Hilton Hotel Corporation to India

Business in Asia Pacific – TERM PAPER Hilton Corporation Hotel and Marriott Hotel facing the Indian Luxury Hotel Industry TABLE OF CONTENT INTRODUCTION3 1The Luxury Hotel industry in India4 2Hilton International4 2. 1Hilton Hotels Corporation (HHC) on a global perspective4 2. 2Hilton Hotel Corporation in India6 3comprasion of the two different strategy15 3. 1HHC’s co-branding16 3. 2Mariott Hotels penetration16 Bibliography17 INTRODUCTION 1. THE LUXURY HOTEL INDUSTRY IN INDIA 2. HILTON INTERNATIONAL 1. HILTON HOTELS CORPORATION (HHC) ON A GLOBAL PERSPECTIVE Facts & Figures In 1919 Conrad Hilton bought his first hotel in Cisco (Texas).

The first hotel under the name Hilton was built in Dallas in 1925. In 1945 Hilton become the first hotel group of the United States and 6 years later, they opened new hotels outside of USA in San Juan, Porto Rico and bought the Waldorf Astoria in New-York. Hilton Hotels Corporation (HHC) is now managed by the Blackstone Group, an American investment bank, which bought it for more than 26 billion $. [Corporate Financing Week. August 2007] Nowadays, HHC is based in Beverley Hills in California and employs about 135’000 employees. The company recorded revenues of $8’090 million and a net profit of $121 million in the financial year 2007. HHC annual report 2007] |Top ten hotel groups in the world | |Rank |Group |Hotels |Hotels |Evol. |Rooms |Rooms |Evol. | |2008 (2007) | |2008 |2007 |Hotels |2008 |2007 |Rooms | |2 (2) |Wyndham Worldwide |6 544 |6 473 |71 |550 576 |543 234 |1. % | |3 (3) |Marriott International |2 901 |2 775 |126 |517 909 |502 089 |3. 2% | |4 (4) |Hilton Hotels |2 959 |2 901 |58 |497 365 |497 738 |-0. 1% | |5 (5) |Accor |3 857 |4 121 |-264 |459 494 |486 512 |-5. % | |6 (6) |Choice International |5 516 |5 316 |200 |445 254 |429 401 |3. 7% | |7 (7) |Best Western |4 035 |4 164 |-129 |308 636 |315 401 |-2. 1% | |8 (8) |Starwood Hotels & Resorts |897 |971 |26 |274 535 |265 598 |3. 4% | |9 (9) |Carlson Hospitality |971 |945 |26 |148 551 |145 933 |1. % | |10 (10) |Global Hyatt |720 |733 |-13 |138 503 |141 011 |-1. 8% | | |Total |32 349 |32 040 |309 |3 925 917 |3 883 163 |1. 1% | Table 1: MKG Hotel Groups World Ranking 2008 [MKG, January 08] HHC is present in 74 countries and is managing or franchising a hotel portfolio in every continent of the world.

As we can see on the table above, HHC is the 4th largest group of hotels in the world with nearly 3000 hotels and 500’000 rooms around the world. HHC has different categories of hotels around the world and for the luxury segment HHC provides its Conrad Hotel & Resorts. This category represents 6120 rooms in Europe (4 hotels), Middle East and Africa (2 hotels), Asia Pacific (8 hotels), Americas (4 hotels). Nowadays, the brand Conrad is not present in India but we will explain you later through which way HHC has penetrate the Indian market. The Franchising system of Hilton 82. % of the HHC are under franchising [Des Plaines: Aug 2008]. This high percentage shows us the importance of franchising for Hilton. The Journal of Small Business Management defines the franchising relationships as “a form of collaboration in which an upstream firm, the franchisor, sells the right to market its products and/or services using a proven business concept and its brand name to legally independent entrepreneurs, the franchisees. “[JSBM, January 08]. Practically it means that Hilton allowed their franchisees to run their own hotel under the name of Hilton brand and in return Hilton received franchising fees.

