JW Marriott Houston Downtown - Source Strategies...JW MARRIOTT, HOUSTON DOWNTOWN XXX Xxxx XXXXx, Houston, Texas 77002 This study has been prepared to determine the financial result

JW MARRIOTT - HOUSTON DOWNTOWN Financial Feasibility Study

Source Strategies, Inc. October 3, 2011

Page 1 of 119

October 3, 2011

Financial Feasibility Study:

JW MARRIOTT, HOUSTON DOWNTOWN

XXX Xxxx XXXXx, Houston, Texas 77002

This study has been prepared to determine the financial result and feasibility of converting the

existing 20-story office building at Main and Rusk to the 302 unit ‘JW Marriott, Houston

Downtown.’ The resulting hotel will effectively be a new hotel with a classic exterior.

The building’s shell, structure, floors and window openings will be retained and totally refurbished, with

all interior space totally reconstructed. The building plan includes replacement of the building skin, all

windows, plumbing, wiring, elevators and HVAC systems. With high ceilings, ideal window spacing

for a hotel, center-core elevators and utilities, the conversion can be accomplished economically. At

$204,000 cost per rental unit, the investment in improvements will be far below replacement cost.

Because of its newness, and its stylish, high quality of furnishings, amenities and service, the JW

Marriott Houston Downtown should be the highest-quality lodging option in the area. The hotel

entrance will be across the street from the new and spectacular MainPlace office building, at the

junction of the two major downtown rail lines. The hotel will be home to a top-line fine restaurant and

bar, operated by a nationally-known celebrity chef. The hotel will offer a rooftop pool, a first class

health club and spa, and exceptional banquet and meeting services in 10,000 square feet. After ‘ramp -

up,’ the hotel is expected to qualify for a Four Diamond rating from the American Automobile

Association.

KEY FINDING: Converting the existing 806 Main office building to a JW Marriott Houston

Downtown hotel should generate an unleveraged, pre-tax return on total invested capital of 21%,

with a return on equity above 67%. This return on invested capital assumes that renovations are

completed at the developer’s estimated cost of $182,000 per unit, plus an acquisition cost of

$10,000,000 for the building and land. This is an exceptionally-attractive hotel investment.

PO Box 120055, San Antonio, TX 78212 ♦210-734-3434♦ Fax 210-735-7970 ♦ www.SourceStrategies.Org

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Total Investment

Land $3,300,0001

Improvements $61,700,000 @ $204,305 per unit2

Total Investment $65,000,000

Pre-Tax Project Return3 21.01%

Pre-Tax Return on Equity4 67.54%

The hotel will offer:

240 rental units as high-ceilinged, King and Queen rooms of 350 square feet (a typical

Holiday Inn room is 320 square feet),

62 suites with a large living room and separate bedroom(s); typical square footage would be

550 square feet, the same as most suite hotels (e.g. Embassy, Residence, Homewood Suites).

The inclusion of this high volume of suites offers superior accommodations to lodging guests

that have extended stay business needs downtown.

Project quality is assumed to meet or exceed the physical and operating standards of the JW

Marriott brand. The current level of quality and acceptance for the ‘JW Marriott Hotel’ brand in other

markets nationally has been assumed in projecting the financial performance of the project. Operating

expenses are set appropriately for the Luxury hotel segment of the Southwestern market. The study

assumes the hotel operates as a ‘JW Marriott’ for twenty years under a standard franchise agreement.

Wit

h an

Apri

l

2013

open

ing,

cash

flow market projections for the JW Marriott, before taxes and after renovation reserves, should

1 Developer's estimate investment of the land value (part of the $10,000,000 combined cost of the existing building and its land). 2 It would be difficult or impossible for a new competitor to match this hotel offering due to the high cost of ground-up construction (probably $200,000+

additional cost per room to the JW Marriott’s). 3 after reserve for on-going renovations 4 assuming 25% equity and 75% debt at a 5.5% pre-tax debt cost; calculated weighted average.

This study incorporates the current downturn in the Texas hotel market, caused by the broader

national recession, which began in 2008. In our Market section, we highlight the historical

hotel performance in Texas, noting the effect of past recessions. While every market has its

own unique characteristics, our projections for the local area market consider how the Texas

lodging industry has reacted in times of economic downturn and in normal times. We believe

the Texas market is currently in a slow, long-term period of encouraging recovery. However,

there are federally based issues that remain, and are worrisome. See the Market section for

details.

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be available for debt service, income tax and dividends as follows (both with and without a

Historic Tax credit):

Project Summary

Occupancy Average $ Total Cash Flow**__________

Percent $ Rate REVPAR Revenue Excl Credit Incl Credit

Year I 65.9% $208.90 $137.68 20,456,550 $9,166,730 $9,166,730

Year II 72.1% $227.78 $164.23 24,382,329 $11,196,927 $14,688,859

Year III 74.7% $238.83 $178.38 26,475,142 $11,953,710 $15,790,247

Year IV 74.3% $247.19 $183.73 27,269,397 $11,902,395 $12,573,926

Year V 74.0% $255.84 $189.24 28,087,478 $12,258,018 $12,258,018

Year VI 72.7% $263.51 $191.66 28,449,293 $12,089,162 $12,089,162

Year VII 71.5% $271.42 $194.12 28,815,809 $11,100,588 $11,100,588

Year VIII 71.0% $276.85 $196.60 29,187,087 $10,726,823 $10,726,823

Year IX 70.5% $282.38 $199.12 29,563,191 $10,760,233 $10,760,233

Year X 70.2% $286.62 $201.18 29,871,885 113,766,335 113,766,335***

*Year I ADR equates to approximately $195 in current market dollars. ***Before Income Tax &

Financing expense, but reflecting $6,718,937 in reserves for capital expenditures / property

renovation ($22,248 per unit). ****assumes valuing property at Year 10 cash flow at a 10% return-

to-buyer, less 4% expense of sale, plus year 10 cash flow.

The above cash flow, including all probable incentives and tax credits, assuming a Year 10 sale,

has been discounted at the rate of 21.0% to a present value of $65,040,115, matching the budgeted

investment of $65,000,000. This 21.0% is the project's unleveraged return, provided capital is kept to

budget.5

In our experience an estimated capital budget of $204,305 per unit 'turn-key' costs for a hotel of

this size and quality may be about half of replacement cost and only made possible by the very

low-cost acquisition of the 20-story office structure, and the good fortune that it is highly suitable

for conversion to a hotel. For a new ‘ground-up’ high-rise luxury hotel, we would normally expect the

turn-key investment cost to be in the area of $400,000 per key.

If capital outlays vary from budget for this project, returns will of course vary. If the actual

expenditure turned out to be up to 20% higher than budget, the project would still generate a highly

attractive return. If it were lower than budget, the returns become even more attractive. The following

table illustrates the linear nature of financial returns as capital requirements escalate or decline and cash

flow streams remain as projected.

5 Should an expected Historical Preservation Tax Credit of $8,000,000 not materialize, then the return drops 131 percentage points to 19.7%.

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Effect on Returns if Capital Investment Changes6

Improvements Budget Land Total Discounted Cash Flow

Variance Per Unit Total Cost Investment Total Proj On Equity

(85%) $173.7 $52,445 $3,300 55,745 24.60% 81.90%

(90%) $183.9 $55,530 $3,300 58,830 23.35% 76.90%

(95%) $194.1 $58,615 $3,300 61,915 22.15% 72.10%

BUDGET $204.3 $61,700 $3,300 65,000 21.01% 67.54%

(105%) $214.5 $64,785 $3,300 68,085 19.99% 63.46%

(110%) $224.7 $67,870 $3,300 71,170 19.04% 59.64%

(115%) $235.0 $70,955 $3,300 74,255 18.14% 56.06%

6 Discounted Cash Flow / Internal Rate of Return.

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A detailed look at Year III (2015), the first ‘going’ year of the hotel, shows the following:

Year III – 2015

Room Revenues $19,662,563

Total Revenues $26,475,142

Income Before Fixed Costs $11,843,645 (44.7%)

Net Before Tax & Fin w/o credits $ 9,371,967 (35.4%)

Net Before Tax & Fin with credits $10,961,535 (41.4%)

Cash Flow Before Financing $10,915,369 (59.6%)7

Occupancy % 74.7%

Average Daily Rate $238.83

$ REVPAR $178.38

Per Occupied Departmental Expenses $ 78.03

SUMMARY OF CRITICAL ASSUMPTIONS: Critical assumptions

are summarized as follows, with the Market History and Projection

(page 15) following the Methodology section (page 11).

1. Continuing the past year’s trend, market occupancy is projected

to continue rising, settling at an equilibrium occupancy level of 63%

by 2016. The local market should return to historical growth rates, including the absorption of the JW

Marriott addition to supply in 2013. Market REVPAR is expected to grow 2.8% annually over the next

nine years, coupled with room revenue growth of 5.6% annually, 2.8% annual rate increases and flat

occupancy. Both real demand (room nights sold) and supply are projected to grow at an average 2.8%

annually.

Also affecting this market, downtown is full of old, vulnerable hotels: on average, a total of 44% of the

available rooms in downtown Houston were built in 1970, making them 41 years old. These include the

nearby competitors of the proposed 302 room JW Marriott: the 259 room Crowne Plaza originally

opened in 1965, the 984 room Hyatt Regency in 1972, the 350 room Doubletree in 1980 and the 404

room Four Seasons in 1982. Detailed downtown market history and projections commence on page 25.

.

DOWNTOWN HOUSTON MARKET

Year Occupancy % $ REVPAR

2001 65.8% $ 91.13

7 Before deductions of loan principal and interest, before income tax deductions, and before any equity payout. Assumes receipt of Year III City Incentives

of $1,589,568 taxable (Property Tax Rebate, Operating Expense Offset), and a Historic Tax Credit of $3,836,537.

The critical statistic used

in this study is REVPAR.

REVPAR means revenue

per available room per

day, and reflects the

average daily room

revenue yield of every

room in a property or

market (not just occupied

rooms). REVPAR is

generated by multiplying

occupancy times rate

(REVPAR = % occupancy

times average daily rate),

and is the most effective

and important tool in the

evaluation of the success

of any lodging concern.

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2004 52.1% $ 67.72

2007 64.7% $ 94.47

2009 54.9% $ 82.66

2010(12 months 3/31/11) 62.8% $ 92.84

Projected

2013 63.0% $ 99.04

2015 62.7% $104.64

2018 62.8% $114.49

Historical Compound Growth Rates

Past 9 Year Average -0.7% -0.1%

Past 4 Year Average -0.4% 0.8%

Past 1 Year Average 13.4% 12.5%

Future Growth Rates

Next 9 Years 0.0% 2.8%

Next 5 Years 0.0% 2.6%

2. Versus the local market's REVPAR dollar projections, the REVPAR index of the proposed JW

Marriott Houston Downtown hotel starts at 139% of the market average REVPAR in Year I,

climbs to 161% in Year II, and peaks at 169% in Years III-V. Thereafter, the REVPAR Index

declines due to the normal aging cycle. Detailed REVPAR derivation and subsequent projections

commence on page 34.

JW Marriott Houston Downtown DERIVATION

Data in 2010/11 $'s Year I Year II Year III

Base: Name, Type & Quality 1.29 1.29 1.29

x Brand Age Adjustment 1.10 1.10 1.10

x Site Value Adjustment 1.05 1.05 1.05

x Size Adjustment 1.19 1.19 1.19

x Other Adjustments .85 .85 .85

x Newness Adjustment .92 1.07 1.12

=Theoretical REVPAR Index 139% 161% 169%

x Current Market REVPAR $92.70 $92.70 $92.70

= Projected Performance $128.53 $149.49 $156.47

The REVPAR performance of the JW Marriott is projected to be the highest in the market, and

reflects the fact that this hotel is expected to perform 69% higher than the market average. The

hotel's REVPAR level starts at a level above the market average in Year I, peaks in Years III-V, then

slowly loses ground versus the local market's inflationary growth:

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3. Other Revenues are derived from leasing space for a fine dining restaurant operated by an

independent celebrity chef. Additionally, the hotel generates revenue from their own operation of a

lobby bar and extensive meetings and banquets in separate conference space.

4. Expenses are set at the level of similar, Luxury full service hotel products, based in part on Smith

Travel Research Host Reports operating statistics, inflated at 3% per annum. See page 56 for details,

including Other Revenues.

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PROJECT REASONABILITY ANALYSIS: Critical comparisons can be made of the key

assumptions in this feasibility study; these allow an assessment of the reasonability of projections.

The detailed analysis starts on page 46 and is briefly summarized here:

1. Local market REVPAR – is forecast to continue the moderate recovery now underway, and to

rise at a reasonable, conservative rate. Over the next nine years market REVPAR is projected to

grow 2.8% per year, the same as the projected net supply growth rate, thereby holding a stable

equilibrium occupancy level of 63% throughout most years of our projection.

2. The derived Base Value index of 129 for a JW Marriott - in Texas High Priced markets - is

reasonable when compared to the Base Values of other competitive hotels in these same markets.

REVPAR Index Comparison8

REVPAR

Hotel Brand Index

Ritz Carlton 211

Four Seasons 192

ZaZa 166

JW Marriott 129

Hilton 117

Hyatt 117

Marriott Hotel 112

Embassy Suites 102

3. Developing actual adjustment factors for the existing properties - so that their projected

REVPAR equals actual REVPAR - indicates why the REVPAR index projection has a high

probability of being achieved. REVPAR differences between the closest key competitors

appear to be both explainable and reasonable, using the unique and proprietary REVPAR

forecasting system of Source Strategies, Inc.

For each property, revenues are driven first by chain name affiliation and product type, and are

further adjusted for size, segment, hotel age and site location. The REVPAR index is then

multiplied by the actual local area market average to generate dollar REVPAR. We also include

8 Unadjusted for physical aging of each brand.

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the theoretical Year III performance of the subject hotel, as follows:

REVPAR COMPARISON

JW Marrt Hyatt Four Hilton Doubletr Crowne

Data in 2010/11 $'s Yr III Regency Seasons Americas Hotel Plaza

Base: Name,Type & Quality 1.29 1.17 1.92 1.04 .88 .70

x Brand Age Adjustment 1.10 1.28 1.30 1.26 1.36 1.36

x Site Value Adjustment 1.05 1.15 .86 .90 1.13 1.15

x Size Adjustment 1.19 .90 .97 .83 .96 1.08

x Other Adjustments .85 .95 1.00 1.00 1.25 1.25

x Newness Adjustment 1.12 .61 .73 1.05 .70 .58

= Theoretical REVPAR Index 169% 90% 152% 103% 114% 86%

x Market REVPAR Average $92.70 $92.70 $92.70 $92.70 $92.70 $92.70

= Projected Performance $156.47 $83.20 $140.90 $95.37 $105.31 $79.81

Actual Performance Past Yr n/a $82.99 $140.90 $95.63 $104.79 $79.57

Projected vs. Actual n/a 100 100 100 100 100

Opened: 2013 1972 1982 2003 1980 1965

# Units 302 984 404 1200 350 259

Age in Years* n/a 36 26 5 28 43

4. The designated management of the proposed JW Marriott Hotel is Pearl Hospitality of Fort

Worth, one of the most successful developers and operator we have noted in our 41 years in the

industry (including as marketing and strategic planning officer for Holiday Inns 1975-1980).

5. The projected REVPAR performance of the JW Marriott Houston Downtown reflects the fact

that this hotel’s service and style will be the highest in downtown Houston. Additionally, Marriott

brands in total are currently undersupplied in downtown Houston compared to Texas High Priced

markets; this confirms an unfilled demand for a Marriott brand since market share is usually balanced

with demand for the brand(s).

6. The $156.47 JW Marriott projected Year III REVPAR compares reasonably to that of the key

competitors downtown, particularly $140.90 of the Four Seasons (current Year dollars). The JW

Marriott is newer (effectively a new hotel versus a 1982 opening for the Four Seasons), smaller (302

versus 404 for the Four Seasons), much better located (e.g. next to MainPlace and the better-sited hotels

downtown), and will be supported by a much stronger marketing company, Marriott. The other nearby

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hotels include the Hyatt Regency, a 1972 hotel of 984 smaller rooms, in a lesser location and highly

vulnerable to new competition. The Doubletree and Crowne Plaza hotel operations are also very old.

7. The proposed JW Marriott Hotel will have the fortunate circumstance of a major and critical

competitive edge: a far lower investment cost than any new competitor could match. It will cost

under $204,000 per key (plus land) while any new and comparable high-rise hotel would cost in a range

of $350,000 to $500,000 per key. This competitive barrier means that few if any new competitors will

threaten the success of the new JW Marriott hotel.

8. Compared to the Top 500 Texas hotels of 2010, the JW Marriott would rank Number 12 in its

Year III, and in third place in Houston behind the St. Regis (the former Ritz Carlton) and The

Granduca suite hotel. Following the JW Marriott performance are the Four Seasons, the Houstonian,

the Marriott Waterway Woodlands, and the Hotel ZaZa (formerly The Warwick):

9. The downtown Houston market is full of old, vulnerable hotels. The average hotel room in the

market was built in late 1989 and is 21 years old, more than half way to the expected life of most hotels.

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METHODOLOGY

To develop Pro Forma financial results for the proposed project, two major sets of assumptions

have been developed. First, the future market's average REVPAR is forecast on a reasonable and

economically-sound basis; the performance of the project is dependent on this market forecast and

varies from it only due to specific variables of the project.

Second, the specific variables of the project are combined and expressed as an index for each

quarter of the forecast, an index that is used to adjust the overall market performance to the

specific project.

Market REVPAR Forecast

The larger City of Houston market area is examined historically and then projected. The key in

our market projections is to stabilize the market in the future at a sustainable, average equilibrium for

occupancy, a level which we have determined to be approximately 61% for large cities. Over the 20

years from 1987 through 2007, according to the Source Strategies, Inc. database, hotel occupancy in

Texas has averaged 59%, and slightly higher in Texas metros. This occupancy level is highly relevant

as a long-term, equilibrium occupancy, a level where investors are neutral about adding new hotel rooms

to the market and an average that will reoccur over long periods of time (e.g. 20 years).

After the total market area is forecast, we then forecast the performance of the local Downtown

Houston market on a similar basis. Market projections are based on growth rates in real demand

(room nights sold), prices (average daily rates), and supply (rooms available). The key in this projection

is to stabilize the local market in the future at a sustainable, average equilibrium for occupancy, a level

which we have determined to be approximately 63% in large and vibrant downtown markets of this

type.

We then project REVPAR by year and quarter, a projection that is then the pro forma market

environment of the proposed subject development. The project will vary from the norm for only

project-specific differences, and then only relatively.

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PROJECT SPECIFIC VARIABLES:

DEVELOPMENT OF PROJECT REVPAR INDICES

The first variable from the averages to be developed has to do with the fact that each product type

and brand have a typical and identifiable influence on REVPAR performance. This variable is

based on its consumer acceptance, its product definition, its level of quality, the price it can command

from the consumer, its marketing efforts, and other factors. The value of the brand and product type is

termed the Base Value.

The second adjustment used on the dollar value of the local area's REVPAR is the Brand Age

Adjustment. This is made to reflect the average age of similarly branded hotels on the subject

property's performance versus the market average. The opening dates of Marriott hotels in high priced

Texas areas were examined in order to quantify this factor.

The next step to developing a project REVPAR index is to determine any further adjustment

based on any deviation from a normal project Size. If the number of proposed rooms in the project is

significantly above or below the average for that brand and product-type, its performance will also vary

from the norm. A lower than average number of rooms should increase per room performance and vice

versa. This is due to the fact that consumer demand for a single brand is demand at the project's site,

regardless of the number of rooms offered by the hotel (a minor exception here would be a convention

hotel).

An empirical proof of this evaluation of Size is the major increase in volume enjoyed by numerous

hotels throughout Texas that have split into two branded operations, using two different names. For

example, the Hilton Hotel Towers Austin added $1,000,000 annually to revenues by splitting off its

adjacent, ground-based rooms as a Super 8 Motel. By creating another brand, the Super 8 began to fill

demand for budget properties in the immediate area, while the Hilton Towers kept its current upscale

customer base. Hence, smaller room counts than average generate higher occupancy than average.

Further proof is the correlation between project size and occupancy: the smaller the property, the higher

the occupancy.9

9 Study detailed in size factor derivation in analysis section.

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A further, 'Other,' segment adjustment may be made if the proposed product type is under- or

over- supplied in the local market, or for other factors. For example, a product type commanding 10%

of the Texas market - but zero locally - would command a higher daily rate or occupancy locally

because it is a relatively scarce commodity. Further, a subject product far exceeds the product quality of

the brand average, then a positive adjustment should be made to reflect a better product than normal.

Then the REVPAR potential of the subject Site, regardless of brand, is developed in two ways.

First, all other property factors except site are calculated for nearby competitors, the site factor then

being used to bring the calculated REVPAR into a match with actual REVPAR performance. In other

words, combining all factors including a 'plugged' site factor results in the theoretical REVPAR

projection equaling actual REVPAR for each property studied, revealing the mathematical value of

individual hotel sites.

While there is usually a reasonably consistent pattern of site factors for the nearby local chain properties

selected, these factors often vary because of unique situations, including: 1) visibility and access

differences between nearby sites; 2) any large variation from the norm in the usual number of rooms for

a local chain property at a site; 3) a nearby property's quality, the quality of management, last

renovation, etc.; and 4) any major new commercial development nearby (e.g. the new MainPlace office

tower). Adjustments can be made for these differences within forecast site factor, based on industry

experience. This is the Segment, or Other adjustment.

With the development of the adjustments for Brand/product type, overall Brand Age, Segment,

project Size, and Site, a revenue projection for the proposed operation begins to take form by

combining these factors into a combined index that is applied to the overall market-wide

REVPAR projection, resulting in the forecast of the project's dollar REVPAR. However, this

combined index changes with the cumulative age the project.

Then, the physical Age of the individual project impacts this REVPAR index. A +12% increase

factor is applied to the combined REVPAR index in the operating Years III-V. A first-year start-up

adjustment of -8% and a second year adjustment of +7%, followed by a +12% adjustment for years III-

V. This factor reflects the major revenue-generating power of new versus old properties. In the sixth

year and thereafter, the REVPAR index is then diminished at a rate of 1.67% per annum in order to

reflect aging and the normal life-cycle of a hotel.

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This pattern of declining performance with property aging is based on major studies of economic life-

cycle patterns. The first study was conducted on a census of all 25,000 Texas rooms built between 1980

and 1982 (study published in September 1994 issues of MarketShare10 and the October 1994 issue of

Hotel & Motel Management); the second investigation was conducted on all 17,231 rooms built in Texas

from 1990 through 1995. These Source Strategies, Inc. studies confirm a similar, major study conducted

in 1982 at the Holiday corporation on 160 company-owned and company-operated Holiday Inn hotels.

Combining all of these factors - Product Type, Brand Age, Site, Size, Segment (other), and

Newness (Age) - results in the REVPAR stream for the project. A REVPAR stream from which

room revenues, estimated rate, occupancy and room nights sold are derived. At this point, the

investment and operational costs can be laid against the revenue line to generate pro forma

financial performance and discounted cash flow analysis. The calculation of the statistic of

Operating Costs Per Occupied Room (before fixed/capital costs are deducted) is typically the important

cost to examine carefully because it is highly stable and predictable, regardless of occupancy and rate.

The Smith Travel Research Host Report of Hotel Operating Statistics, 2009 edition (2008 data) with

dollar costs inflated, and Source Strategies, Inc. financial models are the source of operating cost

statistics.

From national average occupancies, costs are categorized as fixed, semi-variable or variable, resulting in

the highly-leveraged profit performance characteristic of lodging products, depending on occupancy and

REVPAR performance (i.e. variable costs increase proportionately with higher occupancy levels while

fixed costs do not).

Furthermore, with a capital expenditures profile provided by the International Society of Hospitality

Consultants' CapEx, A Study of Capital Expenditures in the U.S. Hotel Industry, a method has been

applied to determine an appropriate amount of renovation reserves to ensure that the property is

maintained at the franchisor's required level.

All study-area individual hotel/motel five year histories are included in the study, using the Source

Strategies, Inc. database of all Texas hotels and motels (includes each hotel’s brand, room count, room

revenue, occupancy, rate and REVPAR). The methodology of this database is attached as an exhibit.

10 Now Hotel Brand Report.

Page 15 of 119

MARKET REVPAR HISTORY: TEXAS

1. Since 1980, the State of Texas (and the wider U.S. market) has experienced other instances of

economic turmoil such as the current recession. In 1982-1983 the Texas market suffered through six

consecutive quarters of major demand declines, with a sharp plummet of 24% in the first quarter of

1983.

Two years later, every quarter in 1986 posted significant demand decreases of 19% or more.

Before the recent recession, the most recent period of decline was in 2001, during which the onset of a

recession was coupled, and accelerated by, the terrorist attacks of 9/11. Beginning in the Third quarter

of 2001, seven of the next eight quarters showed declining room demand, and it was not until the first

quarter of 2004 that healthy levels of growth resumed.

We have considered the historical market patterns in formulating our projections for all market

projections. Though there are differences in each economic downturn, and areas across the state are

impacted differently depending on factors driving demand, there is much that can be discerned from

historical negative trending performances and the patterns of subsequent periods of recovery.

Historical quarterly periods of economic decline and recession are highlighted in the

Texas market data that follows overleaf:

Page 16 of 119

HOTEL MARKET: STATE OF TEXAS - 1980-1989

# Room-1 Total

Htls nites Rooms % Growth Vs Yr Ago

Year & and # sold Revenue % 2 $ 3 $ 4

Quarter Mtls Rooms 000's $ 000's Occ. Rate RPAR Sply Real ADR $ Rev

801 1,694 138,446 9,012 286,171 72.3 31.76 22.97

802 1,859 143,967 9,593 321,352 73.2 33.50 24.53

803 1,941 147,589 10,077 331,532 74.2 32.90 24.42

804 1,827 150,272 9,430 296,137 68.2 31.40 21.42

811 1,808 149,062 10,268 349,319 76.5 34.02 26.04 7.7 13.9 7.1 22.1

812 1,990 154,783 11,102 398,057 78.8 35.85 28.26 7.5 15.7 7.0 23.9

813 2,065 157,359 12,026 429,629 83.1 35.73 29.68 6.6 19.3 8.6 29.6

814 1,941 159,855 10,955 368,202 74.5 33.61 25.04 6.4 16.2 7.0 24.3

821 1,944 159,719 11,275 410,194 78.4 36.38 28.54 7.1 9.8 6.9 17.4

822 2,072 164,022 11,554 448,560 77.4 38.82 30.05 6.0 4.1 8.3 12.7

823 2,122 168,756 11,239 426,972 72.4 37.99 27.50 7.2 -6.5 6.3 -0.6

824 1,909 169,962 9,383 340,781 60.0 36.32 21.79 6.3 -14.4 8.1 -7.4

831 1,927 171,393 8,574 326,286 55.6 38.06 21.15 7.3 -24.0 4.6 -20.5

832 2,098 177,954 9,118 367,533 56.3 40.31 22.70 8.5 -21.1 3.8 -18.1

833 2,192 181,281 9,574 378,280 57.4 39.51 22.68 7.4 -14.8 4.0 -11.4

834 1,988 181,046 8,445 320,928 50.7 38.00 19.27 6.5 -10.0 4.6 -5.8

841 2,059 185,074 9,110 370,661 54.7 40.69 22.25 8.0 6.3 6.9 13.6

842 2,263 193,838 9,777 417,810 55.4 42.73 23.69 8.9 7.2 6.0 13.7

843 2,343 198,581 10,267 440,975 56.2 42.95 24.14 9.5 7.2 8.7 16.6

844 2,144 198,042 8,762 357,849 48.1 40.84 19.64 9.4 3.8 7.5 11.5

851 2,168 201,426 11,088 462,103 61.2 41.68 25.49 8.8 21.7 2.4 24.7

852 2,396 207,832 12,005 525,445 63.5 43.77 27.78 7.2 22.8 2.4 25.8

853 2,456 210,876 12,004 521,612 61.9 43.45 26.89 6.2 16.9 1.2 18.3

854 2,201 210,122 10,095 422,314 52.2 41.83 21.85 6.1 15.2 2.4 18.0

861 2,221 209,942 8,935 394,611 47.3 44.16 20.88 4.2 -19.4 6.0 -14.6

862 2,366 216,430 9,484 438,490 48.2 46.24 22.26 4.1 -21.0 5.6 -16.5

863 2,398 216,313 9,335 433,948 46.9 46.49 21.81 2.6 -22.2 7.0 -16.8

864 2,162 214,530 8,011 354,767 40.6 44.29 17.97 2.1 -20.6 5.9 -16.0

871 2,125 211,297 9,822 439,986 51.6 44.80 23.14 0.6 9.9 1.4 11.5

872 2,323 217,846 10,613 469,942 53.5 44.28 23.71 0.7 11.9 -4.2 7.2

873 2,488 223,226 11,609 513,072 56.5 44.20 24.98 3.2 24.4 -4.9 18.2

874 2,288 220,113 8,703 389,235 43.0 44.72 19.22 2.6 8.6 1.0 9.7

881 2,225 216,646 10,651 480,022 54.6 45.07 24.62 2.5 8.4 0.6 9.1

882 2,328 219,194 11,468 519,279 57.5 45.28 26.03 0.6 8.1 2.3 10.5

883 2,394 220,718 12,179 551,823 60.0 45.31 27.18 -1.1 4.9 2.5 7.6

884 2,183 217,487 10,408 468,241 52.0 44.99 23.40 -1.2 19.6 0.6 20.3

891 2,139 214,433 10,972 505,830 56.9 46.10 26.21 -1.0 3.0 2.3 5.4

892 2,254 216,409 12,152 568,731 61.7 46.80 28.88 -1.3 6.0 3.4 9.5

893 2,380 219,464 13,087 606,723 64.8 46.36 30.05 -0.6 7.5 2.3 9.9

894 2,143 214,991 10,915 505,305 55.2 46.30 25.55 -1.1 4.9 2.9 7.9

1. Room nights sold (derived from est. rate and actual revenues) 2. Occupancy nights sold divided by

nights available for sale. 3. Avg. price for room nights sold; Directories, Surveys, & experience. 4.

