Rosewood Hotels & Resorts: Branding to Increase Customer Profitability and Lifetime Value...

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Rosewood Hotels & Resorts: Branding to Increase Customer Profitability and Lifetime Value ________________________________________________________________________________________________________________ Chekitan S. Dev and Laure Mougeot Stroock prepared this case solely as a basis for class discussion and not as an endorsement, a source of primary data, or an illustration of effective or ineffective management. Chekitan S. Dev is Associate Professor of Marketing and Brand Management at Cornell University’s School of Hotel Administration. Laure Mougeot Stroock is an independent business research analyst and casewriter working for the School of Hotel Administration and Cornell’s Johnson Graduate School of Management. This case, though based on real events, is fictionalized, and any resemblance to actual persons or entities is coincidental. There are occasional references to actual companies in the narration. Copyright © 2007 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. C H E K I T A N S . D E V L A U R E M O U G E O T S T R O O C K Rosewood Hotels & Resorts: Branding to Increase Customer Profitability and Lifetime Value Introduction For nearly 25 years, Rosewood Hotels & Resorts (Rosewood), a private hotel management company, sought to build a global reputation with iconic luxury hotels such as The Mansion on Turtle Creek in Dallas and The Carlyle in New York—trophy properties so distinctive, each could thrive on its own name, without any “corporate” identification (see Exhibit 1 for brand history). The Rosewood brand was muted, unmentioned in advertising, and known mainly to hotel professionals. However, in early 2004, to boost the company’s growth, John Scott, Rosewood’s new president and CEO, and Robert Boulogne, vice president of sales and marketing, were considering a new brand strategy. As Boulogne recalled: We thought the time was right to establish Rosewood as a true brand incorporated into the name of each hotel and prominently displayed in all communications for and at our properties. This would help provide us with a platform for encouraging guests who stay at one of our properties to stay at some of the others. But, they wondered how far they could push this branding strategy without undercutting the distinctiveness of each individually branded hotel. Company Profile and Background Headquartered in Dallas, Texas, Rosewood Hotels & Resorts, L.L.C, was a privately held company, established in 1979 by the Caroline Rose Hunt Trust Estate (see Exhibit 2 for biographies of key figures). The first hotel Rosewood managed was The Mansion on Turtle Creek, opened in 1980. This hotel was an old mansion in Dallas rescued from demolition by Mrs. Hunt, the daughter of Texas oil tycoon H.L. Hunt. Rosewood worked with Hunt to transform the property into a world- class hotel and restaurant. After successful conversions of existing hotels (The Mansion on Turtle Creek and Little Dix Bay in the British Virgin Islands), and new builds (The Lanesborough in London 2087 J U N E 1 5 , 2 0 0 7 For the exclusive use of M. Harthi, 2022. This document is authorized for use only by Mashor Harthi in BA 590 Marketing Management (2022W CHEN)-1 taught by Johnny Chen, Oregon State University from Dec 2021 to Jun 2022. 2087 | Rosewood Hotels & Resorts: Branding to Increase Customer Profitability and Lifetime Value 2 BRIEFCASES | HARVARD BUSINESS SCHOOL and Las Ventanas Al Paraiso in Mexico), the company became known for its ability to enhance a property’s value by creating unique, one-of-a-kind properties with a small ultra-luxury residential style that differentiated it from other chain-like luxury competitors.1 As of 2003, Rosewood had 12 hotels worldwide, with a total capacity of 1,513 rooms, for which the nightly rate ranged from a low of $120 for one of the Saudi Arabian properties to $9,000 for a Canadian lodge. In the previous year, 115,000 unique guests2 had stayed at Rosewood hotels (see Exhibit 3 for operating profile). Rosewood competed with two groups of luxury hotels: the corporate branded Ritz-Carlton, Four Seasons, St. Regis, One&Only, and Mandarin Oriental hotels, and the “collections” of individually branded unique hotels, such as Auberge, RockResorts, and Orient-Express (Exhibits 4 and 5). The Individual Brand/Collection Strategy Unlike the corporate brand model, in which luxury tended to follow (as Scott dubbed it) a “canned and cookie cutter” approach across properties, Rosewood operated a “collection” of unique properties, each with its own name or brand (see Exhibit 6, Rosewood Properties and Signed Agreements). Each hotel and resort featured architectural details, interiors, and culinary concepts that reflected local character and culture and defined Rosewood’s “Sense of Place” philosophy. Scott explained: What makes Rosewood different is its commitment to unique, one-of-a-kind, luxury properties. Our brand compass has always been built on our concept of “A Sense of Place®” which, at its core, means that each of our properties seeks to capture what is unique about the given location. From design to service to programming, we try and tailor each property experience to what is special about a given