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1. This project report is based on the Harvard case “Rosewood Hotels and ResortsBranding
to Increase Customer Profitability and Lifetime Value”. 2. Write up a project report by following the structure laid out as below.
It should consist of: a. Executive Summary: written as a memorandum (within 1 page, singled spaced). b. Main Body: [Double spaced]; it should consist of:
– Problem Statement (within 1 page), – Recommendations (make your points concise and right to the point.), – Supporting Analysis (including tables and exhibits of professional quality that
are used to support your recommendations).
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EBZ 3030
Customer Relationship Management
Project Report (Full Score: 10 POINTS)
INSTRUCTION
1. This is an individual assignment!!! Work on the project report on your own!!!
2. This project report is based on the Harvard case “Rosewood Hotels and ResortsBranding to Increase Customer Profitability and Lifetime Value”.
3. Write up a project report by following the structure laid out as below.
It should consist of:
a. Executive Summary: written as a memorandum (within 1 page, singled spaced).
b. Main Body: [Double spaced]; it should consist of:
– Problem Statement (within 1 page),
– Recommendations (make your points concise and right to the point.),
– Supporting Analysis (including tables and exhibits of professional quality that
are used to support your recommendations).
IMPORTANT NOTICES
1. Deadline: Submit a DIGITAL copy of your project report on the Blackboard before
11:59PM of May 10 (Friday).
2. Long report doesn’t necessarily imply high quality, so the length of your report is not
something you want to be obsessed with.
3. Your report will be evaluated in the following dimensions: 1) the report structure; 2)
the logic you develop to analyze the problem; 3) the correctness of the analysis; 4)
the appropriateness and soundness of your recommendations.
4. I don’t expect a standard answer from all students, so you will be in a good shape
as long as you get your analysis right and make your arguments reasonable and
convincing.
5. Any project reports with great similarity will be severely punished!!! Such an
incidence will be handled according to the principles of academic integrity issued by
the university.
ROSEWOOD HOTELS & RESORTS: CUSTOMER LIFETIME VALUE (CLTV) ANALYSIS
Inputs
Without
With Rosewood
Rosewood
Corporate
Corporate
Branding
Branding
115.000
Total Number of Unique Guests
115.000
$750,00
growing at
Average Daily Spend
$750,00
2,0
Number of Days Average Guest Stays per Stay
2,0
32%
Average Gross Margin per Room
32%
1,3
Average Number of Visits per Year per Guest
1,2
$138,70
growing at
Average Marketing Expense per Guest (system-wide)
$130,00
$150,00
Average New Guest Acquisition Expense (system-wide)
$150,00
24.919
Total Number of Repeat Guests
19.169
11500
of which: Total Number of Multi-property Stay Guests
5.750
Additional Costs Required per annum
$1.000.000
8%
8%
Discount Rate
21,67%
Average Guest Retention Rate
16,67%
CLTV Calculation With No Changes to Brand Strategy
Year
Number of Nights per Stay
Number of Stays per guest (assuming they are retained)
Revenue Per Night
Revenue per Customer
Average Gross Profit per Customer
Less Annual Marketing Cost per Customer
Net Profit per Customer if Retained
2003
2004
2,0
1,2
$795,00
$1.908,00
$610,56
$133,90
$476,66
2005
2,0
1,2
$842,70
$2.022,48
$647,19
$137,92
$509,28
Probability of Being Retained
Expected Net Profit per Customer
1,00
$476,66
0,17
$84,89
NPV of Expected Net Profit per Customer
Total NPV of CLTV per Customer
$441,35
$72,78
2004
2
1,3
795
$2.067,00
$661,44
$142,86
$518,58
2005
2
1,3
842,7
$2.191,02
$701,13
$147,14
$553,98
1,00
$518,58
0,22
$120,04
$480,17
$102,92
CLTV Calculation With New Brand Strategy
Year
Number of Nights per Stay
Number of Stays per guest (assuming they are retained)
Revenue Per Night
Revenue per Customer
Average Gross Profit per Customer
Less Annual Marketing Cost per Customer
Net Profit per Customer if Retained
$528,49
2003
Probability of Being Retained
Expected Net Profit per Customer
NPV of Expected Net Profit per Customer
Total NPV of CLTV per Customer
$611,09
– Change in CLTV per customer over the next 6 years due to new brand strategy (Increase or Decrease?)