Hire a custom writer who has experience.
It's time for you to order amazing papers!

order now

This concept is regulated by several expectations from HHC [HHC website]: ? ( Uphold brand value, product and service quality standards, and our culture of complete guest satisfaction. ? Total commitment to building customer loyalty. ? Ensure that the employee team members are well-trained and focused on delivering on our commitment to product and service quality. The long-term health of our brands depends on this commitment. In the guest’s mind, a brand is only as strong as its weakest property. Rigorous enforcement of standards helps both of us. Tell us directly how we can better serve and support you. We invite our franchisees to communicate openly and regularly to provide input to improve our brands and relationships, and will seriously consider all ideas and points of view that benefit the brands and our relationships. ? Take a proactive role in building new HHC brands in your markets. We expect and encourage our quality HHC franchisees to be the most aggressive developers of our brands, and we will try to help them in that effort. ( 2. Hilton Hotel Corporation in India

After having seen the HHC on a global perspective and understanding the global strategy of the company, we will explain how the company has reached the Indian market and analyze the strengths and the weaknesses of its operation. In the late 90’s Hilton International tried its first penetration to the India’s hospitality sector in concluding an alliance with a self-made hotelier in Delhi and later with a resort owned by Sanjay Khan, a former film actor, but both tentative fell apart. After having learned from this bad previous experience, Hilton International had agreed a franchising deal with India’s Oberoi group in 2003.

At that time, Oberoi is the India’s second-largest hotel group with 30 hotels in India [FT September 2003]. By the agreement, nine hotels belonging to Oberoi were renamed under the Hilton brand. According to the Economist Intelligence Unit Ltd “the Oberoi group will use the international brand equity and worldwide marketing resources of the Hilton group but will continue to manage and operate all its properties. The 15-year arrangement between the two hotel chains involves the Oberoi group paying a certain percentage of room sales as fees to Hilton. Under the agreement Hilton is free to build and own properties India”. EIU, September 03]. For instance, the domestic marketing, promotions and reservations in India where undertaken by Oberoi group while Hilton International was responsible for international marketing, promotion and reservations through its global network. In exchange HHC receives 3 to 5 percent of the gross room revenue. [Businessline, August 2008] The franchising concerned the brand Trident, a luxury hotel existing at Agra, Kochi, Chennai, Bhubaneshwar, Jaipur, Udaipur and proposed hotels (at that time) in Gurgaon and North Mumbai [pic] [pic] [pic]

Table 2: (from left to right) Trident at Udaipur, Agra and Jaipur The famous Oberoi Towers was also re-branded Hilton Towers. Table 3: The Oberoi Towers Strengths of the strategy Oberoi group benefited from the international reputation of the Hilton hotels to attract foreign tourists and were able to reach new customers through the Hilton’s vast sales and marketing network. Mr Mukherji, Managing Director of the company said that “With more globalisation, your brand needs to be exposed to the global market.

The current strategic alliance with Hilton for our Trident brand is for this. Internationally, Hilton hotels are well accepted by the mid to senior company executives and also well established with global tour operators”. [Businessline 2003] With this agreement, Oberoi group had a higher occupancy level. For HHC the franchising strategy with Trident brand allowed it to benefit from the Trident’s domestic brand position and operational expertise. It also brought a major access to 1900 rooms in the Indian market. [Businessline 2003].

To go through franchising allowed HHC to be present quickly in the market without a major investment. At that time Mr David Michels, Hilton Group chief executive said “Our presence in India is important and we have finally found a partner we feel safe with”. Indeed, other major hotel groups were already present in India and to be there was really important for them in order to keep a global advantage on the market. [FT, September 03]. Another important aspect in his sentence is the fact that going together with a local brand is less risky than going your own.

Indeed, the local brand has the local knowledge and is adapted for the local needs. Moreover by this experience HHC acquired a lot of knowledge concerning the Indian market. As we can see, there is strengths for both part and a franchising strategy do not request a lot of investment as the hotel are already build and allowed both part to take profit from the experience or support of the partner. Nevertheless, there are also weaknesses of the strategy which are described bellow that the HHC had to take into consideration and to do its best to avoid the bad consequences of them.

The weaknesses of the strategy To explain the different weaknesses of this strategy, we will lead you through the facts which happened after 4 years of partnership between Oberoi and Hilton. Indeed, these years of partnership through the Trident Hilton Hotels, Oberoi and HHC have ended the co-branding partnership. At that time (2007) HHC was planning a joint venture with DHL, the Indian’s largest developer; to open 10 Hilton branded hotels in India through their mid-segment hotel (Hilton Garden Inn) [HHC, Mai 2007].

