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Hotel Industry Overview

Vail R. Brown

Vice President, Global Strategy & Marketing vail@str.com

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www.hotelnewsnow.com Click on “Hotel Data Presentations”

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Agenda: 21 June 2012

Total U.S. Review

Seattle Market Overview

Key Destinations

2012 / 2013 Forecast

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30,000 Foot View… Current Hotel Performance

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Total United States: Estimated Total Revenue and Profitability, In Billions Years 2001 – 2011

103.5 102.6 105.3 113.7

122.7

133.4 139.4 140.6

127.2 127.7

137.5

16.2 14.2 12.8 16.7

22.6 26.6 28.0 25.8

16.0 18.0 21.6

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Revenue Profit

Profits are on the rise!

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Highest Demand - EVER

(430 Million Rooms Sold)

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Supply / Demand Imbalance Drives Results. Pricing Back?

% Change

• Room Supply* 727 mm 0.3%

• Room Demand* 430 mm 3.5%

• Occupancy 59.1% 3.1%

• ADR $104.52 4.2%

• RevPAR $61.80 7.5%

• Room Revenue* $44.9 bn 7.8%

Total U.S. Results: YTD May 2012 * All Time High

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-10

-5

0

5

10

1990 2000 2010

Demand ADR

ADR Rebound Trajectory Bodes Well for 2012

-6.9%

-4.7%

-0.9%

-4.6%

-0.2%

-8.7%

Total U.S.: ADR & Demand % Change, 12 MMA 1990 – May 2012

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2000 2002 2004 2006 2008 2010 2012F

Nominal ADR

2000 / 2007 Grown by CPI

2000 ADR Grown By CPI

Total U.S.: ADR $ and Inflation Adjusted ADR $, 2000 – 2013F 2000 – 2010 CPI from bls.gov, 2011 – 2013 CPI from Blue Chip Economic Indicators

$85

$101

$104

$85

$107 $109

$107

$117

2013F

Inflation Adjusted ADRs Well Out Of Reach

2007 ADR Grown By CPI

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Seattle Hotel Overview

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%Change

• Hotels 335

• Rooms 40,615

• STR Sample 89%

• Occupancy 64.6% 3.7%

• ADR $113.77 4.9%

• RevPAR $73.51 8.8%

• Room Revenue $450.7mm 8.9%

Seattle Market: Key Performance Indicators

YTD May 2012

2nd Phase of Recovery: ADR contributing more to RevPAR growth.

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-12

-8

-4

0

4

8

12

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Supply % Change Demand % Change 8.4%

-9.3% -8.3%

Seattle Market: Supply & Demand % Change Twelve Month Moving Average 2002 through May 2012

Supply / Demand Imbalance = Pricing Back?

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-15

-10

-5

0

5

10

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2002 2004 2006 2008 2010 2012

OCC % Change ADR % Change

ADR growth finally outpacing OCC.

4.8%

4.9%

Seattle Market: OCC & ADR % Change Twelve Month Moving Average 2002 through May 2012

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$90

$110

$130

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

50 Months

42 Months

Seattle Market: Actual ADR Twelve Month Moving Average Jan. 2001 – May 2012

Absolute ADR may not recover for at least another 2 Years

-$6.31

-$17.87

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Seattle Customer Segments

• Group – Rooms booked in blocks of 10 or more.

• Transient – Third party, rack rate, government rate. Will include single business traveler and leisure traveler

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Seattle Market: Monthly Transient Room Demand 2007, 2010, 2011 & May 2012

200

400

600

800

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2007 2010 2011 2012

Tho

usa

nd

s Transient Rooms Sold Out Pacing Prior Years

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… Transient ADR Still Lags 2007 Results

