The Analysis of the Ritz-Carlton Hotel Company - Essay Example

The Ritz-Carlton Hotel Company Submitted By: Submitted Contents 0 Introduction…………………………………………………………………………3 1 Historical Background…………………………………………………….3-5 1.1.1 Company History………………………….……………………….3 1.1.2 Company Leadership………………………………….…………...4 1.1.3 Merger and Acquisitions…………………………….……………..4 1.1.4 Company Value and Mission………………………………………4 1.1.5 Trends and Forecast………………………………………………..5  1.2. Legal & Financial…………………………………………………………5-6 1.2.1 Type of Company……………………………………………..……5  1.2.2 Financial Analysis…………………………………….……….……5 1.2.3 Employment Legislation…………………………………….……...6 1.3 Size and Structure……………………………………………………….……6 1.4 Product and Service………………………………………………………..…6 1.5 Types of Customer………………………………………….………………7-9 1.5.1 Customer Profile…………………………………………………..7 1.5.2 Average Spend/ Cost………………………………………………8 1.5.3 Share of Market……………………………………………………8 1.5.4 Promotional Strategy…………………………………….………..9 2.0 SWOT……………………………………………………………………………….9  3.0 Economic Factors…………………………………………………………………..10 4.0 European Economy……………………………………………………….………10-12 4.1 Relevant Laws related to a Manager in the THL industry……….……... 10-11 4.2 Member States of EU……………………………………………….……….12  4.3 Pros & Cons for the UK Adapting the Euro Currency……………………....12 5.0 Conclusion ……………………………………………………………………….12-13 6.0 Bibliography………………………………………………………………….……...13 7.0 Appendices ………………………………………………………………………….14 The Ritz-Carlton Hotel Company 1.0 Introduction  The Ritz-Carlton Hotel Company operates the Ritz-Carlton chain of hotels. The Ritz-Carlton Hotel Company is wholly owned by Marriott International. Ritz-Carlton is well-known globally for its luxury hotels, private condominiums, fractional ownership, innovative retail sales, and golf communities. Ritz-Carlton has divided the countries in which it has properties into the following six geographic regions; USA & Canada, Mexico, Caribbean & Latin America, Europe, Asia-Pacific, and Middle East & Africa (Ritz-Carlton, 2014). 1.1 Historical Background 1.1.1 Company History The genesis of the Ritz-Carlton Hotel Company has roots in the legendary hotelier Cesar Ritz who was known as the “king of hoteliers and hotelier to kings.”  The Ritz-Carlton, Boston was opened in 1927 and catered to the rich and famous. The logo of the hotel, which had the British royal seal (the crown) and the logo of a financial backer (the lion) was designed by Cesar Ritz. The hotel assumed the status of a private club meant for the very rich. The hotel entertained only those guests who were on the Social Register or were the Who’s Who of the society. Edward Wyner, the owner of the Ritz-Carlton, Boston passed away in 1961. The property was thereafter owned and managed by land developers Cabot, Cabot & Forbes and their chairman Gerald W. Blakely. Charles Ritz, son of Cesar Ritz, remained an active board member of the Ritz-Carlton hotel until he died in 1977. William B. Johnson bought the hotel and the rights to The Ritz-Carlton name from Blakely and established The Ritz-Carlton Hotel Company (Ritz-Carlton, 2014). 1.1.2 Company Leadership  Herve Humler is the President and Chief Operations Officer of Ritz-Carlton. Leeny K. Oberg is the Chief Financial Officer while Bob Kharazmi is the Global Officer, Worldwide Operations (Marriot, 2014). Simon F. Cooper remained the President and Chief Operating Officer of the Ritz-Carlton Hotel Company from February 2001 to September 2010 and was instrumental in the expansion spree of the hotel chain during the period (Ritz-Carlton, 2014). 1.1.3 Mergers and Acquisitions Ritz-Carlton has not adopted the mergers and acquisition route to fulfill its growth aspirations. Instead the company has expanded organically by meticulously planning and building its own properties. 1.1.4 Company Value and Mission Ritz-Carlton is committed to providing top-notch service to its esteemed customers. The hotel chain has adopted the motto; “We are ladies and gentlemen serving ladies and gentlemen.” Genuine care and comfort of its guests is the highest mission of Ritz-Carlton. All the employees of the company are taught the “The 12 Service Values,” “The Credo,” “The Three Steps of Service,” and “The 6th Diamond” which together form the basis of day-to-day working of the company. The company has been honored with the Malcolm Baldridge National Quality Award twice (Ritz-Carlton, 2014) 1.1.5 Trends and Forecast  The world economy is slowly but surely recovering from the recession. The economic environment is thus propitious and the future revenues of Ritz-Carlton are likely to increase in the coming times. 1.2. Legal and Financial Information 1.2.1 Type of Company  The Ritz-Carlton Hotel Company, L.L.C. operates the Ritz-Carlton chain of luxury hotels. It is a hybrid, legal business entity and has certain characteristics of a corporation and a partnership or sole proprietorship. The ‘Limited Liability Company’ clause entails limited liability for its owners. The Ritz-Carlton Hotel Company is owned by Marriot International. 