Ritz Carlton-Hotel Company

Introduction

The standard “seven day countdown” prior to a hotel opening is currently used by The Ritz-Carlton Hotel Company as a state of the art blitz, to acclimate new employees to the principles and standards of hotel operations. However, pressure from Brian Collins, parner and current chief operating officer for Millenium Hospitality Partners, is questioning the validity and effectiveness of such a routine procedure. These concerns are primarily focused around the opening of the Washington, DC’s historical Foggy Bottom Ritz-Carlton hotel.

James McBride has been selected as general manager of the new hotel and is a veteran in the Ritz-Carlton hotel business. Utilizing the “seven day countdown”, McBride has successfully opened several Ritz-Carlton hotels worldwide. While any routine measure can be improved over time through the process of innovation and evaluation, Ritz-Carlton has maintained practice of the “seven day countdown” since the 1980’s, without many changes.

This constancy of the hotel opening process is almost contradictory to the Ritz-Carlton standard, that being to constantly provide service and improve on current service practice in order to enhance the customer experience.

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The Ritz-Carlton is in charge of managing the new Washington, DC hotel investment made by Millenium Hospitality Group. This is by no means an “invest and walk away” scenario, Millenium is concerned with the “seven day countdown” and questions the validity of its usefulness. Issues revolved around two major conflicts: 1.) How would the Ritz-Carlton effectively implement changes to their process, without compromising operations? 2.) What measures of success would Millenium Hospitality constitute as a result of changes in the “seven day countdown”? Obstacle #1 – “The Seven Day Countdown” may impact service measures.

Since the 1980’s the Ritz-Carlton Hotel Company has been refining the hotel-opening process.

There is no doubt, that the company has been quite successful in the opening of hotels, as they currently stand as one of the most luxurious hotel companies on a global standard. However, the implementation of the “seven day countdown” is somewhat contradictory to the very values that inspire the company’s mission and service granting logic. In seven days, Ritz-Carlton executives, hotel managers, trainers and newly hired employees must all come together to reach a level of acumen that ensures that both employees and managers alike are on one accord and are synced in the service philosophy of the Ritz-Carlton brand. Based on my evaluation of this case, it is hard to gain a clear understanding as to why this seven day countdown has never been evaluated for complete effectiveness.

It is almost as if the notion is, because this process has worked successfully in the past, that there is no reason to change it. However, there is no definitive measure to fully explain this in a thorough manner; as stated in the case, “it was difficult to train new hires to meet the high expectations of The Ritz-Carlton service standards in only seven days, but that was how The Ritz-Carlton worked”. What is even more striking is that the case revealed that often times; hotel openings barely approached readiness status for opening day following this routine countdown procedure. This causes one to question whether or not seven days is indeed enough time to train and prepare employees and division teams for grand opening. Obstacle #2 – “The Seven Day Countdown” may result in profit loss. Collins has a good point, in questioning the validity of the “seven day countdown”; after all his company has made a $700 million investment and want to see that returns are optimized. As it stands, following the high-stressed, jam-packed “seven day countdown”, the Ritz-Carlton estimates to open the hotel with 50% occupancy, with the anticipation of reaching 80% occupancy within a few months.

Their reasoning for doing so is due to the fact that “flawless execution is the goal, and then speed will come”. The Ritz-Carlton company also believes that opening at 50% capacity will help offset turnover costs that are experienced after opening. The Ritz estimates that is takes about four months to reach occupancy capacity of 80%, which is the desired occupancy. Based on data from Exhibit 3 (Ritz-Carlton, 2001 First Year Monthy Budget), in January when occupancy is 57%, revenue from rooms is $1.6 million, versus 2.2 million in May when occupancy is 76%. At the front end of opening, the Ritz-Carlton is losing money in the range of $0.6 million dollars of uncaptured revenue due to their opening at 50% capacity. Despite their rationale for this, one may question whether or not this loss is necessary, and could it be augmented by a more through opening training process that exceeds the routine “seven day countdown”.

Recommendations

1.Evaluate the effectiveness of the “Seven Day Countdown” Despite the pressures from Collins in recommending changes to the “seven day countdown, The Ritz-Carlton must first evaluate the effectiveness of the program they already have in place. Based on the case analysis, it is not clear as to what metrics the company uses to determine the success of a hotel opening. These analyses of course would need to be market specific, and adjusted for the economic climate in which the Ritz-Carlton property is located. Implementation of such a procedure will assist The Ritz-Carlton in identifying gaps in knowledge with respect to their business operations following a grand opening. Profit should not be the only key measure of success. Employee satisfaction and job performance should also be evaluated following a grand opening.

Moreover, an understanding in the amount of hours spent re-training or fixing mistakes is also very crucial towards effective operations, as The Ritz-Carlton prides itself on quality customer service. 2.Evaluate the effectiveness of the “50% Occupancy at Grand Opening Rationale” The Millenium Hospitality group has every right to challenge the “seven day countdown” opening process, as key elements may stand to impact both initial and future profit gains. Despite their dedication to service, The Ritz-Carlton opening at 50% capacity may not be fully necessary in the beginning. If the “seven day countdown” is indeed working at superb standards, then employees should be well-equipped to perform their job functions properly with minimal errors. This embedded “safety net” to shield against turnover, may even be hurting core operations and is indicative of a flawed opening process.

Following an assessment of the “seven day countdown” as a whole, The Ritz-Carlton management team, would then need to experiment with altering the occupancy percentages at different levels to assess profitability. The Ritz-Carlton’s company values are deeply rooted in service, but if profitability is not maintained, growth and company sustainability could be deeply impacted in a negative way. Similar to the previous recommendation, The Ritz-Carlton would need to evaluate both customer satisfaction and employee performance in earlier stages of hotel operations under increased occupancy conditions.

Conclusion

The disadvantage towards implementing these recommendations is that they limited only to store openings, meaning that hotels that are already in operation do not constitute appropriate models for these measures. However, The Ritz-Carlton company operations may benefit from a secondary data analysis of performance or profit measures following a hotel’s grand opening. In my opinion, if service is the number one priority to The Ritz-Carlton executive team, then serious considerations should be given towards optimizing or expanding the “seven day countdown”. The process seems very rushed and does not take into account the discrepancies in employee job acclimation.

Based on my personal experience in starting a new job, it took me a considerable amount of time to actually feel comfortable in my position, usually ranging from one or two months. Certainly if The Ritz-Carlton is going to continue and improve upon its service quality standards, they must spare no expense. After all their employees and the service they provide is the principle focus of the company. Thus, there is always room for improvement and innovation in the level of quality service rendered.