The classic brand continues to expand profitably for its shareholders by focusing on hospitality.
Most people are familiar with Hilton Worldwide Holdings (NYSE:HLT) and its brand of hotels. The Hilton name goes back 100 years and includes over 5,700 properties worldwide. But many investors may not realize that Hilton’s business has continued to grow briskly, delivering excellent results for shareholders.
Driving demand by encouraging loyalty
The core of Hilton’s growth strategy has been its shift from a vertically-integrated hospitality and property management company to a focus on hospitality. In 2017, Hilton spun off its time-share business to create Hilton Grand Vacations, and a large chunk of its physical hotel properties went to Park Hotels & Resorts. Now, the slimmed-down entity generates most of its revenue from lucrative franchise fees and hospitality management contracts that provide it with a cut of its franchised and managed hotels’ monthly revenue.
Hilton Worldwide will see its revenue continue to grow as it adds new hotels to its system, or if existing hotels improve their own sales through higher occupancy or nightly rates. The two go hand in hand, because it’s easier to add new hotels if existing hotels are doing well.
A major responsibility for Hilton as the global franchisor of its brands is to produce compelling advertising and marketing. The company has hit traditional and online marketing channels hard with its “Expect Better, Expect Hilton” campaign featuring the actress Anna Kendrick. The focus has been to persuade younger travelers to stay at a traditional hotel instead of competing lodging options like Airbnb and to remember to book directly with Hilton instead of an online travel website such as Expedia.
To incentivize guests to book directly with Hilton, the company has promoted its loyalty program and offers to match the best price offered on any website — giving travelers both the best price and loyalty rewards points.
The response has been encouraging. Hilton has seen its loyalty program jump from 36 million members in 2012 to 94 million this year. The growth of this effort is especially promising as loyalty program members represented over 60% of the hotel chain’s occupancy as of the second quarter of 2019.
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