Hilton Hotel - SWOT Analysis - Case Study Example

GLOBAL MARKETING By Name Course Instructor Institution Location Date Introduction Launched in 2016, Tru by Hilton brand is a franchise under Hilton worldwide that was launched to cater for the middle scale hotel market (Oates, 2016). The services and products of the hotel are limited compared to other Hilton hotels and the designation of the hotels ensures its flexibility in many avenues including highway settings, modern and suburban settings. The brand is currently focused in North America and the locations include Denver, Atlanta, Dallas and Missouri (Oshins, 2017). The presence of additional plans for expansion into the Latin American region and the European region requires the company to examine its internal and external forces which could have an impact on the establishment and operations of the new ventures. A marketing audit makes a fundamental part of the planning process in marketing as it examines internal and outside influences on marketing planning. This retro respect therefore discusses the potential launch of the Tru by Hilton brand in Latin America; particularly Peru. The paper will equally conduct a market audit and analysis for the competition in the specified market. Overview and Analysis of Hilton Hilton is among the largest hospitality brands in the world and was founded by Conrad Hilton in 1919 (Chathoth, 2016). The company has thirteen global rated brands including Hilton Hotels and Resorts, Conrad, Double Tree, Waldorf Astoria among others. The global market share of Hilton is currently at 4.5%. Hilton’s mission and vision include an aspiration to be the most hospitable brand in the whole world and to deliver exceptional experiences to their guests. The company standards are grounded on teamwork, good leadership, accountability and discipline. The following section therefore describes the strengths and opportunities as well as the weaknesses and threats of Hilton Worldwide. SWOT Analysis Strengths Hilton has a worldwide brand with wide-ranging experience in the hospitality sector with hotels in over one hundred countries (Ahsan et al, 2014). The large scope of Hilton operations enables the hotel to benefit from economies of scale thus creating the opportunity for the hotel to expand exponentially. In addition to the world scale brand, Hilton has a loyalty program that is well known in the industry which has helped it maintain its customers. The extent of the properties that Hilton owns worldwide is strong in itself as the ownership of property reduces costs of operation and can easily be insured against risk. Hilton furthermore boasts of strong leadership that has set an appropriate example for the rest of the members of hotel group. The group has seen change through an enhancement of the corporate culture, cost cutting initiatives and maximum cooperation of the brands through the leadership of the CEO, Christophe Nassetta. The integration of technology into the operations of Hilton worldwide has helped in the provision of seamless products and services and these technological enhancements include; digital keys, coordinated travel, phone applications to assist the customer and use of current hotel software to improve services and customer experiences. From the competencies mentioned above that Hilton possesses, consumers have gained loyalty to the brand which continues making the group stronger in the industry (Ahsan et al, 2014). Tru by Hilton is therefore backed by a strong brand with strong leadership and assets that should ensure successful development of the midmarket hotel in Peru. Weaknesses The domestic focus of Hilton on the American market makes it susceptible to any economic crises that affect the region thus failing to give the brand enough immunity against economic recession (Ahsan et al, 2014). The percentage of revenue received from other Hilton brands in the globe are too low compared to that received in the United States. The level of debts that Hilton has is additionally high and despite the diligent efforts by the CEO to reduce these debts, the future of the business remains threatened. The large size of the Hilton brand limits its flexibility making it hard for the Hotel and its brands to engage in different business. Despite the large brand portfolio, Hilton Worldwide has a small global share in the hospitality industry. The late expansion into international markets by Hilton made it fail to garner the lucrative ventures that were gained by early entrants (Ahsan et al, 2014). Furthermore, the elevated prices of real estate have made it harder for the group to introduce less costly brands into markets like Russia, China and Vietnam. The new venture by Tru by Hilton into Peru may thus be met by these economic and infrastructure challenges as well as the limitation of being a new establishment. The private ownership of the Hilton Corporation moreover makes the brand vulnerable to decisions made from individual interests as opposed to thinking about the brand at large. Opportunities Despite the weaknesses that Hilton Corporation faces, there are diverse opportunities that the brand can exploit including venturing