Homewood Suites Tops 300 Hotels, Readies New Brand
These are heady times for Hilton’s Homewood Suites brand. In the past few months, the upscale extended-stay chain opened its 300th property and snagged a seventh J.D. Power award as top brand in its segment. And, more importantly, the system is riding a streak of 25 straight months of market share gains. Hilton is also gearing up for next month’s opening of the first Home2 Suites by Hilton, the company’s midscale counterpart to Homewood.
“Opening our 300th hotel was a very meaningful milestone because it represents a critical mass goal we’ve always sought,” says Bill Duncan, global head, brand management for both Homewood and Home2. “We felt great when we hit both 100 and 200 properties, but getting to 300 hotels is a terrific display of our momentum and a validation of the investment by our owners.”
The brand didn’t stop at its 300th property, which is a 115-suite hotel in Round Rock, TX, an Austin suburb. Following that landmark opening in September, two properties debuted last month in Bonita Springs, FL and Slidell, LA.
While Homewood is a 21-year-old brand, its inventory is relatively young. According to Duncan, 45 percent of rooms in the portfolio opened in the past three years, and the average Homewood property is just seven years old.
ACCOLADES AND INNOVATION
While 300 hotels is an important landmark, Duncan and his executive team are even more excited about the brand’s seventh J.D. Power and Associates Hotel Guest Satisfaction award, which it received in July. Homewood was one of two Hilton brands (Hilton Garden Inn was the other) to land atop its segment category this year. Homewood has won the prestigious award in all but three years of the category’s 10-year history.
Beyond bragging rights within Hilton and throughout the industry, Duncan believes the J.D. Power accolade helps the brand in a number of ways and with a number of its constituents.
“Of course, it’s an important validation of our efforts to be a high-quality brand. It also serves as a listening post to hear what guests think of the brand and gives us an opportunity to course-correct and improve the product,” says Duncan. “It’s also important within our internal community of owners, developers and the rest of the Hilton family. Many developers and owners like to be part of a quality, award-winning system.”
It’s an effective marketing tool, too, says Duncan, especially with third-party travel management firms and corporate travel managers because “it gives them the confidence of an unbiased point of view that this brand is tops among its competitors.”
To further solidify that confidence, Homewood recently launched a new brand cultural program, Be At Home, to make sure owners, operators and employees understand they need to treat their guests like they’re hosting them in their homes.
“We want to make sure travel managers know we take care of their people when they’re most vulnerable: when they’re away from their families and loved ones for extended periods of time,” says Duncan. “It’s one of the reasons food and beverage is an important component of the brand. We try to give guests the kind of home cooking that will make them feel as comfortable as possible.”
In recent years, the chain revamped both its breakfast offerings and its four-day-a-week evening beverage and hot meal program. Among the refinements was the adoption of 30-day rotating menus to give long-stay guests as much variety as possible. It also completed work on a five-year product improvement program, Distinctly Homewood, that introduced granite countertops, wood flooring in the kitchens, flat-screen TVs and other items to the chain’s standards.
EXTENDED STAY BEFORE TRANSIENT
While about half of Homewood’s occupancy comes from shorter-stay transients, the brand’s sales, marketing and operations focus remains on the extended-stay customer (five nights or more). The simple reason is profitability.
“There is a direct negative impact on gross operating profits for those hotels in which extended stay doesn’t constitute half or more of their business,” says Dawn Koenig, vice president of brand support for Homewood. Her team includes eight regional directors who each consult with 35 or so Homewoods on operational, training, revenue management and quality topics. “The longer a guest stays, the less amenities we need to replenish, and many long-term guests bring their own amenities. Also, more extended stay means fewer check ins, which saves on front desk and housekeeping hours.”
The key to achieving the 50-percent threshold is sales and marketing. According to Don Willingham, senior director of national brand sales, Homewood “spells out very clearly (to owners and managers) where the sales focus needs to be. It will be even more critical in the near future because as we gain rate strength, some owners will be tempted to book less extended-stay business since it is at a lower rate. Our job will be to remind them that extended-stay business is more profitable.”
