Ritz-Carlton Case Study

Justin Stappler 3/10/2009 What do most people think of when they hear the name Ritz- arlton! "hey think of wealth# $uality# ser%i&e# and presti'e( )ts easy to find a hotel anywhere in the world# *ut there only a few hotels a*le to rea&h the top of the heap( "he produ&t differentiation strate'y employed *y the Ritz- arlton has allowed it to dan&e &ir&les around its &ompetitors# and &ontinually pla&e it at the forefront of the hotel industry( )ts ar&hite&ture# routines# and &ulture ha%e pushed the or'anization to a le%el of ser%i&e that *rin's an enormous amount of %alue to the &onsumer that doesn+t appear to *e fadin' away anytime soon( "he first aspe&t of this *usiness# its ar&hite&ture# is a 'ood pla&e to start when analyzin' it as a whole( "he *asis of all of its su&&ess stems from a few *asi& ideas( "he first is the Ritz+s &entralization# or la&k there of( ,s is seen in the arti&les# 'eneral mana'ers of spe&ifi& Ritz- arlton hotels 'et a &ertain amount of autonomy alon' with their -o*( James .&/ride has e0&elled as a mana'er *e&ause of this autonomy( 1e is a*le to fuse his own personal style into the or'anization+s operations *y ensurin' that he understands the &ulture and settin' of his hotel and foldin' it into the way he runs it( .&/ride uses the en%ironment around him to make his hotel more appealin' and to &ater to the needs of his 'uests( ,n e0ample of this was his afternoon tea and &arria'e ride in Washin'ton 2( ( *efore the openin' of the 2( ( Ritz when the &herry *lossoms were in *loom( 3ne of the 'reatest times to see the &ity# he was a*le to take ad%anta'e of this time of year &oupled with the &ity+s well known &ites to deli%er a uni$ue e0perien&e to all who were present(

"he de&entralization of mana'ement helps the &ompany to differentiate itself from other or'anizations# *ut only to a &ertain e0tent( "hou'h he allows his mana'ers to make de&isions *ased on the hotel+s lo&ation# 1orst S&hultz# 4resident and 33 of the Ritzarlton# still takes a hands-on approa&h to his *usiness strate'y( "he te0t fo&uses on how he helped his mana'ers tea&h new staff mem*ers durin' the se%en-day &ountdown and o%ersaw 'eneral pro'ress of the trainin' pro'ram in the new 2( ( Ritz( "he hirin' and re&ruitin' of new staff# and espe&ially mana'ers# is done in a mu&h more &entralized manner lea%in' &ontrol in the hands of more e0perien&ed mana'ers like S&hultz( "his approa&h of de&entralized operation of a hotel and more &entralized way of hirin' 'i%es the Ritz a spe&ial tou&h that differentiates it from other hotels that su*s&ri*e to -ust one style( When lookin' at this spe&ifi& &ompany# it+s easy to see that &ustomers %alue the *rand( "he $uestion is why it &arries su&h a per&ei%ed %alue and why it has maintained it for so lon'( ,'ain we &an look to the ar&hite&ture of the or'anization for the answer( Somethin' spe&ial that is *uilt into the ar&hite&ture of this &ompany is its 'rowth of internal staff( ,&&ordin' to the te0t# 5 orporatewide# 267 of the or'anization+s mana'erial workfor&e *e'an their &areers at the Ritz- arlton as hourly employees# su&h as dishwasher# housekeeper# and restaurant ser%er# or as hourly super%isors(8 Whi&h in&ludes S&hultz himself( apitalizin' on the knowled'e internal staff has of all fa&ets of the industry# adds an enormous amount of %alue to the or'anization as a whole( .ana'ers who understand what lower le%el staff 'o throu'h are *etter a*le to moti%ate staff and understand ways to make menial -o*s seem more important( When employees see %alue in their work# 'uests will see %alue as well( "his is one reason 'uests are willin' to pay

