Hilton and Marriot
In spite of the fact that there are concerns and debates revolving around over the global economy and discretionary spending, people particularly customers in the hospitality industry have the freedom to travel to places they feel offer the best services and products. It should be noted that confusion in the hospitality industry is often experienced during celebrations and holiday seasons. Hilton and Marriot International Inc are household names in the hospitality industry, and they have branches or otherwise subsidiaries all over the world. It should not be forgotten that the two giant hotels have incredible and readily available markets in the global business accommodation as well as the travel sector. A competitive advantage possessed by both corporations is that they are capable of catering for almost every person regardless of their budget for a vacation, excursion, or business trip. The corporations are competitive because they offer a wide range of services, and thus generate revenue from various avenues such as lodging as well as catering to customers’ different services, foods, and others. Both the Hilton and Marriot International Inc aim at achieving the set objectives and goals, a primary aim being to sell themselves as the better values. It is argued that the Hilton Corporation is more successful than the Marriot International Inc (Deighton & Shoemaker, 2000). Thus, there have been questions and a debate regarding which of the two has a larger market capitalization than the other. Besides, questions have been raised regarding which of the two has a better bargain. Thus, focus is on the market types of the two organizations, the various key elasticity indicators of the companies and the goods they produce, the relative value of each of the companies, potential future growth, and recommendations are made as to which company is a better investment than the other.
Market type of Hilton and Marriot
Hilton focuses on the demographic segment, and this means that the company unlike its competitors considers the income, socio-economic class, family cycle, as well as occupation when choosing the target market. Other characteristics thought not keenly considered by the organization when choosing the market type are gender, religion, age, and race. The reason why the organization fails to consider factors such as age, religion, race, and gender when selecting the market type is that it focuses on the provision of premium pricing services and products, and thus the need to maximize profits means that the mentioned factors cannot be taken into consideration when selecting the market type. Hilton being a global brand finds it hard to divide or select the market type based on geographic location. Arguably, the brand has branches in almost every geographic location worldwide. Thus, the organization needs to segment the market into countries and this is because customers are from countries worldwide. The market type of the organization is also based on other factors such as values, lifestyles, and customer personalities (Deighton & Shoemaker, 2000). On the other hand, Marriot also targets every customer although there is a difference in the willingness to pay for the luxuries and comfortable services offered by the company. This underscores the fact that Marriot has ventured in the creation of a tier of different styles of hotels that offer various services and products that vary in prices. The aim is to ensure that every customer has his or her needs met. For the Marriot hotel, there are tiers of hotels created to satisfy the needs of customers from all walks of life. It has chains that provide different services to various age groups, cultural groups, education levels, income, and religious groups. The market segmentation of Marriot also leverages on the activities that a potential customer wants to engage in. Thus, Marriot has tiers that provide specifically corporate activities or leisure activities. The market type of Marriot is also determined by behavioral practices of customers. Factors such as brand loyalty, usage status, frequency, and benefits influence Marriot’s market type.
Products and elasticity indicators
Hilton is a household name in the global hospitality industry, and it offers accommodation and catering services. The key elasticity indicators for the organizations are price and demand. Price elasticity demand is an indication of the relationship between the price and the quantity of products or services demanded by customers of a given organization or company (McGuigan et al, 2014). With this perspective in mind, it should be noted that the organization (Hilton Hotels) increases the prices of its products in case the demand for the products is high, and lowers the product prices in case the demand for the same is low. Through this, the organization has for several years been in a position to overcome stiff competition from competitors in the global industry. Besides, the huge steps made by the company in terms of profitability are owed to the embrace of the strategy. It is notable that the prices and demand indicators for Hilton are elastic, and this is because they change from time to time. As mentioned earlier, the prices of products such as food and beverages are seen to increase when the demand is high and decrease when the demand is low. The products and services such as catering and accommodation are luxurious, and thus are only affordable to people of a high socioeconomic class. This underscores the fact or argument that the key target customers of Hilton are people with good income and occupations.
What is the price elasticity demand for the products?
Like Hilton, Marriot International Inc is a household name in the global hospitality industry and it also offers accommodation and catering services to customers. The key elasticity indicators for the organization are price and demand. Like Hilton, the prices of products and services at Marriot are high when the demand is high. However, the prices of products and services at Marriott are lowered when the demand for the same is low. This is a strategy used by the organization to ensure maximization of profits, and this gives the organization competitive advantage over close competitors in the hospitality industry. The pricing and demand indicators of Marriot International are elastic, and this is owed to the fact that they change from time to time (McGuigan et al, 2014). For instance, prices of products and services are high when the demand is high or when the number of customers seeking for the same product or service is high. Essentially, the products and services offered at Marriot International Inc. are luxurious, and thus, individuals from high socioeconomic classes are the key customers. However, the corporation has come up with an intervention that has seen the provision of necessities such as water and food at affordable prices, and this means that people from low socioeconomic classes are also customers at Marriot International Inc.
