Rosewood Hotels & Resorts: Customer Lifetime Value Analysis

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

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

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

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 Customerb
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

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
b
$1 million growing at 3% per year allocated to 115,000 guests
Without Rosewood With Rosewood
Branding (2003) Corporate
Branding
Growth Rate
115,000 115,000
$750.00 $750.00 growing at 6%
2.0 2.0
32% 32%
1.2 1.3
$130.00 $138.70 growing at 3%
$150.00 $150.00
19,169 24,919
5,750 11500

8% 8%
16.67% 21.67%

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 $842.70 $893.26 $946.86 $1,003.67 $1,063.89
$1,908.00 $2,022.48 $2,143.83 $2,272.46 $2,408.81 $2,553.33
$610.56 $647.19 $686.03 $727.19 $770.82 $817.07
$150.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
$133.90 $137.92 $142.05 $146.32 $150.71 $155.23
($150.00) $476.66 $509.28 $543.97 $580.87 $620.11 $661.84

1.00 1.00 0.17 0.03 0.00 0.00 0.00

($150.00) $476.66 $84.90 $15.12 $2.69 $0.48 $0.09

1.000 0.926 0.857 0.794 0.735 0.681 0.630

($150.00) $441.35 $72.78 $12.00 $1.98 $0.33 $0.05

$378.49

2003 2004 2005 2006 2007 2008 2009

2.0 2.0 2.0 2.0 2.0 2.0
1.3 1.3 1.3 1.3 1.3 1.3
$795.00 $842.70 $893.26 $946.86 $1,003.67 $1,063.89
$2,067.00 $2,191.02 $2,322.48 $2,461.83 $2,609.54 $2,766.11
$661.44 $701.13 $743.19 $787.79 $835.05 $885.16
$150.00
$133.90 $137.92 $142.05 $146.32 $150.71 $155.23
$8.96 $9.23 $9.50 $9.79 $10.08 $10.38
($150.00) $518.58 $553.98 $591.64 $631.68 $674.27 $719.55
 1.00 1.00 0.22 0.05 0.01 0.00 0.00
($150.00) $518.58 $120.04 $27.78 $6.43 $1.49 $0.34

1.000 0.926 0.857 0.794 0.735 0.681 0.630

($150.00) $480.17 $102.92 $22.05 $4.72 $1.01 $0.22

$461.09

$82.60
$9,498,542
$29,682,943
 ROSEWOOD HOTELS & RESORTS: CUSTOMER LIFETIME VALUE
Inputs
Column1
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
Net Profit Per Guest

CLTV Calculation With No Changes to Brand Strategy

Year
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

CLTV Calculation With New Brand Strategy

Column1
Gross Profit per Customer
Less Cost to Acquire Customer
Less Annual Marketing Cost per Customer
Less Additional 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

Total CLV for 115000 guests without coporate branding

Total CLV for 115000 guests with coporate branding
Benefit for Corporate Branding over Life-time
LIFETIME VALUE (CLTV) ANALYSIS

Without CB (2003) With CB Growth Rate

115,000 115,000
$750.00 $750.00 6%
2.0 2.0
32% 32%
1.2 1.3
$130.00 $138.70 3%
$150.00 $150.00
19,169 24,919
5,750 11500

8% 8%
16.67% 21.67%
576.00 624.00

2003 2004 2005 2006 2007 2008 2009

$610.56 $647.19 $686.03 $727.19 $770.82 $817.07
$150.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
$133.90 $137.92 $142.05 $146.32 $150.71 $155.23
($150.00) $476.66 $509.28 $543.97 $580.87 $620.11 $661.84

1.00 1.00 0.17 0.03 0.00 0.00 0.00

($150.00) $476.66 $84.90 $15.12 $2.69 $0.48 $0.09

1.000 0.926 0.857 0.794 0.735 0.681 0.630

($150.00) $441.35 $72.78 $12.00 $1.98 $0.33 $0.05

$378.49

2003 2004 2005 2006 2007 2008 2009

$661.44 $701.13 $743.19 $787.79 $835.05 $885.16
$150.00
$133.90 $137.92 $142.05 $146.32 $150.71 $155.23
$8.96 $9.23 $9.50 $9.79 $10.08 $10.38
($150.00) $518.58 $553.98 $591.64 $631.68 $674.27 $719.55

1.00 1.00 0.22 0.05 0.01 0.00 0.00

($150.00) $518.58 $120.04 $27.78 $6.43 $1.49 $0.34

1.000 0.926 0.857 0.794 0.735 0.681 0.630

 ($150.00) $480.17 $102.92 $22.05 $4.72 $1.01 $0.22
$461.09

$43,526,823.29
$53,025,365.00
$9,498,541.71