Hilton Opening First New Brand in 20 Years

ADRIAN SAINZ | Associated Press

MEMPHIS (AP) – Hilton is launching its first new hotel brand in 20 years.

With Thursday's scheduled opening of the first Home2 Suites in Fayetteville, N.C., Hilton Worldwide is venturing into a mid-tier extended stay market that remains relatively competitive amid a slowly recovering economy.

Hilton already has a presence in the extended-stay segment with the upscale Homewood Suites, but Home2 Suites is providing something new: Increased amenities and a larger, more modern lobby design. Hilton hopes its lobby concept – called "Oasis" – will bring extended-stay customers out of their rooms and into the lobby, so they'll feel less isolated or lonely during multi-day stays.

Six other Home2 Suites are under construction, with the next few opening in Baltimore, San Antonio and Layton, Utah.

Until now, mid-priced extended stay hotels have paid little attention to lobby designs, on the theory that business travelers would rather hole up in their rooms than hang out in a lobby after working all day. But wireless access and longer stays have led to a new approach.

"As people have become more mobile with laptops and iPhones and what have you, the things that tether you to your room aren't there anymore," said Robert LaFleur, managing director and lodging and leisure analyst with Hudson Securities. "People are social creatures by nature."

Home2 Suites lobbies will be large, with plenty of tables and modern, colorful couches and chairs. A breakfast area is included. Outside, there could be a swimming pool, a patio with grills and seating areas, and an exercise track. The lobby design is a rarity for the typically bare-bones, budget-conscious extended-stay segment, providing an area for social gathering as well as communal and individual work and meeting zones.

The first Home2 Suites in Fayetteville, like most of the other properties in the pipeline, is a new construction project. It will have 118 rooms, priced from the low $100s, with rates dependent on season and availability.

Many of the properties will be located near universities, hospitals, military bases and commercial centers – places where visitors tend to stay several days or even weeks at a time. Fort Bragg, a major U.S. Army facility, is in the Fayetteville area.

Many Home2 Suites franchise owners already own a Hilton property, and about 90 Home2 Suites owners have either received approval or have deals in the works, said Bill Duncan, global head for brand management for Homewood and Home2 Suites.

Home2 Suites falls under the umbrella of Hilton Worldwide, based in Memphis.

All Home2 Suites properties will have carpets and tables made from recycled materials, Energy Star appliances and other eco-friendly features. Studios and one-bedroom suites will have kitchens and a "working wall" with a 42-inch flat screen TV, ambient and task lighting, alarm clock with iPod port and MP3 jack.

Furniture can be moved around to customize living spaces and adjust storage options. Studios will average 323 square feet and one-bedroom suites will be around 509 square feet, smaller than rooms at high-end extended hotels.

But Eric Brey, director of the Center for Resorts and Hospitality Business at the University of Memphis, believes the "Oasis" concept will be key to the new brand's success. "That's going to be that sweet spot," Brey said. "They're going to try to bring people out of the room and bring them downstairs and have a social dialogue that other competitors don't really provide."

The Fayetteville property's opening was delayed from December to February, due to construction delays including weather problems. In addition, some Home2 Stay franchise owners had trouble securing financing because of the economy.

"We have seen signs of purse strings loosening up a little bit, but they have to be gold-plated deals," LaFleur said. "Projects are done with a lot of equity, with more developer 'skin in the game.'"

The extended-stay market appears to be picking up. The occupancy rate for extended stay hotels was 70.1 percent last year, up from 64.2 percent in 2009 but below the 74.7 percent seen in 2005, according to research by Hendersonville, Tenn.-based STR Inc.

Revenues eclipsed $6.3 billion in 2010, up from $5.6 billion in 2009 and $4.7 billion in 2005. Job cuts could actually be a reason why extended-stay hotel revenue has increased, as people take jobs farther from home.

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