Hilton Worldwide: Edge In Market Segments
It would be naïve to think that other multinational hospitality organizations do not have similar offerings in each of the scale segments that Hilton does; Hilton’s competitors are broken down into direct and indirect competitors. Hilton has implemented an effective market strategy to infiltrate numerous segments to gain a competitive advantage over its competitors. Hilton’s Annual Report 2016
As for direct competitors, Hilton acknowledges Accor S.A., Carlson Rezidor Group, Hong Kong and Shanghai Hotels, Hyatt Hotels Corporation, Intercontinental Hotel Group, Marriott International, Mövenpick Hotels and Resorts, and Wyndham Worldwide Corporation as its direct competitors. In Hilton’s luxury segment, which includes Waldorf Astoria and Conrad properties, the primary competitors are: Sheraton Four Season; The Ritz-Carlton; The Fairmont; Park Hyatt; JW Marriott; and Intercontinental. In Hilton’s Upper upscale segment, which includes Hilton Hotels & Resorts, Embassy Suites, and Curio properties, the primary competitors are: Hyatt Regency; Hyatt; Marriott; Autograph Collection; and Sheraton. In Hilton’s upscale segment, which includes Hilton Garden Inn, Homewood Suites, Doubletree, and Tapestry collection properties, the primary competitors are:Crowne Plaza; Holiday Inn; Aloft; Courtyard; and Hyatt Place. In Hilton’s Upper Midscale and Midscale segments, which include Home2 and Tru properties, the primary competitors are Candlewood Suites; Best Western; Comfort Inn; and La Quinta.
Hilton’s biggest indirect competitor is also the biggest indirect competitor for the entire hospitality industry:Airbnb. Airbnb offers a compelling value proposition for business and leisure travelers alike; the biggest thing holding Airbnb back from completely dominating the hospitality industry is the company’s lack of a rewards program and a higher tier luxury experience.
One of Hilton’s core competencies is its effective segmentation, targeting, and positioning strategy. The hospitality industry, and specifically the hotel industry in which Hilton competes, services a broad range of customers which can be broken down into classic marketing segments. Due to the characteristics of the services and products that the industry provides, some customer segments are more relevant than others. Hilton and its competitors attempt to create the greatest value for the most relevant segments of the market by positioning branded hotel lines to target specific customer segments. Hilton, About Our Brand
Targeting & Positioning In Market Segments
Hilton offer a portfolio of properties. The properties provide service to a wide range customer market. While there are numerous ways to segment the market, Hilton has chosen to target the most relevant segments. The main method Hilton utilizes to segment the market is breaking down customers by benefits sought. Hilton has recognized that the benefits customers are seeking in accommodations are heterogeneous, and has subsequently developed independently branded hotel lines to satisfy the heterogeneous demand. Benefits sought by customers cover the full spectrum of the market including luxury, full service, extended stays, budget accommodations, and timeshare vacation properties.
These segments possess all the characteristics of useful segments because they are identifiable, substantial, stable, differentiable, accessible, and actionable. These characteristics have lead multiple hotel chains to uncover and target those segments producing an extremely competitive market. In recent years Hilton uncovered a new segment of the market that is identifiable and differentiable.
Recent years have seen the millennial generation opt to utilize owner driven home- renting through companies such as AirBnb and HomeAway. Due to this trend, Hilton recognized that a hole existed in the offerings of the corporate hospitality industry for midscale hotels targeted at this younger generation. Hilton developed Tru by Hilton: “A simplified, spirited brand grounded in value, offering a back-to-basics experience with soul,consistently delivered in a surprisingly affordable way.” Hilton plans to open the first property in 2017 and expects the market segment Tru targets to be both actionable and accessible.
In addition to segmenting the market by benefits sought, Hilton has chosen to segment the market by geography. Hilton’s traditional footprint has been in the United States where it generates more than 75% of its sales; in recent years, however, the company has expanded internationally, specifically into developing markets. By recognizing that geographic regions have varying benefits sought, Hilton uses a multi-segmentation strategy. The strategy places brands in regions where demand exists for the brand’s benefits offered.
Finally, Hilton utilizes behavioral segmentation of the market through its customer loyalty program, Hilton Honors. Hilton Honors provides a tiered reward system in which customers earn points for nights stayed at any Hilton property. The reward points are redeemable through Hilton for goods, services, and free hotel nights. The points can be redeemed by partner companies for goods and services such as transportation. In 2016, 60 million Hilton Honors members spent nearly US$17 billion with Hilton and accounted for nearly 56% of total occupancy. The Hilton Honors loyalty program helps encourage customers to spend their travel dollars with the company and, consequently, Hilton has recognized benefits from a specific customer segment. Hilton Honor’s highest tiered customers account for the most dollars spent at Hilton properties. The Hilton Honors loyalty program provides a clear incentive for customers to consistently utilize Hilton properties.
Branded for Success
The portfolio of brands that Hilton has developed are diverse and are positioned to target numerous segments of the market. Strength in positioning these brands, leverage the Hilton Honors loyalty program to connect guests across established benefits sought segments. Hilton utilizes the fact that the name Hilton has the highest brand awareness in the hospitality industry. This ensures that the Hilton name is associated with each of its independently branded hotels.
Hilton recognizes that every country is different. They utilize regional marketing teams to integrate local features into all marketing plans and strategies. The company also incorporates its brand in its promotional strategy. Hilton knows the value and weight that the Hilton brand carries. On Hilton’s webpage, there are many statements that indicate that Hilton is aware of the importance of its brand; for example, on hiltonworldwide.com, the company promotes its brand by stating: Hilton
“With more than 700 sales professionals in offices around the world, owners and operators can be sure their property receives the combined benefits of scale, access, competence, and experience from Hilton Worldwide Sales. Our sales teams are fully engaged in providing a differentiated selling platform for our portfolio of brands. We’re focused on being the most global, integrated, and relevant sales force in the industry, relentlessly driven to grow market share.”
Hilton’s ability to obtain prominent brand recognition, and infiltrate multiple market segments are why it is arguably toe global leader in the hospitality industry.