MKT Rosewood Case Analysis

Rosewood Case Analysis For Rosewood Hotels to successfully move from the “canned and cookie cutter” approach of individual branding to a collective strategy of corporate branding, first the pros and cons have to be weighed and measured. From the research conducted by Rosewood, the most obvious and immediate pro to a corporate branding strategy is the projected increase in multiproperty stay guests from 5% to 10%. This has the potential to not only increase revenues but also brand awareness, recognition and word of mouth referrals. A full complement of pros and cons to converting to a corporate brand strategy for Rosewood is outlined in the table below: Pros

Cons

Increased brandwide usage

“Canned and cookie cutter” approach

Increased brand recognition

No “sense of place” philosophy

Connection amongst properties

Loss of uniqueness

Good positioning for competition

Less differentiation

Increased market/share

Potential loss of current brand equity

Increased brand awareness

Loss of discretion

Promotion of cross-property usage

Resistance to change (guests and management)

Increased return visits

Increased marketing costs

Brand loyalty – less property specific

Competition tougher among corporate branded hotels

Increased revenues Building customer lifetime values

Change in the corporate culture is challenging

Overall customer lifetime value is higher with corporate branding than without, as demonstrated in Exhibit A. Without corporate branding, overall net present value totals $378.49 per guest while with branding that number jumps to $461.09. The average gross profit, based on repeat guests, is $2,702,500.00 without branding and $5,305,000.00 with corporate branding. Based on the calculations, as well as the overall pros and cons, I believe that Rosewood should definitely move from individual brands to a corporate brand. That being said, the company currently has some powerhouse locations under its overall corporate climate, such as the flagship location, The Mansion on Turtle Creek in Dallas and also The Carlyle in New York. So as not to lose any current brand equity in those properties, and also to appease the management of those locations who are probably more resistant to the change to corporate branding than any other locations, I would recommend a modified corporate umbrella plan using a combination of new and existing brand elements. Rather than renaming The Carlyle to The Rosewood Carlyle, I would recommend the name become “The Carlyle, a Rosewood Property” or something similar. This will associate the properties with the Rosewood name without detracting from the brand equity already built within the current naming framework. The changes to the corporate culture will be difficult enough to traverse without adding undue stresses, and Rosewood definitely does not want to alienate current customers with dramatic and immediate changes. All new properties could be named under the Rosewood umbrella. The company also needs to strive to establish the same service levels across all properties that the patrons of locations like The Carlyle and The Mansion at Turtle Creek have come to expect. Rosewood needs to maintain the core company philosophies and impeccable standards established by Mrs. Hunt when she rescued The Mansion from demolition and made it the worldclass hotel and restaurant that it is today.

Exhibit A Rosewood: Brand-wide Customer Lifetime Value Spreadsheet Model Without Rosewood Branding (2003) Total Number of Unique Guests Average Daily Spend Number of Days Average Guest Stays Average Gross Margin per Room Average Number of Visits per Year per Guest Average Marketing Expense per Guest (systemwide) Average New Guest Acquisition Expense (systemwide) Total Number of Repeat Guests Of which: Total Number of Multi-property Stay Guests Average Guest Retention Rate Average Gross Profit per Guest Without Rosewood Branding Year Gross Profit per Guest Acquisition Expense per new Guest Marketing Expense per Guest Net Profit per Guest Retention Factor Discount Factor Net Present Value With Rosewood Branding Year Gross Profit per Guest Acquisition Expense per new Guest Marketing Expense per Guest* Net Profit per Guest Retention Factor Discount Factor Net Present Value

0

115,000 $750.00 2.0 32% 1.2 $130.00 $150.00 19,169 5,750 16.67% $470

With Rosewood Corporate Branding 115,000 $750.00 2.0 32% 1.3 $138.70 $150.00 24,919 11,500 21.67% $461

increasing at 6%

increasing at 3%

1 $610.56

2 $647.19

3 $686.03

4 $727.19

5 $770.82

6 $817.07

($150.00)

($133.90) $476.66

($137.92) $509.28

($142.05) $543.97

($146.32) $580.87

($150.71) $620.11

($155.23) $661.84

1.00 1.000 ($150.00)

1.00 1.080 $441.35

0.17 1.166 $72.78

0.03 1.260 $12.00

0.00 1.360 $1.98

0.00 1.469 $0.33

0.00 1.587 $0.05

0

1 $661.44

2 $701.13

3 $743.19

4 $787.79

5 $835.05

6 $885.16

($150.00)

($142.86) $518.58

($147.14) $553.98

($151.56) $591.64

($156.10) $631.68

($160.79) $674.27

($165.61) $719.55

1.00 1.000 ($150.00)

1.00 1.080 $480.17

0.22 1.166 $102.92

0.05 1.260 $22.05

0.01 1.360 $4.72

0.00 1.469 $1.01

0.00 1.587 $0.22

($150.00)

($150.00)

*includes incremental factor of $1 million increasing at 3% per year allocated to 115000 guests