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Edward Heim Mba 2008 Dissertation


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"Über Luxury Hotels: …

"Über Luxury Hotels:
Exclusivity and Customer Service Expectations"
Dissertation written by Edward Heim: MBA University of Edinburgh Business School

Published in: Business, Technology

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  • 1. ÜBER LUXURY HOTELS: Exclusivity and Customer Service Expectations By Edward Heim Dissertation presented for the degree MASTER OF BUSINESS ADMINISTRATION University of Edinburgh Business School August 2008
  • 2. TABLE OF CONTENTS ABSTRACT 5 LIST OF FIGURES 8 LIST OF TABLES 9 ACKNOWLEDGEMENTS 10 CHAPTER 1. INTRODUCTION 11 1.1 Methodology 11 1.2 Objectives 11 1.3 Literature Review 11 1.4 Interviews 12 1.5 Research as an Expert and as a Consumer 12 CHAPTER 2. LITERATURE REVIEW 13 2.1 Luxury Defined 13 2.2 Luxury in Ancient Political Thought and Philosophy 13 2.3 Sumptuary Laws and Ancient Rome 13 2.4 17th and 18th Century Civic Philosophy 14 2.5 The Modern Era: Elasticity of Demand 15 2.6 The Swiss Influence on Luxury Hotels 16 2.6.1 César Ritz and Escoffier 16 2.7 A New Era: Is It Luxury or Über Luxe? 18 2.8 Defining the Über Luxury Hotel 21 2.8.1 Affluent Hotel Guests and Value for Money 22 2.8.2 The Importance of Relationships with Affluent Consumers 23 2.8.3 Experiences and Emotions Are Important To Affluent Guests 24 2.9 Über Luxury Service Standards: What is Expected 24 2.9.1 Discreet Service 25 2.9.2 Personalized and Sincere Service 26 2.9.3 Anticipatory Service: CRM 27 2.10 Defining Service and Measuring Successful Delivery 28 2.11 Measuring Successful Hotel Customer Service 29 2
  • 3. 2.11.1 RevPar 30 2.11.2 The Apostle Model 30 2.11.3 The Importance of Measuring Customer Emotions 32 2.11.4 Industry Recognition of Service Quality 34 2.11.5 A Benchmark: The Ritz Carlton Model of Service 34 CHAPTER 3. The Von ESSEN COLLECTION 35 3.1 Von Essen Hotels: The Great British Manor House 35 3.2 Research Interviewee Feedback 36 3.2.1 Customer Experiences 37 3.2.2 CRM and Capturing Guest Data 37 3.2.3 The von Essen Service Standards 38 3.2.4 Access versus Exclusivity 39 CHAPTER 4. CONCLUSIONS & RECOMMENDATIONS 40 4.1 The Case for a von Essen CRM Implementation 40 4.1.1 Measurement of CRM Effectiveness 43 4.1.2 A (CRM) Scorecard 43 4.1.3 E-CRM (Electronic Customer Relationship Management) 45 4.1.4 Capturing Customer Loyalty 47 4.1.5 Economic Value of a Repeat von Essen Customer 48 4.1.6 Economic Value of a von Essen Loyal Guest: A Hypothetical Model 48 4.2 Conclusion 51 REFERENCES REFERENCES 54 APPENDICES APPENDIX A: Ritz Carlton Gold Standards 64 APPENDIX B: Glossary of Hotel Terminology 67 APPENDIX C: CRM Terminology 68 APPENDIX D: AA UK Standards 69 APPENDIX E: Rosette UK Standards 69 APPENDIX F: AAA United States Standards 70 APPENDIX G: Michelin Star Standards 71 3
  • 4. APPENDIX H: The von Essen Collection 72 1. Classic Set 72 2. Country Set 72 3. Continental Set 72 4. Family Set 72 5. Metropolitan Set 72 APPENDIX I: the von Essen Strategy 73 APPENDIX J: Sample von Essen Interview Questions 75 APPENDIX K: Relais & Châteaux Guest Satisfaction Sample Questions 76 APPENDIX L: Condé Nast Johansens Guest Satisfaction Survey Sample 77 APPENDIX M: Relais & Châteaux Destinations 78 APPENDIX N: Apostle Model Classifications Table 79 APPENDIX O: PriceWaterHouseCoopers Luxury Hotel 2007 Outlook 80 APPENDIX P: PriceWaterHouseCoopers New Luxury Hotels for 2007 London 81 APPENDIX Q: PriceWaterHouseCoopers Luxury Hotels in Europe 82 APPENDIX R: Hotel Customer Service Measurement Providers 83 APPENDIX S: von Essen 2007 Company Report 84 4
  • 5. ABSTRACT Dissertation Title: The Über Luxury Hotel: Exclusivity and Customer Service Expectations Name: Edward Heim Dissertation Advisor: Professor David Marshall Institution: University of Edinburgh Business School Date: August 2008 Chris Berry writes in “The Idea of Luxury, A Conceptual and Historical Investigation” the following from a 31 December 1987 quote in The Times (The Times 1987 cited in Berry 1994, p.3): “A Lake District Hotel is offering weekend breaks costing nearly £1,000 a day. Guests paying £1,995 each will be served grouse, venison, fillet steak, lobster, caviar, truffles and pâté de fois gras. Miss Carolyn Graves, Director of the Hotel says, “The big spending break is for people who work so hard that holidays are a rarity and have to be crammed full of a year’s worth of pleasure......”” “These pleasures will include return helicopter travel from up to 200 miles, a self-drive or chauffeur driven Rolls-Royce, the hotel’s luxury suite with its spa bath and sunbathing tower, a case of champagne per person, the pick of the cellar, a personal chef to cook whatever takes the guests fancy, and two sheepskin coats and personalized crystal decanter and glass as souvenirs.” Luxury service innovation was developed over 100 years ago by César Ritz. He began with a focus on what was then small enough of a segment, that there were no established standards in place, the wealthy social customer. It was during these early days of trial and error that Ritz built the model for todays über luxury hotels. Service standards at the worlds most luxurious destinations should be personal centric. Developing superior levels of personal service has been shown to be a source of profitability, RevPar growth, and a superior reputation in a world of exclusivity. The inherent success of the best in customer service at über luxury hotels is dependent upon having staff who deliver genuine service which is unique and meaningful, and which maintains and promotes the culture of the brand. An example of a customer service promise: “The hotels of the Dorchester Collection are perfectly located in the great cities of the world. Each is justly celebrated, combining original character with the most modern amenities. Suites and rooms are luxuriously comfortable. Acclaimed restaurants, convivial bars and indulgent spas are a focus for fashionable society. The hotels are prized for a style of service that responds superbly to the individual.” (The Dorchester Collection 2007) Somewhere along the way, luxury began to loose its exclusivity. This is due in no small part to several factors, such as; increasing levels of wealth, and the availability of goods which were once thought to be exclusive brands, to the general populace. It has been written that, “ There is spreading affluence: there are now significant numbers of customers at various points on the luxury lifestyle from the sophisticated to the newcomers.” (Ogilvy, 2007) Robert Frank (2008) writes, “The trouble for high-end marketeers is how to market luxury in an age when the term has become meaningless.” The question is who resides at the top of the wealth pyramid, where exclusivity still holds 5
  • 6. court. Crocker (2007, p.19) writes that those are the individuals, “Worth more than $30 million, of which there are approximately 94,970 worldwide. Their numbers grew 11% last year and 10% the prior year.“ This global wealth is coming from emerging markets, cities such as Mumbai, Dubai, and Moscow, as well as; the United States. Today’s new über wealthy seek accommodation in some of the most beautiful hotels in the world. The diminishing of the exclusivity of certain brands has filtered to the hotel sector, and hotels seeking to differentiate have become part a new class of über luxury hotels. Guests of these hotels, “ Have a thirst for emotionally fulfilling experiences, which are a defining trait of today’s luxury travelers, and it’s driving suppliers to introduce new products and services.” (Crocker, 2007) Greg Ward of von Essen Hotels (2008) says that, “Experiences are the key; we are in the service industry after all, and we should remember that.’ Fulfilling our guest experiences, whatever those may be is our goal. You can’t bottle the experience, and each visit should seek to fulfill ones aspirations, and create a long- lasting memory.” (Ward 2008) Today’s super affluent hotel guest will seek value for money, where once that wasn't always the case. The tastes of these High Net Worth Individuals, according to James Olgivy (2007, p.13), “Have become more sophisticated but more simple, and the demand for the overpriced and over-embellished amongst certain sectors has reduced, they are still willing to pay for high-quality simplicity, even austerity.” Greg Ward (2008) when asked to describe an über luxury hotel guest, said, “They would be characterised by among other things as seeking value for money.” What will enable smaller hotels, such as those in the von Essen collection to maintain a competitive edge in the European marketplace? It will be to develop a reputation as a leader in delivering the best in customer service and experiences. All things being equal perhaps amongst competitors, not all levels of service are created equal. Olgivy (2007, p.12) writes that, “ Levels of service in the industry are surprisingly varied. Some do an excellent job, but there are still too many examples of lazy or arrogant service which will no longer do.” A strong customer service training regimen is crucial for successful service to take place. Affluent customers are notoriously fickle and can be less than loyal as they seek new experiences each time. Successful delivery of unobtrusive customer service, which delivers a feeling of home, and invokes emotions that enable guests to feel sophisticated, pampered, and elegant; will secure guest loyalty. Small über hotel groups can help this cause by developing and utilising the value of information, gathered through effective e-CRM (electronic customer relationship management) tools such as a company web portal or PMS (Property Management System), and using customer data to assist staff in providing the best service possible by anticipating customer wants and needs. E-CRM should be part of an overall CRM capability. An effective Customer Relationship Management program will lead to increased market share, increased profits, and a potential increase in guest loyalty. Studies have shown that there is an economic value to a repeat guest. Reichheld and Sasser (Reicheld & Sasser 1990 cited in Reichheld et al. 2008, p.121), proved quantitatively that a small increase of “5% in customer loyalty can yield increases in profit by as little as 25% to as much as 85%.” The Ritz Carlton Group has attached a $100,00 value to a repeat customer due to the value of positive word of mouth amongst friends and acquaintances. If just one of those friends becomes a guest, then in turn, the repeat business they might generate could lead to additional profit. Greg Ward (2008) and the author spoke of the Pareto Principle, whereby “80% of new business shall be generated from 20% of ones existing business.” (Pareto 1906) Studies have 6
  • 7. shown, that loyal customers are less expensive over time, due to the reduced amount of marketing capital needed to retain their business. Perhaps James Olgivy, publisher of The Luxury Briefing, notes it best when it comes to customer service for the new über wealthy class, “They, (meaning staff), need to be able to change with the ever-evolving demographic of the luxury customer and strike the right degree of either formality or informality appropriate for the modern world. Take things to the next level. Remain one step ahead of the mainstream. Come up with ideas which will surprise and delight your customers and generate valuable word of mouth PR.” (Olgivy 2007) The Earl of March (2008) best describes the über affluent experience in the following quote which merges the old visages of opulence with the new thinking of todays affluent guest: “Goodwood House and Estate have been my family’s home for over 300 years, and there can be few places as beautiful. With its breathtaking setting on the Sussex Downs, it is a haven for peace and tranquillity: somewhere to spoil yourself in an unspoilt world. At Goodwood, everything we do reflects our passions and our desire to share them: our obsession for perfection; our spirit of adventure and daring; and our desire to create an experience which is both truly pleasurable and uniquely English. Good is never enough for us – everything has to be glorious. Whether it is motor racing, horseracing, golf or the stunning art collection in the House, everything has to be perfect. We want to take your breath away in how we deliver that perfection.” THE EARL OF March 2008 7
  • 8. LIST OF FIGURES Figure 2.8 Most Expensive Suites 21 Figure 2.7b Growth in HNWI 19 Figure 2.8.1b Intersection of Luxury Mindset 23 Figure 2.10a Grönroos Service Quality Model 28 Figure 15b Parasuramans’ SERVQUAL/Gap Model 29 Figure 2.11.2a A Satisfied Guest is Loyal 31 Figure 2.11.2b Customer Satisfaction and Loyalty 31 Figure 2.11.3 Market Metrix Determination of loyalty emotions by segment 33 Figure 4.1 von Essen CRM Initiative Conceptual Model 42 Figure 4.1.2 Conceptual Model of a von Essen CRM Scorecard 44 Figure 4.1.4 Lifetime Economic Value of Repeat Customers 47 Figure 4.1.6 von Essen Model-a 12% increase of repeat business 50 Figure I von Essen Strategy 74 Figure O PWC Luxury Hotel 07 Outlook 80 Figure O1 PWC Luxury Hotel 02-08 Room Rate Growth 80 Figure P PWC New Luxury Hotels 07 London 81 Figure P2 PWC Development Plans Luxury Hotels 07 81 Figure S von Essen 2007 Company Report Sample 84-87 8
  • 9. LIST OF TABLES Table 2.7a Numerical Representation of HNWI Growth 19 Table 2.8.1a Value In The Luxury Sector 22 Table 3.1 von Essen KPIs 35 Table B Glossary of Hotel Terminology 67 Table C CRM Terminology 68 Table K Relais & Chateaux Guest Satisfaction Survey Sample 76 Table L Condé Nast Johannsens Guest Satisfaction Sample 77 Table M Relais & Chateaux Global Destinations 78 Table N Apostle Model Classifications 79 Table Q PWHC Luxury Hotels Europe 82 9
  • 10. ACKNOWLEDGEMENTS Many thanks to Professor David Marshall of the University of Edinburgh for his insight into the world of marketing as well as loads of patience whilst guiding me through this process. A special thank you to Mr. Andrew Davis and the von Essen Collection, and Mr. Greg Ward who was most gracious in providing his personal insight into a fantastic company. In addition, thanks to the following General Managers and Staff of The von Essen Hotel Collection, who were so generous in allowing me access to each of their properties: Ms. Alison Mathewson of Dalhousie Castle Mr. Andrew Thomason of Lower Slaughter Manor Mr. Matt Saxton of Washbourne Court The staffs at the Cliveden House Hotel, Dalhousie Castle, Lower Slaughter Manor, and Washbourne Court. Finally, and most importantly; thank you to my dear wife Nicole with whom all things are possible. I wouldn’t have made it without you. Edward Heim August 2008 10
  • 11. CHAPTER 1. INTRODUCTION 1.1 Methodology I chose to undertake this study from the viewpoint of an experienced hotelier and as a consumer. Assuming a guest centric role lessened potential bias from professional hotel experience. I was seeking to answer and explore the following questions: • Do the existing service levels explored in this dissertation, meet and exceed current customer expectations as they relate to über luxury? • Does the über luxury hotel group manage its long-term relationships and therefore manage customer aspirations long-term? • How might utilisation of an effective CRM model assist von Essen in improving its levels of customer service as well as other aspects of the collection? For example, is there adequate guest profiling which helps the group identify their most valuable customers. Does this data in turn help the marketing group target these loyal guests? • Does data capture enhance viral marketing, and can we therefore legitimately attach an economic value to repeat guests at the über luxury level? • With the development of a new über luxury consumer market; how would von Essen, maintain exclusivity whilst granting access to the mass consumer. 1.2 Objectives The main objectives of this dissertation are to determine the importance of an effective Customer Relationship Management System, (CRM) to the uber luxury hotel sector in the United Kingdom; including the following: • The importance of an e-CRM component to capture key data and assist in target market segments most valuable to an über luxury hotel. • To determine the benefits of targeting repeat customers, derived from an e-CRM data capture point, leading to the potential economic value of a nominal increase in repeat guest business as a result of an e-CRM initiative. • What CRM initiatives are necessary to support the growth of the von Essen brand and ensure long-term relationship management. 1.3 Literature Review Literature used was primarily in the English language except for some works in French. The breadth of source publication dates were broad intentionally to add scope and develop historical ideas of luxury to derive the existence of the über luxury segmentation, as well as to develop scope for luxury hotels. The scope of source material was inclusive of luxury consumption from several sectors to develop customer service expectations; sectors looked at were FMCG, luxury and non, as well as travel and leisure both luxury and non. The subjects the author explored to add scope were sociological, marketing, e-commerce, historical, and economical in nature. 11
