By Michael S. Rosenwald
Washington Post Staff Writer
Thursday, January 22, 2009
Hilton Hotels, one of the world's largest lodging firms, said yesterday that it is moving its corporate headquarters -- and several hundred jobs -- to the D.C. region this year, parking itself squarely in the back yard of a major competitor, Marriott International.
The announcement, which surprised industry executives, comes less than two years after the Blackstone Group bought the Beverly Hills, Calif., hotel chain for $26 billion and later named Christopher Nassetta chief executive. Nassetta, who grew up in Arlington County, had been chief executive of Host Hotels & Resorts, based in Bethesda.
Industry executives said Hilton's plans tip the Washington region over the edge, making it the center of the world's hospitality business after growing up around Marriott chief executive John W. "Bill" Marriott Jr. in the last few decades. Besides Marriott International, which is also based in Bethesda, there are several notable area companies either spun off by Marriott or run by former Marriott executives.
After Hilton's move, three of the six top hotel companies in the world by number of rooms would be based in the region, controlling more than 1.5 million rooms, according to Hotels magazine. The figures are based on rankings at the end of 2007.
"Washington is becoming the hotel capital of the world," said Frederick V. Malek, chairman of the Annapolis-based Thayer Lodging Group and former president of Marriott Hotels.
Hilton's move ends a storied run in Beverly Hills, where the star-studded Hilton family -- think: Paris Hilton -- maintained ties with the company until giving up its 5 percent stake in the Blackstone deal in 2007. In an interview, Nassetta cited the D.C. region's lodging know-how as one of the primary reasons for relocating.
"There's a significant population of lodging and real estate people in that market," Nassetta said. "That market is a very sensible place for us to operate. We are obviously trying to attract and retain talent."
Marriott's roots in the region go deep. Bill Marriott's father, J.W. Marriott, founded the company as a District root beer stand in 1927, later growing that into the popular Hot Shoppes chain. The company entered the hotel business in 1957, but it was Bill Marriott who pushed the company deeper and deeper into lodging, often against his father's wishes. The elder Marriott despised debt, which was needed to build hotels.
Now the region is home to Choice Hotels International, notable for its Comfort Inns and Econo Lodges and headed by former Marriott executive Stephen Joyce. Host Hotels & Resorts, spun off from Marriott, owns dozens of Marriott and Starwood properties. Then there's RLJ Development, owned by Robert L. Johnson and run by Thomas J. Baltimore, a former Marriott executive, and several other ownership and management groups, including DiamondRock Hospitality, Thayer Lodging and Interstate Hotels & Resorts.
Figuring out which is bigger -- Marriott or Hilton -- is difficult, depending on the which numbers are used. Hilton has 3,276 hotels and 547,189 rooms in 77 countries. As of September, Marriott had 3,105 hotels and 550,453 rooms in 67 countries. Marriott franchises hotels and manages them for ownership groups; Hilton mostly franchises but also owns and manages some. Choice franchises more than 5,000 hotels.
"This has always been a political capital, and today more than ever, it is a global capital of commerce," Bill Marriott said. "Hilton obviously agrees, and we welcome them to our home town."
The hotel industry has taken a beating in the recent economic downturn. Asked how that would factor into paying for a move, Hilton spokeswoman Ellen Gonda said, "All of our analysis shows that the move will result in savings in the tens of millions of dollars per year." How many employees will be based in the region is not yet clear. Gonda said, "Many of our employees will be offered the opportunity to relocate, but as a result of the relocation, some will decline and some positions will be eliminated."
Nassetta said that Hilton is evaluating locations in suburban Maryland and Virginia and that the firm intends to move in the third quarter. Besides the region's talent, he said Hilton settled on the Washington area after deciding that it would be less expensive to operate here and provide executives with a better launching point to other key corporate locations, including Memphis, Orlando, Dallas and London.
Marriott has been based in Bethesda since 1979. An inevitable question is whether Hilton will use the move as an opportunity to poach Marriott employees. Nassetta said there were no plans to do so. Malek said that he thinks there will be some competition for talent but that Marriott employees tend to be loyal to the company.
"Marriott is viewed as the top of the food chain," Malek said.