Hilton HHonors Worldwide: Loyalty Wars
Executive Summary
Hilton Worldwide is an American global hospitality corporation and it is highly recognized in the market. Hilton Hotels are known to be stylish, and strategic looking entities in the hospitality industry. Currently, Hilton serves guests in more than 76 countries than any other hotel brand and it has more than 530 hotels. EssayBishop nA key rival of Hilton announced a revised guest loyalty program that offer new features. The program helped Starwood in starting to attract individual business travelers. Hilton had to develop a loyalty program to respond to Starwood program as a way of retaining the brand position and the image. The loyalty program also sought to increase the loyalty of their customers towards the brand rather than the guest program only. Growing the brand of the company is critical because the hospitality mainly relies on their brand to attract the various consumers into their hotels. Hilton HHonors is facing a raising costs and expenditures due to the adoption of the loyalty programs that are not cost-effective. Hilton HHonors relies on the loyalty programs including the implementation of the aggressive regular-guest programs, which would lure more travelers into their hotels. Even though Hilton invested around $50 million in ad campaign, the loyalty program of Hilton faces stiff competition from other big hotel companies offer similar loyalty programs including Starwood, Marriott, Hilton, and Hyatt.
PEST Analysis
The PEST analysis of Hilton evaluate the key environmental factors affecting the performance of the company. The company’s brand was controlled by Hilton Hotels Corporation and Hilton International. However, the two brands agreed to unite together forming a strong global brand. The new corporation decide to cooperate on various functions including sales and marketing, standardization of the operations, and the management and running of the Hilton HHonors loyalty program among the various hotels. To promote their brand and compete with other rival companies, Hilton created and were keen to implement the HHonors loyalty program. The loyalty program was keen on the managing of the revenues and yields, collaboration with partners, working with the franchisees, improving the relationships with the guests, and helping the travel managers to comply with the customer needs.
Based on the industry, the hospitality market was least attractive as the industry was mainly dominated by the large scale players. The hospitality industry is also a mature industry and thus, new firms were facing a key challenge in entering into the market. The existing companies in the industry experiencing medium returns and investment opportunities due to the challenges of implementing a differentiation strategy in the industry. Hilton faces a stiff challenge in getting more consumers into their hotels. Most Americans rarely sleeps in a hotel. Among 74% of all Americans who travelled overnight annually only around 41% spent their night on a hotel or resort. Hilton is competing in a small market segment that is mainly shaped by the price levels, the purposes of the trips, and the division among leisure, convention, and business departments. The business segments largely accounts for around 30% of the room nights in the hotel market.
In terms of competition, Hilton faces stiff competition from other key players in the lodging industry. All these players have come up with generous loyalty programs and thus, Hilton was pushed to invest on the loyalty program even when it was costly for the company. The market share has Bass leading at 34%, Marriot International at 23%, Promus at 18%, Starwood at 9%, Carlson at 7%, Hilton at 6%, and Hyatt at 3%. Hilton has the lowest percentage of guest rooms compared to other rivals. Hilton has only 6% guest rooms compared to Bass and Marriot with 30% and 23% respectively. In the late 1990s, Hilton created a loyalty referred to as the Hilton HHonors that help in providing incentives to the consumers. Compared to its competitors, the HHonors program allowed for free enrollment and ability for anyone to apply to be enrolled into the program. The program involved various tiers of membership including Blue, Silver, Gold, and Diamond. Every tier was awarded to the customers based on the days stayed in the hotel. Hilton will need to come up with relevant strategies to compete with the rival companies with generous loyalty programs. Going forward, Hilton had an opportunity to capitalize on the emerging markets, expanding their luxury brand as well as investing in the franchisee contracts and programs.
Strategic Options
To overcome the loyalty war challenges, Hilton had to decide on the right strategic measures and actions to implement to remain competitive effectively in the lodging market.
1.
The differentiation of the current loyalty program by a persuasive brand strategy and promoting the brand passion. Such an option would be critical in expanding the overall brand loyalty. The persuasive brand strategy will be able to attract and retain the loyalty consumers as well as develop long-term relationships essay bishop. However, the integration of persuasive brand strategy has some disadvantage including being costly and unable to increase the consumers directly. The strategy would be able to increase the customer base by 15% in the next 12 months.
2.
Partnership with other companies is also critical as it would help in strengthening the company’s loyalty program as well as attracting more consumers. Hilton was able to partner with around 25 airlines, car rental firms, and others. Through the partnership, Hilton should try to avoid competition. Hilton would rely on firms who were complementary in improving the loyalty of the consumers and allowed the customers to earn points jointly. However, the partnership strategy might not beneficial to the company as the partnership might unable to translate into higher consumer loyalty and revenues. The goal of the strategy to increase the proportion of partnership with other key companies in the market by 25% in the next 2 years.
3.
Increase the budgetary allocation of the marketing department. For instance, an increase in the budgetary allocation to the marketing unit by 50% would help in expanding their marketing capacity to build a stronger brand compared to its rivals. Hilton is expected to respond to the competitive Starwood program that offered customers better offers. The increased budget to the marketing department would be useful in revamping their loyalty program through increasing the rewards to the consumers. The loyalty membership programs would need to be expanded to help attract and maintain the consumers in the hotels without any challenges. The disadvantage is that the increase in budgetary allocation will be costly for Hilton to manage effectively.
4.
Another strategy is loyalty increment would be effective in increasing the benefits to the loyal consumers. It will involve reducing the point systems to help more consumers in receiving significant benefits from the program. The allocation of points through the loyalty program was high and thus, reducing the points would assist in expanding the benefits received by the members. However, the disadvantage was the approach would make the loyalty program too expensive to manage.
Tactical Plan
The action plan for Hilton would be to increase the overall marketing budget allocation to the marketing department to increase the positive brands for Hilton in the hospitality industry. In terms of price, the company will reduce the pricing for guest rooms by 15% in the next 3 months as a way of attracting more consumers to the hotel. The marketing budget will be used to ensure that Hilton can cut price levels while maintaining a high level of quality and customer satisfaction scores. The distribution of the brand will need to be done through online social media campaigns. In the next 6 months, Hilton will need to invest around $2milion in promotional campaign about their brand and the loyalty program. To respond to Starwood program, essaybishop it is recommendable for the management of Hilton to be aggressive in the financing of the loyalty program as a way of improving the growth of the company’s revenues. Integration of persuasive brand strategy is significant and might counter the influence of Starwood and other key rivals in the hospitality industry including Marriot International.
In the short run, Hilton should be focused on retaining the existing customers through offering excellent customer service. The marketing team should also focus on the positive factors including the Double Dipping Service s a way of attracting more customers. Having positive attitude towards the members and new customers will be critical in growing the overall market share of Hilton. In the long run, the expanding the marketing budget will help Hilton in growing their overall brand and the public image. In the next five years, Hilton will expand their market share by being able to grow their brand rather than the loyalty program. Currently, the loyalty program of Hilton is more popular and has good reception than their overall brand. Most importantly, Hilton will need to invest in talented people and efficient promotional campaigns. Hiring experienced marketers in the hotel industry will enable the company to learn how to compete effectively in the industry. As a result, the capacity to improve their brand is critical in shaping their long-term performance and public image to remain successful.
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