Ritz-Carlton Hotel Company L.L.C.
Ritz-Carlton Hotel Company L.L.C.
Wholly Owned Subsidiary of Marriott International, Inc.
Sales: $970.6 million
NAIC: 72111 Hotels (Except Casino Hotels) & Motels
The Ritz-Carlton Hotel Company L.L.C. operates a chain of 36 hotels worldwide. The chain banks on the lustrous image of its name and strives to make each of its locations uniquely luxurious. Its hotels are top-rated, including several that earned five stars and five diamonds in domestic rankings. Aside from its 20 hotels across the United States, Ritz-Carlton has locations in Sydney, Australia, Shanghai, China, Bali, Indonesia, Seoul, Korea and other Asian locations, several in Europe and the Middle East, and others in the Caribbean. As of 1999 the chain was in the midst of plans to expand abroad and domestically. Founded in 1983 when William Johnson bought the rights to the famous Ritz-Carlton name, the chain is owned by hotel giant Marriott International.
The history of the current Ritz-Carlton Hotel Company properly begins in the 19th century, with the exploits of legendary hotelier Cesar Ritz. The ambitious child of a poor herdsman, Ritz was born in 1850 in the small mountain village of Niederwald, Switzerland. One of 13 children, Ritz left home at the age of 16 to work in the dining room of a hotel in the adjacent town of Brieg. After a few months on the job he was fired, according to his employer, for not possessing even an “aptitude,” much less a “flair,” for the hotel business. Hired as a waiter in the restaurant of another hotel, Ritz soon was fired once again.
Undismayed, Ritz traveled to Paris, where he worked emptying slops for small hotels. Fired from two more jobs, he finally landed a position at a chic restaurant near the Madeleine and worked his way up from bus boy to manager. At the age of 19 he was asked to become a partner by the owner of the restaurant, yet Ritz politely refused the offer. His ambition was still unsatisfied, but now that he knew what he wanted, he rolled up his aprons and sauntered down the street to the most elegant and famous restaurant of the day, Voisin, an international meeting place for royalty and gourmets. Starting at the bottom as an assistant waiter, Ritz learned how to carve a roast and press duck, how to decant wine, and how to serve food in ways that pleased both the eye and the palate.
It was at Voisin that Ritz developed his instincts for high-quality food and service, and his personal touch began to attract influential customers such as Sarah Bernhardt, Alexandre Dumas the younger, and the Rothschilds. When Germany invaded France and laid siege to Paris in 1871, a food scarcity led the city zoo to butcher its two elephants; Voisin’s purchased the trunks of the animals. When Ritz served them in high style, trompe sauce chasseur became a gourmet’s rage and Ritz himself an overnight sensation in Parisian culinary circles.
A short time later, Ritz left Paris and worked for three years in resort restaurants and fashionable hotels in Nice, San Remo, Rome, Baden-Baden, and Vienna. Good luck now came his way. Ritz was the restaurant manager at Rigi-Kulm, an Alpine hotel renowned for its location and cuisine, when he was informed one cold winter day that the heating plant had broken down and, at almost the same moment, that a group of 40 wealthy Americans were to arrive soon for lunch. Ritz ordered lunch to be served in the drawing room instead of the dining room—it looked warmer because of the large red curtains that framed the room. He directed the waiters to pour alcohol into large copper pots and then set them afire, and bricks were placed in the ovens. The room was warm when the Americans arrived, and each of them was given a brick wrapped in flannel to warm their feet. By the end of the meal, which started with a peppery hot consomme and ended with flaming crepes suzette, the guests were gushing with praise for the young manager.
Reports of Ritz’s modest miracle of quick thinking and resourcefulness spread among hotelmen throughout Europe and the United States. When the owner of a large hotel in Lucerne heard the story, he immediately hired Ritz to act as his general manager. The hotel had been losing money steadily for some time, but the 27-year-old former peasant revived the hotel in two years. Here he developed and refined the hotel service and methods that made his name famous. “People like to be served, but invisibly,” Ritz once said. It was Ritz who originated the phrase, “The customer is always right.” Ritz remembered who preferred Turkish cigarettes, who loved gardenias in their room, and who ate chutney during breakfast. If a diner did not like the way his meat was prepared, it was immediately whisked away without any questions asked. For Ritz, no detail was too small and no request too big if it meant satisfying a customer.
