Hotel del Coronado is going to become a Hilton

The storied Hotel del Coronado will soon become a Hilton hotel, joining the huge hospitality company’s smaller Curio Collection of more unique, upscale properties around the world.

But don’t expect to see a large Hilton marquee suddenly adorn the facade of the 129-year-old, red-roofed Victorian building. While Hilton’s physical presence will be understated, the company’s marketing muscle and its 64 million honors program members will significantly broaden the reach of a property that already is widely known.

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The Blackstone Group, which owns the hotel, will remain as owner but will rely on Hilton to manage the Coronado property. (Fox 5 San Diego)

The 757-room oceanfront resort, which includes separate tower rooms and luxury cottages and villas, is expected to formally become a part of the Curio inventory by the end of this month. Curio is a newer brand that Hilton debuted three years ago and currently includes 39 four- and five-star hotels, three of them in California, with several more in the pipeline. The Hotel La Jolla is the only other San Diego Curio property.

Others include the Boulders Resort in Arizona, The Darcy in Washington, D.C., and the Renwick in New York.

The Blackstone Group, which owns the hotel, will remain as owner but will rely on Hilton to manage the Coronado property. Hilton will be replacing KSL Resorts, which has managed the Hotel del Coronado since 2003 and at one time had an ownership stake in the property.

“It’s been truly an independent hotel and we’re not looking to change it in any way,” stressed Mark Nogal, global head of Curio for Hilton Worldwide. “What we’re doing is coming in as an operator to help strengthen the performance of the hotel, and the owners get the buying power behind the Hilton organization.

“So quite literally, there will just be a couple plaques near the front door because we don’t want to change that independent identity that the Del has. It will always be the Hotel del Coronado.”

The changeover, which began to germinate earlier this year, comes about eight months after a planned sale of the hotel by Blackstone to China’s Anbang Insurance Co. was scuttled.

The Hotel del Coronado was one of 16 luxury properties that were part of Strategic Hotels & Resorts, which Blackstone was planning to sell to the Beijing-based firm. While 15 of the 16 properties were ultimately sold, the Hotel del was pulled from the portfolio after a Treasury Department committee was said to have had concerns about its proximity to the Coronado Naval Base.

The move was especially surprising to longtime broker and hotel analyst Alan Reay of Orange County-based Atlas Hospitality Group.

“I’ve never seen anything like that before, where you have a restriction on who you can sell a hotel to,” said Reay, who values the hotel at $800 million to $1 billion. “It is hard to find who the real ownership is behind Anbang, and there was a concern that high-level government officials had a stake in the company.”

Just last month, Anbang announced that its chairman, Wu Xiaohui, was stepping aside temporarily for “personal reasons.” The announcement came not long after it was reported that Wu had been detained by police as part of a Chinese government investigation into his company.

Reay said the new Hotel del Coronado alliance with Hilton makes sense for a number of reasons, including Blackstone’s relationship with the company, which it purchased in 2007. It has since pared its stake in Hilton to just 10 percent.

Normally, a hotel’s affiliation with a name brand like a Hilton or Marriott can help raise the profile of a property, although that’s less a benefit for the Hotel del Coronado, long known for its connection to major films and such Hollywood luminaries as Marilyn Monroe and Jack Lemmon, said Reay. But there are still other benefits, he said.

“We’ve moved to a lot of online travel agents like Expedia and TripAdvisor, and as an independent hotel, you have no bargaining power with those online travel agents,” said Reay. “But with Curio there could be a significant savings on those commissions that could help pay for the fees to be part of the Hilton system. So it’s definitely an economic decision — the combination of those savings and the affiliation of Hilton’s reservations system and tapping into those loyalty members who travel through the Hilton honors program.”

Blackstone said it was drawn to Hilton because of its proven record in operating hotels, and the Curio Collection was an especially good fit.

“It’s the strength of the operating team, the breadth of their distribution, and obviously, the soft branding of Curio maintains the independent feel of the hotel while still getting the benefits of Hilton platform,” said Matt Anderson, Blackstone’s senior vice president for global affairs.

Anderson was unable to disclose what new improvements may be coming to the hotel as a result of Hilton’s involvement, saying only that “we are evaluating making additional investments in the property.”

According to Hilton’s Nogal, the ownership spent more than $11 million last year on improvements, and an additional $15 million already has been invested this year on such renovations as new carpeting and painting in hotel corridors, furnishings and upgraded lighting.

“Because we have a history with Blackstone and they know how we operate, what they’re looking to do is take a property that has performed well and for us to take it to a better place and drive more profits and revenues,” he added.

Built in 1888, the Hotel Del Coronado has had multiple owners over the years, from sugar magnate John Spreckels during much of the first half of the 20th century to M. Larry Lawrence, responsible for a sizable expansion of the hotel rooms.

In 2011, Blackstone rescued the hotel from a potential default on more than $600 million in loans when it invested cash to reduce the hotel’s debt and became a majority owner.

lori.weisberg@sduniontribune.com

(619) 293-2251

Twitter: @loriweisberg