The Head of Hilton Talks About How His Business Will Survive

What will be the biggest single change in travel?

Now there’s people in PPE, social distancing, hygiene protocols, hospital cleanliness standards. Some of that will go on, and things that were already happening with technology—the digitization of our business—will accelerate like crazy. We’d already rolled out to almost every hotel in the world digital check-in, digital room selection, and digital key. So on your Hilton Honors app, you already had contactless entry. Of Hilton Honors members, about a third used it. You will see mass adoption of that. And then people won’t go back.

How robust a pickup do you expect?

Well, 75% of our business relates to business-related travel—either groups or business transient—and 25% of it is leisure travel. At the bottom, systemwide occupancy in May would have been 10% or 12%. I think now it’s like 27% or 28%. So it’s two or three times better than it was. But we finished last year with average occupancy of almost 75%, so it is meaningfully—devastatingly—lower than where it was.

So what comes back first?

Right now what we’re seeing is predominantly growth in leisure. Memorial Day weekend, in markets near beaches and [places] where people wanted to get out, we had hotels that were at capacity—lower capacity because of distancing, but as much capacity as we can handle. Business travel hasn’t really come back in earnest, because most people still aren’t back in their offices and allowing people to travel.

When will business travel pick up?

People are not going to stop traveling and do Zoom the rest of their life. But over the next year, business travel will be weak. It’ll work its way back over two or three years.

How bad will things become?

When you get through the health-care crisis, which we’re not through, obviously, you’re going to be in the middle of one of the toughest recessions we’ve had in modern history. That affects business. Businesses are letting people go. They are not hiring any incremental people. They’ve cut capital expenditures. All the things that help generate activity around our business have diminished. But they will all come back, as they always do.

What about conventions?

There’s zero conventions happening now. But they are going to start happening in the fall. And that’s going to be one of the other things that I think will be a lasting change—that people are going to be doing hybrid conferences. They’re going to be doing part physical, part virtual. And so one of the things we’re doing is investing in this time with partners— and getting pipe into all the big hotels so that you can accommodate that.

I would say when you fast-forward three or four years, I think the group business will look a lot like it did 90 days ago, because I am highly confident we will have figured out Covid‑19, either with therapeutics or, hopefully, a vaccine. And people will feel like it is not an unreasonable hazard for them to congregate.

So people will come back?

Here’s the thing: You go back to the Spanish flu, you go back to all these things that were as devastating as this is, you go back and look at history where things were much more impactful from a mortality point of view, and you study it. And people went back sooner than you [expected] to their prior patterns, once they felt that they were in a healthy space.

Not that it’s the same by any means, but I remember 9/11. I lived through it. I was running another hotel company, and I remember sitting around talking with our board: “Nobody’s ever gonna get on a plane again. Why would they get on a plane?” Within a year, they did.

How well has the government handled the unemployment crisis caused by Covid-19?

They’ve worked in a very bipartisan way so far to address what I think have been the most meaningful issues. What’s happened with the unemployment insurance top-ups from the federal government adding to the state [payments], I think has been extraordinarily helpful.

Do they need to extend the extra unemployment payments?

I think they need to extend it, and I think they will. But I think they need to do it in a little bit different form. In many cases, when we want to bring people back on, it’s actually provided a disincentive to people to go back to work. And so we need to sort of right-size it in various markets to make sure that it is not providing sort of that incentive.

The most important thing we can do for our front-line team members, though, is get them back to work, right? The best thing we can do is provide a bridge while there is no work but get activity going again so that there is work, and we can get folks back in jobs. Because what they really want for their self-esteem is not the government to take care of them, they want to be back and working. Our people love hospitality. They love their people, serving people. They love what they do. And they’re not enjoying this existence, even if they’re being helped to survive it.
 
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