BRUCE BALTIN THE ROAD AHEAD …. a DIP? or a BLIP? · Source: CBRE Hotels’ Trends in the Hotel Industry National Market with reproduction and ... NOT HOTEL. SEARCHING FOR GROWTH

THE ROAD AHEAD ….a DIP? or a BLIP?

BRUCE BALTINCBRE HOTELS ADVISORY

2 CBRE HOTELS | 2019 OUTLOOKSource: CBRE Hotels’ Trends in the Hotel Industry National Market with reproduction and use of information subject to CBRE Limited Disclaimer|Terms of Use as detailed at http://www.cbre.ca/EN/services/valuationservices/hotels/Pages/hotels-vas-disclaimer.aspx

• The Economy• Too Much New Supply?• The ADR Conundrum• Our Forecasts• Conference Center Update

Agenda

THE ROAD AHEAD …. A DIP OR A BLIP?


- The Economic Outlook Remains Favorable Well Into 2020.

- U.S. Hotels Remain Fundamentally Sound.

- Look for a “Blip” in Performance in 2021.

- Conference Venues Will Feel it First.

TODAY’S MESSAGE:


WHAT COULD END THE CURRENT CYCLE?

4. Oil/Energy Price Increases5. Asset Price Bubble

1. The Economy 2. Over Building 3. Unpredictable Demand Shock

THE ECONOMY


-2.7%

2.0%

-1.9%

-8.2%

-5.4%

-0.5%

1.3%

3.9%1.7%

3.9%

2.7%2.5%

-1.5%

2.9%

0.8%

4.6%

2.7%1.9%

0.5%0.1%

2.8%

0.8%

3.1%

4.0%

-0.9%

4.6%5.2%

2.0%

3.3%

3.3%

1.0%0.4%

1.5%2.3%

1.9%

1.8%

1.8%

3.1%2.8%

2.3%2.2%

4.2%

3.4%

2.6%2.4%3.0%

2.0%

1.3%

0.5%0.3%

1.0%1.6%

-10

-8

-6

-4

-2

0

2

4

6

8

10

I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

(GOVERNMENT) Government consumption expenditures and gross investment

TRADE (Net exports of goods and services)

BUSINESS (Gross private domestic investment)

CONSUMERS (Personal consumption expenditures)

Lodging Demand

CBRE HOTELS’ LODGING INSIGHTSOUTLOOK ON MOST IMPORTANT HOTEL DRIVERS REMAINS FAVORABLE

Source: STR, Moody’s, BEA, CBRE Hotels Americas Research, Q4 2018

TOO MUCH NEW SUPPLY?


WHAT COULD END THE CURRENT CYCLE?

4. Oil/Energy Price Increases5. Asset Price Bubble

1. The Economy 2. Over Building 3. Unpredictable Demand Shock


NEW ROOMS ADDED

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,00019

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

1020

1120

1220

1320

1420

1520

1620

1720

1820

19

Source: STR, CBRE Hotels’ Americas Research, Jan. 2019.

12 MMA of New Hotel Room Added in the U.S.

Well Below Previous Peaks

Do We Have a Problem?


PIPELINEROOMS UNDER CONSTRUCTION

120,000

140,000

160,000

180,000

200,000

220,000

240,000

260,000

2015 2016 2017 2018 2019

InconstructionSource: STR, Q1 2019


PIPELINEROOMS IN FINAL PLANNING & UNDER CONSTRUCTION

120,000

140,000

160,000

180,000

200,000

220,000

240,000

260,000

2015 2016 2017 2018 2019

Inconstruction Final PlanningSource: STR, Q1 2019


PIPELINEROOMS IN PLANNING, FINAL PLANNING & UNDER CONSTRUCTION

120,000

140,000

160,000

180,000

200,000

220,000

240,000

260,000

2015 2016 2017 2018 2019

Inconstruction Final Planning PlanningSource: STR, Q1 2019


0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

160.0%

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12

2017 2018

B&B HOTEL NOT HOTEL

SEARCHING FOR GROWTH – AIRBNB IS NOW ALLOWING HOTEL LISTINGS

Y-O-Y Growth in Units on Airbnb

Source: CBRE Hotels’ Americas Research, Airdna, Q1 2019.Note: Based on self-classification by host on Airbnb.com (Excludes B&B properties)

