West Meets East

In a single small office more than a quarter-century ago, at a time when travel to China was still a wildly exotic notion, Martin Chan had a vision of East meeting West. And with that and just himself, his wife and an accountant Chan launched Ritz Tours.

Honing in on a single mission that would ultimately help introduce capitalism to Communist China, Chan’s focus was clear: Be the leader in offering the best-quality tours to his homeland at the most affordable prices.

Amid an increasingly competitive industry, that focused vision coupled with continual reinvention has propelled the West Coast-based tour operator to a leading position in a surging destination market.

Today, Ritz has expanded to 215 employees, with offices in Los Angeles, San Francisco, Hong Kong, New York, Shanghai, Beijing and London. They offer additional tour packages throughout Asia and an annual growth rate of 15 percent over the past five years as it caters to an average of 30,000 travelers a year.

Acknowledging there is no such thing as a sustainable competitive advantage, however, the tour operator has continued to boost its number of destinations and tour products; has branched into customized tours and independent travel; launched a series of premium-luxury leisure tours last year; and has rolled out a slate of 2007 programs that includes new and expanded offerings.

Understanding China
The strategies have come at a key time, as international tourism organizations including the Pacific Asia Travel Association (PATA) continue to forecast demand for Asia to be among the strongest international destinations for U.S. travelers. PATA’s overall annual growth forecast for Asia Pacific tourism through 2008 is close to 8 percent.

“History shows us that truly great companies continually reinvent themselves,” says Evan Chan, managing director of Ritz Tours. “Jack Welch of General Electric also would say we have to change or we will die. So that’s where we see ourselves: constantly reinventing. You can’t just say you’re making good money, you have to be on to your next good thing.”

For Ritz, that comes even as it maintains its lock on the China escorted-tour market, where Ritz’s founder capitalized on his knowledge of his homeland when he launched a specialized line of escorted tours.

Ritz’s first China Discovery tour an all- inclusive 10-day, 8-night package that included air from the West Coast and all sightseeing was priced at $999, about half of what other operators were offering at the time.

“The market innovation captured the heart of America. It came on during the summer and we didn’t expect it to be so successful demand quadrupled or quintupled over what we had the space for,” recalls Evan Chan, who runs Ritz’s day-to-day operations for Martin Chan, who remains the company’s owner and president. “We didn’t have enough airline seats or hotel spaces. I remember we had to call up the general manager of Air China in Los Angeles and say we need space, and he said, ‘You keep selling and I’ll get you the space.’ I look at that moment as the moment where we truly decided we’re going to focus on China.”

Today, China remains Ritz’s biggest and most successful market, still accounting for about 90 percent of company sales and positioning Ritz as a top U.S. escorted-tour operator to the country. Chan attributes the success to the company’s in-depth understanding and connections in the region.

“China is really different. You don’t run companies the same way or interact the same way,” he says. “With our heritage and background and being bicultural, like I am, we can guarantee the quality of service.”

Over the years, Ritz has focused on differentiation to retain its edge in the region, expanding its China offerings to include specialized tours to various regions from the Yangtze River and the Silk Road to Hong Kong and Tibet.

In addition, the company has continued to innovate with specially-designed itineraries crafted by professional guides knowledgeable on the region, its points of interest and culture. And it has expanded options for travelers looking to extend their tours to other locations, including Hong Kong, Tokyo, Thailand, Vietnam and Cambodia.

And while 80 percent of Ritz’s business remains escorted tours, it also has adapted to the growing independent travel market, offering China and Asia City Packages to Beijing, Guilin, Shanghai, Xian, Hong Kong, Bangkok, Singapore and Tokyo that offer added flexibility for travelers.

Another key to the company’s success has been its strategy and ability in choosing suppliers that reflects Ritz’s own customer-centric corporate values and strategic vision, Chan says.

“Nothing else matters if the customer is not happy. Our support staff, tours, customer service, all revolves around that. So our business partnerships go far beyond the bottom line to how the company sees its responsibility to the client,” he says.

