Upmarket Strategy Analysis: Ritz-Carlton Reserve and Hyundai Equus

This take-home quiz requires an analysis of the upmarket strategies of Ritz-Carlton and Hyundai. Students are tasked with playing the role of an independent consultant, evaluating the potential success of the Ritz-Carlton Reserve and the Hyundai Equus. The analysis should leverage course concepts such as brand equity frameworks (Keller's and Aaker's models), consumer knowledge structures, competitive set considerations, and the objectives and risks associated with moving upmarket. The assignment emphasizes the application of these concepts to construct a logical position statement, similar to an op-ed piece, supported by clear communication, logical flow of ideas, and proper citations. The provided articles offer insights into the companies' approaches to upmarket positioning. The assignment is graded on the ability to integrate and apply course concepts effectively.

TAKE HOME QUIZ
General Guidelines
The take home quiz serves a dual purpose. First, it allows me see how well you are able to
integrate and apply the course material covered in class to a new type of situation. Second,
it allows you to synthesize the material and use it to construct thought pieces or opinions on
an issue. And, an opinion that is well grounded is likely to carry more weight. I hope that you
will use this as an opportunity to practice coming up with such an opinion.
To accomplish these two objectives, I typically give a set of readings and ask you to come up
with a position statement or a thought piece. What I look for is your ability to use
frameworks and concepts discussed in class to arrive at this “position statement” or a “point
of view”. Thus, after reading the news stories, you might believe that the strategy being
followed by the company is likely to lead to success (or not) and you might have reasons for
these beliefs. However, in stating your position, you need to provide a logical analysis of the
situation using concepts discussed in class.
Some points to keep in mind:
1. You will be graded on your ability to integrate and apply course concepts to the
situations/issues described.
2. I look for logically constructed “position statements” or “observations” where one
idea follows systematically from the previous one. I am very picky about how
arguments are constructed and how they are expressed. Therefore, please pay
careful attention to the logical flow of ideas. It helps to keep in mind where you are
going so that you do not lose track of the main points you wish to make and
supporting arguments all lead to that point.
3. Communicate clearly. Brand managers have to be good communicators. Clarity of
thought is often a precursor to good communication. Likewise, poor communication
of ideas suggests muddy thinking. So, I pay special attention to how well you are
able to communicate. If you were writing an op- ed piece for the South China‐
Morning Post– commenting on this case – think about how would you write it and
give me the equivalent.
4. Don’t forget the footnotes and citations. Proof read your work.
5. I don’t have a fixed page limit but a 5-page document (single spaced) would be in
the ballpark. This does not include appendices, references, etc. You will have 1 week
to work on an assignment. It is due on December 9th (midnight – 11:59 pm ).
Question
Attached are a few articles describing how two companies are attempting to move
upmarket. The first, is the Ritz Carlton. It is attempting to reinvent itself by going even more
upmarket with its new offering “The Ritz Carlton Reserve”. There are many articles on the
web pertaining to this issue. However, the ones included here are representative. The
second company is Hyundai with its launch of the Equus. Please read these articles and play
the role of an independent consultant. How could you use the course concepts discussed so
far to come up with a position statement about the likely success of these strategies for the
two companies. Given below are a few tips on what you can bring to bear on this issue:

a) Brand equity frameworks to assess the strengths and weaknesses (e.g., Keller’s model to
build brands, Aaker’s model components etc.) of each company. Use it to discern any
potential problems are likely to arise
b) Consumer knowledge structures about the brands in question (awareness –
recall/recognition; user imagery, attributes central to the brand, attitudes); Associative
network models, negative associations that might exist)
c) Competitive set, priming, context effects etc. – how will this change with the upmarket
move. What will it do to the product line?
d) How will the move upmarket fare – what is the objective here (changing target market,
profits, satisfying needs, line extension etc..) and what are the potential risks when it comes
to erosion of brand equity.
Good luck!

RITZ CARLTON ARTICLES
IS THE RITZ CARLTON REINVENTING ITSELF OR LOSING ITSELF?
