Micro and macro environment of hotel industry

Situational Analysis On Ritz-Carlton

Executive Summary

In this report, we will be addressing the issue faced by the Ritz Carlton Philadelphia in the value that is being delivered to customers. We have found through research and reviews that the clients are dissatisfied with their experiences when staying at the Ritz Carlton and most agree that it does not live up to the Ritz Carlton brand.

By utilizing market research and evaluating employees’ and customers’ perceptions, we will be able to pinpoint where the issues lie in delivering the service expected by guests. By reevaluating the internal marketing strategies currently in place at the Ritz Carlton Philadelphia we believe we can solve any domestic issues the company is facing that is keeping customers from being satisfied with their service. We can ensure employees are being recruited and trained properly and are delivering the high-quality service associated with the Ritz-Carlton name. Through communicating the current condition of the Ritz and the current renovations being undertaken, guests will not be surprised when they see the construction and will be less upset when they are affected by it because they were made aware previously.

We want to ensure this hotel is delivering service consistent with the rest of the brand and that even though the hotel is currently under construction- guests still receive an excellent stay and want to come back when the renovations are complete.

Table of Content

1.0 Introduction ..............................................................................................................................3

2.0 Situational Analysis ………………………………………………………………………….3

2.1 Internal analysis…………….…………………………………………….…………...3

2.1.1 Organization Overview………………………………………………...…4

2.1.2 SWOT…………….……………………………………………………….5

2.1.3 Customer’s Profile……………………………………………………….12

2.2 External Analysis…………………………………………………………………….13

2.2.1 Environmental Analysis………………………………………………….13

2.2.2 Industry Analysis………………………………………………………...17

2.2.3 Competitor Analysis……………………………………………………..19

2.2.4 Target Market Analysis………………………………………………….22

2.3 Summary of Situational Analysis……………………………………………………24

3.0 Marketing Problem …………………………………………………………………………25

4.0 Marketing Strategies ……………………………………………………………………….26

4.1 Research……………………………………………………………………….…..…26

4.2 Internal Marketing………………………………………………………….………..28

4.3 Communication………………………………………………………………………29

5.0 Conclusion …………………………………………………………………………………..30

Appendix………………………………………………………………………………………..31

References……………………………………………………………………………………….39

1.0 Introduction

The Ritz-Carlton is a chain within the Marriott brand. Marriott International is a hotel company that operates, licenses, and franchises hotels and timeshares throughout the world. Marriott International is a leading lodging company with more than 4,400 properties in 87 countries and territories. Founded by J. Willard and Alice Marriott and guided by Marriott family leadership for nearly 90 years, the company is headquartered in Bethesda, Maryland, USA. At Marriott, the search is never-ending for inventive ways to serve the customers, provide opportunities for their associates, and grow the business. The company that began as a nine-seat A&W root beer stand is recognized today as a top employer. With its superior business operations, it conducts them based on five core values: putting people first, pursuing excellence, embracing change, acting with integrity, and serving the world.

2.0 Situational Analysis-

Situational analysis is a collection and analyzation of internal and or external forces that may influence the Ritz Carlton’s performance and choice of strategies. This report also assesses the Ritz Carlton’s current strengths, weakness, opportunities and threats (Web Finance, Inc. 2016). It also assesses the external forces like political, economic, social-cultural, technology and environmental. This reports looks at both internal and external factors that could or will affect the Ritz Carlton

2.1 Internal Analysis

Internal Analysis is the process of identifying and analyzing the internal characteristics of the Ritz Carlton. This analysis explains internal factors and features that differentiate and distinguish the Ritz Carlton. (Trinity WW, LLC 2015).

2.1.1 Organization Overview

Ritz-Carlton is a luxury hotel chain under the Marriott Brand. The Philadelphia location is a century-old historic landmark building in Center City Philadelphia located at 10 Avenue of the Arts. It has 299 rooms and 18 meeting rooms. There is a 10 Arts Bistro and 10 Arts Lounge located in the lobby. The hotel has a fitness center and spa. It offers a Ritz Kids program to teach kids about the environment and encourage sustainability. The building was originally a bank built in 1907. It became the Ritz-Carlton in 1931. It's only steps away from City Hall and the Subway, with unique food and dining options all around. Next to the hotel is the Residences at the Ritz-Carlton, which is an extended-stay hotel for guests seeking accommodations for a longer stay with full service and amenities available (The Ritz-Carlton LLC, 2016).

