Almost exactly three years after Hilton announced its upscale lifestyle Tempo hotels as its 18th flag, the company has announced its 19th brand. According to the company, Spark by Hilton is meant to fill a “white space” in the industry with a premium economy option.
Bill Duncan, global head of Hilton’s all-suites and focused service categories, said the new brand began to take shape as new travel patterns emerged following the worst of the pandemic. With leisure travel—particularly family travel—rebounding ahead of business travel, the company started looking at segments of the industry where it lacked product. “We felt very good about what we've been doing with everything in the midscale and up [segments],” Duncan said. “Over the course of the last 15 years, we've more than doubled the size of our portfolio organically through new brands and growth—everything from midscale to luxury, and everything in between.” But the company has lacked a brand in the economy space—and leaders determined this was costing them a valuable guest demographic.
Targeting Customers
By the spring of 2021, the company started researching the segment, finding some notable facts about the strength of economy hotels. The company determined that a full 68 million people stay in economy hotels each year in the U.S., 80 percent of overall travelers are staying in economy hotels and 43 percent of the U.S. hospitality industry is comprised of economy hotels. Just as notably, 77 percent of Hilton’s target traveler stays in an economy brand each year.
The development team visited nearly 100 economy hotels to get a sense of what the current offering looks like and what gaps a new brand could fill. An advisory panel of customers similarly provided insights on what travelers need and what a premium economy brand should offer.
Ultimately, the research team found that their target demographic wanted many of the same features traditional Hilton guests look for—“simplicity, practicality, quality, consistency, value”— but a lot of that value was driven by price point. “It's really about … accessibility, affordability, ability to pay,” Duncan said. “They're all different age ranges and different stages in life, [but] their values are tied a lot to the just the fundamental ability to pay.”
To meet the demand of the brand’s target guest, Duncan said Hilton is looking primarily at secondary and tertiary markets for Spark, particularly in areas where the company does not already have a foothold. “There are a significant number of markets out there with no Hilton product at all,” he said, adding that the brand will consider everything from small towns with few hotels to highway locations. “We're going to be very focused on putting this [brand] in accretive markets where [people] travel. We're going to obviously be very careful about making sure we're building Trus where Trus need to go and Hamptons where Hampton needs to go. This has got a great opportunity to get us into those markets where we have no existing Hilton product.”
Premium Economy
Spark hotels will fit somewhere in between traditional economy and midscale hotels, Duncan said, with a “stronger sense of quality [and] consistency.” For example, the hotels will serve light breakfasts and coffee in the mornings. The public spaces will have multifunctional seating (including rocking chairs) as well as communal tables, while guestrooms will have “streamlined” furniture, refrigerators and a workspace table that can move and shift within the room. The exterior will have graphics for a “splash of color.” The team looked to Hilton’s Tru brand—which opened its first property in 2017 and now has more than 220 hotels open—for guidance in what midscale elements they could bring to the economy space.
The brand will be limited to conversions from existing assets, with a focus on either independent hotels or economy and midscale brands like Wyndham’s La Quinta, Baymont, Days Inn and Super 8 flags. “We're looking at all different sizes, all different types,” Duncan said.
For each conversion, Hilton will inspect the asset and develop a product improvement plan to make sure the property can meet the brand standards. Hilton Supply Management—the company’s procurement, logistics and supply chain provider—has developed a renovation package of lobby and individual guestrooms that Duncan expects will be easy for owners to implement. While the company is in the process of finalizing the prices, he expects the conversion costs will be in the low $20,000 range per key, including exteriors, interiors and lobby updates. Depending on the original property, guestroom packages can include open closet plans or even design elements for suites.
Hilton is also looking to partner with individual owners who are looking to establish a relationship with the company. “They've been excited for Hilton to get into this segment we haven't really done in the past,” Duncan said. “But now that we are, they're coming to us with their products and asking us to take a look.” Over time, he added, these owners could expand with Tru or Hampton properties.
Average daily rate for the brand could be in the high $80s or low $90s range, Duncan added, although this could depend on demand in different markets. Duncan also said he expects the brand to offer limited housekeeping, which could limit the number of employees needed to run the hotel. Similarly, a single employee would be able to oversee the limited breakfast service. The company also considered self-check-in kiosks, but determined they wouldn’t be a good fit for all owners yet. Much like the company’s digital key roll-out from several years ago, he said, implementing new technology like kiosks will take some time.
The brand has more than 100 deals in various stages of development across the U.S., with the first 30 properties anticipated to open by the end of 2023.