Ritz-Carlton Dresses Down
Aug 07, 08 | 12:10 am
There's a new look in Ritz-Carlton lobbies across the country: casual elegance.
Particularly at the newer Ritz-Carlton resorts, the formal, somewhat stuffy style for which
the brand is known is being updated with a look that is more relaxed and in keeping with the
properties' settings. At the Ritz-Carlton Grand Lakes, Orlando, Fla., for example, the dress
code for staff is a Tommy Bahama shirt with a collar. No tie. And the interior design, while
still redolent of silk, damask, and marble, feels more relaxed than the typical urban Ritz-
Carlton.
Ditto for the spectacular but similarly dressed-down Ritz-Carlton, Lake Las Vegas. Here, the
Mediterranean design aesthetic is completely different.
How far is too far? According to one Ritz-Carlton spokesperson, “We're not going to lose our
core customers by allowing people to come to the dining room in flip-flops and crop tops.”
Reinventing the Ritz-Carlton
On this winter morning in 2007, a strategic planner, Mark Miller, from a boutique ad agency
has tacked up art from dozens of advertisements for luxury hotels in the Ritz-Carlton Hotel
Company’s Maryland offices. He has done it to prove an absurd truth: nearly every brand in
the category uses the same imagery, the same tonality—everything but the same models.
He gives the company’s executives time to absorb the scene, then issues a challenge. “Which
of these ads,” he asks, “is yours?”
The question is very relevant. Not long before, Simon Cooper, Ritz-Carlton’s president and
COO, and Bruce Himelstein, senior vice president of sales and marketing, had arrived from
parent company Marriott eager to liberate Ritz-Carlton from the coat-and-tie formality that
had characterized the chain since its 1983 inception. One obstacle, as Mark Miller had so
vividly identified, was its dated and old marketing formula. But that stale imagery was
symptomatic of a deeper, more fundamental problem: how to invigorate a brand freighted
with a concept of luxury as it existed in 1927, when the original Ritz-Carlton opened in
Boston?
The hotels themselves stood firmly in another era, their heavy drapes closed against the
sunlight. The public spaces within were dark, full of wood and marble, and overtly
masculine. Their dining rooms served the usual American standards with gracious formality
but little verve. And every property looked more or less identical: a cross between an
Italianate mansion and an English country manor that had been outfitted by Donald Trump.
Until a guest emerged blinking into the bright Phoenix morning, he could have been in
Philadelphia…or Tysons Corner, Virginia…or most any Ritz-Carlton in the world. “We had no

sense of place,” remembers Herve Humler, a 25-year veteran of the company and now the
president of Ritz-Carlton International.
Until Simon Cooper’s ascendance as COO, that’s just how Ritz-Carlton wanted it. “What
worked initially was, build all the hotels the same so that people will recognize them,” says
Himelstein, and such uniformity served it well. From 1983 to 1993, the brand grew from a
single hotel to 30, while stamping an image of tasteful opulence on the consciousness of
American travelers. Then the ground shifted. As wealth proliferated among the young, the
innovative, and other demographic categories not typically associated with blue blazers and
Hermès ties, a different group emerged: one favoring experiences that were unique,
authentic, and not easily available for purchase. That might mean a trip to the sold-out
Masters Tournament, a day of skiing on a pristine mountaintop, a glimpse of a celebrity. It
didn’t mean a stay in one of the dozens of carbon-copy Ritz-Carltons around the world, no
matter how polite the doorman.
The very predictability that consumers had found so desirable was now a hindrance to
attracting a new generation. These “discerning affluents,” as Miller calls them, were willing
to sacrifice the comfort of a familiar setting for an experience they could talk about back
home. “What they want,” Miller says now, “is to collect stories.”
Toward that end, Cooper and Himelstein engineered one of the swiftest—and arguably most
important—corporate makeovers in recent hospitality history, a paradigm shift that inverted
Ritz-Carlton’s long-standing relationships to product and place. The first of the new Ritz-
Carltons opened as something of an experiment in April 2003, in a retrofitted civic
incinerator in Washington, D.C.’s Georgetown neighborhood. Another followed that New
Year’s Eve in a restored Modernist landmark in South Beach.