For Oberoi it had been seen as a threat for their Trident image, indeed, for Mr Mukherji, Managing Director of EIH Ltd[1], “there may be too much confusion in the minds of customers with many types of Hilton hotels in the country” [Businessline, September 2007]. This example shows that when you are doing co-branding with two brands, they should share the same value or you will have an image problem. Moreover at that time, Trident Hilton Hotel was playing in the same segment as the Oberoi brand: “We are projecting Oberoi as a five-star deluxe brand and Trident as five-star brand.

We need to have distinctive brand identity for these two” said Mr Mukherji. On the side of HHC, due to the fact that the hotels were owned by Oberoi, the end of the partnership reduced the presence in the luxury segment of HHC. To conclude this part, we can say that for HHC this co-branding was a good experience because it allowed the company to enter the market quickly, to gain knowledge concerning this market and to make its brand Hilton known without huge investments. Nevertheless, after 4 years of partnership HHC had no more hotels and had to react quickly to keep a good position in the Indian market.

We think that this partnership with Oberoi was a first step for them to use the strengths mentioned before and to prepare the second step they are doing now, for instance, the push of their own brand through joint venture with DFL and the build of their own Hotel. Koos Klein, President of Hilton Hotels Asia Pacific, said, “With huge growing demand for hotel room supply in India, there is great potential for Hilton to tap this opportunity, particularly now that we have partnered with the country’s largest developer.

We are conducting extensive research into what the Indian business traveller wants on the road and these insights will help us customize short and long stay business hotel prototype concepts for the Indian traveller’s needs. We aim to define the business hotel segment in India”[HHC, May 2007] and added: “in India, a lot of people have plans, but not a lot of land, DLF does” [Wall Street Journal June 2008]. With this important partner, HHC will have the opportunity to reach every segment of the market in a near future. 3.

Marriott Hotel 1. MARRIOTT HOTEL ON A GLOBAL PERSPECTIVE 2. Marriott Hotel in India Demand for business hotels in India is expected to remain strong with India’s favoured status as an outsourcing destination. SOURCES According to Mr Rajeev Menon, Marriott’s Vice-President (India, Malaysia, Maldives & Pakistan) “Over the last five years Marriott has been growing on an average by 25-40 per cent in India. This year, when the US has gone into recession and Europe has slowed down, we are still going to grow in the double digit range. “That’s a pretty good number in a depressed global market, in Asia, too, growth has been lower than in India. “he said SOURCES Marriott currently operates six hotels in India, the 358-room JW Marriott Hotel Mumbai; the 178-room Goa Marriott Resort Panjim; the 287-room Hyderabad Marriott; the 286-room Renaissance Mumbai Hotel & Convention Center; the 171-unit Mumbai Lakeside Chalet Marriott Executive Apartments; and the 238-room Courtyard by Marriott Chennai. The company has planned to open other 24 hotels in the next year. Some of them are going to be open by 2009/2010 and others by the end of 2011.

The company had revenues of $150 million in India last year, and is expecting revenues of $165-170 million in 2008, against $170-175 million projected a couple of months ago. Similarly, for 2010, revenues are expected to be about $225 million ($250 million projected earlier). [Bussines Line 2008] After having seen Marriott International on a global perspective and understanding the global strategy of the company, we will explain how it had reached the Indian market with its first hotel and describe the future implementation of their luxury hotel.

At the end of the part, we will analyze the strengths and the weaknesses of its different operations. Marriott International had first penetrated the Indian market in 1999 [Businessline, November 1999] in Goa which is situated at 45-minutes drive from the Dabolim Airport and is accessible to guests via the hotel’s own shuttle bus service. Even if the hotel is in the category of the 4-stars we will analyze the strategy used because it is the first implemented hotel of Marriott in India and the same strategy will be use later for their luxury hotels brand “JW Marriott”.

