Hilton Hotels CIO: Tim Harvey

Dan Farber: Tim, thanks for joining me.

Tim Harvey: Thank you Dan for having me.

Dan Farber: Now Hilton is a very large-scale operation, 3000 hotels, 500,000 rooms, across 80 countries. How do you manage deploying technology across such a diverse set of properties?

Tim Harvey: Well Dan, it's about trying to take the things that all hotels do, check-in, check-out, taking reservations, taking care of the customer consistently at all hotels through one common integrated technology platform that's proprietary to us called OnQ. And then as you go on to the various countries you have localization requirements, you have differences by brand, as an example to services that are offered in a Hampton are gonna be different from a Hilton. But without that base platform, its consistency, it'd be awfully hard to do

Dan Farber: Now tell me a little bit more about the OnQ platform, it's something you built internally, it's proprietary. How does it give you enough competitive advantage to justify, I guess it costs you about 50 million dollars, building something proprietary?

Tim Harvey: You know Dan, It's like when your grandmother comes to your house. You know exactly who she is. You know exactly what she eats for breakfast. You know what kind of pillow she likes. You know whether she can climb the stairs or not so you know what room to put them in. We have the same passion about our hotel business. We want to know who are customers are and we want to take care of those customers every time we have an opportunity to touch them. So the value of OnQ is primarily having that information with that in-depth knowledge about customers. Obviously it's not going to work across almost 3000 hotels around the world, you can't do it on a 3x5 card. If you want to treat those customers consistently, the only way you are gonna do it is through technology.

Dan Farber: Now another way to say caring for customers is to get a greater share of wallet from those customers and can you point to any metrics or success stories in terms of how the system has improved your ability to serve those customers and generate revenue.

Tim Harvey: Hilton Hotels Corporation acquired Promise Hotels Corporation back in 2000. With that acquisition, they acquired four brands and about 1700 hotels. And so the very first measure was starting to cross-sell so if someone calls in New York for a room in New York, they wanna stay in a Hilton, prior to the acquisition you just hung up the phone. After the acquisition, it was about using OnQ to then leverage those customers when there wasn't a room available in the Hilton to be able to cross-sell them to the Embassy Suite or Double Tree Hotel in Times Square. And at last count, starting in 2000, we run an annual basis about 400 million dollars in cross-sell revenue.

Dan Farber: 400 million in cross-sell revenue out of a total of how much revenue?

Tim Harvey: About 10 billion.

Dan Farber: Now when you talk about the OnQ system, it's really about customer relationship management and what we're seeing often right now is a lot more self service and how has the internet and self service impacted your bottom line?

Tim Harvey: Well our internet distribution, so when we sell hotel rooms to customers, one of the channels that we sell through is the internet. We get just about 20 percent of all of our rooms are sold through the internet. It's about 2.3 billion dollars. And so the internet has in creating a personal relationship with the people that like to shop in that way has been instrumental. So for instance, we know who the customer is. Our loyalty program is called Honors, so we know if you are an Honors' member. We know what your preferred room types are. We know what your preferred in-room amenities are. We are able to customize those experiences on the internet and as a result we have seen 30-40 percent, you know growth in internet booking each and every year. And we believe the reason for that is customers can come there and get the kind of service that's customized to what their needs are. We have announced and will be delivering at the end of the second quarter of 2007, the ability to actually check into a room just like you do for an airlines' seat. Prior to leaving for an airport, you check-in, you get the seat on the plane that you want. We're gonna offer that same service on the hotel side where you can actually see the hotel. You can actually pick the room that you actually want to stay in. For instance, I want to be on the, you know, west side of the building cause I'm going to sleep late and I don't want the sun rising too early. I want to be close to the pool. I want a view of the mountains. You are able to see all of the available rooms and actually pick the one that you want. So we're gonna try all that and start with our Homeward brand which is an extended state product again in the second quarter of 2007.

Dan Farber: Now you're collecting a lot of data about your customers which obviously gives you the capabilities to deliver a better service but I would assume that you would have to deal with a lot of security and privacy issues surrounding that.

Tim Harvey: Yes. It's paramount for us to protect our relationship with our customers. We give our guest the opportunity to opt in and out of our program, full disclosure on what we do with the information. Staying in a hotel is about trust, you want to trust the hotel; you want to trust that you are gonna have a secure room. That's how we treat the customer information.

Dan Farber: Now that you've developed this CRM system and can you point to any major innovations that allow you to compete better against the Marriott's and Starwood's and IHG's?

Tim Harvey: Yeah, you know, we are the recognized leader in the use of kiosks. We've got over 300 hotels that have kiosks installed. We just recently introduced an ability to print boarding pass which doubled its usage. So the kiosk was primarily designed to help people check in and out of the hotel without having to stand in line. The reason we are able to do the web check-in is because we have OnQ which has complete understanding of the inventory and displays that up to the internet so you can actually see the inventory and what's available at the hotel.

