| Name | Hilton Worldwide Holdings Inc. (NYSE: HLT) |
| Industry | Hotels and Resorts |
| Founded | In 1919 by Conrad Hilton in Texas |
| Headoffice | McLean, Virginia |
| CEO | Christopher J. Nassetta |
| Revenues | $ 4,307 Million, 2020; $ 9, 452 Million, 2019. |
| Net loss/Income | $ -715 Million, 2020; $ 881 Million, 2019. |
| Competitors | Marriott International, Accor Hotels, Choice, Hyatt, IHG, Mandarin Oriental, Ritz-Carlton |
Company Overview:
Hilton worldwide is a holding company that develops, owns, leases, manages and franchises hotels and resorts globally. Hilton brand portfolio includes full-service hotels and resorts, luxury and lifestyle and focused-service hotels. Hilton business operates through two segments that are; (1) management and franchisee and (2) ownership segment. The management and franchises include brand licensing, and the ownership segment develops, owns and leases hotels and resorts (Bloomberg, 2021; Hilton, 2021). Hilton brand value is $11 Billion (Lock, 2021), and it is ranked 46th in the Top 50 U.S. Prophet Brand Relevance Index and 97th in Brand Finance U.S. top 100 (SyncForce, 2021).
Hilton Strengths 2021:
- Global brand and properties portfolio.
According to Hilton (2021), it has hotels and resort in 119 countries worldwide with hotel portfolio of 6,478 properties having 1,019,287 rooms. The ownership segment has 61 hotels with 19,400 rooms. The franchise segment has 715 managed hotels and 5,451 franchises hotels with 990,860 rooms as of 1 January 2021. - High stock performance.
Hilton stocks offer a much higher return when compared to S&P 500 index and S&P hotels and resorts, as shown in the diagram below. In 2019, the company provided a return of $265.30 compared to $158 for the S&P 500 and $167.20 for S&P hotels and resorts. Likewise, in 2020, the return was $266.69 compared to $183.77 for the S&P 500 and $123.30 for S&P hotels and resorts (Hilton, 2021). - Persistent business and market development (Ansoff matrix).
Despite the pandemic, Hilton has new development projects pipelines comprising 2,570 properties and 397,000 rooms by the end of 2020, including 31 new territories and countries (Bloomberg, 2021). Moreover, the company has launched a large-scale franchise model in Asia-Pacific in the Chinese market in 2021.
- Diverse brands portfolio and HHonors loyalty program.
According to Forbes (2021), Hilton has a diversified hotel brand portfolio categorized as full-service hotels, luxury and lifestyle hotels and focused services hotels. The full-service segment hotels include Curio collection, Signia, Tapestry collection, Embassy Suites and Hilton hotel and resorts. Moreover, the luxury and lifestyle hotels are LXR hotels and resorts, Waldorf Astoria, Conrad, Tempo and Canopy. Finally, the focused services hotels are Hampton, Home2 Suites, Homewood Suites and Tru by Hilton. Moreover, Hilton Honors have 112 million members that support the brand portfolio of the company. - Hilton CleanStay program for Covid-19.
Hilton developed a cleaning program from hotel disinfection and cleanliness across 18 brands to ensure guest safety and promote traveling to tackle pandemic. The program aims to offer the same care and diligence in hotel cleaning to protect against Covid-19 risks.
Hilton Weaknesses 2021:
- Poor customer reviews and ratings.
Hilton has a reputation problem with poor reviews and ratings on platforms such as Facebook and Trustpilot, as shown in the diagram below. The customer feedback shows guests had a poor hotel stay experiences at some properties. - Revenue dependence on the U.S. market.
In 2020, the total revenues of Hilton were $4,306 million, out of which 83% ($3,593 million) was generated from the U.S. market. Likewise, in 2018, the company has generated 77% and 79% of revenues in 2019 from the U.S. market. - High debts levels.
Hilton has high indebtedness, which could affect the financial position and ability of the company to raise capital. On 1 January 2021, the total indebtedness was $10.7 Billion. The maturity of long-debt for 2021 will be $56 million, $29 million for 2022, and $24 million in 2023 (Hilton, 2021). - Making pandemic services cut permanent in 2021.
According to the CEO of Hilton, the services cut made during a pandemic include eliminating daily housekeeping, some in-room amenities (minibars to coffee machines) and closing of restaurants, bars and outlets may be permanent. Hilton had introduced measures to limit interactions and save costs (BusinessInsider, 2021).
Hilton Opportunities 2021:
- Vendor partnerships for hybrid meetings.
