Hilton Realizes Results With Revised Business Model

BEVERLY HILLS? Hilton Hotels may have a head start on those companies beginning to take an inward-look at value creation within their organization. In an interview with HOTEL BUSINESS?, Deiter Huckestein, evp and president of the Hotel Division at Hilton Hotels said that the company is finally realizing the benefits of a business model it implemented several years ago called the Hilton Value Chain? which connects the company?s vision and strategic plan with value drivers designed to benefit all aspects of the business. Huckestein, a 30-year veteran of the hospitality industry who has experience in many different aspects of the industry including marketing and international operations, was largely responsible for developing the new business model, a process which began four years ago in response to changing industry conditions as well as shifting economic indicators. The program, he said, helps create tailored objectives for each property by translating corporate direction into goals that can be attained and measured continuously at the property level. Due to the system, hotel performance has improved across-the-board, he said, with noticable increases in several key areas of operations including RevPAR and employee morale. ?I believe we have harmonized customer satisfaction with employee morale and financial objectives,? said Huckestein, who calls the model a ?motivational performance system.? The new model will be leveraged by Hilton?s technological innovations including its new reservations system, he said, as well as the company?s executive management team which has been together for three years and is led by one of the industry?s most recognized dealmakers, Stephen Bollenbach, CEO. ?Part of Steve?s value driving strategy was to enhance the value of the [Hilton] brand. We are truly being recognized as the leading franchisor in the upper mid market and a lot of it has to do with this system.? Measuring Success To gauge whether the strategy is working, Hilton uses a balanced scorecard, modeled after the concept developed in the early 1990s by Robert Kaplan, an accounting professor at the Harvard Business School, and David Norton, president of Renaissance Strategy Group. System-wide, Hilton uses eight metrics that align with its four value drivers to address the financial, customer, and business process perspectives that provide a balanced view of the present and future performance of the business. The four Value Drivers in the model are: revenue maximization; operational effectiveness; value proposition; and brand management. The eight metrics that measure them are: room RevPAR; RevPAR index, which is revenue per available room versus competitors in the same market; EBITDA; guest comment cards; customer satisfaction tracking survey; team member survey; mystery shopper, which is the average score of random visits; and standards compliance, a measurement based on a hotel?s compliance with brand standards. An easy-to-identify color zone system based on numerical scores is used to keep track of performance? green for meeting or exceeding the goal, yellow for being slightly below the goal, and red for being well below the goal. Not only do the color codes help indicate a sense of direction, but they also visually show strengths and weaknesses, which help motivate employees to do better, said Huckestein, who noted that franchise properties who started using the value creation model have already shown tremendous improvement. According to Huskestein, the model has enabled Hilton Garden Inn, a new franchise concept, to capture more than its share of the market and command a premium rate. The model will also help Hilton?s new extended-stay brand, Hilton Residence, get off of the ground successfully, he said. ?I?m fully aware that there will be certain obstacles [with Hilton Residence], but we have proven that we can do this. The new business model has been in the works for three years. The first year it was introduced, the