2010 U.S. Hotel Chain Survey: Ritz-Carlton Knocks Off Four Seasons In Punch-Drunk Luxury Tier

Ritz-Carlton wrested top honors in the U.S. Hotel Chain Survey's deluxe tier after a year luxury hoteliers called the most challenging in the tier's history.

Ritz-Carlton and last year's top brand, Four Seasons Hotels and Resorts, have been in a back-and-forth battle for the top slot in the survey for more than a decade. Hilton's Waldorf-Astoria Collection maintained its third-place ranking from last year, tying Fairmont Hotels & Resorts, which finished fifth in 2009.

Ritz-Carlton scored the best in eight of 13 criteria used to measure the tier, including staff, arranging group travel, non-resort meeting facilities and the overall price/value relationship. Ritz-Carlton president and COO Simon Cooper said the latter category mattered most in 2009.

"There's no doubt the consumer last year was value-oriented and much more discerning at being cautious and careful," Cooper said. "To lead in that category in 2009 is one that I am very pleased about."

Ritz-Carlton and its competitors faced the combined challenge of falling travel budgets, unprecedented new supply and a perception issue as companies sought to dissociate corporate travel with luxury travel. Because of the perception issue, some businesses canceled planned meetings that carried penalties as high as the cost of the actual meeting, the company said.

Compared with 2008, the luxury tier's revenue per available room dropped by about 24 percent, and about two-thirds of that came from rate decline, said Smith Travel Research vice president of global development Jan Freitag. The tier added about 8,000 new rooms in 2009, a supply increase of about 8.9 percent.

Many new hotels, planned during better times, faced particular difficulties, said Bjorn Hanson, associate professor at New York University's Tisch Center.

"Some were built with the assumption that things would keep getting better," Hanson said. "The economics were based not on market conditions remaining as good as they were in 2007, but improving to make the economics work."

Amid these difficulties, Ritz-Carlton reevaluated some traditional approaches to service, Cooper said. The process began six years ago, when the brand began initiatives to improve its third-party-generated internal rankings against Four Seasons. It also measured guests who had stayed recently at a Ritz-Carlton against those who had not been to one in several years.

"When we finished in 2009, we had a statistically better differentiation on every single attribute we were looking for," Cooper said. "We set it as a six-year journey because you don't change perceptions overnight."

Much of the changes centered on training staff to be more adaptive to the variety of guests who stay at a Ritz-Carlton, he said. A business traveler who arrives in a suit, for example, would warrant a different approach than a 20-something traveler who arrives in casual clothing.

Ritz-Carlton also has changed its approach to food, for which it received top survey marks, focusing its efforts on partnering with well-known chefs instead of offering traditional dining options.

"The restaurant deals we've done with Wolfgang Puck and Eric Ripert are partly to keep our guests and partly to make the dining experience at a Ritz-Carlton a destination in and of itself," Cooper said.

To help earn its top scores in arranging group travel, Ritz-Carlton countered the perception issue, as did many of its competitors, by offering unprecedented group packages, throwing in concessions like free nights and free Internet usage, company spokesperson Vivian Deuschl said. It also increased social responsibility components to meetings, replacing recreational activity with work activities at orphanages or wildlife preserves, she said.

"We've had to be extremely creative with planners and bosses, and our salespeople had to work twice as hard to attract new meetings while retaining what they were losing," Deuschl said.

Four Seasons this year earned the top score in only one metric: its hotels' physical appearance. The Waldorf-Astoria Collection, in only its second year of showing enough usage to be included in the survey, topped four metrics, including arranging group travel and corporate rate programs.

Luxury hotels still face a tough year in 2010, but there are some signs of improvement. Smith Travel Research reported it was the only tier to see a year-over-year increase in occupancy during the fourth quarter of 2009, though Freitag said the question remains as to whether business is fully returning or that more people simply are taking advantage of lower rates.

Supply growth also is slowing, with the number of hotels under construction this year down about 60 percent from last year's levels, according to Freitag. Even so, the major brands all have openings slated this year: among them, Fairmont in Pittsburgh, Saudi Arabia and Beijing; Four Seasons in Marrakech, Denver and Beirut; and Ritz-Carlton in Dubai, Shanghai and Hong Kong, where it will open the tallest hotel in the world.