Executive Summary
The hotels industry in any part of the world operates in a delicate yet profitable environment. Since it is a service based industry, many players allocate a
significant amount of their annual budget for purposes of marketing and general branding. Hilton hotel has a unique segmentation strategy that encompasses both the
economical and cultural dynamics that guarantee destination attachment and satisfaction. They include the behavioral, demographic, geographic/cultural and
psychographic segmentations. This paper takes a closer scrutiny of market segmentation and the general SWOT analysis of the hotel and tourism sector in general.
Table of Contents
Executive Summary 3
Table of Contents 4
Introduction 5
1.Market segmentation strategy 5
1.1 Behavioural segmentation 6
1.2 Psychographic segmentation 6
1.3 Demographic Segmentation 7
1.4 Cultural and geographic segmentation 8
2. Tourism sector and Hilton hotel SWOT analysis 8
2.1 Strengths 9
2.2 Weaknesses 10
2.3 Opportunities 10
2.4 Threats……………………………………………………………
Conclusion……………………………………………………
References……………………………………………………
Appendices……………………………………………………
Segmentation strategy: Hilton Hotel
Introduction
Since hotels have different customers with diverse backgrounds and needs in different geographical places, the aspect of market segmentation comes into play (Dev,
2012). The Hilton Hotels, which will be used as a case study in this exercise, have a global presence. This makes them exposed to competition and a challenge to blend
into cultures and social systems of countries and people that it serves. In addition to this, there are new demographics that have emerged with new tastes and
preferences. According to Sonderegger (2011), younger people are making more money than ever before and they represent a significant percentage of the general profits.
Furthermore, tourists from many parts of the world have shown a trend of looking for new destinations in non-traditional places and choose Africa and South-Asian
countries.
1. Market Segmentation Strategy
Market segmentation is usually the first step that is used in the aspect of market targeting. According to Doraszelski and Draganska (2006), it gives marketers the
ability to position products and services for potential and current customers. Traditionally, the hotel sector experiences peak and off-peak times at any given year.
Because of this, hotel owners maximize the time of the year when the demand is at its highest. However, during the low season, there are strategies that have been
tried and tasted that enable these firms make a considerable return. They include price and service packaging and adjustments that enable a constant cash flow
throughout the low season.
1.1 Behavioral Segmentation
Hilton hotels and resorts are considered high class and exclusive service providers in the international scene. With over 530 hotels and resorts worldwide, the hotels
have diversified and set base in over 78 countries. With this information in customers’ minds a certain perception, attitude and behavioral aspect towards the brand is
inevitable (Hazbun, 2008). Because of this, the hotel has created an interesting segmentation of customers according to their brand perception and knowledge hence
creating a niche in the high end community. This is the reason that governments and international dignitaries choose this brand for their launches and meetings.
Because of this attitude and knowledge, loyalty of the target customers remains unwavering. In new countries that the hotel plans to venture such as Myanmar, few
people are reportedly aware of the hotel’s global reputation because of the politically motivated information embargo. According to the management, a unique approach
of the launch will be inevitable in order to avert competition from the Asian hotel players.
1.2 Psychographic Segmentation
This is segmentation according to lifestyle demand of people and their personal activities. This is highly important because the service providers will be at a good
position to package their wares to the intended customers (Allenby et al, 2002). Hilton hotels’ premises at a coastal city of Johannesburg and its presence at the
Texas City of Dallas serve different segments of the markets in a unique way. The lifestyles of populations around coastal towns and those of the country are
different. For instance, coastal lifestyles especially in the tropical areas have a different weather patterns that are completely different from those of the
countryside. These populations spend their leisure differently and view the hotel’s service in a different manner from each other. The hotel’s target customers at the
beach environment are therefore different from those of the country customers. Tourists and holidaymakers prefer the coastal environment while travelers and visitors
make a significant numbers of those that book inland hotels. This influences the marketing strategy that the service providers put in place to target their customers.
