Hilton to Open 100 Budget Hotels for Business Travelers

As part of a plan to expand its hotel rooms by 50% by the end of the century, Hilton Hotels Corp. announced Thursday that it will open 100 hotels geared toward value-minded business travelers.

The new line of Hilton Garden Inns marks a departure for the Beverly Hills-based hotel and casino company, which in the past has largely concentrated on luxurious, full-service hotels such as the Beverly Hilton and the Waldorf-Astoria in New York.

“This sector is growing much faster than first-class hotels,” Hilton spokeswoman Jeanne Datz said. “This will be a first-class, mid-priced product line.” Room rates will range from $60 to $80 a day, she said.

Hilton stock rose $4.50 to $69 on trading of 417,600 shares, more than twice the three-month daily average of 163,900.

Many of the 90-to-250-room hotels will target “secondary markets”--suburban areas and smaller cities where potential for growth is greater, according to James Abrahamson, Hilton’s senior vice president of marketing.

About four-fifths of the Hilton Garden Inns will be new facilities, with the remainder being converted from existing hotels. Each new hotel will cost between $6 million and $10 million to build, Abrahamson said, and will be financed jointly by Hilton and local partners. Hilton hopes to have 25 under construction by year’s end.

With the total number of Hilton Hotel rooms hovering at about 95,000 in the last 10 years, analysts welcomed the announcement as a sign the company is trying to expand. Abrahamson said Hilton plans to add 50,000 rooms in the next four years with the new line and the purchase of other hotels.

It’s hard to see how they are going to grow “when they’re not growing rooms,” said David Wolfe, an analyst at Oppenheimer & Co. “Now this may be changing.”

But Wolfe wondered whether the hotel chain had targeted the right growth area. Although the mid-range hotel business is among the fastest-growing, it is also attracting competitors hoping to copy the success of Host Marriott Corp.’s Courtyard by Marriott chain.

“There are just so many players coming into this market,” Wolfe said. “It may be getting saturated.”

Hilton experimented with this market segment in 1990 with four CrestHil by Hilton Hotels, including one in Valencia. Although the recession quashed additional CrestHils, customers like them, Abrahamson said. Occupancy rates at the four hotels range between 75% and 85%. “We know the product works,” he said.

Hilton Garden Inns will forgo such hotel luxuries as banquet halls and valet parking but will provide business centers with computers and fax machines, sports lounges and small retail stores.

Rooms in the new hotels will have plenty of work space, Abrahamson said, with power outlets near desks to allow people to easily plug in laptop computers.