How Hilton pushes to expand pool of hotel owners
Leader of Unlocking Doors program says networking, education key for new investors
Home2 Suites is among the brands most popular for new hotel investors participating in Hilton's Unlocking Doors program. Pictured is the Home2 Suites by Hilton Savannah Airport. (Hilton/CoStar)
Hotel ownership is appealing for a lot of people with the available funds and a general interest in the franchise business model, but the level of industry-specific knowledge required to break in can be daunting for some.
That's where Hilton's Unlocking Doors program comes in, promising "educational programs, networking opportunities and access to affordable capital" since its launch in January 2024.
DeShaun Wise Porter, vice president of strategic pathways and recognition at Hilton, joined the latest episode of the CoStar News Hotels Podcast to talk about how that program is faring and where it's seeing successes. She said in the end, these efforts benefit not just Hilton but the industry at large.
"This is essential knowledge," she said. "The foundational knowledge [of investing in hotels] is interchangeable across all of these different brands."
Many of Hilton's entry-level brands for new hotel owners are more straightforward in terms of operations and development, such as Hampton Inn, Hilton Garden Inn or Home2 Suites, Porter said. For hotel owners buying and converting an existing property, they often look to Hilton's newer Spark brand, she added.
Asked whether there are commonalities seen among people who are looking to invest in the hotel business, Porter said it's often entrepreneurs with some experience in other forms of real estate who lack the operational experience of the hotel industry.
"The residential, housing side seems to be what we've been seeing more recently," she said.
One of the more rewarding aspects has been connecting new owners with experienced hotel owners, Porter said.
"It's helpful to really make sure that they have a cadre of industry leaders, other owners, mentors, if you will, to help them as they are facing new challenges or new opportunities as they're delving into this space," she said.
For the rest of the interview with Hilton's DeShaun Wise Porter, listen to the podcast above.
Travel Disruptors: Bringing the low-cost airline model to Türkiye
https://www.mckinsey.com/industries/travel/our-insights/travel-disruptors-bringing-the-low-cost-airline-model-to-turkiye
Pegasus Airlines has achieved considerable growth as a low-cost carrier. CEO Güliz Öztürk discusses its key strategic choices.
Güliz Öztürk joined Türkiye’s Pegasus Airlines in 2005, when it was a charter operation with 14 aircraft. She helped oversee the company’s transformation into a scheduled airline, with a fleet that now numbers more than 120 aircraft (not including a recent order for at least 100—and up to 200—more) and a route map that includes 53 countries. Öztürk became chief commercial officer of Pegasus in 2010 and was named its CEO in 2022.
In this installment of Travel Disruptors, Öztürk spoke with McKinsey’s Can Kendi about the distinctive business model choices Pegasus has made, the difficulty of applying a low-cost approach to long-haul travel, and Pegasus’s efforts to become a tech innovator in the airline sector. The following is an edited transcript of their recent conversation in Istanbul.
For more about the business of low-cost airlines, see further coverage in McKinsey’s State of Aviation 2025 report.
McKinsey: What has differentiated Pegasus since you joined the company?
Güliz Öztürk: The first and most important differentiator was the choice to bring the low-cost airline model to Türkiye. Türkiye has more than 80 million people—with a substantial middle-class population—and traveling by road from west to east takes about 22 hours by bus. So we knew it made sense on a certain level, and we now have 37 domestic destinations.
We did need to help people understand the low-cost model, though. This model is well known in parts of Europe and in the US, where it’s been accepted for decades. But for Turkish customers, we needed to invest a lot in explaining, for example, why they needed to pay extra to buy water and food on board the aircraft. People would send letters to us saying water should be free. We continuously explained that this would, in the end, be in favor of our customers, because it allows us to offer low fares while letting customers design their own experiences based on their personal choices.
We adopted the low-cost model very deliberately, sticking to basic principles. From top down, you can ask anyone in the company what our most critical success factor is, and they’ll all say “cost discipline” without needing to think twice. Everyone is invested in achieving this. In recent years, we’ve been among the world’s airline leaders in terms of cost per available seat kilometer.
