2015 Austin Hotel Trends Austin Hotel & Lodging Association

October 2, 2015

The Austin Story

• Occupancies and Rates at All Time High

• New Supply is Over Due

• Supply On the Way – Too Much of a Good Thing?

• Demand Growth is Strong – 2nd Qtr 2015 Up

• New Induced Convention Demand

• Occupancies and Rates Will Normalize

• Austin Will Continue to be Austin!!!

I. The Economy

II. Lodging Forecasts – U.S.

III. Lodging Forecasts - Texas

IV. Austin Submarkets

Presentation Outline

Factors Affecting Economic Forecasts

• Collapse in Energy & Other Commody Prices

• Chinese Economic Slowdown

• Value of U.S. Dollar

• U.S. Monetary Policy Normalization

• Iran Nuclear Deal

United States: Economic Outlook

Source: Moody’s Analytics, July 2015

Employment

Personal Income

GDP

CPI (Inflation)

2014 1.9% 2.6% 2.4% 1.6%

2015 2.2% 4.2% 2.4% 0.4%

2016 2.2% 3.8% 3.0% 2.7%

2017 2.2% 4.1% 2.9% 2.8%

2018 1.6% 3.4% 2.7% 2.8%

2019 0.9% 2.0% 2.2% 2.6%

Austin: Economic Outlook

Employment

Personal Income

GMP

CPI (Inflation)

2014 4.2% 4.3% 6.2% 1.9%

2015 2.6% 4.8% 2.5% 0.5%

2016 2.4% 3.1% 3.5% 2.6%

2017 3.1% 4.6% 4.6% 2.8%

2018 3.2% 5.6% 5.0% 2.8%

2019 2.4% 4.1% 4.3% 2.7%

Source: Moody’s Analytics, July 2015

June 2015

Source: Texas Work Force Commission

United States 6.3% 5.5%

Texas 5.5% 4.4%

Austin 4.4% 3.3%

Dallas/Fort Worth 5.4% 4.0%

Houston 5.4% 4.5%

San Antonio 5.1% 3.8%

June 2014

* Not seasonally adjusted

Unemployment Comparison*

Influence of Texas Oil Factor

Recovery of the Oil & Gas Industry

• Oil Prices Remain Low Through 2016

• Oil Markets Begin Rebalance in Mid-2016

• Drilling Returns in Early 2017

• Industry Rebounds in 2018 & 2019

I. The Economy

II. Lodging Forecast – U.S.

III. Lodging Forecast - Texas

IV. Austin Submarkets

Presentation Outline

Hotel Horizons®

• Econometric Forecasting Model − Smith Travel Research – historical lodging data,

pipeline data

− Moody’s Economy.com – economic forecasts

• Five-Year Forecasts of Supply, Demand, Occupancy, ADR, RevPAR − 59 Major U.S. Markets

• Updated Quarterly

United States: 2nd Quarter 2015

= Below/Above Long Run Average

Long Term

Average 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F

Supply 1.9% 0.4% 0.4% 0.6% 0.8% 1.1% 1.8% 2.3% 2.5% 2.7%

Demand 2.0% 4.7% 2.7% 2.0% 4.3% 3.3% 2.2% 1.6% 1.4% 0.8%

Occupancy 62.0% 60.0% 61.4% 62.2% 64.4% 65.8% 66.1% 65.6% 64.9% 63.7%

ADR 3.0% 3.8% 4.2% 3.8% 4.5% 5.0% 5.9% 6.3% 5.3% 3.4%

RevPAR 3.2% 8.1% 6.6% 5.2% 8.2% 7.2% 6.3% 5.5% 4.1% 1.5%

Source: PKF Hospitality Research – Hotel Horizons® Report (2nd Quarter 2015), Smith Travel Research

New Hotel Additions – 2015 - 2017

• New York MSA – 22,000 to 25,000

• Houston MSA – 8,000 to 10,000

• Austin MSA – 6,000 to 8,000

- Outlying Markets – 1,500 to 2,000

U.S. Hotel Markets - Supply

0.1% 0.3%

0.3%

0.7%

0.9%

1.8%

6.2%

7.4%

7.9%

8.4%

8.4%

0% 5% 10%

Tucson

Oakland

Hartford

Sacramento

Norfolk-VA…

National Average

Cleveland

New York

Houston

Austin

Pittsburgh

Greatest and Least Change in Supply Forecast Change 2015 to 2016

Source: PKF Hospitality Research, a CBRE Company, October 2015 Hotel Horizons® reports

