The Hilton HHonors program believes that loyalty is the key to success in the sense of attracting and keeping the hotels customers. Hilton made this program to “build loyalty to the Hilton brand worldwide” (Deighton & Shoemaker, 2013). Hilton HHonors has both strengths and weaknesses in its business that may benefit member properties, guests, travel departments and the Hilton Hotels Corp. The Starwood has created its own program to increase customer loyalty, to, which the head of Hilton HHonors, Jeff Diskin, has to decide what to do (Deighton & Shoemaker, 2013).
Hilton HHonors created double dipping service and was the only chain to offer it. This is definitely one of their strengths from the Hilton International and the Hilton Hotels Corp standpoint. What it does is, it allows for customers to save up points, and redeem them but not only at the hotel, but also with affiliated partners such as FTD Florists and partner airlines, whereas other hotels only allow you to earn points if you stay at the hotel. Customers are also able to buy different products and services.
Although this service is very beneficial, it also has some weakness. HHonors failed to take into account blackout dates, paperless rewards, capacity control and hotel reimbursement, which was brought by the Starwood Preferred Guest Program. HHonors does not allow its members to request and redeem their points or request a room upgrade when it is a peak season. The Starwood Program also allows customers to pay with points for all the unreserved rooms, whereas HHonors only has a limited amount for its members.
The paperless rewards don’t require the customer to present a certificate that was given by exchanging points; now Starwood’s Program has made it much easier and allows individuals to pay directly with their points. From the standpoint of franchised hotels, the franchisees are able to expand their business, because they are able to use the Hilton brand name, which brings them more business (Deighton & Shoemaker, 2013), (Kelly, 2012). HHonors benefits the guests in the way that it rewards its members.
Members may be awarded with either a Silver VIP status, Gold VIP or the Diamond VIP, which includes a lot of benefits such as priority-reservation, receiving bonus points and discounts. They are able to use partner airlines, Mrs Field cookies, buy products by redeeming their points, getting a room upgrade if they are dissatisfied, guest profiles, etc. This is all done to maximize customer satisfaction and repeat business. As stated previously, the guest are only allowed to use certain services such as redeeming their points for a free stay only at certain times, having to exchange their points for a certificate, etc. these complicate things for the customers. Corporate travel departments were offered discounts in exchange for a certain number of stays. The problem with that is that customers may be loyal to other brand hotels; it may be difficult for the travel agencies to convince the customer to stay at the Hilton hotels; “Our overall objective is to use the program as a tool that can help the travel manager with compliance to their overall travel policy” (Deighton & Shoemaker, 2013). The value that is generated by the program exceeds its costs. Hilton hotel’s cover a fixed cost of 68% occupancy.
The HHW program helps increase the occupancy level through corporate travel departments, where “occupancy has exceeded break-even” (Deighton & Shoemaker, 2013). Since they have exceeded the break-even point, this means they are making more revenue than their expenses were. Also, according to their income statement, their net income consists of $399. This program is definitely exceeding in their revenue rather than their costs. Starwood is attempting to increase competition for customer loyalty by providing customers with rewards, and more convenience in the program in comparison to HHonors.
The head of Hilton HHonors, Jeff Diskin, has to decide whether or not to compete with Starwood and match up to their level or not respond. Jeff Diskin should try and improve the program and making it more convenient by providing the customers with more rewards, such as the ones in the Starwood Program. The easier it is for a customer, the happier they are. Diskin can also try not only improving more program, but adding more, such as double dipping that they have created previously, which was very beneficial, making them very unique.
The “activation, retention, and member spend per visits all have improved. If we can deliver the same amount of business to the Hilton brand and it costs less, Hilton makes more margin” (Deighton & Shoemaker, 2013). Jeff Diskin should not try and match up to the Starwood level and spend more money, but just improve what they already have, especially due to a previous experience in price wars that he has had with United Airlines, which resulted in damage (Deighton & Shoemaker, 2013).
The Hilton HHonors program brought in a lot of profit that has overcome the costs. The loyalty program is very beneficial in attracting guests and keeping them, having franchisees sign management contracts, travel departments bringing in more business, etc. This program does have its weaknesses, but who doesn’t. Overall, the profits overcome the expenses, and the benefits overcome the flaws. References Deighton, J. , & Shoemaker, S. (2013). Essentials of services marketing (2nd ed. ).
