4.2 Driving Forces

Rising overheads, shrinking profits and influxes of competitors are other issues that Hilton Brisbane face. To counteract these problems, Hilton Brisbane utilizes strategies such as the use of economies of scale and outsourcing with regards to services and amenities, to minimise costs and keep standards consistent (Von Bodman, Carlos, Poprawski, Saab, Wu, & Harrison, 2003). Furthermore, the Hilton Group ensures its future by diversifying their portfolio and focusing on several target markets. In addition, they continually build strategic connections and affiliations in the industry to attract consumers. All these strategies create a security blanket to protect the Hilton in times of economic difficulties, which can threaten the hotel industry.

4.3 Porter’s 5 Forces

The hotel business is a moderately attractive business. Suppliers, new entrants, threat of substitutes and the bargaining power of customers are of average authority in Australia. When it comes to suppliers, the Hilton Brisbane depends on secondary suppliers, which serve the operational needs of the company. Due to this strong dependence on resources and staff, suppliers have a strong bargaining position (Datamonitor, 2008 c). However, despite this reliance the bargaining power of suppliers remains at best moderate, due to the superior market power of large market players, such as Hilton (Datamonitor, 2008 c).

With regards to new entrants, it is quite difficult for a new competitor in the hotel business to enter the market, due to legal complexities in purchasing, leasing, and property management as well as the large amount of funding required (Datamonitor, 2008 c). However, the likelihood of new entrants is still moderate, as the market is perceived as being “attractive” for affluent investors (Datamonitor, 2008 c).

Looking at the threat of substitutes, such as alternative forms of accommodation (for example, camping or apartments), it can be stated that this force is also moderate, but alternatives are continually increasing. However, most consumers do not consider these accommodation alternatives further, as their main purpose for choosing luxury hotels is either business or luxury travel (Datamonitor, 2008 c).

Finally, the buyer’s power is high. Although they are price sensitive, a strong brand image could persuade them to patronize the Hilton brand. This is the area the Hilton Hotels should emphasize more, as a positive and predominant brand image results in a broader & more loyal customer base.

Overall, the use of Porters five forces tells us that the hospitality market is fairly attractive to both existing players and future hoteliers.

5.0 Analysis of Competitors

The Hilton, Marriott, and Sofitel are reknown hotel brands competing worldwide, with franchises in key locations such as in Brisbane, Australia, where competition is particularly intense. In Brisbane’s CBD, franchises of all three hotel groups can be found within a mile radius of each other, giving consumers a greater variety to choose from and increasing competition (see Appendix 2). All of these hotel groups were listed internationally under the NYSE, until the recent privatization of the Hilton brand by Blackstone Corp.

However, to gauge the extent of the competition, it is important to compare their financial standing through their total international revenue and compare their differentiating factors and target markets within Australia. Internationally, by the end of the financial year of 2007, Marriott Inc. lead in total revenue, followed by the Hilton Hotels and finally Starwood Hotels (see Appendix 3 & 4) (Datamonitor, 2008 b, e & f). However, with regards to operational profits for 2007, Hilton Hotels suffered a steep decrease from year 2006, whilst Starwood Hotels and Marriott Inc. experienced increases (see Appendix 5) (Datamonitor, 2008 b, e & f).

Nationally, the three competing hoteliers share the same target market, focusing on luxury and upscale business travelers. While the Marriott defines its market as being “Achievement Guests”, Starwoods’ Sofitel prioritises comfort & relaxation of their business travelers and the Hilton specializes on business launches & conference, they essentially target similar consumer needs (Datamonitor, 2008 b, e & f). However, while sharing the business travel market, these three hotels employ noticeably distinct strategies. The CEO of the Sofitel unveiled its “Pillars of Strategy” focusing on their brand growth, HR, and maximization of shareholders’ revenue (Datamonitor, 2008 f). Marriott’s central focus is on their “Spirit to Serve^®” program, dedicated to consumer empowerment through use of excellent service and amenities, while Hilton Hotels adopt a philosophy of treating guests and stakeholders as part of the “Hilton family” and continually improving relations (Datamonitor, 2008 b & e).

Based on the competitive analysis it can be deduced, that the competition of the Hilton Brisbane is only moderate, due to the fact that all competitors have different strengths. However, further improvements in both product offerings and promotions are still necessary for the Hilton Brisbane to maintain and increase their market share.