Introduction
Hilton Worldwide is a United States-based multinational hospitality business. Conrad Hilton founded the company in Cisco, Texas, in 1919 (Hilton, 2022a). Through innovation, expansion, and acquisition of other related companies, Hilton now has the best-performing portfolio in the industry. Currently, the company’s head office is located in Tysons Corner, Virginia, and is led by Christopher Nassetta (Hilton, 2022a). Hilton operates as a holding company and, therefore, competes on a broader basis. It functions under different forms, namely, ownership, franchise, and timeshare. In this regard, it develops, owns, manages, leases, and franchises businesses, as well as timeshare properties. Hilton has 18 brands and operates in 123 countries and territories and 7061 properties through which it provides hospitality services (Hilton, 2022a). Similarly, there are over 360,000 employees working across Hilton’s corporate offices and establishments (Hilton, 2022b). Based on Hilton’s mission statement, its relationship with customers and other key stakeholders drives its reputation and growth.
Scope of the Study
With the increased investment opportunities in the hotel and tourism industry, companies may face corresponding risks and challenges that negatively impact their profitability. In view of this situation, the present study analyzes the market conditions and Hilton’s competitiveness. To this end, the study utilizes PESTEL, Porter’s Five, and Ansoff Matrix analytical tools. The models provide insights into competitive standing or the factors affecting hotel and travel industry profitability to inform decisions about increasing capacity and developing competitive strategies. The scope of the study is restricted to selected scholarly journals, new articles, books, and websites that give the background of opportunities and challenges in the hospitality sector.
Market Conditions and the Competitive Analysis of Hilton
Although Hilton is a popular brand in the hospitality industry, it is influenced by a dynamic business environment. Various elements that affect its day-to-day functions are linked to collective social actions, environmental activism, a shift in technological innovations, changes in consumer spending, and the ever-evolving legal system. In this case, PESTLE analysis assesses the following;
Political Factors
Politics strongly influence Hilton’s operations domestically and abroad. For example, the increasing tension between the United States and Russia over Ukraine can make tourists from these two countries unwilling to travel (Russu, 2022). Similarly, visa suspensions, economic sanctions, and the banning of Russian aircraft by the United States from operating in its airspace may likely discourage a significant number of travels to North America. (Schaper, 2022, para. 3). Thus, diplomatic conflicts may simultaneously decrease or shift some business operations, reducing Hilton’s revenues.
Economic Factors
The economic situation within the country has direct and indirect impacts on the hotel industry. They may include the availability of key infrastructure, GDP, inflation level, and interest rate. The economic shock caused by the outbreak of Covid-19 has resulted in an unconventional recession, consequently affecting the bottomline of most businesses. Restrictions on regional and international travel led to a sharp decline in hotel occupancies and revenues (Gursoy and Chi, 2020, p. 527). Since the beginning of 2020, the United States lodging occupancy rate has decreased by 30% compared to the previous year, leading to hotels losing over $46 billion and suspending some critical operations (Shapoval et al., 2021, p. 2). Therefore, the economic downtime due to Covid-19 negatively impacts leisure and travel activities and directly affects profitability.
Social Factors
Various elements, including culture, demographic patterns, a shift in consumer behavior towards traveling, and health and safety attitudes, can impact Hilton’s operations. Social factors can be a major concern because they influence hotel selection decisions (Uca et al., 2017, p. 2). In the early stages of the Covid-19 pandemic, people minimized social interactions. For instance, guests preferred smaller hotels and short-term rentals due to imminent concerns about the disease. In 2021, traveler preference for short-term accommodations was 12% higher than in the pre-pandemic period (Change in travel accommodation preferences continues, 2022, para. 4). These trends show that the market is likely to become increasingly fragmented, which signals great opportunities for Hilton to provide unique and exceptional services.
Technological Factors
Adopting technologies can help Hilton reduce operational inefficiencies and, at the same time, enhance customers’ experience. For instance, automation is becoming more prevalent in most industries. About 40% of jobs in America will be automated by 2030 (Jenkins, 2017). In the food and hospitality service sectors, 25% of jobs would be computerized (Nova and Schoen, 2019). Thus, artificial intelligence and big data will make it possible for hotels to anticipate and meet evolving guest expectations through personalized services based on previous visits. Customer satisfaction will be enhanced through smart reserved parking, remote check-in or check-out, and digital keys mobile applications (Garrido-Moreno et al., 2021, p. 9). Therefore, integrating the latest technologies in business operations can assist Hilton in gaining a competitive advantage.
Legal Factors
The legal framework plays a significant role in the development of Hilton domestically and abroad. Therefore, the company must be cognizant of various laws dictating its operations to avoid license cancelation and criminal lawsuits. These standards might relate to intellectual property, employment, discrimination, and health and safety laws. For example, during the Covid-19 outbreak, governments enacted various rules to manage the pandemic. These regulations include social distancing and sanitization of the hotel rooms to curb the spread of the disease (Cronin et al., 2021, p. 2). Therefore, a careful evaluation of legal aspects is needed to avoid undesired circumstances, which can damage Hilton’s public image due to breaches of hygiene standards.
Environmental Factors
Customers are increasingly becoming more health and environmentally conscious due to climate change and the emergence of infectious diseases. Therefore, waste pollution is a serious environmental threat to Hilton. The industry produces over 289,700 tonnes of waste annually, including 79,000 tonnes of food remains (Tayao, 2017, para. 5). All these excesses contribute to sea and land pollution and global warming. In this regard, the hotel sector can suffer an accompanying economic risk as tourists may avoid areas affected by disasters (Rosselló et al., 2020, p. 1). Thus, Hilton needs to invest in sustainability efforts because customers and employees now want to be associated with companies that take initiatives to protect the environment.
