2. History of Hilton in Havana
Figure 1: Hilton Havana Advertisement
US News and World Report March 28, 1958
• America imposed an arms embargo on the Cuban
government on March 14, 1958.
• The Habana Hilton opens March 22, 1958. At a cost of
$24M, the hotel was a partially owned asset.
• Castro enters Havana on January 8,1959. Suite 2324,
in the Habana Hilton, became his headquarters.
• Hilton managed the hotel until October, 1960, when
casinos were closed and all hotels were nationalized.
3. History of Hilton in Havana
Is Hilton ready to Gamble Again in Havana?
4. Financially Focused
• Outperform competitive set’s annual EBITDA and RevPar figures
• Increase long-term value by separating hotel, real estate, and
timeshare business segments into three separate companies
• Create cost efficiencies by driving business to preferred booking
channels
Current Strategic Objectives
5. Guest Focused
• Develop technology plans to enable state-of-the art merchandising
across all guest engagement channels
• Expand implementation of digital room selection process and check in
• Execute system-wide roll out of Digital Keyless Entry system
• Increase Hhonors program enrollments and enhance member
value-adds
Current Strategic Objectives
6. Team Member Focused
• Redesign compensation plans to align with financial goals and bias
performance
• Implement industry-leading benefits, including parental leave,
enhanced paid time off, GED assistance and flexible work programs
• Develop a robust talent, skill, and capability assessment process
• Establish one global platform for all training and curriculum
Current Strategic Objectives
7. Owner Focused
• Provide increased stakeholder value through Hilton Performance
Advantage Services
• Increase “repeat ownership” figures, of franchises, by providing a
diverse portfolio of brands
• Continue to grow the pipeline of 3rd party developed room inventory
• Increase conversion rate of competitor/independent hotels to Hilton
Worldwide brands
Current Strategic Objectives
8. Community Focused
• Create hospitality job opportunities through apprenticeship
programs, career engagement, and life skills training
• Strengthen communities through volunteer projects and
company-wide Global Month of Service
• Preserve the environment through company-wide conservation
efforts along with tracking and monitoring tools
Current Strategic Objectives
10. Global Expansion
How expanding into Cuba may affect work functions:
• Property Operations
• Brand Standards
• Global Development, Architecture, Design &
Construction
• Finance and IT
11. Global Expansion
• Human Resources
• Legal Compliance and Government Relations
• Commercial Services
• Time Share Operations
How expanding into Cuba may affect work functions:
12. Key Components for the Restructure
• Change Management Strategy
• The Hilton Leadership Team
• Five Key Components
• Post-rollout
Change Management Strategy
13. Assessment of the Change
• Identifying Obstacles
• Prospects of a successful restructuring
• Develop a strategy
• Document overall risk and specific risk
• Assess the readiness of the organizations impacted by the change
Change Management Strategy
14. Communicating the Plan
• Management to design a plan
• Communicating the plan
• Communicating risk
• Communicating benefits
Change Management Strategy
15. Training for Change
• Preparing for resistance
• Sponsor activities
• Sponsor roadmaps
• Understanding culture
Change Management Strategy
17. Recognizing Success
• After Action Review
• Avoid the Loss of Valued Employees
• Evaluate Success and Failures
• Identify Next Global Market Expansion
Change Management Strategy
18. Action Plan
• Phase 1 – Preparing for Expansion:
1. Develop a plan that focuses on finances, guest, team members
and owners
2. Develop a training curriculum for the management team
• Phase 2 – Managing Changes and Resistance:
1. Leaders will communicate expansion
2. Create job opportunities, hospitality, and employee training
3. Create volunteer projects
Change Management Strategy
19. Action Plan
• Phase 3 – Reinforcing Change:
1. Conduct surveys
2. Analyze all data collected and feedback
3. Recognize success
Change Management Strategy
23. Arthur, Luke(2016).,The Advantages and Disadvantages of International Franchises, Retrieved October 7, 2016, http://small
business.chron.com/advantages-disadvantages-international-franchises-22488.html
Global Hotels and Motels Industry Profile, New York: Datamonitor, 2015, Retrieved October 7, 2016, http://www.datamonitor.
