Methodology for Feasibility Studies for Waterparks and Hotels. Presented by: David J. Sangree, MAI, CPA, ISHC

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1 Methodology for Feasibility Studies for Waterparks and Hotels Presented by: David J. Sangree, MAI, CPA, ISHC

2 A feasibility study analyzes: Supply and demand Demographics Usage/occupancy Revenues Expenses Net income to determine the value of the proposed project compared to its projected development costs.

3 Purpose Necessity Scope of assignment Who is the client: developer, lender, government, etc. Determine financial feasibility Analyze plans and designs and make recommendations

4 An outdoor waterpark is a facility offering three or more waterslides and other aquatic facilities. An indoor waterpark resort is a lodging establishment containing an indoor aquatic facility with a minimum of 10,000 square feet of indoor waterpark space and inclusive of amenities such as slides, tubes, and a variety of indoor water play features.

5 A standalone indoor waterpark is an aquatic center without an attached hotel, having a minimum of 10,000 square feet, inclusive of amenities such as slides, tubes, and a variety of indoor water play features. A resort hotel with outdoor waterpark is a hotel with three or more water play features, such as slides, lazy rivers, or wave pools that require lifeguards.

6 1. Area, Demographic, and Neighborhood Analysis 2. Site Review 3. Proposed Development Recommendations and Costs 4. Market Analysis 5. Proposed Development Usage and Pricing Analysis 6. Financial Analysis 7. Feasibility Analysis 8. Comparison of Value Created to Projected Costs

7 1. Area, Demographic, and Neighborhood Analysis Population Trends Number of families with children within driving distance Household Growth Household Economics Area Economics Area Transportation

8 2. Site Review Drive-time Demographics: Indoor waterpark resort: 180 miles Outdoor waterpark: 60 miles Site visibility and access Amenities/nearby tourist attractions Governmental Impacts

9 Ratio of Family Households to Indoor Waterpark Hotel Rooms within 180 Miles of Example City, Wisconsin Dells & Sandusky Example Wisconsin Dells Sandusky 2016 Est. Family Households, 180-mile radius 9,012,310 4,273,443 6,647,145 Number of Existing and Under-Construction Hotels with Indoor Waterparks Total Rooms 2,360 9,599 4,039 Family Households per Indoor Waterpark Hotel Room 3, ,645.7 Sources: ESRI, Hotel & Leisure Advisors

10 Residents per Outdoor Waterpark by Region Number of Residents per Region Waterparks Population Waterpark Northeast 74 56,209, ,588 Midwest ,941, ,076 South ,319, ,703 West ,657, ,256 Total US ,127, ,837 Source: Hotel & Leisure Advisors, LLC, September 2017

12 3. Proposed Development Recommendations and Costs Physical plant information Facility size Branding Hotel affiliation Amenities Theme Development costs

13 4. Market Analysis Hotel Market Hotel competitors Existing indoor waterpark resorts Demographic analysis Recent hotel openings Potential hotel openings Market segmentation and market penetration Projections

14 Overall U.S. Lodging Performance Occupancy % Change ADR % Change RevPAR % Change % 4.2% $ % $ % % 1.5% $ % $ % % 3.4% $ % $ % % 1.7% $ % $ % % 0.0% $ % $ % Source: STR

15 Performance Data by Property Type All Hotels Full Service Limited Service Suite w/f&b Indoor Waterpark Resort Convention Resort Occupancy 74.9% 75.2% 70.9% 77.6% 69.2% 74.8% 73.2% ADR $ $ $ $ $ $ $ RevPAR $ $ $77.87 $ $ $ $ Source: C BRE Hotels and H&LA

16 Industry Forecasts STR CBRE PwC STR PwC Supply 2.0% 1.9% 2.0% 2.2% 1.8% Demand 2.0% 2.2% 2.1% 2.0% 1.6% Occupancy 0.0% 0.3% 0.1% -0.2% -0.2% ADR 2.3% 2.5% 2.3% 2.3% 2.0% RevPAR 2.3% 2.8% 2.3% 2.3% 2.0% Source: STR/CBRE/PWC

17 4. Market Analysis Waterpark Resort Market Existing and potential competitors Attendance Demographics Amenities of competitors Waterpark pricing