AirBNB


Year Hotel Rooms Hotel^ Airbnb Units Airbnb^ Airbnb+Hotels Airbnb+Hotels^

2012 4,848,884 0.3% 13,000 150% 4,848,885 0.5%

2013 4,873,095 0.5% 28,000 115% 4,873,095 0.8%

2014 4,902,655 0.6% 58,000 107% 4,902,655 1.2%

2015 4,947,954 0.9% 115,235 99% 5,063,189 2.1%

2016 5,017,721 1.4% 223,710 98% 5,241,431 3.5%

2017 5,103,984 1.7% 342,865 53% 5,446,848 3.9%

2018 5,205,425 2.0% 469,425 37% 5,674,851 4.2%

Previous Peak @ 3.1% Q1 2009

AIRBNB & HOTEL SUPPLY IN THE US

Average Daily Active Airbnb & Hotel Supply in U.S.

Source: CBRE Hotels’ Americas Research, Airdna, Google Trends, STR, Q1 2019.

THE ADR CONUNDRUM


Gap

54

56

58

60

62

64

66

68

(20)

(15)

(10)

(5)

0

5

10

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

Occupancy (%)Y-o-Y % Change

STR HISTORY OF U.S. HOTEL FINANCIAL PERFORMANCE

1989 – 2018 Y-o-Y Percent Change in ADR/Occ/RevPAR & Occupancy Level

Notes: Previous historical peak occupancy 66.2% (2018 Q2), Current occupancy 66.1% (2018 Q4) Sources: CBRE Hotels' Americas Research, STR Q4 2018

Contribution from ∆RADR Contribution from ∆Occupancy

∆RRevPAR

OCC (4-Qtr Moving Average)

Area of Interest


54

56

58

60

62

64

66

68

-11.0

-9.0

-7.0

-5.0

-3.0

-1.0

1.0

3.0

5.0

7.0

9.0

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

Occupancy (%)Y-o-Y % Change

Real ADR (∆RADR) ∆Occupancy

Additional Contribution from Modeled ∆RADR ∆RRevPAR

2015 Q2

MODELED ADR - IF HISTORY WAS REPEATED?!

1994 – 2018 Y-o-Y Percent Change in Real ADR/Occ/RevPAR with Occupancy Levels

Notes: Previous historical peak occupancy 66% (2017 Q4), Current occupancy 66.1% (2018 Q1) Sources: CBRE Hotels' Americas Research, STR Q4 2018.


New York, NYSan Francisco/San Mateo,

CAMiami/Hialeah, FLAustin, TXAnaheim/Santa Ana, CACharlotte, NC-SCDenver, COOahu Island, HIPittsburgh, PABoston, MAHouston, TXFort Lauderdale, FLNashville, TNNew Orleans, LAPortland, OROakland, CAFort Worth/Arlington, TXSan Diego, CASeattle, WA

San Jose/Santa Cruz, CACharleston, SCWest Palm Beach/Boca Raton, FLTampa/St Petersburg, FLNewark, NJDallas, TXChicago, ILLos Angeles/Long Beach, CAWashington, DC-MD-VAAlbany/Schenectady, NYBaltimore, MDLouisville, KY-INRaleigh/Durham/Chapel Hill, NCAtlanta, GAPhiladelphia, PA-NJLong IslandSavannah, GASt Louis, MO-IL

Columbus, OHCincinnati, OH-KY-INPhoenix, AZDetroit, MIJacksonville, FLMinneapolis/St Paul, MN-WIMilwaukee, WISan Antonio, TXOrlando, FLCleveland, OHColumbia, SCOmaha, NESalt Lake City/Ogden, UTMemphis, TN-AR-MSSacramento, CAKansas City, MO-KSRichmond/Petersburg, VAHartford, CTIndianapolis, INDayton/Springfield, OHTucson, AZAlbuquerque, NMNorfolk/Virginia Beach, VA

CITIES WITH THE DISEASE AND THOSE WITHOUT (TOTAL = 60)WITH (37) WITHOUT (23)


CBRE HOTELS’ LODGING INSIGHTSAN ONGOING QUESTION: HIGH OCCUPANCIES/WEAK ADR GROWTH

- New Supply- Traditional Hotels- Sharing Economy

- Intermediaries Capturing an Increasing Share- Uncertainty


When you are uncertain about something, what do you typically do?

