Strategic Expansion Functions of Hilton Worldwide

The assignment provided discusses the strategic expansion functions of Hilton Worldwide, highlighting the importance of its financial division in boosting business profitability and growth. It also touches on performance metrics like net profit ratio and operating profit ratio. Additionally, it mentions critical success factors, balance scorecards, and other relevant elements for measuring a firm's performance. The document provides a comprehensive overview of Hilton's organizational structure and its approach to strategy formulation and implementation.

STRATEGIC PLANNING
FOR HOSPITALITY
INDUSTRY

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Knowledge and understanding about most popular strategic options....................................3
TASK 2............................................................................................................................................6
Critically analyse the factors affecting implementation of strategies....................................6
TASK 3............................................................................................................................................9
Analyse and evaluate the different performance metrics of Hilton........................................9
CONCLUSION.............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Hospitality also known as service industry is a vast sector which is consist of
transportation, event planning, cruise line, theme parks, hotels and many more. This report will
be studying about Hilton Worldwide holidays Inc. which is an American multinational hotel
company. The respective organisation operates in near by 109 countries. Similarly, the total
number of properties of the respective hotel chain are more than 5,500 (Phillips and Moutinho,
2014). The respective hotel have near by 15 brands some of which are Conrad hotel and resorts,
canopy by Hilton, Doubletree, Hilton hotel and resorts, and many more. The respective hotel
have its headquarters in Virginia, United States. Similarly, the number of employees of the
respective hotel chain is very vast which is near by 1,63,000 till 2017. The revenue of Hilton
Worldwide is approx £1.80 billion which reflects a continuous growth of the hotel organisation.
This report will discuss about various popular strategic option which are adapted by the
respective organisation such as management contract, franchising and many more. Addition to
this, report will also study different factors that affects the implementation of strategies such as
human resources, leadership, structural design, etc. Furthermore, the file will help in better
understanding about different performance metrics in various context such as CSF, balance score
card, etc.
TASK 1
Knowledge and understanding about most popular strategic options.
In order to expand the business, a company adapts variety of strategies which suits their
organisational structure and objectives. Expansion plays a vital role in an organisation as it helps
in more profit earnings and enhance the reputation of the company. Addition to this, it helps in
delivering its services to more customers and helps in minimising the external risks in the market
such as competition, technology, price, etc. Thus, Hilton Worldwide can adapt various options to
expand their business in different countries. However every method has its own advantages and
disadvantages. Some of the strategies are franchising, management contract, joint ventures,
merger and acquisitions. To have a better understanding about these factors, a discussion is
mentioned below:
Franchising- It can be defined as an arrangement in which an individual or the franchiser
grants the other party known as franchisee, a right to use its name or trademark along with a set

of business system and processes in order to deliver products and services in the desired market
(Theobald, 2012). Addition to the, the franchisee has to pay certain amount of fee which is
usually a one time payment along with a fix percentage of sales revenue which is called royalty.
Hilton hotels have 221 franchise all over the world (HILTON HOTELS AND RESORTS, 2018).
However there are certain benefits and disadvantages which are mentioned below:
Advantages
 The rate of success of these franchise are generally high which works as a positive
introduction of company in the new market.
 No experience is needed as trainings are provided by the franchisors in order to maintain
the values and brand image of the company.
 The cost involved in franchise is usually less than other alternatives which does not
burden the company to invest in expansion.
Disadvantages
 It binds the franchisor and franchisee in a formal agreement due to which both of them
get responsible for further loss and other issues.
 The performance of franchise becomes tough to control.
It is a productive way of expanding the business which can help in earning more profit
for Hilton Worldwide. Thus, Hilton worldwide should carefully analyse these factors and then
invest in this strategy.
Management Contract- It is an agreement between the company and a management
organisation which are hired for managing or coordinating the company or the contract. In this
method, the organisation hires a management company in order to perform the specific task. In
return for the services, the owner company provides certain amount of compensation to the
management company (Swanson and Edgell, 2013). It is the best solution for the hotel
companies which is been adapted by various big hotel organisations. Thus, these contracts often
take control on the whole hotel operations. Addition to this, these management companies are
responsible for controlling guest services, marketing management, maintenance of the property
etc. For example, Hilton have management contract for Beijing, Conrad hotel in China, and
many more. The advantages and disadvantages are mentioned below:
Advantages
 This style of expansion helps in saving time and resources of the company.

