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US LODGING INDUSTRY OVERVIEW
Jan D. Freitag
Vice President
SMITH TRAVEL RESEARCH
Agenda
• Total US Overview• Scales and Major Markets• Pipeline• Projections
U.S. Lodging Industry - Key StatisticsJune 2008 YTD (Prelim)
% Change• Hotels 49,672 2.0%• Room Supply 4.5mm 2.2%• Room Demand 2.7mm - 0.4%• Occupancy 61.5% - 2.6%• A.D.R. $107.62 4.3%• RevPAR $66.15 1.6%• Room Revenue $54.3B 3.9%
-6
-4
-2
0
2
4
6
1989 1991 1993 1995 1997 1999 2001 2003 2005 2007
Supply % ChangeDemand % Change
Total United StatesRoom Supply/Demand Percent ChangeTwelve Month Moving Average – 1989 to May 2008
5.1%
0.6%
4.0% 4.2%
- 4.8%
1.8%
1.0%
A Year Ago Fundamentals Were Worse
-8-6-4-202468
10
1989 1991 1993 1995 1997 1999 2001 2003 2005 2007
Occ % ChgADR % Chg
Total United StatesOccupancy/ADR Percent ChangeTwelve Month Moving Average – 1989 to May 2008
-0.7%
5.4%
6.8% 7.6%
ADR Growth Is Slowing…. But Not Dropping Rapidly
-5
0
5
10
2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 J F M AM
Total United StatesRoom Rate Percent ChangeJan 2003 – May 2008
Summer Rate Growth Will Be Closely Watched
-2.2%
4.5%
-5.8%-3.9%
3.0%
-3.4%
3.3%
-2.0%
4.7%
1.8%
5.4%
-9.6%
0.6%
4.0%
-15%
-10%
-5%
0%
5%
10%
Occupancy % Chg ADR % Chg
May YTD 6/7 6/14 6/21 6/28 7/5 7/12
Total U.S.Occupancy and ADR Percent ChangeYTD through 7/5
July 4th Timing Helped and Hurt
Chain Scales and Major Markets
3.3 3.3
5.8
-2.6
5.0
2.21.7 1.93.6
-6.1
2.2
-1.2
-10
-5
0
5
10
Luxury UpperUpscale
Upscale Mid w F&B Mid wo F&B Economy
SupplyDemand
Chain ScalesSupply/Demand Percent ChangeMay 2008 YTD
Healthy Demand Growth, Except in Two Scales
3.2
5.0
2.4
-1.5-3.3
-2.2-3.5
-1.4
-2.5
3.33.2
4.5
-5
0
5
10
Luxury UpperUpscale
Upscale Mid w F&B Mid wo F&B Economy
OccupancyADR
Chain ScalesOccupancy/ADR Percent ChangeMay 2008 YTD
Rate Growth Around / Above Inflation – Except for Economy Segment
0
4
8
Luxury UpperUpscale
Upscale Mid With Mid W/O Economy
Chain ScaleADR Percent ChangeTwelve Month Moving Average January 2008 To May 2008
Upper End Scales See ADR Deteriorate – But at a High Level
-3.8-3.2
-2.4-2.2-2.2
-2.0-1.4
-1.00.1
0.41.4
1.81.9
1.5
-8.2-4.5-4.4
-10 -8 -6 -4 -2 0 2 4
Phoenix, AZPhiladelphia, PA-NJAtlanta, GADallas, TXChicago, ILLos Angeles-Long Beach, CAAll Other MarketsTotal United StatesTop 25 MarketsWashington, DC-MD-VASan Diego, CANew York, NYOrlando, FLOahu Island, HIBoston, MAMiami-Hialeah, FLSan Francisco/San Mateo, CA
Key 15 MarketsOccupancy Percent ChangeMay 2008 YTD Year over Year
Coastal OCC Holds – So Far
2.32.7
3.43.93.9
4.34.5
4.8
5.55.75.85.9
6.5
7.37.7
5.3
1.8
0 4 8
Miami-Hialeah, FLAtlanta, GA
Orlando, FLWashington, DC-MD-VA
All Other MarketsSan Diego, CA
Dallas, TXTotal United States
Oahu Island, HITop 25 Markets
Los Angeles-Long Beach, CA
Boston, MAPhiladelphia, PA-NJ
Phoenix, AZSan Francisco/San Mateo, CA
Chicago, ILNew York, NY
Key 15 MarketsADR Percent ChangeMay 2008 YTD Year over Year
Strong Rate Growth Bodes Well for The Summer
Exchange Rate Impact on 2007 ADR % Change
ADR $ % Change Currency % ChangeAtlanta, GA 12.7% Euro 3.4%Boston, MA 6.3% Euro -2.5%
New York, NY 10.6% Euro 1.4%Orlando, FL -0.7% Euro -8.9%
Washington, DC-MD-VA 3.7% Euro -4.8%
Los Angeles-Long Beach, CA 9.0% Yen 4.0%Oahu Island, HI 7.4% Yen 2.5%San Diego, CA 2.9% Yen -1.9%
San Francisco/San Mateo, CA 5.7% Yen 0.8%
America Is On Sale!
