Case Study

R&Rs Sumptuous Sea, Sun and Service

[This case is a hypothetical case though, as the references indicate, it reflects reality and the
company should be treated as real. The timing is the summer of 2016.]

Satisfied was not the right word; in fact, its not a word that enters George Healys
vocabulary. Contented, no. Vindicated, thats the word, he thought as he sipped his drink
and puffed on a Cuban cigar whilst watching the sunset over the Caribbean. Yep, he said
to himself, I must call Joe in New York and remind him of his parting words ten years ago.
Now what were they? Oh yes: You wont last six months in the Caribbean; the idea is lousy,
you know nothing about the hotel industry and youll miss Manhattan you klutz.

OK, it had been ten years of what could euphemistically be called challenges. But R&Rs
had not just survived, it was now growing and ready for the next step in its development;
though exactly what that was to be remained elusive. George knew he had some detailed
thinking to do on that one. For the moment, he thought more about the risk he had taken
when on 2006, with 9/11 and the Bali bombings still fresh in the memory, he had bought a
rundown hotel with a private beach on Mancay Island at a knockdown price, and then poured
millions of dollars into the project much of it borrowed from banks using contacts from his
days as an investment banker.

However, one thing never wavered: his vision for R&Rs. Joe was wrong George did know
enough about the hotel business to have a well-defined plan. After all, he had stayed in
numerous hotels, for both business and pleasure, and therefore knew what high-income
people wanted. His training instilled in him the need for a well-defined vision: a luxury
holiday experience for the high rollers of the world who wanted everything laid on in a
peaceful setting. A boutique Club Med-type inclusive holiday so that couples of whatever
age (children would be accommodated but certainly not encouraged) could enjoy a holiday
that offered both high energy activities such as scuba diving and water-skiing, and also spa
treatments to relax and refresh.

Importantly, the guests would not have to think about money. Once the price had been paid,
that could be it. Flights, airport transfers, meals, drinks and snacks, entertainment, activities,
spa treatments, laundry, visits to local places of interest led by experienced guides, and tips
were included. Guests could, of course, choose to dine out and they would have to pay for
that; similarly, with shopping for souvenirs, car hire, and telephone calls. But that would be
at their discretion. The idea was that R&Rs would be a holiday where the guests could put
their cash and credit cards in the room safe on arrival and only take them out when leaving.

The location was opportunist. George had been visiting a nearby Caribbean tax haven in
order to deal with his financial affairs. At 42 years of age, he had done it all, successfully,
and was worth more than a few million dollars himself as a result. However, his life had
become, in his own words: boring, mundane and barely worthwhile: meetings; financial
ratios; statistics; airports; and hotels where it was difficult to know where you were. There
were the highs of pulling off a deal, of outmanoeuvring competitors, of meeting
entertainment stars and politicians he had even met the President of the United States
though only because he has paid thousands of dollars to attend a fund-raising dinner.
However, when he saw a hotel with a private beach for sale on Mancay Island, immediately

R&Rs case study. Original devised and written by Rob Thomas. Updated by Cherry Hood. 1
the vision had appeared in his mind; not the full detail that would take months of planning
but the germ that would multiply and take him off into a different world and a very different
challenge.

Financing the project (for George, at least), staffing and marketing were relatively
straightforward issues. The biggest question for George was the image and, with it, the
dcor, of the hotel. It had to be upmarket and unique to make it stand out from the
competition in order to justify the high prices he intended to charge. A design competition
brought ideas but it was his wife and one of his daughters who came up with the idea of not
having a theme, rather setting out different areas of the hotel according to the target sub-
markets young couples, older couples, wedding couples, the active and those who wanted
to relax and enjoy the spa treatments. So, no room has the same dcor and furnishings; no
two corridors are the same dcor; three restaurants offer different environments and cuisine.
The refurbishment included the building of shacks near one corner of the beach for those
who wanted a closer commune with nature. All 81 rooms have been fitted to a high
specification that includes large screen televisions, laptops and Wi-Fi. Whenever possible,
the fixtures and fittings were sourced locally, though to Georges annoyance this proved very
difficult and too much had to be imported. He did try to reduce imports by funding several
local craftsmen to make some of the furniture but they were unable to complete more than a
small proportion of what was needed during the refurbishment phase because of the lack of
skilled employees available.

