Chinese Hotel Investments in the US & Europe: Understanding Tourism & Business Trends

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2 Chinese Hotel Investments in the US & Europe: Understanding Tourism & Business Trends Stephen Cheung, World Trade Center Los Angeles Daniel Peek, HFF Don Li, Interstate Hotels Moderated By: David Sudeck, Global Hospitality Group of JMBM Law Firm in Los Angeles

3 Stephen Cheung World Trade Center Los Angeles

4 Global Private Equity Opportunities Forum Global Private Equity Opportunities Forum Beijing Stephen Cheung [May 19-20]

5 Global Private Equity Opportunities Forum 2016 U.S.Tourism Highlights International travel to the U.S. In 2016, there were approximately 76.8 million international arrivals to the U.S. Each overseas traveler spends approximately $4,360 when they visit the U.S. Chinese Visitors In 2016, the U.S. welcomed 2.4 million Chinese visitors, a 14% YTD increase and the 5 th largest international market Outside the U.S. In 2016, there were 70.1 million arrivals of Chinese citizens across the world. Over 12.5 milion of those arrivals were to Europe. WORLD TRADE CENTER LOS ANGELES

6 Global Private Equity Opportunities Forum 2016 L.A. Tourism Highlights Visitation In 2016, LA achieved a record high with 47.3 million overnight and day visitors. International Visitiation increased by 2.9%, as more than 7 million foreign residents came to L.A. last year, an all-time high International Market Trends L.A. is the first U.S. destination to welcome more than 1 million visitors from China (more than 41% of all Chinese vistors to the U.S. in 2016). This marks the 7 th year with at least +20% YOY visitiation growth Direct Visitor Spend A record $21.9 billion was spent in 2016, a $1.3 billion increase (6.3%) from 2015 s total WORLD TRADE CENTER LOS ANGELES

7 Global Private Equity Opportunities Forum Los Angeles County Overnight & Day Visitors, 2016 WORLD TRADE CENTER LOS ANGELES

8 Global Private Equity Opportunities Forum Los Angeles County Overnight Visitor Market Segmentation, 2016 WORLD TRADE CENTER LOS ANGELES

9 Global Private Equity Opportunities Forum DTLA Projects Foreign Capital Luxe Hotel Replacement Developer: Shenzhen Hazens Budget: $700 million Phase one: 32-story, 250-room W Hotel and a 32-floor condominium tower Phase two: 42-story tower Result: Hotel condominiums and 80,000 sqft of retail space Metropolis Developer: Greenland USA, subsidiary of Shanghai Greenland Budget: $1 billion Phase one: 350-room Hotel Indigo (now open) and 38-floor tower with 308 condos Phase two: 40- and 56-story condo buildings + 70,000 sqft of retail space Oceanwide Plaza Developer: Beijing Oceanwide Budget: $1 billion Hotel project: 184 rooms under Park Hyatt Brand Result: 504 condos and 166,000 sqft of retail space WORLD TRADE CENTER LOS ANGELES

10 Global Private Equity Opportunities Forum DTLA Projects Foreign Capital Wilshire Grand Developer: Hanjin - Korean Air Budget: $1.1 billion Phase one: 73-story, 900-room InterContinental Hotel Result: Hotel + 677,000 sqft of office space and 67,000 sqft of retail space Grand Avenue Project Developer: Related Companies Budget: $950 million ($290 million investment from Chinese Developer CORE) Result: 300-room Equinox Hotel, residential tower and retail complex Olympia Developer: Shanghai Shenglong Group Budget: TBA 1,367 residential units 40,000 sqft of retail and restaurant space 115,000 sqft of open space WORLD TRADE CENTER LOS ANGELES

11 Global Private Equity Opportunities Forum DTLA Hotel & Mixed Use Projects CLARK HOTEL EMBASSY HOTEL FIG + PICO FREEHAND HOTEL HOTEL FIGUEROA RENOVATION HOXTON HOTEL CECIL HOTEL RENOVATION J.W. MARRIOTT EXPANSION NOMAD HOTEL PROPER HOTEL SPRING STREET HOTEL TUCK HOTEL BROADWAY TRADE CENTER CIRCA CITY MARKET COLLEGE STATION HERALD EXAMINER LA PLAZA CULTURA VILLAGE LUXE HOTEL REPLACEMENT METROPOLIS OCEANWIDE PLAZA OLYMPIC TOWER ROW DTLA SUNCAL SIXTH AND ALAMEDA THE GRAND WILSHIRE GRAND WORLD TRADE CENTER LOS ANGELES

