Editor’s Note: This interview is part of Skift’s CEO interview series. This series is with hospitality CEOs talking about the Future of the Guest Experience and the evolving expectations and demands of hotel guests. Check out all the interviews as they come out here. Also, enjoy the previous series on the Future of Travel Booking, with online travel CEOs.
Hilton Worldwide is the largest global hospitality company by number of rooms and is quickly innovating to meet customers’ changing demands across technology, experience, and mindfulness.
For example, Hilton is tapping into tech innovation to improve guests’ experience. In July, it was the first major hotel brand to give guests the ability to select specific rooms a day before their stay.
Hilton also joined the ranks of major hotel corporations putting a foot in the growing independent and lifestyle segments. In June, the company launched Curio, a collection of independent properties that wouldn’t fit under its other brands. In October, it launched Canopy, a lifestyle hotel that connects guests to the local culture.
Christopher Nassetta joined Hilton as CEO in December 2007 after holding executive roles at Host Hotels and Resorts and several real estate and investment companies, after being courted by its owner Blackstone. He shepherded the brand up to and through its initial public offering in December 2013.
In addition to learning from travelers inside and outside of Hilton’s system to inform new initiatives, Nassetta pulls on his own interests in sustainable growth and education to direct the global hotel brands’ projects and priorities.
An edited version of Skift’s recent conversation with Nassetta follows:
Skift: What are some of the biggest challenges that you’re facing to improve the guest experience today?
Christopher Nassetta: One is the pace of change, both related to technology and, more generally, globalization. The other challenge is the war for talent around the world.
In most aspects of our lives, we have so much choice and control afforded to us today, in large part because of the technical advances that we’ve seen. People are driving all aspects of their life on a personal digital device, whether it be checking a boarding pass, paying for Starbucks, making their schedule, talking on the phone. People have so much more choice and control over how they interactive with everything in their life today.
The speed at which that’s been changing is amazing, even over the last five to ten years. What that means from a customer point of view is that if customers are becoming accustomed to having that level of choice and control in all other aspects of their life then they’re going to want that same thing when it comes to their experience with us. They’re going to want that when they dream about a trip, think about booking a room, check in, check out, provide feedback, and everything else that’s a part of the journey.
If they have a significant amount of choice and control in how they interact with every other aspect of life, they’re going to want it with us too. To continue to please customers, we have to keep up as an industry, and certainly Hilton as a company, by giving customers unprecedented levels of choice and control in how they interact with us. That pace of change has been very rapid over a relatively short period of time.
This is also related to the war for talent. When you think about opportunities around the world, there is a middle class in emerging markets that has doubled in the last 20 years and is expected to double again to nearly five billion people in the next 20 years. Tourist arrivals have doubled. Last year, for the first year ever, we had more than a billion global tourist arrivals. It’s doubled over 20 years and is expected to double again to nearly two billion tourist arrivals over the next 20 years.
Yet when you look at emerging markets and the hotel business, room capacity is about 10 percent of what you find in the west. That means there is tremendous opportunity and that there needs to be very rapid growth to keep up with those demographic trends. Ultimately, there needs to be a huge cohort of potential employees available to deliver service levels that meet guests’ expectations.
In many developing parts of the world where there is a small hotel base, you don’t have a population with the embedded skills necessary to fill hotel roles. We are very involved in working with governments and organizations around the world to get young people prepared to be employable in our industry.
They need basic life and entry-level skills so when we get them inside the company, we can mold and train them within our programs. We have fantastic programs that have been in place and refined over many years. However, there are certain basic skills that young people need in order to start out in the system.
Skift: What role is technology playing in improving the guest experience or in meeting those expectations? Do you focus more on consumer-facing or back-end technology?
Nassetta: When I think of customer-facing technology, I think about every step of the journey from the first time somebody is thinking about a trip, through the process of booking, to feedback on their experience, and how we can interact with them in real-time way while they’re on that journey with us.
Thinking about the customer experience at every one of those touch points is what’s most critical to changing the relationship that we have with the customer and giving them unprecedented levels of choice and control.
This past summer we launched digital initiatives that allow guests to control the entire experience that they have with us, at all of those touch points I just described, in the palm of their hand. What is unprecedented is the global scale on which this is possible. We intend for these digital capabilities to be in every one of our 4,265 properties around the world.
We already have, obviously, the ability for you to dream with us, go on our website to explore different opportunities and book. We have now rolled out globally-specific room selection, a first in the industry. In 2015, we will roll out straight-to-room, which is the ability to use a personal digital device to bypass the front desk and go straight to the guest room. It will probably take us 18 to 24 months to roll out throughout the entire world.
It’s critical that the back-end systems, property management systems, reservation systems, and HHonors systems are all interconnected around the globe in order to accomplish our digital initiatives. It is a major foundational element of what makes all of this happen.
From a customer’s point of view, it should be seamless to them no matter where they are, how they’re interacting with us, or which branded hotel they’re staying at with us. They shouldn’t worry that all of our property management systems at our 4,200-plus hotels are the same and connected to a reservation system.
While we were private, we spent more than half a billion dollars rebuilding our technological infrastructure to create a common platform that allows us to now connect all the dots and have a very comprehensive digital strategy on a global basis. That is very unique in the industry.
Skift: You launched Curio, the brand for independent hotels, and now Canopy which is more a lifestyle brand. Do you see this as the start of something or is this almost the culmination of it?
Nassetta: I view these as core products. Both Canopy and Curio will be large brands, in the sense that when we’re done in five or ten years and we’ve made really good progress, they will both be large scale in terms of number of units and global distribution. They’re not going to be 20 or 50 hotels like some of the lifestyle brands from other companies, there will be hundreds of hotels.
