Hilton hopes to attract thrifty millennial travelers with its new brand Motto
Motto is not your standard double bedroom. Armed with a number of features including wall-beds, trendy restaurants and functional furniture to save space, Hilton aims to "freshen up" the ordinary hotel experience with Motto.div > div.group > p:first-child">
"Our research shows that 40 million U.S. adults are traveling to urban destinations, and that 70 percent are looking for a more affordable way to travel to these destinations. A good proportion of these guests are willing to trade off room size to be in the very best locations with great local design, and a strong food and beverage offering," Tripp McLaughlin, global brand head for Motto by Hilton, told CNBC.
Hilton said it conducted extensive research which showed that travelers who opt to stay at a hostel do not like rooming with strangers and often choose a hostel just so they can be close to their friends and family. Industry experts said cost is also forcing function. While the U.S. hotel operator did not disclose the average room rate, it did say Motto will be in the affordable category for those cost-conscious travelers.
McLaughlin said London is among the first few cities where Motto will be unveiled. U.S. cities include Savannah, San Diego, Boston and Washington, D.C.
Hilton's launch of its fifteenth brand comes as pressure intensifies on hotel operators to get younger travelers invested in their brands and loyalty programs.
Shares of Hilton have fallen more than 13 percent this year. Suntrust's team doesn't think Motto's launch will move the stock in the near term.
"Probably does not do too much for the stock," C. Patrick Scholes, managing director of lodging and gaming at Suntrust, told CNBC.
The larger headwind for hotel stocks has been higher interest rates. Plus, latest industry data shows a decline in hotel demand. STR Global reported last week that U.S. revenue per available room fell into the red in the month of September for the first time since 2010.
Industry watchers said offering younger travelers new hotel options is an important strategy hotel giants like Hilton and Marriott will continue to deploy to drive longer term growth.
In Skift's U.S. Experiential Traveler 2018 survey of hundreds of 18 to 34 year olds, 51 percent said they still prefer branded chain hotels and just 23 percent said they preferred independent boutique hotels.
Note: Hilton CEO Chris Nassetta will be on CNBC's "Power Lunch" on Wednesday, Oct. 24at 1p.m. ET for an exclusive interview.