the 'audy pri&es atta&hed to a stay at a Ritz( /e&ause of these fa&tors# the or'anization is a*le to &reate a si'nifi&ant amount of %alue to &onsumers( "he final pie&e added *y the Ritz+ ar&hite&ture is dura*ility( "he most important statisti& is one that is %ery rare in the hotel industry( ompared to a normal 1007 turno%er ratio# the Ritz- arlton *oasts a mere 207 turno%er ratio worldwide( "he fa&t that employees are a*le to rise throu'h the &ompany so $ui&kly 'i%es them a realisti& per&eption of opportunity and in&reases employee morale( , low turno%er ratio pro%ides the dura*ility of fine $uality as the staff is more e0perien&ed than at most hotels around the &ountry and around the world( ,r&hite&ture is an e0tremely important part of a *usiness# howe%er it is not the only part( Routines are also a ma-or &ontri*utor to the way an or'anization flows and how it operates( When dis&ussin' a *usiness su&h as the Ritz- arlton it is important to fo&us first on how its pro&esses and routines are different from other hotels and hotel &ompanies( "he startin' point here is the inter%iew pro&ess in openin' a new Ritz( all*a&ks are done routinely to make sure a potential employee is truly interested in the position# and to make the &andidate feel that they will *e %ery important mem*ers of the team should they *e hired( "hose that are not a&&epted are treated well to( )n the eyes of the mana'ement staff# it is important for all those who apply to *e treated fairly( ,s 9eonardo )n'hilleri said# people who don+t 'et a -o* offer &ould still *e a potential &ustomer some day( 3ne of the most important marketin' tools for any *usiness is a 'ood reputation# and one of the most painful thin's that &an happen to a *usiness is when people speak *adly a*out it to e%eryone they know( /y ensurin' that e%eryone is treated

e$ually# the Ritz- arlton is eliminatin' a *usiness threat# and thus is differentiatin' itself and 'i%in' itself a &ompetiti%e ad%anta'e in the hotel industry( , se&ond way the hotel &ompany differentiated its routines is the se%en-day &ountdown( "his &rash &ourse in hotel ser%i&e is a %ery important part of the or'anization( )n'hilleri *elie%es that the window of opportunity to impose your %alues on a new employee is small and must *e e0ploited immediately( /y throwin' people into the mi0 and for&in' them to learn at a rapid pa&e# Ritz mana'ers &an $ui&kly moti%ate new staff and &ut down on e0pensi%e drawn-out trainin' pro&esses( "he Ritz en'a'es in a num*er of a&ti%ities that add %alue to a &ustomer+s stay and add %alue to the &ompany as a whole at the same time( 3ne way is to remind staff mem*ers daily of their &ommitment to $uality( S&hulze understands that if you &ome to work day in and day out# e%entually you+ll -ust think you+re &leanin' rooms( )f you+re &onstantly reminded# as Ritz staff are# of the importan&e of your -o* and how it affe&ts the &ustomer and their per&eption of the staff and their e0perien&e as a whole# you are far more moti%ated to do your -o*( ,s stated *efore# more moti%ated staff &an a&hie%e a mu&h hi'her le%el of $uality in their work# and will also *e more in&lined to *e ni&er and more helpful to 'uests( "he push to do *etter e%ery day is a %ery powerful for&e( "his approa&h is similar to what is applied in manufa&turers usin' the "oyota 4rodu&tion System( /oth "oyota and 2anaher orporation use this idea that# 5e%ery employee# from the -anitor to the president# :finds; ways to impro%e the way work 'ets done(8 ,pplyin' a strate'y from another industry has paid off for the Ritz in the form of a hi'her %alued or'anization to its &lients(