The Ritz-Carlton brand as a whole prides itself on empowering its employees and establishing pride in their title as "ladies and gentlemen serving ladies and gentlemen" (The Ritz-Carlton LLC, 2016). Ritz-Carlton is known worldwide for their outstanding customer service (The Ritz-Carlton LLC, 2016). They hold themselves to a unique gold standard and stress a "6th Diamond" (even though the AAA diamond ratings only range from 1-5) to express their level of service to the guests- the sixth is for their mystique, emotional engagement, and functionality (The Ritz-Carlton LLC, 2016). As opposed to an official mission statement, the Ritz-Carlton operates and is guided by this credo (The Ritz-Carlton LLC, 2016).

The Credo

The Ritz-Carlton Hotel is a place where the genuine care and comfort of our guests 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." (The Ritz-Carlton LLC, 2016)

2.1.2 SWOT Analysis

A SWOT analysis takes an in-depth look at a company's internal environment by evaluating its strengths and weaknesses, as well as assessing the company's external environment by looking at potential opportunities and threats to the business (Kotler, 2014). Appendix 1 is an example of a SWOT diagram; this shows the strengths, weakness, opportunities and threats that the Ritz-Carlton is currently facing.

Strengths

Architecture

The hotel was originally a bank called Girard Trust Exchange Bank that was designed and created to resemble the Pantheon in Rome. The aesthetics of the building make it an attractive tourist spot. (The Ritz-Carlton LLC, 2016)

Location

The hotel is right in the heart of the city. The Ritz Carlton is very easy to get to by using public transportation making it convenient for the business traveler. The building is located across the street from the City Hall subway station and regional rail; this makes it easily accessible by public transportation. The location of the hotel in Center City is also a high point because research shows that consumers staying in luxury hotels are more likely to seek out other luxury activities like dining out (Rogers 2014). Due to the central location of the hotel, there are luxury activities such as shopping and dining out available everywhere which can help the hotel appeal to higher income consumers. There are also plenty of luxury leisure activities available within the hotel like the fine dining or the spa services available to guests. (Rogers, 2014). Rewards Points Program

Marriott already has a well-known presence in the reward program realm. Now as Marriott purchases Starwood, who also has their compensation program Starwood Preferred Guest, this will make the program even bigger. It increases Marriott's reach for customers. When Marriott Rewards and Starwood Preferred Guest combine, Marriott will be the largest loyalty program in the hospitality business (Clampet, 2016). Arne Sorenson, the CEO of Marriott told CNBC that “they wanted to create a combined plan that offered everything a guest could want: ‘Something that is even more powerful for our customers so they’ll say ‘Why should I get a card with anyone else?’”(Clampet 2016). This program would change the hospitality industry by raising the standards of loyalty programs, and Marriott would have a large client base. As you see in Appendix 2 and 3 we see how Reward programs influence customers buying patterns and their decisions. (Harland, 2015) In Appendix 2 and 3, the graph explains that loyalty programs can impact customer’s shopping behaviors, influence the frequency of the client of visits and increase in customers spending habits due to the advantages of the programs benefits. The reward program can increase repeat guests because of the brand loyalty. More than half of all Americans are enrolled in a travel award program. (Macke, 2015a). Travelers that are active members in hotel reward programs are typically more experienced travelers and, therefore, are more likely to stay at midscale, upscale, and upper upscale/luxury hotels. (O'Donnell, 2015). Parent Company

Being under the Marriott umbrella not only assures more brand loyalty because of the reward programs throughout all of the hotels, but it gives you access to the title Marriott has, and that is being the “largest hotel company in the world”. When consumers are searching online for a place to stay in the area, the Ritz-Carlton will have a greater presence in a typical search engine because of the power that Marriott has in the market. One-third of travelers says that they try to stay in a hotel within the same family (O'Donnell, 2015). Consumers prefer to stay with a brand that has previously worked for them. A good brand promotes familiarity and trust to potential buyers.

