Rid­ing the ho­tel wave on the cusp of change Q&A CHRISTOPHERNASSETTA

Hil­ton bullish on growth prospects in China, ac­cord­ing to top ex­ec­u­tive

China Daily (Canada) - - BUSINESS - ByWANGWEN wangwen@chi­nadaily.com

Hil­ton World­wide Hold­ings Inc, the world’s largest ho­tel op­er­a­tor by mar­ket value, has big dreams in China, ones that are hinged closely to the coun­try’s rapid economic growth and bur­geon­ing hospi­tal­ity mar­ket, a top com­pany of­fi­cial said.

ChristopherNassetta, chief ex­ec­u­tive and pres­i­dent of Hil­ton World­wide, said the com­pany plans to ex­pand its foot­print in China and also have more ho­tels in the pipe­line. “By in­vest­ing more re­sources, we want to con­sol­i­date our pres­ence fur­ther,” he said.

Nassetta, who took of­fice in 2007, said the ho­tel op­er­a­tor has am­ple con­fi­dence in the long-term growth prospects in China. At present, Hil­ton has 48 ho­tels un­der five brands and 140 ho­tels in its pipe­line un­der con­struc­tion in China.

“We plan to in­tro­duce two more brands in China by the end of this year,” he said. The first would be the Em­bassy Suites, which will be launched soon. In ad­di­tion, Hil­ton may also launch its three-star brand— Hamp­ton, Nassetta said.

“We want to cater to dif­fer­ent types of cus­tomers, and our prod­ucts range from three-star to su­per luxury.”

At the same time, Nassetta ad­mits that Hil­ton has much catch­ing up to do in China. “The strate­gies that we adopted ear­lier in China did not have the de­sired re­sults. As a re­sult, we lagged be­hind our ri­vals. But we are fast catch­ing up.”

Hil­ton en­tered the Chi­nese mar­ket 26 years ago with a ho­tel in Shang­hai. How­ever, it had only five ho­tels in China by 2007. “I do not know why, since I was not there then,” Nassetta said.

In­dus­try sources, how­ever, said the ho­tel gi­ant could not fo­cus much on the China mar­ket due to var­i­ous rea­sons. Hil­ton In­ter­na­tional and the orig­i­nal do­mes­ti­cUS busi­ness, Hil­ton Ho­tels Corp, be­came sep­a­rate com­pa­nies in 1964, and HHC reac­quired Hil­ton In­ter­na­tional in 2006.

Dur­ing the 40-year sep­a­ra­tion, HHC bought sev­eral brands, and af­ter the two units re­u­nited in 2007, the new Hil­ton World­wide was a “very dys­func­tional or­ga­ni­za­tion”, the sources said.

“We were the No 1 brand in terms of cus­tomer aware­ness in ev­ery re­gion of the world,” Nassetta said. “But we were not do­ing any­thing about it.”

Nassetta, who has over two decades of ex­pe­ri­ence in the ho­tel and real es­tate in­dus­try, was named CEO and pres­i­dent of Hil­ton World­wide in 2007, af­ter pri­vate eq­uity firm Black­stone Group took of the ho­tel op­er­a­tor.

The $26 bil­lion ac­qui­si­tion was con­sid­ered a “bad in­vest­ment” by many in­dus­try sources as the global ho­tel in­dus­try went into a tail­spin due to the fi­nan­cial cri­sis in 2008. How­ever, in­vestors fi­nally got re­wards in 2013, when the ho­tel group listed its shares on the New York Stock Ex­change. Hil­ton World­wide raised about $2.34 bil­lion in its ini­tial public of­fer­ing, a record of sorts for the ho­tel in­dus­try.

The IPO suc­cess and fi­nan­cial per­for­mance have helped bol­ster in­vestor con­fi­dence, said an­a­lysts. No­mura Se­cu­ri­ties raised its price tar­get for Hil­ton World­wide to $29 a share on July 7, when the mar­ket price was $24.8.

Hil­ton will en­joy a much higher growth rate than most of its peers due to its huge global pipe­line and high op­er­at­ing lever­age, Harry Cur­tis, an an­a­lyst with­No­mura Se­cu­ri­ties, said in a re­cent re­search re­port.

More im­por­tant, the group’s re­turn to the cap­i­tal mar­ket is con­sid­ered by many in­dus­try sources as an in­no­va­tive move cham­pi­oned by Nassetta.

Martin Rinck, Asia Pacific pres­i­dent of Hil­ton World­wide, said Nassetta has iden­ti­fied four strate­gic pri­or­i­ties for Hil­ton. Th­ese in­clude align­ing the cul­ture and or­ga­ni­za­tion, max­i­miz­ing per­for­mance, strength­en­ing brand and com­mer­cial ser­vices, and fur­ther ex­pand­ing its global foot­print.