U.S. Hotel Markets - Demand

Greatest and Least Change in Demand Forecast Change 2015 to 2016

Source: PKF Hospitality Research, a CBRE Company, October 2015 Hotel Horizons® reports

0.5% 0.7% 0.7%

1.0% 1.0%

2.2% 4.7%

5.3% 5.6%

6.3%

6.4%

0% 4% 8%

San FranciscoNew Orleans

HartfordSan Diego

SacramentoNational…

SavannahAustin

New YorkPittsburghCleveland

U.S. Hotel Markets - Occupancy

Greatest and Least Change in Occupancy Forecast Change 2015 to 2016

Source: PKF Hospitality Research, a CBRE Company, October 2015 Hotel Horizons® reports

-5.6%

-2.8%

-2.8%

-2.0%

-1.7%

0.4%

1.5%

1.7%

1.9%

2.2%

2.5%

-8% -4% 0% 4%

Houston

Austin

Miami

Pittsburgh

Albany/New York

National Average

Oakland

Norfolk-VA Beach

Columbia

Richmond

Tucson

I. The Economy

II. Lodging Forecast – U.S.

III. Lodging Forecast – Texas

IV. Austin Submarkets

Presentation Outline

56.7% 60.6%

63.6% 66.2% 68.6% 69.0% 67.5%

Occupancy

$89.47 $91.75 $94.11 $99.25 $103.67 $107.00 $110.00

$50.69 $55.63 $59.81

$65.65 $71.13 $73.99 $74.41 ADR

RevPAR

2010 2011 2012 2013 2014 2015F 2016F

250,312 254,399 257,474 259,228 261,475 268,234 281,918

Supply

Texas Summary

Dallas: 2nd Quarter 2015

= Below/Above Long Run Average

Long Term

Average 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F

Supply 2.4% 0.8% 1.4% 0.3% 0.2% 1.6% 4.3% 5.0% 4.1% 3.7%

Demand 3.5% 9.1% 4.7% 5.5% 5.8% 5.1% 3.6% 3.3% 3.1% 2.5%

Occupancy 61.0% 59.1% 61.1% 64.3% 67.8% 70.2% 69.7% 68.6% 67.9% 67.1%

ADR 2.2% 3.4% 1.1% 5.0% 3.4% 5.4% 5.5% 4.3% 3.7% 2.9%

RevPAR 3.4% 11.9% 4.5% 10.5% 9.1% 9.0% 4.7% 2.6% 2.7% 1.7%

Source: PKF Hospitality Research – Hotel Horizons® Report (2nd Quarter 2015), Smith Travel Research

Fort Worth: 2nd Quarter 2015

= Below/Above Long Run Average

Long Term

Average 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F

Supply 3.0% 1.3% 1.1% 0.4% 1.6% 0.5% 1.8% 3.6% 3.5% 3.6%

Demand 3.6% 7.1% 2.8% 4.0% 4.5% 4.1% 3.1% 3.3% 2.6% 2.2%

Occupancy 61.0% 59.4% 60.4% 62.6% 64.4% 66.7% 67.6% 67.3% 66.8% 65.8%

ADR 3.2% 1.1% -1.3% 1.2% 3.3% 3.6% 4.1% 3.4% 3.4% 3.0%

RevPAR 3.9% 6.9% 0.4% 4.8% 6.4% 7.3% 5.4% 3.1% 2.5% 1.5%

Source: PKF Hospitality Research – Hotel Horizons® Report (2nd Quarter 2015), Smith Travel Research

Houston: 2nd Quarter 2015

= Below/Above Long Run Average

Long Term

Average 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F

Supply 2.5% 1.9% 0.9% 0.6% 1.3% 2.8% 7.9% 4.9% 3.2% 2.1%

Demand 4.0% 10.9% 10.3% 6.3% 5.1% -1.8% 1.8% 2.9% 6.5% 4.8%

Occupancy 62.2% 60.0% 65.6% 69.3% 71.9% 68.7% 64.9% 63.6% 65.6% 67.4%

ADR 3.1% 2.5% 3.9% 7.8% 5.9% 1.0% -2.1% 1.4% 3.1% 4.2%

RevPAR 4.8% 11.6% 13.6% 13.9% 9.9% -3.5% -7.6% -0.5% 6.4% 6.9%

Source: PKF Hospitality Research – Hotel Horizons® Report (2nd Quarter 2015), Smith Travel Research

