Rosewood Marketing Case Study

Executive Summary

Uniting individual properties under one strong corporate Rosewood brand is more value generating path. It opens Rosewood hotels to larger and more profitable customer segment. Projected additional annual marketing budget will be repaid within 1 year.

Understanding a Rosewood Customer

Customers in Hotel industry can be broadly classified as high purchasing power luxury seeking, mid spending high service quality seeking and low spending quality independent customers.  Historically Rosewood has served very specific high end customers. Rosewood identified its customers as higher purchasing power individuals with rich tastes. Rosewood’s current customers prefer luxury customized service which enables them to experience the culture of local heritage. These customers are very sophisticated who value the exclusive feel of the individual properties. These customers are loyal to individual property and thus some of Rosewood’s properties see high end of scale return ratio (40%).  

Current customers of Rosewood brand across different properties are of superior taste. Table 1 outlines Rosewood’s current customer base value expectation and Rosewood’s proposed value under corporate branding. Rosewood’s current customers do not associate themselves with the Rosewood brand but with individual property brand. This customer segment spends a superior amount in comparison with the industry average in luxury corporate brand hotel market and expects a higher return in terms of functional and psychological values. They take pride in being a loyal customer to the individual property and functionally value the local customization of the properties. The individual properties in Rosewood’s portfolio has highly adapted to local culture. From the welcome greeting to menu card, every element in the hotel provides the customers a sense of place they are visiting. Rosewood brand is very small in these properties and the customers are indifferent to it. They value the experience they get out of these individual properties more than the value they get from their association with a corporate brand.

There are significant differences outlined in table 1 between the value expectation by current customers and value envisioned by Rosewood. It is evident that if Rosewood takes the path of corporate branding and unites all its individual properties under one name, its target customer base will change. Taking the corporate branding route, Rosewood will be exposed to a larger customer base with different value expectations. With corporate branding strategy Rosewood runs a risk of turning away some of their loyal guests at properties that a brand in themselves. On the other hand, they will attract a larger customer segment that values brand loyalty and seeks physiological values from the brand experience. Rosewood target customer under the corporate brand strategy will highly value consistent service at any Rosewood property they visit. These customers, although need consistent service, value sense of place experience that individual Rosewood properties have to offer. They will be similar to loyal customers of other exotic brands that offer consistent experiences in different settings. These customers would want to attach their hotel stay purchase with a luxury brand name. By creating a unified brand, Rosewood is also providing the opportunity to its target customer to not look for alternatives at locations where other Rosewood properties exists. This can prove to be highly beneficial economically for both customers and travel agents.

Market Assessment (Competition)

Rosewood is a collection of highly sophisticated rich experience properties. Its customers value the luxurious sense of local culture it provides in an exotic setting. These properties are highly customized based on local culture and compared to its large corporate like chain hotels, Rosewood hotels provide an authentic experience of the location. Although these locations adapted experiences are similar in nature to value provided by small individual hotels, Rosewood hotels have the means that are available to corporate brands and they utilized those means to enrich their guest’s experiences. Major advantage that Rosewood has over small individual hotels is their large customer database which automatically gathers data through its central reservation system. Through availability of this extensive database Rosewood can create specific guest preference profiles and adapt their services across whole of Rosewood brand.

With a consolidated corporate brand Rosewood will enter a new market with very strong advantages of adaptability to local culture with the information and economic resources of a corporate luxury brand. Rose will make both individual and corporate hotel market more competitive with their experience in providing customized services to a larger customer base with higher than present cross property usage.

Impact on the Bottom Line (Company)

Rosewood’s hotel managers take pride in their own individuality. For them their hotel’s brand has more value than the Rosewood brand itself. Some of the managers feel the threat of loss of autonomy in their workspace. To bring a cultural shift in any business is a big change and such apprehensions are not uncommon. Past the initial threshold, a consolidated brand will a sense of common goal and unity among the management at different sites. The information sharing that a corporate brand culture brings will benefit all the individual hotels.

Major chunk of cost projected is the $1 Million per year marketing cost, however there are other costs to be considered too. Rosewood would have to standardize its utilities and services and doing so comes at a cost. Training of staff and managers for adherence to brand standards will take time, cost and effort. Some undesirable costs in terms to letting go of change averse employees and hiring more forward seeking employees should be expected too.

Financial Considerations

• There are two routes that Rosewood hotels can take. First is to stick with being a low key brand and promote their individual properties instead. Other is to come out in the corporate market with a unified luxury corporate brand. Aside from different functional and physiological values that both options present financial implication of both options should be considered too. Assuming that the customers we will lose while adopting the corporate branding path will be offset by the new customers acquired, the number of customers has been kept constant at 115,000. Base year is considered as year 2003. 6% yearly growth in ADR and 3% growth in annual marketing expenditure is assumed. Detailed calculated can be referred from table 3a and 3b.
• It is evident that average CLV with corporate branding customer segment ($378) is significantly higher than that of individual branding customer segment ($461). The marketing budget of $1 Million for 5 years will equal to $5 Million, which will be highly compensated by the gain of about $9 Million gain over these 5 years. In my recommendation, Rosewood can adopt the Corporate branding strategy and consolidate its individually unique properties into uniform service experiences.

Recommendation:

Rosewood hotels has a great potential in its unique properties. By consolidating these valuable hotels under one strong corporate brand, Rosewood will target a new customer base. This customer base is larger with greater potential for repeat stays and cross property usage. This larger customer base values consistency in service and association with strong brands. Being exposed to this market, Rosewood has a potential to increase its cross property usage from 5% to industry average of 10-15%. At the same time Rosewood has the opportunity to stay at the high end of customer return rate of 40% by providing them authentic sense of locale. This customer segment is catered by highly competitive market and in this market Rosewood can leverage its advantage of information and adaptability to make its mark. The case of Corporate branding is supported by financial implications too. The extra $1 million marketing budget that Rosewood has to spend every year will be repaid by more than $9 million within 5 years.