Another differentiator for Pegasus was the airport we selected as our hub. At the time, in the mid-2000s, most airlines in Türkiye were flying out of the main airport, on the European side of Istanbul. We deliberately chose Sabiha Gökçen airport on the Asian side. That decision was questioned by a lot of people in the early days. We had to communicate to people that this airport wasn’t far away; it was a viable option. It ended up being a great decision for us. It’s an airport that’s easily accessible and less expensive to operate out of.
Istanbul, in general, is also well-positioned to carry connecting traffic—for instance, between Europe and the Middle East, North Africa, and Central Asia. We were able to gain a competitive advantage from carrying connecting traffic without threatening our on-time performance or the efficiency of our aircraft utilization. That gave us a real boost to increase our capacity and our load factors.
McKinsey: What’s your view on providing low-cost long-haul service? Would you ever expand to provide service to North America or East Asia?
Güliz Öztürk: This is one of the most frequent questions I get, both from my team and from our customers.
In my view, there are two reasons why it’s difficult to offer long-haul service using a low-cost model. One reason is turnarounds. We gain an advantage from having shorter ground times compared to the legacy carriers. We might turn an aircraft almost seven times in a day when they only do four. So in that day, we have the potential to serve many more customers, which also enables much cheaper fares. With long haul, this advantage goes away. You send the aircraft on a long flight, and then it comes back. You can’t get a competitive advantage from turning more efficiently.
The second issue is that, comfort-wise, with the number of seats we fill on an aircraft, I think we can’t have a flight of more than five or six hours. We would need a different type of aircraft with a different configuration, and we don’t intend to explore that right now. The beauty of Istanbul is that, in our view, there is potential to fly to 500 destinations that are within six hours, and right now we fly to fewer than half of those.
McKinsey: When you look ahead, what do you see as the key challenges for Pegasus? And what can you do today to prepare for them?
Güliz Öztürk: I think two areas are critical. One is technology improvement. Technology can transform everything. For instance, it’s my suspicion that, in the long term, airlines might become solely operators—connected to AI-backed sales platforms.
Last year, we set up an innovation lab in Silicon Valley. We’ve defined our focus, which is on efficiency and creating technologically integrated customer products. We want to be one of the technology leaders in our sector. Why? Because it will differentiate us. And because if we are late to adopt innovative technology, we’ll not be competitive in terms of efficiency or in creating differentiating products and services for our customers.
The second area is sustainability. Fuel consumption is the most emission-intensive aspect of the aviation sector. In my view, the near-term solution will be sustainable aviation fuel (SAF), because this is a drop-in solution that aircraft and airports can be ready for. This is likely the most efficient way to get to net zero by 2050.
We have our own climate transition road map at Pegasus. We are engaging with various stakeholders, including those in the public sector. But it’s likely that, at least in the near term, using SAF will increase the cost of operating an airline, and that will, in turn, increase costs for customers, so there’s a real challenge involved.
McKinsey: What has been the biggest challenge for you so far in your personal journey leading Pegasus?
Güliz Öztürk: The main challenge is simply being the CEO of an airline, because it is an extremely complicated role. You need a strategic mindset, and you need to drive innovation. But at the same time, you need to constantly delve into details—without getting bogged down in them.
An airline seems like it’s one company, but it’s more like a combination of companies. Technical operations, flight ops, aircraft finance, commercial—these are all very different components, and none of them can wait for you. Time management is important. Prioritization is important. Setting the culture is important. Safety is important. One day doesn’t look like another, and the job doesn’t end with just selling the seat at the right price to the right customer at the right time with the right cost.
I’ve worked on myself a lot. For example, I was a lot more assertive 15 years ago, trying to push and dictate more. But now I try to cultivate a learner’s mindset. I want to learn from all my interactions and communications. I’m trying to get people heard and to create a culture where they feel comfortable speaking up. It’s important to grow and evolve yourself.
Are low-cost airlines losing altitude?
https://www.mckinsey.com/industries/travel/our-insights/are-low-cost-airlines-losing-altitude
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Low- and ultra-low-cost airlines have tended to earn better returns than full-service carriers, but their performance has slowed in the United States. Are there lessons here for global airline leaders?
Airlines are often categorized into groups differentiated by their business models—in particular, their cost structures and revenue approaches:Legacy carriers (also known as full-service airlines) tend to offer multiclass cabins and a wide range of amenities, with many service features included in the ticket price. Examples include American Airlines, British Airways, and Cathay Pacific.
