Hilton Worldwide Holdings Inc.: Company Strategy & Performance Analysis
Hilton Worldwide Group commenced operations in 1919 and is headquartered at Tysons Corner, Virginia, the US. It operates in three segments, ownership, managed & franchise and timeshare. Hilton’s categories include luxury & lifestyle hotel brands, full service hotel brands, focused service hotel brands, and timeshare brands. Its luxury & lifestyle hotel brand portfolio includes, Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts and Canopy. The company’s full service hotel brands include Hilton Hotels & Resorts, Curio-A Collection, DoubleTree and Embassy Suites. Some of its focused service hotel brands include Hilton Garden Inn, Hampton, Tru, Homewood Suites and Home2 Suites. Hilton Grand Vacations is one of the leading brands in the timeshare segment. The company also launched a new full service brand, Tapestry Collection in January 2017.
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Loyalty programs drive customer retention
Hilton has been conducting various loyalty programs to improve customer satisfaction. Hilton offers one of the best customer loyalty programs in the industry represented by Hilton Honors. In this program, customers are rewarded with points for each stay at any of Hilton’s hotels and resorts worldwide, which are further redeemable for free hotel nights and other goods and services. These benefits enable the company to retain and improve its customer base thereby generating significant revenues. Hilton Honors members represented approximately 56% of system-wide occupancy and contributed more than US$17.0 billion hotel level revenues in 2016.
Decline in occupancy rates in the Owned and Leased segment affecting revenue
The decline in occupancy rates in one of the key segments is a cause for concern for the company. The company’s owned and leased segment reported a decline in occupancy by 0.9% to reach 78.6% in 2016. The decrease in occupancy rate is due to the disposal of international hotels. This has caused a decline in segment revenue, from US$4,262.0 million in 2015 to US$4,157.0 million in 2016. The Ownership segment has been reporting a decline over the last three years. This segment reported a continuous decline in revenues by 0.2% and 2.5% in 2015 and 2016 respectively.
Construction delays hampering the pipeline hotels
The company has been facing construction delays which halted the development of many projects. In April 2017, the company planned to establish the 1200 block of Broadway. However, the project has been delayed due to higher anticipated construction costs, which stood at more than US$12 million. Also, in November 2016, the company delayed the opening of Jomo Kenyatta International Airport (JKIA) hotel in Kenya to May 2017. Earlier, Hilton had planned to start it in March 2016, however operational constraints have affected the development and opening of the mid-priced hotel. The company also faced a similar kind of issue in Nairobi, Kenya related to Hotel Pullman Nairobi.
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