rosewood hotels and resorts: branding to increase customer profitability and lifetime value

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Rosewood Hotels and Resorts

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Page 1: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

Rosewood Hotels and

Resorts

Page 2: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

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Page 3: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

•  T h r o u g h t h e 1 9 9 0 s , Rosewood’s advertising was property-specific.

•  T h e R o s e w o o d l o g o remained secondary to the hotel logo.

•  Rosewood’s management believed that the individual property brand was a powerful tool to differentiate Rosewood properties from competitors.

Page 4: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

“ “The Rosewood branding was soft and meant to be complementary,

not intrusive” Robert Boulogne,

vice president of sales and marketing Rosewood Hotels and Resorts

Page 5: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value
Page 6: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

§  I n d i v i d u a l b r a n d pos i t ion ing l im i ts target market.

§  Results in very low cross property usage rate.

§  Intense competition in t h e l u x u r y h o t e l segment.

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Page 7: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

“ “I want to emulate the AmanResorts model and develop ‘Rosewood junkies’ who will

seek out Rosewood properties exclusively.” John Scott,

President and CEO Rosewood Hotels and Resorts

Page 8: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

▪  Increasing cross property usage from

5 to 10%.

▪ Creating “Rosewood Junkies.”

▪  Increasing Brand Awareness.

▪  Increasing Brand Equity. ▪  Increasing the customer lifetime value

so as to increase the profit per guest.

Page 9: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

How can

corpora

te brand

ing help?

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Page 10: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

Better brand positioning

and Competitive edge

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Page 11: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

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Page 12: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

Greater Brand Awareness

& Loyalty

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Page 13: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

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.

Page 14: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

“Very low awareness, less than 5%. It’s a secret club.” A Rosewood Employee

“Perhaps 25% of clients know the name Rosewood. They know the hotel name better”

A Travel Agent

“No, I really do not know the name Rosewood, even after staying at the property. ”

A Guest

Page 15: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

Such brand audits again emphasize the need for corporate branding to develop consistent brand-wide performance standards while preserving the uniqueness and individuality of Rosewood properties.

Page 16: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

Better Customer Lifetime

Value

Page 17: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

HOW

CLV (Customer Lifetime Value) is a prediction of all the value a business will derive from their entire relationship with a customer.

Page 18: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

A Few Assumptions

•  Average number of visits per year per guest will inflate from 1.2 to 1.3.

•  A marketing and operations investment of $1 million per year would be necessary to implement the corporate branding strategy.

•  Double occupancy is treated as one guest.

Page 19: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

Total number of unique guests 115,000 115,000

Average Daily Spend 15 10

Number of Days Average Guest Stays 2 2

Average gross margin per room 32% 32%

Average number of visits per year per guest 1.2 1.3

Average marketing expense per guest $130 ($130x115000+$1 million)/115000 =

$138.70

Average new guest acquisition expense $150 $150

Total number of multi-property stay guests 19169 (19169-5750)+10% of 115000=24919

Total number of multi-property stay guests 5750 10% of 115000=11500

Page 20: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

TO FIND 1. Average Guest Retention Rate 2. Average Gross Profit per Guest 3. Net Present Value

Guest retention rate: the probability that a guest comes back to a Rosewood hotel the following year (number of repeat guests/total number of guests).

Average Gross Profit per Guest = (Gross Profit Margin)x(No. of days avg guest stays)x(Avg no. of visits per year per guest )

Few other assumptions Discount Rate-8% Marketing Cost increases at 3% every year Sales Revenue increases at 6% every year

Page 21: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

Average Guest Retention Rate 19169/115000=16.67% 24919/115000=21.67%

Average Gross Profit per Guest 750x2x1.2=$576 750x2x1.3=$624

Page 22: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

How to find Net Present Value?

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Page 23: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

Year 2003 2004 2005 2006 2007 2008 2009

Revenue per Customer (increases by 6% every year)

$1800 $1908 $2022.48 $2143.83 $2272.46 $2408.81 $2553.33

Gross Profit per Guest $576 $610.56 $647.19 $686.03 $727.19 $770.82 $817.07

Acquisition Expense per guest $150 - - - - - -

Marketing Expense per Guest (increases by 6% every year)

($130) ($133.90) ($137.92) ($142.05) ($146.32) ($150.71) ($155.23)

Net profit per guest $296 $476.66 $509.28 $543.97 $580.87 $620.11 $661.84

Retention Factor (rate=16.67%) 1 0.167 0.028 0.0047 0.0007 0.0001 0.00002

Discount Factor(rate=8%) 1 1.08 1.166 1.260 1.360 1.469 1.587

Net Present Value(NPV) $296 $73.70 $12.23 $2.02 $0.298 $0.042 $0.008

NPV of Customer Lifetime Value $384.298

Without Corporate Branding

Page 24: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

Year 2003 2004 2005 2006 2007 2008 2009

Revenue per Customer (increases by 6% every year) $1950 $2067 $2191.02 $2322.48 $2461.83 $2609.54 $2766.11

Gross Profit per Guest $624 $661.44 $701.13 $743.19 $787.79 $835.05 $885.16

Acquisition Expense per guest $150 - - - - - -

Marketing Expense per Guest (increases by 6% every year) ($130)

($142.86 +$8.96)

($147.14 +$9.23)

($151.56 +$9.50)

($156.10 +$9.79)

($160.79 +$10.08)

($165.61 +$10.38)

Net profit per guest $335.30 $509.63 $544.76 $582.14 $621.90 $664.19 $709.16

Retention Factor (rate=21.67%) 1 0.227 0.051 0.012 0.0027 0.0006 0.00001

Discount Factor(rate=8%) 1 1.08 1.166 1.260 1.360 1.469 1.587

Net Present Value(NPV) $335.30 $107.11 $23.82 $5.54 $1.23 $0.27 $0.0061

NPV of Customer Lifetime Value $473.282

With Corporate Branding

Page 25: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

$88.98 Increase in CLTV per customer from the new brand strategy

$31,978,625 annually

$10,233,160 annually Multiplied by # of Customers to obtain increase in PROFIT of Rosewood

Divided by 32% gross margin to obtain increase in REVENUE

Page 26: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

$31,978,625 Whoa! That’s a big number!!!

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Page 27: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

BUT there are RISKS As always!

Page 28: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

•  Prominently imposing the Rosewood brand might alienate guests at

well-established properties.

•  Many hotel managers feel threatened in their autonomy.

•  Ensuring product/service quality will be more important than ever to

keep up to the new brand promise.

Page 29: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

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•  Greater Brand Equity. •  Better Customer Lifetime Value. •  Enhanced cross property usage. •  Higher PROFIT.

•  Higher Marketing Investment. •  Alienation of guests. •  Emotional attachment might cause

resistances.

Corporate Branding

Page 30: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

However, the PROS clearly outweigh the CONS.

Corporate Branding is therefore the way forward!

Page 31: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

▪ Standardise product/service quality across all properties.

▪ Set reward programmes for frequent customers.

▪ Undertaking social corporate initiatives.

▪ Establish a strong digital presence.

Page 32: Rosewood Hotels and Resorts: Branding to increase Customer Profitability and Lifetime Value

Disclaimer

This presentation is created by Pallabh Bhura of Jadavpur University during a marketing internship under Prof. Sameer Mathur, IIM Lucknow.

Prof. Sameer Mathur Pallabh Bhura

Thank You!