1.3. Demographic segmentations
This is perhaps the basic aspect of segmentation according to many marketers and service providers. This encompasses age, occupation, race, level of education and so
on. Through this, the service provider can successfully determine the needs, preferences and position of the target market (Liu, 2010). Hilton Hotels have created a
reputation of targeting the high end and classy population all over the world. Celebrities, professionals, business people and high ranking politicians often seek the
services of the hotel. Despite that, the hotel has its presence in some countries and destinations that do not have many of the wealthy individuals. This means that
the company must target the few that exist or focus on another demographic aspect such as foreign tourists and dignitaries. This ensures that the profit margin is
maintained at all times.
According to Kamakura (2000), demographics have a unique characteristic because each has a special kind of demand that has to be met. For instance, people of the same
education level and exposure might differ in their taste due to the stages in life. A medical doctor in his twenties will want a good car and prefer accommodation in a
fun filled environment especially while travelling. In his fifties with a spouse, he often will prefer a serene environment far from the hassle and bustle of his work.
Therefore hotels such as Hilton normally have a packages and services tailor made for their customers.
1.4 Cultural and geographic Segmentation
This is an increasingly sensitive aspect of segmentation for service providers. Hilton hotel packages its service according to destinations’ cultures and geographical
locations. This includes segmenting by religion, state, region and territory. This is because people normally defend their belief system and go to great lengths to
preserve these cultures. Hilton Kabul which is an Islamic city has an obligation to observe Islamic regulations that touch on its sector. For instance, the cuisine and
foods served in its menu do not include pork because of its place in the Islamic religion. This does not happen in Sydney or any other secular destination because of
the different view of religion that exists there. In another example, African traditions and cultures are also taken seriously by the people of that continent. Out of
respect and sensitivity for the cultures that exist, the hotel has gone to extent of blending into that for the sake of its customers.
2. Tourism Sector and Hilton hotel SWOT analysis
Strengths
• Strong brand name
• Strong supply chain
• Use of technology
• Real estate
• Customer loyalty Weaknesses
• Cost structure
• Internal operation structures
Opportunities
• New services
• Newly emerging destinations
• Expansions
• Weakening competitions
Threats
• Political instabilities
• Intense competition
• Alternative services
• Increasing costs of operations
The hotel sectors all over the world have been experiencing major opportunities and challenges at the same time in the last decade. With the global economy going
through a roller coaster, many hotel players have been forced to change strategy especially in marketing their services. Hilton hotel has its own SWOT factors that
contribute to its present being.
2.1 Strengths
The biggest strength of the Hilton hotels and resorts is its name and global image. It is difficult to convince customers on the other side of the hotel. The global
brand that has been in existence for almost a century sells more than the day to day marketing of the hotel. Secondly, the hotel has a large capacity of real estate
and tangible property. Most of its hotels premises are internal property that is valued greatly. Competitors that provide similar services lack this aspect making the
hotel be placed in a good position of leading the pack. Technology in terms of operations has been attributed to be the key factor in the advancement of the hotel.
This is a key strength that makes the customers and stakeholders alike increase their loyalty to the brand (Gu, Z and Qian, 2009).
2.2 Weaknesses
The two major weaknesses include the costs of setting up and running the huge hotel chains and resorts. Rapid expansions that demand new structures and buildings
increase the costs exponentially. This is a short term weakness but has a significant effect on the revenues. Secondly, operations and management of the company rarely
goes without internal politics (Dutton, 2008). Such situations place the hotel management in a risky position.
2.3 Opportunities
The emerging of new markets in places such as East and South Africa is a promising aspect for the hotel industry. Economic forecasters have shown that the hotel
industry will experience a significant growth because of these markets. Major competitors of Hilton hotels are weakening as seen through the media and other sources.
New services for new customers present an opportunity for the hotel to increase its capacity in the short and long term.
2.4 Threats
The presence of the hotel in many a country places it at a position where threats are inevitable. Political instabilities and such situations may create huge losses.
For example, the infamous Arab revolution saw cities such as Cairo and Tripoli experience a period of uncertainty as a result of changes in governments. Secondly,
competitors have equally strong strategies that they use to increase their presence. This intensity is a potential threat to the undecided customers of the hotels. The
increase in general prices around the globe means that the cost of operations raises for the hotel. This creates a situation where customers have a smaller margin of
expenditure than previously in the same economic bracket hence they seek alternatives.