– Multiplied by # of Customers to obtain the cumulative
profit gain (or loss) over the next 6 years
due to new brand strategy
– Divided by 32% gross margin to obtain the cumulative
revenue gain (or loss) over the next 6 years due to new
brand strategy
$9.499.480
$29.685.875
Sourcce
Exhibit 8
6% Exhibit 8
Exhibit 8
Exhibit 8
Exhibit 8
3% Exhibit 8
Exhibit 8
Page 5
Exhibit 8
2006
2,0
1,2
$893,26
$2.143,83
$686,03
$142,05
$543,97
2007
2,0
1,2
$946,86
$2.272,46
$727,19
$146,32
$580,87
2008
2,0
1,2
$1.003,67
$2.408,81
$770,82
$150,71
$620,11
2009
2,0
1,2
$1.063,89
$2.553,33
$817,07
$155,23
$661,84
0,03
$15,11
0,00
$2,69
0,00
$0,48
0,00
$0,09
$12,00
$1,98
$0,33
$0,05
2006
2
1,3
893,262
$2.322,48
$743,19
$151,56
$591,64
2007
2
1,3
946,85772
$2.461,83
$787,79
$156,10
$631,68
2008
2
1,3
1003,6692
$2.609,54
$835,05
$160,79
$674,27
2009
2
1,3
1063,8893
$2.766,11
$885,16
$165,61
$719,55
0,05
$27,78
0,01
$6,43
0,00
$1,49
0,00
$0,34
$22,05
$4,72
$1,01
$0,22
ROSEWOOD HOTELS
AND RESORTS
Branding to Increase Customer Profitability and Lifetime Value
Jianying_Zhang
Background
• Operating as privately hotel management Company since 1979
• Number of properties 12 worldwide with 1,513 rooms in 2003
• Initial idea was to convert od properties to luxury hotels/resorts
• This resulted in lack of brand recognition and lower cross selling
• Management decided to adopt brand strategy to improve company’s
operations
Jianying_Zhang
Central Issues
❖Four Seasons with 54%, Ritz-Carlton 73% and Fairmont with
84% are grabbing the market
❖Low brand recognition
❖Only 25% of the customers knew about Rosewood
❖Travel agents promote the famous brands instead of something
customers already do not know about
❖The current visitors are mostly past guests that are only about
5%
Jianying_Zhang
CLTV Calculation With No Changes to Brand Strategy
CLTV Calculation With No Changes to Brand Strategy
Year
2003
2004
2005
2006
2007
2008
2009
Number of Nights per Stay
2.0
2.0
2.0
2.0
2.0
2.0
Number of Stays per guest (assuming they are
retained)
1.2
1.2
1.2
1.2
1.2
1.2
$795.00
$842.70
$893.26
$946.86
$1,003.67
$1,063.89
$1,908.00
$2,022.48
$2,143.83
$2,272.46
$2,408.81
$2,553.33
Average Gross Profit per Customer
$610.56
$647.19
$686.03
$727.19
$770.82
$817.07
Less Annual Marketing Cost per Customer
$133.90
$137.92
$142.05
$146.32
$150.71
$155.23
Net Profit per Customer if Retained
$476.66
$509.28
$543.97
$580.87
$620.11
$661.84
1.00
0.17
0.03
0.00
0.00
0.00
Expected Net Profit per Customer
$476.66
$84.89
$15.11
$2.69
$0.48
$0.09
NPV of Expected Net Profit per Customer
$441.35
$72.78
$12.00
$1.98
$0.33
$0.05
Revenue Per Night
Revenue per Customer
Probability of Being Retained
Total NPV of CLTV per Customer
$528.49
Jianying_Zhang
CLTV Calculation With New Brand Strategy
CLTV Calculation With New Brand Strategy
Year
2003
2004
2005
2006
2007
2008
2009
2
2
2
2
2
2
Number of Stays per guest (assuming they are
retained)
1.3
1.3
1.3
1.3
1.3
1.3
Revenue Per Night
795
842.7
893.262
$2,067.00
$2,191.02
$2,322.48
$2,461.83
$2,609.54
$2,766.11
Average Gross Profit per Customer
$661.44
$701.13
$743.19
$787.79
$835.05
$885.16
Less Annual Marketing Cost per Customer
$142.86
$147.14
$151.56
$156.10
$160.79
$165.61
Net Profit per Customer if Retained
$518.58
$553.98
$591.64
$631.68
$674.27
$719.55
1.00
0.22
0.05
0.01
0.00
0.00
Expected Net Profit per Customer
$518.58
$120.04
$27.78
$6.43
$1.49
$0.34
NPV of Expected Net Profit per Customer
$480.17
$102.92
$22.05
$4.72
$1.01
$0.22
Number of Nights per Stay
Revenue per Customer
Probability of Being Retained
Total NPV of CLTV per Customer
$611.09
Jianying_Zhang
946.85772 1003.66918 1063.88933
Change in CLTV per customer over the
next 6 years due to new brand strategy
❖Cumulative Profit Gain
❖Cumulative revenue growth
$9,499,480
$29,685,875
❖Based on the calculation for a period of 6 years, Rosewood
should go for the new brand strategy as we can see considerable
increase in the revenue.
Jianying_Zhang
Guidelines to implement new strategy
❖Increase the brand awareness among customers by utilizing extra
budget allocated
❖Improve travel agents network
❖Employees should promote
❖Reconsider branding strategy
❖Introduce packages and membership programs
❖Focus on repeat returns of guests
Jianying_Zhang
Jianying_Zhang
For the exclusive use of J. Zhang, 2019.
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 Jianying Zhang in EBZ3030 – Customer Relationship Management taught by Jun Ru, California State Polytechnic University – Pomona from Jan
2019 to May 2019.
For the exclusive use of J. Zhang, 2019.
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 Jianying Zhang in EBZ3030 – Customer Relationship Management taught by Jun Ru, California State Polytechnic University – Pomona from Jan
2019 to May 2019.
For the exclusive use of J. Zhang, 2019.
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.
HARVARD BUSINESS SCHOOL | BRIEFCASES
3
This document is authorized for use only by Jianying Zhang in EBZ3030 – Customer Relationship Management taught by Jun Ru, California State Polytechnic University – Pomona from Jan
2019 to May 2019.
For the exclusive use of J. Zhang, 2019.
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 servi …
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