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
nly 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
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. 10000 point discount when they claimed a reward

costing 100000 points.

Upgraded to 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 FTD Florists Other firms

WORKING WITH FRANCHISEES

HSW a strong factor to persuade hotel owners to become Hilton franchisees. Franchisee smaller hotels. Dependent 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. Employees to follow company policy to get reimbursed.

MEMBERS ATTITUDE
HHW made use of conjoint analysis to measure what members wanted from HHP. Important features of the hotel programs were  Room updates 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

DISKINS DILEMMA
Do we have to compete point from point? Do we want 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