Hilton’s growth prospects in Central, Eastern Europe
 
Hilton’s growth prospects in Central, Eastern Europe
11 FEBRUARY 2020 9:22 AM

Hilton officials are focusing on growing in the Central and Eastern Europe region with a strategy of bringing in its flagship brand to major cities and then filling other locations with Hampton, DoubleTree and soft brands.

LONDON—Despite being franchise-heavy in global terms, Hilton is likely to move more into management agreements the farther east in Europe it goes, according to Marybelle Arnett, VP of development for Central and Eastern Europe.

Arnett said her company’s growth in the region is driven by a focused plan on expanding its flagship brand in major markets.

“Our strategy when entering new markets has been to launch with our universally recognizable Hilton brand in gateway cities, then explore opportunities with our other brands depending on what the market needs,” Arnett said during an interview with Hotel News Now at the Hilton Bankside London.

A Tennessee-born expat, Arnett joined Hilton in 1999. At that time, the company acquired Promus Hotel Corporation, which had approximately 1,000 hotels, most of which were franchised.

Through the end of the third quarter of 2019, Hilton had nearly 440 hotels under nine brands in operation in Europe, with more than 90,000 rooms, while its pipeline of 190 assets comprise approximately 31,000 rooms.

That compares with Central and Eastern Europe, where there are approximately 120 (approximately 23,100 rooms) hotels in operation and more than 50 (approximately 8,700 rooms) hotel in some stage of development, Arnett said.

Not one size fits all
Hilton’s properties in Central and Eastern Europe are either franchised or managed, Arnett said.

She said various countries in Europe require different approaches and structures for deals

“We work with owners to determine which model makes sense. Our focus is always to ensure we’re delivering return on investment for our owners,” she said.

Germany, for example, is ripe for franchises, she said, even if leases dominate there. Typically lease agreements are a business model that many of the major international hotel firms prefer to shy away from.

But ultimately, successes in the region lead to more growth, sometimes through word of mouth in the investment community.

“Serbia is a great example of where a Hilton-flagged hotel has been so successful it has promoted other investors to reach out,” Arnett said.

By and large, investors are taking their time, Arnett said.

“Investment capital has not shifted in this patch. It is local money, more entrepreneurial and from those successful in other businesses,” she said.

In 2016, the flagship Hilton brand opened a franchise in Podgorica, the capital of Montenegro, but it is in neighboring, much-larger Croatia that Arnett has seen the greatest run of openings and investment interest of late.

“All of a sudden Western Europe and the U.S. have found Croatia, which is a beautiful country. We partnered well in (capital) Zagreb, with a DoubleTree, Hilton Garden Inn and Canopy (by Hilton) all franchised with the same owner,” Arnett said.

Croatian projects in the pipeline include a massive renovation of a Hilton in Dubrovnik and construction ongoing for a resort-oriented Hilton between Opatija and Rijeka on Croatia’s north coast.

Poland is one of the most successful markets in Arnett’s region.

“The market is perfect as there is money to be found, construction costs are reasonable, the Polish like to travel, others love to visit and there are lots of great management companies to partner with,” Arnett said.

One project opening in Poland in 2020 with franchisee Zdrojowa Invest & Hotels is the Hilton Świnoujście Resort & Spa in the Baltic Coast city of Świnoujście.

Elsewhere, development costs make finding the right hotel project a bit more challenging.

“Construction costs are high in Hungary,” she said.

Those costs will not stop Hilton looking at the country, she added.

“Budapest is thriving,” Arnett said, who added Hilton Garden Inn debuted there in June 2019.

Not every brand…yet
One brand that is not coming soon to Eastern Europe is Tru by Hilton, Arnett said. Brands such as Hampton, Hilton Garden Inn, DoubleTree and Hilton are the focuses, she added.

Arnett said in her total region there are 35 trading Hampton hotels with a further 30 in the pipeline, while across all Europe there are 87 Hamptons, with a further 70 or so in development.

The first Hampton in Europe was the Hampton by Hilton Corby/Kettering in the English country of Northamptonshire, which opened in March 2009.

“We’re seeing tremendous momentum behind our Hampton, Hilton Garden Inn and DoubleTree by Hilton brands in Central and Eastern Europe,” Arnett said. “At the same time, we continue to debut new brands across the continent, such as Europe’s first Tapestry Collection properties opening this year in Madrid and Paris.”

Overall, Arnett has high hopes for Hilton’s opportunities in the region.

“We do not see growth slowing down over the next five years,” she said. “People like new places, and for many travelers Central and Eastern Europe is new.”

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