Hilton CEO Chris Nassetta on the travel industry during a COVID-19 era

Hilton CEO Chris Nassetta talks with Yahoo Finance reporter Jen Rogers on the changing landscape of the travel and airline industries during the COVID-19 pandemic, and how the company is handling the coronavirus.

Video Transcript

- Chris Nassetta has been with Hilton since 2007. He leads a team who manages over 6,000 properties with close to a million hotel rooms in 188 countries. There are 18 brands under the Hilton name including Embassy Suites, Doubletree, Hampton, and the storied Waldorf Astoria. Nassetta's leadership comes at a time of unprecedented challenges for travel and tourism as the COVID-19 pandemic has devastated the industry.

JEN ROGERS: Hi, I'm Jen Rogers. Thanks for watching and Chris Nassetta thanks so much for joining us. I have to just start on kind of a personal level. I have not been in a hotel since last January. Are you traveling right now and, if so, what are hotels like?

CHRIS NASSETTA: I am. First of all, Jen, thanks for having me on. Great, great to be with you guys. I am traveling. In fact, I've been traveling not like I would have before, you know, pre-COVID I'd probably spend 80% of my time on the road as you would guess. I'm in the business of travel, traveling all over the world.

During COVID, the initial stages, very little travel but some. And now I'm getting out maybe once a week mostly domestic. I had my first international trip this week, which was liberating. It felt really good. I was in Mexico to meet with some of our partners down there and meet with our team and do some town halls and look at some of the things that we have under development. And it was great, of course, you know like everybody doing it thoughtfully and safely and using PPE and the like. The experience, I think I would like to give everybody confidence that when you stay with us it's, it's really safe.

I mean, when we got into the pandemic, very early into it, in March I said to our team, "At this point, a lot of the world is closed and people aren't going to be traveling but soon enough they're going to and we're going to have first responders, we're going to have others that need to travel and what we need to do is give them the confidence as we have for 101 years at Hilton that when they stay with us, they're in a safe and secure environment." So we went out in March and started working with the Mayo Clinic and Lysol Dettol to try and come up with what we thought was the absolute best standard in hygiene and cleanliness for our hotels, the public spaces, the rooms, and the like.

We ended up bringing that Hilton CleanStay and we implemented that on a global basis to all 6,300 hotels in 120 countries around the world in the following 60 or 90 days. And so everywhere you go now in the world where you stay with us, and almost all of our hotels are open, we've implemented Hilton CleanStay to basically hospital-grade cleaning and hygiene standards where you literally, when you check into the room, you break a seal.

JEN ROGERS: I think a lot of people have been surprised at how quickly some of the leisure travel piece has come back. Business, obviously, is still having a tough time. What does the road back look like for business travel? When-- what is it going to take to get people back on the road?

CHRIS NASSETTA: Yeah. Interestingly, the pattern-- Well, this is a different kind of crisis and economic decline caused by you know a pandemic versus other declines. The pattern of how we're recovering is, is, is pretty similar and that has been always that leisure is more resilient and that business travel probably second and then group and meetings business last because it's a longer lead business. That is the case more dramatically so this time as compared to prior cycles but, but reasonably similar.

I think what's going on on leisure is sort of backed up by the research we did as we've launched our latest marketing campaigns and that is that people want to travel, right. If you talk to people- I think it's like 95% of people say they miss travel and 95% or 96% of people say some of their best memories, if not their best memories, involve travel. And so they want to get out, and so they are.

And the fact of the matter is they have more time in the sense that, you know, in many cases their kids either during the summer were not in school now they're not back in school, many offices haven't opened, and people are working virtually, kids are going to school virtually. And so people have a lot more flexibility with their time. So you put more flexibility with their time together with a burning desire to get out and travel and a burning desire to create new memories and that's, that's brought you a whole bunch of leisure business. The rest of the business will take some time but it is coming back.

I mean, what's interesting is as we come out of the summer season into the fall season that's generally when you see a huge pickup in the business travel segment of the business and a big pickup in the group travel segment. And while we're not seeing-- The group will be on a much greater lag. People are going to take some time and I think it'll be largely post-vaccine before you're going to see people congregating that way.

Business travel has started to come back. I mean, businesses are realizing they, they've got to get their teams out, they have to meet with their partners, their sales teams have to talk to people to generate incremental sales and like. So, while it's slow, there's no question in the fall season we've started to see some of the business travel come back. Still predominantly at this point, the demand is made up more of a leisure but I--

You didn't ask the question but I'll say it anyway, I'm a big believer that when you wake up in two or three years not unlike other crisis we've been through, the demand patterns will look a heck of a lot like they did a year ago in two or three years. It'll just take some time to get there and this has been a big health crisis, it's created a lot of fear, and it's going to take time to sort of work through that. It's going to obviously take more progress on testing and vaccines and therapeutics and the like and just more data and information, which you know reality is that's what's happening.

I mean why is leisure up? Why are people willing to go out? Why is business travel starting to pick up? Because we have made-- While we're not through the pandemic by any stretch, we've made progress. I mean, people do feel like vaccines are coming. Certainly the therapies and the ability to treat the disease, we've made huge advances. And there's a lot more data where people can assess their risk depending on their own individual circumstances.

