Strategic Management in the Hospitality Industry, on TUI travel company
This report includes through analyses of Hilton Inc. and it business unit such as Hilton Hotels and Resorts, Conrad Hotels and Resorts, Home2 Suites by Hilton. The report consist of introduction based on Course work one, covering Porter Five Forces Analyses, Competitive capabilities, and PESTEL Analyses’ results. Further study of Hilton strategic position, are done by using in famous Porter generic strategy and Strategy clock theories in order to identify strategic position of Hilton Hotels and Resorts.
To extract more detailed information regarding Hilton strategic performance, the author conduct value creation process of Hilton worldwide towards its business unit, analyses. Additionally the analyses were done using Ansoff Matrix and BCG Matrix with three business units of the Hilton Inc. The author of the report was able to compile detailed report based on provided information, as well as provide recommendation on potential future opportunities.
Hilton worldwide is one of hospitality largest corporation. The organization has been around for almost a century now, with Conrad Hilton purchase of his first lodging property known as Mobley Hotel in 1919 Cisco, Texas. Shortly after Conrad Hilton recognized the potential of lodging industry and in 1925 the first Hilton Hotel was found in Dallas, Texas. Throughout following years Hilton lodging company continues to expend and grow across United States of America. The turning year for Hilton Company was 1949, when first international Hilton Hotel was open in Puerto Rico.
However, Hilton success was only behind rapid expansion but also behind Conrad Hilton believe in innovations. Hilton hotels were the first lodging hotels to inaugurate in-room TV (1947), as well as the begin developing property within promises of Airports in 1963.
Nowadays, Hilton Corporation has taken place among Hospitality leaders, with ten business units within an organization. Those include Hilton Grand Vacations, HOME2, Hilton Garden Inn, Hilton Hotels and Resorts, Hampton, Double Tree, Homewood Suites, Embassy Suites, Waldorf Astoria and Conrad Hotels and Resorts. Hilton property has scattered across 6 continents and 90 countries, with total of 4000 Hotels and 650000 rooms. The organisation is also providing employment for more than 144,000 employees worldwide.
FORMALLY STARTED BY THE ORGANIZATION
? H OSPITALITY
Passionate about delivering exceptional guest experiences
? I NTEGRITY
Do the right thing, all the time
? L EADERSHIP
Leaders in the industry and in their communities
? T EAMWORK
Team players in everything they do
? O WNERSHIP
The owners of their own actions and decisions
? N OW
Operate with a sense of urgency and discipline
Vision To fill the earth with the light and warmth of hospitality
Mission To be the preeminent global hospitality company the first choice of guests, team members, and owners alike.
Team compiling a previous project, has come out with two primary key scenarios that might have a direct affect for Hilton Hotels and Resorts. Those scenario included Strict Visa Regulations and importance of e-commerce.
Visa regulation in the country is one of the tools to adjust number of foreigner arrivals; therefore it has a direct impact on tourism volume. Hilton Hotels are part of Hospitality industry and directly affected by tourism industry in the country.
E-commerce as world enters IT era, it’s essential for large organization to adapt to changes in ways of conducting business and market themselves. If once the most popular marketing approaches were billboards and printed media, now with Internet continue growing, Online marketing become a vital tool for marketing and advertisement.
The best key scenario for Hilton Hotels is believed to be a combination of low visa regulation and strong e-commerce. Low visa regulation will allow volume of tourism to increase; consequently expanding a size of tourism market as well as profits for organization if such managed to take advantage of growing market. Whereas, strong e-commerce will provide a ground for organization to increase its market share in growing market resulting to increase of company’s revenues.
Porter Five Forces analyses:
The approach allowed the author to identify the attractiveness of Hilton Hotels and Resorts for future investments. It was identified that Suppliers have a low power, buyers have a high power, threat of substitutes is high, new entries are low and rivalry is high in the market. Although the analyses of five forces have shown a comparably balance distribution of power in the market for large hospitality operators, the industry remained attractive for investments. The business remain stable over time with power distribution in the market is balanced. Additionally Hilton Hotels and Resorts is remaining potentially attractive business for investment. Despite long term financial crisis, organization continues its growth and expansion within flourishing markets in Asia and South America with number of new projects being developed.
