Interview with Brian Garavuso - Chief Information Officer, Hilton Grand Vacations Company

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March 01, 2008
Face to Face
Richard Siegel - Rich@hospitalityupgrade.com

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© 2008 Hospitality Upgrade. No reproduction without written permission.

Note from Rich:
For 16 years I have flown to the location of a CIO and sat down with him or her for a couple of hours to talk technology. So far our interviews have included hotel, cruise and gaming companies – but never have I had the opportunity to talk with someone in charge of technology for a vacation ownership company. My perception of the timeshare industry is now forever changed. I'm not sure if I am ready to buy a timeshare, but the thought might not be as strange as it was before the interview. A very good read, I bet your eyes also will be opened to this booming segment of the industry. Of course, you might never answer your home phone again, but then again….maybe you will.

Rich: Our readers enjoy background on those we interview. Let’s start with your education, did you go to a hotel school?
Brian:  Actually, I have an accounting degree from the University of South Florida.  I was a commuter student who lived in Fort Myers and drove to Tampa to attend college. The first eight or nine years of my hospitality career were in accounting.
 
Where was your first hotel job?
In 1978 I worked as a bellman at the Sundial Beach Resort on Sanibel Island.  I moved to Florida with my parents when my dad retired. I haven’t left the industry since. 

1978, huh?
Yes. For my first six years, I was in resort operations – as a bellman, in the front office, ran the housekeeping department, and so forth. I also worked with food and beverage for about a year and a half.  Brock Hotels managed our property and offered a management training program that I joined.  I moved around the hotel in every department. They were trying to groom me to be a GM. Brock eventually ended its management agreement with the hotel and I moved to the company that bought the property.  I stayed another 15 years.

What company was that?
It was the Mariner Group, which also was the company that ultimately created South Seas Resorts, which was where I was for a number of years.

What were you doing then?
I was the director of accounting for the timeshare division.  Mariner Group had 19 timeshare properties. 

So you’ve been in the timeshare world before this?
Yes, I ran the accounting division for the homeowners association of the 19 timeshare properties.

Didn’t you leave the industry for a while?
For about 18 months I was the director of accounting at a local hospital. 

A hospital?
Yes, but eventually Mariner asked me to come back because of my finance and technology background. Back then, controllers also ran IT as well.  Mariner asked me to come back and downsize its accounting system from a big IBM mainframe to a small LAN-based system.  I rejoined the company in 1990, and a few years later Mariner decided to sell its timeshare division, which eventually sold in 1994. It’s interesting that the impetus that created the original Hilton Grand Vacations Club was the company that I worked for back in the early ‘90s. 

I guess this is one of those what-goes-around-comes-around situations.
You could say that.

Then what did you do?
I decided to stay with Mariner. I thought it would be interesting since the plan was to take the company public. Mariner was ultimately sold to CapStar Hotels and I stayed with CapStar through its five mergers and acquisitions. CapStar quickly became MeriStar Hotels and then eventually became Interstate Hotels. 

You were the CIO at Interstate, correct?
That I was. Good memory Rich. 

Thanks. How long have you worked here at Hilton Grand Vacations?
I am just starting my fourth year. 

How big is Hilton Grand Vacations?
Big in timeshare doesn’t necessarily mean the same as big in hospitality. If you look at the number of properties, we manage 31 properties, which is fairly small in that sense.

Small is relative.
True. In 2008, Hilton Grand Vacations projects to generate about a billion dollars in revenue. When I was at Interstate, which was a management company with more than 300  hotels at its peak, the company only did $940 million in revenue.  This is a completely different emphasis based on marketing and real estate sales.

Tell us the relationship that Hilton Grand Vacations has with Hilton Hotels. 
Well, as a wholly owned subsidiary, so the timeshare division is completely owned by Hilton, but we operate as an independent business unit.  Our CEO, Antoine Dagot, reports to Hilton’s new President and CEO Chris Nasetta, and we have all the functions of a standalone company.  We have our own departments including HR, IT, finance, resort operations, legal and sales and marketing. One key item that we really rely on from Hilton, particularly technology-wise, is our ability to run the same back office system for consolidated financials. We are a PeopleSoft shop. Also we just started to deploy Hilton’s property management system, OnQ.

But, wouldn’t it seem to make sense that you both had some sort of synergy between what’s going on there and what’s going on here, especially as you look at new technologies?
We do have a connection from an IT prospective. Our VP of operations is involved with the Hilton Operations Group.  They meet quarterly, and discuss big range projects so we can coordinate things like antivirus software, spam filters, and that type of thing. Purchasing power is one of the things we leverage heavily, to that end we use the same telecom providers Tim Harvey, Hilton’s EVP and CIO, and I also communicate frequently.

Would there ever be an occasion where you would actually get something that just is totally different than what Hilton does?
At the end of the day if we decide to make a technological decision and it’s different from what Hilton is doing, that’s fine. Interestingly enough, in some  cases we are deploying technology before them.  Obviously, it’s a much smaller budget and we can do things a lot faster, which is why we can  implement technology before them, and then Hilton looks at what we’ve done.  Sometimes Hilton will choose what we’ve done and sometimes they choose a different direction. 

