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 mcbrides 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, washingtons 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 its 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 its 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 its 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 its 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.