$100

$110

$120

$130

$140

$150

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2007 2010 2011 2012

Seattle Market: Monthly Transient ADR 2007, 2010, 2011 & May 2012 ADR

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4.0

1.1

2.7

1.1

3.3

6.7

5.7

7.0

4.9

3.0

5.6

1.5

2.3

4.8

5.9 5.7

7.5

Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12

Seattle Market: Transient ADR % by Month Jan. 2011 – May 2012

Transient ADR Growth To Continue

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Seattle Market: Monthly Group Room Demand 2007, 2010, 2011 & May 2012

50

100

150

200

250

300

350

400

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2007 2010 2011 2012

Tho

usa

nd

s Group Demand is pacing strong…but

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$100

$110

$120

$130

$140

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2007 2010 2011 2012

Seattle Market: Monthly Group ADR 2007, 2010, 2011 & May 2012

… Group ADRs Still Depressed (& Could Dampen Future Absolute ADRs)

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4.1

5.2

6.6

0.1

1.4

7.9

4.0

0.4

2.2

-4.0

4.0

2.8

6.3

3.5

-2.5

3.2 3.4

Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12

Seattle Market: Group ADR % by Month Jan. 2011 – May 2012

Group ADR Comps Getting Harder

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Seattle Chain Segments

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• Luxury – Fairmont, Four Seasons, Ritz Carlton, JW Marriott

• Upper Upscale – Sheraton, Embassy Suites, Hyatt, Marriott

• Upscale – Radisson, Hilton Garden Inn, Residence Inn, Springhill Suites, Homewood Suites, Courtyard

• Upper Midscale – Fairfield Inn/Suites, Holiday Inn, Clarion, Hampton Inn/Suites, Best Western Premier/PLUS

• Midscale – Country Inn & Suites, Best Western, Candlewood Suites, Quality Inn/Suites

• Economy – Extended Stay America, Red Roof, Days Inn, Microtel

2012 STR Chain Scales Selected chains from each segment

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2nd Stage Of Recovery - ADR % OCC %

9.6

3.7

4.8

3.6

5.2

-0.4

4.3

5.4

4.0

2.9 2.5

5.3

Luxury Upper Upscale Upscale Upper Midscale Midscale Economy

Occupancy ADR

Seattle Market Chain Segments: OCC / ADR % Change Year To Date May2012

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Upper End Sells 7 out of 10 Rooms Every Night

73.2 72.4

75.1

70.6 69.5

68.5 70.6

71.8 72.1

59.6 59.3

55.8

Luxury Upper Upscale Upscale Upper Midscale Midscale Economy

2007 YTD 5/2012

Seattle Market Chain Segments: Absolute OCC % Year To Date May 2012 vs. 2007

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ADR Growth Is Strong – But Not Strong Enough (...yet)

$223

$171

$132

$109 $97

$67

$182

$152

$121

$101

$84

$57

Luxury Upper Upscale Upscale Upper Midscale Midscale Economy

2007 YTD 5/2012

Seattle Market Chain Segments: Absolute ADR $ Year To Date May 2012 vs. 2007

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Destinations of Interest

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Key Markets - Room Demand % Change YTD Ending May 2012

1.4

1.5

1.8

2.3

3.5

3.8

4.1

4.5

4.9

5.2

Vancouver Downtown

Bellevue-Eastside

San Francisco/San Mateo, CA

Denver, CO

Anaheim, CA

Seattle, WA

Portland, OR

San Diego, CA

King County, WA

Salt Lake City-Ogden, UT

YTD: Salt Lake City experiencing strong demand growth

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Key Markets – Occupancy % Year To Date May 2012

62.0

62.1

64.6

65.1

65.8

68.3

68.4

68.8

71.1

75.4

Portland, OR

Denver, CO

Seattle, WA

Salt Lake City-Ogden, UT

King County, WA

San Diego, CA

Vancouver Downtown

Bellevue-Eastside

Anaheim, CA

San Francisco/San Mateo, CA

2.8%

2.1%

3.5%

1.5%

4.4%

4.7%

3.9%

3.7%

San Francisco strongest OCC % but King Cty leads in OCC growth.

