FINAL PROJECT

STRATEGIC MANAGEMENT
Hilton Hotel and Resorts
Monday, May 23' 2011

Team Members,
Namra Malik (fa07 BBA 094) Maryam Khan (fa07 BBA 056) Ahad Humayun (fa07 BBA 008) M. Jawad Shahnawaz (fa07 BBA 078) M. Azfar Khan (fa07 BBA 069) Naqi Husnain (fa07 BBA 095)

COMSATS Institute of Information Technology, Islamabad

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Introduction
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 continents. From inaugural balls and Hollywood award galas to business events and days to remember, Hilton is where the world makes history, closes the deal, toasts special occasions and gets away from it all.

Strategic Analysis - External Analysis

1. Market Size and Growth Rate

With more than 3,600 hotels in 76 countries, our trusted portfolio of hotel brands includes the Waldorf Astoria, Conrad, Hilton Hotels & Resorts, Doubletree, Embassy Suites, Hilton Garden Inn, Hampton Inn & Suites, Homewood Suites by Hilton, Home2 Suites by Hilton and Hilton Grand Vacations. Market Size, Feb 18, 2010 Economic research firm e-forecasting.com in conjunction with Smith Travel Research announced HIP declined in January after improving 2.8 percent in December. HIP, the Hotel Industry's Pulse index, is a composite indicator that gauges business activity in the U.S. hotel industry in real-time, similar to a GDP measure. The latest monthly change brought the index to a reading of 82.4. The index is set to equal 100 in 2000. HIP's six-month growth rate, which historically has signaled turning points in U.S. hotel business activity, improved from the previous month with a reading of negative 1.9 percent compared with negative 3.4 percent in December. As a benchmark, during the worst of the hotel industry recession, which was last March, the six-month growth rate hit negative 23.4. This compares with a long-term annual growth rate of 3.2 percent, the same as the 38-year average annual growth rate of the industry's gross domestic product. As we noted in October, the road to recovery for the hotel industry is going to be a bumpy one, with some months gaining ground while others reduce those gains. This month's reading leaves the industry nearly flat for the first month of the year," said Evangelos Simos, chief economist of e-forecasting.com. The probability of business improvement decreased slightly in January to 96.4 percent after a stronger reading of 98.4 percent was recorded in December. Growth Rate
The revenues for the company increased from USD 3.8 billion in 2002 to USD 8.2 billion in 2006 at a compounded annual growth rate (CAGR) of 16.42%, which is considerably higher than the CAGR achieved by its competitors such as Marriott (7.64%) and Starwood (5.44%)

Customers for the hotel industry include tourists as well as business travelers. Tourists may be further categorized into low-medium income groups and high-income groups as the income of a person will determine the kind of hotel he/she chooses. For example, people with high income are more likely to stay in an upscale luxury hotel, which a person with a low-medium income may not be able to afford. Hilton primarily focuses on high-income/upscale group and business travelers.

The demand from low-medium income customers is primarily affected by an increase in airfares. These customers generally have a fixed budget for their vacations. Thus, if they are forced to spend more on airfare, their ability to spend on a hotel room, resort or other services declines. On the other hand, business travelers will be affected by an economic slowdown as that would have a direct impact on the volume of business. As Hilton s customers belong to the high-income group or are business travelers, the impact of an economic slowdown will be more significant for the company. In addition to these factors, certain events, such as acts of terrorism, wars, and outbreak of contagious diseases have a severe impact on the demand from all customer segments. With events such as 9/11, the invasion of Afghanistan, the outbreak of Severe Acute Respiratory Syndrome (SARS), and the tsunami, people either stop traveling to those respective countries or choose alternative destinations for travel, which has a negative impact on the hotel and tourism industry in the affected area. Competitors y y y y y Starwood Hotels Choice Hotels Internationals InterContinental Hotels Marriot International Orient-Express Hotels

2. Position in the Life Cycle

Growth The revenues for the company increased from USD 3.8 billion in 2002 to USD 8.2 billion in 2006 at a compounded annual growth rate (CAGR) of 16.42%, which is considerably higher than the CAGR achieved by its competitors such as Marriott (7.64%) and Starwood (5.44%). In 1919, Conrad Hilton picked up a little something extra on the way to buy a bank in Cisco, Texas the Mobley Hotel. Today, the company owns or has stakes in about 110 properties and leases or manages more than 2,750 others. The swanky Waldorf-Astoria Hotel in New York and the Palmer House in Chicago are its crown jewels. The company also manages properties under the Doubletree, Hampton Inn, Embassy Suites, Homewood Suites, and Conrad names. Most Hilton properties are located in the U.S., but Hilton also owns and manages properties in 77 countries. The company s largest unit is Hampton Inn & Suites, with more than 1,600 locations. In 2007, the company was acquired by private equity firm The Blackstone Group for $20 billion plus $6 billion in debt. The total price of $26 billion is a record for the hotel industry. Blackstone already owns the La Quinta and Suites and LXR Luxury Resorts & Hotels chains.

In March 2009, Hilton announced the launch of a new brand of hotels catering to the globally conscious modern travelers of the world, called Denizen Hotels. The Denizen brand plans to round out Hilton s luxury portfolio. However, only a month after the announcement, rival Starwood Hotels fired a lawsuit at Hilton, alleging that secret documents were stolen from Starwood to develop the Denizen Brand. Hilton denies the allegations but still faces federal scrutiny. 3. Number of Rivals Since Hilton is a luxury hotel, hence its competitors are few in number but are large and widespread. Hilton already has a strong presence in the U.S and is expanding its global operations through acquisitions. For example, Hilton acquired the U.K-based Hilton International in February 2006 to establish a footprint in the U.K. It also signed a multi-year agreement with a leading resort real estate developer in Thailand, Destination Properties, to manage a newly built, 358-room golf resort and spa in Thailand. Starwood Hotels owns and operates luxury hotels, retreats, and residences across the world. Approximately half of Starwood's hotels are outside of North America, with 397 in Europe, Africa, the Middle East, and Asia and new Starwood hotels are being built in developing countries like China. The company manages franchises that operate under its various brand names - St. Regis, The Luxury Collection, W, Westin, Le Mridien, Sheraton, Four Points, Aloft, and Element Choice Hotels Internationals is a worldwide franchisor of hotels and the nation s first hotel chain. The company franchises over 5,400 hotels under the Comfort Inn, Comfort Suites, Cambria Suites, Sleep Inn, Mainstay Suites, Quality Inn, Clarion, EconoLodge, Rodeway Inn, and Suburban Extended Stay brands throughout the US and more than 40 countries and territories. Choice generates a majority of its revenue from royalty fees, which are based as a percentage of gross room revenue of its franchised hotels InterContinental Hotels is the largest hotel company by number of rooms, with 590,361 rooms in over 100 countries around the world. It operates a diverse portfolio of brands across multiple economic segments, including Intercontinental Hotels and Resorts, Crowne Plaza Hotels and Resorts, Holiday Inn, and Holiday Inn Express. IHG makes most of its money by franchising hotels. Out of the nearly 4,000 hotels bearing IHG brands, it owns only 18. Orient-Express Hotels is a hotel and leisure group, which is focused on the luxury market. The company owns and operates luxury hotels, restaurants, tourist trains, and river cruises in over 25 countries. OEH's hotels, many operated only seasonally, target luxury travelers

Marriott International, Inc. (Marriott) is a worldwide operator and franchiser of hotels and related lodging facilities The following table compares Hilton s performance to its competitors in 2006.
Comparison to Competitors Starwood Number of Hotels Number of Rooms (Thousands) Geographical Presence (Countries) Occupancy (Percent) Average Daily Rate (USD) RevPAR (USD) 871 266 Hilton 2,935 501 Marriott 2,832 514 Intercontinental 3,600 538

100

78

68

100

71.2

72.5

74.4

N.A.

191.56

115.43

153.99

N.A.

136.33

82.46

114.61

N.A.

Consolidation 1943 First coast to coast hotel chain in the US through acquisition of Roosevelt and the Plaza in NY BEVERLY HILLS, CA and NEW YORK, NY, October 24, 2007 Hilton Hotels Corporation and The Blackstone Group today announced the completion of the previously announced merger of Hilton with an affiliate of The Blackstone Group's real estate and corporate private equity funds. Pursuant to the terms of the merger agreement, holders of Hilton's common stock will receive $47.50 in cash, without interest, for each share of common stock that they own immediately prior to the effective time of the Merger. As a result of the merger, Hilton's common stock will cease to trade on the New York Stock Exchange at the close of market today and will be delisted.

Hilton has been involved in purchasing small and medium-sized hotels since 1970, primarily for the purpose of expanding operations in the U.S. The company acquired Hilton International, the lodging assets of Hilton Group Plc, for GBP 3.3 billion in 2006. This made Hilton the biggest lodging company in the world.

4. Buyers Needs and Requirements

Customers for the hotel industry include tourists as well as business travelers. Tourists may be further categorized into low-medium income groups and high-income groups as the income of a person will determine the kind of hotel he/she chooses. For example, people with high income are more likely to stay in an upscale luxury hotel, which a person with a low-medium income may not be able to afford. Hilton primarily focuses on high-income/upscale group and business travelers. y y y y y y y Price Location Luxury/service Amenities Loyalty programs Family friendly Ambience/local flavor

5. Pace of Technology Change

Hilton Hotels has launched a new mobile Web application giving iPhone users accessibility to the hotel chain's Internet features. The new mobile services for German and British users, including the ability to book from the iPhone, were launched in conjunction with Dublin-based Mobile Travel Technologies Ltd. Users can access and change bookings and view hotel images and information. What makes such velvet-glove treatment possible is Marriott International Inc.'s use of customer management software from Siebel Systems Inc. (SEBL) The hotel chain, based in Bethesda, Md., is counting on such technology to gain an edge with guests, event planners, and hotel owners. The software lets Marriott pull together information about its customers from different departments, so that its reps can anticipate and respond more quickly to their needs. It starts with reservations. Says Chairman J.W. Marriott Jr.: ''It's a big competitive advantage to be able to greet a customer with: 'Mr. Jones, welcome back to Marriott. We know you like a king-size bed. We know you need a rental car.'' Sheraton Grande Sukhumvit (Starwood Hotels) has blazed a trail among Bangkok hotels as a leader in technological advancement and convenience-featuring the fastest possible internet connections, wider bandwidth, wireless access throughout all guest rooms and public spaces, as

well as state-of-the-art business and meeting facilities. For its farsighted approach, the hotel has garnered several technology awards since 1996.

6. Vertical Integration
Hilton s primary business segments include hotels (ownership and managing & franchising) and timeshare operations (an arrangement under which a purchaser receives the right to use an accommodation or amenities or both for a specified period). Hilton develops and operates timeshare resorts through Hilton Grand Vacations Company, which provides on-site management services to Hilton Grand Vacations Club resorts. Hilton is also increasingly relying on the franchisee-based model for growth. This enables the company to earn revenues without incurring any additional costs to purchase real estate and construct hotels. This strategy further enables the company to concentrate its efforts towards building a strong brand instead of buying real estate.

7. Product Innovation
Hilton remains synonymous with hotel because of its innovative approach to products, amenities and service. Whether becoming the first hotel to install televisions in guest rooms or the first hotel in the world to earn both LEED and Green Seal environmental certifications, individual Hilton hotels always lead the way. Among its industry firsts, Hilton developed the concept of franchising hotels, launched the first airport hotel, introduced the first multi-hotel reservation system and became the first U.S. coast-to-coast hotel chain. After more than 90 years, Hilton's expertise and insight of global travel remains unmatched. Hilton also introduced the iphone application. Marriott included the first workspace (desk, chair, light, etc.) in a hotel room; first TV remote control; first hotel brand to open licensed Starbucks stores in hotels; first to offer express check-out; and more recently, a holistic approach to designing public spaces, with special emphasis on the lobby, based on intense research around the needs of the guests.

8. Degree of Product Differentiation

Hilton has always been on the forefront of technical innovation, and never more so than today when the need for instant, accurate information is crucial to every hotel s bottom line. Hilton s proprietary hotel management system, System 21, provides true competitive leverage by linking all of Hilton s customer sources together, such as Hilton Reservations Worldwide, airline Global Distribution Systems, Hilton Sales Worldwide even individual Hilton properties, regional offices and Hilton s world headquarters.

Hilton Hotels has launched a new mobile Web application giving iPhone users accessibility to the hotel chain's Internet features. The new mobile services for German and British users, including the ability to book from the iPhone, were launched in conjunction with Dublin-based Mobile Travel Technologies Ltd. Users can access and change bookings and view hotel images and information. In 1937, Marriott s Hot Shoppe No. 8 became the home of his next innovation. Since it was located near an airport, Marriott noticed that airline passengers would often stop off to his store and buy lunch to eat on board. With that came Marriott s idea to sell pre-boxed meals directly to airlines. It was the launch of an entire new industry, and Marriott was soon selling lunches to more than 20 flights a day from that one airport.

9. Scope of Competitive Rivalry

Hilton operates internationally. The business is spread over 76 countries around the globe. Hilton appreciates its role as a global citizen and values the communities it serves. The brand and its team members support a variety of philanthropic activities and they encourage guests to join their efforts. The Hilton HHonors Giving Back program makes it easy for members to convert HHonors points into assistance for others. Hilton is also increasingly relying on the franchisee-based model for growth. This enables the company to earn revenues without incurring any additional costs to purchase real estate and construct hotels. This strategy further enables the company to concentrate its efforts towards building a strong brand instead of buying real estate. Industries where Hilton and its competitors compete and get advantages not only in their home country, but in host countries aswel;
y y y y y

Lodging Leisure Extended Stay & Business Suite Hotels Mid-Priced Hotels & Motels Upscale & Luxury Hotels

10. Economies of Scale

It is through franchising that Hilton gains economies of scale through cost reduction. In the hospitality industry economies of scope can originate from strategic alliances, joint ventures and mergers. For example, consider a hospitality company that forms a strategic alliance with a car rental company. As part of this alliance, the companies use the same central reservation system (CRS) to support both hotel and car reservations. Consequently, Reservation

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cost of hotel rooms and generate a joint reservation system and a general cost reduction in reservation transactions. In 1993 only two mergers occurred in American hospitality Industry, and their total value was about $30million.

11. Experience and Learning Curve Effects

y y y y y y y y y y y y y y

1925 the first hotel formally named Dallas Hilton in Texas 1927 first hotel with cold running water and air conditioning in public rooms (Waco Hilton) 1943 first coast to coast hotel chain in the US through acquisition of Roosevelt and the Plaza in NY 1947 First hotel to install televisions in guest rooms (Roosevelt Hilton) 1949 Hilton International is born when Carbie Hilton in Puerto Rico, the first Hilton outside the U.S open 1955 First central reservation office is established (HILCRON) 1959 Hilton opens its first airport hotel (San Francisco Airport Hotel) and the pioneers the airport hotel concept 1965 First upscale lodging company to develop concept of hotel franchise 1973 first centralized reservation service using computer technology (HILTRON) 1987 First guest loyalty program introduced (HHonors) 1995 Hilton enters cyberspace as its first website, www.hilton.com, launches 2002 first collection of premium resorts and exotic vacation experiences introduced (Hilton Worldwide Resorts) 2009 Hilton launches its first application for mobile devices 2010 Hilton Hotels and Resorts operate in 76 countries, more than any other fullservice hotel brand

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PESTEL ANALYSIS 1. Political Analysis

a) Government Stability The impact of government stability in terms of hotel industry as a whole are described by the two articles published in Hotel Industry Magazine Intelligence for the UK's Hotel Industry (www.hotel-industry.co.uk). The articles were issued on 26th May 2010 and 16th June 2010 respectively. The article is related to the hotel industry in the United Kingdom. i. Post Election Cuts The Impact for UK Hoteliers By Lee Jamieson

Despite the good news that Rev-PAR figures for London-based hoteliers are set to grow over the next two years, instability from the recent election has already been felt. Whilst hoteliers are enjoying rejuvenated corporate demand, this growth is likely to be tapered by George Osbourne s initial 6.2 billion of public sector cuts this financial year. Assuming a dependency of 30 per cent of hotel business on public sector supply, cuts could shave almost 1 per cent off the latest UK RevPAR growth projections in both 2010 and again in 2011, according to PricewaterhouseCoopers. Occupancy is likely to be the first casualty of any post-election cuts as travel budgets are slashed, explained PricewaterhouseCoopers UK hospitality and leisure leader, Robert Milburn. Private sector business is also dependent on public sector contracts which could reduce the number of corporate traveling as well. That said, 70 per cent of those hoteliers we polled are more optimistic than they were six months ago. Group and transient business is picking up and there is hope of pent up demand for face to face meetings. ii. Coalition Government: A Bright Future for Hoteliers under a Coalition Government?

The recent election was widely predicted to leave the UK with a hung parliament, but few experts and commentators forecast a Conservative/Liberal Democrat coalition, yet David Cameron and Nick Clegg are playing their part in trying to persuade the British public that this unlikely alliance can work. However, is this new political marriage going to be good news for the hotel and tourism industry?

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Well according to the Chief Executive of Pride of Britain Hotels, Peter Hancock, yes it is. He said, Having Cameron at No.10 means the country s monstrous deficit can at last be brought under control, thereby avoiding the high interest rates that would surely ensue otherwise. High interest rates place a terrible strain on hotel businesses and make our customers poorer. Experts in the hospitality sector also seem positive about the effects the new Co/Lib government could have. There were few splits from both parties on the issues of tourism and hospitality preelection, with Bob Cotton, outgoing Chief Executive of the British Hospitality Association saying, The overriding concern is getting the public sector deficit right, and as long as they are both committed to that in the medium term that is the main issue. However, despite a dedicated tourism minister being appointed by the government, Mr Cotton fears that the industry is still not being taken seriously enough. He said, It is disappointing that the word tourism is not in the name of the new department (the Department for Culture, Olympics, Media and Sport). As a signal of taking tourism seriously that would have been a nice little way of doing it. In addition, there may be extensive training and employment opportunities within the hospitality sector. The Conservatives pre-election manifesto pledged 50,000 training places for unemployed people as part of their welfare reform plan to Get Britain Working . Eleven of the UK s largest hospitality, leisure and tourism companies signed up to support a Service Academy which is planned to offer 50,000 training places and work placements for people without work, over the next two years. The companies include Barcelo Hotels and Resorts, Bourne Leisure, Gala Coral Group, Guoman and Thistle Hotels, InterContinental Hotel Group, Merlin Entertainments Group, Pizza Express, Sodexo, Starbucks, Travelodge and Whitbread PLC. They will commence with the Service Academy scheme to train people for jobs within the hospitality sector by promoting an attitude of customer service in those taking part, and improve their basic skills. The Service Academies will provide industry-designed training to allow people to gain the soft skills and basic industry skills that employers need. The industry-led training programs will also give participants some experience of the jobs within this sector before they go on to apply for them. Individual businesses will be responsible for the training content, materials and structure and delivery methods employed on the program. Speaking when she was Shadow Secretary of State for Work and Pensions, Teresa May, the new Home Secretary said, We welcome the support being given by businesses in the hospitality industry and their commitment to helping to tackle unemployment by providing preemployment training in this service sector. The creation of a Service Academy will not only give people practical skills but also an entry route into a career in a growing area of business.

