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1999

Application Summary

THE RITZ-CARLTON
HOTEL COMPANY, L.L.C.

Copyright 2000 by THE RITZ-CARLTON HOTEL COMPANY, L.L.C. All Rights Reserved
THE RITZ-CARLTON HOTEL COMPANY, L.L.C.
at a Glance
Products and Services: The Ritz-Carlton Hotel Company, L.L.C. develops and
operates luxury hotels for others. The hotels are de-
signed and identified to appeal to and suit the re-
quirements of its principal customers who consist of:
(1) Meeting Event Planners and (2) Independent Busi-
ness and Leisure Travelers.

President & COO: Horst Schulze

Headquarters: 3414 Peachtree Road, N.E.


Suite 300
Atlanta, Georgia 30326

Operations: One Central Reservations Office


Seven International Sales Offices (ISOs)
24 Hotels and Resorts in North America
Two Hotels in Europe
Eight Hotels and Resorts in Asia
Two Hotels in Australia
30 Hotels under Development

Customer Base: Over 800,000 Customers World-wide

1999 Revenue: $1.5 Billion. A 40% increase over the previous five
years.

Employees: 17,000 World-wide, known as The Ladies and Gentlemen


of The Ritz-Carlton

History: Established in 1983, the former owner, W.B. Johnson


Properties, acquired the exclusive North American
rights to the Ritz-Carlton trademark, the foremost
name in luxury hotels. This status was largely due to
the legendary Caesar Ritz who developed and operat-
ed two of the worlds best hotels in Paris and London.
The hotels achieved such fame in the marketplace that
they attained what is often referred to as The Ritz
Mystique. In 1995, The Ritz-Carlton was jointly ac-
quired by Marriott International Inc. to achieve their
strategy of entering the luxury hotel segment of the
industry; the takeover/merger occurred in 1997.

Copyright 2000 by THE RITZ-CARLTON HOTEL COMPANY, L.L.C. All Rights Reserved
The Ritz-Carlton Hotel Company, L.L.C.
1999 Application Summary

Overview

A History of Managing for


Performance Excellence in the Hotel Industry
Most hotels remained profitable despite these quali-
Previously, in tiny hotels and inns, the innkeeper di- ty deficiencies because competitors had similar problems.
rected activities in the organization personally, including
managing for quality. As hotels grew in size, the volume Ritz-Carlton Returns to the Fundamentals:
of activity outgrew the capacity of the innkeeper to manage Upper Management Participation
by personal direction it became necessary to delegate.
Then came 1983 and Horst Schulze. The pace
Apprentices were trained in the craft and qualified quickened with a lengthy procession of new Ritz-Carlton Ho-
by examination to become craftsmen. The innkeeper - the tels under development. Faced with this challenge, Horst
master - then delegated much of the managing for quality to Schulze and his team decided to personally take charge of
the craftsmen, subject to inspection and audit by the master. managing for quality because they realized managing for
Many of our standards go back 100 years to this era of Cae- quality could not be delegated!
sar Ritz and the legendary Chef August Escoffier.
The upper management participation of Horst
As we entered the 20th century, the size of a hotel Schulze and his team ranged across a broad spectrum, but
and its organization sharply increased. The resulting large most significant activities consisted of:
hotels required functional departments. The innkeeper - now
a general manager - delegated to each functional department Defining the traits of all company products which are set
head the responsibility for quality, for performing the func- out in The Credo. For a full explanation of The Credo, see
tion correctly. Figure 1 on page 2.

With the emergence and growth of technology, hotel Translating The Credo into basic standards to clarify the
products and processes became increasingly complex. To quality responsibilities for our Ladies and Gentlemen; the
deal with these new complexities the hotel industry adopted most important of which include: (1) anticipating the wish-
the principle of separating planning from doing. Planning of es and needs of the guests (2) resolving their problems and
the various departments was delegated to division and depart- (3) genuinely caring conduct towards guests and each other.
ment heads (e.g. Food & Beverage managers, Rooms Execu-
tives, Purchasing Directors, etc.). This left the job of execut- Personally training the Ladies and Gentlemen of a new
ing the plans to the first-line supervisors and the workforce. Ritz-Carlton on The Credo and Basic Standards, commonly
The separation of planning from execution had four major referred to as The Gold Standards, which are shown on page
consequences. 2 as Figure 1.

1. A factory concept emerged in which people were assigned Aggressively instilling a passion for excellence.
one task rather than a single craftsman performing the en-
tire sequence of tasks. In this factory approach, if task #11
was causing a problem for task #24, it wasnt identified Another Major Change, A Comprehensive
until it reached the customer, and even then the problem Structure
likely continued.
2. A dramatic rise in productivity. By 1989 Horst Schulze realized that a more com-
3. The segregation of divisions and departments. prehensive structure was necessary for the Ritz-Carlton to
4. A further distancing of upper managers from the job of optimize its performance. He selected the Malcolm
managing for quality. Baldrige National Quality Award Criteria. Through the use
of this assessment tool and the resulting feedback reports,
The progressive removal of upper management from The Ritz-Carlton developed a Roadmap to business excel-
managing for quality produced negative effects on quality. lence (see pages 3-4) which has attained significantly higher
Typically, performance either fell short of customer need or performance levels. A major ingredient of this approach was
the cost to meet the need became excessive. In addition, the involving people in the planning of the work that affects them.
hotels accumulated huge chronic costs as a result of poor
quality.

1
THREE STEPS THE EMPLOYEE
PROMISE
OF SERVICE We Are At The Ritz-Carlton, our
THE RITZ-CARLTON

CREDO
1 Ladies and Gentlemen are the
A warm and sincere greeting.
Use the guest name, if
Ladies and most important resource in our
service commitment to our guests.
The Ritz-Carlton Hotel is a
place where the genuine care
and comfort of our guests is
and when possible
Gentlemen By applying the principles of
trust, honesty, respect, integrity
our highest mission.
We pledge to provide the finest
2 and commitment, we nurture
personal service and facilities
Anticipation and
compliance with guest needs.
Serving and maximize talent to the
benefit of each individual
for our guests who will always
enjoy a warm, relaxed yet

The Ritz-Carlton Hotel Company, L.L.C.


and the company.
refined ambience.
3 Ladies and The Ritz-Carlton fosters a work
environment where diversity is
The Ritz-Carlton experience
Fond farewell. Give them enlivens the senses, instills
a warm good-bye and use their valued, quality of life is enhanced,
Gentlemen well-being, and fulfills even

1999 Application Summary


names, if and when possible. individual aspirations are fulfilled,
the unexpressed wishes
and The Ritz-Carlton mystique
and needs of our guests.
is strengthened.

