Rosewood Hotels & Resorts Business

Case
GMBA 2017 Section 3 Group A
 Rosewood Hotels &
Resorts

• Established in 1979
• Headquartered in Dallas, Texas
• Global reputation with Iconic
luxury hotels(Ex. The Carlyle in
New York)
• As of 2003, 12 Hotels worldwide
with 1,513 rooms
• Room rate ranged from $120 to
$9,000
• Yearly total guests: 115,000
Rosewood’s Current Branding
Strategy

Sense of Place

Individual Property
Brand
 Rosewood Problem

Limitations of Individual property branding

◈ Low cross-property usage
◈ Low corporate brand awareness
◈ Limiting its market growth targeting a
subset of the luxury market while vast
majority of the luxury market value the
corporate-branded hotels.

Rosewood considering the corporate branding

strategy to boost its growth and to increase
cross-property usage and corporate brand
awareness
 The 5 C’s of Rosewood Marketing
Strategy

Company Context Customers

• Enhance property • 1990s – “collection of • Current branding limits

value unique properties” growth potential
• 2003 – Luxury
• A “Sense of Place” associated with • Standardized luxury
cooperated brand hotel

Competitors Collaborators

• Two luxury hotels groups • Ambiguous feeling

Hotel Managers
• Branded hotels • Awareness
Revenues Travel Agents
Expansion • Engagement
Other Partners
 Alternatives

1. Individual Property Branding

2. Frequent Stay Program

3. Corporate Branding Strategy

RECOMMENDATI
ON

Corporate Branding
Strategy.
 IMPLICATIONS

Current Strategy Proposed Strategy

◈ Limited brand ◈ Increase brand

awareness awareness

◈ Limited market share ◈ Increase market share

◈ Low cross property ◈ Improve cross property

usage usage

◈ Unable to realize ◈ Take advantage of

synergies synergies

◈ Inconsistent ◈ Consistent performance

performance standards
standards
 ASSUMPTIONS IN THE MODEL

WITHOUT Rosewood branding WITH Rosewood branding

(2003)
Total Number of unique guests 115,000 115,000
Average Daily Spend $750.00 $750.00
Number of Days Average Guest Stays per Stay 2.0 2.0
Average Gross Margin per Room 32% 32%
Average Number of Visits per Year per Guest 1.2 1.3
Average Marketing Expense per Guest (system-
$130.00 $130.00
wide)
Average New Guest Acquisition Expense
$150.00 $150.00
(system-wide)
Total Number of Repeat Guests 19,169 24,919
of which: Total Number of Multi-property Stay
5,750 11,500
Guests
Additional Costs Required per annum $0 $1,000,000
Discount Rate 8% 8%

Average Guest Retention Rate 16.67% 21.67%

Discount rate – 8%, Marketing cost escalation of 3%, Revenue escalation of 6%.
 CLTV ANALYSIS

Expected Cash Flow from Customer (Individual Branding)

$600.00
$500.00
$400.00
$300.00
• CLTV with corporate
$200.00
$100.00
branding is increased by $
$0.00
2003 2004 2005 2006 2007 2008 2009
82.60 per customer
($100.00)
($200.00)

Expected Cash Flow from Customer (Corporate Branding) • For a total of 115,000
unique customers, this will
$600.00
$500.00
result in an increase in
$400.00 revenue by $ 29.7M
$300.00
$200.00
$100.00
$0.00
2003 2004 2005 2006 2007 2008 2009
($100.00)
($200.00)
 Implementation Plan

1 2 Pre Launch 3
Planning “Go Live” & Monitor
Strategy Execution
(4 Months) (6 Months) (Onwards)
 Implementation Plan

O Phase 1:
Planning
Communication Management
Stakeholder Management

Risk Management

Planning for Formal Launch

Brand Performance Measurement
Timing / Special Event
Identifing KPIs

Procurement
 Swap Strategy

O Phase 2: Pre-Launch - Strategy

Execution
Creating Brand
Ambassadors Creating
Advertisemen
Staff & Collaborators
Soft Introduction of t Campaigns
Corporate Brand
Changing name on
Customizing
amenities, stationary, etc   CRS


 


Progress
Internal
Reporting
Cost, Milestones, etc
Communication
Webinars, Weekly Meetings between
managers and board members, etc
1 2 3
Implementation Plan

