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How to manage the distribution of Knowledge, Data and Money 
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In the Travel and Tourism Industry Embassy Suites, San Francisco, 25-26 January, 1999
Globalization in the travel industry: Threats and Opportunities
Bruce Rosenberg, Vice President Marketing Distribution, Hilton Hotels
Intro (Bill McFarlane)
– Hilton Hotels is the nations 7
th
largest hotels company, and is aninternationally recognized hospitality gaming and lodging company. Bruce was elected VicePresident Marketing Distribution for Hilton Hotels Corporation in March 1995, and most recentlyserved as Director of Marketing Distribution for Hilton, a position he has held since January of thisyear. In this newly created position, Rosenberg oversees travel agency marketing and Hilton’sglobal distribution systems, including automation systems, used by travel organizations. He alsoguides Hilton’s efforts into a new distribution channel appropriate for specific segments - thankyou Bruce.* * * *I think I’d like to start with a public service announcement today, Hilton is installing high-speedinternet access in all of our hotels throughout the course of 1999, and if predictions hold true thisshould be by the end of December. I have no idea whether this will make us money or not, or make investing in us a profitable transaction as you so alluded, however we thought it was time tostep up to the bar and experiment in this vein, so I encourage you to go there because we’d liketo have a lot of clicks and have you all try it, and let me know how it works.Back to today’s topic, globalization in the travel industry: threats and opportunities, I want to talk alittle bit about Web-trends, I want to compare USA business verses non-USA business, talk aboutglobalization strategy, and if you’re not considering it, well I think you should, or if you areconsidering it, I think you should go about it. We do have a little bit of experience in this area, welaunched a Japanese web-site totally in Japanese language, earlier in 1998, and what I’d like todo is come up with a few recommendations on how to proceed in 1999.If you look at US users today, the US, as everybody knows, we are dominating the web presence,62% of all users that we know about are in the United States. Now if you could see this slide, welike to track the different research surveys that are out there, we track Forester, we track Jupiter,we track any New York Times reporting, and if you can see this slide you can see there’ssomewhere between 30 million and 85 million users, so in terms of percentage of population youhave between 22% of the adults on-line today are up to 40% of the adults on-line today. Thebottom line is when you have 30 somewhat million people on-line if you’re in the web businessyou got to make some money, it doesn’t mean you’re going to make a profit, but you’re certainlygoing to generate some revenue.As Bill pointed out with have one new user every 1.67 seconds, by the year 2002 the USA marketwill hit 85 million users. But what happens after the year 2002? Our prediction is that you’re notgoing to have much more penetration than 85 million and if you look at cable TV and really that’sconsidered as a broadcast model I don’t think it’s really going to go above 85 million, but that’sstill a huge number, if we can’t make some revenue off 85 million people, we’re really not doingour jobs particularly well. But when it comes down into a strategy, customer acquisition is notgoing to fuel future growth.Ok, so you have two strategies that I think you need to employ on a web-site, one you have tomaximize the existing value of your customers, and everybody knows to look the book ratio todayis, I would consider, unacceptable, although someone told me Travelocity is doing 15/16% maybeAntoine Toffa, who is speaking later, can see if he’s doing that well, because we’re not doinganywhere near that number. If I could do 15/16 % I would be retired with Mr Chesler right now.But we’re nowhere near that number, and I think we’ve got a long way to go to get there. Now but
 
if for some reason the close ratio don’t materialize lets say the travel agents get their act together and they have these knowledge repositories, what are you going to do to continue to grow your business on the web? Well your only other option again in my opinion, is you’ve got to go global.And the reason you have to go global is we have 76 million total users in the world today, 47million in the United States, non-US is 29 million, so you have a total of 76 million. What happensis the US hits a saturation rate quickly by the year 2002 we will hit our saturation point, what’sgoing to happen overseas is that the telecoms will figure out that they really must figure out a wayto take advantage of this opportunity – they’re going to cut their prices, they’re going to figure outthat they’re going to take viewers away from television, and they’re going to move them over tothe web, and they’re going to make a fortune, like they’re starting to do in the United Sates, atleast their stock prices have reflected.So by the year 2000 non-US users will have the majority of internet subscribers, this is outsidethe United States. And by the year 2002 we are going to have 228 million users, 85 million in theUnited States and 140 million outside the United States. So where are you going to invest your dollars? Assuming that that makes sense to you where we think has the most potential for thegrowth, UK, Germany, France, Sweden, Scandinavia, Asia, Japan, Taiwan, Australia and NewZealand, and it all depends on when you get your business. But when you have to break it downis in how many people today are online, you go to Germany you’ve got 4.3 million users, and if you go to the UK it’s 4.1 million users, I just saw another survey on Friday that says the UK nowhas 5 million users. The question is can you put a web-site up and serve that population in thelanguage that they’re used to speaking with, and in my opinion you have to be local, I mean youcan’t really do this in English and do it particularly well, and make a profit or at least make somerevenue off of 4.3 million German users, or German-speaking users, UK users and Swedenusers, there’s just not enough bodies there. So that’s the question, what’s your strategy, how doyou go live in third-party countries or non-US countries, and deliver product that’s acceptable,that’s inclusive. And if you look in the rest of the countries – Japan, 5.2 million users, this is reallyearly adapter time. Now you think about the strategies that most of us employed 2 or 3 years agowe were all out there - lets get our web-site up and running, and let’s see what happens to themarket place, well if you did that today you’d have to make a bet that adoption is going to be asfast as it was in the United States, you really have to believe the statistics that were quoted earlier with 285 