Millennials Spending Power Has Hilton Weighing a 'Hostel-Like' Brand

Hilton CEO Nassetta Says Don’t Expect M&A Anytime Soon

Hilton Worldwide Holdings Inc., the world’s biggest hospitality company by number of rooms, may add a new brand that focuses on small, cheap hotels in big cities, Chief Executive Officer Chris Nassetta said.

“There’s potential for something that has more of an urban flair, more of a micro-hotel,” Nassetta said in an interview in Berlin. “We haven’t made a decision to do anything in that space, but it’s certainly one of the things we’ve been exploring.”

Hilton, owner of the Waldorf-Astoria and Hampton Inn brands, aims to meet increasing demand by young travelers seeking no-frills, affordable lodging. Large hoteliers face increasing competition for budget accommodation from online providers such as Airbnb Inc.

The brand would offer “hostel-like” accommodation for younger guests, with lower prices and less service, Nassetta said. Hilton prefers to develop new brands itself, rather than making acquisitions, he said.

Spending by young overseas tourists around the world is forecast to rise to $336 billion by 2020 from $230 billion in 2014, according to Stay Wyse. Half of millennials spend at least 1,000 euros ($1,100) during a trip, according to a November 2014 report by the company that represents the global youth-travel industry.

That spending power is drawing investors. Fonciere des Regions of France is acquiring buildings that will be operated by Meininger Holding GmbH, a unit of Mumbai-based Cox & Kings Ltd. Invesco Real Estate agreed in 2014 to pay 60 million euros for as much as 23 percent of hostel operator Generator, which will be used for new projects.

Hilton, with 747,000 rooms, is the world’s largest hotel company, ahead of Marriott International Inc. and InterContinental Hotels Group Plc, according to data compiled by STR. Hilton on Feb. 26 announced a plan to break itself up into three entities to create a company focused on operating hotels, a real estate investment trust focused on owning properties, and a time-share business.

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