CHINA HOTEL MARKET OUTLOOK

Topics To Cover Key Market Assessment China Hotel Market Sentiment Survey The Big Picture For China In 2010 Key Market Outlook

KEY MARKET ASSESSMENT

Key Market Occupancy Trends Change in Occupancy from December 2007 to Feb 2010 Beijing -17.2 Sanya -8.3 Shanghai -11.7 Guangzhou +2.6 Shenzhen -6.4 Hangzhou -11.1 Tianjin -11.8 Chengdu -2.4 Dalian -5.8 Chongqing -7.2 Note: Percentage Point Change

Key Market RND Growth Trends Change in Room Night Demand Volume from December 2007 to Feb 2010 Beijing -1% Sanya 20% Shanghai -4% Guangzhou 34% Shenzhen 20% Hangzhou 15% Tianjin 11% Chengdu 25% Dalian 22% Chongqing 37%

Key Market Assessment All Charts & Data Presented As A Rolling 12-Month Average

Beijing Supply & Demand Trends Hotels 52 Rooms 23,097

BEIJING Room Night Demand Volume 12,010 April 2008 12% Decline 10,584 May 2009

BEIJING Room Night Demand Volume 11% Growth

BEIJING Supply & Demand Trends Supply Growth 33% RNA from 17,364 to 23,097 Demand Growth -1% RND from 11,845 to 11,776 Supply & Demand Gap Grown from 5,519 to 11,321 Occupancy from 68.2% to 51.0%

BEIJING ADR Trend RMB 1,104 Dec 2008 RMB 820 Feb 2010 26% Decline

BEIJING RevPAR Trend RMB 709 April 2008 RMB 406 Nov 2009 43% Decline

BEIJING 2010 Outlook Positives Improving global economic environment Recent strong demand growth Relatively limited new supply International demand should return in bigger numbers Negatives Room rates still in a downward trend International corporate demand likely to remain price sensitive Although limited supply new entrants will dampen occupancy growth and keep room rates competitive

SHANGHAI Supply & Demand Trends Hotels 59 Rooms 24,700

SHANGHAI Room Night Demand Volume 13,679 Jan 2008 13% Decline 11,860 June 2009

SHANGHAI Room Night Demand Volume 10% Growth

SHANGHAI Supply & Demand Trends Supply Growth 17% RNA from 21,046 to 24,700 Demand Growth -4% RND from 13,574 to 13,031 Supply & Demand Gap Grown from 7,472 to 11,669 Occupancy from 64.5% to 52.8%

SHANGHAI ADR Trend RMB 1,122 Aug 2008 RMB 851 Feb 2010 24% Decline

SHANGHAI RevPAR Trend RMB 708 Jan 2008 RMB 439 Nov 2009 38% Decline

SHANGHAI 2010 Outlook Positives Shanghai Expo is creating excitement in the market. All tiers looking to benefit Improvement in global economic environment Economic and financial centre, development of commercial sub centres, transportation infrastructure improvements Negatives Supply will continue to grow and impact the market Still heavily reliant on international demand sources, particularly at the top tier level Rate weakness continues gov t trying to stop price gouging Post Expo concerns

GUANGZHOU Supply & Demand Trends Hotels 15 Rooms 5,490

GUANGZHOU Room Night Demand Volume 34% Growth

GUANGZHOU Supply & Demand Trends Supply Growth 28% RNA from 4,287 to 5,490 Demand Growth 34% RND from 2,252 to 3,017 Supply & Demand Gap Grown from 2,035 to 2,473 Occupancy from 52.5% to 55.1%

GUANGZHOU ADR Trend RMB 804 Dec 2008 RMB 731 Jan 2010 9% Decline

GUANGZHOU RevPAR Trend RMB 415 Dec 2008 RMB 382 Jul 2009 8% Decline

GUANGZHOU RevPAR Trend RMB 415 Dec 2008 RMB 406 Feb 2010

GUANGZHOU 2010 Outlook Positives Global economic recovery will aid Canton Fair Korea is becoming a bigger source of demand for the market Asian games in November may offer a boost to end the year Negatives New supply will dampen potential for occupancy growth Limited rate integrity in the market will make rate growth difficult Market yet to demonstrate it can support high tier properties

SHENZHEN Supply & Demand Trends Hotels 23 Rooms 7,879

SHENZHEN Room Night Demand Volume 20% Growth

SHENZHEN Supply & Demand Trends Supply Growth 34% RNA from 5,862 to 7,879 Demand Growth 20% RND from 3,624 to 4,356 Supply & Demand Gap Grown from 2,238 to 3,523 Occupancy from 61.8% to 55.4%