Conclusion
In the nutshell, the paper has looked at both the segmentation and the SWOT analysis of the Hilton hotels and resorts. By considering the general position in the
tourism industry one could see that the position of the hotel represents a large majority of the individual hotels. The service providers have not only supposed to be
relevant but careful on the way they operate.
References
• Allenby, G, et al., 2002, Market Segmentation Research: Beyond within and across Group Differences, Marketing Letters, 13 (3) pp. 233-243
• Dev, C, S, 2012, Hospitality Branding, New York:Cornell University Press
• Doraszelski, U and Draganska, M., 2006, Market Segmentation Strategies of Multiproduct Firms, The Journal of Industrial Economics, 54(1) pp. 125-149
• Dutton, E., 2008, Low-Wage Work in the United Kingdom, London:Russell Sage Foundation
• Gu, Z and Qian, Y, 2009, Hotel managerial ownership and firm performance: An empirical investigation, Tourism and Hospitality Research, pp. 145-154
• Hazbun, W, 2008, Beaches, Ruins, Resorts, Minnesota: University of Minnesota Press
• Hilton.com, 2015, Hilton hotels and resorts, Retrieved 7 January 2015 from http://www3.hilton.com/en/
• Kamakura, W, A, 2000, Market Segmentation: Conceptual and Methodological Foundations, Journal of Marketing Research, 37(1) pp. 135-136
• Liu, Y, 2010, Multicriterion Market Segmentation: A New Model, Implementation, and Evaluation, Marketing Science, 29(5) pp. 880-894
• Sonderegger, S, 2011, Market Segmentation with Nonlinear Pricing, The Journal of Industrial Economics, 59(1) pp. 38-62
Appendices
Figure 1: Top reasons why hotels are booked. (Courtesy of lastminutetravel.com, 2015)
Figure 2: Hotel Industry Market share courtesy (investhotel.net, 2007)
Figure 3 : General Hotel industry segmentation (Courtesy:ibisworld.com, 2015)
Interview Questions
1. What can you say about the general tourism industry in the past decade?
With over 530 hotels and resorts worldwide, the hotels have diversified and set base in over 78 countries.
2. Which is the biggest challenge that has been noted so far in the sector?
Its major competitors like Marriot , Hyatt , chevron have equally strong strategies that is the biggest challenge for the hilton chain.
3. To what extent has the market segmentation been effective in your firm?
Tourists and holidaymakers prefer the coastal environment while travelers and visitors make a significant numbers of those that book inland hotels. This influences the
marketing strategy that the service providers put in place to target their customers
4. What are the current threats and weaknesses that this business experiences now?
Political instability and sometimes competitors have equal strong strategies. The major is the costs of setting up and running the huge hotel chains.
5. Do the external stakeholders such as government play its role well in promoting your business?
Because this hotel has interesting segmentation of customer according to their brand and perceptions, government choose this brand for the launches and meetings.
6. What have been the greatest achievements and strengths so far?
The Hotel has large capacity of real estate and tangible property . Global brand sells more than day to day marketing of the hotel. New services for the new customers
presents an opportunity for the hotel to increase its capacity in short and long.
7. What does the future hold for the industry and indeed the hotel?
Tourists from many parts of the world have shown trend of looking for new destinations and non traditional places and choose Africa and south Asian countries.
Situational Analysis: Hilton Hotel
Product and Experience Analysis
Products and Services: The secondary research and primary research as conducted in relation to the Hilton hotels have indicated significant level of findings
with regard to the products and services that are offered by the company. An analysis of Hilton Hotel indicates that there are wide range of products and services that
are included within the products and services portfolio of the company. The core service of a hotel organisation is mainly the accommodation and restaurant services,
and these core services are also included within the service delivery portfolio of the Hilton Hotel. However, the conduct of interview with one of the employee of
Hilton hotel indicated that apart from these core service delivery of the company, there are a wide range extra services that are offered by the Hilton hotel group
based in Sydney. The performance of interview has indicated that Hilton Hotel Sydney accounts for delivering hotel services such as event planning in the form of
marriages, facilitating business meeting with high class equipments such as audio visual equipment, express mail, high quality rooms lashed with sound IT
infrastructure etc. The interview with the employee has also indicated that Hilton Hotel Sydney specialises in providing a range of services including bar services,
gym and SPA, clothing store, ATMs, beauty salon, currency exchange services and many more. This implies that a part from the core services of accommodation and
restaurant, hotel accounts for delivering high range of extra services aimed at satisfying its customers (Hilton, 2014).
