[Date] RESEARCH AND

ANALYSIS
PROJECT

WORD COUNT: 7500

ACCA REG. NO.:
Table of Contents
Table of Contents ............................................................................................................ 1

PART-1 ......................................................................................................................................... 6

Research Objective and Overall Research Approach ....................................................... 6

Reason for Choosing the Topic ....................................................................................... 8

Reason for Choosing the Company ................................................................................ 8

Industry Analysis ............................................................................................................. 9

About Company .............................................................................................................. 9

Industry Sales: .............................................................................................................. 11

Market Share: ................................................................................................................ 12

RAP Objectives: ............................................................................................................ 14

RAP Framework: ........................................................................................................... 14

Part-2......................................................................................................................................... 15

Information gathering and Accounting &Business technique ......................................... 15

Information .................................................................................................................... 16

Sources of Information: ................................................................................................. 16

Annual Report: .............................................................................................................. 16

Company Website: ........................................................................................................ 16

Other Websites: ............................................................................................................ 16

Limitations of Information Gathering:............................................................................. 17

Annual Report: .............................................................................................................. 17

Company’s Website: ..................................................................................................... 17

Other Website: .............................................................................................................. 17

ACCOUNTING AND BUSINESS TECHNIQUES: ......................................................... 18

Financial Analysis:......................................................................................................... 18
Horizontal Analysis: ....................................................................................................... 18

Limitation of Horizontal Analysis: ................................................................................ 18

Ratio Analysis: .............................................................................................................. 19

Types of Ratios: ............................................................................................................ 19

Profitability Ratio: .......................................................................................................... 19

Liquidity Ratios: ............................................................................................................. 19

Activity Ratios: ............................................................................................................... 19

Investors Ratio: ............................................................................................................. 19

Gearing Ratio: ............................................................................................................... 20

Key Business and Financial Metrics: ............................................................................. 20

Average Daily Rate: ...................................................................................................... 20

RevPAR: ....................................................................................................................... 20

Occupancy Rate: ........................................................................................................... 20

Limitation of Ratios: ....................................................................................................... 20

Business Analysis: ........................................................................................................ 21

SWOT Analysis: ............................................................................................................ 21

Internal: ......................................................................................................................... 21

 Strengths: ............................................................................................................... 21

 Weaknesses:.......................................................................................................... 22

External: ........................................................................................................................ 22

 Opportunities: ......................................................................................................... 22

 Threats: .................................................................................................................. 22

Limitation of SWOT: ...................................................................................................... 22

PEST Analysis: ............................................................................................................. 23

Limitations of PEST Analysis: ....................................................................................... 23

Ethical Consideration: ................................................................................................... 24

Part-3......................................................................................................................................... 25

Analysis, Conclusion and Recommendation...................................................................... 25

Financial Analysis:......................................................................................................... 26

Horizontal Analysis: ....................................................................................................... 26

Sales: ............................................................................................................................ 26

Domestic and International Sales: ................................................................................. 28

Segment Wise Sales: .................................................................................................... 30

Competitor Sales: .......................................................................................................... 31

Ratio Analysis: .............................................................................................................. 33

Profitability Ratios:......................................................................................................... 33

Operating Profit Margin: ................................................................................................ 33

Net Profit Margin(NPM): ................................................................................................ 35

Return on Capital Employed: ........................................................................................ 38

Liquidity Ratios: ............................................................................................................. 39

Current Ratio: ................................................................................................................ 39

Activity Ratios: ............................................................................................................... 41

Debtor Turnover: ........................................................................................................... 41

Creditor Turnover Ratio: .................................................. Error! Bookmark not defined.

Key Business and Financial Metrics: ............................................................................. 44

Average Daily Rate: ...................................................................................................... 44

RevPAR: ....................................................................................................................... 45

Occupancy Rate: ........................................................................................................... 45

Investor Ratio: ............................................................................................................... 47

Earnings per Share (EPS): ............................................................................................ 47

Price Earnings Ratio (P/E Ratio): .................................................................................. 48

Dividend Yield: .............................................................................................................. 50

Gearing Ratio: ............................................................................................................... 51

Financial Gearing: ......................................................................................................... 51

Interest Cover: ............................................................................................................... 54

Business Analysis: ........................................................................................................ 55

SWOT Analysis: ............................................................................................................ 55

Strength:........................................................................................................................ 55

Weaknesses: ................................................................................................................. 55

Opportunities: ................................................................................................................ 56

Threats: ......................................................................................................................... 57

PEST Analysis: ............................................................................................................. 57

Political: ......................................................................................................................... 57

Economical:................................................................................................................... 58

Social: ........................................................................................................................... 58

Technological: ............................................................................................................... 59

Conclusion: ................................................................................................................... 60

Recommendation: ......................................................................................................... 61
PART-1

Research Objective and

Overall Research
Approach

Word count:882
Topic -8: An Analysis and Evaluation of Business and Financial
Performance of Hilton Worldwide Holdings Inc. For the year ended
2014/2015/2016

Reason for Choosing the Topic

I have selected this topic because during the course of ACCA I always wanted to
implement the theory I have been studying, in practical life Oxford Brookes university
have given me this opportunity to polish the skills I learned in theory, which will also
help me to pursue my professional career.

I also want to continue my career in finance and audit therefore in-depth research will
be beneficial in my future career.

Reason for Choosing the Company

Reason for choosing Hilton Hotel is to enhance my knowledge in hotel industry as I am
personally inspired by hospitality business, generating money and insight of it. I chose
this company because Hilton is considered as one of the leading Hotels in world
comprising of 4,922 hotels, resorts and timeshare properties comprising of 804,097
rooms in 104 countries and territories as of December 31,2016. (viafield, 2017a)

The premier brand portfolio also includes luxury and lifestyle hotel brands, Waldorf
Astoria Hotels & Resorts, Conrad Hotels & Resorts and Canopy by Hilton, Hilton Hotels
& Resorts and Curio. (viafield, 2017b)

In 2015 US travel and tourism contributed to 2.6% of total GDP, one out of every 18
American is employed in the tour and travel industry either directly or in directly.
(selectusa, 2016a)
Industry Analysis

About Company
Hilton was founded in 1919 by Conrad Hilton in Texas (US).
Since acquisition, Hilton has delivered highest growth in industry. It experienced a 40%
system-wide growth in room count. It was listed on NYSE under the symbol “HLT” when
it completed its initial public offering (IPO) in December 2013. It expands through
franchising which saves fixed regional set-up cost, however, there are some franchises
within US and some internationally. (marketrealist, 2014)

(marketrealist, 2017)
Hilton operates as a holding company, which provides hospitality services. It also
engages in owning, leasing, managing, developing, and franchising hotels, resorts, and
timeshare properties. It has more than 700 sales team members who can speak over 42
languages which is relevant in every market.(hiltonworldwide, 2015)

There are many segments in which Hilton operates including Management and
Franchise, Ownership, and Timeshare. The Management and Franchise segment
manages hotels, resorts and timeshare properties owned by third-parties and license its
brands to franchisees.

