1. 1
Hilton International
Hilton International is one of the market leaders in the hotel industry in the United States.
Hilton is a well known and distinguished name in fine hotels across the United States and
worldwide. The purpose of this case analysis is to address the key marketing issue for the
Toronto Hilton International (THI). The marketing strategies Hilton should pursue will be
discussed and recommendations will be made. In addition, the use and implementation of the
SWOT analysis and operating ratio analysis will be incorporated throughout the discussion.
Information will be provided from the case study.
Hilton International in Toronto is located in the citywide of Toronto, the heart of the
city’s entertainment and business area. THI has 600-room and provide variety of facilities such
as indoor and outdoor swimming pools, meeting facilities, and health club. In addition, the hotel
operates three restaurants, two lounges, and 24 hours room service. Mr. Philip Stratton, the front
office manger of Toronto Hilton International, faced a dilemma where the hotel’s average daily
rate has been declined by $12 in the previous year and occupancy percentage decreased from
78% to 71%. The average daily rate is directly associated to the occupancy percentage, when
ADR decreased, occupancy rate will decrease. The issue that the management faced is whether
decrease the room rate and increase the occupancy, or stay with the same rate and sell more
rooms. Its obvious that the second choice is better but in the real world this is tough to achieve.
Based on the facts and figures provided in this case, I will analyze and recommend alternatives
to the management that will help them with this issue.
2. 2
SWOT analysis
Strength
1. Location: Hilton International in Toronto is located in the citywide of Toronto, the heart of
the city’s entertainment and business area. The hotel located near to major shopping
businesses.
2. Facilities: Toronto Hotel International provides variety of facilities such as indoor and
outdoor swimming pools, meeting facilities, and health club. In addition, the hotel operates
three restaurants, two lounges, and 24 hours room service.
3. Average room rate: the ADR of the competitors increased from $145.75 in the previous
year to $178.50. This number shows that there is increase in demand.
4. Reservation center: one of the powerful tool to sell room is that the hotel under huge
company like Hilton International which provide them access to the 800 number.
5. Parking Rates: among all competitors, THI has the lowest rate of parking which is $10
daily. In metropolitan city such as Toronto, low parking rate is important to customer
purchasing behavior.
Weakness
1. Promotional packages: the hotel offer different kinds of promotional packages. In the case,
the hotel offers 17 different types of packages. Each package has its special rate, amenities,
and price restrictions. By offering variety of promotional packages the hotel sold “only 1
percent of all daily occupied room ever sold at rack rate.” This strategy provides customers
with price discrimination and too many restrictions.
2. Number of rooms: Toronto Hotel International has 600 rooms where some of its
competitors have almost more than the double.
3. 3
3. Occupancy percentage: the main issue of THI is occupancy percentage where its 67% of
600 rooms, and the competitors has lower occupancy percentage but with higher number of
rooms. The number of rooms sold of THI is 402 of 600 rooms and Sheraton sold 824 of
1398.
4. Market Mix: THI divides its customers to three categories, which are 40% groups, 30%
tourist, and 30% business. I think this mix is unrealistic because the hotel mainly depend on
groups who buy block of rooms and makes its difficult to revenue manger to maximize the
revenue where the hotel is located in downtown and business travelers mainly stay in
downtown hotels. Therefore, the hotel should focus more on which travelers segment should
attract.
Opportunity
1. Demand: in 2012, the demand increased in United States, which indicates that people tend to
travel more.
2. Economy: when economy is booming, the average spending is increased and people tend to
travel.
3. Geographic location: Toronto is the financial capital of Canada, which makes it the mecca
for business travelers who want to do business in Canada. Also, Toronto is largest city in
Canada. Toronto located near to the north east of United States.
4. The demand for convention and meeting facilities: Hilton has facilities that can
accommodate 1,100 people. The downtowns are the place where convention is usually held.
