Expert Answer :Discussion Rosewood

  

Solved by verified expert:Assuming Rosewood decides to go ahead with the corporate brand strategy, recommend some initiatives aimed at: (a) building consumer awareness perception of the Rosewood Brand (b) improving booking including cross-property stays and (c) ensuring service quality across properties. (max 250 words single space)
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For the exclusive use of S. Morataya, 2018.
2087
JUNE 15, 2007
CHEKITAN S. DEV
LAURE MOUGEOT STROOCK
Rosewood Hotels & Resorts: Branding to
Increase Customer Profitability and Lifetime Value
Introduction
For nearly 25 years, Rosewood Hotels & Resorts (Rosewood), a private hotel management
company, sought to build a global reputation with iconic luxury hotels such as The Mansion on
Turtle Creek in Dallas and The Carlyle in New York—trophy properties so distinctive, each could
thrive on its own name, without any “corporate” identification (see Exhibit 1 for brand history). The
Rosewood brand was muted, unmentioned in advertising, and known mainly to hotel professionals.
However, in early 2004, to boost the company’s growth, John Scott, Rosewood’s new president
and CEO, and Robert Boulogne, vice president of sales and marketing, were considering a new brand
strategy. As Boulogne recalled:
We thought the time was right to establish Rosewood as a true brand incorporated into the
name of each hotel and prominently displayed in all communications for and at our properties.
This would help provide us with a platform for encouraging guests who stay at one of our
properties to stay at some of the others.
But, they wondered how far they could push this branding strategy without undercutting the
distinctiveness of each individually branded hotel.
Company Profile and Background
Headquartered in Dallas, Texas, Rosewood Hotels & Resorts, L.L.C, was a privately held
company, established in 1979 by the Caroline Rose Hunt Trust Estate (see Exhibit 2 for biographies of
key figures). The first hotel Rosewood managed was The Mansion on Turtle Creek, opened in 1980.
This hotel was an old mansion in Dallas rescued from demolition by Mrs. Hunt, the daughter of
Texas oil tycoon H.L. Hunt. Rosewood worked with Hunt to transform the property into a worldclass hotel and restaurant. After successful conversions of existing hotels (The Mansion on Turtle
Creek and Little Dix Bay in the British Virgin Islands), and new builds (The Lanesborough in London
________________________________________________________________________________________________________________
Chekitan S. Dev and Laure Mougeot Stroock prepared this case solely as a basis for class discussion and not as an endorsement, a source of
primary data, or an illustration of effective or ineffective management. Chekitan S. Dev is Associate Professor of Marketing and Brand
Management at Cornell University’s School of Hotel Administration. Laure Mougeot Stroock is an independent business research analyst and
casewriter working for the School of Hotel Administration and Cornell’s Johnson Graduate School of Management.
This case, though based on real events, is fictionalized, and any resemblance to actual persons or entities is coincidental. There are occasional
references to actual companies in the narration.
Copyright © 2007 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685,
write Harvard Business Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. This publication may not be digitized,
photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.
This document is authorized for use only by Sheryl Morataya in Market Analysis and Customer Insight-1-1-1-1-1-1-1 taught by Devon Johnson , Montclair State University from February 2018
to April 2018.
For the exclusive use of S. Morataya, 2018.
2087 | Rosewood Hotels & Resorts: Branding to Increase Customer Profitability and Lifetime Value
and Las Ventanas Al Paraiso in Mexico), the company became known for its ability to enhance a
property’s value by creating unique, one-of-a-kind properties with a small ultra-luxury residential
style that differentiated it from other chain-like luxury competitors.1 As of 2003, Rosewood had 12
hotels worldwide, with a total capacity of 1,513 rooms, for which the nightly rate ranged from a low
of $120 for one of the Saudi Arabian properties to $9,000 for a Canadian lodge. In the previous year,
115,000 unique guests2 had stayed at Rosewood hotels (see Exhibit 3 for operating profile).
Rosewood competed with two groups of luxury hotels: the corporate branded Ritz-Carlton, Four
Seasons, St. Regis, One&Only, and Mandarin Oriental hotels, and the “collections” of individually
branded unique hotels, such as Auberge, RockResorts, and Orient-Express (Exhibits 4 and 5).