$ Revenue per available room per day (room sales per day)

Page 17 of 119


# Room-1 Total




901 2,129 214,419 11,679 554,170 60.5 47.45 28.72 -0.0 6.4 2.9 9.6

902 2,311 218,824 12,840 624,482 64.5 48.64 31.36 1.1 5.7 3.9 9.8

903 2,488 223,343 12,708 629,223 61.8 49.51 30.62 1.8 -2.9 6.8 3.7

904 2,195 215,581 10,531 513,588 53.1 48.77 25.90 0.3 -3.5 5.3 1.6

911 2,288 216,607 11,476 565,424 58.9 49.27 29.00 1.0 -1.7 3.8 2.0

912 2,450 220,230 12,714 652,416 63.4 51.31 32.55 0.6 -1.0 5.5 4.5

913 2,489 221,280 13,203 669,743 64.9 50.73 32.90 -0.9 3.9 2.5 6.4

914 2,288 217,777 11,146 556,396 55.6 49.92 27.77 1.0 5.8 2.4 8.3

921 2,311 218,438 11,593 595,139 59.0 51.34 30.27 0.8 1.0 4.2 5.3

922 2,488 222,368 12,751 675,369 63.0 52.97 33.38 1.0 0.3 3.2 3.5

923 2,548 223,434 13,690 721,311 66.6 52.69 35.09 1.0 3.7 3.9 7.7

924 2,359 219,803 11,488 593,804 56.8 51.69 29.36 0.9 3.1 3.5 6.7

931 2,364 220,328 11,903 630,049 60.0 52.93 31.77 0.9 2.7 3.1 5.9

932 2,526 223,631 12,955 711,191 63.7 54.90 34.95 0.6 1.6 3.6 5.3

933 2,587 225,580 14,033 762,508 67.6 54.34 36.74 1.0 2.5 3.1 5.7

934 2,382 221,392 11,714 625,100 57.5 53.36 30.69 0.7 2.0 3.2 5.3

941 2,414 222,471 12,287 671,853 61.4 54.68 33.56 1.0 3.2 3.3 6.6

942 2,593 227,497 13,565 773,762 65.5 57.04 37.38 1.7 4.7 3.9 8.8

943 2,666 230,187 13,848 787,544 65.4 56.87 37.19 2.0 -1.3 4.7 3.3

944 2,475 226,119 12,215 677,868 58.7 55.50 32.59 2.1 4.3 4.0 8.4

951 2,457 225,028 12,549 738,394 62.0 58.84 36.46 1.1 2.1 7.6 9.9

952 2,604 229,116 13,526 810,170 64.9 59.90 38.86 0.7 -0.3 5.0 4.7

953 2,701 234,593 14,117 841,494 65.4 59.61 38.99 1.9 1.9 4.8 6.9

954 2,602 232,201 12,326 722,297 57.7 58.60 33.81 2.7 0.9 5.6 6.6

961 2,596 233,619 13,221 823,051 62.9 62.26 39.14 3.8 5.4 5.8 11.5

962 2,740 239,156 14,047 878,542 64.5 62.54 40.37 4.4 3.9 4.4 8.4

963 2,735 242,809 14,040 875,250 62.9 62.34 39.18 3.5 -0.5 4.6 4.0

964 2,666 241,679 12,572 775,657 56.5 61.70 34.89 4.1 2.0 5.3 7.4

971 2,694 245,315 13,353 861,700 60.5 64.53 39.03 5.0 1.0 3.6 4.7

972 2,774 250,349 14,720 965,813 64.6 65.61 42.39 4.7 4.8 4.9 9.9

973 2,838 254,368 14,874 968,988 63.6 65.15 41.41 4.8 5.9 4.5 10.7

974 2,800 257,088 13,470 873,191 57.0 64.83 36.92 6.4 7.1 5.1 12.6

981 2,847 258,388 14,390 965,828 61.9 67.12 41.53 5.3 7.8 4.0 12.1

982 2,930 263,497 15,481 1,057,929 64.6 68.34 44.12 5.3 5.2 4.2 9.5

983 3,019 270,763 15,927 1,053,109 63.9 66.12 42.28 6.4 7.1 1.5 8.7

984 2,978 271,238 14,316 941,569 57.4 65.77 37.73 5.5 6.3 1.4 7.8

991 3,047 277,678 15,010 1,023,911 60.1 68.22 40.97 7.5 4.3 1.6 6.0

992 3,129 282,933 15,996 1,125,938 62.1 70.39 43.73 7.4 3.3 3.0 6.4

993 3,220 290,145 16,562 1,111,162 62.0 67.09 41.63 7.2 4.0 1.5 5.5

994 3,208 289,149 14,552 968,974 54.7 66.59 36.43 6.6 1.7 1.2 2.9

1. Room-nights sold (derived from est. rate and actual revenues) 2. Occupancy nights sold divided by

nights available for sale. 3. Avg. price for room-nights sold; Directories, Surveys, & experience. 4.


Page 18 of 119


# Room-1 Total




001 3,226 290,046 15,883 1,114,731 60.8 70.18 42.70 4.5 5.8 2.9 8.9

002 3,356 295,709 17,001 1,232,674 63.2 72.51 45.81 4.5 6.3 3.0 9.5

003 3,388 300,371 17,187 1,219,157 62.2 70.94 44.12 3.5 3.8 5.7 9.7

004 3,360 299,047 15,228 1,064,870 55.3 69.93 38.71 3.4 4.6 5.0 9.9

011 3,411 302,343 16,517 1,188,162 60.7 71.94 43.66 4.2 4.0 2.5 6.6

012 3,536 306,089 17,222 1,239,069 61.8 71.95 44.48 3.5 1.3 -0.8 0.5

013 3,589 310,957 16,802 1,164,254 58.7 69.29 40.70 3.5 -2.2 -2.3 -4.5

014 3,535 307,914 14,483 960,167 51.1 66.30 33.89 3.0 -4.9 -5.2 -9.8

021 3,576 309,745 15,867 1,110,327 56.9 69.98 39.83 2.4 -3.9 -2.7 -6.6

022 3,684 314,166 17,012 1,225,468 59.5 72.04 42.86 2.6 -1.2 0.1 -1.1

023 3,707 318,226 16,541 1,158,407 56.5 70.03 39.57 2.3 -1.6 1.1 -0.5

024 3,644 313,988 14,713 986,554 50.9 67.05 34.15 2.0 1.6 1.1 2.7

031 3,672 316,723 15,361 1,057,864 53.9 68.87 37.11 2.3 -3.2 -1.6 -4.7

032 3,780 318,836 16,737 1,169,718 57.7 69.89 40.32 1.5 -1.6 -3.0 -4.5

033 3,805 323,624 16,776 1,162,518 56.3 69.30 39.05 1.7 1.4 -1.0 0.4

034 3,734 320,212 14,914 987,483 50.6 66.21 33.52 2.0 1.4 -1.3 0.1

041 3,747 323,147 16,239 1,145,793 55.8 70.56 39.40 2.0 5.7 2.5 8.3

042 3,878 327,926 17,518 1,237,847 58.7 70.66 41.48 2.9 4.7 1.1 5.8

043 3,913 332,549 17,679 1,264,128 57.8 71.50 41.32 2.8 5.4 3.2 8.7

044 3,829 329,158 15,951 1,082,616 52.7 67.87 35.75 2.8 7.0 2.5 9.6

051 3,852 329,449 17,015 1,214,908 57.4 71.40 40.97 2.0 4.8 1.2 6.0

052 3,983 332,254 18,593 1,391,414 61.5 74.84 46.02 1.3 6.1 5.9 12.4

053 4,048 338,115 19,173 1,449,393 61.6 75.59 46.59 1.7 8.5 5.7 14.7

054 3,962 334,144 18,561 1,383,105 60.4 74.52 44.99 1.5 16.4 9.8 27.8

061 3,978 334,912 18,910 1,479,351 62.7 78.23 49.08 1.7 11.1 9.6 21.8

062 4,121 337,788 19,328 1,609,669 62.9 83.28 52.37 1.7 4.0 11.3 15.7

063 4,184 344,093 19,733 1,606,206 62.3 81.40 50.74 1.8 2.9 7.7 10.8

064 4,093 341,556 18,004 1,439,964 57.3 79.98 45.82 2.2 -3.0 7.3 4.1

071 4,127 343,745 19,366 1,614,471 62.6 83.37 52.19 2.6 2.4 6.6 9.1

072 4,290 347,178 19,916 1,756,887 63.0 88.21 55.61 2.8 3.0 5.9 9.1

073 4,340 353,440 20,324 1,743,413 62.5 85.78 53.62 2.7 3.0 5.4 8.5

074 4,248 350,908 18,594 1,564,612 57.6 84.15 48.46 2.7 3.3 5.2 8.7

081 4,276 353,555 19,690 1,738,726 61.9 88.31 54.64 3.1 1.7 0.2 -0.9

082 4,463 359,217 20,654 1,919,396 63.2 92.93 58.72 3.6 3.7 8.5 10.3

083 4,524 366,163 21,246 1,907,486 63.1 89.78 56.62 3.8 4.6 7.0 22.3

084 4,338 360,500 19,285 1,694,290 58.1 87.86 51.09 2.7 3.7 4.4 8.2

091 4,378 366,440 18,710 1,592,799 56.7 85.13 48.30 3.6 -5.0 -3.6 -8.4

092 4,603 374,553 18,627 1,613,320 54.7 86.61 47.33 4.3 -9.8 -6.8 -15.9

093 4,789 385,834 18,572 1,598,060 52.3 86.05 45.02 5.2 -12.6 -2.3 -5.6

094 4,507 380,224 17,174 1,367,498 49.1 79.62 39.09 4.9 -10.6 -6.3 -13.9

101 4,569 385,457 19,015 1,544,141 54.8 81.21 44.51 4.6 1.8 -6.0 -4.3

102 4,782 392,775 20,075 1,725,520 56.2 85.96 48.28 4.2 7.5 -0.1 8.0

104 4,599 396,315 18,692 1,537,908 51.3 82.27 42.18 4.2 8.8 12.5 4.5

111 4,528 393,999 20,979 1,778,074 59.2 84.75 50.14 2.2 10.3 15.1 8.0

CGR% 28yrs 3.1% 2.5% 5.4% -0.6% 2.9% 2.3%

“ 20yrs 3.0% 2.7% 5.5% -0.3% 2.7% 2.4%

“ 10yrs 2.8% 2.0% 3.7% -0.8% 1.7% 0.9%

“ 5yrs 3.4% 1.4% 3.5% -1.9% 2.1% 0.1%

“ 1yr 3.6% 9.7% 10.7% 6.0% 1.0% 6.9%




Page 19 of 119

Texas Lodging Market: Projection

Room-

Yr nights $ Room % Changes to Prior Year

& # # Sold Revenues % $ $ # Rooms $

Qtr Hotels Rooms (000's) (000's) Occ Rate REVPAR Rms Sold ADR Revs

112 4,927 400,631 21,480 1,938,726 58.9 $90.26 $53.18 2.0 7.0 5.0 12.4

113 4,955 403,648 22,063 1,934,415 59.4 $87.68 $52.09 1.0 6.0 5.0 11.3

114 4,830 399,387 19,656 1,692,568 53.5 $86.11 $46.06 1.0 5.0 5.0 10.3

121 4,898 404,961 21,456 1,902,773 58.9 $88.68 $52.21 2.0 4.0 4.0 8.2

122 5,076 408,643 22,339 2,096,926 60.1 $93.87 $56.39 2.0 4.0 4.0 8.2

123 5,105 411,720 22,946 2,092,264 60.6 $91.18 $55.24 2.0 4.0 4.0 8.2

124 4,977 407,375 20,442 1,830,681 54.5 $89.55 $48.85 2.0 4.0 4.0 8.2

131 5,046 413,060 22,315 2,058,039 60.0 $92.23 $55.36 2.0 4.0 4.0 8.2

Texas REVPAR Growth

History & Projection

$0

$10

$20

$30

$40

$50

$60

$70

80

85

86

90

95

00

05 8 9

10

11

12

13

Year

RE

VP

AR

$'s

Projection

Begins

Page 20 of 119

City of Houston Market

REVPAR History & Forecast:

2. Over the past nine years, the City of Houston Market has shown an average annual real growth

of 0.7% (room-nights sold), annual growth of 3.1% in total room revenues, and a 0.8% annual

gain in REVPAR; note that the severe recession of 2009 depressed the long-term performance

numbers. Occupancy dropped 1.5% per year over the nine years. Supply rose by 2.2% per year, with

room rates rising 2.4% annually.

Over the past four years, a loss of 0.3% per year in demand was coupled with supply growth of

2.7% annually. Revenues over this period rose an average of 0.8% per year, while REVPAR slipped

1.8% annually. Room rates rose 1.1% per year. Occupancy decreased over the last four years by 2.9%

per year.

Over the last two years, demand dropped by 3.1% annually. Hotel results also were damaged by

a 3.4% annual increase in supply. These results caused occupancy to fall by 6.3% annually, and

REVPAR to drop 10.6% per year. Rates fell 4.7% per year, and yearly revenues slipped 7.6%.

Most recent history, the 12 months ending March 31, 2011, shows the results of slowed supply

growth and the recent recovery of the overall Texas economy. Real demand rose by 9.4%, rates

fell by just 0.9%, revenues rose by 8.6%; occupancy rose by 5.5%, as supply still grew by 3.8%.

REVPAR rose 4.6% for the average hotel. Revenues rose 11% for the state of Texas in the same

period. City of Houston market occupancy averaged 58%, versus 56% for the state.

Page 21 of 119

LODGING MARKET HISTORY: CITY OF HOUSTON

# Room1 Total

Htls nites Rooms

Year & and # sold Revenue %2 $3 $4 % Growth Vs Yr Ago

Quarter Mtls Rooms 000's $000's Occ. Rate RevPar Sply Real ADR $Rev

012 350 41,307 2,646 205,314 70.4 77.59 54.62

013 350 41,831 2,651 195,348 68.9 73.69 50.76

014 352 41,293 2,334 172,189 61.4 73.79 45.33

021 357 41,827 2,478 193,601 65.8 78.14 51.43

022 362 42,635 2,426 191,515 62.5 78.94 49.36 3.2 -8.3 1.7 -6.7

023 365 43,487 2,372 173,378 59.3 73.10 43.34 4.0 -10.5 -0.8 -11.2

024 373 42,843 2,284 168,308 58.0 73.69 42.70 3.8 -2.1 -0.1 -2.3

031 376 43,262 2,295 174,674 58.9 76.12 44.86 3.4 -7.4 -2.6 -9.8

032 376 43,197 2,303 173,135 58.6 75.17 44.04 1.3 -5.1 -4.8 -9.6

033 379 44,248 2,356 168,878 57.9 71.68 41.48 1.7 -0.7 -1.9 -2.6

034 385 43,954 2,296 166,441 56.8 72.50 41.16 2.6 0.5 -1.6 -1.1

041 389 45,260 2,554 213,880 62.7 83.76 52.51 4.6 11.3 10.0 22.4

042 390 45,400 2,448 187,291 59.2 76.51 45.33 5.1 6.3 1.8 8.2

043 392 46,108 2,443 184,357 57.6 75.46 43.46 4.2 3.7 5.3 9.2

044 397 45,621 2,369 173,705 56.4 73.33 41.39 3.8 3.2 1.1 4.4

051 401 45,884 2,573 198,030 62.3 76.97 47.95 1.4 0.8 -8.1 -7.4

052 399 45,667 2,654 210,495 63.9 79.30 50.65 0.6 8.4 3.6 12.4

053 401 46,000 2,845 224,117 67.2 78.78 52.96 -0.2 16.4 4.4 21.6

054 401 45,172 3,049 256,948 73.4 84.26 61.83 -1.0 28.7 14.9 47.9

061 402 45,075 2,941 256,967 72.5 87.38 63.34 -1.8 14.3 13.5 29.8

062 404 45,114 2,657 241,344 64.7 90.84 58.79 -1.2 0.1 14.6 14.7

063 406 46,163 2,703 232,672 63.6 86.08 54.78 0.4 -5.0 9.3 3.8

064 410 45,667 2,587 234,051 61.6 90.46 55.71 1.1 -15.2 7.4 -8.9

071 408 45,625 2,926 267,683 71.3 91.47 65.19 1.2 -0.5 4.7 4.2

072 413 45,767 2,776 275,431 66.7 99.20 66.13 1.4 4.5 9.2 14.1

073 415 46,743 2,763 255,628 64.2 92.53 59.44 1.3 2.2 7.5 9.9

074 423 46,274 2,684 262,209 63.1 97.68 61.59 1.3 3.8 8.0 12.0

081 420 46,818 2,879 293,216 68.3 101.83 69.59 2.6 -1.6 11.3 9.5

082 425 47,370 2,821 303,524 65.4 107.59 70.41 3.5 1.6 8.5 10.2

083 430 48,105 2,858 293,097 64.6 102.55 66.23 2.9 3.5 10.8 14.7

084 425 46,894 3,049 314,467 70.7 103.15 72.89 1.3 13.6 5.6 19.9

091 422 47,326 2,730 271,215 64.1 99.36 63.68 1.1 -5.2 -2.4 -7.5

092 428 47,704 2,409 245,007 55.5 101.71 56.44 0.7 -14.6 -5.5 -19.3

093 430 48,982 2,341 217,731 52.0 93.00 48.32 1.8 -18.1 -9.3 -25.7

094 434 49,163 2,374 217,740 52.5 91.74 48.14 4.8 -22.1 -11.1 -30.8

101 441 49,808 2,713 249,083 60.5 91.80 55.57 5.2 -0.6 -7.6 -8.2

102 447 50,402 2,649 258,257 57.7 97.50 56.31 5.7 10.0 -4.1 5.4

103 446 51,150 2,633 235,995 56.0 89.63 50.15 4.4 12.5 -3.6 8.4

104 453 50,666 2,521 236,066 54.1 93.64 50.64 3.1 6.2 2.1 8.4

111 451 50,790 2,962 278,926 64.8 94.18 61.02 2.0 9.2 2.6 12.0

CGR% Past 9yrs 2.2% 0.7% 3.1% -1.5% 2.4% 0.8%

“ 4yrs 2.7% -0.3% 0.8% -2.9% 1.1% -1.8%

“ 2yrs 3.4% -3.1% -7.6% -6.3% -4.7% -10.6%

“ 1yr 3.8% 9.4% 8.6% 5.5% -0.9% 4.6%




Page 22 of 119

3. In the future, overall City of Houston market occupancy is projected to return to the estimated

long-term equilibrium occupancy level of 61% by 2013. For the next nine years, real demand

(room nights sold) is projected at an average 3.2% growth rate, above the projected net supply

growth of 2.6%. With 3.3% average daily rate inflation, market gross revenues should gain 6.6%

annually during the nine year forecast.

These assumptions relative to demand, supply, and occupancy reflect the fact that over the past 20 years

overall occupancy in Texas has averaged about 59%, a level considered to be 'Equilibrium Occupancy'

state-wide. This fact considers that larger and more successful metro area markets generate higher

overall occupancy and REVPAR numbers than state averages, while rural areas lag these averages

(Source Strategies, Inc. database).

'Equilibrium Occupancy' is further explained by the fact that new investment money will eventually be

attracted to an under-supplied market until market occupancy falls and lower returns on capital are the

result. The equilibrium occupancy point is where net, new supply is being added at about the same rate

as growth in demand, and where return on investment is in balance with the cost of capital.

Fueled by moderate, steady demand growth, the City of Houston has room for appropriately-positioned

new development, added at similar rates to demand. Higher quality new lodging products at or above

mid-priced levels are performing very well in the market despite overall performance numbers being

moderated by the large number of older, obsolete, budget and independent hotels.

These older, existing competitors are highly vulnerable to the superior attractiveness of newly-built

lodging. This pattern can be seen in the success of chain operations at or above the mid-priced levels.

Given this growth scenario, room supply consequently grows from 50,752 rooms currently to 63,710 in

2019, 26% higher and representing 12,958 net new rooms (gross new openings, less closings).

Note that REVPAR growth for every individual hotel unit is well below the total revenue growth

of the market, with average REVPAR in our projection rising by 4.1% per annum over the next

five years (compared to 0.8% REVPAR average growth of the past nine years). Revenues are

forecast to grow by 6.6% per year on the strength of 3.4% growth in real demand and 3.1%

growth in price (room-rates). Occupancy over the next five years is expected to rise by 1% per

year, as supply rises 2.4% per year.

Page 23 of 119

If supply should grow 6,400 rooms over forecast (+10%), without demand also growing faster than

forecast, average individual hotel REVPAR would decline by 9% versus forecast, dropping from the

forecast REVPAR of $78 to $71 by 2019. Real growth for hotel rooms in the metro is expected to

slowly continue the recovery that began in the Second quarter of 2010.

Page 24 of 119

CITY OF HOUSTON PROJECTION

# Room1 Total

Htls nites Rooms



112 460 51,309 2,821 281,910 60.4 99.94 60.38 1.8 6.5 2.5 9.2

113 459 52,071 2,804 257,609 58.5 91.87 53.77 1.8 6.5 2.5 9.2

114 466 51,578 2,685 257,686 56.6 95.98 54.30 1.8 6.5 2.5 9.2

121 464 51,704 3,154 304,490 67.8 96.53 65.43 1.8 6.5 2.5 9.2

122 469 51,822 2,863 293,292 60.7 102.44 62.19 1.0 1.5 2.5 4.0

123 468 52,591 2,846 268,010 58.8 94.17 55.39 1.0 1.5 2.5 4.0

124 475 52,094 2,725 268,090 56.9 98.38 55.94 1.0 1.5 2.5 4.0

131 473 52,221 3,202 316,784 68.1 98.95 67.40 1.0 1.5 2.5 4.0

132 488 53,377 2,949 312,664 60.7 106.02 64.37 3.0 3.0 3.5 6.6

133 487 54,169 2,931 285,712 58.8 97.46 57.33 3.0 3.0 3.5 6.6

134 494 53,657 2,807 285,797 56.9 101.82 57.90 3.0 3.0 3.5 6.6

141 492 53,788 3,298 337,708 68.1 102.41 69.76 3.0 3.0 3.5 6.6

142 508 54,978 3,038 333,316 60.7 109.73 66.62 3.0 3.0 3.5 6.6

143 506 55,794 3,019 304,583 58.8 100.87 59.34 3.0 3.0 3.5 6.6

144 514 55,266 2,891 304,674 56.9 105.39 59.92 3.0 3.0 3.5 6.6

151 512 55,402 3,396 360,013 68.1 106.00 72.20 3.0 3.0 3.5 6.6

152 528 56,628 3,129 355,331 60.7 113.57 68.95 3.0 3.0 3.5 6.6

153 527 57,468 3,110 324,701 58.8 104.41 61.41 3.0 3.0 3.5 6.6

154 535 56,924 2,978 324,798 56.9 109.08 62.02 3.0 3.0 3.5 6.6

161 533 57,064 3,498 383,792 68.1 109.71 74.73 3.0 3.0 3.5 6.6

162 549 58,326 3,223 378,801 60.7 117.55 71.37 3.0 3.0 3.5 6.6

163 548 59,192 3,203 346,148 58.8 108.06 63.56 3.0 3.0 3.5 6.6

164 557 58,632 3,067 346,251 56.9 112.89 64.19 3.0 3.0 3.5 6.6

171 554 58,775 3,603 409,141 68.1 113.54 77.35 3.0 3.0 3.5 6.6

172 572 60,076 3,319 403,821 60.7 121.66 73.87 3.0 3.0 3.5 6.6

173 570 60,968 3,299 369,011 58.8 111.84 65.79 3.0 3.0 3.5 6.6

174 579 60,391 3,159 369,121 56.9 116.85 66.44 3.0 3.0 3.5 6.6

181 577 60,539 3,711 436,165 68.1 117.52 80.05 3.0 3.0 3.5 6.6

182 595 61,879 3,419 430,493 60.7 125.92 76.45 3.0 3.0 3.5 6.6

183 593 62,797 3,398 393,384 58.8 115.76 68.09 3.0 3.0 3.5 6.6

184 603 62,203 3,254 393,501 56.9 120.93 68.76 3.0 3.0 3.5 6.6

191 600 62,355 3,823 464,974 68.1 121.63 82.85 3.0 3.0 3.5 6.6

192 619 63,735 3,521 458,927 60.7 130.33 79.13 3.0 3.0 3.5 6.6

193 617 64,681 3,500 419,367 58.8 119.81 70.47 3.0 3.0 3.5 6.6

194 627 64,069 3,351 419,492 56.9 125.17 71.17 3.0 3.0 3.5 6.6

201 624 64,226 3,937 495,685 68.1 125.89 85.75 3.0 3.0 3.5 6.6

202 644 65,647 3,627 489,239 60.7 134.89 81.90 3.0 3.0 3.5 6.6

203 642 66,621 3,605 447,066 58.8 124.00 72.94 3.0 3.0 3.5 6.6

204 652 65,991 3,452 447,199 56.9 129.55 73.66 3.0 3.0 3.5 6.6

211 650 66,152 4,056 528,425 68.1 130.30 88.76 3.0 3.0 3.5 6.6

212 670 67,616 3,736 521,554 60.7 139.61 84.76 3.0 3.0 3.5 6.6

213 668 68,620 3,714 476,595 58.8 128.34 75.49 3.0 3.0 3.5 6.6

214 679 67,971 3,556 476,737 56.9 134.08 76.24 3.0 3.0 3.5 6.6

221 676 68,137 4,177 563,328 68.1 134.86 91.86 3.0 3.0 3.5 6.6

9 yr CGR % 2.6% 3.2% 6.6% 0.6% 3.3% 3.9%

“ 5yrs 2.4% 3.4% 6.6% 1.0% 3.1% 4.1%

HISTORY

CGR% Past9yrs 2.2% 0.7% 3.1% -1.5% 2.4% 0.8%

“ 4yrs 2.7% -0.3% 0.8% -2.9% 1.1% -1.8%

“ 1yr 3.8% 9.4% 8.6% 5.5% -0.9% 4.6%

Room-nights sold (derived from est. rate and actual revenues) 2. Occupancy nights sold divided by


$ Revenue per available room per day (room sales per day.

Page 25 of 119

LOCAL DOWNTOWN MARKET PERFORMANCE

4. The subject hotel’s local market consisting of Downtown Houston11 currently generates a

REVPAR of $93, over double the Texas average, and very near the $86 for the comparable Texas

High Priced Market12 areas:

PERIOD: TWELVE MONTHS ENDING MARCH 31, 2011

HOTEL MARKET: DOWNTOWN HOUSTON ZIPCODES

# 1 EST. $ EST.

#* RMS % RNS % AMT. % EST2 $ $

BRAND HTL 000S RMS 000S RNS 000s AMT %OCC RATE RPAR

FOURSEAS 1 .4 7.5 95 7.7 20,778 11.3 64.4 218.66 140.90

ZA ZA 1 .3 5.8 79 6.3 14,525 7.9 68.4 184.70 126.33

TOT LUXURY 2 .7 13.3 174 14.0 35,303 19.3 66.2 203.29 134.52

HILTON 1 1.2 22.1 270 21.8 41,885 22.8 61.6 155.21 95.63

HYATT 1 1.0 18.2 224 18.1 29,806 16.3 62.5 132.86 82.99

TOT UPSCALE 2 2.2 40.3 494 39.9 71,691 39.1 62.0 145.06 89.93

RESIDENCE 2 .3 5.4 71 5.7 8,820 4.8 67.2 124.00 83.30

OTH SUITE 1 .3 5.8 71 5.8 11,414 6.2 62.4 159.65 99.59

TOT SUITES 3 .6 11.2 143 11.5 20,234 11.0 64.7 141.87 91.77

COURTYARD 2 .3 5.4 62 5.0 8,322 4.5 58.7 133.84 78.59

CROWNPLZA 1 .3 4.8 57 4.6 7,522 4.1 60.7 131.13 79.57

DOUBLTREE 1 .4 6.5 87 7.0 13,387 7.3 68.2 153.60 104.79

TOT MID/UPS 4 .9 16.6 207 16.7 29,231 15.9 63.0 141.42 89.07

BEST WEST 1 .1 1.4 17 1.4 1,514 .8 60.4 90.40 54.59

HOLID EXP 1 .1 2.1 27 2.2 3,313 1.8 66.4 122.04 81.04

TOT LTD SVE 2 .2 3.5 44 3.5 4,827 2.6 64.0 109.97 70.35

TOTAL CHAINS 13 4.6 84.8 1,061 85.6 161,285 88.0 63.3 152.00 96.18

INDEPENDENTS

$100+ ADR 4 .5 9.7 113 9.1 16,205 8.8 59.0 143.07 84.41

$60-99ADR 1 .3 4.9 59 4.7 5,478 3.0 60.6 93.31 56.52

LT $60ADR 1 .0 .6 6 .5 343 .2 53.3 55.15 29.37

TOT INDEP 6 .8 15.2 178 14.4 22,026 12.0 59.3 123.61 73.28

TOTAL MARKET 19 5.4 100.0 1,239 100.0 183,311 100 62.7 147.92 92.70

1. Room-nights sold (derived from est. rate and actual revenues) 2. Occupancy nights sold divided by nights available for sale.

11 Zipcodes: 77002/003/005/010/019. 12 See Exhibit IV

Page 26 of 119

Local Market REVPAR History & Forecast:

5. Over the past nine years, the Downtown Houston market has shown an average annual real

growth of 7.9% (room-nights sold), annual growth of 8.6% in total room revenues, and a 0.1% annual

loss in REVPAR. Supply rose by 8.7% per year (faster than demand), with room rates rising 0.6%

annually. Occupancy fell 0.7% per year over the nine years. Given the recent recession and the addition

of a huge, publicly sponsored convention center hotel, these are fairly strong performance numbers over

the past 9 years.

Over the past four years, an annual gain of 1.1% per year in demand was coupled with a gain of

in supply of just 1.5% annually. Revenues over this period rose an average of 2.3% per year, while

REVPAR rose 0.8% annually. Room rates rose 1.2% per year. Occupancy fell over the last four years

by 0.4% per year.

Over the last two years, demand fell by 1.5% annually, and supply rose by a slight 0.1% annually.

These results caused occupancy to fall by 1.5% annually, followed by a REVPAR loss averaging 5.2%

per year. Rates fell 3.7% per year, and yearly revenues also fell 5.2% per year.

Most recent history, the 12 months ending March 31, 2011, shows a very strong recovery. Real

demand (room nights sold) rose 13.6%. Rates still slid slightly, by 0.9%, while revenues rose by

12.8% and occupancy rose by 13.4%. With a supply increase of only 0.2%, REVPAR rose 12.5%

for the average hotel. Market occupancy averaged 63% versus 56% for the state in the 12 months

ending March 31, 2011.

Page 27 of 119

LODGING MARKET: DOWNTOWN HOUSTON

# Room1 Total

Htls nites Rooms



012 8 2,594 161 23,530 68.0 146.53 99.68

013 8 2,520 150 19,779 64.5 132.33 85.31

014 9 2,538 152 20,605 65.0 135.83 88.25

021 8 2,585 163 23,592 70.2 144.44 101.40

022 8 2,585 150 22,415 63.9 149.11 95.29 -0.3 -6.4 1.8 -4.7

023 8 2,585 134 18,159 56.1 136.00 76.36 2.6 -10.7 2.8 -8.2

024 9 2,653 141 19,163 57.9 135.55 78.51 4.5 -6.8 -0.2 -7.0

031 10 2,838 138 19,432 54.1 140.71 76.08 9.8 -15.4 -2.6 -17.6

032 11 3,013 128 17,994 46.8 140.20 65.63 16.6 -14.6 -6.0 -19.7

033 12 3,437 143 18,893 45.1 132.39 59.75 33.0 6.9 -2.7 4.0

034 14 3,724 160 20,377 46.6 127.60 59.48 40.4 12.9 -5.9 6.3

041 16 4,902 258 36,530 58.4 141.84 82.80 72.7 86.5 0.8 88.0

042 18 5,083 222 28,069 48.0 126.29 60.68 68.7 73.3 -9.9 56.0

043 18 5,225 250 31,657 52.0 126.56 65.86 52.0 75.3 -4.4 67.6

044 19 5,149 238 29,581 50.2 124.38 62.45 38.3 48.9 -2.5 45.2

051 19 5,385 269 33,842 55.4 125.97 69.83 9.9 4.3 -11.2 -7.4

052 19 5,381 281 36,008 57.3 128.34 73.53 5.9 26.2 1.6 28.3

053 19 5,487 293 36,199 58.0 123.73 71.71 5.0 17.0 -2.2 14.3

054 18 5,070 311 42,033 66.7 135.16 90.11 -1.5 30.8 8.7 42.1

061 18 5,077 336 46,707 73.5 138.99 102.22 -5.7 25.0 10.3 38.0

062 18 5,073 292 42,355 63.3 145.05 91.75 -5.7 4.1 13.0 17.6

063 18 5,180 294 40,047 61.7 136.18 84.03 -5.6 0.5 10.1 10.6

064 18 5,070 280 39,641 60.0 141.65 84.99 0.0 -10.0 4.8 -5.7

071 18 5,077 321 45,137 70.2 140.75 98.78 0.0 -4.6 1.3 -3.4

072 19 5,138 304 46,185 65.0 151.95 98.78 1.3 4.1 4.8 9.0

073 19 5,487 300 42,478 59.5 141.42 84.15 5.9 2.1 3.8 6.1

074 19 5,377 320 47,952 64.6 150.03 96.94 6.1 14.2 5.9 21.0

081 19 5,384 342 54,235 70.6 158.44 111.93 6.0 6.7 12.6 20.2

082 19 5,380 327 54,599 66.8 166.95 111.52 4.7 7.6 9.9 18.2

083 19 5,487 322 51,067 63.8 158.54 101.16 0.0 7.2 12.1 20.2

084 19 5,377 320 51,252 64.7 160.09 103.60 0.0 0.2 6.7 6.9

091 19 5,384 307 46,891 63.4 152.56 96.77 0.0 -10.2 -3.7 -13.5

092 19 5,380 262 42,059 53.5 160.48 85.91 0.0 -19.8 -3.9 -23.0

093 19 5,487 239 34,283 47.3 143.69 67.91 0.0 -25.9 -9.4 -32.9

094 19 5,377 273 39,588 55.3 144.77 80.03 0.0 -14.6 -9.6 -22.8

101 19 5,384 317 46,649 65.3 147.38 96.27 0.0 3.0 -3.4 -0.5

102 19 5,388 302 46,742 61.6 154.72 95.33 0.1 15.3 -3.6 11.1

103 19 5,495 294 41,423 58.2 140.87 81.94 0.1 23.3 -2.0 20.8

104 20 5,395 292 42,681 58.8 146.24 85.99 0.3 6.8 1.0 7.8

111 19 5,392 351 52,465 72.4 149.36 108.11 0.1 11.0 1.3 12.5

CGR % Past 9yrs 8.7% 7.9% 8.6% -0.7% 0.6% -0.1%

“ 4yrs 1.5% 1.1% 2.3% -0.4% 1.2% 0.8%

“ 2yrs 0.1% -1.5% -5.2% -1.5% -3.7% -5.2%

“ 1yr 0.2% 13.6% 12.8% 13.4% -0.9% 12.5%

Wider Market History

CGR% Past 9yrs 2.2% 0.7% 3.1% -1.5% 2.4% 0.8%

“ 4yrs 2.7% -0.3% 0.8% -2.9% 1.1% -1.8%




Page 28 of 119

6. Overall market occupancy is projected to continue the trend of the past year as market

occupancy rises through 2013, before falling back to an equilibrium occupancy level of 63% by

2016. This occurs as the local market returns to more standard, historical levels of growth, and

slow, new supply absorbs the high level of demand that the area has seen recently.

