Hotel heritage opens a window on wider world

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Hilton Worldwide’s president of global brands and commercial services outlines his vision for what he describes as a ’brand management organisation’ with major expansion plans.

When Conrad Hilton addressed the American Hotel Association convention in 1954, he said it was his company’s responsibility to “fill the earth with the light and warmth of hospitality”. This somewhat sentimental principle remains Hilton Worldwide’s official vision today.

In 2011, the hotel company intends to shine this light into corners of the globe that its founder perhaps never predicted, as it accelerates its expansion outside the US. According to Paul Brown, Hilton Worldwide’s president of global brands and commercial services, the “pipeline” of hotels in development covers more of the world than ever before.

In 2007, just 15% of the business’s global pipeline was outside the US. That figure grew to 50% by the end of 2010. “From a marketing perspective that requires a pretty fundamental shift,” explains Brown.

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This shift will see marketing spend abroad increase significantly in 2011. The UK, as Hilton Worldwide’s second-biggest market after the US, will see a significant portion of that money, but expenditure will rise ahead of growth in emerging markets such as China and India.

Now under the unified Hilton Worldwide business, developments will be delivered under the banners of the company’s 10 hotel brands, which are split into three tiers – luxury, full service and focused service. According to Brown, luxury brand Waldorf Astoria, full-service hotel DoubleTree and budget brand Hampton Inn will see the highest proportional growth in marketing activity outside the US.

Hilton Worldwide uses all of its brands to break into new territories, although the initial assault on a country will often be made from the higher end of the portfolio, in particular the Conrad, Waldorf Astoria and Hilton brands.

However, Brown adds that many Asian markets are now at a “point of transition” where the company sees significant opportunities to introduce its full service mid-market offering to such territories.

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In China – perhaps the most crucial target market strategically – the Hilton brand itself is the one showing by far the greatest growth, being the longest established of the 10 around the world. Across all its brands, Hilton Worldwide has 17 resorts in China, which will grow to 50 in the next two years, then 100 over the next four to five years, according to Brown. Of these, 30% will operate under the Hilton brand. The pipeline of hotels in development currently consists of 64 resorts.

Given that China is now the second-largest economy in the world, Hilton’s focus on the territory is neither surprising nor unique. Hilton Worldwide lags behind some of its rivals in establishing a footprint in China. InterContinental claims to be the largest group by number of rooms and the business has ambitions to reach 250 properties in China within five years, while Marriott also aims to double its portfolio there to 120 by 2015.

But Hilton Worldwide has a strategy to make its own mark in China and beyond. The marketing plan that it is unleashing on a global scale has been the result of a wide-ranging reappraisal of Hilton Worldwide’s branding, a review known internally as Hilton 360 and one that Brown suggests is as comprehensive as any performed by a company of this size. From it, his team has formed a long-term approach to communicating the company’s objectives.

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“We have mapped out what the advertising and marketing message for the brand will be over the next four years, and then aligned how that message evolves with what Hilton Worldwide is going to be doing,” he says.

The strategy involves increased activity within the existing “Stay Hilton. Go everywhere” campaign. This even means that the creative work for its campaigns is almost all complete for that entire period, notwithstanding any twists of fate and accompanying adaptations.

Brown argues that this has improved relations with investors and franchisees because being able to show these parties the ad that the company would like to run in 2015 is “an incredibly powerful tool”, he says.

While building on its existing campaign, the business will be exploring unknown territories. A first-ever brand campaign focusing on the company’s HHonors loyalty programme will launch on 15 March. The ads will seek to put emphasis on the experiences that are available to repeat customers, rather than on the mechanics of amassing points.

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“The HHonors programme is critically important for us,” says Brown. “We have 27 million HHonors members, and 9 million of them have stayed with us at least once in the past 12 months. Those customers are responsible for 43% of our revenues.”

Of the 9 million active members, more than 5 million have opted into marketing, says Brown, meaning a large number of customers are ready and willing to be communicated to by the brand. The business has spent 18 months exploring ways to enhance the loyalty programme for these members.

Hilton Worldwide also attaches importance to HHonors because direct marketing generates a significant amount of business. Most customers visit us more than once a year, says Brown, and as such the company has gone to great lengths to improve the quality of the data it holds on not just HHonors members but all its customers.

Not surprisingly for a company that Brown refers to as a “brand management organisation”, Hilton Worldwide is like a Russian doll of brands within brands, of which HHonors is just one example. Last October, the company launched the Eforea spa brand, resident within its hotels.

