lienate some guests at well-established properties;
May diminish the value of each individually branded hotel; •
Hotel managers may feel threatened in their autonomy;
Hotel managers more inclined to promote their own brand.
The objectives of the corporate branding strategy should be to increase the Rosewood brand awareness among existing and new customers and increase multi-property guests while at the same time retaining the “Sense of Place” hospitality and service at each location. Rosewood cannot lose their competitive advantage – each property must remain closely connected to its location.
We performed an analysis of the customer lifetime value (“CLV”) with and without Rosewood corporate branding at Exhibit II. The move to corporate branding will increase CLV from approx. $481 to $573. Additionally, the move to corporate branding will increase the net present value (“NPV”) of 7-year cash flows from approx. $378 to $461. The NPV of 7-year cash flows is different then the CLV Infinite Lifetime calculation in that the NPV of considers the average marketing expense per guest and the CLV does not. Further, the NPV does not consider the average guest retention rate and the CLV does.
We believe that customer equity is an effective way to value this firm because the long-term profitability of Rosewood is closely related to customer loyalty. As an example, we performed a sensitivity analysis on Average Number of Visits per Year per Guest. If this number is reduced from 1.3 to 1.0 with Rosewood corporate branding, the CLV is reduced to $406. Consequently, market strategies that center on the brand are important to the hospitality industry.
We recommend that Rosewood implement the proposed corporate branding strategy because of the increase to CLV and NPV of the 7-year cash flow analysis. Customer-based brand equity occurs when the consumer has a high level of awareness and familiarity with the brand and holds some strong, favorable and unique brand...
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