REVPAR should grow 2.8% annually over the next nine years, coupled with room revenue growth

of 5.6% annually, and 2.8% annual rate increases and flat occupancy. Over the next nine years,

real demand (room nights sold) is projected at an average 2.8% growth rate, with supply also rising

2.8%.

These assumptions relative to demand, supply, and occupancy reflect the fact that over the past 20 years

overall occupancy in Texas has averaged about 60%, a level considered to be 'Equilibrium Occupancy'

state-wide. This fact considers that larger and more successful metro area markets generate higher

overall occupancy and REVPAR numbers than state averages, while rural and Interstate highways areas

lag these averages (Source Strategies, Inc. database).

'Equilibrium Occupancy' is further explained by the fact that new investment money will eventually be

attracted to an under-supplied market until market occupancy falls and lower returns on capital are the

result. The equilibrium occupancy point is where net, new supply is being added at about the same rate

as growth in demand, and where return on investment is in balance with the cost of capital.

The Downtown Houston Area market has room for selectively-positioned new development.

Higher quality new lodging products at or above mid-priced levels are performing very well in the

market despite overall performance numbers being moderated by the large number of older and obsolete

budget inns. These older, existing competitors are highly vulnerable to the superior attractiveness of

newly-built, major-branded lodging. This pattern can be seen in the success of chain operations at or

above the mid-priced levels.

Given our growth assumptions, room supply consequently grows from 5,418 rooms currently to

6,928 by 2019, 28% higher and representing 1,510 net new rooms (gross new openings, less

closings).

Page 29 of 119

Note that REVPAR growth for every individual hotel unit is well below the total revenue growth

of the market, with average REVPAR in our projection rising by 2.6% per annum over the next

five years (compared to 0.8% average annual REVPAR growth over the past four years, and

12.5% in the past year).

Revenues are forecast to grow at 5.7% per year on the strength of 3% growth in real demand, and 2.6%

growth in price (room-rates). Occupancy over the next five years is expected to remain flat, a`s supply

also rises by 3% per year.

If supply should grow 700 rooms over forecast (+10%), without demand also growing faster than

forecast, average individual hotel REVPAR would decline by 9% versus forecast, dropping from the

forecast REVPAR of $117 to $107 in 2019.

7. Actual market results just received for the Second quarter of 2011 show a more robust

recovery in downtown Houston than initially predicted, and may indicate that the market

projection overleaf may be somewhat conservative:

# Room Total

Htls nites Rooms

and # sold Revenue % $ $ % Growth Vs Yr Ago

2d Qtr 2011 Mtls Rooms 000's $000's Occ. Rate RevPar Sply Real ADR $Rev

Actual 20 5,613 333 55,645 65.1 167.35 108.94 4.2 10.3 8.2 19.0

Predicted 20 5,393 317 49,814 64.6 157.04 101.50 0.1 5.0 1.5 6.6

Actual/Predicted +4.1% +4.1% +0.8% +6.6% +7.3%

Page 30 of 119

LODGING MARKET PROJECTION: DOWNTOWN HOUSTON

# Room1 Total

Htls nites Rooms



112 20 5,393 317 49,814 64.6 157.04 101.50 0.1 5.0 1.5 6.6

113 20 5,500 309 44,154 61.0 142.98 87.25 0.1 5.0 1.5 6.6

114 20 5,400 306 45,494 61.7 148.43 91.57 0.1 5.0 1.5 6.6

121 19 5,397 334 50,594 68.7 151.60 104.15 0.1 -5.0 1.5 -3.6

122 21 5,474 328 52,847 65.9 160.97 106.08 1.5 3.5 2.5 6.1

123 20 5,583 320 46,842 62.2 146.56 91.20 1.5 3.5 2.5 6.1

124 21 5,481 317 48,264 62.9 152.14 95.71 1.5 3.5 2.5 6.1

131 20 5,478 344 53,415 69.7 155.39 108.34 1.5 3.0 2.5 5.6

132 23 5,912 338 56,065 62.9 165.80 104.21 8.0 3.0 3.0 6.1

133 22 6,030 329 49,694 59.3 150.95 89.58 8.0 3.0 3.0 6.1

134 23 5,920 327 51,203 60.0 156.71 94.01 8.0 3.0 3.0 6.1

141 21 5,917 361 57,768 67.8 160.05 108.49 8.0 5.0 3.0 8.2

142 24 6,090 348 59,479 62.9 170.77 107.33 3.0 3.0 3.0 6.1

143 23 6,211 339 52,721 59.3 155.48 92.27 3.0 3.0 3.0 6.1

144 24 6,098 337 54,321 60.0 161.41 96.83 3.0 3.0 3.0 6.1

151 22 6,094 372 61,286 67.8 164.85 111.74 3.0 3.0 3.0 6.1

152 24 6,242 359 63,102 63.2 175.89 111.09 2.5 3.0 3.0 6.1

153 24 6,366 349 55,931 59.6 160.15 95.50 2.5 3.0 3.0 6.1

154 24 6,250 347 57,629 60.3 166.25 100.23 2.5 3.0 3.0 6.1

161 23 6,246 383 65,019 68.1 169.80 115.65 2.5 3.0 3.0 6.1

162 25 6,398 368 66,619 63.2 181.17 114.43 2.5 2.5 3.0 5.6

163 24 6,525 358 59,050 59.6 164.95 98.37 2.5 2.5 3.0 5.6

164 25 6,406 355 60,842 60.3 171.24 103.23 2.5 2.5 3.0 5.6

171 24 6,403 392 68,644 68.1 174.89 119.12 2.5 2.5 3.0 5.6

172 26 6,558 377 70,334 63.2 186.60 117.86 2.5 2.5 3.0 5.6

173 25 6,688 367 62,342 59.6 169.90 101.32 2.5 2.5 3.0 5.6

174 26 6,566 364 64,234 60.3 176.38 106.33 2.5 2.5 3.0 5.6

181 24 6,563 402 72,470 68.1 180.14 122.70 2.5 2.5 3.0 5.6

182 26 6,722 386 74,255 63.2 192.20 121.39 2.5 2.5 3.0 5.6

183 25 6,855 376 65,817 59.6 175.00 104.36 2.5 2.5 3.0 5.6

184 26 6,731 373 67,815 60.3 181.67 109.52 2.5 2.5 3.0 5.6

191 25 6,727 412 76,511 68.1 185.54 126.38 2.5 2.5 3.0 5.6

192 27 6,890 396 78,394 63.2 197.97 125.04 2.5 2.5 3.0 5.6

193 26 7,027 386 69,487 59.6 180.25 107.49 2.5 2.5 3.0 5.6

194 26 6,899 383 71,596 60.3 187.12 112.80 2.5 2.5 3.0 5.6

201 25 6,895 423 80,776 68.1 191.11 130.17 2.5 2.5 3.0 5.6

202 27 7,062 406 82,765 63.2 203.91 128.79 2.5 2.5 3.0 5.6

203 26 7,202 395 73,360 59.6 185.65 110.71 2.5 2.5 3.0 5.6

204 27 7,071 392 75,587 60.3 192.73 116.19 2.5 2.5 3.0 5.6

211 25 7,067 433 85,279 68.1 196.84 134.07 2.5 2.5 3.0 5.6

212 28 7,239 416 87,379 63.2 210.03 132.65 2.5 2.5 3.0 5.6

213 26 7,382 405 77,450 59.6 191.22 114.04 2.5 2.5 3.0 5.6

214 27 7,248 402 79,801 60.3 198.51 119.67 2.5 2.5 3.0 5.6

9 yr CGR % 2.8% 2.8% 5.6% 0.0% 2.8% 2.8%

“ 5yrs 3.0% 3.0% 5.7% 0.0% 2.6% 2.6%

HISTORY

CGR% Past 9yrs 8.7% 7.9% 8.6% -0.7% 0.6% -0.1%

“ 4yrs 1.5% 1.1% 2.3% -0.4% 1.2% 0.8%

“ 1yr 0.2% 13.6% 12.8% 13.4% -0.9% 12.5%




Page 31 of 119

8. A graph of the REVPAR history and projection for the local market shows the strong growth

in the area:

Page 32 of 119

9. The occupancy projection for the Downtown Houston market shows the recent recession, as

well as the convention hotel which opened in 2003. We have moved the market back to the

estimated long term equilibrium occupancy by 2016:

Page 33 of 119

10. Graphing the Room Nights Sold history and projection also shows the reasonable nature of

the expectations for the local market, given a typical level of growth and investment expected in the

area:

Page 34 of 119

PROJECT REVPAR - DEVELOPMENT OF REVPAR INDICES

Within the above market REVPAR forecast, the expected performance of the proposed hotel is

based on six factors. All six factors are independent and modify the market's projected average

REVPAR, reflecting the subject property's particular characteristics.

First, what is the hotel’s Base Value? Base Value is the effect of the Brand in generating demand,

including the subject brand’s specified product and service quality levels. Second, what is the effect of

the brand's overall Age - the combined age of all the brand’s hotels - on the brand’s average

performance? Third, what is the effect of the specific project's Size, or room-count, on results?

Fourth, are there any ‘Other’ adjustments needed to account for various factors, including under- or

over-supply of the product's Segment in which the project will compete, and for other possible reasons?

Fifth, what is the effect of the normal Life Cycle patterns on the project (i.e. the effect of the project's

Newness compared to older competition on their unstoppable way towards obsolescence)? And sixth,

what is the likely influence of the selected Site on results?

1. The Base Value factor sets property type/brand/product quality for the JW Marriott Houston

Downtown at 129%, 15% higher than the 112% average Marriott Hotel operating in Texas

Highest Priced Markets; Highest Priced market details are shown in Exhibit IV.13

This valuation is initially based on the REVPAR performance of the 14 Marriott Hotels currently

operating in the Exhibit IV markets. Operating in markets similar to Downtown Houston, these 14

Marriott Hotels produced $231,481,000 room revenues from 6,620 rooms and commanded an 11.6%

dollar market share, the largest of any brand in the year ending March 31, 2011. Most importantly, they

produced a REVPAR of $95.80, compared to the Exhibit IV market average of $85.73, as follows:

$95.80/ $85.73 = 1.12 or 112% For Basic Marriott Hotels

13 The Exhibit IV hotel market here incorporates Texas’ highest-priced markets which contain 259 hotels, 63,800 rental units generating an average $136.23 daily rate, a 62.9% occupancy and an $85.73 REVPAR in the 12 months ending March 31, 2011. This large market was defined to closely mimic the local

downtown Houston market situation/mix, and to provide a large market sample that reliably supports the prediction of specific brand performance. Hotels

categorized as Budget and Low-priced, extended stay hotels, and hotels priced under $65 are excluded from Exhibit IV.

Page 35 of 119

These 14 Marriott hotels thereby indicate that an additional Marriott Hotel opening should generate

112% of the market average REVPAR after a normal ramp-up and stabilization, and assuming the other

five adjustment factors are average. This 112% Base Value derivation for a Marriott Hotel (not a ‘JW’)

is firmly grounded in a High Priced Texas market; a further adjustment is necessary to reflect the power

of the JW name and quality upgrade.

The 15% premium to the basic Marriott Hotel name, generated by the ‘JW Marriott Hotel’ name

and quality, has been developed by examining the performance of JW Marriott Hotels nationwide.

This is a conservative premium.

After searching the entire U.S. inventory of JW Marriott hotels, we found two JW’ of similar size

to the proposed Houston JW Marriott Hotel Downtown: one is located in a major market, and a

second in a smaller metro. The two cases below indicate that the 129% Base Value used in our

Houston JW Base Value derivation might actually be up to 10% higher. The REVPAR

performance of these two hotels was developed and compared to their local competition, allowing the

calculation of REVPAR differential between them and other known national brands. This allowed

applying the differentials found below to the same brands in our Exhibit IV market in order to determine

the likely performance of a JW Marriott in Texas.

Major Market Case: JW Marriott index calculates at 140:

The JW Marriott REVPAR in this case exceeded the local Hyatt REVPAR by 20%. The Texas

Exhibit IV Hyatt REVPAR index of 117 is increased by this 20%; this would generate an REVPAR

index of 140 for a JW Marriott in Texas (same size as the proposed Houston JW).

12 Months End 3/31/11

Major Market # % Est P12 Mos Room

Competitive Set Rooms rooms Open Index REVPAR Revenues

JW Marriott 337 12.4% 1987 133 $167.17 $20,562,746

Hyatt Hotel 685 25.3% 1973 111 $139.94 $34,987,923

Small Brand Name 591 21.8% 1907 115 $144.98 $31,274,469

Independent 372 13.7% 1915 115 $144.98 $19,685,452

Small Brand Name 360 13.3% 1989 115 $144.98 $19,050,438

Omni 362 13.4% 2002 111 $139.94 $18,489,968

Average $145.96

Total 2707 100.0% $144,216,508

Total Market: 15958 $126.07

Page 36 of 119

Minor Market Case: JW Marriott index calculates at 134:

The JW Marriott REVPAR in this case exceeded the local Radisson Hotel REVPAR by 25% in

the past 12 months. The Texas Exhibit IV Radisson REVPAR index of 107 is increased by this 25%;

this would theoretically generate a REVPAR index of 134 for a JW Marriott Houston.

Minor Market # % Est P12 Mos Room

Competitive Set Rooms rooms Open Index REVPAR Revenues

JW Marriott 340 26.5% 2007 137 $85.89 $10,658,949

Radisson Hotel 341 26.6% 1975 110 $68.90 $8,576,136

Independent 150 11.7% 1988 125 $78.30 $4,286,925

Independent 308 24.0% 1989 150 $93.96 $10,562,983

Small Brand Name 143 11.2% 2004 125 $78.30 $4,086,869

Average $81.75

Total 1282 100.0% $38,253,278

Total Market:

Upscale Chains 2588 $62.64 $59,171,000

2. The second adjustment factor, Brand Aging, is set at 1.10 (110%), causing a relatively minor

performance increase in the subject’s ultimate REVPAR index projection. This factor adjusts for

the effect of the average age of all existing hotels of this brand on the brand's current

performance.14

Marriott Hotels in Texas High Priced markets were opened on average in 1989 and are relatively newer

compared to most other full-service, Upscale and Luxury segment hotels. The 14 Marriott Hotels in

these markets were built in 1989 on average and consequently perform worse than a new Marriott Hotel

would perform due to the fact that they are 22 years old, with all the proven negatives to performance as

a hotel ages (see item #5 for the effect of age on performance, and full study in Exhibit VI).

Although the Marriott Hotel brand aging factor actually calculates at 120, we have conservatively

cut this to 110 because the average age of JW Marriott hotels is an unknown.

14 Point #5, below, adjusts for the physical life-cycle of the subject property, a different and additional consideration.

Page 37 of 119

The brand age adjustment, or life-cycle adjustment, for Marriott Hotels, JW Marriott Hotels and other

brands examined include:

BRAND AGING: TEXAS HIGH PRICED MARKETS

Average Brand Aging

Brand Opening Adjustment

JW Marriott – estimate 1994 1.10

Marriott Hotels 1989 1.20

Hilton Hotels 1986 1.26

Hyatt Hotels 1985 1.28

Four Seasons 1984 1.30

Doubletree Hotels 1981 1.36

Crowne Plaza 1981 1.36

3. The property Size factor - reflecting rental unit ‘room’ count - calls for a positive +19%

performance adjustment for this property, or 119% (1.19). The average Marriott Hotel in the

Exhibit IV market has 473 rooms, 57% more than the proposed JW Marriott Houston Downtown of 302

rental units. The size factor assigns a premium if the property is smaller than average and a penalty to

the property if it is larger than average.

The size adjustment is necessary because demand is not affected by the number of rental rooms

offered, as the individual consumer only needs one room: most customers do not care whether a

hotel offers 100, 125 or 150 rooms and their purchasing behavior will be the same regardless of how

many rooms the property offers. An exception here would be a convention hotel, where the bulk of

guests are attending conferences in the hotel.

Keeping a project conservatively sized assures a higher per-unit revenue yield, particularly in a

competitive markets like the local area. The highly-positive effect on revenues and return on capital due

to building small, and not 'over-sizing' projects is best explained by the following study excerpt, a study

that can be replicated with any brand, in almost any situation. The net effect of building small is to run

higher occupancy and rate, thereby increasing brand REVPAR by building a below-average number of

rental units. The full study is shown in Exhibit V.

Page 38 of 119

A STUDY OF THE EFFECT OF HOTEL SIZE ON PERFORMANCE

IN THE TEXAS HOTEL INDUSTRY

THE CASE FOR DOWNSIZING NEW HOTELS15

Source Strategies, Inc., has long contended that the number of rooms a developer offers in a new

property is one of the key factors in determining a venture's relative success or failure. It is every bit as

important to size a hotel project properly as it is to select the appropriate brand, and to have chosen to

develop in a suitable market and location.

For the purposes of this study, we analyzed two separate samplings of hotels. We first looked at

Comfort Inns across Texas as a selected brand sampling; then we examined all branded hotels built

during a set period of time for a wider sampling.

1) COMFORT INN - SIZING AND ITS IMPACT ON PERFORMANCE

In our initial analysis, we selected a group [55 properties] of Texas Comfort Inn branded properties

ranging in size from 36 to 75 rooms. The following chart of performance statistics clearly illustrates the

fact that on average, the smaller property will perform better, in terms of REVPAR and occupancy, than

a larger property of the same brand:

12 Months Ending September 30, 1999

Rooms Occupancy Rate REVPAR

36-40 66.9 55.25 36.95

41-45 65.3 57.34 37.45

46-50 66.5 57.38 38.17

51-55 62.8 56.02 35.20

56-60 61.8 54.26 33.55

61-65 56.6 55.33 31.33

66-70 44.6 45.71 20.41

71-75 43.8 44.20 19.38

Combined: 52 63.2 55.46 35.03

Further, properties with lower room counts were clearly able to sustain a higher level of occupancy.

Average occupancy ranged from 66.9% for properties of 36-40 rooms, downward to a much lower

43.8% average occupancy for properties in the 71-75 room size bracket.

15 Analyzed and compiled by Douglas W. Sutton and Bruce H. Walker.

Page 39 of 119

The above chart and graph clearly illustrate that developers often miss the mark, building more rooms

than 'optimum'. 'Optimum' is defined as generating the highest return on invested capital, and is closely

tied to occupancy and REVPAR. Analyzing the above data provides a measure of the effect of over-

building. For the typical range of rooms for Comfort Inn projects occupancy dropped 23 points (a full

35%) from 67% to 44% as room counts escalated.

2) ALL BRANDED HOTELS - SIZING AND ITS IMPACT ON PERFORMANCE

In our second analysis, we looked at a sampling [91 properties] of Texas branded hotels of less than 135

rooms which were constructed from 1970-1975. For our analysis we examined performance results

from the year 1985 when all subject hotels were 10 to 15 years old, to well into their aging life cycles.

The following table of performance statistics from 1985 for branded properties throughout Texas clearly

illustrates the downward curve, with a pronounced and methodical erosion of performance as room

counts increased:

Page 40 of 119

# of Hotels Rooms Occupancy Rate REVPAR

2 00-44 70.0 37.88 26.50

3 45-59 73.9 36.13 26.71

7 60-74 66.8 31.10 20.77

14 75-89 62.7 31.65 19.86

29 90-104 60.9 32.42 19.75

16 105-119 57.8 26.25 15.18

20 120-134 55.5 29.35 16.28

Combined: 91 98 59.8 30.34 18.14

The following graph provides a clear picture of descending performance as room counts increase.

Average occupancy ranged from 70% for properties of 44 rooms or less, downward to a much lower

55.5% average occupancy for properties in the 120-134 size bracket, after peaking at 73.9% in the 45-59

size range.

The data is clear: in almost every case small hotels outperform larger ones. Common sense

explains this occurrence: a successful 150 room hotel will inevitably prompt the development of one or

more new, small hotels of similar quality in the immediate area. In a competitive market environment,

the smaller hotel has a distinct advantage and wins - almost every time. The fact remains that if one

builds a smaller than average property for a given brand, results should be improved over the average:

the converse of this fact is also true.

Page 41 of 119

4. The Segment or ‘Other’ adjustment factor is set at 85% (.85), a significant depressant to hotel

performance. We have assumed conservatively that it will be the age equivalent of a hotel built in

1990. The hotel will be developed in a structure originally constructed about 1910, the early 20th

century. Since it is an adaptation of an office building, it cannot be a ‘perfect’ design for a hotel, by

definition. At the same time, there are other aspects of the project that make this adjustment factor

perhaps too conservative:

First, the hotel is offering 62 multi-room suites of about 550 square feet, clearly luxurious in terms

of an industry where 320 square feet is the ‘standard’ (the original Holiday Inn room bay of 12 by

27 feet). This amounts to almost 21% of the total room stock, towards the high end for this type of

hotel. Further, the 240 ‘regular’ rooms will average an ample 350 square feet.

Second, the inclusion of a ‘high-end’ fine restaurant, operated by a chef with a top reputation, is a

plus not normally associated with Upscale and Luxury hotels. While hard to measure, the additional

drawing power of a superior restaurant is regularly proven in the industry. For instance, the new

Embassy Suites Riverwalk in San Antonio features Luke’s, which immediately moved into the small

circle of high end restaurants attractive to guests and locals alike.

Third, and perhaps most important, the designated management of the proposed JW Marriott

Hotel is Pearl Hospitality of Fort Worth, one of the most successful developer and operator noted

in our 25 years of experience as hotel consultants. The evidence of their success is clear, but the

Embassy Lubbock and the Embassy Suites Fort Worth are noteworthy examples. Comparing the

REVPAR of each to the metro averages in the First quarter of 2011 shows the Lubbock Embassy at

263% of market ($103.60 vs. $39.40 metro market average), and the Fort Worth Embassy at Embassy at

180% of market ($103.60 vs. $57.47 metro market average).

Given the above, we may have understated the likely performance of the JW Marriott Downtown

Houston as developed and operated by Pearl Hospitality.

5. Fifth, the Aging Adjustment factor typically reflects the standard hotel life cycle: 92% (-8%) in

Year I; 107% for Year II; 112% for Years III through V; followed by a 1.67% annual decline in

the REVPAR index starting in Year VI.

Page 42 of 119

The aging factor mirrors extensive studies of hotel life-cycles conducted by Source Strategies, Inc.'s

principal, Bruce Walker, when heading the Holiday Inn Corporation's strategic planning department

(1979-83).

It also reflects recent research on the life cycles of 25,000 Texas hotel rooms, developed from 1980

through 1982, and then again in 1990 through 1992, with each group's performance versus the market

tracked to the present (MarketShare newsletter, "The Hotel Life Cycle - It's Very Real" published

September 1994).

6. The last factor, Site, is set at 1.05 (105%), or slightly above average in the downtown Houston

market (as compared to the total Houston Metro market). The site values for this property, as well

as for nearby existing competitors have been developed by quantifying the influence site has had on

their performance. Applying known adjustment factors to existing properties, except for a site factor,

lets us solve for the site value itself.

Source Strategies' site methodology 'backs into' the value of the site by matching actual performance

against known factors, using the site factor as the 'plugged number.' The differences between the closest

key competitors appear to be both explainable and reasonable. The site value is 'plugged' so that

projected REVPAR versus market approaches the actual REVPAR over the past 12 months.

The calculated site value of nearby hotels has tended to be 15% above the average site in the market.

These hotels include the Hyatt Regency, the Doubletree and the Crowne Plaza. Hotels with site values

well below average include the Hilton Americas and the Four Seasons. The site value of 1.05 for the

JW Marriott reflects the dilution its opening will cause in the immediate area, lowering the nearest 115

site values to the 1.05 level.

At the same time, the new MainPlace 46 story office building across the street, new home to KPMG

consultants, and to numerous legal practices, make the JW Marriott site the hotel site of choice in the

area, for meetings and entertaining as well as lodging.

Page 43 of 119

Overall, current performances, considering the JW Marriott’s effect on supply, as well as the

effect of the MainPlace opening, would indicate that a 1.05 site value for the new JW Marriott

would be a responsible if not conservative estimate:

SITE & PROPERTY DERIVATION

Hyatt Four Hilton Doubletree Crowne

Data in 2010/11 $'s Regency Seasons Americas Hotel Plaza

Base: Name,Type & Quality 1.17 1.92 1.04 .88 .70

x Brand Age Adjustment 1.28 1.30 1.26 1.36 1.36

x Site Value Adjustment 1.15 .86 .90 1.13 1.15

x Size Adjustment .90 .97 .83 .96 1.08

x Other Adjustments .95 1.00 1.00 1.25 1.25

x Newness Adjustment .61 .73 1.05 .70 .58

=Theoretical REVPAR Index 90% 152% 103% 114% 86%

x Market REVPAR Avg $92.70 $92.70 $92.70 $92.70 $92.70

= Projected Performance $83.20 $140.90 $95.37 $105.31 $79.81

Actual Performance $82.99 $140.90 $95.63 $104.79 $79.57

Actual/ Projected 100 100 100 100 100

Units in Above Subject 984 404 1200 350 259

Average Units in Chain 680 364 601 305 320

Size Adjustment* -10 -3 -17 -4 8

Opened: 1972 1982 2003 1980 1965

AAA 'Diamonds' 3 4 4 3 -

*1/3 of percentage differential used

Page 44 of 119

Combining all six factors that affect a hotel's REVPAR performance, we calculate that the

proposed hotel's REVPAR will achieve 139% of the market average REVPAR in Year I. During

the ‘ramp up,’ this rises to 161% in Year II and to 169% in Years’ III, IV and V. In Year VI and

thereafter, the index declines slowly due to normal aging:

JW Marriott Houston Downtown DERIVATION

Data in 2010/11 $'s Year I Year II Year III

Base: Name, Type & Quality 1.29 1.29 1.29

x Brand Age Adjustment 1.10 1.10 1.10

x Site Value Adjustment 1.05 1.05 1.05

x Size Adjustment 1.19 1.19 1.19

x Other Adjustments .85 .85 .85

x Newness Adjustment .92 1.07 1.12

=Theoretical REVPAR Index 139% 161% 169%

x Current Market REVPAR $92.70 $92.70 $92.70

= Projected Performance $128.53 $149.49 $156.47

Page 45 of 119

COMBINING MARKET REVPAR PROJECTIONS AND THE HOTEL'S REVPAR INDEX TO

DEVELOP REVENUES, OCCUPANCY, AND RATE

Using the projected Year III REVPAR index of 169%, the above process generates a theoretical

REVPAR of $156.47 (in latest year market dollars). This is the result of the Year III performance

index of 169% (1.69) multiplied by the current market average REVPAR of $92.70.

Therefore, if the property were open today and were in its third year of operation, it should

theoretically be operating at the following level against the latest year's market results: a $156.47

REVPAR computes to gross room revenues of approximately $17,248,000 ($156.47 times 302 units

times 365 days). Please note that the actual effect on the market due to the introduction of this project

and other new hotels is fully reflected in subsequent pro forma market projections and financials.

In current year dollars, this projection for the project's Year III revenue breaks down seasonally

as follows:

Quarter: Second Third Fourth First Year III

Room Revenues $4,525,973 $3,933,582 $4,128,109 $4,660,024 $17,247,688

% of Year 26.2% 22.8% 23.9% 27.0% 100

Seasonal Index 104 90 97 108 100

REVPAR$ $162.90 $141.58 $151.88 $169.57 $156.47

Source Strategies, Inc.'s projections of a reasonable rate and occupancy mix, a split of the JW Marriott’s

REVPAR for occupancy and rate, in latest year dollars, would be as follows:

Quarter: Second Third Fourth First Year III

ADR - $ $208.54 $190.75 $210.38 $228.37 $209.50

Occupancy % 78.1% 74.2% 72.2% 74.3% 74.7%

REVPAR$ $162.90 $141.58 $151.88 $169.57 $156.47

Page 46 of 119

TESTS FOR REASONABILITY

Comparisons can be made to assess the reasonable nature of the above market and subject

projections:

1. Individual property projections depend importantly on the projection of local market REVPAR

- forecasted to continue the strong, local recovery now underway, and to rise at a reasonable,

conservative rate through 2019. Over the next nine years market REVPAR is projected to grow 2.8%

per year (versus no REVPAR increase in the past nine years). REVPAR encompasses the net effects of

supply and demand.

Over the next nine years, we are comfortable with the 2.8% real compound growth in room-night

demand for the local downtown market, the same as the projected net supply growth rate, thereby

holding a stable equilibrium occupancy level of 63% throughout most years of our projection.

2. The derived Base Value index of 129 for a JW Marriott - in Texas High Priced markets -is

reasonable when compared to the Base Values of other competitive hotels in these same markets.

REVPAR Index Comparison16

REVPAR

Hotel Brand Index

Ritz Carlton 211

Four Seasons 192

ZaZa 166

JW Marriott 129

Hilton 117

Hyatt 117

Marriott 112

Embassy Suites 102

Hampton Inn 91

Courtyard 87

16 Unadjusted for physical aging of each brand.

Page 47 of 119

3. Developing actual adjustment factors for the existing properties - so that their projected

REVPAR equals actual REVPAR - indicates why the REVPAR index projection has a high

probability of being achieved. REVPAR differences between the closest key competitors appear to be

both explainable and reasonable, using the unique and proprietary REVPAR forecasting system of

Source Strategies, Inc.

