This week Hilton Worldwide finalised the sale of Manhattan's iconic Waldorf Astoria and announced that it was using the proceeds – a mere $1.95 billion - to purchase five other properties: the Hilton Orlando Bonnet Creek, Waldorf Astoria Orlando, The Reach and Casa Marina Waldorf Astoria Resorts in Key West and Parc 55 in San Francisco.
Like any other business, hotel companies commonly swap properties in their portfolio but divesting this Park Avenue icon could be sending another message and one that business travel buyers should note.
The Waldorf Astoria is probably America's most famous hotel and is synonymous with money and luxury. It started life at the end of the 19th century when New York's industrialists and oil magnates started to demand a city with all the glamour and luxury of the European capitals. When Conrad Hilton acquired it in 1949 it sent the message that Hilton was now top of the hotel luxury brand stakes.
Throughout the mid to late twentieth century the Waldorf was the place for corporate masters of the universe and celebrities to stay (and get married) in New York.
But what both the rich and business people need in accommodation has changed – and so have hotels.
Back in 1949 Hilton was a family business. It has now had the private equity (Blackstone) treatment and is actively traded on the New York Stock Exchange. Being the owner of a luxury brand might help you marry celebrities (and indeed sire some) and build capital value but margins and profits usually come from further down the food chain. Urban luxury flagship hotels are great for marketing but poor for margins.
This is not to say that Hilton is in the budget brand bracket but times have – and are! – changing and the wealthy and business travellers are looking for different things in their accommodation. The world's rich now tend to own their own pads in global financial and social hubs or rent lavish serviced apartments or even use those of friends. Business people tend to look for properties that work (location, connectivity) and give value for money. Masters of the Universe who still want luxury digs opt for less flashy, more discreet properties.
Hilton has invested its money in resort properties and San Francisco's Parc 55, a business hotel which is not budget but at $200 per night clearly not trying to attract the same demographic as the Waldorf Astoria.
At one time the luxury end of the market combined business and high-end leisure. As Hilton has recognised, the pool of business travellers seeking luxury accommodation is shrinking.