So who are you working for these days?

by Yeoh Siew Hoon

I was talking to a hotelier the other morning over breakfast in another country when he said to me, “You don’t know who you are working for any more.”

After years of working for a smallish hotel group which then got bought by a major brand, whereupon he was absorbed into their huge universe, he is now running an owner-managed hotel with no affiliation to any brand other than their own and an international marketing and reservations company.

Manfred Keiler’s been at The Empire Hotel & Country Club in Brunei for the last few months and says it’s the dream job. “I have always wanted to work in a resort. I work directly with owners so I know who I am working for.

“And Brunei is like Burma – the people are so warm and nice.” (Keiler had a stint at the Inle Lake in Burma for a while).

As soon as I touched down in Singapore, I read the news that Blackstone Group will buy Hilton Hotels Group for about US$26 billion – in cash, mind you – in what is a record for the hotel industry.

And so yet another hotel giant (the second biggest hotel chain in the US) – 3,700 hotels and 600,000 rooms – will yet again change hands and all those hoteliers, just like Keiler, will be “hoovered” into the giant vortex of global hospitality, whatever that means, and wonder who they’re working for.

Make no mistake, folks. This deal is huge and historic in more ways than one. It transfers a family-founded group into the hands of a global asset manager who, says www.bloggingbuyouts.com, takes a “value-oriented approach to its investments”.

I take that to mean value to shareholders, and not value to customers or employees.

It is also historic in that it places Blackstone firmly in the ballpark of seriously rich and seriously serious hotel players.
Blackstone, I am glad to tell you, does not mean “their heart is made of stone” in any language.

Actually its name is based on the German heritage of both its founders, Peter G. Peterson and Stephen A. Schwarzman – Schwarz means black and petra is Greek for stone.

Formed in 1985 with $400,000 in equity, it raised $4.1 billion in an initial public offering late last month. It is said to have about $88.4 billion in assets under management. That’s about the size of my dream empire.

It has about US$15 billion in hotel assets including La Quinta Inns and Suites and luxury hotels like Boca Raton Resort and Club and oh, by the way, also owns Galileo, the global distribution system.

What is it they say, he who controls assets and distribution rules?

Anyway, this latest deal gives it all the Hilton brands including Hilton, Conrad Hotels & Resorts, Doubletree, Embassy Suites, Hampton Inn, Hilton Garden Inn, Hilton Grand Vacations and The Waldorf-Astoria Collection.

Paris Hilton, I believe, does not come with the sale even though it was her great-grandfather Conrad Hilton who founded the Hilton chain back in 1919. Her grand-daddy Barron, last estimated to be worth $1.3 billion and this will now have to be re-calculated by Forbes, will get US$990 million for his 5.3% share of the company.

This is what Stephen F. Bollenbach, Hilton’s co-chairman and chief executive, had to say about the transaction: “Our priority has always been to maximize shareholder value. Our board of directors concluded that this transaction provides compelling value for our shareholders with a significant premium.”

There, that’s that word again – shareholder value. It seems these days you’re better off being a shareholder than an employee – especially if you’re living in Shanghai. I am told people have given up day jobs to become day-and-night stock market punters.

Plus, seriously rich people think of you all the time and all they want to do is make you as seriously rich as them. I mean, have you ever come across any transaction in which the buyer or seller say, “This deal will unlock the real potential of our employee value”?

Anyway, the good news for now is that Schwarz-Petra has said it intends to invest heavily in Hilton and does not foresee any significant divestitures. “Blackstone likes the management here,” Bollenbach told The Associated Press. “Matt (Hart) continues to be COO and our plans remain the same.”

I like the word “like”. No one uses that anymore in the business world. I can’t wait for it to blossom into love. Think of the shareholder value then.

What does Yeoh Siew Hoon think about the new Seven
Wonders of the World? Call into the Transit Café this week to find out – www.thetransitcafe.com

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