Introduction

One of the few names which will never be forgotten in the history of hospitality

and service is the ritz carlton. Which being the one of the oldest players in the

industry has managed to overcome the barriers of stiff competition, continouslt

changing processes, rapidly growing expectations of the customers, economic

breakdowns and depressions, world war crisis and the most important of them all

the grievous task of providing the flawless and exceptional service, and

managing to maintain the standards throughout their properties.

It all started in 1898, when a man called Cesar ritz moved from Switzerland to

paris and opened a grand hotel that carried his name, the following year he

opened the carlton hotel in London. Combination of both and the vision of the

man to provide excellent personalized service and that satisfied the most

discerning guests, set the stage for the legenday ritz carlton hotel company.

The ritz carlton was the only hortel company to survice in boston thanks to the

wealthy property owner, from 1983 to 1997, the company expanded nationally

and internationally under johnsons company ownership. By 19972, marriotts

international purchased the riritz carlton whch operated as wholly oxned under

subsidiary. By the end of 2000, the ritz carlton was primarily a management

company operating 38 hotels and rsorts across the globe, with the minority equity

stake in 10 properties and outright oxnership of 3 hotels. The ritz arlton primary

growing strategy was to ontain management contracts for hotels and rsorts

across the world.

The milleniem partners

In 1990, chrisstopher Jeffries, Philip Aarons and Philip Lovett founded the

millennium partners wich was real estate development group based in new york.

Their principal strayegy was to create high end luxury apartments in world class

cities. Eventuallu this group of residential developers ended up in hotel

business. The millennium partners owns eight hotels, out of which six were ritz

carltons and two were four seasons.

The overview

In February 2000 the rmanagment of ritz carlton and milleniuem partners agreed

upon a project. Fot the first time ritz carlton was opening up a hotel that was a

part of the multi-use facility. The proposal was located in the foggy bottom district

of Washington d.c, owned by the millennium partners, the 300 room hotel

included 162 luxurt condominiums, a 100000 square foot sports club, three

restaurants, 40,000 square feet of strret level of restaurants ad retail shops.

However, this was not it, as the property owners also had talks with the ritz,s

arch rivals- four seasons. The issue was raised by brian Collins managers of the

hotels for millniem partners, he had his own ideas about the standards of the

service and pre-opening. Collins pressurized James mcbride, general manager

of the new ritz carlton in Washington d.c, to re-examine the seven day

countdown, a hallmark of the compays well defined preopening process.

The pressure from Collins left mcbride in different thought about the hotel

opening, as mcbride knew that any changes could affect his company,s future

relationship with millennium partners.

Philip Collins has expressed his concerns in a rather blunt style about the seven

day countdown. Collins questioned whether the seven-day time frame limited the

hotels ability to open at a higher rate. While McBride was thinking that the seven

day process was like a gold standard and he knew that the cost would be worth

the benefits, but Collins wanted to ensure that service established was flawless

and a would really impress the condominium residents, so he questioned

whether extra training would help the employees to further polish their service

skills.

Another point that added to mcbride’s dilemma was that he would be responsible

for opeing the second millennium partners-owned ritz carlton hotel in 2001.

So the big decision for general manager to make was should he alter the seven

day countdown process, even if it was an established and tested worldwide best

pratice for the company or to put the relations with the partners in rough waters.

Strategy

Before further discussing what strategy should james mcbride apply, the author

would be discussing the strategy it self and what it is all about, strategic

management and its concepts. A basic definition of strategy would be ‘long-term

direction of an organisation’.

Strategy is direction and the scope of an organization over the long term, which

achieves advantage for the organization through its configuration of resources

within a changing environment and to fulfill stakeholder expectations.

The strategy may require major resourece changes for an organization, for

example; decision to expand geographically have significant implications in terms

of the need to build and support a new customer base, which could be seen as a

risk. Also the strategic decision is likely to affect operations.

The strategy of an organization is is affected not only by the environmental forces

and the resource availability, but also by the values and expectations os those

who have power in and around the organization. Strategy can be thought of as a

refelection of the attitudes and beliefs of those who have the most influence in

the organization. Whether a company is expansionist or a more concerned with

consolidation, and where the boundaries are drawn for a companies activity, may

say much about the values and attitude of those who influence strategy – the

stakeholders and owners of the organization.