These properties looked like no Ritz-Carlton before them—and felt different, too. Flexibility
came above bellhop livery and dress. Sense of place subordinated continuity with the brand.
To some loyalists both inside and outside the company, the changes seemed jarring, almost
profane. When Team One was awarded the account in late 2004, replacing a conglomeration
of various agencies, Miller found a chasm between those who believed the new approach
would ultimately save Ritz-Carlton, and those who saw it as the road to ruin. “People who’d
been with the company for years felt strongly that the dark wood and chandeliers defined
the brand,” he says.
But Cooper had seen the future, and it didn’t include heavy drapes. His team of outsiders
forged ahead. South Beach and Georgetown became models for the next wave of Ritz-
Carltons, which were integrated into singular sites such as Bachelor Gulch, Colorado;
downtown New York; Moscow, just off Red Square; and Beijing’s Financial Street. All of them
use setting and local culture to determine design components, such as a cowboy bar in
Bachelor Gulch and a feng shui–inspired floor plan and tea apothecary in Beijing.
Older properties followed suit. Many of the formal dining rooms have been replaced by jazzy
restaurants run by celebrity chefs, including Eric Ripert, Dean Fearing, Gordon Ramsay,
Laurent Tourondel, and Wolfgang Puck. Today’s Ritz-Carltons are asked by Cooper to
emphasize singular experiences (or “scenography,” in the Miller lexicon). In Cancún,
scenography means an Aztec fire ceremony every Saturday. At the Lodge at Reynolds

Plantation, in Georgia, it means serving spiced pecans to guests during check-in, with the
scent of fresh magnolias in the air. The concept can get carried to the point of absurdity— as
at Bachelor Gulch, where the house Labrador retriever is available to accompany guests up
the mountain for an afternoon of snowshoeing—but the point is clear: Let no one ever again
be able to claim that Ritz-Carltons are all the same.
Has the message been heard? We’ll find out this summer when Cooper ups the ante. A new
brand, dubbed the Ritz-Carlton Reserve, debuts with the Phulay Bay resort in Krabi, Thailand.
A second Reserve, Molasses Reef in Turks and Caicos, is slated to open in January 2009, with
as many as 10 more coming by 2015. The idea is to attract sophisticated travelers to
unintrusive, ecologically friendly properties in remote areas, where they’ll bask in site-
specific splendor. To anyone who hasn’t stayed in a Ritz-Carlton in the past five years, of
course, such cultural immersion will seem bewildering at best. This isn’t about the lack of oil
paintings on the walls; the living areas at Phulay Bay don’t even have all their walls. Meals
there are so informal, they’re served on the beach upon request. Even the familiar blue lion-
and-crown logo will be hard to find.
None of this will seem particularly novel to people who frequent the far-flung adventure
resorts that now dot the globe, but it will be quite a stretch for the stalwart Ritz-Carlton
customer. And that’s precisely the idea. If trust in the brand can lure its longtime customers
slightly further into the wild…and a few extreme travelers can be persuaded that creature
comforts don’t detract from the authenticity of their eco-experience, Ritz-Carlton just might
co-opt an entire niche category.
YOU CAN CHECK OUT THE PROPERTIES HERE
http://www.ritzcarlton.com/en/Reserve/Locations.htm
AN ARTICLE ON ONE OF THE PROPERTIES
A Ritz Ups the Ante in Puerto Rico with a Ritz-Carlton Reserve Hotel
Laura Magruder for The New York Times
Pool at Su Casa, part of the new Dorado Beach resort in Puerto Rico.
