By acquiring Hilton, Blackstone bought a company with a history of stepping in when others were running away. In 1919, Conrad Hilton bought a Texas flophouse called the Mobley for $40,000. After failing as a banker, a legislator, and a music promoter, Hilton spruced up the Mobley and, in short order, turned it around. Soon, he began buying up other fixer-upper hotels in Texas and beyond. In 1940, as fears of a Japanese attack on California depressed real estate values, Hilton started buying high-end hotels there cheaply. (The move would be echoed six decades later when Blackstone acquired La Quinta and Extended Stay Hotels after the September 11 attacks had badly shaken the hotel industry.) In 1949, Hilton bought the Waldorf-Astoria, and in 1954, he bought out his main competitor, the 10-hotel chain Statler, for $111 million, in what was the single largest real estate transaction since the Louisiana Purchase.

When Conrad Hilton died in 1979, he left 185 hotels. His son Barron took over as C.E.O. and continued to grow the company until 1996, when Stephen Bollenbach, a hard-knuckled dealmaker who had worked for Disney, was named C.E.O. and co-chairman of the board, alongside Barron. Under Bollenbach, Hilton Hotels experienced the most fevered growth spurt in its history. In 1999, Hilton bought the struggling Promus Hotels, whose brands included Doubletree, Hampton Inn, Homewood Suites, and Embassy Suites, for $4 billion. And in 2006, Hilton spent $5.7 billion to buy back the 400-hotel-strong Hilton International chain, which it had spun off in 1964. That bifurcation had hobbled Hilton overseas because it meant that only core Hilton hotels, not other lines like Doubletree or Embassy Suites, could be built abroad. With the domestic and international operations reunited, Hilton suddenly had huge international growth potential. This, along with the handful of valuable real estate assets Hilton owned outright, like the Waldorf-Astoria and the Chicago O’Hare Hilton, made the company attractive to Blackstone.

Anticipating an economic downturn,  Bollenbach engineered the sale. When Blackstone was courting the hotel firm, Hilton’s board and Bollenbach already had misgivings that maintaining the company’s pace of expansion “may not be achievable,” according to Securities and Exchange Commission filings.

Bollenbach walked away with about $125 million and later boasted that it was the best deal he’d ever made. It worked out well for Barron Hilton too, who raked in about $1 billion. He plans to leave the vast majority of his fortune to the family’s charitable foundation—and not to his wayward granddaughter Paris. He declined to comment for this article, though an assistant says he’s enjoying his retirement, adding pleasantly, “He has no idea what Blackstone is doing, and he could care less.”

Some of the more existential challenges facing Hilton Hotels are epitomized by one of its flagship properties, the Waldorf-Astoria in Manhattan. The Waldorf is arguably the most recognized hotel in the world, just as Hilton is the most recognized hotel brand. Both before and after Blackstone took over Hilton, Schwarzman used the Waldorf frequently for events. Recent highlights include a $1,000-a-plate benefit for the Appeal of Conscience Foundation and two September round tables, one about the credit crisis and another on the suddenly cowed private equity industry. Reported the Wall Street Journal: “Schwarzman’s insights were in much demand during the two-hour round table, so much so that at one point, he laughingly objected, ‘Why do I always get called on first?’ ”

Recently, I stayed in a room on the 16th floor of the Waldorf. The rug was ratty, the TV was old, the wall sconces in the bathroom were flecked with black paint, the tub was chipped and stained, and the bathroom mirror had come loose, leaving an inch-wide gap that receded into darkness. Far from becoming suffused with a sense of old-time Manhattan sophistication, I was overcome with the feeling that I had stumbled into a rich, aging aunt’s seldom-used guest bedroom. Worse, when I had tried to check in, I was told the computers were down. They remained that way for several hours. When I inquired about the business center, I was shown to a shabby facility where no one could figure out how to hook a Mac up to a printer. All the directions were for PCs. My visit suggested that the Waldorf has been coasting on its name and fallen more than a little behind the times—a problem when Blackstone is hoping to open Waldorfs all over the world to capitalize on the cachet of the original. I resolved to take this up with Hilton’s new C.E.O.

Nassetta had worked with Blackstone’s Gray when Nassetta was C.E.O. of Host Hotels & Resorts, a REIT based in Bethesda, Maryland, and one of the country’s largest owners of hotel properties. During his tenure, Nassetta more than doubled the holdings of Host, which routinely generated strong returns. In 1998, Blackstone took a 19 percent stake in Host, in exchange for a portfolio of domestic luxury hotels. Several deals between the two companies followed, and Gray and Nassetta became friends. After Blackstone and Hilton agreed to terms in July 2007, Gray called him up. Nassetta, 46 years old and the father of six girls, pulled up stakes and set out for Beverly Hills, where Hilton is headquartered. “The vision of [Hilton] is really simple,” he says. “It’s to be the preeminent global lodging company. My guess is, we will be the biggest. But for me it means being the best.”

When I speak to Nassetta, he is staying in the $10,000-a-night Presidential Suite at the Waldorf, which features a simple wooden rocking chair once owned by President Kennedy and an imposing desk that belonged to General Douglas MacArthur. Nassetta is animated about both the room and the job. When he gets excited, his voice rises almost to a squeak. “I’ve got a lot of energy,” he says, “and I’m having an amazing amount of fun. It’s just so stimulating. You have this opportunity, and to do all this—you can imagine!” He tells me he’s been sequestered in the room for five days straight, talking to owners and various industry types but is looking forward to flying down to Memphis the next day to surprise his mother on her birthday. (Later, when I knock on the front door of the suite to grab something I’d left, he tells me to come in, calling out, “I’m actually just sitting in John F. Kennedy’s chair doing some email. It’s actually pretty comfortable. Maybe some of it will rub off on me.”)

I lodge my complaints about the state of my room, particularly about the TV. “You don’t have one of these?”