Ownership segment consists of hotels that it owns or lease. Timeshare segment

markets and sells timeshare intervals, operates timeshare resorts and timeshare
membership club and provides consumer financing. It is headquartered in McLean,
VA.(borntosell, 2017)
Industry Sales:

Revenue of the United States hotel industry

205

200
5.1%
195

190
sales

185 7.2%
180

175

170

165
2014 2015 2016
Industry Sales

Series 1

(statista, 2016a)

Lodging industry is largest subsector of travel and tourism industry in US and accounts
for over 19% of total travel and tourism spending. In 2016 travelers spent more than
$293billion on traveler accommodations. This sector supports more than 1.4million
U.S.jobs. Revenue of hotel industry is increasing due to boom in travel and tourism
industry which increases demand of hotels. (selectusa, 2017b).

In 2015, industry added more than 30,000new hotel jobs and 100,000new travel-related
jobs, resulting in increase of over $12billion in travel-related wages and salaries, up 6%.
Total number of properties also grew to 53,432properties from 52,000in 2014. In 2015,
hotels generated $141.5billion in business-travel tax revenue which is up $6.5billion
from 2014. Airbnb entered in market in 2008 and has grew to 53,432properties however
Hilton has history of more than 100years, still it is operating in 4,610properties.

As per IBIS World industry report for hotel and motels in U.S, industry revenue has
increased during recent years. Industry revenue for U.S. hotels and motels is expected
to increase to $169.2billion in 2016 (yielding $28.7billion profits) at an average annual
rate of 2.4%, as compared to $165.1billion in 2015 and $159billion in 2014.(tandfonline,
2016)

Market Share:
 Top 5 hotel brands in US

11%
29% Hilton worldwide inc.
14% Marriott international inc.
Choice hotel international inc.
2%
Wyndham Hotel Group
Hyatt Hotel

44%

(statista, 2017(b)

Hilton is growing quickly as its market share of room supply is approximately 5%, its
main operations are concentrated in U.S. but has started to grow internationally as well.

It has highest market-share in U.S of 9% having relatively small share in other regions
i.e. 3%in Middle-East and Africa and 1%in Europe and 1%in Asia-Pacific region.

In U.S, Hilton is one of top 10 company. Hilton and Marriott have highest market-share
of 10%each after them is Wyndham’s of 9%, Choice Hotel’s and International Hotels
Groups 8%each, and Best Western Company and Starwood’s at 3%each.

Hilton’s stock is also part of more than 20 exchange-traded funds which includes Power
Shares Dynamic Leisure and Entertainment Portfolio, which is an ETF with
85%invested in Hotels and Lodging sector. It holds 5% in Hilton shares.(finance.yahoo,
2016)
RAP Objectives:

Following are RAP objectives:

 Through using ratio and horizontal analysis, financial-analysis of a company is

performed.
 Performance of company is compared with its competitor over a period of three
years.
 Business analysis of a company is performed using SWOT and PEST analysis.
 Using the analysis performed, some conclusion and recommendation can be
given.

RAP Framework:

I have started the report with reason for choosing hotel industry
and reason for choosing Hilton worldwide along with competitor Marriott int. to analyze
position of the company by gathering information through primary and secondary
sources.

I have also performed financial analysis through horizontal analysis and some key
ratios. Business analysis is performed through SWOT and PEST analysis with
conclusion and recommendation.
Part-2

Information Gathering and

Accounting &Business
Technique
 Word count:1120

Information
It is knowledge obtained from investigation or study. Data which is
accurate, and specific, presented in a context which gives meaning to it. (business
dictionary, 2016a)

Sources of Information:

Annual Report:
The most important document periodically issued by companies, it
not only contains financial information rather it also includes non-financial data. Its
authentic because it is audited by external auditor. For evaluation of Hilton hotel, I have
used annual reports of Marriot and Hilton hotel for year ended 2014,2015 and 2016.

Company Website:
I’ve used company websites which consist of segments from
which company generates revenue, its products, markets and its management.

Other Websites:
I’ve used several other websites such as Nasdaq and Economic
Times for information required for analysis.
Limitations of Information Gathering:
There are many limitations to sources of information described above

Annual Report:
It contains information that can be biased and lacks independency
as it is prepared by company’s own management therefore chances of management
biasness increase. Information is based on historical facts and figures which means that
current-position cannot be analyzed. As it is an internally generated document therefore
there might be window-dressing in accounts.

Company’s Website:
Website provides limited information, information which
company thinks, portrays. Positive image of the company is provided in website
therefore company’s website can be biased.

Other Website:
Information provided in other website may not be reliable and there
is a junk of information available, so relevant information may not be found.
ACCOUNTING AND BUSINESS TECHNIQUES:

Financial Analysis:

Horizontal Analysis:
Defined as comparative study of two or more accounting
period using balance-sheet or income-statement to compute both total and relative
variance. It is also called trend-analysis.(business dictionary, 2017c)

Limitation of Horizontal Analysis:

 There are many limitations of horizontal analysis. There is a lack of

standardization like some companies may value stock on FIFO basis and some
are valuing it on LIFO or on weighted average basis.

 There is no absolute formula for any ratio for example, some calculate current-
ratio by dividing all assets from all liabilities, however some exclude prepayments
from current-assets.

 There is no strict standard for what to do with certain extraction of information for
example, short-term liquidity can be determined in number of ways like only
calculate current-ratio or only calculating quick-ratio. Some companies calculate
both, however some do not.(guidance portal, 2014)
Ratio Analysis:
It is the most important technique for financial analysis in which
numbers are converted into ratios to determine trend and compared with past ratios of
other firms in the same/different industries. (business dictionary, 2017d)

Types of Ratios:
Following are normally calculated for the firms I selected.

Profitability Ratio:
It means how well a company is operating in terms of generating
profits. It includes NPM, gross-profit margin,

Liquidity Ratios:
It refers to company’s ability to pay short-term debts when they
fall due. Higher ratio means company have less chances of default, it can be calculated
as cash available and marketable-securities against outstanding-debts.

Activity Ratios:
It means how effectively firm is using its assets, it can be
calculated through receivable, inventory and asset-turnover ratios. (Businessdictionary,
2017e)

Investors Ratio:
Performance of company’s shares are assessed through
investor’s ratio. For example, price-earnings ratio, earning-yield ratio and earnings-per-
share. (Businessdictionary, 2017f)
Gearing Ratio:
It defines capital structure of a company, comparing owners’ equity
to funds borrowed by company. It is calculated by debt-to-equity ratio, interest-cover
ratio. (investopedia, 2017a)

Key Business and Financial Metrics:

Average Daily Rate:

A metric used by hospitality industry to calculate average room
rental realized per day. (investopedia, 2017g)

RevPAR:
RevPAR is a performance metric calculated by dividing hotel-room revenue
by total number of room-nights available to guests. (investopedia, 2017h)

Occupancy Rate:
It means utilization of hotels available capacity. It is ratio of used
and rented space with total amount of available space. (investopedia, 2017i)

Limitation of Ratios:

 Sometimes it is difficult to find suitable ratio to compare with, as many firms

operate in different divisions in different industry.
  Inflation effects balance sheet of company, so as the profit of company, therefore
comparing ratios of one company with another of different ages may need
interpretation.

