Ritz Carlton Company Strategy

Executive summary

Ritz Carlton needs to increase its occupancy rate. It needs to ensure that its new establishment picks up very fast. Its biggest bottleneck in meeting service demands is caused by the employee recruitment process. It takes longer to open faster and makes the hotel lose opportunities. Relying on an incomplete technology system also exposes the hotel to service delivery errors that it seeks to eliminate. Presently, it has to resort to manual mechanisms of dealing with mismatches of guests’ expectations and available hotel experience.

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As a remedy, it has collected enough information about hotel guests and their interactions and preferences in its facilities. The hotel needs a robust technology system to complement the customer relationship jobs done by employees and to increase its ability to use the knowledge to improve services. It also faces a challenge of keeping employees inquisitive about all interactions, irrespective of their significance in the hotel.

As a recommendation, the paper wants the hotel to come up with mechanisms that allow the employees to raise suggestions for service improvements. It considers this as an important step in empowering employees and making the hotel responsive to its changing business environment. Another suggestion is to have an overhaul of the training of new workers. Redesigning the process should take into consideration the challenges and solutions that the hotel has made over the years of operation.

These recommendations come in the wake of a possible solution that works in the hotel’s environment. Benchmarking and taking care of guest variations have been universal solutions to operations management challenges and they should contribute to quality improvements in the business.

Introduction

Ritz Carlton is a global high-end hotel chain that has operated since 1989 mainly in the US and Europe before expanding into Asia. The hotel began in Europe and it was known for its European characteristics for a long time. However, the establishments outside Europe seek to retain the Ritz Carlton qualities and embrace the uniqueness of their locations and its associated features in a contemporary world.

The Ritz Hotel chain has been excellent in delivering high quality services for high-end customers in the hotel business. The company’s hotels are recipients of a number of awards and credible mentions as the best hotel in different categories. Ritz Carlton now has 85 facilities that are spread in 30 countries around the world.

Major Issues of the Two Cases

One of the issues in the case study of Ritz Carlton is to increase the occupancy rate of the hotel in all its facilities. The hotel enjoys an 80 per cent occupancy rate. The owners see the potential of appealing to an additional 5 per cent of its customer base.

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When it eventually succeeds in attracting the additional 5 per cent, it should be able to boost occupancy with 8 per cent, thus giving it an 88 per cent occupancy rate and an additional USD 300 million in revenue. Appealing to the extra group of customers requires more dedication to quality service delivery and fixing problem areas in the existing system to avoid discontent among hotel guests.

The hotel specializes in service provision and places a huge burden of quality delivery on its employees. Its focus on employee recruitment and training is very high. One major issue is attracting the right talented individuals and training them to become skilled providers of the Ritz Carlton experience to guests at any of the hotel’s facilities.

Making sure employees are motivated and willing to go an extra mile to deliver excellent quality to customers is a concern that the management and leadership at the Ritz Carlton is dealing with daily. In fact, the hotel sees employees as equally important as the customers. Thus, its motto emphasizes on employees and customers, acting and receiving treatment that recognizes them as highly valued people.

The third issue relates to technology and the ability of third party systems to deliver personalized care to Ritz Carlton guests. Recommendations, repeated service, employee, customer personalized relations, and the provision of a second home to customers are some of the service highlights of the hotel. Third party technology systems collect information about customers and provide Ritz Carton with a database of its customers, link the hotel with clients, and match the demand for service with the available supply.

Unfortunately, inherent design flaws and inadequacy of the systems fail to offer comprehensive client management to a scale that Ritz Carlton needs. There is a need for a more powerful system than Encore and COVIA; a system that represents personalized and best interest of the hotel, which is to connect deeply with customers and have enough information to provide the required services.

The fourth issue also relates to technology. The hotel wants to concentrate on its core business, which is service delivery, and would like third party providers of technology systems to come up with effective system designs to solve regular service delivery challenges. The hotel does not want to commit most of its resources to obtain technologies and then spend more resources fitting the technologies to their needs.

The hotel faces the challenge of keeping employees inquisitive about the kinds of service failures that clients might encounter. In addition to the provision of solutions for requests and using monetary or other forms of compensation to relieve customer dissatisfaction, the hotel also wants to avoid repeats of disappointments to customers.

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Ritz Carlton wants to ensure that it gathers adequate information about all employee and customer interactions to develop a knowledge database and repository that would allow it to make arrangements so that disappointments in service delivery never occur again.

