Meet The Money 2010

Prepared by: Jack Westergom Managing Director Manhattan Hospitality Advisors

INDUSTRY FUNDAMENTALS

Apparently the Economy has survived and so will the hospitality industry! 2009 was the worst year in hospitality history. Bling is out! Value is in! Risk is bad! Signs of economic improvement are on the horizon. Renewed activity in the manufacturing sector. Stability in the housing market. Unemployment remains high and will for some time. GDP increases at higher than anticipated levels.2

INDUSTRY FUNDAMENTALS

Hotel debt markets have not improved. Terms are not favorable for transactions. B-note & mezzanine debt purchases are preferred methods to eventually own distressed assets. Cap rate consensus while still difficult is emerging. Identifying Fulcrum Position the position necessary to gain control of an asset at foreclosure is difficult.3

INDUSTRY FUNDAMENTALS

At bottom of operating cyclelooking up. Occupancy levels have stabilized and leading indicators point to growth. Group demand has not buoyed operating results in this downturn. Transient is outperforming group business. Luxury and group-oriented hotels expected to lag near-term, outperform medium-term. Earnings outlook demonstrated modest increase.4

Source: Green Street Advisors

WHAT IS ASSET MANAGEMENT?

Text books describe asset management as the umbrella name for all phases of expertise in the acquisition, management, operation and eventual sale of real property assets. Assisting the hospitality lender or investor to maximize cash flow and investment returns while reducing lender risk. I believe it is the passionate pursuit of hospitality profit.5

WHY ENGAGE AN ASSET MANAGEMENT CONSULTANT ?

Increases asset and resource effectiveness by providing a platform to support the asset. Asset Managers have specific knowledge and experience with Most hospitality asset types...resorts, commercial and convention hotels, etc. Asset managers have specific knowledge and experience in most domestic and international markets that you might encounter. Asset Managers offer an unbiased opinion on the assessment of that assets operation and best path for maximizing value.6

WHY ENGAGE AN ASSET MANAGEMENT CONSULTANT ?

Asset Managers offer a team approach that applies a broad range of skills to analyze assets quickly. Asset Mangers offer a focused approach to provide you with requisite owner/manager data to make managerial decisions for that asset. Asset Mangers compliment and augment what owners do. Asset Mangers free up your time to oversee the broad range of assets that you are engaged with. 7

WHAT DOES ASSET MANAGEMENT ENTAIL?

Protect, preserve and enhance the asset and asset value. Evaluation of asset performance versus its competitive set and comparable hotels. Track financial metrics. Act as a liaison between the owner, lender and the management company or franchise company. Act as a liaison between the owner, lender and broker to facilitate an asset sale.8

WHAT DOES ASSET MANAGEMENT ENTAIL? Sales and marketing program performance analysis. Food and beverage performance and concept effectiveness. Capital expenditure management, oversight and cost reduction. Insurance/property tax program administration. Monthly P&L analysis/review and attendance at onproperty asset management meetings.9

SUCCESSFUL ASSET MANGERS DO IT DIFFERENTLY

Substantial experience with distressed asset oversight spanning multiple real estate cycles. They not only point out challenges and problems, but offer solutions to them. They take the time to understand your exit strategy or help develop one with you.

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SUCCESSFUL ASSET MANGERS DO IT DIFFERENTLY Experience and understanding in all aspects of hospitality, i.e., operations, marketing, positioning and risk management. Negotiated management agreements so they can identify opportunities to make managers more responsive or be able to secure a better contract. Have worked with multiple brands over the years so they can identify strategies to move an asset forward. They focus on REVENUE ENHANCEMENT not just cost containment. 11

ASSET MANAGEMENT FLOW CHARTIdentify ownership exit strategy

Profit value improvement and asset enhancement

Facilities, Cap-Ex, operational, staffing, management and business plan review

Adjust strategies

Identification of revenue and cost containment opportunities

Monitor performance / results

Dialogue with operator to address issues including management changes if necessary

Oversee / implement plan including review of all Cap-Ex spending

Identify and review appropriate strategies and ownership priorities

Create and implement management / owner information tools and reports

Develop and guide action plan with operator

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ASSET MANAGEMENT TEAM ADDS VALUE TO LENDERS AND OWNERSCap-Ex project management oversight Improved industry understanding Increased level of comfort in debt serviceability and verification

Cap-Ex, operational and marketing strategy enhancement

OWNER & LENDER

Identification and implementation of appropriate exit strategies

Enhanced confidence in cash flow forecasts Link via asset management to operator

Availability of ad hoc data by professionals

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