2000, The Ritz-Carlton Hotel Company, L.L.C. All Rights Reserved


2

The Ritz-Carlton Basics 7. To create pride and joy in the work- 13. Never lose a guest. Instant guest Do not screen calls. Eliminate call
place, all employees have the right to pacif ication is the responsibility of transfers whenever possible. Adhere
1. The Credo is the principal belief of our be involved in the planning of the each employee. Whoever receives a to voice mail standards.
Company. It must be known, owned work that affects them. complaint will own it, resolve it to 18.Take pride in and care of your per-
and energized by all. 8. Each employee will continuously iden- the guests satisfaction and record it. s o n a l a p p e a r a n c e . E v e r yo n e i s
2. Our Motto is: We are Ladies and tify defects (M.R. B.I.V.) throughout 14. Smile We are on stage. Always responsible for conveying a profes-
Gentlemen serving Ladies and Gentle- the Hotel. maintain positive eye contact. Use sional image by adhering to Ritz-
men. As service professionals, we 9. It is the responsibility of each employ- the proper vocabulary with our Carlton clothing and grooming
treat our guests and each other with re- ee to create a work environment of guests and each other. (Use words standards.
spect and dignity. teamwork and lateral service so that like Good Morning, Certainly, 19.Think safety first. Each employee is
3. The Three Steps of Service are the the needs of our guests and each other Ill be happy to and My pleasure.) responsible for creating a safe, secure
foundation of Ritz-Carlton hospitality. are met. 15. Be an ambassador of your Hotel in and accident free environment for
These steps must be used in every 10. Each employee is empowered. For a n d o u t s i d e o f t h e wo r k p l a c e . all guests and each other. Be aware of
interaction to ensure satisfaction, example, when a guest has a problem Always speak positively. Commu- all fire and safety emergency proce-
retention and loyalty. or needs something special, you nicate any concerns to the appropriate dures and report any security risks
4. The Employee Promise is the basis for should break away from your regular person. immediately.
our Ritz-Carlton work environment. It duties to address and resolve the issue. 16. Escort guests rather than pointing 20.P r o t e c t i n g t h e a s s e t s o f a R i t z -
will be honored by all employees. 11. Uncompromising levels of cleanli- out directions to another area of the Carlton hotel is the responsibility of
5. All employees will successfully com- ness are the responsibility of every Hotel. every employee. Conserve energy,
plete annual training certification for employee. 17. Use Ritz-Carlton telephone eti- properly maintain our Hotels and
their position. 12. To provide the finest personal service quette. Answer within three rings protect the environment.
6. Company Objectives are communicat- for our guests, each employee is with a smile. Use the guests name
ed to all employees. It is everyones responsible for identifying and record- when possible. When necessary, ask
responsibility to support them. ing individual guest preferences. the caller May I place you on hold?
2000, The Ritz-Carlton Hotel Company, L.L.C. All Rights Reserved

Figure 1
The Ritz-Carlton Hotel Company, L.L.C.
1999 Application Summary

The Ritz-Carlton Chronology of Performance Excellence

Genesis 1890s

Caesar Ritz defines Standards for a Luxury Hotel

Apprentice Programs, Inspection/Audit by the Master

1900
General Manager Concept

Delegation of Quality to Functional Managers

Managers Plan / Workers Do


1980

1983
Extensive Participation of Horst Schulze
in the Management of Quality
The Credo
Basic Standards for The Ladies and Gentlemen
A Passion for Excellence
1988

1989
MBNQA Audits and Feedback

Business Excellence Roadmap


(Figure 3)

Involving People in the Planning


of the Work that Affects Them
1999

100% Employee Pride & Joy

Zero Customer Difficulties

100% Customer Loyalty

2003
Figure 2

3
The Ritz-Carlton Business Excellence Roadmap
Approach Deployment Results Improvement
MBNQA Plan Do Check Act

1. Leadership A Passion for Excellence Senior Leaders Start-Up new hotels Performance Evaluations Development /
Training Plans
The Seven Pyramid Decisions Distribution of
The Pyramid Leadership Center
Basic Empowerment Process
Daily Reinforcement of Developmental
The Gold Standards Job Assignments

The Ritz-Carlton Hotel Company, L.L.C.


2. Strategic Fact-based Strategic Objectives Divide/Subdivide Objectives Actual versus Planned Act on the
Planning performance compared Differences
Fact-based Key Process Select Process Owners Quarterly by Upper Managers Evaluate / Improve

1999 Application Summary


Identification at the corporate and hotel level Planning Process
Develop Processes
Daily Operations review
Provide Necessary Resources by the workforce
4

3. Customer and Market Research that concentrates 6Ps Concept Daily Hotel Measurement Evaluate / Improve
Market Focus on the quality of the hotel facility SQI Annually
and operations Operation of the CLASS Database RevPAR by
Market Segment
Standard Performance Measurement
Monthly Measurement
Advance Bookings
Customer Satisfaction
RevPAR
P&L

4. Information and Selecting Performance Individual Process Owners select Statistically Trained Continuous
Analysis Measurements for: Performance Measurements for: Employees, Improvement
Upper Managers Upper Managers Consulting Specialists
Daily Operations Daily Operations

Comparative Benchmarking Share/Replicate Best Practice


Performance, On-Going

Figure 3
The Ritz-Carlton Business Excellence Roadmap
Approach Deployment Results Improvement
MBNQA Plan Do Check Act

5. Human Jobs are designed so our Employee Education, Training and Q.S.P. Site Visits by
Resources people: Development Senior
Development and Know what to do Day 21/365 H.R. Leaders
Management Know how well they are
doing Training Certification Review
Can regulate the process Analysis of
or their own personal Performance Appraisal Employee Surveys

The Ritz-Carlton Hotel Company, L.L.C.


conduct Evaluations

Analysis of Employee Surveys

1999 Application Summary


6. Process Manage Key Production and Incorporate changing Customer P.Q.I. Major changes that
Management Support Processes requirements require project
S.Q.I. management
5

The GreenBook
Process Audits Incremental
Process Owners Modify Processes Day-to-Day
for each new hotel Improvements

7. Business Strategic Objectives define Lead People Actual versus Planned Continuously and
Results long-term targets Performance compared quarterly Forever Improve
Manage Processes by Senior Leaders at the corporate
Tactical Processes set and hotel level
annual targets Standard Performance Measures
Daily Operations Review by the
workforce

Figure 3 (continued)
The Ritz-Carlton Hotel Company, L.L.C.
1999 Application Summary

Leadership
Our Senior Leaders continue the strong excellence- as The Gold Standards, Figure 1, page 2. These standards
driven leadership that began in 1983 and resulted in us be- consist of: (1) The Credo (2) The Basics (3) Three Steps of
coming a recipient of the 1992 Malcolm Baldrige National Service (4) Motto and (5) most recently, The Employee
Quality Award. In the years following the award they actual- Promise. These standards have had a long life with only the
ly increased their involvement in both the improvement and Basics changing with business conditions.
operation of our structured approach to business excellence.
A summary of this business excellence roadmap is shown in Collectively, these standards have an incredible em-
Figure 3, page 4. powering effect on The Ritz-Carlton Ladies and Gentlemen
to think and act independently with innovation for both the
Approach Plan benefit of the customer and our organization.