18 Top 20 US Waterparks by Annual Attendance % Change Rank Park Location Attendance Attendance over Typhoon Lagoon at Disney World Orlando, FL 2,277,000 2,294, % 2 Blizzard Beach at Disney World Orlando, FL 2,091,000 2,107, % 3 Aquatica Orlando, FL 1,536,000 1,600, % 4 Wet 'n Wild Orlando, FL 1,310,000 1,310, % 5 Schlitterbahn New Braunfels, TX 1,037,000 1,037, % 6 Water Country USA Williamsburg, VA 733, , % 7 Adventure Island Tampa, FL 650, , % 8 Six Flags White Water Marietta, GA 568, , % 9 Schlitterbahn Galveston,Tx 562, , % 10 Six Flags Hurricane Harbor Arlington, TX 549, , % 11 Splish-Spash Calverton, NY 513, , % 12 Wet 'n' Wild Splashtown Houston, TX 501, , % 13 Wet 'n' Wild Phoenix Phoenix, AZ 481, , % 14 Six Flags Hurricane Harbor Jackson, NJ 449, , % 15 Typhoon Texas Houston Katy, TX 440,000 Not yet open - 16 Camelbeach Tannersville, PA 437, , % 17 Hyland Hills Water World Denver, CO 434, , % 18 Zoombezi Bay Powell, OH 423, , % 19 Dollywood's Splash Country Pigeon Forge, TN 416, , % 20 Raging Waters San Dimas, CA 403, , % Source: TEA 2016 Theme Index, Global Attractions Attendance Report (released 2017)

19 2017 US Open Waterpark Supply by Region Outdoor Waterparks Region Municipal Private Total Northeast Midwest South West Total Indoor Waterpark Resorts Region Franchise Independent Total Northeast Midwest South West Total Standalone Indoor Waterparks Region Municipal Private Total Northeast Midwest South West Total Resorts with Outdoor Waterparks Region Franchise Independent Total Northeast Midwest South West Total Combined Total Number of US Waterparks 1,055 Source: Hotel & Leisure Advisors, LLC, September 2017

20 The Midwest boasts the largest number of indoor waterparks. The South has the largest number of outdoor waterparks with the Midwest close behind. It offers few indoor waterparks indicating potential opportunity. The Northeast has the fewest number of outdoor waterparks and the fewest combined indoor waterparks (resorts and standalone), indicating potential opportunity. The majority of outdoor waterparks are municipal due to the Midwest having so many municipal outdoor waterparks

21 Indoor Waterpark Additions & Indoor Waterpark Resorts Opened in 2016 Indoor Waterparks and Resorts City State / Prov New Rooms Indoor Waterpark Sq. Ft. Great Wolf Lodge Southern California Garden Grove CA ,000 Great Wolf Lodge Colorado Springs Colorado Springs CO ,000 Parrot C ove Waterpark and Heritage Inn & Suites Garden C ity KS 95 20,000 Expansion of Cape Codder Resort Hyannis MA 0 20,000 Holiday Inn Express Expansion Brainerd MN 21 3,000 Treasure Island Resort Waterpark Addition Welch MN 0 40,000 Sahara Sams Expansion West Berlin NJ 0 10,000 Great Wolf Lodge Addition of Wolf Tail Waterslide Niagara Falls ON 0 0 Hershey Lodge Water Works Addition Hershey PA 0 30,000 Valcartier Vacation Village Indoor Waterpark Resort Valcartier QC ,000 Total 1, ,000 Note: Resorts have a minimum of 10,000 square feet of indoor waterpark space Source: Hotel & Leisure Advisors, LLC

22 Indoor Waterpark Additions & Indoor Waterpark Resorts Projected to Open in 2017 Indoor Waterparks and Resorts City State / Prov New Rooms Indoor Waterpark Sq. Ft. Cocokey Water Resort Expansion of Waterpark Omaha NE 0 20,000 Kalahari Resort Phase II Pocono Manor PA ,000 Kalahari Resort 5-slide Outdoor Waterpark Expansion Sandusky OH 0 0 WaTiki Waterpark Resort Home2 Suites Addition Rapid City SD The Epic Grand Prairie TX 0 60,000 Apex Centre Aquatics and Fitness Facility McKinney TX 0 24,000 Kalahari Resort Outdoor Bowl Slide Addition Wisconsin Dells WI 0 N/A Note: Indoor Waterpark Resort is defined as a hotel with more than 10,000 square feet of indoor waterpark space. Source: Hotel & Leisure Advisors, LLC, September 2017

23 Private Municipal 2016 Outdoor Waterpark Openings Park Location Total Slides Laguna Splash at DelGrosso's Amusement Park Tipton PA 10 Sandy Harbor Family Fun Center at Ocean Lakes Myrtle Beach SC 3 Splash Kingdom Greenville TX 6 Typhoon Texas Katy TX 33 NLand Surf Park Del Valle TX Total 52 Cabot Aquatic Park Cabot AR 4 Pocahontas Aquatic Center Pocahantas AR 5 Super Splash Park Carbondale IL 3 Long Branch Lagoon Dodge City KS 6 Midwest Health Aquatic Center Topeka KS 5 American Legion W ater Park Elizabethtow n KY 4 Carlsbad W aterpark Carlsbad NM 5 Kingston Community Pool Kingston PA 3 Clover School District Community YMCA Clover SC 3 Greenview Pool Columbia SC 3 Alice Natatorium and Water Park Alice TX 6 Memorial Pool Renovation Wausau WI 3 Total 50 Source: Hotel & Leisure Advisors, LLC, September 2017

