Case Study Short Answer *Windermere Manor Case Study Included*

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WINDERMERE MANOR: SUSTAINABILITY AND CHANGE Chetan Joshi, Hari Bapuji and R. Chandrasekhar wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com. Copyright © 2013, Richard Ivey School of Business Foundation Version: 2013-12-09

In early June 2012, Neil Kellock, general manager of Windermere Manor, a hotel in the Canadian city of London, Ontario, had just concluded his weekly meeting with the hotel’s housekeeping manager and guest relations manager. Both had drawn his attention to the breakdown of a core process, which was aimed at facilitating the reuse of towels by hotel guests in individual rooms. As part of internal reporting, the managers had been regularly monitoring the number of towels used per guest per day. For the three-month period beginning March 2012, their data showed that 75 per cent of the towels were being replaced in the rooms by the housekeeping staff and only 25 per cent of the towels were being reused. This low percentage of reused towels was despite 75 per cent of guests having expressed, while checking in, their willingness to reuse towels. Kellock concurred with the managers that the prevailing routine was not influencing the behaviour of guests in a positive way. Having tracked the towel reuse, which was considered to be one of the hotel industry’s building blocks of sustainability, Kellock now needed to examine ways of unlocking value in the process and improving the performance metric. Said Kellock:

The key to unlock the value in the process lies in two steps. First, we need to change the routine that has become an integral part of the process. The routine has become weak, leading to confusion and uncertainty in the minds of its stakeholders. Second, we need to change the way the underlying message is being communicated to its recipients. The alignment between intention and action is missing. We should set it right.

CONTEXT Several nuances were influencing the social behaviour of guests during their stay in a hotel. Typically, most people would act in an environmentally friendly way in their offices and homes, which was evident in their buying of green products and segregating of organic waste for special disposal. While

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Page 2 9B13C044 travelling, however, many guests left those routines behind as easily as they would follow them elsewhere. Having paid for their stay in a hotel, many guests considered fresh towels as entitlements. In their homes and offices, most people dutifully switched off power when lights were not required and turned off the tap when water was not needed. But they failed to respond to visual displays in a hotel reminding them of the need to conserve water and energy on its premises. Many guests would often do the opposite. Kellock knew that if Windermere Manor could not convince the average enthusiasts to “go green” during their stay, changing the behaviour of less enthusiastic guests would hardly be easy. The issue was compounded by the behaviour of the housekeeping staff. Despite the mandate to encourage towel reuse among guests, many of the housekeeping staff replaced the towels as a matter of course. They would do so to pre-empt customers from becoming annoyed with the quality of their room service. The housekeeping staff were apprehensive that if a guest were to go a step further and lodge a complaint, the guest’s voice would prevail over theirs since, in the normal course of business, the customer was always right. The housekeeping staff thus had an incentive for playing it safe. Kellock’s dilemma was how his team should manage the behavioural changes at various levels at Windermere Manor in their efforts to secure the desired objective of increasing the towel reuse in the rooms. SUSTAINABILITY IN HOTEL INDUSTRY Carbon footprint was a universal metric of sustainability. Measured as tons of carbon dioxide (CO2) emitted by a business enterprise in a financial year in the course of providing products and services to customers, the carbon footprint provided a basis for monitoring the impact of an enterprise on its environment. Since 2000, the metric had been gaining ground in many industries that were also developing specific standards. Hotels emitted CO2 primarily through the combustion of natural gas used in cooking and heating (both water and space). Other sources of CO2 emissions included fuels (such as diesel) used for backup generators and running the hotel fleet (e.g., cars, trucks and shuttles). Energy consumed for lighting, cooling and operating equipment and appliances also led to emissions. In 2011, the hotel industry made its first formal attempt to develop a system for calculating its carbon footprint. In collaboration with 23 leading global hospitality companies, the International Tourism Partnership and the World Travel & Tourism Council set up the Hotel Carbon Measurement Initiative (HCMI) Working Group to “devise a unified methodology based on available data and to address inconsistencies in hotel companies’ approaches.”1 The initiative had spawned regional endeavours. For example, based on HCMI guidelines, the Hotel Association of Canada had developed a carbon management software called Green Key Calculator. Since May 2012, this software had been made available to members of the Green Key Global Eco Rating, a global certification program that rated hotels on nine areas of sustainability practices: energy

1 World Travel & Tourism Council, “Major International Hotel Companies Launch Standardised Approach to Carbon Measurement,” media release, June 12, 2012, www.wttc.org/news-media/news-archive/2012/major-international-hotel- companies-launch-standardised-approach/, accessed March 12, 2013.