com/
Heil, Karl (2016)., Strategy in the global environment., retrieved from http://www.referenceforbusiness.com/management/Str-
Ti/Strategy-in-the-Global-Environment.html
Hilton Worldwide About Us, “Executive Committee”, Retrieved October 7, 2016, http://www.hiltonworldwide.com/about/leade
rship/
Hilton Worldwide About Us, “Corporate Responsibility”, Retrieved October 3, 2016, http://cr.hiltonworldwide.com
Hilton Worldwdie About Us “ 2015 Annual Report” Retrieved October 6, 2016, http://ir.hiltonworldwide.com/financial-reporting
/annual-reports
References
24. References
Jones, G., & George, J. (2016). Contemporary Management (9th ed.). New York, NY: McGraw-Hill
Periu, M. February 9, 2015, American Express Open Forum “What You Should Know About Doing Business With Cuba”, Ret
rieved on October 7, 2016, https://www.americanexpress.com/us/small-business/openforum/articles/evaluate-cuba-opport
Prosci. (2014). The System And Tools For Managing Change. Retrieved From: http://www.change-management.com/tutorial
-change-leadership-mod3a.htm
Wall Street Journal October 2015, Accessed October 2016 http://www.wsj.com/articles/hilton-to-spin-off-hotel-properties-into
-real-estate-investment-trust-1450300095
Wallack, H. October , 2015, “SHRM Delegation to Cuba Finds Entrepreneurial Buzz in Havana and HR Issues Similar to U.S
.” Retrieved October 7, 2016, http://blog.shrm.org/blog/shrm-delegation-to-cuba-finds-entrepreneurial-buzz-in-havana-and
Editor's Notes
For the Week 4 Learning Team Project, Team “A” has selected Hilton Worldwide for a proposed expansion into Cuba.
The Habana Hilton opened in March 1958 –shortly after the US government imposed an arms embargo on the Cuban government.
The hotel cost $24M to build and was managed by Hilton, but, the bulk of the hotel’s financing came from an investment by the pension plan of the Cuban Catering Workers Union.
The hotel was operated as a Hilton until October 1960 – when the political situation between the US and Cuba escalated. The hotel was one of many nationalized by the government and was renamed the Hotel Habana Libre.
Financial - The company’s RevPar is revenue per available room. RevPar is calculated by dividing a hotel's total guestroom revenue by the total number of available rooms in the period being measured. EBITDA measures the company’s profitability and refers to earnings before interest, taxes, depreciation, and amortization.
Separation - The objective is to simplify “Hilton to a capital-light, fee-based business, while fully activating our real estate and timeshare businesses as stand-alone companies" . According to the Wall Street Journal, this is a strategy for companies that “want to slim down and improve their boost their stock” (Wall Street Journal October 2015)
Cost Efficiency - Wherever possible the company is trying to move bookings to their own channel – www.Hilton.com. The reason for this is to eliminate the additional costs that result from travelers making reservations through 3rd party sites. In order to encourage travelers to use the desired channels, Hilton is offering rate discounts to Hhonors loyalty program members who make their reservations through www.Hilton.com. The benefits are two-fold – elimination of bookings fees and, through loyalty program membership, Hilton gains the ability to collect traveler data and preferences.
Enhance technology to provide the ability to identify customers through collected data and predictive modeling. This will allow the company to leverage the information a “shopper” shares when they search the Hilton website.
Digital room selection is similar to what you experience when you select your seat on an airplane. Twenty-four prior to arrival, a guest is allowed to access the system and select a guest room from the system. The digital check-in process allows a traveler to check-in in advance of arrival at the hotel. The hotel will have a key packet ready. This reduces check-in time since the guest does not need to show ID, Credit Card, etc.
Hilton has Digital Keyless Entry in 100 hotels right now, but, the goal is to have it system wide by 2017. It means changing out the lock system on every single guest room door – which is a very costly process. Once the system is in place, it allows a traveler to use their hand-held device to open their guestroom door – instead of using a magnetic stripe key. Coupled with electronic room selection and check-in, using Digital Key will allow a traveler to completely bypass the front desk and go straight to their room upon arrival at the hotel. Zero wait time.