ANOTHER QUESTION:

Delay, Postpone or Nothing if you can!


CBRE HOTELS’ LODGING INSIGHTSPOLICY UNCERTAINTY INDEX –

0

50

100

150

200

250

300Pre 2008 Post 2008

BalanceBudget Act Black

Monday

1st Gulf War

Russian Crisis/LTCM

9/112nd Gulf

War Large Interest

Rate Cuts

Lehman& TARP

Banking Crisis

Debt CeilingDispute; Euro Debt

FiscalCliff Gov’t

Shutdown Gov’tShutdown

Brexit

TrumpElection

Source: PolicyUncertainty.com

DOES ELEVATED UNCERTAINTY IMPACT ADR?


CBRE HOTELS’ LODGING INSIGHTSYES!

Using our Econometric Models, we can estimate the impact of Policy Uncertainty:

• Negative Impact on both Demand & ADR (Largest Impact on ADR)• Price Elasticity of 0.02 in our national model

While additional research is required, these preliminary observations suggest that these elevated levels of uncertainty since 2008, which can mostly be attributed to actions in Washington D.C., may have caused annual ADR growth to be 0.5% lower than would have been the case if more normal levels of uncertainty were present, holding everything else constant.

Seems to be more of an issue for Upper-Upscale and Luxury hotels.

OUR FORECASTS


2022F1.7%

2.5%

65.1%

0.6%

1.4%

CBRE HOTELS’ LODGING INSIGHTSHOTELS TO PEAK IN MID-2020 – SLOWDOWN WILL BE A MILD ONE

2022F1.7%

2.5%

65.1%

0.6%

1.4%

Long Run Average 2017 2018 2019F 2020F 2021FSupply 1.8% 1.7% 2.0% 1.9% 1.8% 1.8%

Demand 2.0% 2.5% 2.5% 1.9% 1.2% -0.1%

Occupancy 62.3% 65.9% 66.2% 66.2% 65.8% 64.6%

ADR 3.0% 2.2% 2.4% 2.6% 2.6% 1.3%

RevPAR 3.3% 2.9% 2.9% 2.5% 2.0% -0.6%

Source: STR, CBRE Hotels’ Americas Research, Hotel Horizons® Q4 2018

A Blip!


2022F2.4%

2.5%

71.9%

1.4%

1.4%

U.S. TOP 25 MARKETS – ALL HOTELSAN EVEN MILDER SLOWDOWN IN THE LARGER MARKETS

2022F1.7%

2.5%

65.1%

0.6%

1.4%

Long Run Average 2017 2018 2019F 2020F 2021FSupply 1.8% 2.4% 2.7% 3.3% 3.1% 2.5%

Demand 2.2% 2.9% 2.5% 3.0% 2.6% 0.9%

Occupancy 67.3% 73.7% 73.6% 73.4% 73.0% 71.9%

ADR 3.1% 1.7% 2.7% 2.4% 2.5% 1.6%

RevPAR 3.5% 2.2% 2.5% 2.2% 2.0% 0.1%Source: STR, CBRE Hotels’ Americas Research, Hotel Horizons® Q4 2018

A Smaller Blip!