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Page 3 9B13C044 conservation, water conservation, solid waste management, hazardous waste management, indoor air quality, community outreach, building infrastructure, land use and environmental management. Some individual hotels had moved beyond such common measures as installing energy-efficient lighting and low-flow showerheads. For example, some hotels had moved to a keycard-based energy management system. Guests could insert their hotel keycard into a control switch near the door, which turned on the lights and the heating, ventilation and air conditioning (HVAC) systems; when they locked the room on their way out, all energy-consuming systems in the room were automatically switched off. The keycard system cost $120,000;2 in approximately 10 months, a hotel could recover this investment through energy savings. The savings added up when the investment was made across a hotel chain. The U.S. Environmental Protection Agency (EPA) had found that, each year, hotels and other lodging facilities used more than 510 trillion British thermal units (BTUs)3 of energy at a cost of more than US$7.4 billion. Hotels generated 54 million metric tons of greenhouse gas emissions, equal to the emissions from more than 11 million passenger vehicles. The EPA reported that the U.S. lodging industry could save US$745 million annually by reducing energy use by 10 per cent. At the micro-level, such savings translated to US$0.60 more revenue per room night at limited-service hotels and US$2 more revenue per room night at full-service hotels. TOWEL REUSE The towel-reuse program, which began in the 1980s, was among the earliest steps taken by hotels to promote sustainability. In 1986, the idea of towel reuse had prompted environmental activist Jay Westerveld to coin the term greenwashing. The term had been based on a general perception that hotel chains were more interested in saving money on laundry bills than in saving the earth. Greenwashing had since become a generic term for seemingly lofty ecological behaviour that was actually being driven by ulterior agenda. Hotels were among the bulk customers for the towel manufacturing industry. Hotel towels were usually white in colour. A white towel was amenable to rough handling: it could be boiled in hot water to make it look new, and it matched well with any room décor. Hotel towels were also made of 100 per cent cotton. They were usually knitted as opposed to being woven. Knitting was more expensive but it ensured that the loops would not loosen or be pulled. Higher cotton prices were driving up the cost of towels. Not surprisingly, some hotels were sewing washable radio frequency identification (RFID) chips into their towels for tracking purposes. If a guest tried to take a towel away from the hotel, the chips triggered an alarm. The RFID chips saved hotel costs because up to 20 per cent of a hotel’s towel stock typically went missing. For example, a hotel in Honolulu witnessed a loss of about 4,000 towels per month at its swimming pool; the number decreased to 750 a month after the introduction of RFID tags.4 The RFID chips’ tracking ability also helped to better manage the towel inventory. Meant to withstand more than 200 chemical washes, a hotel towel came in four standard sizes, all of which were made available in a hotel room: large towels (67cm × 140 cm), medium towels (60 cm × 120

2 All currency is shown in Canadian dollars unless otherwise noted. 3 A BTU is the amount of heat energy needed to raise the temperature of one pound of water by one degree F. It is the standard measurement used to state the amount of energy of a fuel and the amount of output of any heat-generating device. 4 Chris Murphy, “Don’t Steal the Hotel Towels. . . They’re Electronically Tagged with Traceable Microchips,” www.dailymail.co.uk/news/article-2019930/Hotels-combat-towel-theft-electric-tags-traceable-microchips.html, accessed May 10, 2013.

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Page 4 9B13C044 cm), hand towels (30 cm × 50 cm) and small face towels. Some hotels also provided beach towels (used on sand) and sweat towels (used in the gym). A survey by the American Hotel & Lodging Association in 2008 found that 83 per cent of members responding to the survey had a towel-reuse program and 88 per cent had a linen-reuse program. The benefits of towel reuse were fivefold: � Savings in laundry and detergent costs � Reduced wear and tear, thereby extending the life of towels � Reduced employee time dedicated to changing, folding and arranging towels in individual rooms � Fewer workplace injuries, particularly those related to back strain, a particular vulnerability for

