Sterling Valley Systems, Inc.

Company Overview
May 2006
 General Overview
 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 3 rd party Internet sites

 Develop, market and support all Inntopia products with ten employees located in
Stowe, Vermont headquarters

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

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

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 Brief History
Inntopia.com, Inc. spun-off
Unexplored declares
from Digital Frontier, a web-
bankruptcy
design company
Sterling Valley
Original product was
Systems created to
onlinereservations.com
purchase assets of
Inntopia
Inntopia 5.0 and Inntopia
Air released
Sign up Breckenridge,
Crested Butte, Dear Valley
and Bear Mountain
Grow revenue over
100% and achieve
Research and
profitability
Development
9 employees
Rebuild of Platform

1998 2001 2003 2005

1999 2002 2004

Inntopia.com, Inc.
acquired by
Unexplored, Inc.
Unexplored formed to
execute a roll-up of
niche travel sites
Research and Development
Rebuild of Platform
Inntopia 4.0 and InntopiaCRS
Released for DMO marketplace
Sign up North Lake Tahoe
Resort Association as first CRS
customer
Add Stowe Area Association
4 Employees
 Key Management and Board Members
 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 of Business 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

4
 A Sampling of Our Customers
DMOs Hotel Properties 3rd Party Sites
InnSeasons Resorts
Breckenridge CRS Wintergreen Resort Hotel, VirtualTahoe.com
Wintergreen, VA
Stowe Central Reservations Stoweflake Resort & Spa, TahoeGuide.com
North Lake Tahoe Resort Stowe, VT GoNewport.com
Assoc Carambola Beach Resort,
Sundance.org
St. Croix
Deer Valley Resort Grand Timber Lodge, Vermont.org
Crested Butte Mountain Breckenridge, CO 65 Additional Sites
Resort Middlebury Inn,
Big Bear Lake Resort Assoc Middlebury, VT
Deer Ridge Mountain Resort,
Gatlinburg, TN
Donner Lake Village Resort,
Truckee, CA
400 Additional Properties

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 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 information

and 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, but

also complex back-office functionality

 Legacy DMO technology vendors and leading hotel-direct transaction

processing 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
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 The Inntopia Solution
DMO Call Centers Supplier Control Panel
 Web-based control panel for travel suppliers and
` `
` resellers to manage accounts
` GDS/IDS
 Robust, easy-to-use (i.e., reduced learning
`
curve) central hub to manage all distribution
` channels
InntopiaCRS
 Handles complex back-office commission
Legacy CRS SynXis processing and reporting
Web Services InntopiaPlus InntopiaCRS
 Allows travel resellers to efficiently manage call
` center reservations and inventory
Legacy PMS Inntopia `
Inntopia Booking Engine
InntopiaPMS ResHub Booking
Engine  Allows travel suppliers and resellers to process
`
` Internet reservations
Consumers  Provides for seamless connections between
Property Management
` suppliers and resellers, eliminating extra manual
Companies
`
Inntopia
Control Panel
InntopiaAir steps
Inntopia Plus
 Connects travel suppliers to the GDSs through a
Synxis connection
` InntopiaP2P
` Inntopia P2P
`  Allows suppliers to cross-sell complementary
Lodging, Activity, Transportation and Galileo products and services
Event Suppliers
`
Inntopia Air Module
`  Allows for bundling of air with lodging and
Airlines
activity packages

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 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 call
center 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

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 The Inntopia Destination Solution
Breckenridge
 Products installed
 Installed Booking Engine in August 2004
 Installed CRS, Inntopia Air Module and Inntopia P 2P 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.
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 Key Inntopia Benefits
Constituent Key Benefits
• Significant cost savings due to automation of inventory/
rate updates, back-office accounting functions, etc.
CHI DMOs • Ability to efficiently process call center and Internet
reservations
• Seamless integration with suppliers and resellers
• Increased inventory from suppliers due to improved
selling capability
• 80% decrease in training times

• Ability to cost-effectively process Internet reservations

CHI Suppliers • Seamless connection to DMO and 3rd Party sites
• Ability to bundle complementary products and services
• Single-image rate and availability updates.

