Matt Hart, president and COO of Hilton Hotels Corp., sat with BTN hotel editor David Eisen late last month to discuss the February integration of Hilton International into Hilton Hotels Corp. and the direction the combined entity will take.BTN: How far along are you with the Hilton International integration?
Hart: The integration has gone really well, relative to some other deals we've worked on. There's not very much crossover because Hilton International operated in their territories fairly independently. Plus, we've already had this strategic alliance that we've been working on for the past 10 years, so we know the people and have a lot of respect for them. They were already doing a good job. There are a couple of areas left: We want to put our OnQ operating system in all properties, which will take us about two years to accomplish all around the world. We've folded their Americas group, based in Miami, into our operating groups. We will take the Conrad operation, which had been operated and managed centrally out of Brussels and Beverly Hills, and we're going to fold those operations into the local management teams.
BTN: Are you looking to build up Hilton International's Scandic brand and Hilton's U.S. brands?
Hart: With Scandic we really have focused on the hotel business in Scandinavian countries—Norway, Denmark and Sweden—they were beginning to branch out into other countries in Europe, but I think they are best served in their local geographic market. The big opportunity we have is to take the Hilton U.S. select-service brands—Hampton Inn, Hilton Garden Inn, Embassy Suites, Homewood and Doubletree—and move them into different opportunities around the world.
BTN: How will branding and development of the luxury Waldorf-Astoria collection
(BTN, Jan. 23) proceed?
Hart: You can't compete in business without size. We are attaching a brand name and also growing the brand. There are four properties right now with the Waldorf-Astoria distinction and a new Waldorf-Astoria will break ground in Orlando four months from now, with 500 rooms. By June 1, we'll start accepting Hilton Honors points at the Waldorf properties.
BTN: How does your OnQ operating system work and how is Hilton looking to improve or expand on it?
Hart: It's the back-of-the-house operating system that connects reservations to the front desk. All of the information about all of our customers and their stays within our family of brands is stored there: preferences they've given us about what they want in a room, what type of room they look for—any kind of customer service problems and how we resolved it. We have their personal profile so that when they stay with us, we know what they want. The best part is that it's across all of our brands. Our competitors have that within their brands, but they don't have a system where a Hampton Inn customer gets all of his information transferred when he stays at a Hilton or the Conrad. People want the points, but they really want recognition. This allows you to personalize a stay across a very large enterprise.
BTN: A lot of hoteliers have voiced displeasure with the current request-for-proposal process for corporate negotiated rates. What is the cost to responding to RFPs and how or do you want the process changed?
Hart: What we're doing is making it easier for people to book small groups so you can book the room and meeting space online for under 25 rooms. I just think that it's going to be the way of our business for a long time. What's happening is that the larger companies have procurement experts that negotiate the deals they can for their company, so I don't think we are going to get away from that. Generally, the leverage in that situation is shifting toward the hotel companies, because the demand is greater than the supply, particularly in the cities, but at the same time, it's a long-term relationship with these customers and so our increases will be measured.
BTN: With indicators pointing toward continued profits and growth in the hotel industry—at least through 2008, according to PricewaterhouseCoopers—how will development of Hilton hotels move forward?
Hart: We will open in excess of 200 hotels this year. Most of them are in our select-service category—Hilton Garden Inn, Hampton Inn, Homewood—and we have some new-build Embassy Suites, we have some new build Hilton's and we have some new builds and conversions for Doubletree. So for us it's going great. Our pipeline is larger than it's ever been—we have 700 hotels in our pipeline, including properties from Hilton International, over 90,00 rooms. So we know for the next two or three years we're going to be in really good shape in terms of growth. Beyond that, the big opportunity for us is with our select-service brands overseas. The statistics on international travel are staggering. The airline business will continue to grow. There are more new planes coming online, more discount carriers, a burgeoning population in India, China, Brazil. There will be tremendous opportunity for us to export our select-service brands into a lot of these very fast growing markets.
BTN: Are travel buyers leveraging meetings and transient travel together
(Meetings Today, May 1) and is this something Hilton encourages?
Hart: Those are obviously hugely important to us, because so much of our company is oriented toward the group market. They are our biggest and most important customers so we listen very carefully to what they want and we, to a large extent, tailor our offerings to what they need.
BTN: Is there a market for business class hotel rooms for business travelers at a premium price?
Hart: I don't think so. We have in all of our hotels business centers that are open 24/7. In many of our hotels, we have an in-room fax machine. The biggest thing we can do is deliver reliable high-speed Internet access. We're working on a program where we're going to take all that responsibility in-house and guarantee that at least 95 percent of the people trying to go online are able to do so on the first try and those that aren't are able to get online within 10 minutes or 95 percent of them. It's a 95/95 program. The business traveler wants reliable, truly high-speed Internet access and there is a big opportunity for us to provide that.
BTN: Hilton was in the news recently regarding lobby kiosks and their improved functionality that allows guests to print out boarding passes and room key cards. Are guests using them?
Hart: We have a vastly different take rate on the kiosks, anywhere from 1 percent to 30 percent where we have them. It's just a thing where even though we spend a ton of money on training and getting the right employees, some people when they check in just don't want to make a friend—all they want is their key. So for us it's just a matter of giving them the choice. Some people—once they understand how it works and see the reliability—seek it out, so that's fine for us.
BTN: First came the bedding wars, then removing bathtubs because everyone prefers to shower—what will be the next big trend?
Hart: My own personal one is an alarm clock that a human being can set and I think we got that wired. The curbed shower rod in the bathtub was a great innovation. Obviously we are all going toward better and fancier televisions. The shower instead of the tub is great—we've had huge success with that at the Beverly and New York Hilton. I would say you'll see a more residential feel in some of the guest rooms—hardwood floors with an area rug, like you might have in your home.
BTN: Will you keep developing mixed-use sites?
Hart: There will continue to be residential hotel developments around the country and world. We are finding a lot of interest in the Waldorf-Astoria brand to supplement that.
BTN: Have strides been made to direct more reservation traffic to your Web site and away from third-party sites?
Hart: Yes. That's been a huge change for the hotel company. Guests know that the hotel's Web site is the most efficient way to book rooms. That's been a very interesting change: Three years ago, people thought that these third-party sites would take over the business. Now, we recognize it for what it is: a potentially valuable channel for selling rooms when we need the help, but I think it's seen its peak in terms of contributions to revenue.
BTN: In five years, where do you see Hilton's place in the hotel industry?
Hart: We will be the worldwide leader in hospitality. We have the strongest and the most well-known brand name around the world. We now have the opportunity to take select-service properties around the world. If we execute it right, we will be without question the leader in our industry.