Rosewood Hotels & Resorts: Branding to increase customer profitability and Lifetime Value, Harvard Business School Case Analysis

1. Rosewood Hotels & Resorts:
Branding to increase customer
profitability and Lifetime Value
Harvard Business School Case

2. What is Rosewood?
Who is John Scott?

3. 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

4. Key Players
• John Scott
• Robert Boulogne
President and CEO
Vice President of Sales & Marketing

5. Current Scenario

6. 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

7. Why study this case?

8. 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

9. Objective of this case (2/3)
Understanding concerns of
Loyal Customers and
Resort Managers

10. 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

11. Three Issues to analyse
and understand

12. Three Issues
Analysing behaviour and POV of Loyal
Consumers and Managers
1

13. Three Issues
Revisits and Multi-property visits
2

14. Three Issues
Analysing Customer Lifetime Value and
evaluating the profits of corporate strategy
3

15. Behaviour and Point of
View of Loyal Consumers
and Managers

16. History
• Selling point : One of a kind properties, Point of
Differentiation
• Hotels with brand name greater than ‘Rosewood’
itself

17. Consumers
• Reluctant to go towards bigger brand
• Feeling of exclusiveness
• Emotional attachment towards brand name

18. –Robert Boulogne
“Hotel Managers are more inclined to promote
just their own individual hotel brands,
particularly if they have a strong brand”
Managers

19. 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.

20. Revisits and Multi-
property Visits

21. –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

22. Limited Market
People want Brands
Smal sophisticated segment value exclusiveness

23. 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?

24. Strong Individual
Brand/Property
Recognition
Rosewood name
recognition is low

25. 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

26. Effect of corporate branding(2/2)
2x
times better
Multi-property
visits

27. 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’

28. Customer Lifetime
Value

29. Analysing CLTV for
next 6 years

30. CLTV
• Reluctant to go towards bigger brand
• Feeling of exclusiveness
• Emotional attachment towards brand name
$139
24,919
11,500
21.67%
$90 $81
$159

31. Analysis (1/2)
• We observe that the overall guest retention rate
improved from 16.67% to 21.67%
• Multi property visits doubled

32. Analysis (2/2)
• Although the net profit per guest is reduced, it
might be compensated by the retention rate of
old guests

33. 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

34. 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

35. 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.

36. Disclaimer
Created by Parakh Agarwal, IIT
Delhi.
During Marketing Internship
under Prof. Sameer Mathur