ROSEWOOD HOTELS AND RESORTS Branding to Increase Customer
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 v. Four Seasons with 54%, Ritz-Carlton 73% and Fairmont with 84% are grabbing the market v. Low brand recognition v. Only 25% of the customers knew about Rosewood v. Travel agents promote the famous brands instead of something customers already do not know about v. The current visitors are mostly past guests that are only about 5% Jianying_Zhang
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 Number of Stays per guest (assuming they are retained) 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 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 Year 2003 2004 2005 2006 2007 2008 2009 2 2 2 Number of Stays per guest (assuming they are retained) 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 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 v Cumulative Profit Gain v Cumulative revenue growth $9, 499, 480 $29, 685, 875 v 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 v. Increase the brand awareness among customers by utilizing extra budget allocated v. Improve travel agents network v. Employees should promote v. Reconsider branding strategy v. Introduce packages and membership programs v. Focus on repeat returns of guests Jianying_Zhang
Jianying_Zhang
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