Competitive advantages of Hilton worldwide:
Hilton Hotels have a number of unique competences, which are exclusively designed bathroom amenities by infamous dermatologist Peter Thomas Rose. This allows Hilton to provide unique experience for their customer as well as out-stand
organization from its competitors. To further enhance unique experience, ePrint HP application was designed for organization to ensure convenience for business customers that have put their trust with Hilton. Moreover, Hilton is not only providing unique experience for their customers but also for their employees. Hilton Training program known as Hilton Worldwide University is large training and education program that allows employees to develop their personal skills and educate them with accordance to Hilton’s values, mission and vision.
Those resources and competences allow Hilton to create a unique image in contrast with their competitors. Exclusively designed applications and amenities are ways to enhance guest experience and allow them to feel differences between Hilton and other brands. Training program for Hilton is not only aiming to provide experience for employees, who is able to develop their skills and establish a career growth but also provide unique experience for customers as ways to deliver service and product are different from those of other brands.
Aims and Objectives
? To analyse strategic position, the strategic purpose and culture of Conrad Hotels and Resorts, Hilton Hotels and Resorts and HOME2 Suites. Thereby using strategic planning and change management theories.
? Examine competitive strategy of Hilton Hotels and Resorts and Strategic Clock
? To analyse with the use of the Ansoff Matrix and BCG Matrix strategic options that Conrad Hotels and Resorts, Hilton Hotels and Resorts and HOME2 could/should pursue in the future
? To write a conclusion and propose recommendation for future organization
HILTON HOTELS RESORTS:
Hilton Hotels and Resorts is one of the most prominent business units within Hilton worldwide corporation. Its mid-range hotel, available to customers in any parts of the world, the property is considered to be competitor to other hospitality leaders such Marriott Hotels and InterContinental hotels. The Hilton hotel has a large pool of loyal customers that have been with company for many years or only join. The organization use Hilton Honor reward program to sustain and build a large pool of loyal customers, both leisure and corporate travelers.
The Hilton works towards creating and providing unique experience for it’s customers through provision of exclusive training for Hilton employees, who consequently delivers Hilton standard of service to customers. In accordance with beliefs of Hilton founder, organization is working to implement innovation in daily operation of Hotels as well as for guest experience. It’s not only renovation and updating of facilities that allows Hilton to preserve experience, but it’s also exclusively designed amenities and even application for business center.
Although Hilton Hotels and Resorts is high standard property, it’s not a fully luxury hotel like Conrad and Astoria Hotels, but it’s a property that is considered to be among industry leaders. As mid-range hotel that is surrounded by number of strong competitor. Hilton is not able to be flexible with the rate, and is forced to maintain market average rate to remain competitive. Thorough Hilton Marketing it could be seen that Hilton is attempting to present itself as different lodging establishment that provide unique and special experience for customers. This identifies that Hilton Hotels and Resort is attempting to establish organization as different and unique property. It makes apparent that Hilton management is using Porter Generic Strategy of Differentiation.
HILTON HOTELS AND RESORTS
Hilton Hotels and Resorts is one of the world hospitality leaders. It is a lodging company that is focused to provide high standard product and service to customers of both leisure and corporate market. Although Hilton worldwide corporation that is aiming to deliver product to various market segments from low-medium income customers to high-income customer, Hilton Hotels and Resorts are mostly aiming to sell their product to mid-range income customers.
Hilton Hotels trying to provide unique service and product to its customers in order to differentiate themselves from competitor’s Hotels. The organization providing excusive amenities, property designs as well as Hilton renowned service. Using this strategy Hilton was able to establish itself as one of the permanent members of Hospitality market.
The author of this research has concluded that Hilton Hotels and Resorts are in Route 4 (Differentiation Strategy) of strategic clock. This route of strategic clock, include organization that are providing products with high-perceived benefits at mid-range price. Therefore, Hilton as an organization is providing high standard product at average market place is currently at this stage of strategic clock.
However, Hilton is tending to change the route as touristic season changes. Hilton property is switches to Route 5 (Focused Differentiation Strategy), during pick season in tourism industry. While at this stage, Hilton raising it rates for equal product. Under Focused Differentiation Strategy it’s understood, that product is perceived to be highly beneficial and sold at high price.
Tourism industry is vibrant sector, with volume of business changes in accordance with seasons and weather. It’s been analyzed that Hilton generally operates within Route 4 (Differentiation Strategy) of strategic clock, but as demand for tourism accommodation raises Hilton is travelling to Route 5(Focused Differentiation Strategy). Furthermore, the touristic demand in certain geographic location tends to drop in volume. This is the time when Hilton Hotels switching to Route 3(Hybrid Strategy) of strategic clock. During this period of time, Hilton lowering its rates to maintain hotel occupancy but continue to provide high-standard product. Hybrid Strategy includes organization that providing high-standard product at the lower price.