into emerging markets that have been brought about by improved economic situations, the revolution of the middle class, developing infrastructure and expansive growth in foreign tourism (Della Corte, 2016). Hilton therefore has the opportunity to expand further into the international market such as Latin America. The present popularity of luxurious brands is a growth potential sector for the corporation due to the continued rise of high profile customers. The requirement for distinctive services and experiences by consumers is an additional opportunity for the Hilton brand to tailor services based on the wants of customers and improve its business across different consumer segments such as the midmarket. Subsequent opportunities in the market are a result of technological innovations, awareness of the importance of health and wellbeing and the appeal for environmental conservation into which the corporation can tap into. Threats The threats that Hilton Corporation faces in the industry include a downturn in business travel due to the failing economies around the globe. The economic crises have also caused consumers to be more cautious of spending and this may affect the number of guests that Hilton receives. An additional threat is the continued individuation of consumer wants which has made most customers choose to go to individual establishments that offer the services that they want as opposed to large brand that incorporates all these services. Due to its presence globally, Hilton is susceptible to instability caused by political factors and the rise of terrorism may equally affect its operations (Della Corte, 201). There are other global insecurities including diseases and natural catastrophes that have taken place in some parts of the Americas which may greatly affect business in Peru. Hilton has also had ethical related issues in its hotels which may cause possible loss of business. The increase of hotel business worldwide has caused intense competition but Hilton has suffered the loss of talented personnel to other brands which threaten the quality of services provided in the hotels. Product The midmarket hospitality product is lucrative in Peru due to the increased leisure travel activity that has created a demand for hotels (WTTC, 2015). Lima, the capital city of Peru, is the gateway to some of the best tourist destinations in Peru including The Sacred Valley, Cusco and Machu Picchu. The rich cultural heritage of the country is an additional attraction for visitors into the country. The presence of luxury brands makes it easier for Tru by Hilton to capture the rest of the segment that is seeking an affordable hospitality product as well as the tourism product. The growing economy in Peru after the downturn in 2009 moreover means that there is a rise in the middle class (Petersson et al, 2014). Tru by Hilton is compatible with the growing districts in the city where there are office developments, restaurants and malls; meaning that the midmarket hotel will capture the population working or visiting within the area. The current favorable economic climate in Peru means attraction of investors thus suitable for Tru by Hilton. There is however, the difficulty of intense competition due to an influx of investors into the hospitality market that may cause Tru by Hilton to fail to achieve its target revenue. The move to improve the quality of life in Peru and the changing consumer behavior makes it easier for Tru by Hilton to penetrate the middle market. Given that Peru is still a growing economy (Petersson et al, 2014), settling into the middle market is better for Hilton as it will cater for both local consumers and international visitors. Based on the market, potential resistance to the new product might be low as Peruvians are accepting the need for better products and services. The government of Peru is accommodating to investors (Metaxas and Kechagia, 2016) and has policies that support ventures such as that of Tru by Hilton thus making resistance low. However, the fact that a majority of the Peruvian population lives below the poverty level may bring complexities in the acceptance of the product as they cannot afford basic necessities to begin with (Chacaltana, 2016). The other complexity may arise from international travelers who prefer luxury brands over the midmarket product and thus go to other brands. Furthermore, the Tru by Hilton brand in the midmarket may cause confusion to consumers who know it as a high valued brand. Market Demographics Peru is located in western South America and has a population of about 30,000,000 people and an annual growth rate of 1.23% (World Bank, 2017). Peru is the fifth most populated country in Latin America and is separated into the poor, sub employed and an urban population. Majority of the Peruvian population is aged between 15 and 64 years and the average life expectancy is 70 years. Peru is multilingual with three main ethnicities including whites, Mesiztos and indigenous people. The gross national income of Peru is currently at 396.7 billion PPP dollars while the income per capita is 12, 480 PPP dollars (World Bank, 2017). The minimum wage in the