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HAF "The change of use offers a premium location that would be difficult to achieve with new construction"

Nick Smart, Hilton's Vice President of Development for Northern and Western Europe, spoke at the Hospitality Asset Forum about how Hilton is transforming space to drive growth in Europe and beyond.

Hilton has been around for over 100 years. We operate about 7,000 hotels that , 1.1 million rooms in over 100 countries,

We have almost 3,000 hotels coming up, half of which are under construction across 18 brands, whereas we had only rolled out 13 in the EMEA region. This represents a small number of brands compared to the competition because we believe that it is necessary to concentrate on a few brands and what matters is the scale effect for the owners.

On the luxury side, the brands are diverse and varied: LXR Hotels & Resorts, Conrad and Waldorf Astoria. For the lifestyle: Canopy by Hilton and Motto by Hilton. Then, on the full-service side, there are two conversion brands: Curio Collection by Hilton, Tapestry Collection by Hilton and also Hilton Hotels and Resorts and DoubleTree by Hilton. Finally, on the focused service, we have Hampton by Hilton and Hilton Garden Inn.

This year, we remain on track to deliver approximately 5% net unit growth. What is a net growth unit? It's the number of rooms opened plus room additions minus everything that was terminated during the year. It's a very honest measure and for us it means a growth of 60,000 rooms per year. That's what we continue to do and we've done it in 2020, 2021: 60,000 a year.

In Europe, Middle East and Africa, we have 600 hotels, a little less than 1,000 if you take into account everything in the pipeline and the trading too.

What do schools, retail outlets, department stores, offices, grain stores, police stations, power stations have in common? Hilton has converted them into hotels. Large groups are very interested in conversion, but what we talk less about is the adaptive reuse of asset classes so that they become hotels. This may represent 5% of the portfolio of other groups, but for us it is more like 10%. I think it will increase to 20%.

The Waldorf Astoria Amsterdam was once a bank and then residential. However, you should not think that every bank can become an upscale or luxury product. Recently in Rotterdam we opened another example. It was a micro brand, 14 m² room with a 2 m² bed and the F&B offer is carried by Pesca. 

More and more, we are looking at city centre locations such as retail spaces that have converted, not only into hotels but also into mixed-use places.  This is exactly the kind of conversion we do.

This is adaptive use in Europe and we are not limited to the UK. We have done the same in Germany, France and Spain. There are other projects underway as well. I have to tell you that the retail world has changed completely and hotels are part of it. They are an integral part of the solution.

What we like about this approach is that you can have prime locations and it would be difficult to find that if it was a new build. In addition, financing is greatly facilitated. Finally, the local authorities are much more supportive because they want these neighbourhoods to live from these buildings. And this is shown, for example, by good planning permissions and they can change the very identity of the building. Also, what we like is sustainability and that is something that is built in beforehand.

A few years ago, an office building in Orly became a Hilton Garden Inn. It has two types of windows with two Venetian blind systems and rooms of about 24 m². It's the depth of the building that doesn't allow you to have a room, a corridor, a room. So what we are interested in is the window space, the general configuration, the ceiling height, the location of lifts, services and how we can deliver the product in this property.

What matters is that after a quick study, I can tell you if it will work for a rehabilitation plan. My colleagues are also experts in adaptive reuse. Give us your buildings, that's the message!

The first opportunities in this area are offices. Because often, after Covid, secondary office space will have to be reused, especially in relation to brand new products, new buildings. We have worked a lot on the conversion of offices. This works very well in hotels on the basis of the criteria mentioned above. In addition, department stores and also small shops in general are a great opportunity as well.

And then, of course, the regeneration of town centres, town halls are very proactive. Car parks can't be left aside. They must be reused, whether they are open or partially closed car parks. They are a great opportunity and a great target for us. What we also like is that these projects are simpler because with them you go with the flow, you are supported by the local authorities and you have public funding.

Mixed-use venues are a real trend for us in the hospitality sector. For example, for regeneration in city centres, but it also applies to transport hubs, such as train stations or conference centres.

We also have another unusual example which is part of our business, sports stadiums. The stadiums are only used 12 days a year, for example, so you have 343 days when they are not used and your aim is to fill them up on those days. It's a strategy that works very well for us. There are several sports stadiums built per year and often our rooms are completely integrated into the stadium and therefore become the rooms where guests can watch the games. For leisure, it's really very interesting. It works for sport, it works for entertainment and it also works as a meeting place. There is a commercial value attached to these units.

To conclude, my message to you is this: adaptive or mixed use is part of our strategic growth. It is 10% this year and I hope we will go to 20%. We can be creative! We have the brands, we have the expertise, so we can build on those examples. Hilton hotels are very profitable already with a very high RevPAR but, in addition, there are other effects on the whole programme because there is this sense of place, energy and a destination point where people want to go or spend time.

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