tv The David Rubenstein Show Peer to Peer Conversations Bloomberg December 12, 2021 2:00pm-2:30pm EST
♪ david: this is, uh, my kitchen table and also my filing system. over much of the past three decades, i've been an investor. the highest calling of mankind, i've often thought, was private equity. [laughter] and then i started interviewing. i watched your interviews, so i know how to do some interviewing. [laughter] i've learned from doing my interviews how leaders make it to the top. >> i asked him how much he wanted. he said $250,000. i said fine. i did not negotiate with him and i did no due diligence. david: i have something i would like to sell. [laughter] and how they stay there.
you don't feel inadequate now because being only the second wealthiest man in the world, is that right? [laughter] ♪ before covid, i used to travel 200 days a year and stayed in hotels. i am beginning to travel again. i always had an interest in what was going on in the hotel industry. i had a chance to talk to the head of hilton hotels, chris nassetta, about how the industry is coming back and 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. do you think that is a fair statement, you and the airline industry probably? chris: yeah, probably the cruise industry would top the list. we would be near the top of the list. it has been a difficult couple of years, but things have improved by a significant margin from where we were. we started out in the first quarter of 2020 at, you know, 8%
or 10% occupancy, which we have never, you know, never experienced that kind of downdraft, certainly in the 40 years i have been doing this. but at this point, we are not through covid and where we were at the peak of 2019. we are still 15% to 20% down, and generally trending in a positive direction. my guess is that when we get the second, third quarter of next year, we will be back to peak levels of demand, similar to 2019. what has been really interesting and well documented at this point, the leisure business has been off the charts. if you look at demand for leisure broadly, the rates on leisure, they are already higher significantly higher than the peaks of 2019. the business segment and the
group, the meetings and events segment, you know, is on a slower recovery, which you would expect, but, but, you know, building, building up momentum. david: you think the worst is behind us? chris: i think the worst is definitely behind us, not a straight line up, but the worst is definitely behind us. david: you had to close hotels and lay people office covid was hitting the industry. i assume that was difficult. chris: it was. having done this for almost 40 years, we open hotels all the time. at this point, we are opening more than one hotel a day in the world, still with covid, we are opening one hotel per day. we rarely close hotels. when a hotel opens, it is open, most of them forever. like, you open them up, open the doors, open 24 hours a day, seven days a week. it is 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 built another hotel, so we are not experienced a closing hotels, but we gained the experience. david: did you close hotels? chris: we closed a significant percentage of the system. at some point in time, we had probably circa 1500 hotels that were closed. but the difficult part was the people. hotels were closing. you know, it had a huge impact on our frontline teams, in the sense of necessitating furloughs, reductions in force, you know, both in the field and at the corporate level. so it was hard to close hotels, because the people side of it in the early stages of covid that were heart wrenching. david: now you're coming back and have the opposite challenge. chris: correct. david: to open hotels and bring employees back. it is reported that it's hard to bring employees back or to hire new people and you have to pay
more, so is that a big challenge for you reopening hotels? chris: it is. at this point, almost all our hotels are open but they are not fully staffed. the single biggest issue we have is getting labor back into the hotels broadly, but particularly certain roles like housekeeping and the culinary areas. and while we have seen some easing of that over the last few months, we still have a ways to go, so it is something we are working very hard on. it is a complicated issue. it is hard throughout. there have been health concerns. people don't want to go to other places where other people are congregating. there have been significant issues on childcare, particularly when schools were not open. people had nobody to take care of their children. there have been government policies that compensated people that were unemployed in ways that provided some disincentives, and then, to be honest, some people have been reevaluating, you know, life
and what they want to do, and some of those folks have said, you know, i would rather go work in a warehouse rather than, you know, clean rooms and other things, so it is a complex equation that would take a significant amount of time to work through. we are a lot better off than we were three months ago, and when we wake up over the next year, we will be able to get, i'm hopeful, you know, labor back to do what we do. david: one of the biggest concerns i assume the industry has is people like me have gotten used to using zoom, and therefore, instead of traveling across the country or around the world, i can zoom. is that a concern when people say, look, zoom expenses pretty good and i don't need to travel? chris: it is not a big concern for me. i think the world is figuring this out. a year ago, you know, i think people were saying, gosh, this is so efficient, maybe i don't need to do the things i was doing. i think a year later, at least everybody i am talking to, they
