Hilton SWOT

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Hilton Worldwide

Company Profile
Publication Date: 14 Oct 2011

www.datamonitor.com
Europe, Middle East & Africa
119 Farringdon Road
London
EC1R 3DA
United Kingdom

Americas
245 5th Avenue
4th Floor
New York, NY 10016
USA

Asia Pacific
Level 46
2 Park Street
Sydney, NSW 2000
Australia

t: +44 20 7551 9000
f: +44 20 7551 9090
e: [email protected]

t: +1 212 686 7400
f: +1 212 686 2626
e: [email protected]

t: +61 2 8705 6900
f: +61 2 8088 7405
e: [email protected]

Hilton Worldwide

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Hilton Worldwide
© Datamonitor

Page 2

Hilton Worldwide
TABLE OF CONTENTS

TABLE OF CONTENTS
Company Overview..............................................................................................4
Key Facts...............................................................................................................4
SWOT Analysis.....................................................................................................5

Hilton Worldwide
© Datamonitor

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Hilton Worldwide
Company Overview

COMPANY OVERVIEW
Hilton Worldwide (or ‘the company’) formerly *Hilton Hotels Corporation (HHC) is one of the leading
global hospitality company. The company operates more than 3,750 hotels in 84 countries around
the world. It is headquartered in McLean, Virginia and employs about 130,000 people.
Hilton being a privately owned company and hence is not obligated to release its financials in the
public domain.
*In 2007, HHC was acquired by Blackstone and subsequently HHC became a privately held company

KEY FACTS
Head Office

Hilton Worldwide
7930 Jones Branch Drive
McLean
Virginia 22102
USA

Phone

1 703 883 1000

Fax
Web Address

http://www.hiltonworldwide.com

Employees

130,000

Hilton Worldwide
© Datamonitor

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Hilton Worldwide
SWOT Analysis

SWOT ANALYSIS
Hilton Worldwide (or ‘the company’) formerly Hilton Hotels Corporation (HHC) is one of the leading
global hospitality company. The company offers a wide range of boarding and lodging services
across luxury, upscale, mid-priced, extended-stay or vacation ownership. It has a strong brand
awareness and brand recall in most of its key markets where it operates which gives it a distinct
competitive advantage over its peers. However, intense competition could lead to pricing pressures,
thereby decreasing the profitability of the company.
Strengths

Weaknesses

Strong brand image ensures steady
revenue growth
Wide range of hotel services
Debt restructuring improves liquidity position

Exposure to the premium market increase
the operating cost of the company

Opportunities

Threats

Strong growth in the hotel and motel
industry in emerging markets
Strategic agreement with AT&T to enhance
the company's online service offerings
Launch of iPhone and iTouch applications

Intense competition may lead to pricing
pressures
Sluggish global economic recovery
Terrorist attacks and natural calamities

Strengths

Strong brand image ensures steady revenue growth
Hilton Worldwide has strong portfolio of hotel brands. The company operates more than 3,750 hotels
in 84 countries around the world. The company's portfolio of hotel brands include Waldorf Astoria
Hotels & Resorts, Conrad Hotels & Resorts, Hilton, Doubletree, Embassy Suites Hotels, Hilton
Garden Inn, Hampton Inn & Suites, Homewood Suites by Hilton, Home2 Suites by Hilton and Hilton
Grand Vacations.
The strong brand image of the company has led to a strong customer base for Hilton Worldwide. It
has a strong brand awareness and brand recall in most of its key markets where it operates, which
gives it a distinct competitive advantage over its peers. Hence, the company’s widely recognized
brands provide it with a competitive advantage in attracting customers over its specialized rivals in
the market place. Hence, an extensive portfolio of hotel brands enables the company to reach more
customers which in turn positively affects its top line growth.

Hilton Worldwide
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Hilton Worldwide
SWOT Analysis

Wide range of hotel services
Hilton Worldwide is one of the world's largest hotel groups. The company offers a wide range of
hotel services across luxury, upscale, mid-priced, extended-stay or vacation ownership. For traveling
for business or leisure, Hilton Worldwide offers city center hotels such as The Waldorf-Astoria
Collection and Conrad Hotels and Resorts for luxury segment. It offers convention hotels like Hilton
Garden Inn and Hampton Inn which focus on mid-priced services. For extended stays the company's
portfolio offers Homewood Suites. Furthermore, the company has Hilton Grand Vacations which
offers high-quality vacation ownership resorts in selected vacation destinations. Therefore, the
company's wide variety of services would not only enhance its market share, but it also limits its
exposure to the risks associated with a particular segment.
Debt restructuring improves liquidity position
The company has restructured its debt position which significantly improved its liquidity position. In
April 2010, Hilton Worldwide considerably reduced its debt position by almost $4 billion by bringing
down its outstanding debt from $20 billion to $16 billion on its balance sheet in FY2009-10.
Additionally, the company also extended the maturity period of its post restructured debt outstanding
which is $16 billion by two years to mature in FY2015. The restructuring was done through purchase
of $1.8 billion of debt and also the conversion of $2.1 billion of junior mezzanine debt to preferred
equity. With this restructuring and extended debt maturing period, the company's liquidity position
improved significantly which puts Hilton Worldwide in a strong position to capitalize on the recovery
in the hospitality industry.