In 1892 Ritz journeyed to London to manage the Hotel Savoy, an elegant hotel in the midst of a financial crisis. Ritz brought along his lifelong associate, Auguste Escoffier, a chef whom he had met during one of his jobs in Europe. With Ritz devoting his attention to a myriad of details, sometimes roving from room to room remaking beds to assure his guests the most comfortable night’s sleep in London, at other times arranging lavish entertainment for important customers, and with Escoffier whipping up gourmet dishes in the kitchen, the Savoy soon became the toast of London’s high society. When Alfred Beit, a diamond mogul from South Africa, asked Ritz to arrange a party for him, Ritz flooded the Savoy’s main dining room and transformed it into a miniature Venice, with dinner served to guests as they lounged in gondolas serenaded by native gondoliers. At another party, with Cecil Rhodes, James Gordon Bennett, Lord Randolph Churchill, and Gilbert and Sullivan attending, Ritz arranged for Caruso to sing for their evening pleasure. After three years, the Savoy’s stock rebounded from a few shillings to 20 pounds a share.
When a quarrel broke out one day between Ritz and the directors of the Savoy, Ritz left the hotel never to return again. Ritz’s friends reacted immediately with more than 200 telegrams sent to show him their support. The Prince of Wales, a close friend who was later to become King Edward VII, wired the statement, “Where Ritz goes, we follow.” With such support from wealthy and influential friends, Ritz decided to pursue a dream he had had for years—to open a hotel of his own that would be the epitome of elegance.
The Ritz Hotel, built in Paris on the Place Vendóme, opened for business in 1898. The lobby was small to discourage idlers, and only 225 rooms were constructed for its guests, but furnishings were exquisite and service meticulous to the last detail. Ritz designed a garden to encourage conversation over coffee and tea; he painted the hotel’s walls instead of papering them because it was easier to keep clean; he borrowed the overall color scheme for the hotel from a painting by Van Dyck; and, highly innovative for the time, Ritz equipped many of the rooms with private baths. Ritz also established the traditional apparel for hotel personnel: a black tie for the maitre d’hotel, a white tie for the waiter, and brass buttons for the bellhop’s uniform. On opening day people came from miles around Paris to walk through the hotel’s corridors. And anybody who was anyone during the early years of the 20th century—from J. P. Morgan to Lily Langtry—either lunched or dined at some time in the Hotel Ritz.
Ritz prepared an elaborate reception and elegant dinner in 1902 in honor of the coronation of his good friend Edward VII. All the arrangements had been finalized when a telegram informed Ritz that Edward was grievously ill and required an operation. With a heavy heart the great hotelier attended to the details of cancellation and then, exhausted from his exertions, collapsed. He revived and redoubled his efforts to please patrons of the hotel, but suffered a physical and mental breakdown in 1911. Never fully regaining his renowned verve and energy for work, for seven years Ritz was a figurehead at his own hotel. In October 1918, as he lay dying, Ritz thought he saw his wife at the bedside and asked her to take care of their daughter. Ritz and his wife had no daughter—the “daughter” was the way both of them referred to Ritz’s dream hotel in Paris.
Ritz-Carlton Chain in the Early 20th Century
Near the turn of the century, Ritz had arranged to build and operate the Carlton Hotel in London and, shortly thereafter, opened the Ritz Hotel in Piccadilly. At this time, he also organized a group of hoteliers and financiers and created the tri-continental Ritz-Carlton Management Corporation. The purpose of the group was to lease the Ritz-Carlton name, crest, and stationery to interested parties willing to establish a hotel of their own and abide by the service and culinary standards set by Ritz himself. Under the terms of this agreement, one of the most famous of all the Ritz-Carlton Hotels opened in New York in 1910.
Since the early years of the 20th century, the name Ritz-Carlton has been synonymous with the luxury hotel, conjuring images of opulent yet elegant furnishings based on designs from Versailles and Fontainebleau, haute cuisine in the best French tradition, and meticulous attention to the needs and comforts of its clientele. The Ritz-Carlton Hotel Company is known in the hotel industry for its unwavering commitment to the tradition of impeccable service and luxurious ambiance introduced by the man who made the Ritz name famous, Cesar Ritz.
