CY ‘01 IOC/CHI Market Basket Pricing Comparison

CHI Pricing can be truly competitive!

• Rocky Pintozzi’s Comfort Suites IL415• Billy Wellons’ Sleep Inn NC252• Reg Poteat’s Comfort Suites NC246• Hasu Patel’s Comfort Inn TX269• Gene Ammons Jr.’s Sleep Inn NC839• Ed Lynn’s Quality Inn OK102• Himesh Kana’s Comfort Inn OK108

CY ‘01 IOC/CHI Market Basket Pricing Comparison Participant

Properties

CY ‘01 IOC/CHI Market Basket Pricing Comparison

• IOC developed and approved a list of 40 generic items which comprised the “market basket.”

• The DoPS then visited IOC Member Properties to complete the pricing comparison, comparing standard EDOV and ChoiceBuys.com pricing vs. property invoiced pricing based on a common product specification. The meeting was held face-to-face with the owner and/or general manger as requested by each owner in advance.

• On average the pricing on ChoiceBuys.com was at least 10% lower than prices paid by the participating hotels.

• Savings were as high as 25% in some instances.

• Savings generated were based on a unit count of one (1).

• The average 80 room property would see substantially increased savings on ChoiceBuys.com based on multiple items and quantities purchased.

• Based on the results, the average hotel should be able to realize $10,000-$15,000 in savings annually for guest room supplies, continental breakfast, administrative supplies and maintenance items.

CY ‘01 IOC/CHI Market Basket Pricing Comparison

ProductUnit of Measure Hotel's Price

ChoiceBuys.com Price Savings

White Bath Towels one dozen $36.10 $33.44 $2.66Ice Machine one dozen $3,071.00 $2,882.00 $189.00HP Printer Toner each $111.00 $39.97 $71.03Key Cards per 1000 $108.00 $80.00 $28.00AAA Batteries pkg of 24 $9.60 $6.48 $3.12Sunbeam Iron each $20.99 $17.00 $3.99Sunbeam Hair Dryer each $24.99 $16.50 $8.49100% Orange Juice 4/96 oz. $70.13 $61.43 $8.70

CY ‘01 IOC/CHI Market Basket - Partial Results

CY ‘02 Andersen Buyer Value Analysis & Pricing Study

# Properties Owned # Market Density # Brand #

Large management co. 10 Large market 7 EL 10Multi-property system 16 Mid-size market 20 SL 7Single property 14 Small market 13 CI 10

Region # Time in System # CS 1

Northeast 8 New 00-02 8 CL 5Southeast 12 Mid 95-00 15 QI 6Midwest 12 Old < 95 17 QS 1

West 8

A viable cross-section of properties were queried

2002 Andersen Study - Segmentation of Participants

CY ‘02 Andersen Study - Buyer Value Analysis Findings

• There is a negative perception by licensees of the program largely due to the fact that Choice receives rebates from vendors. Rebate structures hinder the perception of lowest price.

• 78% of BVA respondents believe they get better prices on their own.

• There is a general perception that the Endorsed Vendor Program (EVP) is only ChoiceBuys.com

• There is a general perception that the EVP is a vendor program, not a licensee program.

CY ‘02 Andersen Study - Buyer Value Analysis Findings

OperatingSupplies

Linens SmallWares

Food &Beverage

FF&E

OrderFrequency

Monthly(46%)

Monthly(31%)

As needed(46%)

2-4 months(25%)

Weekly(55%)

As needed(26%)5 years(26%)

5-7 months(26%)

Time SpentComparingPrices perOrder

Never(41%)

16-30 min.(24%)

Never(48%)

Never(40%)

1 hour(26%)

Never(82%)

>40 hours(38%)

3-4 hours(38%)

PurchasingCriteriaMentioned

1) Price 1) Price2) Quality3) Service

1) Price2) Service3) Delivery

1) Price2) Service

1) Price

• There is a significant gap between program perception and actual pricing results.

• Endorsed Vendor Program (EVP) offered lower prices for 26 of the 33 market basket items (79%)

• In comparing each licensee’s total basket of goods to the same basket purchased through the EVP, 87.5% of study participants would have saved money using the EVP. For those who saved money on the items they purchased in the market basket, average savings would have been approximately $114.

• In every segmentation criteria, licensees could have saved money on the majority of items in their entire market basket through the EVP & ChoiceBuys.com

CY ‘02 Andersen Study - Buyer Value Analysis Findings

• Operating Supplies: the EVP offers lower prices for 10 of the 14 (71%) items in the market basket

• Linens: the EVP offers lower prices for 4 out of 4 (100%) linen items in the market basket

• Small Wares: the EVP offers lower prices in 5 of the 7 (71%) items in the market basket.

• FF&E: the EVP offers lower prices for 7 of the 8 (87.5%) items in the basket

CY ‘02 Andersen Study - Pricing Analysis Findings

Price Comparison with the EVP by SizeTotal

SampleLarge

Mgmt Co.Multi-

PropertySole

ProprietorEVP Items Lower 26 25 24 22EVP Items Higher 7 8 8 11Total 33 33 32 33

Notes:Large Management Company - 6+ propertiesMulti - properties - 2-5 properties

CY ‘02 Andersen Study - Pricing Analysis Findings (Continued)

Percentage of Participants Purchasing through Endorsed Vendors

Market Basket Items

Percentage of Respondents Who Purchased Through

Endorsed VendorsOperating Supplies: Room Supplies 82% Key Cards 70% Copy Paper 57% Uniforms 27% Other Supplies 66%Linens 65%Small Wares 72%Food & Beverage 32%FF&E: Ice machines 14% Televisions 38% Soft FF&E 65%