Low-cost carriers and ultra-low-cost carriers—a combined group known as (U)LCCs—tend to sell discounted base-fare tickets and then charge extra for a range of amenities. Examples include Southwest Airlines, Spirit Airlines, Ryanair, and AirAsia.
In the course of our research on airline profitability, we’ve found that (U)LCCs have typically delivered better financial returns than legacy carriers. This outcome has been true across geographies and over multiple decades.
But (U)LCCs in North America, one of the world’s largest airline markets, have recently been underperforming their legacy counterparts—falling behind, by some measures, on both growth and profitability. Changing economic conditions that influence passenger demand could, of course, push this trend in unexpected directions, but it’s worth investigating how such a major reversal occurred.
Which actions or circumstances clouded the picture for North America’s (U)LCCs? And what important business model implications should be considered by airlines of all types, in all regions?
Budget airlines have propelled industry growth and profitability
From 2012 through 2019, (U)LCCs generally outperformed legacy airlines across the globe with respect to ROIC (Exhibit 1). This trend was especially pronounced in the years leading up to the pandemic, when (U)LCCs benefited from structurally leaner cost bases than legacy carriers—thanks to simplified operations and lower overhead and labor costs.
Exhibit 1
A key factor in (U)LCCs’ success has been their overall cost structures. They often use streamlined route network designs, opting for point-to-point service over hub-and-spoke models, thereby enabling more efficient aircraft utilization and limiting the operational complexity of connecting passengers. Additionally, they tend to fly to secondary airports (which generally involves lower costs) and operate denser aircraft with a single-cabin layout (fitting more passengers on the same plane by narrowing the seats and decreasing legroom).
(U)LCCs have also excelled at generating incremental revenue at relatively high margins from optional services such as baggage fees, seat selection, and onboard refreshments. These services are unbundled from base fares, priced dynamically, and often purchased at the point of need. While legacy carriers have adopted similar unbundling strategies, (U)LCCs have built an entire business model around this approach, which reinforces their value-oriented positioning (thanks to low base fares) while bolstering financial performance.
Over the past decade and a half, (U)LCCs have grown at a faster rate than legacy carriers. Across most regions of the world, (U)LCCs’ share of total available seat kilometers (ASKs)—a measure of airlines’ carrying capacity—has significantly increased (Exhibit 2).
Exhibit 2
Discount carriers have stalled out in North America
While (U)LCCs outperformed legacy airlines in the period preceding 2020, more recent data show legacy carriers beginning to lead in ROIC in North America (Exhibit 3). Although (U)LCCs continue to grow modestly in terms of scheduled capacity, their growth rate now trails that of legacy carriers for the first time in many years.
Exhibit 3
While North America presents the clearest example of this shift, recent data suggest it is not the only region where changes are afoot. In Latin America, for instance, legacy carriers are now leading (U)LCCs with respect to ROIC (though some have improved their financial positions through postpandemic bankruptcy restructuring). There are indications that the North American trend may not be isolated, and that it could reflect broader changes in the industry’s competitive dynamics.
This raises two important questions: What caused this novel divergence in North America? In light of this development, what implications should global airline leaders consider?
What happened to North America’s discount airlines?
Based on interviews with airline leaders, public statements from across the industry, and McKinsey research, we find that the slowed performance of North American (U)LCCs—in comparison with their better-performing legacy counterparts—has resulted in large part from three factors: increased labor costs, a divergence in spending between higher-income and lower-income travelers, and a concerted effort by full-service carriers to mimic (U)LCCs’ popular offerings while providing better value and improved onboard experiences.
Cost convergence between (U)LCCs and legacy airlines
The postpandemic pilot and labor shortage has increased labor prices for all airlines. For legacy carriers with broadly higher pay scales, this increase was more muted as a percentage of total existing costs. For (U)LCCs, labor costs as a percentage of operational expenditures increased at a far faster pace (Exhibit 4). This increase resulted in a drastic reduction in the cost differential between (U)LCCs and legacy carriers.
Exhibit 4
Growth in premium demand—paired with softer demand for budget options
Postpandemic US consumer spending has become increasingly reliant on households earning more than $250,000 a year—the upper 10 percent by income. These households have increased their spending above inflation levels. Travelers from these households are more likely to value products traditionally associated with legacy carriers (such as premium-economy or business class seats, airport lounges, and other upmarket offerings).
