In the Hot Seat
Click here to read Jeri Clausing's interview with Ritz-Carlton President Simon Cooper, who discusses how Ritz-Carlton has fared during the downturn in luxury and meetings travel, and the brand's future under a new Marriott corporate structure.
Marriott International is undertaking an ambitious corporate makeover that will split it into four autonomous divisions around the globe and bring many formerly independent Ritz-Carlton brand operations into Marriott’s corporate offices.
The final details of the plan, including the number of jobs that will be moved or eliminated, are still being worked out, though Marriott President Arne Sorenson said, "The number of jobs lost will not be very large."
Even so, he said there would be "significant reshuffling" before the reorganization is complete.
Perhaps the Marriott component most affected by the plan will be Ritz-Carlton, which has until now been a stand-alone global division of Marriott.
Many of Ritz-Carlton's operations are being streamlined into the corporate structure as Marriott works to set up what Sorenson described as four "continental" offices, each of which will have its own president and resources to operate independently.
Each region will have its own teams for all the necessary operations like sales and marketing, revenue management, procurement and finance.
Essentially, Sorenson said, the idea is to decentralize power so that the regional presidents "have the resources necessary to make decisions and so those decisions can be faster, more efficient, more local."
However, Sorenson emphasized that the change "as it relates to Ritz-Carlton will be entirely invisible to the guest. And we will still have the Ritz-Carlton president, who will make sure that the brand remains very focused."
The integration of operations will be focused on "the back-of-the-house kind of things," Sorenson said. "The front of the house will still be very much a Ritz-Carlton brand experience."
Lalia Rach, divisional dean of the New York University hospitality school, said the consolidation was in line with industry trends. Whether it will be good or bad for Ritz-Carlton, however, remains to be seen.
"If they can convince the Ritz clients there is no change, then they win," Rach said. "And the only way to win is if there is no change or if it gets better. … But if that Ritz tradition or its service goes away, that’s when they lose. If it erodes, they lose."
In the end, Rach said, it will come down to focus. If Ritz stays true to its traditions, she said, "the upside is it could even get better."
Ritz-Carlton President Simon Cooper said Sorenson "has been clear about maintaining the brand standards at all costs."
The reorganization "does create some movement and some level of concern," said Cooper, who took over as president of the brand in 2001 when founder Horst Schulze sold it to Marriott. Cooper said he intended to stay with Ritz-Carlton and that Ritz-Carlton would retain its offices in Chevy Chase, Md., separate from Marriott’s corporate headquarters in nearby Bethesda, Md.
"Marriott is making sure that Ritz-Carlton, to the extent possible, continues to operate as an independent brand," Cooper said. "Really, from a customer point of view, it won’t be noticeable."
He added: "Marriott is taking a global view. … I think Marriott was a North America-based company with international operations. This is really taking it global."
The hotel industry, hit hard by the global economic meltdown and the resulting drop in business travel, is coming off one of the worst years in its history. The luxury segment has been especially hard hit, and Ritz-Carlton has been no exception.
But Sorenson said the reorganization was not about cost-cutting, though he admitted that costs had played a larger role in the discussions given the events of the past year.
"Viewed fairly, this is the next step of our global evolution," he said.
Currently, Marriott is split into four divisions: Ritz-Carlton, which is a global operation; the company’s global timeshare business; its international lodging group; and its U.S. and Canadian operations.
It will be reorganized into four divisions, Sorenson said: the Americas, Europe, the Middle East and Asia. Only the timeshare business will operate outside the new regional structure, Sorenson said.
The reorganization won’t be complete until the beginning of 2011. But Sorenson said the new presidents for Europe and the Americas were already in place.
Amy McPherson is heading up the European division, he said. McPherson previously served as executive vice president of global sales and marketing. Dave Grissen, a former executive vice president for the Eastern U.S., will head up the Americas division.
In the meantime, a few high-level Ritz-Carlton executives have already left the company. Among them is Bruce Himmelstein, who was the brand’s senior vice president for sales and marketing.