The setting is the Quest for Excellence Conference XXI held at the Hilton Hotel in Washington DC.  There is a stage at the end of the ballroom with a podium, plants, and a big projection screen.  In addition, there is a long table with microphones for each of the six participates.  An audience of about 550 conference attendees is seated about the ballroom.
Harry Hertz:  Good morning everybody, good morning everybody, alright.  Well welcome back to day three of Quest for Excellence 21.  I know for me itās been a great conference and I hope all of you will agree and certainly from those of you who Iāve spoken to personally itās been two days already full of lots of learning and sharing and I wanna thank all of you and all of our speakers for their participation in helping that learning occur.  So round of applause for everybody this morning.  This morningās sessions will be available free of charge in the coming days from our website so check our website for details.  Itās my pleasure now to introduce to you this morningās keynote speak, Simon Cooper who is the president and Chief Operating Officer of the Ritz Carlton Hotel Company and true to the person that he is or that Iāve gotten to know very recently, his first comment to me was ćKeep the introduction brief and give credit to the people I work with.ä  So you have a sense of our morning speaker from just that comment.  But still Iāll give you a brief introduction to Simon Cooper, he oversees the operations development and strategic positioning of the worldās most powerful brands and luxury groups, one of the worldās most powerful brands and luxury groups.  He joined the Ritz Carlton Company in February 2001 after a distinguished career with Marriott International where he served three years as president of Marriott Lodging Canada.  He was born in England but is a citizen of Canada and his first hospitality job was with Canadian Pacific Hotels and Resorts.  Among his many professional honors, Simon has served on the Woodrow Wilson International Center for Scholars and the Canada Institute Advisory Board.  Since becoming president and COO of Ritz Carlton, he has presided over a major expansion of the brand which now numbers 72 hotels around the world and as he shared with me this morning that number continues to grow.  Maybe most impressive and then Iāll stop talking about Simon is that he was recently named the 2008 Corporate Hotelier of the World by Hotels Magazine; quite a distinction.  Iād also like to on a more personal note on behalf of the Baldrige Program thank Simon and Sue Stevenson for the Ritz Carltonās coordination of our community service event that some of you participated in this Sunday, the community footprints event that was held at the Washington DC boys town.  It was a wonderful event, a great opportunity to give back to the community and I thought we would start right before Simon comes up with sharing a few photos from that event this past Sunday.  As you can see we helped beautify the landscape around Boys Town.  There is I believe David Spong the former President of the Baldrige Foundation digging in the earth there and I think thatās Simon planting and we had help from people of all ages, great.  Okay thank you again to the Ritz Carlton and to everyone else who participated in that event.  Now without any further introductions let me please introduce to you our keynote speaker, Simon Cooper please join me in welcoming him.
Simon Cooper:  Thank you very much.  Thank you, thank you very much indeed, good morning ladies and gentleman.  Iād trade all those awards for 10 points of occupancy right now.  Actually the best award of the year was at Boys Town, I got an honorary resident award, so I now have another place to stay in Washington which is terrific.  I was thinking about sort of ducking the reality of what weāre in and giving you a nice keynote speech on the pursuit of excellence at Ritz Carlton.  But I decided that given the environment weāre all in and I donāt think thereās anybody globally from my travels that has managed to avoid the realities of the economic crisis and how that unfolds in a company or in a division or in a group of people or a team, I think is really important.  So Iāve decided to sort of give you news from the front and talk a little bit about sort of inside a two time Baldrige winner, you know, during an economic crisis and what I think are some of the critical things.  It does tie back to two of the things that Barbara did want me to talk about, the oneās I wonāt cover sort of the growth of Ritz Carlton around the world because I donāt think thatās as pertinent and the second one was an interesting subject, I always like are just, you know, how do you follow a legendary leader in a company.  But I will talk about how a luxury organization like ours is addressing the global economic situation and also a tie in to, you know, what we do with our communities and our community footprints program, some of which you participated in at Boys Town.  So I gotta hit three topics and this is my start off, I do a joke now at the beginning of each presentation, I didnāt use to but in this current environment I think we need a little bit of humor.  So level with me Colonel what kind of worst case scenario are we talking about here?  Three topics and they relate to the criteria for performance excellence, Iām gonna cover basically leadership and customer focus in the workforce.  