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Hilton CEO says hotel chain was ?Totally Dysfunctional? before Blackstone

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December 5, 2013

Hilton CEO says hotel chain was ?Totally Dysfunctional? before Blackstone

Hilton CEO Christopher J. Nassetta in Davos on January 23, 2013. World Economic Forum / FlickrHilton Worldwide?CEO Christopher Nassetta told potential investors during its?IPO roadshow?that the chain was a ?totally dysfunctional organization? prior to Blackstone?s 2007 acquisition.

The hand-picked Nassetta came?on board from Host Hotels and Resorts?in October 2007, five days after the acquisition closed.

Cost containment under the prior Hilton regime?

?Let?s just say there was none? at either the chain or property level, Nassetta remarked to investors during the roadshow.

Private Company Gets Candid About Its Roots

As a private company, Hilton executives usually don?t dish in public on past transgressions, but in crafting a plot line about Hilton?s growth story and ?transformation? in preparation for thenow-imminent $2.4 billion IPO???the largest public offering in the history of the hotel industry ? Nassetta was brutally candid with Wall Street types, who took it all in.

By the time Blackstone arrived in 2007, Nassetta said, Hilton had ?ceded? its hotel industry leadership position, its growth rate was ?average? and almost entirely U.S.-based, but it still had good brands, although there were plenty of holes in them to fill.

The culture of the global organization was a mess, and Hilton had no thoughtful ?people structure? to recruit talent in the 90 countries it operated in, Nassetta said.

A Moral To the Story

Of course, the punchline is that there is a Hilton turnaround story here.

Nassetta said Hilton rebuilt the entire management team, constructed a ?global matrix organization? with consistent values and priorities, relocated its global headquarters, fixed the top line, and removed ?hundreds of millions? of dollars in costs.

Nassetta said Hilton before Blackstone had no luxury strategy, and today has the fastest growing luxury brands in its?Waldorf Astoria?and?Conrad Hotels?brands. Hilton also reenergized its full-service brands, and launched the ?focused-service brand???Home2 Suites?by Hilton?in 2009, its most-successful brand launch to date.

In addition to revamping Hilton HHonors to make it more ?aspirational,? Hilton vastly expanded its international footprint, Nassetta said.

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