Hilton Franchising

Franchising at Hilton Hotel Corporation By : Cindy Budiman Devina Sastria Edwin Salim Wiguna Juvena Elizabeth

PowerPoint Template

Contents History Hilton’s Business Model

Franchise Development Process HHC’s Principles Of Franchising Support to The Franchisee Future Plans

HISTORY

History

History 1965 1946

Hilton Hotel Corporation (HHC) was formed.

1964

1949

Hilton International Co. (HIC) was formed.

HHC began Franchising.

Hilton controlled by 2 unrelated corporation : •HHC •HIC

History

History

1997

Alliance between HHC and HIC

1999

Expanded portfolio with the acquisition of Promus Hotel Corporation 1949

20012003

Global expansion through acquisition and franchising continued at HHC

HILTON’S BUSINESS MODEL

Hilton Brand

Text As of 2009

Hilton’s Business Model Leased Hotels

B Owned Hotels

C

A Business Model

Franchised Hotels

F E Timeshare Ownership

D

Managed Hotels

Joint Ventures for International Operations

Franchise Portfolio

Franchise development process

Reasons for Franchising  The hotel market is booming and gaining more attention from franchise investors.  Lodging industry is projecting strong growth in the future.  Great opportunities for this type of business exist in the U.S and worldwide; the lodging industry is constantly expanding.  Little or no capital investment required.  To expand globally and gain brand recognition

Franchise Development Process 21-step Franchise Development Process

Approval Process: Steps 1-9

Design & Construction : Steps 10-21

Approval Process Franchisee contact HHC developer and will receive UFOC (Uniform Franchise Offering Circular). Decision for the site of the hotel. Completion of FLA (Franchise License Application). Payment of Initial fee. Project summary submitted. Approval letter from Franchise Administration. Get Hilton Standard Manual and set up a pre-design meeting with the architect.

Design & Construction Franchisee send preliminary plans and specifications to the Hilton project manager for review and comments. After final approval construction of the hotel began. Franchisee sent monthly updates/repots The project manager may visit the site up to three times during construction for inspections. Decide the opening date.

Design & Construction  Obtain a Certificate of Occupancy from local Building Department.  Pre-opening checklist.  Installment of the required property management system and training for using the computer equipment  Final consent by QA team  The Hotel Open !!!

Franchise Fee at HHC (as of 2008) Initial License Fee

Initial fee based upon the number of guest rooms in prospective hotel. The initial fee ranged between $50,000 and $85,000 for the first 100- 275 guest rooms and $300$450 per room thereafter

Franchise Royalty Fee

Ranged between 3-5% of monthly gross rooms revenue

Monthly Program Fee

Ranged between 3-4.3% of monthly gross rooms revenue

Computer System Fees

 Up-front software  OnQ  High Speed Internet Access (HSIA) Fees are based on the size of the hotels and the number of workstations and it ranged between $40,000 and $150,000

Other Fees

For Frequent Traveler/Guest Reward program, training, ongoing computer system maintenance and related fees, etc.

Franchise Growth Year

U.S. Franchises

Canadian Franchises

Foreign Franchises

Company Owned

2009

189

11

29

296

2008

188

11

27

291

2007

175

11

25

306

2006

167

11

30

400

2005

157

10

2

68

Source : “Hilton, Hotels, Suites, Resorts, “www.entrepreneur.com.

HHC’S PRINCIPLES OF FRANCHISING

HHC’s Principles Of Franchising  HHC believed that a franchise relationship should be a long-term commitment made to benefit both parties. “The purpose of the HHC Principles of Franchising is to provide a clear definition of the expectations of the franchisor and franchisee to help us both build an even greater foundation for a solid, long-term relationship.”  Both HHC and its franchisees shared a mutual interest in maintaining the product and service quality at a competitive edge.

HHC’s Principles Of Franchising  HHC also charted out growth and development programs for its franchisees through principles of development, multiple brand considerations, and market awareness and fairness.  The principles of development focused on fair play, teamwork, mutual respect and open communication.  HHC also gave its franchisees multiple brand considerations as it had a wide range of hotel brands and brand extensions, each with a unique and differentiated product and service profile, and at distinct price points.

What Franchisees Expect from HHC  HHC should protect the value of its brands.  HHC was committed to deliver outstanding service to its franchisees and to help them maximize the value of the system.  HHC should maintain the superiority of its brands by continuously monitoring and conducting research on trends and standards within each brand’s competitive set.  Develop and manage programs and processes to maintain HHC’s product and service quality at a competitive edge.  HHC to monitor quality and performance, and develop leading-edge programs and products.

What HHC Expects from Its Franchisees  Uphold brand value, product and service quality standards, and HHC’s culture of complete guest satisfaction.  Total commitment to building customer loyalty.  Ensure that the employee team members were well-trained and focused on delivering HHC’s commitment to product and service quality.  HHC invited its franchisees to communicate openly and regularly to provide input to improve its brands and relationships.  Take a proactive role in building new HHC brands in its (franchisees) markets.

SUPPORT TO THE FRANCHISEE

HILTON SUPPORT

 Spent more than $700 mil in a year  Worldwide marketing and sales • • • •

Promoting the brand in top media National and regional advertising Public relations National programs, such as Hilton vacation package, easy escape getaway packages

 Total technology solution • OnQ system, a technology platform that linked all its brands and hotels to enhance customer service and loyalty. • Maximize the operational efficiencies.

Hilton Support (cont.)  Hilton reservations worldwide • In 1999, $30 million central reservation system (CRS) called HILSTAR. • Toll-free 1-800-Hiltons in the US and Canada.

 Cross-Selling • Hilton horizon system, linked the reservation availability and facilitated referrals to other nearby hotels within the Hilton gamily of hotels.

 Hilton HHonors • Frequent guest reward program. • As of 2004, 13 mil loyal HHonors members.

FRANCHISEE ADVANTAGES  Hilton is a name that is synonymous with first class hospitality.  Franchising with Hilton is a satisfying and rewarding experience.  Hilton gives committed service and support.

Enjoy Shopping, Dining and Live Entertainment at Downtown Disney®

FUTURE PLANS

Future Plan HHC focused on franchising and management contracts, which required little or no capital investment. Capital improvement on owned hotels. Franchise financing programs, which are $50 mil outstanding loans and $69 mil debt.

Latest Development  On July 3, 2007, Hilton was acquired by the Blackstone group for around $26 billions.  The deal was at $47.50 or a 40% premium from yesterday's closing stock price.  In 2009, HHC launched new corporate name and logo.  Next, Hilton moved its headquarter from Beverly Hills, CA to McLean, VA.

Latest Development • Launched iPhone and iTouch application in the lodging industry. • Formed senior management team to make expansion plan and execution in Middle East and Africa. – 19 properties, and over 5,000 rooms spanning Egypt, Levant and Africa. • In 2009, named as #1 hotel brand in Middle East and Australia.

HILTON RANK on FORTUNE 500 Rank

Company

500 rank

Revenue ($ millions)

1

Marriot International

203

12,160.0

2

Harrah’s Entertainment

254

9,780.7

3

Hilton Hotels

296

8,162.0; 572.0(profit)

4

MGM Mirage

315

7,588.0

5

Starwood Hotels & Resorts

381

5,979.0

6

Wyndham Worldwide

546

3,842.0

7

Boyd Gaming

768

2,397.5

8

Penn National Gaming

797

2,244.5

9

Las Vegas Sands

801

2,236.9

Source : Fortune Magazine, April 30th, 2007 issue

World Hotel Group Ranking 2009

www.themegallery.com

Have a Pleasant

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