Introduction & Executive Summary
Ritz – Carlton was founded by Mr. Cesar Ritz who initially worked in finest Hotels and restaurants in Paris. He owned grand Hotel Ritz and within one year he expanded wings in London and opened Hotel Carlton which became Ritz – Carlton Hotel Company. He believed in excellent personalized services which satisfied the discerning guest. Ritz – Carlton expanded to North America and ownership changed during 1983 to Johnson Company. During 1983 – 1987 Ritz – Carlton expanded domestically and internationally under new ownership. [i]
During 1997 Marriott International purchased Ritz – Carlton and by 2000 it became primarily a management company operating 38 Hotels and resorts worldwide with minority stake in 10 properties and outright ownership of 3 hotels. The company used to obtain management contracts for new hotels and resorts around the world.
Over the year’s hotel conglomerate won & acclaimed for its services and had been awarded Best Hotel in Asia – Pacific in the eight Business Traveler Asia / Pacific magazine Travel Awards Subscribe Survey and for two consecutive years Best Business Hotel in Malaysia.
The Ritz – Carlton Hotel Company for the first time now wants to open a hotel in historic Foggy Bottom district of Washington D C in Multi – Use facility complex owned by Millennium Partners. The Hospitality Complex is 162 Luxury Condominiums, sports club, splash Spa, three restaurant, and 40,000 square feet of street -level restaurants and retail shops and 300-room hotel.
Millennium partners founded in 1990 that set up high end luxury apartments and Lincoln square four building complex in New York was their first project and exhibited their future intensions. Millennium partners ended up in hotel business.
In this case study Essence of Ritz-Carlton experience, the Ritz-Carlton selling, how the Ritz-Carlton creates “Ladies and Gentlemen” in only 7 days. Also McBride, Ritz-Carlton GM, to lengthen the amount of time spent on training hotel employees before hotel opening. McBride should consider a total overhaul of the hotel opening process.
Products and Services
Ritz-Carlton Hotel Company develops and Operates luxury hotels. Hotels are designed and identified to appeal to and suit the requirements of major customers including meeting event planners, Business travelers and leisure travelers. Ritz- Carlton set out to open any new hotel Ritz-Carlton including detailed analysis of site selection, new product and service development and feasibility study. The detailed analysis also includes target customers, their needs and expectations. The each hotel customized to meet local market demand. Innovation through make use of latest technology for enhancing customer satisfaction level – Link restaurant services through internet KobaltExpress.com. It allows customers to decide menus ahead of time and also select the choice of table. Differential aesthetic look and best quality interior was few of the additional features.
Core Values & Business Model
Following are the core values and Business model exist at Ritz Carlton:
Core values: Trust, honesty, integrity and commitment.
A great emphasizing on human resources, believes it important and biggest assets
Foster work environment to fulfill individual aspirations
Focus on Service but not sales
Guest greets at Airport with mimosas and discount coupons on a silver tray
Airport check – in concierge
Techno savvy to ensure customer’s needs satisfied
Ritz -Carlton managed properties for Millennium partners who were one of several hotel owners. Ritz – Carlton charged management fees of 3% of total revenue besides wholly owned luxury hotels around the world. The customer segment was Independent travelers and Meeting Event planners. The key success indicators of hotel business were “Average Daily Rate” and Revenue per Available Room”.
Independent travelers were influenced through special services like providing discounting coupons at airports, created hotel room at airport and also introduced “Technology Butler”. The specialized services increased customer convenience and outpaced the competition.
The nature of services is perishable and individual travelers are aiding in profitability. The event business / meeting business are growing and desirable for the sustainable profitability. The management contracts tend to meet needs of owners and operators.
Quality at Ritz – Carlton:
Ritz Carlton has a great emphasizing on human resources. Robust HRM practices envisage right people for the right job and inducted to become perfect lady and gentleman. The total quality management philosophy began to permeate the organization. Company focused on new activities and measures including quality standards, continuous improvements for delivering better service & quality. New programs designed to meet customer specific need and service quality indicators. The Quality policy believes in “Exceeding Standards”. Warm and sincere greeting, anticipation and compliances of guest needs and warm good bye are key service steps.
