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Hilton's Innovation Acceleration

Hilton Worldwide may well be a poster child for remarkable brand power and perseverance. Despite an acquisition and recession whose timing resulted in a perfect storm of debt and industry-wide downed occupancy, Hilton Worldwide maintained award-winning customer satisfaction, record growth, and high brand equity throughout 2009; a year that will likely go down as one of the toughest on record for the lodging industry.

According to STR's early forecasts, the U.S. hotel industry posted a 16.7 percent drop in revenue per available room during 2009. Hilton Worldwide's 2007 acquisition by private equity firm Blackstone Group hit just prior to the recession and the timing left Blackstone with $20 billion in debt carried on Hilton Worldwide's balance sheets.

Today, Hilton Worldwide, headquartered in McLean, Virginia, is on the road to growth and global transformation, and is already posting positive news. In April, the company announced a restructuring of substantially all of its existing debt and reduced the total by nearly $4 billion. Adding to its 2010 wins, in February Hilton Worldwide won the People's Choice Stevie Award for "Sales & Customer Service -- Favorite Customer Service in Leisure and Tourism." It also ranked the highest in brand equity with its Hilton brand compared to all the other major hotel brands in the 2010 EquiTrend study, conducted by market research firm Harris Interactive. In terms of growth, despite major challenges for the hospitality industry overall, in 2009 Hilton Worldwide added 302 new hotels and more than 45,000 rooms to a total count that is now more than 3,500 hotels and 585,000 rooms. Its 2009 property development marked the second best year in the company's 91-year history (2008 was its highest at 327 properties).

According to chief information officer Robert Webb, who joined the company in August 2009 with extensive IT leadership credentials, Hilton Worldwide is now embarking on an aggressive global technology innovation roadmap that will also integrate its Hilton International arm. In this exclusive Q&A with Webb, Hospitality Technology gets the inside story on the three-year restructuring plan that will allow the company to rapidly migrate its technology functions. The plan relies on outsourcing certain elements of its IT infrastructure -- what's been dubbed the Hilton Worldwide Innovation Collaborative -- while simultaneously reinvesting internally in other areas. The result, projects Webb, will strengthen the company's global operations and enable growth across the entire portfolio.

HT: What are Hilton Worldwide's overall technology goals for the next several years?
RW: I would summarize Hilton Worldwide's strategic technology objectives for 2010 through 2012 as this: accelerating technology innovation that's aligned to our business objectives; recruiting, upgrading, training and retaining a world class technology leadership team; instituting select strategic partnerships to drive innovation that enables the hotel business; establishing solid project, program and process management disciplines for governance; and then really making certain that we have a robust infrastructure, architecture and security set of disciplines across the company.
So it's really around innovation and technology strategy aligned to business objectives, processes and people, and making sure that we have the right technology underpinnings to make all that come alive.

HT: What are some of the specific technology projects that are planned?
We're going to spend a greater portion of our energies focusing on innovation initiatives that best differentiate our offerings. We have half a dozen critical priorities that are multi-million dollar in scope as we reinvest in our technologies. Surrounding the differentiation I spoke of before, those projects focus on our website redesign, our financial system upgrade, our sales force system upgrade, revenue management systems integration, and innovation in the area of the guest experience, in-room and on-property.

We're going to refocus our internal resources more on the things that make us a terrific hotel and less on the commodity offerings, and we're going to be leveraging world-class suppliers for things that are more commoditized in nature.

HT: The decision to bring in partners for certain areas of your I.T. strategy, how has the acquisition of Hilton International played into that?
The acquisition of Hilton International has been a very important event that requires us to partner with a new set of global strategic technology providers. With more than 3,500 hotels in 81 countries, we need suppliers who have the necessary scope and scale; who have a presence in those countries and who can provide us with support and services key to those markets.

The other important consideration is that the acquisition brings with it the challenges of integrating legacy applications. This creates the need for us to integrate some of those existing systems, and reinvest in other, global solutions.

HT: What criteria are being used to select partners in terms of reaching these goals?
One key criteria is around speed. Collaborating with world class providers like IBM, Accenture, and Microsoft, combining their core-competencies with the commonality of our systems, allows us speed in bringing the right innovations to market faster. Another key criteria is around investment. The magnitude of the investment that companies like IBM, AT&T or Accenture make in technology is amplified by working with us, and our initiatives are amplified by working with them. As a result, we have an economy of skill, and we also have an economy of scale. The last criterion is cost savings. We're not doing this for cost savings. We're doing this to innovate faster, to have more competitive solutions, to take advantage of the investments that the world's largest technology companies are making, and to tap into their vast pools of talent and expertise.