“Nassetta has cre­ated a se­nior lead­er­ship team in Hil­ton to un­der­take th­ese tasks. His pas­sion for ex­cel­lence and his in­cred­i­bly en­gag­ing per­son­al­ity have helped trans­form the com­pany from a sleep­ing gi­ant to a high-per­for­mance pow­er­house,” Rinck said.

Con­se­quent to the list­ing, some in­dus­try sources had ex­pressed cu­rios­ity aboutNas­setta’s next ca­reer tar­get. “There is no next tar­get”, as there are still­many things that can be done in Hil­ton World­wide, Nassetta said, adding thatChina is still an im­por­tant mar­ket where Hil­ton has much to do.

“We were in­ac­tive in the Chi­nese mar­ket dur­ing the first 10 years of the 21st cen­tury,” he said.

In­ter­con­ti­nen­tal Ho­tels Group head­quar­tered in the UK had nearly 200 ho­tels in China by Fe­bru­ary 2014. Mar­riott In­ter­na­tional Inc had 67 ho­tels in China by April 2014 and plans to en­large the num­ber to over 100 in the next two years.

Most of the ho­tel chains are bet­ting big on growth in China due to the huge tourism po­ten­tial and tourist num­bers.

China Tourism Academy es­ti­mates that do­mes­tic tourism rev­enue will hit 3.1 tril­lion yuan ($502 bil­lion) this year

con­trol and the num­ber of out­bound tourists will ex­ceed 100 mil­lion per­son-trips.

Hil­ton is aware of the po­ten­tial and will take ad­e­quate steps to en­hance its pres­ence, Nassetta said, adding that he makes at least three to four trips to China ev­ery year. “I spend as much time as I can in China to help the growth (of our ho­tels),” he said.

China ranks among the top four global mar­kets for Hil­ton World­wide cur­rently. “It will be among our top two mar­kets in the next five years,” said Nassetta. “Though China’s con­tri­bu­tion to the Hil­ton global turnover is small, its growth has been fast.”

Hil­ton is not only tar­get­ing the home mar­ket in China, but also the ris­ing out­bound tourists.

“We do not just serve the de­mand here, but also serve Chi­nese cus­tomers all over the world,” Nassetta said, adding that the group had 6,800 rooms in 100 coun­tries by the end of 2013.

He said Hil­ton’s main pri­or­ity in China would be to ex­pand the busi­ness and boost brand aware­ness. “Th­ese mea­sures will help Chi­nese cus­tomers to au­to­mat­i­cally choose our ho­tels when they go abroad,” he said.

How do you spend your week­end amid your busy sched­ule?

When I’m not work­ing, I en­joy spend­ing time with my wife and daugh­ters— whether we’re cook­ing on a Sun­day af­ter­noon, or at­tend­ing a game or view­ing the many sports that they par­tic­i­pate in.

What is the say­ing you like the most?

that

Con­rad Hil­ton’s words to “fill the Earth with the light and warmth of hospi­tal­ity”. Th­ese words are also pretty much the driv­ing force for Hil­ton World­wide.

What do you value most in your friends?

the

Loy­alty. Some of my clos­est friends have been with me since child­hood. To this day, I still live close to where I grew up and near to many longterm friends and fam­ily, whom I trust deeply and who have been very loyal and been at my side for many years.

What’s the best way to break the ice with a Chi­nese busi­ness­man you meet for the first time?

Un­der­stand­ing and lis­ten­ing to in­di­vid­u­als, ir­re­spec­tive of the coun­try they are from, is the most im­por­tant as­pect that I con­sider when con­nect­ing with in­di­vid­u­als. I also try to take time to ask the right ques­tions, un­der­stand their busi­ness needs and in­ter­act with them on a more per­sonal ba­sis. Meet­ing in­ter­est­ing and amaz­ing peo­ple from all over the world has been one of the fa­vorite as­pects ofmy job.

What kind of ex­pe­ri­ence has shaped your thoughts the most?

I be­gan my ca­reer in the hospi­tal­ity in­dus­try work­ing at a ho­tel in Wash­ing­ton, DC, in the en­gi­neer­ing depart­ment. That ex­pe­ri­ence gave me an early in­sight into the day-to-day op­er­a­tions of a ho­tel, which has helped shape many de­ci­sions over the years. One of the lessons that re­ally stuck with me from that job ishow­im­por­tant it is for ev­ery per­son on the team to play a role— no one should ever feel like they are too big or small to pitch in, and ev­ery­one should be treated with re­spect.

What do you dis­like most about your ap­pear­ance?

Well, I have to ad­mit that I ama lit­tle sur­prised some morn­ings when I look in the mir­ror and I see all this gray hair — I wouldn’t mind having less of those!

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