For each property, revenues are driven first by chain name affiliation and product type, and are further

adjusted for size, segment, hotel age and site location. The REVPAR index is then multiplied by the

actual local area market average to generate dollar REVPAR. We also include the theoretical Year III

performance of the subject hotel, as follows:

REVPAR COMPARISON

JW Marrt Hyatt Four Hilton Doubletr Crowne

Data in 2010/11 $'s Yr III Regency Seasons Americas Hotel Plaza

Base: Name,Type & Quality 1.29 1.17 1.92 1.04 .88 .70

x Brand Age Adjustment 1.10 1.28 1.30 1.26 1.36 1.36

x Site Value Adjustment 1.05 1.15 .86 .90 1.13 1.15

x Size Adjustment 1.19 .90 .97 .83 .96 1.08

x Other Adjustments .85 .95 1.00 1.00 1.25 1.25

x Newness Adjustment 1.12 .61 .73 1.05 .70 .58

= Theoretical REVPAR Index 169% 90% 152% 103% 114% 86%

x Market REVPAR Average $92.70 $92.70 $92.70 $92.70 $92.70 $92.70

= Projected Performance $156.47 $83.20 $140.90 $95.37 $105.31 $79.81

Actual Performance Past Yr n/a $82.99 $140.90 $95.63 $104.79 $79.57

Projected vs. Actual n/a 100 100 100 100 100

Opened: 2013 1972 1982 2003 1980 1965

# Units 302 984 404 1200 350 259

Age in Years* n/a 36 26 5 28 43

4. The designated management of the proposed JW Marriott Hotel is Pearl Hospitality of Fort

Worth, one of the region’s most successful developer and operator.

The evidence of their success is strong, with the Embassy Lubbock and the Embassy Suites Fort Worth

good examples. Comparing the REVPAR of each to the metro averages in the First quarter of 2011

shows the Lubbock Embassy at 263% of market ($103.60 vs. $39.40 metro market average), and the

Fort Worth Embassy at Embassy at 180% of market ($103.60 vs. $57.47 metro market average).

Page 48 of 119

5. The projected REVPAR performance of the JW Marriott Houston Downtown reflects the fact

that this hotel’s physical and operational service qualities will be the highest in Houston, as will its

cutting-edge style. The JW Marriott Houston Downtown will have the unusual benefits that 21% of the

hotel’s rental units will be over-sized, 550 square foot suites, and the balance over-sized 340 square foot

standard rooms. It offers a superior site, a spa and rooftop pool, and will be a ‘hard-to-buy’ brand given

the fact that it is sized well below normal room counts for Marriott Hotels and JW Marriott Hotels.

The hotel will have the extra attraction versus competition of offering a major upscale dinner

house and bar, independently operated by a well-known chef (instead of a ‘hotel restaurant’), most

likely making it a stylish, ‘hot’ destination.

Pearl Hospitality will be operating the hotel with their proven quality and high sales yields, in both

the Rooms and the Banquet areas. This applies to the Meeting and Banquet side of food and beverage

services, offered in about 10,000 square feet of meeting space.

6. Lastly, Marriott brands in total are dramatically undersupplied in downtown Houston

compared to Texas High Priced markets; this confirms an unfilled demand for the brand since

market share is usually balanced with demand for the brand(s). Currently, Marriott brands

downtown garner only a 9.3% market share (of dollars) with two Courtyards and a Residence Inn, about

half of Marriott’s normal share in High Priced markets and reflecting the absence of a full-service

Marriott hotel.

With a new JW Marriott, the Marriott brand share in downtown Houston should rise to about 17% based

on the Year III projections and current year market revenues, below their current share of 19.5% in

Texas’ High Priced markets (Exhibit IV).

Page 49 of 119

7. The $156.47 JW Marriott projected Year III REVPAR compares reasonably to that of the key

competitors downtown, particularly $140.90 of the Four Seasons (current Year dollars). The JW

Marriott is newer (new versus 1982 opening for the Four Seasons), smaller (302 versus 404 for the Four

Seasons), much better located (e.g. next to MainPlace and the better-sited hotels), and will be supported

by a much stronger marketing company, Marriott.

The other nearby hotels are the Hyatt Regency, a 1972 hotel of 984 small rooms, in a lesser location; it

is highly vulnerable to new competitors. The Doubletree and Crowne Plaza hotel operations are also

very old and thus highly vulnerable to new, fresh competition.

8. The proposed JW Marriott Hotel will have the fortunate circumstance of a major and critical

competitive edge: a lower investment cost than any new competitor could match. It will cost about

$200,000 per key to construct and furnish (plus land) because the structure of the hotel was acquired at a

low cost.

This compares to the fact that a new and comparable high-rise hotel would cost in a range of $350,000

to $500,000 per key. This competitive barrier means that few - if any - new competitors are likely to

threaten the success of the JW Marriott hotel.

Page 50 of 119

9. Compared to the Top 500 Texas hotels of 2010, the JW Marriott would rank #12, in third place

in Houston behind the St. Regis (former Ritz Carlton) and The Granduca suite hotel. Following

the JW Marriott would be the Four Seasons, the Houstonian, the Marriott Waterway Woodlands, and the

Hotel ZaZa (formerly The Warwick):

Top REVPAR Hotels in Texas - 12 MONTHS ENDING 3/31/2011 $ Room # Est $ Est% Actual

Hotel City Brand Revenues Rooms ADR Occ RPAR

ROUGH CREEK LODGE IREDELL $3,235,124 39 $320 71.1 $227.27

FOUR SEASONS HOTEL A AUSTIN FOURS 22,678,809 291 291 73.4 213.52

THE DRISKILL HOTEL AUSTIN 13,527,551 188 266 74.2 197.14

THE SAN JOSE HOTEL AUSTIN 2,771,964 40 260 73.1 189.86

RITZ-CARLTON DALLAS DALLAS RITZ 14,386,505 218 260 69.6 180.80

HOTEL ZA ZA DALLAS ZA ZA 9,806,187 153 265 66.2 175.60

AVIA HOTEL WOODLANDS 4,223,342 70 244 67.6 165.30

ST REGIS FMR RITZ HOUSTON 13,677,561 232 233 69.4 161.52

GRANDUCA HOUSTON X.STE 7,361,425 126 229 69.8 160.07

MANSION OF TURTLE CR DALLAS 8,314,156 143 252 63.1 159.29

MOKARA HOTEL SAN ANTONI 5,589,470 99 263 58.9 154.68

LAKE AUSTIN SPA RESO AUSTIN 2,238,160 40 267 57.3 153.30

FOUR SEASONS RESORT IRVING FOURS 22,204,428 397 260 59.0 153.23

HOTEL JOULE A LUXURY DALLAS 6,980,432 129 216 68.5 148.25

W DALLAS-VICTORY DALLAS W 13,483,847 252 229 64.1 146.60

INTER-CONTINENTAL ST AUSTIN INT-C 9,985,115 189 196 73.7 144.74

EMBASSY SUITES * FT WORTH EMBAS 8,200,583 156 191 75.3 144.02

CRESCENT COURT DALLAS 11,530,798 220 235 61.2 143.60

ASHTON HOTEL FT WORTH 2,034,101 39 240 59.6 142.89

FOUR SEASONS HOTEL HOUSTON FOURS 20,777,765 404 219 64.4 140.90

GRAND HYATT DFW GRAPEVINE HYATT 15,077,676 298 229 60.5 138.62

HOUSTONIAN HOTEL HOUSTON 14,609,600 289 216 64.1 138.50

*A Pearl Hospitality Hotel

Page 51 of 119

10. In the overall market, any new hotel will have an inordinate advantage over the old; the

playing field here is not level as the lodging consumer almost always votes for 'new' versus old.

From Holiday Inn consumer research, 'new' means 'clean,' and 'old' means 'dirty' to the

consumer. Cleanliness is the number one consumer selection factor in lodging.

The downtown Houston market is full of old, vulnerable hotels. The average hotel room in the

market was built in late 1989 and is 21 years old, more than half way to the expected life of most hotels.

Built since 2002, the newest hotels in the market include the 1,200 room Hilton, located away from the

heart of downtown, the 314 room Magnolia, and the 263 room Club Quarters.

However, the older properties, representing 44% of the total available rooms in downtown

Houston were built on average in 1970, making them 41 years old. These include the nearby

competitors of the proposed 302 room JW Marriott: the 259 room Crowne Plaza originally opened

in 1965, the 984 room Hyatt Regency in 1972, the 350 room Doubletree in 1980 and the 404 room Four

Seasons in 1982.

The following table shows the age and sizes of all of the properties in the marketplace:

DOWNTOWN HOUSTON HOTELS

#

Open Rooms Local Hotel 2004 201 INN AT THE BALLPARK

2004 135 HOTEL ICON

2004 263 CLUB QUARTERS IN HOUSTON

2004 100 COURTYARD WEST UNIVERSITY

2004 120 RESIDENCE INN WEST UNIVERSITY

2003 314 THE MAGNOLIA HOTEL

2003 191 COURTYARD DOWNTOWN

2003 171 RESIDENCE INN

2003 32 SCOTT'S INN & SUITE

2003 1200 HILTON AMERICAS CONVENTION CTR

2002 97 ALDEN HOTEL FMR SAM HOUSTON

2001 112 HOLIDAY EXPRESS DOWNTOWN

2001 76 BEST WESTERN DOWNTOWN

1982 404 FOUR SEASONS HOTEL

1980 350 DOUBLETREE HOTEL ALLEN CENTER

1972 984 HYATT REGENCY HOUSTON

1965 259 CROWNE PLAZA FMR WHITEHALL

1964 315 HOTEL ZA ZA FMR WARWICK

1959 93 THE LANCASTER HOTEL

Page 52 of 119

11. The graphically projected REVPAR performance of the JW Marriott Houston Downtown,

compared to the local market average, reflects the fact that this hotel will be well above the overall

market average because of its brand, newness, location, and superior product offering. After the

first five years of operation, the Marriott’s REVPAR gradually declines - versus the market average -

from its Year III-V peak level.

Page 53 of 119

12. Graphing the projected occupancy performance of the project versus the local market

demonstrates a realistic pattern: the hotel leads the local market average when new and

then moves towards the averages as it ages:

Page 54 of 119

PRO FORMA REVPAR: Applying the project derivation factor (169% Year III-V) to the

quarterly local market REVPAR forecast results in the following progression:

PROJECT REVPAR PROJECTION Subject/

Year& Downtown Marriott Market Index

Quarter Market Hotel Qtr Year

132 104.21 139.64 134

133 89.58 122.73 137

134 94.01 132.56 141

141 108.49 156.22 144 139

142 107.33 162.07 151

143 92.27 145.79 158

144 96.83 160.74 166

151 111.74 188.84 169 161

152 111.09 187.75 169

153 95.50 161.40 169

154 100.23 169.38 169

161 115.65 195.46 169 169

162 114.43 193.38 169

163 98.37 166.24 169

164 103.23 174.46 169

171 119.12 201.32 169 169

172 117.86 199.18 169

173 101.32 171.23 169

174 106.33 179.70 169

181 122.70 207.36 169 169

182 121.39 201.73 166

183 104.36 173.42 166

184 109.52 182.00 166

191 126.38 210.01 166 166

192 125.04 204.31 163

193 107.49 175.64 163

194 112.80 184.33 163

201 130.17 212.70 163 163

202 128.79 206.93 161

203 110.71 177.89 161

204 116.19 186.69 161

211 134.07 215.42 161 161

212 132.65 209.58 158

213 114.04 180.16 158

214 119.67 189.07 158

221 138.10 218.18 158 158

CGR%9Yrs 3.7% 4.6%

First5Yrs 3.1% 6.8%

-CGR% measured from open date

Page 55 of 119

RESULTING REVENUE PROJECTION : This REVPAR forecast is then extended to room

revenues - multiplying REVPAR by the number of days in each quarter and by the number of

rooms in the project - and to occupancy, estimated rate and to room-nights sold:

JW MARRIOTT HOUSTON DOWNTOWN

Resulting Average Room-

Year& Room Annual % Daily nghts Annual Basis

Quarter Revenues Basis Occ Rate Sold RoomNites Occ. Rate

132 $3,837,527 66.5 $210.00 18,274

133 $3,409,914 64.6 $190.00 17,947

134 $3,683,028 64.7 $205.00 17,966

141 $4,246,053 $15,176,522 67.9 $230.00 18,461 72,648 65.9% $208.91

142 $4,454,109 70.8 $228.90 19,459

143 $4,050,580 70.4 $207.10 19,559

144 $4,466,128 71.9 $223.45 19,987

151 $5,132,711 $18,103,529 75.3 $250.70 20,474 79,478 72.1% $227.78

152 $5,159,661 78.1 $240.35 21,468

153 $4,484,329 74.2 $217.46 20,622

154 $4,706,092 72.2 $234.62 20,058

161 $5,312,481 $19,662,563 74.3 $263.24 20,182 82,329 74.7% $238.83

162 $5,314,451 77.7 $248.76 21,364

163 $4,618,858 73.9 $225.07 20,522

164 $4,847,275 71.8 $242.83 19,961

171 $5,471,856 $20,252,440 73.9 $272.45 20,084 81,932 74.3% $247.19

172 $5,473,885 77.4 $257.46 21,261

173 $4,757,424 73.5 $232.94 20,423

174 $4,992,693 71.5 $251.33 19,865

181 $5,636,011 $20,860,013 73.5 $281.98 19,987 81,536 74.0% $255.84

182 $5,543,945 76.1 $265.19 20,906

183 $4,818,314 72.3 $239.93 20,082

184 $5,056,594 70.3 $258.87 19,533

191 $5,708,147 $21,127,000 72.3 $290.44 19,653 80,174 72.7% $263.51

192 $5,614,902 74.8 $273.14 20,557

193 $4,879,984 71.1 $247.13 19,747

194 $5,121,314 69.1 $266.64 19,207

201 $5,781,205 $21,397,405 71.1 $299.16 19,325 78,835 71.5% $271.42

202 $5,686,767 74.3 $278.61 20,412

203 $4,942,443 70.6 $252.07 19,607

204 $5,186,862 68.6 $271.97 19,071

211 $5,855,199 $21,671,270 70.6 $305.14 19,189 78,279 71.0% $276.85

212 $5,759,552 73.7 $284.18 20,267

213 $5,005,701 70.1 $257.11 19,469

214 $5,253,248 68.2 $277.41 18,937

221 $5,930,140 $21,948,641 70.1 $311.24 19,053 77,726 70.5% $282.38

222 $5,819,110 73.4 $288.44 20,174

223 $5,057,464 69.8 $260.97 19,379

224 $5,307,571 67.8 $281.57 18,850

231 $5,991,462 $22,175,606 69.8 $315.91 18,966 77,369 70.2% $286.62

232 $5,879,284 73.1 $292.77 20,082

233 $5,109,762 69.4 $264.88 19,291

234 $5,362,455 67.5 $285.80 18,763

241 $6,053,418 $22,404,919 69.5 $320.65 18,879 77,014 69.9% $290.92

CGR%9Yr 4.6% 0.6% 4.0% 0.6%

First5Y 6.8% 2.0% 4.8% 2.0%

Page 56 of 119

OPERATING REVENUES & COSTS17

Profitability and returns reflect the above revenue projections and the following other critical

assumptions: - operating costs per occupied room approximate Full Service hotels of similar type, size,

rate, occupancy and geography, (Smith Travel Research's Host Report for 2008 data, and Source

Strategies data).

Full Service Hotel Total Operating Expenses take into account the lower costs of the West South

Central United States, which had an average Per Occupied Room Cost of $150.51 in 2008 for

Department Expenses and Undistributed Operating Expenses combined - versus a national average of

$172.16 - or 87.4% of the U.S. average. Subsequent cost comparisons have been adjusted to reflect this

12.6% lower-cost environment that may be expected in operating a Full Service hotel in a West South

Central area of the U.S. such as Texas. An exception here will be the Rooms Only department, where

the lower costs of the West South Central United States are measured by Host at 79.9% of the U.S.

average and used in the Rooms Only department projections.

Specific Food, Beverage, Banquet and Other Revenue assumptions, and cost assumptions for all

revenue items in the study are as follows:

Restaurant & Bar Contribution: a leased restaurant to a top chef is assumed to generate $10,000 rents

per month for space only, inflating at 3% per year. All restaurant FF&E capital investment, revenues

and operating expense revert to the leased restaurant entity and are not reflected in hotel statements.

17 The calculation of the statistic of Operating Costs Per Occupied Room (before fixed/capital costs are deducted) is typically the important cost to examine

carefully because it is highly stable and predictable, regardless of occupancy and rate. Looking at costs on a percentage basis can be highly misleading because of the high variability in average room revenues.

Page 57 of 119

Banquet Facility Rent, Food & Beverage Revenues and Expense: The hotel operations retain all

banquet operations, operating in approximately 10,000 square feet of meeting space including a 5,000

square foot ballroom, and 5,000 square feet in breakout facilities. The banquet kitchen facilities will be

separate from the leased restaurant. Dollar volume is assumed to be generated at 20% of room revenues,

including meeting room rents. Expenses should total 30% of revenues, including the space rental.

Telecommunications should generate .99% of room revenues (and expense at 108.4% telecom

revenues), based on the 2008 average telecom revenue and expenses for U.S. Luxury hotels.

Other: Other includes F&B revenue from room service, a lobby F&B operation, a seasonal rooftop pool

F&B operation, fees from parking operations, and fees from a leased Spa operation. The estimated

amount is equivalent to 13% of room revenues (9% of total revenues) and makes a 50% contribution.

Rooms Only Expense is conservatively set at $42.97 per Occupied Room (POR) in 2013, equal to the

average expected Luxury hotel expense in the Southwest. This is 10% above the average Full Service

hotel. It also reflects a 20.9% reduction from national averages to reflect actual results for South West

Full Service hotels (pages 22-23 in Host Report for 2008 data).

Rooms Expense POR 2008 Basis 2013 Basis** West South Central Average $33.07 $36.97 Luxury* $36.18 $42.97 Urban* $38.01 $45.15 Roomcount 300 to 500* $33.65 $39.97 Roomcount Over 500+* $38.16 $45.33

*U.S Averages adjusted downward by 20.9% to reflect the average regional costs savings in Rooms expenses.

**2008 actuals inflated at 3.5% annually (factor of 1.188 for five years of inflation)

Page 58 of 119

Total Departmental Profit amounts to 75.7% of total revenues in Year III based on the above

assumptions. This compares to 58.1% for the average of U.S. Luxury hotels, to 58.3% for the average

U.S. Full Service hotel, and to 61.7% for the typical Full Service hotel operating in the West South

Central region. The major reason for the premium here is the fact that the low-margin food business is

leased out to an independent operator, while the high-margin banquet business is retained.

UNDISTRIBUTED OPERATING EXPENSES

Administrative & General Expense is estimated at $27.60 POR. This is 5% higher than the Luxury

Full Service hotel average. The premium reflects the higher positioning of this hotel versus the typical

‘luxury’ hotel listed in the Host Report.

Administrative & General POR 2008 Basis 2013 Basis** West South Central Avg $20.24 $24.04 Luxury* $21.38 $25.39 Urban* $20.10 $23.87 Roomcount 300 to 500* $20.51 $24.36 Roomcount Over 500+ $20.32 $24.13

*U.S. Average adjusted downward by 12.6%

**2008 actuals inflated by 3.5% annually (factor of 1.188 for five years of inflation)

Marketing Expense is set at 6.4% of gross revenues, equal to the average expected in Urban hotels.

We have examined the developer’s pro forma Sales and Marketing Expense budget for 2014, amounting

to 6.37% of revenues, and believe it is appropriate and sufficient. This budget will include the

marketing funds sent to the franchisor’s marketing trust funds that support the brand:

Marketing (% of Revenues) 2008

Luxury 6.6%

Urban 6.4%

Roomcount 300 to 500 7.0%

Roomcount Over 500+ 6.1%

West South Central Avg. 7.2%

Page 59 of 119

Utility Costs are set at $9.40 Per Occupied Room (POR) in 2013, after 3.5% annual inflation from 2008

actual costs. This represents the average for Luxury hotels reduced for regional differences in costs,

further discounted by 23% to reflect the deregulated prices of Houston energy suppliers, a very efficient

building footprint of 10,000 square feet in a building meeting the standards for LEED certification, and

the installation of all new and efficient systems.

Property Operations and Maintenance has been preliminarily set at $12.52 POR in 2013, virtually the

same as the average Full Service hotel and the average Urban hotel in the West South Central region.

This projected cost is 8.3% below the typical Luxury hotel (due to the extra efficiencies of this hotel).

The preliminary $12.52 is then discounted an additional 20%, to $10.02 for 2013. This reflected the

newness of systems, equipment, fixtures and furnishings of the JW Marriott as compared to the average,

existing Full Service chain hotels in the Southwest; these were built in 1986 on average and are thus

subject to much higher maintenance costs. An examination of a pro forma budget breakdown confirms

the reasonableness of the budget.

Property Ops & Maintenance (POR) 2008 Basis 2013 Basis** West South Central Avg. $10.57 $12.56 Luxury* $11.50 $13.66 Urban* $10.54 $12.52 Roomcount 300 to 500* $11.03 $13.10 Roomcount Over 500+* $11.74 $13.95 *U.S. Averages adjusted downward by 12.4%

**2008 actuals inflated by 3.5% annually (factor of 1.188 for five years of inflation)

Page 60 of 119

Franchise Fees are assumed as represented in the chart below. These values represent those negotiated

with the JW Marriott brand by the ownership group. The contribution to Marketing Trust Fund(s) is

included in the Marketing expense.

Franchise Fees % Room Sales %F&B Sales Year 1 3% 1% Year 2 4% 2% Year 3 5% 3% Year 4-20 6% 3%

Management Fees are assumed at 6% of gross revenues.

Property Taxes are assumed at 2.5% of $26,200,000, the estimated 2011 value assessment based on 14

comparable properties in the market, increasing at 3.5% annually. The likelihood of a property tax

abatement of 50% of the above Property Tax amounts has been taken in financial statements.

Insurance is set at .71% of revenues, an appropriate expense level for a hotel of this value and revenue.

The insurer provider currently insures other properties of the developer at this rate.

Depreciation is assumed to be ‘straight-line’ for 39 years.

Net Operating Income is then calculated to include all above revenues and expenses (before interest

and income taxes); Houston city incentives are NOT reflected at this level of calculation (no incentives).

In Year III, the JW Marriott should generate about $9,371,967 NOI, or 35.4% of total revenues.

Page 61 of 119

ADJUSTMENTS TO INCOME - AFFECT OF CITY INCENTIVES ON PROFITABILITY

We have two lines of added revenue and/or reduced expense to the income statements for the first

seven years of operation. These lines reflect:

1. The likelihood of a property tax incentive/abatement of 50% of the above Property Tax

amounts;

2. The likelihood of a Houston City Hotel Occupancy Tax incentive/rebate amounting to 7%

of taxable room revenues (assume 90% of dollar room revenues above times 7%)

Net Operating Income After City Incentives is then recalculated to include all above revenues and

expenses (before interest and income taxes) after adding the property tax and HOT rebates to NOI. City

incentives would add about $9,145,175 per year for seven years to the JW Marriott Net Operating

Income. In Year III, NOI is projected to be about $10,961,535, or 41.4% of total revenues. In Year III,

Net Cash Flow is similar to NOI, projected at $11,953,710.

This 41.4% compares favorably to Host data for 2008, which showed an NOI percentage of 26.1% for

all Full Service hotels in the West South Central U.S., 24.5% for U.S. Luxury hotels, and 25% for U.S.

Urban Full Service hotels on a comparable basis in the Host Report for 2008. In part, it reflects the low

depreciation expense, the tax and operating incentives, and the favorable food margins allowed by the

leased restaurant operation.

This NOI amounts to $133.14 POR and compares very favorably to the 2008 Net Operating Incomes of

$62.01 for the average West South Central Full Service hotel, to $72.91 for the U.S. Luxury hotel

average (adjusted to the West South Central), and to $69.41 for the average U.S. Full Service Urban

hotel, adjusted (data listed in the Smith Travel Host Report for 2008).

Page 62 of 119

HISTORICAL TAX CREDIT AFFECT ON PROFITABILITY AND RETURNS

The federal grant of an $8,000,000 historical tax credit for building preservation is likely and has

been reflected in additions to cash flow in Years II through IV. The credit would be to raise Cash

Flow from $10,364,142 in Year III to $11,953,710, and the overall return on invested capital from

19.7% to 21% over the life of the project.

A reserve for renovations is taken and subtracted from projected cash flows annually; such

renovation reserves amount to 1% of Gross Rooms Revenue in year one, escalating to 5% of

Gross Rooms Revenue in year 11. Reserves insure that future revenue streams continue by

maintaining product quality at excellent levels. Reserves amount to $6,718,937 in the first ten years

($22,248 per unit). Reserves are based on actual reserves required by the JW Marriott Brand:

Year % of Gross Rooms Revenues Year 1 1% Year 2 2% Year 3-5 3% Year 6-10 4% Year 11-20 5%

TOTAL CAPITAL

Total capital of $65,000,000 is allocated for land/building acquisition and for improvements. The

estimated turn-key cost of improvements of $204,305 per unit should be more than adequate considering

the low acquisition cost of the land and structure. However, if improvements were far higher per key,

the returns on this project are still attractive. Building and Land acquisition is set at $10,000,000 by the

developer. The developer’s estimates of necessary capital include:

Investment

Land Investment $3,300,00018

Improvements $61,700,000 @ $204,305 per unit

Total Investment $65,000,000

The pro forma profit and cash flow statements are shown overleaf:

18 Developer's estimate investment of the land value (part of the $10,000,000 combined cost of the existing building and its land).

Page 63 of 119

Open 4/1/13 YEAR I JW MARRIOTT DOWNTOWN HOUSTON Land Value: $3,300,000

# Rooms: 302 Capital/room ex land $204,305

QUARTER Second Third Fourth First Year

Rmnites Sold 18,274 17,947 17,966 18,461 72,648

Rmnites Avail 27,482 27,784 27,784 27,180 110,230

Occupancy % 66.5% 64.6% 64.7% 67.9% 65.9%

Avg Rate 210.00 190.00 205.00 230.00 $208.90

REVPAR $139.64 $122.73 $132.56 $156.22 $137.68 %

Revenues

Room Revenues 3,837,540 3,409,930 3,683,030 4,246,030 15,176,530 74.2%

Banquet 767,508 681,986 736,606 849,206 3,035,306 14.8%

Leased F&B 30,000 30,000 30,000 30,000 120,000 0.6%

Telecom 38,375 34,099 36,830 42,460 151,765 0.7%

Other 498,880 443,291 478,794 551,984 1,972,949 9.6%

Total Revenues 5,172,304 4,599,306 4,965,260 5,719,680 20,456,550 100.0%

Department Expense

Room Expense 785,234 771,183 771,999 793,269 3,121,685 15.3%

Banquet 230,252 204,596 220,982 254,762 910,592 4.5%

Leased F&B 0 0 0 0 0 0.0%

Telecom 41,599 36,964 39,924 46,027 164,514 0.8%

Other 249,440 221,645 239,397 275,992 986,474 4.8%

Total Dept Expense 1,306,525 1,234,387 1,272,302 1,370,050 5,183,264 25.3%

Departmental Profits

Rooms 3,052,306 2,638,747 2,911,031 3,452,761 12,054,845 58.9%

Banquet 537,256 477,390 515,624 594,444 2,124,714 10.4%

Leased F&B 30,000 30,000 30,000 30,000 120,000 0.6%

Telecom (3,224) (2,864) (3,094) (3,567) (12,748) -0.1%

Other 249,440 221,645 239,397 275,992 986,474 4.8%

Total 3,865,778 3,364,919 3,692,958 4,349,630 15,273,286 74.7%

-Undistributed Op Expense

Admin & General 504,362 495,337 495,862 509,524 2,005,085 9.8%

Marketing 331,027 294,356 317,777 366,060 1,309,219 6.4%

Royalties 122,801 109,118 117,857 135,873 485,649 2.4%

Utilities 171,776 168,702 168,880 173,533 682,891 3.3%

Prop Op & Maint 183,105 179,829 180,019 184,979 727,933 3.6%

Tot Admin & Gen 1,313,072 1,247,341 1,280,395 1,369,969 5,210,777 25.5%

Gross Oper Profit 2,552,706 2,117,577 2,412,563 2,979,662 10,062,509 49.2%

Page 64 of 119

Page 2 Year I

YEAR I,P2 Open 4/1/13 JW MARRIOTT DOWNTOWN HOUSTON Land Value: $3,300,000

# Rooms: 302 Capital/room ex land $204,305

QUARTER Second Third Fourth First Year

Gross Oper Profit 2,552,706 2,117,577 2,412,563 2,979,662 10,062,509 49.2%

Management Fees 310,338 275,958 297,916 343,181 1,227,393 6.0%

Income B.Fixed Charge 2,242,368 1,841,619 2,114,648 2,636,481 8,835,116 43.2%

-Fixed: Insurance 36,310 36,310 36,310 36,310 145,242 0.7%

Property Tax 163,750 163,750 163,750 163,750 655,000 3.2%

Deprec SL 39 Yrs. 395,513 395,513 395,513 395,513 1,582,051 7.7%

Tot Fixed Expense 595,573 595,573 595,573 595,573 2,382,293 11.6%

Net Income Before 1,646,795 1,246,046 1,519,075 2,040,908 6,452,823 31.5%

Tax & Financing

Depreciation Add-back 395,513 395,513 395,513 395,513 1,582,051 7.7%

Repl. Reserve (37,941) (37,941) (37,941) (37,941) (151,765) -0.7%

Cash Flow Before 2,004,366 1,603,617 1,876,646 2,398,479 7,883,109 38.5%

Tax & Financing

City Incentives

Prop Tax Rebate 81,875 81,875 81,875 81,875 327,500 1.6%

Op Expense Offset 241,765 214,826 232,031 267,500 956,121 4.7%

Total Incentives 323,640 296,701 313,906 349,375 1,283,621 6.3%

Revised Net Income 1,970,435 1,542,746 1,832,981 2,390,282 7,736,444 37.8%

Before Tax & Financing

Depreciation Add-back 395,513 395,513 395,513 395,513 1,582,051 7.7%

Replacement Reserve (37,941) (37,941) (37,941) (37,941) (151,765) -0.7%

Revised Cash Before 2,328,006 1,900,318 2,190,552 2,747,854 9,166,730 44.8%

Tax & Financing

(Note: Historic Tax Credit nil in Year I)

Year 2 through Year 10 Shown Overleaf.