Threat
1. Competition: Toronto Hilton International faces a huge competition in the downtown of
Toronto. The main competitors are Sheraton, Westin, Royal Plaza, and Crown Plaza. All of
4. 4
the competitors’’ rack rates are almost the same; they rang from $139 to $169. Competitors
such as Royal Plaza decreased its rack rate to $139 to attract more customers and increase the
occupancy percentage.
2. Newcomers: it’s forecasted that there will be 18,000 rooms in supply, which will increase
the competition. Also, there will be unbranded hotel, which will provide 450 rooms and
located near to THI.
Operation ratio analysis
Average Daily Rate (ADR) = Rooms Revenue / Rooms Sold
Occupancy Percentage = Rooms sold / Rooms Available
Revenue (annually) = Rooms Available * ADR * Occupancy * 365
RevPAR = ADR * Occupancy Or Total Revenue / Rooms Available
Hotel Rooms Market
Mix
(Rooms)
Rack
Rate
ADR Occupancy Revenue Market
Mix
(revenue)
RevPAR
Hilton 601 12% $149 $110 67% $16,167,200 15% $73.7
Crown Plaza 587 11.7% $169 $110 42% $9,898,581 9% $46.2
Royal Plaza 1,438 29% $139 $110 48% $27,713,136 25% $52.8
Sheraton 1,398 28% $139 $110 59% $33,116,523 30% $64.9
Westin 964 19.3% $149 $110 57% $22,061,622 20% $62.7
Total 4,988 100% 100%
Hilton’s market share among its rivals in term of number of rooms is 12%, which is low
by comparing the market share of Sheraton. If I consider that every hotel in the competition has
the same ADR, which is $110, our hotel would be the best because our occupancy percentage is
67%, therefore, the highest RevPar would ours, which is $73.7. However, if our competitors
have higher ADR, especially Royal Plaza and Sheraton that will change the calculation because
they have highest market share of number of rooms, which are 29% and 28% respectively. The
increase in ADR will increase in RevPAR and will increase in revenue. Also, when competitors
have higher occupancy that indicates they attract customers more and we lose our market share.
5. 5
Yield Revenue
Yield = Actual Revenue / Potential Revenue
Hotel Actual Revenue Potential Revenue Yield Revenue
Hilton $16,167,200 $32,685,385 49.46%
Crown Plaza $9,898,581 $36,209,095 27.33%
Royal Plaza $27,713,136 $72,956,930 37.98%
Sheraton $33,116,523 $70,927,530 46.69%
Westin $22,061,622 $52,427,140 42.20%
By looking to the yield revenue percentage, the percent of revenue that a firm make
compare to if the firm achieve the highest revenue, Hilton’s yield is not bad, however, Sheraton’s
yield percentage is also high and we assumed that their ADR like ours. Again, if the ADR is
higher that $110, the yield will jump, for example, let say Sheraton’s ADR is $120, the yield will
be 51% instead of 46.69. So the ADR is important as well as the occupancy percentage.
Recommendation
1. Product development - Focused Differentiation Strategy
We as Toronto Hilton International must focus more on our group and business traveler who
are seeking to travel for meetings and convention especially we are located in downtown Toronto
and we are near to most shopping areas. We should catered to conventioneers rather than
shunned them, by employing a strategy now referred to as MICE (Meetings, Incentives,
Conventions, and Exhibitions), we should transform Hilton from just hotel which provide bed
and food to a place of business and leisure. The principal goal of the MICE strategy is to
maintain mid-week demand at the hotel by drawing guests from attendees and exhibitors at the
hotel’s convention and meeting room complex, while continuing to derive weekend demand
from vacationers. This strategy will improve our hotel margins while simultaneously turning
Toronto into a global business center and tourist destination.
6. 6
2. Pricing Strategy
We should lower our rack rate from $149 to $119 and attract more traffic in our hotel. By
lowering the rack rate and maintain the ADR as $110, the occupancy percentage will increase
more than 67%. We should reduce the number of promotional packages from 17 to 6 packages,
and eliminate the restrictions on reservation unless we have high season. Also, we must give our
loyal guest, the Hilton honors club with special promotion and point, so they can redeem it in
low seasons.
