Lodging Industry Overview

1
Lodging Industry Overview
Brad Garner Vice President Operations/Client
Services
2
Agenda

• U.S. Overview
• Delaware Overview
• Delaware vs. State Comps
• Delaware vs. Market Comps
• Delaware Cities/Areas
• Delaware Pipeline
• U.S. Pipeline
• U.S. Projections

3
Two important points before we begin

• Dont Shoot The Messenger!

4

• and history proves that downturns dont last
  forever

although they may seem like they do
The Key Word is - Cyclical
5
Total United StatesLodging Key StatisticsJuly
2008 YTD

• Change
• Hotels 40,042 2.0
• Room Supply 4.6mm 2.4
• Room Demand 2.7mm -0.2
• Occupancy 62.6 -2.5
• ADR 107.45 3.9
• RevPAR 67.24 1.3
• Room Revenue 64.8B 3.7

2008 Smith Travel Research, Inc.
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Total United StatesKey Performance Indicators
Percent ChangeYear End 2006, 2007, July YTD 2008
2008 Smith Travel Research, Inc.
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Total United StatesRoom Supply/Demand Percent
ChangeTwelve Month Moving Average 1989 to July
2008
4.9
3.9
3.9
2.1
4.6
0.5
2008 Smith Travel Research, Inc.
8
Total United StatesRoom Supply Percent
ChangeJan 2003 July 2008
20 Year CAGR of 2.1
2008P Supply Increase of 2.2
9
Total United StatesOccupancy and ADRTwelve
Month Moving Average July 2008
2008 Smith Travel Research, Inc.
10
Total United StatesOccupancy/ADR Percent
ChangeTwelve Month Moving Average 1989 to July
2008
Above-Inflation Rate Growth
7.6
3.6
4.8
-1.5
45 Months Negative OCC Growth
2008 Smith Travel Research, Inc.
11
Total United StatesRevPAR Percent ChangeTwelve
Month Moving Average 1989 to July 2008
9.4
3.3
2008 Smith Travel Research, Inc.
12
Total U.S.Occupancy, ADR RevPAR Percent
ChangeYTD through 9/6
2008 Smith Travel Research, Inc.
13
Other U.S. Drivers/Implications
14
Source SHA Center for Hospitality Research,
Smith Travel Research
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ADR Drop vs. OCC Gain
Assumptions Occupancy 70 ADR 100 RevPAR
70 ADR Discount 10 New ADR 90 (100
10) New RevPAR 63 (90 ADR 70
Occupancy) To get back to a 70 RevPAR,
Occupancy has to increase. By how much? 70
RevPAR 90 ADR x New Occupancy X 77.7 New
Occupancy OCC Increase (7.7 / 70) 11
16
Upper Upscale Hotels Net Demand Change By Source
of Business ()July YTD
Mix Shift Towards Groups Stay
17
Upper Upscale Hotels ADR By Source of Business
()July YTD
Business Shifts Towards Lower Rates
18
Upper Upscale Hotels ADR Change By Source of
BusinessJuly YTD
Group Change Probably Not Sustainable
19
Upper Upscale Hotels Weekday / Weekend ADRJuly
YTD
Rate Increases Have Slowed
Weekday Sun Thu Weekend Fri Sat
20
Upper Upscale Hotels Weekday / Weekend
OccupancyJuly YTD
Still Selling 7/10 Rooms
Weekday Sun Thu Weekend Fri Sat
21
Exchange Rate Impact on 2007 ADR Change
America Is On Sale!
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Delaware Overview
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Reminders

• 1) Dont Shoot The Messenger!

