Hilton charts path forward after celebrating centennial
 
Hilton charts path forward after celebrating centennial
13 JUNE 2019 8:32 AM

Not satisfied with simply hitting the 100-year-old mark, Hilton executives believe there is plenty of space left for their company to expand. In a video interview with HNN, CFO Kevin Jacobs discussed the financial and practical benefits of continued growth.

REPORT FROM THE U.S.—Getting to 100 is a major achievement for Hilton’s leadership team, but it’s not a finish line as executives continue to lay out plans for growth with new brands and markets.

Speaking with Hotel News Now during the NYU International Hospitality Industry Investment Conference, CFO Kevin Jacobs said opportunities abound for the company.

“The company’s growth rate is really strong,” he said. “We’re entering new countries every day. We’re now in 113 countries, and we have 30-odd some additional countries in the pipeline, so that’s really exciting. And growth provides opportunities. It provides opportunities to serve more customers; it provides opportunities for our people, and obviously there are financial benefits to growing as well.”*

One avenue the company is focusing on for growth is the launch of new brands, most recently the Motto by Hilton and Signia Hilton brands. He noted his company’s approach to brand growth has been measured and thoughtful.

“I think it’s been one of the hallmarks of Hilton that we always look to the strategic benefits and the customer benefits first when we decide to enter a new market or a new price point or a new type of brand,” he said. “So (the new brands) are all really meaningful in their own way. Some will be higher volume brands.”

Purpose-driven culture
During a general session at that same conference, Hilton President and CEO Chris Nassetta said the company’s history continues to inform its future. He believes Hilton is at its best when it remains purpose driven in the way founder Conrad Hilton had originally intended.

“He started the business with a noble premise,” Nassetta said. “He believed travel could make the world a better place, and bring people closer together.”

Nassetta noted the company has done a lot of work to improve itself since Blackstone purchased it in 2007—in a deal he noted was the most profitable private equity buy ever. Conrad Hilton’s ethos has served as the company’s North Star throughout that process.

“We grounded everything in rebuilding our culture back to the purpose upon which we were founded,” he said.

Hilton President and CEO Chris Nassetta (left) speaks with CNBC’s Andrew Ross Sorkin at the NYU International Hospitality Industry Investment Conference. (Photo: Tom Weis)

Nassetta reiterated his position that Hilton isn’t looking at moving into the home-sharing space for growth, at least for now, but he does think there’s a “convergence” of hotel companies dipping their toes into the sector.

“I’m not hard headed,” he said. “If our customers are saying to me, ‘We need and want you to be in it,’” then Hilton will do that, Nassetta said.

But he believes it’s a significant challenge to ensure “consistency and quality” in home sharing in a profitable way.

He said he holds similar opinions on the co-working sector.

“We’ve got plenty of meetings space and opportunities still to maximize what we have without necessarily creating a product to compete directly” with co-working companies, he said.

Like many global companies, Hilton faces some challenges in China, which has been viewed as a massive growth market for the company before recent trade wars and tariffs traded between the U.S. and Chinese governments.

But Nassetta said he remains confident in Hilton’s position and growth potential in China.

“The Chinese middle class will only keep growing,” he said. “And the Chinese middle class and all classes of people in China want to see the world.”

He noted he doesn’t foresee a future where the Chinese government curtails the population’s desire for travel, and the ownership structure for Hilton properties in China is likely to play out in the company’s favor.

“We own no hotels in China; we manage or franchise 100% of that estate,” he said. “It’s 100% owned by Chinese nationals, with many state-owned enterprises. So that does, we think, mitigate against a bunch of the risk.”

He noted the Chinese government, which took control of Anbang Insurance Group and by extension the Strategic Hotels & Resorts portfolio, has indicated to him the intention to be long-term holders of the Waldorf Astoria even as it plans to sell off the other hotel assets. He said that property will soon return to its full glory after closing to convert rooms to luxury condos.

“It’s eerie to walk through, now, since parts have been completely gutted down to the steel beams,” he said.

LatAm opportunities
In an interview with Hotel News Now during the recent Hotel Opportunities Latin America conference, Ian Carter, president of global development, architecture, design and construction, said his company sees significant opportunities for growth across Latin America and the Caribbean.

“We’re approaching 150 hotels through the region and will be adding another 90 to 100 in the next four years,” he said. “It’s a significant region for us. We’ll have 40,000 rooms even if we didn’t sign another deal.”

Carter noted establishing stronger footholds in regions like Latin America serve as a demand tailwind for the entire Hilton distribution system, particularly through the Hilton Honors loyalty program. Latin America and the Caribbean have a highly desirable mix of leisure and business demand, and the company continues to grow its brand presence there, he said.

“We’ve got nine brands present in the region, and with the additional deals in the pipeline we’ll be adding another five,” he said. “That really tells you it’s more of a mature destination. So we now have brand choice within that region and a good presence in key countries like Mexico, Brazil, Columbia and Peru.”

Hilton has been working on growing its footprint in the all-inclusive resort segment, which was spurred forward via a deal with Playa Hotels & Resorts. Carter said so far he’s happy with the results of the three operating Hilton properties through that deal, and he believes that segment will continue to grow with added demand from American and European travelers.

He noted Hilton isn’t solely reliant on the Playa deal for growth in all inclusive, with plans to open a new resort in Cancun under different ownership.

The Hilton brand also saw another big win recently with the reopening of the Caribe Hilton in San Juan, Puerto Rico, which has been closed since the island territory was hit by hurricanes in late 2017. That hotel is owned by Park Hotels & Resorts and managed by Hilton and saw a $150 million restoration.

“It’s an iconic property, and the storm damage was significant,” he said. “The team did an incredible job to get it back to full operational status with many improvements. I think it’s great to see that back open and back on the map. And it’s great for the island because it employees a lot of people.”

The Caribe Hilton in San Juan, Puerto Rico reopened in May after closing due to hurricane damage in 2017. (Photo: Hilton)

Global growth is not without its challenges through. Carter said the company is continually working on establishing a bigger footprint in Brazil, which represents a huge potential pool of guests with more than 200 million people in the country.

“The barriers to entry (in Brazil) are high, but there’s a benefit to having built out the Hampton and Hilton Garden Inn models” in the region, he said, noting local players are more willing to work with brands after they show their ability to succeed.

Juan Corvinos, VP of development in Latin America and the Caribbean, said the company had six deals in Brazil last year through its deal with Atlantica Hotels.

*Correction, 14 June 2019: This story has been updated to correct an incorrect quote.

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