American Express Company (AXP) Presents at Citi Virtual Global Property CEO Conference (Transcript)

American Express Company (NYSE:AXP) Citi Virtual Global Property CEO Conference March 9, 2021 12:15 PM ET

Company Participants

Steve Squeri - CEO, American Express

Chris Nassetta - CEO, Hilton

Conference Call Participants

Michael Bilerman - Citi

Michael Bilerman

Good day. I want to welcome everyone to day two of Citi’s 26th Annual Global Property CEO Conference. I'm Michael Bilerman, Global Head of the Real Estate and Lodging Team here at Citi.

We hope that everyone had a great night last night at the interactive magic show. I know my kids and my boys were blown away from it. And the good news is we now know what we're going to do for my son’s bar mitzvah in May. In other good news, I have no idea if anyone laughed at that joke. And I'm totally fine with it.

Now, if you have a minute or two after this session, please fill out the conference poll survey on the homepage. After exploring the future of spaces and places with Gensler and Boston Properties yesterday, I couldn't be more excited to discuss the future of traveling and spending with two leaders in corporate America, the CEOs of Hilton and American Express. I think, I can speak for many of you out there, I really miss traveling and checking into my Hilton hotel and getting that upgrade that Chris always gets for me. Now, I wish I could say the same thing about missing my growing American Express bill.

Now, we're really at an interesting time with the pandemic that teams are being administered globally, and there's more optimism in many locations around the world. However, there remains significant differences in restrictions, the vaccine administration and even the COVID impacts, making cross-border travel still pretty challenging. The pandemic has also raised questions about where people want to live and where they want to work.

So, to address these and other topics, we have the CEO of Hilton, Chris Nassetta; and the CEO of American Express, Steve Squeri, joining me up here on the virtual stage.

Now, Hilton is a leading global hospitality company with a portfolio of 18 brands, 6,400 properties and more than 1 million rooms across 119 countries and territories. Now, I first met Chris in the early 2000s when he was the CEO of Host Marriott, and immediately I was struck by his contagious enthusiasm. Chris led Host through significant growth and diversification, culminating in the rebrand to Host Hotels, and becoming an S&P 500 company in 2007.

Jon Gray then called in over the last 14 years, Chris has led significant positive change throughout the Hilton organization, and with customers, partners and other important constituencies. He has grown the platform, grown the brand, grown the revenue mix, and gave us another REIT in Park Hotels.

Our second keynote speaker is Steve Squeri, the CEO of American Express. American Express is a globally integrated payments company, and they provide their customers with access to products, insights and experiences. In addition, they have a reputation for world-class service and the American Express brand is consistently ranked as one of the most valuable brands in the world. Steve became Chairman and CEO of Amex in early 2018, originally joining the Company in 1985 as a manager in the Travelers Cheques groups, certainly got through my Europe adventures back then. So, thank you, Steve, for being part of that.

Over time, Steve grew within the organization and took on more and more leadership roles, having a positive impact wherever he went. With 140 million cards globally and their card members accounting for roughly 35% of spending that's done on all consumer credit and charge cards in U.S. as well as being the number one small business card issuer and corporate card relationships with over 60% of the Fortune 500, this undoubtedly provides a pretty unique perspective as we look forward to discussing spend, travel and the overall outlook from here.

So, with that, gentlemen, with those introductions, thank you so much for being with us here today. And maybe we can start just on your relationship, both at the personal level and the corporate level and how that has just evolved? And maybe, Chris, we'll kick it off to you first for that.

Chris Nassetta

Thanks, Michael. And thanks for having me. It's -- you're right, it's not the same when we're doing it virtually, although the Citi technology is pretty slick. So, I appreciate it. As the host of the event, as the diplomat, it breaks my heart not to see everybody in their little cubicles with the bells going off and doing the cattle calls, which I did for so many years. And as much as I wanted to hate you for it, I always loved you for it because it was the most efficient way that I could talk to investors, a great number of investors in a short amount of time. So, hopefully, next year, everybody will be back at the Diplomat and we could do a little wining and dining and in addition do a lot of talking about what's going on in the business.

And Steve, thanks for joining us here. Steve has been part of your conference in a way I have over the years, but I thought it’d be fun. There's really nobody that I respect more in the related business that has better insights into what's going on with customers. And obviously, I'll let Steve talk about that.