Our Senior Leaders have a passion for excellence, Since The Credo stresses providing the f inest
largely because of: (1) the performance expectations of Horst and anticipating the unfulf illed wishes of our guests,
Schulze (2) our Gold Standards and (3) the Pride and Joy of The Ritz-Carlton Ladies and Gentlemen continually learn
achieving excellence. and innovate.
The Three Steps of Service, combined with our
The seven specific decisions made by our Senior basic empowerment process shown below in Figure 1.2 pro-
Leaders, collectively, to set direction for business excellence motes innovative, quick personal service.
are shown below:
Deployment DO
1. 10 Year Vision
2. 5 Year Mission The specific actions taken by our Senior Leaders to
3. 3 Year Objectives deploy our leadership approach consist of three major
4. 1 Year Tactics processes:
5. Strategy
6. Methods 1. Since 1984, all members of Senior Leadership have per-
7. Foundation sonally ensured that each new hotels goods and services
are characteristic of The Ritz-Carlton on opening day.
The process for providing our Senior Leaders with Since six to seven hotels open each year, our leaders
the necessary data and analysis to make these key decisions spend at least six to seven weeks working with our Ladies
is explained fully in the Strategic Planning section. and Gentlemen (using a combination of hands-on behav-
ior modeling and reinforcement) during the seven day
It is worth mentioning that our Senior Leaders per- countdown to opening. This includes the President and
sonally established our foundation, which is now referred to COO who personally demonstrates the guest/employee

1 The Basic Empowerment Process


Three Steps of Service

Warm Welcome
Employee Employee
Employee
Breaks Away Applies Determine Guest
2 Anticipation and Senses Guest
from Routine Immediate Reaction
Wish or Need
Compliance with Duties Positive Action
Guest Needs
If Satisfied If Dissatisfied
3
Fond Farewell Employee
Document the Guest Memory Escalate the
Returns to
Incident System Complaint
Routine Duties

Figure 1.2

6
The Ritz-Carlton Hotel Company, L.L.C.
1999 Application Summary

interface image and facilitates the first vision statement Results Check
session for each newly formed department. During these
formative sessions which all employees must attend, the Leadership effectiveness is evaluated (1) On key
President and COO personally interacts with every new questions of our semi-annual employee satisfaction results
employee both individually and in a group setting. His (these questions reveal if the respective leader has gained the
in-depth knowledge of hotel operations and enthusi- full support of the Ladies and Gentlemen regarding our
asm for The Gold Standards are an inspiration for all Gold Standards). (2) Through audits on public responsi-
concerned. bility (i.e. Life Safety Systems, Security Systems, Food
Preparation and Alcoholic Beverage Service, Environ-
2. The results of the seven specific decisions from mental Stewardship).
the annual strategic planning process are
arranged in a Pyramid Concept and distrib- Improvement Act
uted throughout the organization. The 2000
Pyramid is shown in Figure 1.3. Gaps in leadership effectiveness are ad-
dressed with development/training plans. For
3. The Gold Standards are reinforced daily widespread deficiencies, the corporate human
in a variety of forums which include: resource function develops/improves courses,
(1) lectures at new employee orientation 10 YEAR VISION processes or facilities. As a result, we have
(2) developmental training (3) daily To be The developed a leadership center at Corporate
line-up meeting (4) administration of Headquarters. In addition, we make ex-
both positive and negative reinforce- Premier Worldwide tensive use of developmental job assign-
ment (5) mission statements dis- Provider of Luxury ments.
played (6) distribution of Credo Travel and Hospitality Prod-
Cards (7) The Credo as first topic ucts and Services
of internal meetings and (8) peer
pressure. 5 YEAR MISSION
Product and Profit
Dominance

OBJECTIVES
T h e V i t a l - Fe w O b j e c t i v e s

TACTICS
Key Production and Suppor t Processes

S T R A T E G Y
C u s t o m e r a n d M a r k e t Fo c u s S t r a t e g y w i t h
Action Plans

M E T H O D
TQM - Application of Quality Sciences
M a l c o l m B a l d r i g e N a t i o n a l Q u a l i t y Aw a r d C r i t e r i a
T h e G r e e n B o o k 2 nd E d i t i o n

F O U N D A T I O N
Va l u e s a n d P h i l o s o p h y T h e G o l d S t a n d a r d s
Credo Motto
Three Steps of Service Basics Employee Promise

Copyright 2000 by THE RITZ-CARLTON HOTEL COMPANY, L.L.C. All Rights Reserved

Figure 1.3

7
The Ritz-Carlton Hotel Company, L.L.C.
1999 Application Summary

Strategic Planning Planning Process

At The Ritz-Carlton, Strategic Development is the 1


process that enables Senior Leaders to make specific deci- Confirm/Modify Vision,
sions that set direction for Business Excellence. Mission, Strategy, Methods,

Macro Environment Analysis


Foundation
Approach Plan

A description of the three major components of our


planning process, including the pre-work known as the Macro 2
Environment Analysis, is show in Figure 2.1. Select RITZ-CARLTON Strategic
Mandates
Macro-Environment Analysis

This extensive analysis is done to understand the


current state (and expected future state) of the Macro En- 3
vironment in which we operate our company. The key re- Develop RITZ-CARLTON Vital-
sult of the analysis is a projection of the future state of Few Objectives and Targets
The Ritz-Carlton relative to competitors and the expectations
of hotel owners in primary performance areas. Subsequently,
gaps are identified. MarchJune
Figure 2.1
Step 1 March - June
Deployment Process
Using the Macro Environment Analy-
sis, Senior Leaders confirm the 10 Year Vision,
1 5
5 Year Mission, Strategy, Methods and Founda-
tion or make changes. Reinforce Pyramid Concept/
Develop Production Plans/Budget
Step 2 March - June Processes
6
Using the Macro Environment Analy- Communicate Pyramid
sis, strategic mandates are identified along with Concept to the
gaps in performance. 2 Ladies and Gentlemen

Step 3 March - June Deploy Support


7
Processes
The strategic mandates and the gaps Execute Plans
identified in the Macro Environment Analysis
are used to create the Vital-Few Objectives for 8
the next three years. The Objectives are de- 3 Daily Line-Up Reinforcement
signed to address the projected gaps identified Develop Preliminary on-going throughout the year
in the Macro Environment Analysis and to main- Plans / Budgets for
tain or enlarge The Ritz-Carlton advantage over L.L.C. and Hotels 9
competitors where these advantages exist. Vital-
Few Objectives are separated into multiple cate- Evaluate/Improve Planning
gories for two purposes: (1) respond to the Process
Strategic Mandates and (2) represent all who are 4
affected by The Ritz-Carlton. Finalize RITZ-CARLTON
Pyramid Plan, Budgets Conduct Monthly Reviews of
The output of this step becomes our for L.L.C. and Hotels Plan at all levels. Collect in-
Pyramid (Figure 1.3, page 7). formation for the next cycle.

