Edit | Yu Bin
Produced by | Chaoqi Network "Yu see column"
Since 2020, the continuous recurrence of the epidemic has made the impact on offline business self-evident, and the hotel industry, which relies heavily on offline traffic, is even more like a bottom of the barrel. In mid-2020, a news about the layoffs of thousands of people by the international hotel giant Hilton attracted widespread attention. Previously, Hilton Hotels had implemented mandatory vacations and cut working hours to save the company's operating costs.
At that time, Hilton also extended the previous mandatory leave, working hours and wage cuts by 3 months. The international giants' frugality has also made people see the seriousness of this impact. So, after 2 years, has Hilton's spring arrived?
Recently, Hilton Group's financial report showed that in the fourth quarter of 2021, Hilton Hotels achieved revenue of $1.836 billion, an increase of 106.3% year-on-year; net profit was $148 million. For the full year, Hilton achieved revenue of $5.788 billion and net profit of $410 million in 2021. Looking at the Hilton Hotel through this report card, there are clear signs of recovery.
However, if it wants to restore its previous revenue scale, it is almost impossible in the short term. For example, according to Hilton's fiscal 2019 annual report, net profit attributable to common shareholders of the parent company was $881 million, up 15.31% year-on-year, and operating income was $9.452 billion, up 6.13% year-over-year. Compared with last year's Hilton data, it can be seen that Hilton's revenue and net profit in recent years have almost cut off.
However, is the "decline" of Hilton only a factor affecting the epidemic? Through the development of the hotel industry and Hilton's frequent actions in recent years, it may not be all, but there are deeper reasons.
The hotel industry collectively declined, Hilton recovered "slowest"
The impact of the epidemic on the hotel industry is widespread. But as the epidemic is gradually brought under control, the hotel industry is also recovering. But compared to the recovery speed of other hotel companies, Hilton hotels seem to be a beat slower.
Take Marriott, the world's largest hotel group, for example. It is understood that some of its performance indicators for 2021 are close to the pre-epidemic level. According to The earnings report released by Marriott, Marriott achieved revenue of $4.45 billion in the fourth quarter of 2021, an increase of 105% year-on-year; net profit was $468 million, an increase of 67.7% compared with the same period in 2019. Total revenue for the full year was $13.857 billion, up 31% year-on-year, and net profit for the full year was $1.1 billion, down 13.7% from 2019.
For example, the comparison of Hilton's revenue and net profit before and after the epidemic above is enough to see that Hilton's recovery speed is relatively slow. It is worth mentioning that two other hotel giants, Wyndham Hotel Group and Hyatt Hotel Group, are also in the midst of a strong recovery.
According to Wyndham Hotel Group's earnings report, revenue in the fourth quarter of 2021 was $392 million, up 32% year-on-year. The full year 2021 net profit was US$244 million, an increase of 284.85% year-on-year; operating income was US$1.565 billion, up 20.38% year-on-year. In contrast, in terms of revenue and net profit growth, Wyndham Hotel Group's net profit growth ability is stronger, while Hilton Hotels is just the opposite, showing the dilemma of increasing revenue without increasing profits.
It is understood that although Hilton Hotels will turn a profit in 2021, its net profit is far from that before the epidemic. The analysis believes that the profitability of Hilton hotels has been hit hard, which is related to the number of stores opened against the trend.
According to the financial report data, in the fourth quarter of 2021, Hilton Group opened 94 new hotels worldwide, with more than 16,000 rooms. In 2021, 414 hotels were newly opened, with a total of 67,100 rooms, and the number of new rooms reached a record high, with a net increase rate of 5.6%.
By the end of 2021, Hilton had nearly 2,670 hotels in the pipeline worldwide, with 408,000 rooms in place, equivalent to 38% of the current number of rooms. These hotels are located in 115 countries and territories, 28 of which are the debut of the Group's hotel brands.
At the same time, due to the impact of the epidemic, the hotel occupancy rate has plummeted, which has also impacted the pace of recovery of Hilton Hotels Group. Hilton's Q4 2021 system-wide comparable RevPAR (revenue per saleable room) is said to have decreased by 13.5% compared to the same period in 2019, and the full-year RevPAR was 30% lower than in 2019.
This is also an important factor leading to the decline in its revenue and profit. Kevin Jacobs, Chief Financial Officer of Hilton, said that the emergence of the Opichron variant has had the most serious impact on the performance of the Asia-Pacific region, especially China.
Open a store and close a store, why?
On the first day of 2018, the 30-year-old Hilton Jing'an Hotel was officially withdrawn from the license, replaced by the new LOGO of Jing'an Kunlun, and managed by Jin Jiang Preferred Hotel Management Company, which also means that this "foreign hotel" will be replaced by a local brand.
You know, this was one of the earliest five-star hotels in Shanghai, and it was also the first brand hotel for Hilton to enter the Chinese market. The hilton hotel, as high as 40 floors, is also a "landmark" level of Huashan Road. Nowadays, the Hilton Hotel has changed owners, in addition to the attachment of the surrounding residents, there is also the helplessness behind the Change of Hilton Hotel.
According to the relevant people of the hotel, after the change of license, Jin Jiang invested 40 million yuan for the upgrading of the hotel. Moreover, 95% of the management staff is left behind. In fact, Hilton abandoned its first store in Shanghai with its strategic considerations.
First of all, in the past, Hilton was positioned as an absolutely high-end user group, but in recent years, it has gradually been impacted by other brands. In the past, Hilton, whether it was pricing or service, was five-star or even higher.