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But unlike much of the company’s other marketing work, the concept was secondary to the business opportunity. “We had 80 spas planned anyway. The branding came afterwards,” admits Brown. The decision had the happy consequence of allowing franchisees to take advantage of economies of scale when opting to include a spa, while also being able to adapt it to the needs of th­eir individual hotels, he adds.

“We wanted to create a more packaged concept that we also designed as a kit of parts because not all spas are created equally. We can take the Eforea concept and put it in very different footprints and also in different markets, and take various elements of it and fit it in the right kind of space, albeit still under the full branding of Eforea.”

The example is the exception rather than the rule, but it shows a willingness on the part of Hilton Worldwide to be reactive as well as proactive when circumstances require.

This mindset is also demonstrated by how the company assesses consumers’ attitudes to new initiatives. Tracking conversations on social media sites after the Eforea launch turned up a surprising number of approving mentions, according to Brown.

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Of course, monitoring social media is useful for judging whether negative sentiment exists as well as positive, and Hilton Worldwide has employed it for this purpose recently. Until December last year, the company had been entangled in an industrial espionage case with rival hotel firm Starwood. The latter sued, accusing former employees Ross Klein and Amar Lalvani of stealing documents with plans for a boutique hotel design when they moved across to Hilton Worldwide.

In 2009, the companies agreed that Hilton Worldwide would refrain from further developing its Denizen brand, on which the two men had worked. Both left the company, and the case was settled in December 2010 when Hilton Worldwide agreed not to develop or acquire any new lifestyle or boutique hotel brands for two years. The New York Times also reported that $75m was paid as part of the settlement, with Starwood entitled to a further $75m worth of management contracts. Hilton Worldwide and the former employees deny Starwood’s allegations, and a grand jury investigation is still ongoing.

Despite international coverage, Brown says the case has not required a great deal of firefighting to protect Hilton Worldwide’s reputation, since it sparked little public interest.

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“I would say it had zero impact on the consumer perception of any of our brands. There was nothing that we needed to do in the consumer space to respond.”

However, another story to confront Hilton Worldwide last year required a much more proactive response. In June police temporarily shut the Hilton hotel in Chongqing, China, after a prostitution ring was alleged to have been found operating from the premises.

Brown explains: “We responded very quickly to that, particularly in China. We wanted to make it very clear internally and externally that there was zero tolerance and we have taken swift actions in that case – not because of the feedback coming from customers, it was because of our values as a company.”

The stories have not proved as much of a marketing headache as might be expected for Brown, who says that the variety and intricacy of the brand portfolio make the company better able to adjust to any setbacks.

However, the restrictions of the Starwood settlement mean a redoubling of efforts elsewhere. Hilton Worldwide has stated its intention to eventually bring a lifestyle brand to market – the original intention of the Denizen hotel was to add an edgier brand to the portfolio – but the injunction barely restricts the company’s ability to grow the wider business, claims Brown.

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“We have such a broad spectrum of brands that delaying the launch of a new brand targeted specifically at the lifestyle segment has a negligible impact on the business. Virtually any kind of opportunity from the development standpoint that comes our way fits within our existing brands.”

And with such a large portfolio of brands originating in the American market, the challenge for Hilton Worldwide will be to introduce them convincingly to a global audience.

CV Paul Brown

2008-present
President of global brands and commercial services at Hilton Worldwide

2005-2008
President of Expedia in North America. Previously president of Expedia’s partner services group and senior vice-president of strategic planning

2001-2005
Partner at management consultancy firm McKinsey & Company

2000-2001
President and chief operating officer at relationship management company Thinkologies

1998-2000
Senior vice-president of brand services at InterContinental Hotel Group. Previously
vice-president of strategic planning

1994-1998
Manager at The Boston Consulting Group

1989-1992
Senior consultant at Andersen Consulting. Previously a consultant for the same company

marketer2marketer

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Sarah Hawkins

Marketing director at La Senza, asks: More than ever, we are finding that we do business with less formality. How has Hilton, renowned for being a business hotel chain, changed and responded to this shift?

Paul Brown (PB) We want to make sure in our hotels – and it does differ by brand, but particularly for the Hilton brand – that any service is adaptable to what the customer wants. It used to be common practice that when somebody comes into the door, you immediately grab their bag and try to take it away from them and take it to the room. There are a lot of travellers that do not want that to happen, and so we are now training employees on how to recognise that.