Iāve gotta sort of pick those three topics because we only have a short while and I thought those are the three that probably are the three constituencies that are the most concerning to a leader in a challenging economic time.  His or her own personal leadership of the organization, how it impacts the customer, how it impacts the ladies and gentlemen, in our case the employees.  I think also I will touch on how it impacts communities because in many cases a Ritz Carlton hotel is often by far is the largest employer in its community so communities are also very important.  So those three areas, leadership, customer and the work force and let me start with what I consider to be the role of a leader in a crisis and Iāve put three things down there, evaluate, communicate and act and I think that the one that is most important is evaluate, whether youāre leading a company, whether youāre leading a group, whether youāre leading a team, one needs to evaluate the significance of the environment that oneās in and how thatās gonna impact your team or your group or your company and this is a very, itās almost unprecedented I think what weāve gone through in the last certainly eight to nine months and a lot of very smart people have made some very, very poor decisions.  Theyāve evaluated and made some terrible decisions.  Thereās a number of large American airlines out there that have hedged fuel out to the end of the year at $100 a barrel and a very expensive, very poor decision.  You can argue whether the decision by the government to let Lehman go down was the right decision.  You look at Warren Buffet and some of his investment decisions, this has been almost an unprecedented environment weāre in and how does a leader evaluate effectively how that environment is going to impact his or her organization and what do they need to do about it.  So I think the evaluation process has been really important this time around because this crisis has not resembled anything weāve seen before and if you take the typical approach to a crisis that you try to evaluate it in advance, take actions one time and then let the organization rebuild.  This has been almost a weekly, monthly, daily situation as it rolls out, frankly across the world.  The second is communicate and I think that we all agree that in an environment like this one cannot communicate enough, all of our ladies and gentlemen read headlines as I do, theyāre all aware of whatās happening in the environment, in the economy, in their part of the world and itās a question of how does it impact them and what are we doing about it.  I just came back from doing 14 hotels in five days, basically three to four hours every single hotel and everywhere the same message, because one has to be out in front in times like this.  You canāt duck it, our ladies and gentlemen wanna see leadership, they wanna see what leadership is doing about it, they wanna also understand the bigger picture because everything that they see rolls out in their small environment, what is the bigger global picture and what are we doing about it.  So moving along, one of the things that when asked the question ćHow bad will this economic crisis be; how long is it going to last and what is the recovery gonna look like?ä  Those are three absolutely critical questions that I and my team try to evaluate.  We look at things like, you know, where do we think the economyās gonna go, I donāt wanna spend any time on this, nevertheless our projections are that right the way through ā09 certainly in North America there is going to be negative GDP thatās very impactful obviously upon expenditures, very impactful upon businesses, very impactful upon the consumer.  So itās a long term, the main thing to take away from here is that weāve decided it is long term.  The second thing we look at is what is the recovery gonna look like and this is really quite critical to a lot of the decisions that we make and if you look at the top right hand corner thatās called a sort of a V recovery, everything recovers relatively quickly.  I use this when Iām talking to our leaders in our hotels because we went through 9/11 as did everybody else and 9/11 in the travel industry was a relatively short term loss of business, it wasnāt an economic issue, it was confidence in travel and so Ritz Carlton like probably a lot of our other companies, certainly in the travel, we did things that made sure that our ladies and gentlemen stayed employed with us.  So we would encourage four day weeks, we would encourage furloughs, we would encourage leave of absence.  We did all sorts of things but the last thing we didnāt wanna do was to terminate anybody or have any kind of layoffs because we knew that this was gonna be that long, business would return and we needed our teams back in full force.  On the other hand the bottom left hand corner is probably closer to where we think the recoveryās gonna be for our luxury segment of travel.  It could be the top left which is a sort of a slower recovery but either way our evaluation coming back to this, the role that leaders play in evaluating, our evaluation is that it is gonna be a longer drawn out recovery.  That has very significant implications on our decision making and one of the toughest things in visiting our hotels and the region I was in was primarily Florida and the southeast which is a key region for us.  I had to frankly say to everybody, all the leaders I addressed there that we had 300 less leaders in that region than we had 12 months prior and thatās because we have decided that we needed to right size the organization for a long drawn out recovery and thatās a very tough thing for us.  