The Individual Brand/Collection Strategy
Unlike the corporate brand model, in which luxury tended to follow (as Scott dubbed it) a
“canned and cookie cutter” approach across properties, Rosewood operated a “collection” of unique
properties, each with its own name or brand (see Exhibit 6, Rosewood Properties and Signed
Agreements). Each hotel and resort featured architectural details, interiors, and culinary concepts
that reflected local character and culture and defined Rosewood’s “Sense of Place” philosophy. Scott
explained:
What makes Rosewood different is its commitment to unique, one-of-a-kind, luxury
properties. Our brand compass has always been built on our concept of “A Sense of Place®”
which, at its core, means that each of our properties seeks to capture what is unique about the
given location. From design to service to programming, we try and tailor each property
experience to what is special about a given location, architecture, history, and culture. To this
end, our Rosewood design and service standards are meant to be flexible enough to adapt to
local conditions. Our local teams are expected to have some degree of flexibility and creativity
to reflect “A Sense of Place®” from menu design to how a guest is greeted. This is a very
different approach from our chain-like competitors.
In the 1990s, Rosewood’s management believed that the individual property brand or collection
strategy was a powerful tool to differentiate Rosewood properties from competitors with a corporate
brand. Scott explained:
Our original collection growth strategy was two-fold. We sought to convert existing iconic,
luxury hotels with strong brand equity which needed to be re-positioned and re-launched with
professional management (i.e., The Carlyle and Little Dix Bay). We also sought to help
developers conceive and create the next generation of luxury hotels and resorts around the
world, and in doing so create brand equity in the property itself (i.e., The Mansion on Turtle
Creek and Las Ventanas al Paraiso).
Under the individual brand or collection strategy, the Rosewood hotel marketed itself under its
own brand name in addition to participating in Rosewood-related advertising. “The Rosewood
branding was soft and meant to be complementary, not intrusive,” remarked Boulogne. The
Rosewood logo appeared discreetly on low-profile amenities such as clothes hangers or stationery.
Higher-profile amenities, such as bathrobes and towels (which also provided a profitable souvenir
business), bore the logo of the hotel. Hotel phone greetings did not mention the Rosewood name.
1 In December 2002, Las Ventanas Al Paraiso’s RevPAR index was 3.62 (the index measures the Revenue per Available Room
of a hotel compared to the ones of its competitors in the same market). The Lanesborough’s was 1.5, the Mansion on Turtle
Creek’s was 1.96 and Little Dix Bay’s was 1.25.
2 For example, a couple or family staying in the same hotel room counted as one unique guest.
2
BRIEFCASES | HARVARD BUSINESS SCHOOL
This document is authorized for use only by Sheryl Morataya in Market Analysis and Customer Insight-1-1-1-1-1-1-1 taught by Devon Johnson , Montclair State University from February 2018
to April 2018.
For the exclusive use of S. Morataya, 2018.
Rosewood Hotels & Resorts: Branding to Increase Customer Profitability and Lifetime Value | 2087
Through the 1990s, Rosewood’s advertising was property-specific: the property name appeared
first, then the location. In the early 2000s, Rosewood’s advertising began to feature a list of all
Rosewood properties, but the Rosewood logo remained secondary to the hotel logo.
The Limitations of Individual Branding
In April 2003, John Scott, who was the director of acquisitions and asset management at a private
real estate investment group and a Rosewood board member, was asked by the Board to become
CEO and help chart a new direction for Rosewood. He recognized that the Rosewood brand had low
recognition and brand-wide usage among guests and was an untapped asset.
Scott and Boulogne concluded:
Our emphasis on individual property brands was not working from a number of fronts.
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. 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.
Philip Maritz, chairman of the board, went further in questioning Rosewood’s individual
branding positioning: “I think we are underestimating the power of corporate brands, such as Four
Seasons, as status symbols. At this time, we are after only a subset of the luxury market—the
sophisticated customers who value the distinctive, exclusive ‘collection’ hotel—when in fact the vast
majority of the luxury market seem to value the corporate-branded version of luxury. Our current
brand positioning substantially limits our market.”
The Case for Corporate Branding
Rosewood Hotels & Resorts had very low brand awareness with its guests. A 2003 report from
Strategic Marketing Solutions commissioned by Rosewood showed that a majority of consumers did
not know the brand—and the few who did had learned the name Rosewood from their travel agents
(see Exhibit 7, Selected Quotes).
