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This business case examines Rosewood Hotel\'s option of going corporate.
Citation preview
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
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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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