Hilton Hotels and Resorts are mostly operating within three routes of strategic clock. It’s done due to changes of demand and supply in tourist market. As organization is travel from route to route, they main goals are maintain occupancy during low season, maximize profits while at pick season and remain competitive during mid-season periods.
The Hilton Hotels and resorts, is part of Hilton worldwide corporation. As part of larger network and business unit, the mother company attempting to create value for unit through various approaches. Those approaches include Envisioning, Couching and Facilitating, Provision of central services and resources and Intervening when required. This process of value creation allows organization to establish its unit into certain market. In case with this report, Hilton worldwide is establishing it’s business unit into mid-range hospitality market both in home country and over-sees.
During this stage of creating value, the mother company shares assist it’s business unit to create sense of direction and goal to strive for. Through this process Hilton Hotels and Resorts are driven and guided through set of qualities and values.
Hilton Hotels and Resorts, is largest unit of Hilton worldwide, and it shares the visions, mission and values between two organizations. Though share of values Hilton is able to establish business unit that represents everything for what the brand stands. It helps organization to spread universal standards and create a large pool of loyal customers.
Hilton brand sharing it values that state, Hospitality (Deliver the exceptional service to customers), Integrity (Staying with it principles at any situation), Leadership (Be a leader in its industry and communities), Team (encourage and practice teamwork across all aspects of business), Now (move with time, be always innovative and up to date) (Hilton Worldwide, 2014). This values allows company to be aligned in it’s interests and to be consistent for customers, competitors, communities and organizational team.
Furthermore, both organizations are sharing common mission and vision. The mission of Hilton Worldwide and Hilton Hotels and Resorts states the desire to be the preeminent global hospitality company the first choice of guests, team members, and owners alike. Whereas the vision is to fill the earth with the light and warmth of hospitality.
Couching and facilitating
The couching and facilitating is inseparable part of Hilton Hotels and Resorts cooperation Hilton worldwide. The business unit is a franchise business unit of corporation. Due to it’s nature as the franchise organization it is not focused on expansion through purchasing tangible assets but rather focused on selling service and brand in order to expend.
The organization is offering its product in set of service that include business plan, training services, marketing advantages as well as managing contract together with most importantly with a brand name. Business plan for franchising Hilton covers numerous aspect of operation, beginning with architecture, construction and decoration of the property.
Architecture and design protocols of franchise agreement, including assistants of expert’s team. The involvement of the team might varies depending on circumstance, for example if the franchisee desires to construct new building, the team will provide all necessary assistance in planning and creating building outline. However, if franchisee already possesses a property, the team will assist them with refurbishing and re-branding image of the establishment in accordance with Hilton standards (Hilton worldwide, 2014).
Other than architectural assistance, Hilton provides further services stated under managerial agreement. The agreement includes full-management of the property by Hilton established standards. Under this term is understood that Hilton is supplying Human Resource training and development, appointing an experienced and capable General Manager as well as provide assistance with food and beverage establishments, SPA operation, revenue management, event planning and many more depending on the nature of establishment.
Over all, Hilton worldwide and Hilton Hotels and Resorts are expansion-focused organization as most of the industry leaders. However, the organization recognizes opportunity through selling pre-planned service and established brand in order to expend. This sort of expansion approaches are known as franchise and focused on selling services that covers most aspect of the organization operation, instead of expending through purchasing numerous properties with direct leadership.
Providing central services and resource
Hilton Hotel and resorts is one of the first and most prominent business units with the Hilton Corporation. Headquarter organization and business unit are closely tight together with Hilton worldwide providing envisioning, and couching service to Hilton hotels and resorts franchisees. Further relation between two organizations comes from provision of central services and resources.
Central service that Hilton worldwide provides to its business units include central reservation system, common marketing and performance assistances similar to those identified in section of couching and facilitating.
Central reservation system is function of the mother company website, that allows visitors to find any business unit property at different location. Through this function the loyal customers of the brand can be informed on presence of the establishment in
different parts of the world. As Hilton executes it’s marketing program that might include certain business unit and entire brand, regardless to aim the Hilton market it’s brand name that stated on all business unit including Hilton Hotels and Resorts.
