Taxation the Hilton Hotels Corporation

¶ … Taxation

The Hilton Hotels Corporation is the largest hotel chain in the world with over 500 locations around the globe. In the last ten years the corporation has expanded drastically and sustained a competitive advantage. The purpose of this discussion is to investigate the tactics used by Hilton Hotel in their quest to expand around the globe.

Hilton Expansion

Hilton's business model utilizes a combination of hotel ownership, franchising/management and timeshare (Annual Report 2004). Hilton owned hotels include Hampton Inn, Conrad, Hampton Inn and Suites, Double Tree, Embassy Suites, Hilton, Hilton Grand Vacations Club, Hilton Garden Inn, and Homewood Suites (Annual Report 2004). Each of these hotels has unique characteristics, the most significant being the cost of the rooms. For instance guests would not pay as much to stay at an Embassy Suites as they would to stay at a Hilton Grand Vacations Club location.

Part of the reason why Hilton has been able to expand in such a tremendous way is because the hotel offers a variety of accommodations for people at different price levels. This allows the company to attract a wide range of consumers and maintain a competitive advantage.

This diversity of accommodations coupled with an increased demand for travel has meant tremendous financial success and the opportunity to expand (Annual Report 2004). The increased travel is particularly evident in large cities where business travelers frequent. The report contends that Hilton hotels are able to demand higher prices in these locations because the presence of competitive hotels is slim. The increased price that the company can demand for its accommodations aids in the corporation's ability to expand (Annual Report 2004).

According to the corporation's Annual Report 2004, the company has made great strides over the last year. The report explains that in 2004 alone the Hilton Hotel Corporation added 128 new locations to its repertoire (Annual Report 2004). The company is currently outpacing the rest of the industry as it relates to rooms under construction in the United States (Annual Report 2004). The report also asserts

Among our 128 property additions in 2004 were full-service Hiltons in Omaha, Memphis and Colorado Springs, and Doubletree hotels in New York City, Niagara Falls and Orlando. Our two fastest-growing brands, Hampton Inn and Hilton Garden Inn (the latter is also the industry's fastest-growing brand), added 61 and 36 hotels to their respective systems in 2004 (Annual Report 2004)."

In addition to hotel chains, the timeshare division of the company has also expanded drastically. According to the report, the strategy of the company is to expand timeshare development in locations that see high traffic year-round travel. The report contends that such a strategy allows the company to "effectively manage new growth opportunities in this business, while providing high-quality products and amenities for our customers (Annual Report 2004)."

Indeed customer relations have been essential to the successful expansion of the company. According to an article entitled Data Driven Hospitality," it is no coincidence that Hilton is the most expansive company in the industry. The article asserts that the success of such expansion has been dependent upon the customer relations strategy that the company has developed called OnQ (Kontzer). This strategy chronicles the preferences of over 22 million customers. In doing this, the company is able to cater to their needs and build customer loyalty. The article explains that such a strategy can also weed out customers that have failed to pay for their hotel rooms in the past (Kontzer). This makes the company more profitable and has added to the ability of the company to expand at such a rapid pace. The article asserts that the company hopes to open 150 new locations in 2005.

Another strategy that the company has implemented is the fomation of a joint venture company in efforts to expand the Conrad brand of hotels. According to an article entitled "Hilton Group plc, Hilton Hotels Corporation Launch Conrad Hotels Joint Venture" the author explains that Conrad hotels are luxury accommodations and that the Hilton Group will work together to expand the hotel to locations around the world. The article explains that Hilton will utilize a strategy for expansion that will involve the securing of management contracts for new build hotels and conversions, requiring modest investment by the joint venture partners. Additionally, the companies are exploring designating the Conrad brand to specific portions of existing Hilton properties ("Hilton Group plc, Hilton Hotels Corporation Launch Conrad Hotels Joint Venture")."

According to the article the joint venture between the companies begin in 1997 allows the company's to enjoy combined sales and marketing programs, joint reservation systems, the industry leading Hilton Hhonors loyalty program, and a unified advertising campaign and logomark. This type of strategy allows Hilton to manage the Conrad Brand in a manner that is cost effective because many of the most expensive aspects of the business are performed jointly. An article located in Hotel & Motel Management asserts that Hilton Hotel Corporation and Hilton International desire to have 50 Conrad hotel units built by 2010. The hotel currently has 17 locations (Hilton Hotel and Hilton International plan to open...).