A Room With a High-Tech View.

Although he thinks his company's shares are being treated like an ugly stepsister by an e-crazed stock market, Stephen F. Bollenbach, president and CEO of Hilton Hotels, says it's not his job to try to boost the company's anemic stock price. Yet the silver-haired chief executive was virtually ubiquitous in the broadcast media this past summer, logging appearances on CNBC, PBS, and Fox Business News, and on the radio, reciting the same mantra: "The value of the stock is low relative to the value of the business. The market doesn't like the hotel business and real estate stocks in general. What Wall Street is interested in is high-tech."

Since the company spun off Park Place Entertainment late in 1998, its stock has been trading at around $9. While its second-quarter 2000 profit rose 14 percent on stronger demand for rooms at big-city hotels, Hilton shares fell upon that announcement. And although Bollenbach, who owns options on 12 million shares, would be ecstatic if their price surged, he says, "there's not much I can do about the stock price except to ensure that the company is managed well. My job is to be sure this company is the very best it can possibly be."

Realizing that "the company needed to get bigger to cut overhead," says Bollenbach, in late 1999 it completed a $4-billion merger with Promus Hotels. Now Hilton--which owns legends like New York's Waldorf-Astoria and Chicago's Palmer House--is the seventh-largest hotel company, according to Hotel Business. Its brands include Hilton, Hilton Garden Inn, Embassy Suites, Doubletree Hotels, Hampton Inns & Suites, Homewood Suites by Hilton, Conrad International, and Red Lion. In June, New York University gave the company its fifth annual "Deal of the Year" award--which acknowledges a transaction that makes a significant impact on an industry--in recognition of the merger.

Because the hospitality business is high-touch and, therefore labor-intensive, high employee morale and low employee costs are critical. Technology is one tool that can boost performance and keep us from being squeezed on the labor side," Bollenbach notes. Thus, Hilton is spending $40 million on a technology initiative, with much of that figure devoted to automating reservation systems. (Putting that $40 million in careful context, Bollenbach says the maintenance capital of existing properties is $250 million.)

"We'll be in a position to be a leader in technology," he explains. "We'll make lots of money cross-selling our brands. Every iteration of every hotel you might want to stay in will come up on our reservation screen." He adds that the combination of technology and Hilton's set of brands at different price points will enable the hotels "to do things they couldn't afford to do by themselves," including increasing the caliber of management, cross-selling, marketing, advertising, and back-office services.

Not surprisingly for a CEO in a business so heavily focused on service, Bollenbach says he believes each hotel experience should exceed a customers expectations. He says his earliest job, dipping ice cream at Disneyland, gave him an added appreciation for the customer experience. His resume includes a brief detour from the hotel business as senior executive VP and CFO of the Walt Disney Co. There he was instrumental in the execution of that company's $19 billion acquisition of ABC/Capital Cities, the second-largest acquisition in U.S. business history. Prior to that, he was president and CEO of Host Marriott Corp., an organization he helped to create in 1993 by leading a restructuring of Marriott that created two companies, Host Marriott and Marriott International. And from 1990 to 1992, Bollenbach was chief financial officer of the Trump Organization, where his primary responsibilities involved refinancing various assets and companies owned by the industry celebrity, Donald Trump.

Not every CEO would consider it his job, but as a former CFO, Bollenbach makes it his business to review a daily list of financial measures from all of Hilton's owned, managed, and franchised hotels. And certainly, at Hilton, he's proven he's got a head for the numbers. Since taking the helm in 1996, annual cash flow--considered a key profit measure for hotels because it focuses on the performance of the underlying business--has increased from $500 million to nearly $3 billion. "If you charge $10 more for a room," Bollenbach notes, "93 cents shows up on the bottom line."

But he attributes the improvement more to growing the gambling side of the business, strategic acquisitions, and upgrades in the company's management, especially in finance and development. "We built the gaming side from a small business to the largest gambling company in the world through two things," he explains. "We recognized that we couldn't stay Nevada-based, so we acquired Bally for an Atlantic City presence. And from 1996 to 1999, we were buying hotels like crazy at prices you couldn't touch today."

Bollenbach also is using his diplomatic skills to help resolve a historic conflict between Hilton International and Hilton U.K. The two companies were once potential courtroom adversaries; today they share advertising, marketing, and a logo. In fact, Bollenbach says, a future merger isn't Out of the question. "We'd have a better stock price if we were one company," he notes.

Yet Bollenbach says he has miles to go before he sleeps--or before customers will consistently sleep in Hilton's approximately 1,400 hotels. His to-do list includes continuing to enhance customer service and increasing marketing for both company-owned hotels and its franchisees. (There should be "a mix of company-owned business and fee income," he says.) In addition, Hilton is growing its timeshare business.

But despite a clear vision of the corporate big picture, Bollenbach says the success of a hotel depends on three smaller and more personal details: "It's got to be in the right location. It's got to be clean. And," he adds, "it's got to check you into your room quickly and check you out quickly."

Vital statistics

Stephen F. BOLLENBACH

President and Chief Executive Hilton Hotels

"Mediocre management in a public company should not exist."

Age 58

Born Los Angeles

Family: Married 31 years to wife, Barbara. They live in Bel Air, and can see Hilton's headquarters in Beverly Hills from their property. Two grown sons.

Education: B.S. in finance, UCLA. Master's in management, California State University, Northridge.

Outside activities: Serves on the boards of Catellus Corporation, Kmart Corporation, lime Warner Inc. and Hilton Group PLC, the parent company of Hilton International. Trustee of the Los Angeles County Museum of Art and The Music Center in Los Angeles. Member of the Los Angeles Business Advisors.

Downtime: Fly-fishing in Alaska

Last vacation: Guest at a friend's villa in Tuscany

Drives: Gray BMW 540

Favorite books: Catcher in the Rye, The New New Thing