Behind Hilton's plan to take extended stay global

Homewood LatAm Room

DALLAS - Bill Duncan, global head of Hilton’s nascent All Suites category and SVP of Embassy Suites, has big plans for his brands. At the second day of the Extended Stay Brand Conference here, Duncan talked about the rationale for creating the category, and the role extended-stay hotels will play in Hilton’s global growth.

Creating The Category
As Hilton has added more brands to its ever-growing portfolio, the need to categorize them had become apparent, Duncan said. “We want to make sure the categories are really focused on overall strategy and optimization,” he said. “Through that evaluation, we felt we had a very compelling case to create the All Suites category.” 

The brands that comprise the category are sufficiently diverse to prevent in-brand competition, he said, with Embassy Suites in the upper-upscale category, Homewood in the upscale extended-stay category and Home2 in the midscale extended-stay category. 

“We have one of the highest distributions of all suites products from a room-count perspective of any of our competitors and significant growth opportunity for the future, so we just felt it made a lot of sense to keep the suite brands in a category of its own," Duncan said.

International Expansion
InfographicCurrently, the seven-year-old Home2 Suites brand is focused solely on the U.S. and Canada due to its age and relatively small footprint. Homewood, on the other hand, at 27 years old, has a “significant opportunity” in Latin America and the Caribbean. “That’s where we’re focusing its international growth,” Duncan said. 

Embassy Suites is also expanding in Latin America and the Caribbean, where Duncan said the brand is already “doing really well.” Beyond the Americas, he added, Embassy Suites has deals in China and has signed another deal for Saudi Arabia. “They’re doing some further international expansion,” he said. 

The difference among the expansion plans is that while all three brands involve suites, only Embassy is not geared toward extended stays. When Hilton began looking to take Homewood beyond the U.S. and Canada, they found that Latin America has a relative dearth of extended-stay product. “There’s no market,” he said. 

Still, people do travel for long stays. According to the UN World Travel Council,  the average length of stay for an international guest in Brazil is 13 nights. “In Peru, it’s 11,” Duncan said, suggesting that these long-term guests stay in apartments or even in traditional hotels. “There was very compelling evidence that there was a tremendous opportunity in Latin America—and, really, that’s pretty much what we’re finding in other parts of the world.”  

But gaining a foothold in a new market is never easy, especially when a company is also trying to introduce a new product. The key, Duncan said, is to understand the regional differences and create a product that owners would want to build to serve in that market.

“In looking for Homewood in Latin America and the Caribbean, we realized that the product that we have in the U.S. and Canada, won’t translate down into Latin America,” Duncan said. "The lack of square footage in good urban hubs makes suites challenging from both a logistical and financial point of view."

To solve the problem, Duncan and his team created a studio suite prototype for Homewood that he estimates covers about 325 square feet. While the prototype has all of the key Homewood features—full kitchen, dishwasher, full-size refrigerator, bedroom area—Duncan said that it is more like an efficiency apartment, common in an urban area.

“We found we had to adjust the prototype to be able to fit into those types of urban locations, otherwise, it was just not feasible to build a traditional Homewood-style product,” he said. 

LatAm HW

Lost in Translation
Language proved another hurdle to overcome, with “extended-stay” not translating easily to Spanish. As such, Homewood and Home2 are called “long stay” hotels in those markets. “Changing the nomenclature to adjust and integrate yourself into the local development community helps,” Duncan said. 

Ultimately, taking the two extended-stay brands global is a matter of adjusting to cultural differences and finding the right developers. “In many cases, you’re educating them on what an All Suite product is and why they want to build it,” Duncan said. “You have to convince them of that story. You have to really convince developers that there’s a need, and why, and what’s the advantage potential and what to do and how to do it.

“The other thing you want to do is try to find investors who have some experience and developers who can provide a testimonial—because, really, you are looking for pioneers. “It’s all really about performance. At the end of the day, you have to present compelling evidence on demand, market potential and what’s currently occurring in the market. Then you have to compare it to your existing performance and what you would expect [to happen].”

The All Suite Pipeline
As of the end of 2015, the All Suite category has a total of 650 hotels, and Duncan expects another 100 to open by this time next year. Homewood Suites has 128 hotels in the pipeline; Home2 just opened its 82nd hotel and has 297 in the pipeline; and Embassy Suites has 44 Embassy Suites are in the pipeline, and the company expects to sign an estimated 12-15 new deals this year.

In total, Duncan said, Hilton expects to have 1,000 All Suite hotels operating in the next few years.