Exclusive: Hilton adds Canopy lifestyle brand
 
Exclusive: Hilton adds Canopy lifestyle brand
15 OCTOBER 2014 3:33 AM
The 12th hotel brand for Hilton Worldwide Holdings, called Canopy by Hilton, will introduce the lifestyle segment to a new group of consumers and developers, according to company executives. 
McLEAN, Virginia—Hilton Worldwide Holdings CEO Chris Nassetta will announce Wednesday morning that the company is launching a lifestyle brand called Canopy by Hilton.
 
Nassetta, who is scheduled on Wednesday to address 1,900 Hilton global partners gathered in Orlando, Florida, said in an exclusive interview with Hotel News Now on Monday that the new brand is all about providing “accessible lifestyle” to consumers and hotel developers.
 
“Canopy is being launched at a time when we are comfortable delivering the right product,” Nassetta said. “Over the last several years, we have done a lot of work regarding what current customers’ and future customers’ needs are. That time has been well spent in terms of what we’re going to deliver with Lifestyle 3.0.”
 
Canopy by Hilton has 11 letters of intent signed by developers who will be in on the first wave of its development. Two of those developers told Hotel News Now in separate interviews on Monday that they’re eager to see Canopy redefine the lifestyle hotel space.
 
“This particular brand, from what we’ve seen, it’s not something that’s too radical in its concept—it’s very much about personalized experiences,” said Al Patel, president of Baywood Hotels, a Greenbelt, Maryland-based company that owns and operates 70 hotels. “What the Canopy brand is going after is more of the experiential model. Accessible lifestyle, it means more inclusivity.”
 
Patel, whose company will develop two Canopy by Hilton hotels, said he sees the brand fitting between the upscale and upper-upscale segments.
 
“What we define as upscale—Hilton Garden Inn, Hyatt Place, Courtyard by Marriott—that’s the floor for this,” Patel said. “The ceiling sits somewhere between that and upper-upscale full service. There’s no particular category for this right now. We’re really creating a new one.”
 
Dave Pollin, co-founder and president of Buccini/Pollin Group, said Canopy is a welcome addition to the lifestyle landscape. BPG, based in Wilmington, Delaware, owns and manages 20 hotels and plans to develop two Canopy properties. 
 
“We felt this was not a me-too product and that it would layer into a differentiated space,” Pollin said. “Hilton learned everything it could be from the lifestyle space and combined it into something that’s affordable to develop.”
 
In separate interviews last Friday, two Hilton executives said the difference for Canopy is that it’s not aiming for the luxury segment where many other lifestyle brands play. 
 
“It’s not a new brand introduction; it’s creating a new niche for the industry,” said Jim Holthouser, Hilton’s executive VP of global brands. “Lifestyle has been largely the domain of higher-end brands. As we’ve been studying this segment the last few years, we saw a bigger opportunity to bring ‘wow’ lodging experiences a little farther down the chain scale into the upper-upscale arena.”
 
“A lot of lifestyle brands are calling themselves luxury,” added John T.A. Vanderslice, Hilton’s global head, luxury & lifestyle brands. “We see it different, as a fresh approach to hospitality experience that is more accessible to consumers as well as owners.”
 
Gary Steffen will serve as global head, Canopy by Hilton.
 
Canopy will be the 12th brand in publicly traded Hilton’s portfolio (see related chart below).The Canopy concept is built around an urban neighborhood feel, according to the executives. The ideal Canopy property will have between 150 and 250 rooms, according to Holthouser.
 
Up to 70% of the rooms will have standard décor packages. The other 30% will have unique elements such as purposely mismatched bedside tables and lamps to reinforce the unique feel, according to Holthouser. Floors will be hard surface and could be polished concrete. Exposed brick walls and wood beams are welcome. It is engineered to be operational as a new build, conversion or adaptive reuse.
 
“The very first thing you’ve got to understand is it’s all about the neighborhood,” Holthouser said. “Getting the design right is critical—that’s what will make or break this.”
 
Patel said Canopy will fill a need for accessible lifestyle product in urban locations because travelers want to experience the city environment and have a personalized experience.
 
“It’s designed as an urban living type of offering,” he said. “That’s what we’re very much excited about. Before, (the industry) was trying to put a round peg into a square hole.”
 
Nassetta said Hilton is looking at Canopy as a franchising and management vehicle; it will not own any of the properties.
 
The launch comes nearly four years after a New York district court ordered Hilton to pull the plug on its previous lifestyle brand concept called Denizen. That action was a result of a 2009 lawsuit filed by Starwood Hotels & Resorts Worldwide that charged Hilton with corporate espionage in stealing the “Denizen” concept. 
 
Nassetta declined to discuss Hilton’s Denizen chapter, saying he wants to focus on the future.
 
Deal and development details
Signed letters of intent to develop Canopy properties include:
  • Buccini/Pollin Group—Canopy Portland (Oregon) Pearl District and Canopy Rockville (Maryland) Pike & Rose;
  • Baywood Hotels—Canopy Miami Brickell and Canopy Ithaca (New York) The Commons;
  • North Point Hospitality Group—Canopy Nashville Downtown and Canopy Savannah (Georgia) Historic District;
  • Keystone Corporation—Canopy Indianapolis City Centre;
  • Anish Hotel Group—Canopy Oklahoma City Bricktown;
  • J Street Hospitality—Canopy San Diego Gaslamp Quarter; and
  • two separate undisclosed developers will develop the Canopy London and the Canopy Charlotte (North Carolina) Uptown.
 
The targeted development cost is $100,000 per guestroom (without land), but that will vary by market, according to Vanderslice. A typical 200-room Canopy by Hilton will have 66 full-time employees. Other key stats include a minimum room size of 350 square feet and a recommendation of 3,000 square feet of meeting space. Each Canopy property will be full service and offer three daily meals.
 
“The message to developers is we took the discipline to design this as a conversion brand that engineers just as well as a new build,” Vanderslice said.
 
Hilton hopes to have 30 Canopy by Hilton properties open by 2017, he added.
 
“The ideal of doing accessible lifestyle is really focused on opening a broader set of demand,” Nassetta said. “That is ultimately about having more scale. When I think of this brand five to 10 years from now, I think of it having hundreds of hotels. That is possible because of price point and ethos we’re focusing on.”
 
Pollin said he expects there to be 200 Canopy properties at some point.
 
“I don’t want to be part of a brand that’s 50 or 60 hotels; I want to be part of one that’s a couple hundred hotels,” he said.
 
Patel said putting the product in the top 50 metropolitan statistical areas would provide a great foundation for future growth.
 
Holthouser said Hilton engineered the product for operating efficiency and solid gross operating profits. Canopy’s price point will be comparable to the price points of Hilton Hotels & Resorts and Embassy Suites with an operating model that will produce GOP close to that of Embassy Suites.
 
Pollin said he has a definite idea of how Canopy’s success will be defined.
 
“When we’re doing our underwriting on this brand, we’re going into markets where we feel the brand can be 105(%) (revenue-per-available-room) index,” Pollin said. “We think we can do better, and we expect to do better, but the cost model works if we can achieve that 105 RevPAR index.”

Updated at 7:30 a.m. Wednesday, 15 October, to reflect number of attendees at conference and the total number of letters of intent signed.

Click chart to enlarge.

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