Introduction of Hotel Hilton:

Hilton Hotel Corporation was created by Conrad Hilton. He purchased his first hotel in Cisco, Texas in 1919. The first hotel which carried Hilton’s name was opened in Dallas in 1925. Hilton hotels became the first coast-to-coast chain of hotel in America in 1943, emphasizing on the service of business customers. Hilton hotel first went over seas in 1949 by opening a branch in Puerto Rico. By 2000 Hilton had over 500 hotels all over the world.

Hilton has been involved in purchasing small and medium-sized hotels since 1970 as earlier, Hilton was more focused on acquiring and owning more real estate, the company acquired Hilton International, the lodging assets of Hilton Group Plc, for GBP 3.3 billion in 2006 which made Hilton the biggest lodging company in the world. Recently they have changed the trend and went for franchising. Hilton primarily operates in the U.S and is also present in major cities, such as London, Paris, Rome, Sydney, Tokyo, Beijing, Shanghai, Toronto, Stockholm, and Sao Paulo.

Hilton Hotels was acquired by the Blackstone Group on October 24, 2007 for $20.1 billion. Before the Blackstone Transaction, there were 500 million authorized shares of common stock with a par value of $2.50 per share, of which 409 million were issued at December 31, 2006, including 22 million treasury shares. When the merging took place, a total of 150 million shares with a par value of $0.01 per share is authorized, of which 120 million were issued at December 31, 2007, including one million treasury shares.

As a result of the merger, Hotel Hilton is now an affiliate of Blackstone and their common stocks (and listed debt securities) were delisted from the New York Stock Exchange and ceased to be a publicly held corporation. (As the financial data is not available for all we could not provide financial analysis after 2007)

Company

Microenvironment

Macro environment

Legal

Natural

Technological

Social

Economic

Suppliers Customers

Distributors Competitors

STRATEGIC ANALYSISSTRATEGIC ANALYSIS

STRATEGY DEVELOPMENTSTRATEGY DEVELOPMENT

STRATEGY IMPLEMENTATIONSTRATEGY IMPLEMENTATION

STRATEGIC EVALUATION & CONTROLSTRATEGIC EVALUATION & CONTROL

International

Strategic Analysis

1. Introduction

This section entails the strategic analysis of the project. This part focused on mainly Hilton hotel’s intervening conditions-internal and external environment Here six sections are involved. In the first section it explains the mission & vision, values and objectives of the Hilton Hotel. In the second section it states about its past and current strategies. The third sections talked about its organizational structure and culture, management style etc. The next section talked about all the Key Performance Indicators (KPIs) like profitability/growth, competitive centered, customer centered, product/service based, all the stakeholders, resources and other factors are analyzed and explained. Finally in the last section it discussed about market trends, PESTEL, life cycles, 5 forces, industry KFS etc.

Figure 1: Figure 1: Environments & Strategic Analysis Environments & Strategic Analysis

Mission:

Hilton’s mission is to become the leader in the hospitality sector.

Giving the team members consistent, quality training is critical to this mission. To overcome this problem Hilton established Hilton University, an online learning portal which is accessible to all Hilton employees. This mission includes the following program:

Enhance the guest experience;

Engage all the employees;

Improve Operational efficiency;

Advance building design;

Strengthen partnership;

Serve the communities;

Protect global environment;

Enrich the family of brands.

Vision:

The Vision of Hilton Hotel is to be the luxury hotel choice for discerning travelers, creating a world that celebrates individuality in every sense.

They offer Luxury as unique as every guest. As the most modern luxury hotel, they created a proud & prestigious heritage with a very contemporary attitude. At its heart, Hilton is all about offering unique experiences for discerning travelers. Individuality sets them apart from its competitors. From guests to team members to the hotel and resorts, Hilton is all about providing places where people can truly be themselves because according to them that is the real luxury today.