HHonors is Hilton’s guest loyalty program. The program currently has 50 million members. The objective is to continue to grow the program membership – to encourage repeat business and to reward travelers who continue to stay with Hilton properties. Hilton is also using HHonors as a way to move travelers to preferred booking channels (www.Hilton.com) by offering incentives like rate discounts, increased loyalty points, free internet access, etc.
Company is reevaluating compensation to ensure that salaries are fair for the market. Hilton is one of 29 companies to sign the White House's Equal Pay Pledge – which is intended to reduce the gender pay gap. Hilton is also working to ensure that global salary and increases are based strictly on job performance.
Fairly straight-forward. Implementing flexible work for HRCC (Hilton Reservations and Customer Care). HRCC is comprised of the large global call centers which take voice reservations. By allowing this group to work from home, the company will no longer need the vast office space occupied by the call centers – thus reducing overhead costs.
Hilton is working with a 3rd party company to develop assessment testing for each discipline. The way that they gathered the benchmark is by interviewing those with the very best and the very worst performance evaluations.
Training methods and curriculum differs from one country to another. The objective is to have one central training platform to promote a higher level of consistency in how business takes place at the property level.
Hilton Performance Advantage Services is a “toolkit” that is available to all franchise owners. It is comprised of: Hilton HHonors, Hilton Worldwide Sales, Hilton Reservations and Customer Care (HRCC) , Global Online Services, Revenue Management Consolidated Center (RMCC), Information Technology (IT) and Hilton Supply Management (HSM). These shared services basically provide owners with a turnkey product when they opt to invest and brand as a Hilton franchise property.
Approximately 76% of Hilton’s franchisees own more than one Hilton Worldwide branded property. Franchises require little to no capital investment from Hilton and the revenue from the franchise fees represents almost half of the company’s overall annual revenue.
Hilton brands operate at scale and, because of this, Hilton has large resources in place that can be used to drive demand in a market. Having more hotels in the pipeline represents increased franchise fees – which can then be used to enhance guest-related technology and also can be used to increase advertising/marketing.
Increased conversions, for example, a Marriott property becoming a Hilton, means increased franchise fees.
The travel and tourism industry will need to fill approximately 73 million new jobs by the year 2022. (Global Hotels and Motels Industry Profile, New York: Datamonitor, 2011). Hilton is trying to get ahead of the curve by investing in apprenticeship programs, career engagement and life skills training for young people.
Hilton encourages their team members to be active in their local communities. Each year, the company designates the month of October to participate in a global month of service. All team members are encouraged to volunteer eight hours of work time during the month of October.
Hilton’s environmental measurement tool, LightStay, tracks environmental and operational impact of taking place at the property level and in the Hilton corporate offices around the world. LightStay reporting and has enabled Hilton to reduce energy use by 14.5 percent, carbon output by 20.9 percent, waste output by 27.6 percent and water use by 14.1 percent since 2009, resulting in an estimated $550 million of cumulative savings. (Hilton Worldwide About Us, “Corporate Responsibility”, Retrieved October 3, 2016, http://cr.hiltonworldwide.com)
Combination of both Functional Structure & Geographic Structure
Going from Left to Right –
EVPs & Presidents of Americas, EMEA and Asia/Pac oversee the sales and operations functions for the owned and managed hotels in each of their regions. These are typically full-service branded hotels like Hilton, Waldorf Astoria, Conrad, Doubletree, Embassy Suites, Curio. Property-level General Managers oversee their hotels and report up to these three executives.
EVP of Global Brands oversees brand management, brand standards and customer marketing for the franchise hotels worldwide. Day-to-day operations, for franchise properties, are typically handled by an outside management company that the ownership selects. In the case of franchise hotel, you have an owner, a management company and Hilton – who provides the brand.
President of Global Development oversees the growth of the company’s footprint. He is responsible for expanding the development pipeline, overseeing architecture, design and construction of all hotels. This role ensures that the hotels are meeting or exceeding the minimum requirements put in place for the physical structure of any hotel which carries the Hilton brand flag.
EVP & CFO – Oversees the company’s global finance, IT and real estate functions. Note, our IT operations have been outsourced to Dell.
