Hilton Hotels

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0:41We look forward to seeing you there. OK, so we're on the 27th floor here and this is called the Presidential Suite. It's a pretty fancy one. It is. It's a two-bedroom suite, could even be a three-bedroom suite, but it's one of our premier suites in London with panoramic views across Hyde Park and much of the London skyline. I'm being given a tour of one of the best suites at the Park Lane Hilton Hotel in Mayfair, London, by Simon Vincent, Executive Vice President at the Hilton Hotel Group. Was this the kind of one where, I don't know, a very wealthy businessman or a celebrity in town might stay?

1:16No, absolutely. Celebrities, important business people, those are the type of people that come into this suite. In fact, we had Jon Bon Jovi staying with us most recently, and he looked over where he was playing his last concert in Hyde Park. got all emotional and teared up that brought back very fond memories for him.

1:38I'm Dougal Shaw and this is the Business Leader Podcast, where we look at the stories and strategies behind modern businesses. Today, I'm meeting up with Simon Vincent. He's Executive Vice President at the Hilton Hotel Group and as President of Europe, Middle East and Africa, he's responsible for around a thousand hotels. He joined Hilton in 2007 and in his current role looks after more than 85 ,000 employees, 18 ,000 of whom are based in the UK in the 200 hotels it operates here. Hilton Hotels is a huge global brand in the world of hospitality, founded in 1919 in the US by Conrad Hilton. So what insights can Simon Vincent share about running and scaling an organisation of this magnitude?

2:22But first, how did he get into the world of hospitality in the first place? Well, I was born and brought up in Limington in Hampshire, which is one of the UK's premier sailing destinations. So I spent a lot of my childhood on the Solent, sailing and enjoying life. But having then completed my studies, I decided to go and study banking and international finance at City University in London. And I was sponsored by Midland Bank, which became HSBC. And I joined them as a young graduate trainee and got very lucky to be working in the office of the chief executive of the global banking sector. And he at the time was chairman of Thomas Cook.

3:06And I ended up leaving banking and going to join Thomas Cook. It was supposed to be a short term assignment. Originally, 12 years later, I was chief operating officer at Thomas Cook, running a tour operator, an airline and a big retail and online business. subsequently I went on to run Apodo as chief executive which is an online travel agency and I joined Hilton in 2007 so it's been an unconventional move into hospitality I guess I've always been in and around hotels and actually my first ever job was washing dishes in in a restaurant in Limington a fish restaurant that is is well known in that particular town That was your first taste of hospitality?

3:48Indeed, yes, indeed. In the back, washing dishes.

3:55Now let's talk about this hotel we're in at the moment, because the Park Lane in London is obviously an iconic location. When you look at it from the outside, the actual core of the building is a 1960s building, but you step inside, it's completely modernised. so is that normal that the buildings get changed in this way to meet modern standards and you know what people expect from hotel changes of course yeah i mean look all of our hotels have got their own unique positions in the cities or towns that they occupy and all have their own unique characteristics this one is a 1963 concrete monolithic block that is quite controversial in many respects because it was the highest skyscraper in London at the time that it was built in 1963 but it's become an integral part of the London skyline and it's a hotel that we have evolved over a number of years it's a key part of our portfolio and one of London's skyline's most prominent buildings.

4:56And I think one thing about this hotel is that back in the 60s this was one of the first ones to have TVs in the rooms, air con, ensuite bathrooms. No absolutely and look I think you've got to go back to Conrad Hilton, our founder, and his time in the hospitality business. He was a true innovator. It's actually an amazing story. You know, in 1919, he went out to buy a bank and ended up buying a hotel. The first hotel was in Mobley in Texas. And over the course of 50, 60 years in the business, he was a pioneer and an innovator. And he was the first First to introduce air conditioning into rooms, first to introduce TVs into rooms, first to open an airport hotel.

5:42All things that we take for granted in many respects. But he was a true pioneer in that respect. And, you know, his legacy lives on in our business and his vision is still very prominent in everything that we do. In Europe, Middle East and Africa, you've come very close. Well, you're about to hit a thousand hotels. By the time this podcast goes out, you probably will be at 1 ,000, I imagine. What are the kind of the new things that people expect, the kind of the latest trends, whether the day-to-day essentials when you're staying in a hotel or, I don't know, what greets you when you come in? I think, you know, today's customer is all about personalization and control.

6:24We're wanting to make sure that we as Hilton have a hotel and a hotel brand for every stay occasion. and by that I mean we have 23 brands in our portfolio overall and those stretch right the way across all consumer segments from luxury to budget hotels and everything else in between. Different customers want different things, whether you're a business customer or whether you're a leisure customer, whether you're a group customer, whether you're having a wedding in a hotel and I think all of those brands cater for different trip occasions And the key for us is to make sure that we have a brand that is relevant to customers, whatever it is that they want to, you know, want to experience within a hotel.

