Hilton HHonors Worldwide: Loyalty Wars

Submitted by – Group 2
Arun Kumar (P40062)
Ela Bisht (P40068)
Himanki Saluja (P40074)
Manvi Singh (P40083)
Rahul Saran (P40095)
Rohit Verma(P40096)
Case Introduction
The Global hotel industry constituted of 13.6 million rooms and is dominated by major chains –
Hyatt, Starwood, Marriot and Hilton. All the chains have quite less standardization in their
operations. Focus of the industry with cut throat competition has been predominantly shifting
towards the loyalty programs to increase return business, shh\ow gratitude and convert them into
chain loyalists. Hilton has led the hotel industry with innovative approach and launching a
loyalty program – Hilton HHonors. Hilton segmented market into three segments depending
upon the purpose of booking the hotel –

 Business
 Convention
 Leisure

Competitive Landscape in Luxury Hotel Industry

Number of Rooms/
Hotel Chain
Positioning
339200 (Luxury, Mid-market, Upscale
Economy)

93700(Luxury)

212900(Luxury, Mid-market, Upscale)

154000(Luxury, Mid-market, Upscale)

Hilton HHonors Worldwide (HHW)

This program was designed by Hilton in order to create experiences, retain customers and
cultivate revenue. The loyalty program has different level of memberships – Blue, Silver, Gold,
Diamond.
 Levels of membership Requirements
Blue Everyone who joined the program
Silver Stay in Hilton 4 times a year. 15% bonus on base
points
Gold Stay 16 times or 36 nights in year. 25% bonus on
basis points
Diamond Top 1% of members

Now Starwood has decided to start its loyalty program where in industry standards are being
challenged and cost of managing operations/loyalty program will rise for the whole hotel
industry- No backout dates, no capacity control, paperless rewards and hotel reimbursement.

Problem Statement
Starwood Hotels and Resorts Worldwide Inc., decided to expand its Preferred Guest Program by
offering new features that will increase operating costs and lead to higher staying costs. Diskin is
facing a dilemma whether Hilton compete with Starwood’s loyalty program or take a different
approach of differentiating its offerings from other players.

Alternatives Generated
1. Compete head on with Starwood – Hilton hotel in this case can directly compete on the
idea of Starwood loyalty program by providing options – No blackout dates, no capacity
control, paperless rewards and hotel reimbursement. But the problem with this
alternative is that it will lead to substantial increase in cost which was on decline now. If
this alternative is to be implemented then careful financial planning is required from
Hilton.

2. Differentiate Hilton HHonors from Starwood and other major hotel chains - Hilton
HHonors guest reward program has a competitive advantage over Starwood's program
because Hilton's loyalty program has been successful compared to others in the hotel
industry. They should focus on service seekers not game players. Under their double
dipping program, they can further expand their partnerships.

Alternative chosen and recommendations

There is no available data whether or not Starwood's new aggressive frequent-guest program is
going to be successful in attracting new customers. Giving more rewards does not necessarily
mean the program will attract more customers because the new program reduces the cost-
effectiveness and increases staying costs. Similarly entering in such cut throat arena will hamper
profit margins of both the players rather Hilton should try to differentiate their offerings.

 According to the program research, Hilton lost more than half of its loyal customers
annually due to its relatively limited network size and distribution. Thereby, the
management should implement a new strategy that allows to expand the number of
partners, such as airlines, rental car firms, restaurants, casinos, etc. Sponsoring to
convention centers and big conferences will also help Hilton extend its network size.

 Hilton should create a unique stay experience that cannot be imitated by other chains and
provide personalized experience to the customers. In order to do that, Hilton should
invest in its employees by training them on how to make customers feel that they are
treated special. With mass-personalization strategy, employees are able to identify each
customer wants and needs. They should focus more on service seekers rather than game
players.

 Hilton should offer a clearly understandable referral bonus program to its loyal
customers. A loyal guest can earn extra points because of referring Hilton to other
qualified prospective customers.