Pandemic has changed the traditional business meeting context, and people prefer meeting through technology. The future of meetings will be hybrid events – a combination of live streaming and in-person elements (Chartered Management Institute, 2021). Thus, Hilton needs to adapt to hybrid events and partnership with hybrid experts or technology firms to plan for the hybrid events. - Overseas expansion.
According to Statista (2021), the revenues from the hotel will be $175 million with a CAGR of 20% by 2025. Hilton generates 80% of revenues from the U.S. market, and overseas expansion would lower the revenue risks. Thus, there is an opportunity to expand in new markets such as Asian markets to diverse revenue streams through business expansion. - Hotels design for Instagram.
Social media marketing plays a critical role in branding through videos and photos. Wilson (2020) discussed that the hotel design for Instagram makes sense when Millennial and Gen Z guests post their travel experience on Instagram. An Instagram post can go viral and provide ample opportunity for record business for the hotel.
Hilton Threats 2021:
- Fewer business travelers.
Stankiewicz (2021) assessed that business travel was a significant source of revenue for Hilton, but it still lags in leisure recovery. According to Hilton CEO, business travel has recovered 50% of pre Covid-19 levels but complete rebound of business travelers is a must for the long-term profitability and growth of the business. - Delta variant and Labour shortages in the U.S.
The delta variant fear has resulted in labour shortages for Hilton. Jane (2021) stated that half of the hotel workers laid off during the pandemic had no plan to return to work because of a stressful working environment, poor employee benefits, and lower salaries. - Covid-19 waves and Long-term impact.
According to Reuter (2021), Covid-19 turned out havoc to Hilton business because of lockdowns. Hilton revenues dropped 55%, and net income fell by 182% in 2020, as shown in the diagram below. The multiple Covid-19 waves will continue to negatively affect the financial and result of operations in the near future. - Franchisee risks.
Hilton has a strong brand reputation for performance and quality, and franchises lack of compliance could damage Hilton brand reputation. Reuters (2021) appraised that there has been disagreement between Hilton management and franchise related to quality, branding and technology to deliver performance standards. For example, Hilton has been fined in China for poor hygiene standards. - Mandatory Vaccine Passport.
The vaccine passport is compulsory in Europe and Canada for people to enter hotels, gyms and restaurants (Gebicki, 2021). Moreover, Young (2021) added that the vaccine passport has resulted in customer backlash and customer refuses to provide a passport, i.e. Hilton conducting operations in a hostile environment.
Hilton SWOT Analysis Conclusion:
Hilton faces challenges such as high debts, poor customer reviews, fewer business travelers, and labour shortages. The delta variant is likely to threaten Hilton revenues and business operations for the next few years. However, Hilton has a diverse hotel portfolio, customer loyalty and business development capabilities for success in a hostile Covid-19 business environment. Hilton has the capabilities to overcome business weaknesses and exploit new business opportunities for long-term business success.
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References:
- Bloomberg (2021). Hilton Reports Fourth Quarter and Full Year Results.
- Bloomberg (2021). Hilton Worldwide Holdings Inc.
- BusinessInsider (2021). Say goodbye to hotel turndown and these other services.
- Chartered Management Institute (2021). Hybrid collaboration: 8 best practices for 2021.
- Forbes (2021). Hilton (HLT) – Forbes.
- Forbes (2021). Hilton (HLT) – Forbes.
- Gebicki, Michael (2021). Vaccine passports around the world: The countries excluding and banning unvaccinated people.
- Hilton (2021). Welcome to Hilton.
- Hilton (2021). Hilton Worldwide Holdings Annual Report.
- Lock, S (2021). Most valuable hotel brands worldwide 2020, by brand value.
- Ollila, John (2020). Hilton CleanStay With Lysol Coming In June 2020.
- Reuter (2021). Hilton earnings disappoint as pandemic pains linger, shares fall.
- Reuters (2021). China probes Marriott, Hilton hotels over poor hygiene after undercover expose.
- Stankiewicz, Kevin (2021). Hilton CEO: Business travel is back to about 50% of pre-Covid levels, but some markets are stronger.
- Statista (2021). Hotels – Asia.
- SyncForce (2021). Hilton Hotels & Resorts – Rankings per brand. 2021. 2021.
- Thier, Jane (2021. Hilton CFO: ‘We’re not big believers in new normals’.
- Trustpilot (2021). Hilton Hotels & Resorts Reviews – Trustpilot.
- Wilson, Jacob (2021). How to market your hotel on Instagram.
- Young, Leslie (2021). ‘Don’t take it out on us’: Some restaurants face abuse over vaccine passports.
