On October 11, 2000 The Ritz-Carlton was on the eve of opening Washington DC’s first luxury hotel in 10 years. The 300 room hotel was part of a $225 million complex owned by Millennium Partners. This would be the first hotel opened of a six hotel deal between Millennium Partners and The Ritz-Carlton. Millennium Partners owned the properties and The Ritz-Carlton was hired to operate the hotels. After only seven days of training the 400 person staff would open the doors the next morning.
James McBride, the general manager, faced pressures concerning the training approach The Ritz-Carlton had established. Millennium had two primary problems with the seven day training process. First, they felt seven days was not an adequate amount of time to get an entire hotel staff trained to provide flawless service. Secondly, they felt there was a revenue loss since the hotels typically only opened at 50% occupancy due to the limited training.Managing a hotel chain had a key potential problem - there were two different customers.
They had the hotel guests to service and satisfy, but they also had the hotel owners to satisfy. Millennium Partners, who owned the D.C. hotel and had over $700 million invested in all six hotels, had concerns over opening a new hotel with new staff that had seven total days of training.
The hotel owners expected complete perfection from the first day of operations. Training new staff to perform at the level of excellence expected within seven days represented a risk to Millennium and also The Ritz-Carlton. A mistake here could result in losing contracts for the remaining five hotels.In addition, Millennium had contracts with The Ritz-Carlton’s largest competitor – the Four Seasons.
Over the previous three years, while the Ritz-Carlton had achieved higher occupancy rates, the Four Seasons had averaged higher Average Daily Rates and Revenue Per Available Room. For an average 300 room hotel this could equate to nearly $2M higher revenue for hotels operated by Four Seasons (Exhibit A).A second concern was The Ritz-Carlton’s policy of opening the hotel at a 50% occupancy rate. Millennium questioned if more training would allow the company to open at a higher rate.
The D.C. hotel was part of a multi-use site that included condominiums, so flawless service was even of greater importance from day 1. This would be The Ritz-Carlton’s first attempt at opening a hotel in a multi-use facility.Recommendation and RationaleThe concerns of the Millennium Group were understandable. However, the success of The Ritz-Carlton training process was undeniable.
The seven day training process was just one key element in implementing The Ritz-Carlton philosophy that was founded on customers, employees, and quality. Therefore, it is recommended to keep the training process in place. There are three primary reasons for keeping it in place.The first reason is that the training process immediately helped to transform the employees’ behavior.
The Seven Day Countdown was the training period prior to a new property opening. This seven day training period was the only training the staff would receive prior going live. The training was kicked off with a welcome from management and the President of the company. The first two days of training were dedicated to orienting employees to The Ritz-Carlton values and culture.
The company believes that it is critical to take time to enforce these values slowly and immediately. They feel that behaviors can only be changed as a result of a significant emotional change, such as a new job. During the two day orientation employees learn about the company, each other, Gold Standards, service and leadership philosophy. The focus of the remaining 5 days is on skills training.
During the training staff employees were taught the importance of the guest experience. The Ritz-Carlton philosophy to achieving excellence in customer service is to create a unique and memorable experience for each customer. A customer may originally visit the hotel for a room, but they return because of the experience they receive as a result of the people who work there.The Ritz-Carlton is in the business of service. As a Ritz-Carlton manager stated “It’s all about people. Nobody has an emotional experience with a thing.
We are appealing to emotions.” The Ritz-Carlton has had a great deal of success in achieving this experience with one of the highest customer satisfaction rates in the industry, 92%. The Ritz-Carlton strategy employs a variety of techniques to achieve, maintain, and improve customer satisfaction on a daily basis. This begins with internal quality which leads to employee satisfaction and profitability is realized once customer loyalty is obtained.
The foundation of The Ritz-Carlton success in world class service was largely attributed to attention to quality and employee relationships.The second reason to keep the Seven Day Countdown is because of the company focus on training each day. The company never stops training their employees. The Ritz-Carlton employee receives more training that anyone in the industry. A new employee receives an average of 400 hours of training within the first year. In addition to typical training, each employee receives training on a daily basis during the daily “lineups”.
Two 15-minute lineups are held each day at each hotel. One is a general one and the other is a more specialized meeting for each service. During the lineups employees discuss stories, service values, and how they can do a better job incorporating these values into their jobs.Each day a specific Golden Standard value is discussed.
Each day a “Wow” story is shared. The same story is shared across all hotels. The “Wow” story illustrates a real situation where an employee went above and beyond to make a guest’s stay memorable and unique. This gives the training a memorable and emotional connection with the employees. The lineups are held 365 days a year across the 38 hotels located throughout the world. So while it may seem the hotel staff receives only a limited seven day training process, the company is actually providing thousands of hours of ongoing training per year to its employees.
