Channel Strategy Framework from #1 Hotel Brand Hilton

Hilton Owns 4 of the Top 10 Most Valuable Hotel Brands

A robust channel strategy framework helps Hilton dominate the market. In 2022, Hilton Hotels & Resorts yet again claimed its spot as the most valuable hotel brand in the world. Its brand value increased 58% to $12B. And in 2023, the streak continued, with Hilton’s brand value being almost double that of runner-up Hyatt.

Those impressive numbers don’t even tell the full story of Hilton’s success. BrandFinance’s top 10 list includes three other hotel brands owned by Hilton:

• In 4^th place, Hampton by Hilton, valued at $3.9B
• In 6^th place, DoubleTree by Hilton, valued at $2.1B
• In 9^th place, Embassy Suites Hotels, valued at $1.4B

Altogether, Hilton’s 22 hotel brands include more than 7,000 properties with over 1 million hotel rooms worldwide.

Channel Strategy Framework:
Hilton Brand Performance Overview

Before we dive into Hilton’s channel strategy framework, it will be helpful to look a little further into performance metrics from 2022. In the hotel industry, there are three key performance measures:

• Occupancy Rate: Percentage of rooms sold in any given time period
• Average Daily Rate (ADR): Total room revenue divided by number of rooms sold
• Revenue Per Available Room (RevPAR): ADR multiplied by occupancy rate

A few key differences across categories stand out. Luxury hotel brands have lower occupancy rates but much higher ADR and RevPAR than hotels in the Midscale or Premium categories. Occupancy rate growth is highest in the Boutique, Premium and Luxury categories, while lowest in the Midscale category. This result can be partially explained by Midscale’s already-higher occupancy rate (there is less room for growth).

Channel Strategy Framework:
Channel Choices

Across categories, the booking channel choices remain the same for a brand’s channel strategy framework. Broadly speaking, they include these five channels:

1. Online Travel Agencies (OTAs): Apps and websites that aggregate hotel options and earn revenue on commissions per booking. Examples include the Expedia Group with brands Expedia, Hotels.com and Hotwire.
2. Global Distribution Systems (GDS): Intermediaries between hotels and travel agents, such as Amadeus and Travelport.
3. Direct Bookings: Many hotels break this category up into sub-categories, like phone vs. website or on-property vs. off-property. These bookings aren’t subject to commissions, but often require significant marketing activity to drive activity.
4. Metasearch Engines: Google Hotel is the big player here, with the functionality built into the search engine, i.e., if a user searches “hotels in New York.” The service earns revenue from advertising.
5. Wholesalers: This channel purchases hotel inventory in bulk and packages them into group travel or package deals.

Hotel Tech Report breaks down travelers’ booking channel preferences by age:

While those are statistics for travelers as a whole, Hilton’s channel strategy framework is more specific. Hilton has tried to diminish its overall reliance on OTAs:

“Large hotel groups (like Hilton and the like) have been consolidating and building new subbrands, which means that they have a lower reliance on OTAs; travelers can find many types of accommodations on the global brands’ own websites.”

One way to increase direct booking is through Hilton Honors, a loyalty program that offers members benefits like the lowest price, digital room key, free WiFi, and loyalty points. Hilton has enjoyed significant success with the program and boasts 146 million members around the globe.

Let’s drill down into some of the channel strategy framework differences among Hilton’s hotel categories.

Channel Strategy Framework:
Midscale

Of all the Hilton brands, Hampton by Hilton is the most prominent, with almost 3,000 properties and over 300,000 hotel rooms worldwide. It ranks as the 4^th most-valuable hotel brand. Other midscale Hilton brands include Hilton Garden Inn and Tru by Hilton, which was the topic of my customer segmentation example in midscale hotels.

In 2019, Hilton’s president and chief executive Chris Nassetta announced:

“Web-direct channels were growing at three times the rate of other channels….He adds that direct channels now represent about 75% of total business with web channels about half of that.”

Travel agents are also an important part of Hilton’s channel strategy framework. In late 2022, the company partnered with GDS firm Amadeus to provide a more seamless experience for agents booking with Hilton.

“The Amadeus GDS is the first to directly integrate with the company’s API, which means both Hilton and Amadeus will benefit from a faster, more advanced connection to the GDS channel in areas such as credit card information, cancellation policies, and meal plan details.”

Channel Strategy Framework:
Premium

Hilton Hotels & Resorts is Hilton’s flagship brand, with over 600 properties worldwide. This is the brand that continues to rank as the #1 most valuable hotel brand. Also included in the premium category is DoubleTree by Hilton with over 650 properties (6^th most-valuable hotel brand).

Franchising is an important element of Hilton’s business strategy, and the company promotes its advanced channel strategy framework to attract franchisees.

“The Hilton Performance Advantage is an integrated system of innovative solutions and advanced technologies that work together to drive increased business and keep costs down, without compromising quality. Together, these seven services provide access to the latest tools, technologies, forward-thinking strategies, and the most influential people in the industry to create an unrivaled competitive advantage.”

Channel Strategy Framework:
Luxury

Hilton has a different structure for luxury brands Waldorf Astoria Hotels & Resorts and Conrad Hotels & Resorts. While Waldorf is completely managed by Hilton, Conrad also includes a mix of franchisees.

Direct booking channels are even more-highly prized within the luxury channel, because higher room rates also mean higher commissions for OTAs and GDS systems (Commission rates vary from 15-20% for these channels). Richard Blowes adds:

“Our own research has shown that customers who book direct stay on average for more room nights and have a higher discretionary spend once in the hotel.”

Channel Strategy Framework:
Boutique

Typically, boutique hotels are independent and heavily rely on OTAs and Metasearch. They simply can’t compete with the big brands. When Hilton expanded into boutique-style hotels, it brought its channel strategy framework powerhouse with it. Travelers seeking a unique, one-of-a-kind stay can still benefit from Hilton Honors and professional hotel management, so they can reliably expect “one-of-a-kind” won’t include unpleasant surprises.

• Canopy by Hilton: “a vibrant boutique hotel brand that embodies the neighborhood, giving guests an energizing experience and a positively local stay.”
• Curio Collection: “handpicked for its distinct character, offering travelers authentic, curated experiences through distinctly local touches and unexpected amenities.”
• Tapestry Collection: “a portfolio of original hotels that offer guests unique style and vibrant personality. Each property encourages guests to explore the local area.”

Channel Strategy Framework:
Extended Stay

An extended stay hotel has a different reason for existing than most other hotels. From business travelers on assignment to those visiting family for a couple weeks, the home-feel environment of an extended stay hotel offers suites with kitchen areas. These travelers are searching for this kind of hotel and are more likely to book direct than through an OTA or Google.

Hilton’s extended-stay suite options include:

• Embassy Suites by Hilton: “Business travel made easy” (9^th most-valuable hotel brand)
• Homewood Suites by Hilton: “Stay and soak up summer”
• Home2 Suites by Hilton: “Stay and soak up summer” (positioning seems identical with Homewood)

An effective channel strategy framework is critical for success in the hotel industry. Hilton has carefully implemented a channel strategy that allows it to be profitable, provide a good guest experience and capture contacts for continued marketing—all while managing a portfolio of almost two dozen brands.

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