EVP and Chief HR Officer – oversees all HR functions for the company. Individual HR teams, at the hotel level, do not report up to the EVP, but, the EVP and his team create the policies and procedures which must be followed at all owned/managed hotels. Franchise hotels would follow the policies and procedures put in place by their respective hotel management company.
EVP & General Counsel – Oversees the company’s global legal, compliance and government relations functions. EVP acts on behalf of the owned/managed properties. Franchise hotels would need to find/utilize their own corporate counsel.
EVP & Chief Commerce Officer – This role oversees the global commercial team which included Above Property Sales, Revenue Management, regional marketing and eCommerce, and Hilton Reservations and Customer Care. Basically, this position oversees National Sales, Revenue Management, Marketing, Distribution and Customer Service.
President of Hilton Grand Vacations – Oversees all of the sales, marketing and operations for the global timeshare division.
Hilton Worldwide About Us, “Executive Committee”, Retrieved October 7, 2016, http://www.hiltonworldwide.com/about/leadership/
Property Operations - Power outages happen frequently in Cuba. Internet access is not widely available. There will likely be some challenges due to workers being from a Socialist environment – see notes in HR section on next slide. Will workers be willing/able to provide the service levels expected in Hilton properties? Will the hotels be able to maintain company values? Due to the poverty-level economy in Cuba, will theft be a problem?
Brand Standards – May be challenges delivering brand standards based on local fire code, insurance and safety regulations. For example, some of our hotels have a brand standard of having a microwave and refrigerator in each guest room. However, in some locations, due to local fire regulations, we must get creative, and place microwaves in a central location rather than in the guest rooms. There may need to be changes to Food & Beverage offerings based on local culture. For example, in Hampton Inns in Germany, we serve liquor. This is not a brand standard, but, due to local culture, it was added. See note re complimentary high-speed internet access under “Finance & IT” below.
Development, Architecture, Design & Construction – “Cuban-government holding companies retain majority ownership and control of all projects. While in theory, Cuba has permitted up to 100 percent foreign ownership of companies since 1995, in practice it doesn’t happen.” (Periu, M. February 9, 2015) It might be difficult to secure real estate and building supplies – and then break ground and adhere to Hilton’s building code requirements.
Finance and IT – “”The Cuban government has a poor track record as a borrower and business partner. Over the past five years alone, Cuba’s debtors have written off more than $40 billion in debt as uncollectible. This is equivalent to the U.S. failing to pay $8 trillion in debt.”” Regarding IT, most Cubans do not have internet access and to use it in an internet café costs the equivalent of a month’s wages. Offering complimentary high-speed internet access (brand standard) would be near impossible in the current environment.
(Periu, M. February 9, 2015, American Express Open Forum “What You Should Know About Doing Business With Cuba”, Retrieved on October 7, 2016, https://www.americanexpress.com/us/small-business/openforum/articles/evaluate-cuba-opport)
Human Resources – Fundamental HR concepts of equal work, equality, nondiscrimination, prohibition of child labor and protection of youth, guaranteed work periods, rest periods, and paid vacation, health and social security are in place in Cuba. But, wages are extremely low and the labor pool is untrained. Wage levels are set by the state and hiring of workers takes place through a state-run hiring agency.
(Wallack, H. October , 2015, “SHRM Delegation to Cuba Finds Entrepreneurial Buzz in Havana and HR Issues Similar to U.S.”)
Legal compliance and government relations – Again, issue of the Cuban government retaining the majority ownership and control of all projects.
Commercial Services – This area would probably see the least impact to Standard Operating Procedures. Commercial Services would only be effected if the hotel was unable to deliver on what was agreed upon on behalf of the hotel. For instance, if the national sales team books a large conference at the hotel and the property books something on their own, which conflicts, there would be an issue for Commercial Services. But, this is not something unique to Cuba. It happens in the US quite frequently.
Time Share Operations – Since the government still owns all of the property, I’m not sure that a time share operation is feasible.
Change management strategy are the collection of techniques and tools used for reducing and managing resistance to change when implementing an organizational restructure.
