Situation Analysis –Hilton in China 2009Jerry Chen, Jessica Hyde, Nattaporn Yaemsaard, Tifa Yang
Current Performance• Hilton currently has three brands of hotels in China: Conrad Hotels & Resorts, Hilton Hotels, and Doubletree.• The first Waldorf Astoria will open in 2011 and 20 Hilton Garden Inns are now under construction in China.• Hilton Financial Report as of 2008: (in millions, except per share amounts) 2006 2007 2008 Revenue $8,162 $8,090 $7,770* Operating Income $1,274 $1,610 ** Net Income $572 $121 ** Net Income per $1.39 N/A** N/A** share *Less than 1% of Hilton’s Revenue comes from China **Hilton was taken private in 2007 by Blackstone
Customer Needs• Travel and tourism are developing rapidly in the Chinese domestic environment• Chinas hotel and catering industry saw 25% growth in turnover during 2008 over the previous year• A large portion of the growth is coming from foreigners on business and pleasure trips to tier one cities like Beijing and Shanghai• Online accommodation sales and booking are increasing significantly• Holiday-oriented consumers
Competitive Landscape in China
Competition and Industry• Hilton is the 10th largest hotel operator in China by number of rooms with 2% market share.• The top five competitors have 45% of the market. 55% of the market is served by other, mainly local businesses.
Competition and Industry• Both the Business and Leisure Segments of the market offer good profit potential.• The hotel industry in China has a large number of substitutes, both foreign and domestic, and faces intense price rivalry particularly in tourist areas.
Competitive Position and Value• Relative to the top ranked brands in China, customers perceive Hilton to haveslightly superior service and to be somewhat less expensive. Customer Value 160 Inferior Value 140 120 100 80 60 40 Superior Value 40 60 80 100 120 140 160 Customer BenefitsBased on analysis of customer surveys by J.D. Power and Associates
Current Marketing MixProduct• Accommodations, Services, Conferences, EventsPrice• Luxury: Conrad Hotels ($437-722)• Upscale: Hilton Hotels (start at $150)• Midscale: Doubletrees (start at $75)Place• First-Tier Cities: Beijing (4), Shanghai (1), Chongqing (2), Hong Kong (1)• Second-Tier Cities: Sanya (1), Kunshan(1), Qingdao (1), Shenyang (1)• Third-Tier Cities: Guiyang (1), Hefei (1), Wuxi (1)
Current Marketing Mix (Promotion)Hilton Asian Pacific• 2009, Hilton launched a multi-media promotion where anyone reserving a room would be eligible to receive a complimentary day meeting package• Another current promotion: Book 21 days or more before your trip to any Hilton hotel in Asia Pacific, receive 20% offIndividual Branches:• The Doubletree in Huaqiao-Kunshan let guests help design rooms in a social media promotion• The Hilton Beijing Wangfujing launched a campaign to promote its dining and lifestyle services and distinguish itself from the other hotels in Beijing
Market ShareHilton• Ranked No. 10 in China bynumber of rooms• Market Share 2% (2008)• Plans to launch 22 new hotels inChina in the next two years Hilton Xiamen
Brand Loyalty• Customer Satisfaction• Loyalty Program – A 2009 survey conducted by Hilton revealed: • 73% of travelers in China are feeling as or more loyal to brands after the economic downturn • 47% of all travelers agreed that even if they knew it was more expensive they would still choose to stay at a Hilton hotel because it would accrue them personal loyalty points
Hilton HHonor• Customers earn points and miles that can be used for stays at anyof Hilton’s hotels and airline miles with over 50 airlines• Currently, if you stay two nights, you double your points for yourentire stay. If you stay three nights you triple your points, or fournights to quadruple your points• No black out dates• An HHonors credit card is available to allow customers to earnbonus points redeemable for hotel stays and car rentals
Market Demand• Growth rate: 16% from 2005 to 2008• In 2008: – 130 million inbound travelers to China (26 million foreigners), generated revenue of around $42 billion. – Down 1.4% from 2007 despite the Beijing Olympics in 2008 –1.61 domestic visits by traveling Chinese generated revenue of more than $102.5 billion.Source: China National Tourism Administration (CNTA)
The Global Economic Downturn• Significant decrease in hotel industry performance in China in 2009 largely due to the decrease in international tourism
Brand SWOT Strengths Weaknesses-Powerful brand -Difficult to find high-Excellent customer quality employeessupport program -Employees require extra-Cross-selling training to serve Western guests Opportunities Threats-Many tourists both foreign -Competition from foreignand domestic and Chinese hotel chains- Changes in Chinese - The global economicconsumer behavior downturn- Year round conferences - The rise of budget hotelsand events-Shanghai World Expo 2010