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September 22, 2021, Online, New York, NY, USA
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How We Live and Work Has Changed for Good, Will Travel?
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Christopher Nassetta
President & CEO at Hilton

Christopher J. Nassetta is President and Chief Executive Officer for Hilton. He joined the company in 2007. Previously, Mr. Nassetta was President and Chief Executive Officer of Host Hotels & Resorts, Inc., a position he held since 2000. He joined Host Hotels & Resorts, Inc. in 1995 as Executive Vice President and was elected Chief Operating Officer in 1997. Before joining Host Hotels & Resorts, Inc., Mr. Nassetta co-founded Bailey Capital Corporation in 1991, where he was responsible for the operations of the real estate investment and advisory firm. Prior to founding Bailey Capital Corporation, he spent seven years at The Oliver Carr Company, ultimately serving as Chief Development Officer. In this role, he was responsible for all development and related activities for one of the largest commercial real estate companies in the mid-Atlantic region.

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And now for our closing session of the day, please welcome president and CEO for Hilton Christopher to set up for discussion with skiff, founder and CEO Ruffin. Thank you Chris for being here before you start. I didn't want to voice one. Small complaint a question for you. I want to know I was here last in 2019 in 5/8, fabulous to see some some why can't say smiling faces. Cuz I can't see their smiles, but nice to see a lot of people in the room, but I did. I do something wrong to be the last weekend of the day. In 2019, to get the 5:30 p.m. Slot. Was it? Is it

set? Remind me that I would ask you to tell your team, to renew their subscriptions, active research, and then we will put you earlier today, but that's why they're all there. Okay. Thank you. Is everybody in cocktail hour? Like all my dinner was feeling. So let's, let's start with all the stupid and I think in the Q2 earnings call, you said, you were you, you do, you did, you didn't factor into your projections, two weeks into September, I guess, 3 weeks. Now, what's your feeling? Now has anything changed? So you're seeing that set up a chewing out and then coming back.

What I talked about in the Delta. It stinks. In a bunch of things have changed. So I'll come back to you. But think, picture, what I talked about was my faith in the resilience of the business, you know, the Find demand, both natural and pent-up demand in all segments. We obviously and seen that and Leisure like crazy already, but we were really starting to see if this is traveling. We were really starting to see it in the bookings on meetings and events, like like these

events. And so, my big picture of you then was listened as we get towards the end of this year and into next year and covid-19. You know, I think we are on a solid road to recovery and I have every confidence that we're going to continue to see you. No pick up in the segment said that have been like that. It was a natural consequence of not just a health issue. But, you know, a a reception that was brought on by a health issue. I've been doing this for longer than I wanted every time you're coming out of recession. You know,

we've seen leisurely not quite that, you know, by this measure but generally leisurely business, travel meetings and events following so, you know, over Dependency of the, you know, the next three or four quarter is my view, then was I think we're going to get back to sort of a place where we're pretty much where we were in 19, not mint, not in the full year like next year but on a run-rate basis. And I would say cuz you asked me a question. I will answer it. I don't really feel any differently today. But if you then died a little deeper into like where we are at this exact moment relative

to what I what I hope for the NSA were a little bit behind, it does not change my view on the broader trajectory that does not change my view on what I think. On a run-rate basis. We will achieve next year, based on what's going on with covid-19 SC in demand patterns and booking patterns, but I think and I'm not it's impossible to be perfectly scientific. I think what we did is we inserted like four to eight weeks of going through this Delta, you know, Spike that is. I think you know, if you read all the data feels like his sort of getting under control and it's finished the best

Leisure season we've ever had in 102 years. So that's pretty healthy. And if you know and this is just in the strength of the US market Driven, you know, driven by the US market and we expected August to drop off and does it travel it always does. Right, people do go on vacations. They don't travel for business and it said, but not that much. Not a whole lot different than we expected and post-labor day. You know, it's picking back up, probably a little slower really objective. I would have thought it would pick up a little bit faster. The slope would

have been a little bit steeper when I talked about it on with you two than what we're seeing out. But it is, you know, in September as we get deeper into September, this recovery meetings and events. I mean, that is pushed out a little bit because it's easy for people to say, I don't know if I should, we do this event. Big businesses are saying, I don't want to put people in Harm's Way. That's more of a, we'll get some fourth quarter meetings and events more than we've had but that's really a 2022. Any sort of

knocked it out. Maybe a couple months, but not much more than that. And I think my fundamental optimism, which I think is well-founded on data, you know, about sort of the trajectory of where we're going and how this will play out. Next year, is pretty much what it was and all of you or anybody was watching online, that we will have some time for questions, go to the app and put your question in, and I'll get all these questions here. So hopefully Google to answer some of those if we have time. So you have a contrary, I guess.

