The expansion of the Ritz-Carlton on foreign markets [301436]

[anonimizat]® on foreign markets

Mihai Răzvan DOBAI*

[anonimizat], Tourism and Sport,

1 University str., 410087 Oradea, Romania, e-mail: [anonimizat]

Abstract: The spreading of globalization drives the companies pursuit to expand on foreign markets for various reasons. [anonimizat]-Carlton®, a [anonimizat]. [anonimizat], [anonimizat]-[anonimizat], one of the essential factors being the improvement and development of economic ties which led to an interdependence between the main actors of the current international affairs. [anonimizat]. [anonimizat], [anonimizat] a hotel is indirectly part of the economic and soft power of a country.

Key words: [anonimizat], [anonimizat], expansion, foreign market

1.[anonimizat]® is a 5-stars hotel worldwide known for its quality of provided services that is owned since 1998 by The Marriot International.Its activity addresses tourists with a [anonimizat] a business tourism sector which is currently expanding faster than any other sectors of tourism. The term tourist is defined by the United Nations World Tourism Organization as “a temporary visitor staying at least 24 hours in the country visited with the purpose of whose journey can be classified under one of the following headings: a) leisure, recreation, holiday, health, study, religion or sport; and b) business, family, mission, or meeting” (Edgell, Allen, Smith, & Swanson, 2008, p. 1). [anonimizat]: business, mission or meeting.

[anonimizat], the aristocracy being more often replaced by the modern business men who started to form an important market for the hospitality industry. To meet their needs the hotels had to keep their high standards and to try to offer them services as personalized as possible. (Page, 2009)

[anonimizat]. [anonimizat]. (Clarke & Chen, 2007)

The business traveler is a segment of tourists who provides a higher income even if they get a corporate rate. Additionally they provide extra income to the businesses by making use of the annexed services offered by the hotel (restaurant, [anonimizat]). (Kotler et al., 2010)

The methods of expanding on foreign markets vary from country to country and they can be: franchising, licensing other companies offering them the right to use the company s logo, name and trademark, building new properties on these countries, through mergers with local hotels or loan management agreements. (Page, 2009)

With the expansion of the globalization phenomena with all its components: internationalization, liberalization, universalization, Westernization or modernization and de-territorialisation (Scholte, J. cited in Reisinger, 2009) it becomes easier and easier for the international organizations to expand on other markets. The tourism sector makes no exception.

Tourism like any other economic activities creates economic dependencies between countries, hence influences the foreign policy towards specific countries. Furthermore, it is correlated with peace, it is a generator of peace because of the dependencies created but also needs a peacefull climate to develop and grow at its highest potential. (Edgell, DelMastro, Smith, & Swanson, 2008)

2.Methodology

The first step was to chose a relevant hotel company based in the United States specialised chiefly in offering accommodation to the international bussines people. Analyzing the literature regarding business tourism and the expansion on foreign markets as described on the official website of the Ritz-Carlton and other articles were drawn the major lines of expansion and the maps; describing the expansion in 3 different steps: before 2000, between 2000-2010 and after 2010. Moreover it was tried to explain the reasons of opening a hotel in this locations linking it to the spread of the United States soft and economic power.

3.The expansion on foreign markets of The Ritz-Carlton®

The brand was created by Caesar Ritz, a Swiss born in 1850 in Niederwald, Switzerland. At the age of 19 he became the manager of a restaurant in Paris before previously being fired from various jobs in the hospitality industry. Soon after, he started to work as an assistant waiter at Voisin where was taught the art of food serving and polished his skills in delivering qualitative services to the costumers (for example in 1871 due to a food scarcity in Paris, the restaurant bought meat of the elephants slaughtered by the local zoo and served it to their high class guests who were impressed). After revitalizing two hotels, one in Luzern and the other one in London, he decided to open his own hotel and succeeded in doing in in 1898, opening the Ritz Hotel in Paris. At the beginning of the 1900s he built the Carlton Hotel in London and also opened the Ritz Hotel in Piccadilly, creating also Ritz-Carlton Management Cooperation which was composed by financers and hoteliers (Michelli, 2008).