Page 65 of 119

JW MARRIOTT DOWNTOWN HOUSTON Compound

Growth

Year 2 thru 10: 2 3 4 5 6 7 8 9 10 Yr 2-10

Rmnites Sold 79,478 82,329 81,932 81,536 80,174 78,835 78,279 77,726 77,369 0.7%

Rmnites Avail 110,230 110,230 110,230 110,230 110,230 110,230 110,230 110,230 110,230 0.0%

Occupancy % 72.1% 74.7% 74.3% 74.0% 72.7% 71.5% 71.0% 70.5% 70.2% 0.7%

Avg Rate $227.78 $238.83 $247.19 $255.84 $263.51 $271.42 $276.85 $282.38 $286.62 3.6%

REVPAR $164.23 $178.38 $183.73 $189.24 $191.66 $194.12 $196.60 $199.12 $201.18 4.3%

Room Revenues 18,103,529 19,662,563 20,252,440 20,860,013 21,127,000 21,397,405 21,671,270 21,948,641 22,175,606 4.3%

Banquet 3,620,706 3,932,513 4,050,488 4,172,003 4,225,400 4,279,481 4,334,254 4,389,728 4,435,121 4.3%

Leased F&B 123,600 127,308 131,127 135,061 139,113 143,286 147,585 152,012 156,573 3.0%

Telecom 181,035 196,626 202,524 208,600 211,270 213,974 216,713 219,486 221,756 4.3%

Other 2,353,459 2,556,133 2,632,817 2,711,802 2,746,510 2,781,663 2,817,265 2,853,323 2,882,829 4.3%

Total Revenues 24,382,329 26,475,142 27,269,397 28,087,478 28,449,293 28,815,809 29,187,087 29,563,191 29,871,885 4.3%

Department Expense

Room Expense 3,517,625 3,753,122 3,847,074 3,943,335 3,993,788 4,044,900 4,136,864 4,230,868 4,337,778 3.7%

Banquet 1,086,212 1,179,754 1,215,146 1,251,601 1,267,620 1,283,844 1,300,276 1,316,918 1,330,536 4.3%

Leased F&B 0 0 0 0 0 0 0

Telecom 196,242 213,142 219,536 226,123 229,017 231,948 234,917 237,923 240,384 4.3%

Other 1,176,729 1,278,067 1,316,409 1,355,901 1,373,255 1,390,831 1,408,633 1,426,662 1,441,414 4.3%

Total Dept Expense 5,976,808 6,424,084 6,598,166 6,776,959 6,863,680 6,951,523 7,080,689 7,212,371 7,350,113 4.0%

Departmental Profits

Rooms 14,585,904 15,909,441 16,405,366 16,916,678 17,133,212 17,352,505 17,534,406 17,717,773 17,837,828 4.5%

Banquet 2,534,494 2,752,759 2,835,342 2,920,402 2,957,780 2,995,637 3,033,978 3,072,810 3,104,585 4.3%

Leased F&B 123,600 127,308 131,127 135,061 139,113 143,286 147,585 152,012 156,573 3.0%

Telecom (15,207) (16,517) (17,012) (17,522) (17,747) (17,974) (18,204) (18,437) (18,628) 4.3%

Other 1,176,729 1,278,067 1,316,409 1,355,901 1,373,255 1,390,831 1,408,633 1,426,662 1,441,414 4.3%

Total 18,405,521 20,051,058 20,671,231 21,310,519 21,585,613 21,864,286 22,106,398 22,350,820 22,521,772 4.4%

-Undistributed Op Expense

Admin & General 2,065,237 2,127,194 2,191,010 2,256,741 2,324,443 2,394,176 2,466,001 2,539,981 2,616,181 3.0%

Marketing 1,560,469 1,694,409 1,745,241 1,797,599 1,820,755 1,844,212 1,867,974 1,892,044 1,911,801 4.3%

Royalties 796,555 1,101,104 1,336,661 1,376,761 1,394,382 1,412,229 1,430,304 1,448,610 1,463,590 13.0%

Utilities 769,506 821,023 871,764 921,168 957,112 977,849 991,990 999,227 1,001,893 4.4%

Prop Op & Maint 820,261 875,175 897,084 919,530 931,295 943,214 964,658 986,579 1,011,509 3.7%

Tot Admin & Gen 6,012,028 6,618,905 7,041,761 7,271,798 7,427,986 7,571,680 7,720,928 7,866,442 8,004,973 4.9%

Gross Oper Profit 12,393,492 13,432,153 13,629,470 14,038,721 14,157,627 14,292,606 14,385,470 14,484,378 14,516,799 4.2%

Page 66 of 119

Page 2 Of Years 2-10 JW MARRIOTT DOWNTOWN HOUSTON Compound

Growth

Year 2 3 4 5 6 7 8 9 10 Yr 2-10

Rmnites Sold 79,478 82,329 81,932 81,536 80,174 78,835 78,279 77,726 77,369 0.7%

Rmnites Avail 110,230 110,230 110,230 110,230 110,230 110,230 110,230 110,230 110,230 0.0%

Occupancy % 72.1% 74.7% 74.3% 74.0% 72.7% 71.5% 71.0% 70.5% 70.2% 0.7%

Avg Rate $227.78 $238.83 $247.19 $255.84 $263.51 $271.42 $276.85 $282.38 $286.62 3.6%

REVPAR $164.23 $178.38 $183.73 $189.24 $191.66 $194.12 $196.60 $199.12 $201.18 4.3%

Gross Oper Profit 12,393,492 13,432,153 13,629,470 14,038,721 14,157,627 14,292,606 14,385,470 14,484,378 14,516,799 4.2%

Management Fees 1,462,940 1,588,509 1,636,164 1,685,249 1,706,958 1,728,949 1,751,225 1,773,791 1,792,313 4.3%

Income B Fixed Chgs10,930,553 11,843,645 11,993,307 12,353,473 12,450,669 12,563,657 12,634,245 12,710,587 12,724,486 4.1%

-Fixed: Insur 173,115 187,974 193,613 199,421 201,990 204,592 207,228 209,899 212,090 4.3%

Property Tax 677,925 701,652 726,210 751,628 777,935 805,162 833,343 862,510 892,698 3.5%

Deprec SL 39 Yrs. 1,582,051 1,582,051 1,582,051 1,582,051 1,582,051 1,582,051 1,582,051 1,582,051 1,582,051 0.0%

Tot Fixed Expense 2,433,091 2,471,677 2,501,874 2,533,100 2,561,976 2,591,806 2,622,623 2,654,460 2,686,839 1.3%

Net Income Before 8,497,462 9,371,967 9,491,432 9,820,373 9,888,693 9,971,852 10,011,623 10,056,127 10,037,646 5.0%

Tax & Financing

Depreciation Add-ba 1,582,051 1,582,051 1,582,051 1,582,051 1,582,051 1,582,051 1,582,051 1,582,051 1,582,051 0.0%

Repl. Reserve (362,071) (589,877) (810,098) (834,401) (845,080) (855,896) (866,851) (877,946) (887,024) 21.7%

Cash Flow Before 9,717,443 10,364,142 10,263,386 10,568,024 10,625,665 10,698,007 10,726,823 10,760,233 10,732,673 3.5%

Tax & Financing

City Incentives

Prop Tax Rebate 338,963 350,826 363,105 375,814 388,967 402,581 0 0 0 -100.0%

Op Expense Offset 1,140,522 1,238,741 1,275,904 1,314,181 1,074,530 0 0 0 0 -100.0%

Total Incentives 1,479,485 1,589,568 1,639,009 1,689,995 1,463,498 402,581 0 0 0 -100.0%

Revised Net Before 9,976,947 10,961,535 11,130,441 11,510,367 11,352,191 10,374,433 10,011,623 10,056,127 10,037,646 2.9%

Tax & Financing

Depreciation Add-ba 1,582,051 1,582,051 1,582,051 1,582,051 1,582,051 1,582,051 1,582,051 1,582,051 1,582,051 0.0%

Replacement Reserve (362,071) (589,877) (810,098) (834,401) (845,080) (855,896) (866,851) (877,946) (887,024) 21.7%

Revised Cash Bef. 11,196,927 11,953,710 11,902,395 12,258,018 12,089,162 11,100,588 10,726,823 10,760,233 10,732,673 1.8%

Tax & Financing

Historic Tax Credit 3,491,931 3,836,537 671,531

Revised Cash Before14,688,859 15,790,247 12,573,926 12,258,018 12,089,162 11,100,588 10,726,823 10,760,233 10,732,673 1.8%

Tax & Financing

Page 67 of 119

October 3, 2011

OPINION

This report is based on independent opinion, surveys and research from sources

considered reliable. No representation is made as to accuracy or completeness and no

contingent liability of any kind can be accepted.

The study projections are dependent on the developer opening and operating the ‘JW

Marriott Houston Downtown,’ including luxurious amenities, and spending the

appropriate operating funds necessary to generate projected revenues, most especially

budgeted funds for aforementioned amenities and for marketing.

It is our opinion that this report fairly and conservatively represents the room revenues,

profitability and return on investment performance that can be achieved by converting

the existing building at 806 Main Street, Houston, Texas, and operating it as a 302 unit

JW Marriott Hotel.

Please contact us with any questions at (210) 734-3434.

Respectfully submitted,

Bruce H. Walker, President

PO Box 120055 134 Laurel Heights, San Antonio, TX 78212 210-734-3434 Fax 210-735-7970 www.SourceStrategies.Org

Page 68 of 119

EXHIBITS:

I Market History, Aggregated Basis:

-Texas Metros Combined

-Downtown Houston Area

II Downtown Houston Market: By Segment and Brand, Past Five

Years, Annual Basis

III Individual Hotel/Motel Histories For

Downtown Houston Market

IV Texas High Priced Markets

V The Case For Downsizing Hotels

VI Start-up Performance of New Hotels

VII CAPEX Study of Capital Expenditures

VIII Summary Lodging Market Report to the Governor’s Office

of Economic Development and Tourism

IX Preparer Qualifications and Client List

X Source Strategies Database Methodology

XI Hotel Brand Report Newsletter (separate PDF File)

Page 69 of 119

EXHIBIT I

LODGING MARKET: CITY OF HOUSTON

# Rnights $ Rooms

Hotels # sold 1 Revenues % $ $

YRQ Motels Rooms (000s) (000 s) OCC2 Rate3 RPAR4

--- ------ ------ ------- ---------- ---- ----- -----

012 99 20,884 1,382.4 139,477 72.7 100.90 73.39

013 101 21,661 1,361.6 129,375 68.3 95.02 64.92

014 102 20,995 1,230.9 117,850 63.7 95.74 61.01

*TOTAL 2001 3,974.9 386,701 68.2 97.29 66.39

021 104 21,370 1,315.0 133,856 68.4 101.79 69.60

022 106 21,966 1,283.8 131,566 64.2 102.48 65.82

023 106 22,431 1,233.9 116,394 59.8 94.33 56.40

024 108 21,956 1,226.1 116,470 60.7 94.99 57.66

*TOTAL 2002 5,058.8 498,286 63.2 98.50 62.24

031 109 22,193 1,213.9 119,902 60.8 98.78 60.03

032 111 22,452 1,221.0 118,419 59.8 96.98 57.96

033 113 23,424 1,247.3 114,946 57.9 92.15 53.34

034 114 23,118 1,251.9 117,200 58.9 93.62 55.10

*TOTAL 2003 4,934.2 470,467 59.3 95.35 56.53

041 117 24,448 1,434.0 153,573 65.2 107.09 69.80

042 119 24,608 1,344.4 132,248 60.0 98.37 59.06

043 121 25,230 1,350.8 131,110 58.2 97.06 56.48

044 123 24,788 1,331.8 125,508 58.4 94.24 55.04

*TOTAL 2004 5,461.0 542,439 60.4 99.33 60.00

051 127 25,200 1,462.2 143,366 64.5 98.05 63.21

052 124 24,888 1,482.5 150,871 65.5 101.77 66.62

053 124 25,230 1,563.8 156,890 67.4 100.33 67.59

054 122 24,307 1,671.2 178,096 74.7 106.57 79.64

*TOTAL 2005 6,179.6 629,223 68.0 101.82 69.22

061 121 24,174 1,683.3 185,920 77.4 110.45 85.45

062 124 24,159 1,484.5 172,626 67.5 116.28 78.52

063 124 24,970 1,500.8 165,163 65.3 110.05 71.90

064 125 24,540 1,456.5 168,263 64.5 115.52 74.53

*TOTAL 2006 6,125.2 691,972 68.6 112.97 77.50

071 124 24,529 1,651.4 192,214 74.8 116.40 87.07

072 126 24,609 1,549.4 197,502 69.2 127.47 88.19

073 125 25,369 1,545.1 182,521 66.2 118.13 78.20

074 127 25,014 1,522.0 190,443 66.1 125.12 82.75

*TOTAL 2007 6,267.9 762,679 69.0 121.68 83.97

081 126 25,078 1,611.3 210,291 71.4 130.51 93.17

082 128 25,447 1,580.0 217,426 68.2 137.61 93.89

083 130 25,961 1,588.8 207,720 66.5 130.74 86.97

084 130 25,693 1,649.4 216,699 69.8 131.38 91.68

*TOTAL 2008 6,429.5 852,137 68.9 132.54 91.38

Page 70 of 119

LODGING MARKET: CITY OF HOUSTON

# Rnights $ Rooms



--- ------ ------ ------- ---------- ---- ----- -----

091 131 25,710 1,502.2 189,806 64.9 126.35 82.03

092 134 25,639 1,307.0 171,061 56.0 130.88 73.32

093 136 26,618 1,284.3 152,803 52.4 118.98 62.40

094 140 26,748 1,351.6 158,124 54.9 116.99 64.26

*TOTAL 2009 5,445.1 671,795 57.0 123.38 70.30

101 142 27,017 1,540.1 180,046 63.3 116.90 74.05

102 143 27,171 1,499.2 186,576 60.6 124.45 75.46

103 142 27,761 1,474.5 169,008 57.7 114.62 66.17

104 145 27,199 1,428.0 171,158 57.1 119.85 68.40

*TOTAL 2010 5,941.9 706,788 59.7 118.95 70.96

111 144 27,333 1,684.1 201,078 68.5 119.40 81.74

*TOTAL 57,502.2 6,413,565 64.2 111.54 71.58

1. Room-nights sold (derived from est. rate and actual room revenues)

2. Occupancy: nights sold divided by nights available for sale(x 100)

3. Average price for each room-night sold;from Directories and surveys

4. $ Revenue per available room per day (room sales per day)

Page 71 of 119

DOWNTOWN HOUSTON LODGING MARKET

# Rnights $ Rooms



--- ------ ------ ------- ---------- ---- ----- -----

012 8 2,594 160.6 23,530 68.0 146.53 99.68

013 8 2,520 149.5 19,779 64.5 132.33 85.31

014 9 2,538 151.7 20,605 65.0 135.83 88.25

*TOTAL 2001 461.8 63,914 65.8 138.42 91.13

021 8 2,585 163.3 23,592 70.2 144.44 101.40

022 8 2,585 150.3 22,415 63.9 149.11 95.29

023 8 2,585 133.5 18,159 56.1 136.00 76.36

024 9 2,653 141.4 19,163 57.9 135.55 78.51

*TOTAL 2002 588.5 83,329 62.0 141.58 87.73

031 10 2,838 138.1 19,432 54.1 140.71 76.08

032 11 3,013 128.3 17,994 46.8 140.20 65.63

033 12 3,437 142.7 18,893 45.1 132.39 59.75

034 14 3,724 159.7 20,377 46.6 127.60 59.48

*TOTAL 2003 568.8 76,696 47.9 134.83 64.54

041 16 4,902 257.5 36,530 58.4 141.84 82.80

042 18 5,083 222.3 28,069 48.0 126.29 60.68

043 18 5,225 250.1 31,657 52.0 126.56 65.86

044 19 5,149 237.8 29,581 50.2 124.38 62.45

*TOTAL 2004 967.8 125,838 52.1 130.03 67.72

051 19 5,385 268.7 33,842 55.4 125.97 69.83

052 19 5,381 280.6 36,008 57.3 128.34 73.53

053 19 5,487 292.6 36,199 58.0 123.73 71.71

054 18 5,070 311.0 42,033 66.7 135.16 90.11

*TOTAL 2005 1,152.7 148,082 59.3 128.46 76.11

061 18 5,077 336.0 46,707 73.5 138.99 102.22

062 18 5,073 292.0 42,355 63.3 145.05 91.75

063 18 5,180 294.1 40,047 61.7 136.18 84.03

064 18 5,070 279.9 39,641 60.0 141.65 84.99

*TOTAL 2006 1,202.0 168,751 64.6 140.39 90.65

071 18 5,077 320.7 45,137 70.2 140.75 98.78

072 19 5,138 303.9 46,185 65.0 151.95 98.78

073 19 5,487 300.4 42,478 59.5 141.42 84.15

074 19 5,377 319.6 47,952 64.6 150.03 96.94

*TOTAL 2007 1,244.6 181,753 64.7 146.03 94.47

081 19 5,384 342.3 54,235 70.6 158.44 111.93

082 19 5,380 327.0 54,599 66.8 166.95 111.52

083 19 5,487 322.1 51,067 63.8 158.54 101.16

084 19 5,377 320.1 51,252 64.7 160.09 103.60

*TOTAL 2008 1,311.6 211,152 66.5 160.99 106.99

Page 72 of 119


# Rnights $ Rooms



--- ------ ------ ------- ---------- ---- ----- -----

091 19 5,384 307.4 46,891 63.4 152.56 96.77

092 19 5,380 262.1 42,059 53.5 160.48 85.91

093 19 5,487 238.6 34,283 47.3 143.69 67.91

094 19 5,377 273.4 39,588 55.3 144.77 80.03

*TOTAL 2009 1,081.5 162,821 54.8 150.55 82.50

101 19 5,384 316.5 46,649 65.3 147.38 96.27

102 19 5,388 302.1 46,742 61.6 154.72 95.33

103 19 5,495 294.1 41,423 58.2 140.87 81.94

104 20 5,395 291.9 42,681 58.8 146.24 85.99

*TOTAL 2010 1,204.5 177,495 60.9 147.35 89.79

111 19 5,392 351.3 52,465 72.4 149.36 108.11

*TOTAL 10,135.2 1,452,297 60.2 143.29 86.25

1. Room-nights sold (derived from est. rate and actual room revenues)

2. Occupancy: nights sold divided by nights available for sale(x 100)

3. Average price for each room-night sold;from Directories and surveys

4. $ Revenue per available room per day (room sales per day)

Page 73 of 119

EXHIBIT II



# * EST. $ EST.

#* RMS % RNS % AMT. % EST. $ $

BRAND HTL 000S RMS 000S RNS 000S AMT %OCC RATE RPAR

----- --- ---- ---- ------ ---- -------- ---- ---- ----- ----

CHAINS

FOURSEAS 1 .4 7.5 95 7.7 20,778 11.3 64.4 218.66 140.90

ZA ZA 1 .3 5.8 79 6.3 14,525 7.9 68.4 184.70 126.33

TOT LUXURY 2 .7 13.3 174 14.0 35,303 19.3 66.2 203.29 134.52

HILTON 1 1.2 22.1 270 21.8 41,885 22.8 61.6 155.21 95.63

HYATT 1 1.0 18.2 224 18.1 29,806 16.3 62.5 132.86 82.99

TOT UPSCALE 2 2.2 40.3 494 39.9 71,691 39.1 62.0 145.06 89.93

RESIDENCE 2 .3 5.4 71 5.7 8,820 4.8 67.2 124.00 83.30

OTH SUITE 1 .3 5.8 71 5.8 11,414 6.2 62.4 159.65 99.59

TOT SUITES 3 .6 11.2 143 11.5 20,234 11.0 64.7 141.87 91.77

COURTYARD 2 .3 5.4 62 5.0 8,322 4.5 58.7 133.84 78.59

CROWNPLZA 1 .3 4.8 57 4.6 7,522 4.1 60.7 131.13 79.57

DOUBLTREE 1 .4 6.5 87 7.0 13,387 7.3 68.2 153.60 104.79

TOT MID/UPS 4 .9 16.6 207 16.7 29,231 15.9 63.0 141.42 89.07

BEST WEST 1 .1 1.4 17 1.4 1,514 .8 60.4 90.40 54.59

HOLID EXP 1 .1 2.1 27 2.2 3,313 1.8 66.4 122.04 81.04

TOT LTD SVE 2 .2 3.5 44 3.5 4,827 2.6 64.0 109.97 70.35

TOT CHAINS 13 4.6 84.8 1,061 85.6 161,285 88.0 63.3 152.00 96.18

INDEPENDENTS

$100+ ADR 4 .5 9.7 113 9.1 16,205 8.8 59.0 143.07 84.41

$60-99ADR 1 .3 4.9 59 4.7 5,478 3.0 60.6 93.31 56.52

LT $60ADR 1 .0 .6 6 .5 343 .2 53.3 55.15 29.37

TOT INDEP 6 .8 15.2 178 14.4 22,026 12.0 59.3 123.61 73.28

TOT MARKET 19 5.4 100.0 1,239 100.0 183,311 100 62.7 147.92 92.70

* All figures annualized. Includes taxed and est non-tax room revenues.

Independents are categorized by price: $100+, $60-99.99, and under $60)

Page 74 of 119



# * EST. $ EST.



----- --- ---- ---- ------ ---- -------- ---- ---- ----- ----

CHAINS

FOURSEAS 1 .4 7.5 86 7.9 18,859 11.6 58.4 218.94 127.90

ZA ZA 1 .3 5.7 70 6.4 12,716 7.8 62.3 182.14 113.48

TOT LUXURY 2 .7 13.1 156 14.3 31,575 19.4 60.1 202.47 121.67

HILTON 1 1.2 22.2 242 22.2 37,297 22.9 55.3 153.96 85.15

HYATT 1 1.0 18.2 186 17.0 24,679 15.2 51.7 132.81 68.71

TOT UPSCALE 2 2.2 40.4 428 39.3 61,976 38.1 53.7 144.77 77.75

RESIDENCE 2 .3 5.4 67 6.2 8,516 5.2 63.4 126.96 80.43

OTH SUITE 1 .3 5.8 65 5.9 10,400 6.4 56.4 160.92 90.74

TOT SUITES 3 .6 11.2 132 12.1 18,916 11.6 59.7 143.62 85.79

COURTYARD 2 .3 5.4 62 5.7 8,536 5.3 59.0 136.65 80.61

CROWNPLZA 1 .3 4.8 50 4.6 6,691 4.1 53.3 132.67 70.78

DOUBLTREE 1 .4 6.5 73 6.7 11,313 7.0 57.2 154.74 88.56

TOT MID/UPS 4 .9 16.6 186 17.1 26,540 16.3 56.7 142.68 80.87

BEST WEST 1 .1 1.4 15 1.4 1,414 .9 55.5 91.83 50.96

HOLID EXP 1 .1 2.1 26 2.3 3,025 1.9 62.4 118.60 74.01

TOT LTD SVE 2 .2 3.5 41 3.8 4,439 2.7 59.6 108.52 64.69

TOT CHAINS 13 4.6 84.8 943 86.4 143,447 88.2 56.3 152.17 85.69

INDEPENDENTS

$100+ ADR 5 .8 14.6 141 13.0 18,747 11.5 49.1 132.60 65.10

$60-99ADR 1 .0 .6 7 .6 385 .2 56.1 58.75 32.98

TOT INDEP 6 .8 15.2 148 13.6 19,132 11.8 49.4 129.32 63.85

TOT MARKET 19 5.4 100.0 1,091 100.0 162,580 100 55.3 149.07 82.38



Page 75 of 119



# * EST. $ EST.



----- --- ---- ---- ------ ---- -------- ---- ---- ----- ----

CHAINS

FOURSEAS 1 .4 7.5 97 7.6 22,994 11.3 65.5 238.08 155.93

ZA ZA 1 .3 5.7 71 5.6 14,416 7.1 63.7 201.81 128.65

TOT LUXURY 2 .7 13.1 168 13.2 37,410 18.4 64.7 222.66 144.16

HILTON 1 1.2 22.2 281 22.0 45,821 22.5 64.1 163.18 104.61

HYATT 1 1.0 18.2 211 16.5 30,853 15.1 58.7 146.32 85.90

TOT UPSCALE 2 2.2 40.4 492 38.5 76,673 37.6 61.7 155.95 96.18

RESIDENCE 2 .3 5.4 80 6.2 11,028 5.4 75.2 138.53 104.15

OTH SUITE 1 .3 5.8 72 5.6 12,670 6.2 62.8 175.91 110.55

TOT SUITES 3 .6 11.2 152 11.9 23,697 11.6 68.8 156.29 107.47

COURTYARD 2 .3 5.4 74 5.8 10,964 5.4 70.0 147.97 103.55

CROWNPLZA 1 .3 4.8 64 5.0 8,609 4.2 67.9 134.15 91.06

DOUBLTREE 1 .4 6.5 89 7.0 14,061 6.9 69.7 157.92 110.06

TOT MID/UPS 4 .9 16.6 227 17.8 33,634 16.5 69.3 147.97 102.49

BEST WEST 1 .1 1.4 19 1.5 1,961 1.0 68.6 102.98 70.68

HOLID EXP 1 .1 2.1 28 2.2 3,470 1.7 68.6 123.71 84.87

TOT LTD SVE 2 .2 3.5 47 3.7 5,430 2.7 68.6 115.33 79.13

TOT CHAINS 13 4.6 84.8 1,086 85.0 176,845 86.8 64.9 162.89 105.64

INDEPENDENTS

$100+ ADR 5 .8 14.6 183 14.3 26,470 13.0 63.5 144.80 91.91

LT $60ADR 1 .0 .6 8 .6 493 .2 69.4 60.85 42.23

TOT INDEP 6 .8 15.2 191 15.0 26,963 13.2 63.7 141.23 89.98

TOT MARKET 19 5.4 100.0 1,277 100.0 203,808 100 64.7 159.65 103.27

* All figures annualized. Includes taxed and est non-tax rooms revenues.


Page 76 of 119



# * EST. $ EST.



----- --- ---- ---- ------ ---- -------- ---- ---- ----- ----

CHAINS

FOURSEAS 1 .4 7.6 100 7.9 22,763 11.9 68.0 226.85 154.37

ZA ZA 1 .2 4.6 50 3.9 9,543 5.0 55.2 191.85 106.00

TOT LUXURY 2 .7 12.2 150 11.9 32,306 16.9 63.2 215.25 136.03

HILTON 1 1.2 22.4 284 22.4 43,686 22.9 64.7 154.07 99.74

HYATT 1 1.0 18.4 225 17.8 31,220 16.4 62.6 138.77 86.92

TOT UPSCALE 2 2.2 40.8 509 40.2 74,906 39.2 63.8 147.30 93.97

RESIDENCE 2 .3 5.4 80 6.3 10,123 5.3 75.8 126.17 95.60

OTH SUITE 1 .3 5.9 76 6.0 12,157 6.4 66.2 160.13 106.08

TOT SUITES 3 .6 11.3 156 12.3 22,280 11.7 70.8 142.68 101.05

COURTYARD 2 .3 5.4 76 6.0 10,346 5.4 71.3 136.99 97.70

CROWNPLZA 1 .3 4.8 59 4.7 7,770 4.1 62.7 131.15 82.20

DOUBLTREE 1 .4 6.5 90 7.1 13,971 7.3 70.6 154.81 109.36

TOT MID/UPS 4 .9 16.8 225 17.8 32,087 16.8 68.6 142.60 97.77

BEST WEST 1 .1 1.4 20 1.6 1,827 1.0 71.3 92.39 65.85

HOLID EXP 1 .1 2.1 30 2.3 3,191 1.7 72.3 107.93 78.06

TOT LTD SVE 2 .2 3.5 49 3.9 5,018 2.6 71.9 101.70 73.12

TOT CHAINS 13 4.5 84.6 1,089 86.0 166,597 87.3 65.9 152.97 100.85

INDEPENDENTS

$100+ ADR 4 .5 9.8 123 9.8 19,364 10.1 64.3 156.82 100.86

$60-99ADR 1 .3 4.9 46 3.6 4,474 2.3 47.7 97.74 46.61

LT $60ADR 1 .0 .6 8 .6 416 .2 67.0 53.12 35.60

TOT INDEP 6 .8 15.4 177 14.0 24,254 12.7 59.1 136.96 80.94

TOT MARKET 19 5.3 100.0 1,266 100.0 190,851 100 64.9 150.73 97.79

* All figures annualized. Included taxed and est non-tax rooms revenues.


Page 77 of 119



# * EST. $ EST.



----- --- ---- ---- ------ ---- -------- ---- ---- ----- ----

CHAINS

FOURSEAS 1 .4 7.9 102 8.6 21,922 13.1 69.1 215.00 148.66

TOT LUXURY 1 .4 7.9 102 8.6 21,922 13.1 69.1 215.00 148.66

HILTON 1 1.2 23.5 274 23.1 40,895 24.5 62.5 149.38 93.37

HYATT 1 1.0 19.3 220 18.6 28,892 17.3 61.3 131.16 80.44

TOT UPSCALE 2 2.2 42.8 494 41.6 69,787 41.7 62.0 141.25 87.54

RESIDENCE 2 .3 5.7 85 7.2 9,105 5.4 80.7 106.53 85.99

OTH SUITE 1 .3 6.2 69 5.8 10,627 6.4 59.8 154.94 92.72

TOT SUITES 3 .6 11.8 154 13.0 19,732 11.8 69.9 128.08 89.49

COURTYARD 2 .3 5.7 77 6.5 9,525 5.7 72.7 123.74 89.95

CROWNPLZA 1 .3 5.1 54 4.5 6,665 4.0 56.8 124.15 70.50

DOUBLTREE 1 .4 6.9 86 7.2 12,196 7.3 66.9 142.62 95.47

TOT MID/UPS 4 .9 17.6 216 18.2 28,386 17.0 65.9 131.31 86.50

BEST WEST 1 .1 1.5 20 1.6 1,714 1.0 70.5 87.64 61.79

HOLID EXP 1 .1 2.2 30 2.6 2,793 1.7 74.3 92.01 68.33

TOT LTD SVE 2 .2 3.7 50 4.2 4,507 2.7 72.7 90.30 65.68

TOT CHAINS 12 4.3 83.9 1,016 85.6 144,333 86.3 65.1 142.04 92.41

INDEPENDENTS

$100+ ADR 4 .5 10.3 127 10.7 18,956 11.3 66.2 149.26 98.73

$60-99ADR 1 .3 5.2 38 3.2 3,631 2.2 39.1 96.81 37.83

LT $60ADR 1 .0 .6 6 .5 261 .2 50.7 44.03 22.33

TOT INDEP 6 .8 16.1 170 14.4 22,848 13.7 56.9 134.06 76.24

TOT MARKET 18 5.1 100.0 1,187 100.0 167,181 100 63.7 140.89 89.81

* All figures annualized. Included taxed and est non-tax rooms revenues.


