New Hilton Graduate is Smart...

Yesterday, Hilton CEO, Chris Nassetta , announced here on LinkedIn that Hilton will be spending $210 million to acquire Graduate Hotels in what is a smart move to capitalise on a growing trend.

BACKGROUND

The group, founded in 2014, operates 33 hotels in university (“College”) towns & cities in the US and the UK.  Nasetta was quick to lay down Hilton’s ambition for the brand… “We believe the addressable market for the Graduate brand is 400-500 hotels globally.”  

 “We believe the addressable market for the Graduate brand is 400-500 hotels globally.”

Graduate Hotels has been one of the USA’s fastest-growing hotel companies since it’s launch a decade ago, providing a “collection of welcoming, one-of-a-kind hotels full of local history, charm and pop culture nostalgia located in the most dynamic and unique college towns”.  

This is a unique acquisition for Hilton as they have more typically built their own brands over theist decade, launching new brands such as Waldorf Astoria Hotels & Resorts, Curio Collection by Hilton, and Canopy by Hilton.

TARGET SEGMENTS

Whilst the name may suggest a student-centric focus, Graduate Hotels caters for and targets a much broader audience.

• Primary: - Young professionals (25-45 age range) seeking a trendy and experience-driven stay.
• Secondary:- Business travellers seeking convenient locations.- Families looking for unique cultural experiences.- Recent college graduates.

CAPITALISING ON TRENDS 

The acquisition feels like a good strategic fit for Hilton, signalling that they are looking to capitalise on 2 key trends:

1) Growing influence and affluence of a younger demographic:

• Portfolio Expansion: Hilton gains a foothold in the lifestyle hotel category targeting a younger demographic.
• Complements existing brands: Graduate fits alongside other Hilton brands like Canopy by Hilton, which caters to experience-driven travellers.
• Primed for Growth: Hilton's size, distribution and loyalty program can help benefit & scale Graduate Hotels.

2) Trend for more authentic and localised experiences:

• The Graduate Hotels' Story: Their focus lies in university towns, with a specific focus on local culture and history. This aligns perfectly with a growing traveller demand for unique experiences.
• Complements Hilton's growth strategy: Hilton launched Canopy by Hilton in 2017, as a move into the lifestyle segment, with an aim to cater more towards localisation.
• Market Demand: Hilton's 2024 Trends Report highlighted the increasing desire for authentic experiences. 

POTENTIAL CHALLENGES

As ever with an acquisition, there will be challenges ahead.  One of the key challenges that faces Hilton will be in ensuring that Graduate Hotels remain unique as they introduce Hilton brand standards across various aspects of the business.  Maintaining balance between brand identity and Hilton’s established standards will be key.

Part of the challenge will be maintain the integrity of the brand , ensuring there is a local focus whilst scaling nationally and internationally.  It’s imperative that Hilton does not dilute the core elements of the brand and its authenticity.  Storytelling will play a key role here, not just externally to customers, but internally so that there’s real clarity within the business about what the brand stands for and what is core.  Storytelling extends to many aspects, from recruitment, to training, and the whole market positioning.  

SUMMARY

This is an acquisition that closely follows the acquisition of Moxy Hotels, a young lifestyle brand known for its millennial-focussed and social atmosphere, by Marriott in Aril 2023.

The move signifies Hilton's acknowledgement of shifting traveller preferences as younger generations begin to exert more influence with greater purchasing power. However, successfully integrating Graduate Hotels will require careful strategies to preserve the brand's core value of local authenticity, whilst leveraging Hilton's resources to enhance the guest experience without compromising on the core values of Graduate Hotels.