SHENZHEN ADR Trend RMB 802 Nov 2008 RMB 749 Jan 2010 7% Decline

SHENZHEN RevPAR Trend RMB 486 Jul 2008 RMB 391 Oct 2009 20% Decline

SHENZHEN RevPAR Trend RMB 486 Jul 2008 RMB 416 Feb 2010

SHENZHEN 2010 Outlook Positives Quality of new supply is raising profile and quality of market Negatives Some impact of new supply in 2010 to dampen occupancy growth Convention centre is good quality and will improve MICE demand for the city Rate decline in 2009 was not too severe

HANGZHOU Supply & Demand Trends Hotels 15 Rooms 4,642

HANGZHOU Room Night Demand Volume 15% Growth

HANGZHOU Supply & Demand Trends Supply Growth 37% RNA from 3,388 to 4,642 Demand Growth 15% RND from 2,327 to 2,665 Supply & Demand Gap Grown from 1,062 to 1,977 Occupancy from 68.7% to 57.6%

HANGZHOU ADR Trend RMB 665 March 2009 RMB 642 Sep 2009 4% Decline

HANGZHOU ADR Trend RMB 665 March 2009 RMB 659 Feb 2010

HANGZHOU RevPAR Trend RMB 443 Dec 2007 RMB 363 Sep 2009 18% Decline

HANGZHOU 2010 Outlook Positives Some very nice properties open or set to open should raise the profile of the market City fundamentals remain strong attracts both high end corporate and leisure demand Negatives Significant supply coming into the market will severely test the depth and strength of demand Qianjiang New CBD development still an unknown as a hotel market area Market is beginning to separate geographically

SANYA Supply & Demand Trends Hotels 17 Rooms 7,424

SANYA Room Night Demand Volume 20% Growth

SANYA Supply & Demand Trends Supply Growth 39% RNA from 5,337 to 7,424 Demand Growth 20% RND from 3,357 to 4,039 Supply & Demand Gap Grown from 1,980 to 3,385 Occupancy from 62.9% to 54.6%

SANYA ADR Trend 2 CNY periods included

SANYA ADR Trend Chinese New Year Performance ADR RND Occ % February 2007 1,404 3,948 74% February 2008 1,782 3,714 72% January 2009 1,690 4,605 63% February 2010 2,402 5,011 74%

SANYA ADR Trend Strong Rate & high occupancy

SANYA RevPAR Trend RMB 507 Sep 2009 RMB 613 Oct 2008

SANYA 2010 Outlook Positives Government goal to build Hainan as an international tourism island Long term advantage as being only true tropical beach destination in China Negatives Limited international flight connections will continue to be an issue Some negative perception of price gouging during peak periods Continued improvement in quality of supply continues to boost profile and ADR levels No world-class tourism facilities to support hotel demand growth

TIANJIN Supply & Demand Trends Hotels 15 Rooms 3,759

TIANJIN Room Night Demand Volume 11% Growth

TIANJIN Room Night Demand Volume 8% Growth 10% Growth 6% Decline

TIANJIN Supply & Demand Trends Supply Growth 45% RNA from 2,584 to 3,759 Demand Growth 11% RND from 1,299 to 1,444 Supply & Demand Gap Grown from 1,284 to 2,315 Occupancy from 50.3% to 38.5%

TIANJIN ADR Trend RMB 708 Dec 2008 RMB 580 Feb 2010 19% Decline

TIANJIN RevPAR Trend RMB 369 Oct 2008 RMB 221 Nov 2009 40% Decline

TIANJIN 2010 Outlook Positives Central government support and vision for Tianjin Some large international investment moving into the city Negatives New Supply impact only just beginning considerable supply to come Tourism demand does not support the top tier market heavily reliant on corporate demand Too close to Beijing and development of the city is spread out

CHENGDU Supply & Demand Trends Hotels 11 Rooms 4,475

CHENGDU Room Night Demand Volume 25% Growth

CHENGDU Room Night Demand Volume 2,173 March 2008 2,588 Feb 2010 42% Growth 1,818 Jan 2009 16% Decline

CHENGDU Supply & Demand Trends Supply Growth 31% RNA from 3,422 to 4,475 Demand Growth 25% RND from 2,066 to 2,588 Supply & Demand Gap Grown from 1,356 to 1,887 Occupancy from 60.4% to 58.0%

CHENGDU ADR Trend RMB 720 Jan 2009 RMB 638 Feb 2010 11% Decline

CHENGDU RevPAR Trend RMB 389 March 2008 RMB 305 Apr 2009 21% Decline

CHENGDU RevPAR Trend RMB 389 March 2008 RMB 370 Feb 2010

CHENGDU 2010 Outlook Positives Go West policy still has a positive impact on the market plus post earthquake reconstruction Chengdu a gateway to Sichuan s tourism attractions, Tibet and other western destinations Negatives Supply impact in 2010 will limit market improvement, but over 2 to 3 years supply may have a larger impact Chongqing becoming more competitive MICE demand strong with New Century City performing picking up

