The Ritz-Carlton Hotel: Company’s Dilemma

Introduction

Ritz-Carlton is one of the oldest hotel companies in the world. Having been established in 1893 by Cesar Ritz, it became one of the most renowned and appreciated hotel chains in the world. As it stands, the company is owned by Marriott, which is the largest hotel chain. Ritz-Carlton operates in more than 30 countries, offering a new level of luxury service. Its properties include 130 hotels with more than 40,000 people in employment.

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The company’s revenues exceed 3 billion dollars a year. It is known not only for the highest quality of service and tremendous amounts of respect and adoration towards the customers but also for the perfect amalgamation of business-driven and employee-driven practices. The company’s motto is “We are Ladies and Gentlemen serving Ladies and Gentlemen.” The employees are treated with a healthy amount of respect.

At the same time, the competition for the workplaces in Ritz-Carlton is very steep, and the expectations for the employees are high. The company employs the Seven-Day-Countdown framework to train new employees and prepare new hotels for service. It includes two days of company orientation and 5 days of employee training. However, questions have been raised on whether this framework is efficient in terms of speed and the quality of training.

With the opening of a huge multi-level facility as part of the Millennium Partners Project in Washington DC, the demands for quality and efficiency are even higher. The case study analyzed in the scope of this paper focuses on potential improvements to the Seven-Day-Countdown framework. The purpose of this paper is to offer potential solutions to the Ritz-Carlton Hotel dilemma.

Case Study Summary

In this case study, the student is required to decide for James McBride, who was appointed as a general manager of the newest Ritz-Carlton project in Washington, DC. This project is a part of a much larger effort made by the Millennium Partners Project, which has invested over 700 million dollars in Ritz-Carlton’s six hotels over the past years.

The new project presents a 225-million dollar effort in creating a large hospitality complex, which includes 162 luxury condominiums, a sports and golf court, street-level restaurants and retail centers, and a 300-room hotel. James had experience in establishing Ritz-Carlton hotel chains in Asia and Asia-Pacific, having received numerous awards, including the “Best Business Hotel in Malaysia” by the Business Asia Magazine. Mr. Collins, who is a representative of the Millennium Partners, and has a considerable influence on the project, is calling the tried and true instruments used by Mr. McBride into question.

It is up to McBride to investigate whether Mr. Collins’ concerns are reasonable and evaluate the system to find an optimal balance between training efficiency, costs, time limits, and hotel occupancy. The bottom line is that Ritz-Carlton should find a way to operate their hotels at 80% capacity from the opening day, to achieve maximum efficiency when compared to their competitors. One of these competitors includes the Four Seasons hotel chain, which has greater overall average daily rates as well as higher revenues per available room, despite scoring a little less in the overall occupancy rates.

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Existing Practices in Ritz-Carlton

Ritz-Carlton’s practices towards the preparation and training of employees are encompassed in the Seven-Day-Countdown strategy, which enabled it to train and prepare its employees at an incredibly high speed. The training provided has an emphasis on respect towards the employees and customers, the high value placed on the excellent quality of work, and constant self-improvement.

The program takes advantage of high employee motivation, competent HR selection process, and the use of Six Sigma practices to improve the quality of work. The demands towards managers are extremely high, and while the employees are tasked with making the customers feel good about themselves, the purpose of managers is to make money by increasing efficiency and money spending wherever it is possible. Ritz-Carlton focuses its HR strategy on improving retention rates, reaching an impressive 25% turnover, while the rest of the hotel industry suffers from 70-100% yearly turnover rates. Improved retention ensures employee satisfaction, desire to grow and improve, and the overall excellence of service.

Also, the company practices various psychological motivators to build up team spirit and ensure that all employees are reminded of the company’s mission and purpose. According to the provided case study, Ritz-Carlton dedicates the first two days of orientation to get the potential employee-inspired about the culture and values of the hotel and making them feel welcome as part of the new team. Only once the recruit had internalized and accepted the idea of being a Lady or a Gentleman serving other Ladies and Gentlemen, may the practical training begin. The created sense of purpose and belonging helps the company retain and promote their talents to higher positions.