  • 12. Academic literature from multiple sources was utilised, including journals and periodicals, industry publications, electronic sources including company web sites, as well as printed company collateral from the following: von Essen Hotels, The Dorchester Collection, Oetker Hotel Group, Condé Nast Johansens, and Relais and Châteaux. 1.4 Interviews The von Essen Collection was chosen as a case study due to its unique style and reputation in the UK luxury hotel sector. A total of four interviews were conducted to explore the culture of the brand, one with the Sales and Marketing Executive Director Greg Ward of the von Essen Home Office; and three Property General Managers, Alison Mathewson, Matt Saxton, and Andrew Thomason. The interview with Mr. Ward was to achieve overall scope from the Corporate Office viewpoint, and to derive marketing strategies for the group. The interviews with the Property General Managers were to explore each individual property culture, and to understand current levels of customer service, as well as; to explore necessary support for a CRM initiative. Interviews were conducted at • Cliveden House • Dalhousie Castle • Washbourne Court • Lower Slaughter Manor. Hotels Author Stayed At as Part of Research • Cliveden House and dined at Waldos’ Restaurant • Stayed at Lower Slaughter Manor and dined in The Slaughter Restaurant • Stayed at Washbourne Court and dined in Eton’s Restaurant • Toured Dalhousie Castle 1.5 Research as an Expert and as a Consumer The author chose to approach exploration of the von Essen group from the viewpoint of eight years in Hotel Marketing, E-Commerce and Revenue Management and as a guest. The difficulty with approaching the project from an expert centric viewpoint was to become reliant on expert bias. Therefore the author chose to stay as a guest at four von Essen properties; The Cliveden House, Washbourne Court, and Lower Slaughter Manor, as well as a day visit to Dalhousie Castle. Through this approach, expert bias was mitigated, and balanced with a guest perspective. 12
  • 13. CHAPTER 2. LITERATURE REVIEW 2.1 Luxury Defined In its simplest form, luxury is defined as “a state of great comfort and extravagant living. An inessential but desirable item.” 1 The original meaning of the word is “lechery,” with the origin of the word coming from the Latin word “luxuria,” in itself derived from the word “luxus,” meaning “excess.”2 According to Christoper Berry, (1994, p.4), “From the Greeks onwards, luxury had always been associated with desire, and a morally censorious attitude toward luxury persisted throughout the nineteenth century attaining a prominent place in France.” 2.2 Luxury in Ancient Political Thought and Philosophy “The type of character produced by Wealth lies on the surface for all to see............wealth becomes a sort of standard of value for everything else, and therefore they imagine there is nothing it cannot buy. They are luxurious and ostentatious; luxurious, because of the luxury in which they live and the prosperity which they display.” (Aristotle 365 BC cited in Berry 1994) Luxury as an idea began to appear in ancient civilisations as trade over great distances was growing, due to the demand for precious objects; “Metals and rare organics were sought after; amber, ivory, incense, pepper, and silk were mainstays in Ancient Rome.” (Sherratt 1995) Luxury as an ideology began to appear in ancient Greek Philosophy and Political Thought. Socrates and Plato, and too a much lesser extent Aristotle, wrote about the idea of luxury. At its earliest mention, it was thought of as a corrupting and moral vice. Socrates viewed the overindulgence of certain necessities (natural needs like food and clothing) as a result of “the inflamed city experiences fancy food, fancy clothes and fancy dwellings with gold and ivory.” (Berry 1994) 2.3 Sumptuary Laws and Ancient Rome “It follows that it is unworthy and base to wallow in luxury, softness and effeminacy (quam sit turpe diffluere luxuria et delicate ac molliter), and that it is proper and becoming (honestum) to lead a frugal life of temperance, austerity and sobriety.” (Cicero cited in Berry 1994, p.66) Ancient Rome and its ideology influenced the idea of luxury well into the eighteenth century. According to Christopher Berry (1994, p.63), “For the Romans, luxury was a political question because it signified the presence of the potentially disruptive power of human desire, a power which must be policed.” The Moralists greatly influenced the idea of Roman luxury ideas. A central figure of this movement was Epictetus who wrote the Manual. According to Berry (1994, p.64), the main point that Epictetus makes of Stoicism is “that the man of virtue is one who understands this contrast and lives his life accordingly.” The Stoics, Berry writes, “Recommended the natural life, in contrast to one of luxury and desire.” (Berry 1994) 1 2 Ibid, 2008 13
  • 14. Cicero was important during this time. Cicero (cited in Edmonds 1856) 3 writes in his work The Offices, “ If a man shall have any delight in pleasure, he ought to extremely observant of limits in its indulgence.” Ancient Rome was a military society and luxury was viewed as corruptive of these ideals. Seneca (cited in Berry 1994, p.67) wrote, “The life of luxury is especially debilitating because once the pleasures of the body are sought, they are insatiable...........the greedy are always in want, just as the rich are never rich enough.” Stoicism says, “Individuals of virtue are those who possess a keen understanding those things that are slavish or a vice.” (Baltzly 2008) Roman views on the over indulgence of luxury and materialism led to the creation in 215 B.C. of Sumptuary Laws, by Gaius Oppius of the Roman Senate. The Latin term was Lex Oppia 4 which dictated who might “own, wear, and display certain luxury goods, and was imposed across the ancient and early modern world to curb conspicuous consumption and displays of wealth, its goal was to reinforce social divisions, and maintain social stability.” (Berg 2005) The word Sumptuary is defined as follows: “referring to laws that limit private expenditure on food and personal items-origin Latin, sumptuarius from sumptus cost“ 5 2.4 17th and 18th Century Civic Philosophy Early Economists and Social Theorist perception of luxury goods in the seventeenth and eighteenth century was social centric, and industry focused. Social perceptions were influenced by the type of luxury goods one used and how that might affect social standing. Luxury also was being thought of relative to its demand, and the net effect on development of industry, leading to the creation of wealth and work in service of demand for luxury goods. Seventeenth century viewpoints about luxury were also still in conflict with morality. An early philosopher and political economist, Bernard de Mandeville, spoke often of the vices of luxury, but was also one of the first to note that luxury goods did have some public benefit. Berry (1994, p.128) writes, “Mandeville not only regards luxury, characterised by effeminacy and enervation, as one of these vices but also openly admits its close relationship to pride, avarice, fraud, envy and vanity....he points out its connection with public benefits.” Mandeville (Mandeville 1714 cited in Berry 1994) defines luxury as, “All the most elegant comforts of life as they are experienced by an industrious, wealthy and powerful nation, while simultaneously enjoying all the virtue and innocence that can be wish’d for in a Golden Age.” In being critical of those who condemned luxury, Mandeville (Mandeville 1714 cited in Berry 1994) writes, “To expose the unreasonableness and folly of those moralists who decry the vices and inconveniences of an opulent and flourishing people yet who are wonderfully greedy for the benefits of material prosperity.” Mandeville was thus speaking to the hypocrisy of those who desired luxury but readily condemned those other than themselves of being corrupt for such vices. The commerce luxury relationship continued to draw attention, both negative and positive, from Commercial writers of the seventeenth century. St. Lambert (1751-1777, cited in Berry 1994) wrote in his article Luxe in L’Encyclopédie about six arguments in favour of luxury: “it encourages population and the well-being of states; it facilitates the circulation of money; it reforms manners; it favours the progress of knowledge and the fine arts and it increases the 3 In citing Cicero’s The Offices, I draw on translations of Edmonds (1854) from Oxford University Online at: id=q2MFAAAAQAAJ&printsec=titlepage&client=safari&source=gbs_summary_r&cad=0 4 5 view=dev_dict&field-12668446=sumptuous&branch=13842570&textsearchtype=exact&sortorder=score%2Cname 14
  • 15. happiness of individuals and the power of nations.” St. Lambert (1751-1777, cited in Berry 1994) is in the same breath critical, “Luxury coexists with extreme inequality of wealth; it ruins the countryside by attracting men to cities; it contributes to depopulation; it weakens courage and it stifles love of country.” Adam Smith and David Hume were two prominent economists of this era, and supported the notion that the consumption and creation of luxury goods was had a direct relationship on a robust industrial society. David Hume according to Berry (1994, p. 152), was a strong advocate for the positive relationship afforded to “commerce, luxury, and liberty,” and “lays great stress on the energising effects of the provision of, and desire for, luxury goods and how this increases both power and happiness, as well as the increase in liberty associated with growth in commerce.” Adam Smith a moral philosopher and political economist believed that through commerce, which created work and wealth, would a person be able to create a better life, Smith (1762) wrote in The Glasgow Lectures on Jurisprudence, “Opulence and freedom were the two greatest blessings men can possess.” Adam Smith derived the connection between dependence on material possession and corruption, Smith ( 1762 cited in Berry 1994), writes, “ Opulence and freedom were the two greatest blessings men can possess.” Because of Smiths passionate belief in the world of commerce, luxury began to loose some of the negative association with vice. Smith (1776 cited in Berry 1994), “The world of commerce is a world where every man becomes in some measure a merchant, ...a commercial society is a natural society.” 2.5 The Modern Era: Elasticity of Demand “What we find is that the privatisation associated with, and the innocence of, luxury goods are not immune from criticism from those who wish to dispute the political morality of liberalism. Unlike the classical critique which indicted luxury because it undermined virtue, the modern critique focuses upon the obligation to meet needs.” (Berry 1994) Twentieth century contemporary thought began to look at luxury in the context of consumerism, defined as a “preoccupation of society with material goods.” 6 Berry (1994, pp.177-195) discusses the “Historicity of needs,” as a theory which evolved during this era, a proponent being Karl Marx. What Berry is referring to is the notion that luxury is fluid and not static, and that what was and is seen as a luxury can become a necessity, thereby relegating the luxury good to a normal need. Berry (1994, p.177) writes that, “Marx is associated with the affirmation of the historicity of needs.” Kate Soper, (Soper 1981 cited in Berry 1994) writes that, “It was Marx’s crucial insight to have recognised the historically developed nature of needs. Karl Marx (1845 cited in Berry 1994) writes that, “The satisfaction of needs to maintain life is the fundamental condition of history and as such it must be met. The satisfaction of the first needs leads to new needs and the production of new needs is the first historical act.” In todays world, luxury is seen relative to goods and services. Lancaster (Lancaster 1971 cited in Berry 1994) writes that, “Mainstream economists view a luxury good as a good or service that enjoys high income elasticity of demand. 7 A good becomes a luxury good when income elasticity is greater than unity (e>1) and a necessity when it is less than unity (e<1)” The meaning here is clear. The higher the demand for a good, the higher the price, therefore, 6 7Refers to rising levels of demand relative to fluctuations in price. See: demand/elasticity/price/ 15
  • 16. the good becomes a luxury, something not a necessity but an aspiration. As demand drops, the price lowers exponentially, the good then becomes attainable and therefore a necessity. These modern economical views serve to give scope to the fluid definition of luxury. 2.6 The Swiss Influence on Luxury Hotels The Swiss influence on the development of the grand, luxury hotels of Europe made a lasting affect which can still be seen today in some of the best super luxury hotels of the world. The Swiss maximized the value of an opportunity by developing hotel destinations throughout their country which would cater to the wants and needs of the affluent from not only Europe but across the globe. They were able to capitalize on the growing demand of affluent travelers who wanted to come to relax in an Alpine setting. Performer Fanny Kemble (Kemble 1870 cited in Denby 1998) wrote, “There is really almost a continuous terrace all along the lake from Lausanne to Villeneuve of hotels like palaces, one more magnificent than another, with terraces and gardens, and fountains and bands of music, and such luxurious public apartments, and table d’hôte.” 2.6.1 César Ritz and Escoffier History views César Ritz as the innovator of modern luxury customer services. His ideas have been studied and utilised, successfully, and are important to the notion of über luxury hotels service today. Ritz began his early development at the Restaurant Voisin in the Faoubourg Saint-Honoré. His goal at this stage was to work in the most fashionable establishment he could find, where famed artists and politicians would frequent. His motive was to begin learning how the Voisin catered to affluence. Bellenger, then the owner, was known as one who taught his staff what quality “service” meant, focusing particularly on attention to detail, (Denby 1998). Ritz found his way to the Hôtel Splendide. Whilst there, he gained successful promotion to maître d’hôtel by utilising what he had learnt about luxury service standards. His clientele of the time were names associated with eighteenth century American affluence; such as Wanamaker, Gould, Vanderbilt, and Morgan. It was during this time, that Ritz began to formulate his own models for luxury service standards. Ideas Ritz would apply to his own hotels, were paying attention to and knowing his clients individual preferences, and being able to utilise this information to develop long-term relationships with repeat customers, as well to develop new business. Ritz would further develop service standards for affluent customers when he began employment in 1873 during the Vienna Exhibition, at the Restaurant les Trois Frères Provenceaux. Here Ritz would refine and test his service knowledge while serving European Nobility of the later eighteenth century. An example of the Ritz model in action, shows that he had noticed wealthy Americans had to have ice water, and that, “Anticipating this was both novel, and well respected.” (Montgomery-Massinbred & Watkin 1989) In addition the idea of having a sommelier suggest appropriate wines was much appreciated by his clientele. Ritz continued to refine documenting customer habits and preferences, which became the predecessor to modern day guest profiling in the luxury hotel industry; the idea of tracking guest preferences, storing the data, and utilising the data to cater to affluent customer wants and needs. The Prince of Wales once said to Ritz (HM Prince of Wales cited in Montgomery-Massingbred and Watkin, 1989, pp.12-13) when choosing from a menu, “You know better than I do what I like. Arrange a dinner to my taste.” 16
  • 17. Ritz took all of his service ideas, and put them into practice when he took over management of The Savoy in London. Whilst at The Savoy, Ritz took service to a new level; creating bathrooms en suite for every room; for example, as all hotels during this time, even on a grand scale had shared bathrooms. Ritz was attempting to make the Savoy “the hôtel de luxe of London and of the world.”(Montgomery-Massingberd & Watkin 1989) Ritz’s goal was to develop a hotel around the needs of the affluent, where all would feel flattered by enjoying an experience “such as they might have in their own homes.“(Montgomery-Massingberd & Watkin 1989.) Ritz himself said (Ritz cited in Motgomery-Massingberd and Watkin 1989, p.24), “Mon hôtel doit être le dernier cri de l’elégance, or my hotel will be the latest in elegance!” The famous chef, Georges Auguste Escoffier is paramount to this discussion, as his refinement of the luxury dining experience, like Ritz and customer service, has become a mainstay at the finest Michelin Star restaurants in the world, and indeed part of what über luxe symbolizes, opulent dining experiences. Ritz would partner with Escoffier to develop the total idea of luxury service, both in lodging, as well as; food and drink. Escoffiers’ achievement was to update traditional French cooking methods, currently in practice in Grand Luxury Hotels of the Period. He was able to simplify Anoine Carême’s idea of “Haute Cuisine” defined as “the cooking of grand restaurants and hotels of the Western World, and characterised by elaborate preparations and presentations of large meals.”8 (Montgomery- Massinbred & Watkin 1989) Escoffier would make eating out a chic experience for the affluent, where it once was not, by changing the perception of the cooking profession through the introduction of serving dishes one at a time (service à la russe) 9, in a prescribed order and assigned time, the beginning of the 4 or 5 course luxury dining experience. The César Ritz Model was successful in being able to bridge the gap between luxury accommodation and the level of service expected. He was able to develop a model, which managed customer aspirations as a long-term relationship. In doing so, Ritz and Escoffier were able to generate new affluent customers, who would help to make the Ritz concept famous worldwide and a model for today’s über luxe hoteliers. 8 Haute Cuisine: 9 17
