Read the full interview HERE
We recently interviewed the Former Global Head of Corporate Strategy at Hilton Worldwide on building loyalty and hotel distribution.
- How Hilton built a portfolio of brands for all market segments
- Hotel conversions versus new builds
- How hotel loyalty schemes are moving from simple frequency plans to full customer experiences
- Franchisee cost strucutre and financial leverage
- The long run positioning of the OTA's and who owns the customer
How did you then think about building a portfolio of brands under one roof?
The regional idea wasn’t really a ground expansion of brands. I guess there was an idea that one or two would be launched. But just thinking about the rationale would be brand to brand. The Hampton Inn brand, for example, was performing very well, but the question would be, if you looked at Hampton Inn, its average daily rate was north of $100. Meanwhile, Marriott had Fairfield Inn, which was averaging more like $75. There was space for Hilton to say, hey, there’s another part of the market that, maybe, we are not capturing. Part of that comes from looking at the customers and part of that’s also coming from owners, where owners are happy with their Hampton Inn and they say, we’d like to build another product with you. We already have a Hampton Inn, in the market, but we see an opportunity to go to this other space. That’s just one example where Hilton launched Tru, which was a slightly more downscale product, to Hampton Inn.
We looked at the full spectrum. I think the other thing I will just mention, really quickly, is luxury. Hilton was, and even today, continues to have a lower supply in the Luxury segment. Luxury is important, firstly, because talking about filling up the space, it’s important that you can go after the luxury-oriented customer. But the other thing is, there’s a halo effect. When you have the Waldorf Astoria, in Beverly Hills, that shows up in a lot of magazines or on TV shows and that is good for branding. There’s a mixture of getting that customer, but then also having that halo effect of the hotels themselves.
Does a higher premium mix drive more brand loyalty?
I would agree with that, yes. There’s a couple of things to be said there. You have to have the hotels in the right locations, to drive frequency and loyalty. The challenge you have with sub-scale brands is, how do you drive loyalty if you only have 20 locations and you go to New York City and there is nothing in Time Square, if you are a customer, you obviously have to go with another brand. It’s making sure you have the buildings in the right locations and then, within that, more to your point, people want to trade up, at times, to go on a nice vacation with their spouse, or resorts are also important. Having those places where people can burn their points, in a location, when they want to take a week off over Spring Break. Having those, what we call burn properties, places where people want to go at their leisure and they’re aspirational properties, is important to have, in terms of helping to support loyalty.
How did you think about loyalty when you were scaling Hilton?
Traditionally, the loyalty has really just been like a frequency program and a way to encourage people to come back and, obviously, that helps with reducing marketing costs, in the long term and encourages people to book direct. It allows us to market to those people. But I think the loyalty system for the brands has transformed a little bit, because now, the importance is also about understanding the guest profile. Number one, you can drive better marketing and then, when they are on property, ideally you can provide better customer service. I still think we’re in the early days of that latter point. I think, in the future, there is going to be better integration of that guest profile into what happens at the property. Today, there is still room for opportunity there and I think this goes to the longer play, which is, who owns the customer profile? That’s whether it’s Amazon or Google or if it’s an OTA or if it’s Hilton.
I know, at some point, you’re going to ask my about the OTAs and I think it’s interesting that the OTAs have spent very little time on individual customer profiling, because their whole idea was to drive as many people into their funnel, to drive conversion. To ask someone a bunch of questions around who they are, as it’s going through, slows down the conversion. It’s been a great way for Expedia and Booking to fill their initial business, but I think the ongoing business is going to be this race to understand and deliver a more personalized experience to the customer. I think the brands have a little bit of a headway there.
Read the full interview HERE