Hotel Development & Investment Analysis Master of Science Real Estate Development Columbia University Fall, 2016

Transcription

1 Hotel Development & Investment Analysis Master of Science Real Estate Development Columbia University Fall, 2016

2 Class Overview Week 1 State of the Industry/Development Overview/Feasibility Week 2 Development Overview/The Operating Statement/Underwriting/The Lender s Perspective Week 3 The Role of Brands/Management & Franchise Agreements Weeks 4 & 5 Integrated Product/Resorts/Sharing Economy/Developer Case Studies Week 6 Final Presentations

3 Class #1 Course Introduction Current Market Overview/Trends Today s Investment Climate Why invest/develop Hotels? Is now the time?

4 Class#2 P&L Review/Capital Markets Overview Development Process Overview Development Costs Across Various Segments Review of Feasibility/Appraisal Process P&L Review The Operating Statement (incl. various segments.) Fixed/Variable Nature of Hotels Analysis of Market Share, Occupancy, ADR Revenue & Expense Forecasting Underwriting Process (Valuation Methodologies) Capital Markets Perspective Capital Sources & Financing Credit & Hotel-Specific Concerns Debt Yield Vs. DSCR EB-5, etc

5 Class #3 Utilizing Brands/Management & Franchise Agreements Management contracts & franchise agreements. Roles/Uses/Necessity of a Brand Differences between Brands Which brand is right for your hotel? PIP s Design features/importance-of

6 Takeaways 1. Analyze factors that influence the decision to develop/invest in hotel real estate, including: general economic trends, the hotel investment climate, business cycle issues, and alternative investment opportunities; 2. Apply the steps necessary to value a hotel; contrast the various techniques used by different parties to a transaction including the seller, buyer, broker, and lender; 3. Examine those considerations of ownership that are most germane in hotel property investing including the selection of a management company and franchise affiliation; 4. Formulate an opinion of value for a specific hotel property and communicate the findings; 5. An understanding of current trends and market dynamics; 5. Understand the management and asset management functions; 6. Determine effective sales and marketing strategies for a hotel asset.

7 Where Are We Today?

8 Where Are We Today? (NOI of Actual Hotel) $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $ $2,000,000 Year EBITDA

9 Transposed $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $ $2,000,000

10 Where are we today? Rapid Development Lodging Decline, Leads Other Sectors Development Picks Up U.S. is Here Accelerated Development? 2016/7 Long Run Occupancy 2015 Equilibrium ADR Occupancy Declines, ADR Follows 2013 ADR and Margins Recover 2014 Development Slows 2012 Occupancy Recovers Development at Minimum Levels Lodging Recovers, Lags Other Sectors (Not this Time!)

11 Overview The fundamentals are solid across the vast majority of markets. No threats from the factors that historically have brought an end to the good times. Elevated industry growth will persist comfortably into High occupancy levels will provide the leverage needed to achieve large real ADR increases for the next two-three years. Competition for building materials and labor will continue to present challenges for developers inmost markets. Modest (but increasing) hotel construction will be the result for the next two-three years. Above long run average occupancy levels will lead to strong profit growth comfortably through 2017, enough to off-set increasing labor costs. Ability to re-price on a daily basis provides greatest upside scenario of all real estate asset classes in a positive economic and low-supply environment.

12 However 2016 likely to be remembered as the peak year of the post Great Recession cyc New supply concerns and global economic factors impacting outlook for hotel performance and investment Debt more challenging to procure, though interest rates remain low Gap between buyer and seller expectations stalling transaction market Cap rates have risen 50 bps for most assets but remain low for high quality full service and luxury hotels in prime markets Aging hotels once again challenged due to lender pullback, cap ex and new supply Higher cap rates will be offset by rising NOI in strong markets sustaining values Higher cap rates will negatively impact values in markets facing supply and demand challenges and stagnant or declining NOI

13 Industry Observations (Cont d) The U.S. lodging industry will likely achieve 65.7% occupancy in 2015, the highest national occupancy rate since STR, Inc. began reporting data in By year-end 2015, PKF projects that the demand for lodging accommodations will have increased ~26% since the depths of the recession in 2009, while the supply of hotel rooms will have grown by just 5.6%. RevPAR growth driven by much stronger occupancy growth than previously expected. Construction activity remains below historical averages, but is picking up. Accelerating supply growth, heading towards long-term average of 1.9% (though market specific) With U.S. hotels achieving all-time high occupancy levels, hoteliers should be able to continue to drive ADR going forward. Through 13/14, the economic recovery mostly benefitted higher-income segments of the population. This led to an imbalanced pattern of lodging recovery that has favored upperpriced properties and large coastal markets. Now, with employment levels on the rise across all employment sectors, we are seeing a commensurate uptick in performance across the entire U.S. lodging spectrum. Being further along the business cycle, the upper-priced RevPAR gains are heavily influenced by ADR, while the lower-priced RevPAR growth is the result of a balance between occupancy and ADR increases.

14 August 2016 YTD: Occ % Change Turned Negative. % Change Room Supply Room Demand Occupancy A.D.R. RevPAR 66.9% $124 $83 1.5% 1.3% -0.2% 3.1% 2.9% August 2016 YTD, Total US Results

15 August 2016 RevPAR: Three Markets Drag Results Down Total US YTD: +2.9% NYC: - 2.8% Miami - 3.3% Houston: % Total US excluding NYC / Houston / Miami: +3.5% *RevPAR % Change August 2016 YTD for Total US excluding NYC, Houston, Miami

16 Tenets to live by Hotels are a unique combination of single purpose real estate that is inextricably linked with a complex operating business. That operating business usually accounts for up to 50% or more of the value of hotels mid scale or higher. Unless you have extremely patient capital with a tolerance for volatility, very deep pockets, or little need/concern for return, if you cannot build a hotel that will open in early stages of a cycle recovery, you probably should not build it. The second or third investor in the property will have a higher likelihood of success (from a return perspective). Hospitality sector typically leads into the recession, lags coming out (though bounced backed quickly this time). Hotels Investments: Are Highly Cyclical Utilize Operating Leverage (which is perfect of upturns, though rapidly erodes profit during downturns) Highly vulnerable to factors outside of our control (terrorism, airline strikes, oil spills, etc) Require extensive human capital Require high levels of capital reinvestment or ultimately face obsolescence Readily available construction financing generally means a top is fast approaching. Cap rates are the inverse of what they should be. Greater Fool Theory Don t be the greater Fool. Leverage over 65% LTV is a high-risk proposition for hotels.

17 Asset Vs. Operating Considerations Asset Age & Condition of Property Capex Barriers to competitions, zoning and building codes, and other land value considerations Existing and potential functional obsolescence issues Insurance coverage and taxation Regulatory issues Operating Revenue, sources of revenue, revenue mix Business mix and seasonality of business Expenses Margin Performance Volatility of Cash Flow Operating Leverage Performance versus financial barometers

18 What if Bought/Developed here, where prospects were modestly good? What do we do now? What if Bought/Developed here, when prospects were Poor?

