Both Hilton and Starwood feel they have something lacking in the midscale segment and plan on doing something about it.
As Starwood’s investors pressure the company to consider merger and acquisition possibilities, Hilton’s CEO was keen to talk about what this means for his brands and how a new mid-scale brand for Hilton would make a lot of sense.
Speaking during Hilton Worldwide’s first quarter earnings call yesterday, CEO Chris Nassetta told analysts organic growth is always preferable to inorganic growth and the company is positioned to accomplish its goals organically.
Nassetta did, however, provide his thinking on what a new brand would look like if one were brought into Hilton’s portfolio:
“Honestly, I was not particularly surprised when I [read about Starwood’s strategic alternatives],” said Nassetta during the call. “It would be silly to say we would never participate in merger and acquisition activity…”
“I think, particularly an entry-level brand that would replace what space Hampton has, with all of its amazing success, has exited as it’s moved up. And I think we could stand to have a slightly lower price point brand in the mid-scale segment that would allow us to capture customers earlier in their lifecycle and garner their loyalty to allow them to grow up with us in our system and shop in and around our system with our other brands.”
“So…whether it’s this year or early next, sometime I’d say in the next 12 months. For sure, you are going to see us do something in that category. And we think that could be a mass scale brand globally. I mean, it will start likely in the U.S. But given the scale of the Hampton brand as an example, we have over 2,000 hotels open. This could be amongst the largest brands by hotel count that we have. And I think we will be a very powerful driver of bringing new customers in and continuing to build loyalty.”
Nassetta also said Hilton will deploy the last portion of the Waldorf Astoria New York proceeds to acquire the Cypress Hotel in Cupertino, California for $112 million. He expects that transaction to close sometime during the second quarter.
Photo credit: A Hampton Inn in Pensacola Beach, Florida Innisfree Hotels / Hilton Hotels