Hilton's Hughes on Biz Travel Growth, Maintaining Buyer Relationships

Hilton's Danny Hughes talks...

• faster-than-expected business travel growth
• maintaining travel buyer contacts
• personalized hotel experiences

Hilton Hotels Corp.'s president of the Americas Danny Hughes spoke with BTN's senior editor Donna M. Airoldi in mid-August about trends including how the hotel company has seen business travel return faster than expected, an increase in personalized hotel experiences and maintaining travel buyer contacts during the pandemic. Edited highlights follow.  

BTN: I heard that Hilton has seen business travel return faster than expected. When did you first start seeing that, and to what extent has it been faster than expected?

Danny Hughes: It was really March, once the vaccines started to get rolled out, we started to see more blue blazers coming through the front doors of hotels and in the airports. It picked up steam over the summer, and it's continued to accelerate. I'm defining the business traveler into two segments: the individual business traveler and the group segment. They are still slightly different, meaning that group activity is now—certainly not at pre-pandemic levels—but it's accelerating very nicely. Individual business travelers are starting to get out and about. But I think we will truly see this explode when offices open. Individual business travel will really hit the gas when you have the offices open, which we are still confident that after Labor Day that will be strong.

BTN: What percentage is your business travel back compared with 2019 levels?

Hughes: We're still not even at 20 percent of 2019 levels, pre-pandemic levels. That has been more than compensated for by leisure travel. But if you look at occupancy in our hotels, a year ago, business travel was less than 5 percent. Now certainly it's about 20 percent-ish and continuing to grow. 

BTN: Has that momentum slowed or changed in the past few weeks with the spread of the delta variant, increased cases and some destinations reintroducing indoor masking requirements? 

Hughes: Not significantly at the moment. What we've seen is a little bit more caution in some group attendance. So rather than any outright cancellations or rush to reschedule, we've seen a bit more cautiousness and a bit weaker attendance. But we monitor it all the time. Again, we are very confident on what we are seeing on the group end and the business travelers starting to pick up. Earlier we were talking about New York, I think we've got almost all inventory open apart from the New York Hilton in Midtown on Sixth Avenue, which we are working to reopen. But we are seeing encouraging trends there. We monitor it carefully, but certainly nothing as devastating as we saw in the initial phase of the pandemic.

People need to interact. Business needs to get done. There is so much opportunity now, people feeling good about the opportunities, a good amount of investment coming from the federal government that is going to create business travel needs. People are in the planning stages now and reestablishing relationships. One thing the pandemic has taught us, as good as modern technology is, you simply cannot replace genuine, authentic and real face-to-face human interaction. When I talk to business clients, when they do travel and do see their clients, it's validating their trip. That is an important factor. When you talk to business travelers venturing out for the first time, unanimously they tell me, 'Oh my god, it's so good we did this. It's so valuable. We were able to rebuild that relationship. We were able to get that signature we needed.' It's validating the desire and the need to travel.

BTN: Any challenges about the faster-than-expected return, and how has Hilton mitigated those?

Hughes: The availability of labor is the single biggest challenge for our industry right now. You have the situation where hotels, as an industry, we have tens if not hundreds of thousands of good paying, great benefit jobs available. Our single biggest challenge is recruiting enough people. There are a whole bunch of reasons for this. But again, I feel very confident as we come to the end of the summer, there will be some form of normality with the schools system, which your working mothers and fathers have not been able to rely on the last year or so at least. There is going to be a greater sense of comfort and security that hotels are safe places to work, again, because of all the precautions we've taken and the growing level of vaccinations across the industry. Frankly, there has been government assistance in the form of unemployment insurance that was totally understandable and required during the heights of the pandemic, where now we're in that transition stage where we have enough good paying jobs for everybody, and we're kind of rolling through that. It's a challenge now, but I think we are all working hard to make sure we're providing a very safe and attractive working environment, and more and more people will hopefully want to jump back into the workplace.

BTN: Which Hilton brands are seeing more of a return to business travel?

Hughes: It's incredibly strong across all the brand segments, again led by leisure. … What differentiates it a little bit is destinations. The slowest part of the recovery has been urban city centers. The New Yorks, the San Franciscos, the Chicagos of this world, that need a strong and solid convention business to support the whole industry. You can look at contrasting our resorts in Florida, they are booming compared to our hotels in New York that are in the early stages of recovery. Rather than brands being differentiated or performance that has been differentiated, it's been more geographical.

But I will tell you that the level of group inquiries and the conversion from those inquiries from a meetings and events point of view is incredibly encouraging. When we look at levels going into 2022, we are seeing that the rates that people are paying are at or greater than pre-pandemic levels. Which is a very encouraging sign. The demand is huge because people are playing catchup. Effectively, by the time we get to the fourth quarter, we will have had six quarters where people haven't met in any great numbers. While the volume is still a little off of 2019 levels, it's building. The demand is there, and rate is very positive. 