JulySeptember OctoberFebruary
Figure 2.2

8
The Ritz-Carlton Hotel Company, L.L.C.
1999 Application Summary

Deployment DO Activities that heave been agreed upon are then tied into our
financial planning and budget process.
The specific actions by Senior Leaders to deploy the
Vital-Few Objectives are shown in Figure 2.2. Steps 5 - 7 October - February

Step 1 July - September Step 5 occurs during our semi-annual General Man-
agers meeting which sets in motion steps 6 and 7.
Key Production processes are identified by three cri-
teria: (1) work that ranks very important to customers (2) Step 8 On-Going Throughout the Year
work that is rising in importance to customers and (3) work
that is poor in comparison to competitors. These processes Everyday, in every work area, on every shift, a brief
must then be developed and deployed. This is done by line-up meeting is held. During these formative sessions, the
process owners at the corporate level. For a discussion of Pyramid Concept is deployed, The Gold Standards are rein-
these processes and how they are developed see Section 6, forced and good ideas are shared.
Process Management.
Step 9 Annually
Step 2 July - September
Each year the Vice-President of Quality is responsi-
Support processes are deployed to the support func- ble for evaluating and improving the Strategic Planning
tions of the organization. These processes indirectly affect Process. Benchmarking other Baldrige recipients is used ex-
our products and enable us to reach our Vital-Few Objectives. tensively for continuous improvement.
These processes are also developed/deployed by corporate
process owners at the corporate office. Results Checks
Steps 3 - 4 July - September Monthly performance reviews of the the Strategic
Plan are conducted by the upper managers at the corporate
To bring out into the open the resources required to and hotel level. The framework of a typical review is shown
reach our Vital-Few Objectives, we involve the Ladies and in Figure 2.3, which focuses on the pre-established perform-
Gentlemen of The Ritz-Carlton. First, we communicate the ance indicators of the Vital-Few Objectives as well as key
measures and targets of our Vital-Few Objectives to lower processes. This information allows us to easily make im-
levels of the organization. The lower levels then identify the provements and benchmarking comparisons which are dis-
deeds, that if done, will collectively meet the objectives. The cussed in Category 4.
lower levels also submit the bill to perform these deeds.
The quarterly performance reviews are
Focus Indicators Whats Process translated into opportunities for improve-
ment and innovation. These decisions are
Reviewed Owner determined by process owners with assis-
Employee Key Survey Questions Actual versus Human tance from the special organization of Direc-
Pride & Joy Turnover Plan / Trends Resource tors of Quality. Widespread understanding
Director and involvement of findings and actions are
Customer Overall Customer Actual versus Operations deployed to lower levels through: (1) the tra-
Loyalty Satisfaction Plan / Foremost Director ditional hierarchy (2) process owners and
Customer Difficulties Competitor, Quality teams and (3) Commitment to Quality
Trends Director newsletters.
Revpar / Advance Bookings Actual versus Marketing
P&L Market / Business Plan / Industry Director Another form of improvement is the evalu-
Performance Trends Finance ation of the Strategic Planning Process. The
Director Vice President of Quality is responsible for
Key Key Production and Actual versus Functional developing, benchmarking and improving
Processes Support Processes Plan / Trends Leaders this process.
Figure 2.3

9
The Ritz-Carlton Hotel Company, L.L.C.
1999 Application Summary

Customer and Market Focus A particularly noteworthy tool that we use is CLASS
(an automated memory system that links returning guests
At The Ritz-Carlton, customer and market focus to their preferences). The practice of remembering regular
concentrates on the information needed for hotel develop- guests creates lasting relationships, which is a major compet-
ment and operation explained in Section 6, Process Manage- itive advantage for us. The types of information stored in the
ment. CLASS database are given in Figure 3.2 .

Approach Plan In addition, we utilize other information technolo-


gy: (1) DFS (2) Product Quality Indicators (PQI) and (3) Ser-
The many needs and sources of this information (i.e. vice Quality Indicators (SQI), explained in the next Section,
market research) are summarized in Figure 3.1. Information and Analysis.

Needs and Sources of Market Research at The Ritz-Carlton


Needs for Market / Brought Readily Available Must be created by
Customer Information to our Attention but Requires Analysis a Special Study
Determination of Market Alliances with Travel
Segments Partners (Airlines, Credit
Card Companies,
Convention Bureaus,
etc.)
Identifying Potential Sales and Marketing function Same as above
Customers ranks potential and current
customers by volume,
geography and profit
Relative Priorities of Automated Memory Analysis of CLASS Focus Groups
Customers System that links returning database Customer Satisfaction
guests to their preferences results
Demand Forecast Use of Information
Technology
DFS
Individual Dissatisfaction of Complaints, Claims, Client
Customers Alerts, Feedback from the
Salesforce, Summarized in
the SQI/PQI
Widespread Customer Pareto analysis of the SQI and Interviews with
Dissatisfaction PQI customers
Competitive Quality Status Criteria, Rating and Awards Ratings from Customers, Star World-Class customer
from Travel Industry Report, Salesforce reports and employee
publications Summary of above analysis satisfaction data
Opportunities for Improving Pareto analysis to identify Summary of above Special psychological
RevPAR through Quality major causes of customer studies to understand:
dissatisfaction 1.What Customers
mean, not what they say
2.How to appeal to the
customer in the
language they most
understand
Figure 3.1

10
The Ritz-Carlton Hotel Company, L.L.C.
1999 Application Summary

Deployment DO to remember returning guests and generate essential prefer-


ence and schedule information to all concerned. In this way,
The specific actions taken by our Sales and Market- the Ladies and Gentlemen of The Ritz-Carlton and our sup-
ing Leaders to deploy our Market Research conclusions con- pliers understand what is new or different about each indi-
sist of four major processes: (1) The 6 Ps Concept (2) Oper- vidual customer or event.
ation of the CLASS database (3) Complaint Resolution
Process and (4) Standard Performance Measurements. Standard Measurements
The Six Ps Concept The major components of our Sales and Marketing
Performance Management System are shown in Figure 3.3.
After we gain a full understanding of our market Since these measures both precede and lag the operation they
segments, customers and their relative priorities, we develop are both forward-looking and reaction based.
and distribute, internally, a 6P Concept. The concept consists
of: (1) Problem or need of the Customer (2) Product (what is
Subject Precede / Lag
it) (3) Promises (what it can do for the customer) (4) Person-
Operations
al Advantage (what can the customer do because of it) (5)
Advance Bookings Precedes up to
Positioning (the benefit of it versus the competition) and (6)
several years
Price/Value (what customers must give up in time or money
Service Quality Indicators (SQI) Lags by One Day
to get it). These concepts lay the groundwork for process de-
measure The Gold Standards
sign.
Revenue Per Available Room Lags by One Day
(RevPAR)
The 6Ps concept typically creates a vision of well-
Customer Satisfaction Lags by 45 Days
being, which results from the purchase of Ritz-Carlton prod-
Determination
ucts genuine care, comfort and prestige. By disseminating
The P&L Statement Lags by 40 Days
this information into the marketplace, we reinforce an aura of
competence. Figure 3.3