 As there are different accounting practices being followed within companies

which affects ratio analysis, for example LIFO/FIFO, leasing/buying equipment.

 It is difficult to analyze whether ratio is good or bad, due to lack of knowledge. An

increasing trend is considered good however high inventory-turnover ratio is a
bad signal for company. (investopedia, 2017b)

Business Analysis:
It can be done using following two ways:

SWOT Analysis:
A process to evaluate position of company by assisting firm in
achieving its objectives, what obstacles to overcome, to achieve desired results, by
analyzing both internal factors i.e. strength and weaknesses and external factors i.e.
opportunities and threats faced by company. (investopedia, 2017c)

Internal:

 Strengths:
Internal resources and attributes to generate favorable outcome.
  Weaknesses:
Internal attributes that works against favorable outcome.

External:

 Opportunities:
External factors that firm should capitalize and make use of it.

 Threats:
External factor that could put the project in jeopardy.

Through SWOT, we can understand our business better by eliminating weaknesses and
threats, taking advantage of strengths and opportunities available.
(searchcio.techtarget, 2017)

Limitation of SWOT:

 It doesn’t help in decision making of complex issues while addressing uncertain

situation, like you may get a prominent location but leasing maybe expensive.

 It does not prioritize main issues and doesn’t provide alternative solutions to
problem.

 It doesn’t provide relevant information, for example it may generate too many
ideas but not suggest which one is best for current situation.(business.qld.gov,
2017)
PEST Analysis:

A tool that’s used to assess markets for particular product or business,

PEST stands for:

P E S T
Political Economic
environment, environment, Social factors, technological
includes includes interest- includes advancement and
government rates, economic demographics i.e. the rate at which
regulations or any growth, exchange population growth, technology gets
defined rules for rates as well as age, career. obsolete.
industry. inflation rate.

(economictimes, 2017)

Limitations of PEST Analysis:

 As External factors are based over assumptions and macroeconomic-conditions,

it points question on transparency of the PEST analysis.

 Generally, firms outsource this work to experts for research and development
purpose therefore any wrong assessment may lead to losses for company. On
the other hand, it also increases expenses.
  PEST analysis should be taken out in more detail as company makes strategic
decisions based it, government might also help firms with subsides and
incentives to improve their position, therefore this analysis should be properly
supervised. (Pestle.analysis, 2017)

Ethical Consideration:

Ethical considerations have been taken into account while

preparing this project. All information provided above is relevant and reliable to best of
my knowledge. There is no manipulation of words and I have used Harvard referencing.
This report is prepared for academic purpose only.
Part-3

Analysis, Conclusion and

Recommendation
Word Count:

Financial Analysis:

Horizontal Analysis:

Sales:

(HILTON Annual Report, 2014, 2015, 2016)

In October 2014, a new brand Canopy and Curio-Collection by Hilton were launched
7.3%
which is quite successful (loyaltytraveler, 2017)as a result, revenue increased by 8% to
$10,502million compared to2013. (Annual Report, 2014, p.68)

Hilton’s revenue increased by 7.3%in 2014-15, it generated over $19billion from Global-
Sales, Hilton Reservations & Customer-Care, and 3rd-Party
Distribution.(hiltonworldwide, 2015)

Growth rate in 2015 is 3.4%. As Hilton operates in international-markets, it had to face

impacts of exchange rate movement. Total loss on foreign currency is $41milliontill
2015, which was basically due to strengthening of USD in comparison to Euro and
currencies of Asia-pacific where most of US-owned and lease hotels are based. In
addition, most of foreign-currency transactions, mainly short-term intercompany loans
are denominated in EURO and GBP.(Money.CNN, 2015).
Hilton generated about $ 1,786 million from management and franchise fees and
$4,157million from ownership-segment and from timeshare-segment $1,390million in
2016. (4-traders, 2017b)

Improved revenue was due to surge in overall sales-volume by 4% from commissions

from sale of third-party developed intervals by $23million, owned-timeshare intervals by
$15million and growth in resort operations. This increase was offset by increased
timeshare-expenses relating to selling and advertisement expense.

In addition, Hilton also introduced 354properties and added hotels in 5new countries,
signed over 106,000guestrooms, grew its pipeline to 310,000, increased by 16%over
2015 and further 157,176under construction, increase of 17%in 2015, further improving
revenue.(questex , 2017)

Hilton's timeshare business was included in spin-off of Hilton Grand Vacation (HGV)
and as part of its on-going relationship with HGV, Hilton and HGV entered into 100-year
license-agreement for use of timeshare brand, which can boost future revenues.
(ir.hilton, 2016(a)
Domestic and International Sales:

DOMESTIC & INTERNATIONAL SALES

9.66% 19.8%
100%
90%
80% 11.53% 6.08%
70%
60%
50%
40%
7927 8844 9382
30%
20%
10%
0%
2014 2015 2016

Domestic International

(Hilton and Marriott Annual report 2014,2015,2016)

Revenue of domestic sales increased by 6.08%from 2015-2016 mainly because of

increase in food and beverages revenue, after offsetting increase in RevPARof 0.4%
and ADR (average daily rate) of 2.1%with decrease in occupancy of 1.4%.(questex ,
2017)

Additionally, it is due to increase in revenues from US-Owned and leased properties

acquired and disposing off Waldorf Astoria New-York in February2015.It also grew its
pipeline by 13%and signed over 106,000 guestrooms, thus improving revenue
further.(questex , 2017)

Decrease in revenue from international sales is due to loss on foreign-currency changes

of $49m. (4-traders, 2016(b), primarily due to strong USD against Euro and currencies
of Asia-pacific where most of US-owned and lease hotels are based.(Money.CNN,
2015)
However, from 2014-15, domestic growth is 11.5%due to increase in RevPAR of 4.2%(
greater than average industry RevPAR of 3.5%)and due to increase in revenues from
properties acquired and disposed of, such as Waldorf Astoria disposal mentioned
above.(questex , 2017)

Hilton’s international sales decreased mainly due to result of foreign-exchange changes

due to slump in Euro and decrease in revenues from 2hotels and land disposed in 2014.
(reuters, 2017) although revenue of non-comparable international-owned and leased
hotels increased due to large renovation projects being completed, providing availability
of those properties to guests.(questex , 2017)

In 2016, Hilton grew in China, having hotels open for a total of nearly 96,000rooms
across country.(hotelmanagement., 2017)

Hilton also installed Global Management System across all Hilton Worldwide leased and
owned hotels for optimized standard of labor-management practice. It helped to reduce
fixed cost and increase profitability. (hospitalitytech, 2017)
Segment Wise Sales:

Segment wise Sales

8000
-2.5
2(2.5z
-0.2 2.5%-
7000 5%
2.52s
6000 k
15.2 5.6
5000
4000 11.7
3000
6.3
2000
1000
0
2014 2015 2016

Ownership Management and Franchise Timeshare

(Hilton Annual report 2014,2015,2016)

Hilton generates its revenue from three segments;

Management and franchise segment generates revenue from fees charged to third-
party hotel owners and from license-fee charged to HGV for using Hilton marks and
intellectual property in timeshare business.