The conjunction of wanting, firstly, to ensure guests did not suffer from power cuts,
secondly, to reduce operating costs and, thirdly, to enhance R&Rs image, led to the
installation of solar and wind power equipment with battery storage to limit generator use;
also all human and kitchen waste is composted. This was, and continues to be, supported by
the use of energy efficient lighting, large window areas to reduce the need for artificial light
and requests to guests to minimise energy use. George has still to work out the complexs
carbon footprint but he is confident it is being reduced each year excluding flights by
guests.

During his investment-banking career, George was either an employee or a lone operator
with few staff to oversee. An early decision was to employ a general manager and delegate
staffing to her. Her, because George was convinced that a hotel is better run by a woman; in
his mind were the words of a successful Japanese hotelier who felt, the male of the species
is a hunter, he is not good at service, his place is not indoors1.

Linda Bains was head-hunted from an international hotel group. Her experience and
reputation for ensuring good service in 5-star hotels, plus the way in which her philosophy
fitted with the ethos of R&Rs, more than impressed George. They agreed a policy of
recruiting locally whenever possible and then investing in training and frequent updating of
staff. They were both aware of the sometimes negative attitude to service (perhaps stemming
from memories of colonial days) prevalent in parts of the Caribbean2. Hence the need for
training and explicit service policies but also the banning of terms such as bell boy or room
maid. The staff training includes multi-skilling so that, where possible, absences can be
covered without disruption to the service; it is not possible in some operational areas where
certain specialisms require temporary cover from outside.

Staffing levels are geared to maintain a minimum 3 staff to 1 room ratio. This is high even
by 5-star hotel levels but George is in no doubt that it is necessary in order to provide the

R&Rs case study. Original devised and written by Rob Thomas. Updated by Cherry Hood. 2
level of service expected by guests. Of the 251 staff, 78% are women, with 70% of
department heads, deputy and duty managers being female.

The organisations emphasis on quality is underpinned by a philosophy that values all staff
and aims for fair treatment with bonuses and incentives for excellent performance. The pay
structure reflects this approach, being approximately 50% above local rates for jobs of
equivalent skill and responsibility. Uniform is provided and laundered free of charge whilst
all staff can have free meals. Free medical insurance with annual checkups for staff and
immediate family members (spouse and children) is offered to those who successfully
complete a six-month probationary period. Bonuses are paid according to occupancy and
additional payments are made to those identified by other members of staff as having
provided exemplary service (a nomination and voting procedure is used on a monthly basis).
Every three months, an event, such as a BBQ or a dance, is held for all staff and their families
to attend whilst George has been keen to develop staff sports teams that play competitive
matches.

The training and payments are aimed at recruiting and retaining able and enthusiastic staff.
Both Linda and George believe this enthusiasm could be wasted without good two-way
communication between all levels of management. To facilitate this, a lean management
structure has been adopted (see Fig 1 below). All staff can email George or Linda and can
request a one-to-one meeting with them, or their Department Head. There are monthly
meetings, during paid time, for all staff with the meetings being repeated to ensure staff on
different shift patterns can still attend. All managers are trained to listen during these
meetings and to act on the suggestions and other comments made by staff. As George has
said more than once, whats the point of paying to get good staff and then ignoring their
ideas; they know whats needed because they are in there, doing it. There are also annual
appraisals with each appraisal report being read by Linda.

Fig 1: R&Rs Management Structure

Chairman

General Manager

Department Heads

Deputy and Duty Managers

Line Staff

Training also includes introductions to, and refreshers for, ICT because the complex is very
dependent on new technology for functions ranging from security through bookings to stock
control. It is also used extensively in the spa treatments and the latest development has been
the building of a guest data base for use in marketing.

Although straightforward in some ways, marketing has been a headache in others. George
was aware from the outset that R&Rs was to appeal to a very select group of guests who
would want privacy and would not want to be associated with a resort complex that had been
mass marketed via TV and high-street travel agents. On the other hand, how then to get the
message across? Subtlety was the key but not so subtle that no one ever heard of R&Rs.

R&Rs case study. Original devised and written by Rob Thomas. Updated by Cherry Hood. 3
Obviously, word of mouth was an important channel but that would only come as the guest
base grew. That left the internet and using selected travel agents; agents which would
dedicate staff to selling R&Rs holidays and in return these staff received full training from
R&Rs and the agents benefited from a hefty commission. Last year, and perhaps more for
fun, George arranged for giant posters to be erected near the point at which cruise passengers
disembarked for their half-day tour of the island the posters stated, If you like the island,
why not come back and stay at R&Rs. But he also knew that repeat customers were vital
(Gmelch, 2012).