19 Total United States Average Duration (PrePlanning to Open) Luxury 70 Upper Upscale 58 Upscale 42 Upper Midscale 33 Months Midscale 33 Economy Source: STR

20 Total United States - Average Duration (Construction to Open) Luxury 25 Upper Upscale 25 Upscale 18 Upper Midscale 21 Months Midscale 17 Economy Source: STR

21 Industry Snapshot PROPERTY/ROOM BREAKDOWN By Location Property* Rooms+ Urban 4, ,145 Suburban 17,763 1,759,476 Airport 2, ,159 Interstate 7, ,840 Resort 3, ,773 Small Metro/Town 16, ,150 53k properties* 5M guestrooms $178 billion in sales By Rate Under $ ,805 $30-$ , ,508 $45-$ , ,009 $60-$85 14,873 1,058,655 Over $85 26,218 3,052,566 By Size Under 75 rooms 29,264 1,252, rooms 17,536 1,839, rooms 4, , rooms 1, ,887 Over 500 rooms ,832

22 What Matters A Lot: Employment and Jobs Personal Income GDP Somewhat: Corporate Profits Leading Economic Indicators Not So Much: Foreign Exchange Rates

23 Economic Drivers of US Lodging Industry National & Regional Real GDP, GPDI, & Metro GDP Total Employment Real Personal Income Consumer Confidence Specific MSA Drivers Real GDP 1.70% 2.20% 1.90% 2.40% 2.80% CPI 3.20% 2.10% 2.0% 1.30% 0.50% Corporate Profits 7.30% 5.90% 3.30%.5% 7.20% Disp. Personal Income 1.30% 1.60% 1.70% 2.50% 2.80% Unemployment Rate 8.50% 8.20% 6.70% 6.20% 5.30% 10.0% Tracking Vs. Real GDP 5.0% 0.0% -5.0% Real GDP (% Δ) Occupancy (% Δ) -10.0% -15.0% Source: STR, HVS Gross Private Domestic Investment

24 GDP & RevPAR Forecast 5% 0% -5% -10% -15% Slowing of RevPAR growth rate does necessarily suggest the cycle is in imminent danger of ending. -20% RevPAR GDP Source: STR, Inc., CBRE Hotels Americas Research, CBRE Econometric Advisors Q

25 Income & Employment Lodging demand is strongly influenced by income especially in late cycles 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% Demand Income Source: STR, Inc., CBRE Hotels Americas Research, CBRE Econometrics Advisors Q

26 Economic Fundamentals Personal income is a key economic indicator for hotel performance Average Personal Income Growth ( ) 7% 6% 5% 4% 3% 2% 1% 0% Albuquerque Minneapolis Long Island Albany New York Omaha Dayton Cleveland Savannah Louisville Oahu Cincinnati US San Antonio Hartford Pittsburgh Baltimore Saint Louis Kansas City Chicago Boston Columbus Norfolk-VA Beach Washington DC Philadelphia Fort Worth Newark Anaheim Houston Richmond Oakland Memphis Sacramento Los Angeles Charlotte Austin Detroit Charleston San Diego Denver Tucson Dallas Indianapolis Raleigh-Durham Nashville Salt Lake City Columbia Miami West Palm Beach Atlanta Fort Lauderdale Portland San Jose-Santa Cruz Phoenix New Orleans Seattle Tampa Orlando Jacksonville Southeast and West Coast will continue be the leading centers of economic activity. Source: CBRE Econometric Advisors National Average 3.2%

27 Income & Employment The economy is at full employment for the first time since 2007 and income growth is strong Y-o-Y Change 8% 6% 4% 2% 0% -2% -4% -6% Employment Income Source: STR, Inc., CBRE Hotels Americas Research, CBRE Econometrics Advisors Q

28 Employment Growth 4% 3% 2% 1% 0% (1)% New Orleans Hartford Long Island Albany New York Baltimore Pittsburgh Washington DC Oahu Chicago Albuquerque Newark Boston Cleveland Omaha Philadelphia Houston Indianapolis Minneapolis Saint Louis Norfolk-VA Beach Kansas City Detroit Charleston Cincinnati Savannah Dayton Salt Lake City Los Angeles San Francisco Columbia Austin Louisville Seattle Anaheim San Diego Charlotte Denver Sacramento San Antonio Columbus Portland Nashville Memphis Oakland Richmond San Jose-Santa Cruz Fort Worth Fort Lauderdale Miami Dallas Tampa Atlanta Jacksonville Tucson West Palm Beach Raleigh-Durham Orlando Phoenix Source: CBRE Econometric Advisors National Average 1.7%

29 Industry Observations Unemployment Rate 12% Payroll & Related Cost ($/Available Room) $9,000 10% $8,500 $8,000 8% $7,500 6% $7,000 4% 2% There is inverse relationship between unemployment and real labor costs. $6,500 $6,000 $5,500 0% $5,000 Unemployment Rate Real Labor Costs Source: Moody s Analytics, PKF Hospitality Research CBRE Hotels, Q

30 Market Overview 15 Year Perspective Occupancy % 59.0% 59.2% 61.3% 63.0% 63.2% 62.6% 59.6% 54.0% 57.5% 60.0% 61.5% 62.2% 64.4% 65.5% 65.3% 65.0% YOY % Change -1.1% 0.3% 3.5% 2.8% 0.3% -0.9% -4.8% -9.4% 6.5% 4.3% 2.5% 1.1% 3.6% 1.7% -0.3% -0.4% Pct Point Diff 0.7% 0.2% 2.1% 1.7% 0.2% -0.6% -3.0% -5.6% 3.5% 2.5% 1.5% 0.7% 2.2% 1.1% -0.2% -0.3% ADR $82.5 $82.7 $86.2 $91.0 $97.6 $104.3 $107.4 $96.1 $96.0 $101.7 $106.4 $110.6 $115.0 $120.2 $124.3 $128.4 YOY % Change -1.3% 0.2% 4.2% 5.6% 7.2% 6.9% 2.9% -10.5% 0.0% 5.9% 4.6% 4.0% 3.9% 4.5% 3.4% 3.3% Nominal RevPAR $48.7 $48.9 $52.8 $57.3 $61.7 $65.3 $64.0 $51.9 $55.2 $61.0 $65.4 $68.5 $74.1 $78.31 $ % % Change from Prior Year -2.4% 0.5% 7.9% 8.6% 7.6% 5.9% -2.0% -18.9% 6.5% 10.5% 7.2% 4.7% 8.2% 6.2% 3.1% 2.9% Inflation Adjusted RevPAR (2005 Base) $61.8 $60.8 $64.0 $67.6 $70.9 $73.4 $69.8 $58.2 $60.4 $63.7 $66.7 $69.4 $74.1 $78.7 $80.3 $81.0 YOY % Change -3.9% -1.6% 5.4% 5.6% 4.9% 3.5% -4.9% -16.6% 3.7% 5.5% 4.7% 4.0% 6.8% 6.5% 3.1% 3.3% Inflation (CPI) 1.6% 2.3% 2.7% 3.4% 3.2% 2.9% 3.8% -0.3% 1.6% 3.1% 2.1% 1.4% 1.3% 0.4% 1.2% 2.2% Real GDP (% Δ) 1.8% 2.5% 3.5% 3.1% 2.7% 1.9% -0.3% -3.1% 2.4% 1.8% 2.2% 2.4% 2.4% 2.7% 1.5% 2.3% Real GDP (% Δ) (YOY) 1.9% 3.9% 2.9% 2.8% 2.4% 2.2% -3.3% -0.1% 2.4% 2.0% 1.8% 3.1% 2.4% 1.9% 1.8% 2.3% Avg. Daily Rooms Sold 2,573 2,606 2,710 2,786 2,798 2,818 2,747 2,577 2,762 2,891 2,976 3,037 3,163 3,250 3,296 3,345 Percentage Change (From Prior Year) 0.5% 1.3% 4.0% 2.8% 0.4% 0.7% -2.5% -6.2% 7.2% 4.7% 2.9% 2.0% 4.4% 2.7% 1.4% 1.5% Room Starts (000's) Percentage Change (From Prior Year) -24.4% 12.0% 6.1% 2.6% 66.5% 5.0% -9.4% -63.8% -37.8% 53.4% 25.2% 26.6% 34.8% 10.6% 18.6% 2.0% End-of-Year Supply (000's) 4,351 4,386 4,387 4,381 4,415 4,489 4,626 4,746 4,785 4,799 4,831 4,859 4,890 4,959 5,051 5,149 YOY % Change 1.5% 0.8% 0.0% -0.2% 0.8% 1.7% 3.0% 2.6% 0.8% 0.3% 0.7% 0.8% 0.7% 1.1% 1.7% 1.9% Average Supply Change YOY 1.6% 1.0% -0.1% -0.1% 0.2% 1.2% 2.4% 2.8% 1.7% 0.5% 0.5% 0.7% 0.7% 1.1% 1.7% 1.9% Source:PWC