million users. Latin America 2 million users – we don’t even bother doing a percentage of people who reside in the country because it’s insignificant, and Africa has 500,000 users.So I really think you have to go back to your organizations and say if you have a globalizationstrategy how do you sell the fact that you should have a German web-site, or a Japanese web-site, or a European web-site, and is the usage there and is it enough to justify the cost.But then you have all these other issues, that’s what makes it very complex to do global web-sites, how do you support your assets globally, we have hotels in multiple countries around theworld, so everyone has a user base, and everyone wants their own web-site, how do youtranslate your languages today, how many foreign languages are producing substantive material,or is it just a brochure. Brochure might be a place to start, but I kind of think we’re all beyond that.What are your competitors going to do, I don’t know if anyone else has a hospitality site that’s inJapanese – but once you decide in terms of what content you’re going to put on your web-site,assuming that you’re going to come up with some strategy, here’s where the other issues come inand make it really interesting, how are you going to do this, so if you have a US group, and theUS group is formed and you have a web-team and you’re launching and you’re doing products,and you’re busy day to day, and all of a sudden you’re going to do an Asian web-site or aEuropean web-site, well there’s a whole different group there that runs in that part of the world,and you’ve got regional Vice Presidents, you might have a President of Europe, a President of Asia, and they would like to become involved because they know their region better than you do,obviously true. Then you have all these issues, well if it’s Asian, how do you brand in Asia verseshow do you brand in Europe, we have technical difficulties to discuss, we have people around theworld who on the IS side that probably aren’t talking to each other regularly to start with, and now
 
you’re going to throw them into a web model, where I can foresee them having divergent views,and of course legal and cultural differences, and resources. It goes back to justifying spending.So what we’ve done at Hilton is created a corporate review, a strategy board to really have aglobal viewpoint on what you should do, and I think this is a model, this is a Forester researchmodel, and we found that this is effective, so you might want to consider something along theselines. You need to have senior level support, your VP’s in Marketing need to be involved, or perhaps you need to go above them, but you also need support from the regions, so if you havean Asian region or a European region, you need to make sure that they’re involved with dedicatedplayers, and we also need obviously need IT specialists. What we recommend doing, or thinkabout doing, is that you have to figure out how to put your toe in the water because in terms of spending, unless you’re Microsoft, you might want to go at this a little bit slower than your US site,you know as our Microsoft or our other friends out there have lots of money to spend. You mightwant to figure out what’s going to work, what’s your measurement, what can you realisticallyexpect from a population of 5 million users, 4/5million users in the UK. So if you don’t haverealistic expectations going in you will be vastly disappointed. I think what you really need to doright now, is you need competency models – what works in your organisation, how do you getyour global work flow down. We do approvals on our web-site in terms of new content and copyliterally within hours, as soon as you start doing this in multiple languages, how do you geteveryone to agree, what do the attorneys have to do, this is not a big priority in people’s livesright at the moment.And then there’s, do you have regional or do you have country specific, so I mean can marketpan-European now with the Eurodollar , an interesting thought, perhaps it’s time to market to thatregion as similar to the United States, I personally don’t think so, but you could certainly argue inthat vein. Asia as well, do you have an Asian strategy, or do you need a country specific strategy,and I think at this point it’s country specific, and guess what, that means more money.Now in our experience, we’ve been advocating from the US that we should be early adapters andwe should have multiple web-sites around the world that have different languages, and we weretalking to our Asian counterparts, and European counterparts, and we really weren’t gettinganywhere because from the US side we didn’t want to put more dollars into the web-site, we’respending enough – all we can – on focusing on the US market. We got a phone-call one day fromour Asian division saying we’re going to launch a web-site in two weeks, and I said great news,what are you going to do, they said we’re going to put up three hotels, and I said well what aboutthe other 400 or so hotels we have, what are you going to do about those, oh, we didn’t thinkabout that. And I said, ok, is it going to look like the web-site we have now, or is it going to looklike something new, and they said it’s going to look like something new and different because welike it, and I go ok. So we had that conversation and we got the senior level person involved, andwe asked them a series of questions like that, like what are you going to do for branding, aregoing to follow the branding, and they said they didn’t think about that either. And what we wereable to do, was that we caught them in time, and were able to break them down and say youreally need to follow corporate standards, so what we decided to do was an RFP, and we createdan RFP literally within days, and we sent it out to our developers, and a couple of US developers,and the Japanese developer that they had already hired, and we got prices back. Well we gotprices back from the United States at ridiculous money, it was like hundreds and thousands of dollars, and the web developers from Japan came back with a price tag of like $10,000, so wehired the local Japanese developer. It’s interesting having conference calls with a web developer who speaks no English, with our guys who speak reasonably good English, and we’re trying totranslate all the parties at 10 or 11 o’clock at night, you know specific time one o’clock in themorning in Dallas where my web developers are, so it made for some interesting evenings. Buteffectively we did find a strategy, we did find an organisation, we had time-lines, we had budgets,we had everything we needed to launch a successful site. What we really wanted to do was tolaunch our local Japanese hotels, which we’re doing, and we have direct reservations back to our local res office all by telephone, not my ideal choice, but last time I checked my res enginedoesn’t speak Japanese.
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