George realised he could hardly have started R&Rs at a worse time: just as R&Rs was
beginning to get itself known and guest numbers were rising, the credit-crunch recession
hit. With 70 percent of guests coming from the United States, R&Rs occupancy rates fell
(Table 1). The 2009 and 2010 figures were poor and the banks began circling like vultures as
losses were made; in fact, George had to call in a few favours from friends still in the
financial world. However, there was some recovery in occupancy rates (and profits) in 2011
and since then the situation has improved with steady increases.

Table 1: R&Rs Occupancy Rates

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Occupancy rate per room 56.7 60.1 46.6 49.0 60.6 64.1 68.7 71.5 74.5 76.1*
(%)
Occupancy = Rooms Sold /
Rooms Available
* expected outcome on basis of current bookings

George has also been determined to link the resort with the island, not just as a marketing
tool but as a genuine attempt to put something back. R&Rs, therefore, offers free trips that
take guests to see (and hopefully spend at) places of interest. Local produce is used in the
kitchens, and local products utilised throughout the complex whenever possible, with the
prices paid being based on fair trade. Local artists and craftspeople are offered free space in
the complex to display and sell their wares, everything from paintings and carvings to food
and clothes. There is also sponsorship of courses in hospitality skills at the local college and
of equipment in a local school.

Perhaps because of this localism but more probably because R&Rs was, and is, a good
source of tax revenue, the Mancay government has been very supportive throughout the
project. In fact, the good relationship with the local mayor resulted in George hearing that
the Majesty Hotel in central Mancay was in financial difficulty. George thought to himself I
know that hotel and remember eating there when we first arrived on the island. It has a
fabulous view from its hill-top location although it has become rough round the edges and
is in need of refurbishment. I wonder.. depends on the price!.

With another sip of his drink, George Healy mentally shook himself out of his reflections.
Vindicated was the word but not the end. Yes, it had been close to closure in 2009/2010
but growth had returned; and the hotel had defied Hurricane Earl, physically and in
occupancy. The plans had largely been achieved, albeit later than forecast in the original
business plan due to the credit-crunch recession. The return on capital had crept up to 5
percent despite the costs of his staffing and operational principles. George could not,
however, think of it as a success; not yet. There was more to do before he reached sixty.

R&Rs case study. Original devised and written by Rob Thomas. Updated by Cherry Hood. 4
Footnotes
1
Dodd, M. (2002). The Toyoko Inn Group. In B. De Wit & R. Meyer (2004), Strategy:
process, content, and context. An international perspective (3rd ed.)(p. 705). London:
Thomson Learning.
2
Jayawardena, C. & Haywood, K. (2003). International hotel managers and key
Caribbean challenges. International Journal of Contemporary Hospitality
Management, 15(3), 195-198.

Other sources

Gmelch, G. (2012). Behind the Smile: The Working Lives of Caribbean Tourism (2nd
ed.). Indiana University Press. [available as an e-book]

Horner, S. & Swarbrooke, J. (2004), Case study 13: boutique hotels. In S. Horner &
J. Swarbrooke, International cases in tourism management (pp. 148-156). Oxford:
Elsevier Butterworth-Heinemann.

Issa, J. & Jayawardena, C. (2003). The all-inclusive concept in the Caribbean.

International Journal of Contemporary Hospitality Management, 15(3), 167-171.

Jarvis, C. (2001). Case study: the Brighton Hotel Group. Retrieved from
http://www.bola.biz/cases/hotelcase.html but this site is no longer available.

Keller, K. L. (2009). Managing the growth tradeoff: Challenges and opportunities in

luxury branding. Journal of Brand Management, 16(5/6), 290-301.

Over two decades of innovations from Sandals (n.d.). Retrieved from

http://www.sandals.co.uk/general/sandals-history.cfm

Caribbean Tourism Organization (2013). State of the Industry Report. Retrieved

from http://www.onecaribbean.org/content/files/StateofIndustryFeb2013.pdf

R&Rs case study. Original devised and written by Rob Thomas. Updated by Cherry Hood. 5