Rosewood Hotel Cltv Analysis
The hotel management needs to fully understand the value and the lifecycle of its customers in order to prioritize marketing and services offered. If the branding strategy is to be implemented, several steps should be taken in order to maximize an efficient return of investment. Most of the preparation steps needed should be geared towards the guest comfort and satisfaction; which in turn “entices” the guest to return. The more guests, the more return of investment. The hotel management would need analyze and implement some of the following changes: • Encourage trips to their other properties – (cross promotions across all hotels) • Incentives to property owners and guests when they try a new Rosewood hotel. Preserve the uniqueness of each property while still promoting the Rosewood brand/name • Invite artists, designers and architects to visit and aid in the renovation of the properties (in order to keep decor, while incorporating brand) • Develop a metric to measure quality of service and customer satisfaction and implement it across the border in all properties • Develop and successfully use a database of customers (both national and international) which will allow the collecting of data easier and will be beneficial when presenting offers to different customers. • The hotel will need to differentiate their business in order to avoid “feeling” like the other chain-like luxury hotels. However, each property should be enhanced and upgraded individually in order to retain its originality. • Flexible check-in and check-out • Loyalty programs With all of this being said and analyzed, management could make a compelling case about why it would be a good idea to rebrand the hotel.
It would be easy to compel and convey the message that by rebranding the hotels, the Rosewood brand will be recognized and respected as the consummate and top operator of ultra-luxury hotels in some of the most desirable locations in the world. It would also be conveyed that Rosewood hotels deliver exceptional service to the guest, as all employees are willing to go the extra mile. It is important in any customer oriented business to foster a work environment that provides the employees a sense of belonging and personal pride through the accomplishment of the job duties while maintaining a balance between work and personal life. Lastly, it is imperative to analyze and understand how the rebranding will affect the market in terms of their competitors.
Will the competitors (Ultra Luxury Hotels) design a “counter attack” to the rebranding strategy? Will this rebranding of hotels as “Rosewood luxury” saturate the already crowded field of operators? 3. What would be the implications if the retention rate with corporate branding increased only 10% of the average guest retention rate reported in the case? Would it change your decision? Let’s look at the overall financial picture of the consequences of the retention rate being only 10% above the average guest retention. These figures are the results of the increase of rate retention from 16. 67% to 18. 337% (10% increase) | |21. 67% Retention Rate (compared to|18. 4% Retention Rate with |Loss of revenue | | |16. 67% & no corporate branding) |corporate branding | | |Total NPV of CLTV |$450. 64 |$426. 47 | | |Increase in CLTV per customer as result of |$72. 16 |$47. 98 |$24. 17 | |corporate branding | | | | |Increase in profit of Rosewood from corporate|$8,297,972. 0 |$5,518,068. 84 |$2,779,903. 36 | |branding | | | | |Total Increase in revenue |$25,931,163. 12 |$17,243,965. 12 |$8,687,198. 00 | It is evident that the loss of 3. 33% (21. 66% as expected after branding strategy) in rate retention is representing 8. 6M in revenue to the company. However, if you consider that the company will need to invest $1,000,000 yearly in additional expenses, the loss is astronomical.
The decision to pursue corporate branding would need to be re-evaluated as it would cost the company 9M in additional expenses (advertising alone), while the return would only be 8. 6M On the other hand, the decision to pursue corporate branding is appropriate if the retention rate can be expected at or above 21. 6%; anything lower than that, the profits will dwindle down and the overall strategy would need to be re-evaluated. In summary, a retention rate which produces less than the needed expenses should not be considered as there is not return on the investment. Nonetheless, if it can be proven, that this small increase in retention is then set to increase after a small period of time, then a different kind of analysis would be needed to explore said strategy.