Steve and I met, I don't know, probably four years ago. But, Steve's predecessor, who's also a good friend, Ken Chenault, had decided to retire. And Steve was the one that was chosen to take over as Chairman and CEO. And Ken called me. We had built a nice friendship and had a significant business relationship, which we still have between the organizations. And in fact, our relationship with Amex goes back to 1955, which not only predates my time at Hilton, it predates my birth. So, it's a very, very long relationship. And Ken called and said, hey, Chris, I hadn't met Steve at that point, just our paths had not crossed in terms of I met a bunch of folks at Amex, but I wasn't fortunate enough to be Steve. And Ken said, it's a really important relationship. We both agreed. We were doing a lot together. I want to bring Steve down. So, you guys get to know each other, and he did. Steve and Ken came down, and we spent a bunch of time talking. And I immediately knew, at least from my point of view that we've hit it off. Steve's a fantastically intelligent guy, but he's a really good guy. We have a lot of interest in common. And as I'm sure we'll talk about later, Steve is incredibly aware of how important partnerships are. And I think it's fair to say, makes it his business where they have important partners to really get to know folks on the other side, and that included being.

So, I won't go on, but we've got to know each other very well over the last bunch of years, both in the sense of dealing with lots of business issues, which we can talk about. In COVID, all super constructive and productive, I think, for both parties, but also built a great friendship. On the golf course and -- which is a common interest and otherwise. And I think life is and business is ultimately about relationships. And so, I think of Steve is one of the most important relationships we have professionally, but it holds true on the personal side too.

Michael Bilerman

And Steve, how important has that been for you?

Steve Squeri

Well, it's been critical. Thanks for having me today, and it's always good to spend time with my buddy, Chris. And Mike, it's nice to meet you.

And I think when I took over -- just prior to when I took over, we were renegotiating the Hilton co-brand card. And we have a really broad range and relationship with Hilton. It was MR, it was corporate card, it was card acceptance in the Fine Hotels program and so forth. But at the time, we had to split relationship as it related to the co-brand card. And as Chris said, we had met, and I was in the background working with the team to renegotiate that particular deal. And Ken introduced me to Chris, and Ken and I and Chris spent some time. And then, and I went down actually just to go down and see Chris, and we spent like three hours together, just talking about how important the relationship was and how we wanted to take it to the next level. And it was during that time that I realized that not only did the companies have the same values in mind, but Chris and I were really kindred spirits and had the same aspirations for our company, same values for our company, and I knew it was just a partnership that we could build on.

And what was great about it is, Chris and I’ve become really good friends, which being a CEO of a companies can be a lonely job at times. And having other people that you can talk to and deal with who deal with the same experiences that you deal with, it has been very beneficial. And we continue to build a partnership. We continue to build a relationship. And we couldn't be more proud of our Hilton partnership.

Question-and-Answer Session

Q - Michael Bilerman

And how do you expect that to evolve as we emerge from the pandemic, what are the things that the companies are working on together to drive that partnership further?

Steve Squeri

Sure. I'll go first. Yes, I guess, I'll go first. But, I think through the pandemic, the first thing, and Chris called me, and this is where values are really important. Chris and his team came up with the idea of 1 million free hotel nights for first responders. And when he talked about that, we jumped on it. And it just shows you where Hilton's head was at. It was not only to support their owners because it was able to put some people into hotels, but really to do something that made a difference at the front lines. And so, at the beginning of this pandemic, it was all about taking care of employees and taking care of first responders. But during the pandemic, we continue to add value to our cards together, our co-brand cards. A lot of people weren't staying at hotels, but what they were doing was they were still using the cards. What's really interesting and it talks about the power of two brands here. It talks about the power of the American Express brand and the Hilton brand. Because when you look at our Hilton co-brand cards, they're performing better than some of our proprietary cards are on par with our proprietary cards, which if I would ask you at the beginning of this pandemic, you would have said, well, maybe people stop spending on the American Express Hilton card. But that's not the case at all. What's happened is we've added some extra value, some dining credits. We've added value around a grocery. And people -- there is a tremendous -- and Chris will talk about this, but there's a tremendous pent-up demand for people that want to travel, either travel, as we know, travel probably won't come back internationally for a little bit. But certainly, domestic travels, stay vacations, things like that, and people are using this card.

In fact, today, we just launched our first card with Hilton outside the United States in Japan, and we're really proud about that. But, I think, as we're monitoring the signals out there, we anticipate we're going to acquire more and more Hilton cards this year. We're going to continue to add value to these products, and we're going to grow this portfolio and add the value that both Hilton and American Express can bring to the products.

