MULTI-BRAND HOTELS are growing in popularity among hotel developers seeking to enter a market with many demand drivers. While dual brands comprise most of the projects, a three-hotel project in Chicago is rewriting the multi-brand playbook.
In the months since the hotel opened, franchisers and hoteliers are taking a wait-and-see approach to the business model.
First Hospitality Group opened its $80 million tri-branded Hilton project in August. The 466-room development on Nov. 7 celebrated its grand opening with guests, investors, Hilton Worldwide executives and local leaders. “Everybody in the company is excited about this hotel and the innovation it has brought into the market,” Bill Duncan, global head of Hilton Worldwide’s all-suites division and its focused-service brands, said during the evening reception.
In a news conference earlier in the day, Duncan said, “Hilton’s dual brand strategy is incredibly important to us. It’s been growing the last six to seven years and makes up 10 percent of our pipeline. This project is very innovative because it’s the first tri-brand; our only one. We are confident it signifies the future of what this strategy can be and should be.”
The 23-story hotel has under one roof a 184-room Hilton Garden Inn, an upscale, full-service brand; a 187-room Hampton Inn, an upper-midscale limited-service hotel; and a 95-unit Home2 Suites, an upper-midscale, extended-stay property.
Stephen Schwartz, chairman and CEO of First Hospitality Group, said the company had acquired the 2.5-acre site next to the McCormick Place, a convention center, in 2014.
The city had earmarked the vacant tract for a 455-room hotel.
With full-service Marriott Marquis (1,200 rooms) and Hyatt Regency (800 rooms) neighboring the center, First Hospitality Group decided to create a unique alternative that would give convention goers, tourists and business travelers more options in a market that has a dearth of select-service hotels.
“We thought about it and said, ‘You know, this is a great opportunity to marry three different brands in one hotel,’” Schwartz said. “There’s not an overabundance of either [brand] in the market. We knew Hilton Garden Inn and Hampton Inn well enough and Home2 Suites was just emerging on the scene at that time. It was an ideal opportunity to take a piece of real estate where we could not afford to build one, but the efficiencies and the economies of revenue generation of all three came together, all coalesced here.”
First Hospitality Group had about a dozen hotels franchised with Hilton Worldwide brands when it approached the company with the tri-brand idea.
“When Steve came to us with this idea, it was immediate trust in that he knew what he was doing, and we could figure it out together,” said Duncan. “Innovation is such an important part of what we do, and Steve and his team played a very, very big role in that.”
Schwartz said his team visited several dual-brand hotels in the U.S. and noted what they liked and did not like about the model.
Key to the success of the tri-brand, he said, is maintaining each brand’s hallmarks. Although there is a shared entrance and lobby with one front desk, the hotels have individual halls and elevators. The hotels are built vertically side by side and each has its own general manager charged with maintaining his or her brand’s unique identity through service and amenities. Jaren Heglin oversees all the GMs and tri-brand operations.
A hard line also is drawn between each brand’s food-and-beverage programs. Hampton Inn and Home2 Suites each have their own complimentary breakfasts while Hilton Garden Inn offers a cook-to-order breakfast in the hotel’s rooftop lounge.
At the same time, Schwartz said, combining the brands gives guests an experience they could not realize at a single property as the public areas, 6,600 square feet of meeting space, fitness center, swimming pool and rooftop bar are shared by all guests.
Another element that sets the tri-brand project apart is the retail space opened to guests, other visitors to Chicago and locals. VU Skyward Bev & Eat by Concentrics Restaurants operates the rooftop lounge and restaurant. Fatpour Tapworks, a gastropub owned and operated by Big Onion Tavern Group, is to soon open on the street-level and join a Starbucks coffee shop.
While each brand’s identity is carefully guarded, so are the complex’s rates. “The way we can segment business across all three hotels and reach different price points is effective,” Heglin said. “With our location and brands, we have so many different ways to manage channels and segments.”
Kevin Carlin, director of sales and marketing, said the hotel is an “easy sell” for his team. “Our internal tagline is ‘Anything but conventional.’ We attract leisure guests, business travelers, extended-stay and trade-show folks. When there is a major convention, we can flex our rates; when there is not, we can really shine.”
Adrian Kurre, global head of Home2 Suites by Hilton, said the company is watching how the tri-brand operations team optimizes rate and revenue. “How do you figure out the algorithm of what’s the right way to sell it, and how do you maximize the revenue?” he pondered aloud. “With 90-plus extended-stay rooms, is there a marketplace here for 30-plus nights? With Home2 Suites, our most profitable segment is five- to 15-nights. With that we cover the weekends and the shoulders – nights you might not otherwise sell.
“So, how do you sell into this, and what is the right algorithm to say when you should be out selling transient rooms and out pushing extended stay? How do you maximize powerhouse brand names Hilton Garden Inn and Hampton Inn and the new name of Home2 Suites? How do you mix that in an algorithm that gives you the highest possible revenue to drive the highest possible returns? We don’t know the answers to all of that because this is so new.”
Duncan said, as time goes on, he is confident First Hospitality Group and Hilton Worldwide will identify revenue-generating strategies unique to multi-brand hotels. Most importantly, it’s crucial to realize projects the size of the McCormick Place tri-brand are not for every market. “My gut says these will be very, very specific conversations,” he said.
Meantime, Marriott International awaits the opening of its first tri-brand hotel in the U.S. North Point Hospitality Group of Atlanta expects to open in Nashville in the first quarter of next year. It is a combination of AC Hotel, SpringHill Suites and Residence Inn. S. Jay Patel is CEO of North Point Hospitality.