HRM Practices at Ritz Carlton
Human resources is critical element in the process for understanding of the service to be delivered and priorities in doing so, are aligned closely with customers’ expectations and marketing communications by the organization. For managers, the service climate needs to support and reward employees in their efforts to deliver the service product reliably at the promised standard.
The value creation for customer –
If the customer perceives quality of the service to be higher than the cost incurred, the customer receives value.
The greater the difference between the quality of service and the cost, greater will be the satisfaction or dissatisfaction.
Ritz – Carlton turnover rate was 20% compared to hotel industry average rate of 100%. This exhibits how Ritz – Carlton cares about their employees and viewthem as one of the important and biggest asset and has passion for the people. Ritz – Carlton nurtured and maximizes talent of each individual. Through the extensive formal and informal training employee were prepared to meet current obligations and also higher responsibilities in future. Employees were also trained to meet futuristic obligations and encouraged to cross train and learn about many different aspects. Performance was not only criteria but also managed by the employees themselves.
Employees are monitoring their own performance and recognized for outstanding work, which ingrains a competitive advantage not seen not in the same industry but in many others too.
To minimize failure in delivering services, key HRM practices like employee recruitment, selection and training focused and implemented. People having aptitude, talent and attitude to serve people, training schedule made sure to shape out staff for delivering exceptional services. The key of maintaining exceptional service standards was to keep high morale and motivation of each employee. Various tools were used to attract applicants for the various positions include visiting competitor’s restaurants, advertisement in news papers and visiting hospitality schools. Ritz – Carlton job fair was organized for mass recruitment. Aspirants treated well including convenient reaching to destination of job fair, offering snacks and beverages, make them aware about organization.
Value System and Service Oriented Approach of Ritz-Carlton
The customer service oriented approach has three elements: For whom services and products created who will deliver and how will be delivered.
Customer relationships and customer loyalty
Different communication and pricing strategies
Assessment of customer satisfaction and complaints
Making customer value more tangible
Role of employees in value creation
Nature of competencies required to deliver services
Empowerment of employees
Reduction of stress
Operations and Technology
Designing processes to create value
Design and location of facilities
Role of technology
The Ritz Carlton having different value and philosophy in business which includes and they operate The Credo, The Motto, The Three Steps of Service, Service Values, the 6th Diamond & the Employee Promise.
The company is engage in the services oriented which have the unique characteristics for providing the services in order to meet the expectation of the customer. Some of the highlights have been captured depicted below:-
Excellence in service not in Selling
The Ritz-Carlton Philosophy states as they are not in the hotel business. The Ritz-Carlton is selling an experience, and experience that is based on excellence of service. As stated by Schulze, “We are not in the hotel business. The hotel business is about selling rooms, selling food, selling the bar. We do those things incidentally, but our business is service. We charge for service. Our commitment to our customers is excellence in service”.
Their commitment to customers is excellence in service. Service is their profession. The total service oriented approach.
The Ritz-Carlton Hotel is a place where the genuine care and comfort of guests is the highest mission. Pledge to provide the finest personal service and facilities for guests who will always enjoy a warm, relaxed, yet refined ambience. The Ritz-Carlton experience enlivens the senses, instills well-being, and fulfils even the unexpressed wishes and needs of guests.
At The Ritz-Carlton Hotel Company, L.L.C., “We are Ladies and Gentlemen serving Ladies and Gentlemen.” This motto exemplifies the anticipatory service provided by all staff members.
Motto of the company, Employee commitment, The credo, employee promises and twenty basics are gold standards and success mantras. Gold standards reinforced on daily basis in order to build the habits of employees to deliver the highest level of services
The three steps of service,- A warm and sincere greeting. Use the guest’s name. Anticipation and fulfillment of each guest’s needs Fond farewell give a warm good-bye and use the guest’s name.
Employees feel proud To Be Ritz-Carlton as they have opportunity to do following which gives them job satisfaction. The Ritz Carlton is known for service excellence and follow following principals to provide excellent service to their customers.=
1. Employee satisfaction.
2. Leadership involvement.
3. Determination, commitment, and accountability.
4. Attend to “voice of the customers.”
5. Two-way communication.
6. Freedom to act.
7. Employees as ambassadors.
8. Adapt service recovery model (L.A.S.T.: Listen, Apologize, Solve, and Thank You.)
9. Anticipate needs.
10. Scripting to convey the right message [ii]
The 6th Diamond – is Mystique, Emotional Engagement & Functional , these all cared by Ritz- Carlton and known 6th Diamond.
