ROSEWOOD HOTELS & RESORTS: CUSTOMER LIFETIME VALUE (CLTV) ANALYSIS Inputs Without Rosewood With Rosewood Branding (2003) Sourcce Corporate Branding Total Number of Unique Guests Average Daily Spend Number of Days Average Guest Stays per Stay Average Gross Margin per Room 115,000 115,000 $750.00 2.0 32% $750.00 growing at Exhibit 8 6% Exhibit 8 2.0 Exhibit 8 32% Exhibit 8 Average Number of Visits per Year per Guest 1.2 Average Marketing Expense per Guest (system-wide) $130.00 Average New Guest Acquisition Expense (system-wide) $150.00 1.3 $138.70 $125.00 Exhibit 8 growing at 3% Exhibit 8 Exhibit 8 d Total Number of Repeat Guests 19,169 24,919 of which: Total Number of Multi-property Stay Guests 5,750 11,500 Additional Costs Required per annum Discount Rate Average Guest Retention Rate 8% $1,000,000 8% 16.67% 21.67% Page 5 Exhibit 8 Average Gross Profit per Guest 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 Probability of Being Retained Expected Cash Flow from Customer Discount Factor NPV of Expected Cash Flow from Customer Total NPV of CLTV 2003 2004 2005 2006 2007 2008 2009 2.0 2.0 2.0 2.0 2.0 2.0 1.2 1.2 1.2 1.2 1.2 1.2 $795.00 $1,908.00 $610.56 $842.70 $2,022.48 $647.19 $893.26 $946.86 $1,003.67 $1,063.89 $2,143.83 $686.03 $2,272.46 $727.19 $2,408.81 $2,553.33 $770.82 $817.07 ($150.00) ($150.00) ($133.90) $476.66 ($137.92) $509.28 ($142.05) $543.97 ($146.32) $580.87 ($150.71) ($155.23) $620.11 $661.84 1.00 ($150.00) 1.00 $476.66 0.17 $84.90 0.03 $15.12 0.00 0.00 0.00 $2.69 $0.48 $0.09 1.000 1.080 1.166 1.260 1.360 1.469 1.587 ($150.00) $378.49 $441.35 $72.78 $12.00 $1.98 $0.33 $0.05 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 d 2003 2004 2005 2006 2007 2008 2009 2.0 2.0 2.0 2.0 2.0 2.0 to be calc: 1.3 1.3 1.3 1.3 1.3 1.3 $795.00 $2,067.00 $661.44 $842.70 $2,191.02 $701.13 $893.26 $2,322.48 $743.19 $946.86 $1,003.67 $1,063.89 $2,461.83 $787.79 $2,609.54 $835.05 $2,766.11 $885.16 ($125.00) Less Annual Marketing Cost per Customer calc b Less Additional Marketing Cost per Customer" calc ($142.86) ($8.96) ($147.14) ($9.23) ($151.56) ($9.50) ($156.10) ($9.79) ($160.79) ($10.08) ($165.61) ($10.38) Less data management and analytics fee per customer calc Co-Branding payment to airline for advertsing fee of $5.00 (flat) per per customer Cash Flow from Customer if Retained calc ($125.00) Probability of Being Retained Expected Cash Flow from Customer Discount Factor NPV of Expected Cash Flow from Customer Total NPV of CLTV 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 1.00 1.00 0.22 0.05 0.01 0.00 0.00 ($125.00) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 1.000 1.080 1.166 1.260 1.360 1.469 1.587 ($125.00) ($125.00) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0 $0