The establishment is looking for a balance of human resources and relying on systems. The systems provide consistency, routines, and core features of a hotel, while employees deliver the extra service attention that differentiates Ritz Carlton from other hotels. The hotel wants to keep its employee turnover very low.

In the past three years, it has reduced the turnover rate by more than 50 per cent and it wants to keep on with that momentum. It seeks to have employees who work in specific job assignments, but who understand the entire hotel system and service provisions such that they are cognizant of their roles in the whole hotel process. The staff will form part of the problem-solving team and must be able to grasp a system-wide perception of a situation and tackle problems in a given area.

Analysis of the Major Issues using Tools and Understanding

In the first issue, the hotel has to increase the occupancy rate. The following is the design of the current process of ensuring that there is an adequate capacity to fulfil customer needs.

The hotel recruits staff and trains them. It also opens new hotel sites based on a formula to ensure standards remain high. The staff recruitment process is illustrated below.

The staff recruitment process

The process of recruitment above is a summary of the whole process. The process is actually very detailed and involves mostly the management staff. It offers a hands-on experimental form of training to new workers in a new establishment. Training of employees takes place when a new Ritz Carlton is opening.

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Additional trainings only happen when there are specific training needs. They also take place when there are staff replacements in other facilities. However, in addition to the basic training, there are additional on-the-job training sessions that all workers go through to build their capabilities for delivering high quality services to clients. Employees go through several contacts described below, as they work for the hotel.

During the first contact, before joining the hotel, the employee gets a call from a manager verifying the right details about the employee and confirming the interest to work in the hotel. Here, the manager is able to issue a strong proposition for working with the hotel.

It does not have to be vocalized, but it shows in the professional conduct, the friendly attitude, and the actual initiative to place a call and start a conversation. The manager, as an existing employee of the hotel, provides an accommodating atmosphere to entice another potential employee to join the team.

It is also important to consider the fact that the management employees at the Ritz Carlton are entrepreneurs in their job orientation. They have to look for business and manage resources, including human resources, to ensure that the hotel is making profits. They are in charge of finding ways to settle the bills of the hotel and keep it in business. In addition, they must come up with ways of increasing the services and earning the hotel premium fees, which contribute to its profitability.

With the entrepreneurial background, the managers’ job is to reduce recurrent expenses that would be associated with the constant re-training of staff to avoid common mistakes. Therefore, there is a lot of emphasis to do the job once and do it well. The recruitment process is very comprehensive and a product of benchmarking the past practices with preferred outcomes and pilot programs in many of the Ritz Carlton hotels. It is a perfect system of getting the right people to join the hotel.

The following occurs during the second contact that managers do with employees in the selection process. First, the managers reconfirm the orientation date and other details, such as the dress code. They continue conversing to build a relationship. The emphasis is put on making an employee enthusiastic about the job.

There is also information on the documentation needed for the various processes of recruitment. As they reach the third contact, the manager will be calling the employee to answer questions and concerns that the employee may raise.

During the third contact call, the employee is already feeling like a client in the hotel. The same procedures for confirming with clients are used for confirming with employees to ensure they grasp the quality goal of the hotel. Multiple calls also allow the hotel to demonstrate its high regard for human touch.

Many of the steps taken during the second contact call also take place in the third and fourth contacts of the prospective employee with the manager. There is build-up of enthusiasm in the employee and a confirmation of whether the employee still wants to become a part of the Ritz Carton team.

By the fourth contact, the manager will have discovered a great deal about the employee and so will the employee about the company. The call ensures that the employee is still going to join the company and provides final details of the recruitment requirements and exercise.

The recruitment process can be very fast and with few additional processes, depending on the enthusiasm and appropriateness of an employee to join Ritz Carlton. After the process, irrespective of the steps taken, managers deliver staff requisition and send it to the human resources department.

Quality development does not end with the recruitment process. Ritz Carlton knows that other organisational dynamics can cause a lapse in high quality service delivery, despite an elaborate recruitment process. The workers are people with personal issues and have attitudes towards their jobs and their colleagues. The firm uses rewards in monetary and experience forms to encourage the best behaviour.

They are also a show of initiative from the staff. It considers all types of employees, because they all have the opportunity to interact with customers. Even as the emphasis lies with the employees, there is a great deal of effort put on recruiting and training. Other than reminders and apprenticeship examples, few avenues can cause a radical change in employee service delivery.

There are limits to the trainings that can be done for the employees. The firm is looking at other ways of fostering the right behaviour, without spending unnecessarily on training.