  • 18. 2.7 A New Era: Is It Luxury or Über Luxe? “The massification of luxury is diluting the value of the word luxury.” (Advertising Age Luxury Survey 2004) “Luxury isn’t dead, but the word might be.” (Frank 2008) The word luxury has become so overused that it has become difficult to agree on a true definition of the word. Cockerell (2007, p.8) writes that, “staying at a luxury hotel and even traveling by private jet, has become more affordable-accessible to a wider segment of the population who would not normally be characterised as luxury travelers; the end result of this blurring of the luxury market segment is for the market to now differentiate luxury on unique levels; such as “premium, ultra-luxury or über luxury.” The net effect of generalizing the word luxury, has been for the word to lose its luster and exclusivity, resulting in the creation of a new class of distinction, über luxury. Andrew Sacks, a New York based luxury expert, in a speech to the Leading Hotels of the World Annual Conference in Monte Carlo (Sacks 2008 cited in Frank 2008) said, “Luxury, that word is now, a descriptor that is highly suspicious to the very people to whom it is designed to appeal-the affluent.” In a 2004 survey, The Sacks Advertising Agency reported that 94% of respondents said, “Mass availability to the general public is diluting the word luxury.” (Agency Sacks 2004) The luxury market today is not just for High Net Worth Individuals, it has indeed become less obtuse and more multidimensional. Aspirations, defined as a “hope or ambition,”10 are relative to luxury goods and are those products a consumer would like to have, but which for them is not economically possible to acquire. Due to the production of imitation products, mass availability of certain products; as well as rising incomes, the aspirational luxury good is more attainable than ever before. As discussed by Silverstein and Fiske (2003, p.51), “Middle market consumers are trading up.” Consumers making more than £25k annually are seeking more aspirational goods to enhance a more balanced lifestyle. Businesses have begun to cater to this, recognizing the enormous profits that await from exploitation of this growing market segment. Silverstein and Fiske go on to say (2003, p.54) that, “New luxury leaders have an abiding belief in the elasticity of demand. These supply side factors make it possible for entrepreneurs to raise capital to research, develop and manufacture goods quickly and cost effectively, and for companies to scale up volume when demand increases.” The über luxury segment is still not easy to define, über is German and literally means, “Over, super, higher.”11 Therefore this segment is the worlds truly super wealthy. Marilee Crocker (2007, p. 19) writes that, “You simply cannot pigeonhole the luxury consumer. These so called super rich are growing rather than declining, globally. In 1985; there were 14 billionaires in the U.S., today there are roughly more than 1,000. The super rich reside at the top of the net wealthy scales, where they are defined by wealth of $30 million.” The über luxury demographic are classified as High Net Worth, having $1 million in assets, or Ultra High Net Worth Individuals having $30 million in assets. “High Net Worth Individuals in 2006 comprised 9.5 million individuals, an 10 11 18
  • 19. 8.3% increase over 2005, and Ultra High Net Worth Individuals totaled 94,970 in 2006, an 11.3% increase,” year over year. (Cockerell 2007) Table 2.7a and Figure 2.7b show the growth in wealth in different countries. Table 2.7a Numerical Representation of HNWI Growth Country 2005 (ʻ000) 2006 (ʻ000) Annual Change USA 2669 2920 9.4 Japan 825 NA NA Germany 767 798 4.1 UK 448 485 8.1 China 320 345 7.8 Canada 232 248 6.9 Australia 146 161 10.3 Brazil 109 120 10.1 Russia 103 119 15.5 India 83 100 20.5 Source: Adapted from: Merrill Lynch & Capgemini 2007 cited in Cockerell 2007, p.10 Figure 2.7b Growth in no. Of HNWI Source: Merrill Lynch & Capgemini 2005/2006 cited in PWHC, Milburn & Hall 2007, p.4 19
  • 20. The über rich are the driver of demand for the worlds finest customer service. Crocker writes of a “particular fondness for one-of-a kind hotel luxuries that are custom made, personalized and truly expensive.”(Crocker, 2007) Wealth in this sector is coming from emerging markets such as Russia, China, and India. Crocker writes that, “Globally 9.5 million people have more than $1 million in financial assets. In emerging markets, their numbers and wealth are growing faster than the U.S.”(Crocker, 2007) Di Paice (2008 cited in 2008) writes that a luxury brand is “shaped by the price of the high-ticket items that the luxury purchaser consumes.” Admakers International, a South African advertisement agency gives a good example in this respect. This agency handles only über luxury products. Duan Coetzee, Chair for Admakers (Coetzee 2008 cited in Paice 2008) says there is a “difference between a luxury good, as viewed by the regular marketplace and what über luxe consumers see as a luxury good for them, a Mont-Blanc pen costing £320 is not a luxury, it’s an expensive pen, but it’s not a luxury brand. The very rich use Mont Blanc as everyday pens.” Admakers CEO, JP Fourie (Fourie 2008 cited in Paice 2008) says that, “Our definition of über luxe starts at a price point of approximately £16,500.” Todays’ trend, therefore; is that affluence equals demand. This demographic is demanding more in the way of exclusivity of products and services, “The super rich demand exclusive one of a kind hotel and travel experiences, access to restricted locales and events; personalized service; pampering; fastidious attention to detail, and privacy, such habits will include crewed yacht charters, private island rentals, villa vacations and private jet safaris.” (Crocker, 2007) 20
  • 21. 2.8 Defining the Über Luxury Hotel Über luxury hotels are as distinct from luxury hotels as a Porsche is from a Ford. There is a clear division of hotels into what a Price Waterhouse Coopers study written by Milburn and Hall, ( 2007, pp.5-6) quantifies as “super luxury brands; middle market luxury brands; and boutique and designer lifestyle luxury brands.” These über luxury hotels have average daily rates from €370 per night at the La Bonne Ḗtape in Provence to €950 per night at Le Club de Cavalière & Spa on the Mediterranean Coast of France, and are differentiated by a price point which enables exclusivity of the brand to be maintained. (See Appendix B for Hotel Terminology.) In addition, über luxury hotels can be characterized by badges of distinction, such as a Five Diamond AAA rating, a Michelin Star rating, a AA 5 Star Rating (See Appendices D-G), as well as association with and mention in such prestigious publications as Andrew Harpers, Condé Nast Travel, Travel and Leisure and the Robb Report. Figure 2.8: Avg. Cost of Most Expensive Suites Source: Get A Room. The Wall Street Journal Europe 2007 cited in The Luxury Briefing. 2007, p.15 The current economic condition appears to not have affected affluent travel spending. The ILTM (International Luxury Travel Market) Industry Report 2007; has presented evidence that affluence is shielded to a degree from economic downturn. Cockerell (2007, p. 3) states that, “Current luxury travel market comprises approximately 3% of all tourism arrivals, globally, and that the high end or affluent portion of the market, is exhibiting growth at approximately 10-20% annually.” In addition, affluent travelers are trending towards certain destinations. The Mediterranean is a destination at the top of the list, both for the European and North American affluent set. Destination favorites include Italy and the Côte d’ Azur in France. Exotic destinations are in high demand as well. The ILTM industry report by Cockerell (2007, p.24) states “affluent travelers will spend as much as $50,000 (£25,000) to rent an Island for 1 night in the Maldives. “ It is the emerging markets which are showing the most economic potential for growth relative to demand for the most expensive hotels. According to Cockerell (2007, p.10), “Russian and Indian High Net Wealth have grown 15% and 20.5%, respectively, leading the world demand for super luxury goods and services.” The example in Figure 2.8, shows the average cost of the most expensive 5 star suites globally, and is representative of the price points associated with über luxury hotels. 21
  • 22. 2.8.1 Affluent Hotel Guests and Value for Money Relationships with affluent customers are no easy task, and hoteliers are constantly seeking new ways to manage them within the newly defined über luxe segment. Affluent customers perhaps are not as loyal as some, due to the desire for new experiences. Hotels must meet this new demand to have a chance at keeping loyal guests, therefore, “Lessons learned in the über-luxury category can be used to woo this new customer as the landscape of luxury changes.”(Paice 2007) Value for money is an important factor for affluent hotel guests. Greg Ward (2008) of The von Essen Collection, confirmed “The über luxe customer is indeed looking for value for money.” Value for money in these terms might mean tangible or intangible. Luxury hotel customers won’t consider for example fancy bathroom amenities such as lotions value for money, because with luxury, it is probably something they are already using on a daily basis. In a 2006 study, shown in Table 2.8.1a, by the Luxury Alliance (Forrester Research Inc. 2007 cited in McManus et al., 2007), which focused on the importance of value in the luxury sector, targeting those with net worth of $1 million or more noted, “More affluent travelers than mass-market consumers may be brand-loyal, but they’re equally price- focused.” (McManus et al. 2007) Table 2.8.1a: Value In The Luxury Sector Survey Affluent who Agreed Mass-market who agreed Travel is an area in which I’m willing 59% 34% to indulge myself I would pay more for products that 51% 39% save me time and hassle I am willing to pay above-average 50% 35% price for noticeably better-quality travel products and services When buying leisure/personal 41% 28% travel, I consider myself to be brand-loyal Source: Adapted from: Forrester Research Inc. 2007 cited in Luxury Alliance, McManus et al. 2007, p.7 22
  • 23. Luxury awareness not only comes with affluence, but it is a state of mind, as Figure 2.8.1b by Bernstein (1999, p. 3) illustrates: “value for money lies somewhere in between the mind set and the luxury stimuli.” Figure 2.8.1b: Intersection of the Luxury Mindset Source: Bernstein, L. 1999, BC ³ White Paper-Luxury and the Hotel Brand [online], p.3, Available from: http:// [Accessed: 22.7.2008]. 2.8.2 The Importance of Relationships with Affluent Consumers The importance of relationships with affluent customers cannot be understated, especially in the new class of über luxury hotels. Greg Ward of von Essen Hotels (2008) discussed relationships as “long-term prospect, nurtured over time.” Andrew Sacks of Agency Sacks in New York, gave a speech to the Leading Hotels of the World Conference in Monte Carlo 2008. Sacks (Sacks 2008 cited in Frank 2008) discussed two key points for managing relationships with affluent consumers: 1. Respect Your Customer: “They have earned their money, they are smart and they are demanding. They are also regular people usually. The wealthy got that way by being good stewards of a business and of a dollar. Respect their respect for money. If you price it high, deliver value.” 2. Use Their Personal Networks: “Word of mouth is the real driver of sales among the rich. The power of personal networks can be far more important than advertising. Give your customers a good experience with things they can talk about and they will. If you want to sell to the rich, deliver true luxury, just don’t use the word.” 23
  • 24. 2.8.3 Experiences and Emotions Are Important To Affluent Guests Affluent hotel guests have the financial freedom to seek the ultimate in experiences, and have strong affinity towards “emotionally fulfilling experiences which is a defining trait for today’s über luxury travelers. They (affluent customers) yearn for participatory experiences that are engaging or enriching, and that give them bragging rights. More than anything, this is what drives todays luxury travel consumer.” (Crocker 2007) Therefore it can be assumed that access to large sums of money keeps the barriers to experiencing the best in luxury to a minimum. Barsky and Nash (2002 p.43) quantitatively proved that there is a direct link to how much more a guest would pay to stay at a luxury hotel again, if key emotions were met during their stay. Barsky and Nash (2008, pp.43-44) concluded from the study, on the luxury hotel sector, that if affluent guests felt, “Pampered, relaxed, and sophisticated during their stay, they would be willing to return again and spread the positive word of their stay amongst their friends.” In addition, guests who experienced these emotions, would be willing “to pay on average $13 more in rate to stay again, compared to $3.43 for those who didn’t experience these emotions,” (Barsky & Nash 2008), in addition, experiencing these emotions will lead to increased brand loyalty, with according to the study, “lead to an 88% intent to return to the hotel.” (Barksy & Nash 2008) See Fig. 2.11.3. For example, on the back page of the Sunday Time Rich List 2008, of which the von Essen collection were a major sponsor, a full page advertisement regarding the von Essen Helicopter fleet, says, “The von Essen experience begins long before you arrive.”12 Page 69 in the Sunday Times Rich List 2008 also shows a smaller advertisement which simply states, “Fairy tale settings for the most magical day of your life-enchanting interiors, breathtaking panoramas, superb cuisine and a meticulous service that’s totally professional and personalized.” 13 Regis Perruchot, Hotel Business Director for Splendia Hotels (Perruchot 2007 cited in PWHC Milburn & Hall 2007) says that, “Exclusivity is considered to be a luxury, but everything that is seen as luxury, is not necessarily exclusive; price is not the issue, the uniqueness and singularity of the experience is the key.” Greg Ward (2008) mentioned, the importance of managing and fulfilling client experiences as critical to building long-term relationships with the von Essen brand. “Customizing each individual experience is vital to brand equity, you just can’t bottle the experience.” (Ward 2008) Therefore, we can see that experiences can create an emotional tie to the brand, and could lead to increased brand equity. 2.9 Über Luxury Service Standards: What is Expected Über luxury hotel guests, wether on business or pleasure value time, and are seeking a stay which maximizes their time, and look to the staff of these hotels to provide an expected level of service. Marilee Crocker (2007, p.22) writes that, “Affluent travelers demand personal service, pampering, attention to detail. They’re paying top dollar, so they deserve a little name recognition.” The challenge for hoteliers is to consistently fulfill these expectations, and when these expectations are not met, the consequences could be damaging due to among other things, negative word of mouth, which in turn could lead to an erosion of existing brand equity. 12 The Sunday Times Rich List 2008 13 Ibid 2008 24
  • 25. Rising wealth leads to an exponential rise in expectations of service delivery, and the burden of increasing levels of service to match these new expectational levels become a new critical factor for long-term success of the über luxe hotel brand. Affluent hotel guests expectations are high, and when they arrive, the staff face a tough task to not only provide what is expected, but to deliver above and beyond with minimal mistakes. Dr. Barbara Talbott14 (2006, p. 8) writes, “In a 200 to 300 room luxury hotel, there will be as many as 5,000 interactions between guests and staff per day; in other words, thousands of opportunities for high performance and for mishap!” When one looks at the luxury hotel industry, today’s service standards took shape with the César Ritz model of anticipating customer needs to meet and exceed customer expectations. He developed the idea of discreet familiarity with a luxury clients habits-in order to fulfill repeat customer expectations. Having trained staff is critical in carrying this mode of service out, as all levels of superior customer service begin and end with quality staff. Siguaw and Skogland (2004, p.221) wrote in, Are Your Satisfied Customers Loyal? “The factor that caused guests to be most involved in the purchase decision (and therefore more interested in the hotel) was its employees.” Guests in über luxury hotels look for not only the usual accouterment such as smartly dressed staff, luggage whisked away to the room in the blink of an eye, they also expect a level of service that is above all else, personal whilst unobtrusive. Über luxury guests also seek, knowledgeable, professional displays of expertise, as well as; service that is capable of delivering a sense of the brands exceptional experiences, the brand prestige, as well as a sense of feeling at home. Wether the client is a CEO or simply leisure traveller, the level of consistent service will create long term brand equity. Mr. Isadore Sharp, Chair and CEO of the Four Seasons Hotel Group,(Sharp 1998 cited in Sherman 2007, p.25) stated that luxury, “Isn't just building a different kind of building and adding more amenities; it comes through the service element.” Rachel Sherman provides a great case study in, Service and Inequality in Luxury Hotels. Sherman does some behind the scenes work in two super luxury city hotels to develop a portrait of the staff who provide service to affluent guests. In her book, Sherman (2007, p.24-25) interviewed a spouse of a CEO, a frequent visitor of some of the best luxury hotels in the world which provides an example of top notch luxury hotel service: “Well, their linens, and the services, and they bring things, they’re just so accommodating. They go out of their way to make you feel like you matter....................And to be taken care of and to have somebody do things for you in a way thats better than your mother.” 2.9.1 Discreet Service Unobtrusive and discreet service provided by staff at über luxury hotels is an art. To be able to anticipate customer needs, and recognize when these clients seek interaction can be a difficult task, but one that is paramount to providing successful service. “Hotel staff must be equally good at being discreet-knowing when affluent guests wish anonymity and don’t want recognition.”(Mann, 1993) An acquaintance of the author, well placed within British and Edinburgh Society further explains, “the service that is afforded to you upon arrival and during ones stay is fantastic, 14Barbara M. Talbott Ph.D is The Executive Vice President of Marketing for The Four Seasons Hotels and Resorts Group and a Member of the Advisory Board of The Center for Hospitality Research. Her customer service work has centered on how companies can profitability meet customer needs through differentiation, innovation and effective marketing. (The Center For Hospitality Research-Cornell University 2006) 25
