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No Relief Needed

By Dennis Nessler | May 21, 2020

By Dennis Nessler

When it comes to a major company like Hilton, which employs hundred of thousands of people, economically speaking it’s in the best interest of the U.S. government that it successfully navigates the current COVOID-19 pandemic and continues to operate well into the future.

Fortunately for the U.S. government the company is not asking for help, according to president and CEO Chris Nassetta, who stressed during an interview with The Washington Post earlier this week that Hilton has positioned itself well financially.

Nassetta was asked if Hilton had taken any federal aid directly? “No we have not and we would not. We’ve not asked for anything. We didn’t need it, we were in a really good position but this has been hard on everybody. We knew we were at the end of a business cycle so we had extended all of our maturities, we had built in opportunities for implemental liquidity and we actually hit the bond market very attractively during the crisis. So we have ample amounts of liquidity to get through this so it’s not been about us,” he said.

Nassetta reflected a bit on the scope of the pandemic and how it has evolved. “It was very hard to see until you got into late February what was really coming our way. As we sit here today we’re in the middle of one of biggest crises since the Great Depression. And while it’s super challenging you are starting to see the early stages of recovery, which is starting in China and very slowly starting to creep around the world as economies begin to open again,” he commented.

Nassetta told The Washington Post that the company has had to close between 800 and 900 hotels, or close to 15 percent of its some 6,100 properties globally. He further added that in Europe that number is closer to 40 percent, but added that all of the company’s more than 250 hotels in China are now open.

The CEO noted that U.S. closures have been a little more than 10 percent of the portfolio, but there is reason for optimism. “We are now getting requests to reopen hotels more than we are to close,” he said.

Despite the progress, Nassetta cautioned about financial results moving forward. “First quarter numbers were down meaningfully, but second quarter will be much more so because the epicenter of the crisis from an impact point-of-view started in April and continues on into May,” he said, further adding that the company wouldn’t be making any back-half projections, “it’s really difficult to project so we’re not.”

Nassetta did note anecdotally that he’s personally watching the patterns in China to get a feel for a potential recovery. “China was basically closed, they hit a low point of 9 percent occupancy and right now they’re in the ‘40s. Here in the U.S. we’re probably in the mid ‘20s. I suspect as more and more states and cities get operational, even on a limited and safe basis, you will see a step change in performance similar to what you see in China. Then I think it’s going to be a relatively slow grind,” he said.

Nassetta further added, “I think for us to get back to the levels of demand we had [in 2019] it will take three to four years.” Nevertheless, despite what he terms “some form of recession”

Nassetta remains bullish on the long-term future of the lodging business. “I’m super optimistic. As funny as it sounds, I’m no less optimistic today than I was 90 days ago. It’s just going to take time,” said Nassetta.

He did acknowledge the company has had to furlough more than 60 percent of its workforce as a result of the reduced demand and subsequent closures. “As we get to the recovery we are working on and hopeful that will be able to bring the bulk of those [workers] back and I am highly confident that we will. The question of when has to do with the trajectory of this recovery. The bulk of those 400,000 folks are in our hotels and ultimately from a cost point of view they are the responsibility of our ownership community. We have to be thoughtful, they don’t have revenues coming in. As painful as it is for our front-line team members there really was no alternative, but we worked really hard to do it the right way,” he said.

Nassetta pointed out going forward he thinks the company’s digital check-in system “will be massively adopted,” as he explained there will be a number of changes at the company’s properties designed to increase guest safety. For example, he noted Hilton has worked closely with Lysol and the Mayo Clinic to help implement more stringent safety standards.

He explained how critical these efforts are when it comes to getting business to return. “One thing I know whether it’s COVID or not, people don’t go places where they’re not safe. Whether it’s terrorism, a pandemic, or any strife if you don’t feel safe you don’t travel and you don’t go to those destinations. Right now people don’t feel safe anywhere. We can’t solve all the problems, but we can certainly make them feel when they’re in our ecosystem that they’re safe,” he said.

Credit
Dennis Nessler
Editor-in-Chief

Dennis Nessler is Editor-in-Chief of Hotel Interactive, parent company of Hotel Community Forum. Nessler brings more than 28 years of editorial experience to his position, including some 17 years in the hospitality industry. As part of his duties, Nessler not only covers the industry editorially but moderates various high-level panel sessions at hospitality events and frequently conducts one-on-one interviews with C-level executives.


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