President and CEO Chris Nassetta likes the direction of Hilton Worldwide as it puts behind its headquarters move and a bad economy.
Editor’s note: This article was originally posted on 30 September 2010. The article was chosen as part of Hotel News Now’s look back at 10 years of the hotel industry.
MCLEAN, Virginia—Much like the rest of the global hotel industry, Hilton Worldwide faces challenges as 2010 winds down. None, though, are bigger than recuperating some of the average daily rate given back during the recession.
President and CEO Chris Nassetta said during an exclusive interview with HotelNewsNow.com at Hilton headquarters on 8 September and subsequent conversations that group business will help drive an ADR recovery.
Led by a robust recovery in revenue per available room—most publicly traded companies have announced they expect RevPAR increases of 6% to 8% this year—the hotel industry is further along Recovery Road than most imagined a year ago.
“We’ve been a bit surprised by the rapid pace of the industry recovery,” said Nassetta, who added at this time last year most companies hoped for 2010 to come in flat or with modest growth at best.
Nassetta declined to reveal any of Hilton’s precise performance numbers. The privately held company is not required to report the information as it was when it was publicly traded.
“I would say we feel that our relative performance has been very strong versus our major competitors from a RevPAR point of view,” Nassetta said.
When it was suggested that most publicly traded hotel companies are reporting RevPAR growth of 6% to 8%, Nassetta didn’t shy away.
“We’re in that neighborhood,” he said. “Obviously different geographies are going to vary, but we’re likely to be in that range.”
Nassetta knows an uptick occurred with corporate travelers.
“Those travelers have come back more strongly than we would have guessed,” he said. “That’s a result of people having more confidence than they once had in the economy, from a corporate customer point of view.”
So, as corporate rate negotiating season 2010 unfolds, there’s only one way to go.
“Our conversations, as we get into the meat of the season on our corporate negotiations, have been that we are going to move rate up,” Nassetta said. “We’re going to be pushing our corporate customers very hard to see rate improvements. It is still too early to say exactly where those end up, but I think others in the industry have said somewhere in the order of 4% to 7% increases. I think that’s generally in line with our thinking as well.”
A rate revival is within grasp, particularly as individual markets take off. Nassetta pointed to New York City and London as prime examples.
“As we build back occupancies to high enough levels, we’re starting to see an opportunity to shift the mix of our business. We hope to also move rates up in a number of segments and geographies,” he said. “New York is a great example where you’re running 95% or even above in occupancy. It allows you to shift out some of your business to higher-rated business as well as to move rates up. And then, as the economic recovery seasons, you’re going to see opportunities to do that in many more markets around the country.”
One challenge Hilton overcame during the past 12 months was the move of its corporate headquarters to McLean, Virginia, from Beverly Hills, California. Nassetta said the dust has settled well.
“It’s worked out even better than we thought it would,” he said. “There were a lot of reasons that we did it, and we knew that, at the same time there would be benefits, it would be disruptive. But in the end, it’s been less disruptive than we thought.”
Nassetta said approximately 80% of the employees invited to move east accepted the invitation. “My impression is they’ve settled into the area very well, regardless if they are in new roles or the same roles,” he said. “I think we’re up and operating. It’s seamless at this point.”
The ultimate reasons behind the move:
- Cost-saving opportunities of being in Virginia versus Beverly Hills. “Those savings have been greater than we thought,” Nassetta said.
- A better time zone in which to conduct global business.
- Being more proximate to more Hilton employees. Hilton’s largest corporate location is in Memphis, Tennessee; it also has large offices in Dallas, Orlando, London, Dubai and Singapore. “If you think about our proximity to all our team members, in terms of the numbers of people, we’re much closer to them now,” he said. “The theory was we’d have easier access and more communication, and we would see each other more. We also knew it would help us build the enterprisewide culture we wanted, and I think all of that has been far better than we thought.”
- Having access to and retaining more talent. “We also wanted to attract some new talent to add to the incredible base of talent we already had, and we believed the Washington, D.C., market would be fertile ground for us. That assumption has worked out as well; even better than we thought.”
Facing brand creep
While Nassetta said a big challenge for Hilton has been to transform the business from one that operated in silos to a single entity, the company is also intent on keeping its 10 brands as individual as possible.
“We do focus on brand creep,” he said. “It does not worry me. We have the best brand teams in the business, and they are very focused on making sure they are each distinctive and stay within their swim lanes. Now, as is the case in segmentation in any industry, there are gray areas in between some of the brands. But for the vast majority of the business that we do, I think that our brands end up attracting demand from distinct customers who are specifically looking for what they have to offer.”