Hilton's Keltner Strict On Quality

With many buyers scaling back to less costly hotels or adding more of these properties to their programs, they've grown much more concerned about service standards and product consistency. Thomas Keltner, president of brand performance and the franchise development group at Hilton Hotels Corp., recently addressed these concerns with BTN hotel editor Bruce Serlen.



BTN: Hilton aggressively has been growing its Hampton and Hilton Garden Inn brands, including the announcement last month to build four new Hamptons in New York. What percentage of these midprice brands is franchised and what percentage is company owned or managed?

Tom Keltner: At year-end 2001, roughly 80 percent of the hotels out of the approximately 2,000 that we have are franchised. We own or manage about 350 hotels.

BTN: With a brand such as Hampton—with more than 1,100 properties—being almost entirely franchised, what mechanisms are in place at the company level to ensure standards are met?

Keltner: We have a quality assurance group internal to the company that inspects all our hotels, irrespective of who owns them. Generally, they get two inspections a year. They're rated on a thorough range of issues that runs the gamut from cleanliness to capital items to service items. We like to think that we look at those items through the eyes of the guest. It gives us the opportunity to measure our whole system within each brand. We actually rank the hotels on quality assurance, based on guest feedback because we survey guests on a regular basis. We rank them on who's the best, who's got the highest score.

BTN: And those hotels with the lowest score?

Keltner: These properties then get a lot more attention from us to help them improve their record.

BTN: Some of these must end up leaving the system?

Keltner: There always are some that leave. It's probably not as many as you'd expect. Across our family of brands, 10 to 12 leave in a typical year. But what you discover is that those in the bottom slice that have problems quickly get religion when it's time to take down the flag. We say to them, "You've got to do this, this and this," and they wind up doing precisely that. In other words, we use the quality assurance process to make sure hotels get upgraded as they need to be.

BTN: Is it fair to say quality standards have risen industrywide as the traveling public's expectations—and those of business travelers in particular—have become more sophisticated?

Keltner: It used to be that a clean room was a defining criteria of quality. But this is still a people business. For example, how do we deliver service when somebody walks up to the front desk and has an issue? This is highly indicative of how guests think about us and whether or not they'll come back.

BTN: Would you say travel buyers, no less business travelers, fully understand the extent to which such companies as Hilton have gotten out of the ownership business?

Keltner: I don't think they care. They buy a brand. I've yet to have anybody call a reservations system and say, "I'd like to stay at a company-owned and operated Hilton." They want to stay at a Hilton and they have expectations of what that means. Our challenge is, how do you deliver that across all the Hiltons or all the Embassy Suites or all the Hamptons? In terms of the core Hilton brand, that means we own and manage probably just under half the rooms and that's the biggest percentage we own and manage of any brand.

BTN: Travel buyers' concerns about product consistency are most pronounced especially at the midprice, economy and budget levels. Would you say those concerns are valid?

Keltner: You have to deliver the promise of what the traveler expects when you buy a Hilton brand, irrespective of whether you own and manage it. Accordingly, our corporate vision is to be the first choice of the world's travelers. But to do that means we've got to have a lot of hotels, a lot of different price points, a lot of different types of products. And we have to deliver service across all those variables, regardless of whether we own the properties or manage them or they're owned and managed by a third party. The customer just doesn't care. The customer shouldn't have to care.

BTN: Do you tend to work with the same franchisees over and over or, more likely, work with an increasing pool of franchisees?

Keltner: We're working with both existing and new partners. We're always finding new people who want to do business with us and learn more about our brands and how they perform relative to the competition. Our preference though is really to grow with people we know and who produce good quality hotels and then operate them.

BTN: Do you tend to work with owners who have a large portfolio of properties, which would make consistency less of an issue?

Keltner: In the franchise field, there are very few of these. Generally, that came about because of the real estate investment trusts in the mid-1990s. But the average franchisee has anywhere from one to five or six hotels. Some of them have eight to 10. If you're talking about Hampton, none of them are really sizeable, relative to nearly 1,100 Hamptons. If you're talking about Embassy Suites, then Felcor—a real estate trust—is a very significant owner. We manage most of their hotels for them.

BTN: Is it a conflict for you when the owners/managers have other hotel company brands in their portfolio?

Keltner: No, it's a fact of life today. From our standpoint, what we often find is that we say, "Look at how your other brands are performing and how our brands are performing," and we feel pretty good about that. In the best cases, their objectives and our objectives are aligned. We both care about product quality, we both care about delivering the right kind of service to our guests.

BTN: Buyers have reported instances where the owners/managers market themselves and their portfolio as an entity. What's your response to that?

Keltner: When they're publicly traded companies, they may market themselves to Wall Street that way, but their individual hotels are still part of a system of brands and if people want to stay in an Embassy Suites, for example, that's what they market.

BTN: Regarding the trend toward trading down, is it your view that travelers who are used to full-service hotels still expect a full-service hotel?

Keltner: I'd say that's definitely the case. Clearly, some corporations have changed their guidance in terms of their travel policy. But most travelers who want a full-service experience still do and those who are geared to a less-than-full-service experience, be it Hampton or our extended stay Homewood Suites by Hilton brand, are comfortable with that. They often trade service for space.

BTN: You mentioned extended stay. Have you seen more transient business at these properties as a result of the weak economy?

Keltner: The extended stay segment has always had transient business. In fact, one of the challenges in extended stay is managing the mix between five-plus nights and true transient travel. Our extended stay business overall has stayed pretty strong and the transient piece has sort of bounced around like the transient business has in our other segments.