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As far as Hilton itself is concerned, there has been government stability issue when it comes to countries like Egypt where recent riots have pulled a great number of tourists and businessmen from visiting that particular part of the world. The rest of the countries it operates in experienced no such big off an event, hence creating no problems for Hilton Hotels. b) Taxation Policy The effect of the taxation policy on the US hotel industry can be clearly studied in the hospitality research of Mark Woodworth 14th December 2010.

The Potential Effect of the Proposed Payroll Tax Reduction on the U.S. Lodging Industry
After suffering through the all-time worst year of performance in 2009, U.S. hotel owners and operators are eager for growth. The domestic lodging industry has experienced a definite turnaround in 2010. Considering the drags on the economy such as the depressed housing market, high unemployment, and Federal deficit worries, the swift pace of recovery in the lodging industry has been remarkable. Recently released updated forecasts from Colliers PKF Hospitality Research ( PKF-HR ) reveal that a base has been established for very strong gains in both revenue and profits in the years to come. The near-term future could be that much brighter if certain elements of President Obama s recent tax proposal are enacted into law. The U.S. lodging industry is highly dependent on the health of the macro economy to sell their products: guestrooms, food and beverage services, and meeting rooms. According to preliminary estimates from Moody s Analytics, the Obama administration s recently proposed tax plan has the potential to profoundly affect the state of the U.S. economy in 2011. The Hotel Horizons forecasting models developed by PKF-HR over the past 10 years, which rely on historic and forecast data from Moody s Analytics, are driven by underlying economic movements to predict the performance of hotels. The econometrically based models rely primarily on changes in real personal income and total payroll employment. The parsimonious quality and explanatory power of these variables relative to changes in lodging demand is significant and far superior to other measures. The newly proposed tax plan by the Obama administration includes provisions that not only extends the current tax rates, but also introduces a payroll tax reduction of 2.0 percent of wages, effective January 1, 2011. According to Moody s Analytics, this provision alone could boost consumer spending by upwards of $120 billion. While the continuation of the existing tax rates was largely expected and was incorporated by Moody s in their previous U.S. forecasts, the payroll tax reduction proposal, which effectively would give the vast majority of working Americans a 2.0 percent pay raise, took many macro economists by surprise. According to Moody s Analytics, this additional income would be a boon to consumer spending which in turn would increase overall domestic production, thus stimulating the need for additional

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employees. Importantly, while the psychological effects of tax policy certainty over the next year could provide a spending bump (albeit a difficult to quantify one), the payroll tax reduction is directly measurable. Moody s Analytics cautions that the tax plan is far from complete and the disparate reactions from both sides of the aisle since the President made his views known clearly shows this plan is a work in progress. However, if the President s proposal becomes law, effective January 1, 2011, Moody s estimates that the increase in GDP of 4.0 percent (up from a pre-proposal forecast of 2.8 percent) will result in the creation of 2.8 million jobs in 2011 (up from 1.3 million). The recently released December 2010 to February 2011 edition of Hotel Horizons is based on an employment outlook reflective of the pre-tax plan forecast of 1.3 million jobs added in 2011, and a 2.8 percent increase in GDP. The incremental 1.5 million more jobs than originally expected will stimulate greater levels of corporate and leisure lodging demand nationwide. The table below outlines how lodging performance in 2011 could be impacted if employment taxes are reduced from 6.2 percent to 4.2 percent on January 1, 2011. The improved economic outlook would lead to a 5.2 increase in demand, 200 bps greater than the current PKF-HR forecast. These additional travelers would allow hoteliers to become even more aggressive with their pricing strategies such that the average daily room rate forecast increase of 3.9% improves to 4.6%. These higher occupancy and average daily rate levels would yield a 280 bps improvement over the already attractive 6.2 percent increase in revenue per available room (RevPAR), in the expected case scenario. The expected 11.1 percent lift in Net Operating Income for the typical U.S. hotel would expand to 16.0 percent if the employment tax reduction becomes law January 1, 2011.

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Conclusion The short run implications associated with the employment tax reduction component of the President s plan are significant for the U.S. lodging industry hotel fundamentals would strengthen at a much quicker rate than would otherwise be the case. The longer run outlook, however, is not materially different compared to previous expectations. The recovery, which was expected to arrive in 2012, is effectively shifted one year earlier by this fiscal action. Most importantly, expectations for attractive industry growth over the next three to four years remain firm. c) Foreign Trade Regulations Hilton does get affected by the foreign trade regulations of different countries. For instance it imports or buys various items like furniture and other products used from different countries. Each country has specific foreign trade regulation that affects the buying and/or import of various items.

2. Economic Factors
a) GDP Trends US: The 2000 recession was over by 2003, growing 2.5%, and expanding 3.6% in 2004. In 2005, Hurricane Katrina slowed growth to 2.9% in 2005. By March 2006, the economy recovered to 4.8% with the housing bubble peak. But high oil prices dragged on growth the rest of 2006, which only grew 2.7%. (Source: BEA, GDP News) The economy only grew 1.2% in the first quarter of 2007 as the housing bubble popped. A falling dollar boosted exports, spurring growth to 3.2% in the second and 3.6% in the third quarters. When the Subprime Mortgage Crisis hit in October, growth slowed to 2.1%. Overall, the economy expanded 2.1% in 2007. In 2008 and 2009, the economy contracted for four consecutive quarters. The last time this happened? The Great Depression. The economy fell .7% in Q1 2008 with the Bear Stearns bailout, but resumed 1.5% growth by Q2. When the banking system imploded in the third quarter, the economy shrank 2.7%. The Lehman Brothers collapse delivered the death blow-the economy dropped 5.4% in Q4, growing only .4% for the year. GDP plummeted 6.4% in Q1 2009. By the second quarter, the economic stimulus package started to work: the economy shrank only .7% in Q2. It finally grew 2.2% in Q3 and 5.6% in Q4.(Source: GDP Current Statistics). UK: Gross Domestic Product (GDP) decreased by 0.5 per cent in the fourth quarter of 2010, compared with an increase of 0.7 per cent in the previous quarter. The GDP estimate was

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significantly affected by the bad weather in December; more analysis is provided in the bulletin. The decline in the fourth quarter is due to decreases in two of the component aggregate series, namely services and construction. Total services output decreased by 0.5 per cent in the fourth quarter compared with a rise of 0.5 per cent in the previous quarter. The largest contribution to the decline in this quarter was from business services and finance. Distribution, hotels and restaurants decreased by 0.5 per cent, compared with an increase of 0.8 per cent in the previous quarter. Hotels and restaurants contributed most to the decline in this quarter. Interest rates All guests, except those staying in luxury hotels, are less tolerant with rate increases than they were in the previous year. Only luxury hotel guests indicate a willingness to accept larger rate hikes compared to a year earlier. Luxury hotels boosted rates by 6% in 2007 and maintained their occupancy levels (71%). Surprisingly, Upper Upscale hotels also boosted rates in 2007 (4%), but even with a smaller increase their guests show more resistance to future rate increases. At least part of the price strength of luxury hotels can be explained by the size of this segment there are not many luxury hotels and the number of guests able to afford luxury accommodations has risen dramatically in the past few years. This positive relationship will continue as long as the number of new luxury properties does not grow faster than the number of persons willing to pay their premium prices. Hotel room rates in popular cities will continue to escalate as demand outstrips supply. While the luxury segment represents only a relatively minor percentage of the total guestrooms in the US, they re a much greater factor in the revenue arena. Another explanation for the price strength of luxury hotels is their well-off customers. Luxury hotels typically cater to a distinct kind of guest, often wealthy individuals to whom price is less of a factor in selecting a hotel. These affluent income groups have been less affected by the economic downturn than that of lower income groups. Affluent buyers aren t particularly affected by rising interest rates and mortgage related problems. So luxury hotel guests have the ability to absorb the cost increases rather easily. In addition, international tourists, taking advantage of a weakening US dollar, are looking to the US as a prime vacation spot and are spending more money, often upgrading to higher-end, luxury accommodations. But wealthy and international guests should not get all the credit for the price strength of these top tier hotels. Some credit must go to the hotels for attracting these guests and creating

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revenue in the midst of economic uncertainly. Comparing luxury hotel brands (2006 vs. 2007), Intercontinental and Grand Hyatt showed the biggest gains in guest loyalty. Eight of the nine components that make up Hotel Industry Leading indicator had a positive contribution during May: Weekly Hours in Hotels; Hotel Profitability; International Visitors Future Demand; Interest Rate Spread; New Orders for Manufactured Goods; Oil Prices; Housing Activity and National Vacation Barometer. Only one of the nine components had a negative or zero contribution to HIL in May: Labor Market Tightness. HIL is monthly composite leading indicator that, on average, leads the industry s business activity four to five months in advance. The latest increase brought the index to a reading of 113.5. The index was set to equal 100 in 2000. The index s six-month growth rate, a signal of turning points, went up by an annual rate of 10 percent during May after increasing 8.8 percent during April. This compares to a long-term annual growth rate of 3.5 percent, the same as the annual growth rate of the country s overall economic activity. During the deepest point of the recession in January 2009, this growth rate was down to negative 15.7 percent.

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b) Money Supply Since Hilton operates in mostly developed or relatively better/strong economies money supply is not an issue. The value of currency where it operates is apparently stable. c) Inflation Since Hilton Hotels targets the elite and businessmen, increase in inflation does not have much strong effect on its business d) Unemployment Unemployment does not bother the hotel industry that much. Talking in specifically about Hilton, Hilton targets the rich, so they can afford to travel and stay luxury. e) Disposable Income Major operating markets for Hilton are consumption based economies. People here love to go on vacations and businessmen love to earn more. Hence this is a good sign for Hilton Hotels.

3. Socio-cultural Factors
a) Demographic Factors The demographic factors have a great impact on the whole hotel industry aswel as Hilton Hotels. The hotels have to carefully segment their markets and decide their target markets. As far as Hilton is concerned, its hotels are situated exactly where the demand is. Where tourists love to go and close to business junctions for businessmen. b) Income Distribution Big shot businessmen and those who can afford luxury can afford hotel-ling with Hilton and its chain of hotels. These people usually earn themselves and spend on themselves. The masses are not involved. c) Lifestyle Trends The hotel industry has been particularly hard hit by a slump in business travelers, who account for a large proportion of hotels income. The outlook appears bleak, according to Amadeus, a leading provider of technology to the travel and tourism industry. Amadeus commissioned a report from the Economist Intelligence Unit, published in March 2009, which predicted that the business world was entering a new age of austerity.

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The report, titled The austere traveler The effect of corporate cutbacks on hotels, concluded that executives would make fewer, shorter, and cheaper business trips in 2009, and that they would prefer basic efficiency and good service over ancillary services. Antoine Medawar, managing director of Amadeus Hospitality Business Group, was quoted as saying: We are entering an age of visible austerity with regard to business travel. With the eyes of their organizations and shareholders upon them, executives are anxious to make business trips as productive as possible. Forget gyms and restaurants; instead concentrate on efficient checkin and check-out, and internet access. Good wifi connectivity is now rated above any other extra. There is a flight to trusted brands, and the expectation of a common level of good service, no matter where you are in the world. d) Attitude to work Hotels are businesses that run 24/7, and hence require human resource to be on their toes. Hotels usually run shifts and require their staff to be punctual. So, whatever culture they operate in, they mould their employees accordingly. e) Level of Education For the hotel industry somewhat skilled labor is required. All the lower level staff needs to be trained with perfect hospitality traits and the senior management need to be selected on the bases of their communication and hospitality skills. When people pay heavy amounts they in return expect good manners and service which can only come from training and development of the employees.

4. Technological Factors
a) Government Focus As the focus throughout the world is shifting from manufacturing to service sector, the trends have been seen as to how governments support RnD in this sector. They provide tools to allow companies to get closer to their customers. Governments of the developed nations allow hospitality business to go beyond borders since it is becoming a vital and a big part of revenues.

b) New Discoveries y y y DoubleTree by Hilton Hotel Charlotte Airport Charlotte Museum Embassy Suites Anaheim North Discovery Science Center Homewood Suites by Hilton San Jose Airport-Silicon Valley Museum

Children Discovery

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 Marriott Resort and Discovery Cove Dolphin Swim Experience Package  Destination Discovery promotion (Laguna in Phuket) Sheraton c) Speed of Technology Change y y y Strategic, comprehensive plan to drive online traffic and reservations to hotels, resorts and bed and breakfasts. Search engine optimization (SEO), pay-per-click ads, determining keywords, local search Review Facebook, Twitter and LinkedIn, explain how to set up engaging profiles, explain how social media sites can contribute to SEO and examine the impact of YouTube and online videos Enhance services

d) Rate of Obsolesce Many industry players already understand this change, and are pioneering initiatives to engage with customers, promote products, up sell and cross sell, build identity in a more personal way, build immediate loyalty or adherence to their brand, and respond to customers service issues. They already recognize that they need to be part of the conversations taking place online because people believe those conversations more than they do their own advertising. But this is just the beginning. Much more can, and should, be done. It just depends on what can be done now, and how systems need to change to embrace this potential. Marketing depends on research, and research is monitoring that is, listening to what people are saying online. Hoteliers commonly use rate comparison tools to get valuable information to feed their Revenue Management Systems (RMS). They could be using keyword systems to pick up on broader conversations, to alert their marketing departments and build on-the-spot promotions in their Central Reservation Systems (CRS) to be available immediately online. If marketing is talking online, then Property Management Systems (PMSs) could evolve with concierge applications enabling guests and hoteliers to communicate more easily prior to or during a stay. Marketing also depends on raw information, and there is much that can be done in this area to make the information work harder. They should be linked with other business intelligence solutions so that integrated reports show how each program is performing at any technological touch point of the hotel. Social media can also help with sales. By harnessing the volume of conversations hoteliers can show, through what people are saying, why those people s peers should consider them and this can be done on a many-to-many basis, instantly and globally. This would necessitate changes to the hotel chain s content management system, making them robust enough to host new content and the necessary workflow and security to accommodate that.

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5. Environmental Considerations
The European Union currently operates the largest emissions trading scheme in the world and the US and several other countries are also in the process of developing schemes that will place greenhouse gas emission caps on companies. These will increasingly have a direct impact, not just on major carbon emitters, but on other sectors such as the hotel industry. The Environmental Protection Authority in NSW provides legislation, guidelines, standards and regulations for businesses, industry, local governments and households to follow in order to better preserve the environment. This includes legislation such as the Protection of the Environment Operations Act 1997 NSW and the Smoke Free Environment Act 2000. As a result of this legislation, hospitality enterprises are endeavoring to recycle, reduce energy and water consumption, reduce waste and design more sustainable buildings.

6. Legal Factors
a. b. c. d. Competition Law Employment Law Health and Safety Product Safety

Most Commonwealth legislation that relates to the hospitality industry has State equivalent legislation. The Commonwealth legislation is usually set first and State governments modify the legislation so that it can be better implemented in their State. Local governments are responsible for implementing some legislation. For instance, councils employ environmental health officers to implement the Food Act. The tables below summarize the relevant legislation for each of the major areas of the hospitality industry: Hygiene Legislation Food Act 2003 (NSW)(as amended) Main features Covers all aspects of food handling and production as well as the maintenance of premises where the food is stored, prepared and sold.

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Liquor Legislation
y y

Liquor Act 1982 (NSW) Responsible Service of Alcohol (RSA) Regulation

Main features

Covers all aspects of liquor sold in a licensed enterprise. It includes licensing hours, hours of operation, training staff must undertake, the responsibilities of employers in selling alcohol, harm minimization, as well as offences and legal proceedings. Alcohol cannot be sold without a license and only staff with a RSA certificate can serve it. RSA provides training on recognizing the problems of alcohol abuse and knowing when to stop serving customers who may be becoming intoxicated.

Environment Legislation Main features Gaming Legislation

y y y

Smoke Free Environment Act 2000 (NSW) Makes it illegal to smoke in an enclosed public place, thus preventing passive smoking.

Gaming Machines Act 2005 (NSW) (as amended) Gaming Machines Regulations 2002 (NSW) Responsible Conduct of Gaming/Gambling

Main features

Includes the number of machines a venue is permitted to have, signage that must be put in place, the dangers of problem gaming, actions that must be adopted to address problem gamblers such as displays clocks or counselling signage, and how prizes should be awarded. Ensures that fair practices are used for gaming equipment. Staff working in gaming must have a RCG certificate to recognize and take action with problem gamblers.

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Health and safety Legislation

y y

Occupational Health and Safety Act 2000 (NSW) Occupational Health and Safety Regulations 2001 (NSW)

Main features

Determines what employers and employees must do to promote the safety and well being of people in the workplace.

Workers compensation Legislation

y y

Workers Compensation Act 1987 (NSW) (as amended) Workplace Injury Management and Workers Compensation Act 1998 (NSW)

Main features

Ensures employees are compensated for injury or sickness caused as a result of their employment.

Consumer protection and trade practices Legislation

y y

Fair Trading Act 1987 (NSW) Trade Practices Act 1974 (Cth) (as amended)

Main features

Governs issues of product safety and product information. Ensures that businesses do not give false or misleading information in relation to products and services.

Workplace relations Legislation

y y

Workplace Relations Act 1996 (Cth) (as amended) Workplace Relations Amendment (WorkChoices) Act 2005

Main features

The aim of these acts is to ensure employers and employees negotiate fair wages and conditions, and to promote employment, living standards and welfare for Australians.