Moreover, as a "century-old family" in business history, especially in the hotel management industry, the roots of the Hilton family cannot be described as deep, and each generation has the temperament of each generation. Only now, the hotel market space is getting smaller and smaller, and the industry is becoming more and more mature, so it is difficult for Hilton to avoid competition from all directions.
Especially with the rise of non-standard accommodation competitors such as Airbnb, some hotel companies that target high-end people have also had to change course and start to target the sinking market and target brands with different price points and different preferences. For example, after merging with Starwood in 2016, Marriott International owns 30 brands. Accor also operates 39 different hotel brands worldwide.
Hilton also launched its 18th brand, "Lifestyle Brand", Tempo, as early as the beginning of 2020, in an attempt to differentiate itself in this market. Therefore, under the new brand development strategy, it is reasonable for Hilton to choose to give up appropriately.
Secondly, the withdrawal of the Shanghai Jing'an store has not affected the pace of Hilton's attack in the Chinese market. Just from May to June 2019 after the withdrawal, Hilton Group opened 8 new hotels in China in one go, involving Hangzhou, Chengdu, Hefei, Suzhou, Shanwei and other cities, covering different hotel brands such as Joyley and DoubleTree under Hilton.
At that time, it was said that 1 in every 3 hotels under construction in China belonged to Hilton." 2019 is also the 100th anniversary of Hilton Group's establishment, and its obvious change is that the market it targets is gradually shifting to second- and third-tier cities. However, this century-old store will still face new challenges with the rise of China's new first-tier cities and the improvement of consumption power in second- and third-tier cities.
Moreover, the outbreak of the epidemic in 2020 surprised the Hilton Hotel, so the front foot expanded the scale, and the back foot spread the news of thousands of layoffs. In the past, the new hotels that were opened in a big way have also become a heavy burden for the Hilton hotel, making it unable to make ends meet.
In June of that year, Hilton announced that it would cut 2,100 jobs. In response, Hilton CEO Christopher Nasetta said, "In Hilton's 101-year history, our industry has never encountered such a global crisis that has brought travel to a near standstill. According to the previous quarterly financial report, Hilton's net profit plummeted by nearly 90%, almost reaching the historical freezing point.
As of the end of March of that year, Hilton's total assets were $15.788 billion, but its total liabilities were as high as $16.692 billion, and its asset-liability ratio was as high as 105.73%. This also means that at that time, Hilton seemed to only have the value of a century-old virtual brand, and its actual assets were insolvent. Fortunately, after the epidemic, the hotel industry has shown signs of recovery, and Hilton has been able to revive the dead.
Can an aging Hilton get younger?
It has been observed that Hilton's domestic market layout, in addition to aiming at the second- and third-tier sinking markets, also wants to become younger. For example, the Hilton lifestyle brand Tempo mentioned above is one of its performances in entering the young market.
It is worth noting that Hilton has also tried to use a large number of Chinese management to reshape the tone of the brand in terms of brand rejuvenation. However, Hilton has been mainly serving high-end people in business and government affairs for many years, and its brand tone is easy to reverse in the short term.
You know, because Hilton, as a high-end brand, attaches great importance to the unity of the brand image, people's stereotype for Hilton in the past 100 years is: "No matter where you go in the world, you want to see the same thing." Obviously, this is for old-school businessmen, whose marketing rhetoric is usually "at home".
However, the demand of young people to pursue a relaxed and lively, diversified hotel atmosphere is objectively existent, and Hilton wants to re-find a hotel management style that meets the preferences of young user groups, especially Z generation people, which is probably not an easy task.
Compared with localized brands and young users, some of the cultural concepts that Hilton has accumulated over the past hundred years are obviously somewhat ungrounded. With the advent of the tide of consumption upgrading, some of Hilton's differentiated brands have gradually penetrated into the mainland market.
According to Qian Jin, president of Hilton Group Greater China and Mongolia, Hilton Group has more than 10 brands, and many brands will enter the Chinese market, and Hilton divides these into high-end and luxury brands, lifestyle brands, full-service brands and focused service brands. According to geographical location, these brands are distributed to new first-tier, first-tier cities, second-tier cities, third-tier cities and future tourism, vacation, vacation and other places, and carry out differentiated competition with other brands in different dimensions.
It is understood that with the popularization of new technology applications such as 5G and artificial intelligence, the hotel industry has also entered the era of intelligence and digitalization. Hilton is also following the trend and making corresponding digital changes. However, compared with local enterprises, it may lack the basic data that the user base it originally covers is lacking, and it may take time to achieve digital transformation.
epilogue
As a century-old enterprise, Hilton certainly has its solid foundation in the hotel industry, but also has industry experience of different general enterprises. Therefore, in all kinds of strong winds and waves, there is always a breakthrough, and there is no danger in the end.
However, when the development of the global hotel industry is approaching the ceiling, the tide of consumption upgrading and the impact of user rejuvenation cannot be ignored. What Hilton has in front of us may not just be transformation or non-transformation, but how to win in speed. Through the above analysis, it is not difficult to see that after the impact of the epidemic, Hilton Hotels has been seriously injured, and the recovery speed does not have the advantage of the industry.
As a result, the competitive pressure in front of it remains. Moreover, the impact of the epidemic has almost uprooted it, which is also intended to confirm that even a century-old hotel may not be able to sit back and relax, and thinking of danger in peace may be the long-term solution of hilton hotels.