Hilton Hotel (w)

HILTON HHONORS WORLDWIDE: LOYALTY WARS

GROUP 7

• About Hilton Hotels

The most recognized name in the industry, Hilton Hotels

stands as the stylish, forward thinking global leader of

hospitality. Today Hilton welcomes guests in more

countries than any other full-service hotel brand, with

more than 530 hotels and resorts in 76 countries across

six continent.

HILTON HOTEL BRANDS

Loyalty program

Luxury

Full service

Focused service

Time share

LOYALTY MARKETING PROGRAMS

HOTEL INDUSTRY

• Chain brands supplied reservation services, field

sales operations and loyalty program administration.

• Less standardization of operations.

• Chains managed one another's brands.

CONSUMERS

• Only 41% of consumers use hotels over night.

Three segments of customers:

• Business segments

• Convention segments

• Leisure segments

COMPETITION

Four global brands dominated business class Hotel

markets.

Starwood

Hyatt

Hilton

Marriot

MARKETING THE HILTON BRAND

• Hilton hotels were controlled by unrelated

corporations.

Hilton Hotels Corporation(HHC)

Hilton International Corporation(HIC)

• Reunified in 1997

• Bollenbach appointed as president and CEO of Hilton.

• Focus on Brand development.

• Varying product has been a limiting factor.

• Challenge to maintain customer expectation.

• The revenues reached $158 per night per guest.

• Occupancy exceeded break even.

• Fixed costs at about 68% occupancy and 80% at

higher occupancy level.

HILTON HHONORS PROGRAM

• Hilton HHonors worldwide - not as a profit center but

as a service.

• Required to measure the effectiveness through set of

metrics.

• Membership was provided free of cost.

• Members earned points during their stay at HHC or

HIC hotels.

• When earned enough points stay at the hotel is

redeemed.

Four tiers of membership Blue

Silver

Gold

Diamond

BLUE

• In 1998 4.5 cents per dollar was collected from the

members for every stay.

• HSW credited 10 points per eligible dollar of folio.

• Guests earned mileage in partner airline frequent

flyer programs.

• Members earned points by renting a car, using the

Hilton credit card from American express.

• Buying products from FTD florist and Mrs. field's

cookies.

• Besides free stays they had priority of reservations

telephone numbers.

SILVER

• Members awarded silver VIP status if stayed for more

than four times in a year

• Benefits are:

• Earned 15% bonus on base points

• Received a 5000 points bonus after 7 stays in a quarter.

• 10000 point discount when they claimed a reward

costing 100000 points.

GOLD

• Members awarded Gold VIP status if stayed for more than

16 times in a year,

• Benefits are 25% bonus on base points

• Received a 5000 points bonus after 7 stays in a quarter.

• 20000 point discount when they claimed a reward costing

100000 points.

• Certificated for the best room in the hotel after every 5th

stay.

DIAMOND

• No benefits were promised.

• Acquired more bang, more affinity, more vesting

from customers if you do something un expected.

RATIONALES FOR THE PROGRAM

1) Revenue and yield management

• Appoint a revenue manager to oversee day to day

decisions.

• Yield management models were probabilistic

algorithms that helped managers set reservation

policy.

• Variable pricing – rate charged on size and fittings as

well as day of booking, length of stay and customer

characteristics.

• Walking cost depends on

1. Customers future life time value

2. Function of their willingness to pay past loyalty.

Collaborating with partners

• HHW partnered with

• 25 airlines

• 3 car rental firms

• Other firms

WORKING WITH FRANCHISEE

• HSW a strong factor to persuade hotel owners to

become Hilton franchisees.

• Franchisee – smaller hotels.

• Depended on “Road warrior’ business.

RELATION WITH THE GUESTS

• This program let the most valuable guests to be

recognized on-property.

• After visit calling.

• Feedback groups in addition with focus groups

• Maintenance of guest profile

HELPING TRAVEL MANAGERS GAIN COMPLIANCE

• Proportion of Hilton business came from contract with

large corporate clients.

• Responsibilities of travel manager.

• Negotiate a rate by promising volume of stays.

• Objective is to use the program as a tool that can help

travel manager with compliance to their overall travel

policy.

MEMBERS ATTITUDE

• HHW made use of conjoint analysis to measure what

members wanted from HHP.

• Important features of the hotel programs were

Room upgrades and airline miles.

Free hotel stays and variety of on property profit

benefits and services.

Diskin recognized from the study that

o To attract game players

o To improve the stay experience for members

STARWOODS ANNOUNCEMENT

• The wall street journal of feb2,1999 announced the birth of

Starwood preferred guest program

• It included more than 550 participating properties worldwide

• Four features were

No blackout dates

No capacity control

Paperless reward

Hotel reimbursements

DISKINS DILEMMA

• Do we have to compete point from point?

• Do we have to take different positioning?

• Do we have to hold on to loyal members and

differentiate honors from starwood and other

competitors?

STUDY QUESTIONS

• What are the strengths and weaknesses of

Hilton HHonors from the standpoints of

a) Hilton Hotels Corp and Hilton International

b) Member properties(franchise hotels)

c) Guests

d) Corporate travel departments

What is Starwood attempting to do and how

should Jeff Diskin respond

How does the value generated to Hilton by the

program compare to its cost