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Equal employment opportunity Legislation

y y

Equal Employment Opportunity (Commonwealth Authorities) Act 1987 (Cth) Equal Opportunity for Women in the workplace Act 1999 (Cth)

Main features Anti-discrimination Legislation

Ensures that everyone is treated fairly and equally when seeking employment.

y y y y y

The Anti Discrimination Act 1977 Anti-Discrimination Act 1977 (NSW) Sex Discrimination Act 1984 (Cth) Racial Discrimination Act 1975 (Cth) Disability Discrimination Act 1992 (Cth)

Main features Privacy Legislation

Ensures that people are not discriminated against on the basis of gender, religion, race, age, disabilities or sexual preferences.

y y

Privacy Act 1988 (Cth) Privacy Amendment (Private Sector) Act 2000 (NSW)

Main features

Provides security for personal information such as tax file numbers and credit information held by organizations.

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PESTEL Conclusion
After the PESTEL analysis of the entire hotel/hospitality industry, one can clearly see that such industry s major markets are the economies that have been developed and/or are on the fast lane of developing. This can be clearly seen by linking the political analysis with the economic analysis. The major markets for such an industry are the United States of America and the United Kingdom where government stability is not an issue. Evidence from the political analysis shows that taxation policy in the US introduced by Obama Administration, has resulted in more jobs, high wages and an increase in performance of employees and has also increased revenues of the organizations. Backed by the economic analysis, GDP is stable or keeps getting better. Even if the country is hit by a major natural disaster, it has the capacity to stand back on its feet. The socio-cultural factors tell us a similar story. Demographics are very important for an organization to study and to decide what will its segments and target market is. In the hotel/hospitality industry, the major market players have targeted those who can afford luxury and those who love travel either as tourists or as businessmen. For those who want luxury pleasure or business trips are those who earn huge. They are either big shots of corporations or are those have become highly successful businessmen. They earn themselves and spend at themselves hence making income distribution no issue. Linking this with the economic factors we see that a country s interest rates, money supply, inflation and unemployment are no issues. The technological factors made it clear that the world s trend is now shifting more from manufacturing base to service base. Hence, governments tend to encourage research and development on this industry. Similarly, the lifestyles and trends have been changing. The world is becoming into a fast moving engine. Fancy gadgets and technologies are being introduced day by day. All of these advancements and work cannot be carried out without rules and regulations. Hence even in this industry there are certain laws and environmental considerations that need to be followed. These have been discussed under legal factors and environmental considerations and have to be followed by any organization in this industry.

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ANLYZING THE NATURE AND STRENGHT OF COMPETITIVE FORCES RIVALRY

1. Rivalry intensifies more frequently and more aggressively industry members take actions to boost market standing
a) Marketing Tactics Marketing depends on research, and research is monitoring that is, listening to what people are saying online. Hoteliers commonly use rate comparison tools to get valuable information to feed their Revenue Management Systems (RMS). They could be using keyword systems to pick up on broader conversations, to alert their marketing departments and build on-the-spot promotions in their Central Reservation Systems (CRS) to be available immediately online. If marketing is talking online, then Property Management Systems (PMSs) could evolve with concierge applications enabling guests and hoteliers to communicate more easily prior to or during a stay. Marketing also depends on raw information, and there is much that can be done in this area to make the information work harder. They should be linked with other business intelligence solutions so that integrated reports show how each program is performing at any technological touch point of the hotel. Social media can also help with sales. By harnessing the volume of conversations hoteliers can show, through what people are saying, why those people s peers should consider them and this can be done on a many-to-many basis, instantly and globally. This would necessitate changes to the hotel chain s content management system, making them robust enough to host new content and the necessary workflow and security to accommodate that. Hilton Hotels announced the re-launch of two of the brand s online channels HiltonJourneys.com and HiltonToHome.com. In addition to the two refreshed sites, the brand recently completed the translation of its Hilton.com booking portal into Spanish, and is in the process of completing a French version of the site. The installation of Mobile Travel technology with Iphone was also one step towards clever marketing strategy. The explosive and global growth of the Hilton brand has led us to rethink the way we use the internet to connect with our guests, said Jeff Diskin, senior vice president, brand marketing and management Hilton Hotels. With these refreshed sites we have three unique touch points that allow our guests to connect with Hilton in ways that are most relevant to them.

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Comparison with others: Global Hyatt Corp. will launch a mobile advertising campaign that leverages Microsoft s mobile advertising relationship with Verizon Wireless. The mobile advertising display campaign is designed to drive people to register for the Hyatt Gold Passport frequent guest rewards program and let people visit the new, fully functional mobile web site using their mobile phones. Marriott has an extensive and clarifying internet site. It has a lot of information for the customers and you can also book online. But of course there are lots of other ways to promote a hotel. Various packages are introduced to attract customers during summer season, as it is considered as an off-season. b) Strong dealer networks No information was found regarding dealer networks for any of the Hotels since hotels do not need any distribution network. c) Product innovation Hilton Hotels & Resorts Launches eforea: spa at Hilton Hilton Hotels & Resorts unveils eforea: spa at Hilton, its new global spa concept that is poised to be one of the world s fastest growing spa brands. eforea: spa at Hilton features an exclusive menu of treatment journeys and innovative design elements, all providing a turnkey spa solution that owners can easily implement and customize. Leveraging its global reach and expertise, Hilton pulled the best elements and practices from Europe, Asia Pacific, Middle East and Africa and the Americas to create a unique concept for today s savvy global travelers. Hilton Arlington Becomes First Hilton in the Dallas Area to Introduce PURE Rooms Travelers to Arlington Texas can breathe a little easier, knowing Hilton Arlington Hotel has announced that they have become the first Hilton hotel in the city to introduce PURE Allergy Friendly Rooms. The Hilton is setting a new standard by introducing 15 new PURE rooms which create an allergy-friendly environment and remove up to 98% of bacteria and viruses. Travelers who suffer from allergies and asthma can now enjoy the cleanest, freshest air in their rooms and enjoy a more restful sleep during their stay. Hilton Sponsors Time out Dubai to Launch Pioneering Apple Application The Hilton Hotels brand in association with Time Out Dubai treated Arabian Travel Market (ATM) visitors to a preview of the United Arab Emirates first downloadable city guide.

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Hilton Worldwide Unveils Innovative Mobile Printing Application with HP Hilton Worldwide announced today that guests will have the ability to print wirelessly from Blackberry smart phones at 1,300 hotels worldwide within the company s portfolio of brands. Today, HP launched ePrint, an innovative mobile printing application that enables users to print directly from their BlackBerry to any printer in the PrinterOn network of public printers, called PrintSpots. Thirty percent of the PrintSpots are located at hotels within Hilton Worldwide s portfolio, allowing guests around the world to print documents from their BlackBerry smart phones directly to a printer at their hotel. Hilton Worldwide and IBM Announce Global Technology Infrastructure and Solutions Agreement Hilton Worldwide and IBM (NYSE:IBM) today announced a global collaboration agreement to enhance the hospitality company s technology infrastructure and to facilitate the development and delivery of next-generation technology solutions. Comparison with others Fifty-four percent of Americans have an allergy according to the National Institutes of Health, and allergy rates have increased by two to five times since 1980. Odors, mold, dust and animal dander can trigger an immune response, causing itching, sneezing and asthmatic attacks for allergy sufferers. And dust mites among the most common of allergens live and procreate prodigiously in mattresses, pillows, carpets and upholstery. Hyatt Hotels Corp. is paying attention, adding "allergy friendly rooms" across the chain in its latest customer service offering. The hypoallergenic rooms are being outfitted by Pure Solutions, a privately held New York-based company that promises removal of 98% of bacteria and viruses and has worked with Marriott hotels. Later innovations of Marriott included the first workspace (desk, chair, light, etc.) in a hotel room; first TV remote control; first hotel brand to open licensed Starbucks stores in hotels; first to offer express check-out; and more recently, a holistic approach to designing public spaces, with special emphasis on the lobby, based on intense research around the needs of the guests. d) Improved or higher quality products Highest Water Quality at the Hilton Hotel, Malta The Hilton Hotel in St. Julian, Malta, is located directly at the beach. In the course of modernization measures, an effective alternative for the insufficiently functioning seawater desalination system for the generation of drinking water was to be found.

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At the same time, the hotel wanted to become independent of the public water supply. Expert competence was also required for the treatment of the swimming pool water. Comparison with competitors The hotel company has struck a multi-million-dollar deal with New York City-based Portico Home + Spa to launch the eco-friendly bedding consisting of sheets, pillow cases and pillow shams (decorative covers for bed pillows) at all of their hotels. The new bedding is now available in premier suites at 14 Hyatt hotels nationwide as well as in Aruba. Additional Grand Hyatt, Hyatt Regency, and Hyatt hotels plan to add this bedding line to their premier suites in the next year. In spring 2011, Hyatt also plans to add Portico's organic cotton bath linens (towels, bathrobes, and bath rugs) to the premier suites. Launching at select Hyatt Pure locations, the shaving services will allow men to enjoy their daily shave without having to lift a finger. This new offering will be backed by Shave products with services delivered by Hyatt Pure estheticians. Perfect for the business traveler getting ready for a major presentation or for grooms and groomsmen getting ready for the big day. e) Developing valuable expertise The expertise that all major players of the industry enjoy is hospitality and they have built themselves on what they have expertise in. They provide with luxury living at the best.

2. Rivalry intensifies as number of competitors increases and becomes equal in size and capability.
y y y y Starwood Hotels Choice Hotels Internationals InterContinental Hotels Marriot International
Orient-Express Hotels

To many travelers, a clean room, good location, and complimentary breakfast aren't what drive them to choose one hotel over another. In many cases, the choice has been made long before they even looked at the hotels near their destination. Increasingly, the frequent traveler is letting their favorite hotel rewards program be their guide, and it only makes sense. These programs reward frequent stays at associated properties, often saving the best rooms or amenities for the most loyal guests. Here we will take a look at two of the most popular

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rewards programs - Marriott Rewards, offered by Marriott International, and Hilton HHonors, by Hilton Hotels Corporation.

3. Rivalry is usually weaker when there are less than 5 competitors or else so many that impact of one company s action speed thinly across industry
The following table compares Hilton s performance to its competitors in 2006.
Comparison to Competitors Starwood Number of Hotels Number of Rooms (Thousands) Geographical Presence (Countries) Occupancy (Percent) Average Daily Rate (USD) RevPAR (USD) 871 266 Hilton 2,935 501 Marriott Intercontinental 2,832 514 3,600 538

100

78

68

100

71.2

72.5

74.4

N.A.

191.56

115.43 153.99

N.A.

136.33

82.46

114.61

N.A.

4. Rivalry is usually stronger in slow growing markets and weaker in fast growing markets
In 2006 the selling, general and administrative expenses of Hilton Hotel accounts to around 900 million USD from 400 USD in 2003. The said figures are justifiable given the fact that Hilton Hotel is continuously expanding every year. The expansion of the Hilton Garden Inn brand comes during a lull in the development of upscale hotels, a far cry from the heady days of the 1990s, and says industry observers. In 1999, for example, the supply of upscale hotel rooms jumped 15.3% year-over year. But in 2004, the supply of upscale hotels rose by only 0.2% over 2003 levels, according to Smith Travel Research.

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Such dramatic swings in construction are not unusual for an industry notorious for boom and bust periods. As far as hotel industry is concerned, the market is very much fast growing. The major players are not much bothered about what others are doing, but yes they do eat from someone s pie when they feel that their growth has slowed down. i.e. they will go through acquisitions.

5. Rivalry increases when products of rival seller become more standardized and which switching cost from one brand to another is low.
Talking about the hotel industry and specially staying in the bracket of Hilton and its rivals, the services offered are somewhat the same. All of these hotels provide with hotel rooms to residential suites, from spa s to restaurants. They all have similar services to offer to people from the same segment. They differentiate themselves in little what they do. Overall they target one or the same. For instance, Orient Express Hotels have their own Orient Express which facilitates the customers. Similarly, Hilton provides with transportation facility on the road. It won t cost any switching cost for a customer to dine in at Marriot or at an InterContinental Hotel.

6. Rivalry increases when one or more competitor becomes dissatisfied with their market position and launches moves to foster their standing at the expense of rivals.
Starwood sues Hilton for stealing trade secrets. By Andrew Clark (guardian.co.uk Friday 17th April 2009) The US-based hospitality company Starwood has accused its rival Hilton of a "massive" case of industrial espionage through the alleged theft of more than 100,000 electronic files containing sensitive information about its luxurious W hotel chain. Starwood claims that California-based Hilton has been under intense pressure for improved profits since it was bought by the private equity company Blackstone for $20bn (13.5bn) in 2007. Since going private, Hilton has hired 10 managers and executives from Starwood, which owns brands such as Sheraton, Westin and Le Meridien. According to a lawsuit filed by Starwood, two of these executives brought with them a vast store of trade secrets that Hilton used to develop a newly launched concept, Denizen Hotels. "We expect and welcome fair competition," said Starwood's general counsel, Kenneth Siegel. "This, however, is a blatant case of trade secrets, computer fraud and unfair competition."

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Starwood claims that a former head of its luxury brands group, Ron Klein, downloaded files that amounted to "truckloads of documents when printed" on a laptop computer using a personal email account. The information, according to Starwood's lawsuit, included a step-by-step guide to creating a luxury concept that was used in building the successful W brand, in addition to board presentations and market research studies that cost more than $1m. Last month Hilton revealed the creation of a new brand, Denizen, described as an "eclectic, global lifestyle destination" with locations planned in 13 cities including London, Washington, Las Vegas and Miami. Starwood maintains that there are striking similarities to its W concept such as the creation of an area described by both as a "resto-lounge" providing food service in a living room setting. Klein even admitted at a press conference, according to the lawsuit, that Denizen was "cut from the same cloth as W in many respects". Competition has become fierce among hoteliers as the economic downturn hits occupancy rates. Blackstone has faced criticism for buying Hilton for a premium price at the top of the market. In a statement, Hilton said of Starwood's allegations: "Hilton Hotels Corporation believes this lawsuit is without merit and will vigorously defend itself. We fully intend to move forward on the development of our newest brand, Denizen Hotels."

7. The greater benefits of going after a new opportunity the more likely it is that one or more rivals initiate moves to capture it.

Key Dates Intercontinental Hotels (compared with Hilton s timeline. See experience and learning curve) 1940s InterContinental Hotels & Resorts is born as the International Hotels Corporation on 4 April, 1946. International changes its name to InterContinental Hotels Corporation in 1947 to reflect its intention to develop around the world. In 1949, the first InterContinental hotel begins operating in Belm, Brazil. 1950s Early expansion of the hotel brand develops along owner Pan American World Airway's routes in Latin America. InterContinental's first Caribbean properties are also inaugurated in the 1950s.

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1960s InterContinental opens its first hotels outside Latin America and becomes the first international hotel brand to establish a presence in the Middle East, Asia/Pacific and Africa. The group opens its first four hotels in Europe within a two-week period in 1963. The Six Continents Club, the industry's first global guest-recognition program debuts. 1970s InterContinental breaks into the U.S. market, assuming operations for the Hotel Mark Hopkins in San Francisco (now InterContinental Mark Hopkins San Francisco). InterContinental New York (now InterContinental the Barclay New York) was also added to the brand's U.S. portfolio late in the decade. 1980s Pan American Airlines sells its interest in InterContinental. The new owners partner with Pan American Life insurance to build and open the 500-room InterContinental New Orleans. The InterContinental Miami and InterContinental The Willard Washington, D.C. are added to the collection. 1990s InterContinental re-enters the Mexican market by signing a joint venture with Presidente Hotels, adding properties in Cancun, Cozumel, Mexico City, Los Cabos, Puerto Vallarta, and Ixtapa. 2000s InterContinental continues plans to drive growth around the world with key focus on resorts and development in the United States. 2006 InterContinental launches Concierge Programme and Aston Martin Racing sponsorship. InterContinental London Park Lane reopens after 76m refurbishment. InterContinental opens first-ever hotel in Boston, Massachusetts, United States. 2007InterContinental partners with National Geographic. For the first time since 1959, Aston Martin has triumphed at the legendary 24-Heures du Mans in France, the world's most prestigious motor sport event. InterContinental announces 'Insider Experiences.'

8. Rivalry increases when a strong company outside industry acquire weak firm in the industry and launch aggressive well funded moves to transform their newly acquired competitors into major contender. y Hilton s acquisition of Blackstone y Gatehouse Bank plc (Gatehouse), a wholesale Shariah compliant investment bank in the
City of London, has completed the 32.65 million acquisition of the InterContinental Hotels Group Global Headquarters in Denham, Buckinghamshire. The 97,340 sq. ft. property is fully occupied by InterContinental Hotels Group until July 2022, providing a 12 years term certain income with no breaks. Rare for the UK market, the lease benefits from minimum fixed rental uplifts of 13% in both 2012 and 2017.

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y DUBLIN, Calif. and WINDSOR, England, July 5 Taleo Corporation (TLEO), the leading
provider of talent management solutions, today announced the successful implementation of Taleo Enterprise Edition, the industry leading talent management solution for large enterprises, with leading international hotel company, IHG ("InterContinental Hotels Group").

POTENTIAL ENTRY OF NEW COMPETITORS

1. Presence of sizeable economies of scale in production or other areas
Economies of scale are the increase in efficiency of production as the number of goods being produced increases. Typically, a company that achieves economies of scale lowers the average cost per unit through increased production since fixed costs are shared over an increased number of goods. In the hospitality industry economies of scope can originate from strategic alliances, joint ventures and mergers. For example, consider a hospitality company that forms a strategic alliance with a car rental company. As part of this alliance, the companies use the same central reservation system (CRS) to support both hotel and car reservations. Consequently, Reservation cost of hotel rooms and generate a joint reservation system and a general cost reduction in reservation transactions. In 1993 only two mergers occurred in American hospitality Industry, and their total value was about $30million. In 1998, the number rose to 11 mergers, valued at $25 billion. The findings suggest that these mergers generally reduce costs by eliminating redundant facilities and personnel. Furthermore, the mergers increased the product and service offerings and thus strengthened the economies of scale of merged firms. Improved financial performance, which was partially attributed to economies of scope, was also identified. The hotel industry today is going through many mergers and takeovers. All the big shot hotels are expanding by acquisitions and mergers. Just as Hilton merged with Blackstone and Intercontinental Group merged with TELO. Hence any new entrant would have to enter either on economies of scale or would have to face cost disadvantages.