Strong Points of Ritz-Carlton

As it stands, Ritz-Carlton’s Seven-Day-Countdown HR strategy has several strong sides to itself, which are as follows:

  • Employee selection, recruitment, and retention. This part of strategic HR management is extremely important, as enables saving money on recruiting and training personnel while retaining talent and having them contribute to the company. As it was stated in the case study, the recruitment rates for Ritz-Carlton are comparable to those of Harvard. This helps create additional value for the position held by the individual employee. Employment at Ritz-Carlton is not just an “another summer job.”
  • Six Sigma and economic feasibility. Ritz-Carlton implements standardization to achieve a uniformity of high standards across their hotels and eliminate the possibilities for failure. Instead of focusing just on the systems or the personnel, Ritz-Carlton focuses on both, achieving a high quality of care as a result. Besides, as it was stated in the case study, the costs of implementing the Seven-Day-Countdown strategy are extremely low, which helps achieve the necessary results without wasting money or resources.
  • High Speeds. The majority of competing hotels spend around 3 weeks preparing their employees for work. Ritz-Carlton does so in one week while staying competitive in terms of quality. It allows the company to open its hotels quicker and achieve greater exposure.
  • Employee Motivation. As evidenced by the examples of various exercises and team-building practices, Ritz-Carlton’s strategy helps motivate employees to a great degree. Various ways of employee motivation include financial compensation, promotion, and the dignity and respect of working in a high-class establishment.

As it is possible to see, the Seven-Day-Countdown strategy managed to serve Ritz-Carlton well, which is why Mr. McBride managed to use it with success in opening a multitude of hotels across Asia. These hotels typically opened at 50% occupancy rates to protect their employees from being overwhelmed during the first month. In the next half a year, the expectations were gradually increased to 80%. The Seven-Day-Countdown proved effective for that model.

Issues with Ritz-Carlton

To quote a phrase from the case study, “If you do not improve, you become worse.” Mr. Collins, the representative of the Millennial Partners group, voiced the issues with Ritz-Carlton’s approach. The main complaint is about the starting occupancy rate during the first month of the new hotel opening. He points out that Ritz-Carlton places a lot of effort into attracting individuals to their hotels. They work with event organizations, conduct rallies, and invite people to grand hotel openings that are bound to attract the attention of the public. Therefore, the attendance rates at the hotel during the first month are expected to be high. At the same time, their occupancy policy limits it to 50% during the first month, missing out on revenue.

This major contradiction is a direct result of short timeframes, during which Ritz-Carlton trains its employees. As it was already mentioned, other hotel chains spend 2-3 weeks on average in training new employees, and about 2 weeks on training their managers. The company in question spends 5 days on training employees and four on training managers, as per the Seven-Day-Countdown policy.

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No matter how good or intensive the training program is, no matter how motivated the employees are, the majority of skills implemented at the hotel business are learned and perfected through repetition. Without enough training, new employees at the company are simply incapable of handling large numbers of customers during their first month of work, especially if the training conditions are poor and timings are barely passing under the wire.

The last issue is directly related to the concept of rapid response HRM. The case study does not mention any utilities or plans made for transferring employees and managers from one region to another. Ritz-Carlton exists in a globalized economy and has hotels opened up in many countries around the world. Nevertheless, it pursues a strictly ethnocentric strategy without actually providing any accommodations for it.

The company uses staff members hired locally with expatriate managers. However, there is no mentioning of utilizing strategies to train and prepare said managers for the conditions and cultures of different regions. It is likely that such training is not accounted for, as the amount of time and resources spent on training staff, in general, is extremely small. Rapid response HRM is not used by Ritz-Carlton as much as it could have been, which would have helped solve the dilemmas surrounding staffing and opening new hotels.

Evaluation and Discussion

Based on the information provided in the case study, it could be concluded that the Seven-Day-Countdown policy was not as efficient as it presented itself. The idea behind it was to create the most loyal and the most well-trained employee base using the least amount of time and money. This is an impossible notion, as one week is just too short to accomplish all of these goals. As a result, although officially Ritz-Carlton had negligible expenses in the training budget, it had to pay with underwhelming results in the first few months after the opening of the hotel.

They had to artificially cap their occupancy rates for the first 5 months, gradually growing them from 50% to 80%, rather than opening up with 80% occupancy. This loss of profit constitutes a hidden cost of the poor amount of training received by the newly appointed managers and employees.

It is unclear why the Seven-Day-Countdown system is even used when the questions of staffing new hotels arise. Constructing properties is a long-term venture. It is not a sudden development that urgently needs to train employees and staff members under a short deadline.

The company should be aware of future issues the moment they sign the construction contract. Therefore, there is plenty of time to prepare. The Seven-Day-Countdown system may be useful in training employees in the already established hotels. These hotels typically have skeleton crews of well-trained veteran members, who can shoulder the burden while the individuals fresh out of the training grounds are adjusted to the realities of their work. Such an approach should not be used in new hotels, where the number of trained and experienced staff is limited.