 The work is done by professionals, thus company receives expertise and experienced
work.
Disadvantages
 Confidentiality of the company gets hamper as the company needs to surrender all the
information about the services, finance and other internal affairs.
 The control of business gets transferred to the management company which leads to no
control of the operations by the company.
Hence, Hilton Worldwide can practise this method as it will help in managing and
maintaining the brand quality of the company. Also, this method will assist in saving the time
and efforts of the company and help in receiving high returns.
Joint ventures- It is referred to business which is undertaken by more than 2 individuals
or organisations in order to share their expenses and revenue from the company. Hence, it can be
understand as an agreement between the individual in order to accomplish a particular task
however, they are arranged for a limited time frame. It is one of the successful strategy used by
small scale organisations (Hoque, 2013). For example, Some of the companies that have joint
venture with Hilton are Conrad hotels, Double tree, etc. Hence, the advantage and the
disadvantages of joint venture are discussed below:
Advantages
 The risk is shared by both the parties which helps in sharing the load of uncertainty for
the company.
 It is a flexible style of expansion which provides a scope for the company to limit the
commitment with the other company or individual.
Disadvantages
 There is an issue of clarity among the parties in this style.
 It requires a lot of time for research and planning. Hence, it is a time consuming affair.
Hence, Joint venture can help in sharing risk of loss for Hilton company and also provide
an option for flexible expansion choice.
Merger and Acquisitions(M&A)- These are two different terms which can be defined
as consolidation of different companies. Merger of companies can be understand as combining
two companies to form one however, Acquisitions is the term which means one company taking

over another organisation. The key belief of M&A is that two companies together are more
powerful than one single firm. For example, Hilton Worldwide does not practise mergers and
acquisitions for expansions as the company believed that it does not need other company to
compete in the market. Thus, Market Power hypothesis theory can be applied by the company
through which Hilton will be able to control the quality, price and supply of services. These are
certain pros and cons which are discussed below:
Advantages
 It helps in merging the power ans control of company in the market.
 It helps in gaining the advantage of tax benefits as it maximise the monetary leverage,
and provides tax shields to company.
Disadvantages
 The employees from the other company needs to be re trained in order to fulfil the
expectations of the organisation.
 It leads to risking employee surplus and other difficulties such as friction and internal
competition.
Hence, Hilton Worldwide can adapt Joint venture method of expansion however, the
respective organisation needs to monitor the negative aspects of the respective strategy as well.
TASK 2
Critically analyse the factors affecting implementation of strategies.
There are various factors that affects the strategy of expansion of Hilton Worldwide such
as human resources, information and control system. Structural design and leadership. Hence,
these are discussed below:
Strategic Leadership- As per the views of Shahnawaz Saqib, leadership can be
described as ability of management of the organisation to set and accomplish goals and
objectives of the organisation, outperform competition and taking quick and effective decisions
of the company. Similarly, Strategic leadership can be described as a practice where executives
develop vision for the company with the help of different style of management. This helps
Hilton Worldwide to remain stay competitive in the changing environment. There are various
factors that affect implementation of strategic leadership such as ineffective leadership, weak
strategy, resistance to change, etc. If the strategy is not realistic as per the current condition or

situation of the company. There will be a difficulty in implementing strategic leadership. Also,
Strategic implementation faces issue due to ineffective leadership.
Structural Design- It can be defined as the organisational hierarchy of individuals and
divisions which impacts the flow of information within the organisation. With the expansion of
Hilton Worldwide, the company will also have to alter its management structure in order to assist
new functions of the respective company. Thus, Hilton will have to appoint new management
team which can help in managing the business of that area where business is expanded
(Rodríguez-Antón, Alonso-Almeida and Rubio, 2012). The respective organisation can also
organise area division in which the management structure would be different for each area and
will be reporting to the CEO of the respective company. These structure designs can help in
managing the operations around the world and help in assisting operations of the company in
more effective manner.
The current organisational structure of Hilton is hierarchical because of the size of
business. CMO and President of the hotel report to the CEO of hotel. However, staff members
work under the middle management of Hilton.
Information and Control Systems- IT is a system which assist in managing and
analysing the performance of different resources of the company such as finance, human
resources, etc. Thus, information and control system can assist the company in managing its
Illustration 1: Organistaional Structure of Hilton Worldwide
Sources: Organistaional Structure of Hilton Worldwide, 2019