2. Cost and resource disadvantages not related to size.

As cited above, all the major players in the hotel industry have reached to a point where their fixed cost has dropped down to minimum. They have been in these industries for decades, and have achieved economies of scale. These giants have well established their feet and are still grabbing the best possible opportunities (refer to rivalry point 1)

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3. Brand preferences and customer loyalty.

People with high income are more likely to stay in an upscale luxury hotel, which a person with a low-medium income may not be able to afford. Customers for the hotel industry include tourists as well as business travelers. Tourists may be further categorized into low-medium income groups and high-income groups as the income of a person will determine the kind of hotel he/she chooses. The target market for such hotels is very clear. Hence brand preference is very important to them. Loyalty for the brand comes from the brand preference itself. The C.E.O of big shot company would not want to stay is any xyz hotel but would love to stay in a hotel that carries years of experience, excellence and a name.

4. Capital Requirements
When you submit your license application for a Hilton franchise, you pay us an initial fee based upon the number of guest rooms in your prospective hotel. The initial fee is currently $85,000 for the first 275 guest rooms or suites plus $300 for each additional guest room or suite, with a minimum fee of $85,000. Monthly royalty fee 5% of monthly gross room s revenue and other fees. The license application fee for Marriott is $50,000 with a royalty fee of 5.5% of gross room revenues. It is not an easy or a cheap job to open up a luxury hotel.

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5. Access to distribution channels

No such distribution channels are need for the hotel industry, since it s the customers that come to the service.

6. Regulatory policies, tariffs and trade restrictions.

Sometimes countries might put trade restrictions as a barrier to entry. Such barriers were seen in the following countries. Although India has steadily opened up its economy, its tariffs continue to be high when compared with other countries, and its investment norms are still restrictive. This leads some to see India as a rapid globalizer while others still see it as a highly protectionist economy. Till the early 1990s, India was a closed economy: average tariffs exceeded 200 percent, quantitative restrictions on imports were extensive, and there were stringent restrictions on foreign investment. The country began to cautiously reform in the 1990s, liberalizing only under conditions of extreme necessity. Since that time, trade reforms have produced remarkable results. India s trade to GDP ratio has increased from 15 percent to 35 percent of GDP between 1990 and 2005, and the economy is now among the fastest growing in the world. Saudi Arabia s overall economic freedom remains constrained by inadequate levels of monetary freedom, investment freedom, and property rights. The legal system is vulnerable to political influence. Investment freedom remains hampered by bureaucracy and a lack of transparency. Monetary stability is weak and continues to be adversely affected by price controls.

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COMPETITIVE PRESSURE FROM SELLERS OF SUBSTITUTE PRODUCTS

1. Whether substitute are readily available and attractively priced.
Hilton has its hotel chains in so many countries around the globe. For people who are actually the target market of Hilton Hotel, there are many other substitute hotels. In china, people can have The opposite House, Four seasons, Mandarin Oriental and Raffles Beijing Hotel to stay in. In Chicago, In Chicago, The Peninsula Hotels (from $263), Trump International Hotel (from US$276), Ohio House Motel (from $117/night), Hard Rock Hotel (from US$119), Four seasons (from US$283). In New York, Four Seasons, The Peninsula New York, Trump international Hotel and Tower are the substitutes of Hilton Hotels. In Egypt, you can have so many hotels which are substitutes of Hilton. Few of them are; Al Moudira Hotel ($150 $195) Avg. price/night, Pavillon Winter Luxor ($73 - $420) Avg. price/night. Whereas Hilton ($154 - $320) Avg. price/night*. They are also providing their customers with all unique services. Their target market is also the high class people. They have convenient locations for their customers and have luxury rooms with all fully fledged services and they have price which can attract customers easily as compared to Hilton hotels.

2. Whether buyer view the substitute as being comparable or better in terms of quality, performance and other attributes.
Four Season Hotels: highly personalized 24-hour service, combined with authentic, elegant surroundings of the highest quality, embodies a home away from home for those who know and appreciate the best. Their deeply instilled culture, personified by our employees, continues to get stronger. Over nearly 50 years, they have built an unrivalled depth of reliability, trust and connection with our guests a connection we will steadfastly uphold, now and always. Their services include Executive club, fitness facilities, spa, dining etc. The Opposite House: The Opposite House is part of The Village in fashionable Sanlitun, Beijing, and is a short 10-minute drive to the city s central business district. Free Wi-Fi is available throughout the hotel. Rooms are spacious and combine modern, minimalist design with luxurious amenities. They are fitted with a flat-screen TV and digital entertainment system. The bathroom features a rain shower and a bathtub.

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Guests of The Opposite House can enjoy massage treatments at the spa & wellness centre or unwind by the indoor swimming pool. A fitness centre is also available for workouts. The Opposite House offers cultural tours to make your stay more enjoyable. Enjoy Mediterranean flavors or delicious Asian dishes at The Opposite House, with its 6 food and beverage choices, which includes a lounge bar and night club. The Opposite House is a 30minute drive from Beijing Capital International Airport. Hotel Rooms: 99. The Peninsula Hotels: The peninsula Hotels group has a unique identity among the World s leading hotels. Peninsula is living legend, the name synonymous luxurious with comfort and impeccable service. We set our sights high and standards higher, aiming always to delight our customers, and in many cases we are now serving the third generation of our loyal guests. The Peninsula Hotels unique blend of Eastern and Western hospitality in an atmosphere of unmatched service started at its flagship hotel, The Peninsula Hong Kong, in the 1920s. The group is dedicated to providing luxurious comfort, modern facilities and intuitive technology combined with exceptional, personalized service, which can be experienced in any of its nine award-winning hotels in Hong Kong, Shanghai, Tokyo, Beijing, New York, Chicago, Beverly Hills, Bangkok and Manila. Mandarin Oriental: Mandarin Oriental, Hong Kong is the Group s flagship and an icon in its own right. Overlooking glittering Victoria Harbour, the hotel is the centre of Hong Kong s social elite and business scene. The award-winning service and the five-star facilities are legendary. Our 501 guest rooms and suites are newly designed to blend classic Chinese elegance with Western grace. Mandarin Oriental, Hong Kong redefines luxury experience. Ohio House Motel: The features free Wi-Fi and an on-site restaurant. The Ohio House Motel provides en suite rooms with cable TV and air conditioning. In-room safes are available in each room. Guests at the Ohio House have access to free parking. The hostel s restaurant serves breakfast, lunch and dinner 7 days a week. The Ohio Motel House is 4 miles from Wrigley Field, home to the Chicago Cubs baseball team. The Lincoln Park Zoo is 2 miles away. Millennium Avenue and Grant Park are nearby. Hotel Al Moudira: All the gateway to Luxor and the horizon of the dessert; the only palace on the west bank of Nile, Al Moudira is just a 4km away from the valley of kings. The ocher domes, the patios ornate with arabesques and the eight-hectare garden will provide the setting of your oriental dream. Zeina Aboukheir wants to treat you to these natural and historical surroundings, to help you discover and fully enjoy the magic of the Arabian nights. Pavillon Winter Luxor: Located on the banks of the River Nile in the midst of a tropical garden in the city centre, near the Luxor Temple and other attractions such as the Karnak Temple, the

39

Luxor museum, the International Convention Centre and the Mummification Museum. The Pavillon Winter Luxor features three restaurants, two bars and a swimming pool. These all hotels are comparable in terms of quality, performance and price with the Hilton. As they are also provide the top class services to their customers, they can be the perfect substitutes for Hilton.

3. How much it costs end users to switch to substitutes

As all substitutes of Hilton are the top motels and restaurants with standard rates that are almost same as those of Hilton or any other luxury hotel or resort. The services and the locations as noted above are somewhat similar to those of luxury hotels. It won t take a customer to spend extra just to get to these motels or restraints. Hence, switching costs are equal to zero.

4. Signs that the competition from the substitute is strong y The profit is on the rise
Hilton reported $8162million revenue in 2006 (finance.yahoo.com) Period Ending Total Revenue Mandarin Oriental As their income statement suggests, $44.1million for the year 2010 and sales of, 3,986,948,160 y Mar31, 2010 4 93,000 Mar 31, 2009 770,000 Mar 31, 2008 816,000 Mar 31, 2007 581,000(in thousands)

Adding a new production capacity

Hotels expand by acquisition and franchising. Over the years they have been acquiring and forming agreements with different companies in order to expand. Hilton s and its competitor s examples are stated above. As for the substitutes; Mandarin Oriental Intl Ltd acquires Shanghai Peace Hotel from Peoples Republic of China, back in 2001. Similarly the Peninsula Hotels have been in mergers with property businesses in Hong Kong, Shanghai, Tokyo, Beijing, New York, Chicago, Bangkok etc.

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Competitive Pressures from Buyer s Bargaining Power

1. If buyer cost of switching from one brand to another is low
In the hotel industry, the bargaining power lies in the hands of the buyers. As discussed earlier, the rates and the services provided by Hilton s competitors and the substitutes are somewhat similar so the buyers do not have problems regarding any switching costs.

2. If number of buyers are small and customer is particularly important to the seller
The corporate clients are important to all the hotels. Information was not found as to who are the corporate clients but, Marriott on valentine s day did something special for its corporate clients, it sent them gifts. The bargaining power of buyers is very high. The hotel industry caters to a wide variety of potential customers, who have many options when it comes to lodging. Recently, bed & breakfasts, hostels, inns, and motels have become as commonplace as a typical hotel as far as location and availability. These range dramatically in price and quality, so customers have many possibilities when planning their stay. Hotel managers must embrace customers who continually seek out the best deals and lowest rates when booking their hotel stay. Intelligent business tools will be important in keeping track of these rates and deals as they occur. This will allow them to stay aware of the shifting market. The biggest push will involve driving customers to website communities as their booking method of choice. Hotels must maintain their websites and keep them up to date and high tech feeling. These websites should include forums, feedback centers, and reviews from other customers. This will ensure a high level of interaction between customers and hotel managers. Surveys on the website will help with marketing, and allow for more effective advertising. Hotels can also develop loyalty programs to retain customers and promote brand loyalty. Hotels can award loyalty points to recurring customers, which could then be exchanged for coupons and discounts.

3. If buyer demand is weak and sellers are scrambling to secure additional sales of product
All of the hotels give seasonal packages and strive to make customers come to the hotel and avail these packages. There are also packages related to certain events which hotels try to make attractive and attract customers. Here the bargaining power lies with the buyers. Save up to 33% and view life differently this spring; HiltonHonors is offering spring 2011 promotion program to its customers. The Spring 2011 promotion offers special terms for

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bookings made between March 7 and April 7, 2011 at participating hotels in the Hilton Worldwide portfolio of brands in Europe, Middle East and Africa for the weekend of 18 March 2011 and, with some variations and black-out dates, for stays of one or more nights between April 1 and June 30th 2011. Escape!SM Golf package; Marriot s relaxing golf breaks. Whatever your level, Marriott's golf holidays & golf hotel packages help you reach the top of your game. EMBARK ON A CULTURAL JOURNEY WITH OUR MUSEUM PACKAGE; InterContinental s Explore Montreal's history with 2 passes to Muse Pointe--Callire and a historical and architectural walking tour of Old Montreal. Plus enjoy buffet breakfast daily for 2 in Osco! Please book your walking tour with our Concierge upon arrival. Stay at the Sheraton Carlsbad Resort & Spa and take advantage of our private entrance to LEGOLAND California with our package that includes room accommodations and two LEGOLAND tickets. 4. If buyers are well informed about sellers product price and cost of

product
Buyers are well informed about the price ranges and the packages that different hotels have to offer. Below are some rates to compare with. Keeping in mind, the location (London s most elite places), and the requirements (14nights stay for two). 1 King size bed, non-smoking Executive, wonderful view, luxury pillowtop bed, Dvd And Vcr Player, Wi-fi Internet: GBP 354.00 (Sheraton Hotel) 2 Spring Gardens, Trafalgar Square, London, United Kingdom, SW1A 2TS, 44-207-870-2900 0.2 kilometers from city center: From 215.00 GBP / night (Hilton Hotel) 47 Park Street, London, United Kingdom W1K 7EB, 44 207-491 7282: 439.00 (GBP) (Marriott Hotel)

5. If buyer pose a credible threat of integrating backward

No data regarding backward indication was found for any of the hotels.

6. When buyers have discretion in whether and when they purchase the product.

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Many hotels come up with their special packages at the same time of year. For example, every hotel has the holiday package. These packages vary with prices, and customers choose the best one not only keeping in mind the best price but the best services aswel. Last-Minute Weekends Nightly (Marriot Hotel) rates from 231.00 (USD), 01-Apr-2011 - 03-Apr2011, 2-night stay (Sheraton Hotel)Non-smoking Superior Room, 1 King Bed, Beach/pool View, Balcony Ocean View, Dual-line Ph W/modem Jack: USD 233.13 HILTON BED & BREAKFAST: USD 245 at Waldorf Hilton

Competitive Pressure from Supplier s Bargaining Power

1. When few large suppliers are primary source of a particular item.
The Hotel Industry has four large supply companies. These companies offer full packages of supplies of the equipment s needed in the restaurants or the kitchens of the hotels. These four companies are the suppliers of the market leaders; the big shot luxury hotels and resorts and hence the bargaining power lies with the suppliers. The four large supplier companies are as following, American Restaurant Equipment; Restaurant equipment s that include; freezers, kitchen equipment, ice machines, baking equipment. Avendra Professional; Provides procurement for the hospitality industry. Canoe Hospitality; Canoe Hospitality provides innovative and highly personalized procurement services to the owners and developers of luxury hotels and resort. Jean's Restaurant Supply; Offers restaurant supplies, bar supplies, catering supplies, concession supplies and kitchen equipment from the finest companies in the industry to the different hotels in the industry. E-commerce is one the emerging field in any industry. Also in the hotel industry, E-commerce has its significance. Hotels and resorts need to make their presence on the web and have to make presence effective. There are only two web developers in the hotel industry hence having the bargaining power. These companies are as follows; y y iTravel Solutions - Dynamic Packaging Multimedia Solutions Corporation

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2. Whether item being supplied is a commodity that is readily available from many suppliers at going market price.
Every hotel or resort needs an efficient reservation system. It is these reservation systems that help hotels to gain competitive advantage and edge. From being a large player to a smaller one, reservation systems are a prime importance. For the big shot hotels and resorts there are many suppliers of such reservation systems hence giving them the bargaining power. y y y y y y y y y y Advantage Reserve InnQuest Software iTravel Solutions - Dynamic Packaging Pelican Hotel E-Distribution System VIZERGY Pegasus Systems, Inc. Amadeus Atlantic City Hotel Experts Avatar Software Creations Inc. Easy InnKeeping

Hotel Industry also needs good marketing. The latest trends and research shows that marketing efforts have to be the best via internet. The world has become a global village and internet marketing should cater to all potential and actual customers. There are many marketing firms that provide with these services hence giving the buyers the bargaining power. These companies are as follows; y y y y y y y y y y y y y y y y 10Best Solutions Blizzard Internet Marketing Broadband Hospitality Chatter Guard DerbySoft Hospitality Web Design Hotel Social Blogs - Social Media Marketing & Distribution For Hotels iTravel Solutions - Dynamic Packaging Milestone Internet Marketing O'Rourke Hospitality Marketing TRAVELCLICK VEM Global VFM Interactive Inc. OpenTravel Alliance AirDepartment.com EZYield.com

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y y y

icableholder.com Intellistrand inter-touch - Keeping you in touch with your world, and many more.

The uniforms that are worn by the staff of the hotels are also supplied by many different companies hence giving the bargaining power to the buyers. These are; y y y y y y y y y y Big Front Uniforms Chef Shoes Chef Uniforms Chefwear Class Act Uniforms Clean Rental Services, Inc. The Uniform Specialists Clean Rentals the uniform company Custom Uniform Company DRUMMOND Uniform G&K Services, and many more

3. When it is difficult or costly to switch purchases from one supplier to other or the supplier of substitutes
The top hotels have their own management systems like Hilton works on System21 and Marriott works on the software provided by Siebel Systems Inc. (SEBL). For these companies to switch from one software to another would be very costly.

4. When certain needed inputs are short in supply

The restaurant equipment suppliers are less in number they may play around with the prices in order to get advantage for themselves. They have the bargaining power and can make us of it.

5. When certain suppliers provide a differentiated input that enhance performance or quality of industry s product
Apple introduced its iphone and other smartphones such as blackberry emerged. These phones gave a great opportunity for the hotel industry players. They have launched their own applications on these phones which make it easy for the customers to make reservations. Also they provide with a special GPsystem that helps tourists/customers of the hotel industry to locate the places to visit.

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6. When certain suppliers provide equipment or services that deliver valuable cost saving efficiencies to industry members operating their production processes.
In the hotel industry there are many consultants that provide with solutions related to operation management hence having the bargaining power. These companies are as follows, y y y y y y y y y AG Hospitality Services Inc. CHIC Hospitality Consulting Services ; providing solutions for human resource Daniel Edward Craig | Author and Hotel Consultant; social media strategy. Harry Nobles Hospitality Consulting; staff training programs Hogan Hospitality Hotel Guru International Thinking in the Central American Context Marshall Management Inc. MBT, Hotel Consultants; tourism consultants, and many more.

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DRIVERS OF CHANGE What impact will they have? Major underlying causes of changing industry and competitive conditions.
1. Growing use of internet and emerging new technology
Hilton Hotels has launched a new mobile Web application giving iPhone users accessibility to the hotel chain's Internet features. The new mobile services for German and British users, including the ability to book from the iPhone, were launched in conjunction with Dublin-based Mobile Travel Technologies Ltd. Users can access and change bookings and view hotel images and information. What makes such velvet-glove treatment possible is Marriott International Inc.'s use of customer management software from Siebel Systems Inc. (SEBL) The hotel chain, based in Bethesda, Md., is counting on such technology to gain an edge with guests, event planners, and hotel owners. The software lets Marriott pull together information about its customers from different departments, so that its reps can anticipate and respond more quickly to their needs. It starts with reservations. Says Chairman J.W. Marriott Jr.: ''It's a big competitive advantage to be able to greet a customer with: 'Mr. Jones, welcome back to Marriott. We know you like a king-size bed. We know you need a rental car.'' Sheraton Grande Sukhumvit (Starwood Hotels) has blazed a trail among Bangkok hotels as a leader in technological advancement and convenience-featuring the fastest possible internet connections, wider bandwidth, wireless access throughout all guest rooms and public spaces, as well as state-of-the-art business and meeting facilities. For its farsighted approach, the hotel has garnered several technology awards since 1996. Marketing depends on research, and research is monitoring that is, listening to what people are saying online. Hoteliers commonly use rate comparison tools to get valuable information to feed their Revenue Management Systems (RMS). They could be using keyword systems to pick up on broader conversations, to alert their marketing departments and build on-the-spot promotions in their Central Reservation Systems (CRS) to be available immediately online. As the market size of the companies increase, so are the consultancy services. These services have helped hotels to flourish. The companies have already been mentioned above.