Goa Marriott Resort taped the high-spending international traveller. To be able to enter the market, Marriott International made an alliance (management agreement) with the Salgaocar group active in mining and export of iron in India which diversified itself and became a partnership company in 1952 [Salgaocar]. According to the agreement, Marriott International is running the hotel (day-to-day management, Human resources, Marketing & Sales etc. ), while Salgaocar group owns the hotel and is in charge of the development. Businessline, May 1999] Marriott and Salgaocar group decided to build the hotel at this place due to the fact that they were no high standard offer near Panjim the capital of Goa’s state and the place was promising for future investment of international companies. Indeed, at that time Mr. Salgaocar, the owner of the hotel said: “that thanks to the attractive tax holidays in Goa, there were plenty of business opportunities, and pharmaceuticals, electronics, food processing and software industries had appeared on the scene in plenty. His hotel project was targeting executives from these industries who would be increasingly travelling to Goa”. Businessline, May 1999] [pic] [pic] Table 4: Goa Marriott resort (from left to right) during the day and the night After this first success, in the Indian market, Marriott International decided to apply the same strategy with their future hotel from different categories. Nowadays, in the luxury segment, they are present in Mumbai, the city with largest population in India [MCGM] and in Bangalore with the brand JW Marriott hotel. The near future shows us that Marriott wants to push its luxury brand JW Marriott into the Indian market.

Indeed, in 2009 India will count more JW Marriott, one in Gurgaon, in Pune and in 2011 in Chandigarh. These three hotels will be the result of the same strategy that Marriott International already used; a long-term management agreement, this time, with the Uppal Group which is an important real estate developer in the northern region [Marriott website]. In fact, Marriott International will deal with the day-to-day operations (management), while the Uppal Group will own and developed the hotel. In 2011 a new project is planned in Kolkata through a management agreement with Emaar MGF Private Limited.

Emaar MGF Private Limited is a joint venture between Emaar Properties PJSC one of the world’s leading real estate company and MGF Developments India’s leading real estate developer. [Al Bawaba, November 2006] Apart of this strategy for the construction and the management of the hotel, Marriott International has implemented in 2003 a Global Sales Office which will “assist Indian travellers in their international lodging needs. It will also play a vital role in consolidating business from Indian corporate houses, besides leveraging Marriott’s strength in the global marketplace. said Mr Samir Daqqaq, Vice-President (West Asia, Africa & Subcontinent) [Businessline, April 2003]. At that time he added that “The company sees scope to exploit the potential existing in the corporate, incentive and leisure segments of the travel market and hopes to achieve this by working closely with corporate, travel agents and the travel trade” [Businessline, April 2003]. After having understood the strategies of Marriott International in India to penetrate the Indian market, we will analyze the strengths and the weaknesses that Marriott International had to deal with during its expansions.

The strengths We can see that Marriott strategy, in the luxury segment, is different than HHC’s strategy. Indeed, Marriott hotel decided to enter the market thought hotel management agreement comparing to the franchising strategy of HHC. Strength of this strategy is that you are dealing with local developers who own the land in the country and therefore it is easier to find a place to build you hotel. David Kong, CEO, Best Western International active in India confess that it is hard for them to find land: “India offers a great opportunity, but it takes a long time to get the land and go through the ecessary paper work to complete a project. ” [Hotel, April 2007]. Another important point is that when you build new hotels, the brand identity is clear for the customers. Ed Fuller, Marriott International’s president and managing director said: “That’s the advantage of being able to build new, there’s a very clear understanding of the JW brand in Asia. It is about ‘approachable luxury,’ and the product is very consistent across the region” [Hotel, April 2007].

With the hotel management agreement, Marriott International is responsible of the running of the hotel, therefore they have the control on the different operation they are doing. Working with a local leader, allows Marriott International to reach the local customers needs, talking about their partnership with Uppal group Ed Fuller said: “We were conscious in selecting the partner to design the hotel since the construction plays a vital role in operations. The Uppal Group is known to provide architectural marvel and holds an expertise to build and deliver properties in this genre.

The endeavour would ensure optimum blend of design, architecture and operations to serve the customer in a better way. This will be the first of its kind project in the coming times. ” [Marriott Website]. Finally, the fact that Marriott International, is dealing with different partners is also a strength, there are not dependent on them and have, therefore, a power of decision. Apart of the strategy for the construction and the management of the hotel, the implementation of a Global Sales Office (GSO) is an important factor of success for Marriott International in India.