Thirdly, Seven Day Countdown is the standard that brought quality control and human resources into a perfect balance. There is too much risk to damaging the company by changing their standard. Opening the hotel at a 50% occupancy rate allows staff to become more familiar, efficient, and comfortable with their responsibilities. The company focus has been on quality over quantity.
Speed would come with time. Millennium saw the low occupancy rates as lost revenue, but this gradual approach allowed the company to open every section of the hotel at once rather than in phases which was the industry standard.The fourth reason is - at the Ritz-Carlton - its employees make the difference. They believe that employees are not servants, but are instead service professionals. The company treats them as such. This is demonstrated clearly during the initial training period and sets the tone for the employee’s relationship with The Ritz-Carlton.
The company’s deep respect for each employee has led to employee satisfaction and commitment. As a result The Ritz-Carlton has one of the highest rates of employee retention in the industry, with only an average 20% turnover rate. Their philosophy is that people deserve the right to work for a purpose.This purpose keeps the employees engaged in their work and makes achieving success a priority. Employee satisfaction is a priority and focus which improves employee morale (a happy employee is a productive employee).
According to the service profit chain relationship, satisfied employees lead to employee loyalty which eventually leads to loyal customers and profitability.Both customers are better served by retaining the current training process. It keeps costs low, employee morale high, and has a proven track record of success for the employee, customer, and hotel. The Seven Day Countdown should not be considered as a lone entity when evaluating the readiness and effectiveness of the hotel staff. This is just part of an overall strategy that includes thousands of hours of training, human resources, culture, and quality. The Ritz-Carlton is known as a service industry leader and innovator.
This was accomplished by having a standardized and consistent methodology of developing their greatest resource – its people.Exhibit A: The Ritz-Carlton Four SeasonsHotels Rooms per year300 x 365 = 109,500300 x 365 = 109,500 Occupancy (rate x rooms).754 x 109,500 = 82,563.70 x 109,500 = 76,650 Total Revenue(room rate)82,563 x $152 = $12.5M76,650 x $189 = $14.5MService: The Ritz Carlton Hotel Co.
Ritz Carlton intensively expanded throughout the world such as Asia/South Pacific, Europe/Middle East, the Americas and Caribbean. There entire strategy was to acquire management contracts for new hotels and resorts. Not only that they wanted to go Nationwide, they wanted their luxury hotel chains to be well known internationally. It all started from a well known man named Cesar Ritz, who had a dream to operate his own superior hotel chain which was primarily called London’s Carlton Hotel and soon became the Ritz Carlton Hotel Company.Ritz Carlton’s management had a goal to set, which was for their customers to remember the experiences that they had in the Ritz Carlton Hotels.
Since Ritz Carlton whole business model was to provide excellent service to their guest, they were successful in doing so. Ritz Carlton hotel has their technique in targeting customer; they used positioning to create an identity in the minds of businesses for their services and organization. While people might question “What is the essence of The Ritz Carlton experience?” and “What is The Ritz Carlton selling?”• Greeting travelers at airports• Technology Butler• Pre-sold business meetings (reserved)• Personalized service (Guest Recognition)• Customized service for preferred customersAs Ritz Carlton surely being the best hotel operators, they provide desirable service to their customers. Ritz Carlton’s managers ambitiously targeted the independent travelers and meeting event planners because they knew if they made a close relationship with these individuals, it would certainly be a competitive advantage for Ritz Carlton hotel.
James McBride as a general manager was a motivated person that always wanted top notch service to be provided by Ritz Carlton’s staff or in his words “Ladies and Gentlemen”.McBride visited airport terminals to greet travelers with “mimosas and discount coupons” which were offered on fancy silver trays which also boost up the image of the hotel’s business strategy. Not only that they were greet competently, they were also escorted to hotel rooms in the airport, which were fully furnished with armoires, beds, televisions and other accessories that were needed. This instant airport service given is clearly a memorable experience that Ritz Carlton’s customers receive and as you can tell that Ritz Carlton is selling “Service” as a business.With all the special services that Ritz Carlton provides to their customers; they always have a “technology butler”, which are technicians that are available 24 hours a day and seven days a week.
This is for the customers’ convenience, the butler service assist guests with any problems or difficulties that they might face during their stay in Ritz Carlton Hotel. For example “McBride created a concierge desk at the Delta Shuttle at National Airport, implementing airport check-in procedures which provided customer convenience that outpaced the competition”. (McManus, Sucher 4) This strategy takes away the competition from others because the airline travelers are introduced to Ritz Carlton Hotel, so they have competitive advantage.As they targeted independent business travelers, they attracted more business executives to the wonderful experience of Ritz Carlton Hotel. More and more business meetings were held in the hotel and by this being so, the image of Ritz Carlton Hotel became well known for meeting event planners.