-30%-20%-10%

0%10%20%30%40%50%60%70%

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Markets in Expansion Markets in ContractionMarkets in Recovery

REAL REVPAR CHANGE FROM PRE-RECESSION PEAK

Not All Markets Have Fully Recovered From the Last Recession

Source: STR, CBRE Hotels’ Americas Research, Hotel Horizons® Q4 2018

As of Q4 2018 As of Q4 2020


CBRE HOTELS’ LODGING INSIGHTSU.S. LODGING INDUSTRY: CHAIN-SCALE FORECAST – REVPAR CHANGE

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

2017 2018 2019F 2020F 2021F 2022F

All Hotels Luxury Upper-Upscale Upscale Upper-Midsacle Midscale EconomySource: STR, CBRE Hotels’ Americas Research, Hotel Horizons® Q4 2018


Summary Thoughts• The U.S. lodging industry has been operating at peak levels for the past three years

– 2018 played out somewhat better than expected.• Accelerated supply growth in recent years has been readily absorbed in most

markets because of the expanding economy. This has; however, contributed to weaker than normal ADR growth.

• Despite rising salary and wage rates and slowing revenue growth, operators have controlled costs sufficiently to achieve increases in profit margins. GOP margins are at their highest levels since the 1960s.

• While the fundamentals remain attractive across the vast majority of markets, elevated uncertainty (among other factors) has impaired management’s ADR pricing power. This has also contributed to weaker-than-expected NOI growth.

• Watch for a Blip, and not a Dip!

THE ROAD AHEAD …. A DIP OR A BLIP?

MARK WOODWORTHSenior Managing Director+ 1 404 809 3969

[email protected]

CBRE © 2019 All Rights Reserved. All information included in this proposal pertaining to CBRE—including but not limited to its operations, employees, technology and clients—are proprietary and confidential, and are supplied with the understanding that they will be held in confidence andnot disclosed to third parties without the prior written consent of CBRE. This proposal is intended solely as a preliminary expression of general intentions and is to be used for discussion purposes only. The parties intend that neither shall have any contractual obligations to the other withrespect to the matters referred herein unless and until a definitive agreement has been fully executed and delivered by the parties. The parties agree that this proposal is not intended to create any agreement or obligation by either party to negotiate a definitive lease/purchase and saleagreement and imposes no duty whatsoever on either party to continue negotiations, including without limitation any obligation to negotiate in good faith or in any way other than at arm’s length. Prior to delivery of a definitive executed agreement, and without any liability to the other party,either party may (1) propose different terms from those summarized herein, (2) enter into negotiations with other parties and/or (3) unilaterally terminate all negotiations with the other party hereto.

The information contained in this document has been obtained from sources believed reliable. While CBRE, Inc. does not doubt its accuracy, CBRE, Inc. has not verified it and makes no guarantee, warranty or representation about it. It is your responsibility to independently confirm itsaccuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the property. The value of this transaction to you depends on tax and other factors which should be evaluated by your tax,financial and legal advisors. You and your advisors should conduct a careful, independent investigation of the property to determine to your satisfaction the suitability of the property for your needs.

CBRE HOTELSThe World’s Leading Hotel Experts.

Q & A APRIL 11, 2019


DISCLAIMER

All information contained in this document as well as in CBRE Limited (“CBRE”) publications, or otherwise provided by CBRE isdesigned as a reference and a management tool for the internal use of companies and agencies involved in the travel and tourism industry. Reproduction and quotation in documents and matters relating to provision of third party consulting advice,business planning, solicitation of public funds, debt and equity financing, litigation, property tax or other legal and financial matters is NOT PERMITTED without the written permission of CBRE. Quotation and reproduction of this material is permitted otherwise ONLY if credited to CBRE and referencing our disclaimer as follows: Source: CBRE Limited with reproduction and use of information subject to CBRE Limited Disclaimer / Terms of Use as detailed at http://www.cbre.ca/EN/services/valuationservices/hotels/Pages/hotels-vas-disclaimer.aspxUsers of this information are advised that CBRE Limited does not represent the information contained herein to be definitive or all-inclusive. CBRE Limited believes the information to be reliable, but is not responsible for errors or omissions.

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Documents

BRUCE BALTIN THE ROAD AHEAD …. a DIP? or a BLIP? · Source: CBRE Hotels’ Trends in the Hotel Industry National Market with reproduction and ... NOT HOTEL. SEARCHING FOR GROWTH