Sustained dura*ility is another out&ome of the routines en'rained within mana'ement and staff( ,s stated *efore# &onstant reminders of $uality are important to keep up morale# whi&h will keep the $uality of ser%i&e hi'h for a lon'er period of time( "he Ritz- arlton also employs an in&enti%e pro'ram of 5small awards8 and lar'er awards to further moti%ate staff( )f you are always stri%in' for somethin'# the $uality of your work will &ontinue to impress( "his idea is %ery important to S&hulze as he uses it a'ain and a'ain in the te0t( 4erhaps the sin'le most important aspe&t of the Ritz- arlton+s *usiness as a whole is its &ulture# or its &ompany philosophy( , &ommitment to ser%i&e is stressed a'ain and a'ain throu'hout trainin' and throu'hout e%ery sin'le day( "he Ritz- arlton is not in the hotel industry# 5our *usiness is ser%i&e(8 <uests &an 'o to any ni&e hotel -ust for the rooms( What makes the Ritz so different is that it is a ser%i&e industry( When people 'o to the *ar they don+t want drinks# they want to feel 'ood( "he am*ian&e pro%ided *y the staff differentiates this hotel from others and adds &onsidera*le %alue to its name( <uests stay at this hotel *e&ause when you &ome here# you are surrounded *y ladies and 'entlemen( "his uni$ue outlook separates the Ritz# and is the *i''est reason for its &ontinued su&&ess o%er the years( "he %alue pro%ided *y the &ompany+s &ulture is pri&eless# whi&h allows the mana'ement staff to &har'e what would otherwise *e &onsidered astronomi&al pri&es# espe&ially for some rooms( Ran'in' anywhere from o%er =200/ni'ht to o%er =6#000/ni'ht in some suites# &ustomers e0pe&t to *e treated like royalty from the moment they enter the *uildin'( "he idea of staff mem*ers remem*erin' your name after stayin' at the hotel a sin'le ni'ht or ha%in' your own mono'rammed pillow waitin' for you in your room is

somethin' most hotels would ne%er *other with( "he &ompany standard is that e%ery employee is a professional# and &onstant impro%ement happens e%ery day( "his attention to details is another way the Ritz is a*le to &reate a &ompetiti%e ad%anta'e o%er its &ompetitors( 3ther aspe&ts of or'anizational &ulture that add %alue to ea&h and e%ery 'uest in&lude appre&iatin' mistakes# puttin' $uality ahead of $uantity# and handlin' 'uest diffi&ulties( .istakes are not en&oura'ed# *ut are ne%er punished at the Ritz( "hey are seen as a learnin' e0perien&e from whi&h the &ompany as a whole has a &han&e to impro%e itself( "hey are opportunities meant to *e &apitalized on and impro%ed upon( "he Ritz truly %alues $uality o%er $uantity as &an *e seen *y the openin' of ea&h new hotel( 5"he first month of operations# we may open the hotel with 607 o&&upan&y(8 "his is to 'i%e the staff a &han&e to understand their -o* duties and *e&ome effi&ient professionals in e%ery aspe&t of their -o*s( 9astly# handlin' 'uest diffi&ulties &omes *efore anythin' else( )n *etween all of the warm wel&omin'# fond farewells# and instant &ustomer 'ratifi&ation asso&iated with simply steppin' into the hotel# anytime there is a pro*lem# a staff mem*er is instru&ted to drop what they are doin' and help that 'uest( 1a%e you e%er heard the phrase# 5its not my -o*!8 not at a Ritz- arlton( ,ll of these ideas add a si'nifi&ant %alue to the &ustomer that enti&es them to spend more for a *etter hotel e0perien&e( "he final %alue of &ompany &ulture ultimately lies with its dura*ility( an the Ritz maintain its in&redi*le le%el of ser%i&e to ensure the same $uality to e%ery 'uest no matter how lon' the hotel has *een open or how lon' a staff mem*er has *een employed! "he &ompany &ulture answers this with an emphati& yes( >rom day one you are told to e0pe&t

