Hilton Shows Investing in Lifestyle Hotels Isn’t Solely About the Trendy

A lifestyle hotel is a major hospitality buzz word that doesn’t exactly have a standard definition. But that isn’t keeping major hotel companies from touting these properties as a major source of growth.

Accor, which defines them as properties that make as much as half their revenue — sometimes even 70 percent — from food and beverage outlets, is the company with the most public growth target for these hotels. Lifestyle hotels comprise a quarter of projected franchise fees to be generated from the company’s 212,000-room development pipeline.

Hilton isn’t ceding as much of its overall development pipeline to these kinds of hotels; however, the company is still projecting significant growth in the sector, with the company’s lifestyle division across brands like Motto and Tempo slated to double within the next five years.

“With Hilton, the powerhouses are always going to be the Hampton [Inns] and the Hilton Garden Inns,” said Phil Cordell, senior vice president and global head of new brand development at Hilton. “But I’m excited about all of our lifestyle brands. Tempo is going to be the easiest for us to get to scale.”

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Semantics: First thing’s first: How do they even define one of these hotels around Hilton’s McLean, Virginia, headquarters?

Hilton’s lifestyle brands include Motto and Tempo as well as Canopy, the largest of the three with 30 properties.

Motto properties tend to be more about location, location, location in city centers with smaller guest rooms and amenities like craft coffee shops and restaurants. Tempo focuses on the broad ideas of helping guests relax and recharge and can generally be in both urban and suburban areas. Canopy is the more neighborhood-oriented brand and features rooftop bars and trendy restaurants.

While he wasn’t ready to put a specific data point around revenue like Accor’s with food and beverage across the entire lifestyle division, Cordell noted these hotels typically have more local flavor, personalized experiences, and unique designs.

Because of its restaurant and bar focus, a Canopy hotel can generate as much as 40 percent of its revenue from F&B.

“The food and beverage element is a starring role not a supporting one,” Cordell said.

Lifestyle Build-Out: Hilton announced 11 new deals this month for the Tempo and Motto brands, and development is likely to pick up in the years ahead. Hilton CEO Christopher Nassetta estimated in early 2020 at its launch that the Tempo brand could grow to 500 hotels within 10 years.

This isn’t just a U.S. trend. Hilton’s Motto signings include properties in Rotterdam and Tulum while Canopy continues to expand into China as well as new markets in Europe, the Middle East, and Africa.

The lifestyle hotel sector accounted in February for only 2 percent of the branded hotel supply in the world and 10 percent of the entire industry’s development pipeline, Accor CEO Sebastien Bazin said earlier this year on an investor call.

But Accor’s lifestyle growth centers around trendy brands like Mondrian, Delano, the Hoxton, and Faena. Hilton’s approach is about providing similar elevated approaches to dining, design, and experiences without making it an intimidating experience.

“I don’t want to feel like I have to be in the cool kids club to stay at one of these brands, so you’ll find them more comfortable, more casual, and more approachable. Although there’s a focus on design and it’s design-forward, it’s not trend design,” Cordell said. “You see some others in our space go very design-specific, and that’s not part of what we’re about. It’s got to be approachable and comfortable.”

The approachability of the operation helps generate interest among developers and owners: Cordell estimates 80 percent of Hilton’s growth in the lifestyle sector comes from owners who already have an existing Hilton franchise agreement in place.

Many are those who have owned something like a Hilton Garden Inn and want to take a step up in terms of services but don’t want to go fully into luxury hotels or something that might have a more difficult time penciling out in today’s market.

“[Our lifestyle hotels are] like a Cadillac on a Chevrolet chassis,” Cordell said. “[They’ve] got a little bit more design and food and beverage, but the operating model is still more of a service model. It just makes it a little bit easier to get financing.”

Extended Stay America’s $6 Billion Deal Inches Closer to a Vote

With two weeks left ahead of a June 8 shareholder vote on whether to approve Starwood Capital and Blackstone’s $6 billion takeover offer, Extended Stay America late last week issued another release to shareholders touting the value of the deal and refuting claims by leading shareholders like Tarsadia Capital that the price is too low.

The presentation notes the $19.50 per share sale price factors in measures like the resiliency of the brand during the pandemic as well as the potential upside during the recovery. Tarsadia and other shareholders — as well as two board members of Extended Stay’s real estate trust — questioned the timing of the deal and its price tag given most hotels are slated to perform extremely well over the summer season.

Investor documents show Extended Stay explored a potential sale for years in the lead-up to the pandemic, including Starwood potentially offering between $22 and $24 per share in a solo takeover in 2017. However, Extended Stay also owned nearly 70 more hotels then than it does currently, according to filings with the U.S. Securities and Exchange Commission.

Starwood ultimately decided that higher price was not something that could pencil out, according to sources close to the negotiating process.

Accor’s SPAC Ambition

When rumor of Accor sponsoring a special purpose acquisition company emerged last week, it was a bit of a head-scratcher to some. Most hospitality companies like Wynn Resorts and Rosewood Hotel Group have looked to link forces with a SPAC rather than sit in the driver’s seat.

Accor’s plans — confirmed by the company in a release last Thursday — make sense when you consider some of the company’s various investment initiatives in recent years. The Accor Acquisition Co. SPAC wants to target companies in the lifestyle and leisure sector as well as flexible working and travel technology.

SPACs are essentially shell companies that backers create to merge with another company and go public in a much quicker fashion than a traditional bank-led initial public offering, or IPO.

The Paris-based company already has stakes in several of these sectors on top of its ongoing growth in lifestyle hotels, which could be a major customer to whatever materializes from the SPAC.

Non-Hotel Investments: Accor bought restaurant reservation system ResDiary in 2018, has a 50 percent stake in co-working platform WoJo as well as stakes in the Ken Group fitness company, event venues like Potel et Chabot, and travel tech brands like D-Edge and hotel booking platform Gekko.

There is concern of a SPAC cool-off in the U.S., where regulators are beginning to investigate the explosion of deals announced in the last year. But Europe hasn’t been as much of a SPAC boomtown as the other side of the Atlantic.

The U.S. has the bulk of the SPAC IPOs to go on the market this year, including 215 on the Nasdaq and 109 on the New York Stock Exchange, according to Refinitiv data. Four were on the Euronext Amsterdam and three on the Frankfurt Stock Exchange. Accor’s would go on the Euronext Paris market.

“Although many have highlighted weakness in recent SPAC listings, this one looks set to be far more prosaic and small scale than the most high-profile,” according to a Bernstein note last week. “SPACs continue to be popular in hotel listings (see Rosewood, Soho House) and therefore we wouldn’t have concerns that Accor is too late to the party on raising this capital.”