GERMANTOWN, Md. — Over the din of traffic whooshing past along I-270, Chris Nassetta, the president and CEO of Hilton, cuts the ceremonial ribbon at the porte-cochère of the Spark by Hilton Germantown Washington DC North, formally opening what is the second property of the new brand, one in which Nassetta believes will eventually be thousands.
Speaking alongside Mark Carrier, president of B.F. Saul Company Hospitality Group, owner of the hotel, and the nonagenarian billionaire chairman and CEO of Saul Centers, Bernard Saul II, Nassetta is earnest about the brand and its growth possibilities. “We’ve done it twice,” he says to an assemblage of hoteliers and local government and tourism officials of Montgomery County. “Now, thousands more.”
It’s not hyperbole. Around Hilton, the Spark by Hilton brand is being conditioned to be the company’s “biggest” brand, Nassetta said. “It’s a disruptor; it’s transformational,” he said. “It’s nice to have a new toy to play with.”
The plaything is under the direction of B.F. Saul Company Hospitality Group, which owns and manages the hotel. B.F. Saul is an unalloyed and dedicated steward of real estate in the DC/MD/VA region, which makes it agnostic to the type of assets it owns—from multifamily to hotel and, within the hotel space, economy through luxury. It’s a strategy that has served B.F. Saul well through the years; it currently has a portfolio that numbers more than 20 properties, from the Hay-Adams in Washington, D.C, to The Watermark Hotel in Tysons, Va., which is owned by Capital One, serving as its HQ hotel, and managed by B.F. Saul.
The Spark by Hilton concept is pretty simple, which makes it easy for owners to wrap their heads around: it’s a pure conversion play with a rather economical entry point. Spark by Hilton Germantown Washington DC North is 170 rooms, but the average key count for a Spark is closer to 85. The process to convert is around $23,000 per key, inclusive of an $8,000 per-key FF&E package. One of the main selling features is the relative ease: it’s mostly a soft-good renovation, without the need to rip into walls and dig into the bones of the building. There are no intended heavy electrical or HVAC fixes.
Rooms—there are four room types altogether— are rather spartan, with just enough furniture to feel comfortable but not overwhelmed. They don’t include the traditional bedside alarm clock and, it’s rumored, that Nassetta, who has taken a keen interest in the personification of the brand, had a hand in choosing the nightlights.
In the case of Spark by Hilton Germantown Washington DC North, it took 65 days to convert the property from its former embodiment, a 10-year-old Holiday Inn Express. B.F. Saul is not new to conversions or to Hilton. A DoubleTree it owns in Tysons, Va., was a conversion project. “When we became aware that Hilton was launching a new brand, it provided an opportunity for consideration, and we became convinced that we wanted to be part of this new thing for the long term,” said Carrier, who appreciates how value engineered the product is to produce the highest possible profit margins. Spark by Hilton Germantown Washington DC North requires around 32 full-time employees to run the property.
It’s not lost on Carrier that by owning a Spark by Hilton, they are plugged into Hilton’s biggest asset and value enhancement: its Hilton Honors loyalty program. “It has reach into segments that matter and they have an engine that matters,” Carrier said.
Charged to lead the brand is Alissa Klees, brand leader of Spark by Hilton, who refers to it as a “simplified” version of what consumers are looking for in a stay and what owners are looking for in ROI. Consider the complimentary breakfast, which is basically coffee complemented by a bagel bar. Its cost per occupied room is only $1.30, according to Klees, whereas a brand like Hampton by Hilton, for instance, is closer to $3.50. Spark properties also have marketplaces by check-in, where guests have access to hot items and other things, like confections and salty snacks. “When a pantry is well stocked, people are more apt to buy,” Klees said of the retail space.
Public spaces and guestrooms are about brilliance: “Consumers told us to bring the bright in,” Klees said. Hilton achieved this through a colorway of purples and yellows and greens and a capacious lobby area, which is informally referred to as The Yard and comes complete with high-sheen, picnic-like tables to work at or socialize.
Simplification also defines guestrooms. The austere look is by design, a function of customer feedback. “People wanted more space in the absence of furniture,” Klees said. For instance, junior suites have ample living room areas that are absent traditional coffee tables, but include multifunctional desks. Adjacent to the bed, guests will find an open-design closet (doors were taken off) and a surfeit of power outages that would satiate even the most tech-heavy guest toting multiple devices. Full-length mirrors sit close to the entryway so guests can grab a quick head-to-toe glance before heading out the door.
The Spark brand was launched not even one year ago, in January 2023. Two properties are already open, the first, Spark by Hilton Mystic Groton, in Mystic, Conn. There are now some 400 deals in some stage of discussion and Hilton aims to open 100 Sparks in 2024.
A conversion brand aligns with the times of high interest rates and high construction costs, which both are impacting the hospitality industry and chocking off new supply. In order to grow, franchisors are turning to conversion brands, like Spark, like IHG’s Garner hotels, like Marriott International’s City Express and Four Points Express by Sheraton. For both Hilton and Marriott, conversions accounted for a meaningful percentage of new signings and openings—around 35% of new signings in the third quarter for Hilton and 20% of new signings and 30% of openings for Marriott.
“It’s a super-short gestation period from pipeline into [net unit growth]” and “those are projects, they’re in the ground, they’re under construction and we have rational timelines for when we think that those will deliver,” Nassetta said.
“We’ve got some basic strong fundamentals, slow supply growth for several years, which looks to continue going into 2024. And that’s reflected in our higher percentage of conversions,” said Marriott International CFO and EVP of Development Leeny Oberg.
The Spark brand was a consequence of COVID in response to changing guest tastes and travel habits. It was built out before the Federal Reserve began hiking interest rates, which made building new hotels more challenging. In the case of Spark, it was an accidental stroke of good fortune. “Call it kismet,” Klees said.