During the recent downturn, the brand marketed more aggressively to leisure transient customers, including AAA members. “Now, we’re beginning to dial back those efforts in order to maintain higher levels of extended-stay business,” says Carla Raynor, vice president of marketing. “Last year was an anomaly so now we’re focusing on typical extended-stay business, transient business of three nights or more and how to achieve incremental ADR gains.”
Even though the number of property openings will be muted in the near-term, Duncan believes 10 or so new hotels will open in 2011 and the brand will meet its goal of 400 properties by 2014. For now, the focus is North America, although Duncan sees potential for overseas development in the future. Canada has been a ripe market for Homewood, with nine properties open and five or six in the pipeline. Mexico has one Homewood with two more on the way.
While the brand has typically been oriented toward suburban locations, some future development will occur in urban centers (Manhattan is a target, for example), particularly through adaptive reuse of existing commercial real estate. So-called dual builds, in which two Hilton brands are developed in a single structure or contiguous buildings, is another growth strategy.
“It’s been a game changer for us because it allows the brand to further penetrate urban markets,” says Duncan. “It’s very powerful to get two strong brands with slightly different customer bases but united by the Hilton portfolio and Hilton HHonors. It’s two different streams of guests, and you can build on the strengths of both brands.”
A Brand is Born
Later this month or early next, a new brand, Home2 Suites by Hilton, will be born when the first property opens in Fayetteville, NC. The concept has been incubating for several years, and it was an idea that largely came from Hilton’s developer base.
“Actually, many of our Homewood owners asked us to get into the midscale space,” says Duncan. “We received a lot of input from our owners as we created the brand. It’s a smart way to do it, since as a franchisor you can’t have a brand unless you have a product developers want to build. And, after all, they’re on the front lines so they know customers better than any one else.”
While Home2 shares DNA with Homewood, the two brands differ in product, vibe, target markets and cost to develop (about $75,000 a key versus $90,000 to $120,000 for Homewood). Duncan characterizes the Home2 design as “playful and hip,” traits that are evident in both the guest suites and the Oasis, a combination lobby, breakfast room, work space and hang-out spot for guests.
The shotgun-style suites have living and bedroom zones separated by a curtain. Focal point of the room is its “working wall,” which stretches the entire depth of the unit. Along the wall are the kitchen components, a workspace, a 42-inch flat-screen TV and nooks and crannies and other spaces for storage on display of mementos and family pictures. “Extended-stay guests want to make the space their own so the Home2 design facilitates that need in a number of ways,” says Duncan.
Sustainability is another hallmark of the brand. Green elements include dual-flush toilets, bathroom amenity dispensers, CFL light bulbs, flooring and carpeting made from recycled materials and Energy Star appliances. Recycling is promoted throughout the property, and breakfast service includes glass and china instead of disposables.
Home2 offers an enhanced continental breakfast but no evening meal like its Homewood Suites sibling. The basic breakfast spread will include three cereals, yogurt, four bakery items and at least six toppings to allow guests to customize their meals. Open-faced breakfast sandwiches can be sent through a mini conveyor oven (think Quiznos sub shops) to provide a hot offering. A single person working a six-hour shift can service the breakfast area.
The key differentiator of the new product may be the profile of its guests. The Home2 guest will be younger and newer entrants to corporate travel and most likely on a per-diem. “It will be people who are on their way, but not quite there yet,” says Duncan. The pro forma for Home2 Suites calls for the typical guest staying 10 nights or more, and the properties filling 60 percent or more of their suites with extended-stay guests.
“These properties will have smaller staffing models than Homewood, so it’s even more critical they meet that 60-percent level,” says VP Brand Support Dawn Koenig. “Anything less completely changes the dynamics of the operation and its profitability model.”
In addition to the Fayetteville property, other Home2s are under construction in Layton, UT, Jacksonville, NC and San Antonio. Thirty projects have been approved, and Duncan believes another 10 will have begun development before the end of the year. He expects 100 to be open by the end of 2014. The San Antonio project is an adaptive reuse of a 1919-era office building listed on the National Register of Historic Places. The 120-suite property opens next year.
Development will center primarily around military bases, colleges and universities and regional medical centers. Duncan expects 80 percent of Home2 developers will be existing Hilton owners, although he believes “it’s a great product for new entrants to the Hilton system.
“We believe the pace of development will quicken once we open the first properties and developers and lenders get a chance to see the product in person,” says Duncan.
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