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2. Increasing globalization of the industry.

The world has become a global village, the world is now connected. Anybody and everybody can have access to any service present. As for the hotel industry it has expanded globally. There are many luxury hotels and resorts that provide not only hospitality services but also provide tourism. With the globalization of the industry, luxury hotels and resorts have expanded all around the world and now customers can explore many places around the world.

3. Changes in long term industry growth rate.

The hotel industry is going through an interesting phase. One of the major reasons for the increase in demand for hotel rooms in the country is the boom in the overall economy and high growth in sectors like information technology, telecom, retail and real estate. Rising stock market and new business opportunities are also attracting hordes of foreign investors and international corporate travelers to look for business opportunities in various countries. Hotel industry is also inextricably linked to the tourism industry and its growth has added fillip to the hotel industry. Luxury hotels typically cater to a distinct kind of guest, often wealthy individuals to whom price is less of a factor in selecting a hotel. These affluent income groups have been less affected by the economic downturn than that of lower income groups. Affluent buyers aren t particularly affected by rising interest rates and mortgage related problems. So luxury hotel guests have the ability to absorb the cost increases rather easily. Customers for the hotel industry include tourists as well as business travelers. Tourists may be further categorized into low-medium income groups and high-income groups as the income of a person will determine the kind of hotel he/she chooses. For example, people with high income are more likely to stay in an upscale luxury hotel, which a person with a low-medium income may not be able to afford. Hilton primarily focuses on high-income/upscale group and business travelers. The demand from low-medium income customers is primarily affected by an increase in airfares. These customers generally have a fixed budget for their vacations. Thus, if they are forced to spend more on airfare, their ability to spend on a hotel room, resort or other services declines. On the other hand, business travelers will be affected by an economic slowdown as that would have a direct impact on the volume of business. Other factors may include natural disasters and terrorism.

4. Changes in who buy the product and how they use it.
The hotel industry has been particularly hard hit by a slump in business travelers, who account for a large proportion of hotels income. The outlook appears bleak, according to Amadeus, a leading provider of technology to the travel and tourism industry. Amadeus commissioned a

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report from the Economist Intelligence Unit, published in March 2009, which predicted that the business world was entering a new age of austerity. The report, titled The austere traveler The effect of corporate cutbacks on hotels, concluded that executives would make fewer, shorter, and cheaper business trips in 2009, and that they would prefer basic efficiency and good service over ancillary services. Antoine Medawar, managing director of Amadeus Hospitality Business Group, was quoted as saying: We are entering an age of visible austerity with regard to business travel. With the eyes of their organizations and shareholders upon them, executives are anxious to make business trips as productive as possible. Forget gyms and restaurants; instead concentrate on efficient checkin and check-out, and internet access. Good wifi connectivity is now rated above any other extra. There is a flight to trusted brands, and the expectation of a common level of good service, no matter where you are in the world.

5. Product Innovation
Hilton remains synonymous with hotel because of its innovative approach to products, amenities and service. Whether becoming the first hotel to install televisions in guest rooms or the first hotel in the world to earn both LEED and Green Seal environmental certifications, individual Hilton hotels always lead the way. Among its industry firsts, Hilton developed the concept of franchising hotels, launched the first airport hotel, introduced the first multi-hotel reservation system and became the first U.S. coast-to-coast hotel chain. After more than 90 years, Hilton's expertise and insight of global travel remains unmatched. Marriott included the first workspace (desk, chair, light, etc.) in a hotel room; first TV remote control; first hotel brand to open licensed Starbucks stores in hotels; first to offer express check-out; and more recently, a holistic approach to designing public spaces, with special emphasis on the lobby, based on intense research around the needs of the guests. Hilton has always been on the forefront of technical innovation, and never more so than today when the need for instant, accurate information is crucial to every hotel s bottom line. Hilton s proprietary hotel management system, System 21, provides true competitive leverage by linking all of Hilton s customer sources together, such as Hilton Reservations Worldwide, airline Global Distribution Systems, Hilton Sales Worldwide even individual Hilton properties, regional offices and Hilton s world headquarters. Hilton Hotels has launched a new mobile Web application giving iPhone users accessibility to the hotel chain's Internet features. The new mobile services for German and British users, including the ability to book from the iPhone, were launched in conjunction with Dublin-based Mobile Travel Technologies Ltd. Users can access and change bookings and view hotel images and information.

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In 1937, Marriott s Hot Shoppe No. 8 became the home of his next innovation. Since it was located near an airport, Marriott noticed that airline passengers would often stop off to his store and buy lunch to eat on board. With that came Marriott s idea to sell pre-boxed meals directly to airlines. It was the launch of an entire new industry, and Marriott was soon selling lunches to more than 20 flights a day from that one airport.

6. Technology Change
Hilton Hotels has launched a new mobile Web application giving iPhone users accessibility to the hotel chain's Internet features. The new mobile services for German and British users, including the ability to book from the iPhone, were launched in conjunction with Dublin-based Mobile Travel Technologies Ltd. Users can access and change bookings and view hotel images and information. Hilton Worldwide and IBM (NYSE:IBM) has announced a global collaboration agreement to enhance the hospitality company s technology infrastructure and to facilitate the development and delivery of next-generation technology solutions. What makes such velvet-glove treatment possible is Marriott International Inc.'s use of customer management software from Siebel Systems Inc. (SEBL) The hotel chain, based in Bethesda, Md., is counting on such technology to gain an edge with guests, event planners, and hotel owners. The software lets Marriott pull together information about its customers from different departments, so that its reps can anticipate and respond more quickly to their needs. It starts with reservations. Says Chairman J.W. Marriott Jr.: ''It's a big competitive advantage to be able to greet a customer with: 'Mr. Jones, welcome back to Marriott. We know you like a king-size bed. We know you need a rental car.'' Sheraton Grande Sukhumvit (Starwood Hotels) has blazed a trail among Bangkok hotels as a leader in technological advancement and convenience-featuring the fastest possible internet connections, wider bandwidth, wireless access throughout all guest rooms and public spaces, as well as state-of-the-art business and meeting facilities. For its farsighted approach, the hotel has garnered several technology awards since 1996. New Discoveries y y y DoubleTree by Hilton Hotel Charlotte Airport Charlotte Museum Embassy Suites Anaheim North Discovery Science Center Homewood Suites by Hilton San Jose Airport-Silicon Valley Museum

Children Discovery

 Marriott Resort and Discovery Cove Dolphin Swim Experience Package  Destination Discovery promotion (Laguna in Phuket) Sheraton 

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7. Marketing Innovation
Marketing depends on research, and research is monitoring that is, listening to what people are saying online. Hoteliers commonly use rate comparison tools to get valuable information to feed their Revenue Management Systems (RMS). They could be using keyword systems to pick up on broader conversations, to alert their marketing departments and build on-the-spot promotions in their Central Reservation Systems (CRS) to be available immediately online. If marketing is talking online, then Property Management Systems (PMSs) could evolve with concierge applications enabling guests and hoteliers to communicate more easily prior to or during a stay. Marketing also depends on raw information, and there is much that can be done in this area to make the information work harder. They should be linked with other business intelligence solutions so that integrated reports show how each program is performing at any technological touch point of the hotel. Social media can also help with sales. By harnessing the volume of conversations hoteliers can show, through what people are saying, why those people s peers should consider them and this can be done on a many-to-many basis, instantly and globally. This would necessitate changes to the hotel chain s content management system, making them robust enough to host new content and the necessary workflow and security to accommodate that. Hilton Hotels announced the re-launch of two of the brand s online channels HiltonJourneys.com and HiltonToHome.com. In addition to the two refreshed sites, the brand recently completed the translation of its Hilton.com booking portal into Spanish, and is in the process of completing a French version of the site. The installation of Mobile Travel technology with Iphone was also one step towards clever marketing strategy. The explosive and global growth of the Hilton brand has led us to rethink the way we use the internet to connect with our guests, said Jeff Diskin, senior vice president, brand marketing and management Hilton Hotels. With these refreshed sites we have three unique touch points that allow our guests to connect with Hilton in ways that are most relevant to them. Comparison with others: Global Hyatt Corp. will launch a mobile advertising campaign that leverages Microsoft s mobile advertising relationship with Verizon Wireless. The mobile advertising display campaign is designed to drive people to register for the Hyatt Gold Passport frequent guest rewards program and let people visit the new, fully functional mobile web site using their mobile phones. Marriott has an extensive and clarifying internet site. It has a lot of information for the

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customers and you can also book online. But of course there are lots of other ways to promote a hotel. Various packages are introduced to attract customers during summer season, as it is considered as an off-season.

8. Entry or exit of major firms

Since Hilton is a luxury hotel, hence its competitors are few in number but are large and widespread. Hilton already has a strong presence in the U.S and is expanding its global operations through acquisitions. For example, Hilton acquired the U.K-based Hilton International in February 2006 to establish a footprint in the U.K. It also signed a multi-year agreement with a leading resort real estate developer in Thailand, Destination Properties, to manage a newly built, 358-room golf resort and spa in Thailand. Starwood Hotels owns and operates luxury hotels, retreats, and residences across the world. Approximately half of Starwood's hotels are outside of North America, with 397 in Europe, Africa, the Middle East, and Asia and new Starwood hotels are being built in developing countries like China. The company manages franchises that operate under its various brand names - St. Regis, The Luxury Collection, W, Westin, Le Mridien, Sheraton, Four Points, Aloft, and Element Choice Hotels Internationals is a worldwide franchisor of hotels and the nation s first hotel chain. The company franchises over 5,400 hotels under the Comfort Inn, Comfort Suites, Cambria Suites, Sleep Inn, Mainstay Suites, Quality Inn, Clarion, EconoLodge, Rodeway Inn, and Suburban Extended Stay brands throughout the US and more than 40 countries and territories. Choice generates a majority of its revenue from royalty fees, which are based as a percentage of gross room revenue of its franchised hotels InterContinental Hotels is the largest hotel company by number of rooms, with 590,361 rooms in over 100 countries around the world. It operates a diverse portfolio of brands across multiple economic segments, including Intercontinental Hotels and Resorts, Crowne Plaza Hotels and Resorts, Holiday Inn, and Holiday Inn Express. IHG makes most of its money by franchising hotels. Out of the nearly 4,000 hotels bearing IHG brands, it owns only 18. Orient-Express Hotels is a hotel and leisure group, which is focused on the luxury market. The company owns and operates luxury hotels, restaurants, tourist trains, and river cruises in over 25 countries. OEH's hotels, many operated only seasonally, target luxury travelers Marriott International, Inc. (Marriott) is a worldwide operator and franchiser of hotels and related lodging facilities.

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9. Diffusion of technical knowhow across more companies and countries.

In the hotel industry, the technical knowhow spreads very fast across companies and companies. The top luxury hotels and resorts have somewhat the same services to offer and make use of the same technology in their own distinct ways. y y y y y Mobile applications Stay packages Tourism guide Affiliation with NatGeo and Discovery channel Airport Hotels

10. Changes in cost and efficiency

The major change that has come in the hotel industry related to cost and efficiency is the reservation system. Hotels have their presence online on their distinctive websites and hence customers can easily book or reserve rooms, table at a restraint etc. Also, hotels today have their mobile applications to make things easier for themselves and their customers. Just as Hilton s mobile web application on iphone and Marriott being rated as the best website. Hotels today have also merged with real estate business in order to make expansion easier for them. Real estate businesses give them the edge to acquire and know the best land options available for the hotels businesses owners to expand. Hilton merged with Blackstone real estate company and InterContinental Hotels acquired Taleo Corporation (TLEO), the leading provider of talent management solutions. In the near future as we see technology moving at a fast pace and innovations keep knocking on the door, even more cost effective ways of doing business in the hotel industry may emerge. New improved ways of room cleaning or restaurant services many be a part of the cost efficiency targets yet to come.

11. Growing buyer preference for differentiated products

Hotels today have come up with differentiated services that they have to offer. Let it be Hilton s fashion district or Marriot s Dolphin swim experience customers are attracted to differentiated products. As Hilton was the first ever hotel to introduce a television in the rooms, it could also be the first ever hotel to introduced projected touch screen televisions in its rooms.

12. Reductions in uncertainty and business risk

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Hotels are making use of technologies and innovations from other industries. Those technologies can already been introduced in the market and hence their uncertainty and risk has been reduced. Example can be Hilton s agreement with H.P for wireless printing through Black Berry phones.

13. Changing societal concerns, attitudes and lifestyles

Lifestyle and attitude towards hotel industry has changed. As explained earlier Hilton and its competitors target the rich and the businessmen class. The rich need a good time out and businessmen need a good wi-fi and fast check in check out services. The trend is shifting more towards resorts and residential suites. In the near future we may see hotels as being more business center oriented. Just like Hilton s concept of fashion district and/or NatGeo Children s park.

STRATEGIC GROUP MAPS

Competitive Characteristics
1. Price 2. Quality 3. Location 4. Packages 5. Services 6. Loyalty programs 7. Family friendly 8. Ambience 9. Local flavor 10. Amenities

Firms that fall under these categories

y y y y Starwood Hotels Hilton Hotels InterContinental Hotels Marriot International

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Graphs

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Scenario Planning
Scenarios are detailed views of hoe business might develop in the future. The scenarios are made by grouping of key environmental influences and drivers of change. Hilton is a vast empire in the hospitality industry and hence it has to expand its business to stay in the game. It is very important for Hilton to plan scenarios in order to forecast the future. The external environment and the drivers of change have been studied in great detail. Out of these some factors will be taken and put on the "environmental ranking chart." The factors that lie in the problematic region will be used to plan scenarios for Hilton.

Environmental Ranking Chart

Most Certain

Highly Predictable

Least Impact Problematic Region

Most Impact

Least Certain

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The variables that were selected in order to make the scenarios are as follows y y y y Political stability Economic Stability Technology Advances Socio culture factors
Most Certain

Highly Predictable y y Technology Advancements Socio Cultures Factors

Least Impact Problematic Region y y Political Impact Economic Factors

Most Impact

Least Certain

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Scenario One Technological Advancements result in Socio Cultural Advancements

Technology Advancements

Negative Socio cultural Impact

Positive Socio - cultural Impact

Technology Recession

As of today's time, technology advancements are taking place every minute. Technology advancements are not related to any specific company but technology advancement in one industry can have a positive impact on other industry. For instance the discovery of energy saver bulbs have resulted in cost decrease of electricity bills. People will save and have more money to spend on luxury items. Just as Hilton Hotels made use of mobile technologies to make its reservation systems more efficient. If technology keeps advancing and new innovations keep coming, this can lead to betterment of the society. The lives of the people living in a society will improve and technology will make things more cost effective resulting in more savings with the potential and actual customers of Hilton. Society trends will change and more people will get attracted towards luxury hoteling leaving a positive impact on Hilton.

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Scenario Two - Technology stops to progress and negative impact on socio cultural factors

Just as explained above, if the process was turned the other way round, no advancement in technology would mean that no person in the society is facing any sort of positivity. When there won't be any such technology that will cater to persons in a society or help them overcome or reduce costs, people would only have enough amount to spend on their basic needs. None would have the resource or money to spend on luxury goods. This would leave a negative impact on Hilton since it won't be able to attract more and more customers.

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Scenario Three - Political Stability results in Economic Growth

We see that developed countries have a stable political scene and also have a strong economy. When a country's political environment is stable, it automatically leads to economic growth. Governments work for the betterment of their people and their country and bring in projects that are suitable for economic growth. When a country's economy grows the citizens of that country also progress. More jobs are generated; income levels increase and people are attracted more towards a luxury lifestyle. People become more status conscious and want to enter the world of "brands." They become brand conscious which is a positive sign Hilton. Hilton would have to target developed such nations where people afford luxury living and tourism is also at its peak. In such nations people afford what Hilton has to offer and Hilton can reap profits.

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Scenario Four Political Instability leads to Economic Instability and vice versa

When there will be political instability, just as in the case of Pakistan, the Government will be more into keeping themselves safe than working for the betterment of country or countrymen. When a country's political environment is instable, it automatically leads to economic unrest. Governments do not work for the betterment of their people and their country and fail to bring in projects that are suitable for economic growth. When a country's economy does not grow the citizens of that country do not progress. No or less jobs are generated; income levels decrease and people are not attracted towards a luxury lifestyle. People are not status conscious and do not want to enter the world of "brands," rather they fulfill their basic needs. They are brand conscious which is a negative sign for Hilton. Hilton would have to target developed such nations where people afford luxury living and tourism is also at its peak. In such nations people afford what Hilton has to offer and Hilton can reap profits.

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Key Success Factors

Technology Related Key Success Factors
Expertise in Particular Technology  Reservation System

Hilton has the most effective and efficient reservation system which allows its customers to book rooms and other reservations without any extra effort being made. Reservations can be made via smartphones and websites. These allow customers espically corporate clients to stay on the go.  Information System

System 21 allows management of all internal affairs of Hilton  Room Management

Room management systems allow Hilton to keep track of needs to be set right in any particular rooms. Details and maintenance issues are kept in this database and the bell rings as soon as something is on the loop  Food and Beverage Control

Hilton hotels are full-fledge hotels that have restraints and also organize events. They also have resorts where tourists keep coming in. not to forget the residential suites Hilton has to offer. With such a vast range of services available Hilton has to keep track of food and beverage inventory and hence has management systems that help keeping track. Proven Ability to improve Production Process The only thing that Hilton may produce is food.

