1. Hilton Hotels
Michael 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

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

4. Supporting Facts: Hilton’s OnQ Platform
OnQ, according to EVP of Shared Services Tim Harvey, “embodied both the one-stop shopping nature of an integrated solution and a readiness to service customers ‘on cue’.”
OnQ Features:
Tech-focused
Custom-build enterprise system
Supports property-level operations
Same system adopted across entire Hilton family (QA)
Cost of OnQ (Big Price Tag $$$)
$93 Million initial investment
Another $102 Million invested by 2007
OnQ infrastructure maintenance = $60 million per year (in addition)

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
1st major multi-brand operator to launch integrated customer relationship management effort (competition playing catch up)

8. Weaknesses 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

9. Opportunities
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

10. Threats Competition The CRM/OnQ Platform Global/External Environment
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. Stated Conclusion From Case
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?

12. Recommendations 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

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