Introduction
The Hilton Hotel HHonors program is a service that is ran in both Hilton Hotels Corporation and Hilton International. Hilton views this program as a highly effective marketing tool set to serve the frequent business traveler. This is at an aim to create and retain loyal customers given the severe competition in the hotel industry. This loyalty program works by allowing regular guests to acquire and accumulate points as well as airline miles every time they use any of the Hilton services offered. This program is among the largest of its kind with over 30 million registered users.
Q1 (A) Strengths and Weaknesses of the Hilton HHonors Program from the Standpoints of Hilton Hotels Corp and Hilton International
Green, Norma, Gillian & Sandra (96) argue that one of the strengths of the Hilton HHonors program is the Double Dipping service that Hilton Hotels Corporation and Hilton International offers to its clients. This service is unique since it not only allows the customers to earn points when they stay at any Hilton hotel but they also earn points when they use any service provided by other Hilton joint partners. For instance, a customer earns points when they use partner airlines, rental services, Mrs. Field cookies and FTD florists. These accumulated points can be redeemed for hotel stays and flyer miles as well as buying goods and services in partner companies. This comes as an added advantage to the client since it allows them to enjoy one loyalty program for different service providers as opposed to joining a loyalty program for each service provider. This helps raise the revenues of all the partners involved in this program. A recommendation to help entice guests even further would be to award points for every dollar spent at Hilton franchises and its partners. This would attract a greater number of customers.
One of the shortcomings of the Hilton HHonors program is that, it is managed by Hilton HHonors Worldwide, despite it being ran in the Hilton Hotel Corporation and Hilton International Corporation. HHC and HIC do not have direct access to manage and control this program. This means that suggestions pointed out by customers are harder to improve and thus customer satisfaction is not met to its full potential. A recommendation would be to integrate the program into HHC and HIC organizational structure for optimal results. Another shortcoming is cost. The expense for the program for both HHC and HIC is quite large. This is due to the complex management structure. This cost would reduce considerably if the program was integrated into both HHC and HIC as opposed to being ran by HHW.
Q1 (B) Strengths and Weaknesses of the Hilton HHonors Program from the Standpoints of Member Properties (Franchised Hotels)
The success witnessed by Hilton from the Hilton HHonors Program has led to the attraction of other hotels to sign up partnership contracts with this hotel chain (John & Stowe, 5). These partnerships allow Hilton to have access to a bigger pool of customers. This also gave reward to easier accessibility to the other partner companies. This program was considered a great business driver with the advantage of its costs being lower than those of its competitors. In addition to this, since the franchises are all under the Hilton brand, they experienced a cut in advertising costs. This is because advertising for this program by one service provider did not require similar advertising by another service provider. Partnering with other companies on his program also led to an increased contribution. There was a $177 million increased contribution. A recommendation would be for the Hilton to strive to make partnerships with even more companies so as to have access to even more customers and also enjoy an even larger contribution to help further this program
Q1 (C) Strengths and weaknesses of the Hilton HHonors program from the standpoints of guests.
The greatest strength in the program in the guest’s perspective is its ability to gather and accumulate reward points and the ability to redeem these points. It has the advantage of reduced costs for frequent travelers who could now spend less on hotel stays and airline tickets. Another added advantage is that registration to the program is free. Once a member had accumulated enough points, they could redeem them at any Hilton franchise or buy products and services at any of the partner companies. These policies lowered the cost spent by patrons and encouraged continued use of the Hilton chain of hotels. A recommendation to help improve this program even further would be for the Hilton to award points that are redeemable for an American Express Prepaid lodging card. Since these cards are accepted in over 50, 000 hotels around the world, it lifts the limitation of only redeeming points from Hilton and its partners.
A weakness of the program is that only frequent travelers are able to enjoy it to its maximum potential. Members of the program occupied 22.5% of all the rooms available in the Hilton annually. This proportion was small since they were only frequent travelers. The program is not attractive to customers who don’t travel frequently. This may lead to the customer choosing another alternative stay. Change of policy would encourage even infrequent travelers to use this program. The program should introduce new strategies and incentives to help encourage even the infrequent customer to enroll in this program. Ideas can be borrowed from the competition such as the Starwood program that awards points to customers for evry dollar spent. This would mean that customers not only earn points for hotel stays and airline tickets, but also for other products bought at the Hilton franchise and all its patners.
1 (D) Strengths and Weaknesses of the Hilton HHonors Program from the Standpoints of Corporate Travel Departments
The strength of this program from the corporate travel department standpoint is that it allows travel managers to gain compliance to their general travel policy. A significant amount of business for Hilton is from large corporate clients. The corporation earns a discount after a certain number of stays. A lot of money can be saved by selecting Hilton as their choice stay. The program allows Hilton to capture guest preferences and modify their services to the recommendations given making it suitable for selection for future stays. A recommendation to even strengthen this program further would be for the Hilton to introduce automatic discounts for corporate clients. This will mean that corporations chose Hilton over other hotels for its employees to stay at.