In spite of this, Scott had high hopes for Rosewood: “I want to emulate the AmanResorts model
and develop ‘Rosewood junkies’ who will seek out Rosewood properties exclusively.” AmanResorts
was a luxury resort hotel management company with corporate-branded properties located in remote
natural settings. Its core followers, nicknamed “Aman Junkies,” prided themselves on collecting
Aman experiences and generally rejected the other luxury corporate brands. Aman resorts sold the
promise of pure, unadulterated quiet. It offered a consistent service formula with healthful,
uncomplicated food; Asian-themed spa treatments; and an uncannily attentive staff. Although Aman
had only around 500 rooms across 15 resorts in 2003, it counted more than 100,000 repeat guests.3
Inspired by Aman, Scott and Boulogne thought Rosewood could do better.
Toward this end, Scott and Boulogne were taking steps to learn more about Rosewood guests’
habits and profile in order to improve Rosewood’s guest recognition capabilities and promote crossproperty usage. The company, which had been manually collecting guest data from its 12 separate
hotel management systems, had just switched to automated data-gathering through its central
3Jonathan Gregson, “Loyal Beyond Reason,” Financial Times, June 11, 2004.
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3
This document is authorized for use only by Sheryl Morataya in Market Analysis and Customer Insight-1-1-1-1-1-1-1 taught by Devon Johnson , Montclair State University from February 2018
to April 2018.
For the exclusive use of S. Morataya, 2018.
2087 | Rosewood Hotels & Resorts: Branding to Increase Customer Profitability and Lifetime Value
reservation system (CRS), and was creating one global, flexible data warehouse for all its hotels.
Boulogne explained:
Our traditional guest-recognition service was to provide a guest with, for example, a
specific type of pillow upon arrival. Now we are also able to track the repeat factor for that
guest and how much they spent on room, food and beverages, and activities for stays across all
Rosewood properties. In the not-so-distant future, we will combine this data with specific
guest preferences provided by the guest into a comprehensive guest profile to be housed in our
global data warehouse. With this, we will have the ability to expand our customer preference
program across the entire brand. 4
Preliminary results from an analysis of consolidated guest data revealed that, although some
properties enjoyed return visits of up to 40% of guests, only 5% of Rosewood guests had stayed in
more than one of Rosewood’s properties. Such low percentages were typical of the luxury hotel
segment, where the expense per visit was high, loyalty was typically property-specific, and therefore
the number of visits per year was usually only one or two. While the proportion of repeat guests at a
single property could reach 40%,5 the individual brand or collection hotel brands typically had 5% to
10% multiproperty cross-selling rates6 while corporate-branded hotels enjoyed 10% to 15% crossproperty usage rates.7 Rosewood was at the low end of the scale and management felt there was an
opportunity for increasing cross-property usage.
To encourage guests to use more than one Rosewood hotel, two possible approaches were
considered. One possibility to boost Rosewood’s customer multiproperty visits was to set up a
frequent-stay program.8 According to Market Metrix—a provider of market research services for the
hospitality industry—the number of guests enrolled in frequent-stay programs (mostly point-based)
grew by nearly 12% in 2003, and such programs were believed to double repeat business.9 But while
such programs had proved successful for large multiple-segment operators with broad geographic
distribution, where guests could easily redeem their reward (such as Marriott, Starwood, and Hilton),
few luxury hotels had adopted them. Neither Four Seasons nor Ritz-Carlton had point-based loyalty
programs, although members of Marriott Rewards could redeem their points for stays at RitzCarlton. In March 2003, Leading Hotels10 was the first luxury hotelier to offer its frequent customers
4
“Ultra-Luxury Segment Stays Strong in $525 Billion Travel Industry. Rosewood Hotels & Resorts Consolidates Global Guest
History to Target 10% Increase in Repeat Business from World’s Traveling Elite,” www.hotel-online.com. September 30, 2003.
5 A 40% return visit rate meant that if 10,000 guests stayed at a “Hotel X” in a given year, 4,000 of those guests had stayed in
Hotel X within the previous year.
6 A 5% multiproperty return visit rate for a hotel brand which has 100,000 guests in a given year meant that 5,000 of those
guests were guests returning to the same hotel brand, but to a property different from the one they visited the previous year.
7 Cross selling rates for Orient-Express Hotels, for example, was 5% to 10% in 2002. See Francis X. Frei, “Orient-Express
Hotels,” HBS Case 603-024 (Boston: Harvard Business School Publishing, 2002), p.5. Cross selling rates for Four Seasons Hotels
was 9% in 2000. See Roger Hallowell, “Four Seasons Hotels and Resorts,” HBS Case 800-385 (Boston: Harvard Business School
Publishing, 2000).
