GOING INTERNATIONAL
It became clear to Nassetta not long after joining Hilton that the company has great opportunities for international growth. Hilton reacquired Hilton International in 2006 after a 42-year separation. During the years in which the two companies were separate, Hilton in the U.S. was prevented from expanding its brands overseas. Now that it is free to grow around the world, Hilton is committing additional personnel and resources to kick-start its global growth strategy.

“We have these great brands and a great international brand in Hilton, but they had not been fully exploited,” says Nassetta. “Of the 120,000 rooms in the pipeline when I got here, 15 percent were international and 10 percent of what was under construction was international. A lot of our transformation efforts involved creating alignment and focus and removing excess layering in the organization so we would be more effective and efficient. And in achieving those efficiencies, we were able to redirect a lot of our resources into the brand area and into development.”

Today, the worldwide Hilton pipeline includes 133,500 rooms, 43 percent of which are international. And now 65 percent of rooms under construction are outside of the U.S.

The Hilton Worldwide executive team: (left) Ian Carter, Paul Brown, Chris Nassetta and John Vanderslice

Talk to Ian Carter and you’ll get a tour around the world, at least to those markets Hilton hopes to plant its flags in the coming years. Carter was the former head of Hilton International before being named president of global operations and development for Hilton Worldwide.

Carter’s tour starts in South America and moves east until it reaches the company’s prime international targets, China and to a less extent, India:

• “There’s great awareness of the Hilton brand in South America, which we believe we can use as leverage to introduce some of our other flags,” says Carter. Initial growth vehicles will be Hilton, Doubletree by Hilton (as it is known outside of North America) and Hilton Garden Inn. Development of Hampton Inn will follow.

• Europe, where Hilton has 70 hotels and 14,500 rooms in the pipeline, represents almost unlimited opportunities for nearly all of the company’s brands, especially Hampton, Hilton Garden Inn and Doubletree. In Italy, for example, the company has been able to open properties from all three brands, plus Hilton, in the past three years. Turkey, which had a Hilton in Istanbul for decades, will have 20 or so properties from several Hilton brands by the end of 2011, says Carter.

Hampton, which was introduced to Europe two years ago, has five properties open in the United Kingdom and 10 more in the European pipeline. Hilton Garden Inn has 36 signed deals.

• The Middle East is another region in which Hilton has had a long presence. Most of the company’s new growth will be in full-service and luxury, says Carter through the Hilton, Doubletree and Waldorf-Astoria flags. Hilton Garden Inn has potential, too, especially in Saudi Arabia, where one property is open.

• “India is a significant hot spot for Hilton,” says Carter. “We’ll have four or five hotels open by the end of the years with a strong pipeline (more than 20 properties and 5,000 rooms), including both full- and focused-service hotels.”

“There are a couple of issues that make development difficult in India,” says Carter. “The infrastructure is nowhere as good as it is in China, where the highways rival the best in the U.S. And although there is a clear and well-developed legal system based on the U.K., the country is very bureaucratic so it takes a long time to get anything done. Until these obstacles are cleared, development will be hindered.”

• Like most global hotel companies, China is Hilton’s number-one international development target. The company has a lot of room to grow. While the Hilton brand has had a presence in Shanghai and Beijing for many years, the company only had four hotels in the country as recently as the end of 2008. A year later, it had 11 open with 50 properties and 18,000 rooms currently in the pipeline.

“If you look at the world’s population and where the growth is, particularly in the middle class, it’s coming from the emerging markets,” says Nassetta. “China and India will have a bigger middle class soon, if not now, than the entire population of the U.S. And India has fewer hotel rooms than Manhattan or Orlando with a middle class that’s bigger than our whole country. So when you look at those opportunities as a matter of the proportion of your growth that can come from these countries, they have to represent a big part of your future.”

NORTH AMERICAN OPPORTUNITIES
Even though Hilton looks to the world for growth, the U.S. remains its main expansion engine, particularly in the focused-service arena and in conversions of full-service hotels. And while the credit crunch has put the brakes on a lot of ground-up development, Hilton still has more than 600 properties and 75,000 rooms in its U.S. pipeline.

“The little amount of full-service development we’re doing today are mostly conversions for Hilton and Doubletree,” says Bill Fortier, senior vice president, development-Americas. “There are a lot of non-branded or under-branded hotel owners saying, ‘I need extra lift on my rate and occupancy and I need a rewards program. I need what you guys have.’ We’re also getting some traction in North America with our Conrad and Waldorf brands.”

The company positions the Hilton brand as a more traditional, four-star commercial and group hotel. “Doubletree is more like three and a half stars sitting just under Hilton,” says Fortier, “There’s also a lot more flexibility in what the Doubletree box can be. For example, Doubletree allows through-the-wall air conditioning units where Hilton will not.”

Growth in focused-service is mostly new-build Hamptons and the new Home2 extended-stay product. As Fortier says, these projects are small enough developers can secure SBA-backed financing or they’re able to raise the 40-percent-or-so of equity needed to get financing.