Weaknesses

Exposure to the premium market increase the operating cost of the company
Hilton Worldwide has significant level of exposure towards the premium end market (in the hotels,
and resort business). The company incurs high costs to maintain and operate its premium hotel and
resort business, which could be cause of concern in the current weakening economic situation. For
instance, in the premium or luxury hotel segment, the company operates over 39 hotel properties
through its brand Waldorf Astoria and Conrad. The company incurs a huge amount of cost every
year to maintain these hotels and resorts, but with the current economic downturn, where in, customers
are reducing their expenses on luxurious services, could hurt the company's premium hotel's segment.
Therefore, a high level of exposure towards the premium segment would increase the operating
costs of the company which in turn negatively impacts the profitability.

Opportunities

Strong growth in the hotel and motel industry in emerging markets

Hilton Worldwide
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Hilton Worldwide
SWOT Analysis

The global lodging industry has seen remarkable growth from emerging markets like India and China
over the past few years. The GDP growth, economic prosperity and the rise in disposable income
in these countries have contributed to the growth of lodging market. The GDP growth has increased
the number of business travelers travelling within these countries while growth in disposable income
has resulted in increased leisure travelers. According to the Datamonitor's estimate, the Indian hotels
& motels industry generated total revenues of $3,800.4 million in 2009, representing a compound
annual growth rate (CAGR) of 11% for the period spanning 2005-2009. The Indian hotels & motels
industry grew by 4.3% in 2009 to reach a value of $3,800.4 million as compared to $3,645.3 million
in 2008. The performance of the industry is forecast to accelerate, with an anticipated CAGR of
13.7% for the five year period 2009-2014. In addition, China, the world's fastest growing economy,
has also registered strong growth. The Chinese hotels & motels industry generated total revenues
of $24,500 million in 2009, representing a compound annual growth rate (CAGR) of 10.4% for the
period spanning 2005-2009. The Chinese lodging industry, in the long run, is expected to grow with
an anticipated CAGR of 13.9% for the five-year period 2009-14 and reach a projected value of
$46,800 million by 2014. According to data available from the Chinese authorities, the GDP growth
was up about 7.5% annually from CNY18.2 trillion in 2005 to CNY26.1 trillion in 2010 and Per capita
disposable income of urban residents was approximately up 5.0% annually in five years, from
CNY10,493 in 2005 to CNY13,390 in 2010. This trend of growth is expected to continue in the near
future.
In order to tap the growing hospitality industry in India and China, the company has signed various
new management and franchising agreements. For instance, in July 2011, Hilton Worldwide signed
an agreement with Nehru Place Hotels Limited, an Eros Group company, to take over the management
of its landmark hotel located in Nehru Place. The hotel is rebranded as 'Eros Hotel. Further, Hilton
Worldwide signed eight management agreements with Shimao Group, a leading China-based real
estate development conglomerate, for eight new hotels in eight key Chinese cities in October 2010.
These agreements would result in Hilton brand hotels in Tianjin, Nanjing, Wuhan, Shenyang, Yantai
and Wuxi, and Conrad brand hotels in Xiamen and Qingdao. The properties are scheduled to start
operations between 2011 and 2014. In addition, in March 2011, the company signed a management
agreement with Zhuzhou Dahan Real Estate Development Co., Ltd for a new Hilton Hotels & Resorts
hotel in Zhuzhou, the second largest city in China's Hunan province. In the same month, Hilton
Worldwide signed a new management agreement with Greentown China Holdings Ltd., a leading
property developer in Zhejiang Province. The agreement linked with its subsidiary, Beijing East
Greentown Real Estate Co., Ltd to open a new Hilton Hotels & Resorts hotel in China's capital city
with 310 rooms is scheduled to open in 2013 in Tongzhou New City, southeast of Beijing. Further,
in April 2011, Hilton Worldwide signed three management agreements with New Huadu Industrial
Group for a Waldorf Astoria-branded resort and a Hilton Hotels & Resorts property in Hainan and a
Hilton Hotels & Resorts property in Hunan.The company announced that the properties are scheduled
to open between 2013 and 2014, Waldorf Astoria Hainan Baoting Resort, Hilton Hainan Baoting
Resort, and Hilton Changsha East would add another 930 hotel rooms to Hilton Worldwide's
fast-growing pipeline in China. In the same month, Hilton Worldwide signed a management agreement
with Suzhou Chinaing Real Estate Co., Ltd for the first Conrad hotel in Jiangsu, China. The hotel is
scheduled to open in 2013. Furthermore, in July 2011, Hilton Worldwide signed a management
agreement with Yunnan Chengjiang Great Eagle Resort Co., Ltd. for the first Hilton Hotels & Resorts
hotel in Yuxi city, Yunnan Province, China. Comprising 350 rooms, Hilton Yuxi Fuxian Lake Resort
is scheduled to open in 2013. Hence, the expanding property base and strong brand recognition