CHI 3rd Party • Increased inventory from DMO

• Increased reservations
Sites
• Seamless integration with DMO

• Ability to view and book centralized inventory

Consumers • Ability to purchase all destination lodging and activities
• Flexible packaging options. 10
 Key Market Growth Drivers
 As DMOs adopt leading edge technology such as Inntopia, they will be
far more effective at selling existing inventory

 As DMOs become more effective resellers, travel suppliers will provide

more 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 migrate

from 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 DMOs

by 2007
 Approximately 200 DMOs worth an average of $200,000 annually
 Will be quite deliberate in our approach based on competitive landscape

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 DMO Market Growth Illustration
Stowe Central Reservations – Installed December 2004

YoY % January January YoY %

2004 2005 Change 2005 2006 Change
Inventory Sold (# room 10,854 12,563 +16% 1616 1607 -1%
nights)
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 Fee $16,671 $25,236 +51% $3,052 $3,496 +15%b

Revenuea

51% Market Growth after 15% Market Growth

Inntopia Introduced Even with 16% lower
occupancy
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a. 2004 determined using current Inntopia transaction fees; 2006 transaction fees will increase on contract renewal
b. Transaction fee revenue would have grown 36% at occupancy levels equivalent to January 2005
 Competitive Environment
 We face competitive threats from legacy DMO technology providers
and 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

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 Key Competitive Product Advantages
  Inntopia UniRez Rezolution Reslogic iHotelier SynXis
Central reservations center solution X   X X    
Allows searching across multiple
properties 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 system
and service X          
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 Competitive Advantage Case Study -
InnSeason Resorts
InnSeason Resorts recently evaluated SynXis, Secure-Res and Inntopia.
Inntopia was selected (despite a significantly higher price tag) based
upon a variety of factors:

 Superior packaging and dynamic pricing capabilities, both online and in the
call 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.

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 Value We Bring a Consumer Internet Site
Current SVS DMO FY2009E SVS DMO
Market Penetration Market Penetration

 # of DMO Clients: 6  # of DMO Clients: 137

 Annual Gross Bookings: $45 MM  Annual Gross Bookings: $400 MM

 %age of Total Bookings: 6%  %age of Total Bookings: 7%

 Average Site Commission: 25%  Average Site Commission: 25%

$11 MM in Annual $100 MM in Annual

Commission Revenue Commission Revenue 16
 Financial Summary
• FY 2007 reflects adding key senior management hires (EVP of Product
Development and EVP of Sales & Marketing)
• Over 50% of FY 2007 revenue derived from existing customers

Historical and Projected P&L

$16,000 $14,659
$14,000
$12,000
$10,000
$8,000 $7,017
$6,131
$6,000
$4,000
$2,251 $2,194
$2,000 $720
$263 $(5) $290$(21) $90 $296
$-
$(2,000) FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009

Revenue Operating Income

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 Primary Revenue Driver Assumptions
 Projected DMO Adds
New DMO Accounts FY 2007 FY 2008 FY 2009
Tier 1 3 4 4
Tier 2 - Full Service 5 10 10
Tier 2 - Internet Only 9 16 16
Tier 3 12 24 24
Total 29 54 54

 Projected transactions and fees by channel

FY 2007 FY2008 FY2009
DMOs
Transactions 106,782 348,134 763,370
Per Transaction Fee $ 10.32 $ 14.15 $ 16.04
Hotel Web-Direct & 3rd Party Internet
Transactions 45,530 68,295 102,444
Per Transaction Fee $ 9.40 $ 9.40 $ 9.40
GDS
Transactoins 11,988 28,242 58,128
Per Transaction Fee $ 6.00 $ 6.00 $ 6.00
Total
Transactions 164,300 444,671 923,942
Per Transaction Fee $ 9.75 $ 12.90 $ 14.67 18
 Primary Expense Driver Assumptions

 Increases in headcount will drive expense increases

 Adding new technology and sales & marketing personnel

Employees FY 2006 FY 2007 FY 2008 FY 2009

Senior Management 2 3 4 6
Sales & Marketing 1 3 9 9
Technology 2 8 14 21
Administration/Customer Support 5 9 18 24
Year End Total 10 23 45 60
Average during the year 9 20 39 58

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 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 destination’s lodging inventory

(80%+, typically)

 XML-native system for easy interoperability

 Experienced, knowledgeable management team

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Appendix

21
 Suppliers Maintain Accounts Through
Inntopia Control Panel or PMS Interface
Breckenridge Central Reservations
Installed June, 2005

22
Agents Access Inventory Through
InntopiaCRS

23
 Agents Can Build Packages Including Air (using
Galileo Web Services), Lift Tickets, Equipment and
More

24
Online Visitors to the DMO’s Website Can Build their Own
Packages and Book Using the Inntopia Booking Engine

25
Suppliers Use the Inntopia Booking
Engine on their Own Website

26
…and Use InntopiaPlus for Distribution to
Travel Agents and Major Travel Sites

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