  • 26. however; once the staff doesn’t relent because of who you are, it begins to become embarrassing!” (Anonymous 2008) When interacting with staff, affluent customers have certain expectations. For some there is a sense of entitlement to service, after all, the room rate is being paid by them, however; the snobbery that can often be associated with über luxury, can be exactly the opposite to what affluent guests want. In her study Sherman (2007, p.210) spoke to a customer who said, “I prefer service that is quick, unobtrusive, not fawning.” Sherman (2007, p. 210) writes, “Guests definition of luxury service focused on workers authentically legitimating guests’ entitlement without drawing attention to it.” The art of subtlety goes a long way towards customer satisfaction. In my conversation with Greg Ward (2008) as well as with property General Managers (2008) within the von Essen Collection, discussed was the common theme of “providing the best in luxury service, whilst removing snobbery” as an important component of von Essen culture. A key component of offering discreet customer service is for staff to have been trained in the art of intelligence. In other words, the entire staff from housekeeping, to front desk, to the butler, all should be equally adept at listening to what customers prefer, and desire, as well as; what their needs are. The success of intelligence gathering can be measured by increased market share (as measured by RevPar), and competitive advantage gained through reputation amongst repeat customers, who will form a base for business for years to come. Sherman (2007, p. 33) writes, “Needs anticipation also entails reading the guest’s demeanor, picking up subtle clues to predict needs and desires. Guests appreciate needs anticipation.” 2.9.2 Personalized and Sincere Service Having service provided on a level that is personal is an expectation of the affluent guest. Sherman (2007, pp.44-45) writes, “Violations of the sense of authenticity, as well as a sense of rote behavior, rupture the guests’ sense that their individual self is being recognized. Hotel staff should make the service highly personal by recognizing the guest, consistent name use is a benchmark of the luxury hotel industry.” The von Essen collection provided the same for the author whilst on visit to Cliveden House. Upon arrival at the hotel, the staff were right there the minute the taxi door opened, and after minimal exchange with the front desk manager, the staff magically used “Mr. Heim” as if I were a familiar face, thus fulfilling a rule of top service, personalization. Personalized service is important to affluent guests for many other reasons, chief among them is time. Talbot (2007, p.7) writes, “The pace of life, its opportunities and challenges has accelerated in ways that even successful people find difficult to control.” What super luxury hoteliers are seeing is a trend that time is affecting spending habits of their affluent guests. Thomas L. Friedman (2005, p.237) wrote about the “ten forces that flattened the world, such as the fall of the Berlin Wall and September 11, which fostered new global competitive models.” In other words, the business ethos of today is much more global, and leisure travelers, as well as business travelers have much less free time due to the pressures in this new multidimensional business environment. Checking into an über luxury hotel is a signal that with limited time, the traveller wants a personal level of service, a genuine sense of being cared for, away from the stress of everyday life. The Luxury Alliance, a consortia composed of several leading über luxury companies, publish an annual Paper on the State of the Luxury Hotel Industry. The groups 2007 effort discusses amongst many topics, personalized service. McManus et al. (2007, p.9) mention that, “In this climate of enhanced affluence, guest relations call for progressively higher levels of personalization, sparking a rise in concierge services as a key focus of CRM.” In other 26
  • 27. words, the staff at these properties are utilising more detailed conversation with potential clients relative to room selection and services at the property. McManus et al. (2007, p.9) go on to say, “There is a direct correlation between increased concierge services and guest spending which is clearly visible; most frequently, a reservation placed with a concierge will encourage buying up and consequently be of significantly greater value.” Affluent travelers are also seeking positive human interaction, and sincerity. After all, looking beyond the wealth, they are travelers looking for experience and relaxation as the rest of us might. Jones et al. (Jones et al. 1997 cited in Sherman 2007) wrote, “An emphasis on positive human interactions are a crucial feature of luxury.” Wealthy customers realise that there is a fine line between appropriate conservation with staff members; however, they are seeking a normalcy that often might not be representative of their outside lives, hence the choice to stay at a particular hotel. Great service, at the über luxury level begins with staff that are genuinely interested in providing sincere service. Isadore Sharp (Sharp 2005 cited in Talbott 2006) said, “We hire for attitude. We want people who like other people and are, therefore, more motivated to serve them. Competence we can teach. Attitude is ingrained.” In the authors previous role in the luxury hotel industry, one realised that affluent customers could be fickle, and that trust was paramount in building relationships on a long-term basis with clients. There was always a quid pro quo, a mutual trust tied to the sincerity of our service. It really comes down to perceptions, as Greg Ward (2008) mentioned to the author, “We are after all in the service industry, we should remember that.” 2.9.3 Anticipatory Service: CRM Anticipation of customer needs began with César Ritz, and is still important today. During the authors conversation with Greg Ward, we discussed the importance of repeat customers and the impact successful delivery of customer service and experiences has on the bottom line. One of the most important components of customer service in any organisation, particularly within the über luxury hotel segment, is the ability to anticipate your customers needs. Mr. Ward (2008) to wit, mentioned that, “Guest recognition is a key factor, contributing to our ongoing success.” Priscilla Alexander (Alexander 2006 cited in Talbott 2006) writes, “Great service feels less like an old fashioned butler and more like a personal assistant. It takes the right personality to do this, intelligence is important. Confidence, too. The service person has to appear at the right time and know what’s required. You receive what you need, but you’re not conscious of exactly how that happens. When you feel that you can depend on the service to anticipate but not intrude, it allows you to fully relax.” A component called e-CRM-(See Appendix C)-which is relevant to the data capture of a guest(s) details, includes more than simply a telephone number and name. In order for staff to be able to anticipate customer needs, they need access to other details about repeat customers, such as a favorite wine, or a certain type of coffee one prefers in the morning, perhaps there is a note that a client orders a certain meal every third day of a five day visit. Whist these details might seem trivial to some, the importance here cannot be underscored. E-CRM will be developed by the author as a suggested initiative later in the work. 27
  • 28. Über luxury guests look for value for money, and that is not always something that is tangible. Service levels are expected, the best amenities are expected, and not necessarily luxury because they are used every day; the value for money comes; for example, when a guest is approached before dinner, by the sommelier and is told, “Mr. Smith, will you be having the usual 1977 bottle of Chateaux La Tour with dinner?” By anticipating that Mr. Smith might or might not want his usual bottle of claret, the sommelier has provided a genuinely unexpected surprise, by approaching the client with the intimate knowledge of his favorite wine, the staff member has anticipated that Mr. Smith might want that wine, therefore Mr. Smith becomes even more relaxed because that is one less item he has to think about, it has already been taken care of. The long term significance of this exchange is that Mr. Smith, already a repeat customer has had his brand equity reaffirmed, and what is more important, the resulting positive word of mouth message Mr. Smith could take to his own social circle, which could in turn lead to new business for the hotel. The value for money is that Mr. Smiths’ time is spent relaxing, not pondering over a lengthy wine list. 2.10 Defining Service and Measuring Successful Delivery The service industry crosses many sectors, from airlines to hotels to restaurants. Providing some understanding of the topic, lends scope to understanding the expectations of guests at über luxury hotels. Service occurs on a physical and psychological level. There are two popular methods for measuring successful customer service; The,Grönroos Service Quality Model (Grönroos 1984 cited in Hofman et al. 1996) in Figure 2.10a, identifies two components of quality, that of outcome and delivery. Delivery is “the manner in which the core service is transferred to the customer” and outcome is “the core service that the consumer receives.” (Grönroos 1984) Figure 2.10a Grönroos Service Quality Model Source: Grönroos 1984 cited in Hofman et al. 1996, p.35[online], Available from: desire/quality/quality.pdf [Accessed: 28.7.2008]. The second popular model in use for measuring customer service is Parasuraman’s SERVQUAL or Gap Model, (Parasuraman 1985 cited in Hofman et al. 1996) See Fig. 2.10b. This model was introduced by A.Z. Parasuraman in 1988 as a 22 item scale to be use for measuring quality. The model, works by looking at 5 dimensions of service; “Reliability, Assurance, Tangibles, Empathy, and Responsiveness; it measures pre-purchase and post buy customer perception to derive a measurement of quality; the difference between customer expectations and customer 28
  • 29. perceptions, is the outcome hoteliers will look at to see if there any gaps which need to be addressed.” (Parasuraman, 1988.) Hotels could find this tool useful, if used in a pro-active fashion to measure customer responses to service experienced, the data will reveal any gaps, and enable hotels to make adjustments as needed. Hotels for example will develop and provide guest satisfaction surveys. What is measured will be actual results versus the top percentage in a given category, for example, greeted with a smile? The measurement is looked at in percentages with a negative result showing a gap in service levels, and a positive result equalling service levels that have met or exceeded the top percentile. (Parasuraman 1988) Figure 2.10b Parasuraman’s SERVQUAL/Gap Model Source: Parasuraman 1985 cited in Hofman et al. 1996, p.37[online], Available from: metadata/desire/quality/quality.pdf [Accessed: 28.7.2008]. 2.11 Measuring Successful Hotel Customer Service The Hotel Industry has several ways of measuring successful customer service. The main source of data is customer satisfaction surveys. These are provided either at the front desk, or electronically on the hotel website or by email. In addition, if hotels use distribution channels, part of the service provided by these channels is some form of customer satisfaction survey process. For example, Relais & Châteaux-(See Appendix K), as well as Condé Nast Johansens-(See Appendix L), provide satisfaction survey forms to hotels; who in turn give them to guests to post to Relais & Châteaux or Condé Nast Johansens, who then provide data back to the hotels. Hotels of course can derive their own satisfaction survey forms. Hotels do use forms of Parasuraman’s SERVQUAL; however, another form which bears mention and has been used in the authors experience in the United States is the Apostle Model, developed at Harvard Business School. Additionally, another overall measure of hotel success, of which customer satisfaction will play a key role is the use of RevPar, which is a measure of successful market share growth, and a concept, whilst beyond the scope of this paper, is important in so much as it is directly linked to rate and occupancy growth, which is linked to successful customer service and experience delivery. 29
  • 30. Often, as happens in the case of smaller hotel groups, there might not be a customer satisfaction measurement tool in place, so they will utilise outside companies to assist in gathering data for customer satisfaction measurement. There are many companies providing this service such as Market Metrix and UKCSI (United Kingdom Customer Service Institute). (See Appendix R for more on this topic) 2.11.1 RevPar RevPar15 -(See Appendix B), is a measure for hotels, which indicates market share in comparison to an identified competitive set. It’s usefulness in this discussion is that increased market share is a direct result of increasing room rate and occupancy versus ones competitors, which, is a direct result of among other factors, delivery of quality of service. STR Global produces both DaySTAR and STAR-(See Appendix B), reports daily/weekly/monthly 16 for hotels to track this data. 2.11.2 The Apostle Model The Apostle Model-(See Appendix N), in Figure 2.11.2a (Heskett 2008, p.122) and 2.11.2b (Barsky & Nash 2007, p. 1), is a very powerful analytical tool which could help hotels measure customer satisfaction and service levels. It was developed at Harvard Business School. In this model, customers are “Segmented into four quadrants with the titles of loyalists, hostages, mercenaries, and defectors. Questions are then created to measure attitudes relevant to customer satisfaction, a measurement scale will be used from 1 to 10, with 10 being highly satisfied, as well as likelihood to stay at your hotel again.” (Barsky & Nash 2007) 15 Defined: as revenue per actual room. room.html 16 30
  • 31. Figure 2.11.2b Customer Satisfaction & Loyalty Source: Adapted From: Barsky, J., Nash, L. 2007, What Percent of Your Customers Are Loyalists? [online], Available from: [Accessed: 14.7.2008]. Figure 2.11.2a “A. Satisfied Customer is Loyal” Source: Adapted From: Barsky, J., Nash, L. 2007, What Percent of Your Customers Are Loyalists? [online], Available from: [Accessed: 14.7.2008]. 31