O Phase 3: “Go Live” & Monitor (Post-Launch –

Assessment)

External Communication
TV Commercial
Web-based Advertisements
Creative Advertisements
Social Media(Twitter, Facebook
Constant Monitoring of Risks
Performance Measurement
KPIs
- Cross Propery Guests
- Retained Guests
- Goods/Services Sales
- ROI
Periodic Reporting
Rosewood Management
concluded

“
Our emphasis on individual
property brands was not working
from a number of fronts.
Customers are not making
connection between Rosewood
properties and are increasingly
identifying with other strong
corporate branded hotels

“
Philip Maritz, Chairman of the
Board

“
At this time, we are after only a
subset of the luxury market – the
sophisticated customers who
value the distinctive, exclusive
collection hotel when the vast
majority of the luxury market
value the corporate-branded
version of luxury. Our current
brand positioning substantially

“
limits our market
 THE CHANGES (should be part of implementation
plan or deleted)

What Changes What does not change

◈ Name of the property ◈ Feel – Architecture &

interiors
◈ Logos on crockery
◈ Culinary concepts
◈ What we say when we
greet guests ◈ How we greet guests
 CLV WITH CURRENT BRAND STRATEGY

0 1 2 3 4 5 6
Year 2003 2004 2005 2006 2007 2008 2009
Number of Nights per Stay 2.0 2.0 2.0 2.0 2.0 2.0
Number of Stays per guest (assuming they
are retained) 1.2 1.2 1.2 1.2 1.2 1.2
Revenue Per Night $750.00 $795.00 $842.70 $893.26 $946.86 $1,003.67 $1,063.89
Revenue per Customer $0.00 $1,908.00 $2,022.48 $2,143.83 $2,272.46 $2,408.81 $2,553.33
Gross Profit per Customer $0.00 $610.56 $647.19 $686.03 $727.19 $770.82 $817.07
Less Cost to Acquire Customer ($150.00)
Less Annual Marketing Cost per Customer ($133.90) ($137.92) ($142.05) ($146.32) ($150.71) ($155.23)
Cash Flow from Customer if Retained ($150.00) $476.66 $509.28 $543.97 $580.87 $620.11 $661.84

Probability of Being Retained 1.00 1.00 0.17 0.03 0.00 0.00 0.00
Expected Cash Flow from Customer ($150.00) $476.66 $84.90 $15.12 $2.69 $0.48 $0.09

Discount Factor 1.000 1.080 1.166 1.260 1.360 1.469 1.587

NPV of Expected Cash Flow from

Customer ($150.00) $441.35 $72.78 $12.00 $1.98 $0.33 $0.05
Total NPV of CLTV $378.49
 CLV WITH PROPOSED BRAND STRATEGY

0 1 2 3 4 5 6
Year 2003 2004 2005 2006 2007 2008 2009
Number of Nights per Stay 2.0 2.0 2.0 2.0 2.0 2.0
Number of Stays per guest (assuming they
are retained) 1.3 1.3 1.3 1.3 1.3 1.3
Revenue Per Night $750.00 $795.00 $842.70 $893.26 $946.86 $1,003.67 $1,063.89
Revenue per Customer $0.00 $2,067.00 $2,191.02 $2,322.48 $2,461.83 $2,609.54 $2,766.11
Gross Profit per Customer $0.00 $661.44 $701.13 $743.19 $787.79 $835.05 $885.16
Less Cost to Acquire Customer ($150.00)
Less Annual Marketing Cost per Customer ($133.90) ($137.92) ($142.05) ($146.32) ($150.71) ($155.23)
Less Additional Marketing Cost per
Customer* ($8.96) ($9.23) ($9.50) ($9.79) ($10.08) ($10.38)
Cash Flow from Customer if Retained ($150.00) $518.58 $553.98 $591.64 $631.68 $674.27 $719.55

Probability of Being Retained 1.00 1.00 0.22 0.05 0.01 0.00 0.00
Expected Cash Flow from Customer ($150.00) $518.58 $120.04 $27.78 $6.43 $1.49 $0.34

Discount Factor 1.000 1.080 1.166 1.260 1.360 1.469 1.587

NPV of Expected Cash Flow from

Customer ($150.00) $480.17 $102.92 $22.05 $4.72 $1.01 $0.22
Total NPV of CLTV $461.09