Rosewood Hotels and Resorts is a private hotel management company established in 1979 by the Caroline Rose Hunt Trust Estate. It is a well known company in the luxury hotels market which owns 17 iconic properties in 7 different countries
The first hotel was The Mansion on Turtle Creek in Dallas; afterwards the company expanded its “collection of unique properties” all over the world by converting and repositioning existing sites and by building up brand new luxury hotels. The distinctive feature of this collection is the so called “A sense of Place”. In fact in a Rosewood hotel every single service is conceived in order to adapt to the local culture and habits and capture the individuality of every location. Therefore each hotel is characterized by a strong individual image and brand while the Rosewood corporate brand usually stands on the background and mainly has a complementary function. ANALYSIS
The problem the new president and CEO are facing is whether to switch to a corporate branding strategy or stick with the current individual property branding strategy. In fact the latter has been a very successful strategy for the company for the past 15 years. Nonetheless the top managers of Rosewood believe that as the luxury hotels market is becoming more and more crowded and competitive, the individual property branding strategy is actually limiting the potential number of customer the company can target since it doesn’t seem to be effective on the mass market. Therefore a change in the company strategy is required. In order to figure out which is the best solution for the company it is necessary to consider pros and cons of each choice through a qualitative and quantitative analysis.
Pros and Cons
The individual branding strategy guarantees a strong and personal reputation for each resort and a source of differentiation from all the other competitors. The “Sense of a Place” is a unique concept which reflects the peculiarities of each location and sets Rosewood Hotels and Resort aside from all the other chain-like companies. High personalized services, attention to details, superior comfort and luxury are elements which guarantee a high perceived value for customers and therefore stimulate the development of a certain resort loyalty. In fact some of the Rosewood’s properties have a 40% return visit. Undoubtedly thanks to this strategy the organization managed to develop a strong competitive advantage based on the differentiation of its products, whose characteristics are perceived as unique and valuable from its customers. In fact the company managed to obtain a higher ADR and RevPAR than its competitors such as Four Seasons, Ritz-Carlton and Orient Express, even with a significant inferior number of rooms (Exhibit 5). On the other hand the main drawback of this strategy is the fact that it doesn’t highlight any connection between the different properties of the company, thus resulting in a very low corporate brand awareness among guests, as shown in the Strategic Marketing Solutions report.
The Rosewood brand is usually unmentioned in advertising and hidden in the hotels themselves. The majority of the people who took part in the survey stated they got to know it through a professional agent only. Obviously this limits the capability of Rosewood to effectively approach the mass market, thus restricting its target market to a small niche. On the contrary the implementation of a corporate branding strategy will draw the attention on the Rosewood Company as a whole and make it benefit from a higher percentage of return guests and multiproperty cross-selling rate. The name Rosewood will become synonym of luxury, comfort and quality and all the properties of the company will take advantage of it. In fact no matter in which part of the world a customer will be, when he/she sees the word Rosewood, he/she will immediately recognize it, recall potential previous stays at one of the other Rosewood’s properties and instantly know what kind of customer experience to expect. The corporate branding strategy will create a sort of umbrella under which all the properties of the company will fall, thus sharing the same quality level in the customer’s perception.