Chris Nassetta

Yes. And Michael, I mean, with this saying, I agree with all of what Steve said. I mean, sort of how he and I got connected, he talked about. But the history, even though we go back to 1955 with American Express and a co-brand relationship, the history is on our co-brand side was a bit checkered, I would say, in the sense that because of acquisition of Promise Hotels back in the day, we ended up with dual relationships. And so, we had one with Amex. We had another with a firm that will go unnamed because it might be similar to the firm name that you have. And as a result, we neither side of it really got fully activated. And so, a lot of -- I mean, what people don't understand is these co-brand cards end up becoming a significant, whether it's in bad times like we've been dealing with or good times like back to '19 and before, and what I think we'll start to see starting in the second half of this year, this is a significant driver of loyalty. The value proposition on these cards, of course, we had to enhance it, as Steve described and change it to be more relevant to our customers' needs in a COVID environment where they're not moving around, and they're not traveling. And so, they're not spending on travel. So, we gave them inducements and incentives to still keep the card and spend on other things, and they've done it.

And if you look at the numbers relative to the -- to our core business, plus or minus, the core business last year was sort of down 60-plus in the industry, the co-brand side of the business is down like 20, right, because we, together -- because of the strength of the program, and we together found ways to be able to access more customers and get them interested and to incent them to keep using the card and spend because while they weren't traveling and spending on that, they were spending a lot of money as we now have seen and lots of other things.

But the other thing that's really important to note, and the reason we ended up with Amex in a sole source relationship and got out of the two relationships is if properly activated, this is a huge driver of loyalty. In our view, my view, the time was that Amex had a unique group of assets to help us activate that, not just the cards and the value proposition of the cards, but Amex travel, which Amex owns half of now, used to own all of and the ability to help drive incremental share as a result of representing so many customers.

And so, when you take the basic value proposition which customers love and they see -- they think is great value, you take Amex travel, which is representing lots of businesses and other consumers, and you put it all together and you really focus and activated, there is a huge amount of upside. And again, it's not just financial and fees, there's a huge amount of upside in the sense of building incremental loyalty and share. And so, that was what, as Steve described very well, we were so focused on and why I was so excited to have Steve in that role and also fully engages, like this is a this was a huge opportunity by sort of 1 plus 1 could equal 3, if properly activated. And historically, we just hadn't done it. We hadn't done it financially, and we hadn't done it from the standpoint of maximizing the performance of the entire system.

And so, on a go-forward basis, I think it's more of the same. I think, Amex has an amazing access to a huge -- a huge part of our customer base. They will -- we'll talk about it, I'm sure they will get traveling again. The world will go back to a new normal. We will continue to refine the value proposition as customers come back to make sure between us that it's what people want, and that we can attract more customers into the program. Again, not just because, yes, Amex can make some money, we can make some money. But in reality, it's something that we know our customers want, they value and if we do it right, they stay with us more, we get a higher share of wallet. And if I showed you the stats, like after we went sole source, I could prove it to you scientifically. Like, if you really focus and activate these things in a relevant way for customers, they're very powerful drivers of demand.

Michael Bilerman

I think, as we shift into talking about the recovery as CEOs, how do you plan in terms of your investments and the rate of growth? And I think that there -- as I mentioned in my opening, there feels to be much more optimism. And so, how do you know how hard to push on the gas in terms of hiring and investments overall? And I guess, how do you plan for that? And maybe, Steve, if you can take that one first?

Steve Squeri

Yes. So, when we looked at this -- when a pandemic first started, we looked at this as sort of a three-phase sort of problem for us and for the world. I mean, we looked at it as how do you navigate sort of the pandemic? And during the navigation phase, what we were looking at was taking care of our colleagues, then taking care of the brand and our customers, which is why you saw a lot of value injection. We obviously wanted to have a strong financial position from a capital and liquidity position, which was important because you really didn't know at the beginning how credit was going to play out. And you wanted to use this as also as an opportunity to build for the future.

The second phase, which we're in right now is how do you build the momentum for when we're coming out. And we have looked at this as sort of a two-year pause. When I did fourth quarter earnings and talked about where we were going to be this year, we provided two scenarios. We provided a $5 scenario and a $7 EPS scenario, truly probably just really based more on credit and how credit plays out. But, what we committed to was that 2022, we will hit our original 2020 plan. So, again, looking at this a two-year pause. So, as we think about 2021, we're truly thinking about 2021 as a transition year. And as a transition year, we're seeing good signs for investments. We have committed to probably investing more this year from a investment perspective than we had in not only in my tenure as CEO, but my tenure in the company.