7:07That's a lot of brands. And I guess you're trying to appeal to people of different budgets, but some surprises that many. Why do you have that many? Well I think we want a brand for every trip occasion if you like and I think you know we have we've responded to consumer trends and to market opportunities and you know whether it's a Hampton Hotel in the economy segment whether it's Hilton Garden Inn in the mid-market segment or indeed Water for Storia in the luxury segment you know there is an opportunity for us to offer guests a different experience when they come to Hilton depending on their budget and depending upon the trip occasion itself.

7:45For you, obviously, scaling means opening more hotels. Location is vital. How do you decide where the next hotel will be? Look, we've got a team that is constantly looking at this, and our business is very much about supply and demand in many respects. You know, hotels as an asset class are now very attractive to both institutional investors, private equity firms, and individual entrepreneurs. And a lot of people deploy capital in the hotel space, And so we work very closely with third parties to identify opportunities. We'll assess each market on its merits. We'll undertake a full feasibility analysis looking at what customer mix we think will be attracted to a particular location, how many bedrooms, the balance between food and beverage and number of bedrooms, whether there needs to be conference facilities or not, whether we want a spa or wellness facility as part of that.

8:40and that will very often determine what brand we put on the hotel. And obviously, the more complex a hotel in terms of the number of rooms, the number of room categories, the extent of the food and beverage offering, the extent of the spa and wellness offering, the more luxury that hotel is likely to be. Most of our focus service or our limited service hotels are really about the room experience, the stay experience itself with a much more limited food and beverage offering and that fits a particular client group in a particular location and it really depends on the economics of building the hotel you know obviously you've got the land cost initially you've then got the development cost and you've got to get that that equation right in terms of the return that you're going to deliver for any particular investor over a period of time so obviously you do all your research you've got a pretty good idea from the data and the analytics if it should work but you only really find out when you hit the live market do you do lots of site visits and immediately go there and and do you get a sense if this is going to work or not oh yeah i mean look we're we're constantly um monitoring the hotel through its entire development phase and very often if you're building a brand new hotel uh you know you may be into a two three four year project and therefore You are visiting that site many times.

10:06You're tweaking your offering as you test and learn. And once the hotel is out of the ground, we've got a whole team that manage that transition from construction to ultimately the opening of the hotel. And we're monitoring performance all the time. And one of our key performance indicators is the extent to which and the length of time it takes to get a hotel stabilised. And by stabilized, I mean getting its fair market share in the market that it's operating in. And testing how well it's performing means you're constantly checking for failures, for customers being unhappy about things, I suppose.

10:44What kind of things are you looking for? What kind of things come up? Well, look, I think, you know, every hotel is, I mean, the hospitality is about detail. and every customer has a preference and every customer has a different perspective on what they're looking for from their stay. And the key for us is getting to know our customers, getting intimate with our customers. Actually, 50 % of our customer base typically comes through our loyalty scheme and we've profiled many of those customers. We've stayed in multiple brands in multiple cities and we get to know those customers over a period of time and therefore were able to tailor the service to meet their needs.

11:22I was thinking actually with this hotel, the last time I was here was towards the end of last year and it wasn't to stay here, it was for an event. It was a huge Microsoft event, hundreds of journalists here. There was a massive banquet, which was like a kind of lavish Indian wedding or something. And I was thinking this must have been very expensive. A lot of money has been spent here. So what's the kind of mix in your big hotels like this one between the income from events and from people just staying in individual rooms? Yeah, again, it really does depend hotel by hotel. I mean, this hotel is quite unique in its own right.

11:56You know, the conference and banqueting is a very big part of the mix of our business here. You know, it is one of the best venues to host a wedding or a big conference in London. The banqueting team are absolutely first class here. It is a fairly significant part of our revenue streams and getting big groups and events from the international market into London. Enjoying the facilities in this hotel is clearly critical for us. The London Metropolitan, which is top of Edgware Road, that's the largest conference and banqueting hotel in Europe. And, you know, it's a significant hotel in terms of the volume of meeting rooms and indeed its conference facilities.

12:39Go to a typical Hampton hotel and it's, you know, 120 bedrooms. you'll get a hot breakfast but you know actually in terms of you know the rest of the facilities as it relates to meeting rooms and or food and beverage and or gyms etc it's a it's a more limited service in that respect and that is tailored to a specific market and to a specific customer for a specific trip occasion a big consideration when you're scaling a modern hotel chain is how you approach the idea of franchising. This means allowing third parties to operate a hotel under your trusted brand name as part of your network. Franchisees provide external capital, but it also requires a different approach to managing the hotels and ultimately ensuring consistency of the brand.

