Marketing Strategies for HILTON in Europe - Essay Example

Introduction Marketing strategy is as important for a company as the operational one. Without developing a certain approach to the market based on the overall company’s policy and market conditions every large company is doomed. On the other side, a single unique strategy for an international corporation can’t consider cultural preferences However, there is another way. Overall marketing strategy can be a set of guidelines, adapted to each region in a different way. Such strategy allows coordinating divisions while giving them enough autonomy to adapt to specific market conditions. This essay analyses marketing strategy of Hilton Group Plc. Though it includes not only hotel business, most of its solutions are illustrated through its European hotels division: Hilton International. The first part of the essay starts with a company background and the analysis of its financial reports. Then market conditions are observed through PEST analysis, SWOT analysis and Porter’s Five Forces tools. Further Hilton segmentation and positioning is discussed. The next part of the essay deals with Hilton brand overview. Finally the marketing strategy of a company is analysed through the four P’s of marketing mix. A special emphasis of the essay is made on the diversification implemented by Hilton to meet different cultural expectations. Company background Hilton Group Plc. is one of the most well-known corporations in the world. Its history dates back to 1919 when Conrad Hilton purchased his first hotel. Throughout the years the company developed into the first international hotel brand in 1949. Currently it is a major hotel operator through its Hilton International division and Hilton Hotels Corporation with 2,500 hotels worldwide operated by both companies, over 500 of which are branded Hilton. Hilton Group is more than just hotels: Hilton Ladbroke is a betting shops division operating in the UK, Ireland and Belgium; and LivingWell Health Clubs division is about health and fitness clubs mostly situated in the UK, however there are some international extensions in Australia, Germany, Turkey, Malta and Brazil. “Hilton Group employs more than 84,500 people across 80 countries worldwide” (Hiltongroup.com 2005a). As for financial matters Hilton looks reliable today. “Hilton Group enjoyed one of its best performances in recent years and the Board is pleased to present a strong set of financial results with earnings per share rising by 52%” (Hilton Group 2004, p. 10). Internal analysis of 2004 shows that Group profit before taxation was 383,1m GBP which is 41% than in 2003. More detailed, Ladbroke division has brought 273,4m GBP of profit (an increase of 28%), while profits of hotel businesses were up to 171,3m GBP from 146,5m GBP, which is a 17% rise. Despite the negative impact on tourism made by world terrorism and global catastrophes, financial statements of Hilton make the impression of solidity. PEST Analysis for Europe Political factors in Europe seem to have positive influence on the whole hotel industry recovering from Iraqi war and global terrorism setbacks. Hotel business will only benefit from further expansion of EU into the East. As far as betting and gaming is concerned, new Gaming Bill published in the late 2003 in the UK leads to unprecedented scrutiny, however the year 2004 has showed minor impact on the Ladbroke’s business. Cost rising factor in Hilton hotels business remains a serious issue in Europe. For example the rise of sea transport costs and increase of oil prices has hindered the travel industry, which of course reflected on the hotel business. Tsunami catastrophe has caused panic in tourists. On the one side it has overall negative impact on hostelling. However, it makes European countries more attractive for tourism because of their stability. Overall the year 2004 was seen as the year of recovery for hotels industry. The most promising aspect is technological. Website reservations have increased up to 22.8% comparing with previous year. “In 2004, brand websites grew substantially and gained share compared to third-party merchant and opaque websites.” (Koumelis 2005). Electronic reservation creates an opportunity: it is estimated by Hilton that half of reservations will come from electronic channels by 2008. SWOT Analysis Strengths: One of the greatest strengths of Hilton is its brand. Well-known and respected throughout the Europe it creates value for the company. Other advantages include unprecedented mix of knowing how to run business locally and at the same time great international coordination. Hilton manages to remain as close to its clients as most local market players do. Later on this point will be discussed with more detail. Additionally diversification allows Hilton covering more market range than most hotel chains do. Weaknesses: At present company faces a serious expenditure problem, which is