Strategic management

It includes understanding the strategic positions of an organization, strategic

choices for the human and turning strategy into action.

Strategic management is concerned with complexity arising out of ambiguous

and nonroutine situations with organization wide rather than operation-speciefic

implications. Strategic management is characterized by its complixity, its also

necessary to make decisions and judgements based on the conceptualization of

difficult issues. Its also concerned with ensuring that the strategy is put into

effect.

S.W.O.T Analysis for Ritz Carton Washington d.c

Strengths

proximity to several sites of interest, washington’s status as a global

destination and the potential strong clientale base of foreign diplomats and

local resdents.

having James mcbrise as the general manager of the property, who has

proven his worth for the company by opening some the most succeful

hotels for the company and by winning awards for them.

The company has a 92% guest satisfaction rate.

Has an annual employee turnover rate of 20% as compared to the hotel

industry average of 100%.

Threats

The hotel cannot open up at an average of 80% which is desired by the

owners.

There is difference in thought process of the management and the owners

which is causing a problem for the general manager wich could also affect

his performance and the brand image.

Opportunities

Out of the 8% dissatisfied customers the management still has an

opputunity to improve the service and get the satisfaction to 97% which

could results in huge amount o revenue for the company($300 million).

This is the first opputunity for the company to establish a mixed-use

property format, which could be an added advantage for future projects.

Washington is a global destination and there is a prospective clientele

base for foreign diplomats and local residents.

Threats

The biggest threat to the company is to lose the poject to four seasons, as

the owners have inked deals with them also.

There could be an unforeseen threat if the seven day countdown is

altered.

This could affect the brand name and also the lead to loss of potential

customers.

C.A.S.E analysis

The author would be analyzing and rationalizing the issue on the following

framework.

Challenges

Alternatives

Solutions

Execution

The framework proposed by the author would based on scanning the issues and

collecting the challenge or problems faced by the company, and also to explain it

in brief in order to find out the implications. After the challenges have been listed

down, the next step according to the framework is to enlist the alternatives, i.e

different ways by which the challenge could be overcome. Once the alternatives

are in its place the next step would be to chose the best solution, explainaition

and the rational behind its selection. The final step in this framework is to provide

a plan or a process, according to which the chosen solution could be executed,

and how the company would overcome the challenges.

C.A.S.E Analysis for the Ritz carlton

After carefully scanning the case study the author has observed that the the ritz

carton Washington d.c faces a number of challenges and almost all of them are

sisignificant and also could pose a threat for the compant of not dealt propely

with. However, the most important challenge for the management of the

company is to decide about the globally proveb ‘Seven day coutdown’. There is a

dispute of thoughts between James Mcbride and the owner about whether to

apply the process or not. James Mcbride cannot ignore that interference of the

Collins, who holds a high position in the real estate development company that

has invested about $700 million in the brand and any unhealthy circumstances

would affect the future projects as well.

Another major challenge is the occupancy percentage at which the property is

subjected to open which is comparatively lower than the average of other ritz

carlton properties and also lower than the industry average. This is a major

concern for the millennium partners and they want the property in which they are

investing about $225 million dollars to open at much high occupany percentage.

The author has further classified the challenges broadly in three major areas of

concern.

Human Resource challenges

Marketing challenges

Financial challenges

1. Marketing challeneges

After carefully analyzing he case study the author has understood that the

company faces some important marketing challenges, the author have further

distributed he challenges below.

1. product

definition- a product is anything that can be offered to the a market for

attention, acquisition, use, or consumption that might satisfy a want or

need.

The product in this case would be the mixed use fomat complex

developed and they are offering rooms and condominiums however,

that management of the company need to think about the product on

four levels: the core product, the facilitating product, the supporting

product and the augmented product.

The mos basic level is the core product, i.e what the customers is

actually buying. The management at ritz carlton must uncover the core

benefits to the consumer of every product and sell these benefits

rather than merely selling features. In order for the guest to use the

core product the services that must be present at that time are called

facilitating products, for ex offering late night registration into the

condominiums.

Also important for ritz carlton is to offer a planned and exceptional

augmented product which includes accesbility, atmosphere, customer

interaction with the service organization, customer participation.

