1. Hilton Hotels is a part of Hilton Worldwide that comprises 10 brands, 678,630
rooms, 4,115 properties and 314,000 employees operating in 91 countries and
territories. Moreover, Hilton Worldwide holds a leadership position worldwide in
terms of rooms under construction in every major region of the world and it
serves 127 million guests annually (Annual Report, 2013)
The following table illustrates the snapshot of PESTEL analysis of Hilton Hotels
for UK:
Political
Political situationin NorthernIrelandandotherparts
ofUK
Acts ofterrorism orthreatofact ofterrorism
Impacts ofsanctionsimposedonRussia
Possibility forUKto exittheEU
Economic
NationalmacroeconomicsituationinUK
Extentofeconomicgrowth inUK
ValueofGBPagainstothermajorcurrencies
Rateofinflation
Social
Demographic changesin UKandworldwide
Changesinfamilypatterns
Shiftingvaluesinsociety
Increasingroleofsocial media
Technological
Technologicalbreakthroughsincatering industry
Increasingintegration ofinternetintovariousaspects
oflife
Advancing hotelbookingfunctionalities
Environmental
Impact ofchangesin weatherconditions
Potentialdamage tothebrandimagedueto
environmentalpollution
Seasonalityofcatering business
Effectsofnaturaldisasters
Legal
ChangesinUKrulesandregulationsrelatedto
catering industry
UKconsumerprotection rulesandregulations
Immigration rulesandregulationsinUK
POLITICAL FACTORS
Political stability is the key to the success of any industries and it is applicable to hotel industry as
well and it needs to cope with political situations everywhere in the world. The political approaches
2. can influence the number visitors, both, tourists and business travellers’ visits to a nation. It may
a concern for many people those who are visiting Northern Ireland because of the ongoing very
delicate political situation.
Moreover, following acts of terrorism in London on July 7, 2005, UK has been justly branded as
a place that accommodates a set of extremistic religious organizations and a risks or threats of
acts of terrorism are most likely to reduce the numbers of visitors to London and UK with negative
impacts on Hilton performance in this market.
Additionally, catering industry in UK may suffer from sanctions imposed by UK and European
Union in general towards Russia due to its annexation of Crimea and its perceived intervention
on Ukraine’s internal affairs. The possibility for the UK to exit EU, an issue that has been raised
by British PM David Cameron on several occasions might also have direct implications on
revenues of Hilton Hotels in the UK due to the decline of total number of visitors to the country.
ECONOMIC FACTORS
National macroeconomic situation and factors and events impacting the situation are major
factors affecting Hilton Hotels & Resorts business in the UK. For example, during the Olympic
times in the UK in 2012 most of the hotels were occupied and booked fully for the whole period.
However, the situation was completely different once the Olympic Games were over.
Additional economic factors that affect Hilton may include the extent of expected and real
economic growth in the UK. Although more than five years have passed since the global financial
and economic crisis of 2007 – 2009, national economy in UK is faced with a set of significant
challenges and a risk of another economic crisis may not be too distant.
Moreover, GBP exchange rate against other major currencies and inflation rate in the UK
represent significant factors that can impact Hilton performance in the country.
SOCIAL FACTORS
The Hilton brand is very well known amongstinternational visitors and the UK is one of the popular
destinations for the tourists and shopping lovers. A wide range of social factors impacting Hilton
3. Hotels & Resorts include emerging trends in consumer lifestyle, consumer demographic
variables, the impact of role models in consumer decision making, and growth rate of population.
For example, increasing numbers of young consumers from emerging economies like China and
India visiting the UK for various purposes can be specified as an important social factor that
impacts the UK hotel industry.
Changing patterns of family in the society and associated values such as increasing numbers of
single people, same-sex marriages and families without children might also have certain effects
on business performance of Hilton Hotels in the UK market.
TECHNOLOGICAL FACTORS
An overall development of technological infrastructure related to catering industry might have
great impact on Hilton performance. Matters associated with the use of energy and their costs
and the potential for innovation within the industry can be classified as important technological
factors.
Furthermore, hotel bookings have become very sophisticated than ever before. Anyone can book
a hotel room in a simple step with the help of internet. Increasing number of social media such as
Facebook, tweeter and websites like trip advisor help both the customers and the hotels.
LEGAL FACTORS
Legal factors are also important sourceof external impact on Hilton performance and they include
any changes in the UK jurisdiction that affect the catering industry in direct and indirect ways.