San Antonio: 2nd Quarter 2015

Source: PKF Hospitality Research – Hotel Horizons® Report (2nd Quarter 2015), Smith Travel Research

= Below/Above Long Run Average

Long Term

Average 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F

Supply 3.2% 2.5% 1.4% 0.3% 0.5% 0.2% 2.5% 3.0% 3.1% 3.1%

Demand 3.6% 7.2% 5.3% -0.5% 3.4% 2.5% 2.1% 2.3% 2.7% 2.0%

Occupancy 65.0% 61.2% 63.5% 63.0% 64.8% 66.3% 66.0% 65.5% 65.2% 64.6%

ADR 3.0% 0.1% 1.4% 4.6% 2.4% 3.1% 3.1% 2.7% 2.5% 1.7%

RevPAR 3.5% 4.7% 5.3% 3.8% 5.4% 5.5% 2.7% 1.9% 2.1% 0.7%

.

Austin – Local Demand Factors

• Continued IT Expansions - Apple – 3,600 jobs – American

Operations Center

- HID Global - 200 jobs - New Plant & Headquarters

- Websense – 500 jobs – Relocate Headquarters from California

- Relocations from California

• Residential Housing Boom

• Airport Expansion

• Healthcare – UT Dell Medical School

• Festivals / Events - SXSW

- Austin City Limits

- Many Others

• Convention Activity - JW Marriott – NOW OPEN

• Convention Center Capacity

• Hotel Additions – Labor

• Reduced Compression

• Government – Decrease in Oil Tax Revenues

Austin: 2nd Quarter 2015

= Below/Above Long Run Average

Long Term

Average 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F

Supply 3.2% 2.4 0.7% 2.8% 2.2% 7.6% 8.4% 5.9% 3.6% 2.4%

Demand 4.3% 6.9% 3.2% 7.4% 3.6% 6.7% 5.3% 4.5% 2.9% 2.5%

Occupancy 66.5% 66.7% 68.3% 71.4% 72.4% 71.8% 69.8% 68.8% 68.4% 68.4%

ADR 4.1% 5.9% 7.7% 5.4% 6.6% 5.9% 4.6% 3.5% 2.2% 2.3%

RevPAR 5.4% 10.5% 10.4% 10.2% 8.0% 5.1% 1.7% 2.1% 1.5% 2.3%

Source: PKF Hospitality Research – Hotel Horizons® Report (2nd Quarter 2015), Smith Travel Research

Austin: Upper-Priced

= Below/Above Long Run Average

Long Term

Average 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F

Supply 4.1% 2.8% 0.2% 2.0% 2.5% 12.7% 11.8% 9.4% 4.3% 2.0%

Demand 5.4% 6.8% 2.6% 5.1% 3.5% 9.5% 7.4% 6.5% 3.2% 3.1%

Occupancy 70.4% 72.6% 74.3% 76.5% 77.3% 75.1% 72.1% 70.2% 69.5% 70.2%

ADR 4.3% 6.4% 8.2% 6.2% 6.3% 5.6% 4.3% 3.0% 2.1% 2.1%

RevPAR 5.7% 10.5% 10.8% 9.3% 7.3% 2.6% 0.3% 0.3% 1.0% 3.3%

Source: PKF Hospitality Research – Hotel Horizons® Report (2nd Quarter 2015), Smith Travel Research

Austin: Lower-Priced

Source: PKF Hospitality Research – Hotel Horizons® Report (2nd Quarter 2015), Smith Travel Research

