Hilton expects to add to its representation in Australia, New Zealand and the South Pacific islands by using multiple brands in the company’s lineup.

Hilton Worldwide Holdings’ presence in the South Pacific is a work in progress. The Virginia-based hotel giant is knocking off goals one step at a time, according to Ashley Spencer, VP of operations-Australasia.

Speaking during a break at the recent HotelsWorld Australia-New Zealand conference at the Hilton Sydney, Spencer said the company is aggressively looking to add to its 19-property portfolio in the region by focusing on brands other than the core Hilton chain.

Thirteen of those hotels are in Australia, including three DoubleTree by Hilton hotels that joined the system in 2013 (two in Darwin and one in Alice Springs). One of the other properties is the Sydney Hilton, a core owned asset for the company, according to Spencer. Hilton has more than 4,000 hotels worldwide.

The region never reached the abyss other regions reached during the global financial crisis. That has helped the company grow.

“We saw a slowdown but not to the extent of other regions,” Spencer said. “We’ve been insulated, which is positive.”

The 2006 reunification of Hilton—when Hilton Hotels Corporation acquired Hilton International after being separate for 40 years—was a big step for expansion in the Australasia region, according to Spencer.

“It gave us some grunt in the market place,” Spencer said. “(Guest loyalty program) Hilton HHonors became exponentially a bigger machine.”

Prior to the reunification, Hilton International controlled global territory outside North America and the Caribbean and only offered the Hilton Hotels brand. Hilton Hotels Corporation, meanwhile, acquired a number of midscale and upscale brands—including DoubleTree, Hampton Inn and Hilton Garden Inn—when it merged with Promus Hotels Corporation on the last day of 1999. Those three brands have been instrumental in Hilton Worldwide’s global expansion.

“The thing that it has assisted us with is providing the brands that we can use to grow,” Spencer said. “We didn’t have the select service brands (before 2006). We’re finally getting some traction in the market now.”

Spencer cited Western Australia as an example as Hilton earlier this year announced plans for new-build DoubleTree properties in Perth and Freemantle.

“Some locations we’ve been working hard over the years,” Spencer said. “In Perth, we’ve been there a long time with Hilton but always knew we could get something above it and below it (on the chain scale list). It’s been good, it’s been very positive.”

The company added the rebranded DoubleTree properties in the province of Northern Territory last year.

“Now with flags in the ground, it’s an easier proposition for people to understand,” Spencer said. “We’ll have three more by end of year and six more not long after that. We’ll go from zero to 12 (DoubleTree properties) in two and a half to three years. For Australia, that’s huge.”

Spencer said DoubleTree’s flexible design is appealing to owners because it can reflect local culture and lifestyle—two important elements in each of Australia’s nine provinces.

“It sits on firm brand cultures, which is important … and the cookie on arrival,” Spencer said. “It doesn’t matter if you are sitting in Mumbai or Darwin, that’s a big deal. “

The executive said expanding into the luxury segment in the region is a primary goal.

“We’d love to have a couple of Conrads across Australia—Sydney and Melbourne come to mind immediately,” Spencer said. “Australia from a provincial point of view can carry international brands. But you need to have critical mass quickly.”

A regional approach

Australasia is one of four sub-regions in Hilton’s Asia/Pacific stable that is guided by Martin Rinck, executive VP and president, Asia/Pacific.

Spencer said the regional heads get together four to five times a year to dissect the business.

“It’s quite synergized, I must say,” Spencer said. “The pipeline is a big factor in the discussions we have, and the news there is good.”

Spencer said there are 189 projects in the Asia/Pacific region’s pipeline, and they include the Waldorf-Astoria, Conrad, Hilton, DoubleTree and Hilton Garden Inn brands.

“The biggest challenge is the equation between land costs, build costs and rate of return,” Spencer said. “Land where you want to have assets is historically expensive.

Labor costs are off the charts in some parts of the country.

“Second tier and third tier towns represent an opportunity because those equations change,” he added. “Demand is absolutely there.”

With growth comes the need for people, and that can pose challenges in some markets, Spencer said. Provincial China is among the biggest challenges, even with the company having a hotel school to help educate employees.

“There are also many cross-border cooperations,” Spencer said. “We host a finance incubator program in which eight or nine finance directors come to Australia and put them into a variety of situations to teach them the Hilton way.”

The company’s business model in the region includes franchising and management contracts. Deals that include third-party management companies are rare, Spencer said.

The first franchise deal in the region was in French Polynesia four years ago.

Opportunities in New Zealand

Spencer said New Zealand also has opportunities for Hilton expansion. It was hit harder by the global downturn than Australia.

“New Zealand is in a pretty good place—there are opportunities,” Spencer said. “That’s where we’re in DoubleTree country. There are one or two locations left, such as Wellington, where there isn’t a Hilton and we’ve been working on them.”

But there is a limit to how many hotel rooms the country can absorb.

“The objective in New Zealand is to have a network of properties where every destination you can be in is represented,” Spencer said. “That’s three or four on the north island and three or four on the south island.”