Rosewood Hotels And Resorts Case Study Solution Example

Rosewood Hotels & Resorts Case Study

2170 WordsApr 28th, 20139 Pages

• Assignment 1: Case Study – Rosewood Hotels Due Week 2 and worth 90 points

Preparation: o Review the Rosewood Hotels & Resorts case study. o Visit the online Customer Lifetime Value Calculator and go through each tab in the tool and spend time studying how some of the variables and assumptions affect the results in the Sample Problem. Write a 2-3 page paper in which you: o Discuss the pros and cons of the Rosewood Hotels moving from individual brands to a corporate brand. (Feel free to discuss the general concept of CLTV, but consider a wide variety of elements in your response like differentiation, operational issues, brand management, etc) o Based on your exercise with the Customer…show more content…

This has the potential to not only increase revenues but also brand awareness, recognition and word of mouth referrals. other advantages of Rosewood Hotels moving individual brands to corporate brand are increased brand wide usage, increased brand recognition, connection among properties, good positioning for competition, increased market/share, increase brand awareness, promotion of cross property usage, increased return visit, brand loyalty, increased revenue and building customer life values

However, there are disadvantages of moving from individual brands to a corporate brand for Rosewood Hotels. This moment canned the “cookie cutter approach” of doing business. Other disadvantages of having a corporate brand is “no sense of place” philosophy, loss of uniqueness, less differentiation, potential loss of brand equity, loss of discretion, guess and management resistance to change, increased marketing cost, competition tougher among corporate branded hotels, and change in the corporate culture is challenging.

To ensure they were making the best decision to move corporate branding for Rosewood Hotels, Scott and Boulogne used the guest revenue and expense data to show the potential benefits, greater customer life value (CLTV) would outweigh the marketing a n operations cost connected with corporate branding. To accomplish this, Boulogne calculated and forecasted the CLVT for six years with and

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1.     Will the move to corporate branding maximize customer lifetime value?

Customer lifetime value (CLTV) model provides the present value of the stream of future profits expected to occur over the customer’s lifetime spending.

As per the analysis of customer lifetime value (CLTV), results show that implementing the corporate branding strategy will significantly increase the overall profitability. As per Appendix-A, Rosewood corporate branding will increase per customer CLTV by $82.60/-. Detailed calculations of CLTV are performed in excel spread sheet.

However it should be noted that above customer lifetime valuation is based on some estimates and expectations of management.

Number of multi-property guest stay is expected to increase by 5%, raising the average customer visit from 1.2 to 1.3 per year. Because of the corporate brand awareness spending, increase in marketing expenses of $1 million is also based on estimation. Revenues are estimated to grow at annual rate of 6% and marketing expenses are expected to grow at 3% annually.

Conclusion

Based on above discussion, Rosewood is recommended to continue with the corporate branding strategy in a subtle way, where the “Sense of Space” philosophy is not completely destroyed and the strategy should work towards unifying the factors and experiences that the customer is bound to enjoy and assured of at each of the Rosewood facilities. The central reservation system should be used to identify the customer profile and offer experience as per their preferences. It is suggested that as part of the corporate branding, individual hotels should carry a caption underneath its individual brands as “A Rosewood Group” instead of adding Rosewood before each individual brand.

 

Appendix-A
Customer Lifetime Valuation Calculation With Corporate Brand strategy
Years

2003

2004

2005

2006

2007

2008

2009

Revenue per Customer

2,067

2,191

2,322

2,462

2,610

2,766

Gross profit per guest

-

661

701

743

788

835

885

Acquisition expense per new guest

150

Marketing expense per guest

134

138

142

146

151

155

Additional Marketing expense per guest

9

9

10

10

10

10

Net Profit per Guest

(150)

519

554

592

632

674

720

 
Retention factor

22%

22%

22%

22%

22%

22%

Survival Rate

100%

100%

22%

5%

1%

0%

0%

 
Net Cash Flow expected from guest

(150)

518.58

120.04

27.78

6.43

1.49

0.34

Discount factor 8%

1

0.9259

0.8573

0.7938

0.7350

0.6806

0.6302

Net Present Value of Cash flow expected from Guests

(150)

480.17

102.92

22.05

4.72

1.01

0.22

Customer Lifetime Value With Corporate Brand strategy

 461

 

Customer Lifetime Valuation Calculation With Individual Brand strategy
Years

2003

2004

2005

2006

2007

2008

2009

Revenue per Customer

1,908

2,022

2,144

2,272

2,409

2,553

Gross profit per guest

611

647

686

727

771

817

Acquisition expense per new guest

150

Marketing expense per guest

134

138

142

146

151

155

Net Profit per Guest

(150)

477

509

544

581

620

662

 
Retention factor

0.17

0.17

0.17

0.17

0.17

0.17

Survival Rate

100%

100%

17%

3%

0%

0%

0%

 
Net Cash Flow expected from guest

(150)

476.66

84.89

15.11

2.69

0.48

0.09

Discount factor 8%

1

0.9259

0.8573

0.7938

0.7350

0.6806

0.6302

Net Present Value of Cash flow expected from Guests

(150)

441.35

72.78

12.00

1.98

0.33

0.05

Customer Lifetime Value With Individual Brand strategy

378

Description

Amount

Per Customer Increase in CLTV as a result of Rosewood Corporate Branding

83

Expected total increase on Rosewood profits

9,499,480

Expected total sales revenue using 32% profit margin

29,685,875

 

 

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