Franchising at Hilton Hotel

Corporation
By :
Cindy Budiman
Devina Sastria
PowerPoint Template
Edwin Salim Wiguna
Juvena Elizabeth
Contents

History

Hilton’s Business Model

Franchise Development Process

HHC’s Principles Of Franchising

Support to The Franchisee

Future Plans
HISTORY
History
History

1965

1946
HHC began
Franchising.
1964
Hilton Hotel
Corporation
(HHC) was Hilton controlled by
formed. 1949 2 unrelated corporation :
•HHC
•HIC
Hilton International Co.
(HIC) was formed.
History
History

1997 1999 2001-

2003

Alliance between Expanded portfolio with the Global expansion

HHC and HIC acquisition of Promus Hotel through acquisition
Corporation and franchising
1949 continued at HHC
 HILTON’S
BUSINESS MODEL
Hilton Brand

Text

As of 2009
Hilton’s Business Model
Leased Hotels

B
Owned Hotels A C Managed
Hotels

Business
Model
Franchised F D Joint Ventures
Hotels for
International
Operations
E
Timeshare
Ownership
Franchise Portfolio
Franchise development
process
Reasons for Franchising
 The hotel market is booming and gaining more
attention from franchise investors.
 Lodging industry is projecting strong growth in the
future.
 Great opportunities for this type of business exist
in the U.S and worldwide; the lodging industry is
constantly expanding.
 Little or no capital investment required.
 To expand globally and gain brand recognition
Franchise Development Process
21-step
Franchise
Development
Process

Approval Design &

Process: Construction
Steps 1-9 : Steps 10-21
Approval Process
Franchisee contact HHC developer and will receive
UFOC (Uniform Franchise Offering Circular).
Decision for the site of the hotel.
Completion of FLA (Franchise License Application).
Payment of Initial fee.
Project summary submitted.
Approval letter from Franchise Administration.
Get Hilton Standard Manual and set up a pre-design
meeting with the architect.
Design & Construction
Franchisee send preliminary plans and specifications to the
Hilton project manager for review and comments.
After final approval construction of the hotel began.
Franchisee sent monthly updates/repots
The project manager may visit the site up to three times
during construction for inspections.
Decide the opening date.
Design & Construction

 Obtain a Certificate of Occupancy from

local Building Department.
 Pre-opening checklist.
 Installment of the required property
management system and training for
using the computer equipment
 Final consent by QA team
 The Hotel Open !!!
 Franchise Fee at HHC (as of 2008)
Initial License Fee Initial fee based upon the number of guest rooms in
prospective hotel. The initial fee ranged between $50,000
and $85,000 for the first 100- 275 guest rooms and $300-
$450 per room thereafter
Franchise Royalty Fee Ranged between 3-5% of monthly gross rooms revenue

Monthly Program Fee Ranged between 3-4.3% of monthly gross rooms revenue

Computer System Fees  Up-front software

 OnQ
 High Speed Internet Access (HSIA)
Fees are based on the size of the hotels and the number of
workstations and it ranged
between $40,000 and $150,000
Other Fees For Frequent Traveler/Guest Reward program, training,
ongoing computer system maintenance and related fees,
etc.
Franchise Growth

Year U.S. Canadian Foreign Company

Franchises Franchises Franchises Owned
2009 189 11 29 296
2008 188 11 27 291
2007 175 11 25 306
2006 167 11 30 400
2005 157 10 2 68

Source : “Hilton, Hotels, Suites, Resorts, “www.entrepreneur.com.

HHC’S PRINCIPLES OF
FRANCHISING
HHC’s Principles Of Franchising
 HHC believed that a franchise relationship should be a
long-term commitment made to benefit both parties.

“The purpose of the HHC Principles of Franchising is to

provide a clear definition of the expectations of the
franchisor and franchisee to help us both build an
even greater foundation for a solid, long-term
relationship.”