You had 300 leaders who had made a commitment to Ritz Carlton, 300 leaders at Ritz Carlton that made a commitment to them, to their careers, for their future and we embarked on a journey together and then, you know, because of the economic crisis, because of our evaluation that this was gonna be long term, we now had 300 less in that region.  So thereās a very high price to pay but that is I think one of the critical decisions that leadership has to take in terms of evaluating where the business is going, how long this is going to last and what does that recovery look like?  Just an aside and touching a little bit on Ritz Carltonās development.  You wonāt be able to read this and I apologize but this looks at the rest of the world and there arenāt many countries that-- the only thing I would say here is the bottom left is China and India and China still just published I think 6% growth for _______ is looking probably at growth this year around 6 to 7% and will continue to have positive GDP, not what they anticipated but nevertheless positive.  The reason I put that up there is in past times before all of this when we were able to develop long range plans for Ritz Carlton, one of the key things probably six or seven years ago was positioning the brand in China and this is a great growth market for us, we now have seven Ritz Carltonās open in China, weāll have nine by the end of next year, all outstanding, brand new hotels in great locations.  So while itās obviously we have very challenged economy, challenged environments in North America and Europe, fortunate as a brand that part of that long term strategy was to clearly focus on markets like China and position ourselves well.  Now the other one, you never know when youāre gonna get something coming in completely unplanned and this is what we call the AIG effect.  If you canāt read at the back, AIG gets more federal money and the gentlemen at the desk says ćHello Ritz Carlton reservations.ä  We canāt duck the fact that we are a very prominent luxury brand and this particular ad and of course the whole aspect of financial service companies that have received top funds, having meetings at hotels became very much front and center, both in congress and also for the media and it created an enormous hype and a very, very significant cancellation of business in many of our hotels.  Very hard to fight back against, weāve been working hard since the end of last year to try and turn this around a little bit but the bottom line is that the focus that congress put on it, the focus that the media put on it, basically not only financial services companies but any other companies felt that it was inappropriate to go out and have meetings at luxury hotels.  We have been pushing a program called ćMeetings means businessä trying to reverse that and trying to point that this is how America does business.  People getting together in sessions like this and what happened is the actions of a few really have tarnished the whole aspect of getting together and having meetings in luxury hotels.  We did have some success and weāve got some great partners out there who have gone online, who have gone on the media-- have gone on television and said clearly ćThis is how we do business, how else do you get together, how else do you recognize your top performers, how else do you motivate them, how else do you communicate and share and so this has been-- its gonna be a long haul but it was something that came out of nowhere.  It impacted and Iāll touch here on communities for a second because luxury hotels by definition, many of them are located in relatively isolated locations, in small communities.  So whether itās Reynolds Plantation in Green County, Georgia, Half Moon Bay in Half Moon Bay, California, Amelia on Amelia Island north of Jacksonville, Naples, many of these locations the Ritz Carlton is the largest employer, the largest tax payer and the alternative employment for our ladies and gentlemen in these locations is none.  So itās certainly damaged the most vulnerable of our ladies and gentlemen in many of these locations and then also significant impact upon the communities.  Pushing along to customers and again luxury, somehow in the sort of last year has turned from being celebrated and this actually when we announced the Ritz Carlton in Charlotte, ćFeeling crass because your cityās not thought world class, donāt throw Phipps, theyāre putting up a Ritz.  That used to be the way that a luxury hotel was welcomed.  Now this is what appears and, you know, the challenging thing is we have an absolutely wonderful brand but it is still kind of the brand that is identified with luxury and anybody who wants to make a cartoon we end up on the front of the cartoon.  So but on a more serious note, I will flip through this one and go straight to this.  On a more serious note our challenge from a customer point of view is how do we deliver rational luxury as we call it in an age of discerning consumption?  Again from a leadership point of view we have evaluated that this is going to be a long term situation that we are in a new era from a consumer point of view.  This isnāt something again the consumer isnāt just going to rebound.  So coming back to that key point that I tried to make earlier in terms of evaluating how this economic crisis is gonna impact the consumer long term.  Thereās no doubt and that consumers will spend less on luxury goods and services, travel and leisure, dining out and entertainment are all relatively typical.  