Objectives:

Hilton’s Hotel’s Strategic objectives which are central to its overall business plan are;

Definition of Hilton brand;

How central people and organization are to the business;

Having a balanced score card and

Driving the business to forward.

Business Segment and Products:

Hilton’s key business segments include hotels and timeshare operations which is an arrangement under which a purchaser receives the right to use an accommodation or amenities or both for a specified period. Hilton develops and operates timeshare resorts through Hilton Grand Vacations Company, which provides on-site management services to Hilton Grand Vacations Club resorts. The hotel segment of Hilton contribute largest share of revenues. Recently they developed a new brand named- Home2 after incredible amount of time and research. The Home2 resonated best with the customers. It is an extended-stay product where the sense of 2 is a potentially a second home or home away from home.

Current strategies:

HR Strategy:

Strategic HRM is very important for Hotel business. Hilton mainly focuses on its HR strategies to achieve equilibrium both now and in future. Hilton International now has a very clear and proactive business strategy expressed in three-five years plan.

Hilton International has launched the successful “Elevator” program of manager training in 1998. It has designed to recruit high-potential graduates to become hotel general managers. Human Factors International (HFI) based on Stratford upon Avon, UK, was to designed and provides a “virtual psychologist” so that previously labor-intensive

screening process which involves many of Hilton International’s managers could be done online. Before becoming a hotel manager they need to involve in a relatively short training period to make sure that these graduate trainees were of highest caliber. This “Elevator” strategy of Hilton has turned out to be a very realistic strategy. By putting the system online, recruitment became more efficient for Hilton.

Another human resource policy introduced by Hilton International is the “Esprit” strategy. In order to remain competitive for hoteliers it is essential not only to meet customer’s expectations but also to exceed them. For this reason they need to provide quality services associated the brand, which in turn need the training and development of the staff. Here Hilton saw the importance of the creation of “Esprit” strategy which was develop to embrace the key principle of employee recognition, respect and reward.

Another HR initiative that has been taken by Hilton International was the concept of “Equilibrium”. To set their service apart from their competitors this new concept has been devised to ensure all Hilton customers enjoyed a restorative stay or visit that helped to balance up their work and leisure need. It ensures that the customers associated the Hilton brand with a high quality service that staff would deliver well and on time with a smile.

Sustainability Strategy:

Currently Hilton Hotel has announced its short term and long term strategies for establishing an environmentally sustainable business which includes the following programs:

Reduce energy consumption from direct operations by 20%,

Reduce Co2 emission by 20%,

Reduce output of waste by 20%,

Reduce water consumption by 10%.

To become truly sustainable Hilton has committed to focus on several high-impact areas of significant long term benefits. In this regard the key areas will be sustainable buildings and operations, chemical management and purchasing will be the key area. It has also committed to the advancement of renewable energy as a source of power for its operations, not only to reduce its carbon footprints but to develop a viable commercial infrastructure for powering hotels and corporate offices. This comprehensive sustainability strategy of Hilton has put them on a path to leadership in the hospitality industry.

Marketing Strategy:

Hilton hotel is one of the marketing leaders in the hotel and gaming industry. Hilton is a well-known and distinguished name in the fine hotel across the United States and the worldwide. It believes in making customers emotionally connect with Hilton. Previously they were doing Tactical marketing which was not successful to get customers. That’s why they started a new strategic campaign “take me to Hilton”. This is outcome of a vigorous research which showed that customers were seeking emotional connection between the traveler and the brand and a solution to their travel challenges. Hilton believes that by reinforcing personalized services, warm welcome, great technology offerings and comfortable environment they are positioning on that solution. Hilton has its own advertising agency Foote cone & Belding, Irvine, California, which create inspirational but yet identifiable imagery around the tag line to create emotional connection. Hilton develop Ads for 2 sector-one targets the business travelers and the other in leisure execution.