and stri%e for su&&ess( Su&&ess is all around ea&h and e%ery person ea&h and e%ery day( "he hi'h-end &lientele are a &onstant reminder of su&&ess to ea&h staff mem*er day after day# and the mana'ement team always reminds staff mem*ers of the possi*ility and opportunity of su&&ess within the or'anization( Su&&ess is not a&hie%ed alone# *ut *y workin' with friends( Staff mem*ers know ea&h other %ery well# and are a*le to work *etter with ea&h other *e&ause of this( ,re employees more likely to work harder when surrounded *y stran'ers or surrounded *y friends stri%in' for e0&ellen&e! "his employee en%ironment ensures that the le%el of &ommitment amon' staff mem*ers remains hi'h all of the time( 9ookin' at the Ritz- arlton+s new Washin'ton 2( ( hotel# the $uestion *e&omes? is the Ritz in need of a ma-or o%erhaul of its ar&hite&ture# routines and &ulture! "he answer is no( ,lthou'h in&remental &han&e is always ne&essary to sur%i%e in any industry# this or'anization is not in need of any drasti& &han'es( )t su&&essfully moti%ates employees# &ontrols at least half of a %ery hi'h-end ni&he market# shows %ery 'ood profit mar'ins and le%els of &ash flows# maintains a si'nifi&antly lower turno%er rate than the industry a%era'e# and has a *rand that is re&o'nized internationally as a standard of e0&ellen&e( "he mana'ement team has spent years fo&usin' on what is *est for the &ompany and# for now# they ha%e found a strate'y that works %ery well for them( "he &ompany is &onstantly openin' new hotels and is always thinkin' of new ways to ser%i&e &ustomers# as is e%ident throu'h James .&/ride+s installation of a 2@ hour )" ser%i&e# meetin' 'uests at the airport with mimosas# and airport &he&k-in for the hotelAa &on&ept well ahead of its time(

"he readin' ends with James .&/ride de*atin' whether or not to &han'e the se%en-day &ountdown to 'i%e staff mem*ers more time to train *efore the openin' of the hotel due to pressure from /rian ollins( )s se%en days truly enou'h time to fully de%elop a full hotel staff! Bo( ould the hotel open at a hi'her initial o&&upan&y rate if more trainin' time was allotted to new staff! Ces( Would more e0tensi%e trainin' refle&t result in hi'her le%els of interest in &ondominiums on the property! .ay*e( Should .&/ride delay the se%en-day &ountdown! Da&h idea shown a*o%e must *e &onsidered when makin' this de&ision( Se%en days is not suffi&ient to train a full hotel of staff to perform at the hi'hest le%el of e0&ellen&e# howe%er are some of the &ompany+s %alues edu&ation seminars &heapened *y more drawn out orientation and skills trainin' s su''ested *y )n'hilleri! "hey may *e# *ut the fa&t of the matter is that you &an only tea&h an employee so mu&h a*out a -o* throu'h edu&ation( "he only real way for someone to learn and *e&ome effi&ient at their -o* fun&tions is to do them a'ain and a'ain( 1i'her initial o&&upan&y rates would *e possi*le with more trainin'# *ut the $uality of ser%i&e would still *e hi'her a month after openin' than the first day no matter how mu&h trainin' someone re&ei%ed( "he last &on&ern is that ollins wants potential &ondominium owners to see the hi'hest $uality ser%i&e possi*le( Would you rather ha%e your staff workin' full *last at E07 initial o&&upan&y ri'ht away with a sli'htly lower $uality of ser%i&e# or at 607 &apa&ity with a hi'her le%el of $uality and more attention 'i%en to ea&h &ustomer *e&ause of the proportion of staff to 'uest on openin' day( 4eople who &onsider pur&hasin' a property ne0t to a Ritz- arlton are doin' so for the ser%i&e and for the name *rand( /ein' on the same property as a Ritz in itself &arries presti'e# re'ardless if the hotel is workin' at 607

or E07 &apa&ity( )t would only hurt the Ritz and .&/ride to interrupt what is a pro%en pro&ess in openin' a new hotel(