Hilton Worldwide
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Hilton Worldwide
SWOT Analysis

associated with the company brands would give it a unique positioning to the company to compete
effectively with the local and international players in the emerging markets.
Strategic agreement with AT&T to enhance the company's online service offerings
The company in order to enhance and improve its service offerings to a large customer base entered
into an agreement with AT&T, one of the largest providers of hosted internet access in the hospitality
industry in July 2010. Under this agreement, AT&T would offer premium online service to the
company's guests in more than 3,200 properties located in the US, Canada and Puerto Rico.
Furthermore, this agreement is likely to strengthen the company's ''Stay Connected" program started
in FY2005, by providing its guest with access to high-speed internet services, making it more
convenient for its guests to access internet from their hotel rooms, meeting spaces and public areas.
Therefore, the strategic agreement with AT&T is likely to enhance the company's online service
offerings to its customers which will increase the customer traffic enabling Hilton Worldwide to
maintain its leadership position in its key markets.
Launch of iPhone and iTouch applications
The company launched a comprehensive iPhone and iTouch applications in the lodging industry in
2009, observing an increase in the hotel reservations made through mobile phones. The new
application is spread across seven of its hotel brands including Conrad, Hilton, Doubletree, Embassy
Suites, Hilton Garden Inn, Homewood Suites and Hampton Inn brands in the US. The launch of the
new applications offers special features which will help the company to attract more customers. For
instance, the new applications have features like "Request Upon Arrival" service that enables a
traveler to place an order for room service and have a meal in the guestroom upon arrival. Additionally,
the new applications also offer "e-check in," a feature that provides remote check-in up to 48 hours
in advance. The launch of iPhone and iTouch applications will provide more convenience to its
existing and new customers who usually make hotel reservations on mobile devices. Therefore, the
company's readiness in adapting the latest technology changes in the hospitality segment through
launch of new applications such as iPhone and iTouch, could help it to stay competitive in the industry
and also enhance its revenue generation capacity and customer base.

Threats

Intense competition may lead to pricing pressures
The hospitality industry is characterized by a large number of players, with many of them having a
worldwide presence similar to Hilton Worldwide. There are many large hotel chains similar to the
group such as Accor, Marriott International and Hyatt, who are also expanding in potential growth
regions such as Asia. In addition, the wide presence of independent hotels especially in the US
region provides scope for consolidation, which would increase competition further. Furthermore,
some of the company's competitors have greater financial resources, resulting in greater purchasing
power, better financial flexibility and more capital resource for expansion and improvement, which

Hilton Worldwide
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Hilton Worldwide
SWOT Analysis

enables them to compete more effectively. The trend of rising competition in the hospitality industry,
may potentially impact Hilton Worldwide fee structures, forcing the company to lower its fees or
prices, which could affect the top line growth of the company.
Sluggish global economic recovery
The current economic environment has significantly deteriorated consumer confidence and
discretionary spending. The slowing of the domestic and global economies has increased
unemployment and reduced the financial capacity of both corporate and leisure travelers. Although
global economic conditions have begun to improve, prospects for global economic recovery remain
uncertain, reflecting concerns about the weakening effects of stimulus policies in advanced countries.
According to the World Economic Outlook projections June 2011 by IMF, the global activity expanded
by 5.1% in 2010 and is forecast to expand by 4.3% in 2011 and the downside risks continue to
predominate. Furthermore, due to the sovereign debt crisis, Euro zone has experienced a recessionary
trend in the recent past and is still struggling from the crisis.
In the US, the consumer confidence is down and is affected by both property slump and rising prices
of food and fuel. Americans seem cautious and are not willing to increase spending, one of the
reasons why the pace of the recovery is estimated to be more subdued than in the past. According
to the United States Department of Labor, the unemployment rate in the US averaged to 9.6% in
2010. Higher unemployment rates strains discretionary spending, which in turn reduces the leisure
travel by the customers. Sluggish wage gains and credit crunch are all expected to keep customers
relatively cautious in 2010-11. Thus, a weak economic outlook for the important markets of Carlson
would put pressure on its top line and bottom line growth.
Terrorist attacks and natural calamities
Lately, the tourism industry across the world has been prone to anti-social activities such as terrorist
attacks. Although, terrorist attacks were not on the Hilton Worldwide’s hotels; however, such events
reflect the visibility of top hotel brands and vulnerability of the hospitality industry. Further, the
hospitality industry is also prone to situations arising from natural calamities. Natural calamities like
earth quake and tsunami in Japan in 2011, the earth quake in China in 2008, Hurricanes like Rita
and Katrina in the US, affect the tourism and hotel industries adversely. Growing instances of natural
calamities makes the company’s properties vulnerable to the natural calamities, which could in turn
negatively affect the occupancy levels and the aftermath of such events tend to impact consumer
confidence.
Hence, such incidents could reduce domestic and international customer traffic which in turn would
affect the top-line growth and profitability of the company.

Hilton Worldwide
© Datamonitor

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