Contrary to the popular view on business travel. Really? I mean, I don't know depends who you talk to you. I guess you've had a few people on stage. I guess I'll support mine. But here's what I'd say the way you think about business travel. It is in the end. I think businesses need to travel. I mean I run a big business talk to a lot of people to do and I can tell you pretty uniformly, regardless of what people say in the, you know, it's gift and everywhere else, you know, the seals are running to the big businesses need. No, they need to get people

back together and offices more than they have it, and they know that they got to get their people back on the road because they need to build culture. They need to build relationships. They need collaboration. They need, you know, Innovation culture, building in all of those things are very, very hard to do digitally. Listen, I've done more digital need a virtual zoom in all that. You know, I'm pretty advancing that stuff, but I don't enjoy it now. I'm exhausted by my lower back. I can't take it anymore. Cuz like, I can't sit in one spot. Hunched over again on my iPad, but I think

the fundamental truth is this is a core part of doing business, and it's really interesting say, you never travel and you'll cut back and of course you will because you had to cut budgets back and so that's normal in a recession. And I think it's fundamentally will remain true and their budgets will increase until people have to deliver Alpha. I think it's really great until you're competing on a deal and the other guys go out. I travel and they have a dinner, and they build a relationship and you lose the bet. So it's a competitive world. One thing that that's what about long-haul,

International relationships matter and you cannot build relationships the same way to clean new relationships are almost impossible that format. So my belief is business. Travel will recover and as sure as I'm sitting here, I'll pick up Mark 3 years from now business travel will be greater than it was in 2019. By the way. This summer before this the the spike in Delta. It was 75% in our system of Prior business transfer with 75% of higher level. One of the things we do is we filter through our own world. So what's happening is

a massive bifurcation, business, travel small and medium businesses are traveling the W, big businesses or not, because they don't know the risks of budget cuts and all that in our business and we were at all. Mostly the second biggest, one of the biggest in the, in the world 80% of our business, transient travel is small and This is it's not, we love the big. This is too. For those of you who are out there, but it's the minority of our business, small and medium businesses. Don't have the luxury of thing coming through Health crisis. And we are in a cyclical,

recovery a business travel because people clearly have cut budgets and all that. I've said publicly dozens of times that ultimately, you know, you have to go through a number of budget Seasons to get that back. The last thing I'd say which we sort of talked about the back is if you lived way way and you go back over the history of time whether its Leisure Travel business groups meeting the thing. It's really driven travel is mobility. Okay, you know, Mobility, you know, the demographics

of middle class is growing, people wanting more experiences than things in the last 20 years and in my own View. And my opinion is The covid-19 said, think that that's sort of tribuno stopped all that are wrong. I think that it stopped it for a while because it sort of had to kill Mobility to, to tackle the problem. But it actually reinforced all the reasons why people want more mobility and want more experiences and they're going to have the disposable income to do it. Cuz the middle classes around, the world are going to keep growing. So my underpinning on demand, in our

business with her, all segments is you're going to be living in a world of Greater Mobility, think of that, even if like, let's say which I do think people are going to cut back office space. We probably going to be more efficient will do hotel and will do all sorts of things. What does that mean? It means more Mobility. That means our people. They're not going to work from home. It's going to be work from anywhere. What does that mean? They're going to need to travel more? They're going to work in the hotels are going to need meeting space. Is there going to have to come to the home office

for a week? A month, just to dinner do training or or you don't have some semblance of relation? It means more Mobility more people moving, the more people move around the world for various reasons, the more we grow our business for a thousand years. And that's the way it'll be for. Another thing. We hold the last season's whole thing was the future of human Mobility which was the point. Was it as the world moves more, which certain either wave of nationalism with Words, which is happening all around the world would make you think otherwise. But our star

stickers yesterday argue. That's a momentary phases of the last Ferry. I think it's a Fool's errand. That's what I'm calling anybody. That was here. I think broadly it's a Fool's errand to trend line off of the bottom of the top where they were near the top because when things are really gravy always trend line that all my God, it's a new world order and everything is always going to be good when things are really bad and you have a seismic things happening which What's happen? The last year-and-a-half pretty seismic assorted, you know where human we sort of trendline, you know,

we filter for that and we sort of trend line off of that and I think we're at War factoring with a lot of bias. And so that's why I think you got to sort of get get through this. We can debate is more Mobility going to be better for leisure better from this is better for meeting to the you know, my name is as you be better for everything like the man levels of demand levels when I'm hopefully you invite me back and I'm better time slot. Next time when I come back in three years for the first time slot, if I behave myself and weary up our

