Case Study of Rosewood Hotels & Resorts
Established in 1979,
Rosewood Hotels & Resorts, a privately held company, became known for its ability to enhance a property’s value by creating unique, one-of-a-kind properties that differentiated from other chain-like luxury competitors. In early 2004, to boost the company’s growth, Rosewood considered to implement a new branding strategy to establish Rosewood as a true brand with a global reputation for iconic luxury hotels.
Rosewood was facing the problem of restriction and limitation from current individual brand strategy on the sales performance & company’s development, and the problem of choosing approaches that could be adopted to boost the company’s growth.
There were both advantages and disadvantages in the strategies of individual branding and corporate branding. The critical issue would be to understand the pros and cons between these two strategies and to calculate the customer lifetime value and NPV from the investment that the two strategies could bring to Rosewood. Besides, the management also had to evaluate the potential positive impact on guest retention and to see if the revenues could offset the increased marketing and operational cost and effort it required.
Rosewood had to progress in two steps: first to decide the branding strategy, whether to adopt individual branding or corporate branding, and secondly to decide whether to set up the frequent-stay program. In combination, Rosewood had four alternatives: 1. Individual branding strategy with frequent-stay program
2. Corporate branding strategy with frequent-stay program
3. Individual branding strategy only
4. Corporate branding strategy only
Comparison from Pros and Cons
Individual Branding Strategy:
1. This individual branding strategy was a powerful tool to differentiate Rosewood properties from competitors with a corporate brand. 2. Under this strategy, each hotel and resort could best implement the core value and philosophy of “A Sense of Place” by featuring their own architectural and service details. 3. Local teams had some degree of flexibility and creativity in their own properties and they had autonomy in daily operations to some extent. Cons:
1. 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. 2. 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. 3. The vast majority of the luxury market seemed to value the corporate-branded version of luxury and this individual brand positioning substantially limited Rosewood’s market.
Corporate Branding Strategy:
1. Would create guest connection with Rosewood properties and encourage multiproperty guest stays. 2. Better compete with the luxury operators in the intense market of luxury hotels and resorts. 3. To adapt to the luxury market with the value focusing on corporate-branded hotels. Cons:
1. Prominently imposing Rosewood brand might alienate some guests at well-established properties. 2. Challenges would appear in ensuring perfect product/service performance consistency across the portfolio, internal soft branding initiatives to link property-level people to the Rosewood organization. 3. Difficulty in preserving the uniqueness and individuality of each hotel and resort. 4. A large amount of marketing investment to boost the guest retention rate. 5. Resistance from hotel managers and guests.
Evaluation from calculating CLTV and NPV
CLTV Calculation With No Changes to Brand Strategy:
NPV of Expected Cash Flow from Customer
Total NPV of CLTV...
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