Page 78 of 119

EXHIBIT III


E 3 YR AVG

CITY ADDR ZIP S EST 4 OP ADJ 1

---- ---- --- T AVG. % -- -----

# TAXABLE GROSS ADJ 1 DAILY OCC $ 5

YRQ RMS BRAND REVENUE REVENUE FACTOR 2 RATE EST REVPAR

--- ---- ----- ------- -------- ------ - ----- --- ------

HOUSTON 1117 PRAIRIE ST 77002 ALDEN HOTEL FMR SAM HOUSTO 02 1.035

20061 97 1,007,877 1,043,153 .000 140.81 85 119.49

20062 97 888,225 919,313 .000 140.31 74 104.15

20063 97 732,252 745,280 1.018 128.34 65 83.51

20064 97 828,046 851,626 1.028 130.91 73 95.43

20071 97 883,943 891,968 1.009 140.68 73 102.17

20072 97 822,396 851,591 1.035 154.90 62 96.48

20073 97 596,931 600,513 1.006 133.38 50 67.29

20074 97 817,957 846,585 .000 138.97 68 94.87

20081 97 953,075 986,433 .000 144.87 78 112.99

20082 97 908,631 915,062 1.007 147.77 70 103.67

20083 97 858,437 867,545 1.011 142.33 68 97.21

20084 97 878,311 933,738 1.063 147.53 71 104.63

20091 97 654,578 659,766 1.008 143.05 53 75.57

20092 97 620,952 642,685 .000 146.76 50 72.81

20093 97 453,136 468,996 .000 135.89 39 52.55

20094 97 531,470 550,071 .000 129.21 48 61.64

20101 97 645,478 668,070 .000 126.82 60 76.53

20102 97 664,833 688,102 .000 128.21 61 77.95

20103 97 500,658 518,181 .000 118.51 49 58.07

20104 97 666,928 675,697 1.013 122.07 62 75.72

20111 97 684,850 708,820 .000 120.38 67 81.19

720 FANNIN ST 77002 CLUB QUARTERS IN HOUSTON 04 1.180

20061 263 1,095,167 1,204,342 1.100 101.68 50 50.88

20062 263 838,490 913,629 1.090 98.15 39 38.17

20063 263 623,298 729,315 1.170 95.21 32 30.14

20064 263 747,520 878,662 1.175 97.11 37 36.31

20071 263 985,073 1,109,692 1.127 96.53 49 46.88

20072 263 967,970 1,082,932 1.119 99.23 46 45.25

20073 263 814,663 951,900 1.168 94.31 42 39.34

20074 263 972,665 1,132,080 1.164 98.34 48 46.79

20081 263 1,127,771 1,307,272 1.159 98.59 56 55.23

20082 263 1,113,341 1,431,164 1.285 106.96 56 59.80

20083 263 1,230,845 1,422,795 1.156 106.63 55 58.80

20084 263 1,344,802 1,666,073 1.239 106.62 65 68.86

20091 263 1,018,266 1,258,650 1.236 95.53 56 53.17

20092 263 895,761 1,142,731 1.276 101.12 47 47.75

20093 263 478,390 676,033 1.413 92.11 30 27.94

20094 263 812,525 909,266 1.119 88.58 42 37.58

20101 263 925,780 1,069,675 1.155 85.97 53 45.19

20102 263 1,041,995 1,255,464 1.205 94.46 56 52.46

20103 263 863,263 1,116,722 1.294 88.00 52 46.15

20104 263 1,008,182 1,242,306 1.232 90.64 57 51.34

20111 263 1,534,909 1,808,949 1.179 99.41 77 76.42

904 DALLAS ST 77002 COURTYARD DOWNTOWN 191 MIN 03 1.030

20061 178 COURT 1,703,933 1,764,065 1.035 130.97 84 110.12

Page 79 of 119

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--- ---- ----- ------- -------- ------ - ----- --- ------

HOUSTON 904 DALLAS ST 77002 COURTYARD DOWNTOWN 191 MIN 03 1.030

20062 176 COURT 1,461,526 1,521,658 1.041 124.98 76 95.01

20063 232 COURT 1,836,540 1,874,555 1.021 123.75 71 87.83

20064 174 COURT 1,305,259 1,313,779 1.007 126.22 65 82.07

20071 178 COURT 1,477,403 1,490,279 1.009 128.73 72 93.03

20072 176 COURT 1,613,072 1,626,499 1.008 142.61 71 101.55

20073 232 COURT 1,890,207 1,946,913 .000 138.33 66 91.22

20074 174 COURT 1,528,540 1,574,396 .000 138.92 71 98.35

20081 178 COURT 1,729,926 1,740,042 1.006 143.91 75 108.62

20082 176 COURT 1,804,964 1,821,953 1.009 160.22 71 113.76

20083 232 COURT 2,159,426 2,224,711 1.030 154.75 67 104.23

20084 174 COURT 1,665,110 1,735,484 1.042 152.49 71 108.41

20091 178 COURT 1,671,333 1,692,886 1.013 147.85 71 105.67

20092 176 COURT 1,497,549 1,532,594 1.023 159.16 60 95.69

20093 232 COURT 1,609,850 1,655,090 1.028 138.09 56 77.54

20094 174 COURT 1,213,327 1,330,734 1.097 135.71 61 83.13

20101 178 COURT 1,543,284 1,602,765 1.039 147.93 68 100.05

20102 176 COURT 1,425,705 1,509,344 1.059 152.11 62 94.24

20103 232 COURT 1,767,918 1,850,563 1.047 145.66 60 86.70

20104 174 COURT 1,133,817 1,160,032 1.023 141.63 51 72.47

20111 178 COURT 1,279,311 1,288,788 1.007 134.52 60 80.45

1700 SMITH ST 77002 CROWNE PLAZA FMR WHITEHALL 65 1.180

20061 259 CROWN 1,874,724 2,013,507 1.074 122.77 70 86.38

20062 259 CROWN 1,519,108 1,709,432 1.125 126.84 57 72.53

20063 259 CROWN 1,320,120 1,539,447 1.166 116.40 56 64.61

20064 259 CROWN 1,467,955 1,569,457 1.069 128.93 51 65.87

20071 259 CROWN 1,637,934 1,846,317 1.127 124.67 64 79.21

20072 259 CROWN 1,763,053 2,057,997 1.167 141.42 62 87.32

20073 259 CROWN 1,448,789 1,692,186 1.168 121.66 58 71.02

20074 259 CROWN 1,705,516 1,891,098 1.109 131.10 61 79.36

20081 259 CROWN 1,873,686 2,129,119 1.136 130.11 70 91.34

20082 259 CROWN 1,922,233 2,213,693 1.152 139.02 68 93.92

20083 259 CROWN 1,884,752 2,140,241 1.136 135.62 66 89.82

20084 259 CROWN 1,952,802 2,167,254 1.110 135.60 67 90.95

20091 259 CROWN 1,769,138 2,087,583 .000 126.63 71 89.56

20092 259 CROWN 1,405,568 1,776,343 1.264 145.47 52 75.37

20093 259 CROWN 1,199,603 1,490,089 1.242 134.13 47 62.54

20094 259 CROWN 1,299,172 1,642,570 1.264 127.54 54 68.93

20101 259 CROWN 1,557,967 1,782,056 1.144 125.18 61 76.45

20102 259 CROWN 1,634,468 1,973,226 1.207 138.82 60 83.72

20103 259 CROWN 1,480,246 1,775,496 1.199 126.16 59 74.51

20104 259 CROWN 1,420,910 1,723,172 1.213 129.94 56 72.32

20111 259 CROWN 1,808,834 2,049,802 1.133 129.64 68 87.94

400 DALLAS ST 77002 DOUBLETREE HOTEL ALLEN CEN 80 1.040

20061 350 DOUBL 3,364,276 3,434,103 1.021 136.29 80 109.02

20062 350 DOUBL 3,143,419 3,222,791 1.025 149.07 68 101.19

Page 80 of 119

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--- ---- ----- ------- -------- ------ - ----- --- ------

HOUSTON 400 DALLAS ST 77002 DOUBLETREE HOTEL ALLEN CEN 80 1.040

20063 350 DOUBL 2,780,100 2,895,910 1.042 139.26 65 89.94

20064 350 DOUBL 2,824,876 2,908,711 1.030 142.05 64 90.33

20071 350 DOUBL 3,076,707 3,168,636 1.030 140.03 72 100.59

20072 350 DOUBL 3,477,398 3,560,975 1.024 164.51 68 111.80

20073 350 DOUBL 3,147,369 3,273,264 .000 140.17 73 101.65

20074 350 DOUBL 3,143,329 3,219,058 1.024 149.97 67 99.97

20081 350 DOUBL 3,859,792 3,917,474 1.015 164.71 76 124.36

20082 350 DOUBL 3,929,227 3,973,223 1.011 174.62 71 124.75

20083 350 DOUBL 2,790,398 2,865,358 1.010 145.12 61 88.99

20084 350 DOUBL 3,417,014 3,694,184 1.081 155.11 74 114.73

20091 350 DOUBL 3,457,235 3,527,761 1.020 155.25 72 111.99

20092 350 DOUBL 2,699,723 2,824,751 1.046 166.54 53 88.69

20093 350 DOUBL 2,230,407 2,303,764 1.033 150.98 47 71.55

20094 350 DOUBL 2,728,429 2,833,524 1.039 147.48 60 88.00

20101 350 DOUBL 3,315,932 3,351,370 1.011 154.57 69 106.39

20102 350 DOUBL 3,234,076 3,277,927 1.014 163.41 63 102.92

20103 350 DOUBL 3,052,600 3,132,611 1.026 1 145.00 67 97.29

20104 350 DOUBL 3,092,307 3,167,219 1.024 149.35 66 98.36

20111 350 DOUBL 3,652,587 3,809,455 1.043 156.85 77 120.94

1600 LAMAR ST 77002 HILTON AMERICAS CONVENTION 03 1.100

20061 1200 HILTO11,317,905 11,614,950 1.026 146.53 73 107.55

20062 1200 HILTO 9,745,159 10,252,346 1.052 151.38 62 93.89

20063 1200 HILTO 9,197,987 9,634,728 1.047 146.84 59 87.27

20064 1200 HILTO 9,264,709 9,665,500 1.043 149.78 58 87.55

20071 1200 HILTO10,938,452 11,341,992 1.037 149.45 70 105.02

20072 1200 HILTO10,813,706 11,161,821 1.032 151.68 67 102.21

20073 1200 HILTO 8,327,992 9,144,135 1.098 144.53 57 82.83

20074 1200 HILTO 9,823,251 10,451,145 1.064 147.76 64 94.67

20081 1200 HILTO12,445,525 12,928,460 1.039 170.19 70 119.71

20082 1200 HILTO11,575,426 12,251,884 1.058 171.53 65 112.20

20083 1200 HILTO10,245,240 10,959,091 1.070 161.03 62 99.27

20084 1200 HILTO 9,038,205 11,153,298 1.234 161.01 63 101.03

20091 1200 HILTO10,853,302 11,456,323 1.056 159.02 67 106.08

20092 1200 HILTO 8,108,205 9,090,291 1.121 163.16 51 83.24

20093 1200 HILTO 6,490,558 7,479,935 1.152 145.27 47 67.75

20094 1200 HILTO 7,753,942 8,947,504 1.154 147.93 55 81.05

20101 1200 HILTO11,188,017 11,779,428 1.053 157.96 69 109.07

20102 1200 HILTO 9,990,762 10,633,539 1.064 159.69 61 97.38

20103 1200 HILTO 6,807,106 8,587,161 1.261 145.54 53 77.78

20104 1200 HILTO 8,688,884 9,984,950 1.149 151.97 60 90.44

20111 1200 HILTO11,804,137 12,678,930 1.074 161.39 73 117.40

220 MAIN ST 77002 HOTEL ICON 04 1.025

20061 135 1,699,960 1,724,116 1.014 180.10 79 141.90

20062 135 1,382,953 1,713,506 1.239 201.56 69 139.48

20063 135 1,281,477 1,402,251 1.094 170.29 66 112.90

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--- ---- ----- ------- -------- ------ - ----- --- ------

HOUSTON 220 MAIN ST 77002 HOTEL ICON 04 1.025

20064 135 1,530,693 1,562,269 1.021 178.80 70 125.79

20071 135 1,559,170 1,604,738 1.029 179.15 74 132.08

20072 135 1,478,303 1,515,261 .000 194.45 63 123.34

20073 135 1,215,663 1,246,055 .000 175.04 57 100.33

20074 135 1,574,394 1,613,754 .000 188.56 69 129.93

20081 135 1,615,642 1,630,134 1.009 187.13 72 134.17

20082 135 1,558,887 1,589,717 1.020 190.87 68 129.40

20083 135 1,884,752 2,140,241 1.136 182.98 94 172.32

20084 135 1,636,016 1,676,916 .000 188.96 71 135.02

20091 135 1,289,408 1,321,643 .000 177.97 61 108.78

20092 135 1,242,341 1,325,396 1.067 182.60 59 107.89

20093 135 1,089,055 1,116,281 .000 163.47 55 89.88

20094 135 1,213,028 1,243,354 .000 169.15 59 100.11

20101 135 1,345,834 1,352,282 1.005 166.03 67 111.30

20102 135 1,339,393 1,372,878 .000 177.14 63 111.75

20103 135 1,182,496 1,183,854 .000 150.00 64 95.32

20104 135 1,267,660 1,299,352 .000 163.26 64 104.62

20111 135 1,467,086 1,503,763 .000 165.85 75 123.77

1200 LOUISIANA 77002 HYATT REGENCY HOUSTON 72 1.045

20061 984 HYATT 8,038,713 8,298,599 1.032 131.58 71 93.71

20062 984 HYATT 6,570,658 7,267,920 1.106 134.90 60 81.17

20063 984 HYATT 6,336,062 6,726,996 1.062 128.52 58 74.31

20064 984 HYATT 6,694,504 7,100,520 1.061 133.13 59 78.43

20071 984 HYATT 7,506,360 7,796,534 1.039 128.37 69 88.04

20072 984 HYATT 7,456,828 7,697,189 1.032 141.42 61 85.96

20073 984 HYATT 6,428,371 7,122,635 1.108 130.39 60 78.68

20074 984 HYATT 7,182,229 7,991,649 1.113 143.06 62 88.28

20081 984 HYATT 8,230,247 8,408,488 1.022 140.00 68 94.95

20082 984 HYATT 8,256,224 8,495,567 1.029 151.37 63 94.88

20083 984 HYATT 7,297,065 7,892,832 1.082 146.12 60 87.19

20084 984 HYATT 6,041,013 7,708,943 1.276 149.11 57 85.16

20091 984 HYATT 5,962,740 6,755,247 1.133 137.79 55 76.28

20092 984 HYATT 6,070,766 6,648,806 1.095 143.57 52 74.25

20093 984 HYATT 4,479,628 4,696,597 1.048 127.98 41 51.88

20094 984 HYATT 5,956,540 6,328,559 1.062 131.49 53 69.91

20101 984 HYATT 6,908,016 7,005,253 1.014 128.08 62 79.10

20102 984 HYATT 7,296,221 7,536,824 1.033 137.83 61 84.17

20103 984 HYATT 5,886,370 6,543,213 1.112 125.71 57 72.28

20104 984 HYATT 6,481,555 6,698,573 1.033 132.57 56 73.99

20111 984 HYATT 8,631,277 9,027,444 1.046 134.56 76 101.94

1520 TEXAS ST 77002 INN AT THE BALLPARK 04 1.045

20061 201 1,140,669 1,355,204 1.188 116.74 64 74.91

20062 201 519,289 1,393,040 2.683 120.60 63 76.16

20063 201 1,459,602 1,819,774 1.247 126.68 78 98.41

20064 201 931,149 1,086,769 1.167 123.09 48 58.77

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HOUSTON 1520 TEXAS ST 77002 INN AT THE BALLPARK 04 1.045

20071 201 1,341,400 1,393,393 1.039 118.68 65 77.03

20072 201 1,734,345 1,810,521 1.030 140.00 71 98.98

20073 201 1,442,465 1,516,031 1.051 130.95 63 81.98

20074 201 1,241,066 1,395,294 1.124 130.43 58 75.45

20081 201 1,631,898 1,770,902 1.085 139.37 70 97.89

20082 201 1,846,096 1,979,784 1.072 155.59 70 108.24

20083 201 1,699,498 1,880,701 1.107 150.12 68 101.70

20084 201 1,317,238 1,722,461 1.308 145.11 64 93.15

20091 201 1,367,639 1,523,825 1.114 140.70 60 84.24

20092 201 1,295,559 1,474,428 1.138 148.51 54 80.61

20093 201 1,246,276 1,396,733 1.121 135.63 56 75.53

20094 201 1,047,374 1,146,180 1.094 132.89 47 61.98

20101 201 1,250,332 1,342,368 1.074 130.44 57 74.20

20102 201 1,372,205 1,421,204 1.036 140.04 55 77.70

20103 201 1,368,852 1,444,092 1.055 132.06 59 78.09

20104 201 1,171,397 1,222,988 1.044 136.02 49 66.14

20111 201 1,488,227 1,549,014 1.041 131.09 65 85.63

916 DALLAS ST 77002 RESIDENCE INN 171 MINTL 03 1.200

20061 159 RESID 1,253,950 1,457,786 1.163 110.25 92 101.87

20062 157 RESID 1,016,269 1,220,106 1.201 110.77 77 85.40

20063 208 RESID 1,415,199 1,726,591 1.220 110.12 82 90.23

20064 156 RESID 899,514 1,051,614 1.169 103.88 71 73.27

20071 159 RESID 1,095,588 1,221,817 1.115 107.25 80 85.38

20072 157 RESID 1,151,576 1,298,005 1.127 115.39 79 90.85

20073 208 RESID 1,492,266 1,790,719 .000 131.33 71 93.58

20074 156 RESID 1,059,925 1,271,910 .000 120.58 73 88.62

20081 159 RESID 1,347,119 1,519,658 1.128 134.76 79 106.20

20082 157 RESID 1,384,901 1,478,513 1.068 137.45 75 103.49

20083 208 RESID 1,717,971 2,011,389 1.171 141.02 75 105.11

20084 156 RESID 1,195,133 1,450,815 1.214 139.01 73 101.09

20091 159 RESID 1,279,948 1,433,007 1.120 132.85 75 100.14

20092 157 RESID 999,801 1,214,057 1.214 139.41 61 84.98

20093 208 RESID 1,169,419 1,360,879 1.164 125.93 56 71.12

20094 156 RESID 878,119 1,049,452 1.195 117.79 62 73.12

20101 159 RESID 1,186,425 1,327,403 1.119 128.38 72 92.76

20102 157 RESID 1,016,352 1,328,589 1.307 132.84 70 92.99

20103 208 RESID 1,120,193 1,633,202 1.458 124.30 69 85.35

20104 156 RESID 829,161 1,099,691 1.326 121.85 63 76.62

20111 159 RESID 1,017,195 1,221,831 1.201 123.78 69 85.38

2222 SMITH ST. 77002 STERLING RELOCATION INC. 10 .000

20104 10 48,626 54,510 .000 65.92 90 59.25

701 TEXAS ST 77002 THE LANCASTER HOTEL 59 1.110

20061 93 1,031,453 1,046,867 1.015 170.61 73 125.07

20062 93 883,301 902,500 1.022 176.26 60 106.64

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--- ---- ----- ------- -------- ------ - ----- --- ------

HOUSTON 701 TEXAS ST 77002 THE LANCASTER HOTEL 59 1.110

20063 93 776,628 805,393 1.037 167.09 56 94.13

20064 93 902,968 918,725 1.017 173.49 62 107.38

20071 93 931,274 945,176 1.015 167.28 68 112.92

20072 93 920,441 934,398 1.015 177.10 62 110.41

20073 93 729,070 742,922 1.019 165.00 53 86.83

20074 93 842,192 894,628 1.062 176.29 59 104.56

20081 93 998,094 1,009,003 1.011 178.93 67 120.55

20082 93 985,402 1,014,684 1.030 182.50 66 119.90

20083 93 734,039 820,292 1.118 174.96 55 95.87

20084 93 876,957 900,809 1.027 174.94 60 105.28

20091 93 739,964 744,126 1.006 169.62 52 88.90

20092 93 602,757 607,712 1.008 174.03 41 71.81

20093 93 391,292 396,947 1.014 160.10 29 46.39

20094 93 526,651 584,583 .000 152.24 45 68.32

20101 93 629,540 633,319 1.006 152.37 50 75.67

20102 93 625,077 629,925 1.008 159.14 47 74.43

20103 93 501,666 556,849 .000 147.21 44 65.08

20104 93 580,272 660,630 1.138 146.48 53 77.21

20111 93 691,516 769,898 1.113 145.24 63 91.98

1100 TEXAS ST 77002 THE MAGNOLIA HOTEL 03 1.050

20061 314 X.STE 2,616,744 2,790,353 1.066 155.68 63 98.74

20062 314 X.STE 2,570,505 2,756,744 1.072 166.00 58 96.48

20063 314 X.STE 2,331,512 2,384,148 1.023 151.32 55 82.53

20064 314 X.STE 2,534,514 2,637,998 1.041 154.35 59 91.32

20071 314 X.STE 2,777,352 2,848,197 1.026 148.82 68 100.79

20072 314 X.STE 2,828,691 2,941,507 1.040 164.48 63 102.94

20073 314 X.STE 2,541,198 2,627,599 1.034 147.91 61 90.96

20074 314 X.STE 3,111,557 3,172,236 1.020 158.87 69 109.81

20081 314 X.STE 3,368,908 3,416,137 1.014 168.21 72 120.88

20082 314 X.STE 3,309,067 3,710,160 1.121 186.04 70 129.84

20083 314 X.STE 2,894,989 2,962,722 1.023 175.50 58 102.56

20084 314 X.STE 2,975,454 3,066,835 1.031 175.48 60 106.16

20091 314 X.STE 2,814,851 2,930,203 1.041 165.30 63 103.69

20092 314 X.STE 2,585,242 2,775,563 1.074 174.78 56 97.14

20093 314 X.STE 2,058,209 2,190,230 1.064 157.43 48 75.82

20094 314 X.STE 2,413,861 2,564,842 1.063 157.54 56 88.79

20101 314 X.STE 2,736,158 2,869,406 1.049 154.63 66 101.54

20102 314 X.STE 2,938,240 3,073,366 1.046 168.59 64 107.56

20103 314 X.STE 2,328,355 2,508,888 1.078 149.45 58 86.85

20104 314 X.STE 2,531,052 2,664,790 1.053 158.05 58 92.25

20111 314 X.STE 3,042,898 3,167,210 1.041 161.44 69 112.07

1810 BELL ST 77003 HOLIDAY EXPRESS DOWNTOWN 01 1.075

20061 112 HIEXP 695,747 713,081 1.025 88.77 80 70.74

20062 112 HIEXP 614,108 666,660 1.086 91.71 71 65.41

20063 112 HIEXP 645,745 704,409 1.091 88.96 77 68.36

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--- ---- ----- ------- -------- ------ - ----- --- ------

HOUSTON 1810 BELL ST 77003 HOLIDAY EXPRESS DOWNTOWN 01 1.075

20064 112 HIEXP 653,349 682,547 1.045 93.39 71 66.24

20071 112 HIEXP 708,380 739,555 1.044 94.05 78 73.37

20072 112 HIEXP 812,057 838,081 1.032 112.62 73 82.23

20073 112 HIEXP 712,387 742,307 1.042 102.45 70 72.04

20074 112 HIEXP 698,092 735,782 1.054 101.03 71 71.41

20081 112 HIEXP 829,378 874,871 1.055 115.16 75 86.79

20082 112 HIEXP 890,509 924,796 1.039 132.96 68 90.74

20083 112 HIEXP 611,861 752,719 1.230 120.59 61 73.05

20084 112 HIEXP 752,827 883,784 1.174 119.57 72 85.77

20091 112 HIEXP 785,830 908,222 1.156 121.76 74 90.10

20092 112 HIEXP 674,896 733,804 1.087 124.92 58 72.00

20093 112 HIEXP 671,674 715,618 1.065 114.95 60 69.45

20094 112 HIEXP 689,832 744,261 1.079 116.58 62 72.23

20101 112 HIEXP 807,631 831,742 1.030 118.35 70 82.51

20102 112 HIEXP 776,133 836,196 1.077 124.75 66 82.04

20103 112 HIEXP 720,569 759,818 1.054 115.06 64 73.74

20104 112 HIEXP 725,770 787,496 1.085 122.12 63 76.43

20111 112 HIEXP 889,724 929,458 1.045 125.70 73 92.21

1933 SCOTT ST 77003 SCOTT'S INN & SUITE 03 1.080

20061 32 67,650 73,062 .000 41.80 61 25.37

20062 32 63,482 68,561 .000 43.91 54 23.54

20063 32 59,598 64,366 .000 44.14 50 21.86

20064 32 45,671 49,325 .000 45.02 37 16.75

20071 32 72,747 78,567 .000 43.41 63 27.28

20072 32 96,009 103,690 .000 49.87 71 35.61

20073 32 85,485 91,469 1.070 50.99 61 31.07

20074 32 101,552 126,397 1.245 58.68 73 42.93

20081 32 71,649 94,256 1.316 52.28 63 32.73

20082 32 81,668 94,985 1.163 53.32 61 32.62

20083 32 104,959 133,720 1.274 60.14 76 45.42

20084 32 117,435 150,466 1.281 67.64 76 51.11

20091 32 91,293 114,124 1.250 60.73 65 39.63

20092 32 89,760 107,935 1.202 62.31 59 37.07

20093 32 87,800 97,341 1.109 59.75 55 33.06

20094 32 80,996 92,801 1.146 56.81 55 31.52

20101 32 74,551 87,102 1.168 55.76 54 30.24

20102 32 79,797 88,297 1.107 56.38 54 30.32

20103 32 77,213 84,313 1.092 52.00 55 28.64

20104 32 85,064 93,053 1.094 57.68 55 31.61

20111 32 71,685 77,420 .000 54.46 49 26.88

2929 WESTPARK D 77005 COURTYARD WEST UNIVERSITY 04 1.020

20061 100 COURT 795,396 809,450 1.018 107.13 84 89.94

20062 100 COURT 862,326 866,271 1.005 123.98 77 95.19

20063 100 COURT 797,449 803,789 1.008 115.02 76 87.37

20064 100 COURT 748,901 750,051 1.002 117.32 69 81.53

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--- ---- ----- ------- -------- ------ - ----- --- ------

HOUSTON 2929 WESTPARK D 77005 COURTYARD WEST UNIVERSITY 04 1.020

20071 100 COURT 893,101 904,608 1.013 123.91 81 100.51

20072 100 COURT 893,048 902,404 1.010 137.66 72 99.17

20073 100 COURT 792,980 796,152 1.004 123.83 70 86.54

20074 100 COURT 810,562 816,648 1.008 126.18 70 88.77

20081 100 COURT 928,545 942,703 1.015 131.58 80 104.74

20082 100 COURT 928,768 936,578 1.008 139.06 74 102.92

20083 100 COURT 873,019 909,896 1.042 138.63 71 98.90

20084 100 COURT 850,698 902,588 1.061 138.61 71 98.11

20091 100 COURT 708,012 740,242 1.046 129.55 63 82.25

20092 100 COURT 569,512 599,540 1.053 132.93 50 65.88

20093 100 COURT 524,919 535,417 .000 118.64 49 58.20

20094 100 COURT 576,294 586,776 1.018 112.83 57 63.78

20101 100 COURT 679,021 693,041 1.021 115.65 67 77.00

20102 100 COURT 700,181 706,830 1.009 125.09 62 77.67

20103 100 COURT 525,033 531,305 1.012 112.05 52 57.75

20104 100 COURT 554,159 558,943 1.009 113.35 54 60.75

20111 100 COURT 708,233 715,799 1.011 110.87 72 79.53

5701 MAIN ST 77005 HOTEL ZA ZA FMR WARWICK 10 64 1.090

20072 65 ZA ZA 439,310 478,848 .000 195.24 41 80.95

20073 307 ZA ZA 2,093,362 2,175,003 1.039 189.38 41 77.01

20074 307 ZA ZA 3,146,674 3,321,240 1.055 188.09 63 117.59

20081 307 ZA ZA 3,399,564 3,568,289 1.050 196.59 66 129.15

20082 307 ZA ZA 3,502,719 3,556,019 1.015 200.52 63 127.29

20083 307 ZA ZA 3,501,304 3,698,739 1.056 199.90 66 130.96

20084 307 ZA ZA 3,642,958 3,963,221 1.088 215.88 65 140.32

20091 307 ZA ZA 3,087,696 3,198,457 1.036 189.92 61 115.76

20092 307 ZA ZA 3,234,426 3,347,801 1.035 194.86 61 119.83

20093 307 ZA ZA 2,648,043 2,740,148 1.035 173.02 56 97.02

20094 307 ZA ZA 2,918,087 3,050,221 1.045 181.24 60 108.00

20101 307 ZA ZA 3,417,402 3,577,536 1.047 179.17 72 129.48

20102 315 ZA ZA 3,482,775 3,703,366 1.063 192.37 67 129.19

20103 315 ZA ZA 3,032,911 3,239,671 1.068 176.46 63 111.79

20104 315 ZA ZA 3,242,034 3,555,660 1.097 182.78 67 122.69

20111 315 ZA ZA 3,650,653 4,026,147 1.103 186.60 76 142.02

2939 WESTPARK D 77005 RESIDENCE INN WEST UNIVERS 04 1.200

20061 120 RESID 585,025 883,396 1.510 93.21 88 81.80

20062 120 RESID 801,358 994,592 1.241 119.12 76 91.08

20063 120 RESID 469,278 968,077 2.063 100.38 87 87.69

20064 120 RESID 621,772 871,704 1.402 93.94 84 78.96

20071 120 RESID 903,927 1,050,562 1.162 105.12 93 97.27

20072 120 RESID 852,256 1,093,963 1.284 128.62 78 100.18

20073 120 RESID 755,335 1,016,681 1.346 121.85 76 92.09

20074 120 RESID 755,766 985,527 1.304 124.17 72 89.27

20081 120 RESID 922,503 1,146,227 1.243 131.16 81 106.13

20082 120 RESID 976,963 1,226,942 1.256 144.12 78 112.36

Page 86 of 119

E 3 YR AVG


---- ---- --- T AVG. % -- -----



--- ---- ----- ------- -------- ------ - ----- --- ------

HOUSTON 2939 WESTPARK D 77005 RESIDENCE INN WEST UNIVERS 04 1.200

20083 120 RESID 799,637 1,157,801 1.448 139.69 75 104.87

20084 120 RESID 811,447 1,208,959 1.490 139.67 78 109.51

20091 120 RESID 785,722 1,060,107 1.349 134.07 73 98.16

20092 120 RESID 750,435 945,786 1.260 142.48 61 86.61

20093 120 RESID 571,381 835,740 1.463 121.14 62 75.70

20094 120 RESID 602,328 818,309 1.359 118.12 63 74.12

20101 120 RESID 766,703 964,565 1.258 122.81 73 89.31

20102 120 RESID 781,783 969,411 1.240 130.28 68 88.77

20103 120 RESID 657,825 818,815 1.245 115.08 64 74.17

20104 120 RESID 650,797 808,651 1.243 118.53 62 73.25

20111 120 RESID 785,057 939,715 1.197 121.80 71 87.01

1300 LAMAR ST 77010 FOUR SEASONS HOTEL 82 1.030

20061 404 FOURS 5,650,958 6,019,744 1.065 209.47 79 165.56

20062 404 FOURS 5,311,470 5,535,598 1.042 217.44 69 150.57

20063 404 FOURS 4,746,805 4,821,819 1.016 202.28 64 129.73

20064 404 FOURS 5,140,417 5,360,568 1.043 216.53 67 144.23

20071 404 FOURS 6,145,824 6,203,734 1.009 222.27 77 170.62

20072 404 FOURS 5,525,549 5,749,452 1.041 231.58 68 156.39

20073 404 FOURS 4,510,466 4,587,144 1.017 209.11 59 123.42

20074 404 FOURS 6,038,715 6,093,410 1.009 224.29 73 163.94

20081 404 FOURS 6,260,234 6,332,923 1.012 239.76 73 174.17

20082 404 FOURS 6,363,672 6,520,345 1.025 248.68 71 177.36

20083 404 FOURS 5,282,499 5,764,287 1.091 237.94 65 155.09

20084 404 FOURS 5,508,378 5,697,711 1.034 237.92 64 153.30

20091 404 FOURS 4,921,410 5,011,695 1.018 225.84 61 137.84

20092 404 FOURS 4,738,101 4,870,834 1.028 237.93 56 132.49

20093 404 FOURS 3,729,007 3,786,632 1.015 208.79 49 101.88

20094 404 FOURS 4,738,938 4,839,802 1.021 213.09 61 130.21

20101 404 FOURS 5,305,014 5,362,154 1.011 216.03 68 147.47

20102 404 FOURS 5,301,635 5,407,310 1.020 228.20 64 147.08

20103 404 FOURS 4,646,922 4,801,410 1.033 211.35 61 129.18

20104 404 FOURS 4,705,263 4,837,267 1.028 220.06 59 130.15

20111 404 FOURS 5,666,259 5,731,778 1.012 215.25 73 157.64

915 W DALLAS ST 77019 BEST WESTERN DOWNTOWN 01 1.030

20061 76 BWEST 449,771 461,479 1.026 85.98 78 67.47

20062 76 BWEST 425,095 430,822 1.013 88.82 70 62.29

20063 76 BWEST 393,901 400,552 1.017 83.66 68 57.29

20064 76 BWEST 376,700 381,326 1.012 85.33 64 54.54

20071 76 BWEST 492,264 501,235 1.018 91.92 80 73.28

20072 76 BWEST 478,201 480,346 1.004 97.66 71 69.45

20073 76 BWEST 403,666 414,565 1.027 87.94 67 59.29

20074 76 BWEST 408,866 419,404 1.026 89.61 67 59.98

20081 76 BWEST 493,846 512,231 1.037 93.83 80 74.89

20082 76 BWEST 460,679 464,340 1.008 100.79 67 67.14

20083 76 BWEST 390,276 461,525 1.183 100.48 66 66.01

Page 87 of 119

E 3 YR AVG


---- ---- --- T AVG. % -- -----



--- ---- ----- ------- -------- ------ - ----- --- ------

HOUSTON 915 W DALLAS ST 77019 BEST WESTERN DOWNTOWN 01 1.030

20084 76 BWEST 263,739 568,106 2.154 110.47 74 81.25

20091 76 BWEST 437,670 466,741 1.066 99.35 69 68.24

20092 76 BWEST 391,253 398,257 1.018 101.94 56 57.58

20093 76 BWEST 327,294 340,537 1.040 92.00 53 48.70

20094 76 BWEST 322,241 325,157 1.009 87.49 53 46.50

20101 76 BWEST 336,585 349,731 1.039 85.87 60 51.13

20102 76 BWEST 325,255 330,353 1.016 91.92 52 47.77

20103 76 BWEST 327,579 336,983 1.029 87.06 55 48.20

20104 76 BWEST 373,063 385,693 1.034 89.67 62 55.16

20111 76 BWEST 455,426 461,207 1.013 92.50 73 67.43

ENDNOTES: 1. FACTOR USED TO ADJUST TAXABLE TO GROSS REVENUES. AREA

FACTOR USED IF PROPERTY DOES NOT PROVIDE GROSS. TAXABLE IS 89% OF

GROSS STATEWIDE. 2. A NUMBER OR A 'Y' INDICATES QUARTERS REVENUES ARE

ESTIMATED. 3. ESTIMATED AVERAGE DAILY RATE (IE 60-85% OF RACK SINGLE)

4. Occupancy derived from calculated room-nights sold (gross room reve-

nues divided by Average Daily Rate), divided by room-nights available.

