Ritz Carlton case study

Table of Content

I. Executive summary The history of The Ritz-Carlton Hotel Company, L. L. C. originates with The Ritz-Carlton, Boston. The standards of service, dining and facilities of this Boston landmark serve as a benchmark for all Ritz-Carlton hotels and resorts worldwide. The legacy of The Ritz-Carlton, Boston begins with the celebrated hotelier Cesar Ritz, the “king of hoteliers and hotelier to kings. ” His philosophy of service and innovations redefined the luxury hotel experience in Europe through his management of The Ritz Paris and The Carlton in London.

The Ritz-Carlton, Boston revolutionized hospitality in America by creating luxury in a hotel setting: Private bath in each guest room Lighter fabrics in the guest room to allow for more thorough washing White tie and apron uniforms for the wait staff, black tie for the Maitre d’ and morning suits for all other staff, conducive to a formal, professional appearance Extensive fresh flowers throughout the public areas A la carte dining, providing choices for diners Gourmet cuisine, utilizing the genius and cooking methods of Auguste Escoffier Intimate, smaller lobbies for a more personalized guest experience

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Cesar Ritz died in 1918 but his wife Marie continued the expansion of hotels bearing his name. In the United States, Albert Keller bought and franchised the name and established The Ritz-Carlton Investing Company. In 1927 The Ritz-Carlton, Boston, opened and other hotels followed in New York (at Madison and 54th), Philadelphia, Pittsburgh, Atlantic City and Boca Raton, followed by the Miami hotels including the south beach location. However, by 1940 none of the hotels were operating except The Ritz-Carlton, Boston.

The hotel embodies the vision of Cesar Ritz, Yankee ingenuity and Boston social sensibilities. The Ritz-Carlton south beach resort was first created in 1953 with the acquisition and restoration of the Morris Lapidus-designed Di Lido Hotel in Miami’s South Beach district. The new resort featured 375 rooms; a 16,000-sq. -ft. spa located on the third level; and 20,000 sq. ft. of meeting space, including a 10,000-sq. -ft. ballroom capable of seating up to 1,000 guests. The historic restoration retains the exterior flavor of the Morris Lapidus design, characterized as Art Moderne or MiMO (for Miami Modern).

A three-story addition on top of the existing eight-story hotel, along with the incorporation of other surrounding buildings into the new resort, brings the Ritz-Carlton to approximately 500,000 sq. ft. These futures along with the rich history of the building make this hotel resort one of a kind and a must see destination. II. Company Profile The Ritz-Carlton South Beach hotel lies on Miami’s most famous beach and is located just steps from Ocean Drive and Lincoln Road. This is a 10-block pedestrian esplanade with the best shopping, dining, nightlife and people-watching South Beach Miami has to offer. This hotel caters to the most discerning hotel guests, dignitaries and celebrities and includes features that you may not find anywhere else. The hotel has 375 luxurious guest rooms, including two poolside lanai wings in the style of early Miami Beach. It also provides more than 20,000 total square feet of exceptional South Beach meeting and conference facilities and a 16,000-square-foot Ritz-Carlton spa.

This resort is a prime location, within walking distance to Miami’s Ocean Drive, Lincoln Road and South Beach nightlife. The hotel went through a complete restoration of the original 1953, Morris Lepidus-designed, landmark South Beach Miami hotel in order to provide their customers with the luxurious experience associated with the Ritz Carlton name. The hotel is rated as a triple a diamond tier 4 hotel, making it the recipient of the highest rating award for a luxury hotel. Guest Room Features & Amenities 400-450 square feet Views of the Atlantic Ocean, pool, and South Beach

Contemporary, warm furnishings inspired by South Beach’s vibrant ocean destination with the luxuries of home, accented with colors of blue, sea mist green, and coral Generously sized desks iPod docking stations, with AM/FM clock radios In-room laptop-compatible safe Computer and fax hookups Multi-line telephones with hold button Choice of one king or two double beds Goose down and non-allergenic foam pillows Luxurious 100% cotton linens Sumptuous marble baths Suit, skirt and padded hangers Fully stocked mini refreshment bar Rollaway beds available ($50 per day)