The New York Ritz-Carlton was built for $5 million, and its equipment and furnishings cost $750,000 more. Robert Goelet, a businessman, paid $5,000 for use of the Ritz-Carlton name and nurtured the hotel like one of his children. Soft rugs, gilded mirrors, glittering chandeliers, oversized bathtubs, and vials of perfume under the seats of the elevators welcomed and rewarded its rich guests. The hotel immediately became renowned for its superb cuisine—Chef M. Diat created Vichyssoise in its kitchen in 1912. On every floor two waiters were stationed day and night to attend the needs of customers who preferred to eat in their rooms. The hotel was a mecca for the world’s richest and most famous people and, for New York society, was host to a seemingly endless stream of balls, cotillions, and receptions. For one coming-out party, its ballroom was decorated with $10,000 worth of eucalyptus trees; at another, live monkeys helped transform the ballroom into a tropical jungle. Joffre, Foch, Clemenceau, Leopold I of Belgium, the Duke of Windsor, Mrs. George W. Vanderbilt, and Charlie Chaplin were all served at the Ritz-Carlton. The New York Ritz-Carlton remained faithful to Cesar Ritz’s imperatives—pamper your guests with lavish surroundings and meticulous service.
During the 1920s, the Ritz-Carlton Management Company leased the use of its name to a number of financiers that wanted to build hotels and also were willing to abide by the standards set down by Cesar Ritz. During this decade the Philadelphia Ritz-Carlton, Montreal Ritz-Carlton, Atlantic City Ritz-Carlton, and Boston Ritz-Carlton opened for business. All of these hotels, in their individual manner, carried on the tradition of fashionable sophistication so important to the Ritz name. Yet those who had known Cesar Ritz would say that none of the hotels ever captured the rococo elegance of the Paris Ritz on the Place Vendóme.
After Cesar Ritz and one of his sons died in 1918, it was assumed that the remaining son, Charles, would take the place of his father and continue managing the Paris and London hotels under the Ritz-Carlton name. But Charles was more inclined to travel, and even before the death of his father he journeyed to the United States and worked in a New London, Connecticut hotel. His jobs over the next several years ranged from working as a night manager at the New York Ritz-Carlton to selling Swiss music boxes to department stores. The rather leisurely pace of Charles Ritz’s business activities provided him the time to pursue what interested him most—fly fishing. In 1928 his mother made a pilgrimage across the Atlantic to persuade him to return to Paris and work at his father’s hotel. He yielded to his mother’s urging, but once in Paris he found that all the top management spots at the hotel were filled, so he worked in the local office of a New York stockbroker. Rather than being disappointed with not working for the hotel, Charles was able to continue developing his expertise in fly fishing. In fact, he had already launched a secondary career as a designer of fishing rods.
After the crash of the New York Stock Market in 1929, the hotels that bore the Ritz-Carlton name in Europe and America suffered from the onset of a worldwide depression. Although the hotels were able to weather the financial hardship, many of them began to lose the elegant luster they so earnestly and carefully cultivated before the depression. Many millionaires who frequented Ritz-Carlton dining rooms in search of new gustatory delights were no longer millionaires; indeed, the New York Ritz-Carlton even changed its luncheon and dinner menus from French into English hoping that it would result in more customers. The owner and manager of the Boston Ritz-Carlton, realizing he was almost at the point of insolvency, went from room to room turning on the lights in its empty rooms to impress his wealthy father before the old man arrived to discuss terms of a loan for the hotel.
The difficulties luxury hotels experienced during the depression were compounded by World War II. When leisure travel between Europe and America was common in the 1920s and 1930s, many wealthy individuals stayed and dined at Ritz-Carlton hotels. This traffic ceased altogether when the war started in Europe in 1939 and, not surprisingly, Ritz-Carlton hotels suffered as a result. When World War II was at its height, many Ritz-Carlton dining areas and ballrooms on both sides of the Atlantic were used as meeting rooms for military personnel.
Hotels for Businessmen After World War II
Many of the Ritz-Carlton hotels did not survive the combined effects of the depression and World War II. Even though the Paris Ritz celebrated it 50th birthday in 1948 amid diplomats and millionaires drinking champagne, the Philadelphia Ritz-Carlton and Montreal Ritz-Carlton had closed their doors. In 1950, when the New York Ritz-Carlton announced that it would close to make way for a 25-story office building, its former guests protested. The only Ritz-Carlton hotel left in North America was the Boston Ritz-Carlton, and its survival was questionable.
