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00:00This is my kitchen table and also my filing system over much of the past three decades. I've been an investor the highest quality of mankind. I've often thought this private equity. And then I started interviewing. My watch your interviews because I know how to do it. I've learned in doing my interviews how leaders make it to the top. I asked him how much he wanted. He said 250. I said fine I didn't negotiate with him. I did no due diligence. I have something I'd like to sell and how they stay there. You don't feel inadequate now because the only the second wealthiest man. Was that right before Covid. I used to travel about 200 days here and stayed in a lot of hotels. Now I'm beginning to travel again. So I'm always interested in what's going on in the hotel industry. And I had a chance to talk to the head of Hilton Hotels Christmas setup about how the industry was suffering during hope. It is coming back now and how the industry is really changing itself to accommodate new demands from its customers. So of all the industries in the United States probably the lodging industry has been the most heavily impacted by Covid. You think that's a fair statement you and the airline industry probably. Yeah I think so. Maybe the cruise industry would you would probably top the list but I think we'd be near the top of the list. It's been a difficult couple years but things things are have improved. Bye bye. By significant margin from where we were. We. We started out in the first quarter of 2020 at you know 8 or 10 percent occupancy which we've never never never experienced that kind of downdraft certainly in the foremost 40 years I've been doing this. But at this point we are we're not through Covid and we're not back to where we were at the peaks of thousand nineteen. We're sort of like still 15 to 20 percent down and generally trending in a positive direction. My guess is when we get to the second third quarter of next year we will be back to peak levels of demand similar to 19. What's been really interesting and been well documented I guess at this at this point is the leisure business has been off the charts. If you look at demand for leisure broadly the rates on leisure they're already significantly higher than the peaks of two thousand nineteen. The business segment and the group in the meetings and events segment was on a you know on a slower recovery which you'd expect. But but but building building up some momentum. So you think the worst is behind us for the time being. I think the worst is definitely behind us. If it's not a straight line up. But I think the worst is definitely I mean as Covid was hitting the industry you had to close hotels and lay people off. I assume that was extremely difficult. It was you know it's interesting you know having done this for almost 40 years that we opened hotels all the time. In fact at this point we're opening more than a hotel a day in the world still. Even during Covid we've been opening more than a hotel a day around the world but we very rarely closed hotels. So it's something people don't focus on. We don't want to. Hotel opens. It's open. Most of them forever. Like you open them up they hope but they're open. Their doors are open 24 hours a day seven days a week. They're you know it's sort of an epicenter of activity. And you rarely close them. You close them pretty much when you're going to tear them down for another user or build another hotel. So we are not very experienced at closing hotels but we gain the experience. But the hard part. Did you close hotels. Actually we we closed a significant percentage of the system at some point in time. You know we had probably 15 hundred of circa 7000 hotels that were closed. But the difficult part sort of the U.S. and the question was the people hotels were closing there. You know it had a huge impact on our frontline team members in the sense of necessitating furloughs reductions in force you know both in the field and corporately. And so it's hard as it is to close the hotels. It was really the people's side of it in the early stages of Covid where it was heart wrenching. So now that you're coming back you have the opposite challenge. You have to open hotels and hire like toys back. And it's been reported that it's hard to get employees to come back for the previous jobs or to hire new people. You have to pay much more. So is that a big challenge for you in reopening hotels. It is at this point. Almost all the hotels are open but they're not fully staffed. This is the single biggest issue that we have is getting labor back into the hotels broadly but particularly in certain roles like housekeeping in the culinary areas. And while we've seen some easing of that you know over the last few months we still have a ways to go. And so that's something we're working very hard on. It's a complicated issue. You know it's it's part you know throughout throughout this has been health concerns. People don't want to go to places where other people are congregating. It's been significant issues on child care particularly when schools weren't open. People had nobody to take care of their children. There have been government policies that have obviously compensated people you know that were unemployed in ways that provided some some disincentives. And you put and then there. To be honest there's some people would just have been re-evaluating you know life and what they want to do. And some of the you know some of some of those folks have said you know I'd rather go work in a warehouse rather than you know clean rooms and other things. So it's a complex equation that's going to take a significant amount of time to sort of work through. We're a lot better off than we were even three months ago. And I think when we wake up over the next year we'll be able to get. I'm hopeful labor back to go to do what we do. So