12 Global Private Equity Opportunities Forum DTLA Residential Projects 255 GRAND RENOVATION 801 E. FIFTH ST 801 S. OLIVE ST 825 S. HILL ST 888 S. HOPE ST 920 S. HILL ST 950 E. THIRD ST 950 S. BROADWAY 1001 OLIVE AND OLYMPIC 1212 S. FLOWER ST 1400 S. FIGUEROA ST ALEXAN AMP LOFTS BEACON TOWER BROADWAY AND OLYMPIC CONDOS BROADWAY PALACE BUNKER HILL TOWERS UPGRADE CAREER LOFTS CATALINA BUILDING E. ON GRAND ETCO HOMES LITTLE TOKYO FERRANTE FOREST CITY/SOUTH PARK G12 GRAND RESIDENCES HOLLAND PARTNER GROUP/732 S. SPRING ST HOLLAND PARTNER GROUP/EIGHTH AND SPRING HOLLAND PARTNER GROUP/SIXTH AND BIXEL HOLLAND PARTNER GROUP/SOUTH PARK HOLLAND PARTNER GROUP/VIBIANA LOFTS JADE ENTERPRISES/EMERALD JADE ENTERPRISES/ONYX JADE ENTERPRISES/SAPPHIRE JADE ENTERPRISES/TOPAZ MACK URBAN/SOUTH PARK MARIONETTE LOFTS OLIVE DTLA PARK FIFTH SB OMEGA TEN50 THE HILL VALENCIA BLOSSOM PLAZA GAREY BUILDING MAX LOFTS WAKABA L.A 520 MATEO ST BROOKS BUILDING EIGHTH AND FIGUEROA TOWER FOURTH AND BROADWAY TOWER GARLAND BUILDING WORLD TRADE CENTER LOS ANGELES

13 Global Private Equity Opportunities Forum DTLA Office Projects 537 S. BROADWAY AT MATEO CONVENTION CENTER RENOVATION FORD FACTORY BUILDING HARRIS BUILDING ONE BUNKER HILL UPGRADE SOHO HOUSE TITLE INSURANCE BUILDING SKYSPACE L.A. THE BLOC WORLD TRADE CENTER LOS ANGELES

14 Daniel Peek HFF

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16 Transaction Volume Comparison Billions Transaction Volume (US vs. Europe) $16 $14 $12 $10 $8 $6 $4 $2 $0 US Hotel Volume ($) Europe Hotel Volume ($) Source: Real Capital Analytics Hotel Market Trends

17 Cap Rate Comparison 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 16Q3 16Q4 17Q1 European Cap Rates 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% All Europe Source: Real Capital Analytics Hotel Market Trends

18 Cap Rate Comparison 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 16Q3 16Q4 17Q1 European Cap Rates 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% All Europe W estern Europe Source: Real Capital Analytics Hotel Market Trends

19 Cap Rate Comparison 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 16Q3 16Q4 17Q1 European Cap Rates 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% All Europe W estern Europe London Metro Source: Real Capital Analytics Hotel Market Trends

20 Cap Rate Comparison 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 16Q3 16Q4 17Q1 European Cap Rates 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% All Europe W estern Europe London Metro Central London Source: Real Capital Analytics Hotel Market Trends

21 Cap Rate Comparison 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 16Q3 16Q4 17Q1 European Cap Rates 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% All Europe W estern Europe London Metro Central London US Source: Real Capital Analytics Hotel Market Trends

22 Price Per Room Comparison 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 16Q3 16Q4 17Q1 European Price Per Key 300, , , , ,000 50,000 - All Europe Source: Real Capital Analytics Hotel Market Trends

23 Price Per Room Comparison 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 16Q3 16Q4 17Q1 European Price Per Key 300, , , , ,000 50,000 - All Europe W estern Europe Source: Real Capital Analytics Hotel Market Trends

24 Price Per Room Comparison 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 16Q3 16Q4 17Q1 European Price Per Key 500, , , , , , , , ,000 50,000 - All Europe W estern Europe London Metro Source: Real Capital Analytics Hotel Market Trends

25 Price Per Room Comparison 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 16Q3 16Q4 17Q1 European Price Per Key 1,000, , , , , , , , , ,000 - All Europe W estern Europe London Metro Central London Source: Real Capital Analytics Hotel Market Trends

26 Price Per Room Comparison 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 16Q3 16Q4 17Q1 US Price Per Key $25 0,000 $20 0,000 $15 0,000 $10 0,000 $50,000 $0 US Source: Real Capital Analytics Hotel Market Trends

27 Price Per Room Comparison 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 16Q3 16Q4 17Q1 US vs. Europe Price Per Key 300,000 $25 0, , , , ,000 50,000 $20 0,000 $15 0,000 $10 0,000 $50,000 0 $0 All Europe US Source: Real Capital Analytics Hotel Market Trends

28 Price Per Room Comparison 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 16Q3 16Q4 17Q1 Manhattan vs. London Price Per Key Comparison 1,000, , , , , , , , , ,000 - $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 Central London Manhattan Source: Real Capital Analytics Hotel Market Trends

