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One-On-One: Raising Hotel Value Levels
JUNE 20, 2005 --
Hilton Hotels Corp. president and CEO Matt Hart this month met with BTN hotel editor Jay Boehmer during New York University's 27th Annual International Hospitality Industry Investment Conference at the Waldorf-Astoria to discuss the hotel market rebound and the recent surge in amenities hotels offer.
BTN: Amenities and renovations are coming back in a big way this year. Is that something that's going to continue?
Matt Hart: All I can speak to is our company. We've been a little frugal on those things. I've been working very hard to improve the bedding product. It took us one year to analyze the right bedding product. We have that now, and Serta manufactures it. It has a very high coil count and a very thick mattress pad. We have 250 thread-count linens and a combination feather and down pillow. We did a lot of research to make sure we got the bed right. We also wanted to make sure it was affordable for our owners. We're changing out the TVs. We're putting in a clock radio that a human being can set. We are looking very carefully into improving the service levels of the high-speed Internet, which is in all of our rooms and meeting spaces. We're doing a lot of things in our rooms. Generally the reaction from our owners and our guests has been, "it's about time." We're doing that and we're upgrading our amenity package. That's half the story. The other part of the story has to be the service levels. My own personal mission is to get general managers out from behind their desks and more visible with customers and our team members. Whether that's at the front desk when you're checking out or if you're hosting a big meeting, I like to see the general managers on the floor of the hotel, with their name tags, so people know who's in charge and if there's a problem, who can solve that problem.
BTN: Another hotel CEO said that customer research has grown extensively in recent years and the industry has a much better handle on what travelers want. Is that the case with Hilton?
Hart: We bought the Promus hotel company in 1999 and we've been migrating to using their systems for customer satisfaction and for loyalty across all of our brands. We know that customers definitely have brand preferences, definitely have things they look for in hotels. We're trying to get some of the full service brands that we have—the Hiltons, the Doubletrees, the Embassies—to use a lot of the same measurement techniques and try to answer the customer needs in a lot of the same ways that our Hilton Garden Inns and Hamptons do. We know a lot more about what the guest wants and what they want is an emotional connection to the brand. They want consistent service. We're trying to personalize your stay so it's all about you.
BTN: If a traveler likes something when staying at one brand, you can accommodate that when he or she stays at another of your brands?
Hart: Yes. That's where that technology comes in with the OnQ. We know where you've stayed; we know where you've had problems. We know that you don't want feather and down pillows, you just want down pillows. We know that and it's our job to tell you when you check in, "welcome to the Homewood, we've got your down pillows for you." They're not necessarily looking for the best deal or the most stuff; they want to know someone cares that they're coming to stay with them. That's the game: how do we make it about you, not about us.
BTN: Hilton has been a leader in rolling out lobby kiosks. Has this been well-received by travelers and owners?
Hart: We love the kiosk. We've been very successful from the start. I've read a lot of stuff that says that for other hotel companies it's just not working. It may be that their original architecture just was not customer-friendly and it didn't work. Thanks to our technology guys, it works. At some of our properties, particularly at the airports, we're up to 30 percent kiosk checkin. For us, it's not a labor-saving thing; it's not a style thing. We spend millions of dollars training our people to anticipate customer needs, to be friendly, to be caring to get an emotional connection, but the fact of the matter is: Some people when they travel just don't want to make friends. That's okay by us. If they want to use the kiosks, then that is fine. One of the interesting things we find, we give the customer the opportunity to upgrade and people are more likely to upgrade using the kiosk than they are face to face. That's fine with us. It's a nice feature for a lot of people. Think about the airlines now, that's how you do business. Put your credit card in, get your boarding pass: That's just the way it is. For us to give that same opportunity with hotel guests makes all the sense in the world.
BTN: Do you see it becoming as pervasive as it is with the airlines?
Hart: No. We're not trying to force you to do something as a cost-saving thing. It's strictly giving you a choice. We'll soon have the ability to get your boarding pass through there too. We'll have at least one airline in the third quarter and we hope to add more after that.
BTN: One of your competitors began rolling them out at one of its midprice brands. Do you expect to follow suit?
Hart: Embassy Suites has decided to make it a brand standard for all their hotels. For Hilton, we focused it on the larger hotels, the group hotels, places where there is a potential for a line. Except for Starbucks, no one wants to stand in line. That was our initial thought. We put them in by the end of last year in about 50 locations. We'll probably add a few more Hiltons along the way. At the Waldorf here, we have them, but it's not a big hit with the luxury property guests. At the airport properties, they like the kiosks.