The London Ritz-Carlton and the Paris Ritz prospered during the 1950s and 1960s by gradually adapting to a new breed of guest—the international businessman. When Charles Ritz became chairman of the board of the Ritz-Carlton Management Company in 1953, most of the old wealth and aristocracy were gone. By 1968, 70 percent of the guests staying at the Paris Ritz were American businessmen on expense accounts. With his success in Paris, Ritz was asked to serve as a consultant to the firm of Cabot, Cabot, and Forbes, purchasers of the Boston Ritz-Carlton in 1964. He also served as consultant to the Ritz-Carlton in London.
The Ritz-Carlton Management Company leased its name to financiers in both Lisbon and Madrid, stipulating that the hotels meet acceptable standards. Although Charles Ritz owned only one percent of the stock in the company, with the remainder held by British and Continental investors, he was the guardian of the hotel’s standards; during the late 1960s, the company sued the Ritz in Rome over use of the name because the hotel did not measure up to those standards.
The hotels operating under the Ritz name in Europe prospered throughout the 1970s, primarily due to the ever increasing presence of international business travelers with corporate expense accounts and a surge in travel by the nouveau riche. Indeed, the company’s continued commitment to and cultivation of attentive service to a new generation of guests had the effect of raising revenues for almost all the European operations. The week before Charles Ritz died in July 1976, he was still issuing orders to improve the luxury and elegance that symbolized the Paris hotel.
Revitalized Under Johnson in the 1980s
In 1983 William B. Johnson, a real estate mogul and developer from Atlanta, purchased the rights to the name and the aging Ritz-Carlton in Boston for approximately $70 million. Having already constructed more than 100 Waffle House restaurants and numerous Holiday Inns, Johnson turned his attention to the Boston Ritz-Carlton and spent $22 million to restore the hotel to its original condition. He then established a headquarters for his company in Atlanta, the Ritz-Carlton Hotel Company, and began to arrange financing for new hotels around the country, mostly through partnerships between Johnson and other parties.
Bumps in the 1990s
By 1990, Johnson’s Ritz-Carlton Hotel Company operated and managed 28 Ritz-Carlton hotels. Johnson directly owned the hotels in Boston, Buckhead, Georgia, and Naples, Florida; financing for the remainder of the hotels was through partnerships, including those in Australia, Hawaii, and Cancun. The only Ritz-Carlton Hotel that Johnson did not operate was in Chicago. Built by Four Seasons before Johnson purchased rights to the name, the Chicago Ritz-Carlton also was managed by the rival hotel.
The company won the Malcolm Baldridge National Quality Award in 1992. Chosen by the U.S. Department of Commerce, the Ritz-Carlton Hotel Company was the first hotel company awarded the highly prestigious prize. With 24-hour room service, twice-a-day maid service, complete gymnasium facilities, and menus that continued the tradition of culinary excellence first established by Cesar Ritz, Johnson’s company was well prepared for competing with Four Seasons and other hotel groups in the luxury hotel market.
But although the chain was doing extremely well on quality and service, finances were a different matter. The company had expanded aggressively, opening or acquiring eight hotels in 1990 alone, with six the next year and many more planned. By 1992 the company had full or part ownership in 13 of the chain’s hotels, and the others were owned by private investors. These investors included financier Willard G. Rouse III, Ford Motor Company’s real estate division, Prudential Realty Group, and John F. McDonnell, of McDonnell Douglas. Presumably those who had put money into new Ritz-Carltons were not as happy as some of the pampered guests. The hotel industry as a whole was still suffering from the effects of late 1980s recession, and many hotels were stuck with empty rooms. The Ritz-Carlton was no exception. The Buckhead Ritz-Carlton in Atlanta, which Johnson himself owned, was said to require an occupancy rate of virtually 100 percent every night of the year to make enough money to cover its debt. The splashy Mauna-Lani Ritz-Carlton in Hawaii was also in debt, having run approximately $13 million over its estimated construction costs, and its occupancy rate for 1991 was only 44 percent. Teachers Insurancy and Annuity Association, a backer of several Ritz-Carltons, sued in 1992 to recover payment on $80 million it had lent the owners of the Tyson Corners (Virginia) Ritz-Carlton and had trouble collecting on its loan to a Kansas City Ritz-Carlton as well. Sources quoted in a July 6, 1992 Business Week article claimed the Ritz-Carlton Hotel Company was more than $1 billion in debt. The company president, Horst Schulze, admitted only that the company was in default on a loan for $70 million and that it was seeking to restructure other debts. The company insisted that the hotels would get over any stumbling blocks caused by the economic downturn and that its money problems were only short-term.