So, we are heavily investing, not only in value propositions, but in new capabilities and in acquiring cards. And signs are good so far. I mean, you see a lot of liquidity in the system. You see debt being paid down, savings rates have gone up. And look, there's a -- there's a hankering to get out to travel. We just released our American Express travel report today. And 78% of the people said they're going to travel this year, 60% of the people say they're going to spend more than they would have spent last year. And people are focused on experiences. They're focused on cleanliness, they're focused on security. And so, we believe that as we move through this year, you're going to see more and more travel come back. And by the end of the year, we believe it will probably be about 70% in the fourth quarter of where it would have been from '19 levels, most of that driven by the consumer, again, consumer domestically, not necessarily consumer internationally.

And so, I don’t want to wait till that happens. I want to be investing, acquiring more card members, and working with our partners like Hilton to do that. So, we feel good about where the economy is right now. And I think the biggest surprise to everybody through this entire crisis has been credit. I think everybody expected a credit to really be bad. And I don't know if that is bad as the financial crisis. But, that hasn't played out at all is because we've pumped so much liquidity and so much money into the economy.

Michael Bilerman

Yes. Chris, do you feel…

Chris Nassetta

Yes. Similarly, I mean, if you go back a year, which I get a bit of PTSD trying to do, I mean, like Steve, for us, we're a business of people serving people. And so, the early stages of this crisis were protecting people. I mean, we serve 200 million customers. We have 450,000 team members, all -- many of our team members and a lot of our customers were in harm’s way. So, the logistics of dealing with hotel closures, getting people where they needed to be in home and safe, we're mind-boggling. But, we got out of that quite quickly. Like Steve as well, protecting the business was pretty important. We thankfully -- we're in a very good position in terms of access to liquidity. We had done a lot of things on our balance sheet to be in a really, really good position in an absolute sense and a relative sense to our competitors. So, that was a pretty, pretty easy pull. Steve's company played a part in that because we had an advanced point sale deal that had been prenegotiated. So, they were part of that. And we're incredible partners in that. But, we got through that literally in a matter, if I'm being honest, in a matter of days or weeks.

And then, it's been about what you're sort of describing, recovery. And I know, it's hard to think about this, but I've been sort of working on recovery and positioning pretty much since March, April of last year because for us, given the big business we have in China, this started in December, January, not when it started in the United States. And like Steve, I mean, our point of view has been like if we are values based, if we think about our stakeholders in a way where we're really taking care of them as best we can, giving our customers the flexibility they need, taking care of our teams the way they need to be taken care of, helping our owners who were and are in really difficult shape to help them get to the other side, not giving up on our communities, as Steve described -- I called him one Saturday. It's a great testament to a partnership. I called him one Saturday that he was in Florida, I think, I said, I got a crazy idea. I want to give away 1 million rooms, you want to do it with me? It took him like 5 minutes, he said I'm in. Yes, let's do it. And we gave away 1 million rooms to first responders.

I said, listen, what do we have that we can give away, right? It's not going to really cost much, we can be part of the solution. We got a lot of rooms. Nobody is staying at them, but we need people need them. And so, it has been about all of those things, but -- and a lot of that is, obviously, we want to be part of the solution, but it's also positioning. It was also making sure that vis-à-vis how we're viewed in our customers' minds is such that when we get to the other side of this, we've built incremental loyalty. So, everything was about how do we position ourselves that when we get to the other side and we get on terra firma, that we're in a better position.

And while we're not -- to Steve's comment, I wouldn't say, we're not all the way there. And my guess is his business will -- because of leisure spend and all that, will recover more quickly. But we're clearly seeing it. You can see the inevitable grind up. You can just look at the statistics on vaccination rates, on infection rates, hospitalization, death rates lag, but even that is coming down. I mean, hospitalizations are down 70% over the last -- since January, February. You put all that together with the fact, as has already been said, that there's a massive amount of pent-up demand to travel. That's for trips, that’s for leisure trips, business trips, people need to congregate for groups like this group, but probably starts with smaller groups. I do believe that as we get -- particularly to the late spring, but summer and in the second half of the year, I think there's an opportunity for the second half of the year to be a lot better than everybody thinks. And I think like every week now, I start my week with my executive committee, talking about every region of the world, what's going on. And while it's not like rooms aren't flying off-the-shelf, you can really start to see some in most -- Europe being an exception, because they're behind. But in most other parts of the world, you can really start to see that you're getting some traction.

