CEO Chris Nassetta talks about going public, working with Blackstone, ramping up international development, launching two new brands, rolling out straight-to-room mobile technologies, and how running Hilton is like solving a complex equation
Chris Nassetta has a sore back. He stifles a groan as he gets up from his chair and stands where the photographer directs him. As the shoot starts, the president and CEO of Hilton Worldwide explains how his exuberance got the best of him the day before when one his teenage daughters injured her ankle playing soccer. Without thinking, he scooped her up and made his way to the car so he could get her to the doctor. When he was halfway to the parking lot, his back was already crying out in pain.
The twinge he felt wasn’t anything serious (just a muscle strain) and neither was his daughter’s injury (a sprained ankle), but it resulted in a rare moment of limited mobility for a CEO who has led his company through one of the biggest years in its already storied history, a year in which Hilton executed a wide range of deals, new product offerings, and initiatives that are paying off big for franchisees and investors.
Under Nassetta’s leadership, Hilton Worldwide entered 2014 riding the wave of a history-making IPO. This was the direct result of a massive turnaround project that he embarked on seven years and one massive economic downturn ago. In that time, Nassetta remade Hilton’s culture, relocated its headquarters across the country, and ramped up international development to turn the company into a global powerhouse that justified the Blackstone Group’s $26 billion investment in it. The rest of this year has been spent building on that momentum, by introducing two new brands, innovating on mobile technology, and establishing the biggest pipeline in just about every major market around the globe. Here’s what Nassetta had to say about Hilton’s big year.
SINCE BLACKSTONE BOUGHT HILTON AND YOU CAME ON AS CEO, YOU’VE BUILT THE LARGEST HOTEL COMPANY IN TERMS OF ROOMS AND RAISED $2.35 BILLION IN AN IPO. WHAT GOT YOU FROM THERE TO HERE? At the time, plenty of people thought Blackstone’s purchase was one of the last trains out of Dodge and that it had overpaid. What they missed and now can see is that it was the result of a clear view of opportunity from the beginning. The underwriting thesis behind this deal was that many of the right pieces of this company had been put together but were not being optimized.
We had good brands, and there was a lot of potential for market share if you connected everything the right way, but there were gaps in our brand portfolio, and the commercial engines that drive revenue were disjointed. Customer satisfaction scores were not where we wanted them. From a growth point of view, we had an OK U.S. story, though we didn’t lead in size or pipeline. Outside the U.S., we were at the bottom of the pack. We had the No. 1 brand in customer awareness in every major region of the world, but we were anywhere from fourth to eighth in existing supply, pipeline, or rooms under construction. So Hilton had geographic distribution, scale, and darn good chain scale distribution, and if we could get it all working, we knew we would be a juggernaut.
IF YOU COULD SUMMARIZE, WHAT WERE THE BIGGEST KEYS TO THE TURNAROUND? Hard work. There were some challenging moments in the process, but we started with the basics, which was getting everybody focused on True North. For our shared vision, we used a phrase that our founder, Conrad Hilton, coined in the 1950s, which is to fill the earth with the light and warmth of hospitality. We also established a common mission and unified sets of values and key strategic priorities, which changed the culture of the company, and that’s what made the rest happen.
We had to be intensely focused on performance, and being in the middle of the pack wasn’t good enough. We needed to expand the family of brands, improve customer satisfaction, and connect the dots with all our revenue engines. As a result of those things, we would accelerate growth, particularly internationally, because the more places that we were, the more that we could serve any customers’ needs wherever they wanted to be in the world and the more loyalty we would drive.
If you look at our cumulative performance over the six years of being private, we led on the top line, margins, bottom line, and new unit growth and expanded the company by 40 percent, even during the worst of times. Since we’ve been public, every quarter, we’ve been outperforming our competitors.
Hilton Worldwide is 95 years old this year. There are probably 50 years where we dominated the business, and we invented everything. Then there are 20 or 30 where we got to the king-of-the-hill status and became complacent. Today, this company is back to firing on all cylinders and that’s because our people want to win.
GIVEN WHERE THE ECONOMY WAS IN 2009 AND 2010, WERE YOU EVER CONCERNED THAT YOU WOULDN’T BE ABLE TO LET THIS PLAY OUT, ESPECIALLY GIVEN HOW LEVERAGED THE COMPANY WAS? No. In 2008, when most of the industry was starting to falter, we had a very healthy year in terms of growth. Like everybody, though, we started to see the declines manifest themselves in our business, but our declines were a lot less than our major competitors’ because we were running the business really well. We needed to. We had a lot more leverage, and we had more necessity to be really buttoned down.
But it’s my job to worry, and there were times that I had concerns. What CEO wouldn’t have concerns when the lodging industry as a whole was experiencing historic levels of decline? But I never lost faith because we had a great partner in Blackstone that had confidence in our management and in the underlying business. When I started running the company, I realized that the opportunity was bigger than what I had initially thought and that if we maintained our discipline in terms of following the strategy we had set out, things would come back around. And Blackstone was committed to supporting us every step of the way.
Nobody ever saw me walk around the hall-ways with my hair on fire. You could certainly say with $21 billion of debt, more leverage than anybody else, the great recession, catastrophic declines in the industry, and no one knowing when or if this thing would turn around that the conditions were worrisome. But we kept a steady hand, and we followed our strategy.
There was no one time, honestly, when I thought we couldn’t make it through. I never came close to thinking that.