Hospitality and hospitality management

The aim of this paper is to critically review the nature of hospitality and hospitality management that Hilton Worldwide adapted. In view of this it is to be expected that analysis may range from the view at one end of the continuum that this is a lot of unnecessary nonsense which only serves to confuse the issues further, to that which sees this exercise as a stimulating and liberating contribution at the other. The views expressed in the paper clearly raise some significant issues and questions which Hilton management needs to be addressed more fully in the future. The challenge to the conventional wisdom highlights both the identity and parameter issues related to the nature and scope of what should be properly regarded as hospitality and hospitality management. This, in turn, poses some fundamental evaluation concerning the most appropriate orientation and priorities for both hospitality and hospitality management research and practice for Hilton.

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Company Overview

Hilton Worldwide previously known as Hilton Hotels Corporation is a leading hospitality company located worldwide. The new formation signifies the company’s global business reach and strategies; the logo denitrifies the hotels affluent heritage and values and excellence in service (Hilton Worldwide, 2009).

The company’s vision is to fill the earth with light and warmth of hospitality and the mission is to be the global hospitality company; be the first choice for the guests, employee and owners alike (Hilton Worldwide, 2009).

The values of Hilton worldwide is embosses inside the name itself which are

H (hospitality) – delivering outstanding hospitality experience

I (integrity) – always do the right thing

L (leadership) – prominent leader in key business areas and communalities

T (teamwork) – success is the combination of teamwork in everything it does

O (ownership) – owner of business actions and decisions

N (now) – operate in terms of urgency and discipline

Hilton worldwide consists of 10 brands includes more than 3300 hotels in 77 countries as of today and is planning to open 300 in coming days. All of these hotels are either operated by contract or wholly owned by Hilton. Management body is headed by a chairman and CEO, the company is divided into 4 global regions: America, Europe, Middle East & Africa, and Asia Pacific (Hilton Worldwide, 2009).

External Audit

Macro Environmental (PESTE) Analysis)

A PESTE Analysis is an analysis of external macro-environmental factor that affects firms business. PESTE is an acronym for Political, Economic, Social, Technological and Environmental issues that influences the strategic development of a business. These issues are different in different locations and thus business firms may adopt different strategies in different countries where it operates to identify the business opportunities as well as threats. This assessment task would consider the worldwide strategy of Hilton (King, 1995).

Political

Political factors include government rules, regulations and legal issues under which the firm must operate and adhere (Nailon, 1982);(Wood, 1994). The issues discussed are environmental regulation and protection, political stability, corporate and consumer taxation, framework for contract enforcement, intellectual property protection, trade regulations, trading partners, anti-trust laws, pricing, mandatory employee benefits, industrial safety regulations, product labeling requirements, competition regulation etc (Edgar and Umbreit, 1988).

The political movement can have definite effects on hotel business in UK. For example, if government set a rules under 18 years patrons must be accompanied with parents or guardians, it may result the decrease of young visitors. Imposing high goods and service tax (GST) or similar taxes would prevent more people to visit the hotel more often. By loosing these potential customers, Hilton may loose income and may need increase products and services to recover losses. Though Hilton groups are committed to use high scale safety standards, UK government rules may not give permission to operate business due to safety reason (like hill, low lying areas) even though there may have choice if business growth (Middleton, 1983). If the government plans to subsidies some of the service it provides (e.g. for disabled or senior citizens), the hotel may gain profits as well as increase services. Thus political actions may have both negative and positive impact on hotel business (Edgar and Umbreit, 1988); (Hilton Worldwide, 2009).

Economic

Economic factors positively effects hospitality business. It determines how easy or difficult to sustain in a business along with capital, cost, demand, monetary policy, unemployment rates, exchange rates of foreign currencies, tax on exchanges (Wood, 1994). When economic growth is high, consumer’s income level raises thus demand for hospitality will increase too. Since the recent economic recession started, hospitality business was hit badly and it is yet to recover from the losses incurred. Increase of rates would prevent hotelier to seek for alternative choices (e.g. budget hotel or even home stay). In UK, hotel accommodation prices are extremely high than any other countries around the world. Consumer’s income level didn’t rise up much and they fell the stringent budget allocation for daily needs. Very few people will consider spending holidays in luxurious hotels if they don’t afford to. A higher income or wages will allow domestic traveler to get high class hospitality in high class hotels (King, 1995).

Social

Social factors are income level, demographics, geographies, life style, education, weather, culture and fashions (Wood, 1994). Social factors can be both opportunities and threats for a hospitality business (Lewis, 1988). Different age or sex of people would require different services (Slattery, 1983). Elderly people demand is not similar to young people. Business people will seek to have more work related facilities (e.g. internet, video conference) while holiday makers would seek more natural touch (e.g. garden, fishing) (Burgess, 1982).

