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9-809-029
JULY 23, 2008

LYNDA M. APPLEGATE GABRIELE PICCOLI CHEKITAN DEV

Hilton Hotels: Brand Differentiation through Customer Relationship Management
In early 2008, Hilton Hotels Corporation was poised for tremendous global growth—with an aggressive goal of opening 1,000 hotels in North America in five years and 1,000 hotels in the rest of the world in ten years. The company had justbeen taken private by the Blackstone Group1 for a reported $26 billion, a 32% premium over the $32.05 share price the day prior to the announcement. The takeover announcement by Blackstone clearly framed the road ahead: “Blackstone intends to invest in the Hilton properties and brands globally to enhance and grow the business for the benefit of owners, franchisees, and customers... This transactionis about building the premier global hospitality business.” But growth would not be easy in the highly competitive global lodging business. Challenges in this market historically included access to capital, high levels of employee turnover, and difficulty achieving standardization typical of service delivery operations. Improving service delivery and consistency across the family of Hilton brandshad been the major focus of the Customers Really Matter (CRM) strategy that the firm launched in 2002. With five years invested in CRM, the Blackstone acquisition provided the opportunity to evaluate the results to date and to devise an action plan going forward.

Hilton Hotels’ Background
Hilton was perhaps the most internationally recognizable name in the lodging industry, in large part due tothe role that the Hilton family had played throughout its history. The firm began its operations in 1919 with the Mobley Hotel in Cisco, Texas under the guiding leadership of Conrad Hilton. The company went public under the name Hilton Hotels Corporation in 1946, with a portfolio of 15 properties in 11 states. After spinning off the international unit in 1964, Hilton focused on domestic growth inthe lodging segment as well as through diversification into casinos and vacation ownership. A strong commitment to economies of scale was made in 2000 with the acquisition of Promus Hotel Corporation, a transaction that pushed Hilton close to the 1,700 properties mark. Promus Corporation, originally incorporated as Holiday Inns of America in 1954, focused on franchising and managing brands suchas Embassy Suites and Hampton Inns after selling its Holiday Inn division in 1990. Tom Keltner, EVP and CEO of The Americas, a Holiday Inn and Promus
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Professors Lynda M. Applegate of HBS, Gabriele Piccoli of the University of Sassari, and Chekitan Dev of Cornell University preparedthis case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2008 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA02163, or go to www.hbsp.harvard.edu/educators. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.

809-029

Hilton Hotels: Brand Differentiation through Customer Relationship Management

veteran, explained: “It was with the acquisition of Promus that Hilton began the portfoliodiversification process that today gives us a presence in each one of the sizable and growing segments of the industry.” In 2005 Hilton Hotels bought back Hilton International, bringing about 400 Hilton properties into the fold. Organic growth also continued, and in September 2006 Hilton announce the opening of the 1,000th hotel in North America since the acquisition of Promus—a rate of one Hotel every two...
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