Ensuring quality services means Ritz keys in on top recruitment of tour guides from each region’s leading universities and ensures all are extremely fluent in English. Ritz officials also personally visit and stay at each hotel the tour operator contracts with before signing a deal.

In maintaining its competitive edge, Ritz also last year launched its Premiere Series, branching into the luxury leisure escorted travel market. Chan says the move has been a strong success, with more than 90 percent materialization. In September and October, Ritz had to open more tours because of demand.

At the heart of it, Chan says, the series emphasizes three things: premier comfort, premier accommodations and premier inclusion. The packages cap tour groups at 24 members to allow more comfort and individualized attention. They use the highest-end hotels in each city, and the tours include all tips for drivers and tour guides, as well as other typical add-on options such as certain excursions and shopping vouchers. According to Chan, while the packages run about 30 percent higher than other Ritz tours anywhere from $3,499 up to $4,999 they still remain below competitors’ prices.

“We don’t skimp when it comes to Premiere,” he says.

Next year, the company is offering two new itineraries including a 12-day Vietnam and Cambodia package, and has expanded several existing tours, including adding two days to its Journey to Japan Tour (now 10 days) to include Osaka and Hiroshima, and adding three days to its Tantalizing Thailand tour (now 15 days) to include Phuket. The company is also predicting 15 percent growth next year for China spurred by demand related to the Beijing Olympics. Chan says Ritz also sees demand growing for India, and hopes to add an India excursion perhaps in 2008.

One of the biggest trends Chan sees is customization, with Ritz seeing a 50 percent increase in such bookings in the past several years.

“I think it’s not just our industry, but a cross- industry trend toward customization&. Most people like escorted packages, but some would like to do that with their own special group and see if they can get something special&,” he says. “We expect that to continue with ad hoc groups, incentives group and others.”

Amid the changes, Chan also acknowledges the challenge brought on by the Internet.

“Almost everyone in America has access and is Internet savvy. They do their research and comparison-shop online. But that bodes well for us because we welcome comparisons,” Chan says.

An Easy Sell for Agents
Agents also have been a key to Ritz’s success.

“I have to tell you that our backbone is agents. We depend on their production very much,” said Pista Nadj, vice president of sales and marketing for Ritz.

Nadj, who is based in New York, says Ritz also is competing by aggressively courting travel agents at trade shows across the country, and regularly sends promotions and news releases to nearly 80,000 agents. The company also has created a private-label Web site for agents (www.ritzagent.com), with inside information on Ritz’s activities, best offers and tour availabilities and specials.

Ritz offers agents 10 percent commission on its packages, and while the operator does not have scheduled fam trips, once a year it joins with Kahn Travel to organize an invitational press and fam trip for its most loyal agencies, owners and agents.

“You can’t be the best with the prices and the highest quality of tours and at the same time offer extremely high commissions or other benefits,” Nadj said. “Most agents understand this. They appreciate that the quality is unquestionable and the operation is seamless&. On the other side, keeping prices affordable makes it very easy for agents to sell the product.

“For example, agents may spend 10 minutes selling our tours because clients are educated and do their homework & in 10 minutes, they earn 10 percent commission.”

For the future, Chan also has a vision for Ritz that includes positioning the tour operator to capitalize on its reputation in Asia as negotiations are under way to add the United States to China’s list of approved tourist destinations.

“We already do some business travel to the U.S. and we’re hoping to expand that inbound even more next year,” said Chan, adding the company is in talks with potential partners in the U.S. to handle everything from bus to hotel contracts. “We’re hoping that the U.S. will make it on the list of approved tourist destinations for the Chinese in the near future. We want our infrastructure to be ready.”

It’s a strategy that goes to the heart of Ritz’s growth even amid a roiling travel landscape.

“You have to be able to predict two or five years out & what’s the world going to be like,” says Chan. “What’s the industry going to look like five years from now, and get in a position to be ready.”