The use of rewards and allowing employees to run a compensation fund obligation up to USD 2000 empowers the employees. It makes them feel in charge of the customer interaction and gives them enough room to be creative with their responses and their hospitality, while adhering to the laid out code of conduct for quality service delivery (Sucher & McManus 2005).

Although the method has worked well in the past, it is facing constant pressure as employee demographics and customer demographics change. The need to make the Ritz Carlton experience also reflect the location of a hotel changes the demands for quality standards.

The use of technology failed the hotel when it relied on the Encore and the COVIA technology systems to anticipate occupancy and arrange for guests. Calling guests and confirming their details every time they express an interest to be at the hotel is cumbersome and becomes intrusive.

It goes against the intention to let Ritz Carlton work as a second home for guests, where everything seems to happen automatically, based on their preferences. The hotel is gathering adequate customer information by capturing information about guest interactions. However, the results of appropriate merging of people resources and the technologies available to increase customer relationships are yet to show (Harvard Business School 1999).

Solution

The elements of the technology system need a redesign that shows the main values that Ritz Carlton captures in its quality service delivery. They are the credo values, the gold standards, the three steps of service, the mutton and slogan, the employee promise to clients, and the twenty basic values that the hotel adopted.

It is important to use technology as a complementary service, just as the hotel had provided technology butlers to take care of client computer related needs. The technology system in place should allow employees perform their duties and deliver services to employees easily. It should not force them to abandon their learned ways of doing their work and learn other new things (Az-Zu’bi & Judeh 2011).

The hotel must first retain its present levels and then build on the sustainability, given that it wants to increase the occupancy rate. Avoiding steep learning curves for employees is one way to achieve the goal. Here, the hotel will seek to have a technological system that does not force employees to abandon daily duties and procedures, just to make use of the technology.

For example, instead of allowing each employee create files on computers for capturing data from guests in hotels, it can do one of the following things. First, Ritz Carlton can hire staff to convert all the notes and remarks in digital form and put them in the system for future review and analysis. It can also have specific software and files created on computers so that employees have an easier task of data entry (Beer 2003).

There is need to have more benchmarking initiatives against the competitors to ensure that Ritz Carlton does not meet all the costs of research and development. The benchmarking helps the hotel to learn about the industry. The collective investments in service improvements made by its competitors provide the economies of scale advantages that reduce the unit cost of learning new ways of improving service delivery.

It is not enough to only look internally and hope to meet emerging challenges. The extra 5 per cent of guests that should translate to an 8 per cent increase in occupancy is already familiar with the hotel’s service proposition and looks forward to finding alternatives or to see changes. If the hotel keeps looking inside itself for solutions, it may not get alternative views that can help solve the problem.

Benchmarking offers a bigger picture that shows the performance and possibilities of what else is achievable, based on what the competitors are doing. At the same time, benchmarking can also be done on the 30 country operations of the hotel to ensure there is improvement (Chang & Chen 2011).

The hotel needs to contact Encore or COVIO, the providers of guest-management technology systems. Now that the hotel is collecting adequate information about the guests and wants to use technology to improve their experience, it can present the service-delivery process flow diagrams, the objectives of employee interactions, and other informational details about its operations (Chang et al. 2014).

The system developers can then work closely to develop a specific system for the hotel to use in all its facilities. A company-wide robust system for managing guests and employees can increase the level of customer relationships and provide speedy resolutions of problems. Currently, problems receive 30 days of attention. However, the period can be reduced to seven days for the most common problems with good use of technology to link departments and employee individual actions.

Alternatives

Regarding employee recruitment, the hotel can decide to import employees from other hotels during the establishment of a new facility. The process can be done prior to the opening. Their orientation should take a shorter time than that of new recruits, given that they are experienced. However, to achieve this, it will have to undertake diversified trainings of new employees in other hotel locations over a long period to ensure that there is adequate replacement capacity when some of the experienced workers move on to establish new hotels.

One concern for this alternative is that the new employees may compromise the standards already set in the hotels they join, if they do not acclimatise to the hotel’s traditions very fast. On the other hand, the experienced employees may also be handicapped in terms of offering a localised experience in their new job assignments when they are opening a new hotel. However, these are minuscule concerns that can be addressed with a few tweaks to the training program and the new hotel orientation (Ashill et al. 2009).

Regarding the technology system needed to enhance the quality, the hotel can also meet the costs of developing its own comprehensive system. It will have to incur hefty capital expenses to obtain intellectual property and modify the new system to fit its needs. It may need to hire a company to do the customisation (Cohen & Olsen 2013).

