Hilton Power Point Presentation-1

C A S E S T U DY

HILTON HHONORS WORLDWIDE

WELCOME

YOUR HILTON HHONORS EXECUTIVE TEAM:

Rasheed GbajabiamilaNatalia KolodenkoKimone Burnett-MelbourneDiwaker VasisthaAnkita Singh

OPENING QUESTIONS

What is your favorite hotel chain and why?

How many of you have stayed at the Hilton? How do you feel about the Hilton brand?

What are your perceptions of hotel loyalty programs?

Industry OverviewHilton Hotel

OverviewCompetitive

LandscapePurpose of Loyalty

ProgramsHilton HhonorsCase Synopsis

Key IssuesSWOT AnalysisPorter’s 5 Forces

ModelAlternative

ScenariosRecommendations RisksContingency PlanHhonors Today

WELCOME PACKAGE

Hotel Industry

HOTEL INDUSTRY OVERVIEW

The global hotel industry constituted of 13.6 million rooms dominated by 4 chain brands.

Marriott Starwood Hyatt Hilton

OVERVIEW CONTINUED

Hotel Chains offered services such as:

reservations

loyalty programs

on-site sales and services

management of hotel real estate

OVERVIEW CONTINUED

Less standardization of operations

Unrestricted circulation of information regarding competitor operation procedures

74% of Americans travelled overnight per year

41% used a hotel, motel or resort

https://www.youtube.com/watch?v=4Z-ocRmfBnI

Hilton Hotel Overview

HILTON HOTEL OVERVIEW

Founded in 1919 by Conrad Hilton in Texas

Hilton Hhonors introduced in 1987

In 1997 Hilton Hotels Corporation and Hilton International unified its brand worldwide

In 1999 the Hilton brand comprised of 492 Hotels and 154,000 rooms

RO

OM

1

HILTON MARKET

Hilton market was divided into three categories

Business Convention Leisure

There are 12 hotels within the Hilton brand

HILTON DISTRIBUTION

THIRD PARTY BY HHC ( USA ), 207,

42%

HIC ( OUTSIDE USA ), 220, 45%

HHC OWNED ( USA ), 39, 8%

MANAGED BY HHC ( USA), 16, 3%

HHC RUN CONRAD ( OUTSIDE USA ), 10, 2%

COMPETITIVE LANDSCAPE

COMPETITIVE LANDSCAPE

Marriott International Starwood Hyatt Hilton0

50000

100000

150000

200000

250000

300000

350000

400000

339200

212900

93700

154000

Number of Rooms

POSITIONING

LUXURY

POSITIONING

UPSCALE

POSITIONING

MID-MARKET

POSITIONING

ECONOMY

PURPOSE OF LOYALTY PROGRAMS

Building guest relationships

Yield management models

Collaboration with partners Working with franchisees

Assisting travel managers gain compliance

RELATIONSHIP WITH GUESTS

Direct contact Customized experience•

YIELD MANAGEMENT MODELS

The art and science of making more money from the same number of hotel rooms.

Data from loyalty program Behavior models

Set right price+

Drive business to high value clients

YIELD MANAGEMENT MODELS

Who will get the last room in high season? Who will be turned away?

COLLABORATING WITH PARTNERS

Partners database

Easier to earn points

Easier to spend points

WORKING WITH FRANCHISEES

ASSISTING CORPORATE TRAVEL MANAGERS

HILTON HHONORS

Designed to build loyalty to the Hilton brand

Hilton HHonors Worldwide (HHW) operates the program.

HOW TO EARN AND SPEND POINTS

HHonors points

DOUBLE DIPPING ®

HHonors points

LEVELS OF MEMBERSHIP

Everyone who joined the program

Stay in Hilton 4 times a year

15% bonus on base points

5,000 points bonus after 7 stays in quarter

Stay 16 times or 36 nights in a year

25% bonus on base points

5,000 points bonus after 7 stays in quarter

Top 1% of members

???

