Hilton has broken ground on the debut Project H3 extended-stay hotel five months after announcing the brand. The first hotel is set to open in Kokomo, Ind., in the summer of 2024 with 137 apartment-style guestrooms.
The property is owned by Sun Management & Development Corp., a company Matt Schuyler, chief brand officer of Hilton, describes as “a great owner” with which Hilton has worked in the past. “They were keenly interested in this product and had a location site, essentially,” he said of the first deal. “And so they were first in line and worked out really well. We have others that are close behind, but [we’re] delighted to be doing this with Bharat Patel and Sun. They're fantastic owners and we know them well.” Patel—co-founder, chairman and CEO of Sun Development & Management Corp.—already owns nine Hilton properties, he added.
“We obviously have a stable of owners that know us well and know our products well,” Schuyler said. “We had a number of owners that helped us with the design-thinking of this product. So they were keenly interested to get on with site selection and ultimately commissioning the construction.” At the same time, Schuyler sees the brand’s appeal for owners who may be new to Hilton flags. “It's a different type of product. It's more apartment-style in its ethos. It's meant to create demand for white- and gray-collar professionals.” As a result, he added, new owners are “getting into the fray” who are interested in that type of product and customer set.
The Kokomo groundbreaking brought together Project H3 representatives and local dignitaries. Attendees included Isaac Lake, brand leader, Project H3 by Hilton; Tyler Moore, mayor, City of Kokomo; and Lori Dukes, president and CEO, Greater Kokomo Economic Development Alliance. Since the brand currently is new-build only, the Kokomo hotel will likely be the first one to open.
When H3 was announced in May, Hilton was unsure of how much each project would cost to develop. With several deals underway, they now estimate that the cost per key, exclusive of land, will likely be between $116,000 and $120,000. “It's always better to talk about a range when it comes to cost per key,” Schuyler said, noting that costs are “completely dependent” on a project’s location. “Construction [and labor] costs in certain venues are going to be a little higher than others,” he added.
Schuyler expects the average daily rate for H3 hotels to be between $95 and $105, but noted that longer stays could make that vary a little more. “We think the average length of stay will be exceeding 20-plus nights,” he said.
Hilton has “hundreds” of H3 projects “under discussion and many more approved and in the pipeline,” Schuyler said. “So the wheel is starting to move. … We think ultimately we'll have hundreds—if not well over 1,000—of these at some juncture, imagining this 10 years out.”
While the brand has a number of hotels in the works, what it does not have is a name that Hilton can make public yet. “We are beholden to the trademarking process, of course,” Schuyler said, but noted that the company is “almost through” the process and will announce the name “with a little bit of fanfare … in fairly short order.” The trademarking process used to take “a month or two” in the old days, Schuyler added, but over the past few years has extended to at least 12 months and sometimes as long as two years.