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Hilton HotelsMichael J. Marquis MKTG518 Case Study I.

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Presentation on theme: "Hilton HotelsMichael J. Marquis MKTG518 Case Study I."— Presentation transcript:

1 Hilton HotelsMichael J. Marquis MKTG518 Case Study I

2 Hilton Hotel’s Background  Led by Conrad Hilton, operations began in 1919 (Mobley Hotel in Cisco, TX).  Hilton Hotels Group went public in 1946 (15 properties in 11 states).  In 2000, acquisition of Promus Hotel Group (owned 1700 properties)  Promus Group managed Holiday Inns of America, Embassy Suites and Hampton Inn (1954).  In 2006, Hilton had presence in 78 countries w/global workforce over 100,000 (largest lodging company in the world).  Differentiator: excellent care of guests  Hotel Owners = Large % of Hilton’s business (several billion dollars of real estate invested in hotel brands)  “It’s share-of-wallet through brands, and share-of-shelf-space through owners.” – Bala Subramanian, SVP of Global Distribution Services  Led by Conrad Hilton, operations began in 1919 (Mobley Hotel in Cisco, TX).  Hilton Hotels Group went public in 1946 (15 properties in 11 states).  In 2000, acquisition of Promus Hotel Group (owned 1700 properties)  Promus Group managed Holiday Inns of America, Embassy Suites and Hampton Inn (1954).  In 2006, Hilton had presence in 78 countries w/global workforce over 100,000 (largest lodging company in the world).  Differentiator: excellent care of guests  Hotel Owners = Large % of Hilton’s business (several billion dollars of real estate invested in hotel brands)  “It’s share-of-wallet through brands, and share-of-shelf-space through owners.” – Bala Subramanian, SVP of Global Distribution Services

3 General Overview of Case  In 2008, Hilton Hotels Corporation poised for global growth (1,000 hotels in North America/1,000 in rest of world)  Blackstone Group acquisition for $26 Billion (32% premium over the $32.05 per share price).  New Strategy: Global growth with focus on owners, franchisees, and customers.  Challenges post-Blackstone acquisition:  Highly competitive global lodging business  Limited access to capital  High level of employee turnover  Difficult to standardize service delivery operations  Solution: Customers Really Matter (CRM) initiative  In 2008, Hilton Hotels Corporation poised for global growth (1,000 hotels in North America/1,000 in rest of world)  Blackstone Group acquisition for $26 Billion (32% premium over the $32.05 per share price).  New Strategy: Global growth with focus on owners, franchisees, and customers.  Challenges post-Blackstone acquisition:  Highly competitive global lodging business  Limited access to capital  High level of employee turnover  Difficult to standardize service delivery operations  Solution: Customers Really Matter (CRM) initiative

4 Supporting Facts: Hilton’s OnQ Platform

5 Supporting Facts: Customers Really Matter (CRM)  Benefits of the Customers Really Matter (CRM) initiative:  With 78,000 calls/day (total of four North American call centers), OnQ reservations allow agents access to guest preferences.  Greater insight = decreased called time and increase cross-selling abilities  Enables front office to pre-assign guests to rooms  Exclusive benefits for Gold & Diamond level HHonors members (MyWay program)  Superior Customer Recover y– records of previous complaints (planning ahead of time for previously disappointed guests)  Proper dispatching/staffing during lean hours  Tiered guest valuation system (prioritize most valued guests)  Guest survey (SALT) upon guest departure (key metric for evaluating guest experience)

6 Strengths  Access to Capital  Blackstone Group acquisition provides options  Can invest in CRM strategy further or adopt new platform  Global growth a viable strategic option  Established Standardized Delivery Service System  Hilton controls purchasing, maintaining, and refreshing property level hardware  Provides complete turnkey solution (owners just pay a franchise fee)  Major competitive advantage (solid IT infrastructure)  Can be streamlined across entire Hilton family  Aids in expansion efforts: more hotels, quicker pace, more consistency (quality assurance)  Superior customer service to VIP members