Management and franchise revenue increased significantly because of net addition

of600new hotels to the portfolio in 2015, with additional 501more in 2016, thus resulting
in higher management and franchise fee, as well as increase in RevPAR of 2%and
5.5% for year ended 2016-15 and 2015-14 respectively.

License fees also increased by $16million and $57milliondue to increase in RevPAR

during years 2016-15 (hotel-online, 2016a)
Revenue of ownership segment decreased for all periods mainly because of disposal of
hotels and changes in foreign-currency due to slump in Euro, Britain-pound and
currencies of Asia-pacific where most of US-owned and lease hotels are
based.(Money.CNN, 2015). Operating income of ownership-segment decreased by
$26m and $12m in 2016 and 2015 respectively, as operating expenses of non-
comparable U.S. owned and leased hotels increased by 10% during 2016 due to
increased operating expenses from properties acquired, net of decrease in expenditure
due to disposal of Waldorf Astoria NY in 2015 (scmp, 2017)

Competitor Sales:

Marriott's Sales
18000

16000 5% 17.8%
14000

12000 7.3% 3.4%

10000

8000

6000

4000

2000

0
2014 2015 2016

hilton marriot

(Hilton, Marriott, Annual Report,2014,2015,2016)

In 2014, revenues increased by $1,012million i.e. 8%from 2013, due to higher cost-
reimbursements revenue of $764million, higher franchise fees of $79million, higher
owned, leased, and other revenue. (news.marriott, 2014)

From 2014-15, Franchise fees increased by $108m because of stronger RevPAR due to
increased demand, increase in relicensing and application fees of $22million, and
higher fees of from properties of $7million that converted from managed to franchise.
(investor.shareholder, 2015a))

Incentive-management fees also increased by $17m because of additions of hotels due

to Delta Hotels acquisitions and due to higher profit margins of North-American
properties that are company-managed and high RevPAR.

In 2016, revenue also increased due to branding fees. Cost reimbursements revenue
increased by $568m for Legacy-Marriott operations due to higher property occupancies,
unit-growth across system, and growth in Marriott Rewards-program membership. (4-
traders, 2017c)

After acquisition of Starwood for $13billion, Marriott became largest hotel group in the
whole world. Existing hotels consist of 5,456 and 2,101 in pipeline after Starwood
brands like Sheraton, Westin, W and St. Regis under its ownership, creating an
umbrella of 30brands. (Llenrock.Group, 2016)

In 2015, Hilton performed well by growing its RevPAR by 5.9% in first nine months,
however, Airbnb raised $1.5billion back in June only and raised $10billion in 2014.
Airbnb seems to be major factor influencing profits of lodging industry. (seekingalpha,
2017(a)
Ratio Analysis:

Profitability Ratios:

Operating Profit Margin:

Determine appropriate pricing-strategy for products by
telling how much revenue is left after deducting operating-cost.(businessdictionary,
2017)

OPM
15.3% (13%)
18.37

15.93 15.98

10.8% (13.9)
9.31
8.4 8.01

2014 2015 2016

hilton marriot

(Annexure, Ratios)

In 2014, operating income rose to $1673 million (Hilton Annual Report, 2014 p.68)
which is an increase of 52% because management and franchised fee rose up by 20%
and there is a gain of $26 million on foreign currency transaction primarily relating to
intercompany loans. (marketwatch, 2014) These changes were due to strengthening of
Japanese yen compared to USD. (cnbc, 2017a)
 However, in 2015 a loss of 41 million had occurred due to foreign currency changes on
the foreign currency transactions which also were related to intercompany loans which
were denominated in Euro and GDBP (marketwatch, 2014) Strengthening of USD
compared to these currencies resulted in this loss. (FinancialTimes, 2017)

Depreciation and amortization are the factor in the change in operating profit margin
due to the charge of $13m in accelerated amortization in 2015 on a management
contract intangible asset for a property, as well as due to capitalized software cost in
2014. (ir.hilton, 2015(a)

General and administrative expenses increased by $95million in severance cost related

to the sale of Waldorf Astoria, NY, share based compensation of $66million was also
recognized, this increase is due to reversal of accrual due to termination of cash based
scheme in 2014. Further long-term incentive plan was also replaced by Omnibus
Incentive Plan in 2013, which resulted in decrease of general and administrative
expense of $18m. (WSJ, 2017b)

Hilton growth of profit in 2015 is due to RevPAR growth by 1.8% and EBITDA increased
by 3%. Hilton has also introduced 354 properties and added hotels in five new
countries. Hilton also signed over 106,000 guestrooms, grew its pipeline to 310,000
increased by 16% over 2015 and further 157,176 under construction increase of 17% in
2015. (questex , 2017)

After the sale of Waldorf Astoria, Hilton recognized a gain of $145million from the sale
of assets out of which $13million relates to severance costs recognized in general,
administrative expenses thus profit also increased in 2015.

However, there were certain expenses related to this gain which includes $6 million of
unamortized deferred issuance costs resulting from the repayment of the Waldorf
Astoria Loan and properties acquired from the proceeds of sale. $19 million of
transaction cost and $13 million expense relates to remaining unamortized
management contract. (ir.hilton, 2016b)
Conversely Marriott revenue in 2014 increased by $1,012 million 8% from 2013 due to
higher cost reimbursements revenue by 575million this was due to higher occupancy
and overall growth across Marriott, revenue continues to grow in 2015 as well.

Marriott Interest expense rose to $234million in 2016 from $167m in 2015 due to the
increase in credit facility of multicurrency revolving credit agreement to $4000million
from $2500million, income taxes totaled $139 million compared to $82 million in 2014.
Net income totaled $780 million, a 9 % decrease from reported 2015 net income of
$859 million (newsmarriott, 2016(b)

Operating profit declined in 2016 because of the acquisition of Starwood Hotels &
Resorts on 23 September 2016, as a result expenses also increased in 2016 due to
merger-related costs of $136 million, Depreciation, amortization, and other expenses
also rose, due to which operating income declined (latimes, 2017)

Net Profit Margin(NPM):

It is an indicator for determining how good a company is in
controlling its cost NPM. (strategiccfo, 2017)
 NPM

12.56
93.5% (75.15%)

8%
8% (22.9%)
6.49
5.92
5.48
4.56
3.12

2014 2015 2016

hilton marriott

(Annexure, Ratios)

The profitability increased in 2014 from 2013 due to the proceeds of $1866million and
$331million from the sale of Waldorf Astoria,NY and Hilton Sydney. (foxbusiness, 2017)

