Using the Excel spreadsheet I provided, compute the customer lifetime value for the two branding strategies for 2004 (Year 1) to 2009 (Year 6); and don't forget to include acquisition costs in 2003 (Year 0). Does your analysis suggest that changing to a corporate branding strategy will lead to an increase or a decrease in CLV? By how much? I won't expect you to remember a precise value, but you should be able to tell me if the value you calculated falls within a given range.

B E F G H 2 Inputs Without Rosewood |With Rosewood Souroce Branding (2003) Corporate Total Number of Unique Guests 115 000 115 000 Exhibit 8 5 Average Daily Spend $750,00 $750,00 growing at 6% Exhibit 8 6 Number of Days Average Guest Stays per Stay 2,0 2,0 Exhibit 8 7 Average Gross Margin per Room 32% 32% Exhibit 8 8 Average Number of Visits per Year per Guest 1,2 1,3 Exhibit 8 9 Average Marketing Expense per Guest (system-wide) $130,00 $138,70 growing at 3% Exhibit 8 10 Average New Guest Acquisition Expense (system-wide) $150,00 $150,00 Exhibit 8 11 Total Number of Repeat Guests 19 169 24 91 12 of which: Total Number of Multi-property Stay Guests 5 750 11500 13 Additional Costs Required per annum $1 000 000 Page 5 14 Discount Rate 8% 8% Exhibit 8 15 Average Guest Retention Rate 16,67% 21,67% 16 17 18 CLTV Calculation With No Changes to Brand Strategy 19 Year 2 5 6 20 Number of Nights per Stay 2,0 2,0 2,0 2,0 2,0 2,0 21 Number of Stays per guest (assuming they are retained) 1 .2 1,2 1,2 1,2 1.2 1,2 Revenue Per Night $795,00 $842,70 $893,26 $946,86 $1 003,67 $1 063,89 23 Revenue per Customer $1 908,00 $2 022,48 $2 143,83 $2 272,46 $2 408,81 $2 553,33 24 Gross Profit per Customer $610,56 $647,19 $686,03 $727,19 $770,82 $817,07 25 Less Cost to Acquire Customer ($150,00) 26 Less Annual Marketing Cost per Customer ($133,90 ($137,92) ($142,05) ($146,32 ($150.71) ($155,23) 27 Cash Flow from Customer if Retained ($150,00) $476,66 $509,28 $543,97 $580,87 $620,11 $661,84 28 29 Probability of Being Retained 1,0 1,0 0,17 0,03 0,00 0,00 0,00 30 Expected Cash Flow from Customer ($150,00) $476,66 $84,90 $15,12 $2,69 $0,48 60,09 31 32 Discount Factor 1,000 33 $4 NPV of Expected Cash Flow from Customer ($150,00) 35 Total NPV of CLTV 36 CLTV Calculation With New Brand Strategy 38 Year 2 3 5 6 39 Number of Nights per Stay 2,0 2,0 2,0 2,0 2,0 2,0 40 Number of Stays per guest (assuming they are retained) 1 ,3 1 ,3 1 ,3 1,3 1.3 1.3 41 Revenue Per Night $795,00 $842,70 $893,26 $946,86 $1 003,67 $1 063,89 42 Revenue per Customer $2 067,00 $2 191,02 $2 322.48 $2 461,83 $2 609,54 $2 766,11 43 Gross Profit per Customer $661,44 $701,13 $743,19 $787,79 $835,05 $885,16 44 Less Cost to Acquire Customer ($150,00) 45 Less Annual Marketing Cost per Customer ($133,90) ($137,92) ($142,05) ($146,32 ($150,71) ($155,23) 46 Less Additional Marketing Cost per Customer ($8.96) ($9.23) ($9,50) ($9,79) ($10,08) ($10,38) 47 Cash Flow from Customer if Retained ($150,00) $518,58 $553,98 $591,64 $631,68 $674,27 $719,55 48 49 Probability of Being Retained 1,00 1,00 0,22 0,05 0,01 0,00 0,00 50 Expected Cash Flow from Customer ($150,00) $518,58 $120,04 $27,78 $6,43 $1,49 $0,34 51 52 Discount Factor 1,000 53 54 NPV of Expected Cash Flow from Customer ($150,00) 55 Total NPV of CLTV 56 57 Increase in CLTV per customer of new Marketing Plan 58 Multiplied by # of Customers to obtain increase in profit of Rosewood from new brand strategy 59 Divided by 32% gross margin to obtain increase in Revenue of Rosewood from new brand strategy 60 . $1 million growing at 3% per year allocated to 115,000 guests