Cultural differences are a major play in hospitality business. While local people like crowd and gossip, tourist would seek for quiet and silent place as they plan holiday. Season is also an important factor (Middleton, 1983). Year end and holiday season are peak time for hotel business while there’re not much crowd during working days or off-peak season. Most travelers are affected by bad weather and usually don’t think for leisure during extreme either condition specially in winter season (Edgar and Umbreit, 1988).

Technological

This is the century of technology enhancement. So does business. Aggressive development of technological factors brought rapid growth for hotel business (Slattery, 1983). The factors may include spend on technological research; government effort focus industry based technology, new invention and their impacts, communication alternatives, speed of technology transfer, cost of usage, rate of technological diffusion. New technology could prove a useful input in hospitality business but it has to established with purchase and installment cost along with training to employees (King, 1995).

Hilton’s business will mostly depend on technological factors. Customers from around the world is now able to evaluate the products and services provided by Hilton through the respective websites, compare prices, seek advice and even can reserve a facility as early as one year prior to arrival. Hilton group itself placed much effort to keep the website simple and user friendly so that visitor will not feel difficulty to find any available information. Any latest service or products can reach to millions of customers through the website or communications (Reuland, Choudry, and Fagel, 1985). Providing details of every facilities Hilton placed itself to the top choice of any search engines. Traveler from any part of the world can communicate in real time with Hilton representative and made their choices, payments etc (Burgess, 1982).

Besides for in-hotel customer, Hilton offers state-of-the art high speed wireless, video communications, and teleconferencing, to keep guests always in touch with outside world. These services received a bug thumbs up since it was introduced and continuously keep enhancing technology to stay ahead in business (Edgar and Umbreit, 1988).

Environmental

Environmental factors have been considered important factors for large organizations which particularly operated worldwide (Wood, 1994). This factor includes environmental responsibility, improvement of performance towards sustainable future, guest and team commitment to environments, reuse and recycle materials etc (Khan and Olsen, 1988).

Hilton hotels recognizes their responsibility by embracing environmental mission includes all members under its group to focus on energy & water efficiency, CO2 reduction, waste management, renewable energy. It take environment friendly initiatives which will impact guests positively, influence use of resources in harmony with nature by promoting the use of best environment sociable practices, supports local environment policies (Middleton, 1983).

As of present days, Hilton promised to reduce energy consumption, CO2 emissions and waste output by 20% and water consumption by 10%. These steps ahead will place the firm in lead position and will increase reputation by means.

Industry Dynamic (Porter’s 5 Force) Analysis

Porter’s model determines the competitiveness of an organization using the five different forces and shows how the forces are related. To develop business strategies effectively, organizations must understand and act in response to those forces. (Porter, 1985)

Rivalry Among Existing Competitors

Competitive rivalry analysis is one of the key areas that business must consider to determine business strategy that firm must adopt and implement continuously over time (Wood, 1994); (Porter, 1985). The hotel business now days are very much competitive. With millions of tourist travels every year, luxurious hotel is the first choice for most tourists. Having numerous competitors in market (e.g. inter continental, best western) the competition between players are intense (Burgess, 1982). For example, British consumers are said to having higher buying powers thus will seek for high end luxuries. That works behind the reason why companies constantly compete for better products and attractive prices. In order to be leader is luxurious market, Hilton has to offer unique offers (E.g Park and fly with up to 8 days’ airport parking, ultimate spa journey with six senses spa in London). This force is in favor of Hilton.

Threat of New Entrants

Threat of new entrants may consider the ease of new entry, competitive advantages, place and positions, customers, government support etc (Porter, 1985). To open a new luxurious hotel by another firm in UK would be quite difficult since there are huge regulations and rules imposed by governments. UK government chooses to advise the existing hotels to improve their business rather than consider letting bring new competitors. Besides, consumer now days doesn’t seek much luxurious hotel; instead they would prefer budget hotel. Thus new entry to comfy hotel business is not deep (Nailon, 1982). This force is in favor of Hilton.