The benefit is that the system would be suited to grow with the company and handle all the variations that arise in the hotel’s business. Clients with different names or capturing of data with different variables, but concerning the same guest, should no longer pose a problem to the same high quality service-delivery goals of the hotel (Yu & Lin 2010).

Recommendations

The following are the steps that should be taken to ensure change, based on the analysis of the issues that affect the hotel in the two cases. First, the hotel needs to redesign its recruitment process to reduce the time it takes to train and orient new employees to the company. Redesigning can be subtle and happen incrementally.

The hotel can make changes and observe the effect of the changes before making new changes. It must map the process based on the perceptions that the guests have about service delivery. The redesign should not have tough obstacles, given that it places guest concerns as its main service concerns.

Secondly, as much as the hotel is careful to provide the right skills and attitudes to the employees to deliver the best quality of hotel experience to guests, it needs also to allow the employees to take a proactive role for improvement (Brown et al. 2002). Presently, it only has managers in the entrepreneurial capacity. It needs to involve all the employees in coming up with ideas about improvement. Each employee serves as a provider of services and can leave their duties to attend to a concern raised by a guest.

However, the present system does not allow the employees to raise concerns or suggestions about changes to specific interactions or features of the system. Allowing them to do so should lead to a smoother review and change of the main operations management feature in the hotel (Moosa et al. 2010).

Update of the Cases

With the advancement in personal computing devices, the hotel has an opportunity to make real time sharing of information about the guests among the employees. This should increase the information needed to make quality decisions and increase the level of quality offered to guests.

Ritz Carlton continues to grow and has increased the number of hotels it operates to 101 located in various countries around the world. As an organisation, it now has to deal with concerns on cultural diversity, especially in the management of employees and delivering the same high quality standard in all its facilities (Ritz Carlton 2014).

Reference List

Ashill, N. J., Rod, M., Thirkell, P. & Carruthers, J. 2009, ‘Job resourcefulness, symptoms of burnout and service recovery performance: an examination of call centre frontline employees’, Journal of Services Marketing, vol 23, no. 5, pp. 338-350.

Az-Zu’bi, H. A. & Judeh, M. 2011, ‘Measuring the implementation of total quality management: Ibn Al-Haytham Hospital case study’, International Journal of Business and Management, vol 6, no. 5, pp. 114-119.

Beer, M. 2003, ‘Why TQM programs do not persist: The role of management quality and implications for leading a TQM transformation’, Decision Sciences, vol 34, no. 4, pp. 623-642.

Brown, T., Mowen, J., Donavan, D. T. & Licata, J. W. 2002, ‘The customer orientation of service workers: Personality trait effects on self and supervisor performance ratings’, Journal of Marketing Research, vol 39, no. 1, pp. 110-119.

Chang, P.-C. & Chen, S.-J. 2011, ‘Crossing the level of employee’s performance: HPWS, affective commitment, human capital, and employee job performance in professional service organizations’, The International Journal of Human Resource Management, vol 22, no. 4, pp. 883-901.

Chang, Y.-J., Chen, Y.-R., Wang, F. T.-Y., Chen, S.-F. & Liao, R.-H. 2014, ‘Enriching service learning by its diversity: Combining university service learning and corporate social responsibility to help the NGOs adapt technology to their needs’, Systemic Practice and Action Research, vol 27, no. 2, pp. 185-193.

Cohen, J. F. & Olsen, K. 2013, ‘The impacts of complementary information technology resources on the service-profit chain and competitive performance of South African hospitality firms’, International Journal of Hospitality Management, vol 34, pp. 245-254.

Harvard Business School 1999, ‘The Ritz-Carlton: Using information systems to better service the customer’, Harvard Business School, pp. 1-30.

Moosa, K., Sajid, A., Khan, R. A. & Mughal, A. 2010, ‘An empirical study of TQM implementation: Examination of aspects versus impacts’, Asian Business & Management, vol 9, no. 4, pp. 525-551.

Ritz Carlton 2014, About us. Web.

Sucher, S. J. & McManus, S. E. 2005, ‘The Ritz-Carlton Hotel Company’, Harvard Business School, 30 September 2005, pp. 1-30.

Yu, C.-S. & Lin, C.-S. 2010, ‘Building TQM by integrated strategies for B2B industry: Next-generation lighting technology in Taiwan’, Total Quality Management, vol 21, no. 5, pp. 553-564.

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