its main weakness. It is currently reduced to 102m GBP but still requires great efforts to control. Moreover, sometimes the company is accused in having no personality in its approach to clients. Its quality is well-known but it is soullessly standard. Opportunities: Using data from the PEST analysis above, the increasing public interest in electronic reservation can be seen as an opportunity for Hilton. Along with rapid growth of eGaming (an opportunity for Ladbroke) that marks further expansion of Hilton into IT. Threats: Terrorism threat still remains extremely serious for Hilton. For example, Hilton Taba in October 2004 was attacked by terrorists: “explosion at the Taba Hilton killed at least 34 people and wounded more than 150 others” (Salama 2004). Europe seems to be less subject to terrorist attacks, however panic caused by such shocking events requires additional security measures to satisfy customers. Table: Hilton SWOT Analysis Strengths: Extremely strong brand Diversification leads to good proportion of local/international among the divisions and long ‘market range’ coverage Great use of franchising strategy Weaknesses Undesirable level of capital expenditure Lacking personal touch with clients Opportunities: Clients are very interested in electronic services and reservations made through Internet Threats: Panic in travel and tourism industry rising with every terrorist attack Porter’s Five Forces Threat of Entry: The hotel industry in Europe is very dense therefore the risk of new entrants in this sector is low. Current key players in the hotel market sector (e.g. Accor, Choice Hotels Europe, Hilton, InterContinental Hotels etc.) look strong enough to withstand claims from new competitors if emerged. Buyers’ Power: Hotel visitors are strongly differentiated and numerous, and Hilton is established well enough to be one of the major players dictating its own market conditions. Though switching costs from one company to another are small buyers’ power in this sector is considered to be low, increasing only in luxury segment. Suppliers Power: Hotels basically don’t have any significant suppliers of great importance. The only important impact is made by tour operators, but because of their great variety they don’t have enough power to be threat to Hilton. Threat of Substitutes: Current travelling tendencies in Europe show that although customers are ready to spend more money on vacations today there is a certain shift to shorter holidays. “People are taking shorter holidays, but they may take two or even three holidays a year. They are looking for active holidays, more recreation in less time, more experiences on city breaks” (Berger 2004). These trends entail less need in hotels for customers. That is why the risk of substitutes of hotels is considered to be moderate. Resuming, although suppliers and buyers don’t have enough power to control Hilton hotels, rivalry is high because of strong competitors and current trends for shorter holidays. Luckily for Hilton, it is one of the key players in this situation. Segmentation, Targeting, Positioning Hilton operates mainly on the upper and mid-market segment, both on B2C and B2B European fronts. This includes 250 hotels under Hilton brand (up-market) and 150 under Scandic, the leading hotel brand in Northern Europe purchased in 2001. Additionally through partnership with Conrad Hilton goes into luxury segment. Hilton is currently aiming to further diversification of its portfolio franchising European mid-market hotel chains. “The group is also willing to establish a presence in the mid-market not currently served by Hilton International in Europe and Africa.” (Hiltongroup.com 2004) The target audience of Hilton could be evaluated not through demographic but through psychographic means. Hilton positions itself as a company that respects privacy of its customers above all. “The concept of trust as a business opportunity, and information privacy as a key element in establishing trust, fits comfortably into Hiltons corporate culture” (Cone 2004). Similarly to many companies Hilton collects a lot of information regarding its customers. With the concept of consumer trust placed at the basis of the business and a well-defined ethics code Hilton gains great level of customer satisfaction and loyalty. Obviously, people that use a hotel as their ‘temporary home’ enjoy such a positioning of Hilton. “If you’re looking for the convenience of mass standardization with a large chunk of quality thrown in, then you know exactly what you’re getting at Hilton.com.” (Cocoran 2002) While Hilton goes for high quality and privacy valued in the upper market segment, its Scandic brand in Norway stands for other ideals: easy living and environment. Modern tourists show great care to ecological issues and Scandic supports that strive: “when it comes to preserving the environment, Scandics environmentally sound practices enable reductions in energy