So, what do you do in the meantime? I think getting back to the actual question you asked, I think you're -- you need to be careful. Like in our business, I mean, we're a capital-light business to begin with. So, we haven't really slowed -- our capital investment is relatively modest. And we haven't really slowed it. Now our system investment has slowed significantly because the dollars coming into the system are lower, and that's sort of a population zero game. So, we have to be super careful because our -- we have to run a net-zero balance. Essentially, we spend what comes into the system. And so, we have to be very careful as we come out of this. But, I think it's also a lesson that we all learned. And I'm really proud of what we've done at Hilton over these last 14 years because no offence. But, I thought Hilton was a rack when I got here, and I know every CEO says that. But, we were unfocused and we were not performing particularly well. In part, that's because we just had too many things going on. People weren't aligned on core objectives. And we got -- we pulled it in and made it really tight. But you have a 11 or 12-year run. And I'm not saying by any means we were sloppy. We were more cost-efficient than all our competitors, and we were getting tons of things. But like any business in a run that long, you realize that maybe you were trying to do too much, right?

And so, I think those -- we have to be careful to sort of match sources with uses, which is a pretty important thing for us to be doing in a capital-light business. But, I also think what sort of a lesson learned is that back to the basics of doing fewer things better and really well and no matter how well you run a business, I do think over a period of years, incrementally, there's a creeping crud that comes into the system, just more people, more silos, all that fun stuff that where we sit at the top, you have visibility, but some of it’s with a big global organization with 400,000 people is hard to do. So, I think the answer is we're going to be careful, and we're going to be incredibly focused and discipline, but we're going to keep investing very heavily in the things that matter. And the heaviest part of that investment is going to be in the technology and sort of connecting the physical and the digital elements of our business.

We have not slowed down one penny of that investment through this crisis. And we will not, if anything, will increase that investing because that is -- that connectivity in our business, like when you look forward 5 and 10 years, is going to be where the alpha comes from.

Michael Bilerman

Right. Steve, you talked a little bit about the consumer side of the business and seeing some ramp in terms of travel booking, obviously, saving rates are higher, but there is spend going on, whether it's remodels, all the things that have been happening over the last year. What are the signs as you look forward on the business front? And I think that's the wildcard. It definitely feels as though the personal side of things people are eager to get out and it's already been happening. How -- what are you seeing on the business front?

Steve Squeri

Yes. Let me just give you a little bit more from a consumer perspective, and then I'll give you the business as well because I think there's a couple of other points. I think, when we looked at -- sort of looked into the abyss back in April when we had our billings down almost 50%, that's a big deal. But, what we've seen as the year went on, and I'll talk a little bit about the fourth quarter, you see a lot more online. We saw a 25% increase year-over-year from '19 of online consumer spending. We saw an increase in non T&E. And non T&E would be those categories that are not hotel, restaurant, airline and so forth. But overall, T&E is down. It's down about 65% when we looked at last year. And it's down less in restaurants, then hotel, then car rental, then airlines and then cruise lines. I mean -- and that will be probably the last thing that will come back.

You're seeing the consumer come back quicker. I mean, from a consumer perspective, we're down about 57%, from a T&E perspective. But you're seeing a lot more signs of the consumer coming back. And so, you're not seeing a lot of corporate travel, and I don't think you'll see a lot of corporate travel for the rest of this year.

But what I would say is this, if anybody believes that there will not be business travel again, that's full-hearted. You cannot establish relationships via Zoom. You've got to build relationships in person. Chris and I have built great relationship. But I built a lot of great relationships with a number of CEOs by having an opportunity to meet with them. I think, the nature of travel will change though. I think, as Chris said, you're not going to see large groups of people meeting in the short term. I've actually just scheduled one of my Board -- we haven't had a Board meeting in person. We've scheduled a Board off-site in September. We're hoping to meet as a group in person.

And just today, this morning, as a matter of fact, and Chris spoke in our event last year, we bring the top 500 people together, and we just booked the New York City Hilton for February 6, 2023. So, we're planning to bring 500 people together at that particular point in time. And so, will people take that trip to London for the one-hour meeting? Probably not. But, will you take that trip to London for that one-hour meeting to meet that person that you never met before? You probably will. And I think people will get back on the road. I think, we've seen that there are certain things that can be done via Zoom, but people will travel again. Our belief is though that business travel will not come back more to 2023.

And I think that for us, as we do it, as I said earlier, we're looking at overall travel being at about 70% where it was on a run rate basis at the end of 2019. We see that led by the consumer at about 80%. We see small businesses sort of next and then we see large corporations. But, there is no substitute for building a relationship in person. You may see less intercompany travel, you may see, as I said, less of that one-hour trip, and you may see trips sort of change a little bit, but people will get back on the road. And -- but I just think it will be more towards the end of 2022 and 2023 from a business perspective.

Chris Nassetta

Yes. I generally agree with that. I do have a bone to pick. Steve mentioned that he had me speak to his leaders meeting in Miami. I think, it was the last real business trip I did before the world shut down. And he gave me the wonderful flat of being right after Warren Buffett, as I remember. And I thought -- I thought the whole room was like going to clear out and go to the men's and ladies room.