Let’s talk about your industry, vacation ownership or what many of us still refer to as timeshare. It has had a bad name in the past, has that changed?
It definitely had a negative reputation in the late ‘80s and early ‘90s often because independent operators that were under funded, took peoples’ money and left projects partially completed. Starting in the early ‘90s, the major hotel brands – Hilton, Marriott, Starwood – all got into the timeshare business and it truly elevated the business. I will speak on behalf of all of them because I think we all come at it philosophically the same.  It is definitely not the old days of approaching customers on the beach and get them to buy right there in the sand. It’s a very legitimate business. It’s no pressure.  We have created an amazing program and we want people to truly believe in its value enough to buy the product.  Our best customers are our existing customers, so it is very important to us that we have highly satisfied owners. We actually focus on our owner satisfaction scores and it is a key business driver in our operations.  The brands have not only made timeshare legitimate, they have set the standard for quality.  There are still some gray operators out there, but for the most part, it’s a tremendous industry. 

Walk me through the process.  Do people buy a week and for the rest of their lives they own that week?
We are a points-based system, and in nearly much all cases, you’re buying a piece of a real estate, actually you’re  buying points secured by a deeded piece of real estate. You can buy a various number of points anywhere between 3,000 to typically 7,000 points.   Many owners have 14,000 or more points.

What does 7,000 points get you?
For all practical purposes, 7,000 points is equivalent to ownership of a two-bedroom unit for one week of vacation somewhere in our system. Think of the points as “currency.”  If you own 7,000 points in a two-bedroom unit, which roughly represents a week, you can enjoy stays longer smaller units by trading the point value, presuming there’s a favorable exchange.  It also depends on the time of year you travel, and where you own. Obviously points for buying your home resort in Orlando are going to be less expensive than if your home resort was in Honolulu. Las Vegas and Orlando have similar cost structures.  You can use points withing our  system to stay in any of our resorts. You can also convert them to HiltonHonors points and stay in any of Hilton’s properties throughout the world as a HiltonHonors member.  You can also exchange them through one of the exchange companies – we use RCI as our primary exchange company.  We encourage our members to explore RCI’s higher-ranked properties, focusing on the top 400 of 3,700 resorts  with RCI.  You can use your points for cruises, RV rental, yacht charters or to rent a Harley.  We have given our owners lots of other opportunities to use the points.  We also affiliate with some other timeshare companies, such as Fiesta Americana.  We partner with them so we have an exchange program where owners can use points to explore additional properties in Mexico.  We also partner with Club Intrawest enabling our  members to go to Whistler, for example.  Our currency of ClubPoints can be used for all kinds of vacation opportunities. 

So, I buy 7,000 points and I take a week vacation in Hawaii it costs me 7,000 points?  Now my points are gone, right?
For that year, correct.

And then I get 7,000 again the following year. 
Correct.  You can also deposit them, so this year if you couldn’t take a vacation, you can save them and next year you could use 14,000 points.  Or this year, you have the big family reunion, you want to go somewhere and you don’t have enough points. 

So what do I do?
You can borrow. We let you deposit and borrow ClubPoints so you can actually have access to three years worth of points at a time.  It’s a whole currency and obviously the technology around that is very complex. 

Any costs other than buying the points?
Owners pay an annual maintenance fee, which is for the upkeep of the home resort where they purchased. 

What does 7,000 points cost?
It depends on the resort, but could vary between $25,000 at the low end to $60,000 to $80,000 depending on where you are buying.  A penthouse in Hawaii during high-demand season is going to be much more than a one bedroom in Orlando during an off-peak time of year.  We also sell half-point packages, so you can buy 3,500 points and you can stay for a few days or buy 7,000 and stay every other year on an odd/even package. 

And you finance these transactions?
We act as a bank.  We follow all the regulations of a bank.  One thing I must mention is we’re different than a typical hospitality operation. Hospitality is only a small piece of our business,  technologically.  We are really four businesses in one.  Our first business is timeshare sales, which is basically selling real estate. Nobody wakes up in the morning and thinks, I’m going to go buy a timeshare today. People wake up and think about buying a new car then go through the purchase process, but timeshares are typically more of an emotional decision.  There are a few people who know they want to go somewhere and just decide they want to buy, but for the most part we focus on inviting people on a tour and explaining to them how there is more value in owning than paying $300 a room night for  a week of vacationing for the rest of their lives.  Often it is more like explaining that they can pay for this in 10 years, so if they have 20 years of vacation ahead of them, it’s worthwhile plus they are getting a two-bedroom or a one-bedroom suite with a kitchen versus a standard hotel room. That is our first business – the whole real estate sales and marketing operation

And business number two is?
The second line of business is banking. We have a very large  loan portfolio and we have to follow all the same banking regulations that any other bank would. The third business line is the club, all the complexity around the homeowner associations, taking in the points, all the trading with RCI and our affiliate partners.  That’s a whole business unit to itself.  And then of course we have resort operations – the traditional check them in, check them out, clean the rooms, run the F&B operation and worry about room nights. 
The way we fill up our resorts works like this: the owners of timeshare units at each resort have first right to any inventory. We then accommodate marketing guests. Marketing guests are paying a very discounted rate and have committed to spend only about 90 minutes of their time with us. 
 
I’m having a flashback to the old days. ‘Come down, get a free weekend and just attend our two-hour presentation!’
Right, they call it mini-vac, mini vacation, come down, have a great time, enjoy the theme parks, and spend some time with us. We will explain the value of owning with us.  So there are three types of guests – owners, the marketing guest, and then we rent the remaining rooms as a transient hotel business. 

