ISHC Conference - 2010 Mark Lomanno President Smith Travel Research / STR Global

ISHC Conference - 2010

Mark LomannoPresident

Smith Travel Research /

STR Global

Today’s Agenda

• Global Overview

• U.S. Performance

• Chain Scale Performance

• Group/Transient Performance

• Construction Pipeline

• Forecast/Takeaways

Europe2008 2009 8/10-3.6% -6.2% 5.4%

ME & A2008 2009 8/100.7% -10.9% -0.5%

Asia Pacific2008 2009 8/10-7.2% -6.9% 11.6%

USA 2008 2009 8/10-4.6% -8.8% 5.0%

Occupancy % Change – Full Year 2008, 2009, August YTD 2010

Caribbean2008 2009 8/10-3.9% -4.1% 1.3%

2010 STR Global Limited

Positive Occupancy Growth around the Globe . . .

Canada2008 2009 8/10- 2.1% -7.6% 2.9%

Mexico2008 2009 8/10-2.0% -16.1% 10.1%

Europe €2008 2009 8/10-1.4% -11.2% 2.9%

ME & A $2008 2009 8/1016.2% -2.7% 3.6 %

Asia Pacific $2008 2009 8/109.5% -13.5% 10.3%

USA $2008 2009 8/10 2.7% -8.7% -1.0%

Caribbean $2008 2009 8/10-10.2% -13.5% 4.6%

2010 STR Global Limited

ADR Increases everywhere but USA and Mexico . . . .

ADR % Change – Full Year 2008, 2009, August YTD 2010

Canada C$2008 2009 8/103.1% -5.1% 2.4%

Mexico P$2008 2009 8/10

5.2% -0.2% -9.7%

Europe €2008 2009 8/10-4.9% -16.7% 8.4%

ME & A $2008 2009 8/1017.1% -13.3% 3.1%

Asia Pacific $2008 2009 8/101.6% -19.4% 23.1%

USA $2008 2009 8/10 -1.9% -16.7% 4.0%

Caribbean $2008 2009 8/10-14.4% -17.1% 6.0%

2010 STR Global Limited

Global RevPAR Recovers – Primarily Occupancy Driven

RevPAR % Change – Full Year 2008, 2009, August YTD 2010

Canada C$2008 2009 8/100.9% -12.3% 5.3%

Mexico P$2008 2009 8/10 2.9% -16.1% -0.5%

Total United StatesKey Performance Indicators Percent ChangeAugust YTD 2010

Strong Demand Rebound – Supply Slowing

4.3%

2.5%

-4.7%

-6.9%

Total United States: Twelve Month Moving Average 1989 thru August 2010

Total United StatesMonthly Room Demand – Seasonally Adjusted1998 to August 2010

102,307,179

July 2010The Most U.S. Monthly Rooms Sold – EVER!!!

ADR Declines Accelerate In Each Downturn

+0.1%

-4.7%

-8.9%

Total United States: Twelve Month Moving Average 1989 thru August 2010

Total United StatesADR – Seasonally Adjusted1998 to August 2010

$86.59Oct 2000

$86.79Oct 2004

$107.91Sep 2008

41 Months

23 Months

Total United States: ADR Twelve Month Moving Average2000 – August 2010

Absolute ADR Will Not Recover for At Least 2 More Years

-$3.70

-$10.25

Total United StatesOccupancy and ADR Percent ChangeYTD through 9/25

Key 15 U.S. MarketsADR Percent ChangeAugust 2010 YTD

Excludes Las Vegas

Total United StatesRevPAR Percent ChangeTwelve Month Moving Average – 1989 to August 2010

2008 Smith Travel Research, Inc.

-10.5%

- 1.8%

-16.8%

Total United StatesRevPAR – Seasonally Adjusted1998 to August 2010

$55.29Nov 2000

$55.67Mar 2005

U.S. Chain Scales

STR Chain ScalesSelected chains from each segment

• Luxury – Four Seasons, Ritz Carlton, Fairmont

• Upper Upscale – Hyatt, Embassy, Hilton, Marriott, Kimpton

• Upscale – Hyatt Place, Hilton Garden Inn, aloft Hotel

• Mid with F&B – Best Western, Holiday Inn, Ramada, Quality Inn

• Mid no F&B – Hampton Inn, HI Express, Country Inn & Suites

• Economy – Econolodge, Red Roof, Days Inn

U.S. Chain ScalesSupply/Demand Percent ChangeAugust 2010 YTD

Total United StatesRooms Under Construction by Scale – ThousandsAugust 2010

Source: STR / Dodge Construction Pipeline

60% = Upscale & Mid w/o F&B

U.S. Chain ScalesOccupancy/ADR Percent ChangeAugust 2010 YTD

Chain Scale ADR Compression: Threat? Opportunity?

US Chain Scales: Actual ADRPeak vs. August 2010

Upper End Chain Segments Driving Demand Recovery…

U.S. Chain Scales: Demand % Change Monthly thru August 2010

…And ADR Recovery

U.S. Chain Scales: ADR % Change Monthly thru August 2010

Group vs. TransientPerformance

Transient Customer: Third party, rack rate, government rate.

