Businessweek Talks- Hilton CEO Christopher Nassetta

year may since I was looking back. I was looking back at my calendar to the last time we talked, and sadly it was about a year ago, and we were in the process of celebrating our hundred year anniversary UM as a company. UM, that's quite a milestone. We we were celebrating it in in great fashion, in the sense of the company was performing at the absolute highest levels in its history. We were growing faster than we

ever had, innovating more than we ever had. We have been recognized as the number one great place to work in the United States, the number two great place to work in the world, UM, and in so many ways, UM riding high UH in that time frame and frankly, up until probably the early part of March, UM but it's a very different world, um as as as is depicted by the fact that, um, I'm on audio and not sitting in the studio like I was a year

ago with you. I hate I hate that part, particularly as somebody that's in the business of movement and travel. But this, this is our life at the moment. But yeah, it's a uh it's been an interesting few months for sure. Interesting to say that Lee's Chris last you know, three months and also last almost three weeks here, and we want to talk about the state of the hotel industry and how you see it. Got to ask you about leadership though amid what's happened in uh Minneapolis, um, the

protests against racism. You know, we keep hearing we've got to have leaders step up. Money talks and whether you know who you work with in terms of your supply chain, who you give internships to. You know, that's how you make a difference, That's how you make you know, you kind of move the conversation and actually move what's happening in our society. I got to get you to weigh in on this. Yeah, I couldn't agree more. Carol, and thanks and nice to talk with you. Wish I could

see you. Um I'm saddened by everything that's going on. And this is something that as you can imagine, in a in an industry and in a company that is incredibly diverse, this is this is a huge issue. This is diversity is not a new thing for us. You know, We've been focused in this area for a long long time and and been recognized for number two Diversity inc

um ranking in the United States for for diversity. UM But the reality is um as is depicted by what's going on, you know, right here in my hometown of Washington. You know, I could literally hear the protests going on from my house and explaining to my children, two of whom both in New York and Washington, ended up in the march, you know, to to support their black friends

in the in this process. This is a sad day for America, and I think we've had many of these side sad days over the years and in recent years, and I think to your to your point in the question, it's high time we do something about it. That we not just talk about it, but that we act upon it. And that means that collectively as a society and as a country, as we think about reform. We need to think about this and we need to do something about it,

including the criminal justice system. And that means each and every one of us um that has that, that our leaders across a broad range of industries, we need to even if we were we were focused on it, and even if we were, as is the case with Hilton, recognized for it, we have to recognize we have never

done enough. And given what is going on and what we're seeing, what is abundantly clear is there is so much more to do, and so, like everything for me and for Hilton, it's about trying to be a constructive part of the solution. And so you know, we are very I I've been communicating like crazy with all of our team members, including our black team members, all around the country. The stories I've been hearing our heart wrenching that they're pouring their hearts out about the impact you know,

throughout their life that racism has had on them. There's obviously no place in society, no place in in in our industry, and no place in our company for racism.

And so as a company, as much as we've been focused on it, there is so much more that we can do at all levels of our company to create more opportunities for our black team members, and that means at the very top of the ecosystem as we think about and already we're thinking about our border directors to the lowest levels of the company, and to make sure that we're creating opportunities and a feeder system to to develop our teammates in the in the black unity in

a way where they can have bigger and better opportunities. And so as they say, this is something we were focused on, Okay, but I don't want to rest on our laurels and the fact that we were ranked number two,

and that's not good enough. I think for everybody, every leader, I think that the messages um we we obviously have not done enough, and that as society, as business leaders, as political leaders, we need to use this moment to rally for change and not have it be like it has honestly been in a number of other cases in recent years where we talk there's a burst of activity and then we go back to to uh, you know, back to where we were, and so we're really focused.

I mean it has been I have a call literally as soon as we're done with this, I have a call with one of our team members who sent me the most heartbreaking email about her experiences in life and just ask I would like to talk to you. You

and I met once. I just want to be heard, and so you know, I've been doing lots and lots of of those conversations to listen and learn, and I've encouraged all of our team, you know, take a moment, take a deep breath, like become part of the solution in the first step in that is trying to understand it better so that we can help get to better

better answers. Well, and Chris, this is obviously coming at a time when you are listening and thinking about your business and probably the most existential and holistic way that you ever have. And you've been in this business for a long time. If you think of seven years, believe it or not, I would have said, did you start when you were five? What happened? Chris? Oh? I thank you, Carol. That's very kind of you, know I didn't. I'm older

than you think. All the gray hairs that I that I have and a lot more than ninety days and I had had before. Exactly what's the biggest, single thing that's going to change about travel. I think here's the thing I think, guys, when you wake up, and you may think I'm being apollyon, and I'll answer the question.