What is the Income Elasticity of demand for the products and which products have higher income elasticities?
Essentially, income elasticity of demand refers to the relationship between the income of customers and their demand for a particular product. Put simply, a decrease in the income of customers could trigger a decrease in the demand for various products. On the other hand, an increase in the income of customers could result in an increase in the demand of various products and services by customers. For the Hilton Hotels and Resorts, a decrease in the income of customers results in a decrease in the demand for various products and services. Despite focusing on individuals with high incomes, the demand for products and services decreases in case there is a decrease in the income of the customers. Conversely, an increase in the income of customers results in an increase in the demand for products and services at Hilton Hotels and Resorts. For Hilton, accommodation services have higher income elasticities because of the high normal prices accompanying the same. Without a doubt, a decrease in income would force a customer at Hilton to look for alternative accommodation, and this, results in a decrease in the demand for the service (Mukherjee et al, 2003).
For the Marriot International Inc, the situation is similar because a decrease in the customers’ income results in a decrease in the demand for the available products and services. Unlike Hilton, Marriot focuses on both the high and low socioeconomic classes. For the latter, the situation is even worse because a decrease income could result to a change in preference, and this means that the organization would loss the customers completely. For the high socioeconomic class, the situation is the same. A decrease in the income of customers in the high socioeconomic class would result in a decrease in the demand for services, and this jeopardizes the organization’s profitability. For Marriot, both accommodation and catering services have higher income elasticities because of the high normal prices accompanying the same. Also, food and beverage products offered at the organization have higher income elasticities. Without a doubt, a decrease in income would force a customer at Marriot to look for alternative accommodation, catering services, as well as food and beverage products, and this, results in a decrease in the demand for the services and products offered by the organization.
Cross price elasticity of demand for products and competing products of Hilton and Marriot
Arguably, cross price elasticity demand refers to how customers demand a given product in case of the change in price of a different product (McEachern, 2009). That is to say, customers would purchase another product because the price of a given product has been increased, and thus, is unaffordable. For the Hilton Hotels and Resorts, an increase in the price of a given product or service; results in an increase in the demand for another product or service. For instance, if the organization increases the price of food products, attention of the customers will be shifted to beverage products although the needs to be satisfied are different. The increase in the price of one product results in an increase in the demand for another product. Despite focusing on individuals with high incomes, the demand for other products and services increases in case there is an increase in the price of a given product or service at Hilton Hotels and Resorts. The situation is similar for the Marriot International Inc. because an increase in the price of a given product or service; results in an increase in the demand for another product or service. For instance, if Marriot Inc increases the price of food products, attention of the customers shifts to beverage products although the needs to be satisfied are different. Moreover, if the price of a given accommodation service at Marriot increases, attention could be shifted to other services such as catering notwithstanding the fact that the needs to be satisfied are totally different. Without a doubt, the increase in the price of one product results in an increase in the demand for another product despite the socioeconomic class or income of the customer.
The Hilton Hotels and Resorts and the Marriot International Inc are close rivals in the global hospitality industry. The organizations offer wide range of similar products and services, and this means that they offer myriads of competing products and services in the global market. First, both organizations offer accommodation services to customers, and thus there is stiff competition in the provision of the same. Second, both organizations offer catering services to customers, and this heightens the level of competition between the two organizations. Moreover, the organizations compete in the provision of food and beverage products to customers.
Market potential for the organizations’ products
As mentioned earlier, the Hilton Hotels and Resorts focus on customers of high socioeconomic classes and high income. With this perspective in mind, the potential market for Hilton’s products and services are the mentioned groups. On the other hand, Marriot focuses on the provision of services and products to customers from every socioeconomic background and income. Thus, Marriot International Inc has an unlimited potential market for its products and services, and this includes individuals from both high and low socioeconomic classes.
Briefly, the fact that Marriot International Inc focuses on every customers despite the income or socioeconomic class makes it one of the most preferred organizations in the global hospitality industry. Besides, the fact that Marriot Inc is focused on environmental conservation by initiating programs that aim at the reduction of environmental pollution makes it a preferable destination in the global hospitality industry.
Deighton, J., & Shoemaker, S. (2000). Hilton HHonors Worldwide: Loyalty Wars. Harvard Business School.
McEachern, W. A. (2009). Economics: A contemporary introduction. Mason, OH: South-Western Cengage Learning.
McGuigan, J. R., Moyer, R. C., & Harris, F. H. B. (2014). Managerial economics: Applications, strategy, and tactics. Stamford, CT: Cengage Learning.
Mukherjee, S., Mukherjee, M., & Ghose, A. (2003). Microeconomics. New Delhi: Prentice-Hall of India.