In 2014-15, administrative expenses increased by $95million in severance cost related

to the sale of Waldorf Astoria,NY , share based compensation of $66million was also
recognized, this increase is due to reversal of accrual due to termination of cash based
scheme in 2014. Further long-term incentive plan was also replaced by Omnibus
Incentive Plan in 2013, which resulted in decrease of general and administrative
expense of $18m. (WSJ, 2017b)

Further pre-tax gain of $163m and $143m was recognized In 2015 in respect of the sale
of Hilton Sydney and Waldorf Astoria NY (trivago, 2017) respectively recognized as a
result NPM rose by 93.5%. (4-traders, 2017(a)

From 2015-16 amortization expense reduced as compared to 2014-15 due to $13m

amortization recognized in 2015 on a management contract which is an intangible asset
of the property managed by us prior to its acquisition. However, amortization expense
increased during 2015 due to the cost of capitalized software put into service during
2015 and 2015. (marketwatch, 2016)

In 2016 corporate restructuring and transfer of intellectual property during the spin off
resulted in recognition of additional deferred tax liability, which rose to $513m and the
tax expense of $891m in 2016 as compared to the income tax of $80m in 2015, which
had negative impact on net income. (hotel-online, 2017d)

On the hand in 2014, Marriott net income increase by $127 million due to higher
franchise fees of $79 million, as a result of stronger RevPAR due to increased demand
of $35m and $7m fees from properties that are converted from managed to franchised.

Higher incentive management fees of$46million, due to higher profit margins from
North American and international managed hotels and higher North American full-
service deferred of $5m. (news.marriott, 2017)

Additionally, interest expense rose to $67m as compared to $52 m in 2014-15 largely

due to lower capitalized interest expense and higher interest expense associated with a
new debt issuance as a result admin cost also rose up by $70m in 2015-16 as
compared to $25m in 2014-15. Due to lower termination fees from full service hotel
under renovation, net income after tax declined to $ 1184m from $1255m in
2015.(businesswire, 2016)

From 2015-16, net profit of Marriott declined by 22% due to increase in expenses, costs
reimbursements have increased by $1916m in 2016 as compared to $575m increase in
2015-16. It had incurred $386m of merger related cost in 2016 which was not there in
2015 and 2014. Also, Marriott completed the sale of Hotel Imperial Luxury Collection
Hotel, Vienna for a cash proceed of $80m. (hotelmanagement, 2017a)
Return on Capital Employed:
The ratio that measures company’s profitability and
efficiently the capital is employed in generating shareholders value. (investopedia,
2017a)

ROCE

47.38
55% 84.8%

30.54

13% 11.5%

7.89 8.92
6.99 7.2

2014 2015 2016

Hilton Marriott

(Annexure,Ratio)

ROCE of Hilton has increased by 13% in 2014-15 because the profitability increased in
2014 from 2013 due to proceeds of $1866million and $331million from sale of Waldorf
Astoria, NY and Hilton Sydney. (foxbusiness, 2017)

Debt levels decreased in 2015 due to repayments of $775million of ‘Term Loan facility’.
Interest expense also declined which resulted in lower principle amount of debt
balances. In february’15 Bonnet Creek Loan was secured of $450million against loan
covenant of $25million of restricted cash and cash equivalent. (tripadvisor, 2017)

Additionally, Hilton prepaid Term Loan of $1billion in 2014. Further loan mortgage of
$535million and $775million was repaid during year 2015. Also, Hilton issued
$350million notes from timeshare financing receivables to pay outstanding balance of
Timeshare facility. (ir.hiltonworldwide, 2015b)
However, Marriott’s ROCE increased by 55% because in 2015 Marriott acquired
Starwood for 2 billion that seems to be the consolidation of lodging industry and the
reason of boost in the Marriott’s profit. (cnbcllc, 2017b)

Marriott’s total debt had increased to $3.7billion in 2014. Company borrowed

$394million in senior notes and $238million in commercial paper borrowings in 2014.In
2015 Marriott issued $800million loan notes of Series O Notes and Series P.
(businesswire, 2015)

Debt rate further increased in 2016 due to issuance of $1500million Series Q Notes and
Series R Notes to finance cash consideration, which was paid to Starwood shareholders
related to the acquisition of Starwood. (news.marriott, 2015(a)Additionally, some debts
were exchanged by issuing Series S Notes through Series W Notes, with the elimination
of restrictive covenants, change of control. (BusinessWire, 2017)

Liquidity Ratios:

Current Ratio:
It is the measurement of meeting short term financial obligation. It is
the ratio of current assets to current liabilities (businessdictionary, 2017g)
 CURRENT RATIO
1.4
Hilton, 1.32
1.2

1
AXIS TITLE

0.8

Marriott, 0.65
0.6

0.4

0.2

0
2014 2015 2016

(Annexure, ratio)

In 2014,the securitized financing receivables increased by $357million out of which

current portion represents $67million held as current assets , whose maturity date is in
November 2026. However in 2014-15 accruing interest on timeshare financing
receivables were ceased. (newsroom.hilton, 2015)

In 2015 Hilton had 53,697 timeshare receivables with varying interest rates from 0 to
20%.Current ratio of Hilton increased by 26% because of the increase of cash and cash
equivalent to $1684million from 2015 out of which $266million relates to cash collateral
on self-insurance programs, cash is escrowed from the timeshare operations,
(lawinsider, 2017) out of which $350million and $151million was transferred to Park and
Hilton Grand Vacation respectively. (newsroom.hilton, 2017(e)

Current-liabilities (current portion of long-term loan)decreased in 2016 because Hilton

repaid $250 million on senior secured term loan facility entered into in 2013. (hotel-
online, 2017e)
Comparatively, in 2014, Marriott’s assets held for sale has declined from $350million to
$233 million and current portion of long-term debt has increased from $6m to $324
million due to high amount of debt borrowed. (news.marriott, 2015(b)In 2014
$233million assets related to the Miami Beach Edition hotel out of which $17million is
included as asset held for sale. (investor.shareholder, 2014)

Marriott’s current ratio is growing but it is still below the ideal ratio of 1.29:1. (creditguru,
2017) However, in 2016 its current assets has increased by 143% (annexure, balance
sheet) because of $588million of assets are held for sale including $26million liability
related to the hotels which were acquired through Starwood and Miami Beach EDITION
residences.

However, current liabilities have increased by 96% in 2016 (Annexure, balance sheet)
because of the liability for guest loyalty program has increased. After the acquisition of
Starwood, Marriott has offered 85 million combined loyalty members, an option transfer
and redeem points between Marriott rewards. (news.marriott, 2016(a)

Activity Ratios:

Debtor Turnover:
It determines the firm’s credit policies and cash collection efforts,
this ratio shows the relationship between unpaid credit sales to the total credit sales.
(businessdictionary, 2017h)
 40
Debtor Turnover Ratio
35
-9.6% 25%
30

25 6.8%
33%
20

15

10

0
2014 Hilton Marriott 2015 2016

(Annexure, Ratio)

Receivables increased in 2014 as Hilton issued $304million timeshare financing

receivables, since timeshare facility is secured by timeshare financing receivables.