31 Examples of the Chain Scales (Full list in database) Luxury Fairmont, Four Seasons, Ritz Carlton, JW Marriott Upper Upscale Dolce, Hilton, Hyatt, Marriott, Gaylord Upscale Radisson, Hilton Garden Inn, Residence Inn, Springhill Suites, Homewood Suites, Courtyard Upper Midscale Fairfield Inn/Suites, Holiday Inn, Clarion, Hampton Inn/Suites, Best Western Premier/Plus Midscale Country Inn & Suites, Best Western, Candlewood Suites Economy Extended Stay America, Red Roof, Days Inn, Microtel Alternatively - hotel properties can be grouped into three broader categories: Limited Service - Originally defined as a hotel without restaurant or banquet facilities, the services and amenities offered to guests of limited-service hotels are typically simple. Ex: La Quinta, Hampton Inn, Element Select Service: Select-service hotels offer the fundamentals of limited-service properties together with a selection of the services and amenities characteristic of full-service properties. Generally, this means certain restaurant and banquet facilities but on a less elaborate scale than one would find at full-service hotels. Ex: Aloft, Courtyard by Marriott Full Service

32 Hotel Product Categories and Brands Luxury Service is key Examples Four Seasons, Mandarin Oriental, Ritz-Carlton (Marriott), St. Regis (Starwood) Boutique Varying product type. Unique products that accentuate style and design Examples Limited-to-Select Service Ascend Collection (Choice), certain Joie de Vivre products Independent Boutique Hotels Manhattan examples Duane Street Hotel, Time Hotel, Park Central, Paramount Upscale-to-Luxury Boutique Morgans Hotels Morgans, Hudson, Mondrian, Delano Thompson Hotels, W Hotels (Starwood), Dream (Wyndham), Kimpton, Andre Balazs Hotels

33 Hotel Product Categories and Brands Extended-Stay - Suites featuring kitchens or kitchenettes. Longer average length of stay than transient hotels Examples Mid-Tier TownePlace Suites (Marriott), Home2Suites (Hilton), Candlewood Suites (InterContinental) Upper-Tier Residence Inn by Marriott, Homewood Suites (Hilton), Hyatt House, Staybridge Suites (InterContinental) Full-Service - Extensive scope of services and amenities, scope of food and beverage outlets, and meeting space Examples Mid-Tier Wyndham, Radisson (Carlson), Holiday Inn (InterContinental) Upscale Hilton, Sheraton, DoubleTree Guest Suites (Hilton), Embassy Suites (Hilton), Marriott Upper-Upscale InterContinental, Westin (Starwood), Le Meridien (Starwood), JW Marriott

34 Hotel Product Categories and Brands Limited-Service - Simply rooms, minimal scope of services, no food and beverage scope perhaps only complimentary breakfast, limited (if any) meeting space Examples Economy Econo Lodge (Choice), Quality Inn (Choice), Howard Johnson (Wyndham), Baymont (Wyndham) Mid-Tier Comfort Inn (Choice), Wingate (Wyndham) Upper-Tier Fairfield Inn (Marriott), Hampton Inn (Hilton) Select-Service Hybrid of limited- and full-service hotels. Flexible scope of food and beverage services lobby lounge, limited-service restaurant, evening room service. Limited meeting space Examples Courtyard by Marriott, aloft by W Hotels (Starwood), Hilton Garden inn, Hotel Indigo (InterContinental), Hyatt Place, Cambria Suites (Choice), Four Points (Starwood), Tryp (Wyndham)

35 Potential Challenges: The Economy Asset Price Bubble Unpredictable Demand Shock Oil/Energy Price Increases Over Building

36 Occupancy is near its limit Occ % Change ADR % Change Total U.S., ADR & OCC % Change, 12 MMA 1/ /2016 Source: STR

37 Occupancies Still Close to Peak Occupancy (%) ADR ($) Prior Peak: Oct Total US, Occupancy and ADR, 12 MMA Jan 1997 Aug 2016 Source: STR

38 Declining Occupancies and Rising ADRs Are Not Unprecedented 8 6 OCC % Change ADR % Change Months 42 Months Total U.S., ADR & OCC % Change, 12MMA 1/ /1999 Source: STR

39 RevPAR Growth: Slowing Down After 6 Yrs. Of Growth Months 31 Mo 56 Months 78 Mo Total U.S., RevPAR % Change, 1/ /2016 Source: STR

40 The New Normal: ADR Gains Have To Make Up For Occ Drops ADR % Change Occupancy % Change Luxury Upper Upscale Upscale Upper Midscale Midscale Economy *RevPAR % Change by Contribution of OCC / ADR % Change, by Scale, August 2016 YTD Source: STR

41 High-End Hotels Still Very Busy Luxury Upper Upscale Upscale Upper Midscale Midscale Economy *OCC %, by Scale, August YTD 2016 & 2015 Source: STR.