Employee Promises – At The Ritz-Carlton Ladies and Gentlemen are the most important resource in service commitment to guests. By applying the principles of trust, honesty, respect, integrity and commitment, they nurture and maximize talent to the benefit of each individual and the company.
The Ritz-Carlton fosters a work environment where diversity is valued, quality of life is enhanced, individual aspirations are fulfilled, and The Ritz-Carlton Mystique is strengthened. [iii]
Creating Service Oriented culture through orientation
Servitisation approach means bundling goods & services and makes a integrated package. This approach more focus on associated services than product
Four steps in creating servitisation approach:-
Knowing your customers
Organizing service delivery systems
Making sure employees have appropriate skills
A services discipline is defined by the following main features:
The benefits it offers to customers
The need to integrate, manage and deliver processes
The importance of establishing and maintaining relationships
The Ritz-Carlton As a premium hotel whose utmost mission is to provide “genuine care and comfort to guests,” The Ritz-Carlton pledges to “provide the finest personal service and facilities to the guests who will always enjoy a warm, relaxed yet refined ambience.”And this objective can only be fulfilled by satisfied and engaged employees.
The three goals of Ritz are financial results, customer satisfaction and employee satisfaction. These goals are not exclusive from each other. They are very closely interrelated. Without satisfied and engaged employees, there is no way to achieve excellent financial results and guest satisfaction.
To ensure such high service standards, Management team look for people who will fit the existing culture and see the following qualities in the people.
People who share the same values and purpose.
People who care for and respect others.
People who smile naturally.
People who seek a long term relationship.
People who have talent for the job
Process of Ritz to create “Ladies and Gentlemen” in only 7 days
The seven days countdown was formulated for hotel opening process which was refined during in the process of last several years , this was the new employee’s first encounter with hotel, which started exactly seven days before the grand opening of the hotel.
The first two (2) days were devoted to orienting employees to the company culture and values.
The next five days were devoted to more skills training and trial runs of service delivery.
To ensure that employees are get aligned with organization mission and core values.
Trainers from 23 nationalities
The orientation process is slow and thorough, and ensures that the employees are aligned with the organization’s mission and a great deal of focus is kept on the conveying the values of the organization.
The trainers for the orientation program are gathered from 23 different countries, all considered the “best of the best” in their role within the organization. These trainers are responsible for ensuring that each employee is at the required level or standard in their specific job function at the hotel.
Schulze addresses the new team by stating, “You are not servants. We are not servants. Our profession is service. We are ladies and gentleman. We are ladies and gentleman and should be respected as such.” He conveys a message of unity, a message of equality and team work during his address, and he again insists that “We are ladies and gentleman serving ladies and gentleman”, as per the Ritz Carlton motto.
The Ritz-Carlton employed the “Gold Standards” to ensure this message was communicated effectively to all employees; the Gold Standard included “The Credo, The Three Steps of Service, The Motto, The Employee Promise and the Twenty Basics” to ensure employees were focused on the organizations values.
Through continuous communication and brain storming session and directives from top to down level and intensive training, skill development and an aligned HRM strategy, within 7 days the Ritz-Carlton managed to create ladies and gentleman out of their employees.
The steps for making Ladies and Gentleman
Training and daily line-up:
During the first two days employees were aware, trained and dipped into the culture and values of the organization and remaining five days devoted to specific skill training and trial runs of service delivery ensuring everything perfect and meeting service standards. The orientation process ensures aligns the worker with the mission of company and ensured service philosophy ingrained in all its employees, they ingrained the message that all employees are in the service business and not the hotel business.
The executive team and Human Resources explain The Ritz-Carlton Credo, Employee Promise, and 12 Service Values. After that, they will receive 30 days of training from a certified trainer from the department. On Day 21, new employees are asked to give the management feedback on how they can improve their training program for future training and recertification. In addition, every employee gets a minimum of 130 hours of training every year, which spans training for his or her department, company culture, and language and computer skills. Day 365 is recognition of one year of loyal service and is an opportunity to reinforce the hotel’s culture. Every employee will also go through annual recertification after they pass written tests, role-play and interviews on culture and skill.