consumption, waste and emissions. This saves costs while making guests stays more pleasant at the same time“(Hiltongroup 2005b). Scandic is about relaxed and informal stay for guests from the moment they arrive. Luxurious Conrad hotels are high-class in everything from the fundamental principles of guest service, to the boundaries of architectural expression. Its corporate culture adds value to its customers preferring luxury above all. “High standards of architecture, design, comfort and services have allowed Conrad Hotels to receive notable distinctions in the industry” (Conradhotels.com 2005). As can be seen from the above, Hilton achieves its goals through diversification. There are completely different approaches to the way the business is held depending on the division. That allows the company to meet the requirements of completely different customers and at the same to avoid unnecessary competition between its franchises. Branding As it was stated above Hilton brand is probably the strongest in hotels industry. However sometime ago it was complained by its customers as lacking personal touch. The board has considered this and made serious redevelopments. Currently Hilton is often referred to as not only high quality, but also culture-identical to its environment. “Hilton hotels are regarded as special places that reflect the local cultures in which they are geographically situated… The new identity system unites this asset worldwide, combining the uniqueness with a common commitment to excellence of service” (Jarvis 1998). Brand attributes of Hilton could be summarised as follows: high customer loyalty, a combination of global coverage wit local insight, high quality of service and high level of brand integrity. All this makes Hilton brand the main equity of a company. Let me dwell on the aspect of local insight recognised in Hilton: how did they manage to achieve this? How could a company be global and local at the same time? The answer on that question lies mainly in the field of strategy. Hilton is building its expansion through franchises. Hilton managed to come through the travel sector recession in good shape partly due to some well-timed deals and restructuring efforts… that made the company less dependent on revenue from hotels owned by Hilton. Franchise and management fees now account for more than a third of the companys sales. (Hoover’s Company Reports 2005) That gave a company double-sided positive impact. On the one side Hilton grows without adding capital expenditures. On the other, its local franchises run the business locally while staying in the international corporation. Such a chosen strategy proves to be useful when it comes to marketing. For example, Hilton Worldwide Resorts, Hilton International´s portfolio of 47 upscale resorts around the world, has been proclaimed by the UK National Business Awards 2004 as the ‘Marketing Strategy of the Year’. “Hilton International has established the Hilton Worldwide Resorts product and brand. A total resort product with defined market sectors and a resort experience that people can trust has been developed, separate from the parent brand.” (Bahamasb2b.com 2004). This can serve as an example of franchising strategy: Hilton achieves its local insight through separating and diversifying its divisions from the core brand. Diversification is also attained through local websites for every country. Using the same language as your customer is extremely important to generate the feeling of personification and locality. Marketing Mix: Product, Price, Place, Promotion Product: Hilton is offering different products through different divisions. Hilton hotels bring quality and privacy for upper-market clients. Scandic targets mid-market section with its informality and environmental care proposal. Conrad meets expectations of luxury market with its concept of magnificence in everything. Every need is considered but with different brands. Additional various services (e.g. Hilton Worldwide Resorts mentioned above) are also diversified. Every product or service is managed in its own unique way. Such autonomy allows to achieve better performance through better understanding of certain segments of market and therefore to increase overall performance. Price: Hilton pricing policies are also greatly dependant of a product or service and the target audience it is faced. There is no general pricing policy, but there is a general line, that is: to ensure customers will receive services at best prices through own branded websites. Based on a re-evaluation of underperforming traditional distribution partnerships, Hilton International have opted instead to concentrate efforts on driving direct consumer bookings via Hiltons brand websites. Partnering up with UK emarketing team, TradeDoubler, Hilton UK are establishing an affiliate marketing program with the aim of driving 20% of its business online within 3 years. (Metaxas 