So if I go to Hilton.com to book a room because I’m going to Las Vegas, Hawaii or Orlando, and then I look at the different Hilton properties, the Hilton Grand Vacations Club properties come up?
Yes, when we know we have available inventory, particularly in a property that we have built.  For example, at our newest resort in Las Vegas, when we built a second tower and open up 700 units at a time we don’t sell out the property in a week, though we’d love to.  Any of the available inventory that the owners aren’t staying in, we fill through our rental channels and we put available units on Hilton.com like any other Hilton Hotel would offer accommodations in the system. 

So you guys make money by people buying timeshares.  You also make money by renting nice hotel rooms? 
Yes. 

You give all the Hilton HHonors perks and such?
Yes, if you stay in our hotel as a transient hotel guest, it’s no different than staying at the Waldorf=Astoria.  We recognize Diamond, Gold and Silver members, and we take care of them. 

I wonder if you dilute people from Hilton Hotels. Do people typically stay at a Hilton and say, ‘Why am I’m staying in a Hilton Hotel when there is a vacation ownership down the street with suites and kitchens?’
Years ago, that was a concern… that a franchised hotel operation would think they wouldn’t want a potential Hilton customer to stay at a Hilton Grand Vacations Club because then that guest would never return to their property.  We’ve proven that, once you become a Hilton Grand Vacations Club Member, you are one of the most loyal customer in the Hilton system. We generated over $100 million of additional revenue outside of what we do into the Hilton system by our owners staying at Hilton Hotels. If you’re a Hilton timeshare owner in Las Vegas and you’re going to go Timbuktu, what kind of hotel are you going to stay in?  You are going to find a Hampton Inn, a Hilton Garden Inn or whatever Hilton Hotel happens to be in that city, but you’re going to stay in a Hilton-branded property. 

Now, do you market your timeshares to the premium Hilton HHonors members?
Yes, we market to anybody who stays in a Hilton Hotel because we feel that they are brand loyal, even if it is a guest’s first stay at a Hilton.  We introduce our product because we believe that the guest is going to be our most loyal customer. 

Hilton Hotels distributes its inventory via the Hilton.com site and via third-party sites, such as Expedia, Travelocity, Orbitz and others. Does Hilton Grand Vacations do the same with your inventory?
Yes, once we allocate our inventory to Hilton, it is offered through whatever channels are available.

Suppose I’m an owner and I decide to go to Las Vegas for a week at the last minute. I have enough points, but what if I can’t get in? Couldn’t the hotel be full?
Your ownership intrest is unit-specific, and season-specific.  Based on the number of owners we have and through a very sophisticated inventory management system we know how much inventory must be available at any given time to satisfy owner demands.  Owners can request reservations up to a year in advance.  So, we do encourage our owners to book well in advance to ensure best availability of their preferred dates.  For instance, if Rich Siegel has used his 7,000 points for a vacation reservation –  we know his allocation has been used, by going through this process we’re able to track owner usage, and manage our inventory effectively.  We do our best to accommodate our owner’s travel preferences, but within a 30-day window, availability is dramatically reduced. We focus on educating our owners to plan ahead...
 
How do you do it?
Our core application, known as V.O.I.C.E  is a system we bought more than 12 years ago. The source code was also purchased, it has been modified and handles all of our inventory management. 

You’ve had it 12 years? 
Remember I was with the Mariner Group who had spun off its company.  I was on the team that selected the product.  The technology I helped choose 15 to 20 years ago I’m living with today. However, we are in the process of replacing it now.

Why?
There are a very limited number of developers worldwide that can keep developing our software. 

The timeshare industry has very few companies with products for this market.
There is still only a handful, maybe six, in the industry.  Some of the major PMS vendors like MICROS or PAR Springer-Miller have some modules to handle timeshare but not with the complexity of a full enterprise-wide timeshare operation.  If you have a single resort with a timeshare component, those products can handle it.  The ones that are specific for the industry, like TimeShareWare SPI or Triton, are designed to run a whole timeshare operation. But there is really nothing yet to run enterprise-wide the size of a Hilton, Marriott or Starwood.  Each of us are managing and developing our own technologies. 

So Marriott and Starwood also have their own systems?
They use components. I believe Starwood uses a component of TimeShareWare for doing one specific thing, but for the most part they all have their own.

When you say you’re contemplating replacing…
We are in the process of replacing our current system. 

Are you looking at an existing vendor?
We’re developing it in-house. 

So it’s OnQ revisited, huh?
Not because we want to. Hilton Grand Vacations  is looking at a partnership strategy with one of the existing vendors to shorten the development cycle.  We are also using some best of breed. For example, our loans and collections module used for our banking operation is currently an in-house system.  There is no sense to rewrite that.  We are distributing an RFP and we will pick banking software to run that side of the business.  One of the key things we need is complete integration.  We can’t really have interfaces.  We need to know when a guest checks in at a property if he or she is delinquent on his or her loan or maintenance fees.  We must have full visibility.  Many homeowners associations won’t let you occupy your unit if you haven’t paid for your maintenance fee.  So, we need data flowing very interactively between our systems. Plus exposing this to the Web as well, so that owners can take care of their accounts through our Web site, is very important.
 
