Good morning.
It’s been 10 years since Hilton launched its initial public offering on the New York Stock Exchange on Dec. 11, 2013. And its milestones have been the result of the company’s talent and transformation.
Hilton, a Fortune 500 company, has become a “pure play, capital-light, fee-based business,” Kevin Jacobs, CFO and president of global development at Hilton, said. Hilton doesn’t own the vast majority of its hotels but the “vast majority of what drives the earnings growth of the business is same-store sales growth, plus our net unit growth,” Jacobs said. From Dec. 11, 2013 to Nov. 30, 2023, it has delivered total shareholder returns of approximately 330%, according to the company.
In the past decade, Hilton has added nearly a half million rooms—672,000 to 1,160,000. The company is now in 124 countries and territories compared to 90 in 2013. It has grown from 10 to 22 brands, and built a large development pipeline of future hotel rooms—from 185,699 to 457,300. The number of properties grew by more than 80%. And it has quadrupled the number of Hilton Honors members worldwide.
This year, Hilton was named the No. 1 World’s Best Workplace by Fortune and Great Place to Work. For example, 88% of employees surveyed said their work has special meaning: this is not "just a job." And 84% said that management involves people in decisions that affect their jobs or work environment.
But these accomplishments followed a transformation from a public company to a private company, then back to public, and navigating two crises.
‘Just what this business needed’
Hilton began trading on the New York Stock Exchange for the first time back in 1946. And before it went public again in 2013, the company was acquired by the private equity firm Blackstone Inc. in 2007 in an all-cash transaction valued at approximately $26 billion.
Jacobs was tapped by Chris Nassetta, hired as CEO of Hilton in 2007, to help run the company under Blackstone. Jacobs joined Hilton in 2008 as SVP of corporate strategy, a role in which he was the project manager for the reorganization of the business.
“My job was to fly around the world and meet with as many people as I could on our management team to figure out how all of the different pieces of our businesses worked together,” he said. Jacobs was tasked to explore sources and uses of cash, and how Hilton funded the business. That created a strong foundation in his understanding of how the business worked, he said.
“Working for Blackstone was an incredible experience,” Jacobs recalled. “I think they were an amazing sponsor and just what this business needed. I think that being able to take that business and optimize it, and do a massive reorganization, would have been harder in a public company format.”
Going private through Blackstone provided the opportunity to be able to “dig deeper and make the right decisions for the business without having to worry as much about quarterly earnings,” Jacobs said. And being able to take a little bit more risk on the balance sheet side, he said.
But then the financial crisis of 2008 hit. “Capital for new development in our business was very restrictive,” Jacobs said. “Debt became a lot more expensive. Our earnings went down dramatically. We really had to hunker down and conserve cash. You learn from the financial crisis that liquidity is king.”
Jacobs took on the additional role of treasurer in 2009, and then in 2012 was appointed EVP and chief of staff. He became CFO in 2013, about six months right before kicking off the IPO process, he said. Jacobs added the role of president of global development in 2020, leading teams around the world that sell new management franchise agreements.
But then the second crisis—the COVID-19 pandemic—was more dramatic than the 2008 financial crisis, Jacobs said. “Our revenue went down nearly 90%, almost literally overnight,” Jacobs recalled. “You had to get back to the basics and understand that liquidity was at a premium. We availed ourselves of any liquidity we could find." During this time, he gained a deep understanding of which expenses were fixed, and which were variable, he said.
Maintaining growth
How do you maintain growth during time of crisis? “Our growth is driven by the strength of our brands,” Jacobs said. “The growth of our businesses is built on the backs of hotel owners and developers, anything from individuals and families that are small business owners, up to the largest institutions in the world.”
The properties offer different price points and have geographic diversification, and you combine that with a loyalty program, ”you give the customer the opportunity to be more loyal to you,” he said.
I also asked Jacobs how business travel is looking for 2024. In Hilton's third quarter, leisure and business travel each grew 5% year over year, and group revenue was up 8%, and a large component of that is corporate meetings, Jacobs said. He expects the growth to continue into next year.
Sheryl Estrada
sheryl.estrada@fortune.com