The Hilton Leadership team will apply the key components of change in order to drive the expansion to Cuba and ensure the project meets its intended outcomes. If the company adapts successfully to our change environment, the Hilton management team must understand the forces that operate in it and how these forces give rise to opportunities and threats.
We will follow five key components in order to a successful transition into the Cuban market and ensure the project meets its intended outcomes.
Change management will not end once we have established the Hilton Hotel(s) in Cuba. It is important to plan for the long-run adoption of change. As such, the change management plan should cover all phases of an initiative, including post-rollout and institutionalization.
Assessment of the change: To help inform the plan, the Hilton Leadership team will conduct a change readiness assessment, which establishes the organization’s current status and ability to change
We will identify any obstacles that will be faced when trying to implement expansion into Cuba. We will also assess whether our plan to expand provides serious and well-founded prospects of a successful restructuring within a reasonable period. In developing the strategy, the change management team will document the overall risk and specific risk factors.
Communication of Planning: The change management team or project leaders must design a communication plan that addresses the needs of front-line employees, supervisors and executives. We want to communicate with all employee’s clearly, we want to be sure that they understand risk and benefits of the expansion.
Training for Change: The company wants to be highly prepare for change and any anticipated resistance. Sponsor activities and sponsor roadmaps will be provided. It is critical that we create a coherent environment. Understanding the Cuban culture is also critical. Organizational culture is something to consider while changing management strategies especially in a different area, “organizational culture is the shared set of beliefs, expectations, values, and norms that influence how members of an organization relate to one another and cooperate to achieve the organization's goals(Jones and George, 2016)”.
Feedback Mechanisms: We will conduct surveys, interviews, and focus groups to assess the state of the employee engagement regarding the global expansion. With the data collected we will develop our corrective plan. Understanding engagement and how it effects employees and managers will better allow structuring of the organization based on economic, political, and social systems put in place across different countries, geographic regions, and cultures.
Globalization successes must be recognized and celebrated. Individual and group recognition is also a necessary component of change management in order to cement and reinforce the change in the organization. We will also identify process changes for the next country we will expand to. Although process changes will differ depending on market and culture, evaluating the SWOT per area and comparing to the next global market will make it easier for stakeholders to understand potential threats in relation to how they were handled in the last market.
We will apply the change management process in a sequence of steps. We will follow the three phases of the expansion to ensure our transition to Cuba is successful. Constantly evaluating processes will lower risks when moving to another global area, liaison roles, task forces, cross-functional teams, and integrating roles will allow managers to structure and distribute authority. As the Cuban market grows managers must increase integration and coordination (Jones and George, 2016).
Surveys will be conducted of team members.
All data collected with be scrubbed and analyzed. Survey results to be shared with team members.
Success will be publicly recognized and promoted.
“Businesses can choose to globalize or operate in different countries in four ways: trade, investment, strategic alliances, and licensing or franchising”(Heil, 2016).
The company can trade tangible or intangible goods. For example, Hilton could offer complimentary accommodations as part of a “trade”.
A company can choose to make foreign direct investments, which will allow them to control them to gain stock in order to control the companies.
Another way to control a companies assets in another country would be by forming strategic alliances. “Strategic alliances come in many forms, some enable each company to access the home market of the other and thereby market their products as being affiliated with the well known company”(Heil, 2016).
Licensing & Franchising would involve providing another company with the right to use resources such as copyrights, trademarks, and the brand name.
Strategic Alliances - enable a company to pass most of the difficulties of internationalization such as political, regulatory, and social conditions. The company has all access to the home market but can market their products at the international location.
New Markets –being in a new market is a strength. If you own a business already and then go international you may be able to bring in substantial profits.
Favorable Regulations – depends mostly on where you plan on expanding our business. You may be able to save money on taxes and fees due to regulations. Paying lower taxes can improve your business. Cultural differences can be a potential weakness. Just because you business is doing great in the U.S doesn’t mean it will become a hit internationally. Market research is a great way to determine if your business is desired in an international country.
Financial Risks - must be included in the plan when thinking about moving in the international direction. “For example, the exchange rates between currencies can either make or break your business”(Arthur, 2016). Getting the supplies needed for the business could be difficult. If you have to ship the product in, that would be a deduction for your business which is a loss of money.