5. Total REVenues Per Available Room per day, or 'REVPAR';

Prepared from State Comptroller, chain directories and private records.

Includes all quarterly reports exceeding $14,000 (otherwise omitted).

Page 88 of 119

EXHIBIT IV

PERIOD: TWELVE MONTHS ENDING DECEMBER 31, 2010

TEXAS' HIGHEST-PRICED ZIP-CODE MARKETS

INCLUDES PARTS AUSTIN(78701/04/44/52), DALLAS (75201/02/07/40/43)

GRAPEVINE, HOUSTON (77002/05/06/10/24/27/30/42/46/56/60/79) IRVING

SAN ANTONIO (78205/16/51), WESLAKE, FRISCO, PLANO. EXCLUDES BUDGETS,

LOW-PRICED EXTENDED STAY, AND HOTELS PRICED UNDER $65

# * EST. $ EST.



----- --- ---- ---- ------ ---- -------- ---- ---- ----- ----

CHAINS

FOURSEAS 3 1.1 1.7 253 1.8 63,732 3.3 63.4 252.06 159.90

RITZ CARL 1 .2 .3 55 .4 13,558 .7 69.1 246.61 170.39

WESTIN 8 3.5 5.5 759 5.3 121,021 6.3 58.9 159.43 93.87

ZA ZA 2 .5 .7 112 .8 23,160 1.2 66.3 206.12 136.66

TOT LUXURY 14 5.3 8.3 1,179 8.3 221,471 11.5 60.9 187.81 114.35

HILTON 11 6.6 10.4 1,434 10.0 210,124 10.9 59.4 146.56 87.10

HYATT 7 4.8 7.5 1,061 7.4 166,066 8.7 61.0 156.58 95.56

INT-C 2 .7 1.1 158 1.1 23,735 1.2 64.1 150.47 96.48

MARRIOTT 14 6.6 10.3 1,461 10.2 223,036 11.6 61.1 152.61 93.17

OMNI 6 2.2 3.5 529 3.7 78,137 4.1 65.2 147.62 96.25

RENAISSAN 2 .9 1.4 185 1.3 24,488 1.3 56.2 132.31 74.30

TOT UPSCALE 42 21.7 34.1 4,828 33.8 725,585 37.8 60.9 150.29 91.48

EMBASSY 9 2.2 3.4 508 3.6 67,869 3.5 63.3 133.68 84.67

HOMEWOOD 8 1.0 1.5 234 1.6 28,189 1.5 66.3 120.30 79.78

RESIDENCE 12 1.8 2.8 422 3.0 48,094 2.5 65.8 113.99 75.06

STAYBRIDG 7 .8 1.2 189 1.3 19,488 1.0 64.9 103.34 67.07

SUMMERFLD 3 .4 .7 102 .7 11,331 .6 63.7 111.34 70.92

OTH SUITE 10 2.5 3.8 573 4.0 83,554 4.4 64.0 145.87 93.33

TOT SUITES 49 8.6 13.5 2,027 14.2 258,525 13.5 64.5 127.54 82.30

ALOFT 5 .8 1.2 159 1.1 18,794 1.0 57.5 118.35 68.04

COURTYARD 17 2.7 4.2 610 4.3 71,314 3.7 61.8 116.88 72.21

CROWNPLZA 7 2.2 3.5 468 3.3 48,120 2.5 57.1 102.90 58.80

DOUBLTREE 4 1.2 1.9 275 1.9 32,436 1.7 61.8 118.10 72.96

HILT GARD 7 1.3 2.0 299 2.1 35,306 1.8 65.0 118.06 76.71

HOLID INN 8 2.3 3.6 488 3.4 47,055 2.5 58.1 96.34 56.02

HYATT PLC 5 .6 1.0 152 1.1 15,801 .8 65.9 103.84 68.42

INDIGO 4 .5 .8 104 .7 10,666 .6 55.1 102.54 56.54

NYLO 2 .4 .6 64 .4 7,006 .4 46.3 110.31 51.05

RADIS HTL 1 .4 .6 113 .8 13,241 .7 75.0 117.19 87.84

SHERATON 5 2.9 4.6 672 4.7 70,706 3.7 62.5 105.20 65.73

WYNDHAM 3 .8 1.3 142 1.0 11,940 .6 48.7 83.81 40.79

OTHER MUP 1 .1 .2 27 .2 2,044 .1 64.4 74.93 48.27

TOT MID/UPS 69 16.3 25.5 3,573 25.0 384,430 20.0 60.1 107.58 64.66

CANDLWOOD 2 .2 .3 49 .3 3,377 .2 66.3 69.08 45.78

COMFO STE 3 .2 .3 49 .3 3,965 .2 60.4 80.63 48.71

SPRNGHILL 4 .5 .8 133 .9 12,876 .7 68.3 96.56 65.94

TOWNPLACE 3 .3 .5 74 .5 6,647 .3 62.8 90.06 56.57

OTHER MIN 1 .1 .1 13 .1 917 .0 58.9 69.86 41.18

TOT MIN STE 13 1.3 2.1 318 2.2 27,781 1.4 64.9 87.27 56.67

Page 89 of 119

PERIOD: TWELVE MONTHS ENDING DECEMBER 31, 2010

TEXAS' HIGHEST-PRICED ZIP-CODE MARKETS

INCLUDES PARTS AUSTIN(78701/04/44/52), DALLAS (75201/02/07/40/43)

GRAPEVINE, HOUSTON (77002/05/06/10/24/27/30/42/46/56/60/79) IRVING

SAN ANTONIO (78205/16/51), WESLAKE, FRISCO, PLANO. EXCLUDES BUDGETS,

LOW-PRICED EXTENDED STAY, AND HOTELS PRICED UNDER $65

# * EST. $ EST.



----- --- ---- ---- ------ ---- -------- ---- ---- ----- ----

CHAINS

BEST WEST 3 .2 .4 56 .4 4,941 .3 62.0 88.07 54.58

DRURY INN 5 1.0 1.5 233 1.6 26,490 1.4 65.1 113.47 73.85

FAIRFIELD 7 .7 1.1 154 1.1 13,035 .7 60.0 84.51 50.71

HAMPTON 9 1.2 1.9 306 2.1 34,801 1.8 67.5 113.83 76.83

HOLID EXP 10 1.0 1.6 220 1.5 18,900 1.0 60.1 86.03 51.73

LA QUINTA 5 .8 1.3 180 1.3 15,057 .8 61.8 83.47 51.55

WINGATE 2 .2 .3 46 .3 3,248 .2 59.4 70.38 41.78

TOT LTD SVE 40 5.2 8.1 1,196 8.4 116,471 6.1 63.1 97.40 61.48

TOT CHAINS 227 58.5 91.7 13,122 91.8 1,734,263 90.4 61.5 132.17 81.27

INDEPENDENTS

$100+ ADR 27 4.8 7.6 1,078 7.5 176,758 9.2 61.0 163.97 99.98

$60-99ADR 4 .4 .7 93 .7 8,428 .4 56.8 90.54 51.43

TOT INDEP 31 5.3 8.3 1,171 8.2 185,187 9.6 60.6 158.13 95.86

TOT MARKET 258 63.8 100.0 14,293 100.0 1,919,449 100 61.4 134.30 82.48



Source Strategies Inc. (210) 734-3434 03/05/11 BRDR1000.FEX

Page 90 of 119

EXHIBIT V

A STUDY OF THE EFFECT OF HOTEL SIZE ON PERFORMANCE

IN THE TEXAS HOTEL INDUSTRY

THE CASE FOR DOWNSIZING NEW HOTELS

11/30/99

By Douglas W. Sutton and Bruce H. Walker

Source Strategies has long contended that the number of rooms a developer offers

in a new property is one of the key factors in determining a venture's relative

success or failure. It is every bit as important to size a hotel project

properly as it is to select the appropriate brand, and to develop in a suitable

market and location. We have previously conducted extensive studies of the

lodging market that support our hotel sizing contention, and we have taken this

opportunity to re-examine the issue using our extensive database of hotel and

motel performance for the State of Texas.

Before delving into the numbers that define the role of room count in a hotel's

performance, we should first highlight the basic industry theory of 'right-

sizing' a property. The premise offered by many inexperienced developers is "If

I can make a profit constructing a 50 room hotel in a given market, it would be

twice as profitable to develop 100 rooms." In virtually all cases nothing could

be farther from the truth. At some point adding rooms to a project reaches a

point of diminishing returns, and the investment in the additional rooms cannot

be economically justified.

To illustrate this point, mentally divide our hypothetical 100 room project into

two 50 room hotels. The initial 50 rooms may perform very well, with occupancies

over 70% and a very strong rate structure. However, the second 50 rooms are only

utilized when there is overflow from the first hotel because its rooms are 100%

occupied. Effectively, the second 50 rooms may only attain an occupancy of 30%

or less. This low level of occupancy may prompt the general manager to lower

rates to bolster occupancy, but this is a losing battle. Ultimately,

overbuilding causes REVPAR erosion in the property, and in the market as a whole.

Today's developers and lenders would not seriously consider involvement in a 50

room project operating at this low level, but often times they accomplish the

same end by pushing for more rooms in a project than the market can effectively

support. If we now mentally put these two 50 room properties back together (one

operating at 70%, the other at 30% occupancy), what we end up with is an

oversized 100 room hotel that is running a mediocre 50% occupancy.

Page 91 of 119

Over-sizing a hotel makes it difficult, if not impossible, to be competitive in a

marketplace. There are a finite number of room-nights sold to be divided among

existing hotels in the market, and developing a more conservatively sized

property helps insure that a profitable level of those room-nights can be

captured. Building a hotel is not the 'Field of Dreams'.... If you build it -

they won't come.... With the exception of destination resorts and some unique

convention hotels, people do not go someplace because there is a hotel. Rather,

they stay in a hotel because they want to be near someplace.

Builders who construct too many rooms usually put themselves in unenviable

financial situations. Many hotels which we see put up for sale were developed

with far too many rooms. The owners, having had difficulty getting a return on

their investment, are often trying to get out from under a bad investment. There

are even drastic cases of properties bulldozing entire wings to provide

additional parking, because those extra rooms are a financial burden, remaining

unsold the vast majority of the time.

Now that we've outlined the basic economic benefits of 'building small', let's

look into hotel performance numbers and see if they support this development

principle. We analyzed two separate hotel samplings: First we will look at

Comfort Inns across Texas as a selected brand sampling. Then we will look at all

branded hotels built during a given period of time for a more diverse sampling.

COMFORT INN - ANALYSIS OF SIZING AND ITS IMPACT ON PERFORMANCE

In our initial analysis, we selected a sampling of Texas Comfort Inn branded

properties ranging in size from 36 to 75 rooms; they are all 'Limited Service'

hotels. We excluded those properties located in exclusive, higher priced

markets, since they would naturally support larger room counts while maintaining

strong performance levels and would distort the findings. The resulting sample

included 55 Comfort Inn hotels located across Texas.

The following chart of performance statistics from the latest year on file (12

months ending September 30, 1999) clearly illustrates the consistent curve,

showing marked declines in performance as room count increases. This decline was

exhibited in all three measures shown, Occupancy, Average Daily Rate, and REVPAR:

Page 92 of 119

Year Ending 6/30/99 Results

Average

# of Daily

Units Occupancy Rate REVPAR

36-40 66.9 55.25 36.95

41-45 65.3 57.34 37.45

46-50 66.5 57.38 38.17

51-55 62.8 56.02 35.20

56-60 61.8 54.26 33.55

61-65 56.6 55.33 31.33

66-70 44.6 45.71 20.41

71-75 43.8 44.20 19.38

Combined: 52 63.2 55.46 35.03

Looking only at occupancy, the following graph gives a clear depiction of the

notable negative impact of larger room counts on a hotel's ability to maintain an

acceptable level of room-nights sold. Properties with lower room counts were

clearly able to sustain a higher level of occupancy. Average occupancy ranged

from 66.9% for properties of 36-40 rooms, downward to a much lower 43.8% average

occupancy for properties in the 71-75 room size bracket.

When looking at REVPAR, the following graph follows a very similar performance

curve, ranging from an average REVPAR of $36.95 for properties of 36-40 units,

downward to a mediocre $19.38 average REVPAR for properties in the 71-35 unit

size bracket. Note that the downward slide in both graphs did not begin until

room counts exceeded 35 units. Prior to that, a mild upward trend is

experienced. This appears to indicate that, on average, 50 rooms is the

'optimum' size for a Comfort Inn in Texas markets (excluding high priced areas).

Of course, this is an average number for this type of market. Each project must

be examined on an individual basis to determine the proper size to develop within

its given market.

Page 93 of 119

The above chart and graphs clearly illustrates that Developers often missed the

mark, building more rooms than 'optimum.' 'Optimum' is defined as generating the

highest return on invested capital, and is closely tied to occupancy and REVPAR

generation.

Analyzing the above data provides a measure of the effect of over building. For

the typical range of rooms for Comfort Inn projects (40-75 rooms) outside of

higher priced areas, the occupancy dropped 23.1 points (a full 35%) from 66.9% to

43.8% as room counts escalated. With a 35 room increase in rooms from the 36-40

room size bracket to the 71-75 room size bracket, a resulting 35% drop in

occupancy is experienced.

The key question, is how to apply this principle to a given hotel project.

Naturally, each project would have to be judged on its individual merits, but

looking at an 'average' project for a single brand and product is very revealing.

All are Comfort Inns. All are very similar products in similar market

environments, leaving size as the major variable in performance.

In our sampling, the average project is 65 rooms in size. At this size, the

average occupancy is 62.8%. If we built 36% fewer rooms (42 rooms) our average

occupancy would rise a moderate 6.5% to 66.9%. Conversely, if we built 36% more

than average, (71 rooms) our average occupancy plummets by 42.5% to 43.8%.

Clearly there are some basic economic principles at work. Comfort Inns are

conservatively-sized. Building smaller than the average of 65 rooms yields

slightly higher occupancies, but the ability to charge ever higher rates as size

decreases is marginal. As rates rise, some consumers perceive lost value and

will stay at another property. On the other side of the coin, properties built

larger than the average 65 rooms suffer serious occupancy declines. At some

Page 94 of 119

point the need for additional rooms that was envisioned by the optimistic

developer is simply not there, and the extra rooms only serve to depress the

overall performance of the property.

BRANDED HOTELS - ANALYSIS OF SIZING AND ITS IMPACT ON PERFORMANCE

In our second analysis, we selected a sampling of all Texas branded hotels

constructed from 1970-1975; 91 properties across Texas, predominantly 'Full

Service'. Our sampling was limited to hotels of less than 135 rooms. We once

again excluded those properties located in exclusive, higher priced markets. For

our analysis we examined performance results from the year 1985 when all subject

hotels were 10 to 15 years old, well into their aging life cycles.

The following chart of performance statistics from 1985 for branded properties

throughout Texas clearly illustrates the downward curve, with definite erosion in

performance measures as room count increases:

1985 Performance Results

Average

# of # of Daily

Hotels Units Occupancy Rate REVPAR

2 00-44 70.0 37.88 26.50

3 45-59 73.9 36.13 26.71

7 60-74 66.8 31.10 20.77

14 75-89 62.7 31.65 19.86

29 90-104 60.9 32.42 19.75

16 105-119 57.8 26.25 15.18

20 120-134 55.5 29.35 16.28

Combined: 91 98 59.8 30.34 18.14

With occupancy declines being the strongest indicator of the negative impact of

building too large, the following graph provides a clear picture of the

descending performance slide as room counts increase. Once again, properties

with lower room counts were more insulated from market competition and were

therefore able to be more competitive in both favorable and depressed market

environments. Average occupancy ranged from 70% for properties of 58 rooms or

less, downward to a much lower 55.5% average occupancy for properties in the 120-

134 room size bracket, after peaking at 73.9% in the 45-59 size range.

Page 95 of 119

As with the Comfort Inn analysis, the above data provides a measure of the effect

of over building. However, since a number of varying brands are considered in

this sample, the typical range in size of these projects ranges from about 40 to

135. This is a wider range than the Comfort sampling, since many of the brands

in this sample typically have larger room counts than a Comfort Inn. This is

partially due to some brands' ability to support higher room counts, and

partially due to the tendency to overbuild in the early 1970s, when all hotels in

this sample were constructed.

While the 65 room average for our Comfort Inn sample is reasonably close to

optimum sizing for that brand, the 98 room average for this analysis appears to

be oversized. In our assessment, the optimum average number of rooms for this

sampling would have been 60 to 41 rooms, depending upon brand. In 1985, this

roomcount supported occupancies near 70%, with an average REVPAR of almost $27.

Compare this to the average capacity of 98 rooms attaining a much lower average

occupancy of 60.9% and REVPAR below $20. Clearly this lower level of performance

can be attributed to over-sizing projects in the early 1970s.

Looking at our average (oversized) roomcount of 98 rooms, increasing the size by

30% (135 rooms) would cause occupancy to slide 10% from 60.9% to 55.5%. On the

other hand, making the average project smaller (58 rooms, or 75% smaller) would

improve occupancy to 73.9%, or a healthy 21% increase.

For the sake of comparison, let us assume that the average property was more

appropriately sized at about 58 rooms. If the project size were increased to 135

rooms, the largest range in our sample, occupancy would suffer a significant 33%

decline from optimum levels.

Page 96 of 119

Of course this assumes that locational differences are not significant. We

believe this is true; the large sample and clear correlation between size and

performance support this conclusion.

SUMMARY

The data is clear. In most cases, small hotels outperform large hotels, with the

exception of higher-priced markets where competitive barriers to entry exist

(e.g. lack of land, excessive land cost, building restrictions, etc.).

Common sense explains this occurrence: a successful 100 room hotel will

inevitably prompt the development of one or more new, small hotels of similar

quality in the immediate area. In a competitive market environment, the smaller

hotel has a distinct advantage and wins - almost every time.

Page 97 of 119

EXHIBIT VI

START-UP PERFORMANCE OF NEW HOTELS AND MOTELS

A new study by Source Strategies, Inc., utilizing all new chain hotels opened in

Texas between 1990 and 1994, shows that new hotels and motels provide their peak

performance in Years III through V, when they typically reach 112% of their 20-

year average REVPAR performance level.

In other words, the newness of a property is an advantage on the order of a 12%

premium in Years III through V - versus the average REVPAR that would otherwise

be expected for that property over a twenty-year period. That's because the

consumer almost always picks new over old because, to them, 'new' means 'clean'

and 'new' means 'value.' Perhaps this is not news to many, but it is highly

important to those who forecast the performance of new properties.

Here's what the graph looks like for the first twelve years for new properties

opened in the moderately-good and improving markets of the 1990's. The years

after peak are projected based on two major previous studies: one by Limited

Service in the early 1980's and the second last year by Source Strategies, Inc.

Year I at 92% of the 20 Year Average, Year II at 107%

Page 98 of 119

The study found that a property could expect a REVPAR at Year I of 92% of the

twenty-year average for a project. In Year II, this would move to 107% and to

112% in Years' III through V.

For example, if over the twenty-year span of the project, we expect a

hypothetical new hotel to generate 105% of the market average REVPAR, this means

that in Year I it would generate 97% of market (105% times 92%), and in Year II

112% (105% times Year II's 107%), and then peak at 118% for Years III-V.

Study Method

The underlying design for this study was to determine what effect a property's

age had on its REVPAR during the first five years of operation.

From two other studies, we know that properties will decline at 1.67% per year,

versus the market average, over long periods of time. The second study sample

consisted of all new Texas development in the early 1980's, a time of major

under-supply. Consequently, the first few years performance of this group of

hotels and motels was probably be overstated - versus the current, more-normal

times. The current study confirmed that belief.

The current study's design was to develop the REVPAR index for every new chain

property (each new property's REVPAR, divided by the REVPAR of all nearby hotels

and motels). Then all the resulting indices were averaged.

This process was done for each year of development, 1990, 1991, 1992, 1993 and

1994, in order to obtain data for "Year I," "Year II" and so on. These were

averaged as well to obtain an over-all, average Year I result.

This process produced the graph curve shown above, and is reflective of the

particular mix of chain properties, a mix which produced REVPAR slightly above

the market average. To eliminate the effect of a specific mix of chains, the

scale was moved down slightly, so that the application of the year-by-year REVPAR

indices to any project would result in averaging 100 of the first twenty years of

the project.

Page 99 of 119

REVPAR OF ALL NEW CHAIN HOTELS OPENED 1990-1994

INCLUDES THEIR LOCAL MARKET AVERAGES (SAME ZIP-CODES)

Opened 1990 Year I Year II Year III Year IV Year V Year VI

9 Chain hotels 41.97 49.45 54.76 54.17 59.45 66.16

Local Market Average 35.38 37.40 39.72 39.71 43.31 48.87

Index New Chain/Market 119 132 138 136 137 135

(Peak)


8 Chain hotels 32.06 37.95 41.49 44.18 46.26

Local Market Average 29.96 31.26 32.36 33.04 33.70 est


(Peak)

Above assumes Year VI index decline of 1.67%


7 Chain hotels 25.07 36.53 39.76 41.74

Local Market Average 30.60 33.62 34.36 37.49 est est


(Peak)

Above assumes Year V is "flat" and Year VI index declines by 1.67%


16 Chain hotels 24.51 29.15 33.19

Local Market Average 30.70 31.88 35.27 est est est


(Peak) (Peak)

Above assumes Year III and IV are Peak, and Year V and Year VI index

declines by 1.67% annually


29 Chain hotels 30.40 35.97

Local Market Average 38.68 41.29 est est est est


Above assumes Year III and Year IV Peak equals Year II plus 4%, as above, and

Year V and Year VI index declines by 1.67% annually

Peak

COMBINED INDICES Year I Year II Year III Year IV Year V Year VI

Average of Raw Data 93 108 113 113 113 111

Adjusted 100 over 20 years 92 107 112 112 112 110

After Year V, Declines Average 1.67% Per Annum

In the sixth year and thereafter, the twenty-year average REVPAR index is

diminished at a rate of 1.67% per annum in order to reflect aging and the normal

life-cycle of a hotel.

Page 100 of 119

This pattern of declining performance with property aging is based on major

studies of economic life-cycle patterns, studies which were conducted on a census

of all 25,000 Texas rooms built between 1980 and 1982 (study published in

September 1994 issues of MarketShare and the October 1994 issue of Hotel & Motel

Management). These Source Strategies studies confirm a similar, major study

conducted in 1982 at the Holiday corporation on 160 company-owned and company-

operated hotels.

Page 101 of 119

EXHIBIT VII

CapEx: A STUDY OF CAPITAL EXPENDITURES IN THE US HOTEL INDUSTRY

THE FOLLOWING IS A SUMMARY OF THE INTERNATIONAL SOCIETY OF HOSPITALITY

CONSULTANTS' 2000 "CAPEX STUDY, A STUDY OF CAPITAL EXPENDITURES IN THE US HOTEL

INDUSTRY" AS IT APPLIES TO LIMITED SERVICE PROPERTIES:

The objective of our historical analysis in CapEx 2000 was to determine what has

been spent in the past to maintain a hotel in good, competitive condition. Hotel

owners and management companies were contacted to provide data for the study.

Definition of CapEx

"Capital Expenditure" is defined as: investments of cash or the creation of

liability to acquire or improve an asset, e.g., land, buildings, building

additions, site improvements, machinery, equipment; Comparatively, the "reserve

for replacement" for a hotel asset has been narrowly defined as the funds set

aside for the periodic replacement of furniture, fixtures and equipment (FF&E).

The reserve was not contemplated to fund the replacement of major building

components, such as roofs, elevators, and chillers.

For this study the term has been defined as: the cost of replacing worn out

FF&E, as well as the cost of;

- updating design and decor

- curing functional and economic obsolescence...

- complying with franchisors' brand requirements

- technology improvements

- product change to meet market demands

- adhering to government regulatory requirements

- replacing all short and long lived building components due to wear and tear

Although many equity investors frequently argue against the necessity of a

reserve, particularly if the investor does not plan to hold the property for

greater than five years, the requirement for and amount of reserves are typically

contractual issues between ownership, lender, manager, and/or

franchisor/franchisee.

Significant Findings of CapEx 2000

The average amount spent per year by limited-service hotels in the survey was

determined to be 5.5% of total revenue for the time period covered by CapEx 2000

(1988-1998). As these limited-service hotels have matured, CapEx has increased,

underscoring one of our principal findings that CapEx requirements increase as a

hotel ages. CapEx Spending is highly dependent upon a hotel's point in its life

cycle. The following chart shows the range of CapEx spending (as a percentage of

Page 102 of 119

total revenues) over a 25-year time period; the table following the chart

identifies the specific ranges of CapEx spending as a% of total revenues by year.

Percentage Range of

CapEx Spending by Year

Year Range Minimum Range Maximum

1 1.65% 4.51%

2 1.72% 3.29%

3 1.48% 3.15%

4 1.31% 3.64%

5 3.21% 6.23%

6 4.80% 6.77%

7 4.15% 5.85%

8 3.60% 5.23%

9 4.83% 7.01%

10 8.43% 11.94%

11 4.66% 6.55%

12 5.42% 9.36%

13 4.66% 9.93%

14 4.66% 7.82%

15 3.35% 5.72%

16 5.12% 12.40%

17 5.10% 10.50%

18 2.51% 9.72%

19 2.93% 8.10%

20 2.37% 8.68%

21 2.37% 6.99%

22 3.20% 6.84%

23 5.07% 16.98%

24 3.45% 12.88%

25 5.05% 10.24%

As the data indicates, CapEx spending increases over time for all (U.S.) hotels,

with large differences in both the level of CapEx spending and timing across

different hotels. The data illustrates that, over time, the minimum and maximum

levels of CapEx spending generally widens as a hotel increases in age.

Page 103 of 119

For limited-service hotels, the first major increase in spending occurs in the

sixth year, which likely represents the replacement of soft goods. The first

major spike occurs in year 10, which is likely to be the result of a rooms and

corridors renovation. Smaller spikes in CapEx spending occur in the following

years, with the next major spending spike occurring in year 17, which is likely

building and some mechanical renovation and replacement.

The following series of tables illustrates limited-service CapEx spending levels

in various demographic categories:

CapEx 2000- Limited Service Hotels by Location

Average Capex/Total CapEx per

Location Age Revenue Room per Year

All Properties 12.0 yrs 5.5% $1,111

Airport 9.8 yrs 5.4% $1,268

Urban 15.2 yrs 4.3% $ 820

Small City/Hwy 9.2 yrs 5.1% $ 773

Suburban 10.5 yrs 5.7% $1,172

Page 104 of 119

CapEx 2000- Limited Service Hotels by Average Daily Rate

Average Average Capex/Total CapEx per

Daily Rate Age Revenue Room per Year


< $60 12.7 yrs 5.0% $ 687

$60-$80 12.5 yrs 6.3% $1,134

> $80 12.0 yrs 5.3% $1,570

CapEx 2000- Limited Service Hotels by Property Size


Property Size Age Revenue Room per Year


< 100 rooms 8.7 yrs 3.3% $ 475

100-150 rooms 10.3 yrs 5.4% $1,107

> 150 rooms 20.0 yrs 6.9% $1,360

-CapEx 2000- Limited Service Hotels by Age of Property


Daily Rate Revenue Room per Year

All Properties 5.5% $1,111

> 15 yrs old 6.5% $1,372

5-15 yrs old 4.8% $ 897

< 5 yrs old 3.0% $ 547

Overall, the study details the varying levels of capital required to keep a hotel

competitive in its life cycle. Historically, many operators have held no more

than 3-4% of gross revenues in reserve, a level which may be sufficient for FF&E

replacement, but is woefully inadequate for other required expenditures.19

19 Data compiled and organized from the CapEx report of the International Society of Hospitality Consultants, copyright 2000.

Page 105 of 119

August 8, 2011

Market Texas Tourism

Office of the Governor, Economic Development & Tourism

TEXAS HOTEL PERFORMANCE REPORT:

SECOND QUARTER 2011

Texas room revenues gained 12.7% to

$1.942 billion in the Second quarter of

2011; about a third of the revenue gain is

from areas related to oil and gas production.

This 12.7% gain compares to a 15.5% gain in the

First quarter, a 6.5% increase in all of 2010

and a loss of 15 % in 2009. Revenues grew

8.5%+ in both 2008 and 2007.

Second quarter 2011 room-nights sold

increased by a strong 9.3%, returning the

Industry to the long-term trend line for the

first time since 2008. The 9.3% gain compares

to a 7.6% gain in 2010, a loss of 8.6% in 2009

and to gains of 3% in 2008 and 2007.

Occupancy rose by 6.5%, but rates only by

3%, resulting in a Revenue Per Available

Room increase of 9.7%. Occupancy reached

60.4%, up 3.7 ‘points’ – about even with the

long-term annual average.

In the Second quarter, room supply (net

rooms added) increased just 2.6% over 2010.

This compares to a 6.1% growth rate in the year

of 2010; supply growth is steadily declining, and

should continue to do so.

With healthy growth rates, the Texas lodging

market appears to be reaching for a recovery

to normality. However, worrying uncertainties

about the national economy remain, including

very low GDP growth, stagnant consumer

demand and high unemployment.

PO Box 120055 134 Laurel Heights, San Antonio, TX 78212 210-734-3434 Fax 210-735-7970 www.SourceStrategies.Org

Page 106 of 119

Texas lodging performance measures are generally trending positively. However, growth rates are

starting to moderate and average daily rates are still low (current daily rates are just 1.8% above 2009

levels). If rates can rise in future, strong demand levels, combined with shrinking new supply additions,

would return the industry to normal profitability.

Texas: Percentage Change Vs Year Ago Room Room Rooms % $ $

Year Qtr Supply Rev $ Sold Occ Price RPAR

2009 1st 3.0 -8.5 -5.3 -7.9 -3.4 -11.2

2nd 3.6 -16.0 -10.1 -13.2 -6.6 -18.9

3rd 4.3 -16.6 -10.2 -13.8 -7.1 -20.0

4th 4.6 -19.3 -11.4 -15.3 -9.0 -22.9

2010 1st 6.1 -2.8 2.3 -3.7 -5.0 -8.4

2nd 5.8 7.4 8.8 2.7 -1.3 1.5

3rd 4.6 9.5 9.9 5.0 -0.4 4.6

4th 3.9 12.5 9.2 5.3 3.0 8.3

2011 1st 3.3 15.6 10.9 7.3 4.2 11.9

2nd 2.6 12.7 9.3 6.5 3.0 9.7

METRO RESULTS – SECOND QUARTER

Twenty-four of 28 measured areas saw revenue gains. Highest increases were in oil and gas

production areas of Odessa, Midland, Victoria, Laredo, Lubbock, Abilene, San Angelo and rural

areas.

