Date: October 2018
Location: First on – Marylebone, London, UK
Name: Motto by Hilton – opening 2020
No. of Keys: 100
Seller: A 7 storey office building on Old Marylebone Road, 20,000 sq. ft. net floor area, acquired by Dominvs in December 2016. Planning permission for hotel-use granted in November 2017
Buyer: Dominvs, an exciting hotel group run by Preet Ahluwalia and his family, with hotels, commercial & residential projects, ranging from the Crowne Plaza Aberdeen Airport to new-builds in the pipeline such as The Dixon, A Marriott Autograph hotel and the Courtyard by Marriott in Oxford.
Motto by Hilton will target people who stay in hostels aiming to take a fresh approach to modern travel culture through creating a micro-hotel with an urban vibe in prime global locations.
Hilton evaluated the emerging lifestyle hostel model globally to understand the opportunity to enhance the shared room concept. Their research showed that people who stay in hostels, do not like rooming with strangers and often book just with their friends or family. They want more from their hostel experience but are limited by current options in the market.
From market evaluations Hilton see people wanting an affordable urban lifestyle brand – one that combines comfort and accessibility with travel and lifestyle trends.
Motto by Hilton prices will vary by location, each property will offer competitive rates that will make it a viable option.
Not everyone is convinced though… Hotels Magazine of the US had this to say:
As other brands have already staked their claims in the growing micro space – think Moxy (Marriott) or Public (Ian Schrager) – another differentiator for Motto might be the lack of a targeted age group.
The press release lacked the usual oblique references to “millennial-minded” or “tech-savvy” that frequently imply, well, youth. “There are one or two other companies that are trying to get into this space in a more significant way just like we are,” said Phil Cordell, Hilton’s global head of new brand development. “A couple of those companies I think are focusing or over-indexing maybe on millennials… We see (Motto) much broader than that.”
Mottos are in various stages of signing in locations including Lima, Peru; London; Dublin, Ireland; Savannah, Georgia; San Diego, Boston and Washington, D.C. The first hotel is slated to open in the U.S. next year, with possibly a second U.S. location and European site opening in 2020, said Cordell.
“Speaking from the perception of an owner’s representative and fiduciary, new brands represent equal parts opportunity and risk,” said Chad Crandell, CEO and managing director of asset manager CHMWarnick. “For our clients looking to invest and build, fulfilling an untapped need in the market, new brands can sometimes offer that opportunity, especially given recent trends in dual-brand developments. Particularly in the instance of a micro-hotel like Hilton’s new Motto, favourable development costs and density, compared to traditional full-serve hotels, coupled with an efficient labour model could be very attractive to investors.
Room types: Room size will average 163 square feet. “You can get three Motto rooms in the same amount of space you get two midscale rooms like a Hampton Inn,” Cordell said. The “standard” has a king- or queen-sized bed.
The “flex” room has a wall-bed system (he discourages Murphy-bed references) that can fold up and convert to a fold-down table that comes with four chairs, along with a sitting area.
The Bunkie has a queen bed and a perpendicular bunk bed. At least 30% to 40% of the rooms will be accessible to each other by connected door, Cordell said. The company also adds some touches around sleep, with eye mask, white noise app, blackout shades and sound-absorbing materials in the room.
The building: The hotel will average from 175 to 250 rooms, and the company expects that most will be new-builds, with a minimum of conversions.
Costs/management: ADR will depend on the market, but Cordell said he sees it positioned slightly below a Hampton Inn. Because of the urban locations, development costs are targeted at about US$165,000 per key, he says. The first few hotels will be franchised. “We have several existing franchise partners with us who were savvy and experienced enough to grow into this space,” he said. “They’ll all be franchised but they’ll with partners who have a proven record to be able to successfully operate this kind of a unique hotel.”
“Hilton has had success with Tru signings, and smaller Motto rooms in higher-ADR markets might be a way to make the development costs pencil a bit better,” commented Michael Bellisario, analyst at Michael W. Baird.
F&B element: Motto Commons, at it’s being called, will have a “big lounge-y club room area” and what Cordell described as a small “Cheers”-type bar with simple cocktails, wine and beers. The first-floor lobby space will reflect the community, with F&B by well-known local operators and a “great price point.”
Guest payment: Multiple guests will be allowed to split the bill among themselves on booking.
Technology: The rooms will have Hilton’s Connected Room technology, allowing control of temperature, lighting, TV, window coverings and other features from the Hilton Honors app.
Hilton has been hinting about the brand for more than two years now. “A couple years ago we started to kind of be intrigued by this idea of hostels in Europe,” Cordell said. “At their core, they were about simple, basic accommodations that somehow managed to draw in community or create community… As we looked at hostels in general, though, they obviously seemed to exist in a very, very base level. And there really weren’t even a ton of hostels in the U.S.”
“I can see (Motto) fitting in well in major cities where low-cost and high-quality accommodations are in limited supply, and it will also appeal in major destinations such as in South America, India and Asia, which are under-served by this type of accommodation,” said Peter Bates, president of communications firm Strategic Vision.
Because of the complexity of building in urban locations, Cordell said it may take three or four years to get the first 10 or so hotels up and running. “There’s never going to be a thousand of these hotels. But surely, certainly will there be 200 or 300 of these hotels globally over a 15-year time span? Absolutely.”
Cordell said Motto falls somewhere between a CitizenM and a Yotel, and while he is respectful of Moxy – launched at about the same time as Hilton’s flashier Tru brand – and Marriott as a competitor, he says Moxy has “strayed” beyond its original scope. “I think their development strategy is a little bit different.
We will be only in urban cores.” And, he added, “I think Moxy is all about prototypical design and it’s a design aesthetic and experience that we feel skews more toward a younger, specific demographic.”
“We’re not going to be that,” he said. The goal: Appealing, but “not so edgy that you could feel like you’re not comfortable being there.”
Hilton’s 15th brand, Motto will target “prime cities”, and the “micro-hotels” will provide multi-functional, customisable room designs. The concept has emerged to meet the needs of friends and family groups wanting more from the hostel market.
Christopher J Nassetta, president and chief executive of Hilton, said: “Innovation is in our DNA, and as we embark on our 100th year as a company, we are innovating more than ever before. With Motto by Hilton, we are bringing to market something the industry has never experienced with its flexible and affordable room product, desirable locations and guest-empowered service.”
Jon Witter, chief customer officer at Hilton, said: “Following extensive market research that focused on consumers’ needs and wants, we discovered the opportunity for a brand that offers travellers a trifecta of centrally located, reasonably priced and less traditional lodging that provide a one-of-a-kind experience. These findings led us to create Motto by Hilton, a flexible environment that allows guests to design their stay, their way.”
Tripp McLaughlin, global head of Motto by Hilton, added: “This will be a global brand, heavily targeting the destinations where our connected and confident travellers want to travel to the most.”
Hilton has 15 brands comprising more than 5,400 properties with nearly 880,000 rooms, in 106 countries and territories.
THPT Comment: The hostel market is certainly very exciting, with the Generator Group leading the way…Hostel by Hilton might take getting used to though!