DALIAN Supply & Demand Trends Hotels 12 Rooms 4,048

DALIAN Room Night Demand Volume 22% Growth

DALIAN Room Night Demand Volume 20% Growth 2% Growth

DALIAN Supply & Demand Trends Supply Growth 38% RNA from 2,939 to 4,048 Demand Growth 22% RND from 1,566 to 1,918 Supply & Demand Gap Grown from 1,373 to 2,130 Occupancy from 53.3% to 47.5%

DALIAN ADR Trend RMB 651 Dec 2007 RMB 542 Feb 2010 17% Decline

DALIAN RevPAR Trend 27% Decline RMB 255 Jul 2009 RMB 347 Feb 2008

DALIAN 2010 Outlook Positives East Harbour commercial zone will stimulate investment into the city Continued growth of the Dalian Software Park and its position as the best in China Negatives No major supply issue for 2010 but significant growth from 2011 Seasonal demand patterns will continue to be difficult to overcome Recognized as an attractive coastal destination Leisure demand in the city does not support the top tier market

CHONGQING Supply & Demand Trends Hotels 7 Rooms 2,465

CHONGQING Room Night Demand Volume 37% Growth

CHONGQING Supply & Demand Trends Supply Growth 54% RNA from 1,596 to 2,465 Demand Growth 37% RND from 1,068 to 1,468 Supply & Demand Gap Grown from 528 to 997 Occupancy from 66.9% to 59.7%

CHONGQING ADR Trend RMB 465 Dec 2008 RMB 445 Dec 2009 4% Decline

CHONGQING RevPAR Trend RMB 289 Feb 2008 14% Decline RMB 248 Apr 2009

CHONGQING RevPAR Trend RMB 289 Feb 2008 RMB 267 Apr 2009

CHONGQING 2010 Outlook Positives Continued strong demand growth positive market environment Growth in MICE demand has offered strong support for the market Development of Jiangbei New CBD is driving investment in the city. Negatives Supply growth will continue to be an issue in 2010 Historically an occupancy focused market with no rate growth this mentality is likely to continue Leisure demand does not support the top tier market

CHINA HOTEL MARKET SENTIMENT SURVEY

Sentiment Survey Overview - Global Participants from 55 countries Survey conducted in 16 languages More than 2,000 responses Follow-up survey to be conducted June/July

Sentiment Survey Overview - China Participants from 56 cities More than 383 responses Reports to be produced for China, Beijing, Shanghai and Shenzhen The fourth survey conducted in China

Overall Sentiment Ranking Each answer to each question was given a score. Negative answers scored negative points, positive answers positive points. Minimum score representing the most negative outlook equaled -150. Maximum score representing the most positive outlook equaled +150. A score of zero equated to a neutral outlook.

Asia Sentiment Rankings From Jan 2009 Survey South Korea -7.2 China -40.8 Japan -72.1 India -40.1 Thailand -44.9 Hong Kong -52.7 Singapore -64.3 Malaysia -32.8 Indonesia -4.3

Asia Sentiment Rankings From Jan 2010 Survey South Korea 56 Japan -14 India 63 Singapore 49 China 64 Thailand 59 Malaysia 55 Hong Kong 82 Indonesia 50

Asia Sentiment Rankings From Jan 2010 Survey South Korea 56 Japan -14 India 63 Singapore 49 China 64 Thailand 59 Malaysia 55 Hong Kong 82 2009-53 Indonesia 50

Asia Sentiment Rankings From Jan 2010 Survey South Korea 56 India 63 Singapore 49 China 64 Thailand 59 Malaysia 55 Japan -14 2009-72 Hong Kong 82 Indonesia 50

Asia Sentiment Rankings From Jan 2010 Survey South Korea 56 India 63 Singapore 49 China 64 2009-41 Thailand 59 Malaysia 55 Japan -14 Hong Kong 82 Indonesia 50

Market Performance Outlook - China China has has a very positive outlook with more than 80 percent of the respondents stating that market-wide occupancy & revenue performance would be better than 2009. This reduced to about 55 percent for ADR.

Hotel Performance Outlook - China About 80 to 90 percent of respondents expect growth in the three performance indicators in 2010 with a more positive assessment for occupancy and revenue. On average, about 5 percent growth is expected.

Shanghai Expo The majority of hoteliers in Shanghai (50 percent) are expecting Shanghai Expo to have a very positive impact on performance in 2010. We can see that 5 star hoteliers are more cautious in their optimism.