2) The Key Word is - Cyclical
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DelawareKey Performance Indicators 2005, 2006,
2007, 2008
2008 is July YTD
26
Delaware Occupancy and ADR Absolute Value12
Month Moving Average (Jan 2003 July 2008)
July 08 103.61
July 08 56.2
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Delaware vs. Select States
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Select StatesRoom Supply Percent ChangeYTD July
2008
29
Select StatesRoom Demand Percent ChangeYTD July
2008
30
Select StatesRoom Revenue Percent ChangeYTD
July 2008
31
Select StatesOccupancy Percent ChangeYTD July
2008
32
Select StatesOccupancy PercentYTD July 2008
33
Select StatesADR Percent ChangeYTD July 2008
34
Select StatesAverage Daily Rate AbsoluteYTD
July 2008
35
Select StatesRevPAR Percent ChangeYTD July 2008
36
Delaware Tracts
37
Wilmington MSA and Delaware Area Tracts Room
Supply Percent Change12 Month Moving Average
(Jan 2004 July 2008)
July 08 6.9
July 08 -0.4
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Wilmington MSA and Delaware Area Tracts Demand
Percent Change12 Month Moving Average (Jan 2004
July 2008)
July 08 -5.7
July 08 -11.0
39
Wilmington MSA and Delaware Area Tracts
Occupancy Absolute12 Month Moving Average (Jan
2003 July 2008)
July 08 60.7
July 08 50.9
40
Wilmington MSA and Delaware Area Tracts
Occupancy Percent Change12 Month Moving Average
(Jan 2004 July 2008)
July 08 -5.3
July 08 -16.8
41
Wilmington MSA and Delaware Area Tracts ADR
Absolute Value 12 Month Moving Average (Jan 2003
July 2008)
July 08 106.39
July 08 99.72
42
Wilmington MSA and Delaware Area Tracts ADR
Percent Change12 Month Moving Average (Jan 2004
July 2008)
July 08 4.0
July 08 2.7
43
Wilmington MSA and Delaware Area Tracts RevPAR
Percent Change12 Month Moving Average (Jan 2004
July 2008)
July 08 -1.5
July 08 -14.5
44
Wilmington MSA and Delaware Area Tracts Room
Revenue Percent Change12 Month Moving Average
(Jan 2004 July 2008)
July 08 -1.9
July 08 -8.6
45
Delaware Chain Scales
46
STR Chain ScalesSelected chains from each segment

• Luxury Four Seasons, Ritz Carlton, Fairmont
• Upper Upscale Hyatt, Embassy, Hilton, Marriott,
  Sheraton
• Upscale Hyatt Place, Hilton Garden Inn,
  Courtyard
• Mid with FB Holiday Inn, Ramada, Quality Inn
• Mid no FB Hampton Inn, HI Express, Comfort Inn
• Economy Econolodge, Red Roof, Days Inn

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2008
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Delaware Historical Existing Supply by Chain
Scale July 2008
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Delaware Market Chain ScalesSupply/Demand
Percent Change Twelve Months Ended July
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Delaware Market Chain ScalesOccupancy/ADR
Percent Change Twelve Months Ended July
51
Delaware Market Chain ScalesRevPAR/Room Revenue
Percent ChangeTwelve Months Ended July
52
Delaware Chain Hotels vs. Independent HotelsKey
Performance Indicators July 2008 YTD
53
Delaware Comp Markets
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Delaware Competitive MarketsSupply Percent
ChangeJuly 2007 2008 YTD
55
Delaware Competitive MarketsDemand Percent
ChangeJuly 2007 2008 YTD
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Delaware Competitive MarketsOccupancy Absolute
ValueJuly 2007 2008 YTD
57
Delaware Competitive MarketsOccupancy Percent
ChangeJuly 2007 2008 YTD
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Delaware Competitive MarketsADR Absolute
ValueJuly 2007 2008 YTD
59
Delaware Competitive MarketsADR Percent
ChangeJuly 2007 2008 YTD
60
Delaware Competitive MarketsRevPAR Percent
ChangeJuly 2007 2008 YTD
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Delaware Competitive MarketsRevenue Percent
ChangeJuly 2007 2008 YTD
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Delaware Cities/Areas
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Delaware CitiesSupply Percent ChangeJuly 2007
2008 YTD
65
Delaware CitiesDemand Percent ChangeJuly 2007
2008 YTD
66
Delaware CitiesOccupancy Absolute ValueJuly
2007 2008 YTD
67
Delaware CitiesOccupancy Percent ChangeJuly
2007 2008 YTD
68
Delaware CitiesADR Absolute ValueJuly 2007
2008 YTD
69
Delaware CitiesADR Percent ChangeJuly 2007
2008 YTD
70
Delaware CitiesRevPAR Percent ChangeJuly 2007
2008 YTD
71
Delaware CitiesRevenue Percent ChangeJuly 2007
2008 YTD
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Delaware Pipeline
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Delaware Historical Existing Supply and
Pipeline Projects by Phase July 2008
74
Delaware Detail of Projects in Supply Pipeline
by Phase July 2008
75
U.S. Pipeline
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Total United StatesActive Development Pipeline -
RoomsChange From Last Year
Source STR / TWR / Dodge Construction Pipeline
140K Open (close 30K) 2.5 Increase
77
Total United StatesRooms In Construction In
Thousands July 2008
Source STR / TWR / Dodge Construction Pipeline
78
Total United StatesRooms In Construction by
Scale In Thousands July 2008
Source STR / TWR / Dodge Construction Pipeline
79
Markets with Highest Construction ActivityJuly
2008

