The strategic management of Ritz-Carlton

Module title: Strategic management in international hospitality and tourism

Name: Naemi Wang

Student number: 27034364

Date of submission: 13/01/2021

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 Contents

Contents..................................................................................................................................... 2

1. Introduction ..........................................................................................................................3

2. Overview of Ritz-Carlton .................................................................................................... 3

3. Mission and Vision Statement ...........................................................................................7

4. Corporate Social Responsibility ........................................................................................ 7

5. Stakeholder Analysis ...........................................................................................................7

6. Strategic Analysis ................................................................................................................ 8

6.1. Internal Analysis ......................................................................................................... 3

6.2. External Environment Analysis ..................................................................................3

6.3. Industry Environment ................................................................................................. 3

6.4. SWOT Analysis ..........................................................................................................3

7. Business Strategy ................................................................................................................. 8

11. References ...........................................................................................................................8

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1. Introduction

Strategic management refers to the identification of development direction of an organization and the plans

made to achieve that goal. It can be also described as a dynamic management process of looking for market

opportunities which to continuously develop competitive advantage (Lynch, 2018). Strategic management

sets the objectives of the organization according to the external environment and internal conditions within

the organization.

The development of effective strategic management is also crucial for hotel industry. A good strategic

management is conducive to the hotel staff to recognize the mission clearly, connect the strategic objectives

and the current work closely in order to promote staff morale. Strategic management can also help to make

correct adjustment and decision-making for hotel development. It is an important tool to evaluate the effect

of operation (Cathy A. 2010). Therefore, this report aim to provide a critical analysis of the strategy in Ritz-

Carlton, and also give the recommendations to remain the competitive advantages over the next 5 years.

2. Overview of Ritz-Carlton

The Ritz-Carlton company is a global luxury lifestyle brand of Marriott International, which operates five-

star luxury hotels and resorts worldwide while the headquartered located in Maryland, USA. By the end of

2019, Ritz-Carlton already has 106 properties with 28,300 rooms in more than 30 countries worldwide (see

Figure 1) include 40,000 employees in total. In addition, Ritz-Carlton expects to expand its global influence

through 51 hotel projects with 10,216 rooms in the nest few years, with the APAC region as the major market

that 25 projects are in the development line, North America rank the second which get 14 properties, 7 in

Africa, 2 hotels in both South America and Europe and 1 in Middle East (Juliana, 2020). Victor Clavell, the

APAC region vice-president of Ritz-Carlton said that the luxury market in mainland China will be their

major target, adding at least 5 properties in the coming year.

Caribbean &
North Middle East
Europe Asia Pacific Latin Total
America & Africa
America

Properties 39 13 13 33 8 106

Room 11,410 3,079 3,523 8,207 2,081 28,300

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The brand extension of Ritz-Carlton which include spa development, world-class golf that offered at 15 Ritz-

Carlton locations, The Ritz-Carlton destination club which provide luxury villas and resort amenities tailored

to each member’s needs and expectations, and the Ritz-Carlton Residences which offer apartments and

family house for the guests, there are 50 properties in worldwide by 2019 (ritzcarlton.com). Also, Ritz-

Carlton entered the cruise market in 2018, the inaugural cruise will be on April 2021 (Johanna, 2020).

Ritz Carlton hotels and resorts are synonymous with luxury, elegance and charm. They offer the best

facilities and personal services for the guests who will enjoy a memorable experience. Key competitors

include Hilton, Hyatt Hotels, IHG, Four Seasons and Starwood Hotels and Resorts (Craft, 2020).

3. Mission and Vision statement

Mission and Vision statement play the important role in hospitality industry. The mission statement provides

the hotel a clear purpose, while the vision statement ensures that every decisions made are consistent with

the goals (Chathoth et al, 2014). They are used to give a clear direction for the stakeholders and play an

incentive role in order to improve organizational performance while highlight the value of organization and

attract customers.

The mission and vision statement known as ‘credo’ in Ritz-Carlton which contain three statements ‘The Ritz-

Carlton is a place where the genuine care and comfort of our guest is our highest mission. We pledge to

provide the finest personal service and facilities for our guests who will always enjoy a warm, relaxed, yet

refined ambiance. The Ritz-Carlton experience enlivens the senses, instills well-being, and fulfills even the

unexpressed wishes and needs of our guests’ (Ritz-carlton, 2020). This mission statement demonstrates the

determination of Ritz-Carlton toward providing the best experience for their guests, and shows their

customers-focused strategies. Ritz-Carlton aims to delivery distinguished service and enhances the unique

experience of each guest. From the word ‘finest’ and ‘refined’ which tell the standard of service and products

they want to provide, and these luxury services and products define the business that the Ritz-Carlton is and

the major clients that they serve. ‘Fulfills even the unexpressed wishes and needs of our guests’ ensure that

the company is in the first line of understanding customer expectations.