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Manufacturing Related Key Success Factors

Quality Control Knowhow  Quality packages

Hilton has more than twenty different packages for its customers. It also has different packages for different corporate clients and different other packages for different resorts. Highest Water Quality at the Hilton Hotel, Malta The Hilton Hotel in St. Julian, Malta, is located directly at the beach. In the course of modernization measures, an effective alternative for the insufficiently functioning seawater desalination system for the generation of drinking water was to be found. At the same time, the hotel wanted to become independent of the public water supply. Expert competence was also required for the treatment of the swimming pool water. Comparison with competitors The hotel company has struck a multi-million-dollar deal with New York City-based Portico Home + Spa to launch the eco-friendly bedding consisting of sheets, pillow cases and pillow shams (decorative covers for bed pillows) at all of their hotels. The new bedding is now available in premier suites at 14 Hyatt hotels nationwide as well as in Aruba. Additional Grand Hyatt, Hyatt Regency, and Hyatt hotels plan to add this bedding line to their premier suites in the next year. In spring 2011, Hyatt also plans to add Portico's organic cotton bath linens (towels, bathrobes, and bath rugs) to the premier suites. Launching at select Hyatt Pure locations, the shaving services will allow men to enjoy their daily shave without having to lift a finger. This new offering will be backed by Shave products with services delivered by Hyatt Pure estheticians. Perfect for the business traveler getting ready for a major presentation or for grooms and groomsmen getting ready for the big day.  Front and back offices

The reservation desks and the management are of quality  Food and Beverages control

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Hilton hotels are full-fledge hotels that have restraints and also organize events. They also have resorts where tourists keep coming in. not to forget the residential suites Hilton has to offer. With such a vast range of services available Hilton has to keep track of food and beverage inventory and hence has management systems that help keeping track.  Safety and security

Hilton provides quality safety is security to its customers Abilities to Achieve Economies of Scale It is through franchising that Hilton gains economies of scale through cost reduction. In the hospitality industry economies of scope can originate from strategic alliances, joint ventures and mergers. For example, consider a hospitality company that forms a strategic alliance with a car rental company. As part of this alliance, the companies use the same central reservation system (CRS) to support both hotel and car reservations. Consequently, Reservation cost of hotel rooms and generate a joint reservation system and a general cost reduction in reservation transactions. In 1993 only two mergers occurred in American hospitality Industry, and their total value was about $30million.

High Utilization of Fixed Assets Real Estate, buildings, restaurant equipment and other equipment are being highly utilized (furniture etc). Access to Adequate Suppliers of Skilled Labor Importance of skilled labor is one of the prime importances of any luxury hotel, since it has to deal with customers directly 24/7.  Taleo Talent Management Solutions was acquired by Sheraton Hotel which made it possible for Sheraton to be the first company to get talented management.

High Labor Productivity There is high labor productivity for Hilton since the labor they use is in the sense of waiters etc. Ability to Manufacture Customized Products Packages and Room requirements can be customized according to the wants of the clients. For example clients themselves can choose which room to books according to the view they would

67

like or the smoking or non smoking requirements. Even customers can customize their rooms according to what kind of closets they want.

Distribution Related Key Success Factors

Strong Network of Wholesale Distribution and Dealers  No dealer network

Strong Direct Sales Hilton only gives direct sales. Customers walk towards the service. Hilton is left with no choice but to make its direct sales strong. Ability to Secure Favorable Location on Retailer shelf  Does not apply

Breadth of Product Line Hilton has huge product line. The services that they offer directly hit individual customers. These can be walk in customers, corporate clients or even children. Well Known and Well Respected Brand name     Hilton Hotels and Resorts Marriott International Starwood Hotels InterContinental Hotels

Fast Accurate Technical Assistance Hilton offers fast accurate technical assistance when required by the customers, say if the television in someone clients room stops to work they provide with technical staff. Accurate Filling of Buying Orders Room service and restaurant services require accurate and timely fulfilling of orders and this is what Hilton specializes in.

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Courteous Personalized Customer Services Customer services is the prime and the most important thing. Customer Guarantees and Warrantees Guarantees and warrantees are in form of,   Goodwill Reputation

Clever Advertising Marketing depends on research, and research is monitoring that is, listening to what people are saying online. Hoteliers commonly use rate comparison tools to get valuable information to feed their Revenue Management Systems (RMS). They could be using keyword systems to pick up on broader conversations, to alert their marketing departments and build on-the-spot promotions in their Central Reservation Systems (CRS) to be available immediately online. If marketing is talking online, then Property Management Systems (PMSs) could evolve with concierge applications enabling guests and hoteliers to communicate more easily prior to or during a stay. Marketing also depends on raw information, and there is much that can be done in this area to make the information work harder. They should be linked with other business intelligence solutions so that integrated reports show how each program is performing at any technological touch point of the hotel. Social media can also help with sales. By harnessing the volume of conversations hoteliers can show, through what people are saying, why those people s peers should consider them and this can be done on a many-to-many basis, instantly and globally. This would necessitate changes to the hotel chain s content management system, making them robust enough to host new content and the necessary workflow and security to accommodate that. Hilton Hotels announced the re-launch of two of the brand s online channels HiltonJourneys.com and HiltonToHome.com. In addition to the two refreshed sites, the brand recently completed the translation of its Hilton.com booking portal into Spanish, and is in the process of completing a French version of the site. The installation of Mobile Travel technology with Iphone was also one step towards clever marketing strategy. The explosive and global growth of the Hilton brand has led us to rethink the way we use the internet to connect with our guests, said Jeff Diskin, senior vice president, brand marketing and management Hilton Hotels. With these refreshed sites we have three

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unique touch points that allow our guests to connect with Hilton in ways that are most relevant to them.

Skills and Capabilities related Key Success Factors

A Talented Workforce Skilled Workforce and talented workforce is required for dealing with customers everyday and providing the best and efficient services all the time, everyday. Product Innovation Capabilities Hilton has high innovation capabilities. Hilton remains synonymous with hotel because of its innovative approach to products, amenities and service. Whether becoming the first hotel to install televisions in guest rooms or the first hotel in the world to earn both LEED and Green Seal environmental certifications, individual Hilton hotels always lead the way. Among its industry firsts, Hilton developed the concept of franchising hotels, launched the first airport hotel, introduced the first multi-hotel reservation system and became the first U.S. coast-tocoast hotel chain. After more than 90 years, Hilton's expertise and insight of global travel remains unmatched. Hilton also introduced the iphone application. Short Delivery Time Capability   Order delivery Check in and Checkout processes

Strong E.Commerce Capabilities   Internet Marketing Web presence

Convenient Locations    Hotels Resorts Residential Suites all present is areas where tourists love to go. Let it be park lane or resorts in Malaysia.

70

Patent Protection    The name itself The brands The packages

71

Competitive Strength Assessment

Key Success Factors Product Innovation capabilities Clever advertising Strong direct sales High Labor Productivity Expert Technology High utilization of fixed assets Accurate filling of buyer order Strong ecommerce capabilities Convenient Locations Starwood 8 9 8 9 8 10 8 9 8 Marriott International 9 9 8 9 9 8 9 10 9 Hilton 10 10 9 9 10 9 10 8 10

Starwood 1.04

Marriott 1.17

Hilton 1.3

Importance Rating 13%

0.99 0.88 0.54 0.48 0.50 0.88 1.08

0.99 0.88 0.54 0.54 0.40 0.99 1.2

1.1 0.99 0.54 0.6 0.45 1.1 0.96

11% 11% 6% 6% 5% 11% 12%

1.04 8.51

1.17 8.96

1.3 9.42

13%

Key Success Factors Product Innovation capabilities Clever advertising Strong direct sales High Labor Productivity Expert Technology High utilization of fixed assets Accurate filling of buyer order Strong ecommerce capabilities Convenient Locations Total

72

Internal Analysis

73

Evaluating How Well a Company's Present Strategy Works

Whether company is achieving its financial and strategic objectives

Hilton has achieved its strategic objectives

Hilton's statistics Dec 09: Revenue $7,500.0 (Estimated) Dec 08: Revenue $7,770.0 (Estimated) Dec 07* $8,090.0

Net income for 06: $573million

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Whether the company is an above average industry performer

Comparison to Competitors Starwood Number of Hotels Number of Rooms (Thousands) Geographical Presence (Countries) Occupancy (Percent) Average Daily Rate (USD) RevPAR (USD) 871 266 Hilton 2,935 501 Marriott 2,832 514 Intercontinental 3,600 538

100

78

68

100

71.2

72.5

74.4

N.A.

191.56

115.43

153.99

N.A.

136.33

82.46

114.61

N.A.

Net income for; Hilton: $572million(2006) Marriott: $696million(2007) Intercontinental Hotels: 883(2007)

Whether firm s sales are growing slower, faster or about the same pace
Hilton s growth rate: 16.42% Marriott s growth rate: 7.64% Starwood s growth rate: 5.44% Hilton s growth has increased from USD 3.8 billion in 2002 to USD 8.2 billion in 2006

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CEP created Revenue Management University, provided Hilton with revenue management which gave a boost to the market share of Hilton.

Whether company is acquiring new customers at an attractive rate as well as retaining existing customers
Hhonors and Virgin America Airlines have signed a contract that the customers of Virgin Airlines will stay in Hilton hotels when in transit or any other such issues. Hhonors New packages Group reservations Travel guides CEP BlackStone group Hilton: $572million (2006) Hilton s net profit margin for 2007: 1.5% Marriot s net profit margin for 2009: 1.44% Marriott: $696million (2007) Hilton s sales for 2009: 7,500million with year growth of 3.5%

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Whether the company s overall financial strength and credit rating improving or decreasing
Hilton cuts its debt from 4.1 billion and is rated an investment grade by Standard and Poor Acquisition of BlackStone boosts credit rating In 2012 Hilton s notes due may rise to 106.7 which will result in a decrease in the credit ratings

Whether the company can demonstrate continuous improvement in such internal performance measures as days of inventory, employees' productivity, defect rate, misfiled orders, and delivery times and so on
Hilton does give any information regarding its days of inventory. Employee's productivity is high defect rate, misfiled orders and delivery times are kept effective.

How shareholders view the company based on trends in company s stock prices and shareholder value
Insider Sales: Value $131379million Shares 4812247 Option Exercises: Value - $840,693 Shares - $48750 Stock holders equity for 2006: $3727million Stockholders equity for 2007: $5198million Not listed on New York Stock Exchange

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Sizing Up Company s Resource Strength

Competence
Hospitality Information Technology Patent brand name Packages Acquisitions and mergers Ecommerce Reservation systems Human Resource Operations

Core Competencies
Convenient Locations BlackStone

Distinctive Competency
Marriott s website Reservation System

What is the competitive power of resource strength? Is the resource strength hard to copy?
Intelligent way of acquisitions and mergers

Is the resource strength durable, does it have staying power?

Very durable Till today Hilton is making use of BlackStone

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Is the resource really competitively superior?

The BlackStone group

Can the resource be trumped by different resource strength and capabilities of rivals?
1993 till today Marriott has acquisitions of more than 1000, which means that the resource can be copied by the rivals in the same or better way.

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Value Chain Analysis

Benchmarking
Accenture and Hilton: Hilton Worldwide and Accenture Announce Multi-Year Technology Services Agreement Accenture and Starwood: Accenture Providing Starwood Hotels & Resorts with IT Outsourcing Services Through Multi-Year Transformation Program

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TWOS ANALYSIS
Strengths
Well established organization Leader in hospitality and gaming industry Diversity High end customers Market share Corporate customers Franchise network Manufacturers of furniture Strong participative culture Strong financial position Differentiation strategy Decentralized structure Effective communication Strong reputation R&D Strong reputation Loyal customers Diverse range of skills and management Strong brand name Market share leadership Innovation

Opportunities
Array of distinctive services to corporations and entrepreneurs Wedding planning and hosting Expand into or in cruise line Returning growth after economic slump Strong relationship with suppliers Attract more new customers More acquisitions and mergers

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Threats
Extend its efforts to mix entertainment and gaming Extension of credit Terrorism Price war Cheaper technology Economic slow down Exchange range fluctuations Lower cost competitors

Weakness
Vulnerable to downturn in global economy Vulnerable to strikes of labor in developing nations Seasonal turnover Certain rooms require upgrade and renovations Targets only the elite Website

Strengths and Threats

Make use of its vision Decentralization and minor threats Financial position and fluctuating exchange rate Economies of scale and low cost competitors Countries that were not affected by economic slowdown Companies providing security solutions (technology) Give out credit to only big shot corporate

Weakness and Opportunities

Countries with less strict labor laws Offer more diverse products Emerging technologies to overcome renovations and upgrade problems Expansion to get over economic slowdowns

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Weakness and Threats

Buffer stocks Joint ventures and price wars Portray their image Strict labor laws Keep track of profits

Strategic Position and Action Evaluating Matrix

Internal Dimensions
Financial Strength

Leverage: Management takeover of Hilton by Jordon s Dead Sea King Hussain Bin Talal s Convention Center. Hilton has 37,868(M) assets and has debt of 21,177(M)

Return on Investment Hilton has 7000 pages on internet which generate $10 in revenue for every 1$. Hilton s total investment, property and other assets are 34,097million Working Capital Current assets current liabilities 3771 2837 = 934 (M) for 2007 Cash flow 125 (M) for the year 2007 Dividend y May 11, 1990, HILTON RAISES DIVIDEND: Hilton Hotels boosted its quarterly dividend to 30 cents from 25 cents, payable June 15 to shareholders of record June 1. y July 21, 2006--Hilton Hotels Corporation (NYSE:HLT) today declared a dividend of $.04 per share, payable in cash on September 15, 2006, to stockholders of record at the close of business on September 2, 2006

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Competitive Analysis Product Quality High quality products for high status individuals. Refer to previous sections. Product Life Cycle Growth Bringing new products to the market y y y DoubleTree by Hilton Hotel Charlotte Airport Charlotte Museum Embassy Suites Anaheim North Discovery Science Center Homewood Suites by Hilton San Jose Airport-Silicon Valley Museum

Children Discovery

 Marriott Resort and Discovery Cove Dolphin Swim Experience Package  Destination Discovery promotion (Laguna in Phuket) Sheraton Talented workforce One of the prime requirements Customer Loyalty HHonor programs have been able to retain customers. Technical Knowhow Hilton Hotels has launched a new mobile Web application giving iPhone users accessibility to the hotel chain's Internet features. The new mobile services for German and British users, including the ability to book from the iPhone, were launched in conjunction with Dublin-based Mobile Travel Technologies Ltd. Users can access and change bookings and view hotel images and information. What makes such velvet-glove treatment possible is Marriott International Inc.'s use of customer management software from Siebel Systems Inc. (SEBL) The hotel chain, based in Bethesda, Md., is counting on such technology to gain an edge with guests, event planners, and hotel owners. The software lets Marriott pull together information about its customers from different departments, so that its reps can anticipate and respond more quickly to their needs. It starts with reservations. Says Chairman J.W. Marriott Jr.: ''It's a big competitive advantage to be able to greet a customer with: 'Mr. Jones, welcome back to Marriott. We know you like a king-size bed. We know you need a rental car.''

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Sheraton Grande Sukhumvit (Starwood Hotels) has blazed a trail among Bangkok hotels as a leader in technological advancement and convenience-featuring the fastest possible internet connections, wider bandwidth, wireless access throughout all guest rooms and public spaces, as well as state-of-the-art business and meeting facilities. For its farsighted approach, the hotel has garnered several technology awards since 1996. Control over suppliers and distributors There are many suppliers available as mentioned above hence there is no such control that can be set on them. Hilton on the other hand has no distributors. Innovations Hilton has high innovation capabilities. Hilton remains synonymous with hotel because of its innovative approach to products, amenities and service. Whether becoming the first hotel to install televisions in guest rooms or the first hotel in the world to earn both LEED and Green Seal environmental certifications, individual Hilton hotels always lead the way. Among its industry firsts, Hilton developed the concept of franchising hotels, launched the first airport hotel, introduced the first multi-hotel reservation system and became the first U.S. coast-tocoast hotel chain. After more than 90 years, Hilton's expertise and insight of global travel remains unmatched. Hilton also introduced the iphone application.

External Dimensions
Economic Stability Technological changes Rapid technology changes take place not only in the hospitality industry but also in other industries which are or may be used by Hilton to make its services more efficient. Rate of inflation Since Hilton Hotels targets the elite and businessmen, increase in inflation does not have much strong effect on its business. Demand variability Since trends are changing, other than corporate clients also getting attracted towards hoteling and the culture of celebrating holidays is increasing. On the other hand, the changing economic and political conditions around the globe have discouraged tourism.

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Price range of competing products HILTON BED & BREAKFAST: USD 245 at Waldorf Hilton Last-Minute Weekends Nightly (Marriot Hotel) rates from 231.00 (USD), 01-Apr-2011 03-Apr-2011, 2-night stay (Sheraton Hotel)Non-smoking Superior Room, 1 King Bed, Beach/pool View, Balcony Ocean View, Dual-line Ph W/modem Jack: USD 233.13 Competitive pressure Starwood Hotels Choice Hotels Internationals InterContinental Hotels Marriot International Orient-Express Hotels Ease of exit from market Nobody has exit from the market. Also, Hilton and its rivals are big/ huge players in the market and have spread their roots very deep. For them to exit is not easy. Barriers to entry in market No direct competitors may enter the market since all of the top players have achieved economies of scale. So any new player would have to either enter on economies of scale or have to bear high costs. Substitutes may keep coming in Price elasticity of demand y Price is inelastic. Since the target market are the elite class and can afford price changes. Risk involved in business High risks are involved in the business since they need to very thoroughly keep track of their customers and also have to expand into different geographical areas. Stable GDP growth 2.1 in 2007

Industry Strength
Growth potential High Profit potential Net income for; Hilton: $572million(2006)

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Financial stability Hilton: $572million (2006) Hilton s net profit margin for 2007: 1.5% Marriot s net profit margin for 2009: 1.44% Technology know how Hilton Hotels has launched a new mobile Web application giving iPhone users accessibility to the hotel chain's Internet features. The new mobile services for German and British users, including the ability to book from the iPhone, were launched in conjunction with Dublin-based Mobile Travel Technologies Ltd. Users can access and change bookings and view hotel images and information. What makes such velvet-glove treatment possible is Marriott International Inc.'s use of customer management software from Siebel Systems Inc. (SEBL) The hotel chain, based in Bethesda, Md., is counting on such technology to gain an edge with guests, event planners, and hotel owners. The software lets Marriott pull together information about its customers from different departments, so that its reps can anticipate and respond more quickly to their needs. It starts with reservations. Says Chairman J.W. Marriott Jr.: ''It's a big competitive advantage to be able to greet a customer with: 'Mr. Jones, welcome back to Marriott. We know you like a king-size bed. We know you need a rental car.'' Sheraton Grande Sukhumvit (Starwood Hotels) has blazed a trail among Bangkok hotels as a leader in technological advancement and convenience-featuring the fastest possible internet connections, wider bandwidth, wireless access throughout all guest rooms and public spaces, as well as state-of-the-art business and meeting facilities. For its farsighted approach, the hotel has garnered several technology awards since 1996. Control over suppliers and distributors There are many suppliers available as mentioned above hence there is no such control that can be set on them. Hilton on the other hand has no distributors.