42 Group Demand Growth Has Basically Stopped 6% 5% 4% 3% Demand % Change ADR % Change 2% 1% 0.5% -1% -2% *Group Demand and ADR % Change, 12 MMA, 1/ /2016 Source: STR

43 Transient ADR Growth: Slow Despite High Occupancy 6% 5% 4% 3% 2% 1% 0% Demand % Change ADR % Change % *Transient Demand and ADR % Change, 12 MMA, 1/ /2016 Source: STR

44 Rooms Room Supply Projection Since the recession, U.S. hotels have realized an overall surge in performance over the past several years, and one of the most critical factors has been the lack of new supply; averaging less than 1.0% annually from 2010 to After the North American lodging market bottomed out in late 2009, demand rebounded, and the stalled introduction of new rooms has proven a boon to existing hotels. HVS forecasts an annual increase of 1.5% for 2014 and 2015 and 1.8% in 2016, below the historical 20 year average of 2.0% 55,000 50,000 Historical Room Supply 5,000,000 4,500,000 5,500,000 5,000,000 Projected Room Supply +9% +1.8% +2.5% 45,000 40,000 35,000 Number of Hotels Number of Rooms 4,000,000 3,500,000 3,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 30,000 2,500,000 1,500,000 Source: STR 1,000, Source: HVS

45 # of Hotels Hotels Total US - Opened Hotels and Rooms ,000 1,800 1,600 1,400 1,200 Limited supply since 2009 Current supply cycle more compressed than previous two. 180, , , ,000 1, ,000 80,000 60, Number of Opened Hotels Number of Opened Rooms 40, , Source: STR

46 Supply/Demand Dynamic Yr Avg Supply Demand Source: STR

47 % Change Strong Demand (though growth slowing), Increasing New Supply 2015 Supply-Demand Trends By Segment Supply Demand Luxury Upper Upscale Upscale Upper Midscale Midscale Economy 0 Source: PWC

48 Demand Drivers Across Us

49 Current Supply Pipeline Source: STR, PKF, PWC 15%+ Source: STR

50 Rooms Available (millions) Rooms Sold (millions) Total US Correlating Actual Supply and Demand 1,900 1,800 1,700 1,600 Number of US Hotel Rooms has grown from 3M to 5M in the last 27 years. Annual Supply has grown from 1,100M to 1,800M. Annual Demand has grown from 700M to 1,150M rooms. 1,200 1,100 1,000 1,500 1, ,300 1,200 Compound Annual Growth Rates: Supply 1.9% Demand 1.8% Compound Annual Growth Rates: Supply 1.9% Revenue 4.8% 800 1,100 1,000 Supply (Rooms Available) Demand (Rooms Sold) Occupancy -0.1% RevPAR 2.8% Source: STR

51 Historical Supply Growth by Scale 1,000, ,000 Luxury Chains Upscale Chains Midscale Chains Upper Upscale Chains Upper Midscale Chains Economy Chains 600, , ,000 0 *Total US Supply Growth over 27 years by Scale Number of Rooms, 12-month moving average Jan 1988 through June 2015 Source: STR

52 171K In Construction Is Nearing The Prior Peak (2008) Mar 08: 207.5K July 16: 171K Jan 2005 Feb 2006 Mar 2007 Apr 2008 May 2009 Jun 2010 Jul 2011 Aug 2012 Sep 2013 Oct 2014 Nov 2015 Dec 2016 Total US Pipeline, Rooms In ConstructionJan 2005 Jul 2016 Source: STR

53 Demand Growth Feb % 20 Year CAGR: 1.7% June % Aug % *Total US Demand Percent Change 12 MMA 2007 to June Source: STR

54 Total United States Supply & Demand % Change 12 MMA ( ) Jan % June % Feb % Oct % Supply % Change Demand % Change Mar % Aug % Sept % Source: STR

55 Rooms In Construction vs Supply Change Supply percent change seems to trail Rooms In Construction by years Rooms In Construction *Total US Monthly Rooms Under Construction (in thousands) & Supply Percent Change 2005 to June 2015 Supply % Change Source: STR

56 Historical Look at Rooms In Construction Rooms In Construction % Change *Total US Monthly Rooms Under Construction (in thousands) & Under Construction Percent Change 2005 to June Source: STR -80

57 US Supply Overview Broken Down 200,000 Independents Economy Midscale Upper Midscale Upscale Upper Upscale Luxury 150, ,000 50,000 - (50,000) (100,000) Upper Upscale: 11.7% Upscale: 15.6% Upper Upscale: 11.4% Upscale: 19.4% Upper Upscale: 12.6% Upscale: 32.9% Upper Upscale: 17.3% Upscale: 49.9% 27.3% 30.8% 45.5% 67.2% Upper Upscale: 11.7% Upscale: 30.4% 42.1% Source: PKF Hospitality Research, STR, Inc.

58 Total United States Opened and Closed Hotels Opened and Closed (Annual 2004through YTD 2015) saw surge in Opens decrease in Closes 2011 & 2012 lowest number opens in history Opened Closed Source: STR

59 Total United States Opened and Closed Rooms Opened and Closed (Annual 2004 through YTD 2015 in thousands) Opened Closed Source: STR

60 Pipeline accelerates, but still below long-term average Phase % Change In Construction % Final Planning % Planning % Under Contract 542 *Total US Pipeline, by Phase, 000s Rooms, August 2015 and 2016 Source: STR %

61 Supply Growth Perspective` Supply Growth T12 August % Supply Growth Forecast % Supply Growth CAGR 1987-Present 1.9% Source: PKF

62 Supply growth by Chain Scale % Luxury Upper Upscale Upscale *US Pipeline, Rooms Under Construction, 000s Rooms, by Scale, August 2016 Upper Midscale Midscale Economy Unaffiliated Source: STR

63 Supply Increase & Divergence 2% 1% 0% San Jose-Santa Cruz Oakland San Diego Portland Orlando Leaders Salt Lake City Anaheim Boston Sacramento Jacksonville Minneapolis Seattle New Orleans Raleigh-Durham Omaha Austin Pittsburgh Laggards New York Albany Houston Average Supply Growth >2% above Long-Run Average Source: STR, Inc., CBRE Hotels Americas Research

64 Demand Growth In Line 6% 5% 4% 3% 2% 1% Leaders Laggards 0% San Jose-Santa Cruz Oakland Orlando Portland San Diego Salt Lake City Anaheim Boston Sacramento Jacksonville Minneapolis Seattle New Orleans Raleigh-Durham Pittsburgh Austin Omaha New York Albany Houston Forecast Long-Run Average Source: STR, Inc., CBRE Hotels Americas Research

65 Supply/Demand Dynamics Average 16% 14% 12% 10% Will Reach Record Occupancy Levels in the Coming Years! 8% 6% 4% 2% 0% -2% -4% San Jose-Santa Cruz Oakland Orlando Portland San Diego Leaders Salt Lake City Anaheim Boston Sacramento Jacksonville Minneapolis Seattle New Orleans Austin Pittsburgh Raleigh-Durham Laggards Omaha New York Albany Houston Source: STR, Inc., CBRE Hotels Americas Research

66 Historical & Projected Occupancy Performance Occupancy has returned to peak levels. This is most pronounced at luxury and upscale levels, which are often overlooked in high barrier-to-entry markets. Both factors lend to pronounced ADR and value growth. 80% Occupancy By Chain Scale 75% 70% 65% 60% 55% Overall Luxury Upper Upscale Upscale Upper Midscale Midscale Economy Independent 50% 45% Sources: STR, HVS * 2014 & 2015 are PWC Projections

