[UPDATE] Hilton bets on Asia's post-pandemic travel recovery
/ EdgeProp Singapore |
The 1,080-room Hilton Singapore Orchard, which was launched in February, is Hilton’s largest hotel in Asia Pacific (Photo: Hilton)
SINGAPORE (EDGEPROP) - Chris Nassetta, CEO of global hospitality group Hilton, believes that a revival of the hospitality industry is well underway. “We’re really starting to see a massive recovery in the business,” he told a media roundtable on April 7 at the recently opened Hilton Singapore Orchard.
That recovery, initially led by North American and European countries, is now gaining steam in the Asia Pacific (Apac) region as border restrictions start to ease. In Singapore, airline passenger traffic surged to 1.14 million in March, marking a 62% m-o-m rise and the first time monthly passenger traffic has exceeded a million since the start of the pandemic.
Hilton’s CEO Chris Nassetta (left) and Apac president Alan Watts (Photo: Hilton)
The implementation of the Vaccinated Travel Framework since April 1 is expected to further support traffic volume. According to the Civil Aviation Authority of Singapore, 400,000 air passengers passed through Singapore during the week coinciding with the Good Friday public holiday. Meanwhile, other countries such as Thailand, South Korea and Indonesia have also transitioned to quarantine-free entry for fully vaccinated visitors, which bodes well for the region’s recovery.
Amid this landscape, Hilton has been rapidly scaling up its presence in the region. In 2021, the group opened a record number of 100 hotels in the region, boosting the number of its Apac properties to 523 across 12 brands. The new hotels include the 1,080-room Hilton Singapore Orchard, which is the group’s largest hotel in Apac. The property is the former Mandarin Orchard Singapore hotel, located above luxury shopping centre Mandarin Gallery on Orchard Road. The building, which is owned by Singapore-listed OUE, had undergone several months of renovations before it was reopened in late February.
In addition to its new hotels, Hilton has 760 new properties in its pipeline for Apac. The group’s ambitious expansion comes amid a large influx of investments into the market. According to research by CBRE, US$12.1 billion ($16.7 billion) in investment volume poured into the Apac hotel market in 2021 — a surge of 46% y-o-y. “CBRE has observed the sector is fast emerging as one of the most sought-after for investors eyeing value-add opportunities,” the March 31 report says.
Growth engine
Nassetta believes Apac holds significant growth potential for the group, pointing out that its current portfolio of 523 properties in the region caters to a population of around four billion. In comparison, it has over 5,000 hotels in the US catering to a market of about 300 million people. “On a per-capita basis, [Apac] is where we’ll see the highest growth,” he reasons.
Currently, the market makes up around 10% of Hilton’s portfolio in terms of earnings, making it Hilton’s third-largest market after the US and Europe. Alan Watts, Hilton’s Apac president, sees that share growing in the coming years, underpinned by the region’s rapid expansion in travel and tourism, GDP growth, mobilisation and increased domestic travel. In terms of new properties, he estimates Hilton’s Apac portfolio will grow at a CAGR of 150% over the next three to five years.
Despite the brisk expansion, Nassetta emphasises that the group is focused on organic growth rather than growth through consolidation — a point that Watts concurs. “As much as we are proud of being the fastest-growing hotel company in Asia, we don’t seek to be the biggest. It’s basically about the customer experience,” Watts says.
Lobby of Hilton Garden Inn Phuket Bang Tao (Photo: Hilton)
Eyes on China
Over 400 of Hilton’s Apac properties, largely held via master licensing agreements, are located in China. To that end, the country plays a significant part in its growth plans. The way Watts sees it, the rapid urbanisation and the growth of megacities in China will fuel more and more demand for hotels in the country.
He concedes that lockdowns in China as part of its zero-Covid strategy have posed a challenge, dampening Apac’s recovery momentum to an extent. “Ultimately, Apac needs China outbound travel to happen,” he shares. Nevertheless, Watts remains upbeat that travel demand in the rest of Apac, especially Singapore, is on the cusp of a return to normalcy. “The minute you hear China outbound travel is happening, I would say that we’re back to [pre-pandemic levels of demand],” he says.
Hilton inked a deal with Chongqing Jiafa Industrial last November to open a Conrad hotel in Chongqing (Photo: Hilton)
In the meantime, Hilton has doubled down on the expansion of its footprint in China as it aims to capitalise on the growth of its domestic market. In 2020, the group extended its partnership with Chinese hospitality company Plateno Group to increase its pipeline for the Hampton by Hilton brand to 600 hotels by 2034, out of which 200 have been opened. It also announced a partnership with developer Country Garden to establish 1,000 hotels over 10 years under the brand, Home2 Suites by Hilton.
In April 2021, Hilton announced an agreement with Shimao Group Holdings to launch four luxury hotels in China under the Waldorf Astoria and Conrad brands. These include Conrad Shanghai which opened in January, making it the largest Conrad hotel outside of Las Vegas with over 700 rooms. Last November, it announced an agreement with Chongqing Jiafa Industrial to open a Conrad hotel in Chongqing. Hilton also launched a pure-play franchise model under the Hilton Garden Inn brand.
Adapting to a post-pandemic market
In spite of certain macroeconomic challenges such as inflationary pressures and labour shortages, Nassetta remains optimistic these factors will not have a material impact on the recovery in the Apac travel sector over the next couple of years.
However, consumer behaviour is expected to further evolve as travel resumes. According to the CBRE report, there is likely to be a flight to safety, with consumers gravitating to brands they know and trust to manage hygiene considerations.
To cater to a post-pandemic market, Hilton rolled out digital contactless check-ins through its mobile app, along with its CleanStay enhanced hygiene programme, among other initiatives. “There are some things we do differently operationally to give comfort to travellers,” shares Nassetta.
In January, Hilton opened Conrad Shanghai, the largest Conrad hotel outside of Las Vegas, with over 700 rooms (Photo: Hilton)
Watts also notes a shift in the customer profile, pointing out that prior to the pandemic, Hilton hotels in Apac primarily catered to business travellers, which made up some 70% of its customer base. Since the Covid-19 outbreak, that proportion has changed significantly, with leisure demand now making up somewhere between 50% and 60%. Looking ahead, he anticipates leisure demand to continue to be powered by pent-up travel demand, while business travel will also gradually rebound now that international restrictions are being relaxed.
Ultimately, Hilton aims to achieve meaningful growth in the region, operating within the premium segment of the market. According to Watts, the company enjoys a 15% to 20% premium compared to its competition and does not plan to lower rates even as other businesses give discounts to capture the pent-up demand. “We want to do things that customers value and will pay a premium for,” he says.
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