hilton Hotels - Case Study
...nds. [Hospitality.Net, 2003] The company also engages in eBusiness through the operation of the Hiltonworldwide.com, Hilton.com, Doubletree.com, EmbassySuites.com, Hamptoninn.com, HomewoodSuites.com and HiltonGardenInn.com web sites, which provides customer service in addition to the Hilstar reservation system used by HRW. It also provides Internet access and business services in hotel guestrooms and other areas at certain hotels. According to OneSource Information Services Hilton Hotels has 500 IT employees and a total of 5,000 PC;s. Hilton Hotels Corporation IT Profile Address: 9336 Civic Center Drive Beverly Hills, CA 90210 Los Angeles County United States Total IT Employees: 500 Total PC's: 5000 IT Executives Executive Name Title Function Source James Harvey Senior Vice President and Chief Information Officer Information Executive OneSource Robert Machen Vice President-Corporate Systems Information Executive infoUSA Edson Karrati MIS Director Network Management Executive Wendover Terry Gedo Top Computer Executive (CIO, VP or Director of MIS or IT, etc.) Information Executive Applied Computer Research © 2006 Applied Computer Research, Inc. All Rights Reserved. Data noted as source: OneSource, © 2006, OneSource Information Services, Concord, MA The Hilton Culture On the Hilton Worldwide website under Employment the culture of Hilton Hotels is stated as follows, “When you join the Hilton Family of hotels, you'll be part of a dynamic culture committed to the highest quality of service - a fun, family-oriented atmosphere where positive attitudes and a strong work ethic are rewarded. The people who make up the Hilton Family of hotels are called team members. And just like a close-knit family, team members are always willing to assist and encourage each other. In fact, supporting our team members is critical to our future. Perhaps this explains why, in a recent survey, team members listed our culture and reputation as two of the biggest reasons they chose the Hilton Family of hotels over the competition.” Family orientation and a positive team effort is what Hilton Hotels attempts to achieve. The Hilton Mission and Goals Hilton Hotels Mission Statement is, “Hilton Hotels Corporation is recognized internationally as a preeminent hospitality company. Among our 250 hotels are some of the most well-known properties to be found anywhere, including The Waldorf-Astoria, Hilton Hawaiian Village and Palmer House Hilton. Our hotels offer guests and customers the finest accommodations and amenities for business or leisure. For 80 years, the Hilton brand name has been synonymous with excellence in the hospitality industry.” Hilton Hotels also has a Workforce Diversity Mission Statement it was issued by the Board of Directors, "...to create, and maintain a diverse work place culture that strengthens the business value of the corporation and affirms Hilton Hotels Corporation as an industry leader in the global market.” Hilton Hotels is actively recruiting and placing minorities in sales and marketing, purchasing and human resources positions with the corporation. It is uncertain if this effort is a result of litigation or a strategic move realized by the company. Collaborators Suppliers Hari Stones Limited is one of Western Canada’s leading importers and distributors of natural stones. Since 1995, Hari Stones Limited has continued to build a reputation for impeccable service & attention to detail. Their large selections in tiles and slabs for Granite, Marble, Slate, Onyx, Travertine, Limestone & Sandstone are sourced from one of the best quarries in the world. They are an official supplier to Hilton Hotels Corporation and have completed 3 major projects for Hilton Hotels. Muraspec is also group supplier to Hilton Hotels. Muraspec was established in 1971 as a distributor of contract vinyl wall-coverings. Muraspec is the world's leading designer and manufacturer of wall-coverings for the contract market. Waterbury is a UK-based designer and manufacturer of quality bathroom accessories. Offering storage solutions that are stylish and practical, the latest addition to the Astoni collection is no exception. Waterbury products undergo rigorous testing to ensure it meets the highest quality standards. Employing the company’s expertise in manufacturing for commercial customers (Waterbury is a supplier to Hilton hotels worldwide), even domestic collections like Astoni are tested to withstand commercial conditions. Alliances The company undertakes its operations through numerous subsidiaries. One such subsidiary is Hilton Grand Vacations Company, which currently operates 19 vacation ownership resorts in Florida, two in Nevada and one in Hawaii. In addition, HGVC operates the HGVClub; a points based reservation and exchange system. Another subsidiary, Hilton Equipment Corporation, provides design and furnishing services to the company’s hotels and to hotels owned and operated by others. These services include the purchase and distribution of furniture, furnishings, equipment, food, beverage, and operating supplies. Hilton Reservations Worldwide (HRW), meanwhile, operates a worldwide reservation system for hotels owned, operated or franchised by the company Hilton International Co. (HI), their affiliates and others. The company and HI each own a 50% interest in HRW. Customers Market size and growth The U.S. hotel industry hit an all-time high of $113.7 billion in total revenues in 2004 [Smith Travel Research, 2005] Competitors Actual or potential The following companies are the major competitors