67 Occupancy % Change F 2016F Yr. Avg Source: STR

68 Occupancy Performance ( 07 Vs. 15) 80.0% 70.0% 60.0% 71.7% 75.2% 74.5% 74.7% 70.5% 69.6% 65.3% 67.8% 58.4% 59.8% 57.0% 58.8% 61.0% 62.0% 50.0% 40.0% 30.0% % 10.0% 0.0% Luxury Upper Upscale Upscale Upper Midscale Midscale Economy Independent Source: STR

69 2015 OCC/ADR YTD % the shift continues Occupancy ADR Luxury Upper Upscale Upscale Upper Midscale Midscale Economy Independent Source: STR

70 Rate Dynamics In the mature US lodging market, with demand growth for hotel rooms over the last 20 years averaging ~1.8% per year, and indications that this pattern is likely to continue for the foreseeable future, the primary expectation of hotel from their distribution channel partners will be shifting demand share, rather than generating new incremental demand. Aggregate hotel room demand was found to be relatively inelastic. A reduction in room rate will yield growth in demand, but not enough to offset the lower price charged for the room resulting in a net negative result in room revenue. This generally applies at the property level as well, but can play out differently under certain competitive conditions. If increases in hotel room rates are not at or above the inflation rate, then the price increases year-over-year are not sufficient to cover the increased cost of doing business. When ADR growth was examined over time the US industry wide ADR in 2010 was approximately $10 below the inflation-adjusted rate charged in 2000.

71 ADR % Change Yr. Avg F 2016F Source: STR

72 Real ADR Performance Previous Cycle O c c u p a n c y 66.0% 64.0% 62.0% End: Q Start: Q L e v e l 60.0% 58.0% 56.0% 54.0% $95.00 $ $ $ $ $ $ $ Real Average Daily Rate Level (2014 $ s)

73 OCC Performance US Current Cycle O c c u p a n c y L e v e l 66.0% 64.0% 62.0% 60.0% 58.0% 56.0% Present Start Q1 54.0% $95.00 $ $ $ $ $ $ $ Real Average Daily Rate Level (2014 $ s) Source: PKF Hospitality Research, STR, Inc.

74 Real ADR Performance U.S Current Cycle The Path and Duration of Occupancy and Real ADR Recovery O c c u p a n c y 66.0% 64.0% 62.0% 60.0% L e v 58.0% e l 56.0% 2014 Q4 Start Q1 End Q2 Forecast Cycle Cycle Start 64.4% 63.1% 62.3% Current Cycle March 2015 Forecast Occupancy Level Cycle Peak 64.8% 63.5% 65.8% At Real ADR Recovery 64.3% 62.9% 65.4% Delta -0.1% -0.2% 3.1% 54.0% $95.00 $ $ $ $ $ $ $ Real Average Daily Rate Level (2014 $ s)

75 Real ADR Performance - US The Path and Duration of Occupancy and Real ADR Recovery O c c u p a n c y L e v e l 66.0% 64.0% 62.0% 60.0% 58.0% 56.0% 1997 Q Q2 Duration: 6 Years 3 Quarters 54.0% $95.00 $ $ $ $ $ $ $ Source: PKF Hospitality Research, STR, Inc.

76 ADR Nominal ( ) By year-end 2013, nationwide average rate surpassed the prior 2008 peak. Due to the limited amount of new supply and the strong demand over the past several years, hoteliers will continue to focus on rate growth, which should outpace the rate of inflation over the next several years. 140 Nominal ADR Nominal ADR Source: STR

77 ADR Actual Vs. CPI Adjusted Nominal ADR CPI Adjusted ADR Source: STR

78 Market ADR Leaders will continue to grow ADR as new development lags behind steady demand Average ADR Growth 10% 8% 6% 4% 2% 0% All laggards will grow rates slower than the nation -2% San Jose-Santa Cruz Oakland Orlando Portland San Diego Leaders Salt Lake City Anaheim Boston Sacramento Jacksonville Minneapolis Raleigh-Durham New Orleans Seattle Laggards Pittsburgh Austin Omaha New York Albany Houston Source: STR, Inc., CBRE Hotels Americas Research

79 Market ADR Supply Growth erodes pricing power 10% 8% 6% 4% 2% 0% -2% Leaders Laggards -4% San Jose-Santa Cruz Oakland Orlando Portland San Diego Salt Lake City Anaheim Forecast Boston Seattle Minneapolis Jacksonville Sacramento National Forecast New Orleans Raleigh-Durham Pittsburgh Austin Omaha New York Albany Houston Source: STR, Inc., CBRE Hotels Americas Research

80 Real RevPAR Change 10.0% 5.0% 1.8% 5.3% 4.7% 4.9% 4.5% 3.3% 3.4% 5.9% 5.3% 3.0% 3.9% 3.8% 4.1%4.4% 6.6% 0.0% 0.5% 0.4% 0.6% 1.2% -1.4% -5.0% Forecast -4.1% -4.6% RealADR^ -10.0% -6.7% -6.1% Occ Supply^ -15.0% -12.7% -20.0% Lower Supply Growth Leads to Higher RevPAR Increases this Time Around

81 RevPAR Components and Changes in NOI 20% 10% 0% -10% -20% -30% -40% Occupancy A.D.R. Change in NOI* Source: PKF Hospitality Research, a CBRE Company, 2015 Trends in the Hotel Industry report.

82 US Overview Colors represent 2015 year over year change in RevPAR

83 NYC Monthly RevPAR % Change: Declining Sep Oct Nov Dec Jan Feb Mar Apr May Jun July Aug * NYC RevPAR % Change, by Month, 9/2015 8/2016 Source: STR, Inc.

84 Historical RevPAR Trend By Chain Scale RevPAR Growth is anticipated to be in the 5.5% -6.5% range across all chain scales for the next two years, with outperformance coming from the Luxury and Upper Upscale Segments. RevPAR growth will decelerate after that, though should remain strong through % 6% 4% 2% 0% Projected RevPAR Growth $300 RevPAR Growth By Chain Scale $250 $200 $150 $100 $50 $ Overall Luxury Upper Upscale Upscale Upper Midscale Midscale Economy Independent Source: STR

85 % Change RevPAR % Change F 2016F -2-5 Long Term Avg Source: STR

86 Historical RevPAR Trend - Luxury Categorized By Larger RevPAR Swings 15.0% Nominal RevPAR - %Δ 10.0% 5.0% 0.0% -5.0% -10.0% Overall Luxury Upper Upscale Upscale Upper Midscale Midscale Economy Independent -15.0% -20.0% -25.0% Source: STR

87 Historical Profitability Total Revenue & Profitability Revenue House Profit Source: STR

88 Bottom-line performance Percent of Hotels** Posting an Increase in Total Revenue or Profits From Prior Year (*) - Before deductions for capital reserves, rent, interest, income taxes, depreciation, and amortization. (**) - Trends in the Hotel Industry sample. 100% 80% 60% 70.2% 61.6% 47.9% 44.4% 67.4% 58.9% 80.8% 77.1% 79.3% 72.3% 70.4% 70.4% 86.2% 78.2% 40% 20% 8.6% 4.5% 0% Revenue 2011 Profits** Source: PKF Hospitality Research, a CBRE Company, Trends in the Hotel Industry reports.