U.S. Pipeline
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 J FM AM
Total United StatesRoom Supply Percent ChangeJan 2003 – May 2008
Summer Will See More Supply Increases
Total United StatesActive Development Pipeline – (Thousands of Rooms)Change From Last Year
Source: STR / TWR / Dodge Construction Pipeline
Phase May 2008 May 2007 Difference % Change
In Construction 206 189 + 17 9.3%
Final Planning 106 50 + 56 112.3%
Planning 359 302 + 57 19.0%
Active Pipeline 672 541 + 131 24.2%
Pre-Planning 159 94 + 64 67.9%
Total 831 636 + 195 30.7%
U/C Rooms Off The High of Dec. 2007
Total United StatesRooms In Construction by Scale – In ThousandsMay 2008
7.3
23.9
52.1
58.8
9.3 11.3
43.9
0
10
20
30
40
50
60
Luxury Upper Upscale Upscale Mid w F&B Mid w/o F&B Economy Unaffiliated
Source: STR / TWR / Dodge Construction Pipeline
Development is in Growth Scales
Markets with Highest Construction ActivityMay 2008
Market # Rooms % of Existing Supply
Las Vegas 19,212 12.5
New York 9,108 10.9
Orlando 5,133 4.5
Phoenix 4,622 8.5
Washington, DC 4,598 4.8
Chicago 4,454 4.3
LA-Long Beach, CA 3,801 4.1
Source: STR / TWR / Dodge Construction Pipeline
The Usual Suspects
Projections
85.693.1
102.9112.1
103.5 102.6 105.3113.7
122.7
133.4139.4
17.0 20.9 22.1 22.516.2 14.2 12.8 16.7
22.6 26.6 28.0
40.3% 40.2%39.2%
40.9%
37.1%35.7%
35.0%
36.6%
38.8%
41.3% 41.3%
0
20
40
60
80
100
120
140
160
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 200725%
30%
35%
40%
45%
50%
Revenue IncomeGOP
Total United StatesEstimated Revenue and ProfitabilityYears 1997 - 2007
-2
-1
0
1
2
3
4
5
6
1989q1 1992q1 1995q1 1998q1 2001q1 2004q1 2007q1-8
-6
-4
-2
0
2
4
6
8
GDP % Chg Demand % Chg
Total U.S.Hotel Rooms Sold vs. GDP ChangeQuarterly Change – 1988 to Q1 2008
1.6
2.41.9
0.5
1.2 1.31.8
1.4
2.4
-0.1
0.2
1.00.4
4.0
2.8
1.0
0.3
1.3
-1
0
1
2
3
4
5
2002
2003
2004
2005
2006
2007
2008
P
2009
P20
Yr A
verag
e
Supply % Chg
Demand % Chg
Total U.S.Supply/Demand Percent Change2002 – 2009P
2.9
-1.1-1.4
3.6
0.3 0.4
-0.2
-1.2
-2
-1
0
1
2
3
4
2002 2003 2004 2005 2006 2007 2008P 2009P
Total U.S.Occupancy Percent Change2002 – 2009P
20 Year Average: -0.1%
Total USOccupancy Percent2002 – 2009P
59.0 59.2
61.463.1 63.3 63.2
62.361.6
50
60
70
2002 2003 2004 2005 2006 2007 2008P 2009P
4.2 4.44
0.1
7.4
5.9
-1.5
5.5
-3
-1
1
3
5
7
2002 2003 2004 2005 2006 2007 2008P 2009P
Total U.S.ADR Percent Change2002 – 2009P
20 Year Average: 3.5%
8.5
2.83
7.5
5.7
7.9
0.5
-2.7
-5
0
5
10
2002 2003 2004 2005 2006 2007 2008P 2009P
Total U.S.RevPAR Percent Change2002 – 2009P
20 Year Average: 3.4%
2008 Lodging Industry Takeaways
• Accelerating Supply Growth – Pipeline Attrition?
• Slowing Economy = Slower Demand Growth
• Top Markets may outperform
• Weak Dollar = U.S. Bargain
• Leisure feels greater impact than business?
• Revenue Management Discipline?
