Case Study: Hilton HHonors Worldwide: Loyalty Wars
Introduction
The surge in regular guest programs further intensifies the battle for clients in the hotel industry. As a result, it is crucial for hospitality operators to comprehend how to attract a considerable share of guests in their industry. The operator-customer relationship management is the cornerstone of scores of companies’ marketing strategies. Hilton runs loyalty program that functions to retain regular customers just like other leading players. Given the stiff competition in the hotel industry, other key players compete through the introduction of more charitable programs. The concept that is less costly and more desirable in customer retention acts as the base for loyalty trend. Loyal customers spread their positive experiences to others consequently forming a cost-free advertising for their service providers. Notwithstanding the effectiveness of loyalty programs introduced by Starwood, the program instigates lower margins that affect the value of the hotel chain. In this regard, Hilton should not compete in loyalty programs war but differentiate and customize its present loyalty program. Hilton should also establish an inducing brand strategy to form brand passion and loyalty to achieve lasting customer loyalty.
Case Analysis
Starwood Hotels and Resorts Worldwide Inc unveils an aggressive regular-guest program. The company is hopeful that the program will assist in alluring more business travels to its Westin, Sheraton and other star hotels. A 50 million dollar ad campaign will accompany the program in efforts of winning customer loyalty. However, Diskin, the Hilton HHonors head views the program as a strategy that will only raise costs (Deighton & Shoemaker, 2005). According to Diskin, Starwood Hotels and Resorts Worldwide Inc program triggers the reduction of the cost-effective of the hotel industry-marketing tool through adding more spending to the program. Diskin acknowledged the significance of loyalty programs in attacking and retaining customers. The cost effectiveness of the loyalty programs depends on key players in the hotel industry. Given that the strategy employed by the Starwood creates a competitive edge, Diskin experiences the dilemma of either matching up to the strategy or sticking to his company’s loyal members besides differentiating HHonors from Starwood and other leading players in the industry (Deighton & Shoemaker, 2005).
Hiltons Customer Loyalty Program
Customer loyalty forms on a strong relationship between the service provider and the client. Customer loyalty entails attraction of the right clients and making them regular customers who can grasp the attention of other customers into a business. Customer loyalty gets enhancements through keeping in touch with customers, treating them right and rewarding them through quality services and products, and excellent customer service. The idea of delivering quality service to ensure guests satisfaction and successive repeat business is a normal assumption that helps business in gaining profitability and productivity.
The hospitality industry success depends on customer and effective service provision. A Loyalty program is a protected asylum for customers in the hotel industry. Hilton HHonors, the name of the Hilton’s customer loyalty program, includes four members’ tiers, which are blue, silver, gold and diamond (Deighton & Shoemaker, 2005). Members receive the program status depending on the number of times they stay in the hotel. HHonors rewards clients through recognition and upgrading their loyalty levels, hence increased customer value. Members earn bonus and discounts depending on the number of their stay in the hotel premises. The HHonor program helps in customer retention given that the program helps in keeping in touch with the company’s client. The program allows clients to give feedback regarding their satisfaction besides building guest profile that supports customized services. HHW uses direct mail to nurture strong links between the company’s brand and their clients (Deighton & Shoemaker, 2005). A considerable business of Hilton comes from large corporate client hence considerable income. Rewards element forms the basis of HHonors program. This allows the company to enhance customers stay experience.
Hiltons HHonors program is at a competitive advantage. Customer Loyalty programs are significant marketing tools. The Diskin views HHonors, the company’s regular guest programs, as an important tool for marketing (Deighton & Shoemaker, 2005). The program serves to guide quality customer service and direct, promotional strategies for its most loyal clients. The HHonors loyalty program functions to attract and retain frequent customers. Other key competitors also run loyalty programs as a strategy to compete for the same frequent guests through the introduction of more generous program. However, the loyalty program introduced by the Starwood will raise the cost in the entire hotel industry given the high amount of money the program will spend in its ad campaign. HHonors program allows use of direct mail to ensure customer satisfaction (Deighton & Shoemaker, 2005). The use of IT in loyalty programs offers access to customer’s information that can be subject for analysis in decision-making. Use of direct mail is cost-effective, and it allows collection of information relevant for business intelligence. This helps in managing clients and retaining more clients.
HHonors generates increased value to the company. The increased value attracts franchisees. The HHW program raises Hilton’s total revenue besides generating increased value attached to the Hotel chain. This aspect attracts franchisees who view the program as desirable because it creates business prospects. Franchisees remain attracted to run their premises under the Hilton’s brand. Between the loyalty programs employed by Hilton and Starwood, the value of the regular-stay programs is higher on the Hilton Brand (Deighton & Shoemaker, 2005). This is because customers get customized and differentiated services at customer friendly costs. In this regard, profits generated from the program increase the value of the hotel that consequently attracts franchisee to put their businesses under Hilton’s brand.
Recommendations
Hilton hotels should reinforce its brands besides improving brand loyalty to ensure lasting customer faithfulness. Four (4) key players in the hotel and lodging industry are contending on regular- guest programs. They include Marriot International, Hyatt Hotels, Starwood Hotels and Resorts, and Hilton International (Deighton & Shoemaker, 2005). These key players are competing for customer loyalty based on rewards, program use convenience, redemption choices and value of cash to their esteemed clients. Loyalty program competition instigates an increase in value of reward by all the hotels chains. However, the hotel chains cannot increase their prices, as these will affect their business. In this view, the profit margin of the hotel chains will decrease. As a result, it would be detrimental if Hilton competes with other key players through providing more generous and striking loyalty programs.
In fact, providing generous loyalty program will be risky because its loyal customers will shift to other hotel chains to seek for variety and diverse experience. Apparently, hotel industry clients are variety-seekers. Loyalty does not come from rewards, and it is not programmable. The reason why clients utilize loyalty program is to make profits from these programs (Carev, 2008). The more the rewards customers receive, the more their expectation grows. This aspect increases the amount of rewards to customers consequently reducing profitability. Clients become active in loyalty programs for to gain profits and not loyalty. The company trains its clients to anticipate reduced prices capable of generating fewer profits through competing in loyalty programs .From this perspective, Hilton should not engage in the loyalty war but uphold its current reward levels. Hilton Hotel should differentiate its brand through brand loyalty an aspect that will help in retaining customers besides improving customer loyalty (Ehrenberg, Uncle & Goodhardt, 2004). This is possible through forming brand passion that will trigger brand loyalty. The company should reposition its brand and differentiate its brands from others through forming a distinctive experience.
Conclusion
The hotel industry experiences stiff competition among players. Most hotels ensure customer loyalty through offering regular guests programs. These hotels compete through establishing more bighearted loyalty programs. Customer loyalty programs act as a marketing tool and a strategy to retain loyal customers. The loyalty program creates strong links between service providers and their clients. The HHonor recognizes rewards and upgrades customers through rewards, discounts and exceptional treatment. Starwood introduces a more generous loyalty program that is not cost-effective on the operators’ side. As a result, the Hilton hotel loyalty program is at a competitive advantage because its helps the company achieve greater profit margins. This is in comparison to other chains that have to lower their prices to attract customers besides using more money to publicize their loyalty programs. This aspect creates lower profit margins. On the contrary, Hilton generates more value that attracts investors and franchisee. Hilton should, therefore, differentiate and customize its present loyalty program. The company should also establish an inducing brand strategy to form brand passion and loyalty to achieve lasting customer loyalty.
References
Deighton, J., & Shoemaker, S. (2005). Hilton HHonors Worldwide: Loyalty Wars. Harvard Business School, 8:1-18.
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