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Hilton’s big bet on luxury is all about its most loyal clientele

By Lebawit Lily Girma, Bloomberg News

Ask a luxury-minded globetrotter to name their favorite hotel brands and chances are you’ll hear some combination of the following names: Four Seasons Resort & Club, Aman Resorts Group Ltd., Marriott International Inc.’s Luxury Collection and the Ritz Carlton Hotel Co. LLC, or Rosewood Hotels & Resorts LLC.

Now, Hilton Hotels Worldwide Holdings Inc. is doing its best to get on that list. Some loyalists would say it already belongs there — if only for its best-known Waldorf Astoria Hotels & Resorts and Conrad Hotels & Resorts brands.

But even Hilton’s top brass concedes that the hotel behemoth’s reputation lies mainly with road warriors rather than luxury seekers. While Marriott has been busy expanding into luxury all-inclusive resorts in the Caribbean and Ritz-Carlton yachts, Hilton has spent the past year focusing on new corporate-leaning brands, such as Tempo by Hilton.

“Here’s the irony — Hilton didn’t have a full category’s worth of luxury brands a few years ago,” says Dino Michael, senior vice president and global head of Hilton’s luxury brands. “But if you look back before today’s proliferation of luxury brands, Hilton was the international hotel brand,” he says, citing its prominence from the 1950s to 1970s. “We have legitimacy in this space, we just changed focus for a while.”

That’s what Hilton is aggressively pushing to change. The corporate hospitality giant has been on an acquisition and partnership spree to expand its luxury lifestyle portfolio. Its hope is not just to grow in a segment that’s sustained high demand since the pandemic, but to offer its most loyal clientele — 190 million Hilton Honors members, including lots of those road warriors — more enticing ways to spend their hard-earned points.

“We are going from 100 to 500 luxury hotels in 2024,” says Chris Silcock, president of global brands and commercial services. “That’s going to be phenomenal for our customers and will continue to feed our loyalty program —it’s a huge, huge year for us.”

Hundreds of luxury hotels in one year

Hilton’s concerted luxury push started in February 2024, when it signed an exclusive partnership with Small Luxury Hotels of the World, a collection of 560 luxury boutique hotels in 90 countries. Most of those are now bookable with Hilton points — think a beachfront all-inclusive suite at Hermitage Bay in Antigua and Barbuda, a luxury farmhouse stay with mountain views at a Himalayan lodge, or a swanky terrace suite at Nobu Hotel in Marbella, Spain. If you’re booking in points, it’ll cost you: The all-inclusive Caribbean suite goes for 1.3 million points per night in mid-November.

Also in February, Hilton partnered with outdoorsy resort brand AutoCamp. By the time summer travel season rolled around, Hilton loyalists could book the brand’s customized Airstreams and luxury tents, which are set near U.S. national parks in such locations as Zion in Utah and Yosemite in California, from around 70,000 points per night.

Then came the acquisitions. In March, Hilton spent $210 million on Graduate Hotels, a collection of roughly three dozen stylish hotels strategically located near university campuses, which this year will add locations near Princeton and Auburn Universities. By acquiring the majority controlling interest in Andrew Zobler’s Sydell Group, it then added expansion rights to its boho-luxe NoMad brand, which Hilton envisions growing from one London flagship location to as many as 100 hotels around the world. (So far there is no firm pipeline of openings, Hilton confirmed.)

The NoMad deal is especially sweet. While most hotel conglomerates manage the properties in their portfolios without owning them outright, Hilton will do neither for NoMad; it will only offer real estate development services for the brand while keeping it in the mix for Hilton Honors members.

Rethinking legacy brands

Meanwhile, Hilton is trying to up the ante for Waldorf Astoria and Conrad as it rapidly expands both brands. Its latest Waldorf outposts are jaw-droppers: It opened 50 seafront villas and six restaurants on an ultra-secluded private island in the Seychelles in late January, all amid lush forests, lagoons and coral reefs. The Waldorf Astoria Maldives Ithaafushi, meanwhile, opened in 2019. It sprawls across three islands, with overwater villas perched above the Indian Ocean. Each has its own dressing room with a glass floor and infinity pool, plus access to the country’s largest spa.

Waldorf Astoria’s flagship New York location will reopen this year, too, after a highly complex redevelopment spanning several years. After that, it will open a Waldorf Astoria in London — it’s being built into Admiralty Arch, a landmark building that neighbors Buckingham Palace and was originally used by the British Navy. In total, 15 new Waldorf Astorias and Conrads are in the pipeline, all set to open by 2026.

The company’s efforts to further upscale these brands are already helping Hilton’s bottom line. In its Aug. 7 earnings call, it shared that revenue per available room climbed 7.5% in the second quarter compared with the same period a year earlier for the Waldorf Astoria brand, and 8.7% for its Conrad brand. Meanwhile, brands such as Hampton by Hilton, which is focused on more of an upper-midscale market, posted a 1.8% increase in that measure.

A growing, profitable segment

All this is happening at a time when major hotel brands outside of Marriott are playing a big game of luxury catch-up. Intercontinental Hotels Group PLC has acquired Six Senses Resorts & Spas and is bringing its top-notch Regent Hotels & Resorts to the U.S.; Hyatt Hotels Corp. has bought brands such as Alila and Miraval, plus Apple Leisure Group and Mr & Mrs Smith. But as of late, Hilton has been the most aggressive in its luxury pivot.

Silcock says it’s just a way to give his loyalists what they increasingly want. “Many of these customers may spend their traveling life staying in many of our other brands for business or for different occasions,” he says. “But they all like to dream of luxury. The more options we have to offer them, the better.”

Of notable importance are the 30 million new Hilton Honors members who joined the loyalty program in the last year, and who Silcock now needs to retain.

Despite Hilton’s extensive efforts, some experts say it still isn’t doing enough. Bjorn Hanson, adjunct professor at New York University’s Jonathan M. Tisch Center of Hospitality, believes the new acquisitions and partnerships will help fill Hilton’s luxury hospitality portfolio, but not completely.

“Luxury did especially well during COVID, and now it continues to do especially well,” Hanson says, giving credence to Hilton’s strategic timing. But with no other sector of the hotel industry showing greater occupancy gains this year than these five-star stays, Hanson says Hilton is limited to few acquisition opportunities — a challenge, when what it really needs to be doing is buying up more brands with larger portfolios to flesh out its own portfolio.

Hanson gives credit, however, for Hilton rapidly doubling the number of its Waldorf Astoria locations to 30 — an average of one new location each year, the pandemic and supply crises notwithstanding — since announcing the start of the Waldorf Astoria Collection in 2006, branded after its flagship Waldorf Astoria hotel in New York City.

An uphill climb

Hanson isn’t the only one predicting an uphill climb for Hilton. Erich Joachimsthaler, branding expert and chief executive officer at strategic business reinvention firm Vivaldi Group, says that competing directly with Marriott —which has seven well established luxury brands — will require Hilton to better differentiate itself. If it wants to get there, Joachimsthaler says, it’ll need to be the one defining luxury.

“For Hilton to have any chance whatsoever, given they don’t have any scale in luxury right now, they must figure out these points of differences,” he says, noting that today’s luxury consumer isn’t merely seeking amenities that are available at any other brand.

Then again, Hilton’s top brass talks less about winning over market share than simply making its members happy. Take Michael’s obsession with opening a five-star hotel in Paris that his loyalists could book with points: He keeps it at the top of his priority list because Hilton Honors members have it at the top of theirs.

“The road warriors are staying with us because they want to accumulate their points to spend them somewhere they can celebrate and enjoy,” he says. “We know where the demand is.”

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