As part of the Americas Lodging Investment Summit’s Patron sponsorship program, ALIS organizers asked Hilton’s Kevin Jacobs nine timely questions as we prepare for the 22nd annual event January 23-25, 2023, at the JW Marriott/Ritz-Carlton Los Angeles L.A. LIVE. Following are his responses.
1) How has inflation and the threat of a recession affected the U.S. hotel franchising and development segments?
Despite an uneven economic environment, we’re continuing to see growth in our pipeline and supply around the world. The hospitality industry remains a strong long-term investment given the broader secular shift to experiences over materials, resilience to macroeconomic headwinds like inflation, and undersupply, especially in many international and emerging markets. While we are seeing, and expect to continue to see, macroeconomic uncertainty, we remain focused on what we can control to ensure we are delivering on our long-term growth objectives. Additionally, Hilton continues to command an outsized percentage of global growth.
2) Most forecasts show supply growth checking in at about 1% each year for the next two or three years. How do you see it playing out based on Hilton’s pipeline?
We continue to see demand from our guests and interest from developers and owners as we emerge from the challenges of the past few years. Even through the pandemic, we have maintained strong net unit growth of more than 5%. This positive trend is a testament to the strength of Hilton’s network effect, where our brands, commercial engines, and business model continue to fuel opportunities around the world. As of Q2’22, we had a robust pipeline, with more than 413,000 rooms planned to join our global system, and half of these are already under construction. We remain on track to deliver 5% net unit growth for 2022 and remain confident in our ability to continue delivering mid-single net unit growth for the next several years and eventually returning to the 6-7% range we were delivering pre-pandemic.
3) What’s the message to hotel owners, investors, and developers from the lending community in general as 2023 approaches?
While capital is more expensive right now, the hospitality industry remains a strong investment choice for the long-term. At Hilton, our business model allows us to lead the industry in new development signings because owners and developers recognize the power of industry-leading RevPAR Index premiums and our growing network across a range of award-winning brands. As we continue to expand our footprint around the world, it remains a great time to invest with Hilton.
4) Based on your portfolio and what you’re seeing throughout the industry, what segments are the most sought after for development and franchising opportunities? Why?
Across our portfolio, all 18 of our award-winning brands drive incredibly strong RevPAR Index premia. Our focused-service and all-suites brands are particularly well-positioned to capitalize on increasing travel demand across the growing middle class, making them an especially popular franchising option among owners and developers. Ultimately, however, we work every day to drive returns for our ownership and developer partners, delivering a strong value proposition backed by more than a century-long legacy of Hilton hospitality.
5) How has the labor shortage affected the hotel development process? Is it something that the industry will deal with long term?
Though we’re seeing some of our labor issues ease, in the long-term, the industry must be focused on attracting and retaining the best talent. At Hilton, we’ve worked over the last 15 years to build an incredibly strong culture so that our team members feel supported – and in turn provide outstanding hospitality to our guests. We’ve also invested in partnerships and benefits that enable our team members to achieve their professional goals, support their personal needs and plan for their futures. These efforts, coupled with our relationships with owners and developers and the continued demand for Hilton-branded hotels around the world, has allowed us to continue building our high-quality pipeline and delivering additional supply to our eager and loyal guests.
6) What’s the status of the shortage of materials and the supply-chain issues and their effect on the hotel industry?
While purchasing decisions are made on a hotel-to-hotel basis, at Hilton, we continue to work with our properties and partners to address the challenges of the current operating environment. Our procurement experts can leverage the scale, scope, reach, and expertise of Hilton Supply Management to ensure they have the flexibility, access, information, and solutions they need to operate and grow their business.
7) Many CFOs cite people, money, data, and technology as their four areas of biggest concern. How do those four topics converge to set corporate agendas in the hotel space?
First and foremost, we are a business of people serving people – and one of the most important ways we can do that is through investing in best-in-class technology. The pandemic allowed us to accelerate a lot of the critical work already underway to enhance the stay experience with digital touchpoints, including contactless check-in and out, automated upgrades, Confirmed Connecting Room, and Digital Key. Our guests can also customize their stays through the Hilton app, which helps give us data and insights to identify how else we can address the ever-changing demands of our guests. Investing in these technologies also allows our hotel Team Members to focus on what they do best: providing our guests with our signature Hilton hospitality. Ultimately, I truly believe that if you focus on the people, using data and technology to do so, the company will be better positioned over the long term.
8) What’s the most under-estimated challenge the hotel industry faces, and why?
We’ve seen record demand as travel has recovered across all areas of our business this year. As we welcome more guests following the impacts of the pandemic, we have to be incredibly focused on their experiences with us. Travelers are eager to see the world and feel taken care of after the last few years, and we must continue to deliver for them.
9) What’s the most under-estimated opportunity for the hotel industry, and why?
The world is a big place, and the major brand companies have a tremendous opportunity to develop in up-and-coming destinations. At Hilton, our goal is to be able to provide our guests with reliable and friendly experiences anywhere they want to be in the world, for any stay occasion. As we continue to build our portfolio, filling key gaps across segments in primary markets and expanding into secondary and tertiary markets will be critical in allowing us to do just that.
* as of December 2, 2022