HOTEL

Hotel Giants Ramp Up Push To Take Over Competitor Hotels Via Conversion

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Hilton’s new conversion-minded brand, Spark by Hilton

The country’s largest hotel brands are looking to convert more existing hospitality properties than in previous years as their development pipelines slow.

Hilton Worldwide Holdings launched Spark by Hilton last month, its 19th brand but the first aimed at attracting independent and competing properties, The Wall Street Journal reports.

Two-thirds of new BWH Hotel Group properties, which include Best Western hotels, are conversions, up from its historical rate of 50% conversions and 50% new construction, BWH CEO Larry Cuculic told the WSJ. 

Marriott International’s global development officer said it is adding more rooms by conversion than it has historically. A conversion can allow an owner of an older property to renovate to standards of a lower-cost segment if it is expensive to meet the requirements of its existing brand.

The push to convert existing properties to new brands comes as the pipeline and projections for new hotel supply have diminished. In its annual hotel market forecast released last week, CBRE projected hotel room supply growth to sit 40% lower than historical trends over the next five years.

At the end of 2022, there were approximately 612,000 hotel rooms in the pipeline, down 2.6% from 2021 and 6.1% fewer than in 2019, according to Lodging Analytics Research & Consulting data cited by the WSJ. 

While the largest hotel brands are looking to take over properties via conversion, there have been a handful of significant sales of smaller hospitality brands in recent months.

Last month, Sortis Holdings, an Oregon-based hospitality firm, paid $85M for the Ace Group International hotel brand, which has 11 locations in markets like Japan, LA, New York and Seattle. Sortis plans to increase the Ace portfolio to 30 hotels.

In November, Hyatt Hotels Corp. acquired Dream Hotel Group for a deal expected to be worth $300M, adding about 1,700 rooms to Hyatt’s portfolio. That came a month after Hyatt bought Lindner Hotels AG in Germany to expand its presence throughout Europe. 

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