Exhibit 8 Rosewood's Brand-wide Customer Lifetime Value Spreadsheet Model Total number of unique guests Average daily spend Number of days average guest stays Average gross margin per room Average number of visits per year per guest Average marketing expense per guest (systemwide) Average new guest acquisition expense (systemwide) Total number of repeat guests e Of which: Total number of multiproperty stay guests Without Rosewood Branding (2003) 115,000 $750 2 32% 1.2 $130 $150 19,169 5,750 With Rosewood Corporate Branding 115,000 $750 2 32% 1.3 To be calculated $150 To be calculated To be calculated Average Guest Retention Rate Average Gross Profit per Guest 16.67% To be calculated To be calculated To be calculated 0 1 2 3 4 5 6 Years Gross profit per guest Acquisition expense per new guest Marketing expense per guest Net Profit per Guest Retention factor Discount factor Net Present Value (NPV) Source: Rosewood Hotels & Resorts. All numbers are approximate and have been disguised to preserve confidentiality. Note: The company used an 8% discount rate and assumed marketing costs increased at a rate of 3% per year and guest revenues at a rate of 6% per year. a For the purpose of this analysis, Rosewood treats double occupancy (i.e., John Doe and Jane Doe staying in the same room) as one guest. The average daily spend is the total expenditure per guest per day on room, food, beverage, and other services. Twice more multi-property guests, inflating the overall number of repeat guests, 1.3 stays per guest per year, and $1,000,000 marketing expenses. Cost of marketing communication with a Rosewood corporate brand: [(total number of guests * average cost of marketing per guest in 2003) + $1,000,000] / total number of guests. e Repeat guests were guests who, after staying once in a Rosewood hotel, returned to a Rosewood property the year after the same one or a different one). Repeat guests included multiproperty guests. Guest retention rate the probability that a guest comes back to a Rosewood hotel the following year (number of repeat guests/total number of guests). 8 Net Present Value (NPV): the future stream of benefits and costs converted into equivalent values today, by discounting future benefits and costs using an appropriate discount rate. ROSEWOOD HOTELS & RESORTS: CUSTOMER LIFETIME VALUE (CLTV) ANALYSIS Inputs Sourcce growing at Without Rosewood Branding (2003) 115,000 $750.00 2.0 32% 1.2 $130.00 $150.00 19.169 5.750 With Rosewood Corporate Branding 115,000 $750.00 2.0 32% 1.3 to be calc $125.00 24.919 to be calc to be calc 8% to be calc Total Number of Unique Guests Average Daily Spend Number of Days Average Guest Stays per Stay Average Gross Margin per Room Average Number of Visits per Year per Guest Average Marketing Expense per Guest (system-wide) Average New Guest Acquisition Expense (system-wide) Total Number of Repeat Guests of which: Total Number of Multi-property Stay Guests Additional Costs Required per annum Discount Rate Average Guest Retention Rate Exhibit 8 6% Exhibit 8 Exhibit 8 Exhibit 8 Exhibit 8 3% Exhibit 8 growing at Exhibit 80 Page 5 Exhibit 8 8% 16.67% 2003 CLTV Calculation With No Changes to Brand Strategy Year Number of Nights per Stay Number of Stays per guest (assuming they are retained) Revenue Per Night Revenue per Customer Gross Profit per Customer Less Cost to Acquire Customer Less Annual Marketing Cost per Customer Cash Flow from Customer if Retained 2004 2.0 1.2 $795.00 $1,908.00 S610.56 2005 2.0 1.2 $842.70 $2,022.48 S647.19 2006 2.0 1.2 $893.26 $2,143.83 S686.03 2007 2.0 1.2 $946.86 $2,272.46 $727.19 2008 2.0 1.2 $1,003.67 $2,408.81 $770.82 2009 2.0 1.2 $1,063.89 $2.553.33 S817.07 ($150.00) ($133.90) S476.66 ($137.92 S509.28 ($142.05) $543.97 ($146.32) S580.87 ($150.71) S620.11 ($155.23) S661.84 ($150.00) 0.00 Probability of Being Retained Expected Cash