It allows them to be expert of the market, to be closer to the customers and to work closely with the corporate, travel agents and the travel trade. For David Marriott, the hotel company’s senior vice president of global sales: “It’s a very customer-centric approach, whereas in the past, many of our sales efforts were designed around individual hotels, now we’re designing around the customer. “[BTNOnline, January 2008] The weaknesses The Marriott International’s strategies seem to be a success and therefore not a lot of weaknesses have been faced.

One of them is that, even if Marriott as a good decision power, the important decisions could take a long time because you have to deal with different partner with different interest, especially in case of global changes. The fact that they do not owned their hotel can be a weaknesses in ca se of disagreement with their partners. To conclude, we can say that Marriott International strategy is based on management agreement with local developers which allowed them to have a relatively quick penetration in the luxury segment. This strategy has showed more strengths than weaknesses comparing to the HHC’s franchising strategy.


The place The Goa Marriott Resort was the first hotel under the Marriott brand in India, it was opened in December 1999, launched in alliance with the Salgaocar group, the 165-room five- star luxury hotel is located on the banks of the Mandovi river, on Miramar Beach facing the Arabian Sea and close to the capital city of Panaji, business and industrial belt and Old Goa with its history and cultural heritage. Designed to meet the demands of both the business and leisure traveller the Resort boasts. 5th Hotel? Viceroy??? (should we talk about this one? ) Marriott in India compared to Asia

Asia currently contributes 10 per cent to the overall revenues of Marriott, while India (though growing faster) contributes less than 1 per cent, so Asia and specially India have become an important focus area for Marriott. In 2003 Marriott opened a global sales office in India to sell its portfolio of nearly 3000 hotels nowadays. By the time the India office, headquartered in Mumbai, was only the fourth in the Asia Pacific region, and the tenth globally. In Asia-Pacific, it has largest operations in china with over 25 hotels, where it is offering its entire bouquet of brands. [EIU Views Wire, 2003]

How did they deal with cultural aspect (describing the aspects and see how they adapted? ) Marriott adapts to the local culture quite well as they usually buy or merge with a local company, to build a hotel in a certain place. This is very useful for Marriott because the local companies know what is important regarding culture and they know quite well how to handle this subject. Culture is a very important issue in India and it is important to think about it or else it would very hard to expand in this country. It is not the same to build a hotel in India or somewhere else therefore the guides that the local hotels give are very important.

Usually, Marriott takes the ideas of the local companies, these local hotels keep those similar services that people in India usually like and Marriott usually deals with the operational management. Strategy: through which way? (partnership, etc.. ), process of the implementation (place, services, timing, price, promotion), issues they have experimented Marriott’s strategy is to expand all over India seeing that this country is not stopping to grow and that there are good expectations in the future. “Over the last five years Marriott has been growing on an average by 25-40 per cent in India.

This year, when the US has gone into recession and Europe has slowed down, we are still going to grow in the double digit range. ” Marriott want to take advantage of the fact that India is going to continue growing while other countries growth rates are quite stable, or even going in to recession. In India, Marriott is seeking the right properties, right location and right partners, moreover Marriott’s challenges in India are the same as in other countries, learning the market and finding the right people with the same philosophy. Marriot is always looking for properties they can redevelop and rebrand in India.

Marriott tries to create a strong brand with good reputation for those travellers who appreciate and value authenticity by providing unobtrusive personal service and luxurious but unpretentious surroundings. (www. albawaba. com) What does Marriott do when expanding in to India ? Marriott’s main strategy is to chose a local indian hotel, to buy it out or to be partners with them in order to have a hotel on their name. This is very important when aentering a country like India because it is already full of hotels in the main touristical area an dit would be very hard to construct a new one.

They also construct some new hotels usually in places where they find that there are hotels missing. They get together with other companies, such as Viveroy or Salgaocar as they’ve done in the past and with their help they open up a new hotel. It is very important for this company to open up a hotel with someone else. This could be because they can get help related to the cultural aspects which is very important in India. Strategy for the future As we’ve mentioned before, Marriott’s strategy is to continue expanding around India, Marriott tries to satisfy the demands of both the business and leisure traveller.