In 2014-15 current timeshare receivables increased from $980million to $1035million

resulting in higher receivable days. Hilton’s revenue increased by 7.3% in 2014-15,

In 2015-16, current timeshare receivables increased to $1099million from $1035 in

2015, as Hilton ceased to accrue interest on timeshare financing receivables in
2014,2015 and 2016. (vacationclubloans, 2017)

The debtor turnover ratio of Hilton increased from 31 days to 35 days from 2014 to 2016
with a slight decline in 2015, since both sales and receivables increased at same pace.

The sales growth rate in 2014-15 is 7.3% and in 2015-16 4.3%, it has generated total
revenue of $7217m in 2016, $7142m in 2015 and $6811m in 2014 from Management
and Franchise, Ownership and Timeshare segment.(ir.hilton, 2016(c))
In 2015 net receivables declined by 0.81%. Receivables days declined to 28 days from
31 days in 2014, meaning that Hilton was prompt in collecting receivables from
customers so as to inject money into working capital as part of business strategy.

Hilton generated about $ 1,786 million from management and franchise fees and $4,157
million from ownership segment and from timeshare segment $1,390 million in 2016. (4-
traders, 2017b)

In case of Marriott, Receivables in 2014 were $33million.Receivable turnover days

increased by 2 days in 2014-15, as Marriott provided $85million mezzanine loan for
international property. (investor.shareholder, 2015b))

However, ratio increased by 9 days in 2015-16, as Marriott issued $58million loan by a

franchise agreement to a North American Limited-Service property. Despite the impact
of Hurricane Matthew Marriott have generated free cash flow of $158.9 million.(marriott-
vacations, 2016)

In 2016, revenue also increased due to branding fees. Cost reimbursements revenue
increased by $568m for Legacy-Marriott operations due to higher property occupancies,
unit growth across the company, and growth in Marriott Rewards program membership.
(4-traders, 2017c)
Key Business and Financial Metrics:

Average Daily Rate:

ADR
160

155 1%
4.1%
150

145 1.9
%
140

135
3.6%
130

125
2014 2015 2016

Hilton Marriot

(Annexure,Ratios)
RevPAR:

RevPAR
115 1.8%
5.2%
110

105
1.8%

100 5.4%

95

90
2014 2015 2016

Hilton Marriott

(Annexure, Ratios)

Occupancy Rate:

Occupancy Rate
76
75.5
1.3%
75
74.5
74
0.6%
73.5 0.8%
73
72.5
72
71.5
71
2014 2015 2016

Hilton Marriott
 (Annexure, Ratio)

There’s a growth of Hilton’s RevPAR in 2015 in all world regions therefore occupancy
and ADR of Hilton is also rising. The MEA region is facing geopolitical unrest and low oil
prices (seekingalpha, 2017(b), although RevPAR still increased because of improved
year over year demand. Asia pacific RevPAR also increased by 9.3% due to occupancy
of Hilton’s portfolio in China. (newsroom.hilton, 2017(a)

In 2016, due to continuous growth of ADR in Hilton, system-wide RevPAR is also

growing at all hotel segments and regions Including Canada and Mexico however,
performance of MEA is negatively affected due to terrorists’ acts (euromonitor, 2015)
and low occupancy levels. (4-traders.com, 2016a)

Conversely in 2014, RevPAR of Marriott increased by 6.4% to $132.44, occupancy for

these properties increased by 1.5%percentage points to 72.8%, and average daily rates
increased by 4.1% to $182.00. (statista, 2017(c)

From 2014-15 due to increase of $29m RevPAR base management fees of Marriott
also increased by $26m. Stronger RevPAR is due to increase in demand outpacing
supply and higher fees from properties which are converted into franchise-properties
from managed-properties. (statista, 2017(c)

In 2015-16 ,RevPAR increased by 1.8%to $113.50,ADR increased by 1% to $156.53

and occupancy increased by 0.6%to 72.5% , however in many markets revenue was
declined due to new lodging supply, weak demand from oil and gas industries and due
to strengthening of US gateway-markets as compared to moderate GDP growth
(bauer.uh.edu, 2017)
Investor Ratio:

Earnings per Share (EPS):

Portion of Company’s profits allocated to each
outstanding share, indicating profitability. (investopedia, 2017c)

EPS
(Ann
4.5

4 -75.1% exur

3.5 e,
108% -16.7%
3 ratio
2.5 )
24%
2

1.5 In
1 2014
0.5 ,
0
earni
2014 2015 2016
ngs
Hilton Marriott
per
share increased by $0.54 per share to $2.54 per share from $2.00 per share in 2013,
(Annexure,IncomeStatement)due to increased earnings resulting from introduction from
new brands such as Canopy and Curio, as well as overall growth by higher tax benefits
and room rates. (Skift, 2017(b)

EPS of Hilton increased significantly by 108% in 2015 mainly because net income from
continuing operations attributable to Hilton stockholders has increased from $174m in
2014 to $876m. However, in 2016 Hilton suffered a net loss of $18m. Although weighted
average number of shares remained the same at 329m in all these years.
(ir.hiltonworldwide, 2015)
Hilton currently has 990 million shares outstanding, out of which 198 million shares of
Park common stock and 99 million of Hilton Grand Vacation common stock will be
distributed to the shareholders of Hilton due to the spin-offs. (newsroom.hilton, 2017(b)

Marriott’s EPS on the other hand, has been growing in all these years because the net
income have been increasing from $626m to $859m from 2014 to
2016.(Annexure,IncomeStatement) 2016’s EPS in particular, reflects the impact of
Starwood Merger, making it the world’s largest hotel company and thus boosting
investor’s confidence. (Forbes, 2017) However, the weighted average number of shares
have declined from 305m shares to 267.3m shares because Marriott repurchased 8.0
million shares of the company’s common stock for $573 million at a price of $71.55
average, which was also part of Marriott’s strategy to acquire Starwood; and to reduce
dividend payments. (news.marriott, 2016(b)

Price Earnings Ratio (P/E Ratio):

Measures company’s current share-price
against per-share earnings. (investopedia, 2017d)
 P/E Ratio
60
53.38 53.38
50
61%
40 412%
30.72 30.97
30
21.28
20
31% 46%
10.35
10 %

0
2014 2015 2016

Hilton Marriott

(Annexure, Ratio)

In 2014-15 P/E ratio of Hilton suffered significant decline because share price declined
from $53.76/share to$44.1/share (Annexure, incomestatement) and EPS increased due
to increased earnings resulting from introduction of new brands such as Canopy and
Curio, as well as overall growth by higher tax benefits and room rates. (Skift, 2017(b)

However, in 2016 share-price rose to $56.05/share, although EPS declined to

1.06/share, thus increasing P/E ratio by 412%.