7 More Strengths  Brand Recognition  Hilton Hotel Corporation is well known for its customer centric approach to its operations (OnQ/CRM supports brand name)  Technologically Superior  Tom Keltner, EV and CEO of the Americas: “Our IT infrastructure would take years to replicate….”  Custom-built enterprise/proprietary software platform  Consistency across all hotels  1 st major multi-brand operator to launch integrated customer relationship management effort (competition playing catch up)

8 Highly Competitive Global Lodging Business High Levels of Employee Turnover (especially at the front desk) Difficult to Measure ROI with Customers Really Matter (CRM) Initiative OnQ & CRM infrastructures are extremely expensive to build and maintain, year-after-year Global strategy may be too aggressive Too much reliance on CRM as Hilton’s DNA Too many performance metrics/programs around top tier guests Weaknesses

9  Acquisition by Blackstone Group for $26 billion allows for new global expansion strategy.  Option to stick with OnQ/CRM or focus on more targeted service delivery operations platform.  OnQ/CRM has established customer centric framework (historical data for new platform if needed)  Opportunity to take a larger portion of market share (9%) from Marriott during global expansion.  OnQ is the conduit for aggressive expansion (more hotels, quicker pace, more consistency).  Can build Hilton Hotel’s infrastructure even further with new capital  Reliance on brand name while expanding globally  Eventual understanding of QRM’s ROI with increased metrics from SALT (surveys, etc.)  Customer loyalty program expansion for high-end guests Opportunities

10 Threats  Competition  Marriott International with 9% of the U.S. lodging market (Hilton has 9% as well)  Competitors have their own guest experience initiatives (Ritz Carlton’s luxury segment & Wyndham International’s upper upscale segment).  The CRM/OnQ Platform  Yearly infrastructure costs exponentially increase with global expansion  Increased difficulty achieving standardized hospitality service with global expansion  Not target enough to specific customer service related issues (too widespread and vague)  Proprietary platform becomes obsolete as other systems advance  May not be cost-effective (difficult to determine ROI)  Global/External Environment  Governmental regulations  Lack of brand recognition  Global market conditions  Cultural differences

11  CRM Challenges  Difficult to measure the long term success of the CRM initiative  Tough to track its evaluation in terms of ROI  How does one put a metric on personalized interactions?  The CRM initiative may not be cost-effective as Hilton expands globally  For CRM to be successful  Hilton must focus on measurement, executive championship, employee training and empowerment (quantify ROI)  It must continue to be the DNA of Hilton  More cost-effective infrastructure solutions  The Future of CRM at the Hilton Corp  Is it worth reinvesting in CRM or has the program run its course?  Has the initiative enabled Hilton to differentiate its brand?  Was the standardized approach better than a targeted approach? Stated Conclusion From Case

12  Reinvent Brand with New Global Strategy  Boost international guest experience initiatives with a targeted hospitality service platform (do away with CRM outside of U.S.)  Purchase targeted customer relationship management platform after extensive ethnographic studies prior to entering new markets.  Use Blackstone Group acquisition capital as a means of testing various service delivery options (ensure quantitative measurement/ROI).  Establish customer-centric global reputation.  Continue with strategic initiative focusing on owners, franchisees and customers.  More hotels, quicker pace, more consistency with different system  Maintain CRM/OnQ initiative in the U.S.  Continue to differentiate oneself as lodging’s customer service leader  Use net profits from cross-selling as a key performance indicator in collaboration with SALT survey results (profits/service KPI’s)  Reduce yearly CRM/OnQ infrastructure costs by keeping system solely within the U.S.  Habitually increase technology around training, information systems, supply-chain management (not rely so heavily on CRM as sole DNA of Hilton Recommendations

13 References : Applegate, L., Piccoli, G. & Chekitan, D. (2008). Hilton Hotels: Brand Differentiation through Customer Relationship Management. Harvard Business School. Case Jul. 23, 2008.


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