Meanwhile, on the other end of the consumer-spending spectrum, inflation has cut into the discretionary spending budgets of lower-income households. When these households spend less on travel, (U)LCCs feel the effects more acutely than legacy carriers do.
Legacy-carrier products targeting (U)LCC traffic
Legacy carriers have launched their own versions of “basic” economy tickets. United Airlines has reported that more than 15 percent of its ticket sales fit into this category. These products directly target (U)LCC customers, using price points and fare rules that mimic (U)LCC offerings.
Despite the overall softening of budget demand, legacy carriers have succeeded with budget products by offering basic fares within a broader premium-brand experience—combining low entry prices with expansive route networks, robust loyalty programs, and strong brand familiarity. This strategy has not only attracted budget-conscious travelers but also enabled legacy carriers to upsell passengers to higher-margin options and ancillary services, enhancing overall revenue performance.
What implications should global airline leaders consider?
Based on the state of order books for narrow-body aircraft—a broadly indicative measure—(U)LCC growth still appears to be outpacing legacy-carrier growth outside North America, in line with its past trajectory (Exhibit 5).
Exhibit 5
But the same factors that influenced (U)LCCs’ fortunes in North America could certainly show up in other geographies. Global airline leaders can monitor whether similar developments are brewing in their own regions. Additionally, they might draw a few broad lessons from the shift in North America:
*- Cost control is crucial. For airlines of all types, focusing on meaningful cost control will always be a proven path to improving profitability. In today’s environment, rising labor costs—particularly for pilots and technical staff—are placing pressure on operating models that were once highly cost-competitive. While these dynamics could be difficult to reverse, there are opportunities to improve efficiency through better utilization, scheduling, and resource deployment. A systematic approach that is grounded in detailed cost diagnostics, bottom-up planning, and implementation across operations could help airlines identify areas of untapped productivity. Amid continuing volatility, building a more resilient cost base will be critical to sustaining performance.
*- The value story matters. Customers like cheap fares—and they want a good experience when they fly. In North America, legacy carriers have been investing in customer experience, for instance, by improving their on-time performance, offering robust streaming or seat-back in-flight entertainment, providing free Wi-Fi, and serving more appealing free snacks and drinks. Many of these enhancements are available to all customers, including those flying on restricted economy tickets. If customers are presented with an attractive price point, they will likely pick the carrier with the better customer experience.
*- Customer segments can be captured using different approaches. A traveler may choose a full-service, nonrefundable ticket for a week-long trip to Paris and then, a couple of months later, opt for a basic budget fare for a weekend jaunt to Las Vegas. How can an airline best serve both needs? In North America, legacy carriers have introduced basic-economy products—replicating (U)LCC offerings—by creating low-cost, unbundled fares within the same cabin as their full-service products. Similar unbundling strategies have been adopted by legacy carriers worldwide, but there is a notable divergence. North American legacy carriers have largely managed the low-cost challenge within a single airline brand, but legacy carriers in other regions have often responded to low-cost competition by creating group-owned, low-cost carriers under different branding (such as Lufthansa Group’s Eurowings, Singapore Airlines’ Scoot, and Qantas’s Jetstar), while, in many cases, also unbundling their mainline products.
As airline business models continue to converge, the industry may be approaching a turning point. The North American example could portend not just a short-term shift but a deeper change in how airlines compete. Legacy carriers have shown they can adapt by borrowing tactics from (U)LCCs while using broader networks and premium services to compete across customer segments. For (U)LCCs, competing on price alone may no longer be enough, and they could be better served by offering a clearer value proposition—maintaining their low-cost edge while selectively improving the customer experience in ways that build loyalty. The most successful airlines, across categories, will be those that stay agile, rethink their business models regularly, and focus on what customers truly value. As the lines between airline types blur, enduring differentiation becomes even more vital.
DUHC&S | Strategic Hospitality Consulting & Advisory
We transform hospitality and tourism businesses through strategic solutions, operational efficiency, and comprehensive renovation . With over 40 years of experience working with brands like Hilton, Hyatt, Sheraton, and Sonesta , we enhance asset value and profitability through:
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