By BROOKS BARNES
TO reach Ritz-Carlton’s newest and most opulent resort, you drive through a forest of
coconut palms, swamp bloodwoods and flame of the woods flowering shrubs until the road
ends at a wall of water. It’s a fountain of a sort, and behind its soft gurgle stretches Dorado
Beach, a $342 million hotel built along three miles of toasty Caribbean sand. At the center of
the resort, which opened Wednesday, guests will find a labyrinthine infinity pool with a
“bubble bed” in its center, a four-bedroom villa that rents for $30,000 a night and a spa
composed of 22 buildings that sprawl across five acres and includes treatment platforms

built into treetops.
Can these kinds of over-the-top amenities make modern travelers — the status-conscious,
ultra-wealthy kind — take a chance on Puerto Rico?
That is the hope. Resorts catering to 1 percenters pepper the Caribbean, so Ritz-Carlton,
which is using Dorado Beach to introduce its new super-high-end Reserve chain to North
America, knew it needed a lot of wow to get noticed. But Dorado Beach, despite its luxury
and a history featuring Laurance S. Rockefeller, Amelia Earhart and Old Hollywood stars,
must also overcome one dominant and indelible fact: It is in a corner of the Caribbean that
for decades has been more associated with grit than glamour.
True, the “Island of Enchantment,” as Puerto Rican tourism officials market their home, has
improved its reputation in recent years, helped by the Navy’s decision to end bombing
exercises on Vieques and the arrival of a St. Regis resort east of San Juan in 2010. But among
the moneyed guests that Dorado Beach hopes to attract — rooms start at $1,499 a night —
Puerto Rico still ranks low on the must-visit list, according to travel agents who specialize in
the Caribbean. “We still need to get rid of the ‘West Side Story’ image,” Friedel Stubbe, a
Dorado Beach developer, told me bluntly. “It’s not nice to say, but it’s true.”
Ritz-Carlton has some image issues of its own. The chain without question still commands
respect among affluent travelers, travel agents say. But some fans worry that Marriott
International, which fully took over Ritz-Carlton in 1998, has watered down the brand by
opening hotels that are more utilitarian than special, like one in Los Angeles where Ritz-
Carlton and Marriott share an unattractive downtown complex. The Reserve brand, designed
to be a chain of 20 resorts, is meant to plant Ritz-Carlton’s blue flag at the tippy top of the
travel market, which is starting to boom again following four years of retrenchment. Dorado
Beach joins a Reserve property in Krabi, Thailand, which opened in 2009. Herve Humler, Ritz-
Carlton’s president and chief operations officer, says Reserve resorts are in the works for
Oman, Morocco and Mexico.
To make Dorado Beach a success, Ritz-Carlton is leaning hard on the property’s past as a
playground for the rich and famous. We’re not talking about the recent past, when a Hyatt-
owned hotel on the property fell so badly into disrepair that in 2006 it was closed, boarded
up and ultimately demolished. Rather, the era Ritz-Carlton is trying to conjure started in
1920s, when Dorado Beach was still a grapefruit and coconut plantation owned by a woman
named Clara Livingston.
Ms. Livingston, known for carrying a pistol and doting on her two Great Danes, Simba and
Chang-Chang, lived alone on the plantation, running it from Su Casa, a 6,000-square-foot
Spanish colonial hacienda overlooking the ocean. A love of airplanes (she served as a
commander of the Puerto Rican branch of the Civil Air Patrol at one point) brought her into
contact with Amelia Earhart, who became a friend and stayed at Su Casa days before
disappearing over the Pacific Ocean in 1937.
Caribbean Property Group, which owns Dorado Beach with Mr. Stubbe and brought in Ritz-
Carlton to operate it, spent $2 million to refurbish Su Casa, now the villa that rents for

$30,000 a night. (Hyatt, if you can imagine, used it as a headquarters for its kids’ club.) The
house, with its sweeping double stairway and clay-tiled roof, is decorated with some of Ms.
Livingston’s original antiques, which were tracked down in the Long Island garage of a
former employee by Eric Christensen, Dorado Beach’s chief executive.