Distribution Process: In relation to the distribution process of organisation’s services, the performance of interview with the employee of Hilton Sydney
indicates that there is a specific process of distribution being followed for its core services. It is evaluated from the interview that customers seeking services at
the hotel can make pre-booking through online visit to the hotel’s website for room accommodation services, or by way of calling at the hotel, or by way of personally
visiting the hotel and contacting with reception area. Once the services are booked, they can be availed by visiting the hotel. There are a range of services as
identified above as offered by the hotel and they can be positively accomplished by way of contacting the room service personnel or by requesting those services at the
receptions. Upon customer requests, the type of services as preferred by them in delivered and finally, when leaving the hotel, the customers are required to clear the
pending amount for the services availed. Some examples of distribution of services as shared are in relation to dinning which can be offered to customers at their
rooms, or they can come to the cafeteria to avail them (Hilton, 2014).
Contribution to the Destination Experience: An analysis of Sydney Australia indicates that it is a tourism destination, and Hilton Sydney accounts for meeting
out the tourism needs of both the business class and leisure class customers. It provides good accessibility to beaches for its customers that wish to spend their time
in leisure, and it also has good infrastructure in supporting the business meetings.
SWOT Analysis
This section of analysis is now focused towards assessing the strategic position of Hilton Sydney through the application of SWOT analysis. The performance of
interview with the employee of Hilton Sydney and an analysis of secondary literature has indicated different aspects of strengths and weakness, and opportunities and
threats facing the hotel. These aspects are separately discussed as follows:
Strengths:
• Industry wide recognition
• Premium class delivery of services
• Service personnel
• High quality service to customers.
• Locations across the globe. Weaknesses:
• Limited market share
• Target premium class customers
• Ignoring middle group people
Opportunities:
• Offering discounts
• Use of new technology
• Elimination of international trade barriers.
• Changing customer preferences. Threats:
Significant level of competition
Wide range of legislation
Applicable government policies
Advanced technology
Strengths: In terms of strengths are concerned, Hilton hotel group has the basic strength of industry wide recognition as the most branded hotel. It has
established itself as the most reputed hotel group that operates across the majority of the locations across the world. The specific strength of Hilton Sydney as
identified from the interview with its employee indicates that its reputation as being the premium class delivery of services including in location at the centre most
places at Sydney and its wide portfolio of services offerings are regarded as its major strength points. The interview has also indicated that the strength of Hilton
Sydney is its service personnel that are highly talented and accounts for delivering high quality services to its customers (Dominci and Guzzo, 2010).
Weaknesses: Apart from the strengths, there are certain major weaknesses that are also identified in respect to Hilton Sydney from its operations across the
country. The major weakness is that despite its premium factor in delivering high quality services, the hotel accounts for having limited market share in the industry
across Sydney. Secondly, it is also assessed that the premium class services as offered by the group are targeted at premium class customers, and there is no scope for
middle income group people in availing services which represent majority of the market share. This is another significant weakness noted in respect to Hilton as shared
by the interviewed employee (Abrate, Fraquelli and Viglia, 2012).
Opportunities: In terms of opportunities are concerned, the interview with the employee indicated that the Hilton Sydney has the opportunity in attracting more
and more customers by offering discounts and extra special offerings in the form of buy three night packages for the pay of just two nights etc. These bulky discounts
and offerings could attract more customers which could allow for attaining higher market share. The opportunity to the hotel also include innovating in the services as
delivered by it, and also making use of technology to a higher level in further assisting its customers with high quality services delivery (Burns and Bush, 2010).
Threats: With respect to threats are concerned, the major threat of Hilton Australia is mainly from the significant level of competition as posed by the other
major players in the industry. This includes both the major players in terms of Marriott International and various other medium and small ranges of hotel service
providers across Australia. Apart from this, the threat as faced by the hotel is mainly from wide range of legislations and applicable governmental policies in the
successful operations of the hotel (Owolabi, 2010).