Last but not least Hilton provides the service covered in couching and facilitating and additionally it provides service such as Hilton performance appraisal mentioned on official website of the Corporation. The service intends to provide performance appraisal and owner information for franchisees in order to improve performance or adjust to changes in the market.
Hilton worldwide is one of the hospitality leading organization and as any market leader they facing the importance of establishing consistency and maintaining standards of performance unchanged. As market changes around the Globe its not always possible to remain consistent. As gaps appear, it is a signal for main company to intervene in operation of its business units.
As discussed in previous sections of value creation process, Hilton provides numerous services that intervene in operations of individual properties. The most notable part of intervening is managerial contract. As stated in the managerial function that Hilton main company is responsible for appointing General Manager and training and developing personal. Furthermore, as covered in previous sections the engineering assistants, performance appraisal and other function, could be names as intervening into daily operation of the individual properties.
Hilton Hotels and Resorts is an largest and oldest business unit of Hilton corporation. It is a brand with established reputation and large pool of loyal customers. It’s could be said that Hilton hotels and resorts is a flagship of Hilton worldwide.
This section will include the analyses of Hilton Hotels and Resorts through utilization of use the approach known as Ansoff Matrix. Ansoff Matrix is the approach of the strategic marketing that divided into four primary strategies of product development in current market situation. The Matrix is consistent of four strategies:
1. Market Penetration is strategy that includes provision of the same product, but with adjustment to the price. The companies using excessive amount of promotion to outstand it’s product. Furthermore, company is aiming at increasing number of distribution channels as well as constant product development and improvement.
2. Diversification Strategy is a strategy that common for organization, providing unique product into new types of the market. The company is tend to use economies of scope and use of dominant logic. Additionally this strategy includes a constant investment into increase of market power.
3. Market Development is a strategy used by organization that enters new market with product developed prior entrance. The organization strategy is focused on developing promotions, market research and defining of market segmentation.
4. Product Development is a strategy that used by organization that focused on development and improvement of existent product. The organization develops its product in the market, where organization is present. To develop the product organization is focused on delivering to customer needs, innovations and brand growth.
In case of this report, the author has conducted analyses and come to conclusion. Hilton Hotels and Resorts using the strategy of PRODUCT DEVELOPMENT. The conclusion was extracted due to analyses from number of fact related to organization.
Same product Hilton has been focusing on development of the same product over decade, in order to create a superior offer from its competitors. Hilton Hotels and Resorts, formally known as Hilton Hotel, is focused on developing mid-range class product to satisfy needs of mix market segment that include both leisure and corporate clients. By utilizing its vision, the organization is striving to bring innovation into set of core product of the organization. Furthermore organization has created a unique training program in order to be able to accompany core product with superior and unique service.
Focused on customer needs The Hilton Hotels and resorts are focused to create a product of consistent quality and standard in order to maintain demand for the brand. The organization is seems to be working towards growing the pool of loyal
customers. The organization created and continues using the rewards system known as Hhonnors. This program is aimed at sustaining customers and most importantly ensures provision of benefits for constant clients to the brand. The organization is focused on constant improvement of the product in order to differentiate the company from competitors.
Extension of the brand Hilton brand is one the most known hospitality brands, if not the most. Despite being among largest organizations, the company continues to practice the constant expansion through selling its brand as the franchise. It allows company to expend throughout the world without a need of purchasing tangible assets and go through process of domestic legal system. It stated on the Hilton worldwide website that company become the fastest growing hospitality organization in the world. (Hilton worldwide, 2014)
Technology Hilton Hotels and Resorts management is strive to be innovative with accordance to its values. Conrad Hilton the founder of the company has always believed that innovation is key to success. For example, Hilton Hotels were the first lodging property to equip in-room Television. To further develop the product Hilton used all innovative technology to develop its training program to improve service as well as use of technology to increase value of its product.
This section will include analyses of three business units within Hilton Worldwide. In order to conduct the analyses the BCG Matrix, also known as Growth-Share Matrix. Through utilizing the approach, author is able to define the market place of each business unit used in the following section. BCG matrix is focusing on defining product place of the product. There are totally four provided types of share-growth products:
1. Dogs is the product located in slow growing market with limited market share, those products are often break-even units, that use to diversify company portfolio.
