AGENDA
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
• Key Issues/Opportunity Areas
• Industry Analysis
• Financial Analysis
• Possible Alternatives
• Implementation of selected alternatives
• Contingency Plan
• Summary
• Q&A
KEY ISSUE/OPPORTUNITY
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&A
• Brand differentiation
• Monitoring Performance
• Customer Personalization
• Alignment and Execution
SWOT FIN. ANALYSIS
KEY ISSUE/OPPORTUNITY
IMPORTANCEURGENCY
LOW HIGHLOW
Brand Differentiation Monitoring Performance
HIGH
Customer Personalization Alignment & Execution
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
KEY ISSUE/OPPORTUNITY
IMPORTANCEURGENCY
LOW HIGHLOW
Brand Differentiation Monitoring Performance
HIGH
Customer Personalization Alignment & Execution
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
KEY ISSUE/OPPORTUNITY
IMPORTANCEURGENCY
LOW HIGHLOW
Brand Differentiation Monitoring Performance
HIGH
Customer Personalization Alignment & Execution
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
KEY ISSUE/OPPORTUNITY
IMPORTANCEURGENCY
LOW HIGHLOW
Brand Differentiation Monitoring Performance
HIGH
Customer Personalization Alignment & Execution
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
SWOT
STRENGTHS WEAKNESS
• Strong global brand recognition
• Diversified Portfolio• Owner Appreciation• Proprietary IT System
• Principal-Agent • Pre-assignment• Multiple ERP systems
OPPORTUNITY THREATS
• Brand Consistency• Customer Relation
Management• Increasing World Travel & Tourism
• Intense Competition• Exposure to cyclical downturns• Rising cost of air fare
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
SWOT
STRENGTHS WEAKNESS
• Strong global brand recognition
• Diversified Portfolio• Owner Appreciation• Proprietary IT System
• Principal-Agent • Pre-assignment• Multiple ERP systems
OPPORTUNITY THREATS
• Brand Consistency• Customer Relation
Management• Increasing World Travel & Tourism
• Intense Competition• Exposure to cyclical downturns• Rising cost of air fare
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
SWOT
STRENGTHS WEAKNESS
• Strong global brand recognition
• Diversified Portfolio• Owner Appreciation• Proprietary IT System
• Principal-Agent • Pre-assignment• Multiple ERP systems
OPPORTUNITY THREATS
• Brand Consistency• Customer Relation
Management• Increasing World Travel & Tourism
• Intense Competition• Exposure to cyclical downturns• Rising cost of air fare
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
SWOT
STRENGTHS WEAKNESS
• Strong global brand recognition
• Diversified Portfolio• Owner Appreciation• Proprietary IT System
• Principal-Agent • Pre-assignment• Multiple ERP systems
OPPORTUNITY THREATS
• Brand Consistency• Customer Relation
Management• Increasing World Travel & Tourism
• Intense Competition• Exposure to cyclical downturns• Rising cost of air fare
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
PORTERS 5 FORCES
COMPETETIVE RIVALRY WITHIN INDUSTRYModerate
High barriers to exitUtilizing capacity
Buyer power is highModerate level of product diff
THREAT OF NEW ENTRYLow
Capital Intensive marketIndustry dominated
by 2 playersStrong brand presence
BUYER POWERHigh
Access to informationBuyers are price sensitive
Low switching costs
THREAT OF SUBSTITUTIONModerate
Varied optionsEasy substitute
SUPPLIER POWERLow
Large global brandCommodity based product
Cost of switching is low
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
PORTERS 5 FORCES
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
COMPETETIVE RIVALRY WITHIN INDUSTRYModerate
High barriers to exitUtilizing capacity
Buyer power is highModerate level of product diff
THREAT OF NEW ENTRYLow
Capital intensive marketIndustry dominated
by 2 playersStrong brand presence
BUYER POWERHigh
Access to informationBuyers are price sensitive
Low switching costs
THREAT OF SUBSTITUTIONModerate
Varied optionsEasy substitute
SUPPLIER POWERLow
Large global brandCommodity based product
Cost of switching is low
PORTERS 5 FORCES
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
COMPETETIVE RIVALRY WITHIN INDUSTRYModerate
High barriers to exitUtilizing capacity
Buyer power is highModerate level of product diff
THREAT OF NEW ENTRYLow
Capital intensive marketIndustry dominated
by 2 playersStrong brand presence
BUYER POWERHigh
Access to informationBuyers are price sensitive
Low switching costs
THREAT OF SUBSTITUTIONModerate
Varied optionsEasy substitute
SUPPLIER POWERLow
Large global brandCommodity based product
Cost of switching is low
PORTERS 5 FORCES
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
COMPETETIVE RIVALRY WITHIN INDUSTRYModerate
High barriers to exitUtilizing capacity
Buyer power is highModerate level of product diff
THREAT OF NEW ENTRYLow
Capital intensive marketIndustry dominated
by 2 playersStrong brand presence
BUYER POWERHigh
