Hilton HHonors program.docx
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HiltonHHonorsprogram
TheHiltonHHonorsprogramisajointloyaltyprogramdesignedandservicedbybothHiltonHotelsCorporationandHiltonInternational.ItisaguestloyaltyprograminwhichregularguestscangatherandaccumulatepointsandairlinemilesbystayingwiththevariousHiltonfamiliesofbrands.TheHiltonHHonorsprogramisoneofthelargestprogramsofitstypewithover30millionHHonorsmembers.
Q1(A)StrengthsandweaknessesoftheHiltonHHonorsprogramfromthestandpointsofHiltonHotelsCorpandHiltonInternational
Strength
Joblali(2012)mentionedthat,oneofthemainstrengthslaysintheDoubleDippingservicethatHiltonHotelsCorporationandHiltonInternationalprovidestoitscustomers.Hiltonwastheonlyhotelchainthatoffereddoubledipping.Whatmakesthedoubledippingprogramuniqueisthat,inthecaseofotherhotels,customerscanearnpointsonlywhentheystayinahotel.ButwiththeHhonorsprogramcustomerscanearnpointsasandwhentheyusetheservicesofthevariousjointpartnerswiththisprogramforinstancepartnerairlines,rentalservices,FTDfloristsandMrsFieldcookies.CustomerscanusethesepointsnotonlytoredeemitforhotelstaysandflyermilesbutalsotobuyproductsandservicesfromthepartnercompaniessuchasFTDfloristsandMrsFieldcookies.ThisisanaddedincentiveforthecustomersbecauseinsteadofjoiningaloyaltyprogramofindividualservicestheycanjoinHhonorsprogramandbeapartofarangeofserviceprovidersincludedintheprogramandavailtheirbenefits.PartnersarewillingtocooperateastheDoubleDippingprogramisnotcompetingagainsttheirownprograms. Itgivesthepartnersaccesstoeachother’scustomerbaseandhelpsinattractingthemtotheirbusinessandmakethemloyal.Thishelpsindrivingtherevenuesofallthepartnersinvolved.AninvestmentinFTDFloristskeptcostsdownwhileabroaderrangeofrewardsweregiventotheloyalcustomers.
Furthermore,asothercompetitors’programscouldonlyoffereithermilesorpoints;thisstrengthcouldbeseenasHilton’scompetitiveadvantage.Henceitwasabletocreatevalueinitscustomer’seyes.
Themostrecognizedbrandname;theHhonorsprogramalsoenhancestheHiltonbrandasmentionedinthecasethatHiltonhave2.5millionmembers,collaboratingwithotherpartnerslikeairlineswhichhave20,30,40millionmembersit’sawaytobuildarecognisedbrandthatisknownaroundtheworldandincreasingcustomerloyalty.
Weaknesses
Management:
HiltonHHonorsistheonlyguestrewardprogramforbuildingcustomers’loyaltyworldwide.However,theprogramisnotdirectoperatedbyHiltonHotelsCorp.andHiltonInternationalCorp.butbyHiltonHHonorsWorldwide.BasedonstandpointsofHHCandHIC,theydonothaveaccesstomanageandcontroltheprocessofprogram.SoHHCandHICarenoteasytoimprovetheprogramforsatisfyingcustomers’expectationinthefirsttimeifguests’needschanges.Ontheotherhand,theprogrammaybehardlyintegratedintoHilton’sorganizationcultureandlong-termstrategy.
Cost:
Mostimportantly,thecostwoulddefinitelyincreaseasthemanagementcomplexity.WecanfindtherelevantfigurestoillustratethisforHHWincomestatement.TheexpenseofHHW(paymenttoHHCandHIC)is$12,654andrevenueofHHW(fromHHCandHIC)giventoHHWistotally$49.855.ThenumbershowsthattheexpenseofHHCandHICfortheprogramissolarge,reaching$37,200.Sothecostcouldbeconsideredasaninevitableweakness.
Q1(B)StrengthsandweaknessesoftheHiltonHHonorsprogramfromthestandpointsofmemberproperties(franchisedhotels)
Strength
AccordingtoJohn,D.andStowe,S,(2005),mentionedthat,thesuccessofthisprogramhasenabledthehotelchaintoattractmorefranchiseesorhotelstosignmanagementcontractswiththem.TheirpartnershipwithallkindsofcompaniesprovidedHiltontoaccessitspartner’scustomersandrewardsweremorefrequentlyattainedasthecompanieswhoparticipatedinthisprogramweremoreeasilyreached.Theloyaltyprogramwasconsideredtobeagreatservicetodrivebusinesswhiletheprogramscostwascomparableorlowerthancompetitors.
ThefranchisesareunderHiltonbrandwhichmeanscostsforadvertisingarecutsincetheprogramisstandardised.Alsoitwascomplementaryintermsofallowingjointcustomerstoearnbothcurrencies.Drivebuss,byworkingwiththeHiltonbrand.Lastlytherewasanincreaseincontribution($177millionincreasedcontributionagainstspendingof$49.9million).
Weaknesses
FromthetableofU.S.Lodgingindustry,wecanfindsomenotpositivedates.ThenumberofHIC’sfranchisedprosperitiesis“Zero”,andthatofHHCalsoonlyhas207.Thetotalquantity(207)ofHICandHHCfranchisedprosperitiesmeansthatHiltonHHonorsprogramwouldbeunderstoodandenjoyedbyfewcustomers.