We are focusing on “meeting unanticipated needs”. In most cases customers are looking for you to understand and recognise what they need and not force anything on them.

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Rebecca Harwood Lincoln

Global travel retail manager at Polaroid Eyewear, asks: How do you ensure a consistent brand experience for your customers when the Hilton hotel brands are represented in over 80 countries worldwide?

PB The further you move down the price spectrum, the more standardised the products become in a market. Waldorf Astorias will look very different, as will Conrads and Hiltons. The more “luxury” you are, the more it should be about the environment that you are in, but we do have certain standards that need to be met in hotels regardless of where they are.

The challenge with Waldorf Astoria for us is continuing to find the core, the essence of the New York property and then make sure that that is appropriately translated around the world – but not be so literal about it that it looks like we are trying to put the Waldorf Astoria, New York in Shanghai.

When you move into the mid-market, you move into a more prototypical world. But we do not stamp a standard one-size-fits-all view around the world. Once we have defined that ideal product within a country, we try to keep it as standardised as possible.

Q&A

Marketing Week (MW): How is Hilton Worldwide structured as a brand management organisation?

Paul Brown (PB) We have 10 brands and I have seven brand managers. Their responsibility is classic brand management – define what the brands are and market what the brands are to our consumers. Since a lot of our brands are franchise brands, they are also responsible for the owner relations side – working with those that actually own our products. We group our brands into three categories: luxury, full service and focused service.

MW: What is the value of branding to Hilton Worldwide’s business?

PB: We are a branding company, and that is how, ultimately, we make our money. When someone decides to become a franchisee, they are paying for the brand, the asset itself, the name on the building and all the marketing that comes with it. If you look at where and why we outperform our competitors, a lot of it is because on the revenue side we have a higher market share, which comes down to the equity of the brand and the support behind it. Within that, marketing is seen as an extremely significant function in the company and we continue to invest.

MW: How measurable are the returns from Hilton Worldwide’s marketing?

PB: About 60-70% of our marketing spend is direct response marketing spend, meaning I can tie the dollars out the door to specific transactions or revenue sources. A large portion of that spend is search marketing, or online marketing, which is infinitely trackable; or marketing related to the HHonors programme.

MW: What plans do you have for the future development of the Hilton Worldwide brand?

PB: We have been going through a comprehensive branding process called Hilton 360, which is driven by a tremendous amount of quantitative and qualitative research.

Out of that has come a very clear path for the Hilton Worldwide brand, and a revised plan for where we are investing our efforts in the brand – around the room, around food and beverage and around certain other service elements.

MW: How have your responsibilities been affected by reuniting the US and international businesses?

PB: We have been very focused over the past three years on reuniting the company and the brand under one common culture. Reorganisation has been part of that, and forming new management teams in many cases, so I spend a lot of my time communicating with team members, owners and vendors about what Hilton the company is trying to accomplish.

MW: What are your predictions for the hospitality sector this year?

PB: Financial centres like London and New York have remained relatively strong, and that is expected to continue. The government centres, like Washington DC, tend to remain strong, while China is continuing to grow significantly. As an industry we expect to perform better than the economy and most people are predicting a better year this year than 2010. It is expected that prices will continue to increase, so the revenue growth will not be just led by more people travelling, but by those people paying more.

Hilton Timeline

1919
Conrad Hilton buys his first hotel, The Mobley in Cisco, Texas

1925
The first Hilton-branded hotel is built in Dallas

1946
Hilton Hotels Corporation lists on the NYSE

1949
Hilton buys the Waldorf Astoria, New York

1964
Hilton International forms as a separate company, with Conrad Hilton as president.
Two years later, Conrad Hilton’s son Barron succeeds him as president of the domestic Hilton Hotels Corporation

1967
Trans World Airlines acquires Hilton International, with Conrad Hilton giving up the presidency to become chairman. The domestic operation makes no moves to expand into other markets until 1982

1979
Conrad Hilton dies, aged 91

1982
Hilton Hotels Corporation introduces the Conrad International Hotels brand, moving outside the US for the first time since the company split

1987
The HHonors loyalty programme is launched. It is now one of the largest programmes of its type and has partnerships with most major airlines

1997
Hilton Hotels Corporation and Hilton International agree a worldwide strategic alliance

2006
Hilton Hotels Corporation acquires Hilton International. Three years later, the reunited company is renamed Hilton Worldwide

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