1.1%

4.2%

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Key Markets – Actual ADR Year To Date May 2012

$91.96

$94.38

$97.26

$113.77

$116.28

$117.62

$125.99

$156.37

$159.96

$160.98

Salt Lake City-Ogden, UT

Portland, OR

Denver, CO

Seattle, WA

Anaheim, CA

King County, WA

San Diego, CA

Vancouver Downtown

San Francisco/San Mateo, CA

Bellevue-Eastside

3.9%

4.3%

4.9%

3.4%

4.8%

San Francisco/San Mateo strong driving rate growth.

4.2%

10.1%

-3.6%

4.2%

4.6%

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2012/2013 Outlook

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Seattle Market: Hotel Development Pipeline As of May 2012

Phase Projects Project Rooms

In Construction 1 223

Final Planning 6 769

Planning 13 1,742

Active Pipeline 20 2,734

Pre-Planning 5 526

Total 25 3,260

Active Project Rooms = around 5% of existing Supply

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0% to 5% 5% to 10% 10% to 15%

Anaheim-Santa Ana, Boston Miami-Hialeah

Atlanta Chicago

Dallas Detroit

Denver Houston

Los Angeles-Long Beach Minneapolis-St Paul

New York Nashville

Norfolk-Virginia Beach New Orleans

Orlando San Diego

Philadelphia San Francisco/San Mateo

Phoenix Seattle

Washington, DC St Louis

Tampa-St Petersburg

2012 Year End RevPAR Forecast

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2013 Year End RevPAR Forecast

-5% to 0% 0% to 5% 5% to 10%

New York Anaheim-Santa Ana Atlanta

Orlando Denver Boston

Minneapolis-St Paul Chicago

New Orleans Dallas

Norfolk-Virginia Beach Detroit

Oahu Island Houston

Philadelphia Los Angeles-Long Beach

Phoenix Miami-Hialeah

San Francisco/San Mateo Nashville

Washington, DC San Diego

Seattle

St Louis

Tampa-St Petersburg

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Rooms Pipeline Still Not An Issue in 2012…

Phase April 2012 April 2011 Dec 2007

In Construction 61 50 211

“Planned Pipeline” 231 272 204

Active Pipeline 292 322 415

Total U.S. Pipeline, in ‘000s of rooms, by Phase by Year Planned Pipeline includes projects in Final Planning and Planning phases Source: STR / McGraw-Hill Construction Dodge

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Rooms (‘000s) With Open Dates

Reported Date 1 Year

Out 2 Years

Out 3 Years

Out 4+ Years

Out Dec-09 124 130 5 140 Dec-10 75 94 4 142 Dec-11 70 91 34 111

Developers Are Looking Three Years Out

Source: STR / McGraw-Hill Construction Dodge

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Total U.S.: Forecast 2012 / 2013

2012 Forecast

2013 Forecast

Supply 0.5% 1.1%

Demand 2.0% 1.8%

Occupancy 1.5% 0.7%

ADR 4.0% 4.6%

RevPAR 5.5% 5.4%

Key Performance Indicator % Change

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2012 Scale Forecast For Chain Scales

Chain Scale Occupancy

(% chg) ADR

(% chg) RevPAR (%chg)

Luxury +2.6% +5.1% +7.9%

Upper Upscale +1.5% +4.2% +5.7%

Upscale +2.3% +4.6% +7.1%

Upper Midscale +1.4% +4.0% +5.5%

Midscale +2.8% +1.4% +4.3%

Economy +1.4% +3.1% +4.5%

Independent +0.5% +3.5% +4.0%

Total United States 1.5% 4.0% 5.5%

Key Performance Indicator Forecast, by Scale, 2012

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Takeaways

Improving economy – 2H 2012 stronger?

Low supply growth - most markets

Demand growth, but slower

Climb out continues

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Thank you!

www.hotelnewsnow.com Click on “Hotel Data Presentations”