Rosewood Hotel Case

Rosewood Hotels& Resorts

CASE JOURNAL-ROSEWOOD HOTEL& RESORTS

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Rosewood Hotels& Resorts Rosewood’s management is on the right track to increasing brand awareness among its customers by pursuing the corporate branding strategy. Implementation of the corporate branding strategy not only increases the number of repeat visitors to the hotels, but also increases the gross profits made by the company by $2,599,000. Corporate branding has a positive impact on the customer lifetime value as well. Rosewood Hotels & Resorts is a privately owned hotel management company that is known f o r i t s unique properties like The Carlyle and the Mansion on Turtle Creek that differentiates t he co mp an y from other luxury h o t el competitors. The company’s data analyses showed that, though some properties had return visit rates of up to 40%, only 5% of those were cross property stays. On the other hand other corporate-branded hotels enjoyed 10% to 15% cross-property usage rates. This prompted the company’s management to implement the corporate branding strategy in order to increase the brand’s awareness among its customers. The intent of this decision was to help provide the company with a platform to encourage guests who stay at one of their properties to stay at some of the others. This was important for the company as the unfamiliarity of the guests with the company’s other properties is an untapped asset which is financially viable for the company to pursue. Rosewood’s decision to move to corporate branding will improve the company’s visibility among consumers encouraging them to stay at other Rosewood owned properties.

Individual Brand Strategy vs. Corporate Branding Strategy: Individual Brand Strategy Rosewood owned a collection of unique properties, each with its own name or brand. Each hotel and resort featured details and aspects that reflected local character and culture of the location embodying Rosewood’s “Sense of Place” philosophy, meaning each of its properties is uniquely defined by the location. This differentiated Rosewood’s properties from the competitors.

Corporate Branding Strategy: Rosewood Hotels & Resorts had very low brand awareness among its guests. To encourage guests to use more than one Rosewood hotel, two possible approaches were considered. The first possibility to boost Rosewood's customer multi property visits was to set up a frequent-stay program. But this was rejected by the management as it was found that such programs had only proved successful for large multiple-segment operators with broad geographic distribution, where guests could easily redeem their rewards. The other possibility of fostering guests’ connection with Rosewood properties was to adopt a corporate branding approach, which the company believed would encourage multi property guest stays while promoting the Rosewood brand. 2

Rosewood Hotels& Resorts Advantages of Corporate Branding: 

Increasing brand awareness among guests.

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Increasing multi property visits among guests

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Increase in revenue

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Increase in CLV.

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Increased customer retention rates.

Disadvantages of Corporate Branding: 

Increase in marketing expenses

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Inconsistencies with respect to the brand’s “Sense of Place” motto.

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Chances of losing the uniqueness associated with individual properties

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Managers being reluctant to embrace corporate branding.

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Guests unwilling to accept corporate branding.

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Corporate branding means additional branding on souvenirs etc.

Influence of the move to corporate branding on Customer Lifetime Value:

The main challenge that was presented to the executives of Rosewood in considering the move to corporate branding was its affect on customer lifetime value. Rosewood’s move to corporate branding will have a positive impact on Customer Lifetime Value (see Appendix for calculations). With the move to corporate branding, it is anticipated that the number of multi-property guests will double from 5% to 10 %( 5,750 to 11,500).The number of repeat guests will go up from 19,169 to 24,919(see Table 1 in Appendix for calculations). Even though the number of multi property guests goes up by 5%, the average gross profit per guest decreases by $9 due to the additional marketing expense. Overall, the increase in the number of multi property guests will positively affect company’s CLV and will also increase brand awareness among the customers. From the calculations in table 1, number of multi-property guests, average gross profits without and with Rosewood corporate branding is $2,702,500 and $5,301,500 respectively. That is, corporate branding increases gross profits by $2,599,000. The CLV increases by $14,006,874 with corporate branding.

Therefore it is evident that the company has enough financial credentials to support its decision to move to corporate branding. But in spite of these positive attributes, the management must ensure that they preserve the uniqueness and individuality of the Rosewood properties while developing consistent brand-

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Rosewood Hotels& Resorts wide performance standards. Prominently imposing the Rosewood brand might alienate some of the guests at well-established properties such as The Carlyle or The Mansion on Turtle Creek. Therefore the management might want to consider applying a softer branding strategy in such cases, where the name of the individual property is given the first priority. This way the loyal customers are kept satisfied while the brand is also promoted among the newer customers. The company can also strive to become a corporate brand while developing unique properties in geographically diverse locations emphasizing the uniqueness of its location. This will give Rosewood the competitive advantage over its competitors. Finally, management should continue to promote the brand awareness among its customers by pursuing aggressive marketing and dynamic advertising techniques.

APPENDIX: Table 1: Without Rosewood Branding

With Rosewood Corporate Branding

Total Number of unique guests

115,000

115,000

Average Daily Spending

$750

$750

Number of days of average guest

2

2

Average gross margin per room

32%

32%

Average number of visits per

1.2

1.3

$130

$139 ((115,000*130)

stay

year per guest Average marketing expense per guest Average new guest acquisition

+1,000,000)/115000 $150

$150

Total number of repeat guests

19,169

24,919 ( 19169*1.3)

Total number of multi property

5750 (5% of 115,000)

11,500 (10% of 115,000)

Average guest retention rate

16.67% (19169/115000)

21.67% (24,919/11,5000)

Average gross profit per guest

$470 (750-150-130)

$461 (750-150-139)

Average gross profit (based on

$2,702,500 (470* 5750)

$5,301,500 (461*11500)

expense

stay guests

Total number of multi property stay guests)

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Rosewood Hotels& Resorts CLV Calculations: CLV per guest (without rosewood branding) = (470*6)-150 = $2670. CLV for repeat guests= 2670*19,169 = $51,181,230.

CLV per guest (with rosewood branding) = (461*6)-150 = $2616. CLV for repeat guests= 2616*24,919 = $65,188,104.

Increase in CLV due to corporate branding = 65,188,104 - 51,181,230 = $14,006,874

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