All rooms in our South Beach hotel are non-smoking Property Features & Amenities The Ritz-Carlton Spa The Signature Shop Two restaurants, including upscale dining and casually chic oceanfront lounge dining Elevated outdoor pool and private day beds overlook the Atlantic Ocean $2 million original art collection featuring established and emerging artists 24-hour room service Valet parking available at our Miami hotel: Daily $27 / Overnight $36 Limousine services available upon request Personal shoppers available upon request III. Balance scorecard

The balanced scorecard is a strategic planning and management system that is used extensively in the hotel industry to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals. The balanced scorecard has evolved from its early use as a simple performance measurement to a full strategic planning and management system. The “new” balanced scorecard transforms an organization’s strategic plan from an attractive but passive document into the “marching orders” for the organization on a daily basis.

It provides a framework that not only provides performance measurements, but also helps planners identify what should be done and measured. It enables executives to truly execute their strategies. The Ritz Carlton uses this strategy and is comprised of some key basic concepts, which are Financial, Customer, learning and growth, and internal business processes. By adopting this crucial strategy, Ritz Carlton south beach will be able to create a consistent level of service and ensure a path of future growth. A. Service culture Who We Are

The Ritz Carlton separates itself from its competitors in the hospitality industry by offering experiences of exceptional quality. Our objective is to be considered the best luxury hotel brand in the world with each and every location personifying that goal to our customers. We build properties that are designed to take you away to a dream of unlimited possibilities and while also creating a service culture that is the best in the industry. Doing so allows Ritz Carlton to satisfy the needs and tastes of our customers, and to maintain our position as the world’s premier luxury hospitality company.

What We Believe Our greatest asset is our team. We do not label our staff with the term “employee” or “worker” because it takes a true team effort to provide the type of experience that the Ritz Carlton is world renown. We believe that each team member exemplifies that notion and proudly instills the image of Ritz Carlton to our customers. Our success depends on the work of our team and we will always be known as having the best team members in the land. How We Succeed We succeed when all the core components of the BSC are achieved.

We must focus on the needs and desires of our customers while also maintaining a safe and surplus level of revenues and profits while minimizing our expenditures. We must account for our outside competitive set and deliver a product to our customers that cannot be matched. How We Behave We demonstrate our behavior through hard work, compassion, and a true love for what we do. We pride ourselves on having the best code of conduct policy which adheres to all state and federal guidelines while ensuring the happiness of our guests and team members. B. Balance Scorecard table (exhibit 1) “A broad look”

(Exhibit 2) “a detailed look into BSC” Perspectives Objectives Measures Target Initiatives/Actions Financial 1. Increase Revenue 2. Increase RevPAR 3. Increase profit margin 4. Minimize expenses P&L statement STAR reports Department operations reports Operating budget -Maintain RevPAR Index Achieve higher ADR, RevPAR and OCC% than comp set 30-40% profit -secure market share from competitors. -Maintain optimal ADR by appropriate revenue management – Up sell high margin services Customer -Customer service – No guest dissonance -Happy guests -Customer Satisfaction Repeat customers Referred customers

-Online surveys -100% customer satisfaction – Repeat business -Loyalty -Monitoring social media -Mystery shoppers -Score cards with incentives to give any feedback -Creating internal network for sharing customer ifo between associates Internal Business Processes – Adherence to brands standards for operations processes – Following standard operation and billing procedures in the catering department -Service errors -Failure rates -Maintenance and renovation of physical assets – Guest complaints – Bill disputes -3? level of quality for all business processes – Less than 1% bill disputes

-Hiring an Operations control manager – standardized Training for all employees -operating inventory cycle monitoring Learning and Growth – Grooming and retaining the best associates. – Shorter work hours and rested more attentive employees in catering department. – Internal Promotion – Turnover rate – Associate retention – Employee overtime – Employee burnout – Service satisfaction ratings for F&B department -70% promotion from within -turnover below 40% hourly & 10% managerial -5-15% overtime for F&B employees maximum -Developing effective training programs -Quarterly reviews and evaluations

– Incentives for employees staying in the company -promotion from within The BSC tables shown in exhibit 1 and 2 highlight the objectives considered important for the Ritz Carlton at south beach to succeed. Due to the fact that it is a luxury property, the objectives considered in this table are aligned with strategies targeting upscale travelers with unique demands and needs. In a luxury hotel, the top line revenues and profits depend on the level of guest satisfaction. It is assumed that wealthy travelers are willing to pay a premium if all their needs and demands are satisfied.