Operation of the CLASS Database Results Check

A major challenge faced by The Ritz-Carlton is to re- The effectiveness of our Customer and Market
member each of its 800,000 plus customers. In response, a Focus is evaluated through reviews of our standard perform-
special organization exists in each of our hotels called Guest ance measures daily, monthly and annually.
Recognition. This special function uses the CLASS database
Daily reviews at hotels consist of SQI and RevPAR
by market segment and performance.
Likes/Dislikes
Previous Difficulties Monthly reviews at all levels consist of Advance
Family Interests Books, Customer Satisfaction, RevPAR by Market Segment
Personal Interests and the P&L Statement.
Preferred Credit Cards Knowledge
of Individual Annual reviews at the corporate level are contained
Customers, in our Strategic Planning Pre-Work, Macro Environment
Stored in Analysis.
CLASS
Recency/ Lifetime Database
Frequency of Usage
Improvement Act
Use Amount of The daily and monthly reviews identify performance
By Hotel Purchase gaps to be corrected. The extensive analysis of the Macro
All Hotels Environment Analysis drives confirmation or changes in mar-
keting strategy, objectives and plans.
Figure 3.2

11
The Ritz-Carlton Hotel Company, L.L.C.
1999 Application Summary

Information and Analysis The PQI are our Product Quality Indicators, which
consist of the 10 most serious defects that can occur in the
Approach Plan development phase of a new Ritz-Carlton Hotel, listed in Fig-
ure 4.4.
Two basic types of measurements are used at The
Ritz-Carlton: (1) organizational measurements for upper
PQI Defects
managers at both the corporate and hotel levels and (2) oper- 1. Sub-Standard Management Contract
ational (i.e. process) measurements for planning, assessing 2. Missing / Wrong Concepts
and improving daily operations. A further distinction in our 3. Late Feasibility Study
measurement is whether it provides information before, dur- 4. Wrong / Late Schematic Design
ing or after operations (Figure 4.14.3). 5. Detailed Design Changes
6. High-Risk Facility Suppliers
Before Operations Measures 7. Late Construction Days
8. Missing / Inadequate Key Production and
Subject Unit of Measure Use
Support Processes
Macro- Summaries of Annual Input for
9. Inadequate Pre-Sales Results
Environment Performance, Senior Leaders to
10.Inadequate Caring Mindset of Employees
Analysis Money, Ratios, reset organizational
Indexes and operational Figure 4.4
measures Since our customer requirements extend beyond the
New Hotel Defect Points Measures for functional to the sensory (which are difficult to measure), we
Development (i.e. PQI) Senior Leaders to rely on The Gold Standards to measure quality during opera-
plan, assess and tions. Most of these measures are used by line level employ-
improve each new ees. We can do this effectively since the workforce is select-
hotel development ed, trained, certified, reinforced and rewarded through our
Daily Variable Production/Hours Plan daily Gold Standards, This qualifies them to design the appropri-
Demand worked ratio operations and ate sensory measurements that allow them to assess their
pricing work and take appropriate actions.
Figure 4.1
The SQI are our Service Quality Indicators, which
During Operations Measures consist of the 10 most serious defects that can occur during
the regular operation of a Ritz-Carlton hotel. The serious-
Subject Unit of Measure Use ness of each defect is weighted by a point value listed in Fig-
The Gold Taste, Sight, Operational ure 4.5.
Standards Smell, Sound, measures for the
Touch individual SQI Defects Points
Employee to Plan, 1. Missing Guest Preferences 10
Assess and 2. Unresolved Difficulties 50
Improve their Work 3. Inadequate Guestroom Housekeeping 1
Figure 4.2 4. Abandoned Reservation Calls 5
5. Guestroom Changes 5
After Operations Measures 6. Inoperable Guestroom Equipment 5
Subject Unit of Measure Use 7. Unready Guestroom 10
Vital-Few Organizational Improve 8. Inappropriate Hotel Appearance 5
Objectives Performance Organizational 9. Meeting Event Difficulties 5
Indicators, Money, Performance 10. Inadequate Food/Beverage 1
15 Scale, 11. Missing/Damaged Guest Property / 50
Percentages Accidents
Key Production Weighted Defect Improve Daily 12. Invoice Adjustment 3
and Support Points (SQI) Operations Figure 4.5
Processes Production/Hours
The total number of occurrences is multiplied by the
worked ratio
weight, totaled and divided by the number of working days
Revenue per Improve Pricing
applicable to obtain an average daily point value. The aver-
Available Room Policies
age daily point value is disseminated to the workforce daily.
Figure 4.3

12
The Ritz-Carlton Hotel Company, L.L.C.
1999 Application Summary

Comparative Benchmarking process owners to each metric associated with key produc-
tion and support processes.
There are three types of comparative data at The
Ritz-Carlton: (1) comparisons to industry and our foremost Since these process owners are heavily involved in
competitor (2) benchmarks outside our industry and (3) designing the architecture of the data and information that
benchmarks inside our company. Since we began formal they review, rarely do they see a fact or figure presented in a
benchmarking in the 1980s, we have found this highly useful way they dont understand.
as it has pushed us over the years to even higher target levels
of performance and roadmaps to get there. Figure 4.6 details Results Check
the sources of this data and the types of information that are
analyzed. Since we place such a strong emphasis on fact-based
decision making, reliability of the data is critical. We rely on
Deployment DO our highly trained Ladies and Gentlemen (including statisti-
cally trained at all levels) to insure data and information reli-
The specific actions taken by Senior Leaders to de- ability. At the corporate level, we assign individual process
ploy the information and analysis approach is based on the owners to assure data can withstand scrutiny and provide
concept of individual process owners. background information. We also retain third-party special-
ists to provide independent reviews of information analysis
Individual Process Owners and processes.

Our Senior Leaders and Hotel Guidance Teams have Improvement Act
the high level organizational performance data they need be-
cause we assign individual owners to each metric associated Whenever our process owners and consulting spe-
with the Vital-Few Objectives. In addition, our Vice Presi- cialists indicate a change of plan is needed, the plans are
dent of Quality keeps our performance measurements current rewritten, rebudgeted and reapproved. Our Ladies and Gen-
with business needs. tlemen, on a daily basis, identify and implement improve-
ments in performance measurement as expected in our cul-
Our Ladies and Gentlemen have the operational per- ture and facilitated through the training and performance
formance data they need daily because we assign individual management programs outlined in Category 5.