Shanghai Expo Sentiment Score Beijing 53 Shanghai 103 Shenzhen 61 Guangzhou 46 Hangzhou 82 Sanya 52 Suzhou 89 Qingdao 33 Xian 47 Dalian 8 Nanjing 68 Tianjin 8

Hotel Performance Outlook Key Cities Occ% ADR Beijing 5% to 10% 0% to 5% Shanghai 5% to 10% 5% to 10% Shenzhen 5% to 10% 0% to 5% Guangzhou 5% to 10% 0% to 5% Hangzhou 0% to 5% 0% to 5% Sanya 5% to 10% 5% to 10% Suzhou 5% to 10% 0% to 5% Qingdao 5% to 10% 0% to 5% Xian 5% to 10% 0% to 5% Dalian 0% to 5% 0% to 5% Nanjing 0% to 5% 0% to 5% Tianjin 0% to 5% 0% to 5%

Factors Affecting Performance - China Amongst the abovementioned factors, local economic growth has the most positive response as 85 percent of the hoteliers stated that the local economy would have a positive impact on performance. Local tourism trends offered the next most positive assessment with 76 percent of hoteliers expecting continued domestic demand growth. The outlook for export led demand growth remains weak with 31 percent of hoteliers expecting it to have a negative impact and a further 51 percent expecting no growth.

Factors Affecting Performance Key Cities Exports Exchange Rates New Supply Beijing 2 4 1 Shanghai 1 4 2 Shenzhen 1 3 4 Guangzhou 1 4 3 Hangzhou 1 3 4 Sanya 1 2 6 Suzhou 3 2 5 Qingdao 1 2 4 Xian 1 2 3 Dalian 1 4 3 Nanjing 1 5 6 Tianjin 1 2 5

Market Segment Performance - China There has been an improvement in the outlook for foreign demand sources, however, around 50 percent on average anticipate no change or a worsening of demand from international source markets, with leisure group demand the least optimistic. The positive sentiment for domestic demand sources continues, with 60 to 80 percent of respondents expecting domestic demand to record growth. Hoteliers hold the most optimism for the domestic corporate and MICE segments

THE BIG PICTURE FOR CHINA IN 2010

Key Issues For The Hotel Industry In 2009: For the first time in a long time, the economy was viewed in negative terms for the market outlook. In 2010: The local economy held up well in 2009 thanks to the Central Government stimulus. Economic growth was above its ambitious target. Economic growth not seen as a negative for 2010.

Key Issues For The Hotel Industry In 2009: Owners Cash Flow Situation May Impact On Operations and Owner/Management Relations In 2010: A strong recovery in the residential market thanks to the government stimulus has bolstered the cash flow of most large developers in China. This sees them in a much stronger position for 2010. Tightening of financial policy to cool the market may impact the second half.

Key Issues For The Hotel Industry In 2009: Booking patterns will change in response to the economic environment In 2010: We did see a shift in booking patterns in 2009 which should continue in 2010.

Key Issues For The Hotel Industry Booking engines like elong and Ctrip, already important in many hotel markets in China, will become an even more important driver of bookings Short-term pick up in bookings will become stronger, making it harder for budgeting and staffing There will be a shift down in demand to lower rated hotels

Key Issues For The Hotel Industry In 2009: Domestic demand sources will continue to become more important In 2010: Domestic demand did make up a greater slice of the pie in 2009 and should continue to increase share in 2010

Key Issues For The Hotel Industry China Hotel Market Sentiment Survey continues to show a more positive outlook for domestic demand sources in 2010 International hotel groups will have to make adjustments to booking channels used and sales strategies Price competition was prevalent in 2009 and with occupancy levels low, will continue in 2010

Key Issues For The Hotel Industry In 2009: While development trends may slow down, new supply will continue to be a major issue for many markets In 2010: A supply / demand imbalance was obvious in 2009, although in some cases it was not just over-supply but an actual demand decline. Strong growth in the second half of 2009 could not make up and continued demand growth in 2010 will still fall short. Over supply will continue.

KEY MARKET OUTLOOK

Key Market Occupancy Forecast Beijing 55-60% Shanghai 55-60% Guangzhou 55-60% Shenzhen 55-60% Hangzhou 50-55% Sanya 60%+ Tianjin 35-40% Chengdu 55-60% Dalian 50-55% Chongqing 50-55%

Key Market ADR Forecast Beijing 825-850 Shanghai 850-880 Guangzhou 750-775 Shenzhen 750-775 Hangzhou 650-675 Sanya 1,200 Tianjin 575-600 Chengdu 650-675 Dalian 525-550 Chongqing 450-475

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