Steve Squeri

But, you were, you were much funnier.

Chris Nassetta

Yes, I was there. I had to do something. I was juggling. I rode my unicycle, just to entertain…

Steve Squeri

And the mask you put on was great.

Chris Nassetta

Yes. It was awesome. No, I do agree with that trajectory. I mean, the -- it's funny on the leisure business. I mean, Steve sees all the data as do we, he sees it on an even broader scale. I mean you definitely have leisure coming back first. But I would still say, it's sort of like bifurcated. It's sort of lower end of leisure and the very high end of leisure that we see where people are traveling, and the bulk of leisure still is not back out on the road. So -- but that's happening. And I think as you get into the summer, you're going to see a huge incremental surge in leisure travel. So, I don't think we, by any means, sort of gotten back in leisure to where we were.

On the business side, here's the thing. I mean, we're already seeing it pick up. It's not -- the big corporates aren't traveling, right? That's not happening. But, you see small and medium-sized businesses that don't really have a chance. They're going to go out of business if they don't get out and meet partners and clients. That's starting to happen. I mean, it's little bits and pieces. But when you look at the weekday versus weekend numbers, I mean, it's sort of ironic, like throughout the crisis, our weekend numbers are relative to weak, they are off the charts. It's usually the opposite, right? It's always the weekdays and the weekends just struggle. It's been the inverse. But the week days are picking up, right? The only reason the weekdays are picking up other than during holiday seasons and spring break, some leisure is because there is incrementally more business travel. But, it's just -- it's not the big accounts. It's not the big consulting firms, the big accounting firms. It's not that high-end business yet. They're still pretty virtual. But, I do think in the second half of this year, this may be -- maybe I'm slightly more optimistic, Steve, I think you will start to see a pretty good pickup.

Now pretty good off of zero means anything to a degree. I mean, it's been pretty much nonexistent. So, I do think you'll see some pickup. You're also seeing in the second half of this year. And clearly, in a big way to next year, group demand picking up. Our booking pace for groups in the second half is -- it was like 70% down versus 19% in the first half, 30% down in the second half. Now, they can cancel, if things don't go well, et cetera. And then going into next year, you have a huge surge in demand on the belief -- people's beliefs that the all clear sign is going to be out. And so, I think all of that converging together is going to be really healthy for the business starting predominantly in the second half of this year.

Net-net, I still believe, and I totally agree with Steve. I think, we believe it's sort of ‘23 or ‘24, before things get back to where they were in like ‘17, ‘18, ‘19. And that's because when you're done with the health crisis, other than a bunch of companies that really benefited from the crisis, you're in an economic crisis still for a lot of sectors of the economy, so they have to cut their budgets. And what do they do, they cut everything. They cut the people, they cut the travel, they cut capital investment. And so, we're part of that process, and then they sort of build back.

So, I think when you get out of the health thing, which hopefully we're going to do in the next two or three months, then you're back and just rebuilding from a sort of a more traditional economic downturn, and we know what that looks like, right, that just takes some time. And I agree, like a lot of people -- I debate this and lots of investors that are on this call, like business travel is never coming back, it's never going to be the same. I think I said it on your podcast. That's hooey. It's just -- and I agree with Steve. Trip occasions will change. If you look at the history of travel and you put it -- plot it on a graph over time, like the invention of the telephone, the internet, voice mail, internet, telepresence, did it all these -- and by the way, in the moment, those were big things. Like everybody thinks, in the moment, this is the biggest thing. Well, there was no computer when I went to college. Now, look at we're computing, like these -- every one of these things is a big thing.

What we found is on every occasion, travel demand picked up. Why did it pick up? Because it made the world a little closer and it made the world a little faster, which ultimately one way or another required more people to meet, to want to experience other parts of the world, to meet in groups, to build partnerships, to innovate, the culture, et cetera, et cetera. So, every step of the way, travel demand has gone up, and I believe it will be the same. Trip occasions will change. I think Steve is right. I think we'll do it. I don't think like internal meetings, some of them we're going to do virtually because we figured out, hey, we're pretty good at not all of them, but some of them. But that doesn't mean we're going to travel less. That just means we're going to take that time and we're going to dedicate it to travel that is going to create more opportunity for us, that higher value forms of travel.

And so, the substitution effect of doing things that are more important and substituting for things that are less important is what history has said will happen.

