Last Updated 10 May 2020

The hotel industry

Category Hotel
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The hotel industry is a mature industry marked by intense competition. Market share increases typically happens at a competitor’s expense. Industry-wide, most growth occurs in the international, rather than the domestic arena. Though it can be difficult to find an exact definition of a boutique hotel, it is undeniably believed that atmosphere (filled with sense of intimacy) is a very significant factor. It can be argued that atmosphere is the combination of all facilities and services that make a stay, an outstanding one.

In relation to boutique hotels, the term atmosphere comprises mainly of; personal decoration (e.g. by reflecting local character and culture), personalized service, the mind-set of hotel staff in terms of quality and dedication, and most importantly a know-how of how these are all combined to create a sense of closeness among the guests or Sense of Place. Rosewood Hotels & Resorts (Rosewood) is a private hotel business with a collection of twelve boutique hotels across North America, The Caribbean, Latin America, The Middle East, and The Asia Pacific with plans for a thirty-three per cent growth within the next three years (Dev & Stroock, 2007).

The twelve hotels are managed worldwide under an individual brand strategy in which each property operates under its own name while the Rosewood brand is un-intrusive, appearing only on clothes, hangers and stationery (Dev & Stroock, 2007). Rosewood’s competitive advantage up to this point is its ability to include the architectural details, interiors, and culinary concepts that reflect local character and culture in each of their unique properties.

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This defines Rosewood’s Sense of Place philosophy (Dev & Stroock, 2007). However, because of this strategy guests who have stayed at Rosewood properties were only aware of the property brand and not of the corporate brand. Given this lack of brand awareness, Rosewood has not been able to capitalize on repeat and multi-property guest stays in the way that a corporate-branded hotel with clear brand recognition such as that of Ritz Carlton or Four Seasons (Dev & Stroock, 2007).

This is an issue for a company like Rosewood since the hotel industry relies on return visits and brand recognition for profitable customer relationships. Why do corporate branding? Rosewood’s competitors can be divided into two groups of luxury hotels; corporate branded (Ritz-Carlton and Four Seasons) and collections of individually branded boutique hotels (Orient-Express). Competition in the luxury hotel segment is intense and it has become difficult to position Rosewood’s collections of properties in an increasing crowded field of luxury operations.

Rosewood's senior management believe that while individual branding of their hotels appeals to its present customers, the lack of one single recognized brand image limits opportunities for cross-selling among Rosewood’s additional properties. Philip Martiz claims that: “[…] the vast majority of the luxury market seems to value the corporate-branded version of luxury”. Furthermore, Dev ; Stroock (2007, p. 3) explains: “Emphasis on individual property brands was not working from a number of fronts.

Guests are seeking a unique Rosewood property experience and are not making the connection between Rosewood properties and are increasingly identifying with other strong hotel brands. ” The managers further believe that a unified Rosewood brand might increase customer awareness, clarify its competitive positioning, and entice customers to stay at multiple Rosewood locations, thereby improving profitability and "lifetime value" of their customer base (Dev ; Stroock, 2007).

It can thus be claimed that Rosewood’s current brand positioning is limiting their ability to increase market share and that a new brand strategy focusing on corporate branding would increase awareness of the Rosewood brand among existing and new customers (Dev ; Stroock, 2007). It is considered increasingly more important to have a successful brand as it is perceived a primary capital for many businesses (Kim ; Kim, 2005). Brands have been predicted to represent at least 20% of the intangible value of a business (Chernatony et al., 2011), and in various cases brand equity may exceed the conventional asset value (Kim ; Kim, 2005).

Surveys suggest that most guests do not know they are staying at a Rosewood property and only 5 % have stayed in more than one of its properties (Dev ; Stroock, 2007). In contrast, corporate-branded luxury hotels such as the Four Seasons enjoy 10 % to 15 % cross-property usage rates, it can thus be concluded that Rosewood has very low brand awareness among its guests. Furthermore, one travel agent stated “Rosewood is a collection of brands, it is not one brand. ” (Dev ; Stroock, 2007, p. 12).

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