PowerPoint Template

By : Cindy Budiman Devina Sastria

Edwin Salim WigunaJuvena Elizabeth

Franchising at Hilton Hotel Corporation

Contents

Support to The Franchisee

HHC’s Principles Of Franchising

Franchise Development Process

Hilton’s Business Model

History

Future Plans

HISTORY

History

History

HHC began Franchising.

1946

1949

1964

1965

Hilton International Co. (HIC) was formed.

Hilton controlled by 2 unrelated corporation :•HHC•HIC

Hilton Hotel Corporation (HHC) was

formed.

History

History

1997

1949

1999

Alliance between HHC and HIC

Expanded portfolio with the acquisition of Promus Hotel Corporation

2001-2003

Global expansion through acquisition and franchising continued at HHC

HILTON’S BUSINESS MODEL

Hilton Brand

Text

As of 2009

Hilton’s Business Model

BusinessBusiness ModelModel

BB

FF

CC

DD

AAOwned Hotels

Leased Hotels

Managed Hotels

Franchised Hotels

Joint Ventures for International Operations

Timeshare Ownership

EE

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

Approval Process: Steps 1-9

21-step Franchise

Development Process

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/repotsThe 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 rangedbetween $40,000 and $150,000

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

Franchise Growth

YearU.S.

FranchisesCanadian

FranchisesForeign

FranchisesCompany 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 ADVANTAGESHilton 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 DevelopmentOn 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 500Rank 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

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