Threat of Substitute Product and Services

This force is said to have much influence in Hilton business strategy in recent years. There force includes factors such as product for product substation, need, facilities, budget etc (Reuland, Choudry, and Fagel, 1985);(Porter, 1985). Hilton not only requires looking after new entrants as threat but also substituted product and service as a major threat. When there is matter of hospitality, its consumer’s choice what they chose to take. For example, a water bottle in Hilton’s café may cost few more pounds which is cheap just the opposite side grocery shop. A lavishness spa may cost few hundreds of pounds which may be proven cheapest for similar kind in other dedicated spa shops. For one night stopper, back packers and Hilton doesn’t have any special prices which usually find their way in budget hotel. These type of consumers seems to be become a huge amount at the end as budget hotel is booming every where around the world. Hilton came up with idea of including a theme park in hotels without considering that some areas may already have amusement park which provide same services as they plan; often in cheap price. This force is against Hilton (Burgess, 1982).

Bargaining Power of Buyers

This force consists of high income, large service provider, low switching cost etc (Porter, 1985). Before economic recession, consumers were having high incomes and seek more luxuries. As there are choices available in the market, Hilton has to react very quickly to retain customer intention to be their choice of providing world class hospitality in possible lowest price (Lewis, 1988). Today’s buyers are most dynamic and well motivated requires more concentration on their needs . Hilton would have to avoid what they think about customer; instead they should identify what consumers think about Hilton. Consumers will definitely seek most affordable having all facilities they required and so, hospitality firms have to struggle of adopts the new trends, lifestyle as quickly as possible to offer their loyal customers (Slattery, 1983). This force is against Hilton.

Bargaining power of suppliers

This force may include switching cost, high purchase cost etc (Porter, 1985). Raw material suppliers play an important role in firm’s business growth (Tideman, 1983). A foodstuff supplier may not offer today’s price tomorrow due of supply shortage (Middleton, 1983). Thus to offer catering to guest, Hilton has to purchase the same stuffs in higher prices which will be sum of large amounts of money (Burgess, 1982). If this extra money is to be imposed on guests, this would result Hilton loosing business. Besides, switching to another supplier would be a difficult choice too (Edgar and Umbreit, 1988). For example, Hilton has hired a transportation Company to ferry its guest everywhere they go. Considering, high demand of transportation business offers high price, Hilton has to pay high prices than normal to retain transportation facilities in operation. This force is not in favor of Hilton (Khan and Olsen, 1988).

From the above analysis of Hilton’s 5 forces analysis, the diagram below will provide a summary of the firm’s overall industry analysis.

Porters 5 force analysis talks about the external forces applicable to the outside of business. Today’s business is much more vast and robust requiring dynamic approaches which should be an integration of different approaches rather than depends on a single analysis (Porter, 1985). Internal factor analysis requires much analysis as external. Designing, visioning and learning approaches should be considered when an industry analysis is done. Porter’s 5 forces are lack of these factors. (Jones, 1996)

Bargaining Power of Buyers

(-)

Threat of Substitute Products and Services

(-)

Bargaining Power of Buyers

(-)

Threat of New Entrants

(+)

Rivalry among existing competitors

(+)

External Factor Evaluation (EFE) Matrix

External factor evaluation a strategic tool used for analyze the current business strategy. External factors consider the opportunities and threats that a business or firm may face. These factors are closely related to PESTE analysis.

Developing EFE matrix is generally easy in mathematical term. The first step is to gather external factors for opportunities and threats. Next, assign weight to each factor. The weight should be between 1 to 100 (0 means the factor has no value, 1 is most influential and 100 means most critical). All weights at the end must be sum to 100. Then, rate of factors is necessary. Rate indicates how responsive the firm is towards the factors Rating usually be done between 1 to 4 (1 = poor response 2= below average, 3= above average, 4 = fast response). Next, multiply each factor weight its ratings resulting weighted score. Lastly, total sum of all weighted score will determine the EFE of the firm.

For Hiltons Worldwide

Weight Rating Weighted Score

Threats

Economic recession 20% 4 0.80

Government Tax 10% 2 0.20

Low cost hospitality 15% 4 0.60

Price change of raw materials 8% 2 0.16

Opportunities

Strategic location 10% 1 0.10

High hospitality in low price 7% 2 0.14

Awarding loyal customer 15% 2 0.30

Associate with other business 15% 3 0.45

Total weighted score 100% 2.75

The weighted score 2.75 indicates that Hilton has the high ability to response to external factors (value below 2.50 indicates lower response).

Internal Audit

Value Chain Activities

Internal Quality of Service

To sustain in this high competitive market Hilton has to maintain strict internal quality of service (Lewis, 1988). Employees are trained in training center to face any kind of difficulty to ensure the harmony in hospitality business. Up to date information are distributed in a moment when new decision are made (Burgess, 1982).

Employee Satisfaction

Proper attitude of employer towards the employee in Hilton has been recognized as one of the important factors of company growth which is reflected in their high quality of services to customers. All employees are closely monitored to ensure they don’t feel trouble in both on and off-duty (Edgar and Umbreit, 1988).