Michael Bilerman

Steve, your comment about that going to London for that one hour trip. We also have this environment right now where work from anywhere is becoming more adopted, right, in a hybrid work environment. And so, there is an element that, yes, if you had that one important meeting in London, well, you can go to London for that meeting and do continuing your work and be very, very flexible. So, is there a potential -- I guess, how do those things interplay with each other? And I don't know if you have an overall view on remote versus in-person hybrid and how that affects all the travel aspects?

Steve Squeri

Yes. So, it's an interesting question. I think that -- I don't believe we'll be 100% virtual as an organization, but I don't think we'll be 100% back in the office again. And I think by having that, you're open up to a larger talent pool. So, the example that talk about high value, I may hire somebody, I always pick on Indiana and Iowa. I don't know why, but always pick on these two states. I may have somebody that I would have hired in New York who has the talent from Indiana or Iowa, and I may fly them into New York for a team building meeting or I may fly them into New York for an innovation session. And so, I think, what we've seen is you can really work from anywhere. And so, Mike, you're right. I mean, you could basically put that one-hour trip to London and say, I'm going to work remotely at this particular point in time. I don't think the work environment, as we left it, will be the work environment we come back to. I think, it's going to be completely different. I mean, it doesn't make a lot of sense to come in and sit in front of a video screen and do video conference calls all day.

And I think what we're going to have to decide as companies is, what is the purpose of coming into the office. For some people, the purpose of coming into the office is I actually need a place to work because I got a cat running across me, I got a kid climbing on my back. I can't work at home like that. And that -- I don't have that at home, but I've seen this happen. Dogs running through the meeting, kids, the whole bit. And so, they may just need the peace and quiet. Relationship building, networking, team building, innovation and so forth. But, that's not probably five days a week, maybe it's three, maybe it's two. We'll have to figure it out. So, I think I think the office will change. I think they'll be more purposeful as opposed to I have to trudge to work.

And what does that open up? I think it opens up a different talent pool to us. I think, it opens up a better work-life balance. And I think you're right. I mean it could open up a trip that, hey, look, I'm going to go to London to see so and so, but I'm now going to work remotely because now I'm not sitting on a conference call. And I was always the one that sort of was never a big work from home guy, but my view of working from home was being on the phone. But, when you're doing it via conference, video, it's a lot different. It has created a level playing field, but -- so we'll see. We haven't made any decisions. I mean, we -- I've got my -- I'm in the office today. I come in a couple of days a week. But, we've got our -- our organization is basically can work from home until September, and that may get kicked out till the end of the year. I'm not bringing people back until it's 100% safe. People have the option in some of our offices to come back to them now, if they have no other place to work, if people live in tribeca and they'll walk over here.

But I think it's going to change. And I think it's going to change for the better. I think people will be more productive. I think they'll have more balance in their lives. And I think it could open up and actually, as you point out there, another aspect of travel, whether it's bringing people in or having people take that one trip and working remotely. So, I'm excited about what it brings because I think as Chris said a little bit earlier, it's an opportunity. This is an opportunity, why waste a good crisis. And it's an opportunity to look at how we're doing work, where we're working from, where we're getting our talent, and what's the best way to do it going forward.

Michael Bilerman

Chris, do you feel the same way about…

Chris Nassetta

I do largely. I mean, we're in different business. We're in related businesses, but different businesses. Listen, for Hilton, we've been sort of, I would say, ahead of our time on work from home for years. Like there are certain categories of jobs, whether that be our call centers, our revenue management centers and a bunch of other core functions that we've been doing work at home for years and doing it to Steve's point, incredibly -- even without all this great technology, we've been doing it incredibly successfully. And our productivity numbers are great, and they've been important parts of our culture. It has created other forms of travel. Steve, you're right, where we bring them in for training and things where we can congregate, so we can build culture. So, I think we'll keep doing that. And I think there will be a new normal. And I think more of that will happen. And I honestly, I think a lot of companies will follow to a degree. We've already been doing that. My guess is we will do more of it. But, I don't think for us, it will be radically different than what we were already doing, partly because we were doing a bunch of it.

But also, I think over the long span of time, my own view is while, while this has been a good experiment and it's worked, and we've been highly functioning as an organization, in our business, we're a service business, people serving people. I'm obsessed with building our culture. We're number one great place to work in the United States of America, two years running. That isn't all because we're congregating, because we're not all in one place, but it is because we build a network effect amongst our people. And we build trust and relationships that create a family environment that's comfortable for people. And we've been able to keep that going. But, as you fast forward, particularly in an industry that has a reasonably high level of turnover, you fast forward three or four or five years, I don't think we could, right? So I mean, I think I think if I were to say, like, where will we be in four or five years, I think that we will be, at least because we were ahead, we will look more like we did in '19 than what we look like now, a lot more. Will there be a difference? Yes, there'll be a new normal. I don't know what it is. My guess is 10% or 20% for us, something like that. So not insignificant, but not game changing. And it will be just because for us to innovate and collaborate and to maintain that culture from a service industry point of view, we've got to create that cross polinization, and some part of it has to be done in that environment.