one of the biggest concerns I assume the industry has is that. People like me have gotten used to using Zoom and therefore instead of traveling across the country around the world I can zoom is that a big concern that people will say look the zoom experience is actually pretty good. I don't need to travel. It's not a big concern for me. I think you know and I think the world's figuring this out. I mean a year ago you know I think people were saying gosh this works. It's so efficient. Maybe I don't need to do the things that I was doing. I think a year later as at least everybody I'm talking to is realize there are real limits to it. I mean it's great technology. We use it and and it has facilitated our ability to continue to communicate during this crisis. But there is a a unstoppable force that exists with humans which is humans want to interact with humans. And that isn't just for a vacation. Humans need and want to interact on business to build partnerships to innovate to build culture. And they want to congregate the meetings and events business. They want to network. They want to you know to grow their business to build relationships. And so I have no real worries. I mean every time you know we've sort of as we've been recovering if you look at you know the minute people start to feel like we're through the crisis the demand for meetings and events which is the longest lead skyrockets. People or people are dying to. And let's talk about your own background how you came to be the president and CEO. Where did you grow up. I grew up right nearby here Arlington Virginia. And you went to school and I went to a public high school in Arlington. Yorktown High School went to U.S.A.. I ended up at the MacIntyre School of Commerce Undergraduate Business School got out and decided I wanted to follow my father and uncle's footsteps and be in the real estate development business and ended up working for one of the biggest developers and still a good friend today in the D.C. area Oliver Carr. And my first job with actually ended up being a hotel which was the Willard Hotel and office complex. So Oliver car was it was a individual who built a very big real estate company in Washington D.C. the company still around there. Then you were recruited I guess to go to Marriott. Is that right. No. In between there I created a private equity business. A little teeny one compared to that big behemoth that you're part product at the time. You know this would have been in nineteen ninety one. This was the early days of private equity generally certainly real estate private equity. And our view was that it's going to be massive opportunity as a result of the displacement going on in the SNL crisis just so much inadvertent ownership of real estate on the wrong people's balance sheets. And we wanted to go out and take advantage of that. So we did so for five years. My partner and I went out and had a fabulous private equity business. We did you know a lot of deals probably. You know it seems like small numbers today but probably a half a billion dollars of deals across the spectrum of hotels and office did a lot of tax exempt multi-family in in our fund and had a lot of great partners one of whom was Blackstone and then got recruited my partner and I to go to what was then host Marriott after after doing that for five years. Host Marriott was the real estate arm of Marriott Hotel. Marriott had split the company into two parts. One was a brand Marriott that operates the hotels and manages them. The other part was owned the real estate right. That post Marriott came in as the CEO and I became the CEO within four years. My partner in our private equity business Terry Golden was CEO. I was CEO. He retired in four years and I and I took over. All right. So you're running Coast Marriott. You didn't for a good job as I remember. I think so. How did you come to. Hilton. I mentioned in my private equity days I'd gotten to know the Blackstone guys you know really well. John Schreiber then who since retired. But John Gray you know particularly really well Steve Schwarzman a bit. And when I got to host as a result of that relationship and given their interest in the hotel space we did a bunch of transactions for them. So while I had known them I got to know them really really well. And as a result of that relationship I guess when they decided you know in July early late June early July of two thousand and seven that they were going to buy Hilton. John Great called and said I've got I've got the perfect job for you. We know you. We like you. We trust you. We think you've sort of trained your whole career to be able to run a company like this. We think there's a huge amount of upside and potential. This company has been grossly under managed and you should come do it. And I said what are you crazy. I'm going to pick up my wife and my six little daughters at this time. And we're gonna move to Beverly Hills California. You know I famously said look we're going to be like The Beverly Hillbillies out. You know I don't see that asset as on Rodeo Drive. But does the no John Gray know that he's very persuasive. And the truth is as I step back from it and as I talked to my wife who was an equal partner in the decision we realized how many chances in your life are you going to have where it's a counterparty like Blackstone who you know really well who you trust. It's a business that you know but has massive opportunity to meet and it suits your skill set. And those things just don't come together that often. And so eventually I decided we would pick up and be The Beverly Hillbillies and we moved. So. Hilton was a publicly traded company. Blackstone bought for roughly twenty nine billion dollars. Some people thought was a pretty high price at the time you come in to manage the large amount of debt and so forth. And you moved your six young daughters all the way out to California. And