Hospitality Strategy:

Hilton Hotel developed a comprehensive approach of delivering value for all stakeholders. At the heart of the approach were five broad goals-delighted customers, royal team members, satisfied owners, share holders and other stakeholders, successful strategic partners and involves community.

Other recent strategies:

Building an educational engagement program for all brands and team members, including online learning, centralized web content and various training program.

Measuring and reporting progress. The internal environmental management tool used within the company managed hotels will be extended to all properties, which allowed them to report on their commitment and design process and programs that identify areas of opportunities to drive innovation and efficiencies.

Revising brand operational and construction standards for 2009 to ensure both internal and external best practices are shared, adopted and transparent around the globe.

Evaluating all current and future purchasing policies and practices across the brands to ensure that the range of products placed in hotels will not only improve the guest’s experience but also drive value for owners.

Organizational Culture:

The integration of Hilton group and Stakis mean a rationalization of 2 separate organizational cultures. Hilton was known for its professionalism and being process-led, while Stakis was identified more by its company personality, gaining customer loyalty by overcoming any service mistakes in a friendly way. So a new organizational culture has been introduced in Hilton that aimed to make the Hilton group No1 employer and the first choice in the hotel business.

Organizational Structure:

Organizational structure of Hilton Hotel is very flat. Any special request is need to go through the management. It has also adopted a much decentralized organizational structure.

Regional Division:

Hilton Group consists of around 500 hotels, employing more than 60,000 staff in 50 countries. Hilton International is divided in four global regions:

1. UK and Ireland:

2. Europe, the Middle East and Africa

3. Asia Pacific and

4. the Americas

Each region has its own presidents and executive team, and the decentralized organizational structure means that Hilton depends on a clear brand direction.

Internal factors:

1. Financial resources which includes all of the monetary resources from which a firm can draw.

2. Physical resources such as land, buildings, equipment, locations, and access to raw materials

3. Human resources who pertains to the skills, background, and training of managers and employees, as well as the way they are organized

4. Organizational knowledge and learning

5. General organizational resources including the firm’s reputation, brand names, patents, contracts, and relationships with external stakeholders.

External Environment:

Economic Environment:

Hilton Hotel is now going through a challenging Macro economic environment partly because of the going financial crisis and partly because of going trend of swung flue that adversely affected the hotel business. In addition to the week worldwide economic condition the emergence of this diseases corporate travel as well as leisure travel reduced significantly which made the hotel business down, hurting this giant chain. Because of these two reasons their revenue has reduced substantially.

Legal Environment:

Hilton Hotel Corporation recently joined three major strategic alliances with the intention to create 15 more hotels in the Caribbean and Central America, 25 in Russia, and at least 15 hotels in UK throughout the coming years. These strategic alliances made the legal environment quite complex but still it will reinforce their position as the premier global hotel company. Apart from these alliances Hilton already involved in many other strategic alliances and also involved in franchising which complicated its legal environment but favorably affected its revenue.

Technological Environment:

Hilton is a technologically developed corporation. Hilton made its recruitment process more effective by making it available online. It facilitates its traditional learning and classroom training by an alternative flexible method of e-learning which is available at all location and for all team members. They has 24*7 reference ware, online coaching and mentoring, virtual classroom environment and Hilton University discussion forum. They offer more than 100,000 online courses. The potential customers of Hilton can get any information or booked for Hilton’s services online. Hilton hotel offer technologically facilitated room for their customers.

Social Environment: Hilton hotel owns, manages, develops and/or franchises hotels, hotel-casinos, resorts, and vacation-ownership resorts. In addition, it enjoys worldwide recognition thanks to its many overseas facilities and gaming operations. And through its various subsidiaries, it also has interests in designing and furnishing hotels and providing computer reservations for both hotel rooms and rental cars. These activities create lots of job opportunity as well as economic progress for a social community.

