DECISION TIME!

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 Yorktrophy 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 companys growth, John Scott, Rosewoods 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 world class 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 Lanes borough in London and Las Ventanas Al Paraiso in Mexico), the company became known for its ability to enhance a propertys 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 Rosewoods 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, Rosewoods 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.

Through the 1990s, Rosewoods advertising was property-specific: the property name appeared first, then the location. In the early 2000s, Rosewoods 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 Rosewoods collection of properties in an increasingly crowded field of luxury operators.

Philip Maritz, chairman of the board, went further in questioning Rosewoods 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 marketthe sophisticated customers who value the distinctive, exclusive collection hotelwhen 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.

A New Brand Strategy to Build Customer Lifetime Value

By late 2003, Scott and Boulogne began to wrestle with the nuances of corporate branding. Boulogne favored the immediate implementation of a corporate branding strategy, with the Rosewood brand directly preceding the name of properties (e.g., Rosewood Al Faisaliah Hotel, or Rosewood Little Dix Bay). We are sitting on a great brand. The people who know it, love it. Unlike One&Only Resorts, we do not need to start from scratch, we just need to expose it, he argued. But he conceded that outright full branding carried some risks. Prominently imposing the Rosewood brand might alienate some of our guests at well-established properties such as The Carlyle or The Mansion on Turtle Creek, he admitted.

In practice, adopting a new branding strategy meant that the Rosewood name would become ubiquitous across all operational dimensions, from the telephone greetings to in-room amenities and beyond. Scott observed:

To keep our brand promise, we would need to ensure perfect product/service performance consistency across our portfolio, internal soft branding initiatives to link property-level people to the Rosewood organization, and significant marketing investment to boost guest retention and cross-selling.

Scott wondered how far he could develop consistent brand-wide performance standards while preserving the uniqueness and individuality of Rosewood properties. Boulogne explained:

Many of the hotel managers have mixed feelings about spreading the Rosewood corporate brand in their properties. They are more inclined to promote just their own individual hotel brands, particularly if they have a strong brand. I think some hotel managers may also feel threatened in their autonomy to manage the properties because with more brand standards come all kinds of other things like spa branding or other branded programs.

1) Should Rosewood Hotel and Resorts change its individual branding strategy to a corporate branding strategy? WHY?

2) Pick one of the following to comment on based on your answer to the first question:

- If you support changing to corporate branding strategy, how would you address the concern regarding the brand's point of difference as corporate branding requires standardization and consistency?

- If you are against the idea of changing to a corporate branding, what recommendations can you offer to improve the cross-property sales which seems to be the trigger of the decision?