Sources of Comparative Data


Internal External
Source Information Source Information
RCHC Each Hotels measurements in the areas RCHC Ritz-Carlton Marketing and Finance
Information, of employee satisfaction, customer Information, functions compare us against our
Analysis System satisfaction, RevPAR and operational Analysis System competitors in the area of market and
performance are compared business performance
Process Operations, Human Resources, Baldrige Award Annually, the VP of Quality studies
Champions Marketing and Finance leaders drive Winners comparative data and best practices
best practices and processes both up and
down the organization
Regional VP These periodic meetings focus on review Kaznova World-class benchmarks
Meeting of performance to plan Consultants
New Hotel When Ritz-Carlton managers are Travel Industry Travel Publications, AAA, Mobil Criteria
Start-Up assigned as trainers in a new hotel, they Criteria and to identify industry trends and
learn and share best practices Publications performance
Best Practice Any new idea implemented is shared Mayflower The VP of Human Resources compares us
Sharing company-wide via E-mail. Results and Group to Americas most-admired companies
Improvements are communicated in the (i.e. Fortune 500 and Baldrige winners) in
daily Commitment to Quality newsletter the area of Employee Satisfaction
Figure 4.6

13
The Ritz-Carlton Hotel Company, L.L.C.
1999 Application Summary

Human Resource Focus Human Resource Approach


Skilled and Empowered Work Force
Our human resource approach is summarized in Fig- Operating with Pride and Joy
ure 5.1, which is the well established model that underpins


and aligns our various human resource philosophies and pro-
grams. Ritz-Carlton Work Environment

Approach Plan Ritz-Carlton Human Resources


Fundamentals
Our Senior Leaders decided to increase both the
meaning and satisfaction our people derive from their work. Quality Selection Process
This approach consists of three basic components: (1) our Orientation
Ladies and Gentlemen know what they are supposed to do Training Certification
(2) they know how well they are doing and (3) they have the Line-up and daily training
authority to make changes in the process under their authori- Communication
ty or their own personal conduct. Personal and professional development
Work/life issue management
Know What They are Supposed To Do Job Enlargement
Career progression
At Ritz-Carlton our Ladies and Gentlemen know Performance measurement
what they are supposed to: (1) learn and use The Gold Stan- Legal compliance
dards (2) master the procedures of their job (i.e. Training Cer- Employee Rights
tification) and (3) generate ideas to improve products, servic- Issue Resolution Process
es and processes. Reward and Recognition

Know How Well They Are Doing Figure 5.1

We keep our Ladies and Gentlemen informed on Our education and training is designed to keep indi-
how well they are doing in many forms. They receive coach- viduals up to date with business needs. The Corporate Di-
ing from managers and peers on individual tasks throughout rector of Training and Development and the Hotel Directors
the day. of Training and Development have the responsibility to make
sure that training stays current with business needs. To do
Daily, they receive information from the SQI report. this, they work with Human Resource and Quality Execu-
Finally, they receive semi-annual performance appraisals on tives who input organization and job performance training re-
their general performance. quirements or revise existing ones. The flow of this process
is shown in Figure 5.2. Key developmental training needs
The Authority to Make Changes are addressed through a core of courses that all employees re-
ceive.
The ability of our Ladies and Gentlemen to regulate
how work gets done is assured through Basic Standards set All employees (regardless of their level in the com-
out in The Credo Card, People have the right to be involved pany) receive the same mandatory two day orientation
in the planning of the work that affects them. process, which includes classroom type training on The Gold
Standards and The GreenBook (page 16).
Deployment DO
As shown in Figure 5.2, we use input from employ-
The specific actions taken to deploy our approach ees and their supervisors in determining educational needs
range across a broad spectrum, but most significant activities primarily via a review and analysis of our performance ap-
consist of: (1) The Quality Selection process and (2) Employ- praisal documents. The Hotel Director of Training and De-
ee Education, Training and Development. velopment and the Quality Trainers also receive and
consider direct feedback from Ritz-Carlton personnel.
Our President and COO started as a waiters appren- When training is designed, it is piloted and approved in a
tice in Europe, and many of our executives started as front fashion similar to the new product and service development
line personnel in Ritz-Carlton Hotels and were promoted as process described in Category 3. Participants in the pilot pro-
they rotated jobs. Therefore, training receives the highest at- vide direct, candid feedback to the designers and instructors.
tention in our company.

14
The Ritz-Carlton Hotel Company, L.L.C.
1999 Application Summary

The Ritz-Carlton Design of Courses


Evaluate Student Confirm/Modify existing

Corp Director of Training and Development


Departmental Trainer
Reaction/Needs processes/Facilities

Evaluate Performance Develop/Improve


Managers/Training Director
appraisals/training results Courses/Processes/Facilities

Determine Organizational
Vice President, Quality Performance Excellence
Co-
Requirements
developed
Project with supplier
Determine Organizational Outsource
Vice President, Team of new
Developmental Training equipment/
Human Resources
Requirements Technology
Figure 5.2
Although job induction training is classroom deliv- themes of each job. The graph also contains comparative
ered by the Director of Training and Development and the data which consists of industry and Ritz-Carlton norms.
General Manager, most training delivery is on-the-job. This
consists of: (1) daily line-up (2) self-study documents (3) de- Day 21
velopmental assignments and (4) training certification. Most
training is evaluated through examinations, while other meth- 21 days after orientation, each orientation class re-
ods include audits, performance reviews and appraisals. unites for a day of evaluation and debriefing. A similar ses-
sion occurs on or near day 365.
Approximately 80% of the training received by
The Ritz-Carlton Ladies and Gentlemen is from in-house Training Certification
sources which allows us to have direct control over the
method of training delivery and evaluation. Much like the Craft Concept, employees are subject
to examination/audit at the end of their initial training period.
To gain real-life developmental experiences, we Likewise, they must demonstrate mastery of the procedures
make extensive use of developmental assignments in which of their job.
people choose to expand their knowledge and experience
through requesting new assignments within and across hotels Evaluation of Performance Appraisals
and functions. Since most of our executives came up the
ranks this way, this is a widely accepted and expected process Annual Performance Appraisal information is eval-
for people who would like to be promoted. uated to identify weaknesses in our approach to training and
development.
Results Check
Analysis of Employee Surveys
Results of the selection, training and development
of our Ladies and Gentlemen are checked at key stages of We determine employee well-being, satisfaction and
progression: (1) Quality Selection Process Measurement (2) motivation from formal surveys designed, analyzed and com-
Day 21/365 (3) Training Certification Review (4) Perfor- pared to world-class companies, via a consulting specialist.
mance Appraisal Review Evaluation and (5) analysis of em- Our results are compared to outside world-class service com-
ployee surveys. panies and The Mayflower Group. Impartiality of survey
analysis and recommendations is assured by independent and
Quality Selection Process - QSP objective design analysis and presentations.