4. Corporate Social Responsibility

CSR is a double win strategy, which benefits both the company and the society (Jennifer, 2008). CSR

programs may improve business reputation, attract customers, drive recruitment, and grow the business

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(Kuokkanen et al, 2019). Ritz Carlton group has the concept of pursuing excellent service, and this concept

also reflected in their social responsibility. They launched a program called ‘Community Footprint’, and

created the first mission statement in 1983 committed that “The Ritz-Carlton Hotels will be known as

positive, supportive members of their community and will be sensitive to the environment.” (ritzcarlton,

2020). And these principles provide good guidance for them. By mobilizing their resources and skilled

volunteers, they strive to play a role in child welfare, hunger and poverty relief, and environmental

responsibility. In addition, the Ritz-Carlton was the first founding partner of IMPACT 2030 which is an

initiative created to unite corporate through volunteering action to advance the achievement of the

Sustainable Development Goals (Newsdesk, 2014).

5. Stakeholder Analysis

The purpose of stakeholder management is to design a method to manage the numerous groups and

relationships, so as to form a strategic plan (Freeeman, 1984). Stakeholders are particularly important in the

strategic planing process as the development and future of an organization depend on their decisions to a

large extent. Figure 2 shows the stakeholders map of Ritz-Carlton which adapted from Freeman idea (1984).

Figure 2: Ritz-Carlton’s stakeholders

Activist Owners/
Stakeholders Managers
groups

Political
Employees
groups

Ritz-Carlton Financial
Suppliers Community

Trade Government
Associate

Unions Customers
Competitors

(Freeman, 1984)

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 The loyalty of stakeholders is the key to sustainable growth of the company. Although all stakeholders are

essential to the organization, the influence and expectation of the stakeholders are varies in different

situation. To get a better view of this, a stakeholders matrix are made to show the different insights of

stakeholders of Ritz-Carlton (see Figure 3).

Figure 3: Ritz-Carlton’s stakeholder map

Meet their needs: Key player:

Government Owners&Stakeholders
Managers
Customers
Financial Community

Impact of
stakeholders Least important: Keep informed:

Suppliers Competitors
Employees

Interest of stakeholders

6. Strategic Analysis

6.1. Internal Analysis

Every strategy should start with an organization internal scanning. The internal analysis examines the

internal environment of the organization which to evaluate its resources, capabilities in order to determine

the competitive advantage and global position of the organization.

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6.1.1 Resources & core competences

Figure 4: Resources & core competences of Ritz-Carlton

Resources (what RC have) Capabilities (what RC do well)

106 properties with 28,300 rooms and Perfect locations in world business and
development pipeline tourist attractions
Residences Luxurious decoration
Golf Physical Strong brand image
Yacht Customer-focused strategy
Spa Mystique system
Online app

Shareholders Premium pricing strategy

Investors Reward programme: Marriott Bonvoy

Financial

40,000 employees in worldwide Strong customer loyalty

High-profile elite class clients base High level of enterprise training
Service Value High investment on employees
Human

After the resources and core competences are being identified, threshold and distinctive capabilities are given

in order to drive better understanding of the competitive advantage for Ritz-Carlton.

Resources Competences

Employees Perfect location

Properties

Threshold capabilities

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 Resources Competences

Service Value Strong brand image

High-profile elite class clients
base
Distinctive capabilities
Customer-focused strategy
Mystique system
Reward programme: Marriott
Bonvoy
Strong customer loyalty
High level of enterprise training
High investment on employees

6.2. External environment analysis

This section will be analyze the external environment of Ritz-Carlton by using PESTEL module.

This will scan 6 factors which include political, environment, social culture, technology, economical

and legislative which to draw conclusion on what the medium term outlook is for Ritz-Carlton.

Political

Political issue that may have impact on Ritz-Carlton will be the rising of terrorism, there are report

stated that the terrorist attacks around the world increased dramatically to 16200 by 2018

(Terrorism, 2018). There is evidence shows that the terrorists targeted hotels and other tourist

attractions. This will have a huge impact on the international hotel and tourism industry, and lead to

a revenue drop down of Ritz-Carlton, and cause the expensive safety measures in some situation.

The turbulent international relations and political instability will also reduce the the demand for

travel. In addition, some government have adopted travel ban/ trade restrictions under the influence

of global epidemic like Covid-19 which will also affect the overall performance of Ritz Carlton.