Ease of entry into market Not easy

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Matrix
Financial and Industry
Financial Strengths Return on investments Leverage Liquidity Working Capital Cash Flow Dividend Total Average Numerical Value +4 +4 +4 +5 +5 +4 26 4.33 Industry Strengths Growth Potential Profit Potential Financial Stability Technology Knowhow Ease of Entry into Market Productivity Total Average Numerical Value +4 +5 +5 +6 +1 +6 27 4.5

Competitive Advantage and Economic Strengths

Competitive Advantage Market Share Product Quality Product Life Cycle Brining New Product to Market Talented Workforce Brand Image Customer Loyalty Technology Know How Control Over Suppliers and Distributors Numeric value +4 +5 +5 +5 +5 +6 +6 +5 +4 Economic Strengths Technology Changes Rate of Inflation Demand Variability Price Range of Competing Products Barriers to Entry Competitive Pressure Ease of Exit from Market Price Elasticity of Demand Risk involved in Business Stable GDP Growth Total Average 45 5 Total Average Numeric Value +5 +3 +4 +5 +6 +5 +6 +2 +5

+6 47 4.7

88

Strategies to Use
Market Penetration Joint Ventures Product and Market Development Backward and Forward Integration Acquisitions Mergers Downsizing Unrelated Diversification

89

Quantitative Strategic Planning Matrix

ANSOFF Matrix

Hilton lies in the quadrant of diversification, market development and product development.

BCG Matrix Hilton being a "star"

90

QUANTITATIVE STRATEGIC PLANNING MATRIX

SR. NO. 1. 2. 3. 4. 5. 6. 7. 8. 9.

STRENGTHS Well established organization Leader in hospitality and gaming industry Diversity High end customers Market share Corporate customers Franchise network Manufacturers of furniture Strong participative culture

Strategy: use of emerging markets WEIGHT AS TAS 8% 4 32% 7% 7% 8% 7% 6% 6% 1% 8% 6% 7% 8% 7% 7% 7% 4 4 4 4 3 4 1 3 3 3 4 3 4 3 AS -1 -2 -3 28% 28% 32% 28% 18% 24% 1% 24% 18% 21% 32% 21% 28% 21% TAS -15% -34% -54%

10. Strong financial position 11. Differentiation strategy 12. Decentralized structure 13. Effective communication 14. Strong reputation 15. R & D WEAKNESSES Vulnerable to downturn in global economy Vulnerable to strikes of labor in developing nations Seasonal turnover

1. 2. 3.

15% 17% 18%

91

4. 5. 6.

Certain rooms require upgrade and renovations Targets only the elite Website

12% 19% 19% WEIGHT 14%

-1 -4 -4 AS 4

-12% -76% -76% TAS 56%

1.

2. 3. 4. 5.. 6. 7.

OPPURTUNITIES Array of distinctive services to corporations and entrepreneurs Wedding planning and hosting Expand into or in cruise line Returning growth after economic slump Strong relationship with suppliers Attract more new customers More acquisitions and merger

16% 12% 13% 14% 15% 16%

3 3 4 4 4 4

48% 036% 052% 56% 60% 64%

1. 2. 3. 4. 5. 6. 7.

THREATS Extend its efforts to mix entertainment and gaming Extension of credit Terrorism Price war Cheaper technology Economic slow down Exchange range fluctuations

WEIGHT 13% 14% 14% 15% 15% 12% 16%

AS -2 -3 -2 -3 -4 -2 -4

TAS -26 -42 -28 -45 -60 -24 -64

92

SR. NO. 1. 2. 3. 4. 5. 6. 7. 8. 9.

STRENGTHS Franchise network Manufacturers of furniture Strong participative culture Strong financial position Differentiation strategy Decentralized structure Effective communication Strong reputation R&D

STRATEGY: use of emerging technology WEIGHT AS TAS 0.08 4 0.32 0.06 0.10 0.08 0.15 0.10 0.06 0.10 0.07 4 3 2 2 2 2 3 3 0.24 0.3 0.16 0.3 0.2 0.12 0.3 0.21 2.15 TAS -0.21 -0.16 -0.05 -0.42 TAS 0.09 0.3 0.08 0.10

10. 11. 12.

WEAKNESSES Vulnerable to downturn in global economy Vulnerable to strikes of labor in developing nations Seasonal turnover

WEIGHT 0.07 0.08 0.05 100% WEIGHT 0.09 0.10 0.08 0.10

AS -2 -2 -1

13. 14. 15. 16.

OPPURTUNITIES Returning growth after economic slump Strong relationship with suppliers Attract more new customers More acquisitions and merger Returning growth after economic slump

AS 1 3 1 1

17.

0.57

93

18. 19. 20. 21. 22. 23.

THREATS Extend its efforts to mix entertainment and gaming Extension of credit Terrorism Price war Cheaper technology Economic slow down

WEIGHT 0.09 0.08 0.12 0.12 0.10 0.12 100%

AS -1 -2 -1 -1 -1 -1

TAS -0.09 -0.16 -0.12 -0.12 -0.10 -0.12 -0.71

94

SR. NO. 1. 2. 3. 4. 5. 6. 7. 8. 9.

STRENGTHS Franchise network Manufacturers of furniture Strong participative culture Strong financial position Differentiation strategy Decentralized structure Effective communication Strong reputation R&D

STRATEGY: relationship with suppliers WEIGHT AS TAS 0.08 2 0.16 0.06 0.10 0.08 0.15 0.10 0.06 0.10 0.07 2 2 2 1 2 4 2 1 0.12 0.2 0.16 0.15 0.2 0.24 0.2 0.07 1.4 TAS -0.07 -0.08 -0.10 -0.25 TAS 0.18 0.20 0..24 0.2

10. 11. 12.

WEAKNESSES Vulnerable to downturn in global economy Vulnerable to strikes of labor in developing nations Seasonal turnover

WEIGHT 0.07 0.08 0.05 100% WEIGHT 0.09 0.10 0.08 0.10

AS -1 -1 -2

13. 14. 15. 16.

OPPURTUNITIES Returning growth after economic slump Strong relationship with suppliers Attract more new customers More acquisitions and merger

AS 2 2 3 2

0.82

95

17. 18. 19. 20. 21. 22.

THREATS Extend its efforts to mix entertainment and gaming Extension of credit Terrorism Price war Cheaper technology Economic slow down

WEIGHT 0.09 0.08 0.12 0.12 0.10 0.12 100%

AS -1 -2 -2 -2 -1 -2

TAS -0.09 -0.16 -0.24 -0.24 -0.10 -0.24 -1.07

96

SR. NO. 1. 2. 3. 4. 5. 6. 7. 8. 9.

STRENGTHS Franchise network Manufacturers of furniture Strong participative culture Strong financial position Differentiation strategy Decentralized structure Effective communication Strong reputation R&D

STRATEGY: more innovation WEIGHT AS 0.08 4 0.06 0.10 0.08 0.15 0.10 0.06 0.10 0.07 4 2 3 2 2 2 2 2

TAS 0.32 0.24 0.2 0.24 0.30 0.2 0.12 0.2 0.14 1.96 TAS -0.07 -0.08 -0.05 -0.2 TAS 0.27 0.2 0.24 0.3

10. 11. 12.

WEAKNESSES Vulnerable to downturn in global economy Vulnerable to strikes of labor in developing nations Seasonal turnover

WEIGHT 0.07 0.08 0.05 100% WEIGHT 0.09 0.10 0.08 0.10

AS -1 -1 -1

13. 14. 15. 16.

OPPURTUNITIES Returning growth after economic slump Strong relationship with suppliers Attract more new customers More acquisitions and merger Returning growth after economic slump

AS 3 2 3 3

17.

1.01

97

18. 19. 20. 21. 22. 23.

THREATS Extend its efforts to mix entertainment and gaming Extension of credit Terrorism Price war Cheaper technology Economic slow down

WEIGHT 0.09 0.08 0.12 0.12 0.10 0.12 100%

AS -1 -1 -1 -2 -1 -2

TAS -0.09 -0.08 -0.12 -0.24 -0.10 -0.24 -0.87

98

SR. NO.

STRENGTHS

STRATEGY: merge with other 4 stars or less hotels WEIGHT 0.08 0.06 0.10 0.08 0.15 0.10 0.06 0.10 0.07 AS 3 3 3 3 1 2 2 2 2 TAS 0.24 0.18 0.3 0.24 0.15 0.2 0.12 0.2 0.14 1.77 TAS -0.07 -0.08 -0.05 -0.2 TAS 0.36 0.2 0.24 0.3

1. 2. 3. 4. 5. 6. 7. 8. 9.

Franchise network Manufacturers of furniture Strong participative culture Strong financial position Differentiation strategy Decentralized structure Effective communication Strong reputation R&D

10. 11. 12.

WEAKNESSES Vulnerable to downturn in global economy Vulnerable to strikes of labor in developing nations Seasonal turnover

WEIGHT 0.07 0.08 0.05 100% WEIGHT 0.09 0.10 0.08 0.10

AS -1 -1 -1

13. 14. 15. 16.

OPPURTUNITIES Returning growth after economic slump Strong relationship with suppliers Attract more new customers More acquisitions and merger

AS 4 2 3 3

99

17.

Returning growth after economic slump THREATS Extend its efforts to mix entertainment and gaming Extension of credit Terrorism Price war Cheaper technology Economic slow down WEIGHT 0.09 0.08 0.12 0.12 0.10 0.12 100% AS -1 -1 -1 -2 -1 -2

1.1

18. 19. 20. 21. 22. 23.

TAS -0.09 -0.08 -0.12 -0.24 -0.10 -0.24 -0.87

100

PESTEL

SR. NO.

POLITICAL

STRATEGY: expansion in developing countries

1. 2. 3.

GOVERNMENT STABILITY TAXTATION POLICY FOREIGN TRADE REGULATIONS

WEIGHT 0.03 0.05 0.05

AS 2 2 4

TAS 0.06 0.1 0.20 0.36

4. 5. 6. 7. 8. 9.

Interest Rates

ECONOMIC and Exchange

WEIGHT 0.07 0.06 0.04 0.03 0.08 0.06

AS -2 -2 -1 -1 -2 -1

TAS -0.14 -0.12 -0.04 -0.03 -0.16 -0.06 -0.55 TAS 0.06 0.06 0.06 0.06 0.06 0.3 TAS

GDP Money Supply Unemployment Inflation Disposal Income

10. 11. 12. 13. 14.

SOCIO CULTURAL Demographics Income distribution Lifestyle Trends Attitude to work Level of education

WEIGHT 0.02 0.03 0.03 0.03 0.02

AS 3 2 2 2 3

TECHNOLOGICAL

WEIGHT

AS

101

15. 16. 17. 18.

GOVT FOCUS New discoveries Speed of technological transfer Rate Of Obsolense

0.05 0.06 0.10 0.07

2 3 2 2

0.1 0.18 0.2 0.14 0.62

ENVIORNMENTAL

WEIGHT 0.04

AS 2

TAS 0.08

LEGAL 1. 2. 3. 4. Competitive law Employment Law Health & Safety Product Safety

WEIGHT 0.03 0.01 0.02 0.02 100%

AS 2 1 2 1

TAS 0.06 0.01 0.04 0.02 0.13 0.94

102

SR. NO. 19. 20. 21.

POLITICAL

GOVERNMENT STABILITY TAXTATION POLICY FOREIGN TRADE REGULATIONS

STRATEGY: taking customer relations to next level WEIGHT AS TAS 0.03 1 0.03 0.05 0.05 1 1 0.05 0.05 0.13

22. 23. 24. 25. 26. 27.

Interest Rates

ECONOMIC and Exchange

WEIGHT 0.07 0.06 0.04 0.03 0.08 0.06

AS -1 -1 -1 -1 -1 -1

TAS -0.07 -0.06 -0.04 -0.03 -0.08 -0.06 -0.34 TAS 0.04 0.03 0.09 0.06 0.04 0.26 TAS 0.05 0.06 0.1 0.07

GDP Money Supply Unemployment Inflation Disposal Income

28. 29. 30. 31. 32.

SOCIO CULTURAL Demographics Income distribution Lifestyle Trends Attitude to work Level of education

WEIGHT 0.02 0.03 0.03 0.03 0.02

AS 2 1 3 2 2

33. 34. 35. 36.

TECHNOLOGICAL GOVT FOCUS New discoveries Speed of technological transfer Rate Of Obsolense

WEIGHT 0.05 0.06 0.10 0.07

AS 1 1 1 1

103

0.28

ENVIORNMENTAL

WEIGHT 0.04

AS 2

TAS 0.08

LEGAL 5. 6. 7. 8. Competitive law Employment Law Health & Safety Product Safety

WEIGHT 0.03 0.01 0.02 0.02 100%

AS 1 1 1 1

TAS 0.03 0.01 0.02 0.02 0.08 0.49

104

SR. NO. 37. 38. 39.

POLITICAL GOVERNMENT STABILITY TAXTATION POLICY FOREIGN TRADE REGULATIONS

STRATEGY: launching new packages WEIGHT AS TAS 0.03 1 0.03 0.05 0.05 1 1 0.05 0.05 0.13

40. 41. 42. 43. 44. 45.

ECONOMIC Interest and Exchange Rates GDP Money Supply Unemployment Inflation Disposal Income

WEIGHT 0.07 0.06 0.04 0.03 0.08 0.06

AS -1 -1 -1 -1 -1 -1

TAS -0.07 -0.06 -0.04 -0.03 -0.08 -0.06 -0.34 TAS 0.02 0.03 0.03 0.03 0.02 0.13 TAS 0.05 0.12 0.3 0.14

46. 47. 48. 49. 50.

SOCIO CULTURAL Demographics Income distribution Lifestyle Trends Attitude to work Level of education

WEIGHT 0.02 0.03 0.03 0.03 0.02

AS 1 1 1 1 1

51. 52. 53. 54.

TECHNOLOGICAL GOVT FOCUS New discoveries Speed of technological transfer Rate Of Obsolense

WEIGHT 0.05 0.06 0.10 0.07

AS 1 2 3 2

105

0.61

ENVIORNMENTAL

WEIGHT 0.04

AS 1

TAS 0.04

LEGAL 9. 10. 11. 12. Competitive law Employment Law Health & Safety Product Safety

WEIGHT 0.03 0.01 0.02 0.02 100%

AS 1 1 1 3

TAS 0.03 0.01 0.02 0.06 0.12 0.68

106

SR. NO. 55. 56. 57.

POLITICAL GOVERNMENT STABILITY TAXTATION POLICY FOREIGN TRADE REGULATIONS

STRATEGY: mergers and acquisitions WEIGHT AS TAS 0.03 1 0.03 0.05 0.05 1 1 0.05 0.05 0.13

58. 59. 60. 61. 62. 63.

ECONOMIC Interest and Exchange Rates GDP Money Supply Unemployment Inflation Disposal Income

WEIGHT 0.07 0.06 0.04 0.03 0.08 0.06

AS -1 -1 -1 -1 -1 -1

TAS -0.07 -0.06 -0.04 -0.03 -0.08 -0.06 -0.34 TAS 0.02 0.03 0.03 0.03 0.02 0.13 TAS 0.05 0.12 0.1 0.07

64. 65. 66. 67. 68.

SOCIO CULTURAL Demographics Income distribution Lifestyle Trends Attitude to work Level of education

WEIGHT 0.02 0.03 0.03 0.03 0.02

AS 1 1 1 1 1

69. 70. 71. 72.

TECHNOLOGICAL GOVT FOCUS New discoveries Speed of technological transfer Rate Of Obsolense

WEIGHT 0.05 0.06 0.10 0.07

AS 1 2 1 1

107

0.34

ENVIORNMENTAL

WEIGHT 0.04

AS 1

TAS 0.04

LEGAL 13. 14. 15. 16. Competitive law Employment Law Health & Safety Product Safety

WEIGHT 0.03 0.01 0.02 0.02 100%

AS 1 1 1 2

TAS 0.03 0.01 0.02 0.04 0.10 0.40

108

SR. NO. 73. 74. 75.

POLITICAL

STRATEGY: developing more efficient website WEIGHT 0.03 0.05 0.05 AS 1 1 1 TAS 0.03 0.05 0.05 0.13

GOVERNMENT STABILITY TAXTATION POLICY FOREIGN TRADE REGULATIONS

76. 77. 78. 79. 80. 81.

Interest Rates

ECONOMIC and Exchange

WEIGHT 0.07 0.06 0.04 0.03 0.08 0.06

AS -1 -1 -1 -1 -1 -1

TAS -0.07 -0.06 -0.04 -0.03 -0.08 -0.06 -0.34 TAS 0.04 0.06 0.06 0.03 0.02 0.21 TAS 0.05 0.06 0.3 0.07

GDP Money Supply Unemployment Inflation Disposal Income

82. 83. 84. 85. 86.

SOCIO CULTURAL Demographics Income distribution Lifestyle Trends Attitude to work Level of education

WEIGHT 0.02 0.03 0.03 0.03 0.02

AS 2 2 2 1 1

87. 88. 89. 90.

TECHNOLOGICAL GOVT FOCUS New discoveries Speed of technological transfer Rate Of Obsolense

WEIGHT 0.05 0.06 0.10 0.07

AS 1 1 3 1

109

0.48

ENVIORNMENTAL

WEIGHT 0.04

AS 1

TAS 0.04

LEGAL 17. 18. 19. 20. Competitive law Employment Law Health & Safety Product Safety

WEIGHT 0.03 0.01 0.02 0.02 100%

AS 2 2 4 3

TAS 0.06 0.02 0.08 0.06 0.22 0.74

110

SR. NO. 91. 92. 93.

POLITICAL GOVERNMENT STABILITY TAXTATION POLICY FOREIGN TRADE REGULATIONS

STRATEGY: mergers with security companies WEIGHT AS TAS 0.03 1 0.03 0.05 0.05 1 1 0.05 0.05 0.13

94. 95. 96. 97. 98. 99.