Hilton developed its own property management system, OnQ, which has been deployed in most of its properties.  You’re deploying OnQ in all your vacation ownership properties, correct?
Initially our goal was to deploy OnQ in what we call our developed resorts, the ones that were built or converted by Hilton and  branded Hilton Grand Vacations.  We also have the group of managed resorts inherited when Hilton bought the Mariner Group.  We haven’t decided if we will put OnQ in those properties yet, but most likely we will. The strategy is we need a new PMS, why should we go out and develop a new one when Hilton has OnQ?

If it’s designed for a typical hotel operation, and you’re putting it into a vacation ownership group, there is going to be point where it’s not going to do everything that you need.
That is correct. If we had only nine hotels and we just needed a PMS, all nine hotels would be done. We have been working at this for about a year now.  Hilton is modifying  OnQ to work within our resorts.  The biggest complexity is the lock-off units where you have a one-bedroom unit and a standard studio apartment that are side by side, but for a reservation you want to treat them as one two-bedroom suite.  Say you have unit 101 and 102, but for rental purposes you want to consider it 101-102 and sell it as one suite.
 
I’m not sure how unique a need that is. 
Yes, that’s very common in big resorts and serveral of  the PMSs do that.  But Hilton never had hotel properties that needed this technology.  Now, with the acquisition of the LXR portfolio from Blackstone, Hilton needs to focus on this as well, so the timing is good for the entire system. 

The Blackstone deal is complete, right?
Yes, the Blackstone deal closed in the end of October 2007. 

Any changes?
No, it has been very business as usual.
 
That’s good to hear. With your background in hotels and vacation ownership, from a technology standpoint what is the biggest difference?
As I mentioned earlier we have those four lines of business. My career has been really focused on PMS, point of sale, sales and catering systems – all the property technologies. When you’re in the hotel business you have back of the house, e-mail and financial, but that is such a small part of my entire team’s day here.  The majority of the technology in timeshare is focused around sales and marketing. Basically I have three divisions within IT.  I have an operations division that handles all the property technology, field support, data centers and infrastructure. Then there is the strategic technology team, which is the software development and data warehousing, and then I have an e-commerce group focused on using technology to drive sales.  I have a sales component within my group having to produce a certain amount of revenue in package sales as part of IT.
 
Elaborate on that a little bit.
This team’s responsibly is to drive people to the Web site through search engine optimization, click- through, partnership links, anything we can do to drive people to our site and ultimately to buy a mini vacation or call our in-house direct sales department.  Ultimately we want people to call and say, ‘I’d like to buy a timeshare.  Where do I sign up?’  This whole group of people is focused on that technology. Last night you stayed in Hilton Grand Vacations Club on International Drive here in Orlando, right?

Yes.
We have a sales center there.  That sales center features plasma screens.  As guests go through the tour, they stop at a screen and it provides you information.  Part of my team is responsible for all content and technology that resides on those screens.  We have a multimedia division, an e-commerce division and an e-business division that all drive to sales. 

As far as property technology goes, are you standardized on what you use?
Right now, other than being in the middle of a PMS conversion to OnQ, we have a standard system, that we call V.O.I.C.E.  We have the V.O.I.C.E. system deployed in every property. Compared to a hotel management company environment with multiple brands where every property has a different PMS, V.O.I.C.E. enables us to look at the same data across all of our resorts, so that is really nice having everything exactly the same.  From a property technology standpoint, however, we are really the same as any hotel operation. Where there is uniqueness is our need for lockoffs, but any big destination resort that has condo units is going to have that challenge anyway. Managing the inventory is different because we have the owner component. For example, in Hawaii one of our penthouse units sells for $150,000 for a week, so you are buying a week of time for $150,000.  An owner who spends that kind of money has a much higher level of customer expectation than someone who is spending $60 a night in a roadside hotel.  We are committed to delivering a higher level of customer service and support through technology.  How do we recognize the customer?  How do we use a guest’s name appropriately throughout their stay?  How do we deliver special services where we can?

Everybody seems focused on improving the guest experience.
Here at Hilton Grand Vacations the person who heads up our owner and property division is the chief customer officer.  So, we’re talking about everybody – owners and renters – being a customer and how do we impress them?  In terms of how it is a bit different from hotel technology, remember that we have three kinds of guests in the resort – including the owner who obviously we want to take great care of and our marketing guests who we are trying to impress.  So, it’s not just about someone paying $299 to spend the weekend on a special reduced rate.  We want this customer to spend $40,000 and become an owner.  A bad resort experience has a pretty high cost of error. 

If you are a guest who just stays with us because you need a room, you experience our product and you enjoy your stay here. We want to treat you great so that when you leave you say, boy, I’d like to come back here not for business, but to purchase. We really look at everybody coming through the door as being either an owner or a potential owner, and we’ve tried to drive our services with that in mind.
 
You brought up the Orlando versus Vegas versus Hawaii.  From a technology standpoint is everything the exact same? 
Everything is pretty much the same.  We have the same technology in all locations.  The only difference is 20 percent of our overall customer base is our Japanese owners, primarily buying in Hawaii and some in Vegas.  We have sales centers throughout Japan with our largest one in Tokyo.  We have a staff of 150 people in Japan.  I actually have an IT staff of three there.  We are doing a lot of things multilingual – all of our collateral material, sales material, things that we develop in IT, we have to develop it with the ability to capture the Japanese language.  As we move more and more into Asia we want to market to them in their native language.  Capturing that in our system we had to work through that technologically. 

