National Report – As Hilton Worldwide continues to accelerate its development efforts around the world, it’s identifying certain brands to take the lead in specific markets or regions. Focused-service Hampton, for example, has had a lot of success expanding in parts of Western Europe and recently in Eastern Europe. Now it’s Homewood Suites by Hilton’s turn.
This month marks the official rollout of a new property prototype for the upscale extended-stay brand that’s been designed specifically for the South America market, a region that includes the Caribbean and Central America (and is loosely referred to as Latin America).
“With a distribution of close to 400 hotels open and/or under construction in North America, the time seemed right to expand Homewood internationally. The plan is for Homewood to be the extended-stay lead brand in our South America development strategy,” said Bill Duncan, global head of brand management for Homewood and its sister, smaller and younger, extended-stay brand, Home2 Suites by Hilton.
“Other Hilton brands are already in South America, but they’re mostly one-offs. We’re spearheading a concerted effort on behalf of Homewood in response to what we see as a tremendous opportunity for the brand and for the segment,” Duncan said. Plans call for 30 to 40 Homewoods to open throughout the region in the next few years, with the first ones opening as early as 2016.
Why South America? Why now?
“South America is one of the top regions the lodging industry is targeting right now across the board,” said Vail Brown, VP for global business development & marketing at STR, in her presentation on development at the Lodging Conference in October. However, Brown noted that the economies of the countries in South America weren’t all growing at an equally strong pace, some suffering from high inflation.
Duncan confirmed that the Homewood strategy is country-by-country, city-by-city, given that South America is such a large continent. “We’re prioritizing certain countries, where we see more of an opportunity from a development perspective,” he said.
Colombia is one of those countries. “We’ve identified capital partners, there’s available land with few barriers to entry, plus there’s a willingness to accept American brands,” he said.
The prototype Duncan and his team have developed assumes a downtown location. At eight or nine stories, it’s what Duncan refers to as a “shotgun” project, meaning the building’s footprint is relatively small and can “slide into more of an urban pocket.”
An underlying issue in designing the prototype is that living space is thought of differently in parts of South America, especially in the southern part of the continent, than in the U.S. “It’s actually a much more European sense of space. Accordingly, the prototype calls for a streamlined guest suite of about 310 square feet,” Duncan said.
On the plus side this will allow for roughly 120 keys on average, which is high for a Homewood, though there’s flexibility built in.
The interior design package, meanwhile, has been “tropicalized,” to use Duncan’s term, involving “décor that’s a bit more vibrant and colorful in many markets than you’re used to seeing in the U.S.” Suites still include a full-size sleeper couch as well as a bed, desk and chair.
In a break with tradition, the public space built into the prototype includes a small grab-and-go type café and bar, an acknowledgement that in certain cities in the region it’s not necessarily easy for people to come and go at night, out of safety concerns.
In terms of the labor model, the addition of the F&B outlet may only create one extra job position. One of the advantages of the extended-stay labor model, after all, has always been that it wasn’t labor intensive. “There may be a separate associate needed to manage the bar. But as far as the café is concerned, the front desk staff will help facilitate,” Duncan said.
In December, the Homewood team presented the concept to a group of South American developers, the first in a series. “It was a basic presentation that touched on the ‘why’ of the extended-stay story. It was illuminating because it reinforced for us just how much of the story we had to tell from the beginning,” Duncan said. “What is the market for extended-stay? Who is the target guest? What are the advantages of the tiered pricing model?”
One of the biggest challenges U.S.-based companies face when launching their extended-stay brands internationally is the education piece, explained consultant Mark Skinner, partner in the Atlanta-based Highland Group, which specializes in the segment. “In many regions around the world, extended-stay has just been an underserved market. There may be little or no data to help developers and owners understand the opportunity it presents. It takes a while for them and for guests, as well, to appreciate the value proposition,” Skinner said.
In some cases, the Homewood team will be working with existing partners. They know the company and are more likely to have a working knowledge of extended-stay lodging. Duncan expects some developers to be local.
At present, the Homewood team is thinking strictly in terms of new construction in South America, but allows that adaptive reuse and conversion projects may be permitted at some point. “It’s not clear, however, how much opportunity for these types of development there will be in the region,” Duncan said.
He noted that while no deals had yet been signed for South America, a couple are “hovering” and are “eager to start right away.” Final design packs are being prepared. To help encourage developers to step up to the plate, the Homewood team is in the process of building out a model suite in Hilton Worldwide’s corporate office in Miami. Miami was chosen because it’s considered the gateway to South America. Once the model suite is up, developers can fly in and be able to “kick the tires” before making a decision.
While Homewood has been charged with leading the extended-stay in South America, its mid-price counterpart, Home2 Suites by Hilton, will remain focused on growing in the U.S. and Canadian markets. “With 45 hotels open, Home2 still has a way to go until it’s saturated these markets. By comparison, Homewood is more established,” Duncan said.