Marriott’s P/E ratio declined in 2015 because the share price declined to $68/share from
$79/share in 2014, however EPS increased in 2015 to $3.22/share

From 2015-16 share price boosted up to $83/share as well as EPS due to Starwood
Merger, making it the world’s largest hotel company and thus boosting investor’s
confidence. (Forbes, 2017)
Dividend Yield:
Indicates how much company pays out dividend each year against
its share-price. (investopedia, 2017e)

DY
1.6 4%
1.4 45%
1.2 %
57%
1

0.8

0.6

0.4

0.2

0
2014 2015 2016

Hilton Marriott

(Annexure, Ratio)

Hilton did not pay dividend in 2014 although its first IP occurred on 11december, 2013
which may lose shareholders confidence. Hilton was acquired by Blackstone in 2007
privately after the first IPO Blackstone remained its 75% holding in Hilton, in 2016 both
the share price and dividend per share rose to $56.05/share (Annexure, PnL) and $0.84
per share respectively.(hotelnewsnow, 2015)

In December 2016, Hilton paid annual cash-dividend of $0.84per share. (hotel-online,

2017f)
.

Comparatively, from 2014-15 Marriott increased its dividend to $0.95which is further

increased to $1.2 in 2016 with subsequent increase in share price from $79.87 ,68.3
and $82.99 in 2014.2015 and 2016 respectively. (Annexure, PnL).

Since only some companies in the Hotels & Motels industry pay a dividend therefore
paying dividend is a positive trend. Further the last 5 years’ analysis shows, dividend
per share growth is in-line with the industry average relative to its peers, while earnings
per share growth is above the industry average.(FinancialTimes, 2016)

Gearing Ratio:

Financial Gearing:
Identifies how much creditor’s and owner’s funds are employed in
company’s activities. (investopedia, 2017f)
 Financial Gearing
3
2.46
2.5
-29.4% 5%
2 1.74 1.83
1.58
1.5

0.5 238%
0
2014 2015 2016
-0.5

-1 33%
-1.5 -1.14
-2 -1.71
Hilton Marriott

(Annexure, Ratio)

During 2014, Hilton reduced its gearing by 1billion on the Term loan acquired on 2013
from the proceeds of Waldorf Astoria NY,. Also Hilton made $300 million of voluntary
prepayments on its senior secured term loan facility and $13 million of prepayments on
its commercial mortgage-backed securities loan. . (ir.hilton, 2014(c))

As seen on the above graph Hilton’s gearing has decreased to 1.74 (174%) in 2015
from 2.46(246%) in 2014, although Hilton is trying to reduce its gearing levels but it is
still high from the average gearing of 75% (creditguru, 2017) it means Hilton is
aggressive in financing growth from debts than equity. (ycharts, 2017)

Hilton also reduced its long-term debt balance by $225 million in 2015, it has also repaid
in full the amounts outstanding on a Waldorf Astoria loan from the sale of Waldorf
Astoria New York using its proceeds. (newsroom.hilton, 2017)
In April 2015, Hilton made $100million prepayments of senior secured term loan facility .
(reuters, 2017c)Additionally, Hilton will use the proceeds from the sale of Hilton Sydney
of $315million for reducing further gearing. (smh, 2017)

In 2016, Hilton repaid $450million mortgage loan on Bonnet Creek Loan. However,
Hilton issued $1billion senior notes due on 2024 in 2016. (seekingalpha, 2016)

On the other hand, Marriott was having negative leverage ratio, to control its leverage
level Marriott have repurchased the company’s class A common stock by 25 million
shares for a total of approximately 40 million shares authorized for repurchase as result
its gearing levels has increased from negative 171% to 158%. (wsj, 2017)

In 2015 Marriott issued $790million of Series O and P notes, and Series G notes were
repaid by $134million. Marriott have a credit facility to provide $2000million of effective
borrowings which contain a covenant to limit leverage not more than 4 to1. The credit
facility is used to finance all or cash component to pay Starwood’s shareholders and
certain fees related to combination of Starwood. (investor.shareholder, 2015)

Marriott repurchased 7.7 million shares of common stock valued at $544 million in 4Q14
and 24 million shares for $1.5 billion in 2014. To date in 2015, Marriott has repurchased
3.6 million shares for $275 million. (marketrealist, 2016(b))
Interest Cover:
Determines how easily company can pay interest on outstanding
debts. (investopedia, 2017g)

Interest Cover
12

10 20%
10

8
8
12%
6

33.3% 3.6 27%

4 3.17
2.7
1.8
2

0
2014 2015 2016

Hilton Marriott

(Annexure, Ratio)

Hilton’s operating income before interest and tax have increased in 2015 to $2071m
from $1673m in 2014, it is further declined to $1876m in 2016 (annexure, PnL) as result
interest cover ratio have increased in 2015 but it has declined in 2016, although interest
expense is consistent in all these years.

In 2014-15 interest expense declined due to decrease of debt prepayments of

$775million on Term Loan, as a result interest cover ratio increased (seekingalpha,
2017a).

In 2015-16 the interest expense increased due to the issuance of new debt
Conversely Marriott Interest expense rose to $234million in 2016 from $167m in 2015
due to the increase in credit facility of multicurrency revolving credit agreement to
$4000million from $2500million which contain a covenant to limit leverage not more
than 4 to1. (newsmarriott, 2016(a))

Marriott’s interest cover ratio is declining in 2015-16 interest expense increased by

$52million due to the debt for Starwood combination, also it is due to issuance of Series
Q and W notes in 2016. It shows more constraint on the profits as high level of interest
in not in pace with the increase in profits (marketrealist, 2017(a)

Business Analysis:

SWOT Analysis:

Strength:
High Brand Recognition:

Hilton enjoys market leading brands, globally known as icon

of luxury and lifestyle hotels includes Waldorf Astoria Hotels & Resorts, Conrad Hotels
& Resorts, Canopy by Hilton and Tapestry Collection by Hilton etc. (edgaronline, 2017)

Customer and Employee Retention:

Hilton have a quality and luxury sustaining

customers globally (assignmentclub, 2016), they also have high employee retention, in
August 2015, National Labor Relations Board Adopts Expansive New Joint Employer
Standard in US for joint employer's control. (jonesday, 2015)

Weaknesses:
Marketing strategy:
 They focus more on luxury and quality not on cost, not
economical for middle class customers except for Hilton Garden Inn in China.

