Price Line Presentation

8/8/2019 Price Line Presentation

1/27

Sterling Valley Systems, Inc.Company Overview

May 2006


2/27

2

Sterling Valley Systems, Inc. (SVS) is the leading provider of transaction-

enabling solutions to the destination travel (DMO) industry

Internet, call center and GDS transactions for lodging, air and activities

Expect to launch DMO-centric property management system (PMS) in Spring of 2006

Only provider of both front-end reservations and back-office systems that are

required by the DMO market Particularly, DMOs where lodging is comprised primarily of condominiums, rental

houses and independent hotels (CHI Markets)

Power six leading ski DMOs, 400 hotel properties and 70 3rd party Internet sites

Develop, market and support all Inntopia products with ten employees located inStowe, Vermont headquarters

FY 2006 (3/31) unaudited revenue and operating income of $728,014 (148%

growth over FY 2005) and $90,650, respectively

General Overview


3/27

Brief History

19982001 2003

1999 2002 2004

xInntopia.com, Inc. spun-offfrom Digital Frontier, a web-design company

xOriginal product wasonlinereservations.com

xInntopia.com, Inc.acquired by

Unexplored, Inc.

xUnexplored formed toexecute a roll-up ofniche travel sites

xUnexplored declaresbankruptcy

xSterling ValleySystems created topurchase assets of

Inntopia

2005

xInntopia 4.0 and InntopiaCRSReleased for DMO marketplace

xSign up North Lake TahoeResort Association as first CRScustomer

xAdd Stowe Area Association

x4 Employees

xInntopia 5.0 and

Inntopia Air releasedxSign up Breckenridge,Crested Butte, Dear Valleyand Bear Mountain

xGrow revenue over100% and achieveprofitability

x9 employees

xResearch andDevelopment

xRebuild of Platform

xResearch andDevelopment

xRebuild of Platform


4/27

4

Trevor Crist - CEO

Co-founder of SVS and Inntopia.com, Inc. which was purchased by Unexplored, Inc.

Led development of current Inntopia system and led sales efforts which have grown SVS revenue by over 267% since

2003 and achieved profitability

Strong product and technology development background dating to 1995

David Borgendale CTO (acting CFO)

Co-founder of SVS; principal architect of Inntopia commission processing functionality

In charge of all IT infrastructure and database administration at Unexplored

At Artec Distributing, helped start a subsidiary that achieved $24 million in revenue by second year of operation

Prior to Artec, was CIO of 160 person IT group at Lieberman Enterprises

Jim Lilly Director of Sales

Former Director ofBusiness Development for Fuse Marketing

At Fuse, was responsible for developing complex marketing strategies and securing contracts with brands such as Pepsi,

Motorola, Eastern Mountain Sports, PRIMEDIA Publications, NBC, Nextel and many others.

Prior to Fuse, was Director of Sales for the Inntopia division of Unexplored, Inc.

Bruce Mainzer Director

Former Sr. VP of Marketing at TravelCLICK, Inc.

Former Sr. VP of Marketing & Sales at Vail Resorts

Senior management positions at Hyatt Hotels, Carnival Cruise Lines and United Airlines

Key Management and Board Members


5/27

5

A Sampling of Our CustomersDMOs

Breckenridge CRS

Stowe Central Reservations

North Lake Tahoe ResortAssoc

Deer Valley Resort

Crested Butte MountainResort

Big Bear Lake Resort Assoc

Hotel Properties

InnSeasons ResortsWintergreen Resort Hotel,

Wintergreen, VA

Stoweflake Resort & Spa,Stowe, VTCarambola Beach Resort,

St. CroixGrand Timber Lodge,

Breckenridge, COMiddlebury Inn,

Middlebury, VT

Deer Ridge Mountain Resort,Gatlinburg, TNDonner Lake Village Resort,

Truckee, CA400 Additional Properties

3rd Party Sites

VirtualTahoe.com

TahoeGuide.com

GoNewport.com

Sundance.org

Vermont.org

65 Additional Sites


6/27

6

The Opportunity

Approximately, 6,500 DMOs located in North America SVS believes 80% or 5,200 are immediate addressable targets Remaining DMOs are either far too small or in urban markets that we will

target in the future

In many CHI Markets, the DMO is the leading provider of informationand increasingly third-party distribution, of lodging and activities SVS believes that less than 20% of DMOS in CHI Markets provide

centralized booking capabilities Most offer only Internet booking capabilities Few have web-sites linked to back-end fulfillment systems

DMOs require not only front-end reservation processing capability, butalso complex back-office functionality

