Hilton Worldwide Re-engineers its Treasury

by Donald Gradwell, Director, Treasury Infrastructure, Hilton Worldwide

As a result of the merger in 2006 between Hilton Hotels and Hilton Hotels International, Hilton Worldwide’s treasury executives took a hard look at its treasury operations, and subsequently embarked on an ambitious project to re-engineer its enterprise treasury system. As part of this project, the company realised it needed to find a way to simplify communications with the large number of banks it dealt with globally. After considering all options, the firm decided to adopt SWIFT, an industry standard for financial messaging, and to appoint a service bureau to provide a single point of connectivity to its banking network. Not only did this simplify operations, and reduce risk and costs, but it helped to free up valuable resources so treasury staff could focus on mission-critical finance tasks, rather than IT.

Following the 2006 merger, the company moved forward with a significant project to implement a new enterprise treasury system, and initiated the integration of the accounting platforms of its US and international businesses. As part of this initiative, the company realised it also needed to look at its financial messaging capabilities, and find a way to improve and simplify operations and reduce risk and costs. The company had business relationships with many banks globally and, as such, communications with each bank had become increasingly burdensome. Each day, the company had to log onto the websites of all its banks and download the bank statements, and then upload them into its treasury system. To simplify the process and impose consistency on its banking communications, Hilton Worldwide decided to adopt the SWIFT financial  messaging  standard.

Data security in financial communications is of paramount importance for the company, and it was a key factor in the choice of SWIFT and its secure financial messaging network. Another critical factor for a global operation like Hilton Worldwide was the fact that SWIFT messaging is widely adopted across the international banking industry. However, the adoption of the messaging standard brought its own challenges. SWIFT is technically complicated and requires considerable IT expertise, and Hilton Worldwide did not wish to develop a full set of SWIFT skills in-house. Bringing new staff on board would be costly; likewise training existing staff would take time and also cost money. Further, we realised early on that using treasury professionals to manage sophisticated messaging systems was not the best use of critical skills: we wanted the treasury team to be specialists in treasury, not IT.

The company also wanted to relieve itself of the burden of individual communications with multiple banks. Managing the complexity of multiple banking relationships was not only taking up valuable staff time but had also introduced risk. With information being exchanged from multiple sources, and in multiple formats, the risk of error was high. We wanted to improve operational efficiency so that we did not have to log on to multiple banks daily and download bank statements..

After exploring a number of options, the firm decided the best way forward was to engage a service bureau that could provide financial messaging through a single point of connectivity to all its banks. As it embarked on the project, the treasury team began by establishing the criteria that its service bureau partner had to meet: not only would this service bureau partner need to support SWIFT messaging, but it would also need to operate globally and provide direct bank connectivity when required to ensure Hilton Worldwide could link to banks wherever the firm had hotels or resorts.

It was also key that the bureau should have established relationships with a wide range of banks. Not only would this provide a level of comfort about the bureau’s capabilities but it would also ensure that we could get up and running with the service as quickly as possible. If the relationships and technology bridges were already established there would be no need to re-invent the wheel, and establish new channels of connectivity. Another important consideration was the ability of the service bureau provider to integrate with the new enterprise treasury system that Hilton Worldwide was implementing. In choosing a new vendor for something as important as bank communications, the company wanted to know that it already had a relationship with our treasury system vendor and could work with them.  A previous working relationship between the two parties would reduce the time to ‘go live’ and lower the project risk considerably.[[[PAGE]]]

Due diligence investigation of potential providers took into consideration industry credibility and a proven track record, as well as competitive pricing. We identified Fundtech’s SWIFT bureau service as best able to meet our requirements, and implementation began in 2011.

The first phase was to connect Hilton Worldwide to the service, followed by the establishment of links to the company’s related banks globally. The implementation was completed in a reasonable time frame – with SWIFT connectivity established in six weeks and the end-to-end project completed in six months.  The process might have been faster and more efficient had we made greater use of third-party expertise throughout the project, rather than doing the treasury implementation itself while Fundtech handled the bank connectivity.

Although SWIFT is widely used internationally, it is by no means a universal messaging format, and a number of Hilton Worldwide’s banks employ other standard or proprietary messaging formats. Importantly, Fundtech’s service bureau is also able to connect to these non-SWIFT compliant banks and bring them into a single service interface for its clients. Fundtech operates its own middleware layer in the service bureau, which enables it to map any structured messaging format to another. This ability to handle both SWIFT, as well as other messaging formats, means that the bureau is able to support our strategy of preferring SWIFT-enabled banks, but still providing a connection if they are not. It manages all the various bank connections for us, so we  just have to manage a single pipeline into the bureau.

The efficiency of dealing with just one interface for bank communications is a major benefit for Hilton Worldwide.

The efficiency of dealing with just one interface for bank communications is a major benefit for Hilton Worldwide. This value is further increased by the reliability of the service. If we didn’t have such a reliable service, we would have to have many operational checks in place to make sure the bank statements are coming in, and that payments are going out. The service level is such that failed statements or payments are a rarity, and the treasury department is able to leave it to individual finance areas to flag any exceptions.

The fact that the service bureau is handling the technicalities of connecting with banks and ensuring the reliability  of communications frees up  our  treasury staff to concentrate on their primary treasury responsibilities. It also means that when we hire staff, we can focus on their treasury skills and we do not need to worry about trying to find people who are also IT specialists.

Hilton Worldwide currently makes use of Fundtech’s SWIFT bureau service for FIN store-and-forward messaging, FileAct bulk data exchange, as well as Fundtech’s services for direct bank connectivity through the banks FTP portals and host- to-host connections. Meanwhile, the company sees considerable potential for extending the functionality of the service. Once you have a secure communications network in place there are many ways you can take advantage of it.

One of our priorities is to move to electronic bank account management (eBAM). This includes the automation of activities such as the opening and closing of bank accounts and the generation of regulatory and other reports, using the ISO 20022 standard for financial services messaging over the SWIFT network.

Our business requires us to have a large number of banks and thousands of bank accounts, so eBAM is an important part of our strategy for the future. Our plan is to implement a piece of functionality in our treasury system that supports eBAM, and then, as soon as we have the opportunity, to add the messaging to support it. It is not just for the banks with which Hilton Worldwide deals today: we are consistently adding banks throughout the world as we grow. We are trying to steer things so we always work with banks that are SWIFT enabled.

Another objective for the company is to make use of the messaging service for deal confirmations. Currently, the treasury department uses a separate third-party system for confirming foreign exchange and other hedging deals, but the eventual aim is to integrate this function with its other financial messaging. In the end, what we want to do is sell more hotel rooms and make a better experience for our guests – we do not want to have to be IT experts.