Daily line-up – is a daily briefing to reiterate the company’s standard and convey important business messages. It takes place every morning in each department. While each department may conduct briefings differently, the message they convey is the same worldwide: they will talk about one of the 12 Service Values.
Listening and communication: –
Communication is important and creates abundant opportunities to interact with employees beginning with the interview and continuing through monthly breakfast meetings and his daily rounds of the hotel: Human Resources also holds a monthly feedback session with randomly selected employees for 1 to 1.5 hours to discuss their concerns. Overall, every employee has one opportunity every year to speak with the General Manager or HR Director in private. In addition, the hotel conducts annual employee satisfaction surveys, and on an ongoing basis, collects opinions on employee issues and posts them in public areas identifying those responsible for solving them. The executive team then notes the number of issues solved and measures the satisfaction of the employees.
Empowerment and continuous improvement:
Employees are also encouraged to be innovative and creative when it comes to improving their jobs. Money is not the key motivator; employees are rewarded for improving the goals measured by guest satisfaction, financial performance and employee satisfaction at year-end. Employees are rewarded and recognized for their outstanding customer service. [iv]
Through their numerous interactions with guests throughout their stay like check in, room service, and housekeeping, employees continuously record guest preferences and needs in Guest Preference Forms. Every night, such preferences and needs are entered into The Ritz-Carlton’s worldwide database Project Mystique, so whenever guests make a reservation at a Ritz-Carlton hotel, their needs and preferences are known and taken care of.
Reward and recognition:
At The Portman Ritz-Carlton, employees are recognized and rewarded both financially and non-financially. Mark DeCocinis believes if you want your people to be the best, you must pay them top market salaries. While money is not the key motivator, employees are rewarded for improving the goals measured by guest satisfaction, financial performance and employee satisfaction at year end. Employees are rewarded and recognized for their outstanding customer service. Every quarter, a Five-Star Employee Award is granted; with the winner receiving a five-night stay for two at a Ritz-Carlton anywhere in the world, along with round-trip tickets for two and US$500 allowance.
At Ritz -Carlton human resources are very well planned they treat with hospitality. As per their President who says you are not servant. We are not servant. Our profession is service. We are ladies and gentleman, just as the guests are whom we respect as ladies and gentleman. If you impart such culture be sure you will create ladies and gentle to serve.
Give the respect & take the respect, which costs nothing only wins, the heart of the customer who is taking the service & will have regards for the service provider.
Employee orientation schedule
Employee orientation is key part of the training and development process which introduces employees to the jobs, colleagues and organization. Researchers have found that formal orientation can achieve significant cost savings by reducing anxiety of new employees, fostering positive attitudes, job satisfaction and sense of commitment at the start of the employment relationship.
The 7 day countdown was a Hallmark of Ritz Carlton’s well defined hotel opening process which synchronized all steps leading to the opening of a new hotel. It was Ritz Carlton’s orientation process aimed at aligning the employee with the vision and mission of the organization. The 7 day orientation process was standardized and ensured that Ritz Carlton has the right employees to support its vision which was “Excellent Personalized Service”.
The seven day countdown was a worldwide best practice for the organization but in our opinion McBride should lengthen the 7 day countdown because of the following reasons:
Current difficulty faced in training new hires to meet the high expectation of Ritz Carlton’s standards in only 7 days. An increase in the training period would help employees understand their role in achieving the key success factors and creating the ‘The Ritz Carlton Mystique’.
By lengthening the 7 day countdown the service could become flawless which in turn could help translate the 5% dissatisfied customers to satisfied customers. This would result in occupancy going up from 80% to 88% due to increase in satisfaction level translating to $300 million.
Extending the 7 day countdown means investing in long standing excellence in areas such as employee orientation and customer oriented training resulting in increased customer engagement and satisfaction. Research on guest-spending patterns indicates that a four percent increase in customer engagement company-wide would generate an extra $40 million in incremental revenue.
Employee’s morale is boosted as they are protected from feeling overwhelmed. A longer employee engagement would also mean further decrease in the annual turnover which stood at 18%.