According to Ed Fuller, Marriott’s Managing Director they are also planning to increase their Courtyard brand in India apart from foraying into mid-market segment and golf resorts. The company has signed deals for 24 more hotels within India, they include one Ritz-Carlton Hotel and five JW Marriott Hotels in the luxury segment; two Marriott- and three Renaissance-branded hotels in the upscale, deluxe segment; 11 Courtyard by Marriott hotels in the upper-moderate tier; and two upscale Marriott Executive Apartment properties for extended stay travellers. www. albawaba. com] Out of these, 10 would be added by end of 2009 and the rest by 2011, due to the financial turmoil the properties that were planned to be operational in 2009, are now deferred to 2010, however they still being early times, and they have also seen that growing in a double digit range is going to be really difficult, although Marriott still hopeful of a single-digit growth across its existing properties in India. [Business Line 2008] Although for Marriot the economy brand is not their current strategy he company is also planning to expand business in gateway cities like Mumbai and Delhi and is expected to set up more properties in the capital. Broadly, Marriott intends to replicate in India its UK and China business strategies that have met with big success. In the UK, the company has built about 70 hotels, from just one property seven years ago. 5. comprasion of the two different strategy 1. HHC’S CO-BRANDING 2. Marriott Hotels penetration Bibliography [AL BAWABA, NOVEMBER 2006]* “Emaar MGF and Accor form JV to develop 100 Formule 1 budget hotels across India”. Al Bawaba.

London: Nov 28, 2006. p. 1 [BTNOnline, January 2008] “Marriott Adopts Regional, Account-Based Sales Focus”. Michael B. Baker: January 2008 http://www. btnonline. com/businesstravelnews/headlines/frontpage_display. jsp? vnu_content_id=1003698969 [Businessline, May 1999]* “Marriot to open hotel in Goa in October”, Businessline. Chennai: May 29, 1999. pg. 1 [Businessline, September 2003]* ‘We want to take Oberoi abroad with zero investment’ Businessline. Chennai: Sep 22, 2003. pg. 1 [Businessline August 2008]* “EIH terminates 15-year branding deal with Hilton”, Businessline.

Chennai: Aug 15, 2008. [Businessline April 2003]* “Marriott opens GSO office”, Businessline. Chennai: Apr 24, 2003. pg. 1 [Corporate Financing Week, August 2007]* Corporate Financing Week New York: Aug 6, 2007. pg. 1 [Des Plaines: Aug 2008]* “All Eyes On Asia”. Hotels. Des Plaines: Apr 2007. Vol. 41, N° 4; p. 34. Karyn Strauss [Des Plaines: August 2008]* Des Plaines: August 2008. Vol. 42, N° 8;  p. 25. Derek Gale [EIU, September 03]* “East India Hotels in strategic alliance with Hilton”, EIU ViewsWire. New York: Sep 17, 2003. [Financial Times, September 2003]* Financial Times.

London (UK): Sep 5, 2003. p. 32 [HHC website] http://www. hiltonfranchise. com/Index. asp? S=2=10 [HHC annual report 2007] Hilton Hotel corporation annual report 2007 http://library. corporate-ir. net/library/88/885/88577/items/285616/2007AuditedFinancialStatements. pdf [HHC, May 2007] Linda Bain – VP, Communications – Hilton International (London) http://phx. corporate-ir. net/phoenix. zhtml? c=88577=irol-newsArticle=998829= [JSBM, January 08]* Journal of Small Business Management, Milwaukee: Jan 2008. Vol. 46, N° 1; p. 134. [Marriott Website]

News: “5 Star Deluxe property will be owned & developed by The Uppal Group and managed by JW Marriott” [MKG, January 08] [MCGM] http://www. mcgm. gov. in/ [MKG Hotel Groups World Ranking 2008] http://www. mkg-hospitality. com/Portals/0/FILES/CP_FR/2007/communique_235_fr. pdf [Wall Street Journal June 2008]* Wall Street Journal (Eastern edition), New York, N. Y. : Jun 25, 2008. pg. B. 3 [Salgaocar] Salgoacar Website / Background http://www. vmsalgaocar. com/pg_begining. html[pic][pic] ———————– [1] East India Hotels, a company belonging to Oberoi group