The event planners were then the most important customers for Ritz Carlton because they generated 40 percent of annual sales income, which further became more popular in such sense that event planners had to reserve their spot on Ritz Carlton’s meeting schedules.For Ritz Carlton Hotel, these meetings were pleasant because they were pre-sold, which meant that the Ritz Carlton didn’t have to worry about sales in the future because they already were accrued. “An apple left unsold today can be sold tomorrow, but a room night lost today is lost forever” (McManus, Sucher 4). This shows how determined the Ritz Carlton’s business was and they leaving a room vacant is a loss of profit.
To satisfy Ritz Carlton’s entire guests, Schulze President/COO and Mene Vice President of quality realized that their guests’ needs for recognition. They wanted to provide their guests with any specific need while they stayed in the hotel. For example if customers had children, Ritz Carlton would have safety protocols to protect their children. These services were listed under the “Service Quality Indicators SQIs” which listed Abandoned Calls, Missing Preferences, Unready Guest Rooms, Room Changes, Room Conditions, Housekeeping Defects, Unacceptable Appearance of Public Area, Missing or Damaged Guest Property/Accident etc…the list goes on, but this basically improved their way of identifying their problems and how to fix them immediately.Since the Guest Recognition department was made and staff was hired, this made the relationship between the customers and employees more ideal.
Since customer relation is the key factor in business, Ritz Carlton started customizing pillowcases by monogramming their names on the pillows which was a surprised at first to the guests. This showed how Ritz Carlton innovated and raised their values with their customers by selling them such outstanding services.The Seven Day process in opening up a hotel was a really crucial method, which was successful in all Ritz Carlton Hotel openings. There are thousands of applicants that show up to compete for the position of being hired as a Ritz Carlton “Ladies and Gentlemen”. Only four hundred are selected and have to be converted to Ritz Carlton employee within the seven day process and becoming “Ladies and Gentlemen”.
The first two days are entirely committed to absorbing the culture and the value of the company. The rest of the five days involve vivid skill training and trail runs of services provided by the business. To become a thriving Ladies and Gentlemen, employers and new members of the Ritz Carlton gathered up outside the hotel and chanted for their divisions.After the celebration outside the hotel, they are brought inside to the ballroom for an orientation given by McBride and the team members. Schulze addresses “We are not servants, our profession is service, we are Ladies and Gentlemen, just as the guest are, who we respect as Ladies and Gentlemen.” (McManus, Sucher 12) Given the speech by the President and the managers of the company, the new employee were to adapt to the company’s philosophy and values in order to serve their customers efficiently and to the highest level of service.
Since service was Ritz Carlton Hotel profession, they were committed to give their customers excellence in service and to do so, the employee themselves had to be comfortable with the environment they worked in and also have the moral intention to come to work for a purpose, which is the only way an Ritz Carlton’s employee stays committed to the job. The second day entitles the workers to get comfortable with the different departments and how to treat the guests professionally. The actually training begins on the third day of the “Seven Day Countdown” till the seventh day and then the opening day of the hotel. Ritz Carlton’s managers, leadership members and trainers take the training process seriously by discussing all the practice activities that should be done for the entire day by the employees.Standards were set by Ritz Carlton that employees were set to master their departmental duties.
The trail runs were observed by the members of the corporate and flaws were pointed out and fixed instantly. Ritz Carlton wanted “Instant guest pacification”, which meant that guest always came first before any normal duties being done at the time.All employees had “Handling Guest Difficulties Procedure” forms and also a “Guest Incident Action” forms, these two forms were collected daily and reviewed, so that next time improvement is shown and excellence was presented. By the seventh day of training, all employees are pretty much ready for the job and before the grand opening; they have another pep rally, which shows their spirit. At last the employees are officially “Ladies and Gentlemen” at Ritz Carlton Hotel and the accomplishment of Ritz Carlton converting applicants into “Ladies and Gentlemen” in only seven days is ideal.In general this Ritz Carlton Hotel case shows me how important it is for a business to set moral standards for their employees and train them to their best capability.
By the company providing such excellent service in a hotel, why can’t all businesses practice servicing customers in the same way. Customer relation is also a sub-category that helps business tremendously by customers coming back to you because they like your service. A well developed business runs on customer’s preferences and is successful in the long-run. All the essence of Ritz Carlton business, result it in being the top hotels worldwide.
So by reading this case, it gave us guidelines on how to manage a business efficiently and morally.