So if they're young and they don't have preexisting conditions and are in very good health, at this point, I think there's enough data in where people are saying, OK, if I'm responsible I actually can start to have some greater level of mobility. And I think that we will continue. I think to see people more and more look at the data, make their own individual assessment, and then ultimately I think if and when- and I think it's more when than an if- you get to a point of having vaccines that hopefully multiple vaccines that have a reasonable level of effectiveness, I think you'll see a Step Change. Meaning, I think, I think there is a huge amount, and certainly our research suggest it and I think common sense suggests it, there's a huge amount of pent up demand. People love traveling. They want to get out.

And by the way, even business travel people like business travel. It's a break from the monotony in some cases of their work and they need to to be effective. Not everybody but many people in their jobs is really hard to be effective without some face to face interaction. So there's a huge amount of pent up travel demand building. And I think the deeper, you know, the further we get through the crisis the more that will be released as people judge it. And I think vaccines ultimately help create a Step Change in mobility.

JEN ROGERS: How important in the travel and leisure ecosystem are airlines to your business? I know you can only really control your business, but I'm curious because I was actually looking at going to California the other day and I cover this and I could not believe how many flights had been cut. So if I even wanted to go on a business trip, how difficult it would be.

CHRIS NASSETTA: Airlines-- Well, at the moment what's interesting but not surprising, given that the bulk of the demand thus far in the recovery has been leisure as we already talked about. And it's not just been-- It's been a lot more drive to. So the majority of the business that through the summer, and so far into the fall, has tilted towards drive to business. But if you go back a year ago and look at through the past decades, and I think if you go, if you fast forward as I said a couple of years when demand patterns normalized, the majority of the business for us people are coming by planes. And so the answer, the short answer of the story is airline business is critical and important infrastructure for our industry.

JEN ROGERS: Do you think that we need more stimulus coming from the government for the travel and leisure industries?

CHRIS NASSETTA: Yeah. Well-- I-- Yes. OK. Let me unpack that a little. I think it's pretty clear to me and most that we need additional stimulus to the economy, period. OK? Now we need it in the travel and tourism space because we've been one of the hardest hit segments of all segments. I mean, obviously, mobility strikes at the heart of our business.

When you shut the whole world down and you have no mobility, you have no revenues in the travel and tourism business. And so we have been-- While we have some ability now and things have recovered a bit as we've described, we have a long, long way to go and we have been dramatically impacted as as an industry. And so we need it broadly. We need it specifically for our industry and in the places that we needed I think do largely sync up maybe with an exception.

Meaning and what's being worked on in terms of figuring out continuation of unemployment insurance. So that we're taking care of frontline team members that are the most in harm's way. We need to continue to do that. Small business. Creating a bridge so that a liquidity crisis doesn't turn into solvency crisis for a huge number of small businesses. Our business of all the ownership of all these hotels all around the country and around the world for that matter is not all small business, but it is the majority of it is small business and they're dying. And so they need a bridge for liquidity.

The other thing that is ultimately needed as we get to the other side of the health crisis and is very specific- those first two things, I think, are broader, you know, unemployment insurance, continuation bridge of liquidity for small business. What is needed ultimately for our business too is a stimulus that gives people the right incentives to want to start traveling again when we get a little further in the health crisis and people feel like they can do it safely. That's probably rationally on the other side of more, more vaccine development and sort of approvals and the ability to actually distribute it. But, in the end, we're going to, in my opinion, we're going to have to figure out a way to try and use stimulus to sort of jump start the industry and give people incentives coming out of this pandemic where they've had fear when they are safe to get get back on the road again.

I mean, you think about it, we are one of the largest businesses in the country, travel and tourism. We're one of the largest businesses in the world. We're one of the biggest employers. I mean, you know, in the world we're roughly 10% of jobs are in our industry. Roughly 10% of global GDP is in our industry and we've been incredibly hard hit and and there have been a lot a jobs lost. Still, millions of jobs. I think the latest number I saw was eight or ten million jobs have still been impacted.

And so we certainly have to do the-- take care of those people while the economy's recovering and give small businesses a bridge to get the other side. But ultimately, if we don't create some form of stimulus, you're going to have a lot of people unemployed for a lot longer.

JEN ROGERS: Chris, we're going to have to leave it there but I just want to ask you one more question just real quick. As you said, "95% of travelers in your survey are missing travel right now." I personally I am missing the breakfast buffet. I want to know what you miss the most.

CHRIS NASSETTA: You're missing the breakfast buffet. My wife hates the breakfast buffet, but a lot of people do do love the breakfast buffet. Trust me, there is a way to do it safely and, ultimately, you will be able to enjoy your breakfast buffet once again. I think it may take a little time, but I'm reasonably confident that as we get into 2021, maybe the second or third quarter of 2021, you'll be able to enjoy the breakfast buffet once again.

At this point just to make sure that we are being super careful on hygiene and cleanliness given where we are with the pandemic, we've sort of modified food and beverage a bit to address those those issues. But I do-- We have developed some ways where we think we can give you what you want and do it do it safely. And hopefully next year you'll be back at the buffet, in the buffet line, filling your plate up.

JEN ROGERS: Yeah, if you need me to talk to your wife, no problem. I can sort that out and tell her all the great things--

CHRIS NASSETTA: I know. I don't know what it is. She's-- Somehow she doesn't like it, but she does like mini bars.

JEN ROGERS: Who doesn't? All right, Chris Nassetta, great to get a chance to talk with you. Good luck on the future and stay in touch.