resources in order to assure optimum utilization of resources. Hilton worldwide uses OPERA for
property management system which unable to manage information of the customers and other
operations of the respective hotel. Additionally, OPERA helps in accessing information from
different divisions and branches that can help the staff member of hotel while expanding the
business. Similarly, there are other softwares that are practised in the hotel industry such as
QNQ, Micros, etc. There are various challenges faced while implementing information system in
the respective company. The employees needs to be given technical training in order to assist
them to use the softwares adequately. Similarly, there is a constant need of updating these
softwares to secure the data which is a costly affair.
Strategic Human Resources- It is a division of the company which deals in managing
employees issues and concerns related to compensation, performance management, training,
employment law and other factors. Similarly, strategic Human resource management is defined
as a practice of developing, attracting, rewarding and retaining the staff members in order to
assure the benefit of staff members along with the benefit of company. As Hilton will be
expanding its business in international market, the employment regulation are different in every
country. Thus, the human resource strategic management of Hilton can help in managing the
employment laws and frameworks which will help the organisation in managing its legal
regulations and assure the benefit of employees as well as company. There are various concerns
that arises while implementing strategic human resource such as lack of cooperation, resource
challenges, fear of failure, etc. If the resources are limited and there is a time boundation, it may
cause a negative impact on strategic implementation. Similarly, lack of cooperation from senior
management and commitment to employees may lead to further clashes.
TASK 3
Analyse and evaluate the different performance metrics of Hilton.
Critical success factors:
The idea of a critical success factor is first presented by D. Ronald Daniel in year 1960.
These are those specific activities, procedures, factors or areas that a business or organization is
depend upon for their continuous survival in the market. Critical success factors are unique or
different for every organization which represent current business and goal of future. By
analysing business analytics an organization can identify its critical success factors. There are

various factors that reflect the success of Hilton Worldwide. The hotel have 15 different brands
by the name of Hilton hotel and resorts, Curio Collections by Hilton, Waldorf Astoria, etc.
(Ogbeide and Harrington, 2011). All of these hotel brands offer different set of services
distinguished by the type of property, price and other factors. Along with this, the respective
hotel have approx. 5,500 properties in near by 109 countries which is one of the most remarking
success factor of Hilton Worldwide (ONE OF THE WORLD'S LARGEST, FASTEST-
GROWING HOSPITALITY COMPANIES, 2019). Similarly, the hotel has achieved a rate of
flexibility by its corporate responsibility by altering its impact on environment and society.
Different CSF software helpful for the respective organization because with help of critical
success factor software Hilton can identify and analysis its business and future goal or objective.
Balance score card:
A balance score card is a performance metric used in strategic management to identify
and improve various internal functions of business and their resulting external outcomes. It used
to measure and provide feedback to organisation. In an organisation data collection is crucial in
order to provide quantitative results as information gather is interpreted by managers and
executives.
Financial Balance score card is a practice which undertake the financial performance and
application of financial resources of Hilton worldwide. The revenue of the respective hotel has
been increased to near by 24% i.e £1.80 billion (Hilton beats profit, revenue expectations,
2019). Similarly, Customer or different stakeholders reviews the performance of the company
from their own point of view. It helps in determining the quality of services and products of the
company. Thus, some of the measures that are taken by Hilton to manage its customer reviews
are price management, product quality, brand value, etc. The guests of the hotel have a positive
impression towards the company which can be measured by the reviews of customers on
different portals such as tripadvisor, official website, etc.
Internal process helps in understanding the performance of Hilton through business
process and product. The respective hotel have a huge number of employees due to size of the
business. These are managed by effective Human resource management which reflects the
performance of internal process. Similarly, the hotel properties are well maintained to provide
best facilities to the customers.