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Environment

Environment factors include climate change, global warming could cause the close of some ski

resort which may bring affect for Ritz-Carlton resort while the local weather is also a important

determining factor when people choosing the travel destination. Another potential long-term

environment impacts for Ritz-Carlton is the increased cost of electricity caused by limiting coal-

fired power plants to curb greenhouse gas emissions. Another potential threat to Ritz-Carlton is the

higher travel cost caused by increased fuel price. On the other hand, increasing consumer preference

for sustainable hospitality is also the important factor. Sustainable environmental travel which

emphasizes environmental awareness is affecting the whole tourism market and has also become an

important factor for travelers to choose hotels. Ritz-Carlton made use of LED energy-saving lights

in more than 90 properties worldwide and hold the ‘Earth One Hour’ activity to enhance

environmental awareness and experience .

Social culture

Social factors make the future bright for Ritz-Carlton, the data from Mashable showed that people

planned to travel internationally increased by 19% in 2019. Growth GDP in China lead increasing

numbers of Chinese travelers. Population aging in the United States and Europe may increase the

demand for certain kinds of travel experiences. Howevr, with the rise of sharing economy, Airbnb

will be a choice for more tourists, especially the millennials are more likely to choose the affordable

hotel. This is undoubtedly a blow to luxury hotel brand like Ritz-Carlton.

Technology

Technology advance is one of the most important ways to maintain competitiveness in the

competitive market. In nowadays, technology is growing rapidly, the usage of smart phone are

simplifying the hotel experience. And the strong power of social media bring both positive and

negative affect for Ritz-Carlton that a good review from guest may enhance the business image and

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attract new customers. However, it only takes one bad review to destroy the reputation. Also, the

prevalence of e-economy in China urges Ritz-Carlton to integrate into the big environment.

Economical

The increased exchange rate will lead to decrease demand of internationally travel and business

travel. Events such as the collapse of China's stock market and the European debt crisis have greatly

reduced the purchasing power and travel ability of individuals, which has also reduced business

travel and bring a huge impact on luxury hotel brand. In addition, the growing of income inequality

reduce the capacity and expenses on travel.

Legislative

The legislative factor that may affect Ritz-Carlton include ‘Fair Labor Standards Act’ proposed by

Department of Labor (“DOL”) which stated the increasing of minimum wage, and this caused the

higher labour cost for business and lead to a service reduction. Paycheck Protection Program

(“PPP”) loan by ‘CARES Act’ and ‘Consumer Privacy Act’ .

6.3. Industry environment analysis

The purpose of industry environment analysis is to evaluate the level of competitive pressure for the

organization (John,2011). And Porter Five Forces Model was designed by Michael E Porter in 1979

which used to analyze the competition through five factors which are threat of entry, threat of

substitutes, power of buyers, power of suppliers and competitive rivalry.

Threat of entry

The risk of new entrance is very low for Ritz-Carlton as the start of the business require substantial

capital and resource investment. And there is high cost of brand development, Alvarez (2015) stated

that the independent entry does not have enough power to cause a threat as they may face berries

when trying to obtain name recognition. Ritz-Carlton has established high brand reputation and
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loyal customer base. Also, the product differentiation and culture berries will also affect the

decision of new entrants come into the market. To further reduce the entry threat of potential

competitors, Ritz-Carlton introduce innovative products/ service to set strong differentiation basis

and company culture.

Threat of substitutes

The level of threat of substitutes for Ritz-Carlton is moderate. First, the psychological switching

costs of moving from industry to substitute products/ service are low. And there are high availability

of cheaper substitute such as Airbnb. However, Ritz-Carlton own strong brand image in operating

market and established a loyal customer base. One of the most important is that there is no

substitute for the unique experience. In order to reduce the treat for substitutes, Ritz-Carlton should

continue to work on loyalty, and offer a better experience and high value of money which

discourage customers from buying the substitutes.

Power of buyers

The power of Ritz-Carlton’s buyers is high as there are more experienced travelers with good

knowledge and more price sensitive cutovers. They have free to choose substitute offer the same

products/ services but with a cheaper price. And there is a high market saturation which means high

availability of substitutes in the market, plus the low switching cost on psychological.

Power of suppliers

The power of suppliers for Ritz-Carlton is relatively low as they have diversity product and service

line with effective supply chain. And Ritz-Carlton has a low switching cost for supplier and the

ability of low forward integration. Also, due to the particularity of the product, there is shortage

demand of uniqueness products and services, this allow Ritz-Carlton becomes the dominant as the

profit of suppliers is highly rely on the industry.

Competitive Rivalry

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The competitive rivalry for Ritz-Carlton is high as there are amount of providers in the market. And

they still lack of product/ service differentiation which means they have to face strong competition

at the global level. And the exit berries is high as it is not a easy thing for Ritz-Carlton to leave the

market without incurring huge losses.