Legacy DMO technology vendors and leading hotel-direct transactionprocessing companies are not adequately serving the market Legacy technology vendors handle back-office complexity, but are

cumbersome and do not adapt well to the Internet Hotel-direct transaction companies provide little back-office functionality


7/27

7

Th t a t Supplier Control Panel Web-based control panel for travel suppliers and

resellers to manage accounts Robust, easy-to-use (i.e., reduced learning

curve) central hub to manage all distributionchannels

Handles complex back-office commissionprocessing and reporting

InntopiaCRS Allows travel resellers to efficiently manage call

center reservations and inventory

Inntopia Booking Engine Allows travel suppliers and resellers to process

Internet reservations Provides for seamless connections between

suppliers and resellers, eliminating extra manualsteps

Inntopia Plus

Connects travel suppliers to the GDSs through aSynxis connection

Inntopia P2P Allows suppliers to cross-sell complementary

products and services

Inntopia Air Module Allows for bundling of air with lodging and

activity packages


8/27

8

The Inntopia Solution ASP delivery for single image product and guest information, and quick

deployment

Flexible data structures provide for sales of a variety of travel products

Lodging, activities, event tickets, ground transportation, equipment rental

Utilizes Galileo Web Services for delivery of bulk and private airfares

Highly-configurable sales rules allow for dynamically priced packaging for callcenter and online users

Most content delivered as XML, transformed by XSLT for delivery to user

Web Services and RSS feeds are available for interfaces with 3rd party systems


9/27

9

The Inntopia Destination Solution

Breckenridge

Products installed Installed Booking Engine in August 2004 Installed CRS, Inntopia Air Module and Inntopia P2P in June 2005

Annual Breckenridge itineraries processed through Inntopia: 4500+

Average value of each itinerary: $1,101

Average net fee to Inntopia Per Itinerary: $18.78

85% of total rooms in Breckenridge currently available through Inntopia Compares to 10% - 20% available through Orbitz and other consumer sites

80% of Inntopia revenue from lodging 11% from air; remainder ground transportation, activities, equipment rentals, travel

insurance and Booking Fees.


10/27

10

Key Inntopia Benefits

CHI DMOs

Significant cost savings due to automation of inventory/rate updates, back-office accounting functions, etc.Ability to efficiently process call center and Internetreservations Seamless integration with suppliers and resellers Increased inventory from suppliers due to improved

selling capability 80% decrease in training times

Constituent Key Benefits

CHI SuppliersAbility to cost-effectively process Internet reservations Seamless connection to DMO and 3rd Party sitesAbility to bundle complementary products and services Single-image rate and availability updates.

CHI 3rd PartySites

Increased inventory from DMO Increased reservations Seamless integration with DMO

ConsumersAbility to view and book centralized inventoryAbility to purchase all destination lodging and activities

Flexible packaging options.


11/27

11

Key Market Growth Drivers

As DMOs adopt leading edge technology such as Inntopia, they will befar more effective at selling existing inventory

As DMOs become more effective resellers, travel suppliers will providemore and higher value inventory We believe on average, DMOs currently account for only 5% of member

supplier distribution Provide high value inventory such as vacation homes, town houses, suites

DMO transactions in Tier 1 and Tier 2 markets will continue to migratefrom call center to the Internet, where transaction fees are 70% higher We believe that 75% of current Tier 1 and Tier 2 addressable DMO

transactions are via call center

With planned technology enhancements, we can pursue urban DMOsby 2007 Approximately 200 DMOs worth an average of $200,000 annually Will be quite deliberate in our approach based on competitive landscape


12/27

12

DMO Market Growth IllustrationStowe Central Reservations Installed December 2004

2004 2005

YoY %Change

January2005

January2006

YoY %Change

Inventory Sold (# roomnights)

10,854 12,563 +16% 1616 1607 -1%

Call Center Transactions 2,424 2,531 +4% 321 225 -30%

Internet Transactions 2,512 3,468 +38% 315 422 +34%

Average Daily Rate $154 $201 +31% $188 $217 +15%

Total Transaction FeeRevenuea

$16,671 $25,236 +51% $3,052 $3,496 +15%b

a. 2004 determined using current Inntopia transaction fees; 2006 transaction fees will increase on contract renewalb. Transaction fee revenue would have grown 36% at occupancy levels equivalent to January 2005

51% Market Growth afterInntopia Introduced

15% Market GrowthEven with 16% lower

occupancy


13/27

13

Competitive Environment

We face competitive threats from legacy DMO technology providersand leading hotel-direct transaction providers