Ritz Kids

The Ritz-Carlton Philadelphia also encourages children to grow and learn about sustainability efforts during their stay. They get the chance to explore the hotel and how it works as well as other fun activities like crafting. Appealing to children is a key advantage because 9 out of 10 parents ask their children's opinions when it comes to choosing leisure activities. Higher household income also correlates with the likelihood of taking children's ideas into consideration when planning trips or vacations (O’Donnell, 2014). Promoting this sustainability and responsibility is precious in today's society as health, wellness, and taking care of the environment becomes increasingly important to consumers (O'Donnell, 2014). The Ritz Kids program is useful for parents who need alone time. Not many other properties offer this type of program for families (The Ritz-Carlton LLC, 2016).

Mobile Application

The Ritz-Carlton has a mobile app for its rewards members that provides a variety of options such as checking in and checking out via the app, as well as submitting a service request, and the ability to keep track of your bill and charges during your stay. The app is important because most business travelers are seeking efficiency and want to save time- especially younger millennial travelers. But even so, among all generations the convenience provided by the Ritz-Carlton app is agreed upon (Macke, 2015c).

Lobby

The lobby of the Ritz is also a strength because studies show that 35% of business travelers especially millennials- are interested in meeting new people on business trips (Macke, 2015c). The lobby of the Ritz has the 10 Arts Bistro and Lounge which provides the perfect space to mingle and can attract business travelers. It’s setting within the historic building and unique all grand marble lobby is what sets it apart from other full-service hotels. It is open to the public. Therefore, even people who aren't staying at the Ritz can come in and enjoy the lobby space- perhaps increasing the share of mind of business and leisure travelers in Philadelphia (Macke, 2015c).

The Residences

The Residences at the Ritz-Carlton Philadelphia is additionally a great asset for business travelers who might need a longer stay. Millennial travelers are most likely to extend a business trip for leisure so having the option of extending a stay there or scheduling for lengthier stay can appeal to consumers who might typically look elsewhere for a longer stay. With the possibility of the Residences adjacent to the hotel, travelers don't have to give up the full-service experience when staying in a condominium (The Ritz-Carlton LLC, 2016).

Weakness

Employees not Meeting Standards

The Ritz-Carlton is known for their high standards of service. The credo is in place to empower the employees to make the guest stay nothing, but the best. The employees are not just working for the Ritz Carlton; they are representing what the Ritz-Carlton stands for, and that's excellence. Currently, the Ritz Carlton in Philadelphia has not been meeting these high standards of service. The customers on TripAdvisor and Ritz Carlton’s Facebook page have been giving bad reviews because of the service, some calling this Ritz Carlton the worst one they ever been to (TripAdvisor 2016). This Ritz Carlton is not performing at the standards and not standing by what they are representing.

Renovations

Currently, the Ritz Carlton is doing renovations to their property. Customers who are staying at the hotel are influenced negatively about the renewal of the hotel. The Ritz-Carlton name is getting tarnished due to the renovations. We see this in a lot of the reviews on TripAdvisor.

"The front lobby is cordoned off as a new restaurant is being put in. Various renovations are going on. Our room had been updated, but plaster had been spilled on the door handle and various other places. The room was comfortable and the location central, but it is not necessarily worth it until the renovation is completed."(Pcg123. "Still under Renovation")

Opportunities

Philadelphia Named No. 1 Destination

Philadelphia was recently named the number one travel destination by Lonely Planet (DiFilippo, 2016). Historically other destinations have seen increases in tourism after being named by Lonely Planet (DiFilippo, 2016). With this potential increase in visits to Philadelphia, the Ritz-Carlton can attract more guests than in years past.