I think when you wake up in three years, okay, I think travel it's hard to see it right now, like it was hard to see it after nine eleven in the in the wake of that, I think travel and the experience in a hotel will look a lot more like it did ninety days ago than it does now. Okay. And now it looks like there's not many people in the hotels. You see people in ppe um, social distancing,

you know, unbelievable. You know, hygiene protocols like our deal with Lysol and the Mayo Clinic to provide hospital cleanliness standards, etcetera. Some of that stuff will will go on and and some of it, you know, we'll we'll reverb back to normal. What will be different, you know, in my mind, is things that were already happening will accelerate. Okay. So example, we've made, and we talked about it last year when

we were together, huge investments in technology. You know, I'm not just saying it because we've made these investments, uh, to promote Hilton that's my job. But but I'm saying because I think it will be broadly what you find

in the industry. There are things with technology, the digitization of of our business that we're happening, but we're happening at a relatively slow pace, and I think many of those things will the adoption rate to the expansion of the digitization and the speed of that happening will excel

accelerate like crazy. So example, we've already rolled out to almost every hotel in the world digital check in, digital room selection, and digital key So on your Hilton Honors app you can have you already could have had contactless entry. So for our Hilton Honors members, about a third of the people used it. Um I see. You know, when we have customers that are coming back in the hotels, you will see mass adoption of that and then people

won't go back. It'll be like a cash flow machine was, you know, thirty five years ago, where everybody, you know, once it got adopted, people realize, wow, this is easy,

this is seamless. Why wouldn't I do this? You know, other technologies like how you run everything in the room we call it connected room, how you run temperature, how you run lighting, how you run your audio visual um all of that which we developed in a proprietary technology called Connected Room, and we're rolling out not as extensively as Digital key. You will see that demand for that,

an adoption of that accelerate. I do believe you also see hygiene standards while they were really good in the industry already. By the way Mayo Clinic was was was sort of shocked at how good we already were when we when we sat down with him to figure out what to do. There's no reason why you won't see those higher, higher standards. But it's digitization will accelerate. I gotta ask you because people are like, you know, tweeting

at me and messaging me. I've got to ask you because she said it's going to be you know, three years from now, Well it'll look a lot like you know, more like it did you know ninety days ago, right pre COVID in terms of kind of the travel industry, the hotel industry coming back. But you know, what, what are you seeing so far? I mean, how robust a pickup and travel do you expect based on any of the advanced booking data that you're seeing. And I'm also

curious about about business travel. Yeah, well, I think you know, there's three big segments in our business. There's leisure, transient, business transient, and then group business. You know, the vast majority of our business, well of our business relates to business related travel, either groups or business treans, and of it is what you would think of as leisure travel. Most people don't think about that, but that's sort of

the breakdown of our business. And what we're seeing is significant recovery okay, but still um very significantly off of any sort of historical standards. So I'll give you put put some basic numbers. I think at the bottom, system wide occupancy for us in uh in eight in in May would have been you know, like ten or twelve percent. I think if you look at it like last night, it's like twenty seven or eight. So it's two or

three times better than it was. But to keep that in perspective, we finished last year with an average occupancy of almost seventy okay, so it is meaningfully devastatingly um lower than where it was. But you are seeing a slow grind and the way it's happening, which is fairly typical by the way and other other declines, it's leisure first, it's business, and then it's group And right now what

we're really seeing is predominantly growth and leisure. So like Memorial Day weekend, we had markets near beaches and you know, where people want to get out. We had hotels that we're at capacity, that lower capacity because of distancing and normal but as much capacity as we can handle. But business travel has not really come back in earnest because most people still aren't back in their offices and allowing people to travel. Does it take like a year to

come back business travel? Chris, can you put a number on it? I think it's hard to say, Carol. My view is, and I've said this, you know, to a lot of different people. I think what you'll see is sort of a a significant shift up in level of occupancy over the next nine twenty days, which will be driven by a lot of leisure, particularly over the summer months, and a lot you know in the U S and the and and Western Europe and and absolute uh necessary

business travel. That as businesses start to sort of reopen their doors and bring people back, but it will be anemic, and then I think you'll see a slow grind out from there. And it will take two or three years to get back to where it was. A lot of people would you might say, like, we will it ever get back. It will get back to where it was, it'll get beyond where it was. But here's what's happening. COVID.

This is the statement of the obvious um. But COVID was a devastating pandemic and health crisis, and sadly a lot of people were sick and and and even more sadly people died. But the impact that that as a result of COVID that we had on the economy is going to be lasting in my view. And so when you get through the health crisis, which we're not through obviously but working our way through, you're gonna be in the middle of one of the toughest recessions that we've

had in modern history that effects business. Businesses are letting people go, they are not hiring any incremental people, they've cut capital expenditures. All the things that helped generate activity um around our business have diminished. They will all come back as they always do. Okay, people are not going to zoom every They're not gonna stop traveling and do zoom. The rest of their life. They're gonna want to get

back and see people in need to see people. But in the short over the next you know, sort of year or so, I think it will be I think business travel will be weak, and then I think it will sort of work its way back over to two or three years. And the same with groups, I mean congregating in large groups. At this point, you know, we do have people booking groups and we're you know, we're getting ready to launch a whole program around how to