subscription or whatever, we're supposed to do. I think we will be so I'm hoping you'll tell me you were right. I call your segments by Leisure. Went back is probably a little bit greater than it was but it's not what it is. I mean, you know, cuz people do go back to work kids, go back to school. And business travel and meetings in advance have had a phenomenal run pent-up, demand people understanding more than ever that they need to build relationships, congregate. Collaborate going to be able to innovate and drive businesses. Simple, same time, you know, you need a ride. So I

will come back and you can, you can Hammer me if I'm wrong, but I haven't done a lot of work, but not as major. And I mean, if your a New York, obviously, it is but 911. I remember how, you know, when the days following 9/11. Nobody was ever going to get on a plane. Why would you ever get on a plane in a world where you can fly into a building? Like I was at was running another big hotel company at that time and there's like nobody would get on a plane. You woke up a year later, two years later. We came up with coping mechanisms, TSA better security.

Everybody was fine and nobody was thinking twice about it. Let me ask you this question. Do you know people see your famously said I want a while ago? Like things changed over the long-term a lot more than people think and over the short-term a lot less don't trendline. Things are going back to where they were up to think, offices are going to be a lot of things going to be different. But underneath that all mobility in the world that can increase and they're going to get it and it's going to come in a different bunch of different

forms. That is going to be good for a business liability. Got some great news this week with the u.s. Border reopening. One of my questions that I prepared last week, for your team, for you to answer, was to bite it on the station or on opening international travel. What would you advise? And I guess he took that bites before you give them. As an industry, many people in this room and myself, included in working with the administration. And I both administrations, you know, but obviously, you know, it hadn't been really ripe until we got enough shots in arms

and I think the, you know that the guy is covid, RI guess they call him coming coordinator for being so super, close personal friend of mine. So I've been talking to him periodically throughout, and I think appropriately there, real thrust has been like, we got to deal with getting Americans back sedated. And, you know, we don't want to have, you know, in can ants are Risk by bringing anybody in that, you know, that would, that would slow down the trajectory of sort of getting past, you know, covid, physically during the Delta way, but they've done a lot of work. We've done a lot of work and

working with them to point out that you can do this safely. Just like we can all be here and were vaccinated, you know, so can International Travelers. Come into our country with the right protocols. We can do it safely in a way. That's not, you know, going to change the risk profile for the country at a point where one, I think they say that when we started talking to them for five months ago or so. Honestly, I think it was it was very hard to get have a real conversation cuz they just hadn't gotten to

the point of vaccination that they were. They were comfortable with it. And they had a very myopic Focus as a show. I've been traveling a bit internet with her, but it'll take me and it's not that many places. I was in Europe a couple weeks ago for another conference. Ihif. We had dinner with a turbo 900 people there and, you know, it'll be great to get those those Travelers back early for our City's. I mean, the reality is, if you look at the date number is because nobody can leave, you know.

This summer. And all of the numbers were great. As I was saying, because nobody left. So they just, you know, they roamed about the country lot of drive to vacations and it was all pretty good. But the city, you know, if he worked late last night. If you look at our system across the the US business system-wide, 5% of our business is international not that much maybe four or five. If you look at the big cities are not all the same but I like 20 plus. So it's a, it's a big deal for the city's to to get the city's back on their feet. And

obviously the cities are lagging, you know, the Resorter see any Improvement, like Frances, New York City, some slow. I mean that as you would guess that they put it in, you know, sort of three buckets, by broadly Resorts soda, non-city everything else and Citi Bike and grossly oversimplified and the performances in descending. Order of those buckets. The resorts have crushed it. We've had a big steep slope and everybody knows non-city everything else. Cuz a lot of drive to and drive to business travel, and the city have been bringing up

the tail in. They don't have the international travel, you know, the health issues and then more dense areas, you know, are you know, or more are more concerned in, you know, we've had labor and lots of other things is going on the city. So I think it's just been sort of a combo platter of things. Every cities will be different but they've been lagging. But I can have this is going to help cities in a in a big way and yeah, everything is every cities improving. It's just not as fast. You should ask