In 1958, Ms. Livingston sold her plantation to Laurance S. Rockefeller, who built a
midcentury-modern hotel, naming it Dorado Beach. When Cuba became a no-go in the early
1960s and Puerto Rico became the new go-to, Dorado Beach was ready and waiting,
attracting stars like Joan Crawford, Elizabeth Taylor and Ava Gardner, who once stayed for a
month. (Ms. Crawford demanded that her room be repainted pink; the hotel complied and
she sent a thank-you note after returning to Hollywood, gushing about “the most
magnificent stretch of beach I have ever seen.”) Other notable guests included postwar
presidents like John F. Kennedy and Dwight Eisenhower.
Hotels often tie themselves in knots spinning yarns about history as they seek to convince
guests that they are staying somewhere special, but Ritz-Carlton isn’t overreaching by
positioning Dorado Beach as a former society hot spot — “recapturing the magic and
essence of that legendary Rockefeller era,” as its public relations chief put it in an e-mail.
Still, will history combined with modern luxury be enough? Even as a commoner, I found
myself a little embarrassed to tell people where I was going when I headed there in late
October. “The Caribbean,” I’d say. “St. Barts?” was one common reply. “No, not quite that
fancy,” was my response. Turks and Caicos was usually their next guess. When I finally
coughed up Puerto Rico as my destination, people tended to give me a sad look. “I hear
drug-related crime there is spiking. Be careful!” one entertainment executive said cheerfully.
After spending two days hanging around the still-unfinished resort, which borders four golf
courses, a children’s water park and an 11-mile nature path, I experienced a different kind of
embarrassment: I had been too quick to judge Puerto Rico as a destination for true luxury.
Even with 1,000 construction workers crawling over it — the guest rooms and spa were
completed, but the rest of the hotel was still a work in progress — Dorado Beach was
nothing short of jaw-dropping.
Outside the glass-walled Mi Casa restaurant, which will feature a menu by the Spanish chef
José Andres (known for Bazaar in Los Angeles), waves crashed dramatically against a rock
break a few hundred feet offshore. In a reflection of Rockefeller’s interest in the
environment, the central part of the new hotel twists in an architecturally ambitious manner
around dozens of mature trees; bridges link various buildings and feature outdoor “hanging
beds” — wide, flat swings billed as perfect spots for napping or reading. Striking
contemporary art, like a monumental photograph of a woman floating underwater by
Quintin Rivera Toro, decorates the walls.
Dorado Beach has 100 guest rooms and 14 one-bedroom suites spread across 11 two-story
buildings. Although building code now requires large setbacks from the water, Puerto Rican
authorities allowed developers to build the new hotel in the footprint of the demolished one
so that every room is directly on the beach. Each ground-floor room has its own infinity pool
and lawn, while second-floor rooms have rooftop pools. All rooms have outdoor showers.
(Since the hotel wasn’t yet open, I stayed at an adjacent condo in an area near where Ricky

Martin and the golfer Chi Chi Rodriguez have homes.)
Aside from the ocean view, Dorado Beach’s most striking feature may be its bar, which has a
theatrical butterflied roof and a sand floor. The hotel’s guests are meant to stow their Prada
sandals and Gucci loafers in little cubbyholes. It may take some getting used to, conceded
Mark Lipschutz, chief executive of Caribbean Property Group, but his goal was to nudge Ritz-
Carlton out of its comfort zone. “I want people saying, ‘I can’t believe they have this beach
bar at a Ritz,’ ” Mr. Lipschutz said.
Every once in a while, though, a piece of the area’s less illustrious past comes into view.
Literally. A drive on that nature trail in an electric golf cart (no cars are allowed at the resort
after arrival) takes you past a muddy golf course closed for repairs. And lurking about a mile
down the shore is the ghost of Cerromar, a 1970s-era lower-end companion to Dorado
Beach that sits closed, a forlorn reminder that the glamour of the Rockefeller years here
ended long ago. (The Pritzker family bought Dorado and Cerromar in 1985 and added the
hotels to their Hyatt chain.)
“We’ll get to Cerromar next,” Mr. Christensen said.