2005) Place: Redesign of Hilton’s distribution net has been a serious reason for redevelopment held in the past years. Hilton has gained competitive advantage by keeping control of its booking systems rather than relying on third parties-both offline and on the Web. The company treats Web bookings as serious as it is possible. “Technology has enabled us to beef up our marketing, our distribution, our reservation, purchasing and operational systems,” says Hilton president. “Every hotel manager tracks a live ‘scorecard’ that details business goals and performance indicators on an almost real-time basis” (Karpinski 2001). Promotion: Hilton stimulates loyalty increase of its customers through wise discount policies. One of its designs is HHonors, a guest reward programme that gives frequent travelers a faster way to earn the rewards. Members of HHonors earn points in addition to airline miles for every qualifying stay at Hilton hotels worldwide. “Due to the unmatched flexibility, generosity and value offered by HHonors programme features, as well as the many aggressive promotions that HHonors offers each year, the programme has been recognised with numerous travel industry awards” (Hospitalitynet.org 2000). Eventually this programme turns into additional profits as more customers with greater loyalty use services of Hilton. Conclusion Hilton has almost managed to regain its success of 2000. Analysts say that the company will perform even better in future. The roots of its prosperity lie in present times. Let’s summarise what made the performance of Hilton better. Franchising strategy has allowed the company to operate its divisions along with modifying them according to changes in national market conditions. The brand of Hilton is a synonym for the word ‘hotel’. This was achieved through a continuous quality improvement and proper positioning of services. Customers moving to Internet were timely spotted by the board and e-commerce strategy was developed considering previous two principles. Despite its international nature, Hilton is closer to customers than many local brands. The company can serve as an example for the fact, that multinational doesn’t always mean distant. Reference List Bahamasb2b.com. (2004). Hilton Wins Marketing Strategy Of The Year Award. Retrieved May 17, 2005 from http://www.bahamasb2b.com/news/wmview.php?ArtID=4401 Berger, R. (2004). Holidays 2004 — Shorter, More Often, More Expensive. Retrieved May 17, 2005 from http://www.rolandberger.com/press/en/html/releases/514-press_archive2004_sc_content/pr71.html Cocoran, I. (2002). Hilton Brand. Retrieved May 17, 2005 from http://www.brandchannel.com/features_webwatch.asp?ww_id=55 Cone, E. (2004). The Value of Trust Through Privacy. Retrieved May 17, 2005 from http://www.cioinsight.com/print_article2/0,2533,a=134661,00.asp Conradhotels.com. (2005). Development Opportuninties. Retrieved May 17, 2005 from http://www.conradhotels.com/en/ch/brand/development.jhtml Hiltongroup.com. (2005a). Hilton Group Plc. About Us. Retrieved May 17, 2005 from http://213.131.169.243/main.asp?page=6 Hiltongroup.com. (2005). Scandic by Hilton. Retrieved May 17, 2005 from http://213.131.169.243/main.asp?page=403 Hiltongroup.com. (2004). Hilton International counts on franchising to speed Scandic and Hilton brands development. Retrieved May 17, 2005 from http://www.mipim.com/App/homepage.cfm?moduleid=308&appname=100419&K_MAG_ID=2672&K_MT_ID=324&step=FullStory Hilton Group. (2004). Annual Review. Retrieved May 17, 2005 from http://www.hiltongroup.com/annual_report_2004/pdf/annual_review.pdf Hoover’s Company Report. (2005). Hilton Business Strategies. Retrieved May 17, 2005 from http://answers.google.com/answers/threadview?id=503120 Hospitalitynet.org. (2000). Hilton HHonors Recognised as Best International Programme of the Year by Readers of InsideFlyer; Programme Also Receives Two Accolades within Best Award Category. Retrieved May 17, 2005 from http://www.hospitalitynet.org/news/4004442.search?query=%22hilton+international%22+hhonors Jarvis, D. (1998). Hilton Introduces New Worldwide Graphic Identity; Brand Synonymous With Hotel Enhances Equity for New Millennium. Retrieved May 17, 2005 from http://www.hospitalitynet.org/news/4000937.search?query=hilton+brand+attributes Karpinski, R. (2001). The Remodeling Of Hilton -- Expansion Into New Chains And Franchising Made E-Business An Imperative. Retrieved May 17, 2005 from http://www.hospitalitynet.org/news/4008189.search?query=hilton+b2b+or+b2c Koumelis, T. (2005). Major hotel chains grow Internet reservations over 22% in 2004. Retrieved May 17, 2005 from http://www.traveldailynews.com/new.asp?newid=21840&subcategory_id=77 Metaxas, D. (2005). Hilton International concentrate on driving bookings online. Retrieved May 17, 2005 from http://www.ameinfo.com/52936.html Salama, V. (2004). Exodus Redux. Retrieved May 17, 2005 from http://businesstodayegypt.com/article.aspx?ArticleID=2842 Read More