From re-energizing its brands to streamlining operations to aggressive global expansion, the iconic hotel company is on a mission.
Chris Nassetta respects and revels in the 91-year history of Hilton Worldwide and its place as a global hotel brand icon. That said, the nearly three years he's served as president and CEO of Hilton have been marked by a missionary zeal to lift the company and its 10 brands to heights they've never been before.
“We've been very busy in the past three years restructuring, reorganizing and transforming the company,” says Nassetta, who joined Hilton at the end of 2007, a few months following The Blackstone Group's acquisition of the company. “In the decade before the Blackstone purchase, Hilton was in a phase of merger and acquisition. They put together the right pieces so there was full segmentation from top to bottom and a full geographic segmentation.”
But what Nassetta found was a company of many parts not unified through a single culture or mission. Hilton's previous corporate headquarters in California was different from its Memphis office (the former home of Promus Corp., the brand company it bought in 1999) and different from Hilton International headquarters in England.
“I likened it to getting into a boat with the oarsmen rowing out of sequence,” says Nassetta. “The boat moves, but it isn't moving as fast and doesn't look as good as if it is in the proper cadence. We had incredible people, incredible talent, an incredible legacy and incredible brands. It just wasn't integrated and aligned with an enterprise-wide culture and view.”
Nassetta found among employee groups more than 20 different value statements. What's more, the economy and hotel industry were taking a nosedive from which it is just now recovering. Instead of retreating, Nassetta stepped up the transformation. “My attitude was instead of losing the focus on the work we had to do to restructure the company, we should accelerate the changes in the company,” he says.
Rethinking its brands
Beyond aligning corporate cultures, the top job for Nassetta and his executive team was to address brand issues, particularly the Hilton brand. “While it has been performing very well with meaningful market share gains over the last three or four years, we have a lot further to go. It's the No. 1 brand in customer awareness in every region of the world, but by far it's not the largest in terms of footprint in many parts of the world.”
The company also is refining its marketing and product offerings to reflect changing customer expectations. With the meetings business remaining soft, particularly among big groups, Hilton is adjusting its offerings to attract and accommodate smaller groups. “We listen to meeting planners to see what can make their lives easier,” says Paul Brown, president of global brands and commercial services at Hilton.
Brown also oversees Hilton's product innovation group that processes feedback from customers and owners to improve and create new products, services and brands. Home2, Hilton's mid-scale extended-stay brand announced two years ago, is a good example.
“Customers told us they love the Homewood product but wished it was also available at different price points,” says Brown. “And our owners said there are development opportunities in this segment if we could create a product at a lower cost to build and with less required acreage. We developed a prototype, announced it in January 2009 and today we have nearly 70 signed contracts.”
Expanding the global footprint
Hilton reacquired Hilton International in 2006 after a 42-year separation. During the years in which the two companies were separate, Hilton in the U.S. was prevented from expanding its brands overseas. Now that it is free to grow around the world, Hilton is committing additional personnel and resources to jump start its global growth strategy.
“We have these great brands and a great international brand in Hilton, but they had not been fully exploited,” says Nassetta. “Of the 120,000 rooms in the pipeline when I got here, 15 percent were international and 10 percent of what was under construction was international.
“A lot of our transformation efforts involved creating alignment and focus and removing excess layering in the organization so we would be more effective and efficient,” continues Nassetta. “In achieving those efficiencies, we were able to redirect a lot of our resources into the brand area and into development.”
Today, the worldwide Hilton pipeline includes 133,500 rooms, 43% of which are international. Now 65% of rooms under construction are outside the U.S.
“There's great awareness of the Hilton brand in South America, which we believe we can use as leverage to introduce some of our other flags,” says Ian Carter, president of global operations and development for Hilton Worldwide.
Growth vehicles in South America will be Hilton, Doubletree by Hilton (as it is known outside North America) and Hilton Garden Inn. Development of Hampton Inn will follow.
Europe, where Hilton has 70 hotels and 14,500 rooms in the pipeline, represents almost unlimited opportunities for nearly all of the company's brands, especially Hampton, Hilton Garden Inn and Doubletree.
In Italy, the company has been able to open properties from all three brands, plus Hilton, in the past three years. Turkey, which had a Hilton in Istanbul for decades, will have 20 or so properties from several Hilton brands by the end of 2011, says Carter.
Hampton, which was introduced to Europe two years ago, has five properties open in the United Kingdom and 10 more in the European pipeline. Hilton Garden Inn has 36 signed deals.
The Middle East is another region in which Hilton has had a long presence. Most of the company's new growth will be in full-service and luxury, says Carter through the Hilton, Doubletree and Waldorf-Astoria flags. Hilton Garden Inn has potential, too, especially in Saudi Arabia, where one property is open.
“India is a significant hot spot for Hilton,” says Carter. “We'll have four or five hotels open by the end of the year with a strong pipeline (more than 20 properties and 5,000 rooms), including both full- and focused-service hotels.”
China is Hilton's top international development target. While the Hilton brand has had a presence in Shanghai and Beijing for many years, the company only had four hotels in the country as recently as the end of 2008. A year later, it had 11 open with 50 properties and 18,000 rooms currently in the pipeline.
North American opportunities
The U.S. remains Hilton's main expansion engine, particularly in the focused-service arena and in conversions of full-service hotels. Despite the soft economy, Hilton has more than 600 properties and 75,000 rooms in its U.S. pipeline.
“The little amount of full-service development we're doing today are mostly conversions for Hilton and Doubletree,” says Bill Fortier, senior vice president of development for the Americas. “There are a lot of non-branded or under-branded hotel owners saying, ‘I need extra lift on my rate and occupancy and I need a rewards program. I need what you guys have.’ We're also getting some traction in North America with our Conrad and Waldorf brands.”
Ed Watkins is editor of Lodging Hospitality.
HILTON WORLDWIDE AT A GLANCE
Number of Properties: More than 3,600 hotels
Number of Rooms: 600,000
Number of Countries: 81 countries
Number of Brands: 10
Number of employees: More than 130,000