Hilton Hotel

Strategic Management Case Analysis

Introduction

“It has been, and continues to be, our responsibility to fill the earth with the light and warmth of hospitality.”1

This is the stated philosophy of the luxury hotel company that Conrad Hilton, the founder of Hilton Hotels, used to extend his desire for his company to offer customers a kind, hospitable, and luxury setting. Conrad started the hotel chain by purchasing a single 40- room hotel from Cisco, Texas in 1919. Since then the corporation has grown into more than 2,800 hotels and 490,000 rooms in more than 80 countries as of 2006.

Hilton Hotels Corporation headcourters are located in Beverly Hills, California. It is known as the leading hotel company in the United States and globally. The Company owns, manages, and franchises Hilton, Conrad, Doubletree, Embassy Suites and Hotels, Hampton Inn, Hampton Inn and Suites, Hilton Garden Inn, Hilton Grande Vacations, Homewood Suites, and The Waldorf= Astoria Collection.

Identification of the Industry

Hilton Hotels compete worldwide in the lodging industry. Hotel stays are on the rise because people are traveling more with their jobs and as tourists. As a result of the increase in the need for hotels, more hotels are being built to meet larger demands. The hotel industry must offer different types of rooms because they must cater to the needs of everyone. Hilton offers guests the widest possible variety of hotel experiences, including four-star city center hotels, convention properties, all-suite hotels, extended stay, mid-priced focused service, destination resorts, vacation ownership, airport hotels and conference centers.

The industry competes in a number of areas such as owning hotels, managing and franchising, vacation ownership, and internationally.

Marriott Hotels

Hyatt Choice Hotels

Hilton Hotels

Best Western

Intercontinental

Starwood Hotels

Industry Profitability

Intensity of Rivalry. The hotel industry faces competition among other hotels that are expanding rapidly in the industry.Intensity of Rivalry occurs when such as Marriott and Hyatt.

Threat of New Entrants. Entering the hotel industry is fairly difficult because of the high costs related to the purchase of facility, governmental barriers, and brand recognition. Many hotel companies are combining to become bigger players in the industry.

Threat of Substitutes. Hilton is expanding into the Inns and Suites business and competing by offering amenities a step above their competitors such as food and beverage.

Bargaining Power of Suppliers. Entry into the hotel industry is difficult because it is very expensive and competitive. There are no new threats to Hilton.

Bargaining Power of Buyers. Hilton caters to a wide variety of people. Their hotels range from top of the line luxury hotels to their more affordable Inns. Therefore, customers can choose from a wide variety of options.

Summary. The profitability of the company within the industry depends on efficient operations and good marketing. Larger companies have economies of scales and strong name recognition. Smaller companies must rely on favorable locations and specialty services.

The Macroenvironment

Political-Legal Forces

• Tax rebates will provide US families with more disposable income, leading to an increase in travel over the upcoming months.

• Passport Laws: The new laws effective summer 2008 will require that anyone traveling by land, sea or air between the United States and its neighbors will need passports. It can take up to 6- 8 weeks to receive the passport for first time once paperwork is received. This process will make it difficult for U.S. residents to take vacations outside the U.S and have an adverse impact on the industry. http://www.caribbeannetnews.com/2005/04/19/sanders.shtml

• In December 2007, an agreement was signed with Chinese officials, which will cause an increase in the number of Chinese groups that travel to the US. The agreement also allows US companies to market their brands in China. The agreement will go into effect Spring 2008, and Chinese tourists are expected to spend billions of dollars in the US next year. The lodging industry will need to spend more on marketing in China, but will benefit by the additional visitors. http://www.ahla.com/public_overview.asp

• There are bills in both houses of Congress that would help alleviate some of the problems the lodging industry is having with hiring seasonal workers. The bills would affect the US government’s H2-B visa program, which allows Hoteliers to hire short-term workers. The bills before Congress would increase the number of visas available each year and some of the eligibility requirements would be lifted. If these bills are passed, more seasonal workers would be available for the lodging industry and the money spent recruiting workers could be used elsewhere. http://www.ahla.com/pdf/2007_Visa_Program.pdf

• According to the American Hotel & Lodging Association, the US Department of Justice is considering changing the accessibility guidelines in the Americans with Disabilities Act. Some of the proposed changes include expansion of turning ranges, making non-public areas accessible, and greater accessibility to non-fixed features. If the proposed changes are accepted it could cost the lodging industry millions. http://www.ahla.com/pdf/2007-ADA.pdf

• Congress recently extended the Terrorism Risk Insurance Act (TRIA), which promises aid to insurance companies if another terrorist attack such as 9/11 occurs. TRIA benefits the lodging industry because it enables insurance companies to still offer extensive and affordable terrorism insurance to hotels. http://www.ahla.com/pdf/2008_01_10_TRIA.pdf

• There are currently several bills in Congress that would encourage tourism in the US. Some provisions of these bills include an expedited customs process, quicker visa processing, and the development of an International Registered Traveler