Mark, hoplamazian. Is he speaking and why is that? It's very simple. We don't need to be. I mean, you know, we look at the feet of the scale that we have. The network effect that we have is a result of our segmentation, as a result of our Geographic diversification, in the product quality and consistency of service. Living with we put the whole thing together. We've really created what we think is an industry-leading Network effect and we can demonstrate that by

the fact that we've the highest market share of any of the major Global Brandon player. So I think that's pretty good evidence that it works. And so when we look at him and say we look in the contacts that we have, something is working really well. We have opportunities to do more things like since I've been at the company 14 plus years. We've doubled the size of the brand for Flynn from 9 to 18 written. So it's not like we've been sick. Brown, we just did it organically. Why do we do it again? Because we could develop brands that were purpose-built for what exactly what we think of modern

need of the modern needs of a customer are, and it's much higher return, when we're not buying it, and then spending her time, fixing other people's problems which invariably exist in that in that kind of environment. So, we look at everything. We looked at Apple. We've literally anyting is traded traded including Starwood back in the day. We're private. We've looked at some of those things. We spend a lot of time on, but when we put it to a really simple filtered like strategically, does it enhance our ability ability to deliver for customers? What what they want and economically,

is it really accretive to our shareholders as a result of doing it pretty much so far. Nothing is as I made it to the filter. Now at the same time, we've grown faster than everybody and we've done it organically and the returns have been phenomenal. Right? So, you know, we've been I think we doubled the so, you know, it was a big company when I got here. I think we doubled the size of the company doubled, the size of the brand and leaving bought the first night. So it's working, right? So, it doesn't mean I'm skiff or other. We're not going to be in the front page everyday, but that's

not what we're looking to do. For looking to deliver the absolute most reliable friendly experience for our customers and deliver the best returns for shareholders. And I, and we are maniacal about it. That's why we do what we did. In terms of you talk about Labor. And obviously, this is a problem. Everybody's dealing with. I'm sure including you probably visit. Would it be fair to say? One of the top things in your mind? How do you solve it? It's complicated. So there's not, there's not one answer. I mean, not one simple solution. I would say,

things are already happening that will, that will help that will take time. So, I think when you look at the laborers who I think it is, I think, if you think about how we went into covid, we already had certainly in some rolls. On the front line. We already had pressure on labor, but particularly in the area of housekeeping, but in other areas as well, in the front line, they weren't extreme that, they existed. Then you wanted to covid, then you had help people not wanting, you know, to work because of the health issues people didn't have anybody take care of their kids and it's a very,

you know, young Workforce and they have you no children, elderly parents, you know, they have child care, adult care and then you had a number of things happen from a policy point of view, but we all of which I supported heavily and I would argue in the beginning of the end for the you know, the unemployment insurance from the federal government. Back in March and April of 2020. I was I would argue the tip of the spear to be pushing for that. But over time, you know it it had some it had some impact in terms of when there was demanding, when there were there were jobs

available. I don't think was not helpful and you put all that together. Government will pay me. I can't have anybody to take care of my kids, and I'm worried about my health. It's a taxi, you know what, to talk to bring us up. Some of that is is resolving itself and employment has. As soon as you doubtless states are, the federal has ended almost all schools in our opening. We have had we have, ubiquitous access to Maxine's will see with the OSHA. Stop likely event that she will have met. Are you doing for

the rest of the industry to figure out what ocean is doing? Exactly. And then we're going to make judgments. We've done it. We're waiting week as an industry, a number of us. We've all been talking into the last thing we want to do is come out with something and then OSHA comes out with their rights 2 weeks in your house. And it's some kind of different though. So we're waiting but to finish the point on labor, some of those things are easing. So time is going to help us. And then I think, you know that the greatest in a way that we help ourselves is Wheels, Millie,

take, great care of her people. And we have an incredible culture. Number one, great place to work in the United States multiple years running number two in the world. That's cuz we repay while we give great benefits. We create a family environment where people want to be in it and then they tell their friends, they want to be in it. And so ultimately long-term that, you know, having a great. That's why we build a great culture is. So we have the best talent that is inspired to serve our customers. We're going to have to help it and Beyond just kids, going back to school and unemployment

insurance by figuring out more creative and innovative ways with the use of technology, which were investing in and scheduling. Access to be no to flexible, Labour and gigs labor, and much more sophisticated ways, which we've been developing over the years for Howard training people. Who does that we realize it. While we do this in a limited way like we have searched hiring in markets Resorts different times a year that you know, a lot of them there going to be a bunch of people would say like maybe I don't want to work full time. Like I did ever again where I can't because I got child

or you know, family care of some sort, but I want to work a day or two weeks and we just have to I think and we are as a company, get much more sophisticated but how we how we pay people how they actually get paid. You no physically, you know when and using technology that is much more friendly to too much more flexible. Scheduling access doesn't your Southern pools of talents. So we're in the process of doing a bunch of investing and thinking and actually, you know action to, you know, Get more access Brian. Can you put 5 more minutes

