Nassetta says with a laugh, pointing to a giant flat-screen model on the wall of his suite. “Every room within a couple of years will have one of those.” He launches into his plans for the Waldorf, which he acknowledges has been “underinvested in” over the years. He plans an overhaul of the systems, technology, air-conditioning, food and beverage service, and street-level retail space, which is currently vacant. He’s looking to upgrade the rooms, the facilities—the whole thing. “In the next couple of years, you’re going to see a very different Waldorf-Astoria,” he says.

Nassetta spent his first 60 days on the job “circumnavigating the globe,” often with Blackstone’s Gray at his side, touring facilities, trying to get a handle on the way Hilton works, and brainstorming ways to reform its sometimes stodgy and unwieldy organizational structure. He has also been raiding other companies to assemble what John Arabia, managing director at the real estate consulting firm Green Street Advisors, calls “a lodging dream team.” In June, for instance, Nassetta hired two leading specialists in the luxury sector, Ross Klein and Amar Lalvani, who oversaw the expansion of the game-changing W Hotels chain, to spearhead the launch of a Hilton lifestyle brand in the first quarter of 2009.

Despite the harsh economic climate, Nassetta contends that Hilton isn’t struggling. He rhapsodizes about Blackstone, about working with Gray, about Hilton itself. “Our competitors want to talk the deal down and say, ‘Oh my God, they gotta be hating life,’ but the fact is, we’re feeling great,” he says. “All we’re thinking about is, What is this business going to look like three, five, 10 years down the road? And we’re as pure as the driven snow on that objective. I sense nothing but total alignment with me, with these guys, and that’s what I love about it. All the oars are in the water going in the same direction, which is a lovely thing.”

Hotel companies are stubborn, big-footed, slow-moving fauna with huge overhead. As such, they’re uniquely vulnerable to changes in the economy. These days, they’re getting it from all sides: rising airfares and cuts in airline service; widespread financial-industry layoffs; declining leisure travel; high gas prices, labor costs, and construction costs; heightened tension in domestic and global politics; galloping xenophobia—you name it. Occupancy is falling, down 5 to 7 percent in September compared with the same month in 2007, while supply keeps rising, carried forward by the momentum of the hotel boom during 2006 and 2007. By September 2008, the number of hotels was up nearly 12.8 percent year over year in the U.S. But during the first half of 2008, according to Smith Travel Research, occupancy fell in every region on earth, save for the Middle East and Africa. Despite jacked-up room rates, revenue per available unit is also dropping.

Among Hilton’s competitors, Marriott saw its third-quarter profits slide 28 percent, and its share price has dropped about 40 percent so far in 2008. This year, shares of InterContinental, Starwood, and Wyndham have fallen 35, 50, and 40 percent, respectively, and Wyndham is planning layoffs. In late September, Steven Kent, a hotel-industry analyst at Goldman Sachs, cut his estimates for seven major hotel companies, saying he expects revenue to continue falling “well into 2009” and hotel shares to “grind lower in the coming 12 months.”

Hilton is growing so fast that some of its new hotels are starting to cut in on its old ones. A couple of blocks down South 48th Street in Phoenix from Bowers’ Hampton Inn, there’s another Hilton-brand hotel under construction: a 125-room Homewood Suites that will also target business travelers. “It’s going to take some of my business, absolutely,” Bowers tells me. Asked how he expects to cope with the rapidly deteriorating economy and added competition, he tosses his head back toward his office, where the local owners are still sitting. “That’s what we’re talking about now. We’re real concerned.” Adds Jim Flynn, a former senior vice president at Doubletree: “Right now, there’s too many instances where Hilton and Doubletree compete against each other.”

So far, Blackstone insists that Hilton is outperforming expectations. During an earnings call in August, Blackstone’s James acknowledged that suburban business hotels, which make up the bulk of Hilton’s U.S. pipeline, were weak. But thanks to strong franchise growth, he said, Hilton’s revenue before expenses was up by double digits since the beginning of the year. James’ assertion confounded some analysts: “If you beat the data, it’ll admit to anything,” one remarked. “Being up 10 percent—I’m not sure how that’s possible given where the industry is.”

There is a lot riding on the outcome of the Hilton deal, and it will be several years before anyone can say with any certainty whether it was a worthy gamble. If Blackstone can defy the odds and the naysayers, expand Hilton in the teeth of a grim economy, and emerge in a position to dominate the global hotel industry when the economy rebounds, that would constitute perhaps the capstone on Schwarzman’s remarkable career. If not, well, he can always try to unload the Waldorf-Astoria to ease the impact. He just might want to throw up a fresh coat of paint beforehand to goose the sale price.