Employee Loyalty

Hilton has always come up with the issue to retain their talented hosts to serve guests. Employee has been given extensive facilities and almost 95% employees are proven to be loyal to Hilton groups. Reallocation of task brought diversification to employees and influence them grow their career in first class hospitality business (Edgar and Umbreit, 1988).

External quality of Service

Hilton is said to be one of to best strategic partner other companies would love be part of. From airlines to travel agencies, Hilton has maintained a good chin of network to reach to any part of the world virtually (Hilton Worldwide, 2009).

Customer Satisfaction

Consumers in hospitality business seek high quality personnel and dedicated client services (Tideman, 1983). Since adopting high range hospitality strategy, Hilton’s focus always has been in its superior client service. From Beijing to Sydney, From New York to Paris, consumer satisfaction has been always taken care of provided with culture and life style mix (Khan and Olsen, 1988).

Customer Loyalty

The company also manages the world-class guest reward program HHonors. HHonors branding enables their hospitality brands to further build their distinguishing identities and the strong value proposition of the HHonors program through customer loyalty (Pfeifer, 1983). Customer loyalty is yet to get the desired outputs since it is not too long it was introduced (Edgar and Umbreit, 1988).

Higher Income

So thus, having values in hand, Hilton has no way to slip from business. It has been growing over time. Despite having hard time during recent economic recession, Hilton’s business is said to be growing further up with expansion plan to build up to 300 hotels worldwide (Burgess, 1982).

Internal Factor Evaluation (IFI)

Internal factors consider the strength and weakness that a business or firm may face.

Developing IFE matrix is similar to EFE matrix that has been done is page 7. The first step is to gather external factors for opportunities and threats. Next, assign weight to each factor. The weight should be between 1 to 100 (0 means the factor has no value, 1 is most influential and 100 means most critical). All weights at the end must be sum to 100. Then, rate of factors is necessary. Rate indicates how responsive the firm is towards the factors Rating usually be done between 1 to 4 (1 = major weakness 2= minor weakness, 3= minor strength, 4 = major strength). Next, multiply each factor weight its ratings resulting weighted score. Lastly, total sum of all weighted score will determine the IFE of the firm.

For Hiltons Worldwide

Weight Rating Weighted Score

Strength

Good reputation 17% 4 0.68

Large hotel chain 20% 3 0.60

Well-built management team 16% 3 0.48

Wide range of services 14% 2 0.28

Weakness

Not for all consumer 10% 1 0.10

Expensive 10 % 1 0.10

Poor customer service 8% 2 0.16

Slow growth in change of demand 5% 2 0.10

Total weighted score 100% 2.50

The weighted score 2.5 indicates that Hilton has the mutual response to internal factors.

Strategic Plan for Next 3 Years

TOWS Matrix

Strength-Opportunities Strategies

Hilton hotels have a good reputation in hospitality business and a large amount of customer chain. Introducing low cost packages for travelers will means a true hospitality to the existing customer as well as for new customers (Slattery, 1983). Hilton’s wide range of services may be available to people of all income level (Edgar and Umbreit, 1988).

Strength-Threat Strategies

Retain the talented and well managed employees for a smoother business in future could be proven vital (Pfeifer, 1983). Hilton should ways perform task variation, and frequent conversation will all employees to prevent dispute. Employee may be shifted to international chains to gain experience so that they would be loyal to the firm (Burgess, 1982).

Weakness-Opportunity Strategies

High hospitality in low price is definitely a go ahead step Hilton could adopt to overcome its weakness (King, 1995). Now that, market is been volatile, Hilton may consider leaving high scale profit to high range of customer levels to make its facilities open to all customers (Pfeifer, 1983). For example, golf course facility should be opened to all hotel guests not only for guest who additionally buy the facility. Hilton may not loose much amount of money but it would be proven a customer oriented approach (Jones, 1996).

Weakness-Threats Strategies

Poor customer service has been shouted long as major drawbacks for Hilton hotels. Sometimes customer has been given something that is not asking for and has been charged for that said services (Middleton, 1983). Price structure very often is not described to customer before offering thus it brings confusion. In hotel customer services is very crucial to maintain in very high level at always and customer must get the price focus than anything else (Lewis, 1988); (Reuland, Choudry, and Fagel, 1985).

SMART Objectives (Specific, Measurable, Achievable, Relevant, Time-framed)

SMART objectives refer to an acronym for five measures of well business growth plan. Often these measures are used to define firm’s objectives and future goals and evaluation of growth plan.

