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Hilton Hotels Brand Differentiation Through Customer Relationship Management

Business Context/Key Business Drivers
Hilton Hotels started in 1919 in Cisco, TX. Company went public in 1946; had 15 properties across 11 states.
Unit looking after international operations was spun off in 1964, bought back in 2005 400 properties added.
Acquired Promus Hotel Corporation in 2000. Combined capacity stood close to 1700 - diversification of portfolio.
Organic growth continued Sept. 2006 company opened 1000th hotel in North America since 2000, at 2 hotels/day.
Hilton poised to reach 3000 properties mark, operational in 78 countries and over 100,000 employees.
Followed strategy: share-of-wallet through brands, share-of-shelf-space through owners.
Franchising and alignment with real estate owners was the key to fast growth.
Launched Customers Really Matter (CRM) initiative in 2002 main focus was improving service delivery and
consistency across the family of Hilton brands.
Implemented OnQ integrated infrastructure described as nervous system of Hilton Hotels Corporation. Initiative
cost by 2007 was $195M and annual maintenance cost was $60M.
OnQ was a custom built enterprise system to support operations at each level of operations in all the hotels in
Hilton family irrespective of their size, segment, location etc. Instrumental in instilling the CRM initiative at each
customer touch point.
Blackstone group took the company private for $26B, at 32% premium over its last traded share price. This
provided an opportunity to evaluate performance of CRM initiative to date and decide way forward.

2. Initiative Objectives/Benefits
Key Business Objectives
Agile and personalized customer
service
Standardize and amalgamate the
reservation system
Improve customer satisfaction
Trust building among franchisee
owners
Benefit from economies of scale
3. Initiative challenges
Key Challenges
Regularization across brands catering
to variety of categorized customers

Deployment implementation of OnQ

by all front desk employees
Maintain loyal customers

Measure customer satisfaction across

all platforms/properties
Keeping up with changing customer
preferences
Lessened flexibility caused by preassignment
Monetizing the technology initiative

Customer

privacy

concerns

Planned Benefits Of The Initiative

Improved operational efficiency, improved customer satisfaction. for
e.g. Quicker allocation of rooms depending on customer preference
Standardized user interface for customers, shorter call times and
improved cross selling by having single contact point for customer
interaction also meant better delivery.
Attain customer intimacy and build stronger brand loyalty.
Standardized delivery of CRM initiative, seamless operations and
ability of monitoring data continuously for quality assurance.
Reduced costs, standardization, local and global expansion.

Issue Resolution
Classify customer among different segments like active members,
FastRez, 4+, local VIPs etc. and provide a standardized user interface
to cater to needs of all these segments.
Communicate and educate all frond desk employees of all hotels for
the use of the platform.
Use OnQ data to identify regular and high business generating
customers and create a loyalty program to cater to their needs.
Implementation of SALT survey used to gauge customer satisfaction
and act on the findings/feedback received.
Analyzing data to identify trends and patterns to identify and forecast
customer needs NYC example, preference of upper floors.
Use of tiered guest preference system to prioritize the preassignment.
Adopt simplified one-time fee for OnQ platform usage for the
franchisee owner rather than charging them per transaction.
Identify and control the aspects of personal information that should
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customers might have issues with the

amount of personal info Hilton gathers.

be shared with the front desk operators and give assurance to the
customers about same.

4. Results
Cross selling rose to $750M in 2006 and was attributed to implementation of the OnQ across platform. Also data
provided to the call center employees via OnQ reduced call durations.
SALT survey implemented and used as a report-card of customer satisfaction across franchisees and taken
seriously by management.
Quicker and tailored service provided to valued customers via MyWay program. Best Guests arrival reports used by
front desk staff to retrieve customer information and for pre-assignment of rooms.
Hilton could recognize key customers who did not stay often at their hotels, but provided high dollar value
business whenever they did, and treat them as valued customers as well even though they were not frequent
ones. E.g. family spending $20K at Hawaiian resort during once a year vacation.
Though Net Revenue per call fell from 8.69% to 1.4% in 2002 and 2003 respectively (by analyzing exhibit 7), it can
be attributed to the system being implemented. Over the period of five years, for which data is provided, revenue
per call increased by 5.77% annually on an average.
Hilton enjoyed the first mover advantage with implementation of the technology as competitors like Hyatt, Marriot
etc. scrambled to develop and implement a similar system for their operations.
5. Relevance and analysis
Hilton intends to expand by 2000 properties in the next 5-10 years. Customer satisfaction is the key factor for success
in hospitality industry. Market pressures are high are high, as competitors are catching up with Hilton in terms of
implementing such platforms and customer expectations are ever increasing. Also there are zero switching costs
involved for customers and loyalty programs intend to instill those. Standardization in service delivery at each
customer contact point across brands and properties on such a big scale is a huge undertaking for Hilton. Hence,
Hilton had a dire requirement of a customer relationship management infrastructure like OnQ to improve operations,
provide faster and tailored customer service and maintain a competitive edge over competitors.
Hilton has spent $195M on development and $60M per year on maintenance of the OnQ network. This spending is
justified by the increase in cross-selling revenue ($750 million in 2006 alone) and other benefits such as customer
satisfaction, faster service delivery at each customer point, customer inclination forecasting, pre-assignment of
rooms etc. Hence, I believe that there is room for further investment in OnQ, as it is providing incremental benefits
and strategic lead over rivals.
Hiltons OnQ currently has a lot of information about customers, including historical data that might be irrelevant
now. Customer inclinations change and these changes should be conveyed to the front desk employees and
franchisee owners. Also, customers might have concerns about the amount of personal data Hilton holds, and
hence personalization should be voluntary for any client who wants to opt-out, and not a mandate. The CRM
should not just be a data bank of customer profiles, but should also be a system that supports front desk staff and
owners to make agile and customized decisions, may be by using predictive algorithms and BI principals.
Takeaways:
Customer relationship and expectation management is the most critical aspect of business in industries like
Hospitality industry.
It makes more sense financially to invest in retaining an existing customer than trying to acquire new ones.
In the Keda case, ERP was used to improve operational efficiency and resource management. However, in a service
industry like hospitality, IT infrastructure is used to ensure standardization and improved customer satisfaction.
A customer will spread word-of-mouth publicity, either good or bad, about his experience. This cannot be
physically controlled but can be guided by providing excellent service using tools such as OnQ
ROI calculations to gauge benefits of systems like OnQ, such as customer satisfaction, increased sales are difficult
to quantify, but should be determined to understand the benefits of CRM, and decide whether more investments
are needed or the project should be revamped or cancelled all together.

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