Hilton Hotels Management Strengths and Leadership Style

Introduction

The ability of any services-based business to attract and retain loyal customers over time is more a measure of its internal processes and management strengths than any other factor. Adding in the inherent uncertainty of the economic recession that began in 2007, the ability of a services-based business to continue growing and retaining a profitable customer base becomes all the more exceptional. One of the core strengths of Hilton Hotels is its broad range of brands addressing the needs of both business and leisure travelers across several income segments. At the center of these branding strategies is the flagship chain of hotels and resorts bearing the founder's name, alongside the Conrad Hotels & Resorts, Doubletree Hotels, Doubletree Guest Suites, Doubletree Club Hotel, Embassy Suites, Hampton Inn and Hampton Inn & Suites, Hilton Garden Inn, Homewood Suites, and the Waldorf-Astoria Collection.

In July 2007, Hilton Hotels was taken private by the Blackstone Group, which acquired the company for $26 billion. As of July 2009, the company was operating in approximately 74 nations, with 3,000 hotels and over 500,000 rooms across all brands. Hilton has specifically developed a branding strategy that capitalizes on intensive commitments to measuring customer satisfaction over time and then re-aligning internal service processes to address unmet needs (Balmer & Thomson, 2009). The intent of this analysis is to evaluate Hilton Hotels' strengths — particularly their ability to quickly analyze existing and potential market segments — and to examine how the company relies on unique leadership strengths and management styles to capitalize on those opportunities.

At the center of Hilton's ability to respond quickly to unmet market needs is their capacity to gather, analyze, and contextualize customer satisfaction data, competitive pricing information, revenue management metrics, and local market intelligence into differentiated service strategies. The high levels of customer loyalty maintained even in the midst of one of the most severe global economic recessions in decades make this strength all the more visible (Barsky, 2008). Hilton's strategy for countering the global economic recession was not to enter a pricing freefall, but to overcompensate with exceptional service across all brands of hotels and extended-stay properties worldwide.

Hilton's Core Strength in Analytics

During the summer of 2009, many properties that normally draw the majority of their guests from business travel experienced an influx of leisure travelers. This segment requires an entirely different service mindset, as Hilton's SERVQUAL surveys (Parasuraman, Zeithaml, & Berry, 1988) demonstrated. The leisure traveler who chooses a Hilton property — often traveling with family — holds higher expectations than the typical business traveler. To respond to this shift, Hilton created a program allowing guests to submit notes when they received exceptional service from staff. This initiative proved highly effective in reorienting hotel service teams, who during other months focused on the efficiency and speed valued by business travelers, toward the empathy and relationship-building valued by leisure and family travelers.

This example is one of many strategies in which concentrating on unmet needs — as measured through periodic SERVQUAL-based surveys (Parasuraman, Zeithaml, & Berry, 1988) — provided Hilton with substantial customer data upon which to build strategy. Hilton's differentiating use of customer satisfaction data as the foundation for building more profitable, loyalty-driven brands is considered among the strongest in the hospitality industry (Nordling & Wheeler, 1992). The company's ability to combine insights from customer surveys with financial planning frameworks that incorporate branding considerations (Denton & White, 2000) is the core of Hilton's competitive strength.

Hilton's capacity to make rapid decisions that create significant new markets aligns with the findings in Blue Ocean Strategy (Kim & Mauborgne, 2004), which supports the role of incumbent companies as primary sources of market innovation. Kim and Mauborgne found that it is not necessarily spending on Research & Development that drives innovation, but rather the ability to quickly interpret market conditions and capitalize on previously undiscovered needs. This is analogous to uncontested markets — or "blue oceans" — that the authors studied extensively. In contrast, "red oceans" are markets characterized by intense price competition and commoditization (Kim & Mauborgne, 2004). Hilton's analytics capabilities are well aligned with the Blue Ocean Strategy framework, enabling the company to create entirely new markets rather than compete purely on price.

Figures 1 and 2 illustrate the extent to which Hilton Hotels successfully carved out a differentiated market position, achieving leadership of the U.S. market and fourth place globally as of 2008.

Figure 1: 2008 U.S. Market Shares of Hotel Chains

Source: Blackstone Group Investor Relations, 2009

Figure 2: 2008 Global Market Shares of Hotel Chains

Leadership Strategies and Becoming a Trusted Advisor

Source: Blackstone Group Investor Relations, 2009

One of the most critical factors in Hilton's brand execution is the ability to consistently deliver experiences for both business and leisure guests that meet or exceed their expectations. The continual process improvements driven by embedding SERVQUAL data throughout all guest-facing processes, procedures, and programs continue to provide Hilton with insights into the greatest unmet needs of their customers, as well as the factors that generate the greatest satisfaction. As these two sets of factors evolve, Hilton management maintains an agile and lean management structure both at headquarters and at the individual hotel level. As a result of this reliance on SERVQUAL analytics to align management strategies and build customer loyalty, each property is evaluated on five specific performance metrics, often displayed graphically through a balanced scorecard (Hosford, 2006).

Hilton management regularly posts these balanced scorecards and holds monthly meetings to discuss their implications, thereby fostering a higher level of shared ownership in the results. Hilton has found that applying more transformational leadership techniques — giving employees accountability and ownership over their specific service areas — leads to greater levels of performance over time (Maxwell, Watson, & Quail, 2004). From a managerial standpoint, this is a primary strategic motivation for Hilton's commitment to analytics: the company seeks to anchor its internal culture and performance expectations on actual face time with guests rather than on inflated internal metrics (Munck, 2001). For instance, a hotel manager who focused exclusively on monitoring guest accounts and ensuring every charge was captured, rather than directing teams to resolve problems with guest rooms, HVAC systems, plumbing, electrical, or entertainment systems, would represent a misalignment of priorities. Hilton's SERVQUAL-based balanced scorecards are explicitly oriented toward ensuring a high level of customer responsiveness at all times.

Hilton management recognizes that for their global workforce to consistently be aware of and strive to surpass guest expectations, a culture of performance must be deeply embedded throughout the organization. Best practices in managing performance over time are critically important to Hilton, which has built an entire analytics framework to evaluate efforts to attract new guests and retain existing ones (Enz & Siguaw, 2000). These optimized approaches — first measuring guest expectations and then responding through a series of coordinated strategies — form the strategic foundation by which Hilton manages its many brands (Dube & Renagham, 1999).