This is very similar to a lot of surveys that are out there right now.  One of the more interesting facts and Iāve red circled there across the top are three types of luxury customers, true luxury which would be traditional, old money, what would be probably in my organization the traditional Ritz Carlton customer, the contemporary core which is more new money, theyāve accumulated wealth over the last 15 to 10 years and then the third is stretch and these are luxury consumers who are really stretching to buy that handbag or stretching to have that experience at a Ritz Carlton.  The most concerning is the red circle which is this true luxury consumer who has money, is saying that they will spend less money on frivolous things, thatās really important.  Even the consumer with money today and in the future is not just gonna jump back into spending as they used to.  Another one thatās really pretty interesting, the third one down here is ćI purchase more of what I need and not what I want.ä  I would argue that many of our consumers a year ago could purchase what they wanted and I think we are going to see more and more this idea of Iām gonna purchase what I need, much more discerning consumption.  We see values changing, this is a bit busy but if you pull it off afterwards or get it from Barbara itās a little bit busy and what it tries to show is how consumer values have shifted literally in the last six months and theyāve shifted towards the top one of a kind experiences.  I will still pay for an experience that I canāt get anywhere else.  Theyāve shifted to bottom left this idea of authenticity and utility and youāll see this in another slide.  People are buying things that are authentic, itās about craftsmanship, itās not about the logo on the bag as it was last year, itās about how is it made, how is it stitched, how long is it going to last?  And then itās also shifted a little bit to the right there access to knowledge or wisdom and these five areas of one of a kind experiences, knowledge and wisdom, convenience and respect for time, authenticity and utility and wow factor have been five keys in terms of defining what we think define value for our customers and so what we tried to do there was look at how have those changed, the wow factor is definitely less important.  The wow factor is definitely now subordinated to the one of a kind experiences, knowledge or wisdom, authenticity, utility.  One of the stories-- actually I wonāt do the story because I notice what time it is.  This is another one that is much of the same but it tells a slightly different story and it talks about the fact that the gut-- the decision making process by our customers from head, heart and gut and that a lot of the decisions were made by the gut in the last three to four years.  Theyāre about desire, theyāre about fantasy, theyāre about allure, theyāre about the brand whether it be the Ritz Carlton or the Prada, less about its usefulness, less about how long itās going to last, less about the service and this just talks about how the head and the heart and think in your own minds, in your own purchasing how itās changed over the last year, how the head and the heart are gonna be much more influential in terms of the decision making for luxury consumers as we move forward.  A strong believer in that and to me the critical thing from a Ritz Carlton point of view is the head makes the rational decision.  So from a marketing point of view, from a positioning, whatever we do out there, our key is to market to the head to get that decision to go to the Ritz Carlton and then once theyāre at the Ritz Carlton, how do we win over the heart because ultimately what weāre looking for is a fully engaged guest and that comes from the heart.  This just reinforces what I was talking about earlier about authenticity, how the top three things and this is today, consumers are looking for, luxury consumers, superior quality, superior craftsmanship, superior customer service.  The difficulty here is and we use it with our ladies and gentleman is, this is what our consumers are looking for in a time when weāre cutting back.  In a time when we have fewer leaders, in a time when we have less occupancy, in a time when weāre trying to manage our business as practical as we possibly can.  So consumers expectations havenāt changed, theyāve only increased.  These are some of the things weāre looking at in the new term, the only one Iāll go to is the fourth one here and that is around we need to help make guests feel socially responsible.  Weāve been seeing this confluence of the values of Ritz Carlton in terms of our social responsibility to our communities and the changing values of the luxury customer, looking at how can they be more involved in the communities they stay in, how can they be more socially responsible in their practices.  How can they be more environmentally responsible when theyāre staying at a luxury hotel.  You saw some of the photographs, this is our community footprints program and we gave nearly 8ø million in cash in kind donations, we had 57,000 volunteer hours last year and thatās probably only just touching the surface of what are hotels in their communities.  I just focus on the bottom right hand, I donāt wanna spend a lot of time but this is guest involvement, things like give back, getaways, meaningful meetings, _______.  The reason I focus here is this is really, really to me the high point of what we do.  