have realized there are real limits to it. don't get me wrong, it is a great technology. we use it. it has facilitated our ability to continue to communicate during this crisis, but there is an unstoppable force that exists with humans which is humans want to interact with humans. and that is not just for a vacation. humans need and want to interact on business to build partnerships, innovate, build culture, and they want to congregate at meetings and events, network, to grow their business, build relationships, and so, i have no real worries. every time as we have been recovering, if you look at, you know, the minute people start to feel like we are through the crisis, the demand for meetings and events, which is the longest lead, skyrockets. people are dying to meet. get out. ♪
♪ david: let's talk about your own background, how you came to be the president and ceo. where did you grow up? chris: i grew up right near here, arlington, virginia. david: and you went to school? chris: public high school in arlington, then uva, mcintire school of commerce, undergraduate business school, got out, and decided i wanted to follow in my father's and uncle's footsteps and uncles footsteps to be in the real estate developing business, and ended up working for one of the
biggest developers and still a good friend today, and my first job was in a hotel, the willard hotel and office complex. david: oliver carr was an individual who built a big real estate company in washington, d.c. the company is still around. then you were recruited to go to marriott? chris: no, in between, i created an equity business, a tiny one, compared to the one you are part of. at the time, this would've been in 1990 one, this would have been the early days of private equity, certainly real estate private equity. -- at the time, this would've been in 1991, this would have been the early days of private equity, certainly real estate private equity. our view was that there was going to be a massive opportunity as a result of the s&n crisis displacement going on, so much inadvertent
ownership of real estate, on the wrong people's balance sheets. we wanted to take advantage of that, so we did. for five years, my partner and i went out and had a fabulous private equity business. we did a lot of deals, probably it seems like small numbers today, but $500 million worth of deals across hotels, offices, tax-exempt multifamily in our fund, and had a lot of great partners. one of them was blackstone. then got recruited to host marriott, my partner and i, to go to marriott after doing that for five years. david: host marriott that was the real estate arm of marriott. they had split the company into two parts. one was the brand that operates and manages the hotels, the other part owned the real estate. chris: i came in as the coo and i became the ceo. the ceo retired and i took over. david: you are running host marriott. you did a good job as i remember it. chris: i think so. david: how did you come to hilton? chris: i mentioned in my private equity days i had gotten to know the blackstone guys, gone to know them really well.
john gray, steve schwarzman, and when i got to host, as a result of that relationship and their interest in the hotel space, we did a bunch of transactions with them. i got to know them really well, and as a result of that relationship, i guess when they decided, you know, in july, early june, late july 2007, that they were going to buy hilton, john gray called and said, i have got the perfect job for you. we know you. we like you. we trust you. we think you have trained your whole career to run a company like this. we think there is a huge amount of upside 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 move to beverly hills,
california? you know? i famously said, we are going to be like the beverly hillbillies. i don't see us on rodeo drive. john gray is very persuasive. the truth is as i step back from it and as i talked to my wife who is an equal partner in the decision, we realize how many chances in your life will you have where it is a counterparty like blackstone that you know really well and you trust? a business you know but with massive opportunity and it fits your skill set? and those things don't come together that often, so eventually i decided we would be pick up and be the beverly hillbillies and move. david: blackstone bought the publicly traded company for $29 billion. some people thought it was a pretty high price as a time. you come into manage the debt and so forth. you move your six young daughters all the way out to
california. chris: i did. david: and then the great recession comes and all of a sudden the debt from the leveraged buyout seem to be burdensome. were you worried the deal was not going to work and you might go bankrupt? chris: david, i slept like a baby. i slept for two hours, woke up and cried, slept for another two hours, woke up and cried. kidding. no, the truth is there were some tense moments at the beginning of the great recession, but we never lost faith. john and i in particular were the two that put our heart and soul into making this thing work, john gray and i. we knew we had a really good strategy and we were building a world-class team, you know, and i am a big believer on a steady hand on the wheel. what goes down will come up. don't panic. if you have the strategy, work the strategy, adapt it to the times, and you will get to the other side, and we did. david: so, you know, you don't have as much gray hair as i do. chris: i might question that. david: did you get gray hairs from this? chris: definitely.