Organisational capacity helps to view the learning and growth growth capacity of hotel.
Additionally, the technology, culture and other similar aspects are also measured. There are
various training programs that are offered to the employees of Hilton Worldwide to maintain the
quality of services and polish the skills of staff members.
Key performance indicator:
In an organisation numerous factors play a most important role in terms of analysing key
performance of the firm effectively. In this process management of Hilton play a most important
role in analysing service quality and facility by measuring them through different kind of
business approaches. The elements of performance indicators in Hilton are classify in different
category. Through this they can manage working aspects effectively as -
 Accommodation – These kind of aspects are based on average room rate, bedroom
occupancy rate, labour cost ratio and so on. With the help of these practices Hilton can
easily analyse their business performance activities which are based on analysis
practices(Brotherton, 2012). The formula of key performance indicator is ARR = Total
Room Revenue / Total Rooms Occupied. Similarly, the performance of accommodation
can be measured through different modes such as average daily rate(ADR), revenue per
available room, etc. With the help of these tools, Hilton Worldwide can measure the
performance of different sections.
 Food and Beverage – This department is provides quality food and services to
customers on the basis of their requirement. The key performance indicator of food and
beverage division are gross profit ratio, average spending per customer, labour cost ratio,
etc. With the help of these tools, Hilton Worldwide can assure the performance of food
and beverage department.
 Profitability – In this procedure, financial division of Hilton play a most important role.
Main objective of this division is to enhance business profitability and growth through
different business practices. Thus, the tools that are practise to measure the performance
are net profit ratio and operating profit ratio.
CONCLUSION
From the above discussion, it can be concluded that there are various functions which are
available for the company to expand its business. However, there are certain pros and cons to
every strategic option which needs to be monitored by the company. Addition to this, there are

various factors that affect the implementation of expansion functions of the company. Thus, the
respective organisation needs to alter their strategies and approaches which will help in
overcoming these flaws and help in successfully operating in international market. Furthermore,
it can also be analysed that there are various elements through which performance matrix or
respective firm can be measured such as Critical success factor, balance scorecard, etc.

REFERENCES
Books and Journals
Phillips, P. and Moutinho, L., 2014. Critical review of strategic planning research in hospitality
and tourism. Annals of Tourism Research. 48. pp.96-120.
Theobald, W.F. ed., 2012. Global tourism. Routledge.
Swanson, J.R. and Edgell Sr, D.L., 2013. Tourism policy and planning: Yesterday, today, and
tomorrow. Routledge.
Hoque, K., 2013. Human resource management in the hotel industry: Strategy, innovation and
performance. Routledge.
Rodríguez-Antón, J.M., and et. al., 2012. Use of different sustainability management systems in
the hospitality industry. The case of Spanish hotels. Journal of Cleaner Production,
22(1). pp.76-84.
Ogbeide, G.C.A. and Harrington, R. J., 2011. The relationship among participative management
style, strategy implementation success, and financial performance in the foodservice
industry. International Journal of Contemporary Hospitality Management. 23(6).
pp.719-738.
Brotherton, B. ed., 2012. International Hospitality Industry. Routledge.
Online
Hilton beats profit, revenue expectations, 2019. [Online]. Available
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2018-02-14>.
ONE OF THE WORLD'S LARGEST, FASTEST-GROWING HOSPITALITY COMPANIES, 2019.
[Online]. Available through:< https://www.hilton.com/en/corporate/>.
Mergers and Acquisitions. 2018. [Online]. Available
through:<https://efinancemanagement.com/mergers-and-acquisitions>.
The Role of Leadership in Strategy Formulation and Implementation. 2018 [Online]. Available
through:<https://www.researchgate.net/publication/284601403_The_Role_of_Leadersh
ip_in_Strategy_Formulation_and_Implementation>.
HILTON HOTELS AND RESORTS. 2018. [Online]. Available
through:<https://www.franchise.org/hilton-hotels-resorts-franchise>.