  • 32. 2.11.3 The Importance of Measuring Customer Emotions Customer perception in any industry is not to be overlooked. In the hospitality industry, particularly the über luxury segment, customer perception is vital to the success of hotels in retaining valuable customers and developing future business, and guest emotions help to form those perceptions. Barksy and Nash, (2002, p.29) wrote that, “The emotions a guest feels during a hotel stay are critical components of satisfaction and loyalty, and that emotional responses created by hotel products enhance our understanding of satisfaction and our ability to predict guest loyalty.” Often hotels, for example; will provide guest satisfaction surveys, whilst these surveys serve a valuable purpose in providing data to identify gaps in service levels, more often than not, they are not inclusive of allowing a guest to speak to ones emotions, as the relate to the experience of his or her stay. Barsky and Nash (2002, pp.40,44,46)-See Figure 2.11.3, were able to conduct a study which derived “three key emotions for each hotel segment: luxury, upscale, extended stay, mid price, and economy.” The study was meant to establish the likelihood that the guest would stay at the hotel again, and how much of an increase in price they would be willing to pay to return, based on loyal emotion. The importance of this study is that über luxury hotels could achieve higher levels of occupancy and profits by utilising customer service measurements that also address guest emotions toward their stay as well as towards the brand as a whole. Loyal guests are often hard to predict in the luxury sector of the hotel industry. The author experience has been that measuring this loyalty is difficult at best due to a constant desire by these clients for something new at each visit. Hotels need to be at the top of their game in the über luxury sector. Utilising factors which can help a hotel to measure the complete success of its service standards could be of assistance when looking to grow profit as the study suggests. Relais & Châteaux and Condé Nast Johansens provide satisfaction surveys in printed collateral available at properties associated with these two brands. After studying each survey, the author notes that in each, there is little if any reference to customer emotional experience. Most questions contained in each survey refer to the physical stay, and lack an emotional measure. The Relais & Châteaux survey says that, “We would appreciate it very much if you could take the time to complete this questionnaire. Your comments will enable us to offer you even better services and to fulfill all your wishes,” (Relais & Châteaux 2008), which demonstrates the importance which is being placed on this information. Donna Sturgess (2008, p.34) writes that, “It is vital for companies to understand that every customer relates to a brand on an emotional level, and these emotions can trigger or block purchases. It is imperative for companies to gain full sight into customers’ feelings and translate them into an emotional strategy.” Lewis Carbone (2008, p. 37) writes that, “Customers are often unable to articulate their deepest feelings. That’s why companies need to go to the trouble of working with them to find out what’s driving them toward or away from a brand.” Whilst these emotions are indeed quite difficult to get at and perhaps even to measure, über luxury hotels could help their own competitive advantage by utilising these loyalty emotions as valuable components in staff training and overall company strategy. Hoteliers should find ways to gain complete insight into their guests’ emotional experiences and derive effective strategy from those measures. 32
  • 33. Figure 2.11.3 Market Metrix Determination of loyalty emotions by segment Source: Barskey, L., Nash, L. 2002, Evoking Emotion: Affective Keys to Hotel Loyalty-Market Metrix Motel Emotions Scale, Cornell Hotel and Restaurant Administration Quarterly, New York, Exhb 1,6, p. 40,44,46 33
  • 34. 2.11.4 Industry Recognition of Service Quality The hotel industry possesses several awarding bodies which gauge the level of quality at a hotel and/or its accompanying restaurant. These badges of distinction are a form of recognition which the seasoned traveller might seek as part of his or her decision making process when choosing where to stay. In particular, affluent travelers will seek out UK über luxury hotels that have gained AA “4 to 5 Black Stars, or the coveted Inspectors Choice Red Star”17 , or restaurants with “3 or more Rosettes” 18. In the US, like consumers will look for properties that have attained at least “One Michelin Star”19 in its restaurant, or “AAA 5 Diamonds.”20 (See Appendices D, E, F, G for further explanation.) 2.11.5 A Benchmark: The Ritz Carlton Model of Service Über luxury hotels in seeking to develop a set of top notch service standards can look to a market leader for inspiration. A leader in customer service delivery to affluent guests, the luxury hotel company, Ritz-Carlton was awarded the Malcolm Baldrige National Quality Award for its Total Quality Management Program as far back as 1992. In doing so, it became the first hotel company, indeed one of only a handful of service related businesses to receive this award. (Partlow 1993) Ritz-Carlton holds training for service as well as non-service executives to teach them the methodology behind its service delivery, which is held at the Ritz-Carlton Leadership Center21 . This approach is referred to as The Ritz-Carlton Gold Standards. (See Appendix A for further explanation.) 17 18 Ibid,2008 19 20 21 34
  • 35. CHAPTER 3. The Von ESSEN COLLECTION 3.1 Von Essen Hotels: The Great British Manor House The von Essen Collection of hotels was established in by 2002 Mr. Andrew Davis. It is a private company, which was incorporated in the same year. Mr. Davis also owns other companies which have direct correlation with the collection as a whole, and which provide additional services for its clientele. These companies which are also part of the long-term strategy of the collection include; von Essen Aviation Ltd., PremiAir Aviation Group Ltd., and The London Heliport Ltd. and Straight 8. (See Appendices H, The Collection & Appendix I, von Essen Strategy). The von Essen collections primary “passion” according to its Founder and Chairman, Andrew Davis, “is for great British houses, beautiful landscapes and fine art, so ensuring their joys are conserved for the delight of our guests and the benefit of future generations.”(Davis, 2008) The portfolio is predominately country houses as well as some historical castles, varying in size and age. In addition, von Essen is developing its first modern hotel in London, to be completed sometime in the summer of 2009. The company is continually seeking to expand its portfolio and has already done so very quickly. Its goals are to expand into mainland Europe, more specifically into France and Italy. To wit, the von Essen Collection has added the Châteaux Bagnols in Burgundy to its collection. The collection is part of the Relais & Châteaux brand, which is a distribution and marketing network, composed of some of the finest hotels and restaurants in the world. The von Essen collection contains seven hotels which have become part of this brand. In addition the collection has 3 restaurants which have gained the famed Michelin Star; Waldo’s at Cliveden; The Restaurant at Sharrow Bay, and The White Room at Seaham Hall. Von Essen has been recognized from such travel notables as Andrew Harper, and Condé Nast Johansens, as well as other forms of recognition such as UK AA Black and Red Star Ratings of no less than 3 Black Stars per property. Some of the key performance indicators, of von Essen Hotels (2006, pp. 22-23 and 2008, pp.36-37) are shown in Table 3.1. Table 3.1 von Essen KPIs Von Essen 2004 2005 %∆ 2006 %∆ 2007 %∆ KPI’S Turnover £42.20 £42.72 1.21% £50.13 17.36% £56.80 13.31% Gross Profit £34.88 £36.06 3.37% £42.14 16.87% £48.77 15.73% Operational £9.28 £10.02 7.97% £13.01 29.84% £15.11 16.14% Profit Net Profit £5.02 £5.39 7.37% £5.60 3.90% £6.12 9.34% Source: Adapted from: and http:// 35
  • 36. The von Essen mission statement is as follows: “von Essen is a private company that shares with its customers the experiences offered by some of Britain's best country house hotels in the most beautiful locations. It is setting precedents in the provision of quality and style through a programme of relentless investment in places and people.” (Davis 2008) The von Essen collection is unique in that each property is completely different from the other. Von Essen properties, according to Mr. Davis (2008), “Are peerless in terms of quality and the breadth of character that defines each individual and unique hotel.” The author was able to visit four of the properties in the collection; the Dalhousie Castle; Cliveden; Lower Slaughter Manor; Washbourne Court, and can attest to the unique differences at each hotel. As Greg Ward (2008) noted during our meeting in June 2008, “Your experience at each property will be completely different.” The current portfolio consists of twenty-nine properties, primarily in the United Kingdom, and a property in France. Adding to the uniqueness of the brand, the portfolio is segregated into 4 segments; The Classic Set; The Country Set; The Family Set; The Continental Set; and the Metropolitan Set. The von Essen collection has also stretched its brand to add value to the collection overall, into products that are linked to the lifestyle its affluent guests seek. These include PremiAir, which is a private jet hire, and Straight 8, which is a private car hire service for luxury auto enthusiasts, or for those want a chauffeur in a luxury car, such as a Rolls Royce Phantom. These hotels are unique in that part of each hotel is a singular dining experience not like any of the other sister hotels in the collection. The collection currently does 45% in food and drink turnover, annually according to Greg Ward (2008); however, this is not “unusual for hotels which are 40 rooms or smaller.” 3.2 Research Interviewee Feedback For this work, the author chose the von Essen hotel collection as the case study component. This is truly a unique collection, and not only symbolic of the über luxury hotel market as a whole, but symbolic of the uniqueness that affluent consumers are seeking when fulfilling their experiences whilst traveling. (See Appendix J: Sample Interview Questions.) The author interviewed the following individuals representing the von Essen Collection; • Mr. Greg Ward22 • Ms. Alison Mathewson 23 • Mr. Matthew Saxton 24 • Mr. Andrew Thomason 25 22 Executive Director of Sales and Marketing for von Essen Hotels Collection 23 General Manager Dalhousie Castle, Part of the Country Set 24 General Manager Washbourne, Part of the Country Set 25 General Manager Lower Slaughter Manor, Part of the Classic Set 36
  • 37. The goal with interviews was to develop an understanding about the individuality and culture of each hotel, as well as; the customer service levels at each property. The author conducted the interviews beginning with Mr. Greg Ward, the head of sales and marketing for von Essen, and then followed with individual property visits, and interviews with property General Managers. Interviews were conducted at each property, and with Mr. Ward at Cliveden House Hotel, the flagship property of the von Essen Collection. 3.2.1 Customer Experiences All interviewees, agreed that the customer experience was a key factor in von Essen customer service. As Greg Ward (2008) said, “You can’t bottle the experience. Our goal is to provide the best in experiences no questions asked.” During the authors discussion with Mr. Ward (2008), discussed were ways in which von Essen are seeking to deliver the ultimate experience, such as PremiAir, a private jet and helicopter service, Sraight 8, a luxury private car hire, and chauffeur hire; and the von Essen spa experiences, currently of which there are 9, with the goal to expand to approx. 15-20 in the future. In addition Mr. Ward discussed the dining experiences of von Essen as part of the customer experience, such as having a “foodie” experience at Waldo’s or a completely different experience at The French Room, both at the Cliveden House. Often smaller luxury hotel brands will co-brand, to add value for the guest, this can be a dangerous tactic, one which might dilute the brand. Jill Granoff, (2008, p.255) writes that, “Small luxury hotels have created enticing, luxurious, intangibles that resonate with their customers. I think that an umbrella strategy could actually stunt rather than increase the company’s profit and revenue growth, the best brands forge an emotional connection, capturing share of heart as well as share of mind.” Mr. Ward, (2008) was very clear that whilst von Essen is providing the ultimate destination experiences, particularly by offering these different unique services, there “is no co-branding happening, and the individuality of each property is important, and is what makes this brand unique to our guest. We want our properties to stand on their on feet” The property General Managers, all identified and agreed with this aspect of the von Essen culture. 3.2.2 CRM and Capturing Guest Data All interviewees, agreed that capturing key customer data was a critical measure that needed to get better to ensure the continued delivery of top notch customer service, particularly anticipating customer needs, one of the most important elements of the best in quality service, and one which affluent customers of über luxury hotels seek and consider value for money. Ms. Mathewson (2008) of Dalhousie Castle noted, “We do use guest feedback comments to help in training our staff, however, we could do more to capture key customer data, which would enable us to deliver even better service levels.” In the authors opinion this is critical for Dalhousie as the hotel is repositioning the brand to capture more exclusive and valuable market segments. Mr. Thomason (2008) of Lower Slaughter Manor mentioned that, “We do capture basic info once our guests check in, the challenge becomes when we loose that data once the client checks out-we would love to be able to have a better system of guest data capture.” Matt Saxton, (2008) is capturing Guest data through different avenues, such as providing an entry form to win a Jeroboam of Laurent Perrier Champagne, on the form guests provide details such as e-mail, telephone, postcode, etc. Greg Ward (2008) said, “Guest profiling is something we need to get better at, across the brand, CRM should be something we need to get up to speed on.” Therefore, a CRM initiative of some type would be most welcome. 37
  • 38. All General Managers interviewed expressed welcome for more visible support due to the speed of growth within the company. It was generally acknowledged that von Essen is indeed growing very quickly, and that it was vital that infrastructure be in place to support such growth. The author noted from several General Managers the fact that there are at the least 7 different operating systems, which could inhibit CRM initiatives from effective implementation. Whilst this can be a source of frustration, it is important to note that an IT support system, including a PMS system (See Appendix B) should be part of an overall CRM initiative. Implementation of a unified PMS, such as Micros Fidelio could benefit the CRM overall, however; the system must be allowed to mesh with each individual properties needs, as each is unique in size and offer. From the authors own experience with automation, it isn’t always the answer. You can’t remove the human element from any automation, as the machines simply cannot contemplate the happenings in the real dimension. If, and when CRM becomes part of a brand culture, then successful integration is more realistic. 3.2.3 The von Essen Service Standards Beginning with Mr. Ward, (2008) and universal with each General Manager (2008) it was an important part of the von Essen service standard to deliver luxury without snobbery. This concept is developed earlier in the paper as several studies have shown that affluent consumers wish to have discreet unobtrusive service. Speaking with an acquaintance who is well placed in British and Scottish Society confirmed this on a personal level. At each property, one could tell that the best in service was important, but in the same sense, from a guest perspective, a bit uneven in delivery. Matt Saxton, (2008) says that, “Washbourne Court is approximately 50% of the way to getting our customer service levels up to where they need to be. Hotel culture is critical, as is getting staff buy-in. We want to raise our customer service standards above and beyond what is expected, this will help with increasing levels of guest loyalty.” Matt is attempting to personalize service by providing a personal welcome letter for each guest of the hotel. It was noted that measurement of service levels, is important for the future success of the brand. What is needed are the tools and training to assist in this endeavor. All the General Managers face challenges with staffing. Having visited four properties, the theme was dominant at least with three of them. As in the authors own experience high levels of staff turnover in the industry is the rule rather than the exception, and keeping consistent, familiar face staff levels year on year is not always possible. This makes it difficult to train new staff on consistent delivery of customer service. This is what effective CRM initiatives could do to help this notion. By having some sort of von Essen CRM model in place, with flexibility for each property to utilise as needed, the Property General Managers would have a helping hand whilst helping new and existing staff to reach the von Essen standard of delivering the best in customer service, leading to more consistency of the brand message for hotel guests. 38
  • 39. 3.2.4 Access versus Exclusivity Greg Ward, (2008) spoke to the author about the relationship with different distribution channels and maintaining exclusivity of the brand. According to Mr. Ward, (2008), “Rate integrity is important to the brand. Our hotels couldn’t survive on the incremental revenue that distribution channels provide. However, our association with Relais & Chateaux-(See Appendix M) is our most beneficial relationship as they provide the most benefit, not only in incremental revenue generation, but in positive word of mouth and association with a brand synonymous with the best in luxury.” Mr. Ward, (2008) went on the say that, “The mix is important.” The brand, the author noted is working hard at balancing the mix of leisure with high end corporate group business. In fact, Alison Mathewson, General Manager at Dalhousie, (2008) is currently working very hard with her team to reposition the hotel to more profitable mix of leisure and corporate business, as Mr. Saxton (2008) is also doing at Washbourne Court. 39