When you can get a luxury guest staying in a suite spending a lot of money out for an afternoon, possibly with their kids or with their spouses or their friends with employees of the hotel.  When you get guests and employees together working on a project in a community, in an environmental project, a community project, an education project, itās just amazing what you get out of that.  That is almost the sort of the ultimate experience that we drive for that guest is gonna be engaged for life that lady or gentleman is engaged with Ritz Carlton for life and so itās really sort of what began as how do we nurture our communities, how do we give back to our communities, really was a perfect timing for how luxury consumers were looking at how can I have a more meaningful vacation.  How can I take the children while weāre down in _______ do something that has some meaning, introduce them to an environmental program or some other form of educational program.  So I think itās just a terrific as Sue Stevenson who Iām sure youāve all met headed up the only blatant advertisement I have is this one, give back getaways was the most significant story of 2008, it was called ćEmbrace Voluntourismä before it was chic and to be fair and practical, one of the things Iāll always remind everybody is that my predecessor and his team back in 1983 had the environment and communities in the original strategy for Ritz Carlton, in the original vision statement for Ritz Carlton to see how--  Iām gonna very quick on the workforce and thatās not fair because that is a very, you know, how do you keep a culture of excellence like Ritz Carlton has had, how do you keep it thriving in such challenging times?  Iāll give a quote here from _______ this idea that culture, it is the game for a company like ours to expect our 36,000 ladies and gentlemen around the world every single day at every touch point to add value to the company by adding value to that guest experience, we have to have a very strong culture.  I will flip across this point and go to this one, didnāt present this chart particularly well but the yellow is the occupancy in our first quarter last year on the left and the yellow on the right is our full engagement, our guest full engagement last year and then you see the blues, the blues are this year.  So on the left is occupancy which I donāt need to tell you is dramatically lower than it was.  So we have far fewer occupied rooms, on the other hand the full engagement of our guests has risen.  This is obviously something we measure and watch very closely because like any other company we are taking steps to try and mitigate the losses in occupancy by reducing cost and being more efficient.  So critical is to watch is how is that playing out on our guest and there is an old adage that a full hotel operates the most effectively.  So kudos here 100% to our ladies and gentlemen who despite the very difficult environment have managed to continue to raise the full engagement of our customers and that is 100% because of the rich culture that has been 25 years in Ritz Carlton and hopefully we can continue to sustain this even though we-- our valuation that this is gonna be a long hard drawn out fight.  Iām gonna leave you with the two quotes, first one again is by someone who I think is an absolutely terrific leader and I think this quote, itās lengthy but I think for the times weāre in, I happen to love it.  If youāre not there, if youāre not working shoulder to shoulder with your people, if youāre not carrying the burden of everyday execution, if you canāt be inspirational, if you canāt show your real self, if youāre just gonna be intellectual, if youāre not just going to send out memos that is not gonna work.  Leaders are involved, leaders are part of what theyāre leading, youāve gotta care.  I think in this environment whether youāre running a small team, a big company, I think itās just a terrific reminder of what we leaders especially in challenging economic environments need to focus on.  The last one Iāve used a few times and I kinda like it, I use it mostly when Iāve got a terrific team that is top in everything they do and you wanna try and say how do you continue to do better.  On the other hand itās also a really good quote at times like this and this is Hilary, itās not the mountain we conquer but ourselves and I think the context I would use it in here is that we are all facing the same mountain.  I donāt care whether weāre in a hospital or a school,  we are all facing more or less the same mountain.  Economic distress, huge impact on our communities, significant impact on our companies, likelihood of a long drawn out recovery, so weāre all facing the same mountain.  The key for all of us is what we do about it, how do we and our company, in our team, in our businesses, itās what we do about it because the mountain is exactly the same for everybody and what we do about is what is gonna define our individual success, our company success.  So thank you very much indeed, I come right to the end, I hope Iām relatively on time.  My only reminders are from my point of view as we go through this, evaluate, communicate and act, I think evaluation is really critical from a leadership point of view for anybody in this room, anybody running a team, being part of a team, part of a company, make that evaluation, communicate effectively and consistently and constantly to your teams and obviously we have to act.  Thank you very much indeed.
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