EXECUTIVE SUMMARY:

Hilton HHonours is a program designed to build loyalty to the Hilton brand worldwide. This
program is a non-profit making service to its two parents, Hilton Hotel Corporation and Hilton
International. It is a limited liability corporation consisting of 30 staff members along with a vice
president overlooking the marketing, operation and customer services. For over a decade the
loyalty program has been the core of how Hilton attracts and retains their best customers. The
market in which Hilton operates is small but defined by price point and trip purposes and is
divided among business, convention, and leisure segments. Hilton HHonours is open to anyone
without any charge. There are four tiers of membership: Blue, Silver, Gold, and Diamond;
members earn membership points every time they stay at HHC or HIC hotels. The four large
global brands that dominate the business-class hotel market are Hilton, Starwood, Marriot, and
Hyatt. However, Starwood recently came up with a $50 million frequent-guest program that will
lure more business travelers to their hotels thus reducing the cost-effectiveness of the industry
and threatening Hiltons HHonours loyalty program. In order to compete with Starwood, Hilton
will have to differentiate their loyalty program by adding certain features to attract new
customers as well as increase loyalty in existing members. To make it more appealing Hilton is
adding some features to their HHonours loyalty program such as the No capacity control and
Paperless rewards, room upgrades, promoting on popular travel websites as well as tying up
with more airlines, travel agents, large corporate clients, and third party hotels from around the
world. Augmenting their loyalty program combined with a well-established brand name of
Hilton will not only help them to compete against Starwood but will also give them a
competitive advantage in the hotel industry.

PEST ANALYSIS:
Technological trends:
Loyalty programs had evolved from coupons and trading stamps, to computer based programs.
In the 1900s and 1950s, trading stamps were a norm in America. Retailers would provide their
customers a portion of stamps based on the amount of purchases they had made. Customers
would paste these stamps into books that would later be used to collect merchandise. Although
trading stamps were quite popular, consumers lost interest in collecting them and the concept
was eventually driven out by emulators. The concept remerged in 1981 when American Airlines
introduced their frequent-flyer program. The program was similar to trading stamps; air miles
would be given relative to the number of miles a customer had travelled. These miles could later
be redeemed for travelling. What made the program unique was that American Airlines did not
use stamps. They possessed computers that had data-warehousing capabilities. Administrators
eventually enhanced their program by identifying the names and addresses of their most loyal
customers, building a one-to-one relationship with them. Later on, frequency-flyer program was
offered by many airlines and, computer-based loyalty programs had clustered into many service
industries like car rentals department stores and the hotel industry.
Social and Economic trends:
In the hotel industry, chain brands were a major player in a market comprising of 13.6 million
rooms. Chain brands operated under well-established hotels like Hyatt and Marriott. These
chains showed diversity in various segments of the market by providing extensive services like
reservation, field sales operations, loyalty program administration and hotel management. The
chains would manage and own branded-hotels or manage hotels that were owned by a third party

or a franchisee. This was the reason different methods of control were implemented to enhance
customer experience, leading to less standardization of operations in hotel chains. Also, branded
hotel chains would manage other branded hotels, resulting in flow of a competitors operating
information freely in the industry.
There are no political issues.
COMPANY:
The Hilton brand was under the authority of two corporations that were completely unrelated,
Hilton Hotels Corporation (HHC) and Hilton International (HIC). However, in 1997, HHC and
HIC decided to merge together and for one Hilton brand worldwide. By the end of 1998, HHC
had removed itself from casino related activities in order to form a dedicated Hotel Company.
Both the corporations have decided to coordinate, standardize operations and use their Hilton
HHonors loyalty program across all the Hilton hotels. The Hilton brand has 492 hotels and
154,000 rooms.
Hilton HHonors is a loyalty program specially designed for the Hilton brand worldwide. It is a
limited liability corporation managed by Jeff Diskin with a staff of 30 members and vice
president overlooking marketing, and operation and customer services. Anyone can apply for
membership in this program, free of cost. Members earn points towards their account whenever
they stay at any of the Hilton brand hotels. Once sufficient points have been collected, members
can use them to stay at Hilton hotels, buy products or convert them to miles in airline programs.
There are four types of membership: Blue, Silver, Gold and Diamond. Members are awarded
with a certain type of membership depending on the number of nights they stay at the Hilton
hotels. As the membership gets upgraded, the benefits increase.