• Market Rooms Existing Supply
• Las Vegas 14,419 9.3
• New York 10,255 12.2
• Orlando 5,522 4.8
• Phoenix 4,906 9.0
• Washington, DC 4,668 4.8
• Chicago 4,393 4.2
• LA-Long Beach, CA 3,934 6.3

Source STR / TWR / Dodge Construction Pipeline
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Top 10 Construction BrandsJuly 2008

• Brand Rooms
  
• --------------------------------------------------
  -----------------------------------------
• Hampton 41,822
  
• HI Express 41,811
• Hilton Garden 26,008
  
• Holiday Inn 24,851
• Comfort 22,002
• Courtyard 19,911
• Candlewood Suites 19,097
  
• Value Place 17,669
• Residence Inn 17,368
  
• Fairfield Inn 16,043
• Includes Inns and Inns Suites

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U.S. Projections
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U.S. Economic OutlookBlue Chip Economic
Indicators August 2008

• 2007 2008F 2009F
• Real GDP 2.2 1.6 1.5
• CPI 2.8 4.4 2.9
• Corporate Profits 3.9 -4.1 2.7
• Disp Personal Income 3.2 1.7 1.1
• Unemployment Rate 4.6 5.5 6.1

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Total United StatesHotel Rooms Sold vs. GDP
ChangeQuarterly Change 1988 to Q1 2008

2008 Smith Travel Research, Inc.
84
Total U.S.Supply/Demand Percent Change2002
2009P
85
Total USOccupancy Percent2002 2009P
86
Total U.S.Occupancy Percent Change2002 2009P
20 Year Average -0.1
87
Total US Average Daily Rate (In Dollars)2002
2009P
88
Total U.S.ADR Percent Change2002 2009P
20 Year Average 3.5
89
Total U.S.RevPAR Percent Change2002 2009P
20 Year Average 3.4
90
RevPAR Outlook 2008Publicly Traded Companies Q2
Releases

• Choice Hotels (-1.5)
• Diamond Rock Hospitality (REIT) (-3) (-1)
• FelCor (REIT) 4.5 - 6
• Gaylord 1 - 3
• Host Hotels (-1) 1
• LaSalle Hotel Properties 0 - 2
• Marriott Intl. (-1) 1
• Red Lion 0 3
• Starwood Hotels 2 - 3
• Strategic Hotels (North America) (REIT) (-1) -
  1
• Sunstone (REIT) (-1) 1.5
• Wyndham (-3) (-1)

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• Supply Growth Pipeline Attrition?...Have we
  peaked?
• Slowing Economy Slower Demand Growth
  (Perceptions of Disp. Income)
• Top Markets may outperform
• Airline Woes
• Gas/Energy Prices
• Financial Institutions
• In to be Green
• Weak Dollar U.S. Bargain
• Leisure feels greater impact than business
• Revenue Management Discipline

2008 Lodging Industry Takeaways
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brad_at_smithtravelresearch.com 615-824-8664 ext.
307www.smithtravelresearch.com
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Global RegionsOccupancy Percent Change June
2008 YTD Year over Year
2008 Smith Travel Research, Inc.
94
Global RegionsADR Percent Change (In US ) June
2008 YTD Year over Year
2008 Smith Travel Research, Inc.
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Key 15 Global Markets Occupancy Percent June
2008 YTD Year over Year
2008 Smith Travel Research, Inc.
96
Key 15 Global MarketsOccupancy Percent Change
June 2008 YTD Year over Year
2008 Smith Travel Research, Inc.
97
Key 15 Global Markets ADR (In US ) June 2008
YTD Year over Year
2008 Smith Travel Research, Inc.
98
Key 15 Global Markets ADR Percent Change (In US
) June 2008 YTD Year over Year
2008 Smith Travel Research, Inc.