  • 40. CHAPTER 4. CONCLUSIONS & RECOMMENDATIONS 4.1 The Case for a von Essen CRM Implementation After speaking with von Essen General Managers, there was an awareness of rapid growth; as well as, a consensus on needing to get better at profiling valuable repeat customers, as well as the need for an overall system which would assist in delivering superior customer service. Greg Ward (2008) of the von Essen collection feels that, “CRM and profiling is something we need to get better at as a group, and should do more of.” Brassington and Pettit (Brassington & Pettit 2000 cited in King & Burgess 2008) write that, “CRM has developed as an approach based on maintaining positive relationships with customers, increasing customer loyalty, and expanding customer lifetime value.” Doole & Lowe (2004, p.326) define CRM as “a program with defined management processes and procedures to enable staff throughout organisations to capture and use information about their customers to maintain and build relationships.” The goal of any von Essen CRM initiative should center on first, customer acquisition through an appropriate value proposition from the marketing team; and customer retention which will occur from superior service, and a long-term relationship built by targeting the most valuable market segments for von Essen Hotels. The CRM system will utilise ICT (Information, Communication and Technology) to capture key guest data to enable von Essen to develop a personal relationship with guests. CRM will consist of several factors as Swift (Swift 2001 cited in Ngai et al. 2008) writes: 1. Customer Identification 2. Customer Attraction 3. Customer Retention 4. Customer Development All of these components have a greater job as a whole, to create an in depth understanding of hotel guests so that maximum potential is reached over the long-term. These so called data mining techniques will enable von Essen to extract key guest demographics, which will enable the brand to add value to the guest experience through enhanced needs anticipation, as well as; helping the organisation to ensure the most profitable guests are allocated appropriate capital spend from the marketing departments, for continual capture of loyal guests and to develop new repeat business. While there would be some discussion about a single system for all properties due to each having unique individuality and complete autonomy, an overall CRM system could be implemented and each property could retain complete autonomy and tailor it to their needs. The following CRM benefits adapted from Chen & Chen (2004, p. 338), would benefit von Essen Hotels • Greater customer satisfaction, through offering a better service. • Greater business coherence, defining corporate objectives linked to customer satisfaction. • Managing to increase the number of customers and secure greater loyalty thanks to the reorganization and computerization of business processes surrounding the new business opportunities. 40
  • 41. • Knowing how to segment customers, differentiating profitable customers from those who are not, and establishing appropriate business plans for each case. • Increasing the effectiveness of providing customer service by having complete, homogeneous information. • Lower costs. • Sales and marketing information about customer requirements, expectations and perceptions in real time. • Increased RevPar and Profits In addition, customer satisfaction surveys should be utilised, including web based and hand written, as part of an e- CRM component (electronic customer relationship management) to be used as part of an overall CRM campaign. These surveys should take into account the entire guest visit, including measure for both experiences and emotions. In addition, an effective CRM SOP could be developed with the flexibility for each property to keep its individuality and adapt the model to its needs. Figure 4.1 is a conceptual model for CRM implementation. 41
  • 42. Figure 4.1 von Essen CRM Initiative Conceptual Model Source: Some Content Adapted for use from: Sage CRM Inc. 2008, SAGE CRM SOLUTIONS/17 Rules of The Road for CRM [online], Available from: [Accessed: 1.8.2008]. 42
  • 43. 4.1.1 Measurement of CRM Effectiveness The von Essen group, upon implementation of a potential CRM solution, should seek to ensure measurement of its key components to ensure long-term success of the model. The following, while not exhaustive, are crucial to the success of such a program, and a pro active approach towards measurement of any perceived gaps in service, should be adapted in the CRM provision. The Gap measurement will be equal to the difference between actual results and the target. Results should be examined as a percentage, with negative percentages being identified as a performance gap, whilst positive percentages should be identified with either meeting or exceeding the target. Process Measurement • Marketing • Sales • Services Customer Service Delivery Measurement • Guest Relative=Value, Satisfaction, Retention and Loyalty Organisational and Staff Measurement • Culture • Change Management • Management • Communication, Follow-up • Effective Leadership 4.1.2 A (CRM) Scorecard According to Wilkins et al. (2007, p.850) use of an effective “CRM scorecard would enable a hotel to touch all key points of the Customer Relationship Management System to ensure quality delivery across all levels.” Addressing any perceived gaps in delivery or utilisation of the system would optimise its effectiveness. To ensure successful implementation of a CRM solution, von Essen should watch for the following problem areas adapted from (Strauss & Frost 2002): • Thinking that technology is the solution: Removing the Human element from the system, letting the machine do all the work. • Lack of management support due to a lack of knowledge about the opportunities offered by CRM • Lack of Customer centric focus • Lack of vision and strategy. • Not redefining processes. As with other technological projects, it is necessary to redefine the business processes for achieving the desired results • Poor data capture • Not managing the change properly. Change management programmes are a neccesity in CRM implementation which in turn is linked to the company culture. • Not Getting Staff buy-in at all levels. The system needs to display benefit to the user first, so the value can be added later for the guest. 43
  • 44. It is imperative that any CRM initiative must be viewed as not simply implementing software, as the adage says you can’t throw money at something and expect miracles. It is important that small hoteliers seek to manage and measure the success of these initiatives. A potential measure could be implementation of a CRM scorecard, which the author proposes to adapt in Figure 4.1.2, based on ideas discussed by Hyung-Su Kim and Young-Gul Kim (2008, pp.1-13) Figure 4.1.2 Conceptual Model of a von Essen CRM Scorecard Source: Some Content adapted for use from: Su Kim, H., Gul Kim, Y. 2008, 'A CRM Performance Measurement Framework: Its Development Process and Application,' Industrial Marketing Management, pp.1-13 44
  • 45. 4.1.3 E-CRM (Electronic Customer Relationship Management) A component of an effective overall CRM program should be e-CRM (electronic customer relationship management). E-CRM is composed of pro-active hotel electronic data capture systems which could be either a hotel PMS (Property Management System) and/or hotel web sites. Effective us of an e-CRM component, is linked to superior customer service by enabling hoteliers to effectively profile their guests, which in turn leads to increased repeat business, conversion of one-off into repeat guests, better ability to anticipate customer needs, as well as provide key components of customer service such as name recognition. Additional benefits include, assisting the von Essen brand marketing teams to target key customers in its business mix, as well as being able to identify and correct proactively any guest complaints. (Mendoza et al. 2007) Within a CRM Strategy, it is important to know who the most profitable clients are, and how to establish customer loyalty from them. Through proper data analysis of guest history, a hotel should be able to find out who the most loyal guests are, thus enabling the hotel to direct the proper amount of marketing spend toward their retention. The following e-CRM strategy is derived from industry study (Roh et al. 2005), (Su-Kim & Gul-KIm 2008), (Mendoza et al. 2007), (King & Burgess 2008) and can be adapted to a potential von Essen solution The von Essen e-CRM strategy should contain the following: • Customer Knowledge • Superior Customer Service • Personalization • Efficient Marketing • Building Customer Loyalty Effective data capture will be derived from the following sources: • PMS (Property Management Systems). • The von Essen Web Portal. • Central Reservations. • Any additional Points of Sale. • Front Desk/Receptionist. The benefits of an effective von Essen e-CRM strategy could be the following: • Reservations able to identify customers which hold the most value, referring not only to the number of stays, but ancillary revenue generated by repeat customers, referred to in industry as RevPor26 or revenue per occupied room. • RevPar Growth. • Improved Levels of Repeat Business. • Improved anticipatory customer service delivery. • Staff better prepared at time of bookings, and arrivals, and more efficient at anticipating customer needs. 26RevPOR: includes not only the room rate itself, but also any extra services such as room service, laundry and in- room movie viewing. “The total revenue received per room is a more full expression of how much the company is receiving per customer. Is used by analysts to determine the total revenue and profit potential of a company.” http:// 45
  • 46. • Quicker lead times to market. Capturing the following data could prove the most beneficial: • Guest Histories: past stay records, ancillary spend histories. • Guest Profiles: e-mail address, mailing address, telephone numbers, employment, place of residence. • Guest Preferences: Food and drink preferences, newspaper preferences. • Valuable demographics for marketing and revenue management teams to assist with market mix and Revenue Management Strategies. Additional added value for guests from a von Essen e-CRM strategy initiative could be: • Increased interaction with guests through social media platforms. • Enable von Essen staff to generate pre-arrival e-mails and post stay thank you e-mails which will strengthen relationships with existing and new guests. • Generation of Guest satisfaction surveys by way of e-mail or as an interactive component of the von Essen web portal. • Reservation confirmation e-mails. The von Essen collection could derive a measurable ROI by the following: • Increased web site conversion rates not only from leisure segments, but conversion of RFPs (Request for Proposals) into firm contracts for group business, as a derivative of e-mail marketing campaigns, and up-selling to identified valuable market segments. • Increased click throughs and conversions on the von Essen web site. • Increased profits derived from increases in repeat guests. The author suggests that a von Essen initiative to implement an e-CRM solution should include the following components: • Home office support initiatives for all properties which would include: ✔Staff support collection wide for such an initiative, derived from an effective change management program-to include a head office training program for the properties, tailorable to a properties individual needs. E-crm is data mining, and “sorts and gives meaning to all information regarding the client, both chronological and complex, allowing it to be shared with the concerned parties within the company.” (Turban et al. 2006) As Mr. Ward (2008) explained in our meeting in that, “Customer profiling is something we need to get better at as a group, and is a vital initiative moving forward.” In addition all interviews with property General managers backed up the need for capturing customer data. Indeed, Mr. Andrew Thomason (2008) of Lower Slaughter manor noted, “We log customer names and addresses, but we loose that data when the customer leaves. It would be important to us to be able to capture more customer data.” 46
  • 47. 4.1.4 Capturing Customer Loyalty The economic value of customer loyalty, the direct result of a successful CRM programme, should be one of the cornerstones of any hotel strategy and cannot be underestimated, especially for small über luxury hotels. Even nominal increases, year on year in repeat guests could result in positive PR from word of mouth marketing, as well as increased profits and RevPar growth. Hotels often study customer satisfaction to measure service success. The difficulties arise from the notion that satisfied guests aren’t always the most profitable ones. Heskett et al. (1997, p.22) conducted a study which found that the “link between customer satisfaction and customer loyalty was the weakest relationship in their service profit chain model.” The study showed that, “40 percent of those rating a hotel satisfactory would come back, whilst those rating a hotel stay very satisfied would return to visit 90 percent of the time.” (Heskett et al. 1997) Industry studies have shown that customer loyalty has a direct correlation to increasing hotel profits. Frederick F. Reichheld and W. Earl Sasser (Reichheld & Sasser 1990 cited in Reichheld et al. 2008) studied 9 different service sectors, in Zero Defections: Quality Comes To Services, and in their estimation, derived that a small increase of “5% in customer loyalty can yield increases in profit by as little as 25% to as much as 85%.” Loyal guests then have a distinct and measurable economic value. Kotler et al. (Kotler el al. 1996 cited in Bowen & Shoemaker 2003) derived that a “ loyal customer of a luxury hotel who returns and spreads positive word of mouth has an NPV of more than $100,000.” Tie into these principles Paretos’ Principle, which says that, “80 percent of your new business will come from 20 percent of existing business.”(Reh 2008) and you have measured evidence that loyal guests are critical to the success of small über luxury hotels, such as von Essen. Figure 4.1.4 by Peppers and Rogers (2004, p.5) shows graphically the Lifetime Economic Value of Repeat Guests. Figure 4.1.4 Lifetime Economic Value of Repeat Customers Source: Carlson Marketing Group 2004, CRM ROI Blueprint 2004; How Customer-Focused Strategies and Solutions Drive Productivity, Profitability and Growth [online], Available from: 8/6e8bfb86-6a04-4cc9-9c9a-abecb8cb1332/CRM_ROI_Blue_Print.pdf [Accessed: 17.7.2008]. 47
  • 48. 4.1.5 Economic Value of a Repeat von Essen Customer After meeting with three von Essen General Managers as well as the head of sales and marketing, a common theme was the importance of long-term relationships with clients, and the importance of having effective guest data capture to enhance these relationships. The author proposes a model which will help to quantify the economic value of a repeat von Essen guest. The model addresses the following attributes: ✔ Room revenue which is calculated as total room nights x average room rate ✔ Ancillary revenue, which is additional revenue generated per guest exclusive of room rate. The author will address this ancillary revenue growth in terms of dining in the hotel restaurant, in this case The Terrace Room at Cliveden House. ✔ Total potential room revenue generated by a 12% increase in repeat customers year on year. Note: There are many other factors which could effect positively effect this potential revenue growth: ✔ Additional Breakfast and Lunch Covers ✔ Revenues from Room Service, Bar Service, Spa ✔ Marketing Costs to Retain guests, Marketing Costs to Acquire Guests 4.1.6 Economic Value of a von Essen Loyal Guest: A Hypothetical Model The Scenario Cliveden House is a 38 Room property with 75% occupancy. 25% of this occupancy are repeat guests with an average length of stay of 2.5 nights. The Hypothesis Question: What would be the result if Cliveden grew its loyal customer base by 12% in the next full year? Room Revenue Growth By increasing its repeat customer base by 12% year on year, Cliveden House will generate an additional 312 room nights, thereby generating room revenue of £147,576 based on a £473 average room rate, taking place over a Friday and Saturday night. The revenue is derived from room rate only, exclusive of breakfast and any other extra add-ins. Ancillary Revenue Growth Variables Explained (Calculations Adapted from Bowen & Shoemaker, p.43, 2003) • Cliveden House sells 10,403 room nights in a year based on 75% occupancy with a capacity of 38 rooms. The author is using The Terrace Room as part of this scenario. • Loyal customers will account for 2,601 of the total room nights, their portion of the 75% total occupancy percentage. 48
  • 49. • An increase of 12% in repeat guest for Cliveden House will generate an additional 312 room nights, equalling 125 visits to the property. • Repeat Guests will buy dinner 1 more time per 2 visits. Therefore Cliveden House would sell 63 more dining occasions. • If an average table equals 2 covers, (covers=number of guests), The Terrace Room would serve then 126 more dinners. • If the average customer bill for the Terrace Room is £178, which includes 2 prix fixe dinners at £59 each and 1 bottle of red wine at £60, the Cliveden House would realize additional revenue of £22,428. (Bowen & Shoemaker, pp.43-43, 2003) The combination of room revenue and ancillary revenue will generate a total of £170,004 potential revenue gained year on year due to a 12% increase in repeat guests. Figure 4.1.6 provides a visual model to illustrate the revenue growth as outlined. 49
  • 50. Figure 4.1.6 von Essen Model-a 12% increase of repeat business Source: Calculations adapted for use from: Bowen, J.T., Shoemaker, S. 2003, 'Loyalty a Strategic Commitment',Cornell Hotel and Restaurant Administration Quarterly, pp.42-43. 50