6.4. SWOT Analysis

Figure 6: SWOT analysis of Ritz-Carlton

Strength Weakness

Strong brand image Relatively expensive price

Upscale service Negative impact from social media

High quality staff High employee turnover rate

Diversity product/ service Innovation needed

Strong pipeline to expand globally

Opportunities Threats

Growing company with more locations coming in the

Over saturation in the Market
future

Promotion of market diversification High competition among the market

Growing business market Home sharing

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 Opportunities Threats

Decline in tourism industry due to terrorist activities,

Growing GDP
global epidemic…

7. Business strategy

Ritz-Carlton aim to offer the best experience to their guest by providing the best facilities and

personal service which allow guest to enjoy their stay in a warm and relaxed ambience. Their

customer-focused strategy allow them to always focus on the details and preferences of the

customers in order to fulfills even unexpressed wishes and needs of the guests. This kind of

legendary service have create unique, memorable and personal experience for the Ritz guests and

allow Ritz-Carlton stand out from the competitors. In addition, their Commit to Quality (CTQ)

strategy ensure the service consistency, and give the opportunity for organization to build strong

relationship and create life-long guests for Ritz-Carlton.

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8. References list

Ansoff, H. (2008). Strategic management (Classic ed.). Palgrave Macmillan.

Bhasin, H. (2019). Marketing mix of Ritz Carlton - Ritz Carlton Marketing mix. Retrieved from https://

www.marketing91.com/marketing-mix-of-ritz-carlton/

Chathoth, O. (2014). Strategic Management for Hospitality and Tourism. In Strategic Management for Hospitality and

Tourism. Taylor & Francis Group.

Enz, C. (2010). Hospitality strategic management: concepts and cases. In Hospitality strategic management (2nd ed).

Wiley.

Evans, N. (2020). Strategic Management for Tourism, Hospitality and Events. In Strategic Management for Tourism,

Hospitality and Events (3rd ed.). Routledge. https://doi.org/10.4324/9780429437601

Foundations of Our Brand | Ritz-Carlton Leadership Center. (2021). Retrieved from https://

ritzcarltonleadershipcenter.com/about-us/about-us-foundations-of-our-brand/

Hahn, J. (2020). Brand overview: Ritz-Carlton lining up more than 50 hotel projects. Retrieved from https://

tophotel.news/brand-overview-ritz-carlton-lining-up-more-than-50-hotel-projects/

Lynch, R. (2018). Strategic management (Eighth edition.). Pearson.

Luxury Hotels & Resorts: The Ritz. (n.d.). Retrieved from https://www.ritzcarlton.com/en/about/factsheet

Nishant. (2020). International Marketing Plan - Hotel Ritz-Carlton. Retrieved from https://desklib.com/document/

international-marketing-plan-hotel-ritz-carlto/

Olsen, Z. (2008). Handbook of hospitality strategic management. In Handbook of hospitality strategic management.

Elsevier Science and Technology Ltd. https://doi.org/10.4324/9780080914343

Reiss, R. (2021). Forbes.com. Retrieved from https://www.forbes.com/2009/10/30/simon-cooper-ritz-leadership-

ceonetwork-hotels.html?sh=95afb0110b12.

Ritz-Carlton targets vital mainland luxury market. (2012). Retrieved from https://www.scmp.com/article/997599/ritz-

carlton-targets-vital-mainland-luxury-market

Ritz-Carlton Practices for Building a World-Class Service Culture. NIST. (2021). Retrieved from https://www.nist.gov/

blogs/blogrige/ritz-carlton-practices-building-world-class-service-culture.

Solomon, M. (2016). Technology Invades Hospitality Industry: Hilton Robot, Domino Delivery Droid, Ritz-Carlton

Mystique. Retrieved from https://www.forbes.com/sites/micahsolomon/2016/03/18/high-tech-hospitality-hilton-robot-

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concierge-dominos-delivery-droid-ritz-carlton-mystique/?sh=61518faa120b

Staff, T., & staff, T. (2021). Corporate strategy vs business strategy - definitions, examples, differences |

Termscompared. Termscompared. Retrieved from https://www.termscompared.com/difference-between-corporate-

strategy-and-business-strategy/.

Take Five Newsletter: Prepping for Full Compliance! Five Important Legal Compliance Issues Impacting the

Hospitality Industry. (n.d.). Retrieved from https://www.natlawreview.com/article/take-five-newsletter-prepping-full-

compliance-five-important-legal-compliance-issues

The Ritz-Carlton. (n.d.). Retrieved from https://news.marriott.com/ritz-carlton-hotels-resorts/

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