Moreover a strong corporate brand will ease the company identification and potentially increase the number of new guests through word of mouth, thus enabling the company to gain a bigger market share. Nevertheless the implementation of such a strategy will necessarily involve big costs and a structural change in the organization. Its culture, the way in which advertising is done, the facilities and supplies in each resorts, the way in which management operates will have to be adapted to the new branding strategy. Furthermore undertaking this action may let down some valuable customers who are particularly affectionate to a resort and may be afraid that it will lose its unique and individual features. Plus it might also disappoint some skilled hotel managers which may feel threatened in their autonomy and potentially leave the company. Retraining the whole body of employees to adapt to the new strategy may be expensive and time consuming as well. CLV analysis
As far as the pure economic aspect of the decision concerns, the implementation of a corporate branding strategy would increase the Customer Lifetime Value and therefore the profits of the company, as calculated in the attached spreadsheet. The Customer Life Time Value is a metric which shows the value generated for the company by a customer throughout their whole relationship. It equals the present value of the difference between the contribution margin from a customer and the costs of acquiring and retaining the customer, taking into consideration the customer lifetime expectancy. Thanks to a corporate branding strategy Rosewood Hotels and Resorts will be able to increase the number of multiproperty cross-selling rate from 5% to 10%, to raise the number of visits per year per guest from 1.2 to 1.3 and therefore to boost the number of repeat guests. This will cause a significant increase in the revenues of the company . On the other hand in order for the corporate branding strategy to be implemented the company will necessarily have to invest an additional $1 million in operations and marketing expenses, causing the average marketing costs per guest to increase from $130 to $138.70. Eventually the economic impact of this strategy will be positive though: the CLV with the new strategy is actually $84.47 greater than before. CONCLUSIONS AND SUGGESTIONS
From my point of view the corporate branding strategy is more effective as the competition in the luxury hotels market is becoming more and more intense. In fact the Rosewood brand is a valuable asset that the firm already has but it is note exploiting in the right way. On the whole I believe that the greater advantage of the corporate branding strategy is the ability to extend the benefits of branding, that the organization is already experiencing in the single properties, to the company as a whole. It is true that thanks to the distinctiveness and reputation of each hotel the company already has great returns and customer satisfaction and it is taking advantage of all the three benefits of branding (product identification, repeat sales and new product sales). Nonetheless thanks to the implementation of a corporate branding strategy the customers will immediately create a connection between the different properties of the company, thus extending these benefits to the whole company. As a result in the end the name “Rosewood” will become a status symbol and the value generated for the company will be greater than before. The customer brand awareness and loyalty will now refer to the entire company and no longer to the single property and I think this is particularly important in a luxury market.
In fact the cost of a stay at a luxury hotel can be quite high and customer may not be willing to pay such a high cost if they are not aware of the quality of the service they are paying for. Therefore customers will probably keep visiting a Rosewood resort they have already stayed at but they are likely to choose a more known chain-like luxury hotel in case they need to find accommodation in another part of the world. On the contrary if the customer is able to create a connection among all the different Rosewood properties, he/she will perceive an equivalent quality throughout the resorts and know in advance that the service is worth the price he/she is paying. As result the property-specific loyalty will turn into a greater corporate loyalty, which can boost repeat stays, multiproperties stays and word of mouth. Moreover thanks to a corporate branding strategy the company can take advantage of advertising economies: by promoting the entire organization it can indirectly promote the single properties as well, thus resulting in a potential reduction of advertising costs.
Furthermore as the facilities and supplies (such as towels, soaps, linens) of every resort will have to be similar and incorporate the Rosewood brand, the company can take advantage of this uniformity for example by buying bigger volumes from suppliers at cheaper prices but with the overall same quality level. Nonetheless the company must make sure that it is able to maintain (or potentially increase) its total number of guests, otherwise it won’t be able to absorb the costs of the new strategy. In order to do so it is even more important for Rosewood Hotels and Resorts at the moment to put a great effort in the delivery of a superlative customer experience and in the creation of the same perceived quality in all its resorts. In fact not only the positive effects of the corporate branding strategy will affect each single property, but also the negative ones. Therefore if the quality offered by one of the properties is unsatisfactory it will influence the general perception of the others as well. Moreover I think that in order to maintain its current customers the company absolutely has to take into consideration the fact that many of its properties have distinctive names, which are powerful assets.
The change of the name or the introduction of the word Rosewood in the hotel name must be well-planned, because small details such as the position of a word matter. For example customers immediately recognize the Carlyle in New York for its name; the new name of the hotel ought not to be “The Rosewood Hotel in New York” because this would destroy the valuable brand awareness connected with the hotel name. In the end, as the customers particularly appreciate the “ A sense of Place” concept, I believe the company should try and maintain the uniqueness of every resort through small details such as some special dishes on the menu, the kind of music which is played on the background in the common spaces, particular SPA treatments which are offered, etc.
A light product adaptation strategy will guarantee the differentiation of the product from all the other chain-like competitors, despite the corporate branding strategy. To have a feedback on my analysis I visited the Rosewood website. The names of the hotels are actually changed and the reference to the Rosewood brand is strategically positioned in different ways
The company switched from a property based advertising to an institutional one (http://www.youtube.com/watch?v=dAbi6RdGPJY). Anyway it is still trying to promote the “Sense of a Place” motive as one of its guiding principles. The strategy implemented by the company seems to be effective since the company has been collecting a considerable number of honors and rewards over the past few years (the last one was the AAA Five-Diamond Award in 2012).