BTN: How did Hilton keep in touch with corporate travel managers and meetings clients during the travel drought, and how has that influenced current relationships?

Hughes: What's most important is that we maintained relationships. When business travel and group bookings slowed dramatically at the very beginning of the pandemic, we chose to maintain the vast majority of our sales force and client relations people employed on reduced hours and reduced salaries. We were able to maintain over 90 percent of the direct contacts without having to reallocate accounts. And we talked about all the initial emergency measures we took, around Hilton Clean Stay and changing the cleaning protocols and products we used to create a safe working environment for whoever was traveling. We spoke about enhancements we were making around technology to allow people to expand hybrid events and investments we made. … How we were reinventing food and beverage to make sure we were reinventing what room service looked like. How we reinvented the concept of the buffets to individually prepared and packaged food to completely eliminate any kind of open buffet service. And perhaps most importantly, asking them and listening to them: about what they were thinking, what travel managers were doing, what their corporate budgets were when they were ready to travel and what they needed to have delivered when they were ready to travel.

BTN: What is Hilton seeing so far in the requests-for-proposals process for corporate hotel programs? 

Hughes: By maintaining our relationship with all our corporate clients, I will tell you it is much along with everything else, more personalized and flexible and not one solution for everything. The same is true in the RFP season. When we are looking at destinations that have huge demand drivers, there's going to be rate pressure. But as other destinations that are going to take a little longer to recover, they'll be able to be more flexible. We went through in the initial stages extending the rates and allowing clients—without going through an RFP negotiation—to keep everything they had in place. Now we are doing a very customized RFP process, client by client, based on their geographical needs.

BTN: How are companies changing their hotel programs? 

Hughes: There's been a continuing trend to dynamic rather than fixed rates per destination. I think that trend has continued. It's fairer for both clients and suppliers. There's a greater awareness around duty of care for clients. The pandemic has certainly raised the bar. Providing a clean and safe place to stay is more important than ever. You are seeing corporations being more selective around having travel partners that have reacted to that. … We decided right away to partner with an industry expert which was the Mayo Clinic and to reinvent all our cleaning standards. … We are cleaning to a level that is almost a healthcare-provider standard. I think travel managers are waiting to partner with companies that have done that, be it hotel suppliers or car rental suppliers or any others. 

BTN: What changes are hotels making?

Hughes: Things you would expect. A there's a bit of an acceleration of some trends that were happening anyway. One was being able to personalize the stay to a far greater degree than choosing a king bed or two queen beds. People could choose which rooms they wanted to stay in, where those rooms would be located—closer or not to the elevator. It also accelerated the ease of contactless hospitality. We were rolling out the concept of digital key, where you could choose the actual room you wanted, you were able to go through the check-in process on your mobile device so you didn't have to go through the front desk and have your credit card swiped and were able to press a button and your hand-held device became the key to opening the room. Those were trends accelerated by this pandemic. Same thing for room service. There is such good quality of food delivery now and every restaurant in the country that survived has had to adapt to deliver good quality food in good quality sustainable packaging that is environmentally friendly that keeps the food hot or keeps it cold and we've evolved ourselves to that as well. 

BTN: Is Hilton introducing any new products for the business travel segment?

Hughes: We're finding ways to make it much more flexible for these clients. One of the initiatives we've taken recently is for our higher-tiered Honors members. One perk was complimentary breakfast. A lot of our clients told us they don’t want breakfast. We moved to an F&B credit that allows people to get breakfast if they want it. But if not, they can get a drink in the bar, or can buy something to grab and go. We also started to respond to some client needs around our capabilities around the booking process, and one example is confirmable connected rooms. Hotels have always had a percentage of inventory that connect to other rooms. We're the first hotel company where you can not only request a connecting room but also confirm it and get it guaranteed. [That's valuable for] the SME market, where the leisure and business travel crosses over a bit more. I think that trend will continue, when people see the value to be together, being able to merge business travel trips and bring the family and extend it a day. It's important you can confirm connected rooms because your wife or husband and children will join you. And we are looking at our overall capability to make sure we can personalize your stay to a far higher degree than ever before.

BTN: Anything else?

Hughes: The only other thing I can say that is important to business travel, is that despite the slowdown in travel growth the last 18 months, we've continued to expand our footprint. If you're a business traveler and choosing a brand, you want that brand to be where you need to be. We've continued to see growth and expansion of some of our existing brands. In particular, we've seen some opportunities to convert some independent hotels and hotels associated with smaller brands to our portfolio. I think that's important. … It shows there is still great demand and belief from the investment community. This is a great industry. There will always be a demand for high-quality branded products, and we're very happy with our continued net unit growth.