24 2017 Outdoor Waterpark Openings Waterpark Location Major Attractions Private Coconut Cove at Bananas Fun Park Grand Junction CO Play structure with slides and a 10,000 gallon tipping bucket Universal Orlando Volcano Bay Orlando FL water slides, lazy river, wave pool H2OBX Outer Banks / Currituck NC more than 30 waterslides, large wave pool, adventure lagoon and lazy river, FlowRider Cedar Point Shores Sandusky OH Remodel of Soak City Waterpark including 3 new slides and kids area Municipal Batesville Aquatic Center Batesville AR 3 slides, lazy river, zip-line The Wave at Emerald Glen Park Dublin CA 6 slides, 3 pools, water playground Independence Aquatic Center Independence IA pool with zero depth entry, six 25 meter lap lanes, a floatable water walk, two single flume water slides, a drop slide Clarksville Aquatic Center Clarksville IN 6-lane competition pool, splash pad, tube slide, body slide Waterpark Replacement of City's Aging Pool Hutchinson MN lazy river, water slides, zero-depth play areas Pool renovation Palmer Twp PA zero-depth pool, splash park, 3 slides, 6-lane swimming area, diving well Canyon Aqua Park Canyon TX slides, playground, group shelter, spa Junior League Jurassic Jungle Odessa TX 180-foot spray ground, water playground and slides, jumping fountains Erb Park Pool Appleton WI Two pools, diving board, 2 large slides, 1 children's slide, children's play area Source: Hotel & Leisure Advisors, LLC, September 2017

25 We are currently tracking 5 Indoor and 27 outdoor waterpark projects to open in 2018 including: Great Wolf Lodge resort in LaGrange, GA Great Wolf Lodge conversions in IL and MN Summit Splash at Blue Mountain Ski Area - Danielsville, PA Big Rivers Waterpark at Grand Texas - New Caney, TX Splashicana - Corsicana, TX Municipal aquatic centers: o Elk Grove, CA o Naples, FL o Chambersburg, PA o Abiline, TX

26 5. Proposed Development Usage and Pricing Analysis Indoor Waterpark Resorts: Occupancy and ADR Demand Interviews Hotel and Waterpark Demand Day Passes Projections Pricing

27 5. Proposed Development Usage and Pricing Analysis Outdoor Waterparks: Usage Facilities Population Projections Pricing Climate

28 6. Financial Analysis Estimate the potential gross revenues for the subject property. Analyze and project departmental, undistributed, and fixed expenses. Project the resultant net operating income over an appropriate holding period.

29 7. Feasibility Analysis Economic value is calculated through a discounted cash flow analysis.

30 Sum of cash flows plus the reversionary sale price equals market value

31 8. Comparison of Value Created to Projected Costs Is the development justified? How does valuation through a discounted cash flow analysis compare with proposed development budget including entrepreneurial profit? Need to request municipal incentives?

32 Smaller properties generally struggle: three smaller indoor waterpark resorts in Ohio struggle due to competition from 890- room Kalahari Resort with 173,000 square foot indoor waterpark in Sandusky, Ohio (one achieves occupancy levels in the 20% to 30% range) Coco Key Waterpark Resort in Waterbury, Connecticut closed in 2016 due to poor performance and was torn down. Weather affects outdoor waterpark performance. Too much competition can affect performance.

33 National hotel industry achieved highest occupancy and ADR levels in 2016 and projections are for another record year in 2017 Hurricane and other unusual weather patterns have impacted hotel occupancy and waterpark attendance in Texas, Florida, and other locations in 2017 Growth by the Great Wolf Lodge chain is positive for the industry as they develop new properties in Georgia, Illinois and Minnesota over the next 12 months Kalahari Resorts is expanding their properties in Wisconsin and Pennsylvania and developing a new property in Texas Continued growth and interest in the waterpark segment with increased numbers of news stories

34 Both private developers and municipalities continue to introduce new indoor and outdoor waterparks across the U.S. and Canada The development of an outdoor waterpark is less expensive than an indoor waterpark and can add seasonal recreation to a property. Waterpark designers continue to develop exciting new rides and attractions Volcano Bay in Orlando is the most expensive outdoor waterpark in the United States to be built Need to balance revenues versus costs

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37 David J. Sangree, MAI, CPA, ISHC President Hotel & Leisure Advisors, LLC Detroit Avenue, Suite 420 Cleveland, OH Phone:

2017 World Waterpark Association Annual Symposium and Trade Show: Waterpark and Resort Trends Across the Globe

2017 World Waterpark Association Annual Symposium and Trade Show: Waterpark and Resort Trends Across the Globe Presented by: David J. Sangree, MAI, CPA, ISHC The United States has the largest and most