The Hotel Industry Outlook − U.S. Hotel Transactions Suzanne R. Mellen, MAI, CRE, FRICS, ISHC Senior Managing Director Hotel and Casino Consulting & Valuation HVS San Francisco, Las Vegas, Los Angeles 415-268-0351 smellen@hvs.com

Historical Sales (Total Assets >$2.5M)

Source: Real Capital Analytics (RCA)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

$60,000

$80,000

$100,000

$120,000

$140,000

2005 2006 2007 2008 2009 2010 2011 2012 2013*

$ in

Bill

ions

Pric

e Pe

r Key

Sales Volume Price Per Key

*2013 statistics are preliminary. 2

Historical Sales Volume (Assets >$10M)

Source: Real Capital Analytics (RCA)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

$100,000

$130,000

$160,000

$190,000

$220,000

2005 2006 2007 2008 2009 2010 2011 2012 2013*

$ in

Bill

ions

Pric

e Pe

r Key

Sales Volume Price Per Key

*2013 statistics are preliminary. 3

Historical Sales (Assets $2.5-10M)

Source: Real Capital Analytics (RCA)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

$30,000

$35,000

$40,000

$45,000

$50,000

$55,000

2005 2006 2007 2008 2009 2010 2011 2012 2013*

$ in

Bill

ions

Pric

e Pe

r Key

Sales Volume Price Per Key

*2013 statistics are preliminary. 4

Comparison of $ Sales Volumes

0 5

10 15 20 25 30 35

2005 2006 2007 2008 2009 2010 2011 2012 2013*

$ in

Bill

ions

>$10M $2.5-10M

*2013 statistics are preliminary.

Source: Real Capital Analytics (RCA)

+44.6%

+32.7%

5

Comparison of # Properties Sold

*December statistics are preliminary.

Source: Real Capital Analytics (RCA)

891 1,018 886 587

235 315 531 681

893

622 726

739

278

73 229

425 380

467

0

500

1,000

1,500

2,000

2005 2006 2007 2008 2009 2010 2011 2012 2013*

>$10M $2.5-10M

+22.9%

+31.1%

6

MM Hotel Outperforming in 2013

Source: Real Capital Analytics (RCA)/Moody’s

RCA US CPPI

7

2013 Sales by Total Price Paid: $10M+

7% 7%

13%

18%

56%

Count Volume

28%

20% 20%

14%

19% > $200M 100 to 200M 50 to 100M 25 to 50M 10 to 25M

33 35

55

83

261

Source: Real Capital Analytics (RCA) 8

Sales By Price Per Room: $10M+

Source: HVS and Real Capital Analytics (RCA)

120 122

163 207

45 61 38

46 11

20 3

11

0 50

100 150 200 250 300 350 400 450 500

2012 2013

# of

Pro

pert

ies

$750k+ $500-750k $300-500k $200-300k $100-200k <$100k

9

Park Lane Hotel Manhattan (605 rooms) Buyer: The Witkoff Group/Jynwel Capital Seller: Helmsley Charitable Trust Interest: Fee Simple Price: $660,000,000 Price/Room: $1,090,909

Three Sales > $1 Million Per Key

Langham Place Fifth Avenue Manhattan (214 rooms) Buyer: Pacific Eagle Holdings Seller: Bizzi & Partners Dev. Interest: Fee Simple, Leased Fee Price: $229,000,000 Price/Room: $1,070,093

Calistoga Ranch Napa Valley, California (50 rooms) Buyer: Auberge Partners Calistoga Seller: Olympus Real Estate Partners, LLC Interest: Leasehold Price: $55,000,000 Price/Room: $1,100,000

10

Three Sales > $500M Purchase Price

Grand Wailea Resort & Spa Maui, HI (780 rooms) Price: $774,000,000 Price/Room: $992,308

Hyatt Regency Orlando Convention Center Orlando, FL (1,641 rooms) Price: $717,000,000 Price/Room: $436,929

Park Lane Hotel Manhattan (605 rooms) Price: $660,000,000 Price/Room: $1,090,909

11

Omni Enters Resort Market in Big Way

Rancho Las Palmas Palm Springs, CA (444 rooms) Price: $103,011,710 Price/Room: $232,008

Homestead Resort Hot Springs, VA (483 rooms) Price: $102,593,396 Price/Room: $212,409

Grove Park Inn Resort & Spa Asheville, NC (512 rooms) Price: $128,594,739 Price/Room: $251,162

La Costa Resort & Spa San Diego, CA (532 rooms) Price: $365,800,000 Price/Room: $598,691

12

GIC Singapore Enters Resort Market

Grand Wailea Resort & Spa Maui, HI (780 rooms) Price: $774,000,000 Price/Room: $992,308

Biltmore Resort & Spa Phoenix, AZ (740 rooms) Price: $321,394,785 Price/Room: $434,317

La Quinta Resort & Spa Palm Springs, CA (796 rooms) Price: $281,770,770 Price/Room: $353,983

13

Top 10 Active Markets by $ Volume

Source: Real Capital Analytics (RCA)

