It’s a battle royale in the hotel orbit for adding budget brands — well, at least more budget-friendly than most of their legacy offerings — to the company line-up.
But each hotel giant is taking a different strategy when it comes to bragging rights for their respective outlook on these brands.
Hilton CEO Christopher Nassetta has labeled his company’s so-called “premium economy” brand Spark as the most disruptive thing ever done in the brand space in company history. Nassetta also forecasted the conversion-friendly Spark brand will eventually be Hilton’s biggest brand by property count.
A little more than a year after the first Spark debuted in Mystic, Connecticut, Spark ended 2024 with 96 hotels — already larger than some more established, pricier Hilton brands like Waldorf Astoria, Conrad and Canopy, per the company’s annual filing with the U.S. Securities and Exchange Commission.
A 2023 analyst report by Truist Securities noted thousands of Spark hotels are possible, as is the potential for the brand to be a “category killer” in its space akin to what Hampton did in terms of being a more premium offering in its own brand sector.
Over at Hilton’s cross-town rival Marriott International, there’s similar optimism regarding the U.S. rollout of City Express, a Mexico-based brand Marriott acquired in 2023. But Marriott’s optimism around the affordable hotel segment isn’t centered on any one brand.
While pre-Marriott City Express focused on the Caribbean and Latin American region, Marriott has since expanded it to the U.S. and Canada as part of a broader global midscale strategy that has also seen the launch of Four Points Flex by Sheraton in markets beyond the Americas. Marriott is also launching StudioRes, an extended-stay brand set to launch in the U.S. and Canada later this year.
The first City Express in the U.S. opened this month in Duluth, Georgia. Additional properties for the conversion-friendly Marriott brand are in the works for New Orleans, Chicago, Orlando and Ontario, Canada, among others. More than a dozen City Express hotels are slated to open in the U.S. and Canada this year, and there are more than 45 signed agreements in place. City Express currently has more than 150 open hotels across five countries.
“The introduction of City Express by Marriott properties in the U.S. represents a pivotal moment for Marriott International as we continue to expand our footprint in the midscale segment,” Noah Silverman, Marriott’s global development officer for the U.S. and Canada, said in a statement.
Labeling it a “pivotal moment” certainly shows strength and optimism for the brand’s future. But it’s also not the same “game changer” and “most disruptive thing we’ve ever done” kind of chest beating that took place when the first Spark hotels started to open.
What gives in this tale of two affordable hotel chains?
Don’t read this as some kind of development team subduing of the City Express brand.
For starters, while the traveling public might park Spark and City Express in a similar category, they technically aren’t eye-to-eye. Spark sits at the high-end of the economy segment while City Express is in the midscale segment — where Marriott’s StudioRes and Four Points Flex also operate.
Hilton’s more recent midscale brand launch is LivSmart Studios, an extended stay brand. Hyatt also has newer offerings in this space with Hyatt Studios and Hyatt Select.
“Given the sizable amount of owners already under the other brands of these operators, the extension to midscale allows these existing owners, as well as new owners, the opportunity to build in this segment, helping drive long-term unit growth,” Dan Wasiolek, a senior equity analyst at Morningstar, said via email. “Specifically on City Express, it currently has about 150 hotels, which is 1%-2% of Marriott’s total portfolio, so while it can help expand the overall brand advantage for Marriott, it might not move the needle too much.”
Additionally, Spark is Hilton’s go-to, global brand for premium economy while Marriott is taking a regional approach between City Express and Four Points Flex, meaning there are geographic limitations for now on where each brand can grow to. If you’re a hotel owner in Japan operating in the midscale space and wanting to do a deal with Marriott, you’re going to likely turn to Four Points Flex compared to an owner in Toronto who would have City Express as their go-to midscale offering.
Marriott leaders also appear to be taking further regional expectations into consideration as they expand their midscale offering around the world.
“What City Express classically is, relatively speaking, is more of a new-build [product] in [the Caribbean and Latin America but] is much more, overwhelmingly a conversion opportunity in the U.S.,” Leeny Oberg, Marriott’s chief financial officer and executive vice president of development, said earlier this year in a press roundtable.
“Similarly, we've got [the Asia Pacific region] thinking about midscale. What does India need for midscale, and what should it look like? We've got a great array of brands, but we need to make sure that it fits the broad highway of midscale but really matches up to what those customers are looking for.”
While Hilton might be focused on creating a category killer in terms of their new affordable offering, Marriott seems intent on striking the right regional notes with each of their new midscale brands.