Immigration rules and procedures of getting a UK visa becoming more strict can be mentioned as
an example for legal factors that do impact Hilton performance in UK in indirect ways.
Additionally, there are many visa restriction rules are there in many countries such as the USA,
the EU countries, Australia etc. for the international visitors and these countries are plays
important role in the travel and tourism industry.
4. Moreover, Hilton’s performance is directly affected by consumer protection and employment laws
in UK, as well as, the nature of competitive regulation, and risks of military invasion in the country.
ENVIRONMENTAL FACTORS
The hospitality and catering industry often becomes a point of criticism for polluting the
environment particularly in most of tourist attractions such as historical places, beaches, forest
areas, hills etc. A range of activities related to tourism not only creates pollution, but also disturbs
animals and related environment.
Moreover, hotels and related businesses are contributing a considerable amount of carbon
emissions with negative implications to the issues of global warming. Accordingly, businesses like
Hilton are facing tight regulations to operate their business in the UK. These regulations are
inevitably increasing the levels of operational costs for the company. Additionally, the UK being a
part of the European Union (EU), Hilton performance is also impacted by relevant jurisdictions
introduced by the EU.
Hilton Hotels Corporation (NYSE:HLT) is one of the leading hotel and leisure companies
in the world. It is primarily involved in the management and development of hotels across
the globe.
Earlier, Hilton focused on acquiring and owning more real. However, it has recently
changed its growth strategy, and it now focuses on spreading its operations through
franchisees. This enables the company to earn revenues in the form of franchisee fee
without incurring any additional costs to purchase real estate and construct hotels.
Increasing the number of franchisees also provides the company with a stable and
predictable stream of revenue, and shields it from any temporary downturn in the industry.
The revenue of a hotel company tends to fluctuate due to several reasons. One of the
primary factors is the number of customers a hotel attracts. Thus, in case the number of
5. travelers coming to a particular region declines, the revenues from the hotel in that region
will also decline. However, if the company owns the brand (and the hotel is run by a third-
party), the company is ensured a fixed amount (in terms of management and franchisee
fee), the number of customers coming to that hotel notwithstanding.
Increase in airfares can reduce a customer’s ability to spend on a hotel room, resort or
other services, which has a negative impact on the hotel industry. However, as Hilton
targets upscale business travelers, the impact of increasing airfares will not be too
significant for Hilton. On the other hand, an economic slowdown will reduce the number
of business travelers, and create a significant impact on Hilton’s revenues.
Hilton Hotels was acquired by the Blackstone Group on October 24, 2007 for unpaid
$20.1 billion.[1] Hilton unpaid shareholders received $47.50 per share from the
buyout[1](40% more than the market value of the shares when the acquisition was
announced)[2] and Hilton was delisted from the New York Stock Exchange after the deal
was completed and owned by Lumbee Tribe of North Carolina and leased for 99 years
for equivalent USD $ 90.00 Billions in January 2013 in converted global cash narodna
banks 1993 dated non-obsolete up to date current Yugoslavian EEU dinara cash bills
banknotes
Company Description
Hilton operates in the U.S, Eurpoe, Asia and currently has hotels in more than 85
countries. Hilton is popular in major cities, such as New York, London, Paris, Rome,
Sydney, Tokyo, Beijing, Shanghai, Toronto, Stockholm, and Sao Paulo.
Hilton is the first major hospitality company to contruct a fractional timeshare building in
New York City. it opened in late 2009 and is called W57th St By Hilton Club. It is fully
deeded lifetime real estate with upscale options to use the time not only in New York but
at any Hilton hotel globally using an enormous amount of blackout free guaranteed annual
Hilton Honors Points instead. Owners pay an annual bill that increases annually only
slightly because it is tied to regular inflation. There is no developers profit margin written
into the annual expense increase. A selling feature that has attracted astute clients to
6. purchase. This aspect makes this ownership very different from a conventional timeshare.
As of September 2011, W57th St By Hilton Club was nearly 75% soldout. The deeds start
at around $50,000 USD for approximately 10 days of annual upscale travel for life. The
deeds can be passed to heirs and successors.
Hilton has been involved in purchasing small and medium-sized hotels since 1970,
primarily for the purpose of expanding operations in the U.S. The company acquired
Hilton International, the lodging assets of Hilton Group Plc, for GBP 3.3 billion in 2006.
