Rosewood Hotels & Resorts: Branding to increase customer profitability and Lifetime Value

Harvard Business School Case

What is Rosewood?

Who is John Scott?

What is Rosewood

• Hotels & Resort Company

• 13 different properties spread across the globe

• Known for great properties, with each of it’s property itself as a brand

Key Players

• John Scott

• Robert Boulogne

President and CEO

Vice President of Sales & Marketing

Current Scenario

Situation Analysis• Owns very highly valued properties and resorts

• Customers loves the individual properties and brands but fail to recognise ‘rosewood’.

• New branding strategy for higher customer retention rate and multi property visit rate

• Need to evaluate the new strategy and analyse the future of the company, with and without the new strategy

Why study this case?

Objective of this case (1/3)

• To analyse the new strategy and discuss it’s pros and cons for the future of Rosewood group.

• To develop an understanding of collection strategy and corporate strategy

Objective of this case (2/3)

Understanding concerns of Loyal Customers and Resort Managers

Objective of this case (3/3)

• Evaluate the profitability in long term by evaluating profits generated versus costs incurred

• Understanding the role of decision on brand equity

Three Issues to analyse and understand

Three Issues

Analysing behaviour and POV of Loyal Consumers and Managers

1

Three Issues

Revisits and Multi-property visits

2

Three Issues

Analysing Customer Lifetime Value and evaluating the profits of corporate strategy

3

Behaviour and Point of View of Loyal Consumers

and Managers

History

• Selling point : One of a kind properties, Point of Differentiation

• Hotels with brand name greater than ‘Rosewood’ itself

Consumers

• Reluctant to go towards bigger brand

• Feeling of exclusiveness

• Emotional attachment towards brand name

–Robert Boulogne

“Hotel Managers are more inclined to promote just their own individual hotel brands,

particularly if they have a strong brand”

Managers

Bottom Line

It is not in the best interest of Managers and Loyal Consumers to directly switch to corporate branding strategy and hence certain modifications are required.

Revisits and Multi-property Visits

–John Scott

“While guests were seeking a unique Rosewood property experience and product, they were not

making the connection between Rosewood properties and were increasingly identifying with

other strong hotel brands”

No identification

Limited Market

People want Brands

Smal sophisticated segment value exclusiveness

Testimonies of Travel Agents

• “Clients are not aware of it. They do not come to me asking for Rosewood properties”

• “In Dallas, yes it definitely helps”

Is name Rosewood meaningful in encouraging your clients?

Strong Individual Brand/Property

Recognition

Rosewood namerecognition is low

Effect of corporate branding(1/2)

• “Aman Junkies” take pride in collecting the Aman Experience

• Preserves uniqueness and at the same time help customers develop connection b/w different properties

• More than 10,000 repeat guests with only 500 rooms.

Aman Resorts Case

Effect of corporate branding(2/2)

2x times better

Multi-property visits

Bottom Line

Corporate Strategy is the way ahead, it helps us expand Markets, and we can leverage on our existing property brand names.

New properties (Acqualina, Tuanovo Bay, La Solana and Laguna Kai) can leverage on brand names of ‘The Carlye' and ‘The Mansion’

Customer Lifetime Value

Analysing CLTV for next 6 years

CLTV

• Reluctant to go towards bigger brand

• Feeling of exclusiveness

• Emotional attachment towards brand name

$139

24,91911,500

21.67%$90 $81

$159

Analysis (1/2)

• We observe that the overall guest retention rate improved from 16.67% to 21.67%

• Multi property visits doubled

Analysis (2/2)

• Although the net profit per guest is reduced, it might be compensated by the retention rate of old guests

CLTV (1/2)Years 0 1 2 3 4 5 6

Gross profit per guest

US$ 240.00 US$ 259.20 US$ 279.94 US$ 302.33 US$ 326.52 US$ 352.64 US$ 380.85

Acquisition expense per new guest

US$ 150.00 US$ 153.90 US$ 157.92 US$ 162.05 US$ 166.32 US$ 170.71 US$ 175.23

Marketing Expense per guest

US$ 130.00 US$ 133.90 US$ 137.92 US$ 142.05 US$ 146.32 US$ 150.71 US$ 155.23

Net Profit per guest

US$ 90.00 US$ 105.30 US$ 122.02 US$ 140.28 US$ 160.20 US$ 181.93 US$ 205.62

Churn Factor

83.33 83.33 83.33 83.33 83.33 83.33 83.33

Discount Factor

8 8 8 8 8 8 8

Net Present Value

US$ 0.14 US$ 0.16 US$ 0.18 US$ 0.21 US$ 0.24 US$ 0.27 US$ 0.31

Customer LTV

US$ 0.14 US$ 0.29 US$ 0.48 US$ 0.69 US$ 0.93 US$ 1.20 US$ 1.51

Without Rosewood Branding

CLTV (2/2)With Rosewood Branding

Years 0 1 2 3 4 5 6

Gross profit per guest

US$ 240.00 US$ 259.20 US$ 279.94 US$ 302.33 US$ 326.52 US$ 352.64 US$ 380.85

Acquisition expense per new guest

US$ 159.00 US$ 163.17 US$ 167.47 US$ 171.89 US$ 176.45 US$ 181.14 US$ 185.97

Marketing Expense per guest

US$ 139.00 US$ 143.17 US$ 147.47 US$ 151.89 US$ 156.45 US$ 161.14 US$ 165.97

Net Profit per guest

US$ 81.00 US$ 96.03 US$ 112.47 US$ 130.44 US$ 150.07 US$ 171.50 US$ 194.88

Churn Factor

78.33 78.33 78.33 78.33 78.33 78.33 78.33

Discount Factor

8 8 8 8 8 8 8

Net Present Value

US$ 0.13 US$ 0.15 US$ 0.18 US$ 0.21 US$ 0.24 US$ 0.27 US$ 0.31

Customer LTV

US$ 0.13 US$ 0.28 US$ 0.46 US$ 0.67 US$ 0.91 US$ 1.18 US$ 1.49

Bottom Line

The increase in rate of Marketing expenses is too high and even the retention rate is not able to counter it and we obtain a lower CLTV for corporate strategy.

Although the assumption of same no. of unique guest may not hold valid, specially with newer properties coming up, the visits will be higher for corporate strategy.

DisclaimerCreated by Parakh Agarwal, IIT

Delhi.During Marketing Internship under Prof. Sameer Mathur