Ritz-Carlton and Caribbean Property Group are making this “major, major bet on Puerto
Rico,” as Mr. Christensen put it, partly because they like the timing. Puerto Rico, they
believe, is on the upswing. In San Juan, a 30-minute drive to the west, the airport is expected
to get an upgrade and JetBlue has deemed it a “focus” of expansion, making travel to the
island from the East Coast even easier. Two years ago, the Puerto Rican government
introduced aggressive housing incentives — no property taxes for five years, no closing fees,
no capital-gains taxes — to stoke high-end home sales.
Dorado Beach has benefited: 14 private residences at the hotel have already been sold, for
$2.5 million to $7.5 million.
Mr. Lipschutz and Mr. Humler also contend that upscale travelers don’t care as much as they
used to about exotic, far-flung locations. With executives finding it harder and harder to
carve out vacation time, accessibility is the new priority. “If people can’t get there quickly,
they aren’t going,” Mr. Lipschutz said.
Dorado Beach may even be able to succeed in rebuilding a bridge to Hollywood. The Puerto
Rican government has adopted deep tax incentives aimed at luring movie production to the
island, and it’s working. “Runner, Runner,” a coming crime thriller starring Ben Affleck and
Justin Timberlake, shot near Dorado Beach recently. Indeed, a recent headline in The
Hollywood Reporter put a wide smile on Ritz-Carlton’s face: “Why Hollywood Loves Puerto
Rico.”
OTHER MOVES
Ritz-Carlton starts a loyalty programme
Sep 15th 2010, 17:13 by A.B. | LONDON

RITZ-CARLTON has bowed to the inevitable and introduced a loyalty programme. The hotel
brand, which is the flagship of the Marriott group, had previously given the impression of
considering loyalty programmes beneath its lordly notice. But with room rates still lower
than in 2008, that position has changed.
"Ritz-Carlton Rewards" are not like any old reward scheme. Oh no. You get a link-up with the
likes of Abercrombie & Kent, Neiman Marcus, National Geographic Expeditions and Vera
Wang, and you can get air miles instead of reward points, if you prefer. You earn ten points
(or two miles) for every dollar spent on room rates. So you'll need to stay nine nights at $350
per night to qualify for a 30,000-point night in a Tier 1 Ritz-Carlton. A night in the Tier 5 hotel
in Central Park, New York, requires 70,000 points.
The relationship with Marriott's own loyalty programme, Marriott Rewards, is a mite tricky.
You can’t be a member of both programmes, but members of Ritz-Carlton Rewards can earn
points in other Marriott hotels—and Marriott Rewards members can earn points at a Ritz-
Carlton.
What strikes me as potentially the most interesting aspect of this new programme is that it
allows Marriott Reward members to spend points at a Ritz-Carlton. That's a sensible way to
bring some fresh blood into the 73 hotels, as there must be a decent number of Marriott
members keen to splash points on a night somewhere special. The group seems to have
realised that, in the case of its top brand, you can't always wait for the masses to come to
you; sometimes you have to go after the masses.
Four Seasons, which is Ritz-Carlton’s big rival, has no plans to introduce such a scheme.
11 December 2008
How The Ritz-Carlton Manages the Mystique
The luxury brand uses hard data on employee and customer engagement to create its image
and ambience -- and to drive measurable results
by Jennifer Robison
PAGE: 1234
Joanne Hanna recently had the pleasure of being a Ritz-Carlton guest, but only after the pain
of a bad experience she had flying -- crammed into coach -- in December. "I had to get to a
conference in New York, but my flights were delayed over and over. I arrived seven hours
later than I meant to, and if I never see O'Hare airport again, it'll be too soon," she says. That
delay meant that she missed all her meetings and had time only to check into her room,
change, and race to the conference's opening-night dinner.