89 Performance Forecast Outlook 2016 Forecast 2017 Forecast Supply 1.6% 2.0% Demand 1.6% 1.6% Occupancy ADR RevPAR 0.0% -0.3% 3.2% 3.1% 3.2% 2.8% Source: PKF Hospitality Research, a CBRE Company, Trends in the Hotel Industry reports.

90 US 2016 Performance Forecast ChainScale Occupancy (%chg) ADR (%chg) RevPAR (%chg) Luxury -0.4% 2.8% 2.3% UpperUpscale -0.1% 3.0% 2.9% Upscale -0.4% 3.0% 2.6% UpperMidscale -0.1% 2.8% 2.7% Midscale -0.3% 2.8% 2.5% Economy -0.5% 3.3% 2.8% Independent 0.4% 3.3% 3.6% Total US 0.0% 3.2% 3.2% Source: PKF Hospitality Research, a CBRE Company, Trends in the Hotel Industry reports.

91 US 2017 Performance Forecast 2017 Year End Outlook ChainScale Occupancy (%chg) ADR (%chg) RevPAR (%chg) Luxury -0.3% 3.5% 3.2% UpperUpscale -0.3% 3.4% 3.0% Upscale -1.1% 2.7% 1.5% UpperMidscale -0.8% 2.7% 1.9% Midscale 0.1% 2.7% 2.8% Economy 0.0% 2.6% 2.6% Independent -0.4% 3.2% 2.8% Total US -0.3% 3.1% 2.8% Source: PKF Hospitality Research, a CBRE Company, Trends in the Hotel Industry reports.

92 Performance Forecast Long Run Average Supply 1.9% 0.6% 0.7% 1.1% 1.8% 2.3% Demand 2.0% 2.0% 4.3% 2.9% 2.1% 1.8% Occupancy 62.0% 62.2% 64.4% 65.5% 65.7% 65.4% ADR 3.0% 3.8% 4.5% 4.4% 5.2% 5.3% RevPAR 3.2% 5.2% 8.2% 6.3% 5.5% 4.7% Source: CBRE Hotels Americas Research -- Hotel Horizons March May 2015, 2016 STR, Inc.

93 Global RevPAR Performance Global recovery underway since 2010, though growth has been market-specific and uncorrelated. North America +3.2% Central America +1.8% South America +4.3% Europe +2.8% Northern Africa -2.8% Middle East -10.2% Southern Africa +7.0% Asia -0.3% Australia& Oceania +4.2% Source: STR

94 RevPAR Growth 30 Europe AsiaPac Middle East / Africa Americas *Luxury Class, RevPAR % Change in US $, by Region, 12 MMA 1/2009 8/2014 Source: STR.

95 Supply & Demand % Change, July 2016 YTD Supply Demand 5.0% 5.1% 1.5%1.3% 0.8% 3.6% 3.1% 0.7% 1.1% 1.6% 1.2% 3.6% 1.3% 2.8% -2.8% -3.7% North America & Caribbean Central America South America Europe Middle East Africa Asia Australia & Oceania Source: STR.

96 Top Global Markets By Active Pipeline (Next 5 Years) Future global pipeline continues to be weighted towards Asia. Supply growth below historical averages, coupled with strong demand, should continue to drive RevPAR growth over foreseeable future. Stage of RevPAR growth very market dependent East China excl Hangzhou South Central China Regional Western China Saudi Arabia New York, NY Indonesia excluding Bali Hainan Russia Central India Dubai South India Greater London Malaysia Brazil Area Las Vegas, NV Philippines Northeast China Washington, DC-MD-VA Shanghai North China excl Tianjin Delhi-NCR 7 of top 21 markets are in China. Number of Rooms Number of Projects 14 of top 21 markets are in Asia and Mideast regions Only other markets: NY, Russia, London, Turkey, Brazil, Las Vegas, and DC. 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 *Pipeline includes current construction, and all phases of development pipeline Source: STR

97 What is being developed??

98 Top Global Markets Supply (Last 5 Years) Global development heavily weighted to Asia, and primarily China. Western supply growth has been largely constrained, particularly in context of growing demand East China excl Hangzhou South Central China Regional Western China Shanghai Beijing Dubai Northeast China New York, NY Indonesia excluding Bali Greater London North China excl Tianjin Turkey Bangkok Russia Central India Saudi Arabia South India Abu Dhabi Las Vegas, NV Malaysia Singapore Hainan Rooms 7 of top 11 markets are in China. Hotels 17 of top 21 markets are in Asia and Mideast regions Only other markets: NY, London, Turkey, Russia, and Las Vegas. 0 25,000 50,000 75,000 Source: STR

99 Development/Investment Climate

100 Is now a good time to be investing? Expected RevPAR gains now through 2017 to be in-line of historical average (2.9%). Supply growth is accelerating Occupancy levels are reaching their cyclical peak Robust ADR Growth Hotel values exceeding replacement cost Interest rates for development and acquisition purposes remain at historically low levels, yet tougher to acquire. However, how will they trend in the future? Combination of attractive interest rates, increased availability of capital, and healthy industry performance has made the lodging sector very attractive. Many assets for sale. Cap rates are at some of lowest levels on records a function of interest rates, dearth of product, equity and debt coming to market and aggressive buyers. Lodging assets have consistently offered the most attractive yields when compared with other major real estate classes.

101 % Percentage Hotels Maintain Return Premium PWC - Full-Service PWC - Select-Service Regional Mall PWC - Luxury Suburban Office Apartment PWC - Limited-Service CDB Office Source: PWC Real Estate Investor Survey

102 Transaction Market Overview Key Issues to Consider going forward: How long is the cycle? During the 1990 s, the hotel industry saw 9 years of positive RevPAR growth Last cycle was 5.5 years We re about 6.5 years into this uptrend If you average the last two, means you have.5 more years to go Second key issue: Terminal Cap Rates where should they be? Over the last ten years Full service about 250 bps above 10 year treasuries Select Service about 350 bps above 10 year treasuries Treasuries today are artificially manipulated to be lower than they should be to stimulate economic growth Result is cap rates across the spectrum. Source: STR

103 % Percentage 2015 Comparative Rates of Return 25 Full Service SS & ES Ltd. Service Historical NOI 1st Year NOI Discount Rate Equity IRR Source: HVS

104 % Percentage Derived Cap Rates Ticking Up For Select Service Hotels (based on historical NOI) Full Service SS & ES Ltd. Service Source: HVS

105 % Percentage Slight Uptick in Terminal Cap Rates For Select Service Hotels Years Ago (2011H1) 1 Year Ago (2015H1) 2016H PWC - Full-Service PWC - Luxury PWC - Limited- Service PWC - Select- Service Source: PWC Real Estate Investor Survey