location, architecture, history, and culture. To this end, our Rosewood design and service standards are meant to be flexible enough to adapt to local conditions. Our local teams are expected to have some degree of flexibility and creativity to reflect “A Sense of Place®” from menu design to how a guest is greeted. This is a very different approach from our chain-like competitors. In the 1990s, Rosewood’s management believed that the individual property brand or collection strategy was a powerful tool to differentiate Rosewood properties from competitors with a corporate brand. Scott explained: Our original collection growth strategy was two-fold. We sought to convert existing iconic, luxury hotels with strong brand equity which needed to be re-positioned and re-launched with professional management (i.e., The Carlyle and Little Dix Bay). We also sought to help developers conceive and create the next generation of luxury hotels and resorts around the world, and in doing so create brand equity in the property itself (i.e., The Mansion on Turtle Creek and Las Ventanas al Paraiso). Under the individual brand or collection strategy, the Rosewood hotel marketed itself under its own brand name in addition to participating in Rosewood-related advertising. “The Rosewood branding was soft and meant to be complementary, not intrusive,” remarked Boulogne. The Rosewood logo appeared discreetly on low-profile amenities such as clothes hangers or stationery. Higher-profile amenities, such as bathrobes and towels (which also provided a profitable souvenir business), bore the logo of the hotel. Hotel phone greetings did not mention the Rosewood name. 1 In December 2002, Las Ventanas Al Paraiso’s RevPAR index was 3.62 (the index measures the Revenue per Available Room of a hotel compared to the ones of its competitors in the same market). The Lanesborough’s was 1.5, the Mansion on Turtle Creek’s was 1.96 and Little Dix Bay’s was 1.25. 2 For example, a couple or family staying in the same hotel room counted as one unique guest. For the exclusive use of M. Harthi, 2022. This document is authorized for use only by Mashor Harthi in BA 590 Marketing Management (2022W CHEN)-1 taught by Johnny Chen, Oregon State University from Dec 2021 to Jun 2022. Rosewood Hotels & Resorts: Branding to Increase Customer Profitability and Lifetime Value | 2087 HARVARD BUSINESS SCHOOL | BRIEFCASES 3 Through the 1990s, Rosewood’s advertising was property-specific: the property name appeared first, then the location. In the early 2000s, Rosewood’s advertising began to feature a list of all Rosewood properties, but the Rosewood logo remained secondary to the hotel logo. The Limitations of Individual Branding In April 2003, John Scott, who was the director of acquisitions and asset management at a private real estate investment group and a Rosewood board member, was asked by the Board to become CEO and help chart a new direction for Rosewood. He recognized that the Rosewood brand had low recognition and brand-wide usage among guests and was an untapped asset. Scott and Boulogne concluded: Our emphasis on individual property brands was not working from a number of fronts. 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. Competition in the luxury hotel segment is intense and it was becoming difficult to position Rosewood’s collection of properties in an increasingly crowded field of luxury operators. Philip Maritz, chairman of the board, went further in questioning Rosewood’s individual branding positioning: “I think we are underestimating the power of corporate brands, such as Four Seasons, as status symbols. At this time, we are after only a subset of the luxury market—the sophisticated customers who value the distinctive, exclusive ‘collection’ hotel—when in fact the vast majority of the luxury market seem to value the corporate-branded version of luxury. Our current brand positioning substantially limits our market.” The Case for Corporate Branding Rosewood Hotels & Resorts had very low brand awareness with its guests. A 2003 report from Strategic Marketing Solutions commissioned by Rosewood showed that a majority of consumers did not know the brand—and the few who did had learned the name Rosewood from their travel agents (see Exhibit 7, Selected Quotes). In spite of this, Scott had high hopes for Rosewood: “I want to emulate the AmanResorts model and develop ‘Rosewood junkies’ who
Answered 1 days AfterJan 29, 2022

Answer To: Rosewood Hotels & Resorts: Branding to Increase Customer Profitability and Lifetime Value...

Sumit answered on Jan 30 2022
109 Votes
No Change to Strategy
    Year    2003    2004    2005    2006    2007    2008    2009    Sum
    Number of Nights per Stay        2    2
    2    2    2    2
    Number of Stays per Guest        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
    Revenue per Customer        $ 1,800.00    $ 1,908.00    $ 2,022.48    $ 2,143.82    $ 2,272.46    $ 2,408.81
    Gross Profit per Customer        $ 576.00    $ 610.56    $ 647.19    $ 686.02    $ 727.19    $ 770.82
    Less: Cost of Customer Acquisition    $ -150.00
    Less: Annual Marketing Cost        $ -130.00    $ -133.90    $ -137.92    $ -142.05    $ -146.32    $ -150.71
    Cash Flow from Customer    $ -150.00    $ 446.00    $ ...
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