Market $ Volume (Millions) $/Room # Properties

NYC Metro $2,528.4 $336,765 25

Hawaii $1,803.5 351,354 12

San Francisco Metro $1,326.8 280,268 32

Miami Metro $1,125.1 195,223 51

Orlando $996.3 129,693 31

Los Angeles $955.5 129,347 41

Houston $782.0 117,880 44

San Diego $765.0 265,340 22

Chicago (tie) $620.6 114,035 30

Atlanta (tie) $620.6 83,244 40

Boston $597.2 198,404 13

14

Top 10 Active Markets by Properties Sold

Source: Real Capital Analytics (RCA)

Market $ Volume (Millions) $/Room # Properties

Dallas / Fort Worth $545.0 67,198 59

Miami Metro $1,125.1 195,223 51

Houston $782.0 117,880 44

LA $955.5 129,347 41

Atlanta $620.6 83,244 40

SF Metro $1,326.8 280,268 32

Orlando $996.3 129,693 31

Chicago $620.6 114,035 30

Phoenix $514.8 115,374 26

NYC Metro $2,528.4 336,765 25

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Hotel Buyer Composition

Source: Real Capital Analytics (RCA)

Q3

16

Top 25 Buyers/Sellers by $ Volume

Source: Real Capital Analytics (RCA) 17

Hotel Lender Composition – Past 5 Years

Source: Real Capital Analytics (RCA) 18

Comparative CRE Cap Rates - PWC

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

Regional Mall

CBD Office

Suburban Office

Apartment

Full-Service Lodging

Limited-Service Lodging Luxury Lodging

Select Service Lodging

Source: PriceWaterhouseCoopers Real Estate Investor Survey 19

Hotel Cap Rates Steady

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

Full-Service Lodging

Limited-Service Lodging Luxury Lodging

Select Service Lodging

Source: PriceWaterhouseCoopers Real Estate Investor Survey 20

Hotel Cap Rates Steady

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

Full-Service Lodging

Limited-Service Lodging Luxury Lodging

Select Service Lodging

Source: PriceWaterhouseCoopers Real Estate Investor Survey 21

Derived Cap Rates Steady

6.1

7.7

9.5

5.8

7.4

9.3

6.2 7.4

9.2

0 1 2 3 4 5 6 7 8 9

10

Full Service SS & ES Ltd. Service

Full Service 2012 Ltd. Service

Source: Derived from hotel s appraised by HVS at time of sale

2011 2012 2013

22

Comparative Rates of Return - 2013

6.2 7.3

10.6

17.4

7.4 8.5

11.1

18.2

9.2 10.3

12.7

20.1

0.0

2.5

5.0

7.5

10.0

12.5

15.0

17.5

20.0

22.5

Historical NOI 1st Year NOI Discount Rate Equity IRR

Full Service

SS & ES

Ltd. Service

Source: Derived from hotel s appraised by HVS at time of sale 23

Cap Ex Impacts Cap Rates and Values

Source: ISHC CapEx 2000 and STR

0

40,000

80,000

120,000

160,000

200,000

0% 2% 4% 6% 8%

10% 12% 14% 16% 18%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Years

Range # of Rooms

24

Cap Ex Impacts Cap Rates and

Source: ISHC CapEx 2000 and STR

0

40,000

80,000

120,000

160,000

200,000

0% 2% 4% 6% 8%

10% 12% 14% 16% 18%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Years

Range # of Rooms +5 Years

25

Cap Ex Impacts Cap Rates and Values

Source: ISHC CapEx 2000 and STR

0

40,000

80,000

120,000

160,000

200,000

0% 2% 4% 6% 8%

10% 12% 14% 16% 18%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Years

Range # of Rooms +10 Years

26

OUTLOOK FOR 2014 • Ideal conditions for another strong transaction year – activity

expected to equal or exceed that of 2013

• Debt ceiling fight in spring unlikely to derail markets, but a risk • Wide array of buyers will continue to pursue hotel investments • More sellers will come to the table as sales prices near peak pricing • Availability of debt will continue, with lender competition putting

pressure on interest rates and loan-to-value ratios • Interest rates expected to rise only moderately – no major concern • Capitalization rates expected to remain steady despite rise in NOI due

to availability of capital and buyer competition for quality assets 27

Thank You!

• Please Contact Me With Any Questions – 415-268-0351 – smellen@hvs.com

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Suzanne R. Mellen, MAI, CRE, FRICS, ISHC

Suzanne R. Mellen is the Senior Managing Director of HVS Consulting & Valuation and HVS Gaming Services, and is responsible for operation of the firm’s San Francisco, Los Angeles and Las Vegas offices. HVS is a full-service consulting and valuation firm specializing in hotel, gaming, and hospitality properties worldwide. HVS offices under her leadership are renowned for excellence and integrity. Ms. Mellen has appraised thousands of hotels, gaming assets, and related real estate over the past 36 years. She has authored numerous articles and is a frequent lecturer and expert witness on the valuation of hotels, casinos, and related issues.

Ms. Mellen has a B.S. degree in Hotel Administration from Cornell University and holds the following designations: MAI (Appraisal Institute), CRE (Counselor of Real Estate), FRICS (Fellow of the Royal Institution of Chartered Surveyors), and ISHC (International Society of Hospitality Consultants). Suzanne Mellen’s professional experience includes consulting and appraisal positions with HVS New York, Morgan Guaranty Trust, Laventhol & Horwath, and Helmsley-Spear Hospitality Services, Inc. in New York City and Harley-Little Associates in Toronto, Canada.

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