  • 51. 4.2 Conclusion The market has seen what Olgivy (2007, p.13) calls the “democratization of luxury.” Luxury has lost its exclusivity and industry has been forced to redefine that exclusivity into an über wealth category, depicting those of High Net Worth, with $30 million in assets. In addition, formerly exclusive brands have spread their access through lower price points by developing what Olgivy (2007, p.13) calls “entry level goods.” Über luxury hotels which face this democratization of luxury, are facing new challenges to differentiate in the market to maintain a balance of exclusivity and access. These hotels are utilising selected distribution channels, such as Relais & Châteaux to grant some access to the mass public, whilst maintaining brand perception with its affluent customers. As worldwide affluence continues to grow, the demand for newer and greater experiences will exponentially grow. Über luxury hotels will need to keep proactively differentiating through the consistent delivery of superior customer services, which focus on the whole aspect of service; not just on expectations, but experiences and emotions as well. Barsky and Nash quantitatively and qualitatively proved the economic benefit to hotels of measuring emotions as part of the experience. Über luxury hotels can generate competitive differentiation as Michael Porter (1996, p. 62-64) illustrates, • A company can outperform its rivals only if it can establish a difference that it can preserve • Competitors can quickly imitate management techniques, new technologies, and input improvements. • The most generic solutions, those that can be used in multiple settings diffuse the fastest • Competitive strategy is about being different, choosing to perform activities differently or to perform different activities than rivals. In the authors experience, it was never useful to simply copy ones competition, the key to successful RevPar growth was differentiation, doing things differently than the market, which led to long term sustainability of the brand. Here, Porter is speaking to the idea of remaining market oriented, and not internally driven. Successful über luxury hotels can differentiate through superior services and experiences; which will act as a catalyst for increasing profits, market share (RevPar), repeat guests, and long-term profitability of the brand. What is the future of the über luxury hotel? Affluent guests are loyal so long as their expectations are being met consistently. Studies have shown that affluent customers desire not just the best money can buy, but when it comes to über luxury hotels, there is a feeling of “general entitlement” (Sherman 2007), however these consumers are looking for more; they are seeking value for money, they are seeking levels of service that are unobtrusive and genuine in nature, they want to feel relaxed and away from the normal hustle and bustle normally associated with those levels of wealth, and hotels which can consistently deliver these standards, will continue to grow profit and market share. Studies have shown that there appears to be “no slow down in über luxury consumption for the forseeable.” (Milburn & Hall 2007.) Über luxury hotels will need to ensure that there is a loyal guest base, as studies have proven their economic value, from a revenue standpoint and from a word of mouth, positive PR point of view. We examined the reduction in costs for keeping a loyal customer long term as marketing capital is not as high for them, and we further derived the economic value of repeat guests for von Essen by exploring a hypothetical model of a small percentage increase of repeat business year on year. 51
  • 52. There are tools über luxury hotels can utilise to ensure repeat business. An effective Customer Relationship Component with a smart guest data capture process will help to ensure that staff continue to fulfill and exceed affluent guest expectations through problem resolution and anticipation of guest needs. It is important that these hotels see CRM as a long-term investment toward strengthening brand equity, and not simply throwing capital at a problem. Effective change management support from the head office, with a program for training, will ensure implementation success. It will be important if von Essen were to undertake such an initiative that they ensure flexibility for each individual property, with the allowance that such an initiative would be tailorable to each hotels needs. Luxury is no longer viewed as a corruptive vice. Ancient political thought and philosophy were an early interpretation of consumption and overindulgence. The wisdom of Adam Smith and David Hume and the economists of the seventeenth and eighteenth century brought to the forefront the idea that the demand for luxury goods would benefit all by creating jobs with the net effect of building both individual and national wealth. Even during the eighteenth century and its grand opulence, expressed as lavish gatherings at some of the grand hotels of the day in Geneva and Paris, provided a demand that Ritz and Escoffier exploited to the betterment of hoteliers and restauranteurs today. Über luxury hoteliers realize there is a psychological association with goods as aspirations, and experiences. Greg Ward of von Essen (2008) indeed spoke of providing experiences that the guest wants, and thus “fulfilling aspirations which in turn lead to long term relationships with the von Essen brand.” Mr. Ward (2008) also spoke to perceptions when we talked of providing luxury without the snobbery. Studies have shown that affluent guests want unobtrusive and sincere service, not the opposite. The goal of this dissertation was to take a look inside of one of the truly unique collections in Europe, von Essen Hotels. The authors objective was to delve into the collections ideology and culture from the inside as a guest and from the outside as an industry expert, with eight years of hotel experience. By being able to stay at several properties and by experiencing the service in both accommodation and dinning, the author was able to derive some possible suggestions for improvement of an already excellent brand, and to experience first hand the levels of service provided by von Essen staff. In conclusion, the über luxe market segment will more than likely exist for quite some time. Of course there is the chance the word might loose its exclusivity as well, however; the chances are slim as $30 million in net assets is the starting point, and growing. We may already be seeing a glimpse of the change with the first 7 Star award given to a hotel in Dubai. As Olgivy (2007, p.13) best expresses this new balancing act between exclusivity and availability, “Putting it bluntly, how to appeal and sell to both the Shanghai secretary (who provides much of the profits) and the Park Avenue Princess (who provides much of the glamour).” (Olgivy, 2007) 52
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  • 62. WEB SITES 62
  • 63. APPENDICES 63
  • 64. APPENDIX A: Ritz Carlton Gold Standards Ritz Carlton Gold Standards27 The Credo and Motto are as follows: “The Ritz-Carlton 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 ambience. The Ritz-Carlton experience enlivens guests, instills well-being, and fulfills even the unexpressed wishes and needs of our guest.” “At The Ritz-Carlton Hotel Company, L.L.C., We are Ladies and Gentlemen serving Ladies and Gentlemen. This motto exemplifies the anticipatory service provided by all staff members.” (Ritz-Carlton Company L.L.C 2008) The Ritz-Carlton has been measured by industry standards utilising the AAA Diamond Awards whereby a hotel must meet and exceed certain criteria to be awarded certain levels of quality. The relevance for über luxury hotels is that obtaining a 5 diamond award is a stamp of recognition within the industry, and carries influence with the affluent customer, and by providing the very best in service, these awards can serve as a differentiator for the brand in the marketplace. Thus far in 2008, Ritz-Carlton has been awarded 5 diamonds to 19 hotels. Our Gold Standards are the foundation of The Ritz-Carlton Hotel Company, L.L.C. They encompass the values and philosophy by which we operate and include: • The Credo • The Motto • The Three Steps of Service • Service Values • The 6th Diamond • The Employee Promise   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 ambience. • The Ritz-Carlton experience enlivens the senses, instills well-being, and fulfills even the unexpressed wishes and needs of our guests. 27 64
  • 65. Motto At The Ritz-Carlton Hotel Company, L.L.C., quot;We are Ladies and Gentlemen serving Ladies and Gentlemen.quot; This motto exemplifies the anticipatory service provided by all staff members. Three Steps Of Service • A warm and sincere greeting. Use the guest's name. • Anticipation and fulfillment of each guest's needs. • Fond farewell. Give a warm good-bye and use the guest's name. Service Values: I Am Proud To Be Ritz-Carlton • I build strong relationships and create Ritz-Carlton guests for life. • I am always responsive to the expressed and unexpressed wishes and needs of our guests. • I am empowered to create unique, memorable and personal experiences for our guests. • I understand my role in achieving the Key Success Factors, embracing Community Footprints and creating The Ritz-Carlton Mystique. • I continuously seek opportunities to innovate and improve The Ritz-Carlton experience. • I own and immediately resolve guest problems. • I create a work environment of teamwork and lateral service so that the needs of our guests and each other are met. • I have the opportunity to continuously learn and grow. • I am involved in the planning of the work that affects me. • I am proud of my professional appearance, language and behavior. • I protect the privacy and security of our guests, my fellow employees and the company's confidential information and assets. • I am responsible for uncompromising levels of cleanliness and creating a safe and accident-free environment. The 6th Diamond Mystique Emotional Engagement Functional The Employee Promise • At The Ritz-Carlton, our Ladies and Gentlemen are the most important resource in our service commitment to our guests. 65
  • 66. • By applying the principles of trust, honesty, respect, integrity and commitment, we nurture and maximize talent to the benefit of each individual and the company. • The Ritz-Carlton fosters a work environment where diversity is valued, quality of life is enhanced, individual aspirations are fulfilled, and The Ritz-Carlton Mystique is strengthened. 66
  • 67. APPENDIX B: Glossary of Hotel Terminology Table B Glossary of Hotel Terminology Average Daily Rate: The Best Rate Available Every Day at Each Hotel RevPar: Revenue Per Available Room, Calculated as number of rooms x Occupancy percentage RevPor: Revenue Per Occupied Room, Additional Revenue Per Guest exclusive of Room Rate Competitive Set: A group of like hotels which compete for similar or same market segments Lead Time Guest Satisfaction Survey: Surveys given to guests either written or electronic to measure level of satisfaction with hotel services, amenities. Should include emotional measures. PMS: Property Management System. A system hotels use to manage data such as reservations, guest history, and billing. Examples include Micros Fidelio, and Springer Miller Distressed Inventory: Inventory that is left unsold at a property Shoulder Nights: Dates surrounding sold out nights, often contain distressed inventory Soft Periods: Dates were booking demand is slow, often historical in nature, often due to seasonality STAR Report: Produced by Smith Travel. Measures hotel RevPar or market share index on a weekly, monthly, and running total index in comparison to an identified competitive set, and versus own hotel results compared year on year. Demand: The number of enquires made for a reservation. Can be either constrained or unconstrained. Even if the reservation is not converted to a sale, the demand or number of calls can help a hotel to measure how much demand is in their immediate market. Hotels can then adjust strategy, such as placing minimum length of stays or increasing/lowering room rates to capture the excess/lack of demand. Yield Management: The science of Revenue Management. A strategic science which manages, and optimizes all room and food/beverage revenue coming into a hotel or group of hotels. Hotel revenue management teams are a strategy team that directs overall hotel strategy to maximize profits from both leisure and group related business. 67
  • 68. APPENDIX C: CRM Terminology Table C CRM Terminology CRM: Customer Relationship Management. Is a customer focused business strategy that dynamically integrates sales, marketing, and customer care service to create and add value for the company and its customers. (Chalmeta 2006) E-CRM: Refers to the use of the Internet and IT applications to manage customer relationships by way of data capture to assist in targeting a hotels most valuable customers. Enhances staff service levels by enabling staff to utilise guest data to anticipate customer needs. (Jelassi & Enders 2005) Click Through: The act of a customer visiting a web site and clicking through to additional view additional services on the site-not a conversion. (Jelassi & Enders 2005) Conversion: After a series of click through, measured as a click through that converted to a purchase of a good or service by way of a web portal. (Jelassi & Enders 2005) Social Media: Various formats of online or electronic communities where users can discuss common topics. Facebook is an example. (Jelassi & Enders 2005) Viral Marketing: Electronic Word of Mouth Marketing.(Jobber & Fahy 2006) Data Mining: A way in which to use technology and electronic points of sale information to improve knowledge of customers.(Doole & Lowe 2004) Internet Marketing: The achievement of marketing objectives through the utilisation of the Internet and web- based technology. (Jobber & Fahy 2006) 68
  • 69. APPENDIX D: AA UK Standards 28 The AA is a body in the United Kingdom which awards from 1 to 5 Black Stars for achieving a set of quality standards, as well as; the sought after Red Star signifying best in class. In addition, AA Rosettes are awarded for achieving high levels of quality in Restaurants, as part of the hotel. The UK and AA mutually establish the measurement standards for the organisation. The process for evaluation is approximately the same for both hotels and restaurants. To gain any level of AA recognition, the applying property must achieve a minimum score of at least 50%. Über luxury hotels should be in the five star range, however, many hotels in this genre obtain four stars. Five star attributes would include the most luxurious of accommodation and public areas. Guests are always greeted as well. In addition there is a yearly red star given to each hotel in its class, which is recognition by AA as standing out. There is clear distinction between being awarded three stars in comparison to four and five stars. ( 2008) APPENDIX E: Rosette UK Standards 29 The AA Rosettes are awarded annually to AA inspected restaurants for the quality of their food. Hotels in receipt of these awards will be comparable to the best in the world. Those classified here will be “highly individual, with breathtaking culinary skills. In addition there will be a top distinctive wine list.” 30 Greg Ward (2008) mentions the fact the one of the ongoing von Essen marketing objectives is to “market the culinary destination aspect.” Rosettes certainly aid this message. Andrew Thomason (2008) spoke about the difference between simply having 2 rosettes versus gaining a third. “There is a large gap in perception between the two, and obtaining the third is takes your restaurant to a different level. The perception the customer will develop is a direct correlation to the number of Rosettes garnered. Mr. Thomason (2008) notes, that once you obtain that third rosette, you will do all that is necessary to keep it! The damage to the brand comes when and if you loose a rosette.” To wit, Lower Slaughterhouse Manor just acquired a third Rosette during the authors visit. 28 29 Ibid, 2008 30 Ibid, 2008 69
  • 70. APPENDIX F: AAA United States Standards 31 The US model, set by the AAA agency has a two step system which rates for quality. It begins with the AAA evaluation, which if passed, will garner the hotel a AAA approved designation, which stands for quality backed by the rating. (AAA 2008). The Process then moves to a hotel or restaurant being assigned a one to five diamond award. Über luxe properties would be five diamond range which would be synonymous with luxury properties. Five diamond hotels are seen to possess the best in luxury sophistication. The physical attributes are top notch in all standards. Service will be meticulous, guest expectations are exceeded as a rule, and words such as impeccable will reflect the service standards on offer. There are also going to be very personalized services, as well as a multitude of amenities such as plush bath robes, and the best in bathroom amenities by brands such as Phenhaligons or Bulgari. Each Hotel must apply to receive an evaluation by AAA. Upon receipt and acceptance of said application, the property seeking designation will be visited by a team of AAA inspectors, unannounced of course to begin the process. The criteria are so stringent, the following excerpt explains it; “representing the upper echelon of the hospitality industry, AAA 5 Diamond Award Winners make up just 0.027 percent or 1,620 of the 60,000 Diamond rated lodgings throughout the United States.” 32 31 32 Ibid, 2008 70