Michael Bilerman

Chris, what would make you even more optimistic on the return? I know you are generally an optimistic person, but if we're sitting in Florida…

Chris Nassetta

Yes, a long time…

Michael Bilerman

When I'm going to have all the CEOs in Florida next year, when we look back at what will have been the prior 12 months, what do you think is going to surprise them the most of what the next 12 months is going to bring?

Chris Nassetta

Well, I said it already. I think, -- what I hope -- this is maybe hope and belief wrapped into one. I think that we will look back and say, wow, that there was a step change in mobility that occurred somewhere in the late spring-summer, let's just say, midyear, plus or minus, where the -- not the perfect, all clear signed, but a big -- mostly people are being told that it's -- you've had enough herd immunity through vaccination and exposure. Where you can get out and you got to be responsible and wear a mask maybe in some parts of the country, but you can get out and start traveling and live your life again. And so, I think we're going to look back and say this was hard, and obviously devastating to a lot of industries, including ours. But I think history, again, not that history necessarily is what's going to happen in the future, but it's a decent indicator. History would say, the things will revert to the norm faster than we think. I think Bill Gates once said, I give him credit for it anyway that things change a lot less than you think in the short-term and a lot more than you think in the long term.

And so, I think things, once you get a bit of an all clear, are going to revert more quickly than people think, which is why I think sort of like second half of this year, first part of next year could be -- we could be sitting here at the Diplomat saying that was, God, awful, but boy, it's really nice to see everything coming up. I mean, let's be honest, like these cycles, they go like this, right? Like, I think about every crisis I've lived through, 9/11, the Great Recession, how the S&L crisis, like, you go to these periods of time, this is different, but it's a crisis where everything's is negative, like every day, it's just a grind -- the numbers are terrible. The sentiment is terrible, you watch the news and you want to kill yourself, it's terrible. And then, all of a sudden, the paradigm shifts and everything starts coming up roses. Like, everything starts turning positive. So, that always happens. My sense is it will happen at the middle part of this year. I think, again, my hope and belief. And I think, we'll look back and we'll have all learned a lot. I think, most of us that took advantage of it, to Steve's and my comments, will be better companies. I think Hilton was a great company pre-COVID. I think Hilton is going to be a much better company in a post-COVID world.

Michael Bilerman

Steve, I'm going to give you the last word on the optimism out there.

Steve Squeri

Getting the last word when I'm on a stage with Chris Nassetta, this is a true treat. I usually don't get the last word. But look, I agree with everything that Chris said. I would also say that people have short memories. I mean, Chris talked about the financial crisis in 9/11, and it went back. People went back. They went back to living their lives. I think though, you're going to go back to living your life with, again, some increased technological enhancements and some increased things like, look, e-commerce was probably brought ahead five years, as a result of this crisis. That's not going back. But yet people will get out and people will travel again.

And again, I agree with Chris as well. I think companies that have taken advantage of this crisis to get their own house in order, both from a social perspective, and from an infrastructure perspective and an expenditure perspective, will continue to benefit. I mean, look, we've been around 170 years. We started as a freight moving company. And now, we're a payments Company. So, reality is, we've seen crises, we've dealt with crises and you continue to move ahead. And basically, what happens is you stick to your values. And our values, like Chris, it's serving people. It's making sure our employees are well taken care of, so they can take care of our customers, and then we take care of our shareholders, and that has worked for us for a long, long time, and I think it will continue to work for us.

So Mike, thanks for having me on. And Chris, it's always a pleasure to share a stage with you.

Chris Nassetta

Great to see. Yes, great to see, Steve.

Michael Bilerman

Well, I want to thank you both. And for the avoidance of doubt, Chris never upgrades me at a room. That was a joke. Just for the record. I don't want to get any SEC problems, not taking anything from companies. Disclosures are also available on the website. And my fellow colleague, Jill Shea, who covers American Express, thanks you, Steve, as well for participating in this. And Chris, thank you so much for your time. This was highly insightful. I'm sure the investors and the corporates that are watching are getting a lot out of it. And have a great rest of the day.

Steve Squeri

Thank you.

Chris Nassetta

Thank you. Michael, thanks for having Steve. Great to see you.