CUSTOMERS:
Staying at hotels is an occasional event for most of the Americans. Out of 74% of American
overnight travelers, only 41% stay in a hotel or motel. Hiltons actual market is much smaller
where price point and trip purpose are its main determinants. This market is divided into three
segments: business, convention and leisure.
One third of the rooms in the market are served to the business segment. Two-thirds of these
guests have very little authority in choosing the hotel since it its mostly selected by their
employers. The remaining third has the complete power to choose their hotel since their
companies dont negotiate with the hotels.
Another third of the room nights are occupied by convention segment which consists of
convention, conference and other meeting related travel. In this segment, professional conference
organizers can choose the hotel.
The final third is the leisure segment. These guests are sensitive to price, therefore they prefer
packages of airlines, cars, tours, hotels or tour organizers that offer discounted rates.
Even though the chains experience demands from all the segments, it is observed that different
types of hotels have their own demands. This trend makes it difficult to understand that the
individuals in segments differentiated by trip purpose and price point are often the same people.
Frequent travelers choice of a hotel depends on the fact that whether their stay is covered by
business, vacation or personal expense.
HHonors program members occupy 22.5% of the occupied rooms in the Hilton hotels in a year.
Since they are frequent flyers, they are a smaller proportion of the guests staying at Hilton.

COMPETITORS:
The Hilton brand has three global competitors: Starwood, Marriott and Hyatt. Marriott has the
most number of rooms, followed by Starwood, Hilton and Hyatt. These brands are competing at
different price points by offering various packages for a variety of customers.
Starwood was built in 1991 and by the end of 1998 it had unified management with Westin,
Sheraton, St Regis, Four points and Caesars Palace brands. It also announced its plans to make a
new brand, W, which would be aimed at younger professionals.
Marriott International includes various hotels such as the Marriott, Ritz-Carlton, Renaissance
Inn, Courtyard, Towneplace Suites, Fairfield Inn, SpringHill Suites and Ramada International.
Host Marriott is a real estate investment trust that owns some of the properties owned by
Marriott International, Hyatt, Four Seasons and Swisshotel.
Hyatt Corporations is the one and only privately owned major hotel chain. It consists of Hyatt
hotels and resorts in not only the US, but also in Canada and the Caribbean. Hyatt International
is operating overseas. Hyatt also has ownership of Pacific Hotel group in Australia.
In terms of loyalty programs, Hilton HHonors has one strong competitor, the Starwood Preferred
Guest Program which covers Westin Hotels Resorts, Sheraton Hotels Resorts, The Luxury
Collection, Four Points, Caesars, and Starwoods new W brand hotels. This program has
features that are very costly and difficult to meet. These features include no blackout dates,
paperless rewards, no capacity control and hotel reimbursement, none of which were offered in
the HHonors program.

VALUE PROPOSITION:
Hilton is a well-established name in the hotel industry for many years. Along with high quality
standard, loyalty programs have been the core of how Hilton attracts and retains their customers.
For Hilton the value of the customer relationship have been increased through its HHonors
loyalty program. The program lets the most valuable customers be recognized on-property and
strive to provide them with a comfortable and customized hotel experience. Through HHonours
loyalty program customers cannot only earn and redeem their points for room preferences and
hotel reservation but can also benefit from Hiltons tie-ups with various commercial airlines and
third party hotels around the globe. Such quality and customer relationship sets Hilton apart from
their competitors.