Political Environment: Political situation play a vital role in any Hotel business decisions. The existing definitions of political risk focus on the concept of political risk from two different perspectives (Carbon, 1979). One group views political risk in terms of governmental or sovereign interference actions. The second group identifies political risk as occurrences of any political events imposed upon the firm. The examples are violence, terrorism, and guerrilla groups. A hotel like Hilton is unusually vulnerable to political risk due to substantial investments in fixed assets.

Key success Factors (KSF of Hotel Hilton):

Customer: They who their customers are and provide them with the product and services they want.

Quality: their customer is provided with an exceptional product by exceptional staff in terms of services and flexibility.

People: to work together and enjoy being part of a team pulling together to provide excellent services.

Increasing sales: they ensure that their sales and profits are maximized in answering the customer’s needs and the costs are controlled without compromising quality.

Other success factors:

They encourage their new recruits to understand from guest’s point of view-experiencing part of the services on offer, courtesy of the hotel, before officially starting employment.

Their strategy of linking customer offering to staff delivery is also a factor of their success.

Their customer facing team members also play a major role in their success. Their training and learning program plays an important role here.

The development opportunity they offer for their employees is a very important factor for the retention of their employee, which in turn ply an important role for their success.

Porter’s five forces model for Hotel Hilton

Risk of Entry from potential Competitors: the risk of entry from potential competitors is relatively low because of the high initial cost of establishing a hotel business and the fierce competition among the existing hotel corporations.

Threats of substitute products: Services that can alter the choice of the consumers against Hotel Hilton are Small lodges, Business hotels, Boutique hotels, eco friendly hotels. But as Hotel Hilton holds a strong competitive advantage of wide range of branches this threat can be considered as moderate.

Bargaining power of the supplier: this can be considered low in terms of hotel Hilton as they have a number of available suppliers for the resources to operate their business.

Bargaining power of the Buyer: Hotel Hilton has diversified consumer segment. As the global hotel companies expanding their business rapidly, consumers are getting more

Risk of Entry by potential competitors (Low)

Bargaining power of Supplier

(Moderate)

Bargaining power of buyer

(High)

Rivalry among existing established Firms

(High)

Threats of substitute products

(Moderate)

opportunities to choose their desired services from different hotels. So the bargaining power of the buyers is quite high.

Rivalry among the existing competitors of the market: Hotel Hilton is now facing hardship to win the battle against its competitors in the global hotel business. Marriott International (MAR), Starwood Hotels & Resorts Worldwide (HOT), Wyndham Worldwide (WYN), Four Seasons Hotels , Accor S.A, are some of the names of competitors of Hotel Hilton. So we presume that Hilton has high rivalry with its competitors.

SWOT Analysis:

The following SWOT Analysis sheds some light on some of the pitfalls and opportunities that await the Hilton Hotels Corporation.

Strengths

Hilton Hotel Corporation (HHC) is a well established organization and industry leader in the hotel, hospitality and gaming industry

HHC is well diversified across the industry with hotels in the high end, business and mid-priced classes in their product mix

HHC also possesses solid integration features such as owning the companies that manufacture its furniture and has invested in online reservation travel enterprises as well as providing smaller companies to be franchised by HHC, resulting in better sales of their product.

Weaknesses

HHC may be two narrowly focused making it vulnerable to a downturn in the global economy and other world-wide catastrophes that could limit global travel such as the bird-flu and a significant terrorist strike.

HHC may be vulnerable to workers’ strikes and crack down on undocumented workers in the U.S. Most of its holdings are in the U.S.

Opportunities

HHC should offer an array of distinctive and specialized services to the high end guests and high rollers.

Wedding planning & hosting

HHC should look to expand into or acquire a cruise line because a cruise ship is little more than a hotel which floats, this would essentially match what it currently does with its leased properties

Gaming activities would escape regulation, etc.

Take advantage of emerging markets, especially with business class and mid-priced markets

Development of Sustainable hospitality

Threats

Hotel Hilton must be careful not overextend its efforts to mix entertainment and gaming, also the extension of credit and other side effects of gaming can slowly but surely decrease profits.