"The gentleman who escorted me to my room at The Ritz-Carlton asked how my day was,
and I told him, the poor guy," says Hanna. "He said he'd be happy to book me into the spa,
or send up a masseuse, or even have a rose-petal bath drawn for me, and I'd have loved all
of that. But there was no time." So he told Hanna to wait a moment, and then he returned
with a scented candle. "I was so touched, I was speechless -- it was so thoughtful and
helpful, like something a friend would do," says Hanna. "So I told the people at the desk. And
now whenever I check into a Ritz-Carlton, there's a candle waiting for me."
Perhaps any hotel employee could figure out that a tired and frazzled guest could use a little
help. And maybe any hotel company with a global database could keep track of a candle-
loving customer. But making sure that every employee notices, cares, thinks, and acts as
thoughtfully as the one who served Hanna -- well, that takes something special.
The Ritz-Carlton calls that something special "The Ritz-Carlton Mystique." It's a way of
conceptualizing the brand's image and the ambience of each of the company's more than 70
worldwide locations. "Mystique" sounds enigmatic, but it's achieved through the most
straightforward of methods: extremely close attention to performance data collection and a
broad educational platform to deliver the findings.
Of course, all companies watch standard business measures and train employees. But The
Ritz-Carlton watches things that most companies ignore, then uses what they learn in a
unique way to create ongoing, top-to-bottom learning. "What we get from the data is
essential," says John Timmerman, The Ritz-Carlton's vice president of operations.
"Everything we learn we use to set strategies, and every strategy is communicated to our
people. That learning environment is how we stay agile in an ever-changing world."
Beyond the data
Agility from education is a complex thing. A company has to determine what data to collect
and how to collect it, but it also has to ascertain what to do with it. Get any of those things
wrong, and the company trips over its own feet. So The Ritz-Carlton concentrates solely --
but obsessively -- on the factors that support the iconic brand.
"We really wanted to make sure that we not only had a great company but that we also had
a sustainable company," says Timmerman. "So we started to benchmark different business
models. We had to have the right outcome measures, so we developed certain business
priority measurements. We call them our key success factors."
The factors are: mystique, employee engagement, customer engagement, product service
excellence, community involvement, and financial performance. Most companies start with
the financials, but The Ritz-Carlton finishes with them. "Financial performance is a result of
the other metrics -- our key success factors," Timmerman says. "Everything else is a
diagnostic metric."
The key success factors are the business priorities, and within those factors, The Ritz-Carlton
reports on absolutely everything -- from the general morale of the restaurant staff in Bahrain
to the number of scuffs on an elevator door in New York. Every day, the company's staff
determines whether they're meeting the key success factors -- and if not, what needs to
change.
Thus, each location and every one of The Ritz-Carlton's more than 38,000 employees turn in
a river of quantitative and qualitative data points. Those bits of data, filtered by the
requirements of the key success factors, are examined to give the company real-time
information that it uses to set and evaluate the business priority measurements that make
up the key success factors. It's a feedback loop of current information, starting and ending
with the priorities.
"When executives focus on the mechanics, they miss the communication," says Timmerman.
The key success factors feedback loop provides the communication that prevents The Ritz-
Carlton's service from being mechanical -- and keeps it personal, for every person in every
location every day.

How they strategize
The Ritz-Carlton starts with a flood of data, turns it into a powerful strategy, then targets
specific actions to obtain its key success factors. But creating the right strategy to achieve
the factors takes as much evaluation as analyzing the data in the first place.
First, The Ritz-Carlton defines the priorities that make up the success factors so that they're
actionable and applicable to all employees. To draft the actions, a cross-functional team --
including senior corporate leaders, field representatives such as human resources managers,
and rank and file employees -- reviews the plan and contributes insights. The company also
uses the data to perform a SWOT (strengths, weaknesses, opportunities, and threats)
analysis to adjust to new information.
"We look at where we want to be versus where we are today -- and where we see the trends
on the horizon," says Timmerman. "Then we frame the key success factors. Then we ask for
input with the SWOT process. It's a very defined process because it's our opinion that if you
can't define it, you can't control it, you can't measure it, and you can't improve it."
