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Hilton HHonors Worldwide: Loyalty Wars Case Solution
Starwood Hotels Incorporation is one of the major resort and hotel service industry in the market, competing with Hilton Hotels on every aspect of Hotel service. It has chosen to increase its customer base by introducing Customer loyalty program which enables customers to enjoy greater benefits on a regular basis. This step would not only increase the benefits for customers but also increase the expenses incurred by the company. Hilton Group of Hotels and Resorts has to analyze the situation and act in an appropriate manner by introducing same kind of loyalty program or by choosing a different strategy as compared to Starwood Resorts.
Following questions are answered in this case study solution:
Hotels are an unusual kind of product. Consumers buy a branded experience, but the experience is delivered far from corporate scrutiny, under various kinds of control – a manager, a franchisee or a property operator. How can a loyalty program help the property operator and brand owner manage customers better?
Can you quantify the value of the HHonors program to Hilton? How does the value generated by the program compare to its cost?
Now look at the program from the perspective of a franchisee. If the franchisee had the choice of putting the Hilton brand or one of the Starwood brands onto its property, how would they assess the value of doing so?
Diskin points out that franchisees cheerfully pay 10% of room rates to travel agents. Imagine that a franchisee paid HHonors 10 cents per dollar instead of the current 4.5 cents. How would you recommend that HHonors should spend the additional revenue? Would the franchisee get value from the expenditure?
What should Hilton do in response to Starwood?
What is your evaluation of loyalty programs such as those used by airlines, stores, hotels etc?
Hilton HHonors Worldwide Loyalty Wars Case Analysis
1. Hotels are an unusual kind of product. Consumers buy a branded experience, but the experience is delivered far from corporate scrutiny, under various kinds of control – a manager, a franchisee or a property operator. How can a loyalty program help the property operator and brand owner manage customers better?
Hotel loyalty programs are getting less demanding to utilize and more liberal with the passage of time. They come up with several advantages like no power outage dates, and shoppers are running to them to procure free lodging rooms, room updates and numerous different advantages. To take full advantage of the prizes programs, experts infer customers to keep tabs on the Hotel network they utilize and like, get a co-marked credit card and utilize the administrations of that chain's business accomplices; for example, aerial transports or auto rental organizations to rack up focuses speedier and potentially and bounce to a higher remunerates status.
Loyalty programs can help hold clients, increment activity and enhance deals. Restrictive arrangements, rebates and motivations pull in clients. Devotion card motivating forces enhance client administration and associations with clients. In the event that an organization requires enlistment to convey a loyalty card, it can gather information that will help drive adequate advertising methods. Keeping records of past buys can help plan better advancements and publicizing fights. Case in point, offering a moment rebate to steadfastness card holders can sway clients to enroll or make continuous buys. In exchange, the contact data could be utilized to publicize straight with clients who are less averse to purchase.
2. Can you quantify the value of the HHonors program to Hilton? How does the value generated by the program compare to its cost?
The profitability of the hotel was intensely delicate to income. A pattern in the industry was to designate an 'income director' to every property to direct the everyday choices that influenced lodging income. Yield administration models were probabilistic calculations that helped this supervisor set reservations. They utilized past history and other factual information to make ceaselessly upgraded proposals in regards to Hotel booking examples and what cost to offer a specific visitor. A revenue administrator helped the organization's income to expand by 20% over a basic 'first come, initially served, settled value' arrangement.
Client aspects were wanted by the model to gauge 'strolling cost', the expense of dismissing a client. That cost, thus, relied upon the client's future lifetime quality to the chain, a capacity of their ability to pay and past reliability to the chain. These were recognized as "delicate" variables, famously troublesome to gauge. The better the chronicled data on a client, notwithstanding, the better the gauging mechanism was resulted. However, the benefits of the program also come with higher operating costs and increased cost of staying. HHonors program is an expensive activity to continue if there are no results/benefits seen out of it.
3. Now look at the program from the perspective of a franchisee. If the franchisee had the choice of putting the Hilton brand or one of the Starwood brands onto its property, how would they assess the value of doing so?
Starwood has been attempting to improve the Starwood mark. Then again, Hilton Hhonors visitor reward program has a competitive preference over Starwood's project on the grounds that Hilton's steadfastness program has been fruitful contrasted with others in the hotel industry. The most critical characteristic of the project that recognizes itself from competitors is Double Dipping, which lets visitors acquire mileage for the same stay in accomplice visit flyer systems. Hilton is the main lodging network that offers this opportunity. Additionally, turning into a devotion program part gives an alternate point of interest to Hilton's system. In as meager as 4 stays for every year, or 10 nights, participation is conceded to Hhonors. Customers need to stay 25 room nights or have 10 stays for every year to turn into a part of Starwood's steadfastness program. Thus, if the client picks Starwood, he or she has more holding up opportunity to utilize his or her focuses while paying exceptionally high staying cost as a result of its new successive visitor program.
Presently there is no accessible information whether Starwood's new combative continuous visitor project is set to be auspicious in pulling in new clients. Giving more rewards does not possibly mean the system will draw in additional clients by increasing cost effectiveness and decreasing inefficiencies.
4. Diskin points out that franchisees cheerfully pay 10% of room rates to travel agents. Imagine that a franchisee paid HHonors 10 cents per dollar instead of the current 4.5 cents. How would you recommend that HHonors should spend the additional revenue? Would the franchisee get value from the expenditure?
Hilton should focus on introducing programs targeting the active bonding between the hotel and their customers. Maximum rational and emotional bonding with the brand helps the company to stay profitable even if the products are less competitive in the market. Hilton should use the additional revenue and take a different position and keep on differentiating its program from that of Starwood loyalty program. The differentiation is necessary in order to maintain a healthy brand name in the market. Double Dipping should be emphasized, and more features should be included such as the absence of blackout dates, paperless rewards etc. The revenue should also be used on the collection of customer data through different hotel programs and airlines, in order to keep a track on the choices of the customers. In this way, Hilton would be able to improve the quality of its service in the long term.
5. What should Hilton do in response to Starwood?
Hilton may as well take a look at certain regions that might make its loyalty program more alluring. As per the project research, Hilton lost more than 50% of its devoted clients every twelve months because of its moderately restricted system measure and conveyance. Consequently, the administration might as well actualize another technique that permits to stretch the amount of partners, such as carriers, rental auto firms, restaurants, gambling joints, and so forth. Supporting to assembly focuses and enormous meetings will additionally help Hilton develop its system.
Hilton may as well make a remarkable stay experience that can't be imitated by different chains. In order to do that, each hotel administration might put resources into its representatives via preparing them with the most proficient method to make clients feel that they are treated exceptional. With mass-personalization strategy, employees have the capacity to distinguish every client needs and requirements. Case in point, one client may get a kick out of the chance to be served a cafe in his/her room in the morning. This data could be discovered on database. In spite of the fact that this appears basic, it makes the client feel novel. When clients leave content with the administration at Hilton, they will return regardless of what other devotion programs offer since generally clients tend not to change their propensities when they are fulfilled. Hilton might as well offer an obviously reasonable referral reward system to its dependable clients in response to the Starwood strategy.
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