Hilton Worldwide: Market Strategies Leave International Footprints of Success

Ever Heard of Hilton Worldwide?

Hilton Worldwide, Inc. (NYSE: HLT), is a world-leader in the global hospitality industry operating within the hotel industry, a sub-segment of the expansive hospitality industry. Hilton provides a uniquely and truly global product across the globe. With the company’s first hotel in 1919 to its thousands of hotels today, the company has seen changes in its business structure, offerings, and, inherently, its marketing strategy. Market segmentation has led Hilton to differentiate itself through the creation of various product lines, causing the need for marketing strategies specific to each brand. Hilton’s choice to expand into the global market has also caused a need for the company to create a focused marketing strategy to serve various segments. Hilton’s marketing strategies and Segmentation, Targeting and Positioning offers opportunities recommendations for Hilton to further its reputation as a leader in the global hospitality industry.

Hilton’s business operations are broken into three segments: property ownership; property management and franchising; and property timeshares.  Hilton reports that, as of December 31, 2016, it owned approximately 141 hotels containing 57,716 rooms through both direct ownership as well as leases.  Hilton’s property management and franchise portion of its business operations consists of 4,734 hotels containing 738,724 rooms.  Finally, through the timeshare business segment, Hilton sold timeshares in 47 properties covering approximately 7,657 individual timeshare units. Stock Market Daily 2018

In Hilton’s 2016 Annual Report does discuss plans for future development. Hilton hopes to grow its business by increasing the amount of global properties in its portfolio.  As of December 31, 2016, Hilton had approximately 310,000 rooms scheduled to be opened at some future date, with most them falling into Hilton’s management and franchising business unit.  Of Hilton’s 310,000 planned rooms, more than 150,000 were already under construction by end of year 2016. Hilton Worldwide, Annual Report 2016

Brand Variety

Across Hilton’s 14 hotel brands, the company’s annual report breaks down the brands into “Chain Scales”; this allows several brands to target the same customer category. At the top of Hilton’s brand lineup, we have the Waldorf Astoria and Conrad collection. Waldorf Astoria Hotels & Resorts and Conrad Hotels & Resorts are Hilton’s high-end luxury brands.  These hotel chains attract the highest dollar value customers. Those customers want the most customizable experience. The primary difference between Hilton’s Waldorf Astoria and Conrad brands is location; the image below shows the geographic distribution of the two chains.  Conrad brand has many more properties in Europe and Asia, while Waldorf Astoria has a concentration in the United States and Europe.

 

In the above image, Silver tags represent Waldorf Astoria properties while Yellow tags represent Conrad properties.

Two of Hilton’s key strategies that contribute to its success are a variety of brands that target different market segments and their pricing strategy. Though both brands attract High Dollar luxury driven travelers, they each target a different segment based on their locations. Combined, Waldorf Astoria and Conrad brands represent 55 properties and 19,757 rooms across Hilton’s portfolio.  Hilton’s luxury segment represents only 2.5% of total available rooms.

Market Segmentation

In the “Upper Upscale” designation of Hilton’s chain scale, we have the Hilton Hotels & Resorts, Curio – A Collection by Hilton, and Embassy Suites Hotels. It is easiest to compare Hilton Hotels & Resorts and Embassy Suites because the two brands are similar in size. Curio is much smaller than the other two members of the Upper Upscale designation.  Hilton Hotels & Resorts represents 570 properties, 208,762 individual rooms, and approximately 26% of Hilton’s overall portfolio.  Embassy Suites represents 232 properties, 54,589 rooms, and 6.8% of Hilton’s overall portfolio.  Curio represents 31 properties and 7,243 rooms making up .9% of Hilton’s overall portfolio.

