Hilton has 3 brands in China with 2% market share, but plans to expand to 22 new hotels. Travel and tourism are growing rapidly in China, especially from foreigners visiting tier 1 cities. While the industry offers profit potential, it also faces intense price competition and many substitutes. Hilton performs slightly above competitors in customer surveys but seeks to strengthen brand loyalty through promotions and its loyalty program. The global economic downturn negatively impacted the hotel industry in 2009.

1. Situation Analysis –Hilton in China 2009
Jerry Chen, Jessica Hyde, Nattaporn Yaemsaard, Tifa Yang

2. 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

3. Customer Needs
• Travel and tourism are developing rapidly in the Chinese domestic
environment
• China's 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

4. Competitive Landscape in China

5. 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.

6. 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.

7. Competitive Position and Value
• Relative to the top ranked brands in China, customers perceive Hilton to have
slightly 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 Benefits
Based on analysis of customer surveys by J.D. Power and Associates

8. Current Marketing Mix
Product
• Accommodations, Services, Conferences, Events
Price
• 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)

9. 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% off
Individual 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

10. Market Share
Hilton
• Ranked No. 10 in China by
number of rooms
• Market Share 2% (2008)
• Plans to launch 22 new hotels in
China in the next two years
Hilton Xiamen

11. 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

12. Hilton HHonor
• Customers earn points and miles that can be used for stays at any
of Hilton’s hotels and airline miles with over 50 airlines
• Currently, if you stay two nights, you double your points for your
entire stay. If you stay three nights you triple your points, or four
nights to quadruple your points
• No black out dates
• An HHonors credit card is available to allow customers to earn
bonus points redeemable for hotel stays and car rentals

13. 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)

14. The Global Economic Downturn
• Significant decrease in hotel industry performance in China in 2009
largely due to the decrease in international tourism

15. Brand SWOT
Strengths Weaknesses
-Powerful brand -Difficult to find high
-Excellent customer quality employees
support program -Employees require extra
-Cross-selling training to serve Western
guests
Opportunities Threats
-Many tourists both foreign -Competition from foreign
and domestic and Chinese hotel chains
- Changes in Chinese - The global economic
consumer behavior downturn
- Year round conferences - The rise of budget hotels
and events
-Shanghai World Expo 2010

16. Appendix: Hotel industry growth