Forinstance,comparedtoHilton,Starwood’sfranchiseprosperitiesare291,whichismorethanthatofHilton.Therefore,customersenjoyingSPG(StarwoodPreferredGuest)ofStarwoodwouldmorethanthatofHiltonHHonorsprogram,whichcontributestothedecreaseintermsofrevenuesfromHiltonHHonorsprogram.
Q1(C)StrengthsandweaknessesoftheHiltonHHonorsprogramfromthestandpointsofguests.
Strength
ThemostimportantstrengthofHiltonHHonorsfromthestandpointofguestsisimprovingcustomerloyaltybyredeemofpoints,promotionalproductsandservicesorconverttomilesinairlinefrequent-flyerprogramstoreducethecostoffrequentlytravelcustomers.TheapplicationforthemembershipofHiltonHHonorsisfreeforanyone,whenthememberaccumulatedenoughpointsintheprogram,theycouldredeemthemforstaysatHHonorshotels,usetobuyproductsandservicesfrompartnercompanies,orconverttoairlineprograms.Thesepoliciescanlowerthechargesofapatron,inordertosustaintheirdesiretolodgeatHiltonhotelnexttime.
TheotherstrengthiscustomerserviceofHHonorsprogram,ifthereisanyproblemfromaguest,theguestcancontactthecustomerserviceteam.Theteamalsooutboundafter-visitcallingandtheycallHHonorsmembersbecausetheyarethebestdatabaseandthemostcriticalgueststheyhave.Membershadotherbenefitsbesidesfreestays.Theyhadapriority-reservationtelephonenumbertoeasilyreserverooms,andcheck-inwentfasterthannormalcustomersbecauseinformationonpreferenceswasonfilewhentheywereregisteredofmembership.Memberswerefavouredovernon-memberswhentheyaskedforlatecheckout.Ifmembersweredissatisfied,theywereguaranteedaroomupgradecertificateinexchangeforaletterexplainingtheirdissatisfaction.
ThethirdstrengthofHHonorsprogramistoincentivepurchasingofthefrequentcustomers.MemberswereawardedSilverVIPstatusiftheystayedatHHonorshotelfourtimesayear;theywillearna15%bonusonbasepoints,andwillbegivenacertificateforanupgradetothebestroominthehotelaftereveryfifthstay.SimilarwithSilverVIP,therequirementandpromotionishigheroftheGoldVIP.Thetop1%ofmemberswasgivenDiamondVIPstatus.ThislevelwasnotmentionedinpromisedbenefitsbutHHonorswilldosomethingunexpectedtotheDiamondVIPmembers.ThiskindofVIPmemberpolicyisaneffectivetooltomaintaincurrentcustomersandmakethemfeelinsidetheorganizationinordertocheck-inmoreandmore.
Weaknesses
TheweaknessofHiltonHHonorsprogramisthatonlyfrequenttravellerscanpossessthechancetousethepromotions,redeemablepointsandanyotherservicestheprogramoffered.GuestsidentifiedbytheirHHonorsorairlinemembershipnumbersoccupied22.5%ofalltheroomsoccupiedintheHiltonHotelsandHiltonInternationalnetworkinayear.TheyweremuchsmallerproportionofalltheguestswhostayedwithHiltoninayearbecausetheytendedtobefrequenttravellers.NotallthecustomerscanenjoytheprogrameveniftheyjoinedtheHHonorsprogram;thisisnotattractiveforthosecustomerssothattheywillnotcontinuechooseHiltonHoteltostay.
Theindustryestimatedthatmembersofthefrequent-stayerprogramsofallthemajorhotelchainsaveragelybelongedto3.5programs.ThismeansthememberofHHonorsmaybebelongstotheother2or3hotel’sguestrewardsprogram.Althoughthecheck-inrateofthecustomerishigherinHiltonhotelsinces/heisthememberofHHonorsprogram,butalsotheotherhotels’check-inrate.
Q1(D)StrengthsandweaknessesoftheHiltonHHonorsprogramfromthestandpointsofcorporatetraveldepartments.
Strength
ThestrengthofHiltonHHonorsprogramfromthestandpointofcorporatetraveldepartmentishelpingthetravelmanagersgaincompliancetotheiroveralltravelpolicy.AsignificantproportionofHilton’sbusinesscamefromcontractswithlargecorporateclients,sothatHiltonoffereddiscountifthecorporationdeliveredenoughstays.ThecorporatecansavealotofmoneybyselectingHiltonHoteltostay,andthestaffsofthecorporatewillbeimpressedbytheluxuryamenitiesofthehotel,sothattheywillcometoHiltonagainoncetheyhavechance.Bycapturingguests’preferencesandmakingthemavailabletoenhancefuturestayexperiences.
Weakness
Theweaknessisthattheloyaltyofthesecorporateclientsisnothigh.TheHilton’sresearchsuggeststhataquarterofthefrequenttravellersaremembersofloyaltyprogramsbutdon’tconsolidatetheirbusinesswithonechain.Theytypicallydon’tseethevalueinanyoftheloyaltyschemesbecausetheyhaven’tchangedtheirstaybehaviourtoseethebenefits.
Thecashvalueofredemptionrewardwillbedirectlytothecompany,sothattherealconsumers-theguestswillnotearntherewardssothatHHonorsprogramisnotane