IPO response pleases Hilton’s Nassetta
11 FEBRUARY 2014 8:51 AM
Chris Nassetta has overseen plenty of changes in his six-plus years at the helm of Hilton Worldwide.
Editor’s note: This is the first in a three-part Q-and-A with Hilton Worldwide CEO Chris Nassetta. In part two he discusses the company’s growth plans. In the third installment Nassetta discusses how Hilton is using technology to accommodate today’s traveler.
LOS ANGELES—Monumental changes at Hilton Worldwide Holdings during the past seven years—including a sale to Blackstone Group, the relocation of its headquarters to Virginia from California and an initial public offering in December 2013—have led to a stronger company that is attractive to investors, according to President and CEO Chris Nassetta.
Nassetta, hired shortly after Blackstone acquired Hilton and took it private in 2007, said during an interview conducted at last month’s Americas Lodging Investment Summit that he is happy with the way the IPO has played out thus far.
“The pricing and the performance following the IPO has been very good,” he said, adding executives are pleased with how Hilton is valued relative to its peers.
Hilton priced its initial public offering at $20 per share after the markets closed 11 December 2013 and sold more than 117 million shares, raising $2.34 billion. /Article/12820/Hilton-sees-strong-investor-interest-after-IPO
HLT shares closed at $21.50 after the first day on the market. Shares closed on 10 February at $21.65, according to the Hotel Stock Index. Hilton’s market capitalization is valued at $21.1 billion, according to Google Finance.
Nassetta said the key to success has been the company’s ability to leverage its standing in the development community to increase unit growth.
“We’ve done a very good job of completely transforming what was a good company with potential and what is a great company that is really executing and delivering and performing at the top of the market,” Nassetta said. “It was nice to see that the reception (reflected) the transformation and the fact that Hilton Worldwide today is a lot different company than Hilton Hotels Corporation was six years ago.”
Nassetta said there’s been no difference in anything the company is doing now that it’s public—outside of him having to spend more time in the public eye.
“There’s certainly a difference in my time allocation, and there should be in the sense that I need to lead the relationship—with a lot of help from our CFO, investor relations and other people—with how we interact with the buy-side community, with the institutional investor community,” Nassetta said. “In terms of the underlying strategy of how we run the business, what we’re doing and (how we’re) executing against our strategies, what we’re doing against innovation, there is no difference.”
Keep looking ahead
The company’s goals remain focused on next month and next year instead of tomorrow, the CEO said.
“Great, long-term strategies well executed will take care of the short term,” he said. “That’s how I’ve done this when I was a public-company CEO in the past. That’s exactly how I intend to do it with Hilton Worldwide.”
Prior to joining Hilton, Nassetta served as president and CEO of Host Hotels & Resorts, a publicly traded real estate investment trust based in Bethesda, Maryland.
After years of enduring questions about when the company could go public, Nassetta said he was happy to have that behind him so the focus can be on running the business.
So, when will Hilton go private again? “No time soon,” Nassetta said with a laugh.
The CEO said all hotel companies will benefit from the hotel industry’s strong fundamentals, which are in good shape for the foreseeable future.
“You effectively have very good demand growth … and I expect we’ll continue to have (that) matched up broadly with very light capacity additions,” he said. “When you have more demand than supply, it’s good for the growth in the business.”
Nassetta said he is encouraged by the reversal of the European hotel industry as it is showing signs of growth.
“I have every expectation there will be modestly positive growth,” he said. “Asia/Pacific continues to be stable and strong. The Middle East continues to be reasonably stable, as is Latin America.
“The world is consistently stable to good or improving a little bit,” he said. “When you average it all together, it might suggest things are modestly improving on a year-over-year basis, which obviously we like to see.
“If you look at a world where demand growth looks like (it does) and broader (gross-domestic-product) growth is going to continue on a global basis to pick up a bit, I do believe it’s going to be quite a while before capacity additions are going to start to pick up in any meaningful way, so that means we’ve got some pretty good running room in the business.”