Flow from Customer 1.00 ($150.00) 1.00 $476.66 0.17 $84.90 0.03 $15.12 0.00 $2.69 0.00 $0.48 $0.09 Discount Factor 1.000 1.080 1.166 1.260 1.360 1.469 1.587 S441.35 $72.78 $12.00 $1.98 S0.33 S0.05 NPV of Expected Cash Flow from Customer Total NPV of CLTV ($150.00) S378.49 2003 2004 2.0 2005 2.0 2006 2.0 2007 2.0 2008 2.0 2009 2.0 to be calc: $795.00 #VALUE! $661.44 $842.70 #VALUE! $701.13 $893.26 #VALUE! $743.19 $946.86 #VALUE! $787.79 $1,003.67 #VALUE! S835.05 $1,063.89 #VALUE! s885.16 CLTV Calculation With New Brand Strategy Year Number of Nights per Stay Number of Stays per guest (assuming they are retained) Revenue Per Night Revenue per Customer Gross Profit per Customer Less Cost to Acquire Customer Less Annual Marketing Cost per Customer Less Additional Marketing Cost per Customer Less data management and analytics fee per customer Co-Branding payment to airline for advertsing fee of $5.00 (flat) per per customer Cash Flow from Customer if Retained ($125.00) calc calc calc calc ($125.00) Probability of Being Retained Expected Cash Flow from Customer 1.00 ($125.00) 1.00 #VALUE! 0.22 #VALUE! 0.051 0.01 #VALUE! #VALUE! 0.000 #VALUE! 0.00 #VALUE! Discount Factor 1.000 1.080 1.166 1.260 1.360 1.469 1.587 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! NPV of Expected Cash Flow from Customer Total NPV of CLTV ($125.00) #VALUE! Increase in CLTV per customer of new Marketing Plan Multiplied by # of Customers to obtain increase in profit of Rosewood from new brand strategy Divided by 32% gross margin to obtain increase in Revenue of Rosewood from new brand strategy * $1 million growing at 3% per year allocated to 115,000 + 10,000 guests Each custmer costs a $9 data managemt fee increasing and 4% per year 'Management later realized that customer acquisition would actually be $125 instead of $150 Rosewood launched a a cobranded inflight advertsing campaign with Delta Air costing $5 per customer Exhibit 8 Rosewood's Brand-wide Customer Lifetime Value Spreadsheet Model Total number of unique guests Average daily spend Number of days average guest stays Average gross margin per room Average number of visits per year per guest Average marketing expense per guest (systemwide) Average new guest acquisition expense (systemwide) Total number of repeat guests e Of which: Total number of multiproperty stay guests Without Rosewood Branding (2003) 115,000 $750 2 32% 1.2 $130 $150 19,169 5,750 With Rosewood Corporate Branding 115,000 $750 2 32% 1.3 To be calculated $150 To be calculated To be calculated Average Guest Retention Rate Average Gross Profit per Guest 16.67% To be calculated To be calculated To be calculated 0 1 2 3 4 5 6 Years Gross profit per guest Acquisition expense per new guest Marketing expense per guest Net Profit per Guest Retention factor Discount factor Net Present Value (NPV) Source: Rosewood Hotels & Resorts. All numbers are approximate and have been disguised to preserve confidentiality. Note: The company used an 8% discount rate and assumed marketing costs increased at a rate of 3% per year and guest revenues at a rate of 6% per year. a For the purpose of this analysis, Rosewood treats double occupancy (i.e., John Doe and Jane Doe staying in the same room) as one guest. The average daily spend is the total expenditure per guest per day on room, food, beverage, and other services. Twice more multi-property guests, inflating the overall number of repeat guests, 1.3 stays per guest per year, and $1,000,000 marketing expenses. Cost of marketing communication with a Rosewood corporate brand: [(total number of guests * average cost of marketing per guest in 2003) + $1,000,000] / total number of guests. e Repeat guests were guests who, after staying once in a Rosewood hotel, returned to a Rosewood property the year after the same one or a different one). Repeat guests included multiproperty guests. Guest retention rate the probability that a guest comes back to a Rosewood hotel the following year (number of repeat guests/total number of guests). 