1.2.2 Financial Analysis The Ritz-Carlton Company does not disclose its financial results separately. The financial position of the hotel chain can be gauged by examining the annual reports of its parent company, Marriot International Inc. The revenue of Ritz-Carlton is clubbed with Bulgari Hotels & Resorts and EDITION Worldwide in the consolidated balance sheet of the parent company. The three luxury brands of Marriot International Inc. generated revenue of $ 1794 million in 2013, up from $1765 million in 2012 as depicted below. The overall financial results have improved and therefore Ritz-Carlton has put its plans to sell off some of its properties on the back burner (Mueller, 2014). 1.2.3 Employment Legislation There is no specific legislation with regard to employment and pensions in the hotel industry in United Kingdom. The hotel operators however must adhere to Working Time Regulations and Minimum Wage Regulations (CMS, 2008). 1.3 Size and Structure Ritz-Carlton operates 85 hotels in 30 countries around the world. Some of the countries where Ritz-Carlton has properties include Austria, Bahrain, Canada, China, Germany, India, Indonesia, Japan, Malaysia, Mexico, Oman, Puerto Rico, Qatar, Russia, Singapore, South Korea, Turkey, UAE, and the United States. 1.4 Product and Service Ritz-Carlton provides the ‘Gold Standard’ in the hotel industry. The hotel chain strives to provide warm, relaxed, yet refined ambience to each of its guests. The employees go that extra mile to ‘delight’ the guests. Each employee has the authority to spend up to $2000 on a guest to satisfy the latter’s need (Reiss, 2009). Ritz-Carlton bagged the 1st position in the J.D. Power North America Hotel (Luxury Segment) Guest Satisfaction survey due to its exemplary services (Ritz-Carlton, 2014). Some of the brand extensions of Ritz-Carlton include Spa Development, Golf, the Ritz-Carlton Residences and Leadership Centre. 1.5 Types of Customer 1.5.1 Customer Profile Ritz-Carlton has traditionally attracted business and leisure customers as well as event planners. The hotel chain claims that it has the requisite expertise and wherewithal to cater to the needs of any customer. Ritz-Carlton has now decided to target young children as well. The logic behind the move is to ‘catch them young’. Ritz-Carlton offers certain services like the Ritzs Rolls-Royce Phantom and Princess for a Day programme, especially meant for the ‘kiddie market.’ (BBC News, 2014) The company has made a concerted effort to attract the young people by giving a more youthful and contemporary design to its new properties. 1.5.2 Average Spend/ Cost  The occupancy levels at Carlton Ritz properties (North America) were 71.3 percent during the fiscal ended December 31, 2013. The occupancy rates registered an increase of 1.4 percent points over last year. Comparable Company-Owned Properties (Carlton Ritz, North America)* Parameter Twelve Months Ended December 31, 2013 Change Versus 12 Months Ended December 31, 2012 Occupancy 71.3 % 1.4% pts ADR $323.83 6.6% Rev PAR $230.82 8.7% *Source: Marriot International The average daily rate (ADR), at $ 323.83 was also up 6.6 percent vis-à-vis the comparative period last year. The revenue per available room (Rev PAR) at $230.82 in 2013 registered an increase of 8.7 percent over last year. 1.5.3 Share of Market  There is a rising demand for Ritz-Carlton Hotels. The Ritz-Carlton Hotel Company plans to add 15 more properties and take its global portfolio to 100 properties by the end of 2015. The Company intends to add five new hotels in the Asia-Pacific region to maintain its leadership position (Ritz-Carlton, 2014). 1.5.4 Promotional Strategy The Ritz-Carlton chain of hotels has traditionally relied on the print and electronic media for its promotional campaigns. The hospitality company has now harnessed the power of social media to engage its customers. The company interacts with its customers via Facebook, Twitter or apps like Foursquare. Ritz-Carlton has also initiated the "Let Us Stay With You" campaign which emphasizes the good times spent at the hotel. As a part of the campaign, the hotel chain has redesigned the site ‘Ritzcarlton.com.’ Customers can filter content on this user friendly site and can sign up for email promotions (Palmer, 2011). 2.0 SWOT  The SWOT analysis of Ritz-Carlton is enumerated below Strengths Strong Parent Company Empowered Employees Top Notch Service, Rewards Program Weaknesses Perception of Being Expensive High Employee Turnover Limited International Presence Opportunities Emerging Markets (India, China) Corporate Tie-Ups Sponsorship of Events Threats High Operational Costs Recessionary Conditions Intense Competition 3.0 Economic Factors The economic factors include the general state of the economy, interest rates, credit availability, income levels and rate of unemployment. The affect of these factors is more pronounced on Ritz-Carlton as it is a luxury hotel. The overall leisure and tourism industry took a beating during the recession of 2008. Customers of Ritz-Carlton started staying at lower-tier hotels with the objective of saving money. The management claims that the hotels occupancy rates and profitability was adversely affected due to the AIG effect. The business has rebounded since 2012 and Ritz-Carlton has reported strong financial results. The international presence has helped the hotel chain tremendously. While the clouds of uncertainty still loom large on United States, countries in the Middle East and Asian region have moderated growth. In addition to the business traveler, Ritz-Carlton has benefitted from growing number of aspirational travelers in many countries like China, India, and Brazil. 