i definitely did. i definitely have more gray hairs. i will not say it did not stress me out on occasion, but i love a challenge. the truth is i had a great job running host and i loved the company and the people and the board was incredible to me, so why did i leave? i wanted a bigger challenge and, you know, something that was more global and needed fixing, 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, you know, fix it and push myself to get to the other side. david: so blackstone ultimately injected some more money into the deal. chris: they did. david: and bought some debt at a discount. the bottom line is 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 buyout in history. i think blackstone made a $14 billion or $15 billion profit. chris: that is what i am told. david: when you took the company public, it was at a certain
price, but i think the companies up 600%, the stock is up 600%, so you must be pretty happy, right? chris: i think so. luckily, we did our job for blackstone and their investors and they made a great profit out of, you know, what looked like a difficult set up in the great recession. anybody who bought the stock and it was public and held it has done exceptionally well. ♪ david: are you happy doing this and will you do it for the foreseeable future? chris: i would say it is like a coiled spring coming out of covid particularly. so i feel like we have more to do. ♪ david: so ceos today are under a lot of pressure to speak out on publicly controversial issues, civil rights issues, voting rights issues, other things. do you feel as a ceo you should be speaking out? is that good for your shareholders or stakeholders? chris: it is a really
complicated issue. it always has been, but as the most senior representative for the company through me to have a view, it has to be directly connected to our purpose. so i am constantly looking at the convergence of what is good for society but is also good for our business. and looking at that point of overlap and making sure we are focused on these areas because, here is the thing, again, in my humble opinion, today, everybody wants you to have an opinion on everything and do everything. last i checked, focus and discipline matters. so we picked three areas that are most important to us, diversity and inclusion, which is clearly a huge part of our business. we serve an immensely diverse customer base, an immensely diverse team member population, so, you know, that is an important area of work and that
i do speak out on. on the social side, youth. one of the biggest issues in the world today that was a problem before covid has only gotten worse in the youth unemployment. we need young people who desperately want to get into our business. so it is definitely in that convergence. and the environmental side of it. if we don't take care of our destinations around the world, there is no travel business, so that is taking care of the environment and attending to climate issues. not only can we have a big impact on it, but it is immensely important to the future opportunities of travel and tourism. ♪ david: now your company was started more than 100 years ago, a little bit more than 100 years ago by conrad hilton. he is famous for many things. he built this company. but i was told he once made a famous statement about the most important thing in the hotel business. can you tell us what that was? chris: he did. i was not alive to see it.
but he was quite famous at the time and he ended up on "the johnny carson show" on more than one occasion. at one point it goes -- and i have seen the clip so it is not legend -- johnny carson said, "all right, connie" -- he went by connie -- "you are the biggest hotel man on earth. could you just give everybody in the audience one piece of advice? " he said, " if i can give you one piece of advice, i would say, please, keep your shower curtain inside the shower." david: otherwise it would leak out in the water would damage the hotel? chris: correct. david: do you ever communicate with him or get messages from him, saying you did a good job protecting my name? chris: i haven't, but i have is bust in my office. [laughter]
we have all sorts of paraphernalia related to the history of the company, most of which i sent to the conrad hilton museum at the university of houston, because i thought it would be great to catalogue it and have it. the one thing i did keep his his bust, which i keep close to my office. i did not know conrad personally. i did know his son, barron. talking to his son, he was quite proud of what we had done with the company and suggested conrad to me conrad would have been as well. david: conrad hilton was very famous and barron hilton were famous, but the most famous is paris hilton. chris: paris. david: is she involved in the company? chris: more recently, we have been working with paris on the marketing side of it. we are working with her. she just got married and she is on her honeymoon and we are helping sponsor the honeymoon. we have been doing some work more recently. david: when i was growing up in a blue-collar family, we could not afford to go to hilton. hilton was the ultimate brand in those days and we were lucky to
