Over the last 100 years, Hilton has become synonymous with growth and development in travel destinations near and far. From the first-ever Hilton hotel in Dallas in 1925 to the first Hilton located outside the continental United States in San Juan in 1949 to recent openings ranging from the first flagship Hilton property in the Maldives to the first Hampton by Hilton in Latvia to the first Conrad in Los Angeles, the company has continued to blaze a trail of innovation with hospitality.
As Hilton prepares to reach its latest global growth milestone, Stories from Hilton caught up with Kevin Jacobs, CFO and president, global development.
Why is the 7,000th hotel milestone significant?
Hilton was founded upon the premise that travel can make the world a better place. We believe the desire to travel, experience new cultures and connect with others is core to the human experience. As we continue to grow, so does our impact around the world. Reaching 7,000 hotels worldwide demonstrates the scale of destination options for our guests and the positive influence Hilton has had on the communities where we operate.
As we continue to grow, so does our impact around the world. Reaching 7,000 hotels worldwide demonstrates the scale of destination options for our guests and the positive influence Hilton has had on the communities where we operate.
What impact did the pandemic have on development and did Hilton see any slowdown in signings?
At its onset in 2020, the pandemic did slow development. But as we have emerged from the challenges of the last couple of years, recovery in growth has been strong. Prior to the pandemic, our net unit growth was around 6% to 7% annually, and we have continued growth in recent years at above 5%, which is a testament to the strength and value of our brands, network, and business model. As we reported in our first-quarter earnings this year, we’re confident that we will return to that pre-pandemic growth rate over the next few years.
We continue to lead the industry in new development signings because owners and developers recognize the power of our growing network of properties across a range of award-winning brands. They also appreciate our continued investment in new technologies to enhance the stay experience, and, of course, the loyalty of our 133 million Hilton Honors members who are always looking to travel.
Speaking of growth – Hilton has long touted its commitment to organic growth, building brands from scratch. Can you explain the benefit of this strategy over acquisitions?
We strive to be the top choice for owners and developers as they grow their portfolios. Our continued commitment to driving industry-leading premiums among the brands we have developed in-house allows us to meet ever-changing guest needs and gives us a competitive advantage.
Our teams are great at building brands. We are fortunate to have a diverse portfolio of hotel offerings that span the market across multiple segments and price points, and we have had great success growing organically. We view acquisitions through a financial and strategic lens, and we have not seen anything that makes sense for us.
How do you decide where, when and what brand is most appropriate for a new hotel development?
There are many factors that go into where and when we open a hotel. We work closely with our partners to assess the market’s travel demand, competitive set, and community before we agree to put our flag on a property. Our goal is to serve our guests anywhere they want to be for any stay occasion. Whether our guests are staying at a Tru by Hilton, DoubleTree by Hilton or Waldorf Astoria property, we aim to deliver the stay experience that fits their preferences.
Which region(s) and brand(s) are seeing the biggest growth lately?
We’re growing everywhere, which is exciting. In the United States – where we’ve operated the longest – we continue to see growth opportunities, especially in secondary markets where we don’t yet have a presence. We have also introduced new brand offerings in the U.S. and around the world to meet changing traveler preferences. Newer brands like Motto by Hilton, Canopy by Hilton and Tempo by Hilton are examples of lifestyle concepts that are gaining traction with owners and driving new growth in established markets.
Outside of the U.S., our growth remains strong, representing more than half of our total development pipeline. Asia Pacific represents a significant opportunity with its growing economy and rising middle class. Last quarter alone, we celebrated the 50th Hilton Garden Inn in Asia Pacific and opened our largest hotel in the region with the beautiful 1,080-room Hilton Singapore Orchard. With an increase in domestic demand and inbound international travel, the Middle East, Africa and South America also present opportunities to expand moving forward.
What are some of the hurdles – such as labor shortages or inflation – your development teams are facing?
It’s been widely discussed that construction of new hotels has been impacted by labor shortages and rising costs over the last couple of years, however we are seeing improvement in some of these areas. Additionally, signings are up year-over-year indicating continued interest in our brands. This robust increase gives us confidence that we’ll soon be back to pre-pandemic new hotel builds.
In addition to new development, we also benefit from conversions. We increased conversion signings 15% last quarter, representing nearly 20% of all our new hotel signings. The nice thing about our Collection brands – LXR, Curio and Tapestry - is that they’re great options for unique, independent properties that could benefit from joining the Hilton family and introducing themselves to our wide range of loyal guests.
What are you hearing from hotel owners in terms of new investments and developments as we emerge from the pandemic but remain in a challenging economic environment?
I speak with our owners regularly and they continue to monitor changes in the macro-environment, including interest rates, labor and supply chain challenges. However, they also recognize the opportunities to grow with Hilton, which is evidenced by our increasing signings and the strength of our pipeline. Alongside our owners and developers, we are running the business for the long term and are confident that we are well-positioned to continue driving value for all our stakeholders.
Time to get out your crystal ball. What’s the future of hospitality and development look like?
I think you’re going to see greater use of technology to enhance the stay experience and free up resources for our team members to do what we do best at Hilton: serve people with amazing hospitality and service. Tools like Digital Key or Connected Room are just two examples of how we’ve led the industry in this space. Hospitality has been around a long time, and travel is core to the human experience. We look forward to driving Hilton forward and celebrating many more development milestones in the years to come.
So, how long until we can talk about opening Hilton’s 10,000th hotel?
While we don’t provide guidance at that level on our development pipeline, we have been opening a hotel a day around the world for some time. At that pace, we could be talking about 10,000 hotels pretty soon! That’s great news for our owners and developers, but even more so for our guests who will continue to benefit from a wider range of places to stay and enjoy Hilton hospitality around the world.