But bad news continued to dog the luxury chain. When its Aspen, Colorado hotel opened in October, 1992, it was shadowed by lawsuits from investors and dire reports that the 257-room hotel would have to achieve at least 60 percent occupancy just to break even, in a town where 50 percent occupancy was the average. The Hong Kong Ritz-Carlton was completed in August, 1992 but stood empty for months, in receivership, with no prospective buyer. By 1994, a Wall Street Journal report (April 22, 1994) quoted sources who claimed that out of the 30 Ritz-Carltons open at the time, all but six or seven were losing money. This was contested by Ritz-Carlton’s President Schulze. He allowed that 30 percent of the chain’s hotels were unprofitable. Many Ritz-Carltons were in cities that could not really support such a luxury hotel. For example, in Kansas City, the average room rate was $67. The Kansas City Ritz-Carlton charged on average $115, and according to a local hotel consultant, this was still $70 less than the hotel needed to make a profit. The company’s distinctive quest for service often led to exorbitant costs, spending lavishly on harpists, flowers, even champagne-stocked limousines for guests turned away on an overbooked night. The Ritz-Carlton Hotel Company continued to take on average five percent of its hotel’s gross revenues, whether the hotel made money or not, and some investors seemed to think the management company did not really care whether the hotels were profitable, as long as the brand image was maintained.
In 1995 the sprawling hotel chain Marriott International bought a 49 percent stake in Ritz-Carlton. The larger company believed it could increase sales and profit margins at the Ritz and that things would eventually look up for the troubled chain. The cost of Marriott’s initial investment was estimated to be more than $150 million. The next year, Marriott spent $331 million to take over the Ritz-Carlton Atlanta and buy a majority interest in two of the other Ritz-Carltons owned outright by William Johnson. In 1998 Ritz-Carlton announced plans to move its headquarters out of Atlanta and into the Washington, D.C. area. This would put it close to Marriott’s headquarters in Bethesda, Maryland. In the late 1990s, the Ritz-Carlton chain was still moving ahead with expansion plans, constructing hotels in the Phillippines, Mexico, Jamaica, and Egypt, and domestically in Miami, Florida, Houston, Texas, Las Vegas, and New Orleans. Despite the tarnishing reports of economic difficulties, the poshness of the Ritz-Carlton name was still maintained, and the chain took many honors, winning 39 separate five- and four-star awards from Mobil Travel and AAA in 1998 for service, quality, and facilities.
Beirne, Mike, “Collins Checks into New Ritz Digs,” Brandweek, January 4, 1999, p. 33.
Carey, Susan, “This No-Frills (at Present) Hotel Won’t Leave a Light on for You,” Wall Street Journal, February 24, 1993, p. B1.
Cleary, Mike, “Ritz-Carlton May Move Atlanta Headquarters to D.C., Not Virginia,” Knight-Ridder/Tribune Business News, August 5, 1998, p. OKRB982170F4.
Durbin, Fran, “Ritz-Carlton Commissions Study To Examine Meetings Market,” Travel Weekly, April 18, 1994, p. 56.
Gutner, Toddi, “Puttin’ on the Ritz,” Forbes 400, October 19, 1992, p. 22.
Hirsch, James S., “Of Luxury and Losses: Many Ritz Hotels Are in the Red,” Wall Street Journal, April 22, 1994, p. Bl, B4.
Kent, George, “The Word for Elegance,” Readers Digest, 1948, pp. 147-50.
McDowell, Edwin, “Ritz-Carlton’s Keys to Good Service,” New York Times, March 31, 1993, p. DI, D5.
Shaw, Russell, “Ritz Buyer Touts Deal’s Benefits,” Hotel & Motel Management, April 3, 1995, p. 1.
Touby, Laurel, “Too Many Rooms at the Inn for Ritz-Carlton,” Business Week, July 6, 1992, pp. 74-76.
“Why the Ritz Caters to a Business Elite,” Business Week, August 17, 1968, pp. 56-62.
—updated by A. Woodward