Access to informationBuyers are price sensitive
Low switching costs
THREAT OF SUBSTITUTIONModerate
Varied optionsEasy substitute
SUPPLIER POWERLow
Large global brandCommodity based product
Cost of switching is low
PORTERS 5 FORCES
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
COMPETETIVE RIVALRY WITHIN INDUSTRYModerate
High barriers to exitUtilizing capacity
Buyer power is highModerate level of product diff
THREAT OF NEW ENTRYLow
Capital intensive marketIndustry dominated
by 2 playersStrong brand presence
BUYER POWERHigh
Access to informationBuyers are price sensitive
Low switching costs
THREAT OF SUBSTITUTIONModerate
Varied optionsEasy substitute
SUPPLIER POWERLow
Large global brandCommodity based product
Cost of switching is low
DEBT-EQUITY STRUCTURE
86%
14%
Hilton Corp. Capital Structure(as of 2007 year-end)
Avg. Cost Debt = 6.8%
DEBTEQUITY
2004 2005 2006 2007
Hilton Corp. 2.21 2.11 3.42 6.29
Marriott Int. 1.12 1.62 2.28 5.25
2007 Hilton Corp.Capital Structure
Total Debt $32,670 86.27%
Total Equity $5,198 13.73%
Total Cap. $37,868 100%
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
Brand 2001 2006
Annual Revenue (in Millions)
Waldorf Astoria $258.56 $351.12
Conrad International $5.60 $34
Hilton Hotels $2,565.87 $3,334.15
Embassy Suites $1,144.36 $1,581.90
Doubletree $1,023.60 $1,256
Hilton Garden Inn $368.69 $1,045
Homewood Suites $284.50 $566
Hampton Brand $1,787 $3,208.90
BRAND ANALYSIS
Wald
orf Asto
ria
Conrad In
ternati
onal
Hilton H
otels
Embas
sy Su
ites
Doubletre
e
Hilton G
arden
Inn
Homew
ood Suite
s
Hampto
n Bra
nd
$0.00
$500.00
$1,000.00
$1,500.00
$2,000.00
$2,500.00
$3,000.00
$3,500.00
20012006
2001 2006 % Growth
Avg. RevPar $88.25 $113.63 4.3%
Avg. REVPAR Index 106.23 109.51 3.28%
Revenue Matrix Across all Brands
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
CALL CENTRE PERFORMANCE
2001 2002 2003 2004 2005 2006 2007$40.00$50.00$60.00$70.00$80.00$90.00
$100.00$110.00
Hilton Corp. Call Centre Performance
Net Revenue / Call
Year
Conversion Ratio 2007
Hilton Corp. 41.4%
Hospitality Industry 28.4%
Year Net Revenue/Call
2001 $73.09
2002 $77.64
2003 $84.39
2004 $85.57
2005 $90.30
2006 $99.29
2007 $102.55
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
OFF THE SHELF
PROS CONS
• Lower maintenance costs• Outside IT support and
consulting• Cost saving on staff
• Lose competitive advantage• Lose customizability• Timelines• Training costs • Reduces front desk
personalization
• Opt for an off the shelf ERP software like SAP or Oracle• Customize it to the company’s needs• Cost Estimate: $125Million/5 years
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
OFF THE SHELF
PROS CONS
• Lower maintenance costs• Outside it support and
consulting• Cost saving on Staff
• Lose competitive advantage• Lose customizability• Time lines• Training costs • Reduces front desk
personalization
• Opt for an off the shelf ERP software like SAP or Oracle• Customize it to the company’s needs• Cost Estimate: $125Million/5 years
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
CONSOLIDATION
PROS CONS
• Lower maintenance costs• Cost saving on Staff • Brand alignment• Front desk personalization
• High front-end cost• Potential data loss• Managing two systems
• Integrating existing System• Add Customer Personalization and Feedback Component• Coach Front desk Staff • Monthly Performance Reports• Cost Estimate: $392.5Million/5 years
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
CONSOLIDATION
• Integrating existing System• Add Customer Personalization and Feedback Component• Coach Front desk Staff • Monthly Performance Reports• Cost Estimate: $392.5Million/5 years
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
PROS CONS
• Lower maintenance costs• Cost saving on Staff • Brand alignment• Front desk personalization
• High front-end cost• Potential data loss• Managing two systems
CUSTOMER RELATIONSHIP MARKETING
PROS CONS
• Quick implementation• Low cost• Sustainable over long-term• Profitable to gain new
customers• Marketing builds loyalty
• No increased personalization• Does not address front-desk
staff issues• Tailor marketing campaign for
diverse client base
• Using the guest data to target market segments• Launch a Marketing Campaign• Utilize existing system• Cost Estimate: $100M/5 Years
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
CUSTOMER RELATIONSHIP MARKETING
PROS CONS
• Quick implementation• Low cost• Sustainable over long-term• Profitable to gain new
customers• Marketing builds loyalty
• No increased personalization• Does not address front-desk
staff issues• Tailor marketing campaign for
diverse client base
• Using the guest data to target market segments• Launch a Marketing Campaign• Utilize existing system• Cost Estimate: $100M/5 Years
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
DECISION MATRIX