Specific (What to do? For who? With whom)

Any growth strategy should be specific and certain. Confusion on goals will bring ambiguous results which may prove fatal for a hospitality business like Hilton’s. Well specified business goals, responsible resources, affected peoples, impact on the firms business should be well defined in this stage (Burgess, 1982).

Measurable (Is measurable? How to measure?)

Of course, once the growth plan and objectives are specified, a certain quantity or quality must be assigned to determine the success or failure of the process (Pfeifer, 1983). As an example, for future expansion, Hilton plans to open 300 new hotels in next years. 300 is a measurable amount. So then, if the actual success rate is only 200 hotels, it can be said that, the plan didn’t succeed fully (Khan and Olsen, 1988).

Achievable (Can it be done within the resource available?)

Future growth depends upon many aspects specially political, economical and social aspects. If a sudden increase of raw material price, construction of 300 hotels may not be possible within the said budget. Re- calculation might predict a lower scale of growth size (Jones, 1996).

Relevant (Does this step lead to expected outcome?)

Once achievable measurement are defined, Hilton must consider whether getting 300 more hotels would be viable; specially consider the recent economic downturn. In some places, consumer may not afford to get Hilton’s service; especially poor developed where tourism sectors are not blooming, opening a high scale hotel may not provide desired output (Edgar and Umbreit, 1988).

Time-Framed (How much time need to get the objectives done?)

Time is a very important factor for any objectives to be proven very profitable or even failure. Timely decision and timely implementation is the crucial mixture of time-frame (Pfeifer, 1983). For any growth strategy, Hilton must choose the right time to go ahead and put a hold when the time is not right (Taylor and Edgar, 1996). When demand competition is high, Hilton may offer lower price for customers which may includes unique packages for a limited time (Khan and Olsen, 1988).

4.3 Ansoff’s Growth and Contingency Matrix

The Ansoff Growth matrix is a strategic direction tool that helps businesses decides their strategies for growth. Ansoff’s product/market growth matrix discuss about the strategies on which the business deliver new or current products in new or current markets (Tideman, 1983). Overall output of Ansoff product/market matrix is sets of strategies that set the direction for the business growth. These are described below:

http://strategyiseverywhere.files.wordpress.com/2007/12/ansoff_matrix.png

Market Penetration

Market penetration is a general name of selling current products into current markets. Hilton should continuously introduce new products and service to customers to leap ahead (Jones, 1996); (Reuland, Choudry, and Fagel, 1985). Since the hotel’s most incomes come from hospitality facility, reshape of current products will ensure market growth and increase of demands by existing customers (Burgess, 1982). Market penetration for Hilton will be focused on the central markets that it is very familiar with, competitors are known, customer needs are defined and returns are potential (King, 1995).

Market development

Market development tells about the distribution of current products in new market. With its existing facilities, the hotel may introduce private hospitality for the customers who love personal luxury (Taylor and Edgar, 1996). A possible example could be provide terrace houses for high end customers with dedicated services (e.g. personal driver, personal chef etc). (Lewis, 1988)

Product development

Product development is the name given to a growth strategy where a business aims to introduce new products into existing markets (Reuland, Choudry, and Fagel, 1985). Customer lifestyle has been changed dramatically in recent years so does demands (Jones, 1996). New generation customer’s wants champagne instead of coffee. Thus opening of new products with unique style will remind the customers that Hilton cares what customer wants (Edgar and Umbreit, 1988).

Diversification

Distribution of new products in new markets is risky. Only in certain aspects large organization does adopt this. However, it can be proven a major milestone in firms business if diversity has been done and succeed. Self service kiosk is a new service recently introduce in Hilton hotels (Burgess, 1982). Most consumers still prefer to use traditional over the counter facilities to get the process done manually or meet special request (Taylor and Edgar, 1996). New expansion business should not introduce directly this self service facility. First customer should have provided training or information about the usage of system in new market. Else, this step would be proven as a disappointment (Jones, 1996).

Conclusion

Hilton International, the world’s best known hotel brand, has triumphed at the prestigious UK National Business Awards for a second year by winning the coveted ‘Broadsystem Customer Focus Award 2005’. The judges awarded Hilton ‘Best Customer Focus’ for demonstrating it has the customer at the heart of its business and deploys and manages its resources to most effectively meet the needs of its customer base.

Creative marketing agency, campaign works, has supported Hilton’s new brand strategy. The next phase saw the development of innovative internal and external marketing tools that communicated and delivered the brand strategy throughout the organization and to the customer. The strategy led to outstanding success for Hilton International with significant commercial returns. However, like any other company, Hilton still has room to improve further (Burgess, 1982).