The first hotel opened under the aegis of The Ritz-Carlton Management Cooperation was in 1910, in New York, an American investor, Robert Goelet paying 5000$ to use the name. In the 1920s were opened in the same manner The Ritz-Carlton Philadelphia, Montreal, Atlantic City and Boston, the hotel expanding its business on the North American continent. The Great Depression of 1929 and the WWII affected the business, and the hotels lost its clientele, facing financial difficulties. After the end of WWII only 3 hotels survived: the Ritz-Carlton Boston, Paris and London. The last two hotels started to adapt to the new economic climate and its main clientele became represented by international business men, especially from the U.S., replacing the aristocracy from the previous period (Anon., 2012; Michelli, 2008).

In 1983, William B. Johnson bought the rights to the name of the Ritz-Carlton Boston, restored it and setted up the Rtiz Carlton Hotel Company as known in our days, with headquarters in Atlanta. He build partnerships with other investers and started the expansion of the hotel on foreign markets starting the 1990s. The Company expanded slowly until the beginning of the new century when 49% of the stock were bought by Marriot International and after moving the headquarters from Atlanta to Washington D.C. followed new plans of expansion through different means: construction of new hotels, franchising, loan management, or investment partnerships (Anon., 2014; Michelli, 2008).

One of the key drivers of the expansion on the other markets it is the international connectivity between the USA and the other markets, which reflects the foreign policy of the USA. The connectivity is driven either by international trade and production, international labour migration, shared culture and values, and the absence of such connectivity can affect negatively the tourist flows, hence the incomes of those hotels. (Cooper & Hall, 2008)

Marriot International manages more than 1300 hotels of different brands which provided them the acces on new markets such as the Chinese, Russian, Japanese, Indian,or Turkish market for example. The Ritz-Carlton is one example, being a hotel for international businessmen and providing acces to international markets with an intense economic activity. (Reisinger, 2009)

The Ritz Carlton is linked to luxury travel being mainly for wealthy tourists or corporate traveller but some locations can be also for the ones looking for a lifestyle trip or tourists who choose to travel only occasionally, but when they do it they choose exquisite destinations. (Page, 2009)

3.1. The expansion on the Latin American and Canadian market

Latin America and Canada are the markets where the hotel company expanded most in the first phase, between 1990-2000. Even though their first hostel on a foreign market was not set in these area, most of the hotels present nowadays here are from the last century or have been built in the first decade of the new century.

In Canada and Mexico, after all the countries were part of the North American Free Trade Agreement (NAFTA), starting 1992, the trade was liberalized so that the United States started to invest in the neighbouring countries. Even though they are important economic partners for the United States, the Ritz-Carlton is present only in one location in each of those countries: Toronto and Cancun, with plans to open a new hotel in Ciudad de Mexico.

Central America and the Caribbean, the backyard of the US hosts a number of 4 hotels either in luxury destinations or in fiscal paradises: Cayman Islands, Aruba in the Dutch Antilles, the Virgin Islands, and Puerto Rico, the last two being territory of the United States of America. (Figure 1)

In South America there is only one the Ritz-Carlton, in Santiago de Chile, Chile being known since the Cold War as the neo-liberal experiment of the Chicago School, having close economic relations with the United States.

Table 1. The expansion of the Ritz-Carlton® on the Canadian and Latin American market

(Data source: The Ritz-Carlton website: www.ritzcarlton.com, 2016)

3.2. The expansion on the European market

Even though it is present on the European market since the 1990s when they opened in Sintra a luxury destinations due to the tradition of luxury tourism practiced in this area of Portugal; and by operating Hotel Arts, Barcelona under its aegis, the Ritz-Carlton started to expand punctually only in the second part of the 2000s and mostly in locations with a high number of tourists in general, not only people travelling for business purposes.