Dan Farber: What are the core technologies that you use to deliver this OnQ system?

Tim Harvey: Well we primarily use Microsoft technologies and UNIX technologies. Most of the data center systems are run on the UNIX platforms and our property component of OnQ is a Microsoft platform.

Dan Farber: And besides that platform, obviously have a large budget over 200 million dollars annually to spend on IT and a staff of over a thousand, so what are your spending priorities for this year?

Tim Harvey: Around Keeping On-Queue competitive and state of the art. Really want to keep focused in the customer area is the primary reason that we have OnQ. We also are going to be introducing a new capability which is a sales capability that primarily the way the industry grew up you could acquire sales-technology from other vendors. What we've decided to do is take our sales technology and integrate into the OnQ platform so you can do reservations, you can do CRM, you can do revenue management, and now you will also be able to sell to large corporate customers. The other focus for us is globalization. We acquired a company last January that makes us a global company. We acquired 400 hotels with the Hilton International acquisition spread across those 80 countries. And so one of the major focuses is to take OnQ, globalize it so that it takes care of the local requirements, government requirements, currency, language, that sort of thing and make the single platform OnQ work around the world.

Dan Farber: Now given that your focus is very much on your own technology, are you also investing your own resources in some of the other technology areas such as networks and open source and some of the very kinds of trends we see among other companies?

Tim Harvey: Yeah, absolutely. In the networking world, we have some very close partnerships with people like AT&T, Cisco. The important part about OnQ is every single one of those 3000 hotels out there all connect back to central computers. And so networking is very strategic in importance to us and so we continue to look for opportunities to converge networks, converge voice, converge data, to become more efficient, virtualization in our data center so that we can start to share our capacity across wherever we need the computing power, we are able to shift that computing power, shared storage has been a big driver for us over the last several years so that we can effectively manage our storage.

Dan Farber: What are you doing in area of wireless and mobility? It would seem that in the hotel hospitality industry that a lot can be done not just with kiosks but with enabling people from their wireless devices to all kinds of things within the confines of the hotel.

Tim Harvey: Yeah Dan it's a very good point. We made the decision coming into last year that we were going to do more of what we call high speed internet access in the public space and in the meeting rooms; that we were gonna control that. And try to use our help desk for OnQ to help people when they have wireless and wired connection problems. We started that last year. We've rolled it out to about 60 hotels so far, where we will go in and have wireless in the public space, rooms either hardwired or wireless and customers really say that this is so important, if you don't have great high speed, we're gonna pick another one of the competitors. But there is also another bigger reason, we believe that the room will ultimately evolve past just being able to gain high speed access but also to use the room as sort of the entertainment center. When people travel they bring their iPods with them, they bring their laptops, they bring their DVDs. So they are bringing content as well as downloading off the internet and we want to be able to use that high speed highway that we tried to work on and control and support to be able to allow them to bring that content into the room so that feels more like their home and office.

Dan Farber: So when do you expect to have these rollouts completed for wireless and broadband?

Tim Harvey: We'll do a 100% of our full service hotels this year and it should complete by about the third quarter. We will begin then at that point to work on our focus service hotels. We'll complete about 25% in 2007 and the remainder should be completed in 2008.

Dan Farber: You're opening a new hotel almost every day in the North Americas and probably around the world something on a similar frequency. And in your vision what do you see the hotel room being like 5 -10 years from now?

Tim Harvey: From a technological standpoint, what I see is not only a high speed capability to access content off the web but that will also facilitate the content we bring with us, whether or not its an iPod that has your favorite music, or an iPod that has your favorite TV program . And you are able to plug that iPod in and utilize flat screen TVs, speakers, and have an entertainment experience that's customized to what you are used to receiving at home.

Dan Farber: Are you going to RFID tag everybody and everything in the hotel?

Tim Harvey: You know we are looking at for our most loyal customers, so Honors customers, having a card that is RFID enabled, you pull into the parking garage downstairs, you can swipe your card by the time you get to the front desk you are already checked in and just handed a room key to go to the room. I think rooms of the future will have a way to also utilize RFID and maybe even other electronic devices like handhelds for you to have automatic entry into the hotel after you've kind of passed a security check when you check in.

Dan Farber: Well Tim, thanks very much for speaking with me.

Tim Harvey: Dan, Thank you very much for having me.

Dan Farber: I've been speaking with Tim Harvey who is the Executive Vice President for Global Distribution and the CIO of Hilton Hotels Corp. For CIO Sessions, I'm Dan Farber. Thanks for watching.