Case:Hilton Hotels Brand Differentiation

through Customer Relationship

Management

Group 8 Members:
Anuj Chanda – 19A1HP114
Saurav Kumar – 19A1HP110
Arun Nath R – 19A2HP468
S Rahul – 19A2HP421
Swapnil Joardar – 19A1HP003
Soumili Das – 19A2HP419
 Summary
Hilton Hotels Corporationstarted its business in 1991 with the Mobley Hotel in Cisco, Texas
under the leadership of Conrad Hilton. Being one of the most internationally recognizable
names in the lodging sector, it stood as the most stylish, forward thinking global leader in
the hospitality industry.In early 2008, the company was taken private by the Blackstone
Group for $26 billion as they aimed to invest in Hilton’s properties for enhancing their
growth in the business.

After extending their horizon over the international unit in 1964, Hilton Hotels had focussed
on their domestic growth in the lodging sector as well as on diversification into casinos and
vacation ownerships. It was on the verge of an exceptional global growth with an aim of
extending their business more. Serving guests over 78 countries with 2935 hotels (during
2007), it was one of the largest lodging companies in the world.

Hilton Hotels Corporation had grown in size after the acquisition of Promus Hotel
Corporation in 1954 thatpushed them from 15 properties in America to the 1700 properties
mark. In 2005, it bought back Hilton International which brought about 400 Hilton
properties into the fold. A year later, Hilton announced the opening of the 1000 th hotel in
North America since the acquisition of Promus, growing their business at a rate of one hotel
every two days with a global workforce over 100,000. Despite the growth of Hilton Hotel
Corporation, the challenges that members of the global lodging industry had to face still
existed like access to capital, high levels of employee turnover, and difficulty in achieving
standardization typical of service delivery operations. In order to answer that, Hilton
Corporation had introduced a comprehensive, integrated infrastructure called OnQ system.
The OnQ system was created to enhance the Hilton’s CRM, Customer Really Matters
strategy in 2002. It pinned on the idea that showed employees a clearer idea of who
theircustomers were and what their past Hilton experiences had been for providing
constant improvement, thereby solidifying relationships with their customers.

Answer-1
Hilton Hotel Corporationhas been one of the most internationally recognised names in the
hospitality industry. Their core business is in the lodging sector, providing their customers
with a diversified set of hotels and resorts as per their choices and requirements.

They started their journey under the leadership of Conrad Hilton in 1919 with Mobley Hotel
in Cisco, Texas. It went public in 1946 with 15 properties in 4 states. After the acquisition of
the international unit in 1964, Hilton focussed on domestic growth and gradually started
their diversification process through casinos and vacation ownership.

In 2001, Hilton Hotels acquired Promus Hotel Corporation which further enhanced their
diversification process giving Hilton Hotels a growing presence in all the segments of the
lodging industry. In 2006, they were poised to reach 78 countries, crossing the mark of 3000
properties with a global workforce of over 100,000.

Hilton Hotels Corporation defined themselves as “a brand management company” who

were inclined towards the excellent care of their guests. They felt that a major reason
behind the success was the willingness of their owners to invest in their core business,
leading to its massive growth worldwide.

Answer-2
Customers Really Matter (CRM)was an initiative introduced by Hilton Hotels Corporation in
early 2002 with a vision of using technology to give them the power to solidify relationships
with their best customers. It had a building cost of $650,000 and a yearly maintenance of $1
million. The fact that it was built on OnQ infrastructure, it briefed far-flung customer data
and produced extensive arrival reports. It had the ability to match customer reservations
with profile database records in very small pace of time in order to make the guests feel
special. The process of CRM started much earlier than check-in of the guests as it sought to
recognize them at the reservation centres on their arrivals (as per Exhibit 3) thereby
facilitating the reservation process as well as enhanced the service quality. It provided
proper allocation of attention to the guests by reducing the talk-times on phone and
enabling cross-selling. It generated a report by listing all expected guests by ranking them
who had a profile in OnQ. This information helped the front office staff to pre-assign guests
to rooms according to their preferences with exclusive offers like Gold and Diamond
memberships. The reports also helped Hilton to alert them about service recovery issues at
hotels the guests had stayed previously, thereby ensuring that everything worked properly.
CRM thus helped in building customer loyalty and establishing value of a customer by
providing extra attention to VIP customers.

Satisfaction and Loyalty Tracking (SALT) survey, a key component of the CRM was a random
sample of guests evaluating their overall experienceand ability to recommend and
willingness to return. The main motive behind this was their desire to know about the
guest’s experience so that they can better serve them in future (as per Exhibit 3).

However, this system had a few drawbacks and posed some challenges. The OnQ system
needed to be developed into a decision support system rather than just being a computer
information system. OnQ system posed difficulty in updating and keeping a track of the
customers’ preference as it was challenging because it was subjected to change at any point
of time. The estimated cost of maintaining OnQ system was quite high, growing up to $102
million by 2007. The sphere of CRM was an absolute hard-to-maintain ROI as it was almost
impossible to maintain a-priori. It reduced the talk time on phone with the customers but
posed a challenge in the form of dependence of effectiveness of the front desk in creating a
personalized interaction.
 Answer-3
Blackstone Group took over Hilton Hotels Corporation in 2008 and intended to invest in
their properties and brands on a global scale to facilitate growth in their business for the
benefit of owners, franchisees and customers. In 2002, Hilton Hotels had deployed
Customers Really Matter (CRM) initiative which costed them $650,000 to build, with a
yearly maintenance fee of about $1 million. CRM was established with a vision to use
technology to provide better service to their customers. It was built on an OnQ
infrastructure that used customer data and produced comprehensive arrival reports.

As per Exhibit 2, we can conclude that from the year 2002 to 2007, there has not been
much significant change or increase in revenue in spite of investing such a huge amount
behind OnQ CRM. Hilton Hotels had invested another $102 million by 2007 behind OnQ.
They further estimated that the maintenance of OnQ infrastructure would amount to $60
million per year. Hence, we believe that there’s no point in investing such a huge amount
behind OnQ since we aren’t able to see an equivalent increase in revenues as per the
investments.

One of the benefits of CRM is that it allows property to prioritize pre-assignment. But in
some situations we have to make a trade off, since beyond general guest preference,
location and other characteristics of the hotel also played a major role in the selection of
rooms as per the customer’s choice. This can be seen as a drawback of CRM. Investments
can be made to correct these short comings.

Other competitive hotel chains such as Marriott had also started implementing Customers
Relationship Management (CRM) in 2004 through Siebel Systems followed by other groups
such as Starwood, Hyatt and InterContinental. Hence, Hilton was no more the unique
hospitality group which was providing CRM to its customers.

We believe that the basis of the success behind the CRM initiative was more due to the
direct interaction between the hotel staff and the front desk employees with the customers
rather than the data provided by the OnQ system. Therefore, we would like to stick to the
current OnQ infrastructure and rather invest on the services part of CRM.

We could invest on a uniform training course for all the new and existing employees of the
hotels worldwide in order to provide a better and more satisfying experience to the
customers. We would want to motivate the workforce to smoothen the running of the
hotels and for better customer experience through staff incentives.

Hence, after the acquisition of Hilton Hotels by the Blackstone Group, we feel that they
should definitely invest behind the CRM initiative since it has been a major tool for the
Hilton Hotels to deliver the kind of service they have always wanted to. But the investments
must be directed more towards the improvement of the services provided in and at the
properties rather than on collecting data from the customers over phone calls.