A deluxe king guestroom at Hilton Shanghai City Center .
LUXURY HIGH Hilton ’ s luxury and lifestyle pipeline mix is nearly two times its existing supply , “ supporting continued growth in these important segments ,” Nassetta said . Hilton has made a concerted push in the luxury and lifestyle segment , much like its competitors , through acquisition over organic brand building , the latter historically having been the company ’ s approach . Last year , it added some 400 luxury hotels to its network through a partnership with SLH . It also acquired a controlling stake in Sydell Group and , through it , the NoMad brand , along with Graduate Hotels from AJ Capital Partners . It will reopen Waldorf Astoria New York later this year . In all , Hilton is looking to double its presence in the lifestyle segment over the next four years .
There is much more competition for deals at the higher end of the chain scales , noted Kevin Jacobs , CFO and president of global development for Hilton , which , he said , precipitates a higher demand for key money : Hilton contributes key money on around 10 % of all deals , Jacobs said . “ We do play in some of those deals because they ’ re important , and they tend to be higher checks .”
Conversions accounted for roughly 45 % of room openings in the year , as new-construction starts remain depressed in a still relatively high cost of capital climate . “ It ’ s a difficult environment for new development ,” Nassetta said , though opining that the money out there for new construction is attracted to Hilton brands . “ We are getting a disproportionate share ,” he said . “ We ’ re more financeable with the money that ’ s available for new construction .” Conversely , he said , what he called the “ bestperforming brands ” in the business also received a large disproportionate amount of conversion opportunities , which are closing in on 50 % of all deals .
COSTLY CONSIDERATIONS Nettlesome cost pressures continue to roil hotel owners even before the announced imposition , then , for the moment , pullback of U . S . tariffs on two of its biggest trading partners in Canada and Mexico . An unperturbed Nassetta delivered what can only be called his trademark stolid response , invoking what he calls his capacity to lift up above the noise . “ What ’ s playing out is a series of trade negotiations that are delicate , and I believe tariffs are part of that negotiation and part of the strategy to getting to the right kinds of deals in the end ,” he said . “ That doesn ’ t mean there won ’ t be tariffs , but my guess is that we will end up in some form of trade deal that will not involve major tariffs .”
For its part , Hilton , Nassetta said , diversified its supply chains “ in a very aggressive way over the last five years ,” a reaction to COVID , but also other variables . “ It ’ s a really good idea to have various places in the world where we can get various products ,” he said , complimenting Hilton ’ s HSM team , which is responsible for global procurement efforts .
Still , owner P & Ls are bombarded by higher costs from labor to food . “ There are some cost pressures and we ’ ll continue to work for our owners to try to find as many operational efficiencies as we can so that they can grow their bottom lines ,” said Jacobs . “ We are doing the best we can on wages and benefits , doing the best we can on insurance — just helping them with operating efficiencies across the board .” One place that hasn ’ t escaped the tariff stick is China , where a lag in travel still exists for major lodging companies , though it is improving quarter by quarter . Development and new openings , meanwhile , are showing a steady march upward : Hilton ’ s approvals and starts in the country were both up 10 % and openings were up nearly 30 %. “ The slowdown you ’ re seeing overall in real estate isn ’ t affecting lodging as much ,” Nassetta said .
And though volunteering the unknown in China ’ s GDP growth this year , Nassetta remained sanguine on further development , especially in mid-market hotels , such as on the Hilton Garden Inn brand . “ We feel pretty good about doing better on the fundamental side , and then we ’ re doing great on the development side ,” he said .
Chinese outbound travel to the U . S . remains stunted , but that doesn ’ t mean the Chinese aren ’ t traveling . They are “ traveling like crazy ,” Nassetta said , pointing to inter- Asia visa-free zones that make it easier .
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