Hilton Hotels Corp., one of Southern California's marquee businesses, will pull up stakes this year and move from Beverly Hills to the Washington, D.C., area, the company said Wednesday.
The famous hotel operator has been headquartered in Beverly Hills since 1969 but was taken over in 2007 by corporate buyout giant Blackstone Group in a $26-billion deal that converted Hilton from a publicly traded Fortune 500 company to a private one.
The announcement that Hilton would move to the East Coast, nearer to Blackstone's New York headquarters, did not surprise hospitality industry experts but still came as a blow to Los Angeles civic leaders, who were saddened by the departure of the venerable firm with one of the best known brands in the world.
"Another corporate headquarters bites the dust," said economist Jack Kyser of the Los Angeles County Economic Development Corp. "We have seen way too much of that."
Southern California has bid farewell to several Fortune 500 companies' headquarters in the recent decades, including Arco, Lockheed, Fluor and Times Mirror. Last year, Computer Sciences announced that it would move its headquarters from El Segundo to Falls Church, Va., to be closer to Washington, and Calabasas-based Countrywide Financial Corp. was taken over by Bank of America Corp.
As a result of Hilton's corporate transformation and relocation, some jobs will be eliminated; the company has not decided how many. More than 500 people work in a cluster of three buildings on Civic Center Drive in Beverly Hills.
"Many employees will be asked to go east, but some may choose not to come," spokeswoman Ellen Gonda said.
Hilton's move will save tens of millions of dollars a year in operating expenses, she said.
Because it is in the Eastern time zone, Washington is better suited for Hilton's international operations, which include corporate hubs in Memphis, Dallas, Orlando and the United Kingdom, Gonda said. The region also has a stronger pool of hospitality industry leaders to recruit from, she said. Major competitors such as Marriott, Starwood, Choice and Wyndham are located there.
Hilton owns two of its buildings in Beverly Hills and leases the third. The two it owns will be sold or leased, Gonda said.
"This is prime, expensive real estate in the heart of Beverly Hills" and Blackstone should be able to capitalize on that, financially, said hotel consultant Alan Reay of Atlas Hospitality.
Buyers typically move a company's headquarters, he added. "We've been expecting this."
Hilton, founded in 1919 by Conrad Hilton with one hotel in Cisco, Texas, now operates 3,200 hotels with 545,000 rooms in 77 countries. Its brands include Hilton, Conrad Hotels & Resorts, Doubletree, Embassy Suites Hotels, Hampton Inn and its crown jewel, Waldorf-Astoria.
At most locations Hilton is only the operator, but it does own, partly own or lease about 5% of its hotels, including the Hilton La Jolla Torrey Pines, the Hilton San Diego Bayfront and the Hilton Garden Inn in El Segundo.
Hilton said it would move its headquarters in the third quarter of this year and is considering sites in Maryland and Virginia.
Beverly Hills will be sorry to see the company go, city spokeswoman Cheryl Burnett said.
"We understand that this is a natural consequence of takeovers and business restructuring," she said, "but we are disappointed to see a good corporate citizen leave the city."
It's also a bit of a blow to the city's ego, Burnett said.
"Beverly Hills is more accustomed to businesses moving into the city, rather than leaving."
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Public companies based in Southern California, ranked in order of revenue:
* Walt Disney, Burbank
* Ingram Micro, Santa Ana
* Northrop Grumman, Los Angeles
* Occidental Petroleum, Los Angeles
* DirectTV, El Segundo
* Amgen, Thousand Oaks
* Health Net, Woodland Hills
* Edison International, Rosemead
* Sempra Energy, San Diego
* SAIC, San Diego
Source: Fortune 500 list