Now with respect to the ritx carlton, its observed that this is the

companies first venture in a mixed use format. Also it’s a big

challenege for the company to meet the service standards and also to

excel the standards in order to put forward something strong before the

millennium partners.

This is because no amount of first rate advertising or the brand value

will make up for substandard product design nor neutralize the

negative impact.

Pricing

The second most important marketing challenge which the company

faces is regarding pricing. Price is the only marketing mix element that

produces revenue, while all others represent cost, some experts rate

pricing and price competition as the number one problems faceing

marketing executives, hoever defining pricing could be said that the

price is the amount of money charged for a good or service. More

broadly. Pricing is the sum of values consumer exchange for the

benefits of having or using the product or service.

The author compared the product prices of riz carlton with the industry

averages and it was observed that the ritz carlton products were

overpriced by almost 25%, which in turn has a negative impoact on the

occupancy percentage. This can be notices as one of the significant

reasons why the ritz carlton is not performing upto the expectotaions of

owners and the desired occupancy percentage.

The hospitality industry has seen rapid rise in competition over the past

few years so pricing error could be fatal in terms of losing business to

competitors.

Promotion

Another major challenge that still confronts the ritz carlton is promotion

while proc and pricing is looked after it’s next most important job for a

marketing executive to make it available for the target market.

Companies also have to communicate continuously with their present

and potential customers. Having an effective promotional program is

inevitable for any organization.

Promoting the rit carlton Washington d.c is big challenge for its

marketing team as it’s the companies first venture into a mixed use

format with respect to the modern look as compared to the old

fashioned look. Another challenge for the marketing team would be to

attract the market segment a it is a whole new segment and its existing

clients might not be interested in it. A new marketing campaign that

has the mettle to attract the local residents, foreign diplomats,

govermnets officers and alls high profiled guests

Human resource challenges

The hospitality industry has changes a lot from its evolution, wich is

evident that what earlier used to be a simple human resources

department has now chaged into dynamic and complex Human

resource management and devlopmet.

As an integral part of the organization the Hr department must be

flexible to cope with the market unstabilities. This means

understanding the implications of globalization, technology changes,

workforce diversity, labour shortages, changing skill requirements,

contonous improvements initiatives, contingent workforce

decentralized work sites and employee involvement in organisationa

decisions.

2. Pre opening / Orientation

Orintaiton is an integral part of the hotel opening process it involves introducing

the employees to the organization, the work place. It expands the information

received at the recruitement and selection stages and reduces the anxiety level

of the employyes before he starts working.

The major challenge foe the ritz carlton is the ‘seven day coutdown’ which is the

hallmark of the company, a proven success, which is being questioned by the

millinium partners. James mcbride is aware that any wrong moce could affect the

future relation ship with the millennium partners but also the Brand and its value.

3. Retention – another challenge caparatively lower in intensity than the

former is the staff turnover rae of 20% compared to the industry average

of 100%.

Financial challenges

As discussed previously, the changing structure of the hospitaltiyt industry, have

also triggered changes in the financial managements for the hotels and practices.

Conflicting stakeholders claim a downsized corporate environmentand financial

signaling effects, the globalization of finance, the growth of e-commerce,

strategic alliances outsourcing and the emergence of virtual corporation with a

host of other considerations now permeate the landscape of financial decision

making.

Financial management is concened with financing and management of assets,

acquisition, the companies performeance and valuation with respect to the

mission and vision of the organization.

4. Price V/S Occupancy

In the case its observed by the author that the hotel shows a high pricing

approach which is well above the exiting competition (25%) .

Another observation was of the average occupancy percentage of 50 % is

achieved, therefore the two major factors that affects this are low occupancy

percentage rate with a high priced product which could have a serious impact.

The ultimate effect could be clearly seen as the result of the above two has

affected the Revpar (revenue per available room), this results in large variation

and higher fluctuations which lead to low revenues. Since crewpoints and good

stick measure are based on revpar the company should consider increasing the

bottomline without causing dratic pricing differences.

Also if the financial results fials to impress the owners there is alsl a threat of

substitution.