Are you going to build anything in Macau? 
We are not chasing Macau.  It’s a great destination but not necessarily one for us right now. 

Tell me about your IT operation.  How large is it?
We have a staff of just over 120.  Most of them are based in Orlando, and we have a small group in Las Vegas supporting the properties for sale.  We have a sales center there and an outbound telemarketing center.  We also have seven people in Hawaii supporting both Oahu and the Big Island and three people in Tokyo. 

But it’s mainly to support the property technologies…
The three people in Japan are only supporting sales.  The Hawaiian staff is also supporting property technology, but again 85 percent of what my team does on a daily basis is support the sales operation. 

What about your call centers?  How large are these? 
The scale compared to hotels is different. For example, Hilton has five call centers with thousands of employees but that’s primarily inbound calls.  We have about an 80-person inbound call center that handles club membership services. Owners call our club counselors to assist with reservations, membership inquiries, and account services. In Orlando and Las Vegas we have roughly a 300 to 400-seat outbound telemarketing center.  We call people throughout the day and into the evening asking them if they want to come to visit us – we recognized their loyalty to Hilton and invite them to come to a Hilton Grand Vacations Club and spend the weekend for $199, $299 or $350 depending on the location and the time.  We ask them to take one of those mini-vacations we talked about, they get a great trip and simply share 90 minutes of their time with us during their stay.

You’re calling Hilton customers, people that have stayed at a Hilton Hotel or Hilton Honors people.  Do you also buy lists to call?
We have bought lists before, but our primary source of outbound marketing is our Hilton past stays. The reason is we find that the conversion ratio from somebody who stayed in a Hilton Hotel is much higher versus somebody who happens to read Golf Magazine.  The closing ratio is significantly different.  We get about a 4 percent to 5 percent closing ratio for somebody who stays in a hotel.  If we buy a list you’re talking about 0.5 percent closing ratio.  The economics just aren’t there.
 
How do you track all of this calling? 
We have a predictive dialing system.  We have a customer database of about 65 million people total, but we don’t market to that broad of a range. The first thing we do is check if you’re on a national, state or internal Do Not Call list. If you are we take you off the list.

How hard is that to do?
It’s pretty complex.  There are three types of Do Not Call lists.  There is a national Do Not Call list.  Each state has its own Do Not Call list.  If you call us to say, ‘You just called me.  Please don’t ever call me again,’ we put you on our internal Do Not Call list. 

This is interesting because we all get calls at home.
Once you’re on our internal Do Not Call list, which means that you have personally told us don’t call you, we will not call you no matter what.  You could spend $5 million at the Waldorf=Astoria and we won’t call you.  We are very, very compliant with the state regulations.  Every state has its own regulations, so we actually get a Do Not Call list from each state.  It used to be you get the list from the direct marketing associations that included pretty much every state. They don’t do that anymore.  Today you get a state list directly from each state that maintains a separate list and the national Do Not Call list.  If you have stayed with us recently – usually within the last 12 months that’s the average – we can call you.  Even though you may be on a Do Not Call list, you have established a business relationship with us by staying at a Hilton Hotel. 

We scrub the list to make sure we have a good phone number. We use lots of technology to manage this process.  We actually take the data and send it to be cleaned so we get good phone numbers and good addresses.  We put some demographic data with it so we know some of your likes and preferences and use that for modeling so we know what this person bought – how does Rich look compared to that kind of person?  We can do a predictive score on you whether you have a propensity to buy or not.  We then put it in our predictive dialer and start our shift.  It’s pretty cool technology.  It says you’ve got 50,000 names in the dialer system, you’ve got 30 agents on staff right now, and it starts calling and depending on the time of day, it knows I’m getting more answers, answering machines or just ring/no answers.  It will use that as an algorithm to recalculate to slow down or speed up the pace.  An agent doesn’t get a call until you’ve answered the phone.  We don’t have people dialing numbers and sitting there – all of that is done behind the scenes. 

So if I answer the phone what happens?
It immediately connects you to an agent, and I must add we can tell the difference between a live answer and an answering machine. They hear a tone in their headset, your name and address and phone number pop up on their screen and they begin, ‘Hi, Mr. Siegel, this is Suzanne… I’m calling you because I see you’re a Hilton customer.  We’d like to offer you a special value vacation today.’ If you purchase, we record the transaction. We capture your credit card information.  It gets masked and we are PCI compliant.  It goes through the system and then you come stay with us.  Now one of the things we do is we may be calling you – it sounds really good, when do you want to go on vacation?  You don’t know, but you want to do it.  We’ll sell what’s called an open package. At a later time we’ll call you to activate your purchased vacation. We activate your package, get your dates of stay and help put you in the type of unit you need. 

You have a 4 percent success rate? That’s pretty high. 
We have a very effective outbound telemarketing operation.  At the end of the day for all of the timeshares, outbound telemarketing, as much as people dislike phone soliciting, is really the biggest source of business.  We would like to find alternative methods of sale.  Our goal is for everybody to wake up and say I want to buy a timeshare.  We’re trying to find more and more ways to drive people to the Web site and to inbound telemarketing.  We want people to call us.

