bateh, meredith, rosewood case, busi760.ppt [lecture seule]

Meredith BatehBusi 760

SCAD 2009

Should Rosewood go Corporate?

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Recommendations

• « Rosewood » is placed next to the individual and alreadyexisting hotel names, except for The Carlyle.

• All marketing includes the « Rosewood » name.• The Company’s web-site clearly indicates « Rosewood » and the

list of the hotels it owns.

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1. I recommend that Rosewood adopt ahybrid strategy:

2. I recommend an investment of $25,000,000over two years.

Rosewood’s Options

• Option 3: Keeping an Individual approach.

The Four Seasons ,DublinCharleston Place, in CharlestonOrient-Express

• Option 2: Hybrid strategies1. The Rosewood name placed by all of the

hotels names except for The Carlyle.2. The Rosewood name appears on all of the

company’s marketing sources (towels,bathrobes, glasses, web-site,…)

• Option 1: Going corporate

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Campton Place-A Taj Hotel,San Francisco

• Option 2: Hybrid strategies1. The Rosewood name placed by all of the

hotels names except for The Carlyle.2. The Rosewood name appears on all of the

company’s marketing sources (towels,bathrobes, glasses, web-site,…)

• Option 1: Going corporate

• Option 3: Keeping an Individual approach.

Analysis of OptionsOption 1: Corporate

Pros:• May provoke an increase in cross

property usage.• May increase CLTV.

Cons:• Goes against Rosewood’s

brand identity (“Sense ofPlace”).

• Risk of losing existingclientele.

• Involves a complete changeof the company’s strategies.

• Requires an investment of$50,000,000.

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Option 2: Hybrid

Pros:• The individuality of each

hotel is respected.• Already existing clientele

will be kept.• Will help encourage cross

property usage.• Cheaper than option 1.

Cons:• Requires an investment of

$25,000,000.

Option 3: Individual

Pros:• Doesn’t involve any changes

in the company’s strategy,therefore it doesn’t requireany investments.

Cons:• The company’s profit

remains the same.• Cross property usage will

stagnate.• CLTV will remain the same.

Financials

1. The IRR is 25%.2. The net present value is $10,900,000.3. The profitability index is 1.7.

45,000,00030,000,00010,000,000(50,000,000)Net Cash flows

---(50,000,000)CashOutflows

45,000,00030,000,00010,000,0000 Cash Inflows

3210Years

Option 1: Corporate Strategy

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Financials Cont’d

1. The IRR is 43%.2. The net present value is $9,300,000.3. The profitability index is 1.9.

Net Cash Flows

CashOutflows

Cash Inflows

Years

(10,000,000)

(10,000,000)

0

0

(6,000,000)

(15,000,000)

9,000,000

1

15,000,000

-

15,000,000

2

20,000,000

-

20,000,000

3

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Option 2 (recommendation): Hybrid Strategy

Financials Cont’d

1. The IRR is 30%.2. The net present value is $3,100,000.3. The profitability index is 1.8.

4,000,0003,000,000500,000(4,000,000)Net Cash flows

-(500,000)(2,000,000)(4,000,000)CashOutflows

4,000,0003,500,0002,500,0000 Cash Inflows

3210Years

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Option 3: Individual Strategy

Comparisons

PI

1.7

1.9

1.8

1.6 1.65 1.7 1.75 1.8 1.85 1.9 1.95

Option 1

Option 2

Option 3

PI

9

IRR

25%

43%

30%

0% 10% 20% 30% 40% 50%

Option 1

Option 2

Option 3

IRR

Comparison of the Internal Rate of Return

(IRR) of the three options: Comparison of the Profitability Index

(PI) of the three options:

ConclusionRosewood should adopt a hybrid

strategy because:1. It has a higher probability of

impacting the company’sprofitability.

2. It keeps actual loyal customerssatisfied while encouraging morecross property usage.

3. Therefore it will have more of aprobability of increasing CLTV.

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Sources

• Rosewood Hotels web-site,www.rosewoodhotels.com

• Harvard Business Publishings, « RosewoodHotels & Resorts: Branding to IncreaseCustomer Profitability and Lifetime Value »

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