to go to, let's say, an holiday inn or something like that. over the years, the hilton name has not been seen as ultimately elite as ritz-carlton or four seasons. is that a fair statement in some respects? chris: it is. and by choice. if you go back 50 years, hilton was the leading pioneering luxury brand on earth, but as time went on and as we learned that segmentation mattered in the business, and that the customers had different needs, we really tried purposefully to make hilton a four-star brand to allow for other things above it. david: so your ultimate luxury brand, is that waldorf-astoria? chris: waldorf-astoria. our luxury brands are waldorf-astoria, conrad and lxr, but the very highest and is that, conrad, and the other, l
xr, is a collection of historic luxury hotels. david: in new york city, the initial waldorf-astoria has been under construction and rehabilitation for a few years. you don't own it, but you will manage it, i presume. is it going to open in my lifetime? chris: let me correct one thing. that is not the original. david: oh, it's not? chris: the original waldorf-astoria was put together as a consequence of 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 one hotel was the waldorf, the other was the astoria, and they settled the feud by connecting them with peacock alley and it became the waldorf-astoria in new york. that was in the late 1800s. they ultimately sold it to what got redeveloped as the empire state building. where the current waldorf-astoria is was built during the great depression and opened in 1931. david: ok. chris: and is under massive redevelopment, and should reopen
as what i think will be the best luxury hotel in new york in 2023 with 400 rooms in the same amount of high-end luxury apartments. david: so there is another rumor going around about another waldorf-astoria. it is rumored in washington, d.c. where we are now. chris: [laughs] david: the trump hotel, which has had its challenges and has reportedly been sold to somebody, and you, hilton, will manage it as a waldorf-astoria. can you comment on that? chris: i read that same rumor, but i can't comment on it. david: ok. chris: i have a strict rule. i will comment when something is done. david: ok. chris: the rumors are justified in the since there is a lot of work and discussion going on, but nothing is done. david: there is a new phenomenon that's not that new, airbnb. chris: what is that? david: when it came along, the hotel industry shrugged it off, but is it a real competitor and will you be in that business? chris: i do not think it is a real competitor to us. so, if you think about what we do, it is 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 want, you know, that level of consistent high-quality experience. what they do is something different. what they are doing by definition can't have the consistency and the quality and the product and the amenities that are tailored fit, because it is different. it does not mean it is bad, it just means it is satisfying something different. if you look at the numbers even pre-covid, we were coexisting quite well. we were at the peak levels of performance at a time where they were growing by leaps and bounds, and we were not really seeing significant competitive threat as a result. david: 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 a low during the covid time. do you think there is a lot of growth left in lodging and hotel stocks? chris: that -- you know, you're one of the smartest investors on earth, so i will not give you -- i am a lowly hotel guy. i think why the stocks have performed well is really quite simple. i think it is an underlying belief that the business broadly will -- demand in the business and all segments will come back and will, ultimately over time, grow better than it was before, which i believe, and i think in our case why we have performed well. i think investors believe the decisions we made that we had a capital light business that was growing faster than anybody in the industry before, the decisions we made during covid put us in a better position when
we get to the other side of it we are 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 the like, is looking further forward. and i think that when people look forward two and three years, they like what they see in the industry and i like to believe they really like what they see in terms of what we can deliver. david: you have been doing this 14 years if i count the numbers right, and you are 59 years old? chris: i am. david: have you thought you should do something else? i've made a lot of money for investors. are you happy doing this? will you do this for the foreseeable future? chris: i will do this for this for the foreseeable future. i love what i do. we made blackstone a lot of money. we made our shareholders a lot of money. more importantly we have grown the business and have been a huge engine of opportunity. if you think about the jobs we have created around the world, all the communities we have made
better places, all the ownership groups we have help grow their business, and having built a world-class culture, the opportunities we have created for upper mobility for people. in this business, i would still say it's like a coiled spring coming out of covid, so i feel like we have more to do. my job is far from done. ♪
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