The input of frontline staff -- the people who check guests in, serve food, and occasionally
present scented candles -- into the SWOT process is crucial. Their insights are loaded into a
global database so leaders can identify macro-level themes, market specifics, individual
functions, and even corporate blind spots. As a result, the ladies and gentlemen, as all
employees of The Ritz-Carlton are called, feel integrally involved in the business.
"For us, [integrating employee feedback into the process is the] true success because
employees are personally engaged, they're fulfilled, they understand their contribution, and
we're maximizing their talents," says Timmerman. "Involving [employees] in the SWOT
process increases their engagement. And in my opinion, employee engagement
measurements are a barometer of leadership effectiveness."
Once the company has determined the actions for achieving its success factors, the next
step is actually putting them into action. That's the education factor.
How it works
A strategic plan will achieve its goals only if it's understood. And no plan will achieve its ends
if it isn't measured and monitored. So, before long-range plans are put in place, The Ritz-
Carlton goes to great -- some might say extreme -- lengths to teach and learn from
employees. "To be agile in any marketplace, especially one that changes as rapidly as ours,"
says Timmerman, "means being a learning organization."
The Ritz-Carlton never misses an opportunity to teach. All new employees take part in a two-
day cultural orientation before they start their jobs. Then, they are certified after the first 21
days and annually thereafter to ensure that they are delivering brand standards. Every
employee in every location takes part in a daily pre-shift meeting in which actions, events,
issues, and most importantly, The Ritz-Carlton philosophy, are discussed. In this way, no one
is left in the dark about what a priority means -- and everyone understands his or her role in

shaping it. "That helps us all adjust to changes," says Timmerman. "And change is constant."
A byproduct of daily learning is that the ladies and gentlemen who actually deal with guests
are reminded to, coached on how to, and have a method for relaying customers' faint
signals. Even the most subtle guest reactions are noticed and fed into the river of data that is
distilled into the business priorities. As a result, the hotel can pick up on information that
might have been easily missed and have a built-in plan for delivering that knowledge to
others.
Furthermore, every hotel, function, and division has access to the key success factors as well
as very specific revenue and profitability measures. Thus, every day, those ladies and
gentlemen can see how well they're performing against their targets, each of which rolls up
to the company metrics. "So what you have is complete alignment, [and employees can see
how] all the key success factors that are at thirty thousand feet translate down to ground
level," says Timmerman.
Yet none of these approaches are very long term. Through trial and error, The Ritz-Carlton
realized that unless the issue involves a capital improvement, action items should be
designed to be accomplished within 90 days. Furthermore, having learned in the strategy
evaluation process that hotels do very well when they focus their attention on just a few
things, The Ritz-Carlton makes sure every business unit has no more than three priorities.
"[Any objective] longer than ninety days turns into ongoing committees that drink coffee and
produce meeting minutes but not a lot of results. And once you go beyond the top three
priorities, you start to really diffuse your resources, your bandwidth," says Timmerman. So
the company set a mandate that every employee must work on something to improve
customer, employee, or financial outcomes, with visible results within 90 days.
Engaging employees
"At the end of the day, our bottom line is in the hands of our front line," Timmerman says,
which is why the company is meticulous in hiring and developing its staff. The Ritz-Carlton
aims to hire only the very best of the very best -- they select just 1 out of every 20
applicants, and that's after applicants are pre-screened for job requirements.
But fit to role is only part of the employee equation. The other is employee engagement,
because engagement is the cornerstone of every Ritz-Carlton success factor. Employee
engagement first came to the company's attention because of its correlation to performance
measures that have profit consequences; Gallup research has shown that hotels with
increased employee engagement scores have lower management turnover, fewer safety
incidents, and higher profitability and productivity. (See "Feedback for Real" in the "See
Also" area on this page.)
The Ritz-Carlton has conducted employee satisfaction measurements for years because it
understood the crucial role that employees play in satisfying guests. But there's a big
difference between engagement and satisfaction, so the company began using Gallup's Q12
employee engagement metric in 2006.
The Ritz-Carlton has an extraordinary number of engaged workers, with an overall