I’m trying to think if I stayed at a Hilton and got a phone call from you how would I react?  I hate the idea of getting called at home. 
We respect that.  Sometimes people get upset and we immediately put them on our Do Not Call list.  Every outbound telemarketer has access to a system where all they have to do is type in your phone number and it immediately puts them on the internal Do Not Call list and then you’re done.  Hilton Grand Vacations will not call you again.  We may e-mail you, we may mail you, but we won’t telemarket to you.  We talked about owners being our best customers.  Well, we have an owner referral program.  So if you’re an owner, and you say, ‘Oh, Geneva thinks this is a great thing.  Call her, here is the phone number.’  If Geneva is on the Do Not Call list, and we don’t have a business relationship with her, we can’t call her even though you said I could call her.
 
And you have the technology that tracks all this?
Yes.  There’s also recently been a whole new level of complexity to this.  I can’t just randomly call and pitch an offer to you.  Everything that we do has to be registered with each individual state.  We have to tell them what our marketing campaigns are, what our marketing collateral looks like before we can put a postcard in the mail.  That has to go through an approval process.  Our IT and legal teams are very intertwined relative to going outward. We have a whole database of what we call state regulations – our SARS database.  And everything we do has to be run through that to make sure we’re compliant with all the state regulations as well.  There are many checks and balances going on.  We record every one of our calls, every outbound call is recorded.  We save it depending on the state for various lengths of time.  So the database is in terabytes of voice recordings.  If someone complains to the FTC or the state regulators, we track down that exact phone number and we can tell them how many times we called them, the date, time and who talked to them.  We could pull the voice recording if needed to hear what they said.  We take it very, very seriously that we want to be well above the law.  We have a reputation to uphold that comes with representing the Hilton brand.

I was thinking the same thing.  You don’t want to alienate existing or potential Hilton customers.
Exactly.  We are very, very sensitive to that.  There are people who don’t just say thank you for calling, please put me on the Do Not Call list.  They take it as a personal affront so they call the chairman of the board and complain to Hilton that we called them and interrupted their dinner. 

I’m on the Do Not Call lists but occasionally a call will get through for some reason and I’ll ask please take me off your list, and they say absolutely.  Once they do that, you’re not mad anymore.  So the technology that tracks all this information, is it something you developed or is it a call center technology? 
The dialer is call center technology.  We use a company called TDI – Tele Direct and they have their product with other types of businesses such as newspapers, to solicit subscriptions to your local paper.

It is not so bad if a live person comes on…nothing drives you nuts more than answering the phone and getting a recorded message. 
There are occasions if our pacing is behind or ahead, that the machine will say please stand by for a live operator but that is VERY closely monitored and only happens on rare occasions.
 
It’s still better than the typical messages…
Correct, we don’t leave a message.  We monitor that threshold of how many people answer the phone and get that recording.  There is a state regulation that we can’t be over 0.5 percent with this happening.  We’re very sensitive, there’s so much regulation around what we do.

It’s good to know there are many regulations.  Earlier we talked about timeshares having a bad reputation.  The fact that call centers are so regulated is probably helping in the long run. 
As much as it frightened us when it happened because the bulk of our business comes through outbound telemarketing, we want to respect the Do Not Call list so that we don’t abuse it and lose it.
 
You talked earlier about your divisions. 
One of my other divisions is strategic technology, which along with its application development includes business intelligence and data warehousing.  I’ll expose ourselves a little bit and say we had a rudimentary warehousing – a lot of databases with a lot of data in them linked together and a lot of SQL queries where we pull data out.  We are in the process of making a very significant investment in deploying a product by IBM called Ascentials data warehousing solution.  It will be about 20 terabytes of data. It will be every bit of data in our company and every bit of data about those 65 million people that we have, excluding sensitive personal data of course.  We will store this data in a much more sophisticated way.  It is important for us to know your name, address and all the variations.  We may have Rich or Richard or Siegel spelled wrong, but all with the right address.  Or maybe we have your work address and your home address because we get that data all coming in so we need a much more sophisticated way of knowing these five entries of Rich Siegel are all the same person.  We’re partnering with Acxiom to cleanse our data, to append it if we have an e-mail address or a name but no address.  The IBM tool has its own data quality, CASS certification which puts the proper postal code on it.  We need to know that we’re calling the right person and then any direct mail or e-mail marketing that we do we need in our “marketing universe” to be as clean as possible.

In my household we have Brian Garavuso and Allison Morris. In my system we need to know that that’s the same household, and ideally we would like to know that it is a husband and wife, not roommates, and the combined household income, so data warehousing is a key strategic technology for us.  Again, modeling to say these are our last 5,000 vacation ownership purchases.  These are the demographics on those 5,000 people, now model against the 25 million people in my database and of those 25 million which ones have the highest score that look like the people who recently purchased. Then market to that subset group.  We know if you have a preference for golf, we want to market to you in a way that will get you to respond.  We want to look at all your preferences.
 
Are there things that you do that Hilton Hotels might use in its marketing efforts?
We share ideas, but Hilton’s marketing, particularly through Hilton HHonors, is very sophisticated.  Hilton’s goal is not to drive timeshare sales but to drive hotel stays. Hilton uses Hilton HHonors as its marketing vehicle and markets through companies like American Express.  If you’re an AMEX cardholder you’ve gotten Hilton HHonors information mailed to you.  They know you’re a Hilton Honors member and you have an AMEX card, and that’s a specific marketing tool.  If you were a heavy Marriott guest, you may not get that marketing, or you may get both at different times of the year.  We have a joint marketing council with Hilton Hotels and the VP from my department is actually on the Hilton marketing council because much of what is done is electronic.  We share ideas.  Our goal is to figure out how we can get the power of Hilton to drive sales for us.
 