Thus exquisite hotels such as The Ritz Carlton depend directly on the level of satisfaction of their guests as well as the public perception of their brand name and property when setting room rates and other pricing strategies. With all being said it makes sense that such an emphasis is put on the level of service in this second exhibit of BSC. The balanced scorecard approach allows a hotel to asses what its biggest area of opportunity is to succeed and build upon that to better serve its customers worldwide.

Financial and business process measures are taken into account to assure that the company is running at optimal efficiency and that money is being made at an acceptable rate. Although these measures are important, they would mean nothing without the loyalty, retention, and happiness of your team members. In this case, the Ritz Carlton is a luxury hotel, so focusing on the retention and overall happiness of your team members is what will ultimately benefit you the most. Companies make it a priority in finding and retaining top team members, but it is very difficult.

This is why managers must acknowledge the presence of such members on their staff and make an effort to keep them in the company. The retention and development of these members is key in the success of the hotel. You must also understand that not every person is suited for the luxury service culture, so finding the best mix and combinations of team members will bode helpful in the long run. Training courses and a structured system for development should also be put in place to ensure a consistent service culture. A huge retention meter would be to offer employees incentive for their performance.

This can be money based, recognition based, or promotion based. Internal promotion is a practice adopted by upscale properties more than many other types of hotels because the team member is battle tested. They have been brought up from within he/she has learned the company culture along the way and already has the attitude and approach needed to be successful. Another benefit is the fact that this person is familiar with a large portion of the hotels operations, making the transition easy to any department or manager role when needed.

Maintaining and exceeding financial goals and measures are important to the short-term operational success of the hotel; however, the purpose of the Balanced Scorecard is to emphasize the importance of non-financial measures for the success of the business. By following this objective, you will create team member satisfaction, which will cause the customers to experience the full luxury experience, and it will all trickle down to the bottom line, which is increased revenue, and high profits from all departments. C. Strategy map

The Strategy Map below shows how the four perspectives of the BSC influence each other and how the objectives in the bottom affect the ones above them. This ultimately leads to superior workforce effectiveness. Not only does this show workforce effectiveness, but also the overall guidelines to superior financial performance. IV. Operating Budget (See attached Excel document) Market segments The Ritz Carlton at south beach differentiates its potential guests into 2 main market segments – corporate (business travelers) and leisure (vacationers). Corporate

Luxury hotels have traditionally focused on the business traveler because of the amount of money they make and spend, and the frequency of their visits to the property. However, many of the luxury brands including the Ritz, have shifted their focus to other segments. Business travelers rarely use all the amenities available to them at the resort, and restrict their visit to a “professional” exposure. Even with that known, Corporate business during high season is still considerably high. Luxury brands do not discount as much as their lower end neighbors.

During low season the hotel can try to attract some large corporation meetings to offset other lost opportunities. Leisure Just as stated above, the leisure segment is picking up popularity each and every year and many luxury properties have concentrated their efforts in attracting these leisure guests, whose main purpose is to utilize wide array of services and products offered, thus generating additional revenue through the alternative revenue sources. (Unlike the business traveler). There are multiple types of subgroups within the leisure segment such as transient, and group rates.

The transient rates vary depending on the time of year or season. For luxury hotels such as the Ritz Carlton, the rates can skyrocket in season, and fall drastically off-season. Group rates are tailored to meet the needs of different companies, charities, and other organizations with better pricing for bulk deals. Rooms Department – a P&L evaluation The sample data below was fabricated to reflect similar numbers that is shown their most recently available STR report. The data is an approximation, but will show key patterns in ADR, RevPAR, Occupancy percentage, and revenues. Jan Feb March