STRATEGY:
According to the analysis, the Hilton HHonors program has 3 customer base non-members,
members that are very loyal, and members that are not loyal. The companys main strategy is to
retain as many customers as they can from all these customer bases. Hilton plans to do this by
adding certain features to their already well-established program in order to attract new
customers as well as increase loyalty in existing members, taking good care and provide more
benefits to their already loyal members and ultimately creating a customised package that
adheres to the specific challenges Hilton is facing.
The additional features Hilton plans to adopt are from Starwoods program to add to their
existing program to make it even stronger and appealing. The No blackout dates and the
Hotel reimbursement will not be added to the HHonors program since those options increase

costs for Hilton. Keeping costs low will allow more revenue to stay with the company, thereby
increasing its net income and subsequent profit margins.
Since Hilton has fewer properties internationally than Starwood, another strategy the company
plans to implement is to increase the distribution of the HHonors program without physically
opening up properties in new locations. This will be done by aggressively promoting their
program through a variety of tie-ups that will not only increase awareness of the program but
also its distribution.
TACTICAL PLAN:
Product:
Hiltons HHonors program will include new features in addition to the features it had before. The
No capacity control and the paperless rewards features from Starwoods program will be
added to the HHonors program in order to give it an edge over Starwood since a lot more is
offered by Hilton. These features dont affect costs for Hilton so they provide extra benefits
without having to deal with any extra costs. Some details of the existing HHonors program will
be changed as well, for example the luxury segment of the HHonors users will receive 5 hotel
points for every $1 spent at the hotels and the upscale segment will receive 4 hotel points for
every $1 they spend, and all other members will receive the original 3 points for every $1 they
spend at HHonors hotels. This not only provides a lot of benefit to the upscale and luxury
segments as they are already spending a lot of money to get the costlier rooms at the hotel, but
also increase the loyalty the members feel toward the hotel.
Another feature added is the ability for each of the HHonors market segments to upgrade to
premium rooms, provided rooms are available, by paying for a room in their respective segments

as well as spending any accumulated points they may have to get an even luxurious room. This
allows the mid-market segments to stay in upscale and luxury rooms as well as the upscale
segments to use luxury rooms. This feature would be very attractive and convenient to customers
since they are paying an amount that is less than the cost of their room, and the additional points
they pay with can be re-accumulated over time. This also helps in increasing the loyalty
members have toward the brand. The company benefits from this as well as customers are paying
for a room which would have been unoccupied otherwise, adding to the revenue of the hotel.
Price:
Since the HHonors program was offered free of cost before, Hilton will continue to offer it free
of cost as this will help in attracting new customers as well as maintaining the loyalty of existing
members.
Placing and Promotion:
In order to achieve the companys objective to increase distribution of the HHonors program
without physically opening up new hotel locations, Hilton will have to tie the placing and
promotion of the program together.
Hilton can enter into partnerships with 3rd party local hotels near all their established locations.
Their HHonors program can be licenced to these hotels and they can be called Hilton-affiliated
hotels. This achieves the dual objective of improving the image of the local hotels since they are
now affiliated to a hotel chain known for quality and Hilton benefits since its HHonors program
gains greater distribution.

Tie-ups with travel agencies can be made in which the agencies will receive extra commissions
in exchange for recommending the Hilton hotels and the HHonors program. This will help
promote the program since it will receive accreditation from travel agents who are trusted to get
the best travel deals and will raise awareness among customers too about the benefits the
HHonors program offers.
Hilton can also enter into tie-ups with more airlines and promote the program to their customers.
It is important to strengthen the relationship between Hilton and the airlines as well since they
have a huge untapped customer base that Hilton can benefit from. In order to do this, Hilton can
offer discounted rooms for the flight crew of the airline at any destination which has a Hilton
hotel. This cuts cost for the airlines as well as benefits Hilton as they are able to now attract a
wide variety of customers. Furthermore, more partnerships with airlines means a greater
proportion of Air Miles are tied up with Hilton enabling them to make greater use of their
double dipping feature to provide a complete travel package to their customers as well as
significantly decrease the customers cost of travelling. The program can be promoted through
word of mouth at airports as well as on airline websites in order to emphasise the decrease in the
customers cost if they become members of the HHonors program.
The HHonors program can also be promoted through online travel websites like expedia.com
where Hilton often lists their room availabilities. These availabilities can be listed and customers
will receive discount if they are members in order to make the program more popular and its
benefits more acknowledged.