of Hilton Hotels Corporation: Marriott International Inc. (MAR) Starwood Hotels & Resorts Worldwide, Inc (HOT) Four Seasons Hotel Inc. (USA) InterContinental Hotels Group PLC (ADR) (IHG) Cendant Corporation (CD) Interstate Hotels & Resorts, Inc. (IHR) Accor Winston Hotels, Inc. (WXH) MGM MIRAGE (MGM) Hyatt Corporation Caesars Entertainment, Inc. Carlson Companies, Inc. Host Marriott Corporation Wyndham International TRT Holdings American Skiing Company De Vere Group PLC Kempinski Arlington Hospitality, Inc. Jurys Doyle Hotel Group plc Hotel Properties Limited Bharat Hotels Limited SWOT Analysis Strengths Strong brand awareness Hilton has a number of solid brands that are popular with both customers and developers. This has been particularly important in light of the recent economic downturn. The strong brand portfolio attracts developers who remain building Hilton brands even in a time when supply growth is slowing across the board. Hilton brands represent the second most prevalent brand of hotel rooms under construction. Revenues from these hotels are mostly top-line driven and are a reliable source of cash flow. Each of Hilton’s brands reported significant RevPAR increases in the second quarter of fiscal 2004. Development highlights during the second quarter 2004 and early July 2004 included the conversion to the Hilton brand of a 332-room full-service hotel in Indianapolis, scheduled for mid-August; the beginning of renovation of six Doubletree properties recently acquired by USAA Real Estate in suburban Kansas City, Houston, Anaheim, St. Louis, and Tulsa; the opening of Doubletree’s first hotel in Canada, at Niagara Falls; and a new-build Doubletree in Bay City, Michigan (outside Detroit); groundbreaking for the first Homewood Suites by Hilton hotel in Canada, in Toronto; the opening of the Conrad Miami, the first freestanding Conrad Hotel in North America; and the signing of a management contract for a new Conrad Hotel in Indianapolis, scheduled to open in 2006. Improving financial outlook For the six-month period ended June 30, 2004, Hilton reported net income of $112 million, compared to $63 million in the corresponding 2003 period. In July 2004, Hilton Hotels raised its full year 2004 outlook, citing strong revenue per available room growth at its comparable owned hotels, a significant increase in fee income and continued strong brand performance, another outstanding quarter in its vacation ownership business, and significant margin gains. Hilton reported second quarter total operating income of $188 million (a 15% increase from $164 million in the 2003 period) on total revenue of $1.065 billion (a 9% increase from $976 million in the 2003 quarter). Total company earnings before interest, taxes, depreciation, amortization, and non-recurring items ("Adjusted EBITDA") were $278 million, compared with $252 million in the 2003 period, an increase of 10%. Adjusting for the impact of owned hotel sales since the first quarter of 2003 and the consolidation of a previously unconsolidated managed property in the 2004 first quarter, revenue, operating income, and Adjusted EBITDA increased 11%, 16%, and 13%, respectively. Owned hotel margins in the 2004-second quarter, when compared to the 2003 period, improved 140 basis points to 30.5%. Strong cross selling Fiscal 2002 and 2003 sales benefited from strong cross-selling among the brands and the success of the Hilton Honors loyalty program which contributed to gains in market share across all company brands. In fact, Hilton, Hilton Garden Inn, Doubletree, Embassy Suites, Homewood Suites by Hilton and Hampton brands all achieved growth in the system-wide RevPAR index, which represents the share of RevPAR these properties attain versus their respective competitive sets. Sale of properties In July 2004, Integrated Capital from Hilton Hotels acquired the Doubletree Hotel Modesto and the Doubletree Hotel Bakersfield for a combined total purchase price of approximately $40 million. Both properties continued to be operated and managed by Hilton Hotels. In 2003, Hilton sold four Homewood Suites by Hilton properties in two separate transactions for total consideration of approximately $40 million, providing the company with considerable cash resources. The company also retained long-term management agreements for three of these properties and a long-term franchise agreement for the remaining property. Weaknesses Poor recent fiscal year end performances For the fiscal year ended December 2002, Hilton Hotels Corporation achieved total revenues of $3,847 million, a decrease of 4% over 2001. Revenues for 2003 remained essentially flat, at $3,853 million. In 2002 revenues declined in each of the company’s five divisions (Owned hotels, Leased hotels, Management and franchise fees, Other fees and income and other revenue from managed and franchised properties). Full year Management and franchise fees suffered the greatest loss, declining 34% over the fiscal year. In 2003 only the Other fees and income division saw any real growth of 16% to $412 million in 2003. Margins have also suffered in recent years, which has been primarily down to rising healthcare costs and property taxes. Debt Though the current year looks more promising, Hilton’s debt currently has an average life of 9.4 years, at an average cost of approximately 6.7%. At June 30, 2004, Hilton had total debt of $3.6 billion (net of $325 million allocated to Caesars Entertainment and repaid by Caesars in July 2004, and $100 million of debt resulting from the consolidation of a managed hotel, which ...