Hilton Corporation Moves To D.C.

Washington Business Journal - by Missy Frederick Staff Reporter

Hilton Hotels Corp. will move its headquarters from Beverly Hills, Calif., to the D.C. area, a major boon for a region that has lost many of its homegrown corporate headquarters in recent years.

The company, bought by publicly traded Blackstone Group in 2007, announced the move to corporate employees Wednesday before a formal announcement was made by the company late in the afternoon.

Hilton Hotels is scouting locations in Maryland and Virginia. The move will likely occur in the third quarter of 2009, according to the statement. The company, which operates 3,200 hotels under eight brands, has not said how much space it will need or how many jobs the move will generate. The amount of space the company occupies in Beverly Hills was not immediately available.

Hilton would not say whether it is working with a real estate firm, but at least one local county confirmed it has been in discussions with the company.

“Montgomery County has been in discussion with the company for several weeks,” said Kristina Ellis, spokeswoman for Montgomery County’s Department of Economic Development. “They are considering Montgomery County.”

She would not elaborate on what areas Hilton is interested in but said the county would be delighted to be known as a cluster for biotech and beds, as it already has the headquarters of three hoteliers, including Bethesda-based hospitality behemoth Marriott International Inc. (NYSE: MAR).

Other local economic development officials are eager to meet those scouts.

“We’d love to be on their short list, or even long list,” said Larry Rosenstrauch, director of Loudoun County’s Department of Economic Development. Loudoun has lots of greenfield sites already zoned, or in beginning stages of development. But it also has several large, completed office buildings that could be chosen for this quick timetable.

“We like to think of Loudoun as one of the emerging headquarters sites in the region,” Rosenstrauch said. Companies that choose Loudoun arrive there by thinking “where is my work force, not just now, but in the next 10 to 15 years?”

Karen Vasquez, spokeswoman for Arlington Economic Development, said: “We always love to have a corporate headquarters, of course.” She said Hilton could apply for grants from the state to help underwrite infrastructure improvements, for instance, if the company chooses to lease in a planned-but-stalled building in Rosslyn that is due to have a Metro entrance just below it.

Given the tight timetable, Alexandria might be more attractive, as it has two buildings in the Carlyle neighborhood, near Metro, that just delivered. Combined, those buildings could house 650 employees, said Stephanie Landrum, senior vice president for Alexandria’s economic development partnership. “Alexandria has the lowest commercial tax rate in Northern Virginia,” she said she’d tell Hilton scouts.

The move is part of a greater corporate reorganization. In July 2007, Blackstone Group, the New York-based private equity firm, announced it would buy Hilton for $26 billion, a 40 percent premium on the hotel chain's closing price before the deal.

D.C. was chosen because of its strong hospitality talent pool, cheaper cost of living compared to Beverly Hills, and geographic location, said Lisa Cole, a spokeswoman for the company. The move is expected to provide an overall cost savings for the firm.

“This is a more central location for us to operate a global business from,” she said.

Chief Executive Officer Christopher Nassetta, an Arlington native who joined Hilton in October 2007, said in a statement: “We understand this as major change for our organization, and we will do our best to minimize disruptions to employees and operations.”

The D.C. area is somewhat of a hub for hospitality companies. Marriott, which opertates 3,100 properites in 67 countries worldwide, was founded in the region in 1927 as the Hot Shoppes Inc. and went public in 1953. In acquired luxury hotel chain Ritz-Carlton in 1995 and three years later moved Ritz-Carlton's 130 corporate employees from Atlanta to Chevy Chase in 2003. Marriott employs more than 14,000 people in the region.

Another major hotelier, Choice Hotels International (NYSE: CHH), is located in Silver Spring, and Host Hotels & Resorts, DiamondRock Hospitality and Interstate Hotels & Resorts call the D.C. area home.

The region has lost many major corporate citizens in recent years to mergers and acquisitions, including AOL, Riggs Bank, Sprint Nextel, MCI WorldCom, Mobil, Hecht's and USAirways. Some good news came in 2007 when Volkswagen announced it would move its U.S. operation from the Detroit area to Herndon.

The announcement comes a day after D.C. was in the national spotlight for the presidential inauguration.

“If last week was any indication, we may now have more star power than Beverly Hills,” said Jim Dinegar, CEO of the Greater Washington Board of Trade.

Dinegar said D.C. stands out as a hospitality town for the high number of highly-skilled hospitality employees.

“These are people who graduated hospitality schools, worked in back offices for years,” Dinegar said. “We do the service sectors very well as they relate to accounting, business management, sales and marketing, and advertising.”

D.C.’s large number of college graduates in the work force could have also been a factor, said Emily Durso, president of the Hotel Association of Washington D.C.

“We’ve always said that we are the tourism center of the region,” Durso said. “This almost makes us the tourism center of the country.”



Staff Reporter Mara Lee contributed to this story.