4.0 European Economy 4.1 Relevant Laws in the THL industry There are no specific rules applicable to hotels with regard to commercial accounting. A hotel must prominently display the current room rates and VAT applicable thereof in the reception area. Likewise, a bar or a café must display the list of prices and service charge. The hotels are forbidden from selling tobacco to children under the age of 16. A prominent notice to this effect must be displayed near the counter where tobacco products are being sold. The hotel is liable to pay compensation if the guest’s property or belongings are damaged due to negligence of the hotel or breach of contract. The hotel is required to adopt processes that do not harm the environment. These include taking an authorization from local water company to discharge detergents, waste water into public sewers. The EU rules on food and hygiene are applicable throughout Europe. They pertain to certification of kitchen equipment, hygiene standards, foods labeling and disclosure of use of genetically modified foods. Additionally the hotel must comply with the Fire Regulations by carrying out a comprehensive risk assessment of the property and taking appropriate fire precautions (CMS, 2008). The hotel must adhere to the general data protection laws as they apply to all collected guest data. For International guests, information on passport number, place of issue of passport and next destination of the guest must be recorded by the hotel. The hotel must have a public liability insurance policy in addition to a business insurance policy. Last but not the least, the hotel must obtain requisite permissions if it intends to hold marriages or provide trekking, water sports activities, and gaming on its premises (CMS, 2008). 4.2 Member States of EU  The Ritz-Carlton has properties in only 6 EU member nations; Austria, Germany, Italy, Portugal, Spain and United Kingdom 4.3 Pros & Cons for the UK Adapting the Euro Currency  Ritz-Carlton is an international chain of hotels and is therefore affected by, among other things, currency exchange rates. The biggest advantage of adopting Euro is that guests will not have to incur any transaction costs when they travel and stay at any Ritz-Carlton hotel in the European Union. Since all the prices including room tariff will be quoted in Euro, the consumers in UK will also be able to compare prices across the European Union (Lemaire, 2007). The biggest demerit of adopting Euro is surrendering of monetary decisions to the ECB (European Central Bank). The interest rates in UK are lower than the Euro’s interest rates. As per the terms of membership, UK will have to lower its interest rates. In such a scenario the inflationary pressures are bound to increase which may be detrimental to the functioning of luxury hotels like Ritz-Carlton. 5.0 Conclusion  Ritz-Carlton is well poised to maintain its growth trajectory. The parent company, Marriot International Inc., has tremendous experience and expertise in the hotel and hospitality business. The support of the parent will stand in good stead for Ritz-Carlton. Ritz-Carlton invests time and money in selecting and training employees. These employees in turn deliver on the promised brand value of exceptional service. The day to day functioning of the hotel chain is influenced by its mission and values. The company has expanded its target market by specifically wooing the young customers. These loyal customers will boost the top line of the company in the long run. 6.0 Bibliography BBC News, (2014). Kidding around in luxury hotels. [online] Available at: http://www.bbc.co.uk/news/business-14842745 [Accessed 11 May. 2014]. CMS, (2008). CMS Guide to Principal Hotel-Specific Laws in Europe and China. Summer, 2008 Lemaire, P. (2007). The impact of the euro changeover on between-currency conversions. Journal of Consumer Policy, 30(4), 383-391. doi:http://dx.doi.org/10.1007/s10603-007-9045-2 Marriott (2014). About Marriott Hotels | Marriott Corporate Business Information. [online] Available at: http://www.marriott.com/marriott/aboutmarriott.mi [Accessed 11 May. 2014]. Mueller, M. (2014). "Ritz-Carlton Sale Talk Cools as Business Improves", Orange County Business Journal, vol. 37, no. 12, pp. 34. Palmer, A. (2011). "Ritz-Carlton CMO reinvents luxury", DM News, vol. 33, no. 12, pp. 20-21. Reiss, R. (2009). How Ritz-Carlton Stays At The Top. Forbes. [online] Available at: http://www.forbes.com/2009/10/30/simon-cooper-ritz-leadership-ceonetwork- hotels.html [Accessed 11 May. 2014]. Ritz-Carlton (2014). Luxury Hotels & Resorts | Escape to Luxurious Hotels by The Ritz-Carlton. [online] Available at: http://www.ritzcarlton.com/en/Default.htm [Accessed 11 May. 2014]. Un.org, (2014). World Population Ageing. [online] Available at: http://www.un.org/esa/population/publications/worldageing19502050/ [Accessed 11 May. 2014]. 7.0 Appendices  7.1 Appendix 1 7.2 Appendix 2 Read More