Group Customer: Rooms booked in blocks of 10 or more.

Transient Occupancy is back . . . .

U.S. Upper Tier Hotels – 2010 data through August

Upper Tier = Luxury, Upper Upscale Chains and Upper Tier Independents

Total United States – Transient SegmentRoom Demand Percent ChangeJan 2003 – August 2010

. . . . But Transient ADR is not

U.S. Upper Tier Hotels – 2010 data through August

Upper Tier = Luxury, Upper Upscale Chains and Upper Tier Independents

Group Occupancy Below Peak 2007 Levels . . . .

U.S. Upper Tier Hotels – 2010 data through August

Upper Tier = Luxury, Upper Upscale Chains and Upper Tier Independents

Total United States – Group SegmentRoom Demand Percent ChangeJan 2003 – August 2010

. . . And Group ADR Below Depressed 2009 Levels

U.S. Upper Tier Hotels – 2010 data through August

Upper Tier = Luxury, Upper Upscale Chains and Upper Tier Independents

US Transient vs. GroupMonthly ADR ($) - Jan 2003 – August 2010

Low Transient Rate will hold Group Rate Hostage

18 Months

25 Months

* Total US, Transient & Group ADR, 12 MMA, Jan ’03 – July ’10

Group Rates Lag Transient Rates by 1 to 2 Years

Pipeline

Phase August 2010 August 2009 Difference % Change

In Construction 58,609 130,471 -71,862 -55.1%

Final Planning 64,317 70,811 -6,494 -9.2%

Planning 237,580 274,239 -36,659 -13.4%

Active Pipeline 360,506 475,521 -115,015 -24.2%

Pre-Planning 96,147 114,986 -18,839 -16.4%

Total 456,653 590,507 -133,854 -22.7%

U.S. Active Development Pipeline - RoomsChange From Last Year

Active Pipeline is Emptying

Total United StatesMarkets with Most Rooms In-ConstructionAugust 2010

Market Rooms % of Existing Supply

New York 7,412 7.8%

Houston 2,053 2.9

Dallas 1,759 2.3

Washington, DC 1,445 1.4

Atlanta 1,395 1.5

Miami-Hialeah 1,354 2.9

Orlando 1,283 1.1

Key 15 U.S. MarketsAbsolute OccupancyAugust 2010 YTD

Excludes Las Vegas

Key 15 U.S. MarketsAbsolute ADRAugust 2010 YTD

Excludes Las Vegas

U.S. Industry Outlook

U.S. Economic OutlookBlue Chip Economic Indicators – September 2010

2009 2010F 2011F

Real GDP -2.6% +2.7% +2.5 %

CPI -0.4% +1.6 % +1.5%

Corporate Profits -3.8% +30.0% +6.4 %

Disp Personal Income +0.6% +1.4% +2.1%

Unemployment Rate 9.3% 9.6% 9.3%

Total United StatesKey Performance Indicators Percent ChangeFull Year 2009 Actual & 2010 / 2011 Forecast

Total United StatesOccupancy Percent2004 – 2011P

Total United States Average Daily Rate 2004 – 2011P

If year 2000 ADR had increased by CPI each year…

Total US Room RatesActual vs. Inflation Adjusted2000 – 2011F

Note: 2010 & 2011 inflation rate forecast from Blue Chip Economic Indicators

Total United States – Recession Demand % Change12 MMA Demand ChangeFrom Start of Recession, by Month

Total United States – Recession ADR % Change 12 MMA ADR ($) ChangeFrom Start of Recession, by Month

Total United States – Recession Revenue % Change 12 MMA Revenue ChangeFrom Start of Recession, by Month

Total United StatesChain Scale Key Performance Indicator Outlook 2010F by Chain Scale

2010 Year End Outlook

Chain Scale

Occupancy(% chg)

ADR (% chg) RevPAR (%chg)

Luxury 8.1 1.3 9.4

Upper Upscale 6.7 0.2 7.3

Upscale 6.3 0.5 6.8

Midscale w/ F&B 3.0 -0.3 2.7

Midscale w/o F&B 4.4 0.0 4.4

Economy 3.4 -3.2 0.2

Independent 4.0 0.8 4.9

Total United StatesChain Scale Key Performance Indicator Outlook 2011F by Chain Scale

2011 Year End Outlook

Chain Scale

Occupancy(% chg)

ADR (% chg) RevPAR (%chg)

Luxury 0.4 6.7 7.1

Upper Upscale 1.6 5.4 7.0

Upscale 2.1 4.4 6.5

Midscale w/ F&B -1.0 2.5 1.5

Midscale w/o F&B 1.8 4.0 5.8

Economy 1.3 2.3 3.6

Independent 2.4 3.7 6.1

Takeaways

• Value is King

• Performance trough likely past

• Supply growth slowing

• Demand improving

• Pricing conditions improving unevenly

• Second Half 2010 improvement – into 2011

• Performance reset – dig out of the hole

Thank you.

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