Legacy DMO technology providers

Restech, Rezolution, ResLogic

Not well suited for the Internet

Require significant infrastructure to install and maintain

Hotel-Direct transaction providers

iHotelier/Vantis (TravelCLICK), Synxis (Sabre), Unirez (Pegasus) Lack back-office functionality required by DMOs

Not designed to work with multiple supplier sites

Lack dynamic packaging capabilities


14/27

14

Key Competitive Product AdvantagesInntopia UniRez Rezolution Reslogic iHotelier SynXis

Central reservations center solution X X X

Allows searching across multipleproperties X X X

Allows booking of activities, tours, etc X X X

Integrated air engine X X X

On-site booking engine for hotels X X X X

On-site booking engine for property

management companies X

Standalone booking engine for DMOs X

Agent/customer collaboration tools X

Distributes lodging inventory to GDS/IDS X X X X

Integrated back office accounting

systems X X X Dynamic packaging and pricing engine X X

Net rate payment support X

Integrated payment processing X X X

Commission/payment processing systemand service X


15/27

15

Competitive Advantage Case Study -

InnSeason ResortsInnSeason Resorts recently evaluated SynXis, Secure-Res and Inntopia.Inntopia was selected (despite a significantly higher price tag) basedupon a variety of factors:

Superior packaging and dynamic pricing capabilities, both online and in thecall center

Superior call center capabilities

Integrated AR/AP system.

Fully integrated Air packaging system.

Ease of use.

Outstanding reputation for support.

Full support for a variety of non-lodging products.


16/27

16

Value We Bring a Consumer Internet Site

Current SVS DMOMarket Penetration

# of DMO Clients: 6

Annual Gross Bookings: $45 MM

%age of Total Bookings: 6%

Average Site Commission: 25%

FY2009E SVS DMOMarket Penetration

# of DMO Clients: 137

Annual Gross Bookings: $400 MM

%age of Total Bookings: 7%

Average Site Commission: 25%

$11 MM in AnnualCommission Revenue

$100 MM in AnnualCommission Revenue


17/27

17

Financial Summary

Historical and Projected P&L

$263 $290$720

$2,251

$7,017

$14,659

$(5) $(21) $90 $296

$2,194

$6,131

$(2,000)

$-

$2,000$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009

Revenue Operating Income

FY 2007 reflects adding key senior management hires (EVP of ProductDevelopment and EVP of Sales & Marketing) Over 50% of FY 2007 revenue derived from existing customers


18/27

18

Primary Revenue Driver Assumptions

Projected DMO Adds

Projected transactions and fees by channel

New

MO Accounts FY 2007 FY 2008 FY 2009

Tier 1 3 4 4Tier 2 - Full Service 5 10 10Tier 2 - Internet Only 9 16 16Tier 3 12 24 24

otal 29 54 54

FY 2007 FY2008 FY2009

DMOsTransactions 106,782 348,134 763,370Per Transaction Fee 10.32$ 14.15$ 16.04$

Hotel Web-Direct& 3rdParty Internet

Transactions 45,530 68,295 102,444Per Transaction Fee 9.40$ 9.40$ 9.40$

GDS

Transactoins 11,988 28,242 58,128Per Transaction Fee 6.00$ 6.00$ 6.00$

otal

ransactions 164,

00 444,671 923,942

Per

ransaction Fee 9.75

12.90

14.67


19/27

19

Primary Expense Driver Assumptions

Increases in headcount will drive expense increases

Adding new technology and sales & marketing personnel

Empl y F F 7 F 8 FSenior Management

Sales & Marketing

echnology

A ministration ustomer Su ort

a End T al

v ra during y ar 8


20/27

20

Summary

Proven technology and business model for the DMO marketplace

High-ticket items results in high transaction fees

Dynamic packaging/dynamic pricing system for vacation package sales

Ability to aggregate a large portion of a destinations lodging inventory(80%+, typically)

XML-native system for easy interoperability

Experienced, knowledgeable management team


21/27

21

Appendix


22/27

22

Suppliers Maintain Accounts ThroughInntopia Control Panel or PMS Interface

Breckenridge Central ReservationsInstalled June, 2005


23/27

23

Agents Access Inventory ThroughInntopiaCRS


24/27

24

Agents Can Build Packages Including Air (using GalileoWeb Services), Lift Tickets, Equipment and More


25/27

25

Online Visitors to the DMOs Website Can Build their OwnPackages and Book Using the Inntopia Booking Engine


26/27

26

Suppliers Use the Inntopia BookingEngine on their Own Website


27/27

27

and Use InntopiaPlus for Distribution toTravel Agents and Major Travel Sites

Documents

Price Line Presentation