Brand Differentiation through CRM

Hilton Hotels: Brand Differentiation through CRM

Assignment Questions

In late 2016, Blackstone sold 25% stake in Hilton Worldwide Holdings to China’s HNA Group for about $6.5 billion. Billionaire Jonathan Gray, the head of Blackstone’s real estate group and Hilton’s chairman, has been moving to sell big chunks of Blackstone’s ownership in Hilton, which has been one of the best leveraged buyout deals in history. In HNA Group, Gray has found an ambitious Chinese conglomerate that has been using leverage to collect assets, particularly in the tourism industry. In June 2017, Blackstone was said to be selling 15 million Hilton shares amounting to about one billion dollars. Following the group’s stock exchange listing, its split as well as the selling of 25% of its shares to the Chinese HNA, Blackstone continues to financially disengage itself from the hospitality group. If I were Hilton leadership, I would be concerned. I believe Blackstone struck while the iron was hot and used Hilton to its full advantage.

1. After reading this case study, what did you learn from it? As future hospitality leaders, how can you benefit from the Customers Really Matter initiative at Hilton Hotels?
2. The partnership with Blackstone was the key factor in Hilton’s success in 2008. Without Blackstone, Hilton would not have had the $195 million to bring OnQ online. OnQ was another key factor in Hilton’s success. This enabled Hilton’s employees to have access to a large amount of information at each customer touch point allowing them to save time in the reservation process, increase net revenue per call despite an increase in calls year over year, along with other benefits using comprehensive arrival reports. Having a top-notch information technology system like OnQ with a well thought out development and maintenance plan is what set Hilton apart from its competitors and allowed them to build the premier global hospitality business. “CRM is a way to use technology to give you the power to solidify relationships with our best customers,” according Hilton in an article published in USA Today. Hilton was the pioneer in utilizing technology 10 years ago but I personally feel that most if not every brand is attempting to utilize technology, however, not every brand has Blackstone writing a fat check for their technological investment. Everyone in hospitality can benefit from CRM (utilizing technology) as that is the direction our world is headed in. As a side note, I worked the front desk at Savannah Marriott Riverfront in Savannah, Georgia, for 9 months in 2006. I immediately moved over to the Hyatt Regency Savannah about half a mile down the street and to be honest, Hyatt had a better property management system, a better reservation system, and a better catering/meeting space management system. I’d be interested to see what the OnQ system looks like and how it compares to large brand like Hyatt now that they’ve had 10 years to improve it.
4. What is Hilton’s core business (e.g. Franchisor, Management Company, etc…)? What is the value of a brand in the lodging industry? In other words, how a lodging brand provides significant value to its customers?
5. Hilton’s core business is as a lodging management company. Blackstone’s strategy favored franchise agreements versus opening new properties. As of 2013, about 70% of the rooms branded under Hilton were franchised to independent operators and companies. Hilton strives to create a unique yet standardized experience for each of its guests using recognition, personalization, service recovery, and customer analytics.
6. A brand is a product, service, person, cause or organization with perceived intangible attributes, a product or service, which a customer perceives to have distinctive benefits beyond price and functional performance. In the lodging industry brands build customer loyalty, enhance the guest’s perception of value, and distinguishes the brand from its competitors and builds preference. Consistent, strategic branding leads to strong brand equity. And in turn, strong brand equity means the added value brought to the company’s products or services allows the hotel to charge more for the brand than what identical, unbranded products would charge. And speaking of brand equity, this is where cluster management is used to leverage resources and capabilities and create a stronger presence in the marketplace.
7. Evaluate the performance of the Customers Really Matter initiative to date. Please use some of the information provided in the case in addition to some of the exhibits (e.g. Exhibit 2 & 7) to support your answer. Tim Harvey, Executive Vice President of Shared Services and CIO stated that measuring the success of the Customers Really Matter initiative was no small feat. Why exactly? It is difficult to measure whether or not you have created and/or improved more direct relationships with your guests as this is subjective. From an electronic and telephone standpoint, CRM has been successful. OnQ allows agents to quickly have all the needed information without having to switch from screen to different screen wasting the guests time, and more email addresses have been captured.
8. When looking at Exhibit 7, we can see year over year increases for almost all aspects measured. It is very clear that total calls, net revenue per call and conversion ratio (how many calls were “closed” turning caller into bookers) increased from 2001 to 2007. Where these did not increase year over year they were still very close. From 2001-2007, the Reservation Contact Centers have increased net revenue per call by $29.46 and conversion ratio increased overall by a total of 3.4%. These statistics are clear evidence of success and the effectiveness of the CRM strategy. The same can be said for Exhibit 2, with the most improved brands being Waldorf Astoria, Hilton Hotels, Hampton Brand, and Hilton Garden Inn improving by $677,203,850. The ADR declines for each of the brands then comes back above the 2001 starting point. RevPARs either increased or stayed close to the 2001 figure.
9. CRM’s success is going to come down to execution – knowing what the opportunity is, having the infrastructure and the data and effectively harnessing the promise of CRM and the potential of OnQ consistently and flawlessly across the network. Overall it is safe to say that the CRM program was a success.
11. What do you think Hilton leadership should do after the Blackstone acquisition? Should they further invest in CRM or simply maintain the status quo? What aspects of Hilton’s CRM should be strengthened, if any, and how?

It would be nice to see the most updated data all the way up to 2016 but based on the question you have asked, I do think Hilton should continue to invest in the CRM program based on the case study we were provided. At some point the application itself will need to be updated (if it hasn’t been already) as it is now more than a decade old and the reports will need to be updated every few years as certain information will become more important and some irrelevant. Employees will need to be trained on how to read reports and how to use them to their full potential to create the best guest experience possible while staying consistent across the brands. Although advancements in technology will lead us into the future, one should ever under estimate the importance of the face to face interactions and the simplicity and sincerity of a hand written note to a guest.