Hilton Sees 2022 as the Year it Seizes Growth in Asia-Pacific Beyond China
Hilton president Asia-Pacific Alan Watts: This is his year to put Asia first, having gained scale in the region primarily in China. Photo: Hilton
Hilton’s most luxurious brand after the Waldorf Astoria, LXR, is making its presence felt in Asia. The chain has just signed the first LXR in South-east Asia in Bali (above)
By Raini Hamdi, 22 February 2022
Globally, Hilton opened another 400 hotels last year with 67,000 rooms. For the first time, Asia-Pacific accounted for as much as a quarter of those global openings. Most of them were in China.
In fact, outside China, in key markets such as South-east Asia, Japan, Korea, Australia and India, Hilton added only 10 hotels with 1,900 rooms in 2021. Competitors such as Marriott International and Accor added about 30 each.
Asia-Pacific without China is still a dot in the portfolio of global chains, particularly Hilton. One reason why Hilton is undersized in Asia, despite its storied history in the region, is that it did zero acquisitions. Competitors such as Marriott gobbled up Starwood, which gave Marriott more brands, offices and resources to expand in the region. Likewise, Accor, which bought Fairmont-Raffles and Movenpick.
Undersized and disadvantaged by scale, Hilton’s race to enlarge its share of Asia is on nevertheless. Asian countries are collapsing travel restrictions like dominos. The region with the most battered owners has the most conversion opportunities, according to chains interviewed. Plus, Asia-Pacific is the only region where hotel construction increased last year, according to STR. Outside China, there are roughly 184,000 rooms in construction at the end of 4Q21, STR figures show.
Not to put Asia first now would be slipshod of Hilton. Especially when it’s got a taste of a few big wins with new brands, even without putting Asia first. The first LXR hotel in Asia-Pacific opened in Kyoto last September, and the chain has just nabbed a second LXR in Uluwatu, Bali. The hotel is owned by construction company Surya Semesta Internusa, which has a hospitality division and is a longtime partner of Melia Hotels.
Time for Asia First
Now that he’s got China deployed the way he wanted it to be, Asia won’t play second fiddle to China anymore, said Alan Watts, Hilton’s president Asia-Pacific.
“This year is my year to focus on markets in the rest of Asia-Pacific that have significant headroom, such as Indonesia, Thailand, Vietnam and so on. But I would be remiss if I hadn’t started with the largest market in Asia-Pacific, China,” he said.
To unlock scale, Watts went with a China-first policy, which bore fruit. Hilton now has 400 hotels in operation in China – four times more than in Asia. By 2025, it will have 1,000 hotels opened in China. This is thanks to a recently launched Hilton Garden Inn franchise program for individual owners; exclusive rights to Funyard China’s Country Garden to develop its Home2 Suites (signed in 2020); and a partnership with Jin Jiang’s Plateno to expand the Hampton brand in China, now in its eighth year.
Watts’ strategy to grow in Asia is to push new brands that have been seeded in China, Europe and US to Asia. Apart from LXR, this includes the upscale focused service Hilton Garden Inn and the lifestyle Canopy.
“Asia hasn’t seen a lot of new brand deployments from Hilton in the past. Now it will,” said Watts. “And when China outbound returns to Asia, these travelers are already familiar with Hilton Garden Inn, so it’s perfect timing.”
But a plan announced in March 2021 to convert 2,000 rooms in Thailand in 24 months to Hilton Garden Inn is still below the mark, partly due to the kingdom’s lockdown for much of the year.
Watts is open to franchising the brand, saying there is demand in markets with experienced owners such as Australia and Thailand. But he expects franchises to be less than 10 percent in Asia, unlike China where half of the portfolio is franchised.
Hilton is also in talks with owners in Asia-Pacific to deploy Motto, its micro-hotels concept that was launched in 2018. This enables the chain to penetrate high-density hotel markets such as Singapore, Hong Kong or Tokyo, where expensive real estate necessitates a large number of rooms on a small footprint.
The average room size of a Motto is a shoebox 14 sqm. According to Watts, one of Motto’s innovations is the ability to offer flexible, multi-purpose spaces. For instance, an interior corridor can be created to link four or five rooms together, facilitating a dorm-style accommodation.
New brands aside, there will always be demand in Asia-Pacific for luxury brands, of which Hilton has three, the Waldorf Astoria, LXR and Conrad, and for the core Hilton brand, said Watts.
The chain has new milestones to show for this. The largest Hilton in Asia-Pacific (1,080 rooms) will open on February 24 in Singapore. A $111 million (S$150 million) rebranding of the old Mandarin Hotel in Orchard Road, it marks Hilton’s first partnership with OUE, which previously managed the hotel through its subsidiary Meritus.
This comes after Hilton opened the largest Conrad in Asia-Pacific (728 rooms) in Shanghai in January. The hotel is owned by its longtime partner, Shimao.
As of November 2021, Hilton operates 30 hotels under Waldorf Astoria, Conrad and LXR in Asia-Pacific and has at least 17 hotels in the luxury pipeline.
Asia Stirs up
China will continue to grow as Hilton shifts focus to Asia. Even in lockdowns last year, when people were not able to travel across the country, China flouted “a direct correlation between reopening and signings/approvals in regions,” said Hilton’s chief financial officer and president of global development, Kevin Jacobs, during earnings call last week.
So for Hilton, approvals in China were up 45 percent in 2021 over 2020, and openings, 30 percent, Jacobs said. “And we think our openings [in China] will be up something similar to that over the course of 2022,” he added.
Outside China, figures compiled by Hotels-Asia suggest a correlation between a tepid pace of activity and the region’s patchy reopening last year. Marriott, for instance, opened 30 hotels in Asia-Pacific excluding China in 2021, compared with 39 hotels in 2020.
But Watts said development is now “heating up again” as Asia reopens more robustly. “Signings are already strong, although I can’t announce them yet,” he said. “Money is available, interest rates are [still] at their lowest, governments are continuing to restart economies. The climate wasn’t that great in the last two years.”
Watts expects at least twice the number of signings in Asia this year compared with 2021 (see chart below).
2022 could be Hilton’s Asian turning point.