Criteria Weight System Integration/Consolidation
Standardization of IT
CRM Marketing Campaign
Cost 0.05 1 2.5 4Implementation Time 0.05 1 1 4Brand Differentiation 0.2 3.5 0 3.5Performance Metrics 0.1 2.5 2 2Brand Alignment &
Execution 0.35 4.5 2.5 1
Personalization 0.25 4 2 4
Total 1 3.6 1.75 2.65
45%
22%
33%System Integration/Consolida-tion
Standardization of IT
CRM Marketing Campaign
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
CURRENT OnQ SYSTEM
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
NEW OnQ SYSTEM
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
IMPLEMENTATION PLAN
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
Design
• Usability• End-user friendly
• Consolidate/Streamline system• Combine OnQ Reservations, OnQ Property Management System and
OnQ CRM• Front-desk access to data
• Purchasing, Coding & Documentation• Ensure no loss of data• Estimated Time: 6 Months
Testing /Revisions & Finalization
• Estimated time: 2 Months
STAGE ONE:
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
STAGE TWO:
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
Implementation
• Planning & Phased conversion • Estimated Time: 2 Years
Training
• Ensure Front desk properly executes CRM• Implemented by IT specialists (QA)• 1 week per hotel and 30 hotels per week• Estimated Time: Ongoing
Expansion Yr 1 Yr 2 Yr 3 Yr 4 Yr 5Hotels 100 100 200 300 300
PERFORMANCE METRICS
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
• Add QR code on room key for customer feedback• New SALT (Satisfaction and Loyalty Tracking) questions: overall booking
experience with new system, Rating on ability to meet required preferences
RevPAR PROJECTIONS:
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
2006 2007 2008 2009 2010 2011 2012$100.00
$110.00
$120.00
$130.00
$140.00
$150.00
Hilton Corp. Projected RevPAR
CAGR of 3.67%
Basis: Historical 2006 2007 2008 2009 2010 2011 2012CAGR 4.3% $113.63 $118.52 $123.61 $128.93 $134.47 $140.25 $146.28 Conversion Ratio GOAL: MAINTAIN 42%
CONTINGENCY PLAN
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
• Encourage customer interaction
• Example: Ford Mustang Club
• Build Loyalty base
• Utilize existing system
CONTINGENCY PLAN
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
• Using the guest data to target market segments
• Launch a Customer Relationship Marketing Campaign
• Social Media Marketing
• TV & Print ads
• Focus of campaign will be core customers, using OnQ data and SALT surveys to
collect information about and communicate with customers
• Cost Estimate: $100M/5 Years
• Time Estimate: 5 Years
SUMMARY
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
Implementation & Training(2 Years)
Design & Testing
(8 Months)
CRM(5 Years)
Remodel all units
(Ongoing)
Opportunity/Key Issues:
• Brand differentiation
• Monitoring Performance
• Customer Personalization
• Alignment and Execution
Proposed Alternative:
• Integrating existing System
• Add Customer Personalization and
Feedback Component
• Coach Front desk Staff
• Monthly Performance Reports
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
COSTING
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
Yr 155 + (130,000 * 50) + ($50,000 * 50) + $8M + 65M = 137 000 000
Yr2(130,000 * 50) + ($50,000 * 50) + $8M + 65M = 82 000 000 Yr3(130,000 * 50) + 50M + 1 = 57 500 000 Yr4(130,000 * 50) + 50M + 1.5 = 58 000 000 Yr5(130,000 * 50) + 50M + 1.5 = 58 000 000
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 TotalCost $137,000,000 $82,000,000 $57,500,000 $58,000,000 $58,000,000 $392,500,000Annual IT Budget $240,000,000 $240,000,000 $240,000,000 $240,000,000 $240,000,000% of Annual Budget 57.10% 34% 24% 24.16% 24.16%
COSTING
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
Budget = $90.8MHardware costs of new system = $55,000,000Employee cost for design = ($130,000 * 50)(.66) = $4,333,333(50 * $130,000) + (50 * $50,000) = $9MNew IT guys (used for conversion as well) = $50,000 * 50 = $2,500,000Risk (33% of total cost) = $29.96M Implementation and Employee Training Costs for the first 5 years locally = $5000 * 4000 hotels = $20,000,000
Year 1 to 2 = $16,000,000 or $8M per year (1,500 hotels currently plus 100 expansion * $5,000 per hotel training)
Year 3 = 200 hotels * $5,000 = $1MYear 4 = 300 hotels * $5,000 = $1.5MYear 5 = 300 hotels * $5,000 = $1.5M 55 + (130,000 * 50) + ($50,000 * 50) + $8M = 72M + 60M for Maintaining the current system.
COSTING
OPPORTUNITY PORTERS 5 ALTERNATIVES IMPLEMENTATION CONTINGENCY SUMMARY Q&ASWOT FIN. ANALYSIS
Financials- Basis for Calculations
RevPAR Index (Hotel RevPAR/ competitive set RevPAR) *100 = RevPAR Index
CAGR (End Value/Beg Value) 1/n - 1 2001-2006
(113.63/88.25) 1/6 -1
2007-2012
146.28/113.63) 1/7 - 1
Average Cost of DebtTaken from 2006 Hilton Annual Report
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