Hilton tweaks Tru to keep development costs

A fast-paced launch of the Tru by Hilton brand hasn’t kept its management team from tinkering with the prototype in an attempt to keep development costs in line with the projections announced when the brand was unveiled.

Tru has 16 properties open and 470 deals in various stages of development, said Alexandra Jaritz, global head for the brand, during a break at the recent Hunter Hotel Conference.

“We are going to be opening more than 50 this year, and by 2020, we hope to have more than 300 hotels open,” she said.

When Hilton executives introduced Tru in January 2016, they said the projected development costs for a single Tru hotel would be between $83,000 and $85,000 (excluding land) per room. Jaritz said development costs have been slightly higher than originally anticipated, but the brand is taking steps to reduce them.

“We came in a little bit higher than we expected, but what we did—even while Oklahoma City, our first hotel, was under construction—we started value-engineering,” Jaritz said.

Hilton brought in developers, owners, general contractors, architects and engineers to rein in the costs, according to the brand leader.

“We went in and immediately started saying, ‘Where can we (value-engineer), and how quickly can we translate those savings into real time as these hotels are being built?” Jaritz said. “Since having gone through that exercise, we have gotten the numbers to where our owners are now telling us, ‘We don’t believe there is any more you can cut.’ That shows how nimble we have been.”

Rising construction costs since the January 2016 launch played a role in the increased development price tag, Jaritz said.

“It’s not just for Tru; It’s an industry challenge,” she said. “(There’s) the labor costs, then you have the (hurricanes) and all these other events, which are further driving up costs.

“We were, frankly, a victim of general increasing costs that were not something that we could have anticipated,” Jaritz added. “So we had to actually value-engineer even deeper as a result of these things. There was a confluence of things that were occurring, some of which were completely out of control, in fact a lot of which were out of our control.”

As general contractors get to know the brand, they can further value-engineer it because familiarity brings efficiency, she said.

The lobby of the Tru by Hilton in Cheyenne, Wyoming, which opened in August 2017. (Photo: Tru by Hilton)

There have been a several areas that have been fine-tuned, including the façade, the exterior overhang, simplifying the pattern in the flooring to cut installation time, and simplifying the ceiling structure in the lobby, Jaritz said.

“It’s really bits and pieces; there wasn’t one thing that was really driving it,” Jaritz said. “We continue, even as we launched, to have a 15% to 20% differential in construction costs versus Hampton, which was always our goal, and continues to be where we are right now based on estimates that we’re seeing.”