One of the few locations chosen for opening a hotel to serve as an accommodation point for the international business people travelling to it, and mainly for the U.S. business people is Wolfsburg, Germany, actually being the first Ritz-Carlton opened in Germany; not one of the main touristic attractions of Europe, but the place where Volkswagen has its headquarters.

The other locations such as: Vienna, Moscow, Berlin, or Istanbul have a mixed role, because of the high number of visitors attracted by those cities, but also because of the investments held by the US multinationals in these locations. (Figure 2)

Table 2. The expansion of the Ritz-Carlton® on the European market

(Data source: The Ritz-Carlton website: www.ritzcarlton.com, 2016)

Figure 1. The expansion of the Ritz-Carlton® on the Canadian and Latin American market

(Source: based on data from Table 1)

Figure 2. The expansion of the Ritz-Carlton® on the European market

(Source: based on data from Table 2)

3.3. The expansion on the Middle Eastern, Central Asian, South Asian and African market

The African, Central Asian, and South Asian market is only a recent target for the hotel, having only 3 hotels opened starting from 2013: in Almaty, Kazakhstan; in Bangalore, India; and in Cairo, Egypt.

The Middle Eastern market is attractive because of the businesses with oil in the area and the important capital resources of these countries, especially of those Gulf Monarchies. The first hotel was opened in 1995, in Manama, Bahrain, ulterior being followed by other hotels in the period 2000-2010 in countries with strong economic and diplomatic ties with the United States: Saudi Arabia, Qatar, United Arab Emirates, and Oman.

Table 3. The expansion of the Ritz-Carlton® on Middle Eastern, Central and South Asian market

(Data source: The Ritz-Carlton website: www.ritzcarlton.com, 2016)

Figure 3. The expansion of the Ritz-Carlton® on Middle Eastern, Central and South Asian market

(Source:, based on data from Table 3)

3.4. The expansion on the Asia-Pacific market

International Tourism is dominated by western European destination while the market of the Asia-Pacific region is growing faster than the European or North American destinations. (Edgell et al., 2008)

The Asia-Pacific Economic Cooperation has an working group on tourism which worked on a set of specific policy goals to enhance employability, investment and development in tourism, one of these four being to remove the obstacles to the expansion of tourism business and investment. (Edgell et al., 2008)

Table 4. The expansion of the Ritz-Carlton® on the Asia-Pacific market

(Data source: The Ritz-Carlton website: www.ritzcarlton.com, 2016)

The Chinese market is the most representative of the South Asian economies, the hotel group opening already 11 hotels, especially on the Chinese coasts, starting with the Ritz-Carlton Shanghai in 1991 and developing intensely between 2000-2010, with new locations in emerging Chinese cities after 2010.

In Japan, one of the main economic partners and millitary allies of the United States, there are 4 hotels, the first one being opened in 1997 in Osaka, and with the presence on the island of Okinawa.

The other emerging South-Asian economies are represented as well, in the last 25 years the hotel expanding on the Malaysian, Indonesian, Singaporean and South Korean market.

Figure 4. The expansion of the Ritz-Carlton® on the Asia-Pacific market

(Source: based on data from Table 4)

4.Conclusions

Tourism is a simple continuation of politics by other means. Jean-Maurice Thurot, Economia, May 1975 (Edgell et al., 2008)

Tourism as a policy for peace- the cooperation between states it is marked by the existance of relation regarding tourism policies, tourists and investments in the tourism sector. (Edgell et al., 2008)

In addition of serving for economic purposes, tourism ecourages for a better understanding of cultures, friendlier relations between states and a goodwill for cooperation. (Edgell et al., 2008)

Tourism generates development because it engages a series of different sectors which need to be developed for tourism to can develop. (Page, 2009)

The tourism industry is a complex internationa phenomena encompassing societes, cultures, environments and sustainable development,economies, states, and their foreign policy initiatives. (Edgell, Allen, Smith, & Swanson, 2008)

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