Introduction to Business Environment

The current scenario of the world has been very dynamic and has affected the UK hotel industry in a positive and negative manner. The industry has witnessed changes in the area of operational performance due to increased price war against critical economic factors (Benson, Tilbury and Wickens, 2012). One of the major trends has been increased medium budget hotels that are acting as a major threat for big hotels. The impact of current business environment has been addressed in this report on the Hilton hotel.

About Hilton Hotel

The most recognized name in the industry, Hilton Hotels & Resorts stands as the stylish, forward thinking global leader of hospitality. With over 92 years of experience, Hilton continues to be synonymous with hotel because of our innovative approach to products, amenities and service (Hilton, 2013).

 Hilton hotel

Hilton hotel is a multinational firm headquartered in Beverly Hills. It is known for its stylish, forward thinking global image in hospitality industry. This is due to 92 years of experience. The roots of hotel can be traced back to the year 1919 when the first hotel was bought by Conrad Hilton. The hotel to bear the name Hilton was Dallas Hilton which was a high rise that opened in Texas in the year 1925. Growth started from its very inception when Hilton opened its first hotel named as Waco Hilton with amenities like cold running water and air conditioner systems in public rooms (Mosley and Pietri, 2010).

Hilton hotel and resorts formerly known as Hilton hotel is an international chain of full service lodge and resorts. It basically is a flagship brand of Hilton worldwide. The hotel chain claims to have a fastest growth rate over past five years. It has shown a room growth of 29 percent and 950 hotels have been added since 2007 (Reid and Bojanic, 2009). It also has a current pipeline of 860 hotels under development. In the year 2011 it managed to open 170 hotels and has more rooms than other chain in US.

The hotel has shown revenue as largest group in 2011 across the world. It has also generated revenue of around 8 billion US dollars in 2011. The hotel is basically a private firm belonging to hospitality industry and has being ranked among 38th private company in Forbes.

The sector in which the hotel operates is hospitality. At present it has more than 3750 outlets with 615000 rooms in a span of 85 countries. These are inclusive of Conrad Hotels & Resorts, Double Tree by Hilton, Homewood Suites by Hilton, Hilton Grand Vacations. The company has also managed to provide world-class guest reward program under the name of Hilton H Honors (Robbins, 2009).

Hilton Worldwide has been the leading hospitality company, where operations span from lodging sector, luxurious full-service hotels and resorts. It moves up to extended-stay suites as well as a vast array of mid-priced hotels (Burgess, 2000). It has been involved in offering top class accommodations, service and amenities to business and leisure travelers. The major business activity has been to provide hospitality related products and services to its guests and clients. The customers of IHG are mainly business class and leisure seeking travelers. The market is spread over major countries and cities in the world. In this respect Hilton has an 8% share in the branded rooms market and 3% in entire hotel industry.

SWOT Analysis of Hilton hotel

Strengths

The Hilton group of hotels has high brand recognition in hospitality industry. The presence of technical innovations has led to an improvement in consumer experiences. There have also been constant upgradations of business processes. On internal front, the hotel boasts of good employee relations. It became one of the first organizations to get a certification from International Organization for Standardizations’ for Quality and Environmental Management Systems.  The hotel chain has a good market reputation among consumers for offering several loyalty programs. Development in these areas has been very helpful during sluggish market conditions. The international systems and diversified expansion has helped in gaining a strategic garnering leadership position (Kaplan and Haenlein, 2010). 

Weaknesses

There has been a limited market share in spite of a good brand recall. Moreover, the operations have been badly affected by differences and rapid changes in government policies and parameters (Sarkis, Torre and Diaz, 2010).

Opportunities

There are various market expansion opportunities especially in emerging markets. Innovation on consumer services can be used for more improvements. There are prospects of introducing new technology and digitized processes in hotel offerings (Discover a world of opportunity, 2013).

Threats

The major threats have been due to Euro zone crisis and the downturn of economy due to recession. Volatile currency market is also making operational planning difficult. Frequent change in consumer preferences and tastes is making it difficult to introduce product and service offering. There is high risk of competition as most of hotels are providing quality services (González and Garazo, 2006).

 Horizontal and Vertical Integration

Horizontal integration happens when a firm undertakes merger or acquisition with another organization at the same level of business. The main benefit is an increased market share of the company (Benson, Tilbury and Wickens, 2012). Here, a deliberate attempt is made by a company to bring resources of rival firms for enhancing consumer base followed by market share and enlarge its customer base as well as market share. Hilton Company has a huge portfolio of hotel brands and resorts that have been due to horizontal integration.

On the other hand, vertical integration occurs when distinct steps are taken in production and distribution of products and services. Hilton in terms of vertical integration has provided provides many packages to its clients and guests (Sarkis, Torre and Diaz, 2010).