106 Major Hotel Sales Transactions (Assets $10M+) Year 2016Q1 2015Q1 Hotels Sold % Change -35% Average Price Per Room $199, ,860 % Change -30% % 53% 29% -16% 87% 205% -72% -62% 3% 15% 248, , , , , , , , , , ,550 19% 5% 5% -4% 6% 46% -30% 4% -9% 22% Source: Real Capital Analytics (RCA)

107 Portfolio Sales Drove Overall Sales Volume Notable Portfolio Sales Since 2015 December 2015 Properties: 53 (Extended Stay) Buyer: DW Crossland Owner LLC Seller: ESH Hospitality, Inc. Price: $285,000,000 Price/Room: $57,046 Buyout December 2015 Properties: 16 (Full Service) Buyer: Blackstone Real Estate Partners VIII L.P. Seller: Strategic Hotels & Resorts, Inc. Price: $6,000,000,000 Price/Room: $792,498 May 2015 Properties: 10 Waterpark Lodges Buyer: Centerbridge Seller: Great Wolf Lodge Price: $1,350,000,000 Price/Room: $377,200 Merger January (Select Service) Buyer: Starwood Capital Group Seller: TMI Hospitality, Inc. Price: $1,100,000,000 Price/Room: $81,857 Source: Real Capital Analytics (RCA)

108 Sales Exceeding $1 Million Per Key Since 2015 Source: HVS and RCA

109 Sales Exceeding $1 Million Per Key Since 2015 Source: HVS and RCA

110 Luxury Hotel Cap Rates in High Barrier to Entry Markets Location Sale Date Price Rooms Price/Rm Overall Cap San Diego, California Apr-15 $260,227, $1,045, % San Francisco, California Feb-15 $530,000,000 1,024 $517, % Malibu, California Feb-15 $79,900, $1,700, % Laguna Beach, California Jan-15 $360,000, $1,451, % Honolulu, Hawaii Oct-14 $286,238, $846, % Seattle, Washington Jul-14 $62,000, $516, % Wailea Maui, Hawaii Jul-14 $325,500, $598, % Fort Lauderdale, Florida Jul-14 $159,000, $537, % New York, New York Jun-14 $273,600, $570, % Coronado, California Jun-14 $787,000, $1,039, % Napa, California Jun-14 $60,000, $697, % Source: Real Capital Analytics (RCA)/HVS

111 Hotel Cap Rates in Energy Driven Markets With Low Barriers to Entry Location Sale Date Price Rooms Price/Rm Overall Cap Year Opened Kenedy, Texas Jan-15 $8,700, $127, % 2013 Pearsall, Texas Aug-14 $9,300, $140, % 2012 Cotulla, Texas Aug-14 $9,990, $136, % 2013 Pleasanton, Texas Aug-14 $8,900, $141, % 2012 Beeville, Texas Dec-13 $8,700, $124, % 2012 Odessa, Texas Aug-13 $12,000, $101, % 1973 Sonora, Texas Aug-13 $3,900, $72, % 2000 Midland, Texas Apr-13 $6,500, $98, % 2009 Victoria, Texas Feb-13 $9,500, $115, % 2009 Hobbs, New Mexico Jan-13 $2,750, $50, % 1996 Source: Real Capital Analytics (RCA)/HVS

112 Long-Term Compound Growth Miami 11% 2Austin 10% 3New York 9% 4Omaha 8% 5Oahu 8% 6Houston 7% 7San Fr ancisco 7% 8P or tland 7% 9Denver 6% 10New Or leans 6% United States 5% Source: HVS

113 Development Climate

114 Is now the time to develop? Hotel development outlook. New hotel construction increases when two factors occur concurrently: Hotel operating fundamentals are strong and; Reasonably priced financing for new construction is readily available. Hotel fundamentals are strong, aided by the lack of significant new supply over the past several years. The occupancy levels of many hotel markets have fully recovered, leading the way for strong ADR growth. Hotel net income in strong markets has or will soon reach the level necessary to support new development of certain lodging products. However, many markets continue to lag the recovery and will not be supportive of new hotel development for several years. While developers in strong markets look to finance their projects, favorably priced debt for new projects has remained scarce. Those seeking financing are reaching out to other sources than traditional lenders such as debt REITs, private debt funds, and EB-5 programs. The EB-5 program allows investors with a minimum investment of $500,000 to $1,000,000 depending on the area, to receive a visa for a two-year residency which can be converted into a green card if the investment generated at least 10 jobs. Sourcing financing for development projects remains challenging in the current environment. Despite the strong improvement in operating fundamentals, the volume of new hotel construction remains below the peak, though this will change. Another key consideration also motivates hotel developers: that building a new hotel will offer a better investment opportunity than buying an existing asset. Source: STR, HVS, Capital West

115 Thousands Buy Vs. Build Acquisition Cost Development Cost Luxury Upper Upscale Upscale Upper Midscale Midscale Economy Source: HVS

116 Construction In Top 26 Markets: 24 With 2%+ Of Supply Market RoomsU/C %OfExisting Orlando,FL 1,129 1% Norfolk/VirginiaBeach,VA 456 1% Atlanta,GA 1,580 2% OahuIsland,HI 585 2% LasVegas,NV 3,859 2% StLouis,MO-IL 943 2% Detroit,MI 1,054 2% Phoenix,AZ 1,674 3% SanDiego,CA 1,866 3% SanFrancisco/SanMateo,CA 1,580 3% Washington,DC-MD-VA 3,501 3% Anaheim/SantaAna,CA 1,954 3% Chicago,IL 3,970 4% NewOrleans,LA 1,381 4% Boston,MA 2,076 4% Tampa/StPetersburg,FL 1,878 4% Philadelphia,PA-NJ 2,220 5% Minneapolis/StPaul,MN-WI 1,951 5% Miami/Hialeah,FL 3,067 6% LosAngeles/LongBeach,CA 5,633 6% Dallas,TX 5,143 6% Houston,TX 5,625 7% Nashville,TN 2,703 7% Seattle,WA 3,358 8% Denver,CO 4,297 10% NewYork,NY 16,301 14% *US Pipeline, Top 26 Markets, U/C Rooms as % of Existing Supply, August 2016 Source: STR

117 Supply impacting some markets differently Market OCC% ADR%Change LosAngeles/LongBeach,CA Nashville,TN Denver,CO SanFrancisco/SanMateo,CA Tampa/StPetersburg,FL NewOrleans,LA Chicago,IL Miami/Hialeah,FL Houston,TX NewYork,NY * August 2016 YTD ADR % Change in Top 25: 5 Best / 5 Worst PerformingADR % Markets

118 Highest Short-Term Supply Risk Highest Short-Term Supply Risk 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% New York City Area, NY Miami CBD/North, FL 63.4% 62.6% Austin CBD, TX 47.6% Houston CBD, TX Houston North/Woodlands, TX Bellevue/East, WA Nashville CBD, TN West Plano/Frisco, TX Lower Manhattan, NY 47.2% 46.5% 45.5% 43.7% 40.0% 35.5% Source: HVS

