ROSEWOOD HOTELS & RESORTS: CUSTOMER LIFETIME VALUE (CLTV) ANALYSIS

Inputs
Without Rosewood
Branding (2003)

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

115,000
$750.00
2.0
32%
1.2
$130.00
$150.00
19,169
5,750
8%

Discount Rate
Average Guest Retention Rate

16.67%

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

2003

With
Rosewood
Corporate
Branding
115,000
$750.00
2.0
32%
1.3
$138.70
$150.00
24,919
11500
$1,000,000
8%
21.67%

2004
2.0
1.2
$795.00
$1,908.00
$610.56

($150.00)
($150.00)

($133.90)
$476.66

Probability of Being Retained

Expected Cash Flow from Customer

1.00
($150.00)

1.00
$476.66

Discount Factor

1.000

1.080

NPV of Expected Cash Flow from Customer

Total NPV of CLTV

($150.00)
$378.49

$441.35

CLTV Calculation With New Brand Strategy

Year
2003
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
$150.00
Less Annual Marketing Cost per Customer
Less Additional Marketing Cost per Customer
Cash Flow from Customer if Retained

$8.70
($158.70)

2004
2.0
1.3
$795.00
$2,067.00
$661.44
$133.90
$8.96
$518.58

Probability of Being Retained

Expected Cash Flow from Customer

1.00
($158.70)

1.00
$518.58

Discount Factor

1.000

0.926

NPV of Expected Cash Flow from Customer

Total NPV of CLTV

($158.70)
$452.39

$480.17

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

$73.90

$1 million growing at 3% per year allocated to 115,000 guests

$8,498,542
$22,364,583

Sourcce

Exhibit 8
6% Exhibit 8
Exhibit 8
Exhibit 8
Exhibit 8
3% Exhibit 8
Exhibit 8

growing at

growing at

Assume 10% multiproperty crossselling with Corporate Branding

3% Page 5
Exhibit 8

growing at

2005
2.0
1.2
$842.70
$2,022.48
$647.19

2006
2.0
1.2
$893.26
$2,143.83
$686.03

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
$817.07

($137.92)
$509.28

($142.05)
$543.97

($146.32)
$580.87

($150.71)
$620.11

($155.23)
$661.84

0.17
$84.90

0.03
$15.12

0.00
$2.69

0.00
$0.48

0.00
$0.09

1.166

1.260

1.360

1.469

1.587

$72.78

$12.00

$1.98

$0.33

$0.05

2005
2.0
1.3
$842.70
$2,191.02
$701.13

2006
2.0
1.3
$893.26
$2,322.48
$743.19

2007
2.0
1.3
$946.86
$2,461.83
$787.79

2008
2.0
1.3
$1,003.67
$2,609.54
$835.05

2009
2.0
1.3
$1,063.89
$2,766.11
$885.16

$137.92

$142.05

$146.32

$150.71

$155.23

$9.23
$553.98

$9.50
$591.64

$9.79
$631.68

$10.08
$674.27

$10.38
$719.55

0.22
$120.04

0.05
$27.78

0.01
$6.43

0.00
$1.49

0.00
$0.34

0.857

0.794

0.735

0.681

0.630

$102.92

$22.05

$4.72

$1.01

$0.22

$461.09