Porter’s Five Analysis
Porter’s Five Forces can also provide insights to help Hilton navigate the environment in which it operates. The components of the model have been discussed as follows;
The threat of New Entrants
The lucrative industry attracts new players, which increases competition and erodes profitability. Despite Hilton being one of the major players, some brands continue to reshape the industry. The main competition may include Hong-Kong based Langham Hospitality Group, a subsidiary of Eaton hotel in Washington. The company also owns properties in North America, including New York and Los Angeles, and plans to open new branches in San Francisco and Seattle (Langham Hospitality Group, n.d.). Thus, foreign businesses may be encouraged to enter the American market unless Hilton invests in research and development to continue defining quality standards by providing exceptional services.
Threats of New Substitutes
The availability of alternative goods or services may create stiff competition for Hilton. There is a high growth of domestic or small-chain boutique hotels providing a compelling alternative to Hilton. These may include the Unbound Collection by Hyatt Centric, which delivers a unique and memorable experience. Unlike other popular brands, Unbound is for customers with a budget (Hyatt, 2022). Thus, increased substitute shows that guests can use substitute services from other small companies to meet their needs.
Suppliers Power
Hotel amenities are valuable requirements provided to guests by staff when securing accommodations at Hilton. The top hotel suppliers may include KMK Supply Company, Transmacro Amenities, Zecron Textiles., and Ganesh International (Top Hotel Amenities Suppliers and Manufacturers, 2022, para. 2). These are some distributors of items, such as spa items, trash can liners, toiletries, linens, bathrobes, and other luxury items that Hilton needs to provide quality services. Hence, if suppliers have strong bargaining power, they will demand higher prices from Hilton, impacting its potential to maintain above-average profits.
Buyers Power
The bargaining power increases, especially when there are few customers and numerous companies selling goods and services. Similarly, if the cost of switching from one hotel to another is low, this implies that the bargaining power of guests is high. Many multinational companies, such as Marriott, InterContinental Hotel Group, and other small-chain hotels, can provide a compelling alternative to Hilton (Williams, 2019, p. 129). Therefore, through product and service differentiation, Hilton can build loyalty, reduce the defection of new and existing customers to its competitors and increase its market share.
Rivalry Among Existing Competitors
This force explores the degree of competition in the industry. It considers the number of existing competitors and their portfolios. In this context, Hilton can face intense competition from Marriott, InterContinental, and other small hotels. Since many businesses provide the same products and services, consumers can easily switch to the competitors offering them at low costs. This may compel Hilton to adjust its prices and decrease overall business profitability (Sowerby, 2021). Thus, business rivalry can make price wars to ensue and increase advertising and promotion, which can hurt Hilton’s bottomline.
Ansoff Matrix
This model can evaluate Hilton’s growth strategies’ relative attractiveness by leveraging existing services and markets versus new ones and assessing the associated risk levels. The four growth strategic options that can be analyzed using the matrix include;
Market Penetration
This approach can be used by a company when it has the potential to expand its market share in the current industry. In this case, Hilton can boost its market penetration by increasing customer experience through constant innovation. Therefore, when dealing with large volumes of guests simultaneously, the company needs better options for providing high-end, efficient services without compromising safety. Facial recognition and chatbots can provide quick guest identification and automate check-ins and check-outs wherever they are.
Product Development
This strategy involves Hilton either adding new features to the current product portfolio or developing new ones for the existing market. For example, AI robots can help provide efficient services, from cleaning rooms to providing customers with information at the front desk. Therefore, integrating innovative solutions can introduce modifications and improvements in existing services and offer consumers new and improved offerings. These advanced technologies are the best option to make Hilton’s product portfolios more exclusive and personalized.
Market Development
This growth strategy involves efforts to introduce existing products in new markets. For example, a business can conduct research and development to identify potential consumer segments for its services (Solomon et al., 2019). This can help explore and understand people’s behaviors and cultures and how they differ from those in the existing markets. One prominent example of market development may include introducing a concierge system to automate solutions by providing personalized services. In addition, this software can help the hotel interact with customers since they are designed to aid in language translation (Morishita, 2020, p. 108). Therefore, this approach can allow Hilton to leverage existing services and introduce them to different markets.
Diversification
This strategy is a high-risk endeavor and incorporates both market and product development. However, it can attract huge benefits through new revenue opportunities or by reducing a company’s reliance on a limited product portfolio or market (Baines et al., 2022, p. 226). Corporate travelers, business groups, and affluent families on vacation make up a considerable share of the consumer base. Nevertheless, alternative accommodations and other services can be customized to appeal to younger and older leisure travelers on a budget. This approach might include shared accommodations, where multiple guests who are not traveling together can stay in the same apartments. Therefore, service diversification can help Hilton enter new markets and become competitive by remaining relevant in different markets.
Conclusion
Hilton is one of the best-performing brands in the hotel industry. Market conditions and competitive analysis through analytical tools, such as Porter’s Five and PESTEL, indicate that the company has more opportunities to leverage to remain competitive. These include using advanced technologies to enhance remote booking or check-out and increase customer experience. However, social, economic, legal, and environmental factors and other forces in the market present significant challenges that Hilton must navigate to sustain its profitability. Ansoff Matrix analysis shows that Hilton can leverage existing and new services to remain competitive in various markets. This implies that through strategies, such as product development and diversification, the company can cater to customers on budget and increase its market base.
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