= Below/Above Long Run Average

Long Term

Average 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F

Supply 2.7% 2.0% 1.1% 3.3% 2.0% 3.6% 5.7% 2.9% 2.9% 2.9%

Demand 3.7% 6.9% 3.7% 9.5% 3.7% 4.3% 3.4% 2.7% 2.5% 2.0%

Occupancy 64.0% 62.2% 63.8% 67.6% 68.7% 69.2% 67.7% 67.5% 67.3% 66.7%

ADR 3.4% 5.0% 7.3% 6.1% 7.2% 3.9% 3.2% 2.4% 2.2% 1.9%

RevPAR 4.6% 10.1% 10.1% 12.5% 9.0% 4.6% 1.0% 2.1% 1.8% 1.0%

I. The Economy

II. Lodging Forecast – U.S.

III. Lodging Forecast - Texas

IV. Austin Submarkets

Presentation Outline

Submarket – Supply / Demand Analysis

• Majority of New Supply in CBD

• Large Increase in Outlying Markets

• Compression Will Return to CBD

• Compression Will Reduce CBD Supply Impact

• Induced Convention Activity Will Reduce Impact

• Reduced Compression Will Impact Other Markets

• Each Market & Each Hotel Affected Differently

33

Submarket Comparison – YTD 2015

1st Qtr % Pt 2nd Qtr % Pt 1st Qtr % 2nd Qtr %2015 Change 2015 Change 2015 Change 2015 Change

Austin CBD 81.1% 1.3 84.0% 2.3 $236 8.9% $210 8.0%

North Austin 72.5% 3.8 77.6% 4.7 $94 6.4% $90 8.6%

Round Rock/Georgetown 67.6% -0.9 74.9% 1.7 $93 4.9% $93 5.0%

Northwest Austin 77.6% 2.3 81.2% 1.9 $122 2.5% $118 5.3%

South Austin / San Marcos 69.3% 2.2 76.2% 3.3 $124 3.7% $125 4.1%

Source: PKF Consulting, STR

Occupancy ADR

Austin Summary

63.9% 66.7% 68.3%

71.4% 72.4% 71.5% 70.0% Occupancy

$99.07 $104.88

$112.98 $119.04

$126.86 $134.50

$140.50

$63.25 $69.89

$77.14 $85.01

$91.86 $96.98 $98.48

ADR

RevPAR

2010 2011 2012 2013 2014 2015F 2016F

28,714 29,392 29,602 30,419 31,097 33,693 36,213

Supply

Austin CBD

74.5% 77.0% 77.7% 78.4% 79.3% 78.5% 77.0%

Occupancy

$146.18 $158.56

$173.58 $188.39

$203.78 $210.00 $220.00

$108.90 $122.09

$134.87 $147.70

$161.60 $164.85 $169.40

ADR

RevPAR

2010 2011 2012 2013 2014 2015F 2016F

6,038 6,266 6,319 6,667 6,726

8,577 9,042

Supply

North Austin

57.6% 59.9%

63.2% 68.0% 69.5% 69.0% 68.0% Occupancy

$68.38 $73.10

$76.50 $78.98 $83.52 $86.50

$91.00

$39.39 $43.79

$48.35 $53.71

$58.05 $59.69 $61.88

ADR

RevPAR

2010 2011 2012 2013 2014 2015F 2016F

6,812 6,806 6,823 6,835 7,019 7,019 7,420

Supply

Round Rock / Georgetown

59.1% 58.5% 59.4% 65.3% 67.8% 66.5% 65.0%

Occupancy

$75.08 $77.39 $81.55 $82.79

$87.69 $90.00 $95.00

$44.37 $45.27 $48.44 $54.06

$59.45 $59.85 $61.75

ADR

RevPAR

2010 2011 2012 2013 2014 2015F 2016F

3,026 3,301 3,419 3,503 3,503 3,653

4,036

Supply

Northwest Austin

68.6% 72.2% 73.9%

77.6% 75.1% 74.0% 72.0%

Occupancy

$86.72 $89.61 $97.03

$103.16 $112.52 $116.00

$121.00

$59.49 $64.70

$71.71 $80.05

$84.50 $85.84 $87.12

ADR

RevPAR

2010 2011 2012 2013 2014 2015F 2016F

4,791 4,921 4,930 4,963 5,202 5,371 5,804

Supply

South Austin / San Marcos

60.1% 64.3% 65.6% 67.6%

69.7% 68.5% 66.5%

Occupancy

$97.37 $100.50 $109.45 $113.34

$118.51 $121.50 $124.50

$58.52 $64.62

$71.80 $76.62 $82.60 $83.23 $82.79

ADR

RevPAR

2010 2011 2012 2013 2014 2015F 2016F

8,047 8,098 8,111 8,451 8,647 9,073 9,911

Supply

For a Copy of This Presentation Please Visit

www.austinlodging.org or

Contact: Randy McCaslin Email: Randy.McCaslin@pkfc.com

713.621.5252 Ext. 21