on the clock? Sorry, just where it. Where were were in his own here. Let's not get it lightning. But yes. Looks like do you think that the housekeeping, not being daily permanent now and then, and then industry housekeeping, not being daily, meaning cleaning up there of the underlying philosophy and I'm a zealot about this and I have been for the entire time. I've been at the company is that our job is to deliver the most friendly. I said this reliable experiences for customers. And the key way to do that is to give them choice and control and to be able to do

it at massive scale. So that you effective. Play for what? We serve. Two hundred million people over a year. Can customize experience at that level? Because if we take the friction out, we allow them to do. The get the things, the way they can do, what they want, the way they want it in the palm of their hand. Like they have driven most of the rest of their life, then they're going to be happy. It's going to be a better more reliable and more friendly experience and they're going to stay this morning to get a higher market share. And so, the answer, the question is what I think, doesn't

matter because it's an option for the customer. It's choice and control. So ultimately right now it's at the, you know, where we are working, is it is not in our app, but it will be very soon and it'll be super frictionless and super easy for people to say, I want it or I don't and that's a good thing. Because there are people my wife, I found this out there, but I never knew this. She doesn't like housekeepers in the room. Wednesdays. And like I had like there was a huge Epiphany. I said, are you kidding me? Why? Well, you know, I don't I don't know. I got my stuff.

That's all, we're going all sides of it. Part of its covid-19. Don't, you know, the health department is just that some people, you know, don't want people in the room and so we're not taking it away. We're just giving any choice and control. You have a choice and you control if you want it, we won't decide for you. And that's think of that somatic Lee and everything we do or we give people choices and make it super friction-free and and give him the control in the palm of their hand. I think the better their state is going to be weather

that's in room technology with our smart room, whether that's you know, the digital key that we led the industry and and digital room selection where we have the most What time does my choice and control the app, you can get that, you can control it if you don't want it. So, I don't don't don't tap the button if you wanted options. Last, I checked optionality is a very powerful thing to your question on family travel. At what did it took until 2021 for one brand? Only one course monster this summer. I'll give you the answer and I got

like, within minutes. If it going out. I got a picture of the headline and a text from My Wife and she said, oh, this is really great. Now, that our kids are grown up. You finally. Got off your you-know-what and did this. And I was like, oh great. Thanks, cuz my kids are ready. I have six daughters are there 18 to 28? They don't, they don't want to be you anymore. Tell you something like it's not easy in the reason, isn't it? It's what we've been do. It either working on for five years and we're at the very tail

and then we accelerated a lot of this work during covid-19 Italy. When a lot of people are cutting things is, is really just totally reimagining our texts back. And then, so, all of these, the reason all of these things are hard in the, in the old hotel World. Okay. Is that you had these two monolithic, our cave systems that everybody has PMS Property Management, CRS, duration system. And they were all, let's be honest. They're old. And while they work, they were like, I would argue, like, shoestring bubblegum duct tape. I

mean, that, you know, they just weren't built for a modern, the modern world such new advances in technology. They weren't built for the kind of scale that we Now operate in a number of countries and all that. But when your knees big tummies, Hard. They give, you know, you're fine. It's like taking a 747 over the, you know, you were trying to repair engine but your Insight you got to make sure you can play in the air. So the industry broadly, I think it's been very slow in it. For five years ago. We said we're getting out of that world. We're going to reimagine the whole thing. We're going to

go and sort cloud-based. Microservices. We are going to have a text back, that's as good as any of the startups that, you know, that are out there that, you know, in the, in the tech world because we have to, and we're just going to have to make the time in investment and manage their way through it. And while we're not a hundred percent, sure that we are cers is all done, you know, open source microservices, you know, it's it's amazing. We can now Adam eisenmann Tori least, you know, you can have like 26 you never even said we can have a billion room time so we can do all sorts of really

cool things and the TMS probably buy. Realistically middle end of next year, will be pretty fully deployed. Then you put all that together. In the meantime, we can do things now just by virtue of where we are, when we get all the way through it. It allows us to plug in play from a microservices point of view. All sorts of interesting things, like, confirm, connecting rooms that we were able to do it in part because we made enough progress to connect those dots. And I let you know, when we get probably a year from now, I think the opportunities are far far greater. These are little things.

I think, you know, think about a world where you go on and we can, we can atomizer inventory for every single customer. So we know that you want to be, you know, in a few in a high floor, you know, nowhere near the elevators and you love that you do you want a breakfast cereal and he likes that we can put together and literally a atomized package for your exactly and put it in front of you. And in charge appropriately instead of like making you work, you know underneath it. And

so that's why it's taking so long, but we're almost there. We were there to be able to do a lot of it will be fully there soon. I'm not optimistic note. I do have 10 more questions, but we're really out of time.

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