119 Total US Rooms In Construction & Under Contract 12MMA Monthly Numbers of Room Opens, 12-Month Moving Average, July 2015 December ,000 16,000 14,000 12,000 Dates could slip, rounding off the peak. Openings after that could be affected by projects entering Pipeline now. 10,000 8,000 6,000 4,000 In Construction Under Contract 2, Source: STR

120 Historical Supply Growth by Scale 1,000, ,000 Luxury Chains Upscale Chains Midscale Chains Upper Upscale Chains Upper Midscale Chains Economy Chains 600, , ,000 0 *Total US Supply Growth over 27 years by Scale Number of Rooms, 12-month moving average Jan 1988 through June 2015 Source: STR

121 What s In Construction Today (by Scale)? (Rooms in 000 s) *US Pipeline, Rooms Under Construction by Scale June 2015 Source: STR

122 New Hotels w/ 50,000+ Sqft Meeting Space YTD 2016 Total U.S. Count of New Hotels with 50k+ Sqft of meeting space By year, 2008 YTD 2016 Source: STR

123 What s In Construction (by Size)? *Total US Hotel Rooms In Construction by Size Category June 2015 Source: STR

124 Who s Building? Holiday Inn Express Hampton Inn & Suites Residence Inn Fairfield Inn Home2 Suites Courtyard Hilton Garden Inn TownePlace Suites Homewood Suites Springhill Suites Holiday Inn La Quinta Inns & Suites Hampton Inn Staybridge Suites Hyatt Place 8,836 8,527 7,208 12,851 12,750 11,611 11,508 11,497 21,286 19,241 19,148 18,973 17,250 15,445 30,558 *US Pipeline, Under Contract Pipeline by Brand June 2015 Source: STR

125 Top Countries New Opens in Last 5 Years United States China United Kingdom India United Arab Emirates Germany Indonesia Canada Thailand Mexico Japan Turkey Spain Australia Russia Italy Saudi Arabia France Malaysia Singapore Brazil 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Rooms Hotels US and China far surpass other countries Next group: UK, India, and UAE. Third group: Germany, Indonesia, Canada, Thailand, and Mexico. Additional countries include: Turkey, Russia, Saudi Arabia, Malaysia, and Brazil. 0 50, , , , , , ,000 Source: STR

126 Top Global Markets New Opens in Last 5 Years East China excl Hangzhou South Central China Regional Western China Shanghai Beijing Dubai Northeast China New York, NY Indonesia excluding Bali Greater London North China excl Tianjin Turkey Bangkok Russia Central India Saudi Arabia South India Abu Dhabi Las Vegas, NV Malaysia Singapore Hainan Rooms 7 of top 11 markets are in China. 17 of top 21 markets are in Asia and Mideast regions 0 25,000 50,000 75,000 Hotels Only other markets: NY, London, Turkey, Russia, and Las Vegas. Source: STR

127 Top Countries with Most Rooms in Active Pipeline ,000 1,500 2,000 2,500 3,000 3,500 United States China India United Kingdom United Arab Emirates Saudi Arabia Indonesia Canada Brazil Russia Malaysia Thailand Philippines Germany Mexico Turkey Japan Qatar Australia Vietnam Egypt Morocco US and China still at top. 15 of top 21 countries are in Asia Pacific and Mideast regions Others include: UK, Canada, Brazil, Russia, Germany, and Mexico Number of Rooms Number of Projects 0 50, , , , , , ,000 Source: STR

128 Top Global Markets with Most Rooms in Active Pipeline East China excl Hangzhou South Central China Regional Western China Saudi Arabia New York, NY Indonesia excluding Bali Hainan Russia Central India Dubai South India Greater London Malaysia Brazil Area Las Vegas, NV Philippines Northeast China Washington, DC-MD-VA Shanghai North China excl Tianjin Delhi-NCR Number of Rooms Number of Projects 7 of top 21 markets are in China. 14 of top 21 markets are in Asia and Mideast regions Only other markets: NY, Russia, London, Turkey, Brazil, Las Vegas, and DC. 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 Source: STR

129 US Supply Growth over 27 years by Scale ,000 Luxury Upscale Midscale Upper Upscale Upper Midscale Economy 600, , ,000 0 Economy leveling off since Q1 of 2010 (99%) Midscale decreasing since Q2 of 2010 (24%) Source: STR

130 US Supply Growth over 27 years by Location 1,800,000 Urban Suburban 1,600,000 Airport Interstate 1,400,000 1,200,000 Resort Small Town Largest growth in Suburban (90%) then Interstate (80%) then Airport (70%) then Small Town (59%) 1,000, , , , ,000 0 Moderate growth in Resort (42%) and less in Urban (35%) for understandable reasons

131 US Supply Growth over 27 years by Size 1,800,000 1,600,000 Less Than 75 Rms Rooms Rooms Rooms GT 500 Rooms 1,400,000 1,200,000 1,000,000 Largest growth in group (156%) then GT 500 group (96%) then group (81%) 800, , , ,000 Moderate growth in group (64%) Decline in Under 75 group (-1%), peaked in 2001

132 US Supply Growth over 27 years by Hotel Type Extended Stay Boutique All-Suite Convention Casino Destination Resort 600, ,000 Largest growth in Extended Stay (2000%), then All-Suites (350%). Next largest growth in Casino (188%), then Boutique (115%, but note increase since 2008). 200,000 0 Moderate growth for Convention (68%), then Destination Resort (63%). Source: STR

133 New York Past Room Opens by Scale over time Indep Upscale Upper Midscale Upper Upscale Luxury Midscale Economy Lots of Upscale (2013) and Independent throughout. Upper Midscale in Luxury and Upper Upscale in Little bits of Midscale (2011) and Economy throughout.

134 New York Past Room Opens by Tract over time Most growth in Lower Manhattan in Next most in Times Square in , then Moderate growth in NY Area throughout time. NY Area Lower Manhattan Upper/Midtown Rockland/Westchester Times Square Minimal growth in Upper/Midtown and Rockland/Westchester.

135 New York - Top 10 Chains for Last 9 Years Room Opens by Year 1, Most Rooms Opened in 2013 (2923). Then in 2010, 2009, and 2008 (1843, 1688, and 1575) Moderate Opens in 2006 and 2007 (721 and 585). Fewest Opens in 2012 and 2011 (274 and 330)

136 Markets U.S. RevPAR Change U.S. Markets TTM RevPAR Change Decline 15% 10% % 80 0% 60-5% Growth -10% -15% 0-20% Source: STR

137 U.S. Tracts by TTM RevPAR Change Source: STR

138 $ in Billions Price Per Key Historical Sales (Total Assets >$2.5M) $45 $200,000 $40 $35 $30 +30% $185,222 $180,000 $160,000 $25 $138,361 $140,000 $20 $120,000 $15 $100,000 $10 $5 $80,000 $0 $60,000 Sales Volume ($ in Billions) Source: Real Capital Analytics (RCA) Price Per Key