What’s one of the challenges at your properties?
The biggest technology challenge is wireless.  We are constantly trying to improve it.  Unfortunately it’s a source of customer complaints.  Hilton Hotels has decided to take that in-house.  Hilton recognizes this was one of its largest single customer complaints.  Hilton is bundling it in its technology offering package and hotels in the brand pay a technology fee.  High-speed Internet access is installed and provided.  It’s no surprise that your laptop is working in one hotel, you go somewhere else and it doesn’t work simply because there are hundreds of vendors all selling some variation of a solution.  One hotel may be running over a broken-down phone wire while another hotel has Cat5 and still another is wireless with infrastructure interference, another property with a repeater in every unit and the next hotel puts a repeater every three floors – there is no standard out there. 

As an industry that was probably one of the mistakes we made.  Now, could we have ever come up with a standard that if you’re going to put HSIA in, there has to be a repeater in every other room?  Unfortunately that would have never flown, right?  We have all these variations.  Hilton decided; let’s create a single technology platform.  Every hotel will look the same.  It’s in its infancy but that is the concept. 

The one problem is the hotel industry has management companies and management companies might have three Hiltons, four Marriotts and a couple of Starwoods.  They might have relationships to certain technologies like wireless already because they are using it at several other properties.  They will want to use the same vendor that they have a great relationship with rather than the Hilton-recommended solution. 
That’s the value of a management company, right?  The management company has 50 hotels.  They go out and strike a deal with XYZ high-speed Internet access provider. Look at the purchasing power I brought you Mr. Owner by being with Mark 50, versus if you went out as Rich Siegel, the owner of a hotel to buy it, you wouldn’t get as good a deal.  They’re trying to drive value through any purchases – technologies, apple juice, whatever it is – so you’ve got this whole push/pull between the management of the hotels and the brands.  That part of my life I don’t miss (smile).
 
Sometimes the fragmentation of this industry absolutely hurts us.  You never see these situations in an industry like car rentals, right?  They also have franchises.
Would you be a loyal Avis customer if you couldn’t get checked out when you step out of your car at certain locations?

Exactly my point. 
I use either Avis or Hertz for one reason – the rapid checkin.  I get out of the bus, find my name on the board, get in the car and leave.  If I have to go to a counter and wait in line and fumble with my keys…it’s worth the $5 or $10 more a day to avoid the lines.  Can I go back to a question you asked earlier about our in-room technology?

Sure.
Here at Hilton Grand Vacations we have a reverse challenge with in-room technology.  I can’t just run out and put the latest and greatest in-room technology into my units because at the end of the day I’m not going to own that hotel.  The owners who own the weeks for that unit are paying maintenance fees.  So there’s a big implication between me putting high-definition LCD panel, 50-inch plasma TV in a unit, because when I’m done selling that property when I get to an 85 percent or 90 percent sellout, I turn that property over to owner control. Everything that goes in this unit can affect the maintenance fee of that unit.

If you are going to create a high-end resort and you’re going to put in a lot of flat panel TVs with HD signals won’t you get it back via the points? 
Well, yes, but there’s a fine line.  If you’re willing to spend $40,000 to buy a week’s timeshare part of that is great.  ‘We love that you’re buying timeshare, but by the way, Mr. Siegel, your annual maintenance fee is $3,500.’ To which you say,  ‘Well, what do you mean it’s $3,500?  I can get a $350 room night for 10 nights.’
That’s just another thing that you have to sell through.  So we don’t want the maintenance fee to be this huge number that you will say, ‘Why I am buying?  It makes no sense.’  The technology has to be sustainable but, replaceable through our maintenance fee, so it’s a fine line.  I can’t just go crazy, which is again why the focus isn’t necessarily on property technology; it’s on good basics. None of our resorts right now have in-room entertainment or video on demand.  They don’t call for it.
 
I stayed in your property last night.  I mean it’s relatively high tech as far as the TV with the ability to flip to FM radio, CDs, DVDs and things like that with a quality sound system.  You don’t see that everywhere today. 
We’re trying to deliver more of a vacation experience where the length of stay is typically longer than a typical transient hotel.  At our new properties we’re looking at putting jack packs in the wall, so if you have your notebook or you brought your own device, such as a Gameboy or Xbox, we want you to have many of the same amenities that you have in your home.
 
Let’s switch gears and talk about your support in the industry. You have been on the technology committees for AH&LA, the HITEC Advisory Board, GuestRoom 2010 and other committees. Why?
I’ve tried to be involved in the industry.  I feel like if I’m involved, I’m learning; I’m learning from the people with which I’m interacting; I’m establishing great business relationships.  My true friends are industry friends. And, we call each other, ‘Hey, what are you doing about this technology?  Have you talked to this vendor?’  It’s a great network.
 
When we launched The CIO Summit six years ago that was what we hoped for. Thankfully the networking and socializing have also led to some great friendships and attendees do help each other throughout the year.
Absolutely. The most valuable part of going to The CIO Summit is the interaction with my industry peers.  The education is great, but at the end of the day, I get so much more from the other attendees.  But I do have a suggestion.