ECONOMIC Interest and Exchange Rates GDP Money Supply Unemployment Inflation Disposal Income

WEIGHT 0.07 0.06 0.04 0.03 0.08 0.06

AS -1 -1 -1 -1 -1 -1

TAS -0.07 -0.06 -0.04 -0.03 -0.08 -0.06 -0.34 TAS 0.04 0.06 0.06 0.03 0.02 0.21 TAS 0.05 0.06 0.3 0.07

SOCIO CULTURAL 100. Demographics 101. Income distribution 102. Lifestyle Trends 103. Attitude to work 104. Level of education

WEIGHT 0.02 0.03 0.03 0.03 0.02

AS 2 2 2 1 1

TECHNOLOGICAL 105. GOVT FOCUS 106. New discoveries 107. Speed of technological transfer 108. Rate Of Obsolense

WEIGHT 0.05 0.06 0.10 0.07

AS 1 1 3 1

111

0.48

ENVIORNMENTAL

WEIGHT 0.04

AS 1

TAS 0.04

LEGAL 21. 22. 23. 24. Competitive law Employment Law Health & Safety Product Safety

WEIGHT 0.03 0.01 0.02 0.02 100%

AS 1 1 1 1

TAS 0.03 0.01 0.02 0.02 0.08 0.60

112

SR. NO.

POLITICAL

STRATEGY: Online changing of reservations WEIGHT 0.03 0.05 0.05 AS 1 1 1 TAS 0.03 0.05 0.05 0.13

109. GOVERNMENT STABILITY 110. TAXTATION POLICY 111. FOREIGN TRADE REGULATIONS

112. Interest Rates 113. 114. 115. 116. 117.

ECONOMIC and Exchange

WEIGHT 0.07 0.06 0.04 0.03 0.08 0.06

AS -1 -1 -1 -1 -1 -1

TAS -0.07 -0.06 -0.04 -0.03 -0.08 -0.06 -0.34 TAS 0.04 0.06 0.06 0.03 0.02 0.21 TAS 0.05 0.06 0.3 0.07

GDP Money Supply Unemployment Inflation Disposal Income

SOCIO CULTURAL 118. Demographics 119. Income distribution 120. Lifestyle Trends 121. Attitude to work 122. Level of education

WEIGHT 0.02 0.03 0.03 0.03 0.02

AS 2 2 2 1 1

TECHNOLOGICAL 123. GOVT FOCUS 124. New discoveries 125. Speed of technological transfer 126. Rate Of Obsolense

WEIGHT 0.05 0.06 0.10 0.07

AS 1 1 3 1

113

0.48

ENVIORNMENTAL

WEIGHT 0.04

AS 1

TAS 0.04

LEGAL 25. 26. 27. 28. Competitive law Employment Law Health & Safety Product Safety

WEIGHT 0.03 0.01 0.02 0.02 100%

AS 1 1 1 2

TAS 0.03 0.01 0.02 0.04 0.10 0.62

114

SR. NO.

POLITICAL

STRATEGY: Diversify into new product markets WEIGHT 0.03 0.05 0.05 AS 1 1 1 TAS 0.03 0.05 0.05 0.13

127. GOVERNMENT STABILITY 128. TAXTATION POLICY 129. FOREIGN TRADE REGULATIONS

130. Interest Rates 131. 132. 133. 134. 135.

ECONOMIC and Exchange

WEIGHT 0.07 0.06 0.04 0.03 0.08 0.06

AS -1 -1 -1 -1 -1 -1

TAS -0.07 -0.06 -0.04 -0.03 -0.08 -0.06 -0.34 TAS 0.02 0.06 0.06 0.03 0.02 0.19 TAS 0.05 0.06 0.1 0.07

GDP Money Supply Unemployment Inflation Disposal Income

SOCIO CULTURAL 136. Demographics 137. Income distribution 138. Lifestyle Trends 139. Attitude to work 140. Level of education

WEIGHT 0.02 0.03 0.03 0.03 0.02

AS 1 2 2 1 1

TECHNOLOGICAL 141. GOVT FOCUS 142. New discoveries 143. Speed of technological transfer 144. Rate Of Obsolense

WEIGHT 0.05 0.06 0.10 0.07

AS 1 1 1 1

115

0.28

ENVIORNMENTAL

WEIGHT 0.04

AS 1

TAS 0.04

LEGAL 29. 30. 31. 32. Competitive law Employment Law Health & Safety Product Safety

WEIGHT 0.03 0.01 0.02 0.02 100%

AS 1 1 1 2

TAS 0.03 0.01 0.02 0.04 0.10 0.40

116

SR. NO.

POLITICAL

STRATEGY: Online verification of personnel more efficient WEIGHT 0.03 0.05 0.05 AS 1 1 1 TAS 0.03 0.05 0.05 0.13

145. GOVERNMENT STABILITY 146. TAXTATION POLICY 147. FOREIGN TRADE REGULATIONS

ECONOMIC 148. Interest and Exchange Rates 149. 150. 151. 152. 153. GDP Money Supply Unemployment Inflation Disposal Income

WEIGHT 0.07 0.06 0.04 0.03 0.08 0.06

AS -1 -1 -1 -1 -1 -1

TAS -0.07 -0.06 -0.04 -0.03 -0.08 -0.06 -0.34 TAS 0.02 0.06 0.06 0.03 0.02 0.19 TAS 0.05 0.06 0.3

SOCIO CULTURAL 154. Demographics 155. Income distribution 156. Lifestyle Trends 157. Attitude to work 158. Level of education

WEIGHT 0.02 0.03 0.03 0.03 0.02

AS 1 2 2 1 1

TECHNOLOGICAL 159. GOVT FOCUS 160. New discoveries 161. Speed of technological transfer

WEIGHT 0.05 0.06 0.10

AS 1 1 3

117

162. Rate Of Obsolense

0.07

0.07 0.48

ENVIORNMENTAL

WEIGHT 0.04

AS 3

TAS 0.12

LEGAL 33. 34. 35. 36. Competitive law Employment Law Health & Safety Product Safety

WEIGHT 0.03 0.01 0.02 0.02 100%

AS 1 1 1 2

TAS 0.03 0.01 0.02 0.04 0.10 0.68

118

SR. NO.

POLITICAL

STRATEGY: Strategic alliance with tourism companies WEIGHT 0.03 0.05 0.05 AS 1 1 1 TAS 0.03 0.05 0.05 0.13

163. GOVERNMENT STABILITY 164. TAXTATION POLICY 165. FOREIGN TRADE REGULATIONS

ECONOMIC 166. Interest and Exchange Rates 167. 168. 169. 170. 171. GDP Money Supply Unemployment Inflation Disposal Income

WEIGHT 0.07 0.06 0.04 0.03 0.08 0.06

AS -1 -1 -1 -1 -1 -1

TAS -0.07 -0.06 -0.04 -0.03 -0.08 -0.06 -0.34 TAS 0.02 0.06 0.06 0.03 0.02 0.19 TAS 0.05 0.06 0.1

SOCIO CULTURAL 172. Demographics 173. Income distribution 174. Lifestyle Trends 175. Attitude to work 176. Level of education

WEIGHT 0.02 0.03 0.03 0.03 0.02

AS 1 2 2 1 1

TECHNOLOGICAL 177. GOVT FOCUS 178. New discoveries 179. Speed of technological transfer

WEIGHT 0.05 0.06 0.10

AS 1 1 1

119

180. Rate Of Obsolense

0.07

0.07 0.28

ENVIORNMENTAL

WEIGHT 0.04

AS 1

TAS 0.04

LEGAL 37. 38. 39. 40. Competitive law Employment Law Health & Safety Product Safety

WEIGHT 0.03 0.01 0.02 0.02 100%

AS 1 1 1 2

TAS 0.03 0.01 0.02 0.04 0.10 0.40

120

SR. NO.

POLITICAL

181. GOVERNMENT STABILITY 182. TAXTATION POLICY 183. FOREIGN TRADE REGULATIONS

STRATEGY: Alliance with food producing companies WEIGHT AS TAS 0.03 1 0.03 0.05 0.05 2 1 0.10 0.05 0.18

184. Interest Rates 185. 186. 187. 188. 189.

ECONOMIC and Exchange

WEIGHT 0.07 0.06 0.04 0.03 0.08 0.06

AS -1 -1 -1 -1 -1 -1

TAS -0.07 -0.06 -0.04 -0.03 -0.08 -0.06 -0.34 TAS 0.06 0.03 0.06 0.06 0.02 0.23 TAS 0.05 0.06 0.2 0.07

GDP Money Supply Unemployment Inflation Disposal Income

SOCIO CULTURAL 190. Demographics 191. Income distribution 192. Lifestyle Trends 193. Attitude to work 194. Level of education

WEIGHT 0.02 0.03 0.03 0.03 0.02

AS 3 1 2 2 1

TECHNOLOGICAL 195. GOVT FOCUS 196. New discoveries 197. Speed of technological transfer 198. Rate Of Obsolense

WEIGHT 0.05 0.06 0.10 0.07

AS 1 1 2 1

121

0.38

ENVIORNMENTAL

WEIGHT 0.04

AS 2

TAS 0.08

LEGAL 41. 42. 43. 44. Competitive law Employment Law Health & Safety Product Safety

WEIGHT 0.03 0.01 0.02 0.02 100%

AS 1 1 1 1

TAS 0.03 0.01 0.02 0.02 0.08 0.61

122

SR. NO.

POLITICAL

STRATEGY: Merger with Starwood Hotels WEIGHT 0.03 0.05 0.05 AS 2 2 1 TAS 0.06 0.10 0.05 0.24

199. GOVERNMENT STABILITY 200. TAXTATION POLICY 201. FOREIGN TRADE REGULATIONS

202. Interest Rates 203. 204. 205. 206. 207.

ECONOMIC and Exchange

WEIGHT 0.07 0.06 0.04 0.03 0.08 0.06

AS -1 -1 -1 -1 -1 -1

TAS -0.07 -0.06 -0.04 -0.03 -0.08 -0.06 -0.34 TAS 0.02 0.03 0.03 0.03 0.02 0.13 TAS 0.05 0.06 0.1 0.07

GDP Money Supply Unemployment Inflation Disposal Income

SOCIO CULTURAL 208. Demographics 209. Income distribution 210. Lifestyle Trends 211. Attitude to work 212. Level of education

WEIGHT 0.02 0.03 0.03 0.03 0.02

AS 1 1 1 1 1

TECHNOLOGICAL 213. GOVT FOCUS 214. New discoveries 215. Speed of technological transfer 216. Rate Of Obsolense

WEIGHT 0.05 0.06 0.10 0.07

AS 1 1 1 1

123

0.28

ENVIORNMENTAL

WEIGHT 0.04

AS 1

TAS 0.04

LEGAL 45. 46. 47. 48. Competitive law Employment Law Health & Safety Product Safety

WEIGHT 0.03 0.01 0.02 0.02 100%

AS 1 1 1 1

TAS 0.03 0.01 0.02 0.02 0.08 0.43

124

SR. NO.

POLITICAL

STRATEGY: Market Development WEIGHT 0.03 0.05 0.05 AS 1 1 1 TAS 0.03 0.05 0.05 0.13

217. GOVERNMENT STABILITY 218. TAXTATION POLICY 219. FOREIGN TRADE REGULATIONS

220. Interest Rates 221. 222. 223. 224. 225.

ECONOMIC and Exchange

WEIGHT 0.07 0.06 0.04 0.03 0.08 0.06

AS -1 -1 -1 -1 -1 -1

TAS -0.07 -0.06 -0.04 -0.03 -0.08 -0.06 -0.34 TAS 0.02 0.03 0.03 0.03 0.02 0.13 TAS 0.05 0.06 0.1 0.07

GDP Money Supply Unemployment Inflation Disposal Income

SOCIO CULTURAL 226. Demographics 227. Income distribution 228. Lifestyle Trends 229. Attitude to work 230. Level of education

WEIGHT 0.02 0.03 0.03 0.03 0.02

AS 1 1 1 1 1

TECHNOLOGICAL 231. GOVT FOCUS 232. New discoveries 233. Speed of technological transfer 234. Rate Of Obsolense

WEIGHT 0.05 0.06 0.10 0.07

AS 1 1 1 1

125

0.28

ENVIORNMENTAL

WEIGHT 0.04

AS 1

TAS 0.04

LEGAL 49. 50. 51. 52. Competitive law Employment Law Health & Safety Product Safety

WEIGHT 0.03 0.01 0.02 0.02 100%

AS 1 1 1 1

TAS 0.03 0.01 0.02 0.02 0.08 0.32

126

Consolidated Score Strategy Number 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Strategy Score use of emerging markets 1.65 use of emerging technology 1.59 relationship with suppliers 0.9 more innovation 1.7 merge with other 4 stars or 1.8
less hotels expansion in developing 1.67 countries taking customer relations to 0.62 next level launching new packages 1.25 mergers and acquisitions 1.00 developing more efficient website mergers with security companies Online changing of reservations Diversify into new product markets Online verification of personnel more efficient Strategic alliance with tourism companies Alliance with food producing companies Merger with Starwood Hotels

0.74 0.60 0.62 0.40 0.68 0.40 0.61 0.43

Expand into developing nation 0.36 Floating Hotels 0.99 Advance credit only to big 0.4 shot firms Diversify in countries with less 0.48 strict labor laws Offer more diverse products 0.96

127

23 24

Expansions to overcome 0.47 slowdown problems Promote different cultures in 1.02 different areas of the world

The Strategies to Apply

The strategies that we will select will range from 0.7 to 1.7. These strategies are highlighted in the table above.

128

CHAPTER NO.4 CRAFTING A STRATEGY

The Five Generic Competitive Strategies
There are five different generic competitive strategies namely;

Strategies
Low Cost Provider A Broad Differentiation A Best Cost Provider A Focused or Market Niche based on lower Cost A Foocused or Market Niche based on Differentiation

Out of the five strategies available, the fifth strategy i.e. "a focused or market niche based on differentiation strategy" will be applied on Hilton. This strategy has been applied to Hilton because luxury is something where every buyer needs and preferences are distinctively different. The customers of Hilton have different preferences than each other and hence ask for customized services. The basis of competitive advantage of Hilton is that the attributes it offers to its customers appeal specifically to only those who are the part of the niche target market. Hilton's target market is the high class individuals of the society and hence the services only appeal to them. The packages that Hilton offers can be tailored to the tastes and requirements of niche members. The products are custom made and so target every single individual. Just like Hilton has various holiday packages and on the other hand has corporate packages. Hilton also offers excitement for children, so, for every age group there is a specific package available which can be altered accordingly. Hilton is committed to serve the niche better than its rivals; it does not blur the image by entering other market segments or by adding other products to widen market appeal.

129

The target market is big enough to be profitable and offers good growth potential. The customers are the elites or the corporate clients who can very easily afford luxury living. The pay higher prices in return get higher services which leads to revenue and profit generation. Also, targeting a niche allows a small number of rivals. As we see Hilton has five rivals and they are the major players in the market.

Strategic Alliances and Partnerships

Hilton has no such strategic alliances or partnerships on such a large scale but, Hilton has signed agreements and contracts with for example, Nat Geo and Discovery. They have along with Hilton, opened theme parks for children and also learning facilities where kids can learn and progress. Also Hilton has is working with HP technologies. HP provides printing facilities to the customers of Hilton, by synchronizing their smart phones with the printers. Also, smart phones like iphone and BlackBerry provide special gps services to the users who are clients of Hilton by providing tourism guide. Hilton and IBM also announced a global collaboration agreement to enhance the hospitality company s technology infrastructure and to facilitate the development and delivery of next-generation technology solutions.

Merger and Acquisition Strategies

1943 First coast to coast hotel chain in the US through acquisition of Roosevelt and the Plaza in NY BEVERLY HILLS, CA and NEW YORK, NY, October 24, 2007 Hilton Hotels Corporation and The Blackstone Group today announced the completion of the previously announced merger of Hilton with an affiliate of The Blackstone Group's real estate and corporate private equity funds. Pursuant to the terms of the merger agreement, holders of Hilton's common stock will receive $47.50 in cash, without interest, for each share of common stock that they own immediately prior to the effective time of the Merger. As a result of the merger, Hilton's common stock will cease to trade on the New York Stock Exchange at the close of market today and will be delisted. Hilton has been involved in purchasing small and medium-sized hotels since 1970, primarily for the purpose of expanding operations in the U.S. The company acquired Hilton International, the lodging assets of Hilton Group Plc, for GBP 3.3 billion in 2006. This made Hilton the biggest lodging company in the world.

130

Vertical Integration Strategies: Operating Across More Stages of the Industry Value Chain
Hilton s primary business segments include hotels (ownership and managing & franchising) and timeshare operations (an arrangement under which a purchaser receives the right to use an accommodation or amenities or both for a specified period). Hilton develops and operates timeshare resorts through Hilton Grand Vacations Company, which provides on-site management services to Hilton Grand Vacations Club resorts. Hilton is also increasingly relying on the franchisee-based model for growth. This enables the company to earn revenues without incurring any additional costs to purchase real estate and construct hotels. This strategy further enables the company to concentrate its efforts towards building a strong brand instead of buying real estate.

Outsourcing Strategies: Narrowing the Boundaries of the Business

There was no data available for Hilton's outsourcing strategies.

Offensive and Defensive Strategies

As there are just a few major players in the market, they all enjoy their own space and their own customers who bring them great profits and keep them running on the road of growth. They tend to stay busy in their own worlds do what they do best. They like being different from each other even though they offer similar kinds of products to similar kind of customers.

Defensive Strategies
Blocking the Avenues Open to Challengers Hilton keeps on pursuing to adopt new emerging technology in order to reduce the threat that the rivals will attack with a better technology. They have kept their reservation systems upto date and so have other rival firms. Similarly they offer services with such unique technology and keep searching and signing agreement with other technology providing firms. Hilton as compared to its rivals has somewhat the product, services and packages to offer the difference comes when it is time to deliver. If Marriott International offers Dolphin Swim Experience with Discovery Channel, Hilton offers a children theme park with collaboration with Discovery channel and similarly Sheraton offers Lego Land joys. In order to retain or gain new customers these firms also offer different loyalty programs which lead to stronger customer relations. If Marriott International sends gifts to its corporate clients, Hilton offers them HHonors programs.

131

Signaling Challengers That Retaliation is Likely All these big shot luxury hotels including Hiltons give out press releases that talk about their management's commitment to maintain the firm's present market share. Also Hilton keeps on acquiring small hotels in order to expand its business and give out the message that it is still an active player in the market. As mentioned earlier in the report, the prices of these big shots are also similar to each other.

Strategies for Using the Internet as a Distribution Channel

Does not apply.

132