 Both HHC and its franchisees shared a mutual interest

in maintaining the product and service quality at a
competitive edge.
 HHC’s Principles Of Franchising
 HHC also charted out growth and development programs
for its franchisees through principles of development,
multiple brand considerations, and market awareness and
fairness.
 The principles of development focused on fair play,
teamwork, mutual respect and open communication.
 HHC also gave its franchisees multiple brand
considerations as it had a wide range of hotel brands and
brand extensions, each with a unique and differentiated
product and service profile, and at distinct price points.
 What Franchisees Expect from HHC
 HHC should protect the value of its brands.
 HHC was committed to deliver outstanding service to its
franchisees and to help them maximize the value of the
system.
 HHC should maintain the superiority of its brands by
continuously monitoring and conducting research on
trends and standards within each brand’s competitive set.
 Develop and manage programs and processes to maintain
HHC’s product and service quality at a competitive edge.
 HHC to monitor quality and performance, and develop
leading-edge programs and products.
 What HHC Expects from Its Franchisees
 Uphold brand value, product and service quality standards,
and HHC’s culture of complete guest satisfaction.
 Total commitment to building customer loyalty.
 Ensure that the employee team members were well-trained
and focused on delivering HHC’s commitment to product and
service quality.
 HHC invited its franchisees to communicate openly and
regularly to provide input to improve its brands and
relationships.
 Take a proactive role in building new HHC brands in its
(franchisees) markets.
SUPPORT TO THE
FRANCHISEE
HILTON SUPPORT
 Spent more than $700 mil in a year
 Worldwide marketing and sales
• Promoting the brand in top media
• National and regional advertising
• Public relations
• National programs, such as Hilton vacation package,
easy escape getaway packages
 Total technology solution
• OnQ system, a technology platform that linked all
its brands and hotels to enhance customer service
and loyalty.
• Maximize the operational efficiencies.
Hilton Support (cont.)
 Hilton reservations worldwide
• In 1999, $30 million central reservation system (CRS)
called HILSTAR.
• Toll-free 1-800-Hiltons in the US and Canada.
 Cross-Selling
• Hilton horizon system, linked the reservation
availability and facilitated referrals to other nearby
hotels within the Hilton gamily of hotels.
 Hilton HHonors
• Frequent guest reward program.
• As of 2004, 13 mil loyal HHonors members.
FRANCHISEE ADVANTAGES
 Hilton is a name that is synonymous with first
class hospitality.
 Franchising with Hilton is a satisfying and
rewarding experience.
 Hilton gives committed service and support.
 Enjoy Shopping, Dining and
Live Entertainment at
Downtown Disney®

FUTURE PLANS
Future Plan

HHC focused on franchising and

management contracts, which required
little or no capital investment.
Capital improvement on owned hotels.
Franchise financing programs, which
are $50 mil outstanding loans and $69
mil debt.
Latest Development
 On July 3, 2007, Hilton was acquired by the Blackstone
group for around $26 billions.
 The deal was at $47.50 or a 40% premium from
yesterday's closing stock price.
 In 2009, HHC launched new corporate name and logo.
 Next, Hilton moved its headquarter from Beverly Hills,
CA to McLean, VA.
Latest Development
• Launched iPhone and iTouch application in the
lodging industry.
• Formed senior management team to make
expansion plan and execution in Middle East and
Africa.
– 19 properties, and over 5,000 rooms spanning
Egypt, Levant and Africa.
• In 2009, named as #1 hotel brand in Middle East
and Australia.
HILTON RANK on FORTUNE 500
Rank Company 500 rank Revenue ($ millions)

1 Marriot International 203 12,160.0

2 Harrah’s Entertainment 254 9,780.7

3 Hilton Hotels 296 8,162.0; 572.0(profit)

4 MGM Mirage 315 7,588.0

5 Starwood Hotels & Resorts 381 5,979.0

6 Wyndham Worldwide 546 3,842.0

7 Boyd Gaming 768 2,397.5

8 Penn National Gaming 797 2,244.5

9 Las Vegas Sands 801 2,236.9

Source : Fortune Magazine, April 30th, 2007 issue

World Hotel Group Ranking 2009
 www.themegallery.com

Have a Pleasant
“