Lack of differentiation:

It focuses on small market segment handling celebrities and

dignitaries only, all of its services focus on upscale market segment, less market share
as compared to others in the market.. (assignmentclub, 2016(b))

Opportunities:
Potential Ventures and strategic alliances:

Hilton can expand its capabilities by venturing in mid-level affordable hotels such as Tru
hotels launched recently it has started to look for this opportunity. (swotandpestle,
2017(b))

Digitalization and Innovation:

Digitalization and innovation in the customer services can also increase the revenue of
Hilton . (research and methodology, 2017(b))

Hilton has already introduced digital check-ins, room selection, 360 degree videos for
perspective guests etc. (webrezpro, 2017) in recent years, it can make use of several
digital tools such as better in room hardware providing access to new in-room
technologies for guests and CRM tools for better insight of guests habits. (aliceapp,
2017)
Threats:
Political Instability:

Threat of political instability, hospitality industry is directly related tourism which can get
effected due to terrorist attacks, wars, like terrorist attack in Tunisia in 2015 due to
which 3,500 British tourists left Tunisia due to high fear of terrorism. (bbc, 2017)

Immigration Ban:

Adverse changes in macroeconomic environment with recent

political and economic advancements such as US elections, Trump’s ban on Muslim
immigrants for example from Libya, Syria etc., have direct impact on hotel industry.
(bbc, 2017(b))

Customer Purchasing Power:

Purchasing power of customers are effected which effects their spending on leisure
hotels like Hilton. Customer preferences also changes over a period so the company
have to keep pace with the changing demands of customers (swot and pestle, 2016(a))

PEST Analysis:

Political:
Tariffs:

UK’s development and investment is supported by political environment and

legal framework. Currently political environment is very conductive for expansion of
hotel industry by introducing limited number of tariffs for enhancing business
environment. (assignmentclub, 2017)

Terrorist Attacks:
 Since 11 September 2001 terrorists’ attacks in USA has increased the
travel security measures, it has many impacts on the demand of travel and tourism as
terrorists’ motives for targeting tourists or the industry which ultimately effects the
lodging industry. (arrow.dit, 2014)

Contagious Diseases:

The public perception of travel has been negatively shaped,

by travel-related accidents and outbreaks of contagious diseases, such as Ebola, Zika,
avian flu, severe acute respiratory syndrome (SARS) and H1N1 (swine flu). (who.int,
2017)

Economical:
Tax Compliance:

The Foreign Account Tax Compliance Act required foreign banks and
other financial institutions to disclose information regarding income and assets held
by U.S. on July 1,2014 as a result foreign earnings of Hilton are subject to withholding
requirements. (britannica, 2017).

Foreign Exchange:

As Hilton has vast international presence, it is prone to adverse

effects due to foreign currency changes that would directly affect the financials of the
company. For instance strengthening of USD compared to euro and GBP directly
affected Hilton’s international sales in 2015. (cnbc, 2017)

Social:
Global Team Member Volunteer Program:
 Hilton volunteers have designed
and implemented signature projects during annual Global month of service in October.
Arranged teambuilding events at internal meetings and also provided an enterprise wide
online tracking and reporting tool that captures volunteer hours and impact.
(newsroom.hilton, 2017(c)

Hurricane Odile:

On September 14, 2014, Hurricane Odile made landfall in Los

Cabos, Mexico, in which more than 200 Hilton team members lost their homes. Through
responds Fund, Hilton helped their Los Cabos members and communities to rebuild
their houses as well as on-kind donation of supplies and hundreds of volunteer hours to
rebuild houses. . All together financial support of $500,000 was provided. (cr.hilton,
2016)

Technological:
Global Online Services;

The Global Online Services builds high-performance brand

websites designed to grow revenue and build loyalty to optimize customer conversion
and retention. It also provides shopper engagement, employing leading usability
practices, and intuitive navigation. They also have highest-rated, most-visited mobile
applications. (hiltonworldwide, 2016)

Streamlined Process:

The hotel rooms can be unlocked with the guests’

smartphones so they can directly go to their room on arrival. They can also bypass the
front desk upon departure and their bills will be sent to their email address. Members
can sign into their accounts via mobile phones to check-in and choose their preferred
room through floor map plan. (newsroomhilton, 2017(d)
Conclusion:

Hilton worldwide revenue is in continuous growth from 2014 to 2016, they

have performed well in 2014 and 2015 but 2016 was not that progressive revenue has
increased by 7.3% in 2014-15 and by 4.3% in 2015-16. The revenue has increased
from sale of third-party developed intervals, owned timeshare intervals and growth of
resort operations.

Profitability ratios have improved in 2014 and 2015, can be classified as STAR in BCG
matrix however, its profitability declined in 2016 due to corporate restructuring and
transfer of intellectual property during the reverse stock of 1-for-3 reverse stock split for
Hilton, resulting in operating profit margin of 15.96%, net income margin of 3.12% and
Return on equity of 7.91%.

The liquidity ratio is continuously improving from 1.11, 1.06 and 1.33 times in
2014,2015 and 2016 respectively, which is better than the liquidity ratios of Marriott
international comprising of 0.53, 0.43 and 0.65 in 2014, 2015 and 2016 respectively .

Receivable turnover days was reduced in 2015 as compared to 2014 from 31 days to
28 days but have increased by 7 days in 2016 which is in pace with the competitor
Marriott.

Hilton was highly geared in 2014 at 246% much higher than the average gearing of
100% due to losses since 2008 but It has improved its gearing by reverse stock splitting
to 183% in 2016 but is still higher than its competitor.

Hilton’s investors ratio is improving but it was at the highest EPS of 4.27 per share in
2015 which was declined to 1.06 in 2016 which means shareholders confidence is
slowly reducing, but P/E ratio in 2016 is at the highest of 52.88 times. Hilton did not pay
dividend on 2014 which can be a negative factor for the shareholders.

There are other key business and financial metrics which can assess the performance
of hotel better, Hilton’s RevPAR is 107% which is improving each year, Occupancy of
75% pts and Average daily rate of $143, which is in line with Marriott having RevPAR of
113% and occupancy of 72 pts and Average daily rate of 156%.

Recommendation:

 Focus on reducing its gearing levels

 Pay the dividend each year with a defined growth rate.
 Develop the product and services i.e. evaluate the rest rooms and other hotel
services.
 Focus on the entire experience of customers by incorporating more loyalty
programs, digital check-ins, concierge services etc.
 Apartment rental platforms provide another source to drive visits to the hotel
websites, hotels may choose to target specific segments such as families through
this platform.

.linkedin, n.d. linkedin. [Online]

Available at: https://www.linkedin.com/pulse/situation-analysis-hilton-worldwide-kun-gao
19 aug.2017).
[Accessed 19 august 2017].

4-traders.com, 2016a. www.4-traders.com. [Online]

Available at: http://www.4-traders.com/HILTON-WORLDWIDE-HOLDINGS-
32739806/news/HILTON-WORLDWIDE-Management-s-Discussion-and-Analysis-of-
Financial-Condition-and-Results-of-Operat-23883243/
[Accessed 21 september 2017].

4-traders, 2016(b. www.4-traders.com. [Online]

Available at: (http://www.4-traders.com/HILTON-WORLDWIDE-HOLDINGS-
32739806/news/HILTON-WORLDWIDE-Management-s-Discussion-and-Analysis-of-
Financial-Condition-and-Results-of-Operat-24825830/?iCStream=1 .
[Accessed 21 august 2017].

4-traders, 2017(a. www.4-traders.com. [Online]

Available at: http://www.4-traders.com/HILTON-WORLDWIDE-HOLDINGS-
32739806/news/HILTON-WORLDWIDE-Management-s-Discussion-and-Analysis-of-
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