Impact

There is a presence of positive and negative impact due to economic conditions present in whole of Europe. These have been in form of euro zone crisis, economic recession, modifications in UK visa regimes etc. They have impacted the operations of Hilton in a negative manner. However, there is some presence of bright sides as well. These have been removed trade barriers, inflow of tourists; economic growth etc. has lead to increased sources of revenue for Hilton hotel (Kaplan and Haenlein, 2010). It is very clear on the basis of marketing and management journal of hospitality that hotels belong to cadre of late cycle. It is management of hotel Hilton that decides over the policies. This reflects that changes may not been be visible in a near time. In this scenario, it is essential to study the economic factors that can be considered to be the most significant and how they have impacted Hilton hotel (Mosley and Pietri, 2010).

Due to crisis of Euro zone the revenue of Hilton hotel fell by 30 percent. On basis of statistical record of IBIS World, the hotel sector of UK has reduced by a rate of 1.1% on a yearly basis. This has clearly blemished the performance of Hilton hotel leading to a decrease in occupancy rates. The changes in visa regimes have impacted the inflow of foreign tourists on a large scale. Moreover, some of the domestic travelers also found it difficult to  their holidays.

Inflation has also acted as a significant factor to decrease the purchasing power of consumers. There has thus been a reduction in consumer spending with respect to high class service offering of Hilton hotel. Leisure travelers also were affected as a slight increase in prices leads to reduction in their travel related spending (Robbins, 2009).

On analysis of the demand and supply situation of Hilton hotel it is clear that the consumer base visiting the hotel is inclusive of business class travelers as well as leisure tourists that use facilities offered by hotels in form of spas, pools, accommodation rooms, business centers with added amenities in form of fax and modem points plus extra work space. Hence there is a need to set pricing of services by hotel in such a manner so as to provide maximum consumer satisfaction without affecting the overall revenue structure of hotel.

LAWS AND VARIED REGULATIONS

There is a presence of varied laws and governmental regulations that are relevant for the managers of Hilton hotel.

  • Privacy law is required to be followed by managers of Hilton hotel which do not allow for unregistered individuals enter into guest rooms.
  • An increased awareness about disability law is also required with respect to appointment of new employees to hotel. According to this law there must be recruitment and fair treatment of employees with disabilities to induce elements of diversity in work environment. This must be adhered with as it is the major area that leads to number of lawsuits (Burgess, 2000).
  • There must be informed flow of procedures with respect to safety regulations linked with fire, infrastructure etc.
  • A brief overview about possible crimes must be present so that employees are aware about them and also inform it to respected authorities.
  • Manager must spread awareness amongst employees with respect to insurance regulations when issues are raised by client for the same (González and Garazo, 2006).
  • Construction laws must also be kept in mind in order to adhere with materials and architectural designs that have been chosen by hotel.
  • Proper laws with respect to licensing must be followed for full adherence to issues of mishandling the procedural guideline

At present there are 27 member states belonging to European Union. Among these in six core states were predecessors to Economic Community of Europe during the year 1957.  The rest 21 states have joined EU after subsequent enlargements. Given below is a list of major states and the joining year (Sarkis, Torre and Diaz, 2010). 

(Source: The European Union, 2013)

 Various conceptions are related to advantages and disadvantages for hotel industry especially Hilton group if United Kingdom adapts to currency of Euro.

Advantages

It is hoped that euro currency will lead to elimination in transaction cost incurred on operations of Hilton hotel.

There would be an increased transparency in pricing due to adherence to single currency. Consumers will not have to calculate pricing of goods and services offered by hotel Hilton. This will lead to a significant increase in spending power of tourists and visitors that visit Hilton hotel (Jones, 2013).

The aspect of uncertainty that happens on account of exchange rate fluctuation will also be reduced to a great extent.

There will be a reduction in overall cost structure within operations of Hilton hotel due to a decreased requirement for buying foreign exchange within the European Union.

Disadvantages

The adaptation to currency of Euro by United Kingdom is bound to cause a large number of disadvantages for hotel firm. These are in form of several core issues that will impact the operations of Hilton hotel. Adoption of Euro may be seamless from guest point of view but firm should be able to bring clarity to decisions regarding conversion so as to meet the requirements of concerned parties (The European Union. 2013). Issues might be raised with respect to liaison structures as there is an absence of surety that conversion can meet up with the necessities of hotel owners. The adaptation to single euro might not be very consistent with the procedural guidelines placed by hotel.

Enlargement of European Union

Enlargement of EU is found to be helpful in creation of a complete and coherent tourism industry that is likely to have far reaching benefits on the operations of Hilton hotel. There would be a substantial liberalization towards the norms of international trade followed by an elimination of non tariff barriers so as to aid in process of tourist flow. All this would definitely lead to increase in cliental base of Hilton Hotel that would further stimulate growth, operational productivity and provide for creation of many opportunities (Sims, 2002).