then the Great Recession comes and all of a sudden the debt from the leveraged buyout seems to be burdensome. Were you worried that the deal wasn't going to work at all and might go bankrupt. David I I slept like a baby. I slept for two hours. I woke up cried and slept for another two hours woke up and cried. Kidding. No. You know the truth is there were some tense moments at the show at the beginning of the Great Recession but we never lost faith. John. John and I particularly as the two that sort of put our heart and soul into making this thing work. John Gray and I we knew we had a really good strategy. We were building a world class team. And you know I'm a big believer in a steady hand on the wheel. What goes down will come up. You know don't panic if you've got a strategy work the strategy adapted to the times and you know you'll get to the other side. And we did. So we don't have as much gray hair as I do. But do you get any ideas. I might question that. I've got to you. You didn't get any gray hairs from this experience. Definitely. I definitely did. But I found it. You know I definitely got more gray hairs. And I'm not going to say like you know it didn't stress me out on occasion but I'd love a challenge. I mean the truth is I had a really great job running host and I love the company and the people. And the board was incredible to me. And so why did I leave. I wanted a bigger challenge. And you know something that was more global and needed fixing. And so the reality is the Great Recession while it was hard and it was stressful. It was also an opportunity to sort of stretch myself and to fix it and to really push myself to get to the other side. So Blackstone ultimately injected some more money into the deal and they bought some debt back at a discount. The bottom line was they ultimately took a public or you took a public and it turned out to be one of the most successful if not the most successful buyouts in history. I think Blackstone made about a 14 or 15 billion dollar profit. When you want I'm told. And when you took the company public you did at a certain price. But today I think the price is up about 600 percent. The stock is up about 6 percent. So you must be pretty happy right. I think so. We you know did our job for Blackstone and their investors. And they you know they they made a great profit you know out of what looked like a difficult set up there in the Great Recession. And you know anybody that is the bought the stock and we when we went public and held it has done exceptionally well. Are you happy doing this. You're going to do this for the foreseeable future in this business. I would still say it's like a coiled spring coming out of Covid particularly. So I feel like we just have more to do. Now your company was started more than 100 years ago more than a hundred years ago by Conrad Hilton. He's famous for many things. He built this company. But I was told at one time he made a famous statement about the most important thing in the hotel business. Can you tell us what that was. He did. I wasn't alive to see it but he was he was quite famous in the time. And he ended up on the Johnny Carson show on more than one occasion. At one point as it goes I've seen the clip. So it's not legend. Johnny Carson said all right Connie. He he went by Connie you're the biggest hotel man on earth. Could you just give it everybody in the audience. One piece of advice. He said if I could give you one piece of advice I would say please keep your your shower curtain inside the shower because otherwise it was going to leak out and the water was going to damage hotel caress. So do you ever commune with Conrad Hilton. Are you ever getting messages from heaven from him. And you're doing a good job protecting my name. I haven't. But I do have his bus right next to my obviously. When we moved out of Beverly Hills we had all sorts of paraphernalia that you know that was related to the history of the company most of which I sent to the Conrad Hilton Museum at the at the University of Houston because I thought it would be great for them to catalog it and have it. The one thing I did keep was his bust which I keep very close by my office. I did. So I didn't know Conrad personally. I did meet his son Barron who ran the company for for over 40 years and was very close to his father. And they you know at least talking to Barron he was quite proud of what we had done with the company and suggested to me. Can Conrad would have been as well. Well Conrad Hilton was very famous and Baron Hill was very famous. But honestly the most famous person with the last name Hilton is Paris Hilton heiress. Is she involved in the company. She had more recently. We've been working with Paris on the marketing side of it. We're we're working with her. She just got married and she's on her honeymoon and we're helping sponsor the honeymoon. And so we we have been doing some work more more recently when I was growing up in blue collar family. We couldn't afford to go to a Hilton. Hilton was the ultimate brand in those days. And we were lucky if we go to say a Holiday Inn or something like that. Over the years Hilton name hasn't yet been seen as maybe as ultimately elite as Ritz Carlton or Four Seasons. Is that a fair statement in some respects. Yeah it is. And by choice if you go back 50 years ago Hilton was probably the leading pioneering luxury brand on earth. But as time went on and as we learned that segmentation mattered in the business and the customers had these different needs we really tried purposefully to make Hilton a four star brand to allow for other things above. So your ultimate luxury brand is that while there are four story wall of restore our luxury brands are Walter. Walter for story. Conrad and Alex are. You're in a Conrad. As it turns out today but the very highest end of luxury for us is his Walter. Then Conrad and Alex are is a collection of