Hilton Hotels & Resorts is one of the largest single brands in Hilton’s portfolio; with properties across the globe, this brand caters to upscale travelers both domestically and internationally. Hilton Hotels & Resorts provides a great experience across its properties, and travelers will notice economies across the vast network of properties.   Embassy Suites is another of Hilton’s larger brands, but its properties are primarily in the United States.  Embassy Suites boasts all rooms as suites in the properties, catering primarily to business travelers and families who need more space for children. Curio is the smallest brand in the upper upscale segment. Hilton describes Curio as a collection of “handpicked hotels that are authentic, independent, and remarkable.” Curio provides  products for leisure travelers.

Upscale Segment

Hilton has four brands that fall into its upscale segment: Doubletree by Hilton, Tapestry Collection, Hilton Garden Inn, and Homewood Suites. Doubletree represents 494 properties, 117,699 rooms, and 14.6% of Hilton’s overall portfolio.  Hilton Garden Inn represents 717 properties, 102,786 rooms, and 12.6% of Hilton’s overall portfolio.  Homewood Suites represents 418 properties, 47,104 rooms and 5.9% of Hilton’s overall portfolio.   Collectively, the Upscale product segment makes up 33.3% of Hilton’s overall portfolio making it the largest portion of Hilton’s product offering.  Doubletree focuses on business and leisure travelers.

“Upper Midscale” is Hilton’s lowest tier of brands. This consists of Hampton by Hilton and Home2 Suites. Hampton represents 2,221 properties, 223,114 rooms, and 27.7% of Hilton’s overall portfolio.  Home2 represents 129 properties, 13,349 rooms, and 1.7% of Hilton’s overall portfolio.  Hilton does not list a specifically targeted market for Hampton, but the brand provides reasonably priced, comfortable rooms with complimentary amenities.  Hampton is also the most popular brand in the Hilton portfolio with its franchise investors.  Home2 is a lower cost product in Hilton’s extended-stay market segment.  Customers typically are traveling for business for extended periods of time.   Overall, Hilton has a compelling portfolio of brands with product offerings that target customers in nearly every segment.  This is a significant contributing factor to Hilton’s continued success over the decades. Hilton Worldwide, Annual Report 2016

Competitive Advantages

Hilton focuses on obtaining a competitive advantage by quality differentiation, which is also reflected in the pricing of its product. Hilton offers products and services through a premium pricing strategy. Their services bring high levels of customer satisfaction. The services have excellent qualities that contribute to an extraordinary experience for consumers. Hilton uses pricing tactics including dynamic pricing; location pricing; and customer segmentation pricing.

These operational and marketing strategies have lead to Hilton being one of the leading hospitality industries across the world. Hilton has offered various hotel options for over 90 years. It has been offering business and leisure travelers the finest in accommodations, service, amenities and value. The company is dedicated to continuing its tradition of providing exceptional guest experiences across its global brands. Its brands are comprised of its more than 3,300 hotels in 78 countries across six continents. This includes Waldorf Astoria Hotels and Resorts, Conrad Hotels and Resorts, DoubleTree by Hilton, Embassy Suites Hotels, Hilton Garden Inn, Hampton by Hilton, Homewood Suites by Hilton, and Hilton Grand Vacations. Hilton properties are renowned for convenient and strategic locations within major countries throughout the world.

Graphic from Hilton Worldwide 2016 Annual Report.

 

Amongst the many strategies that have contributed to Hilton’s success, the most beneficial core competency has been its marketing and brand recognition strategies. Hilton uses both sales incentives and brand recognition in its promotional mix, successfully promoting the product to its consumers: “Hilton Worldwide Sales generated over $19 billion in revenue in 2015 including Global Sales, Hilton Reservations & Customer Care, and 3rd Party Distribution.” Hilton, About Our Brand  

Many of Hilton’s hotel rooms fall under management in the franchising and management business operations. By not directly owning the franchised properties, Hilton avoids many of the costs associated with owning assets such as hotels. By licensing out the Hilton brand name, Hilton can make a return on intellectual property. Hilton utilizes a very streamlined approach to this facet of the organization.  Hilton’s brand relationship is very strong within the hospitality industry, making it the final and most integral core competency.  Hilton Honors program has a direct correlation to the relationship that these consumers have with the Hilton brand.