HT: You mention IBM, Accenture and Microsoft. What other partners are you working with?
RW: We're working very closely with IBM on infrastructure globally, and they're currently the only partner we've announced as a part of the collaborative. They're running our data center network, and are also running a very critical central reservations system for us. We're also working very closely with Accenture on some of our more complex business integration needs across our back-office systems. Given Accenture's global capabilities in integrating technology platforms, they've already proven to be an important partner for us in helping us with some of those challenges. We also have very close relationships with Tata Consulting Services and Infosys in selected projects where we need to move rapidly with economies of skill and scale. In addition, Microsoft and AT&T are important, and they're all true technology partners rather than service providers.

HT: With regard to Hilton's I.T. vision in this new roadmap, do you see the company positioned as an industry innovator, or as a reactor to market demands?
RW: I believe that we want to be an innovator in the areas of strategic differentiation, such as our websites, financial systems, revenue management, and guest-facing, in-room check-in/check-out technologies. I absolutely want to be making investments with partners and innovating faster in those areas. I think mobile, combined with high-speed Internet access, and location-based services for our guests are very important. Those will be areas where we'll be investing faster in order to differentiate; and when I say faster, I mean faster than before and faster than our competitors.

That being said, it's also very prudent to be a fast follower in some areas. I would very much like to learn from the mistakes of our competitors with respect to the adoption of some technologies. While Hilton has been recognized as a company of firsts there are areas where we will make a decision to be a fast follower instead of a first-to-market alternative, and that would be a strategic decision.

HT: How are you making decisions regarding which solutions should be kept internal, and which should be moved to outsourced partnerships?
RW: We approached this in a rigorous and disciplined way. We looked at non-differentiating elements of our technology stack first, such as networking and data-center services, e-mail services; things that are common to any company but are not hotel/guest experience specific. We set in place criteria regarding speed, cost, and quality, and we evaluated providers, selecting IBM, for example, to deliver our infrastructure services globally.

In other areas, such as the applications area, we're looking at the different application domains and putting them into tiers based on level of differentiation. If you look at corporate systems such as HR and financial systems, we're leveraging suppliers that have scale, skills, and expertise in those platforms and are working with them on the implementation of those systems.

Finally, there are other areas where there are recognized needs for unique capabilities -- where Hilton Worldwide will want to innovate faster. It is these areas that will remain an internal focus, using our suppliers for some but not all functionality. For example, in the area of our website redesign and our loyalty systems; those are things very close to the customer experience where we believe the functionality of our mobile, Web apps, and our revenue management analytics will enable us to be a superior competitor.

HT: What's in store for Hilton's propriety property management system, OnQ?
RW: The OnQ property management system and its framework are at the center of our Hilton technology strategy and we believe it provides unique capabilities. OnQ is a tremendous asset for the company because we have a single image of inventory globally. We believe that OnQ in itself is a differentiation for our franchisees and guests. We'll make additional investments to enhance it and also integrate it with other applications, both custom and package. We'll continue to enhance the interfaces that it has to both our proprietary applications that deliver even greater customer insights and value, and we'll also integrate it to other, more standard applications.  

HT: What's the migration been like in moving to partners, and what's next?
RW: The transition plan is an 18-month one for the first phase of the collaborative that's been announced. That includes the data center with IBM, the network, reservations systems, e-mail, and corporate desk-side support. We're entering into the agreement with IBM on the non-differentiating portions of our IT service delivery first. For the end user, this transition creates a business-as-usual approach.  
In phase two, we'll start to integrate financial and HR systems globally and will accelerate our partnership with other suppliers. There will be subsequent announcements before year's-end regarding additional members of the Hilton Worldwide Innovation Collaborative.

Additionally, we are aggressively hiring key talent in project leadership and architecture roles, with strong process rigor and technology management. We will not be outsourcing the leadership and design portions of what we do. We still need to know what questions to ask, we still need to set strategy, and we still need to manage SOAs with the supplier. We're going to maintain accountability and responsibility for delivering services and programs across the company.
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