A special data run on the top oil and gas producing counties, representing 22% of Texas hotel rooms,

showed that revenues gained 20.4% in the quarter, and represented one-third of the state’s gain in room-

nights sold. In these 99 counties, room-nights sold rose by 33% over the Second quarter of last year.

Excluding the oil and gas areas, the balance of Texas showed a much lower 7.9% gain in room-nights

sold and an 11% gain in room revenues.

Second Quarter % Total Revenue*

% Chains Only:

Metropolitan Areas Market 2010 2011 Change %Occ $ ADR REVPAR

Dallas-Ft Worth-Arlington 26.0% $453.3 $505.8 11.6% 61.1% $91.29 $55.78

Houston-Baytown-Sugarland 22.7% $378.3 $440.7 16.5% 61.7% $97.83 $60.36

San Antonio 12.8% $234.3 $249.3 6.4% 63.9% $99.64 $63.67

Austin-Round Rock 10.1% $172.4 $195.7 13.5% 69.2% $104.77 $72.50

Corpus Christi 3.1% $53.5 $59.5 11.3% 61.9% $86.75 $53.70

El Paso 1.9% $39.2 $37.7 -3.7% 70.4% $74.54 $52.48

Brownsville-Harlingen 1.6% $30.7 $31.8 3.6% 57.8% $82.29 $47.56

McAllen-Edinburg-Pharr 1.2% $21.2 $22.4 5.5% 53.7% $78.51 $42.16

Lubbock 1.1% $18.0 $21.8 21.4% 69.5% $74.84 $52.01

Amarillo 1.1% $19.3 $21.0 8.5% 66.3% $69.58 $46.13

Beaumont-Port Arthur 1.0% $17.0 $18.7 10.0% 50.8% $67.99 $34.54

Non-Metro Areas 8.8% $147.7 $171.6 16.2% 60.3% $76.38 $46.06

Balance of Texas 8.5% $138.9 $166.0 19.4% 61.0% $78.87 $48.11

Total State of Texas 100.0% $1,724.0 $1,942.1 12.7% 60.4% $88.53 $53.47

*$ millions

Page 107 of 119

Revenues By Price: The largest revenue gains

in the past three quarters have been among

travelers purchasing at prices above $90. In

the Fourth quarter of 2010 and the first half of

2011, strong recovery was experienced at price

levels above $90 and especially above $135.

By Product/Price Segment – Second Quarter:

Growth by segment20 appears to be similar

across the board except for the Upscales. This large segment of the major full-service hotels is located

predominantly in urban areas and did not participate in the oil exploration boom, mainly located in

smaller metros and rural areas.

Mini-suites, Limited Service and Luxury hotels showed slightly stronger revenue gains than other

segments, and were beneficiaries of stronger business travel. Limited Service, Mid/Upscales, Budgets,

Suites and Independents added 8,600 of the 10,200 net room supply increase. Budget and Independent

additions include changes from other names.

Segment Performance – Second Quarter 2011 Results ( 000's) # # # $ Room % % % Point Rate RVPAR

Segments Hotels Rooms Chg Revenues Chg Mkt Occup Chg Chg Chg

Luxury 19 8.1 0.1 97,425 15.8% 5.0% 65.9 3.9 7.4% 14.2%

Upscale 84 36.0 0.4 320,132 8.6% 16.5% 63.5 2.4 3.2% 7.3%

Suites 176 23.3 1.2 185,362 13.4% 9.5% 69.8 3.3 2.5% 7.6%

Mid/Upscales 266 48.9 1.7 294,654 12.1% 15.2% 62.8 3.1 2.8% 8.2%

Mini-Suites 248 21.3 0.9 100,267 16.5% 5.2% 64.3 7.6 1.4% 11.7%

L.S./Midscales 1,031 82.9 1.9 410,052 14.5% 21.1% 63.7 4.8 3.5% 11.8%

Extended Stay 197 25.7 0.2 62,382 11.3% 3.2% 68.3 3.5 4.6% 10.3%

Budget 973 70.2 1.9 166,847 12.7% 8.6% 54.4 3.5 2.5% 9.7%

Total Chains 2,994 316.4 8.3 1,637,121 12.6% 84.3% 62.4 3.8 2.9% 9.7%

Tot. Independ. 1,758 82.7 1.9 305,004 12.7% 15.7% 52.7 3.1 3.6% 10.1%

Total Market 4,752 399.1 10.2 1,942,125 12.7% 100.0% 60.4 3.7 3.0% 9.7%

20 Limited Service chain hotels offer high-quality rooms without restaurants (e.g. Holiday Express, Hampton). Mini-suite hotels feature room sizes of about

400 square feet. Luxury hotels are the highest priced chains (Westin, Four Seasons). Upscales are the large full-service, higher-priced hotels (e.g. Marriott, Hilton, Hyatt). Mid-Upscale hotels are lower-priced, select service hotels (Courtyard, Hilton Garden). Low Priced Extended Stay includes brands such as

Budget Suites. Budget chains include Motel 6, Super 8, Days, Ramada and similar hotels.

Change In Room Revenues by Price

Under $90 to

Average

Rate: $90 $135 $135+ Total

2009 -3.7% -9.4% -31.2% -15.0%

2010 9.1% 7.5% 1.5% 6.5%

2011 1st Qtr 8.6% 11.9% 30.3% 15.5%

2nd Qtr 5.7% 15.2% 18.5% 12.7%

Page 108 of 119

Supply Growth Diminishing Net supply additions peaked in

the Second quarter of 2010 at

21,300 hotel rooms (room

openings less room closings, year-

over-year basis). Since then, the

number of net new rooms has

decreased in each of the last four

quarters.

In the Second quarter of 2011, the

net increase on room supply was

down to 10,270 (in 110 new

hotels), below the 13,300 in the

First quarter, the 14,600 room

increase in the Fourth quarter and

17,500 room increase in the Third

quarter. By comparison, additions

to room supply in 2008 averaged

about 10,000 units per quarter.

Gross new hotel rooms added in

the 12 months ending in the

Second quarter were 28,845,

down from the 61,821 added in

the 12 months ending Second

quarter 2010 (‘gross’ means

‘new builds’ only). However, debt financing funds all but disappeared at the end of 2008; hotels having

financing approved before then have probably been opened by now. Consequently, gross new hotel room

supply additions should continue to decline.

Hotel rooms closed in the past 12

months through the Second

quarter were 18,553. This was a

lower number than the 49,373

room peak closings a year ago, the

highest level of the past seven

years. This means that the

difference between ‘gross new’

and closed rooms cause the

important ‘net supply’ statistic to

be declining towards zero.

These trends will have the

financially favorable effect of allowing demand increases to go to existing hotels, raising occupancies

and allowing increases in daily rates and REVPAR.

Page 109 of 119

Results in the Largest Areas

Oil & Gas Area room-nights sold rose 14.7%, with revenues up 20.4%, to $370 million. This

resulted in an occupancy improvement of 5.7 points, to 60%. Net room supply grew 3.8% (3,200

rooms). The highest oil and gas producing counties in Texas account for 22% of Texas hotel rooms, and

33% of the Second quarter’s room-night gains. Counties near the Eagle Ford gas field are included;

Harris and Tarrant counties are excluded. This defined area includes 99 of 228 Texas counties with

hotels),

Houston-Baytown-Sugar Land room-nights sold gained 11.5% while room revenues moved 16.5%

higher to $441 million on a 4.5% price gain. Occupancy increased 4.3 points to 60.4%. Metro room

supply rose by 3.4% (2,700 rooms). In the year of 2010, Houston room revenues gained 6.1% and room-

nights sold rose 6.1%; occupancy decreased 0.5 points to a 54.4% average

Dallas Metropolitan Division room-nights sold rose 10.8% in the Second quarter, with rates

increasing 1.1%. This caused revenues to rise 12% to $339 million. Occupancy gained 5.5 points,

to 61.2%. Net room supply increased by 0.8% (600 net rooms). In the year of 2010, Dallas room

revenues gained just 7% because of a 2.3% decrease in room rates and a 9.5% rise in room-nights sold

from 2009; 2010 occupancy gained 3 points to 55%.

Austin-Round Rock room-nights-sold gained 8% in a Texas state legislative year. Influenced by a

5.1% price rise, revenues gained 13.5% to $196 million. Net room supply rose 3.8% (1,100 net new

rooms). Occupancy gained 2.7 points to 68.3%. For all of 2010, Austin metro occupancy gained 2.1

points to a still-healthy 62.7% as room revenues gained 9.4%. Rooms available rose by 1,500.

San Antonio Metro room-nights sold gained 6.8%, while rates declined 0.4% causing revenues to

gain just 6.4%, to $249 million. As net room supply increased by 3.5% (1,500 net additional rooms),

average occupancy edged 2 points higher, to 62.5%. In the year of 2010, San Antonio room revenues

gained 11.4% because of a 1.2% increase in room rates and an 11.4% rise in room-nights sold; occupancy

gained 1.4 points to a 57.1% average; net rooms available rose by 3,400.

Ft. Worth-Arlington Metropolitan Division room-nights sold rose just 6%, with revenues up

10.7%, to $166 million. Net room supply grew 2.9% (900 rooms) contributing to an occupancy

improvement of 1.6 points, to 57.1%. In the year of 2010, Ft. Worth room revenues gained 7.4%,

room-nights sold increased 7.8% and occupancy gained 1.8 point to a 56.4% average; rooms available

rose 3.3% (1,300).

Page 110 of 119

Second Quarter Occupancy In the Second quarter of 2011, occupancy averaged 60.4%, up 3.7 points from 56.7% last year and

about even with the long term averages. In the First quarter, occupancy was 59.2%, up from 55.2% in

2010. These occupancies compare to 55.0% for all of 2010, 53.9% for 2009, and to 61.4% in both 2008

and 2007.

Chain occupancy was 62.4% in the Second quarter, up 3.8 points from a year ago. Chains

accounted for 84.3% of market revenues, the same as a year ago. Independents generated 52.8%

occupancy, up by 3.2 points.

In the Second quarter, 23 of the 27 Texas areas showed increased occupancy versus last year. Ten

areas exceeded the state occupancy average while eleven areas exceeded the state average increase in

room revenues. The table below is sorted by Second quarter revenue increase; it also confirms the major

and positive effect of oil and gas exploration and production activity:

Metro Area Performances

Year of 2010 Second Quarter 2011

Occ Rev Occ Pt. Rev

Metro Area % %Chg % Chg % Chg

Odessa 53.5 16.3% 74.2 22.0 76.4%

Midland 56.5 9.0% 78.5 22.1 60.7%

Abilene 44.9 -0.4% 59.8 13.5 39.5%

Victoria 53.3 33.9% 63.9 12.1 38.6%

Laredo 59.7 28.5% 67.8 10.9 32.3%

Lubbock 56.6 4.8% 67.2 8.6 21.4%

San Angelo 58.9 -4.9% 59.3 1.8 18.8%

Houston-Baytown-Sugar Land 54.4 2.0% 60.4 4.3 16.5%

Non Metro 50.2 9.9% 57.0 3.9 16.2%

Tyler 52.1 3.8% 55.2 1.8 15.1%

Austin-Round Rock 62.7 7.8% 68.3 2.7 13.5%

State Average 55.0 6.5% 60.4 3.7 12.7%

Dallas MD 55.0 7.0% 61.2 5.5 12.0%

Sherman-Denison 48.1 4.9% 55.2 3.3 11.6%

Corpus Christi 49.6 1.8% 55.1 1.2 11.3%

Ft Worth-Arlington MD 56.4 7.4% 57.1 1.6 10.7%

Beaumont-Pt Arthur 47.3 -11.6% 50.0 4.0 10.0%

Amarillo 59.6 6.8% 64.7 1.9 8.5%

Wichita Falls 48.5 4.1% 50.1 2.2 7.1%

San Antonio 57.1 12.7% 62.5 2.0 6.4%

College Station-Bryan 56.5 -1.4% 61.9 4.5 5.6%

McAllen-Edinburg-Pharr 51.1 2.4% 49.7 1.9 5.5%

Brownsville-Harlingen 47.6 1.8% 51.6 0.6 3.6%

Texarkana (Texas) 59.5 7.6% 58.9 -1.1 2.1%

Longview 52.7 3.1% 55.7 0.8 -0.7%

Killeen-Temple-Ft Hood 54.5 3.7% 57.0 -0.7 -1.4%

Waco 55.4 5.4% 54.0 -3.6 -2.1%

El Paso 68.1 9.5% 69.1 -3.9 -3.7%

Page 111 of 119

Know your competition

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Source is the only provider of individual, hotel-by-hotel data, trends and

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Source data is based on the Texas State Comptroller audited tax files for the

period of 1980 to the present, making it more accurate and complete than

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contract to the Office of the Governor, Economic Development and Tourism

to supply its hotel research data and analysis. Services detailed below and at www.SourceStrategies.org.

The Texas Hotel Performance Factbook, puts each and every hotel and

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Contacts us at (210) 734-3434 e-mail Address

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Amanda B Sykes, Manager Administration [email protected]

http://www.sourcestrategies.org/

Page 112 of 119

BRUCE H. WALKER

1987-Present: Source Strategies, Inc. Founder and President of consultancy in research, strategy

and marketing, specializing in lodging. Practice includes 120+ hotel feasibility studies annually for

individual developers. Other clients include Office of the Governor, Texas Economic Development

& Tourism, Banks, major accounting firms, appraisers and attorneys. Database of 4,100+ Texas

hotel/motels created and maintained continuously. Testify regularly. Publisher and writer of The

Hotel Brand Report and the Texas Hotel Performance Factbook.

1986-1987: La Quinta Motor Inns, Inc. Senior Vice President, Marketing. Repositioned brand

with the ad campaign "Just Right Overnight," new corporate logo, extensive couponing and

premium-quality king rooms.

1984-1985: Portel Videotex Network LP. President. Home-banking, home-shopping start-up.

1976-1983: Holiday Corporation. Hotel Group Vice President, Marketing (1975-79), President of

subsidiaries (1979-82), Senior Vice President, Central and Strategic Planning(1980-83).

Started the first hotel frequent traveler's program, and the classic ad campaign, "The Best Surprise is

No Surprise." Developed and launched the Hi-Net satellite reception network to 350 Holiday Inn

hotels, offering HBO, CNN and ESPN. Created prototypes and strategic plans for new chains

Hampton Inns and Embassy Suites, and recommended sale of Holiday Inn chain (sold 1989 to Bass

PLC).

1969-1975: Howard Johnson Company. Assistant to the President, Director Disney

World Development, Director Restaurant Marketing.

1964-1968: Procter & Gamble Company. International Brand Manager. Took Scope mouthwash,

Secret deodorant and Crisco Oil into Canada, Crest toothpaste and Tempo deodorant into the United

Kingdom.

EDUCATION

1957-61 Amherst College. BA, Economics.

1961-63 Harvard Business School. MBA.

Ongoing seminars throughout career include strategic studies with the Boston Consulting Group.

Appraisal Institute Hotel/Motel Valuation and Investment Seminar, April 1992

PUBLICATIONS AND SEMINARS:

* The Cornell Quarterly, October 1993, "What's Ahead: A Strategic Look at Lodging Trends."

* Hotel & Motel Management, October 1994, " Hoteliers Should Examine Hotels' Life Cycles."

* Two articles per year for Hotelexecutive.com, the authoritative, on-line hotel magazine.

* The Hotel Brand Report newsletter, written and published quarterly since 1987. Over 145 issues.

* Speeches to Urban Land Institute, Appraisal Institute, Real Estate Counseling Group of America

and O’Connor & Associates.

Page 113 of 119

DOUGLAS W. SUTTON

1996- Present Source Strategies, Inc. Executive Vice president specializing in development of

hotel feasibility studies, database software development and maintenance, and developing special

studies and articles published in the Hotel Brand Report newsletter.

Completed over 300 Financial Feasibility studies successfully, encompassing over thirty-two

different brands in Texas, New Mexico, Louisiana, Kansas, Colorado and Oklahoma. Studies

include major and local market assessments and projections, proposed hotel’s revenue generation and

ten-year cash flow forecasts and the projection of return on capital investment. Major contributor to

Source Strategies in its achieving market status as the largest supplier of hotel financial feasibilities

to Texas’ lending institutions.

Responsible for creating and programming database of over 4,000 Texas hotels and motels.

Contributing analyst and writer to Hotel Brand Report newsletter and the Texas Hotel Performance

Factbook, including ‘Hot Brands & Dying Brands’ (2006), ‘Development Since 9/11: Winners &

Losers’ (2005), ‘Higher Priced Brands in Turmoil, Mid-Priced Brands Prosper’ (2004).

Provides litigation support, analysis and strategy for hotel litigation and testimony.

1994-1996 University Health System, San Antonio Texas. Decision Support Analyst.

Provided data analysis support to all levels of hospital management. Prepared numerous medical

studies, grant support documents, cost-analysis studies, staffing studies, and other decision support

analysis. Developed a number of vertical software applications to allow key departments to track

and study their individual patient populations.

1987-1994 Systems IV Professionals, Inc., San Antonio. President.

Consulting firm specializing in data analysis and customized software development utilizing FOCUS

database software. Created major applications, including a long distance network analysis system for

a major carrier; system allowed the carrier to determine the effect of various network changes before

implementation to facilitate selection of the most cost efficient network possible.

1983-1987 United States Air Force. Captain and Information Services Officer, Directorate of

Special Weapons, Kelly AFB, Texas.

Duties included writing and maintaining software to manage the Air Force's Nuclear weapons

arsenal, tracking nuclear component parts and supplies, and acquisition and installation of major

secure computer network.

EDUCATION

1979-83 Troy State University, Troy Alabama, BS in Computer and Information Science.

Page 114 of 119

TODD ANDERSON WALKER

1997-Present Source Strategies, Inc. Senior Vice president, Business Operations.

Major contributor to Source Strategies in its achieving market status as the largest supplier of hotel

financial feasibilities to Texas’ lending institutions. Completed over 400 Financial Feasibility

studies successfully, encompassing over thirty different brands now operating successfully in Texas,

New Mexico, Louisiana, Kansas, Colorado and Oklahoma. Studies include major and local market

assessments and projections, proposed hotel’s revenue generation, ten-year cash flow forecasts and

the projection of return on capital investment. Key contributor to research studies of convention

hotel and convention center performance.

Responsible for sales and operation of Source Strategies’ publications, including The Texas Hotel

Performance Factbook and The Hotel Brand Report Newsletter. Manage Accounts Receivables,

billing and collections.

Contributes as analyst, writer and editor to Hotel Brand Report newsletter and the Texas Hotel

Performance Factbook, including ‘Results from 1995, 2004, & 2005: Limited Service Dominates’

(2005), ‘First Quarter 2004, The Best Increase Since the Year 2000’ (2004), ‘Age Matters, Size

Matters’ (2005).

Provides litigation support, analysis and strategy for hotel litigation and testimony.

1997 The Toronto Globe & Mail Newspaper. Assistant to the Editor of Business Publications.

The Globe & Mail is Canada's national newspaper, a division of Thomson Publishing Corporation.

Wrote business articles and edited publications. Edited InfoGlobe from April to October 1997.

1994-1997 Source Strategies, Inc., San Antonio. Senior Consultant.

Developed hotel feasibility studies. Completed over 60 studies for new hotels and motels throughout

Texas. Circulation Director for Brand Report newsletter and the Texas Hotel Performance Factbook.

Generated renewals at 85% rate.

1989-1994 Intern at Source Strategies, Inc. during university education.

EDUCATION

1989-94 University of Toronto, Ontario, Canada. Bachelor of Arts with Honors in English and

History.

**********

Page 115 of 119

2001 - 2005 FINANCIAL FEASIBILITY STUDIES PARTIAL LISTING

AmeriSuites

Austin NW

College Station

Denton

Fort Worth Stockyards

San Antonio

Waco

Baymont Inn

Houston InterContinental

New Braunfels

Best Value

Houston

Houston SW

San Antonio

Waller

Best Western Inn & Suites

Addison

Andrews

Big Spring

Bridgeport

Cameron

Cleveland

Copperas Cove

Dickinson

Franklin

Halletsville

La Grange

Lake Dallas

Laredo

Levelland

Lumberton

Pearsall

Pilot Point

Rosenberg

Schulenberg

Temple

Tomball

Wakeeney, KS

Budget Host

Fort Worth

Candlewood Suites

Beaumont

Irving DFW

Friendswood

Houston Westheimer

San Antonio Toyota

San Marcos

Temple

Wichita Falls

Comfort Inn,

Comfort Suites

Fredericksburg

Navasota

Pampa

Pharr

Bay City

College Station

Copperas Cove

Deer Park

Elmendorf

Georgetown


Hobbs, NM

Longview

Pasadena

Quanah

San Antonio

San Antonio Downtown

Sugarland

Longview

Webster

Country Inn & Suites

Arlington

Econo Lodge

Dallas

Lake Charles

Port Arthur

Texas City

Embassy Suites

Laredo

Lubbock

Fairfield Inn by Marriott

Livingston

Laredo

JW Marriott Houston

Downtown

Austin Pecan Park

Austin Ben White

Cedar Park

Corpus Christi

Del Rio

Galveston

Gainesville

Greenville

Hillsboro


Houston Beltway 8

Greenville

Nipomo, CA

Rosenberg

Seguin

Schertz

South Austin

Texarkana

Waxahatchie

Hawthorn Suites Ltd

Marble Falls

Hilton Hotel

Fort Worth Convention Center

Hilton Garden Inn

Amarillo

Corpus Christi

Granbury

Houston Beltway 8

Killeen

McAllen

New Braunfels

Temple

Page 116 of 119

Feasibilities Continued…

Holiday Express

Hotel & Suites

Allen

Alvarado

Amarillo

Atlanta

Austin

Buda

Cameron

Center

Cleburn

Corsicanna

Desoto

Galveston

Gatesville

La Grange

La Porte

Lampasas

Manvel

Pearland

Orange

San Antonio I-10 West

San Antonio Toyota

San Marcos

Sherman

Texarkana

Wichita Falls

Holiday Inn

Austin (Select)

Dallas Downtown

Frisco

San Antonio

Homewood Suites

Houston Katy Freeway

Norman, OK

Marble Falls

McAllen

New Braunfels

Waco

Wichita Falls

Independent Hotels

Crescent Hotel, New Orleans

Dacoma Inn Houston

Executive Inn Tyler

Fairmont Hotel San Antonio

First Choice Inn Grand Prairie

Garden Inn San Antonio

Harker Heights Inn

Steward Mansion Galveston

Killeen Inn

Laredo Inn

Luxury Suites Canton

Palms Hotel South Padre

Palace Inn Houston

Passport Houston

San Antonio Inn & Suites

Wylie Inn

Hotel Indigo

Alamo Plaza San Antonio

La Quinta Inn & Suites

Boerne

Cedar Hill

Gun Barrel City

Keene

Palestine

Pasadena

Pearland

Rockwall

San Antonio

San Antonio I-10W

San Antonio Toyota

Seguin

Tomball

Marriott Hotel

Dallas Convention Center

Colorado Springs CC

Quality Inn,

Quality Suites

Katy

San Antonio East

Waco

Radisson Inn & Suites

Amarillo

Red Roof Inn


Pharr

Stafford

Temple

Staybridge Suites

San Antonio

South Padre Island

Studio 6

Bay City

Tyler

Winnie

Super 8

Austin East

Beaumont

Conroe

Copperas Cove

Fort Stockton

Humble

Killeen

Livingston

Pharr

Plainview

Rosenberg

San Antonio South

Townplace Suites

Killeen

Travelodge

Killeen

San Antonio

Wingate Inn & Suites

McAllen

San Antonio

Wyndham Wyndham Savoy Houston

Page 117 of 119

CONSULTING STUDIES, DATA AND LITIGATION SUPPORT

1. Contracted by the Texas’ Governors Office of Economic Development, Tourism Division since 1988 to maintain the

industry database of hotel performance. Source Strategies is the sole supplier to the Governor’s Office of lodging market

statistics and analysis in reports used to assess Texas tourism promotion efforts and to aid in marketing Texas.

2. Provided over 1,500 detailed five-year custom local hotel market histories to MAI appraiser clients.

3. Developed numerous studies of subject hotel(s) to determine their historical, competitive REVPAR performance

versus the market average. This unique analysis technique highlights trends and deviations in performance, regardless of

market movement; a REVPAR index versus market average shows how well a property has performed. By limiting

study to a single variable, a truly scientific conclusion can be made as to cause and effect.

Deviations from trend can be related to specific, causal events such as management problems or outside influence (e.g.

new highway construction, brand change, new competition); if there is no effect from an event, studies confirm the

absence of any impact). If there is an effect, the degree is measurable and apparent. This study approach is among

Source's most important work, frequently the basis for expert witness testimony by Source's principal Bruce Walker.

Examples of major studies include: a) the (lack of) induced demand from opening every large downtown hotel in Texas,

1980 through 2003 (see www.sourcestrategies.org for full study); b) the impact of adding a second luxury

hotel of the same brand in a local market, or removing a hotel of the same name, on the performance of the pre-existing

property; 3) Studies to separate and quantify hotel Business Value - and the separate Real Estate Value - (for tax

assessment disputes). The most important study here was to determine the average revenue effect of adding or removing

the "Marriott Hotel" name to numerous hotel properties from 1980 through 1995. Source Strategies has produced values

for the Marriott Austin hotel and the Marriott Rivercenter hotel San Antonio, both with- and without- the Marriott name

for real property tax disputes. Clients include USAA and the Bexar County Appraisal District.

Sample litigation clients have included the Texas Department of Transportation (through Texas Attorney General's

Office) for condemnation valuation and damage cases, including: the Days Inn Houston I-45N, Motel 6 Ft. Worth,

Holiday Inn Houston I-45N, La Quinta Houston I-45N, Holiday Inn Lubbock, and Austin Hawthorn Suites South,

Chariot Inn, Malibu Grand Prix), Dallas Sheraton, San Antonio Holiday Select Airport, Coit Towers Hotel Dallas, Erie

County PA Hotel Owners vs. Convention Authority, Bandera Motel San Antonio. Other litigating clients have included

USAA, Bexar County Appraisal District, Capital Income Properties (Hilton Nassau Bay, Austin Marriott North),

American Liberty, Dosani Brenham Inn, Wes-Tex Management El Campo. Hospitality (Homeplace Inn), Ramada

Bannister Austin (Lock manufacturer), Rodeway Inn I-10 West (bank's non-funding of a committed loan), Homer J.

Rader, and Siu Ft Worth and San Antonio Inn (bankruptcies), Holiday/Clarion (loss due to change of brand), United Fire

(Wingate McAllen performance due to construction issues), Hyatt Regency San Antonio (arbitration re: introduction of

second Hyatt in CVB).

4. Numerous studies to determine the effect on revenues and cash flow of brand name alternatives, whether in new builds

or in changing to- or from- a brand name. This technique is used extensively in feasibility work to predict revenue

performance of new hotel projects under various brand name alternatives.

5. Represented Host Marriott before Real Estate Tax Appeal Board.

6. Drafted national lending guidelines for Heller Small Business Finance for lodging projects under $5 million.

7. Presentations to bank lending committees to explain the dynamic economics of the lodging industry, particularly the

effect of market demand and supply, equilibrium occupancy, cost structures, and the effect of brand name on REVPAR

and ROIC.

8. Analysis of alternative markets to determine their potential for new lodging: alternative metro areas, alternative sites,

and strategically, for an expanding chain.

9. Consumer intercept and secondary data studies, including the effect of a potential name change, the effect of new

hotel.

http://www.sourcestrategies.org/

Page 118 of 119

Exhibit X

Methodology of Texas Hotel/Motel Reports Texas Hotel/Motel Quarterly Reports are prepared on a custom basis for private clients, including Office of the Governor,

Texas Economic Development & Tourism, and the Texas Attorney General. Reports are prepared by Source Strategies

Inc. of San Antonio, Texas, based on Texas State Comptroller revenue records and independent research.

Data sources include the following:

Room Revenues: State of Texas Comptroller records are the source of taxable room revenues for all properties. All

properties exceeding $18,000 in the current quarter are included; the below-$18,000 units result in 2% of the total state

revenues being initially excluded from the Source Strategies database. As a result, the database covers 98% of Texas.

Gross room revenues (including Non-taxable) were reported to the Comptroller starting in the third quarter of 1990. To

account for the missing non-taxable revenues prior to the third quarter of 1990, Source Strategies increases each

individual property's taxable-only, reported revenues by variable factors averaging 12% to reflect this untaxed volume

(e.g. government business, over 30-day stays, charitable and educational purchases). "Apartment-type" revenues are

typically not reflected.

Starting in the third quarter of 1990, hotels and motels were required by the Texas Comptroller to report both taxable and

gross room revenues. Approximately 80% of properties usually comply, allowing the development of adjustment factors

for all hotels and motels, even if only taxable revenues are reported. For example, taxable room revenues are adjusted

accordingly higher if a hotel reports only taxable revenues (i.e. where taxable equals gross room revenues).

Properties that make no report or only partial reports are estimated based on the past five quarter trends. If and when they

subsequently report accurately, their actual revenues 'overwrite' our estimates.

Room Counts: these are checked annually in chain directories and the Texas American Automobile Association Tour

Book; properties checked account for approximately 80% of revenues. For independent properties too small to be listed,

the room counts reported to the state are used (unless they appear unreasonable; if so, a telephone contact is made).

As a result, the 'CHAIN' occupancies and room counts appear to be very close to 'actual', while independent room counts

could be slightly overstated. Reports are split into CHAIN and INDEPENDENT categories.

Average Daily Rates are estimated with the aid of financial reports, appraisers, private S.S.I. surveys, chain and AAA

directories and another reliable industry database.

Room-nights sold are derived from the above revenues, divided by Average Daily Rates. Room-nights available are

calculated from Room Counts (times days in the period).

Occupancy is calculated from room-nights sold and room-nights available. All occupancy figures reported represent

fully weighted averages, as calculations are always made after sub-totaling or totaling room-nights sold and room-nights

available.

"CHAINS" are defined as one of the "Top 70+" brands, and include the following names: Four Seasons, Gaylord, Westin,

W, Hilton, Hyatt, Inter-Continental, Marriott, Omni, Renaissance, Wyndham. Also, Embassy, Homewood, Residence,

Staybridge, Clarion, Courtyard, Crowne Plaza, Indigo, Doubletree, Hilton Garden, Holiday Inn, Radisson, Sheraton.

AmeriSuites, Bradford, Candlewood, Comfort Suites, Hawthorn, Quality Suites, SpringHill, TownPlace, Amerihost,

Baymont, Best Western, Comfort Inn, Country Inn, Drury, Fairfield, Hampton, Holiday Express, La Quinta, Wingate.

Budget Suites, Extended Stay, Homestead Village, Intown, Value Place, Studio Plus, Studio 6, Best Value, Days, Econo

Lodge, Howard Johnson, Microtel, Motel 6, Quality Inn, Ramada, Red Roof, Super 8.

Accuracy: Room counts and Room Revenues are within 2%. On an overall basis, the change in average daily rates

reported by Source Strategies Inc. are within a few tenths of one-percent of PKF Trends, another private research firm

that gets financial reports from about 30% of all hotel/motels in Texas and then publishes aggregated results by metro and

smaller areas.

Documents

JW Marriott Houston Downtown - Source Strategies...JW MARRIOTT, HOUSTON DOWNTOWN XXX Xxxx XXXXx, Houston, Texas 77002 This study has been prepared to determine the financial result