We measure the desirable, spontaneous behavior Improve Act


(i.e. Talent+) of potential employees at all levels and cate-
gories through our QSP. Certified interviewers measure the Improvement activities in Human Resources rely ex-
responses to a structured interview. These measurements are tensively on internal audits, site visits by Senior Human Re-
then arranged in a performance graph of the necessary sources Leaders and analysis of employee survey data.

15
The Ritz-Carlton Hotel Company, L.L.C.
1999 Application Summary

Process Management
We are a process-focused organization with many Ladies and Gentlemen. The Nine-Step Quality Improvement
standard procedures. Our Senior Leaders realize that Process is featured in this handbook to guide the design, con-
processes must be thoroughly planned so we can give our trol and improvement of all processes. This process is em-
Ladies and Gentlemen the means to meet standards, create a phasized during new employee education, training and devel-
market and thereby generate our companys income efficient- opment and is ingrained in our process-oriented culture.
ly.
Develop/Deploy Processes for New Hotels
Approach Plan
The design of key production and support processes
Through our market research which concentrates on is modified for each new hotel based on: (1) market research
the quality of hotel development and operations, we have (2) facility design and (3) operating conditions. These
identified key production processes. In addition, we have process changes address quality, learnings from past hotels,
conducted formal discussions between: (1) support and oper- cost control and general effectiveness and efficiency. These
ations employees and (2) internal and external customers to processes are transferred to our ladies and Gentlemen during
identify administrative and support processes which impact our pre-opening countdown process.
our hotel products and our companys mission.
Results Check
Deployment DO
Although we must control many sensory character-
The specific actions taken to deploy our annual istics of the products we produce, we try to put it in num-
process management approach flow from our strategic plan- bers in our system of process measurements.
ning process to every job level and category in our company.
Improvement Act
Incorporate Changing Customer/
Market Requirements Standing cross-functional teams at all levels use
After Operations Measures and customer survey inputs to
During the annual strategic planning process, we in- improve key processes. These improvements can come in
corporate changing customer/market requirements into pro- two ways: (1) major changes that require funding, resources
duction and support processes. This assists in prioritizing and project management and/or (2) incremental day-to-day
our processes. improvements. While both types follow the Nine-Step Q.I.P.,
meeting event by meeting event improvement involves job
Assigning Process Owners shape theories found in the GreenBook.

Each production and support process is assigned an Improvements are institutionalized in two main
executive owner at the corporate office and a working ways: (1) the traditional hierarchy and (2) executive process
owner at the hotel level. These owners are responsible for owners.
the development/improvement of these processes. They have
authority in defining the measurements and determining the In either case, we use our process to overcome cul-
resources needed to manage these processes. They involve tural resistance to change. This process consists of four fac-
all concerned in determining what must be done differently tors: (1) stressing the importance of the change (2) express-
to reach our objectives. ing confidence the change can be made (3) providing a rea-
son why people should make the change as a group and (4)
The GreenBook allowing time for people to find an accommodation to the
change.
We use the logic, processes and tools of managing
for quality, set out in our GreenBook, a handbook for our

16
The Ritz-Carlton Hotel Company, L.L.C.
1999 Application Summary

Business Results
7.1 Customer Focused Results Individual Customer Satisfaction
The following results, items reviewed in Category 1,
emanate from our strategy and customer focus Categories 2 Meeting Planner Satisfaction
and 3. They are included in our measurement and analysis

% Extremely Satisfied
90%
Category 4, and executed through our human resource and
80%
processes management Categories 5 and 6. All of our Cus-
tomer and Employee Satisfaction data comparisons are: (1) 70%
statistically significantly different from the competition at 60%
the 95% confidence level (2) administered and produced by 50%
well-known objective and independent outside third-party re-
search sources and (3) analyzed against world-class/world- 40%
best and Baldrige-winning companies by our performance 30%
excellence supplier/partner and benchmark source. 1997 1997 1998 1998
Ritz-Carlton Foremost Ritz-Carlton Foremost
Our Meeting Planner satisfaction is measured both Competitor Competitor
internally and externally. Externally, we use J. D. Power and
Associates to measure our customer satisfaction versus our Event Post-Event Overall Experience
foremost competitor. Figure 7.1a shows our level and trend
superiority. These percentages represent extreme satisfac- Source: J.D. Power and Associates Figure 7.1a
tion. This Meeting Planner Study was not conducted in 1999;
hence, there is no new data available.
Our Individual Guest sat-
Frequent Leisure Traveler 1999 Key Comparisons isfaction is also measured both
Top 2 Boxes Top 2 Boxes Top Box Top Box internally and externally. Ex-
RCHC Foremost RCHC Foremost ternally, we use Nationwide
Competitor Competitor Surveys to measure our cus-
tomer satisfaction versus our
Overall Satisfaction 91% 80% 70% 52%
foremost competitor for fre-
Cleanliness of Room & Facilities 90% 77% 64% 48% quent business and frequent
Adequate Security 83% 64% 57% 38% leisure travelers. Figure 7.1b
Value for the Money 42% 32% 19% 10% shows our level superiority in
Staff Knowledgeable & Helpful 67% 54% 41% 28% 1999.

Frequent Business Traveler 1999 Key Comparisons In the most comprehen-


Top 2 Boxes Top 2 Boxes Top Box Top Box sive, objective and valid study
RCHC Foremost RCHC Foremost to date, the Cornell School of
Competitor Competitor Hotel Administration and
Overall Satisfaction 91% 84% 68% 57%
McGill University undertook a
survey of 13,400 managers in
Quality of Facilities from Location
85% 68% 62% 39% the lodging industry to identi-
to Location
fy Best Practices in the lodg-
Quality of Services 88% 67% 61% 37% ing industry. The study named
Has Alert & Helpful The Ritz-Carlton as the overall
83% 62% 52% 34%
Staff/Responsive to my Needs Best Practice Champion.
Provides Excellent Business Class
70% 49% 43% 23%
Floors
Has Very Clean & Well Maintained
96% 93% 74% 60%
Facilities
Provides Full Range of Busines
77% 58% 48% 26%
Services
Source: Nationwide Surveys Figure 7.1b

17
The Ritz-Carlton Hotel Company, L.L.C.
1999 Application Summary

7.2 Financial and Market Results


Our measures of financial performance fall into a number of different categories. EBITDA (Earnings Before In-
come Taxes, Depreciation and Amortization) and pre-tax ROI (Return on Investment) are shown in Figure 7.2a.

Pre-Tax Return on Investment Summary


Actual Projected
(1)
1995 1996 1997 1998 1999 2000 2001 2002
Total Fees ($M) $21,036 $36,786 $39,930 $46,831 $58,478 $72,847 $85,350 $97,763
(2)
Sales Proceeds ($M) $870,946
EBITDA ($M) $11,951 $20,882 $21,284 $29,668 $39,103 $53,195 $63,937 $945,767
Pre-Tax Return on Investment 5.3% 9.3% 9.5% 9.8% 12.9% 17.6% 21.2% 313.7%
Pre-Tax IRR = 24.4%
(1) (2)
Reflects actual results from April December, 1995 Assumes a sale at year 8 at a 12X multiple
Source: RCHC Internal Data Figure 7.2a

In Figure 7.2b we show administrative costs as a percentage of our total fees, profit and revenue.