Growing Business Markets

The growth of businesses and business travel presents a great opportunity for the Ritz because independent business travelers are the drivers of the hospitality market. When they visit, they typically spend more money than an average traveler would. Usually, when spending money, if consumers are spending someone else's money on themselves they are less likely to economize but will attempt to seek out the highest value (Hayes, 2011). Since the Ritz-Carlton already serves business travelers, their revenues have a potential to grow as corporate expenditures for business travel grow. Business markets have a projected growth of 18% by 2020, resulting in a corporate expenditure growth of about 3-4% each year (Macke, 2015c). Democratic National Convention

The Democratic National Convention from 2012 created an economic impact of $163.6 million to Charlotte, North Carolina (Spanberg, 2013). The amount of money that will be brought into the city of Philadelphia because of this convention is going to be even more significant than the economic impact of the Pope. (Spanberg, 2013). If Philadelphia does well with this size and status of a convention, it will bring in more events like this to Philadelphia meaning more convention revenues.

Copa America Centenario

For the first time playing outside of South America, Copa America Centenario tournament will be coming to Philadelphia's Lincoln Financial Field as they host some of the world's best soccer teams in this 100-year anniversary of the historic tournament. (DiscoverPHL, 2016). This tournament will bring in a lot of international business from all around the world to Philadelphia.

Bleisure

The growing trend of bleisure can additionally attract guests because most business travelers are seeking ways to incorporate leisure in their trips and the three most popular bleisure activities are sightseeing, dining, and arts/culture (Bridgestreet, 2014). Philadelphia is full of these activities, and the Ritz is in the center of it all. 41% of vacation travelers say they value having a centrally located hotel the most. With another 27% saying their most important factor is simple transportation (Karantzavelou, 2016). The Ritz can satisfy both of these needs, therefore, being an attractive potential bleisure travel location for business travelers in the city.

Threats

Oversaturation in the Market

Philadelphia is becoming an attractive city, so many companies want to build their hotels here or take over other properties. In Appendix 4 we can see a lot of new hotels are currently under development. The total number of hotels would increase by 12 and make the total hotels in the city of Philadelphia 97. (Jenkins, 2015) When the competition increases that gives people more options to chose from.

Decrease travel due to terrorism and natural disasters

Fear of travel is becoming a prominent theme across the industry due to terrorist activities and weather like disasters. Recent attacks like those in Brussels or France resulted in the closing of borders for travel (Reguly, 2016). Which can have significant impacts on the entire economy (Thomson, 2015). Events such as these can deter people from traveling and cause them to cancel trips and flights. The fear of traveling will impact the entire economy but specifically the hospitality industry.

Home sharing

Millennials are being fiercely competed for by home sharing services such as Airbnb because they are independent travelers with smartphone access (Shead, 2016). As older generations begin to leave the workforce, and more millennials are traveling for business as they advance in the workplace, services like Airbnb are going to become more of a threat (O'Donnell, 2015).

2.1.3 Customer's Profile

A customer profile is a description of a client or set of them that includes demographic, geographic, and psychographic characteristics, as well as buying patterns, creditworthiness, and purchase history (Web Finance, Inc. 2016).

The Ritz-Carlton Customer Profile

Business Travelers- are consumer group to the Ritz-Carlton because of their companies’ willingness to pay higher room prices. The Ritz has a business center, breakout rooms, and other essentials that a business traveler would utilize. The Ritz-Carlton is in the heart of the city and the business district, so the business travelers can get place to place fairly quickly.

Corporate Meetings- are an important group to the Ritz because their team consists of many business travelers and with the understanding that their willingness to pay for the amenities are a lot higher than a regular guest. The Ritz-Carlton has a lot of space and other facilities that the corporate meeting group can utilize.

Upper & Middle-Class Families- may seek to economize more compared to business travelers or corporate meeting travelers, but are still a precious segment served by the Ritz Carlton. The Ritz-Carlton is near a lot of landmarks known in Philadelphia. Ritz Carlton also has Ritz Kids program which can be appealing to families when traveling, so they have accommodations for their children if necessary.

2.2 External Analysis

The external analysis is a gathering and analyzation of information, which consist of external factors and influences that might affect the performance and profitability of the Ritz Carlton.