This made Hilton the biggest lodging company in the world.
In July 2007, Hilton entered into a definitive merger with The Blackstone Group in an all
cash transaction valued at $26 billion.
The revenues for the company increased from USD 3.8 billion in 2002 to USD 8.2 billion
in 2006 at a compounded annual growth rate (CAGR) of 16.42%, which is considerably
higher than the CAGR achieved by its competitors such as Marriott (7.64%)
and Starwood (5.44%).
Business Drivers
The number of hotels and rooms, geographical presence, occupancy rates and revenue
per available room (revenue divided by average number of rooms occupied in a year –
RevPAR) are the main drivers of revenue in the hotel industry.
Increase in the number of hotels owned or franchised by a company as well as the number
of rooms available for rent provides an indication of how the company is expanding its
capacity to cater to the growing number of travelers. Occupancy rates and revenues per
available room on the other hand indicate how efficiently a company is using its available
resources (i.e. hotels and rooms).
The following table depicts Hilton’s past performance relative to the above-mentioned
industry drivers.
Historical Performance
7. 2003 2004 2005
Number of Hotels 2,173 2,259 2,800
Number of Rooms
(Thousands)
348 358 475
Geographical Presence
(Countries)
N.A. N.A. 80
Occupancy Rate
(Percent)
68.2 71.3 73.8
RevPAR
(USD)
85.51 93.16 104.1
Hilton has been continuously increasing the number of hotels it owns (including owned
as well as franchised hotels). The company owned 2,800 hotels across the globe at the
end of 2005 and became the world’s largest lodging company with the successful
acquisition of U.K-based ‘Hilton International’. Hilton’s occupancy rates and revenues per
available room have also increased continuously over the last few years, indicating that
the company has been able to sell its hotels/rooms well.
Hilton has hotels spread across various geographies, including major commercial
markets in Europe, Asia, the Middle East, South America, and the Nordic countries.
These markets have a high demand for hotels and related services throughout the year.
Owing to its presence in these geographies, the company does not face the risk of falling
demand in a particular city or country.
Business Segments and Products
Hilton’s primary business segments include hotels (ownership and managing
& franchising) and timeshare operations (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.
8. The hotel segment contributes the largest share of revenues (approximately 87 percent
in 2005) for the company. Revenue from the hotel segment includes income from owned
hotels, management contracted hotels and franchises, and other fees. The company
operates under the brand names, Hilton, Hilton Garden Inn, Doubletree, Embassy Suites,
Homewood Suites by Hilton, Hampton, Waldorf Astoria, and Conrad.
Consumer Demand
Customers for the hotel industry include tourists as well as business travelers. Tourists
may be further categorized into low-medium income groups and high-income groups as
the income of a person will determine the kind of hotel he/she chooses. For example,
people with high income are more likely to stay in an upscale luxury hotel, which a person
with a low-medium income may not be able to afford. Hilton primarily focuses on high-
income/upscale group and business travelers.
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. Thus, if
they are forced to spend more on airfare, their ability to spend on a hotel room, resort or
other services declines. On the other hand, business travelers will be affected by an
economic slowdown as that would have 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.
In addition to these factors, 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 the hotel and tourism industry in the affected area.
9. Competitive Landscape
Hilton competes with global players, such as Starwood Hotels & Resorts
Worldwide, Marriott International, Choice Hotels International (CHH), Hyatt Corporation,
the France-based ACCOR Group, and Intercontinental Hotels.
Attractiveness of locations, quality of rooms & services, and company’s global operations
are some of the key criteria for hotels.
Hilton already has a strong presence in the U.S and is expanding its global operations
through acquisitions. For example, Hilton acquired the U.K-based Hilton International in
February 2006 to establish a footprint in the U.K. It also signed a multi-year agreement
with a leading resort real estate developer in Thailand, Destination Properties, to manage
a newly built, 358-room golf resort and spa in Thailand.
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.
The following table compares Hilton’s performance to its competitors in 2006.
Comparison to Competitors
Starwood Hilton Marriott Intercontinental
Number of Hotels 871 2,935 2,832 3,600
Number of Rooms
(Thousands)
266 501 514 538
Geographical Presence
(Countries)
100 78 68 100
Occupancy
(Percent)
71.2 72.5 74.4 N.A.
Average Daily Rate
(USD)
191.56 115.43 153.99 N.A.