What’s that?
If you had The CIO Summit and the Executive Vendor Summit overlap by a day, I think it would be really valuable, if there’s a way to do it without it being a sales event.

You never know what the future holds (smile). You’ve been a part of HFTP’s GuestRoom 2010. Any thoughts on that? 
It’s has been a great thing for HFTP but also a little bit of a challenge. Some people expected GuestRoom 2010  to be the Jetsons, the room of the future.  The reality is if you can’t see it, touch it and it doesn’t exist, you can’t put it in a room, right?  So, it’s never going to be so far out there because that technology doesn’t exist. The real concept is: it’s the room of tomorrow.  What is the latest and greatest that is available that is being put in a room that you could look at and put in a room.
 
Good point.
To be involved in it, it’s been a lot of fun.  Part of why I got involved is to give something back to the association. I’m a huge supporter of HFTP.  I truly believe in any kind of association, and as I mentioned earlier when I left hospitality for a couple of years and went to healthcare, one of the first things I did was join a professional association, met other people like me that are doing similar jobs and built a strong business unit because of these relationships. HFTP is also perfect for that. 

As an industry, are there any things that you think we do really well or that we don’t do well that should be improved upon?
As an industry I don’t know that we come at new technologies in a very unified way.  I guess its two-fold.  I think it’s the competitiveness of the vendors and the competitiveness of each individual property.  You’ve got two hotels side by side and each wants to be better than the other.  They are clamoring to get whatever it is first – the best bed, the best shower, the best technology. In healthcare, one hospital and the other one across town don’t necessarily compete against one another.  When they deploy a new technology it is much more thought out and unified in a much broader way.

Sometimes I think as an industry we just rush out there – it is who can get there first, who can build the better mousetrap, who can get that mousetrap into their property first. And many times it fails because there is nobody helping the vendors flush out a well thought out solution to get deployed globally. Look at high-speed Internet when it first came out, it died. We’re still living with some of that technology that was put in.  The vendors have dwindled and revived, but often those same technologies are in there.

It’s a good point, so what you are saying is…?
At the end of day as a traveler, what do you want?  What was more important to you last night, a soft bed, a hot shower, a clean room or the latest technology? 

I believe the typical traveler wants the bed, the shower, the clean room, but he wants to be connected too – those are basics today.  But when you’re in a resort, you’re there for a while, the in-room entertainment is more important.
Once your length of stay gets beyond three  days, then it’s the whole offering and the property and technological guest amenities are much more important. 

I sometimes wish the hotel industry would be a little more aggressive adopting new technology.
I think one of the challenges is that in the 30 years now that I’ve been in the industry it has always been about capital constraint.  The guys who have capital are looking to do the next project, to build the next thing, and other than probably Las Vegas, they are not looking to take the capital and reinvest into the property technology.
 
Yes, technology is often the hotel’s stepchild. Have you done anything technology-wise that you have regretted?
Oh, yes, definitely. I’m not that bright as a generalization, but when I fall down I know it hurts. I do learn from that.  I always say much of my wisdom is scar tissue. I have deployed technology because I believed it was the best thing for the business, and sometimes it has failed.  At the end of the day, however, it was a good technology, and didn’t fail due to the technology.

Then why?
Because, it was an IT project.  Very early on in my career, I learned that there are no such things as IT projects.  The project has to be driven by the business unit.  The business unit has to want it.  All we should do is give them the idea and the concept and have them buy into it.

Do you have an example?
We tried to deploy a business intelligence system 10 or 15 years ago. Every night we took all the data from the PMS and the systems around the hotel, automate the daily report so when the GM came in the next day it would be electronically in his inbox.  No more of this night audit, typing a spreadsheet, photocopying and putting it in mailboxes. Today, that’s commonplace, right?  But at the time, everybody thought it was a good technological idea. IT was driving it, but what we failed to realize was IT doesn’t know if the numbers are absolutely in balance.  Accounting needed to make sure. If it was a penny off, all they would say is it’s broken because it wasn’t their project and it failed.  It wasn’t until a couple of years later that somebody went to a conference and came back and said this is what we need to do and then I suggested the technology partner.  There are other regrets, such as maybe choosing a wrong vendor, but you make a management decision.  You take the data you have on that day, you make the best decision and sometimes you look back and say, ‘Ehhh.’

That’s part of life, we’ve all done it.
But on the other side of the coin, we just put Computer Telephone Integration (CTI) in our owner call center.  As a member, if you call into our call center, we recognize your phone number, and when answering the call, we have your screen right in front of us. Instead of having to ask you for your member number which you may or may not remember, or having to verify your name or address – everything pops right up for us.  We just ask a question, like a pin number. We’ve had this in the capital budget for four years, but I refused to let IT deploy it until the business drove to have it. They drove the project, they needed it to succeed and it did. We try to avoid technology just for technology’s sake. The business unit has to embrace the technology.

Great point. So, are there any words of wisdom you want to leave with us?
I definitely encourage people to be involved in the industry. People should participate in national events or local meetings and councils. The more people are involved the more value there is for all.

That’s a great point. Anything else? 
Probably the best thing I could suggest is that everybody reads Hospitality Upgrade.  I knew you were going to add that so I figured I should say it first.

(Laughing) You’ve known me too long. This has been great, thank you.
You’re very welcome!  

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