“Give Me The Worst Hotel” - Horst Schulze BETS His Career On A New Ritz-Carlton Standard

Key Concepts

• Purpose and Belonging
• Customer Expectation Management
• Employee Selection, Orientation, Training, and Work Environment
• Respect and Care (for customers and employees)
• Trust and Loyalty
• Timeliness and Individualization
• Product, Service, Price Hierarchy
• The Human Element in Business

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Career Trajectory and Foundational Leadership Philosophy

The speaker, Horst Schulze, recounts his career path, highlighting pivotal decisions that shaped his leadership philosophy. While serving as the Food & Beverage Director at Hyatt, he was offered the General Manager (GM) position at what was considered the company's finest hotel. He famously declined this dream opportunity, stating, "I won't take it." His reasoning was that he could not be the "best general manager in the company unless I have been rooms manager," a role he had never held. This demonstrated his commitment to understanding foundational operations.

He insisted on becoming a Rooms Manager, even requesting the "worst hotel" to gain this crucial experience. This led him to Pittsburgh in 1974, managing a hotel he described as "a dump." Over the next few years at Hyatt, he rapidly advanced:

• 1974: Rooms Manager (Pittsburgh)
• 2.5 years later: Promoted to a larger hotel (Detroit)
• 1 year later: Regional Vice President (over 10 hotels)
• 2 years later: Corporate Vice President (Chicago)

He found the Corporate Vice President role less fulfilling, feeling like "one of a bunch of bumps" compared to the autonomy and impact of a Regional VP. This dissatisfaction, coupled with a unique opportunity, led him to leave Hyatt, where he was on a trajectory to become CEO.

The Genesis of a New Brand: Ritz-Carlton and the Power of Purpose

Schulze was recruited to create a new hotel brand after a venture to build two hotels (a Holiday Inn and another) failed to reach an agreement. He was recommended by a former Hyatt Vice President. The deciding factor for him to take this risk, despite his promising career at Hyatt, was the promise that "operation would be up to you." This ignited a "dream" and a "purpose" within him.

His vision for this new company (which would become Ritz-Carlton) was to make it "the best hotel company in the world." He aimed not to directly compete with existing industry leaders like Hyatt, Hilton International, Western, and Intercontinental, but to "go over them" by "pull[ing] the best out of them and mix[ing] a little bit more." His strategy was to retain the "relaxed service element of America" but infuse it with "a little bit more elegance and customer attention."

The Human Element: Customers, Employees, and Purpose

Schulze's core philosophy centers on the belief that "it's all about human beings." He identifies two critical groups in business: customers and employees. Both groups possess "emotion, thoughts, wishes, dreams," which he argues are often overlooked by company leaders.

He distinguishes between a manager and a leader:

• Manager: Understands customer expectations and creates "processes, system and controls" to deliver those expectations, ideally "superior to my competition."
• Leader: Goes beyond management to "lead my people to want to do that." This is achieved by fostering a shared "purpose and belonging."

He criticizes the common corporate practice of blaming employees for poor performance, stating, "If that employee is no good, why did I hire him?" He asserts that the responsibility lies with leadership in areas such as:

• Employee selection
• Orientation
• Training
• Creating the right work environment

Schulze firmly believes that by meticulously organizing these aspects, any company can achieve unparalleled success. He personally oversaw the opening of every single Ritz-Carlton and Capella hotel, not for celebration, but to "orient the employees as to who we are and welcome them and role play to them how we deal with customers and train them." This hands-on approach ensured employees understood and delivered what the customer truly wanted, not what management thought they wanted. He notes that many CEOs are "full of egos, full of emotion, full of unsecurities" and lack respect for employees and customers, failing to grasp their true desires.

Timeless Principles of Customer Service: Respect, Care, and Trust

Schulze strongly refutes the notion that "everything is new" and solely driven by technology. He argues that "nothing is new" when it comes to fundamental human desires. He states, "5,000 years ago human beings want to be respected and this was true this morning and a minute ago tomorrow and in 5,000 years from now." Technology, in his view, should serve to enhance the delivery of respect and care.

He emphasizes that "it's caring" that truly matters. He cites an "American consumer study" showing that "80% of consumers says I deal with you if you care for me even if I could buy the same product next door for less." This care builds trust, which in turn fosters customer loyalty. "A loyal customer is somebody who trusts you," and this trust is earned through treatment and respect, not just the product itself.

He presents a clear hierarchy for business priorities:

1. Service (first)
2. Product (second)
3. Price (last)

His reasoning is that if a company excels in service and product, customers will be willing to pay a premium. As an example, he mentions that Ritz-Carlton was voted "best value" by Good Housekeeping magazine in its early years, despite being "the most expensive." This illustrates that perceived value is derived from superior service and quality, not just a low price point. He further supports this by noting that guests never commented on expensive physical amenities like a "$28,000 chandelier" or a "$200,000 oriental rug," but consistently praised "how we respected them, how we treated them, how we were friendly, how we responded, that we cared."

Evolution of Service: Timeliness and Individualization

Schulze highlights two significant shifts in customer expectations:

1. Timeliness: Customer expectations for speed have "become dramatic." He contrasts Ritz-Carlton's standard where check-in taking more than four minutes would make a customer unhappy, with Capella's goal of a 20-second check-in. This applies to all interactions, including email responses.
2. Individualization: Millennials, in particular, expect "do it my way." He illustrates this with a McDonald's example: a traditional customer might order "a number one," while a millennial might request "a number one, but not tomato, two slice of pickles." This level of individualization was "much less so 40 years ago" and businesses must now understand and cater to it.

To address individualization, his Capella Hotels were designed with only 100 rooms, enabling highly personalized service. Examples include calling guests before arrival to ask, "What can I do for you?" and offering flexible check-in/check-out times ("We will have a room for you when you arrive").

Synthesis and Conclusion

Horst Schulze's comprehensive philosophy underscores that enduring business success is rooted in a profound understanding and respect for human beings – both customers and employees. He champions a leadership model that prioritizes giving employees a sense of purpose and belonging, meticulously selecting and training them, and fostering an environment where they are empowered to deliver exceptional, individualized service. This approach, centered on care, respect, and trust, builds genuine customer loyalty and allows a company to transcend price competition, proving that the human touch remains the most valuable asset in any enterprise, regardless of technological advancements.