  • 71. APPENDIX G: Michelin Star Standards 33 Restaurants either on their own or part of a hotel can be awarded one to three Michelin stars. These are given in acknowledgment of the finest cooking, with the award being only concerned with what is on the plate, and does not include service in the component. However, what is important here is in the five criteria used by Michelin to award a star: the quality of the product; the mastery of flavor and cooking; the personality of the cuisine; the value for money; the consistency between visits. Ratings are given out from 1 to 3, with 3 being the ultimate and rate prize. The ratings are so strict, that is why affluent customers acknowledge the award. Über luxury hotels are often associated with this type of award, as the distinctiveness is the best. As Matthew Saxton, General Manager of the Washbourne Court Hotel (2008) points out, “We would welcome a Michelin Star in our restaurant. Our clients, those clients von Essen seeks, will recognize the Star, without question, acknowledging the level of dining experience they will receive.” Greg Ward of von Essen (2008) was keen to note that, “An important part of marketing the von Essen brand is the dining experience.” Inside of von Essen printed collateral, we see images and hints of the dining experience, “The restaurants in the von Essen collection of luxury hotels rank among the finest restaurants in the UK.” (Davis 2007) 3 of the collections restaurants have gained the fabled Michelin Star Rating, Cliveden’s Waldos, Sharrow Bay, and the White Room at Seaham Hall. As part of this research, the author was able to dine at Waldo’s at the Cliveden House, a Michelin Star Restaurant. Observations are that the food and service were up to specifications of the award. Beginning at pre-dinner drinks, the pace was unhurried and discreet as well as elegant. Dress was smart for men which added to the experience. The creativity of the food was very evident, and the bonus was that even though the Michelin Star criteria for evaluation is food centric, Waldo’s met and exceeded my expectations for customer service. The important conclusions drawn from this brief analysis of industry recognition as they pertain in this case to über luxury hotels, the language of the Michelin Star ratings gives us a clue. Words like quality, mastery, personality, and value for money, as well as consistency between visits, are all critical success factors of superior customer service. Even though the Michelin Star judges only the cuisine on offer, the components of its measurement are at the very heart of über luxury service standards that affluent travelers seek. In addition, we have noted the value that über luxury hoteliers place on some of these ratings. The notion that there aren’t even 1% of US hotels with a five diamond designation points to the type of distinction affluence commands. This might all beg the question, are AA Star and AAA Diamond ratings overused, as the word luxury became overused? Today, some of these über luxury hotels, are now being designated as 7 Stars or Diamonds. Lower Slaughter Manor had just gained a third Rosette, and the author notes that the quality of service, food was on par with Waldo’s. So perhaps a Michelin Star is not all things to all people, although we have identified that it adds some semblance of value to an über luxury hotel property concerning perception. Hoteliers, however, should look beyond the ratings and derive added values for affluent guests to keep them coming back. 33 71
  • 72. APPENDIX H: The von Essen Collection 34 1. Classic Set This set contains a total of ten hotels, in varying locations throughout the United Kingdom. This collection contains six properties which carry the Relais & Châteaux brand. The author was able to visit and stay at the Cliveden and Lower Slaughter Manor for purposes of this work. In addition, it is within this collection that three hotel restaurants have the coveted Michelin Star. The author dined at Waldos at Cliveden for purposes of this work, as well. 2. Country Set This collection consists of eleven properties classified according to Mr. Davis as “quintessential English country retreats.” (Davis 2008) These hotels offer a unique style, as the author experienced at Washbourne Court. There is a relaxed informality to the experience here, generating a home away from home feel. This informality is in line with Greg Wards comments from our meeting in June, and was a theme in my discussions with different General Managers throughout the collection, “Providing luxury without the snobbery.” 3. Continental Set This collection is newly established as von Essen seeks to grow in mainland Europe. There is only one property, yet it is quite renowned and is the Châteaux de Bagnols in Burgundy. This property has the Relais & Châteaux brand as well as being set within a distinctive winery. 4. Family Set The Family set contains six hotels in varying locations within the United Kingdom. This is a unique set, and one which caters to the Family Experience. Greg Ward mentioned as well during our meeting that one of the key marketing initiatives for von Essen Hotels is to continue to drive business towards families and the über luxury experience. 5. Metropolitan Set This collection is currently just composed of one property, and will be built on properties as the name implies, located in metropolitan city settings Currently, this is a new venture for the collection, taking it away from the traditional English Manor House and historic castle mode, and into a modern, new build scenario. The new hotel will be called the Hotel at Bridges Wharf Battersea. This property is going to be quite unique in that according to Greg Ward, it will be positioned as a 4 Star property due to its competitive set and expected clientele. 34 Davis, A., et al., von Essen hotels: A Private Collection, von Essen hotels, England. 72
  • 73. APPENDIX I: the von Essen Strategy The von Essen strategy is both varied and diverse, and reflective of Andrew Davis’ vision. During my meetings with Greg Ward, discussed were several key success factors for the collection; such as, key components of service excellence and optimising the customer experience. In addition, Mr. Ward (2008) pointed out just how important it was to get “the mix of business right.” Business Mix refers to the physical mix of hotel business, which is a percentage of group/conference plus a percentage of leisure/one-off business. This is adjusted according to a hotels budgeting needs, competition, as well as other factors. • Business Mix Regarding Mr. Wards commentary, the von Essen collection has realised the importance of the proper mix of business at each hotel. It is the understanding that the affluent customer, both new and loyal form an important part of the business, and Mr. Ward acknowledged as such, “Our hotels of course could not survive on for example incremental business, which might come in at lower rates, as rate integrity is important to our business and to our customers. We are continually going after the upper tier of the group market segments, such as the high end corporate business.” Other important components of the von Essen mix, and an overall part of the company marketing strategy is the Family Segment. As we have noted, von Essen has created its Family Collection wherein six distinct hotels reside which cater to families the entire von Essen experience. Along with this unique collection of Family oriented properties, von Essen according to Mr. Ward are keen to marketing the total destination experience to potential clients. The total destination experience means that a von Essen hotel will offer everything from the very best in dining, to the ultimate Spa experience, to arranging private transportation from the fleet of luxury automobiles, to arranging transportation in a private helicopter or jet, in other words the “ultimate destination experience.” Indeed in conversations with the hotel General Managers, each one supported the common theme of property mix, and the importance of getting it right. Two properties in particular, Washbourne Court which underwent full renovation due to the flash flooding in the Cotswold region, and lost a great deal of business due to that misfortune and is attempting to reposition itself to a new clientele, and looking to secure more in the way of high end corporate business; to Dalhousie Castle outside of Edinburgh, which is in the process of repositioning itself from a solely wedding destination, which was a generator of much lower rated business, into more of a higher rated, high end corporate and high paying leisure destination. The General Manger of Dalhousie, Ms. Alison Mathewson mentioned that the property were looking to engage and secure the upper end of corporate, executive and director meetings, and to mix with an appropriate percentage of leisure, and then fold in the wedding business. • Further Initiatives Further initiatives will be the development of more Spas for hotels, along with a unique offering centered on a “concierge idea.” Mr. Ward (2008) explained this could be a unique concept, which would “utilise a combination of the Straight 8 luxury car collection, the von Essen helicopter fleet in a model whereby, affluent clients who don’t wish to say fight traffic to go into London to shop, can arrange through von Essen a helicopter to pick them up at their 73
  • 74. estate, transport back to the von Essen helicopter port in London, where a chauffeured Rolls Royce Phantom will whisk one away to shop, where von Essen has already arranged for the shop to expect the client ahead of time.” Figure I is an interpretation of the von Essen strategy. The model is created by the author taking in context most of the ideas from the 2008 von Essen company report. The author added a few other dynamics to the model such as specific reference to the mix as discussed above and to RevPar, which as previously discussed is the measure of a hotels market capture relevant to a measured competitive set. Improving the mix at the von Essen properties will not only lead towards improved revenue generation, both long and short term, but will directly lead to improved RevPar and market penetration measures. Figure I von Essen Strategy Source: Adapted For Use From:: 74
  • 75. APPENDIX J: Sample von Essen Interview Questions • How would you define über luxury? How does von Essen market the ultimate luxury experiences? • What does the future hold for the super luxury niche? • Given the current economic turndown, how does von Essen plan to maintain and/or grow current market share? • How has your relationship with Relais & Chateaux benefited the collection? • After reading your 2007 financial report, the collection looks to be performing admirably. What specific markets in Europe does von Essen Hotels see itself expanding into to maintain a high degree of profitability? • How would you define your brand culture? Brand awareness and loyalty are often hallmarks of a successful hotel company, what is the current state of the von Essen brand awareness in the marketplace? • Can you tell me about your thoughts about the original vision for von Essen? Has the current state of the company met or exceeded those expectations? • What could the head office do better to support the properties? (For Mr. Greg Ward) • What could the head office do better to support you? (For the Property General Managers) • What market segments provide your most valuable customers? • What are some of von Essens key marketing objectives for the coming year? • Can you describe your version of luxury customer service? What could von Essen do to improve its levels of customer service? • Do you currently asses customer service satisfaction? If so how? • Does von Essen currently have in place a CRM methodology? If not is there a need for one? 75
  • 76. APPENDIX K: Relais & Châteaux Guest Satisfaction Sample Questions Table K. Relais & Châteaux Guest Satisfaction Survey Sample Character: Architecture, location Courtesy: Hospitality, Hotel Service, Restaurant Service Calm: of the location, of the property Charm: of the decor, atmosphere Cuisine: Breakfast, lunch and dinner Comfort of rooms/bathroom Upkeep: Inside, outside Leisure Spa Good Value General Impression of your stay Your Comments/Suggestions Source: Adapted From: Tàpies, J., Chauvin, J-O. 2008, Votre Avis Nous Intéresse: Your Opinion Matters To Us: Relais & Châteaux Guide 2008, Relais & Chateaux, Paris. 76
  • 77. APPENDIX L: Condé Nast Johansens Guest Satisfaction Survey Sample Table L. Condé Nast Johansens Guest Satisfaction Sample Bedrooms Public Areas Housekeeping Service Internet Facilities Ambience Value for Money Food and Drink Did the Hotel Meet Your Expectations I Most Liked I Least Liked My Favourite Member of Staff Additional Comments Source: Adapted From: Warren, A., et al. 2008, Condé Nast Johansens: Tell Us About Your Stay, St.Ives, Plc., England. 77
  • 78. APPENDIX M: Relais & Châteaux Destinations Table M. Relais & Chateaux Global Destinations French Alps Austria Poland,Scotl South Australia Indian Ocean Israel and,Slovenia America Alsace- Benelux Portugal, Canada East Cambodia Morocco Lebanon Lorraine Switzerland (Atlantic, Quebec, Ontario) Auvergne Germany Scandinavia, Canada West China, Southern Turkey Liechtenstein (Alberta, Thailand Africa Rocky Mountains, British Columbia) Burgundy England - Provence The India and France- Wales Caribbean Comté Brittany Spain Loire Valley Mexico Indonesia Corsica Greece Rhône Valley USA : West Japan (California) Côte d'Azur Ireland USA : The Malaysia (French Midwest Riviera) Great South Italy USA: New Zealand West Northeast Normandy - Malta USA: Rocky French Nord Pas de Mountains Polynesia Calais Paris - Ile de Baltic USA: South Singapore France - Countries Champagne Source: 78
  • 79. APPENDIX N: Apostle Model Classifications Table Table N: Apostle Model Classifications Loyalists: report both high satisfaction and high loyalty Hostages: may have low satisfaction, but sill report high loyalty. This will happen as a result low competition- however in the luxury and uber luxury hotel segment, this is not likely. Customers here will feel trapped. Mercenaries: are those who have high satisfaction, but low loyalty. These are the customers who are highly price sensitive and will switch easily when they have the opportunity-again, not relevant to the uber luxury sector. Defectors: have had both low satisfaction and low loyalty. In addition to the costs associated with losing them, defectors also tend to spread their disgruntlement to others. This has direct correlation with customer service levels not met, word of mouth takes over and customer perception and brand erosion begins. Source: Adapted From: Barsky, J., Nash, L. 2007, What Percent of Your Customers Are Loyalists? [online], Available from: [Accessed: 14.7.2008]. 79
  • 80. APPENDIX O: PriceWaterHouseCoopers Luxury Hotel 2007 Outlook Figure O: PWC Luxury Hotel 07 Outlook35 Figure O 1: PWC Luxury Hotel 02-08 Room Rate Growth36 35 Source: Milburn, R., Hall, L. 2007, Jewels In The Crown: Trends and Outlook For Europe's Luxury Hotel Sector, PriceWaterHouseCoopers, United Kingdom, “London's Luxury Hotel Room Rates Could Pass £360 in 2008,”p.5. 36 Source: Milburn, R., Hall, L. 2007, Jewels In The Crown: Trends and Outlook For Europe's Luxury Hotel Sector, PriceWaterHouseCoopers, United Kingdom, “London’s Luxury and Upperscale Hotels Power Ahead.” p.5. 80
  • 81. APPENDIX P: PriceWaterHouseCoopers New Luxury Hotels for 2007 London Figure P: PWC New Luxury Hotels 07 London 37 Figure P2: PWC Development Plans Luxury Hotels 0738 37 Source: Milburn, R., Hall, L. 2007, Jewels In The Crown: Trends and Outlook For Europe's Luxury Hotel Sector, PriceWaterHouseCoopers, United Kingdom, “New Luxury Operators In London p.5. 38 Source: Milburn, R., Hall, L. 2007, Jewels In The Crown: Trends and Outlook For Europe's Luxury Hotel Sector, PriceWaterHouseCoopers, United Kingdom,”Development Plans of Selected Key Luxury Operators,”p.8 81
  • 82. APPENDIX Q: PriceWaterHouseCoopers Luxury Hotels in Europe Table Q: PWHC Luxury Hotels Europe Source: Milburn, R., Hall, L. 2007, Jewels In The Crown: Trends and Outlook For Europe's Luxury Hotel Sector, PriceWaterHouseCoopers, United Kingdom, Table 1: 25 Luxury Hotel Companies Operating In Europe p.6. 82
  • 83. APPENDIX R: Hotel Customer Service Measurement Providers Hotels can utilise outside bodies to assist in measuring levels of customer satisfaction tied to service levels, such as; Market Metrix, and UKCSI (United Kingdom Customer Service Index). Market Metrix 39 was developed by Jonathan Barsky and Leonard Nash to assist companies in the measurement of customer satisfaction, consumer emotions, as well as issues relevant to loyalty and price sensitivity. Contracted studies are conducted quarterly, and the company can provide services globally. Of note, Market Metrix specifically address service levels with luxury hotel companies, see: ( s=products&u=customermetrix&p=CustomerMetrixforLuxuryHotels) (Barsky & Nash 2008) UKCSI40 is an organisation, with UK centric customer satisfaction focus. This company will provide hotels for example with CSI or Customer Satisfaction Index scoring. This model will be based on a web based questionnaire given to a representative sample of UK adults. The customers are asked to give a rating to a hotel for example on things which they considered the most important, the consumers are also asked to detail any complaints and how those were resolved or not. Indexes are compiled every 6 months. 39 40 83
  • 84. APPENDIX S: von Essen 2007 Company Report Figure S von Essen 2007 Company Report Sample 41 41 Source: 84
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