Adults by virtue of having lived longer accumulate greater volume, knowledge and mind-sets. It would help to have more time for the employees to o un-learn and learn new things.
Continuous improvement was absolutely critical to keep the commitment to customer for excellence in service and extending the 7 day countdown would help the process.
Would help thwart competition from ‘The Four Seasons’ by offering flawless service which can be achieved by increasing the orientation period.
Would help meet the expectations of the Millennium Partners about this hotel offering ‘great great service’ which means it expected Service par excellence.
Thus we believe that Ritz Carlton should therefore increase the length of the orientation to further ingrain service excellence in its new employees which will ensure higher productivity and foster competitiveness.
An assessment of 7 days vs 14 days training program
50% occupancy revenue = $5,000,000
Cost of the 7 day training program = $10,00,000 (estimated)
80% occupancy revenue = $8,000,000
Cost of the 14 day training program = $20,00,000 (estimated)
Benefit of the program = 3,000,000
Additional Cost = 1000,000
Return On Investment = 300%
Every investment including investment for employee training associated with cost and benefit. The cost and benefit mean cost involved in training of employees, direct revenue benefit, intangible benefits. The increase / decrease training schedule also adversely / favorably impact.
Ritz – Carlton is well known name to the industry and known for service centric approach. Initial Occupancy may not affected by training period but message of customer care approach need to be ingrained. Local culture also affects the training schedule as behavior of individual employees need to framed up in line of the global approach.
Change in hotel opening process
Change is part of life. World scenario is becoming dynamic and industry is coming up with innovative products to lure customers. In order to stay ahead in competition, Ritz – Carlton also need to think differently.
The entire training module, customer expectancy needs overhaul of the hotel opening process. The defects need to eliminate within shortest time frame.. Additional training and development will increase the cost but it will build up confidence and set new industry bench mark.
Ongoing operation is very different from the opening a new hotel. The opening hotel require two core competencies
One is dealing with the development of the site.
Human resource processes necessary to get the hotel up & running.
Ritz-Carlton regarded employees as the cornerstone of its exceptional service culture. The company understood that, as a service organization, the quality of its end product was only as good as the people providing it. Therefore it took care to see that it not only recruited the right kind of employees, but also provided them with the necessary inputs to enable them to provide exceptional service.
Although Ritz-Carlton’s salaries were not significantly higher than those of other comparable organizations in the hospitality industry, the company was a preferred employer because of its organizational culture and the way it treated its employees. Ritz-Carlton’s organizational culture not only helped the company provide exemplary customer service, but also created an atmosphere where employees felt valued.
It is difficult to train new hires to meet the high expectation of the Ritz Carlton service standards in only seven days, but it worked in Ritz Carlton. Training should not be longer which will not be cost effective in the short span of the time.
The employees already working should be given chance to in the second opening millennium to avoid taking risk at the opening itself.
Recruitment should be done for the Ritz Carlton not for the millennium because the employee can be transferred as per the requirement.
The employees of the Millennium partners can be taken for the opening, as the partner’s employees will feel proud to work jointly as a team. This will give opportunity to the partner’s employee who knows the brand & fame of the Ritz Carlton by giving the Ritz Carlton basics.
Ritz-Carlton management takes the following four steps to ensure that employees maintain the company’s high standards for quality and service
Excellence, as articulated in the Gold Standards: (i) rigorous employee selection process, (ii) employee orientation, (iii) employee training certification, and (iv) continuous coaching.
The service industry is becoming more competitive. Global aspirations and technological innovations are challenges for the industry. Customers are loyal to the services rather than company. The services need to revisit and provide latest offers. World’s best organizations believe in beating their own standards and developing innovating products to serve and win customer hearts.
100 % employee pride & Joy, Zero customer difficulty and 100% customer loyalty are performance criteria of performance excellence set by Ritz – Carlton Hotels. The road map created for performance excellence through strategic planning, leadership, Human resources, Processes & Systems, customer focus, information & analysis finally business results.
Employees groomed and equipped to exceed (Not meet) customer requirements. Regular updating training needs, deliverance evaluation, PDCA (Plan, Do Check, Act) and Z- back approach; unlearning – learning approach aided in meeting industry challenges.