2. Problem Child is the product located in the fast growing market, however, having low market share marks them. This type of product is the unit with unknown future outcome, as it may become a dog or on another hand it may have future as star and even cash cow eventually.
3. Star product that have high market share in the fast growing market and often in niche leading markets. The star products are often developed from problem child product and eventually matured into Cash Cow.
4. Cash Cow is often a primary products of the company that have high market share within slowly growing market. Cash Cow are company cash generators and often resulting from stars. It’s common to use number of Cash cows in company portfolio to understand the financial capability of the organization.
For this report, the author use four business units from Hilton worldwide, all business units are taken from three different types of Hilton service. Business units includes Home2 Suites (Focused service), Hilton Hotels and Resorts (Full-Service) and Conrad Hotels and Resorts (Luxury Hotel)
Hilton Hotels and Resorts:
It is the largest and oldest business units within Hilton Corporation. The business unit is established as flagship of the organization. According to official Hilton Website, the unit is fastest growing unit in the industry. Although Hiltons Hotels and Resort continue growing in the hospitality market, the mid-range hospitality market is highly developed and shared between industry leaders. Those facts could an indication, that Hilton hotels and Resort is Cash Cow of the Hilton worldwide.
It’s youngest business unit of the Hilton worldwide. The new unit was founded in 2009, and focused on selling the apartment hotel style accommodation. Furthermore, creation of this unit is attempted to penetrate extended stay market segment. This market is fast growing in the industry, due to number of reason including decrease of travel price and increase of travel accessibility as well as growth of international corporations (Hotel Management Net, 2014)
Taking into account mentioned factors, it could be said the Home2 Suites having a low market share in potentially fast growing market. This indicates that Home2 Suites is Problem Child. It’s hard to analyze and project future outcome of the unit with having both possibility to become a Star or a Dog unit. However, recent news from Hilton website indicates that there are currently 100 home2 Suites hotels with many more being built internationally as unit expends into Mexico and Canada.
Conrad Hotels and Resorts:
This unit is luxury brand within Hilton chain, the property named after founder of Hilton Company, Conrad Hilton. The property operates in high-class market, focusing sales of the product on the niche that affords luxury products. There are currently 23 Conrad properties internationally. Luxury market is highly developed and competitive market. The unit is one of the hospitality luxury establishment leaders; however, there is a limited information on financial performance of the establishment. To resolve the problem with limited information author is compared the expansion of property with other luxury business unit of Hilton Corporation. For example the Waldorf Astoria Hotels and Resorts was taken, the unit was established in 2006 making the company younger than Conrad Hotels and Resorts by two decades. Despite being a younger property Waldorf Astoria Hotels and Resorts has 26 properties with 8 more under construction. The popularity of new unit that expended further than Conrad property in 8 years might indicate poor performance of Conrad Hotels and Resorts. Taking into account this comparison and slow growth in luxury market, the business unit is indicated to be Dog unit.
Hilton Hotels and Resorts is an outstanding property of Hilton worldwide, the studies have been conducted in order to identify strategic position of the property. The numerous approaches has been used to finalize with the purpose of this study. The article includes generic strategy, routes of strategy clock, value creation and Ansoff Matrix, BCG Matrix.
Author of the report has identified that Hilton Hotels and resorts are using the Porter Generic strategy of Differentiation in order to place its product into the market. There are number of evidence that accompany the statement, evidence include creation unique features of the product, unique staff training and creation of the product that is different from primary competitors.
Strategy Clock was a second stage of analyses for Hilton hotels and Resorts. It was identified that Hilton as many other Hotels adjust the product financial value in accordance with demand in certain geographic region. Furthermore, the report includes a value creation process for Hilton Hotels and Resorts. The property is working closely with Hilton Corporation to maximize performance. Hilton worldwide sharing its culture and intervenes into operation of the Hotel on many occasions during operations.
Further study of Ansoff Matrix, made author believe that Hilton Hotels and Resorts are using the strategy of product development. This conclusion has been made due to number of reasons that include Hilton strive to sustain and deliver to customer needs through provision of perfected product. In order to conclude the study of Hilton strategic position, the BCG Matrix analyses was used. Moreover, the analyses included three business units of Hilton worldwide, such as Conrad Hotels and Resorts, Hilton Hotels and Resorts and Home2 Suites. The study showed that Conrad Hotels and Resort is a Dog, Hilton Hotels and Resort is a Cash Cow and Home2 Suites is a Problem Child of the organization.