September 11th was a major blow to the hotel industry. A similar event could result in another down turn.

Challenges:

Hilton is facing a big challenge regarding its “Esprit” strategy. According to them line managers have a huge role and have a lot of work to understand the essence of “Esprit”. It is only as good as people who live its ethos- walk the talk- and implement it. This is by far their biggest challenge.

Creating a true learning culture across the organization is also imposed a challenge for Hilton.

In order to implement equilibrium, the Hilton brand had to be adopted around the world to suit specific locations. In Asia the challenge is to convert equilibrium across wide range of cultures and countries. In America the challenge is to understand the difference between north and South American customers-where the former have a higher standard of living and more pressurized life and the latter a less affluent but more relaxed lifestyle.

The demand from low-medium income customers is primarily affected by an increase in airfares. These customers generally have a fixed budget for their vacations or travels. Thus, if they are forced to spend more on airfare, their ability to spend on a hotel room, resort or other services declines which will result less occupancy for Hotel Hilton.

Economic meltdown has a direct impact on the volume of business. As Hilton’s customers belong to the high-income group or are business travelers, the impact of an economic slowdown will be more significant for the company.

Certain events, such as acts of terrorism, wars, and outbreak of contagious diseases have a severe impact on the demand from all customer segments. With events such as 9/11, the invasion of Afghanistan, the outbreak of Severe Acute Respiratory Syndrome (SARS), and the tsunami, people either stop traveling to those respective countries or choose alternative destinations for travel, which has a negative impact on occupancy rate of Hotel Hilton.

Offering Future Strategies:

An economist, Edith Penrose, explained that various skills and abilities possessed by firms could lead to superior performance. By analyzing the external and internal factors of Hotel Hilton we can develop a strategy which will be valid, consistent and sustainable. Based on our previous data we have figured out some of the main factors which might play important role in terms of building future strategies

Location based competitive advantage: Hilton offers unequalled business, conference and leisure facilities in all the major city centre, convention and airport. This is complemented by the sustained dedication to high standards of quality and service – a commitment which will be recognized by the consumers thus will increase the occupancy rate in Hotel Hilton.

Efficient Human resource Management: Hilton had shown great interest in development of skilled personnel. They conduct training program, awareness program, and adopt several methods to enhance the service quality of its employees. An efficient and effective work force will ensure higher customer satisfaction and higher revenue.

Esprit Strategy: They should aloe their “Esprit strategy” to grow not only from the HR functions but also by other functional units. They can also outsource the operation of the “Esprit club”.

Eco-friendly hospitality: the current trends of hospitality have changed up to great extent. Travelers and consumers are seeking eco-friendly hotel which may enable a new market segment for Hotel Hilton. If Hilton adopts the sustainable hospitality methods, then they will be able to reduce their operational cost and obtain economy of scale.

Prospect of Franchising: Hilton is also increasingly relying on the franchisee-based model for growth. This enables the company to earn revenues without incurring any additional costs to purchase real estate and construct hotels. This strategy further enables the company to concentrate its efforts towards building a strong brand instead of buying real estate.

By studying national and regional industry trends, Hotel Hilton will be able to take advantage of opportunities that will enable growth while identifying threats (terrorist attack, SARS) that may affect profitability. Growth in the hotel and hospitality industry will include a continued focus on gaming, international expansion and using all media to promote its products to potential customers. By utilizing its competitive strategies along with the effective service of efficient work force Hotel Hilton will be able to strengthen its position at the global hotel industry.

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Consolidated Financial Statements Hilton Hotels Corporation and Subsidiaries:

Year ended December 31, 2006 and the Periods from January 1 through October 23, 2007 and October 24 through December 31, 2007 with Report of Independent Auditors

Appendix:

Hotel Hilton Corporation and subsidiaries Consolidated Balance sheet (in millions)