MARKET SEGMENTATION STRATEGY: HILTON HOTEL

MARKET SEGMENTATION STRATEGY: HILTON HOTEL 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…………………………………………………………………………………………………………………………………………….10 Conclusion……………………………………………………………………………………………………………………………………………11 References…………………………………………………………………………………………………………………………………………….12 Appendices……………………………………………………………………………………………………………………………………………13 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/index.html •    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. SOUTHERN CROSS UNIVERSITY ASSIGNMENT COVER SHEET For use with online submission of assignments Please complete all of the following details and then make this sheet the first page of each file of your assignment – do not send it as a separate document. Your assignments must be submitted as either Word documents, text documents with .rtf extension or as .pdf documents. If you wish to submit in any other file format please discuss this with your lecturer well before the assignment submission date. Student Name:    Rupinder kaur(22230300), Raj kaur(22245061), Harpreet kaur (22313641),  Navjot kaur(22192840). Student ID No.:    22230300, 22245061, 22313641, 22192840 Unit Name:    Strategic Marketing of Destinations and Hotels Unit Code:    MKT00905 Tutor’s name:    Gianpiero Battista Assignment No.:    1 Assignment Title:    Situational Analysis Due date:    17/11/2014 Date submitted:    17/11/2014 Signed: (please type your name) Rupinder Kaur, Raj Kaur , Harpreet Kaur , Navjot Kaur Date:    17/11/2014 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.au/directions-map [Accessed: 16 November 2014]. •    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? ............................................................................................................................................................ PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET AN AMAZING DISCOUNT :)