luxury historic luxury hotels now in New York City. There's the famous signage initial Waldorf Astoria which has been under construction or rehabilitation for a few years. You don't own it but you're going to manage it I presume. Is it going to open in my lifetime. Well let me correct one thing. That is not the original Walter story. Original Waterford story was it was put together as a consequence of the Astor two members of the Astor family feuding that had two hotels that were on the site of what is today the Empire State Building. And the way they settled the feud was the one hotel was the Walter. The other was the Astoria. And they settled the feud by connecting them with what they called PEACOCK Alley. And it became famously the Waldorf Astoria in New York. That was in the late eighteen hundreds. They ultimately sold it to what got redeveloped as the Empire State Building and where the current Walter Four story is was built during the Great Depression and opened in 1931 and is under massive redevelopment and should open reopen as what I think will be the best luxury hotel in New York in 2023 with 400 rooms and you know about the same amount of high end luxury apartments. So there's another rumor going around about another Waldorf story. It's rumored in Washington D.C. where we are now at the Trump Hotel which had its challenges which has been reported and sold to somebody and that you Hilton will manage it as a Waldo story. Can you comment on that. I've read that same rumor but no I can't comment on that. I have a very strict rule or comment when something is wrong. And so the rumors are justified in the sense that there is there's a lot of work and discussion going on but nothing is done. Now there's a. A new phenomenon that's now not that new called air B and B what. What is that. And when it came along the hotel industry kind of shrugged it off a bit. But is it a real competitor to you and are you going to be in that business. I do not think it's a real competitor to. So if you think about what we do it's something different than what they do. And I think we coexist with them quite well. We deliver a high quality consistent product with the amenities wrapped in service with all the technology loyalty. And people pay us generally a big premium for that because they you know they want that level of consistent high quality experience. What they do is something different than what they're doing is by definition you know does can't have the consistency and the quality and the products and the amenities that are tailor fit because it's just something different. But it doesn't mean it's bad. It just means something. It's satisfying a different kind of trip occasion. So if you look at the numbers even pre Covid we were coexisting quite what we were. We were at the peak levels of performance at a time know where they were growing leaps and bounds and we weren't really seeing significant competitive threat as a result of it. As an investor should I be looking at the hotel lodging industry as a good area to invest in. I mean your stock recently has gone to near all time highs from very low point in time during the Kobe period time. Do you think there's a lot of growth left in lodging and hotel stocks. You that you know you're one of the smartest investors on Earth. I'm not going to give you I'm a lowly hotel guy. I'll let you decide that. I think why the stocks have performed well is really quite simple. I think it's an underlying belief that the business broadly will demand in the business in all segments will. We'll come back and we'll ultimately over time grow to be greater than it was before which I believe. And I think in our case why we've performed well as I think they believe investors believe that the decisions we made that we had a very good capital light business that was that was growing faster than anybody in the industry before. The decisions that we made during Covid put us in an even better position where when we get to the other side of it we're a higher market share higher growth higher margin business. And the market as you and I both know as a result of a whole bunch of things in terms of fiscal policy and like is just looking further forward. And I think when people look forward two and three years they'd like what they see in the industry. And I'd like to believe they'd really like what they see in terms of what we can deliver. You've now been doing this for about 14 years by counting numbers. Right. And you're 59 years old. And so have you thought maybe I should go do something else. I can't do anything better than I'm already doing. I already turn this company around. I've made a lot of money for the investors the shareholders and yourself. Are you happy doing this. You're going to do this for the foreseeable future. I'm going to do it for the foreseeable future. I love what I do. And the reality is we've accomplished a lot. As you described we've made blacks and a lot of money. We made our shareholders a lot of money. More importantly we've grown the business and we've been a huge engine of opportunity. If you think about all the jobs we've created around the world all the communities we've made better places all the ownership groups that we've helped grow their business and and having built a world class culture. The opportunities we've created for upward mobility for people in this business I would still say is like a coiled spring coming out of Covid particularly. So I feel like we just have more to do my job. My job's far from.

The David Rubenstein Show: Hilton CEO Chris Nassetta

Chris Nassetta, Hilton President and CEO, talks about the future of travel, getting people back to work and reopening the Waldorf Astoria hotel in New York. He's on the latest episode of "The David Rubenstein Show: Peer-to-Peer Conversations." This interview was recorded Dec. 1.

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