BTN: Travel managers are always clamoring for comprehensive data. Through the OnQ system, are you focused on enhancing data for the travel management sector?
Hart: I don't think we want to get it to the travel management sector. We want to keep it for ourselves and know exactly who our customers are, their spending patterns and their needs. One of the big advantages we have is that our technology platform is the same across all our brands. We know that you're traveling to a Hilton, we know you're traveling to a Doubletree or a Hilton Garden Inn. What we would like to do is use that information and know that you are going to different places for different purposes and customize your stay as to the reason you're going there. The big advantage we have is that customer knowledge of travel and reasons for travel across all the brands.
BTN: Can those types of reports translate to travel managers to see their own traveler's performance or preference?
Hart: You mean to report back to the head guy at IBM and tell them how much this guy is spending at the bar? No.
BTN: With the jump in demand, availability midweek in the key cities has become an issue for corporate travel buyers. What is Hilton's position on providing last room availability to corporate accounts?
Hart: We try to be fair with our big accounts. We need occupancy on the weekends, they need rooms on the weekdays. We're good about figuring those situations out. We have longstanding relationships with corporate customers. We know those relationships are important and we do our best to work those out so that everybody's happy.
BTN: During the downturn, midprice outperformed full-service, relatively speaking, but full-service now seems to be doing better. Is this consistent with prior recoveries? Has it been true for Hilton brands across the board?
Hart: The answer is yes. It's because of the business transient traveler. People are traveling to New York, to San Francisco, to Los Angeles and they need places to stay. That's the normal pattern in our industry, that's compression. The general manager sees the demand coming in from lots of different sources. We have a very sophisticated yield-management system that will aid him or her in making the decision on whether to take business or not. It's based on historical factors as well as to what the outlook is for travel. They're going to make their choices of how to get the best mix of business in the hotel.
BTN: With the lodging industry rebound, hotel companies that own assets are being looked upon more favorably. Does Hilton anticipate changing its asset sales strategy?
Hart: We have been sellers of properties and I expect this month that we'll close on a fairly significant amount of properties that we own. We'd like to get our business to where about 30 percent of our income comes from ownership, about 40 percent from fee income and about 20 percent from time-share. We are selling some hotels. There's a lot of money around and a lot of interest in the business. The interest is well-founded. We're in a period now where demand is strong and will continue to be strong. The supply side of the equation particularly on the full service side is fairly benign. I think you will see good growth in cash flow from these assets. That's why there are a lot of people interested in the industry. That's why we think it's a good market to sell into. We'll close on quite a few things this month and we're very happy with the prices we're getting, but I think we would always want to be an owner of hotels. We're keeping our flags in place and the hotels that we'll continue to own are real brand-builders for the company: the New York Hilton, the Chicago Hilton, the Hilton Hawaiian Village, the San Francisco Hilton. These are really irreplaceable assets that are so important to the foundation of the brand. Any time you sell a hotel, you lose some margin of control. So we always want to control those assets.
BTN: Control issues also were part of the discussion involving hotels and the Internet merchant model.
Hart: Three years ago, even though we didn't feel it and didn't believe, there was concern and skepticism on the part of the press and observers of the industry that our product was going to become commoditized, that we would become a slave to the third-party Internet suppliers. We never viewed it that way. We always viewed it as just another way to sell hotel rooms. We have beefed up our own Web site and we provide a lot of benefits to book through our site, not the least of which is the ability to earn Hilton Honor points. From last year to this year, the growth in traffic in our own Web sites, just the delta, is larger than the absolute number of the third-party volume, which is about 2.5 percent. It's pretty much stayed there, whereas the volume to our own Web sites has increased quite a bit. Yet, we'll always have a need to sell rooms on Christmas Eve and Sunday nights in January and if someone else can help us with that, we're happy to let them. Midweek in October at the Waldorf-Astoria, that's not going to be on Priceline.
BTN: A number of your competitors have rolled out brandwide spa upgrades focused on business travelers as well as leisure. Is this a potential growth area for Hilton?
Hart: It's interesting because our two competitors have taken different approaches. Starwood took the approach of buying a brand name and sprinkling that brand name throughout their spa offerings. They also branded their health clubs with Reebok. Marriott took a different approach and created their own spa brand called Revive and they're converting theirs to that brand. I don't know what the right answer is, but I'm working on it. We've met with some people who would like to partner with us in the spa business and we're probably about six months away from having a solution.
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