There are barely any weaknesses for this program to corporate clients. Research by Hilton shows that approximately a quarter of the frequent travelers are registered members of the program. However, their business is not with only one branch of the Hilton, meaning that changes affected will not be noticed by these clients for them to change their preference from Hilton. Points rewarded are effected to the corporation and therefore no relationship is created between the hotel and the individual staying in it.
Q2. How does the value generated to Hilton by the program compare to its cost?
Using this program, Hilton aims at growing its customer base and retaining existing clients through the provision of incentives. Income statements from the year 1998 show that HHW accrued a total revenue of $ 69,837,000, total expense amounting to $ 69,438,000 and a net income of approximately $ 399,000. This is evidence that the program was making money. The program spent $ 1,108,000 on membership cards in 1998. This was in a bid to maintain and attract customers. This in turn created higher sales volume and a higher customer frequency. Hilton also spent $ 17,851,000 in the purchase of airline miles in 1998. This was effected by an alliance between Hilton and 25 airlines. These strategic partners also increased Hilton’s brand effect since Hilton became the first choice for stay for clients flying with these airlines. This helped differentiate Hilton from its competitors. The Hilton should find ways to cut down on the cost incurred in the running of the program. This would be attained by eliminating unnecessary expenses that do not necessarily affect the smooth operation of the program. This way more value would be generated from the program in comparison to its cost.
Q3. What is Starwood attempting to do and how should Jeff Diskin respond?
Starwood strives to create a customer royalty program the Starwood Preferred Guest Program that quickly becomes more favorable over the Hilton program. SPG has a more passionate membership base. Approximately 85% of SPG members value customer ratings and reviews on travel websites (Lamb, 2011). In the Asian market, membership for SPG tripled over three years. This program allows members to earn points for each dollar spent. Other incentives include rewards of bonus points on certain items, redeem point for hotel stays and flyer miles and also transfer points for travel with any airline. Starwood has proven to be a big competitor in customer loyalty. This is a huge challenge for Jeff Dsikin. To help compete, the Hilton should strive to differentiate itself from its competition so as to attract new clients and retain existing ones. For continued future growth. I would recommend the Hilton to introduce a program that randomly awards its diamond and gold members tickets to high end and exclusive events such as the NBA. To its silver members, The Hilton could randomly award film and concert tickets which many customers would consider a delight. This would increase the number of customers enrolled into the program. Attracting new customers would mean increased sales and bigger profit margins.
Implementation of Recommendations Given
Consistent with the three stage model of service consumption, a customer goes through three stages before service consumption; the pre-purchase stage, the service encounter stage as well as the post-encounter stage (Lovelock, Wirtz, & Chatterjee, 37). This process is paramount since it assist managers to set goals and shape consumer targeted behavior. For the above recommendations to be integrated into the program with respect to this model of service consumption. Targeted actions will be taken for each respective stage. In the first stage, the management will need to raise awareness to the general public about the introduction of these new features. Since at this stage the consumer is searching for information and evaluating alternatives. Aggressive marketing will be paramount so as to encourage the consumer to invest in your service over the other alternatives.
For the second stage, the consumer strives to understand the service system. Management will ensure that the customer is able to contact them and access information as to how the service works. Social media will be an excellent program for the clients to contact the management for answers on any queries they have. The last stage entails evaluation of service performance and future intentions. Targeted action for this stage will be to ensure that the service is operating at its optimum. Suggestions made by the customer will be evaluated and modifications made to ensure customer satisfaction. Since at this stage the customer decides whether to invest in the service in the future, management will ensure that the service is the best in the market. Implementation of these will improve the programs performance considerably.
Future Vision of the Company
For the Hilton to attain its vision and fulfill its long term and short term goals, it should conduct customer surveys to evaluate customer satisfaction. This will help identify any changes in the customer’s needs and preferences and allow the Hilton to modify their service provision as per the suggestions the customer provides. These studies will also allow the Hilton to identify why customers are defecting from their services and considering their competitors. Analysis will allow the Hilton to evaluate the aspects that need modification and improvement for better service delivery. This will foster continued customer loyalty and increase the Hilton’s revenue.
Works Cited
Green, D., Norma, Gillian A. Maxwell, and Sandra, W. Human Resource Management: International Perspectives in Tourism and Hospitality. London: Thomson, 2004. Print.
John, D. & Stowe, S. (2005). Hilton Hhonors Worldwide: Loyalty Wars, Retrieved on 25 Apr. 2016. http://www.mastermarketingdauphine.com/charge/promotion/Hilton.pdf
Lovelock, C., Wirtz, J., & Chatterjee, J. (2011). Services marketing: People, technology, strategy. New Delhi: Pearson.
Starwood Preferred Guest (2012). Bonus Point Opportunities. 25 Apr. 2016.
<http://www.frequentflyerbonuses.com/starwood.html>
Starwood referred Guest-Announcing complimentary in-room internet access. 25 Apr 2016. http://www.spgpromos.com/compnetaccess/index.cfm?language=en_us&EM=VTY_SPG_COMPNETACCESS_PROMOTION