how to do it really responsibly. Conventions aren't happening, Chris, right, like Jason, and we're supposed to go to a bunch of things, just even something this week, a huge euro conventions happening, But they are going to start happening in the fall. They're not gonna happen in the summer. They're going to happen in the fall. And that's going to be. One of the other things that I think will be a lasting change is that people are going to be

doing hybrid um conferences. They're gonna be doing part physical, part virtual. And so one of the things we're doing is investing in this time with partners and and getting pipe into all the big hotels so that you can accommodate that. Um Again, I would say, when you go fast forward three or four years, I think the group business will look a lot like it did ninety days

ago because we will have figured out COVID nineteen. I am highly confident either with the therapeutics or hopefully a vaccine based on what's going on, and people will feel like it is not an unreasonable hazard for them to congregate and humans. Here's the thing. You go back to the Spanish flu. You go back to all these things

that were, you know, as devastating as this is. You get back and look at history where things were much more impactful from a mortality point of view, and you study it, and people went back sooner than you thought to their prior patterns once they felt that they you know, we're in a healthy space. Not that it's the same by any means. But nine eleven I remember nine eleven, I lived through it. I was running another hotel company, and we remember sitting around talking with our board. Nobody's

ever going to get on a plane again. Why would they get on a plane? They did, But three years is a long time. That's a long time to come to Chris I I do want to ask you about your employees and sort of the broader Hilton family as it were, and you know, understanding the way that you operate the business, there are lots of people who ultimately work for franchises and all of that, but you know

they are they are Hilton folks. They have Hilton or or one of your brands on their shirt and there or there a part of our family, of our family, an important part of our family. And knowing how much the unemployment crisis has hit there, what do we need to do? What should the government be doing, what should

we be thinking about in terms of protecting them? I know, you know you've talked to the President about this various times, a boun of times, and Secretary Manuchin and you know, talked to the leaders uh in the Senate, in the House and everybody else. And I would say, you know, I feel very good about our government's response to this.

You know, they've worked in a very bipartisan way so far, you know, to address what I think have been the most meaningful issues, and that has been you know, our frontline teams not just for our industry, but you know, for a broader set of industries. The people that can least afford to be impacted are being most impacted. And so my comment to the President, to all the leaders UM in Congress was you know, we you know, they're really two things that I was I was reinforcing with

them with it. The first job is take care of frontline teams that are being impacted by this because they they will not be able to feed themselves, take care of their families. And so you know what's happened with the unemployment insurance top ups from the federal government adding to the state I think has been extraordinarily helpful. UM.

You know, they need to extend that. Do you think I think they need to extend it, And And I think they will, but I think they need to do it in a little bit different form, you know, just in the sense that UM, in many cases it is provided when when people when we want to bring people back on it's actually in some cases provided a distancenter from people to go back to work. And so we need to we need to sort of right size it in the in various markets to make sure that it is

not providing sort of that that incentive. But I think yes is the answer. The most important thing we can do for our frontline team members though, is get them back to work, right then, you know, we got to give them a bridge. And I want to talk about our owner community, to which I assume you get to, but because that's the other, big, big, you know, block

of things that I've been pushing the administration on. But the best thing we can do is provide a bridge while there is no work, but get activity going again so that there is work, and we can get folks back in jobs, because that's what they really want for their self esteem is not the government to take care

and they want to be back in working. Our people love hospitality, they love their people, serving people, they love what they do, and they're they're not enjoying this existence, even if they're, even if they're, they're being helped to survive it. And the way to do that is to which I've been to respond, possibly continue to open economies, make sure that we have massive amounts of testing, very sophisticated contact tracing methods, use social distancing aggressively, use of PPE.

Until further notice, we only have a couple of minutes left, tell us about the owner community, because I think this is really important because we've done a lot of stories at Bloomberg about temporary people who are out of work becoming permanent work. You know, workers who are out of work. So what do we need to do to help those owners? Well, well, we need to do and we've been doing through p PP and main street lighting programs, which again have been

really responsible approaches. But we we need more access for the hospitality industry. We need the bridge of liquidity so that liquidity doesn't liquidity crisis doesn't become a solvency crisis. You know, most of our owners are small and medium sized businesses, their entrepreneurs, even if they have some reserves, no businesses built for zero revenues and so they have you know, they can't keep their employees because they'll go

broke if do. And so PPP has been helpful in that regard, and the extension of it's been helpful, and the extending of the number of weeks it cover is helpful. But I think main street lending is going to going to be important, and I think ultimately we're going to continue to have to um do more for the ownership community to provide the bridge the liquidity to get to

the other side. And then the next step is going to be which they're working on early days cares for is how do you stimulate uh, you know, with with a responsible system set up of testing and all the things to make sure it's healthy. How do you stimulate the economy. How do we stimulate mobility and travel and obviously a healthy and safe weight. We're good. That's the next step to get the bridges, the bridge of liquidity

and then stimulate activity. Just gotta say, you gotta promise us next time we're going to be in studio when we do this. Okay, we got tobolutely alright. Christmas, Thank you so much, Charen's CEO of Hilton. We really appreciate it.