a. Hilton Reward Program, named Hilton HHonors Worldwide (HHW), was adopted in 1998 in order to build loyalty to The Hilton brand and attract as many customers. The Hilton brand consist of two independent corporations: Hilton Hotels Corporation (HHC) and Hilton Hotel International (HHI). HHC is responsible for the Canadian and both American regions while HHI controls the rest of the world, preferable Europe. These two corporations have their own executives but one marketing program. The strength of the Hilton HHonors Worldwide is that is works in both corporations. Customers can get free nights and other benefits from the program no matter at what part of the world they stay. One more benefit of the reward program is the existence of different statuses for clients. Depending on the number of stays per year, customers get Blue, Silver, Gold or Diamond status. It works like additional attraction for clients because they get not only special attitude but also a moment of a passion: the desire to enhance their status. The disadvantages of the reward program may in additional costs for the company. Moreover, the possibility of free nights may attract guests of different financial status while Hilton was usually a hotel for upper classes.
b. The Hilton Brand is often uses franchisees: hotels are operating under The Hilton name or Hilton is given a contract to run other’s property. The loyalty program works like additional benefit for franchisee. First, because the costs for the loyalty program is lower than those of competitors. Second, it gives opportunity for small local hotels, which are the main franchisee, to attract business travelers and to win in so called “road warrior” business. The only disadvantage for the franchisee is the high requirements for a hotel to become a member of The Hilton Brand.
c. Guests are the main beneficiaries from the reward program. They get special attitude while staying in Hilton together with the possibility to improve this attitude by gaining points. Points of the program are admitted in more than 25 partners including different services. For example, the double dipping benefit allows getting points for both staying in Hilton and flying partners’ airlines. The only weaknesses that guests may face are the costs of staying in Hilton and limitation of presentence in the world.
d. Corporate travel departments also benefit from the HHW. “Hilton offered discounted rates if the corporation delivered enough stays “ In this case, travel departments are interested in promoting Hilton for their clients, which leads to mutual benefit for them and for The Hilton Brand. However, the amount of Hilton hotels all over the world is not very high, that is why it is very difficult for corporate travel departments to deliver to Hilton enough guests to get bonuses from them.
2) The main goal of the Hilton HHonors Worldwide was to build loyalty to The Hilton Brand. As it can be seen from the case, the goal was archived. It was announced, that the total costs for the HHW was $50 million. Main competitors of The Hilton Brand spent much more for the developing of their loyalty programs. For instance, “Starwood was pledging to invest $50 million in advertising to publicize the program” ( Deighton, Shoemaker, 561).
According to the official statistic, in 1998:
Cost of HHonors = $ 69,438,000
Revenue from HHonors = $ 69,837,000
Net Income = $ 339,000
The program had paid off in the first year of its implementation what is a very good result.
Total revenue from HHonors Members - $1,504.837 what is 24.7% of total revenue for 1998.
These data shows us the implementation of the HHW was a good idea of the management that brought benefits to the business. Revenue exceeded Costs and Net Income took place. However, the main benefits from the implementation of the reward program are nonfinancial. Thanks to the different statuses of the reward program, customers feel unique at Hilton. They want get more points, to enhance their status and be served even better. This reward programs also built strong and long-term relationships with other companies-members of the program: from airlines, to florists shops and sweet-shops. Diskin said: “Customers care about the corporations that care about them” ( Deighton, Shoemaker, 562). This is the main principle of the Hilton loyalty war.
The Starwood Corporation was trying to get their piece of pie in the hotel industry. “On February 2, 1999, it was announced the birth of the Starwood Preferred Guest Program” (Deighton, Shoemaker, 565). This program had many peculiarities that made Starwood competitive. For example, Starwood loyalty program had no limitations about special dates or rooms as other companies did. All dates and all rooms were acceptable for the members of loyalty program. There were no limits for free rooms: “all unreserved rooms should be available to guests paying with points” (Deighton, Shoemaker, 565). All these examples show that Starwood was attempting to get leading positions in the hotel industry.
The chief management of Hilton - Jeff Diskin – had two possible ways: to respond or stay at his. Diskin was a wise management. After analyzing the situation on the market, he decided to move his own way. Mainly, because “Starwood's Preferred Guest announcement was a solution to a problem Hilton did not have” (Deighton, Shoemaker, 565). The Hilton Brand was a well-known all over the world while Starwood was just on the way to build its name. Potential audience of these two corporations were different: Hilton was concentrating on business and upper classes while Starwood was trying to attract younger audience. The times has shown that Diskin made a right decision. In November 2015, “Starwood’s CEO has gone so far as to say that he expects Starwood to be taken over by the end of the year” (Shlapping). From this information we may conclude, that Starwood did not succeed in gaining a leading position on the market. Its loyalty program was not good enough to compete with such hotel giants as Marriott, Hilton and Hyatt.
In conclusion, I would like to say that Hilton is a brand that is sold. People all over the world have a strong perception of Hilton as a hotel of high quality and best attitude to its guests. The way to the success is to strengthen and improve this perception.
References
Deighton, J., Shoemaker, S. “CASE 14 Hilton HHonors Worldwide: loyalty Wars”, 555-568.
Shlapping, B. “Implications Of Marriott Buying Starwood”. Boarding Area, 16 November 2015. Web. 19 April 2016.