Administrative Costs Summary


Actual Projections
1995 1996 1997* 1998 1999 2000 2001 2002
Total Fees ($M) $21,036 $36,786 $39,930 $46,831 $58,478 $72,847 $85,350 $97,763
Administrative Costs ($M) $ 9,084 $15,903 $18,646 $17,163 $19,375 $19,651 $21.413 $22,943
Administrative Costs as a % of
43.2% 43.2% 46.7% 36.4% 33.1% 27.0% 25.1% 23.5%
Total Fees (Less=Good)
* Four hotels by individual owner that were out of compliance with RCHC standards were negotiated to another hotel
management company and the costs associated with that transition increased our administrative costs in 1997. Otherwise,
our administrative cost trends are excellent (down).
Source: RCHC Internal Data Figure 7.2b

Figure 7.2c shows the percentage prof it for The Ritz-Carlton versus our main competitor and all other luxury
hotels from 19961998.

% Gross Profit vs. Main Competitor


37%
36%
% Gross Profit

35%
34%
33%
32%
31%
30%
1996 1997 1998 1999
Ritz-Carlton Foremost Competitor Luxury Hotels

Source: PKF Consulting (Note: No 1999 data available other than RCHC internal) Figure 7.2c

18
The Ritz-Carlton Hotel Company, L.L.C.
1999 Application Summary

7.3 Human Resource Results


Our employee well-being and satisfaction is also Our goal of Pride and Joy in the workplace and full
measured through our Employee Satisfaction Survey. Figure participation of as many employees as possible is enhanced
7.3a shows key drivers of overall employee morale and their through employee involvement in planning. We know of no
respective responses for 1998 (Excellent, Very Good, Good). benchmarks in this area as most companies only track execu-
tives and do not include employees in the planning of their
work (Figure 7.3c).
1998 Employee Satisfaction Data
(% Positive)
Ritz-Carlton Service Population Involved in Planning
Issue 1998 Company
Norms 7000 50%
Decision Making 6000 45%
83% 55%
Authority 40%
5000

# of People

% Increase
Teamwork 83% 70%
35%
Department 4000
80% 40% 30%
Coordination of Efforts
3000
Communication Index 87% 57% 25%
Empowerment 85% 67% 2000 20%
Understand Department 1000
86% 86% 15%
Goals
Management 0 10%
Constructive Feedback 73% 45% 1996 1997 1998
Verbal Recognition for
69% 41% # of People % Increase
Job Well Done
Monetary Recognition Source: Kaznova Consultants Figure 7.3c
50% 28%
for Job Well Done
Source: J.D. Power / Kaznova Consultants Figure 7.3a

Figure 7.3b shows our ever-decreasing turnover rate 7.4 Supplier and Partner Results
from a high of 77% in 1989. Positive trends are a result of
increasingly improved selection and training processes as We ensure that performance requirements of our
well as drivers of employee satisfaction. suppliers are met through a robust Supplier Compliance and
Quality Survey Form that measures key aspects of supplier
quality.
% of Turnover
90% Purchasing personnel at each hotel fill out the sur-
vey every six months and rate the issues (i.e. fit for use, ac-
80% curacy, on-time, defect-free, cycle time, service, etc.)
70%
% Turnover

Our goals are to: (1) Increase the number and per-
60% centage of our hotels who certify our Key Suppliers (through
50% our robust process) semi-annually and (2) Increase the num-
ber and percentage of key suppliers who achieve an 80% or
40% better overall rating on all attributes of our supplier certifica-
tion survey (percentage meets quality requirements to a
30%
great extent).
20%
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999

Figures 7.4a and 7.4b show our positive movement


towards these goals over in the last three years. We cannot
Ritz-Carlton Industry Average find other hotels, let alone other service companies, whose
measures are as robust or similar to ours, and hence have no
Source: RCHC / Kaznova Consutants Figure 7.3b
competitive comparison data.

19
The Ritz-Carlton Hotel Company, L.L.C.
1999 Application Summary

% of Hotels Certifying Key Suppliers Figure 7.5a shows our trend and level superiority in
operating maintenance. Our C.A.R.E. program of systematic
Supplier 1995 1996 1997 1998 1999
preventive maintenance (four times a year) has kept our prop-
A 43% 52% 52% 95% 100%
erty and equipment at world-class levels at reduced costs.
B 12% 82% 100%
This is in alignment with our goal of pursuing a defect-free
C 8% 21% 47% 95% 87%
environment.
D 34% 51% 56% 95% 96%
E 13% 39% 43% 100% 100% Figure 7.5b shows our trend improvement in rev-
F 39% 47% 52% 95% 100% enue per hours worked.
G 39% 52% 56% 100% 100%
H 21% 43% 47% 95% 83%
I 43% 52% 56% 100% 100% Total Revenue Per Hours Worked
J 43% 52% 56% 100% 96% $50
K 43% 52% 56% 95% 87%
L 43% 52% 56% 95% 100%
M 43% 47% 56% 100% 96% $45

$ Revenue
TOTAL 34% 47% 50% 96% 96%
Source: RCHC data Figure 7.4a $40

Number of Key Suppliers Achieving 80% $35


or Better on Supplier Certification
14
$30
# of Suppliers >80%

12 1996 1997 1998 1999


10
Source: RCHC Data Figure 7.5b
8
6
With unemployment at a low, and significant com-
4 petition for skilled hires, we embarked on a major project to
2 improve the cycle time from when a potential new-hire walks
in the door and a job offer is tendered. Using our scientific
0
quality approaches, Figure 7.5c shows our 21X improvement
1995 1996 1997 1998 1999 in that reduction. We know of no other company in any in-
Source: RCHC Data Figure 7.4b dustry as of May 1999 that does the hiring process (espe-
cially with our selectivity and scientific selection tool) that
is quicker. Hence, we have no competitive comparisons.
7.5 Organizational Effectiveness Results
Time to Process New-Hire
% Repair and Maintenance Cost to from Walk-In to Job Offer
25
Total Revenue vs. Luxury Segment
5.5% 20
# of Days

5.0%
% R&M Cost

15
4.5%
10
4.0%
5
3.5%
3.0% 0
1996 1997 1998 1999 1996 1997 1998 1999
Ritz-Carlton Luxury Hotels Source: RCHC Data Figure 7.5c
Source: PKF Consulting
(Note: No 1999 data available) Figure 7.5a

20
The Ritz-Carlton Hotel Company, L.L.C.
1999 Application Summary

Notes

21
The Ritz-Carlton Hotel Company, L.L.C.
1999 Application Summary

Notes

22