13:31And in terms of your expansion, the way a lot of it works is through the franchise model. So I look after Europe, Middle East, Africa, and broadly you can divide that into UK, Europe, Middle East, Africa, and those markets are at different stages of evolution. The UK is actually the most mature market. And, you know, we've got 200 hotels in the UK, plus or minus. And the majority of those hotels, you know, are now franchise hotels, as it relates to our pipeline. If you look at our trading hotels, those that are open, up and running and operating, it's probably a 50-50 mix. But the majority now in the pipeline of hotels under construction are absolutely franchise hotels.

14:17And I think that reflects the maturity of the market, the fact that we've got a solid infrastructure here, that there are a lot of third-party management companies that operate in this marketplace. And it's a market that is much more mature as opposed to the Middle East, where we're still growing our presence, albeit very rapidly, but those hotels are mainly managed and or franchised hotels, but the proportion is very different. And it's interesting you say that a mature market is one in which there are more franchisees. So why does that mean maturity? Why does it kind of evolve to that state?

15:00That's because, I mean, in a typical market like the UK, we've got a longer track record of operating here. There's also a number of third party operating companies that are able and capable of operating hotels in their own right. And therefore, the franchise market tends to be more mature in those markets. Go out to the Middle East, go into Africa. There's less depth in terms of availability of talent to manage hotels. But that will come over time. I mean, the US is probably our most mature market. That is predominantly a franchise market now. And it's all about building a system and building a platform that owners buy into.

15:43They buy into your brands, they buy into your sales system, they buy into your marketing programs, they buy into your loyalty program. and you can develop the business around that engine, if you like, and franchisees can operate the hotels. It sounds like you prefer it when it's working under a franchise model. Presumably you have a bit less control, but is it more profitable? No, we're ambivalent in many respects. I mean, you know, we want to do what's right for the individual owner. I mean, the great thing about our business is that it's asset light And so we are growing with other people's money.

16:21And therefore, you know, we like to offer a multitude of models for them. It can be, you know, it can be a managed offering. It can be a franchised offering. It really depends on the preference of the third party, you know, and we'll happily operate either. Does that mean asset light in when you don't own the building, but the franchisee buys it? Yeah. Yeah. So, I mean, look, we work with a number of third party investors, be they institution investors, pension funds, be they private equity houses, be they individual entrepreneurs. Typically, they will fund the construction of the hotel. and you know from the revenues of the hotel you know we will have a fund that is is diverted towards the maintenance of the hotel out of the revenues of that particular hotel but all the capital requirements of the hotel are largely borne by the owner and a lot of your growth now in terms of new hotels is coming from the middle east from places like dubai and egypt as well how do you find doing business out there listen all the markets are nuanced the middle east right now is growing very strongly we're very strong in the united arab emirates we're very strong in saudi arabia saudi arabia would be our fourth largest market globally in terms of our pipeline we're equally strong in markets like turkey where you know we've got over 140 hotels trading today it won't be too long before we have over 200 and you know they're all different and they're all nuanced and the key thing really is to have you know a global approach and a global system if you like but with regional nuances tailored to the individual markets.

18:10A big question at the moment for all businesses is about hybrid working. Obviously hotels is very location-based for a lot of staff but not all the staff. Are you able to embrace hybrid working for some of your workers if have you done that what's your take on it look we're we are fundamentally a business of people serving people and you know hospitality is absolutely about human contact and human connections and uh um yes hybrid working in uh in elements of our business is uh is a factor now but uh i think uh uh for the majority of our team members you know they're they're out serving guests and you know giving outstanding customer service and I think it's it's always going to remain that way and a last question if you were going to get some advice yourself starting out in the hotel business what what would you tell your younger self is there any kind of wisdom you've picked up along the way listen I think be open to every single opportunity I mean, look, I started out intent on a career in finance and I was very fortunate that I had the opportunity to travel as part of that, but then to get into a completely different line of business.

19:23So I would say to my younger self, remain open-minded, seize every opportunity that you're given, treat every role as a learning experience. you've been listening to me Dougal Shaw speaking to Simon Vincent of the Hilton Hotel Group on the Business Leader podcast please do rate and subscribe to us wherever you get your podcasts we do two episodes every week and if you go to our Business Leader website you can also find out how to subscribe to our weekly newsletter a great way to keep up with our content and find out about business opportunities

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