2.2.1 Environmental Analysis (PESTE)

The PESTE analysis is a tool marketer use to analyze the macro-environment, and it helps determines factors that will influence the organization in a positive or negative way. (Professional Academy, 2016). This analysis takes in consideration from a current event that can impact a company directly or indirectly. These currents events that the PESTE analysis gathers Political, Economic, Socio-cultural, and Technological and Environmental information and trends. These factors influence the whole industry, rather than just the organization by itself.

Political

Increase in Sales Tax- is also currently being debated in the state of Pennsylvania. Tom Wolf is also trying to raise the sales tax in Pennsylvania. If he achieves this, Philadelphia will become the fourth highest sales taxed city- right behind Chicago. Governor Wolf is pursuing legislation to increase the sales tax rate from 6 percent to 7.25 percent (Levy, 2016). The increase in sales tax would raise all taxes on the supplies used by the hotel, raise the taxes on customers who stay at our hotel and raise prices for supplies for your employees.

Minimum Wage- is currently under debate across the United States. Tom Wolf is trying to increase the Minimum wage in Pennsylvania. This increase would raise operating cost and companies will have to figure out how to make up for that cost. Governor Wolf is imposing a budget proposes that would boost the state's minimum wage from $7.25 an hour to $10.15. (Langley, 2016). Specifically, in the tourism and hospitality industry, there could be many changes in the workforce structure as a result of this. An increase in minimum wage could potentially lead to an increase in cross training- making fewer employees better-rounded rather than hiring new workers (Carpenter, 2014). Higher pay is also likely to increase employee motivation leading to better service in the industry. Certain positions might get replaced by technological substitutes to cut costs which could also have a significant impact on the experience for customers (Carpenter, 2014). However due to the increased cost for organizations, an increase in minimum wage would result in fewer vacations and other bonuses for employees (Carpenter, 2014). An increase in minimum wage in Philadelphia would undoubtedly improve the lives of hospitality workers, but it may have impacts on the companies that would cause increases in prices or various cutbacks to cover the higher cost (Carpenter, 2014). If minimum wage does go up, the jobs that don’t require many skills get payed the same as jobs that do need many skills like working in a hotel, it will lead to unfair pay to the employee. This issue could lead to a decrease in customer satisfaction due to employee work not meeting with the pay.

Regulation of Sharing Economy- The shared economy is becoming a more prominent part of the hospitality industry. As travel prices increase companies may start to loosen regulations on travel policies- making vendors like Airbnb acceptable accommodations for business travel, thus saving them money on travel expenditures and travel reimbursements. California recently passed a law that allows employees to be reimbursed when using vendors such as Uber and Airbnb (Macke, 2015b). The sharing economy ups the competition in the corporate travel market because traditionally sharing economy vendors were not an option for business travel accommodations.

Economic

Foreign Exchange- is currently changing which has effects throughout the economy. The value of the United States dollar is increasing in the world’s exchange rate with other countries, as the United States rates continue to rise it is going to cost more for international travelers. In Appendix 5 we can see that foreign currency is not the same value as the United States currency. (X-Rates, 2016)

Socio-Cultural

Bleisure- bleisure is a growing trend in the industry that will affect the way business travelers choose their accommodations and do business. 83% of travelers use the business trip time to explore the city; this trend is more popular among younger travelers (O'Donnell, 2015). This give more opportunities to retain and obtain more business traveler.

Technology

Online Presence- Technology plays a significant role not only in how consumers choose and book their hotels but also the experiences they have. User-generated review plays a vital role in the research step when people are beginning to look for their travel accommodations. The presentation of a hotel on a web page has a significant impact on a potential buyer's decision. Hotels positioned at the top or bottom of a list were more likely to be chosen than hotels located in the middle (Ert, 2014). Technology today impacts the way people travel in more ways than you would think. As technology and information become more heavily relied on it will increase consumer confidence in making their decisions when it comes to discretionary spending on travel. A study conducted in 2014 showed that 40% of adults do online research before staying at a hotel they are new at (O'Donnell, 2015). Significant web presence is critical to monitor reviews and provide information about properties. More sources and reports are made available to travelers so that they are less reliant on direct contact hotels or travel agents in helping them book a room.