Thus, the interview with the employee has indicated the strategic positioning of Hilton which signifies that the hotel accounts for satisfying premium range of
customer groups.
Environmental Scan
An environmental scan is aimed at assessing the external market conditions facing the Hilton Sydney. A general assessment of the Hilton Group indicates that
the group operates at the international level with major competitors that directly competes with it includes Marriott International, Intercontinental Hotel Group Plc,
Choice Hotels International etc. These major hotel groups accounts for direct level of competition to Hilton Group as a whole at the international level. However, an
assessment of the Hilton Sydney in terms of its external environment situation through interview with the employee has indicated the competitive rivalry position
facing the firm. In the viewpoint of the interviewed employee, the competitive condition facing the firm is not that significant because Hilton has been favourable in
maintaining a distinctive position in the industry. The brand reputation of Hilton Sydney as per the interviewed employee implies that it is significantly higher which
restricts the competition from the other major operators. The maintenance of the premium factor has allowed the hotel in achieving highly competitive position in the
industry (Crick and Spencer, 2011).
Although the competitive landscape has not that been significantly affecting Hilton Sydney, still the external environment condition indicates that the hotel
is not able to make significant level of impact over the market share as indicated by the employee. This is mainly because of highly narrow focus of the company with
respect to satisfying its customers which aims at satisfying the premium class customer groups only by the hotel. However, the competitive landscape as shared by the
interviewed employee indicates that Hilton Sydney is faced with competition especially from few of the major players in the market of Sydney and according to his
opinion, these include Wentworth and Menzies hotel group. Four Seasons and Ritz Carlton also enhances the competitive conditions as prevalent within the industry. This
implies that the premium class hotel groups became the major hotels that accounted for highly competitive profile across the industry (Hilton, 2014).
Although these major competitors are identified in respect to Hilton Sydney, yet an analysis with respect to their strategic position in the industry indicates
that Hilton Sydney is positioned as the most significant player in the industry as per the opinion shared by the interviewed employee. Hilton Group as a whole has
favourable brand image within the Sydney people, and this is also evident in respect to the Sydney branch of Hilton Group. However, Mariott International has also
accounted for significant level of brand image within Sydney and this enhances its strategic positioning in terms of major competitor to Hilton. Apart from this, the
positioning of Four Seasons and Ritz Carlton indicated that these hotel groups are also operating at the international level, and they are mainly accounted to having a
distinctive image in the industry. Overall, in terms of strategic positioning, it is assessed that Hilton Sydney has occupied the top most place as per the viewpoints
as shared by the employee of Hilton as interviewed (Choi and Chu, 2001).
References
• Abrate, G., Fraquelli, G. and Viglia, G. (2012), ‘Dynamic pricing strategies: Evidence from European hotels’, International Journal of Hospitality Management,
Vol. 31, pp. 160-168.
• Burns A. C. and Bush R. F., (2010). Marketing Research. 6th ed. Pearson Education, USA.
• Choi T. Y. and Chu R. (2001). Determinants of hotel guests’ satisfaction and repeat patronage in Hong Kong hotel industry. International Journal of Hospitality
Management 20, pp. 277-297.
• Crick, A. P. and Spencer, A. (2011). Hospitality quality: new directions and new challenges. International Journal of Contemporary Hospitality Management 23
(4), pp. 463-478.
• Dominci, G. and Guzzo, R. (2010). Customer Satisfaction in the Hotel Industry: A Case Study from Sicily. International Journal of Marketing Studies 2(2), pp.
3-12.
• Hilton, (2014) [Online]. Available at: http://www.hiltonsydney.com.
• Owolabi, W. C. (2010), ‘Marketing Process of Hotel Services’, Lahti University of Applied Science
• Appendix
Questions
Q1: What major products and services are offered by Hilton Sydney and how are they being distributed to the final consumers? Please explain in brief
………………………………………………………………………………
Q2- What do you think is the strategic position held by Hilton Sydney in terms of its strengths, weakness, opportunities and threats?
………………………………………………………………………………
Q3: Please explain about the competitive rivalry and the strategic position in terms of competitive conditions facing Hilton?