GUESTS SEGMENTATION

Rational benefits

Game players

Emotional benefits

Service/ relationship

seekers

CASE SYNOPSIS

The Starwood Announcement

STARWOOD PREFERRED GUEST PROGRAM

No Blackout Dates

No Capacity Control

Paperless Rewards

Hotel Reimbursement

KEY ISSUES

To determine if Hilton should compete point for point with Starwood's Loyalty program

OR

Take a different approach

Diskin’s Dilemma

CHALLENGES

Increased cost

Reduction of cost-effectiveness of loyalty programs

Starwood could become market leader

SWOT ANALYSIS

Strengths• Highly recognized brand worldwide• Experienced CEO and executives • Excellent customer service through provision of customized guest

experiences• Formidable loyalty program with unique point of difference (Double

Dipping)• Strong focus on branding• Widely varying product offerings through multiple brands• Occupancy rate that exceeds break even• Increased synergy and cost savings through unification of Hilton

Hotels Corp. and Hilton International• Huge partnerships with 25 airlines, 3 car rental firms and other firms• Good supply chain management

SWOT ANALYSIS

Weaknesses

• Challenges managing customer expectations due to varying offerings

• Relatively limited network size and distribution

SWOT ANALYSIS

Opportunities• Target other customer segments • Increased market penetration (Hilton Hhonors

members spend 4.6 billion on accommodations per year but not all with Hilton)

• Boost brand loyalty• Increased expansion into emerging markets

and Caribbean• Acquisition of other hotels

SWOT ANALYSIS

Threats• Competition (primarily with Marriott International,

Starwood Hotels & Resorts and Hyatt Hotels)• Availability of information about each hotel’s

operations • Vulnerable to economic downturn, political instability,

natural and man-made disasters• Small market defined by price points and trip

purpose• Increase in operational costs and overheads• Expense of maintaining loyalty programs of this

caliber

PORTER’S FIVE FORCES MODEL

Threat of New Entrants – Low

Significant capital Requirements- Expensive to establish hotels as they are significant initial outlay costs.

Existence of brand loyalty among established brands

Building brand equity and brand recognition takes time.

PORTER’S FIVE FORCES MODEL

Threat of Substitutes - High

Existence of motels, Inns and others that satisfy the same needs

Threat of sharing economy (for instance staying in private residences)

Easy for customers to switch between options

PORTER’S FIVE FORCES MODEL

Bargaining Power of Customers- Medium• Buyers can influence prices based on certain factors such

as:• frequency of stay at hotels• number of guests• status of guests

• Buyers can shop around for best deals• Customers have a significant influence over service

quality and delivery• Hotel prices are usually set and not easily changed

 especially for infrequent customers and depending on the season

PORTER’S FIVE FORCES MODEL

Bargaining Power of Suppliers- Low

Many suppliers from which to choose

Suppliers usually try to please large hotels  and tend to bend in their favor to avoid losing contracts

PORTER’S FIVE FORCES MODEL

Intensity of Competitive Rivalry- High

Highly competitive industry

Price and advertising wars can ensue

Low product differentiation among premium brands, their product/service offerings are usually the same

ALTERNATIVE STRATEGIES

#1 Loyalty War: Match the Loyalty Program of Starwood

HotelNo “blackout” dates

No capacity control

Paperless Rewards

Hotel Reinmbursement

ALTERNATIVE STRATEGIES

#2 Differentiate Hilton Hhonors from Starwood & Competitors

Expand partnerships with other companies

Focus on service-seekers – not game players

Improve experience of upper tier members of

program

Emphasize communication of “Double Dipping”

ALTERNATIVE STRATEGIES

#3 Paid Membership

Coupons and discounts

Flat rates across seasons

Personalized Gifts

RECOMMENDATION

RECOMMENDATION

Alternative #2Differentiate Hilton Hhonors from Starwood & Competitors

RISKS

RISKS

Other competitors may follow suit with Starwood resulting in Hilton being left lagging in the industry

Insufficient return on investment resulting in significant financial losses

CONTINGENCY PLAN

Imitate the Loyalty program of Starwood Hotels to remain current with industry offerings.

Carefully plan and manage the amount of money being spent in order to avoid unnecessary expense and cost over runs

RECOMMENDED AREAS OF RESEARCH

In-depth market research to analyze cost/ benefit analysis of chosen alternative.

Identify future trends in loyalty programs and consumer behaviour.

Estimate volume of each segment of members: find out how many members had negative experience.

HHONORS TODAY

https://www.youtube.com/watch?v=0-ssLCIvkYk

HOPE YOU ENJOYED YOUR STAY WITH US