8 Net Present Value (NPV): the future stream of benefits and costs converted into equivalent values today, by discounting future benefits and costs using an appropriate discount rate. ROSEWOOD HOTELS & RESORTS: CUSTOMER LIFETIME VALUE (CLTV) ANALYSIS Inputs Sourcce growing at Without Rosewood Branding (2003) 115,000 $750.00 2.0 32% 1.2 $130.00 $150.00 19.169 5.750 With Rosewood Corporate Branding 115,000 $750.00 2.0 32% 1.3 to be calc $125.00 24.919 to be calc to be calc 8% to be calc Total Number of Unique Guests Average Daily Spend Number of Days Average Guest Stays per Stay Average Gross Margin per Room Average Number of Visits per Year per Guest Average Marketing Expense per Guest (system-wide) Average New Guest Acquisition Expense (system-wide) Total Number of Repeat Guests of which: Total Number of Multi-property Stay Guests Additional Costs Required per annum Discount Rate Average Guest Retention Rate Exhibit 8 6% Exhibit 8 Exhibit 8 Exhibit 8 Exhibit 8 3% Exhibit 8 growing at Exhibit 80 Page 5 Exhibit 8 8% 16.67% 2003 CLTV Calculation With No Changes to Brand Strategy Year Number of Nights per Stay Number of Stays per guest (assuming they are retained) Revenue Per Night Revenue per Customer Gross Profit per Customer Less Cost to Acquire Customer Less Annual Marketing Cost per Customer Cash Flow from Customer if Retained 2004 2.0 1.2 $795.00 $1,908.00 S610.56 2005 2.0 1.2 $842.70 $2,022.48 S647.19 2006 2.0 1.2 $893.26 $2,143.83 S686.03 2007 2.0 1.2 $946.86 $2,272.46 $727.19 2008 2.0 1.2 $1,003.67 $2,408.81 $770.82 2009 2.0 1.2 $1,063.89 $2.553.33 S817.07 ($150.00) ($133.90) S476.66 ($137.92 S509.28 ($142.05) $543.97 ($146.32) S580.87 ($150.71) S620.11 ($155.23) S661.84 ($150.00) 0.00 Probability of Being Retained Expected Cash Flow from Customer 1.00 ($150.00) 1.00 $476.66 0.17 $84.90 0.03 $15.12 0.00 $2.69 0.00 $0.48 $0.09 Discount Factor 1.000 1.080 1.166 1.260 1.360 1.469 1.587 S441.35 $72.78 $12.00 $1.98 S0.33 S0.05 NPV of Expected Cash Flow from Customer Total NPV of CLTV ($150.00) S378.49 2003 2004 2.0 2005 2.0 2006 2.0 2007 2.0 2008 2.0 2009 2.0 to be calc: $795.00 #VALUE! $661.44 $842.70 #VALUE! $701.13 $893.26 #VALUE! $743.19 $946.86 #VALUE! $787.79 $1,003.67 #VALUE! S835.05 $1,063.89 #VALUE! s885.16 CLTV Calculation With New Brand Strategy Year Number of Nights per Stay Number of Stays per guest (assuming they are retained) Revenue Per Night Revenue per Customer Gross Profit per Customer Less Cost to Acquire Customer Less Annual Marketing Cost per Customer Less Additional Marketing Cost per Customer Less data management and analytics fee per customer Co-Branding payment to airline for advertsing fee of $5.00 (flat) per per customer Cash Flow from Customer if Retained ($125.00) calc calc calc calc ($125.00) Probability of Being Retained Expected Cash Flow from Customer 1.00 ($125.00) 1.00 #VALUE! 0.22 #VALUE! 0.051 0.01 #VALUE! #VALUE! 0.000 #VALUE! 0.00 #VALUE! Discount Factor 1.000 1.080 1.166 1.260 1.360 1.469 1.587 #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! NPV of Expected Cash Flow from Customer Total NPV of CLTV ($125.00) #VALUE! Increase in CLTV per customer of new Marketing Plan Multiplied by # of Customers to obtain increase in profit of Rosewood from new brand strategy Divided by 32% gross margin to obtain increase in Revenue of Rosewood from new brand strategy * $1 million growing at 3% per year allocated to 115,000 + 10,000 guests Each custmer costs a $9 data managemt fee increasing and 4% per year 'Management later realized that customer acquisition would actually be $125 instead of $150 Rosewood launched a a cobranded inflight advertsing campaign with Delta Air costing $5 per customer