8 Loyalty programs in the hotel industry were either based on points (guests earned points, based on spending or stays, which
could be exchanged for rooms or other benefits) or on guest recognition (guests’ preferences were captured, retained, and
communicated throughout the brand and utilized to enhance future visits).
9 “Market Metrix Announces Fourth Quarter 2003 Hospitality Index Results: Membership in Frequent-Stay Programs Double
Repeat Business,” Hospitality.net, Industry News, February 3, 2004. http://www.hospitalitynet.org/news/4018442.html,
accessed on 04/22/2007.
10 Leading Hotels of the World was a hospitality organization that provided sales, marketing, and other services to luxury
hotels and resorts. Besides Rosewood, Leading handled reservations for over 400 hotels worldwide, including the Mandarin
Oriental and the Peninsula hotel brands.
4
BRIEFCASES | HARVARD BUSINESS SCHOOL
This document is authorized for use only by Sheryl Morataya in Market Analysis and Customer Insight-1-1-1-1-1-1-1 taught by Devon Johnson , Montclair State University from February 2018
to April 2018.
For the exclusive use of S. Morataya, 2018.
Rosewood Hotels & Resorts: Branding to Increase Customer Profitability and Lifetime Value | 2087
the possibility to earn rewards for stays at its properties worldwide.11 Research on luxury hotel
guests revealed that loyalty was fostered by offering the following benefits: room upgrades, flexible
check-in and check-out, personalized services, expedited registration, the freedom to request a
specific room, and the capacity of employees to take guests’ problems—even the most unusual—
seriously.12 Scott therefore deemed it wiser for Rosewood not to invest in a frequent-stay program.
The other way to create guest connection with Rosewood properties was to adopt a corporate
branding approach, which Scott and Boulogne believed would encourage multiproperty guest stays,
as delighted guests at, say, Mexico’s Las Ventanas would be encouraged to stay at another Rosewood
property when they visited a different part of the world. However, a fair amount of marketing
expense (not to mention cultural change) would go into building and promoting the Rosewood
corporate brand, and before they could justify the costs, Scott and Boulogne needed to test their
hypothesis.
A New Brand Strategy to Build Customer Lifetime Value
By late 2003, Scott and Boulogne began to wrestle with the nuances of corporate branding.
Boulogne favored the immediate implementation of a corporate branding strategy, with the
Rosewood brand directly preceding the name of properties (e.g., Rosewood Al Faisaliah Hotel, or
Rosewood Little Dix Bay). “We are sitting on a great brand. The people who know it, love it. Unlike
One&Only Resorts, we do not need to start from scratch, we just need to expose it,” he argued. But
he conceded that outright full branding carried some risks. “Prominently imposing the Rosewood
brand might alienate some of our guests at well-established properties such as The Carlyle or The
Mansion on Turtle Creek,” he admitted.
In practice, adopting a new branding strategy meant that the Rosewood name would become
ubiquitous across all operational dimensions, from the telephone greetings to in-room amenities and
beyond. Scott observed:
To keep our brand promise, we would need to ensure perfect product/service performance
consistency across our portfolio, internal soft branding initiatives to link property-level people
to the Rosewood organization, and significant marketing investment to boost guest retention
and cross-selling.
Scott wondered how far he could develop consistent brand-wide performance standards while
preserving the uniqueness and individuality of Rosewood properties. Boulogne explained:
Many of the hotel managers have mixed feelings about spreading the Rosewood corporate
brand in their properties. They are more inclined to promote just their own individual hotel
brands, particularly if they have a strong brand. I think some hotel managers may also feel
threatened in their autonomy to manage the properties because with more brand standards
come all kinds of other things like spa branding or other branded programs.
Some resistance to Rosewood branding came from guests as well as managers. The Carlyle in
New York, a signature, 1930s-era, 35-story hotel overlooking Central Park, was a notable example.
About one-third of The Carlyle’s 179 rooms and suites had been purchased by private owners who
organized into a cooperative (“co-op”). James McBride, managing director of The Carlyle, explained:
11 Ron Lieber, “Better Coddling? Chic Hotel Group To Offer Rewards,” Wall Street Journal, January 23, 2003.
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