These were, as you would expect, born out of what customers are telling us they want. We have 43 million loyal HHonors members and serve hundreds of millions of customers a year who are quite pleased and loyal to our system. We’re talking to them all the time. We’re also, not surprisingly, talking to potential customers to figure out how we can bring them into our system, so that they stay with us and try other products that we have. These two brands were birthed out of that process.
In the case of Curio, customers said to us that they’d like the option of a four- to five-star, very high quality hotel that is unique and almost a brand unto itself. They wanted a non-traditional hotel that really adapts and is very relevant to its local environment, unlike the other options that we have. They said that they would not use it all the time, but they’d try it. Customers outside our system said they’d be more likely to stay with us there and use our other products if we also had that.
It just so happens that owners love the concept as well. Many of our loyal owners have owned these types of hotels and found that they’re unable to drive the same level of performance outside a system with the strength and revenue engines that we have. It’s a very good match of something customers want, something our owners want, and something we can scale to satisfy our customers’ needs.
We have a very simple philosophy: We want to be able to serve any customer, anywhere, for any travel need they have. The more that we are able to do that, the more loyal that they become. The more loyal that they become, the higher the market share of our brands. The higher the market share of our brands, the more owners want to build hotels with us. It is a cycle that reinforces itself. It helps us accelerate our growth, and as we accelerate our growth, we better serve customers because we’re giving them more options.
Canopy is a different lifestyle concept but it has similar drivers. Ultimately customers have said to us: We want you to have a lifestyle brand with something that we would use if you offered it to us. Customers that we don’t have in the system said that they’d be more likely to stay with us and owners have said that they want to build these kinds of products. Again, it’s a nice convergence of what customers and owners want from our point of view. It allows us to grow, but it most importantly allows us to better serve our customers by giving them yet another option in a large number of destinations around the world.
What we’re doing in lifestyle is different, we think, than what others have done. Many of our competitors have focused on the upper end of the lifestyle segment; many of them are luxury lifestyle concepts. We’re trying to build what we call accessible lifestyle. In terms of design ethos, it’s light and organic, not the dark and brooding bar scene that lifestyle 1.0 was. We’re skipping to lifestyle 3.0. That’s what we think customers want, particularly female customers who are looking for something with high energy, that is more locally oriented to whatever environment it’s in, and at an upper end, but not luxury, price point.
We think this opens it up to a much broader set of demand. That means we can serve more customers at more locations, with the philosophy being to serve any customer for any need they have, anywhere in the world. By putting it at the right price point and having the right accessible design ethos, we think it allows us to better accomplish this objective.
Of course, we’ll keep talking to our customers and figuring out what they want. We’re going to keep talking to people who are not our customers that we want to bring into the system. We’ll pursue other opportunities and new brands, driven by what our customers demand or tell us that they want.
Skift: Are there any other concepts that customers are asking for right now?
Nassetta: The one thing that we are spending a lot of time focused on is that younger customers are becoming loyal earlier. Forget whether you call it lifestyle or something else, we think it’s important to make sure that we have products that are accessible, from a price point of view, early in guests’ lives and careers. These products need to resonate with them, but also be affordable. We are spending time looking at other entry-level brands that serve a younger demographic.
Skift: We’re talking about price point, which makes a good transition to fees. What is your view on the increase in hotel fees in the hotel industry?
Nassetta: I think it’s a case-by-case issue. For example, parking depends on location and the bulk of where it is charged for is in an urban environment. No matter what the customer is doing there, they’re going to pay for parking.
The big thing that we hear from customers and that we’re very actively trying to respond to is Wi-Fi charges. I think where that is headed, and we’ve tested it and rolled it out, is a tiered pricing plan. Customers have said that there is a basic level of Wi-Fi that they want, that’s a normal part of their life. It’s like turning the water on when you want to take a shower or flipping a light switch and expecting the power to come on. It’s about, as we talked about earlier, choice and control. The digital existence is so much a part of our existence.
Ultimately we will get to a point as an industry that if you are doing basic activities on a computer or digital device like checking emails, then there should be no excess charge. If you’re streaming or using more bandwidth, that’s a big investment and there will still need to be a cost for higher levels of usage.
Skift: The Hotel Association of New York City recently honored two Hilton hotels for their environmentally friendly initiatives. Where does this focus on sustainability come from and does it have any impact on the guest experience?
Nassetta: We are exceptionally focused in this area. When I got here seven years ago, I decided that it was very important for us to focus on this area, both because I believe that we can have a positive impact on the environment given our scale and because I believe that, increasingly, customers care about this. It can impact the performance of the company. I also believe there’s an opportunity to be thoughtful and do good things for the environment while, at the same time, create efficiencies in the hotels that have a real return associated with them.
It’s the trifecta. It’s good for the environment, good for the economics of the hotel, and it pleases a certain segment of customers who are increasingly focused on environmental impact.
Five years ago or so we created a tool, LightStay, to measure, manage, and share best practices across the whole portfolio. We require every hotel in our system to participate, which means they upload all of their data to measure a myriad of different metrics including energy usage, carbon output, water usage, and waste output.
We were the first company to create a tool like this and make a system-wide standard that hotels have to adhere to. There’s a simple belief I have, which is you cannot manage what you’re not measuring. Until we started measuring it on a global basis, it was very hard to really be strategic about it. The advent of being able to measure it on a global basis has been monumentally important and was a first step of many to have a real impact in this arena.