The inability to be able to open up hotels at their maximum capacity negatively affects the company’s relationships with shareholders. Although the CEO of Ritz-Carlton said that the company puts “employees first, customers second, shareholders third,” the interests of shareholders must not suffer from inefficiencies of the HR management systems. This already became an issue in 1995, when a court charge came from one of the owners of Ritz-Carlton properties, who accused the company of mismanaging his properties and not delivering the revenues expected from his hotels. Thus, a change strategy should be aimed at ensuring the satisfaction of shareholders, better use of newly constructed properties, and training or preparation of employees to fill out these vacant spaces.

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Potential Solutions

To solve the dilemma presented before Mr. McBride, an analytical approach must be taken. In a globalized economy, it is impossible to create a standardized solution to solve all problems, no matter the scope or location. The Seven-Day-Countdown system is such an approach, which, as it has been already discovered, has many hidden flaws and costs imposed on the company. Therefore, the goals of the proposed intervention are as follows:

  • Fill the vacancies for the new multi-use facility with experienced and highly-capable workers.
  • Ensure that the facility opens at an 80% occupancy rate.

These goals can be achieved in a variety of ways. One of the novelty solutions to the dilemma is allowing Ritz-Carlton to train and form a strategic reserve of managers and employees, that would be capable and willing to deploy in the newly constructed facility for a limited period.

Each of the currently owned properties could contribute to forming such a reserve. These individuals would be familiar with Ritz-Carlton standards of service and have actual working experience behind their belts. Training to navigate through the new facility would not take much time. As a result, the new complex built by the Millennium Partners would be fully staffed before opening and will be capable of operating at an 80% occupancy rate from the first day.

After having formed a skeleton crew from experienced expatriate workers, it would be possible to slowly replace them with locally hired labor, by utilizing the Seven-Day-Countdown approach. This process would likely take about a year and could be increased during the winter, as the hotel occupancy rate has been shown to naturally fall down to 50% during the cold seasons. Ritz-Carlton should invest in preparing the strategic reserve and provide cultural training to employees and managers, to help them adjust to the cultural norms prevalent both inside and outside of the country.

Lastly, Ritz-Carlton should revise its Seven-Day-Countdown approach and potentially increase the number of training days dedicated to training new recruits. The majority of other hotel chains are forced to have short training schedules because of the increased turnover rates, which is something that Ritz-Carlton does not have an issue with due to an intelligent HR policy towards the employees. With high retention, it could afford to spend more time training its employees. The quality of labor will rise, resulting in greater customer satisfaction rates.

Conclusions

Ritz-Carlton has a history of successfully opening new properties both inside and outside of the USA. Its strategy and its dedication to employee relations have made the company one of the best places to work. However, the Seven-Day-Countdown system, which is hailed to be extremely efficient in saving money and time on employee training has had many hidden costs, which resulted in reduced occupancy during the first 5 months of property operation.

It is likely to be the reason why Ritz-Carlton has been falling behind the Four Seasons hotel chain for the past few years. The new demands placed by the Millennium Partners group require Ritz-Carlton to be able to operate at 80% capacity from day one. The proposed solutions require forming a strategic reserve of mobile employees and creating alterations in the HR strategy so that there would not be a need to train employees one week before the opening.

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StudyCorgi. (2021, March 10). The Ritz-Carlton Hotel: Company's Dilemma. Retrieved from https://studycorgi.com/the-ritz-carlton-hotel-companys-dilemma/

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"The Ritz-Carlton Hotel: Company's Dilemma." StudyCorgi, 10 Mar. 2021, studycorgi.com/the-ritz-carlton-hotel-companys-dilemma/.

1. StudyCorgi. "The Ritz-Carlton Hotel: Company's Dilemma." March 10, 2021. https://studycorgi.com/the-ritz-carlton-hotel-companys-dilemma/.


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StudyCorgi. "The Ritz-Carlton Hotel: Company's Dilemma." March 10, 2021. https://studycorgi.com/the-ritz-carlton-hotel-companys-dilemma/.

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StudyCorgi. 2021. "The Ritz-Carlton Hotel: Company's Dilemma." March 10, 2021. https://studycorgi.com/the-ritz-carlton-hotel-companys-dilemma/.

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StudyCorgi. (2021) 'The Ritz-Carlton Hotel: Company's Dilemma'. 10 March.

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