April ADR $649 $729 1399$ $679 OCC% 80% 88% 95% 85% RevPAR $519. 20 $641. 52 $1329. 05 $577. 15 Revenue $5,841,000 $6,735,960 $15,450,021 $6,492,937 30 28 31 30 May June July August ADR $329 $379 $389 $299 OCC% 60% 52% 55% 41% RevPAR $197. 40 $197. 08 $213. 95 $122. 59 Revenue $2,294,750 $2,217,150 $2,487,168 $1,379,137 31 30 31 30 Sept October Nov Dec ADR $319 $379 $399 $529 OCC% 49% 65% 68% 75% RevPAR $156. 31 $246. 35 $271. 32 $396. 75 Revenue $1,817,103 $2,863,818 $3,052,350 $4,612,218 31 31 30 31 CATEGORY YTD AVERAGES ADR $539 OCC% 68% REVPAR $405. 72 REVENUE 4,573,634 total = 54,883,612

From the data above, we can get a clear picture of how the different times of year affects the hotels key measures. Average Occupancy Levels for this segment have been estimated at 68%, which was estimated from the charts above. Many luxury hotels, including the Ritz Carlton, keep a relatively high occupancy through the year because of brand recognition and popularity. The ADR rates were estimated through the research of other competing properties in the area. The RevPAR was then calculated by multiplying the OCC% by the ADR. The RevPAR indicates how well the Revenue managers did in optimizing the financial performance of the hotel.

Luxury hotels such as the Ritz Carlton typically stay away from the “price war” tactic of attracting business, but on slower months, doing this may actually increase your revenues and all the other key measures. Food and beverage The DiLido Beach Club The only oceanfront restaurant and lounge on South Beach with a relaxed, chic ambiance perfect for people-watching Ocean-table cuisine features a selection of fresh local seafood, small plates, salads, sandwiches and a selection of homemade sangria Home to special events including the Down-home, Beachfront Crab boil or D.

B. C and the Far East Summer Nights 1 Hours of Operation: Open seven days a week from 12- 8 p. m. Lobby Bar A chic, relaxed but vibrant gathering spot designed for socializing, sipping cocktails, enjoying light bites and people watching, located in the hotel’s upper lobby Live entertainment at this South Beach restaurant Friday and Saturday from 8:30 p. m. to 12:30 a. m. Signature cocktails by master mixologist Ramsey Pimentel Bistro One LR Contemporary American bistro infused with Spanish flavors. Specializing in fresh, local seafood and exceptional steaks.

Miami’s leading Sunday Brunch featuring delicious cuisine, unlimited mimosas, champagne, Bloody Mary’s and live entertainment every Sunday from 12 p. m. to 3 p. m. 1 Hours of Operation: 2 Breakfast: 7 a. m. – 11 a. m. /Saturday and Sunday until 11:30 a. m. 3 Lunch: 11 a. m. – 5 p. m. 4 5 Dinner: 5 p. m. – 10 p. m. lapidus Lounge Lapidus Lounge, named after the famed architect Morris Lapidus – who designed the hotel when it was built in the 50s, serves specialty cocktails, light bites and sushi inside amongst the sophistication and poolside under the stars.

Competition Although the Ritz Carlton has the name recognition and the luxurious fortitude to be the top dog in its competitive set, the hotel still has a few direct competitors in the south beach area of Miami. These hotels include: 1. SLS hotel south beach 2. The W south beach 3. Bentley hotel south beach 4. Z ocean beach hotel These hotels are direct competitors to the Ritz due to their similar pricing strategy and their “suite style” rooms. These hotels do provide something that the Ritz cannot. Customized experiences.

These hotels do not have the brand recognition and corporate structure so they can adapt to customer wants and needs on the fly. This is there main advantage in the marketplace. P & L overview After careful review of the P&L statement, we can see that the rooms department generates the most total revenue for the hotel and food and beverage and Clubs and entertainment generate the rest of the revenue. Clubs and entertainment is very revenue driven, but lacks profit margin, so focusing on other areas is key for the Ritz.

With the emergence of the Internet and mobile devices, it’s safe to say that telephone reservations are at an all time low, causing that department to bring in relatively low figures. The spa for the hotel is generally provided as a luxury for the guest but is not intended to be a moneymaking department for the hotel. Many times that service is deemed complimentary in which the hotel would incur a loss liter for that sale for the room. With fixed and overhead expenses being as high as they are, the key takeaway from this is to maximize the room revenue and profits by providing a luxurious experience through all of the other departments.

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