March 10, 2009 2:00 am

Hilton chief says tastes in travel are changing

Hotel guests are fundamentally reappraising the value of hospitality, ditching conspicuous consumption for basic good practice and service, according to the chief executive of Hilton Hotels, one of the world's biggest hospitality brands.

Chris Nassetta told the Financial Times he believed the public's desire to travel and to stay in hotels was undiminished despite a wholesale decline in trading across the industry brought on by the global downturn.

But he said the mentality of the consumer had fundamentally changed, not just towards hospitality but other consumer products, as the public spurn the glitz and glamour of consumption for "sensible, value-related offers".

Mr Nassetta said: "I am convinced that these events will have a lasting impact on the consumer in a way that we haven't seen for decades."

However, he said the public's distaste for conspicuous consumption did not imperil luxury brands. "You have to be sensitive about your brands not being categorised as conspicuous consumption, or being a little bit more authentic, more organic."

Hilton was bought by Blackstone, the private equity group, two years ago in a top-of-the-market leveraged buy-out deal worth $26bn.

Hotel owners and operators are feeling the full force of the slowdown in travel. The latest figures from STR Global, the hospitality research group, show US occupancy down 12.6 per cent in the last week of February and average daily rates in New York falling by 18.3 per cent.

Blackstone, said Mr Nassetta, remained wedded to the long-term potential of the group, which comprises 3,200 hotels and 525,000 rooms.

"I don't think they ever had a definite exit strategy," said Mr Nassetta. "I think they viewed [Hilton] as a unique opportunity in the space. [The downturn] may extend the timeline generally, if they had one."

The climate for hotels was undoubtedly "tough", said Mr Nassetta, made worse by what he called "the herd mentality" of some US politicians "demonising" business travel, which prompted the Hilton chief executive and other industry leaders to complain to the US government.

But he believed big hotel operators such as Hilton, whose brands include Hilton, Doubletree and Hampton Inn, would benefit from more financially-stricken independent hotels seeking refuge in their brands' loyalty programmes and resources.

However, he said the credit freeze was slowing development pipelines, the cornerstone of not just Hilton's growth strategy but several of its rivals.

The big hotel groups operate asset-light businesses, having sold most of their real estate to concentrate on brand growth through managing and franchising their hotels. But Mr Nassetta denied that the downturn was putting the relationship between hotel operators and owners under strain.

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