country has been estimated at CAD $ 202 per month. The main forms of transportation in Peru are railway, road, and the water way. The improvements on the bus system and the railway system have made them the most convenient public form of transportation. Most Peruvian consumers buy the food product. The hotel industry has 8.9 % of the consumer market. Consumer behavior is also changing in Peru due to the increasing quality of life. The changing consumer behavior in the country and the urban and sub employed population provide a suitable avenue for the introduction of Tru by Hilton’s product. Product Distribution The available distribution channels in the hospitality industry in Peru include direct physical channels, online travel agents, hotel websites, vacation rentals, global distribution systems, and social media (Euromonitor, 2017). The best distribution strategy by Tru by Hilton would be direct distribution as the hotel begins business in the country as the strategy is cost effective. Advertising and promotion The Tru by Hilton brand can advertise through television advertisements, print advertisements and social media to reach the target market of the urban and sub employed populace. In order to promote the new brand in Peru, discounts would be significant as well as public relations campaigns that make the hotel appeal to the segmented market and other potential consumers in Peru as well as visitors coming to Peru. Competition Midmarket hotels in Peru include Tierra Viva Cusco Saphi, Villa Elisa Hotel Boutique, and Marriot Courtyard in Lima. Tierra Viva and Villa Elisa offer the food and accommodation product at fair prices with good ambience and cultural heritage is present in the presentation of their products and services. The hotels have a cultural and early entry advantage as well as favorable locations and mostly sell through integrated channels. Marriot Courtyard on the other hand is a known brand and advertises through its website as well as visual and print media in Peru. The company uses integrated distribution channels including GDS, OTAs and direct sales. Market size Based on the current year and previous years, the estimated industry sales are PEN 70 billion while Tru by Hilton estimates its sales at 300 million dollars. Government participation The government of Peru encourages foreign direct investment and has a basic principle that decrees the equal treatment of foreign and national capital (Metaxas and Kechagia, 2016). The Peruvian agency for the promotion of investment is helpful in assisting establishments that intend to invest such as Tru by Hilton. Conclusion The paper discussed the entry of Tru by Hilton brand into the Peruvian market while analyzing the internal factors of Hilton as well as the hospitality and tourism market in Peru. The paper determined that Tru by Hilton has core competencies in its mother brand which is accompanied by a global presence and ownership of property. Tru by Hilton has captured the emerging midmarket and has future opportunities to expand in different regions and tailor to individual consumers based on their needs. The study however established weaknesses in the Hilton brand including its large focus on the American market, debts and late international expansion. Tru by Hilton is additionally threatened by global insecurities, intense competition and departure of talented personnel. The study further determined that there is a high demand for the hospitality product in Peru due to its attractions and growing economy. The market segment for the product is the urban populace with an integrated channel approach for distribution. There is high competition in the middle market and the government supports foreign investment. As such, Tru by Hilton can positively position itself in the Peruvian market with strategic planning and implementation. Reference List Ahsan, L., Qazi, B. and Syed, S., 2014. Strategic Management of Multinational Companies: Case of Hilton. Chacaltana, J., 2016. Peru, 2002-2012: growth, structural change and formalization. CEPAL Review. Chathoth, P.K., 2016. Historical evolution of hotel chains. The Routledge Handbook of Hotel Chain Management, p.27. Della Corte, V., 2016. The strategic environment of hotel chains. The Routledge Handbook of Hotel Chain Management, p.57. Euromonitor. 2017. Retrieved from : http://www.euromonitor.com/peru Metaxas, T. and Kechagia, P., 2016. Foreign direct investment in latin america: the case of peru. Theoretical and Practical Research in Economic Fields, 7(2 (14)), p.160. Oates, G., 2016. Hilton looks to price and design to lure millennials to its new Tru brand. Skift. Oshins, M., 2017. Changes in the Hospitality Industry: New Paradigms, Frames, and Perspectives. Peterson, R.R., Cardenas, D. and Harrill, R., 2014. Tourism as a catalyst for economic development in Latin America: setting an agenda for policy and research. Tourism analysis, 19(1), pp.117-122. World Bank. 2017. Retrieved from http://data.worldbank.org/country/peru Wttc Travel & Tourism Economic impact 2015. Retrieved from: https://www.wttc.org/- /media/files/reports/economic%20impact%20research/countries%202015/peru2015.pdf Read More