Hilton Hhonors Worldwide Case Analysis

Hilton HHonors Worldwide Case Analysis

Situation Analysis

The Hilton HHonors was the loyalty program designed and managed by Hilton HHonors Worldwide (HHW) to build loyalty to two hotel companies operating under the Hilton brand, Hilton Hotels Corporation (HHC), Beverly Hills and Hilton International Corporation (HIC), London. The HHonors loyalty program included 492 Hilton brand hotels that had more than 154,000 rooms. The program was a huge success for Hilton and by the late 1990s companies in airlines; service industries also adopted loyalty programs to lure their customers with redeemable points and miles. But the biggest threat came to Hilton HHonors Worldwide when the Starwood Group of Hotels announced its Starwood Preferred Guest Loyalty Program in February 1999. This became almost like a loyalty war between Hilton and Starwood and Jeff Diskin - the head of HHW - was unsure about the way he should react to the loyalty war.

Overview of the Hotel Industry

The American hotel industry generally has three different market segments:

1. Business Segment: Employers if business travelers are the direct customers

2. Convention Segment: Professional business travel companies are the direct customers

3. Leisure Segment: Tour and travel agents are the direct customers

The travelers generally selected the hotels to stay based on two factors:

1. Price point of a particular hotel

2. Nature/Purpose of the travel

Based on the above two factors it was identified that:

1. Resort Hotels: Preferred mostly by leisure travelers and by some conventioneers

2. Convention Hotels: Preferred by business travelers

3. Near-Airport Hotels: Preferred by business guests

Challenges in Marketing the Hilton Brand

The Hilton brand faced two primary challenges with respect to its marketing:

1. Hilton (HHC and HIC) had many different hotels for many different market segments ranging from super-premium Waldorf-Astoria, Hilton Hawaiian Village to the smaller middle class hotels

2. Hilton found challenges to give consumers a clear sense of what and what-not to expect from their various types of hotels

Description of Hilton HHonors Program

1. Membership qualification: Membership was open to anyone who applied, at no charge

2. Members would earn points whenever they stayed at HHC or HIC hotels

3. They could use the earned points in following ways:

a. Redeem for stays at HHC or HIC hotels

b. Buy products and services from partner companies

c. Convert them to miles in airline frequent flyer programs

4. There were four tiers of membership:

a. Blue

b. Silver VIP

c. Gold VIP

d. Diamond VIP

5. Double Dipping: The unique practice of Hilton HHonors Program. If a member chooses Double Dip option, HHW would buy miles from the partner airlines and credit the member's frequent flyer account at 500 miles per stay

6. Members would enjoy other benefits such as priority