Social and Economic Trends

There have been several trends with respect to social and cultural trends over the last few decades in United Kingdom. These are inclusive of disposable income, increased standard of living followed by changes in demand of goods and services. As per the data, United Kingdom is considered to be having third highest GDP per person (Laplume, Sonpar and Litz, 2008). Due to this reason, there has been significant changes in lifestyle patterns on account of increased spending on famous hotels. This also includes Hilton group of hotel. They have posed a significant impact on operational capacity of hotels. The changes are reflective of demand in healthy food options, customized service offering, online shopping norms that have posed impacts on overall hospitality industry (Sarkis, Torre and Diaz, 2010). In this regard, there is a need to undertake many marketing and promotional strategies for ensuring a better customer relationship in context of Hilton hotel. From employee point of view, there has been movement towards work flexibility which involves a chance to choose from how, when and where to work.

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Here, the need is to focus on ongoing trends with respect to consumer and employees but within the boundaries of organization. In the last few years, there has been an increased importance towards environmental norms (Henley, 2004). Thus the consumers have started discouraging those hotels that involve in wasteful consumption of resources which shows adherence towards environmentally unsustainable practices. Hilton, hotel has by far been successful in its efforts towards environment. For example, Hilton Vancouver Washington has been recognized as being the first hotel in history to be the leader in Energy and Environmental Design (LEED). For this, it has been certified with Green Seal.

With presence of an increased disposable income, the customers have started preferring services of luxury hotel like Hilton. This is clear from the rise in consumer loyalty by 10 percent. Population growth has been a significant factor to increase the overall demand structure. However, increase in ageing population is a cause of concern (Enz and Canina, 2010). It can be defined as a shift in an overall distribution of age towards old individuals. Moreover, these are further represented by a substantial as well as an underdeveloped consumer base. It is expected that the growth in ageing population is one of the most important socio economic changes seen by UK hotel industry (Aging Population to Impact Future, 2011). According to figures, the ageing population is expected to rise by 25 percent up till 2015. In this respect, there is a requirement to handle issues related to talent management which may likely cause a negative effect on process of recruitment.

On a positive front the overall ageing population is very impressive in form of showing high levels of consumer loyalty (Zientara and Bohdanowicz, 2010). They are also more educated and experienced which is helpful for hotel Hilton. The need is to devise strategies and bringing changes that will be helpful to grab the sophisticated and ageing client base. In the areas of health conscious clients, there will be an increased pressure on catering department to ensure good supply of healthy diet options (Sims, 2002).     

TECHNOLOGY

A large number of technological inputs have posed significant impacts on hospitality industry. Many changes have been observed in the last five years. Hilton hotel has adopted There computerized booking system to help in the process of online reservation. Better transport facilities provided on behalf of government of UK has enhanced flow of tourists to Hilton hotels (McGunnigle and Jameson, 2000). There has been a rise in usage of social networking sites so as to provide for customization of service offering. Increased use of internet by consumers in Hilton hotel has attracted a wider consumer base but also caused for negative word of mouth publicity.

The technological innovations have acted as a boon on one hand but also hindered with the progress of firm. In this regards, there is a requirement in part of Hilton hotel to create a human resource team in form of a specific infrastructure to beat the rival firms (Tribe, 2004). Up till now usage of novice concepts like promotion via internet, social networking sites has helped to identify labor markets and keeping track of performance related to employees etc. Various kinds of technological inputs has aided to operational efficiencies by firm. For example, there has been a provision of booking the rooms via mobile devices in Hilton hotel.

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Thus sensing the present technological innovations there is a need to optimize the operational functionality of websites so that they can be accessed by visitors in a timely manner. New technologies can be utilized to improvise customer satisfaction and performance of employees. For example, data mail campaigns, designing of seasonal promotions and personal advertisements are a must to grab consumer base (Wymer, 2007).

CONCLUSION

Changing economic policies, technology, legal norms, social and cultural ethos play a profound impact to decide the future and present success of Hilton hotel. Hence, it is a key to have a brief overview about required strengths and weaknesses of Hilton hotel in order to assess how the managers of hotel can deal with opportunities and threats (Palmer and Hartley, 2009). It is a known fact that every factor is likely to have an impact on operations of Hilton hotel. Adaption to the process of rational thinking is also a must for adapting to changing situations.

Although Hilton hotel carries a bright future but still it is required to be in tune with upcoming trends to gain an edge over its competitors. Many structural changes are advisable to maintain the position of leader in hospitality industry (Lago and Pofley, 1993).

REFERENCES

  • Atkinson, H. and Brown, J. B., 2001. Rethinking performance measures: assessing progress in UK hotels. International Journal of Contemporary Hospitality Management. 13(3). pp.128 – 136.
  • Benson, A.M., Tilbury, J. and Wickens, E., 2012. Sustainable Tourism Management and Marketing. Journal of Hospitality Marketing & Management. 21(7). pp.703- 709.
  • Burgess, C., 2000. The hotel financial manager – challenges for the future. International Journal of Contemporary Hospitality Management. 12(1). pp.6 – 12.
  • Clark, J.R. and Lee, D.R. 2011. Markets and Morality. Cato Journal. 31 (1). Pp. 1–25.
  • Enz, C.A. and Canina, L., 2010. Competitive pricing in European hotels. Advances in Hospitality and Leisure. 6. pp.3-25.

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