The reason Rosewood is rebranding is so that they can get the same competitive advantage that their competitors are getting from repeat business. According to Exhibits 4 and 5 of the case study, their competitors are currently enjoying higher occupancy and growth rates—even competitors like OrientExpress, who were operating within a similar business model.
Rosewood’s brand awareness was low, known mainly to those within the hospitality industry—as shown in Exhibit 7, the majority of guests who were asked about Rosewood had no idea what it was, and the employees themselves even admitted that their brand was something of a secret, known only to the travel agents who have been saddled with the responsibility of the only marketing the brand gets: word-of-mouth. The majority of the travel agents who book Rosewood hotels for their guests say that those who are in-the-know will go back.
The executives of the company thought that they could make that brand a little less secretive and use its reputation to gain increased revenue through repeat business, which Rosewood needs in order to stay ahead of—or at least equal to—its competition. 2. What are the pros and cons of moving from individual to corporate branding? The hotel industry isn’t about one stay—it’s about how you can get customers to stay loyal to you and not the competitors. It has to do with exposure and preference. The benefits:
The company cannot create brand preference until their brand is more prominent. Customers that remember good experiences at their typical Rosewood hotel will be more encouraged to ask about other Rosewood hotels if they are made more aware of their existence. A good reputation is a powerful marketing tool in the hotel industry, and if the company let its customers know that it has other properties in other locations that are managed and operated by the same company, customers might be more encouraged to ask for Rosewood hotels on their next trip.
Another important factor to note is the competition. This business model has been tried and true for others in the industry, and given Rosewood’s current reputation, it’s not too much of a stretch to imagine this strategy working for the company. The company recently moved to an automated data-gathering system and moved all of their customer data into one warehouse, and this makes the company even more conducive to cross-property promotion.
The VP of the company mentioned how they would eventually be able to expand their traditional preference recognition system across their entire brand, giving customers even more of an incentive to stay at a Rosewood property that’s new to them—of course, customers can’t stay at new properties if they can’t find them. The downsides: Rosewood was built on the premise of locations unique to their settings, and it’s possible that a single brand across all those locations might diminish how unique each property’s brand is.
The VP mentioned that one of the risks of this strategy was that “the brand might alienate some of our guests at well-established properties”. They may also alienate the hotel managers as well, especially those whose properties already had a strong brand of their own, and they didn’t necessarily want to start conforming to all the brand standards that come along with a corporate strategy.
Some of their properties also had a co-op agreement with various owners who didn’t think that being part of a larger brand was a good idea, wondering if it would affect their existing differentiation from their competitors. And some of those people may be alienated with the new strategy, the company executives would need a way to estimate whether or not going against what some of their existing customers want would be outweighed by the new repeat business that a corporate branding strategy would offer. 3.
Will the move to corporate branding maximize customer lifetime value? The move to corporate branding will increase customer lifetime value, and the benefits of this strategy will build on itself. According to the predictions in Exhibit 8 of the case study, the new corporate branding strategy will result in twice more multi-property guests, bumping the average number of visits per guest from 1. 2 up to 1. 3. This will raise the guest retention rate up 5%, from 16. 67% to 21. 67%, increasing the Customer Lifetime Value by a total of $82. 60 per customer.
To sum up: if the company spends $1,000,000 in marketing right now, executives should not be scared off by the initial loss—that one million will lead to an added $9,499,079 in total CLTV for just the unique customers brought in by the marketing strategy, and once the gross margin per room is added in, it means an additional $29,684,622 in revenue for the company. As Rosewood’s Average Daily Spending increases (which it is projected to do at double the rate of the average marketing expenses per guest), that will justify the initial spending on corporate branding, and prove that Rosewood can keep up with the competition using this strategy.