housekeeping staff � Promotion of the brand’s reputation as a “green” hotel, generating repeat business. The website Economically Sound had estimated that a 150-room hotel that used a towel or linen reuse program could conserve 6,000 gallons (more than 22,000 litres) of water and 40 gallons (more than 150 litres) of laundry detergent per month.5 Thus, even a modest hotel could save the equivalent of three persons’ annual water usage each year simply through a towel- or linen-reuse program. In a large hotel with 4,000 guest rooms and suites, the towel- or linen-reuse program could save more than 150,000 gallons (nearly 600,000 litres) of water per month. The dollar savings from a reuse program varied with not only the size of the hotel but also its occupancy rate. Other variables included labour rates, utility rates and whether the washing machines used were front-loading or top-loading. A widely held view was that a towel- or linen-reuse program could generate savings of between $1.00 and $1.50 per day per guestroom. WINDERMERE MANOR HOTEL Housed in a former private manor built in 1925 and situated in exclusive and scenic surroundings, Windermere Manor housed 65 guestrooms and suites. Since it was located close to a university (1.5 km), a research park (0.5 km) and a hospital (1.0 km), Windermere Manor had a relatively homogeneous clientele; most customers were also repeat customers. All rooms (60) and suites (5) were non-smoking. The rooms were distributed equally over the second and third floors of the hotel, while the suites were located on the main floor, as were the hotel’s administrative offices. Compared with the rooms, the suites attracted different clients; typically, the suites were rented by small families on vacation, wedding parties or couples on honeymoon. The architectural beauty of Windermere Manor and its quiet location made it a good venue for weddings. Each room measured approximately 250 square feet (23 square metres) and provided either two double beds or one king bed. The room included such amenities as a coffee/tea maker (with supplies), refrigerator (and a microwave oven on request), 37-inch (94-cm) liquid-crystal display (LCD) television (with cable and pay-for-view movies), iPod docking station, hairdryer, iron and ironing board and makeup/shaving mirror. For those needing to work, the room was furnished with a work desk, an 5 Reese Rogers, “Reusing Hotel Towels: NittyGritty,” http://alumni.stanford.edu/get/page/magazine/article/?article_id=29072, accessed May 10, 2013.

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Page 5 9B13C044 ergonomic chair and two telephones (one cordless) with voice-mail features. The room also included complimentary Internet access and local telephone calls. Guests could access the boardroom and banquet facilities, if required. They could also order room service or dine at an in-house café that offered a multicultural cuisine. The breakfast at Windermere Manor, and more particularly the Sunday brunch, was popular with hotel guests, who also enjoyed free parking. EXISTING TOWEL-CHANGING ROUTINE After performing their regular housekeeping activities, the housekeeping staff placed four fresh bath towels on a towel rack in the bathroom if all towels had been used. If only two towels had been used, the two towels that did not seem touched were left on the rack, and two new towels were added. Three hand towels were hung on the same rack (see Exhibit 1), and three face towels were placed on the counter in a small container that also held the toiletries. On the counter, the staff placed a sign outlining the towel- changing routine for guests, next to the toiletries (see Exhibit 2). This placement ensured the sign was visible, as guests were likely to notice it when they picked from the toiletries they needed or when they were using the bathroom. The sign aimed to set up a routine whereby guests would leave the towels they intended to reuse on the towel rack and throw in the bathtub any towels they wanted replaced. While this routine might work in an ideal world, in reality that was not how it operated. As one housekeeper said, “I don’t know what they [guests] do in their homes; here they use five, six towels a day.” Not only that, “they throw towels all over the place: tub, floor, countertops, bed, chair, everywhere” (see Exhibit 3). The sight threw the housekeeping staff off guard. They simply would not know which towels the guests wanted replaced and which they preferred to reuse. As a result, the housekeeping staff typically changed every towel, even if it seemed like it had not been touched by the guest. Expectedly, the story from the guests’ side was very different. As one guest said, “I do not use a fresh towel everyday at home. So, why would I want to use a towel a day in a hotel? The habits formed over time do not change because I am in a hotel.” Guests reported that when they wanted to reuse towels and left them to dry (e.g., on the hook on bathroom door, on the shower rod or on a chair), the housekeeping staff removed them and replaced them with fresh towels on the rack. ISSUES BEFORE KELLOCK The immediate priority Kellock faced was to correct the flaws that had surfaced in the routine around towel reuse. The process flow needed to be reworked, and the right message needed to be conveyed. According to Kellock, succeeding in smaller initiatives such as the towel-changing routine was the key to succeeding in larger sustainability initiatives in the future:

Many of our guests are repeats. Evidently, they are comfortable with the experience we provide. They are aware of social issues like global warming; they believe in sustainability practices. Why then are we not able to get them to behave in our rooms in accordance with our own goals of sustainability at Windermere Manor? How should we redesign the routine around towel reuse? What message should the signage convey? How do we incentivize our guests to act accordingly? How do we incentivize our housekeeping staff to comply with the general mandate on towel reuse? How should we test a redesigned towel-changing routine and know that it is more effective than the current routine?

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EXHIBIT 1: TOWEL RACK

Note: The towel rack as it appeared just before the guest checked into the room. Source: Windermere Manor.

EXHIBIT 2: SIGN ON THE BATHROOM COUNTERTOP

Source: Windermere Manor.

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EXHIBIT 3: TOWELS LYING EVERYWHERE

Source: Windermere Manor.

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