Why Hilton thinks Spark can become its biggest brand

Hilton said its newest brand, Spark by Hilton, is poised to be its biggest brand yet as CEO Chris Nassetta revealed some of the thinking around its development.

The initial round of openings will be in the US but speaking on the company’s fourth quarter earnings call, Nassetta explained why the opportunity was much greater.

“I’m as excited about this as anything else we’ve done because from a customer point of view, we are going to give them a high-quality, consistent experience at this price point that does not exist in the market because of the way we’ve engineered the retrofit of these properties,” he said.

“And this will ultimately take some time, but it can happen quickly. It will be thousands -- it’s the biggest segment in the US It’s the biggest segment in Europe. I mean, it will be thousands -- it should be, over time, the biggest brand we have in terms of number of units.”

Launched just last month, Spark by Hilton is being touted by the hotel operator as being a disruptive premium economy brand, which will be a 100% conversion brand.

These hopes for Spark come as Hilton revealed that its trading performance is inching closer to 2019 peak levels.

For the three months ended December 31, 2022, the hotel operator posted net income of $333 million on revenue of $2.44 billion, up significantly from Q4 2021’s net income of $148 million on revenue of $1.84 billion. For the full year, Hilton recorded net income of $1.26 billion, more than three times the $407 million posted for 2021. Revenue was $8.77 billion, up from $5.79 billion the year prior.

Revpar for Q4 2022 increased 24.8 per cent year-on-year — up 7.5 per cent compared to 2019 — and for the full year 2022, it shot up 42.5 per cent compared to 2021 and 1% shy of 2019 levels, with the improvement attributed to increases in occupancy and average daily rate (ADR).

Spark by Hilton had more than 200 hotels in various stages of negotiation as of February 3, 2023. As at the end of 2022, Hilton's total development pipeline stood at more than 2,820 hotels representing 416,400 rooms.

Turning to its outlook for the wider business, Hilton said revpar for Q1 2023 is expected to increase between 23 per cent and 27 per cent compared to the first quarter of 2022 and net income is projected to be between $271 million and $287 million. For the whole of 2023, revpar is expected to increase between 4 per cent and 8 per cent compared to 2022 and net income is expected to be between 1.38 billion and 1.45 billion.

Nassetta added: “When we talk to our owners, each individual hotel is making more money than they were at the peak of 2019 and that’s driving optimism. From a fundamentals of the industry point of view, we continue to feel very good about things and we think we’re going to have another really good year.”