Alternatives

After the author have clearly defined and indentifid, the major challenges that the

company faces, the author will be discussing the various alternatives and options

that can be adopted by the rotz carlton in order to overcome the challenges.

The author in this section will be discussing the few key areas that james

mcbride could use to align the both the company views and the desired

outcomes. The solutions have been provided by keeping in mind the high service

standards of the ritz carlton and the yet to effective enough to overcome the

dilemma that james mcbride has.

As the challenge were discussed previously the author will propose the

alternatives solutions to same, the alternatives are as follows.

5. James mcbride invited the few esteemed guests and igh profiled clients

for an evening tea to promote the new venture, however, this can be

improved and the company can have better strategic and effective

promotional campaigns as it’s the companies first project as a mixed used

format so an intensive market research would be better for an effection

promotional programme.

Another alternative which the company could use is market strategy

development- designing an initial marketing strategy for introducing

product into the market. The marketing development strategy consists of

three parts. The first part decrobes the target market, the planned product

positioning, and the sales, Markey share and the profit goals for the first

few years. For example the target market for courtyard by Marriott were

business travelers who wanted moderately prices, high quality rooma and

pleasure travelers who wanted a safe, comfortable room. The second part

of the marketing strategy statement outlines the product palnned price,

distributuin and marketing budgets for the first few years. Stastical

software enables hospitality companies to buile sophisticated models.

These models provide infprmation on pricing and expexted market share

based on these prices. The third part of the marketing strategy statement

describes the planned long run sale, profit goals, and marketing mix

xtrategy over time.

Integrate marketing throughout the organization.

Marketing should be integrated throughout the organization and some of the

most famous hoteliers suggests that the marketing function ina hospitality

organization are the responsibility of people outside the marketing department,

marketing must be integrated into opearations.

Marketing mix strategy

As iscussed earlier that pricing is one of the major challenges for the ritz carlton,

and price is only one of the many marketing mix tools that a copany uses to

acieve is marketing objectives. Price must be coordinated with the product

design, distribution and promotion decisions to form a consistent and effective

marketing program

Also to increase the initial amount od advertising in the initial phase that

would help the hotel to rach out to more customers.

Furthermore that author has notices when the cost of marketing is taken

into consideration versus the revenue earned, the author observed that

the graph is linear, which means that when the marketing is higher the

sales and revevnues were also higher. It can be noted from this that in

increase in marketing activities and correct positioning can reap more

revenue for ritz carlton.

The biggest challenge which the Human Resource department faced was that

the company had hired entire new staff which was put under the seven day

process of training, due to which as per Collins, the hotel could not open to 100%

efficiency. The alternative solution to overcome this challenge coulde be that

rather than ritz carlton employing entirely new staff for this property they could

employ some percentage (one third) of the total employees that are experienced

and know more about the company its service standards and procedures, and

the experienced employees would be able to assist the new staff and ritz carlton

could open at a higher efficiency rate and work towards achieving the target of

80% more effectively and in less time.

The other major challenge noticed by the author was that the guest satisfaction

percentage which depeicts that the satisfaction rate was not 100% despite

having high standards of service and efficient staff, which implies that there are

8% customers disssaatisfied, out of the 8% of the dissatisfied customers, there

could be 2 or 3 % which wants certain amenities or services which are beyond

the reach of the company or if the company does those things it would upset the

other ustomers, but the other 5% are dissatisfied because of certain deects that

are repeating and defects that should have been eliminated permanently. Its

quoted by president of ritz carlton that if they can satisfy this 5% of dissatisfied

customers and operate at a high occupancy average would result in three

hundred million at the bottom line to them, so basically an alternate solution to

this challenge could be to have more rigorous training session, effective

orientation, and the company shoulde focus on providing more purposeful work

so that to remain to make them feel that what they are doing is important and will

make them commited to providing exceptional service.

There are three main aspects in the challenge faced by company, the price and

the yield which is due to huge variance in the Revpar and the ADR. This is what

the millennium partners cited as the primary reason to not givee the results

expected by them and due to this they put forward their demand.

Logically, an alternate solution to this would be that if the company reduces the

daily rate as per the competitors it would lead to increase in occupancy

percentages and this would lead to an increase in Revpar.

An appropriate and efficient pricing approach would also help in increasing

revenue.