29 Don Li Interstate Hotels

30 INTERSTATE HOTELS & RESORTS

31 Table of Contents Interstate at a Glance The Interstate Advantage Maximizing Asset Value Operations Sales & Marketing Information Technology Accounting Purchasing Human Resources Risk Management Capital Markets Strategic Relationships Power of Scale

32 INTERSTATE AT A GLANCE The leading third-party hotel management company. Founded in 1960 Interstate Facts 430 hotels 75,000 rooms 30,000 associates 10 countries globally $10 Billion in managed assets $3.5 Billion in managed revenue 50 Brands Managed Offices In: Arlington, VA, Atlanta, Newport Beach, Dallas, Moscow, Birmingham England, Glasgow Scotland

33 THE INTERSTATE ADVANTAGE 100% Owner Focus Superior Operating Margins Small Company Operating Model Brand Diversity Best Financial Reporting and IT Systems Power of Scale Deepest Bench Strength Best Career Path for Associates Capital Market Expertise International Platform

34 OUR BRANDED HOTELS Other Brands

35 OUR INDEPENDENT HOTELS

36 MAXIMIZING ASSET VALUE

37 Large Company Economies of Scale Small Company Operating Model Full and Select Service Regional Team Single Point of Contact for Ownership Dedicated Oversight of Hotels SVP/VP Sales & Marketing Regional Director of Revenue Management Regional Director of Human Resources SVP/VP Operations Hotel Portfolio Corporate VP Quality Assurance SVP/VP of Finance Corporate VP Food & Beverage *Green Denotes Corporate Resources

38 Crowne Plaza Orlando SALES AND MARKETING Core Capabilities Revenue Management E-Commerce Measurable Sales and Marketing Plans Dedicated Sales Executive Regional Team Member Interstate Sales University Unique Capabilities National Sales Department Interleads Referral Program Extensive Brand and Market Knowledge Preferred Contracts with OTAs

39 Results from Sales and Marketing Interstate s portfolio increased market share for the fourth consecutive year. RevPAR Index grew 1.3% as our hotels increased RevPAR by a 6.4% compared to our competitive sets at 5.1% (25% better) National Sales generated $7.8 Million of additional group bookings and 30,000 room nights for Interstate participating hotels in Interleads generated 1,500 group leads representing over $16 Million. Interstate s preferred partner agreement with Expedia provides a net margin for our independent hotels below Expedia s standard individual hotel merchant rate margin.

40 Hamilton Crowne Plaza Washington, D.C. REPORTING & TECHNOLOGY Interstate has the most sophisticated financial reporting systems and IT platform in the industry. Centralized Accounting at Dallas Shared Service Center Cloud Based Proprietary System Real Time Reporting Mobile App Customizable Reports Available to Owners Multi Language Capability Most Robust PCI Compliance in Industry All Accounting Functions Migrating to Paperless Systems

41 IHR 1: Sample Reporting Capabilities

42 Interstate s IT Advantages

43 TALENT ACQUISITION & DEVELOPMENT Recruiting, training and keeping the best talent. Best Talent in the Industry Promote Upward Mobility for Our Associates Deepest Bench Strength in the Industry Deploy Industry Leading Recruitment Tools Discipline Focused Training Dedicated Task Force Long Tenure Status of Corporate and Field Level Executives

44 PROCUREMENT Interstate s Scale Allows for Unparalleled Purchasing MarketBasket: proprietary procure-to-pay software allows greater cost savings and fewer back office expenses $250 million in direct annual spending on OS&E and consumables Procurement Audits South Seas Island Resort

45 Streamsong Resort INSURANCE & RISK MANAGEMENT In-house Expertise Mitigates Risk, and Minimizes the Impact of Emergency Situations. Competitive Rates Protects the Reputation of Owner and Property Active Crisis Management Works Directly with Insurers to guarantee proper investigation, claim process and rectification of issues

46 Capital Markets Interstate has the Unique Ability to Assist Owners with their Capital Markets Needs Senior Debt Financing Mezzanine Loan Financing Equity Sources Refinancing Extensive Relationships with Transaction Advisors

47 Interstate has Strategic Relationships with Key Service Providers Strategic Relationships Project / Construction Management Architectural & Engineering Interior Design FF&E Purchasing and Financing Food & Beverage Hospitality Consultants

48 Power of Scale Best Accounting and IT Systems in the Industry Unrivaled Purchasing Power Best OTA Commission Rates Deepest Bench Strength Brand Attention Depth and breadth of Corporate Resources Quality Assurance Team National Sales Development Resources Full Time Task Force Takeover and Transition Capabilities for Portfolios

49 DISCLAIMER This presentation outline and the presentation itself are for general education purposes only and are not intended to provide specific guidance or legal advice about what to do or not to do in any particular case. You should not rely on this general information to make decisions about specific immigration matters. If you are not yourself a lawyer, you should seek the assistance of an immigration lawyer to help you resolve these issues. Thank you.