Ultimate Escapes, LLC:How the Market Life Cycle Impacts Success or Failure

Colorado State UniversityGraduate School of BusinessFundamentals of Marketing

October 12, 2010

Typical Market Growth

Time

$

Early Innovation Rapid Growth Change or DieShakeout

Solar Industry Example

Source: Solar PV Development Strategies in Europe: 2008-2020

In the Beginning…•Background: HP, Sorcia, and Center

Partners•Rich Keith and Kären Siwek•Summer 2003

▫Ed’s job search▫Rich and Private Retreats▫Brainstorming over a beer

Destination Clubs•Run like country clubs•Private residences in resort and city

destinations•Lower occupancy, higher availability•Concierge services•Financial:

▫Deposits used for real estate and operations▫Dues and nightly fees▫Limits on redemption▫Appreciation on real estate

Value Propositions• Target Customers

▫ Who are they and who are they not▫ People with common needs; segmented by common

value• Specific, measurable, end-result benefits

▫ Exactly how much faster, better, cheaper, etc. in areas important to Target Customers

• Tradeoffs Target Customers must make▫ Price/Cost, inconvenience, change relationships,

etc.

Source: Building Market Focused Organizations, Lanning and Phillips

• Target Customers: ▫ People with combined household incomes

$200K-$500K/year looking to purchase or build a vacation home or join a private residence club

• Specific, measurable end-result benefits:▫ Unlike other destination clubs, we’re affordable▫ Unlike second home ownership, we offer a choice of

worldwide properties (avg. $400K) and convenient services▫ Unlike fractional ownership, private residence clubs, or

timeshares, we offer a choice of worldwide properties, with higher availability, unlimited usage, and convenient services

• Price/Tradeoffs:▫ $50K-$75K refundable bond, $5K-$10K annual dues, $50-

$100/night▫ No asset appreciation; no ownership▫ Fewer amenities than private residence clubs

Initial Value Proposition

Web Site Launch

Initial Marketing Strategy

• Promotion: “friends and family,” Northern Colorado advertising, direct mail, search engine placement

• Relationship with Private Retreats (A&K)

Memberships

October November

December

January February

Planned 1 4 4 6 10

Actual 0 0 0 0 1

Breakthrough!

•March 2004: Wall Street Journal•“Operation Remora”•Grew to 49 Members, 7 residences and 11

employees by August 2004

Market History

01 02 03 04 05

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Typical Market Growth

Time

$

Early Innovation Rapid Growth Change or DieShakeout

Market Dynamics—2005-6•Exclusive Resorts grows to over 2,000

members, surpassing A&K•New regulations on the horizon•Growth slowing•Rumblings

2006-7 •Tanner and Haley (formerly A&K

Destination Clubs, formerly Private Retreats) files for Chapter 11

•Quintess and Dreamcatcher merge•Portofino and other clubs go dark•Ultimate Resort proposes to merge with

Private Escapes, forming Ultimate Escapes

Typical Market Growth

Time

$

Early Innovation Rapid Growth Change or DieShakeout

2008

•UE merger underway•Market down to 6 competitors•Possibility of more bankruptcies and

merging•Market growth slowing•… then…

The World Changed!

Ouch!

2009-10•Cash crisis•Special assessment•Layoffs and restructuring•Market down to 3 competitors: Exclusive

Resorts, Quintess, and Ultimate Escapes•Plummeting member satisfaction•Sales still nearly zero

Typical Market Growth

Time

$

Early Innovation Rapid Growth Change or DieShakeout

Died!ULTIMATE ESCAPES FILES FOR BANKRUPTCY PROTECTION

ORLANDO – (September 20, 2010) – Ultimate Escapes, Inc. (OTCBB: ULEI and ULEI-W), today announced that it had filed for protection under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware for itself and certain of its subsidiaries.

The Board of Directors of UEI authorized the filing of a Chapter 11 petition following the recommendation of a Special Committee of UEI’s independent directors in order to protect UEI’s assets with a goal to maximize the value for all of its constituencies, including its creditors, its members and potentially its shareholders. The Company has requested that the Court approve the appointment of CRG Partners, LLC to provide the services of a Chief Restructuring Officer and supporting personnel, and UEI has also filed a variety of first day motions that will allow it to manage its critical operations with the goal of continuing to provide a reasonable level of services to its members for the short period of the expected proceeding.

What Killed It

•Fatal, implicit assumptions:▫Real estate values will always appreciate▫Memberships will always increase in value

and will always sell▫Dues don’t have to cover operating

expenses▫The recession is just a “speed bump”

•Bad management system•… and most of all: hubris!