Forecasting in a Windstorm. The Forecasting in a Windstorm webinar will begin shortly.

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The

“

Forecasting in a Windstorm

”

webinar will begin shortly.

1

Tuesday, February 3

rdrd

_{, 2009}

2:00

–

3:00 PM EST

Hospitality Sales and Marketing

Association International (HSMAI)

Forecasting in a Windstorm

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Overview of Format and Topic

Moderator

Barb Taylor Carpender, CMM, CHSC

Managing Director, HSMAI University

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4 hsmai.org

HSMAI University Alliance Partner

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HSMAI University Alliance Partner

POLL QUESTION #1

How many people are participating in this webinar at your location today?

1 2 3 4 5 6 7 8 or more

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Jan D. Freitag

Vice President, Global Development

SMITH TRAVEL RESEARCH

jan@smithtravelresearch.com www.smithtravelresearch.com

R. Mark Woodworth

President PKF International mark.woodworth@pkfc.com www.pkfc.com

Today

’

s Presenters

7

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US LODGING INDUSTRY OVERVIEW

Jan D. Freitag Vice President

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Thoughts about ALIS

“Fear and Loathing in San Diego”

JP Morgan

“…transient demand, (is) a

‘downward death spiral’…”

JP Morgan

“…miserable 2009 management guidance …”

Baird

“…RevPAR still a ‘falling knife’ “

Deutsche Bank 9 85.6 93.1 102.9 112.1 103.5 102.6 105.3 113.7 122.7 133.4 139.4 17.0 20.9 22.1 22.5 16.2 _14.2 12.8 16.7 22.6 26.6 28.0 0 20 40 60 80 100 120 140 160 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Revenue Income

Total United States

Estimated Revenue and Profitability Years 1997 - 2007

2009 Smith Travel Research, Inc.

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85.22 83.99 86.24 90.90 103.91 97.31 82.86 82.75 87.64 89.03 91.06 93.48 96.65 99.77 85.22 102.76 80 90 100 110 2000 2001 2002 2003 2004 2005 2006 2007 Nominal ADR Yr 2000, Grown by CPI

If year 2000 ADR had increased by CPI each year…

It took 6 years to recover from Rate Reductions in 2001

Total US Room Rates

Actual vs Inflation Adjusted

2000 - 2007

11

Total US Overview

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-6 -4 -2 0 2 4 6 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 Supply % Change Demand % Change

Total United States

Room Supply/Demand Percent Change

Twelve Month Moving Average – 1989 to December 2008

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Building Into The Downturn

-8 -6 -4 -2 0 2 4 6 8 10 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 ADR % Chg Demand % Change Occ % Chg

Total United States

Room Demand/Occ/ADR Percent Change

2.4%

-1.6%

-4.2%

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-8 -6 -4 -2 0 2 4 6 8 10 1988q1 1991q1 1994q1 1997q1 2000q1 2003q1 2006q1 -8 -6 -4 -2 0 2 4 6 8 10 Demand % Chg ADR % CHG

Total United States

Hotel Rooms Sold vs. ADR Change Quarterly Change – 1988 to Q4 2008

15

Yield Management Amplifies The Pain

2.4 6.2 0.9 -0.4 5.8 1.3 2.7 -4.2 -1.6 _-1.9 -5 0 5 10

Supply Demand Occupancy ADR RevPAR 2007 2008

Total United States

Key Performance Indicators Percent Change December YTD

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-0.8 3.9 -0.3 -2.6 1.2 2.4 3.2 -7.5 -4.6 -8.2 -10 -5 0 5 10

Supply Demand Occupancy ADR RevPAR Jan-Aug

Sept-Dec

Total United States

Key Performance Indicators Percent Change 2008 – First 8 Months vs. Last 4 Months

17 A Tale of 2 Seasons -1.2 2.1 -4.1 -3.8 -10.0 1.8 -1.6 -0.2 -1.9 -0.8 -5.9 2.4 -3.5 -12.2 -14 -12 -10 -8 -6 -4 -2 0 2 4

Sun Mon Tue Wed Thu Fri Sat Jan-Aug

Sept-Dec

Total United States

Demand Percent Change – Day of Week

2008 First 8 Months vs. Last 4 Months

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2.6 0.3 -1.3 _-1.5 3.3 4.1 4.3 4.4 4.1 3.7 -0.1 0.0 0.7 -0.3 -5 0 5

Sun Mon Tue Wed Thu Fri Sat Jan-Aug

Sept-Dec

Total United States

ADR Percent Change – Day of Week

19

Weekend Rates Are Deteriorating

Chain Scales

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1.9 -1.6 -0.4 -2.2 -4.7 3.6 1.0 1.6 -6.2 -0.3 -4.6 -3.6 -6.0 -9.3 -10 -5 0 5

Total US Luxury Upper Upscale

Upscale Mid W Mid W/O Economy Jan-Aug

Sept-Dec

Total United States

Demand Percent Change – Chain Scale

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High End Demand is Falling

1.7 -1.3 1.7 -0.7 4.2 2.3 2.0 2.6 4.0 3.8 -0.6 -1.5 -4.1 0.9 -5 0 5

Total US Luxury Upper Upscale

Upscale Mid W Mid W/O Economy Jan-Aug

Sept-Dec

Total United States

ADR Percent Change – Chain Scale

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51.7 48.6 42.1 40.5 35.5 18.6 22.7 23.7 20.6 21.7 19.1 2.8 7.1 10 11.9 12.4 14 38.4 0 10 20 30 40 50 60 Luxury Upper Upscale

Upscale Mid With Mid W/O Economy 2007 YE Q3 2008 Q4 2008

Increasing Occupancy and ADR

Chain Scales – Percent of Properties

Year End 2007 – 3rd & ₄th _{Quarters 2008}

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Only 7 Luxury Hotels Increased ADR & OCC

4.1 2.2 6.2 5.5 10.8 28.5 16.4 17.2 23.3 20.6 24.9 60 53.8 42.5 34.7 _33.1 31.7 8.1 0 25 50 75 Luxury Upper Upscale

Upscale Mid With Mid W/O Economy 2007 YE Q3 2008 Q4 2008

Declining Occupancy and ADR

Chain Scales – Percent of Properties

Year End 2007 – 3rd_{& 4}th _{Quarters 2008}

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Major Markets

25 2.0 5.4 2.8 2.1 6.6 7.4 6.4 4.4 -12.1 3.3 2.3 1.6 -15 -10 -5 0 5 10 Chicago, IL New York, NY Phoenix, AZ San Diego, CA San Francisco/San Mateo, CA

Top 25 US Markets All Other US Markets

Berlin Hong Kong SAR Dubai London Rio de Janeiro

Key 10 Global Markets

ADR Percent Change (Local Currency) December 2008 YTD

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-4.7 -0.1 -3.8 -4.4 -2.1 -3.7 -5.2 -1.6 3.8 -11.2 -1.8 -6.0 -12 -10 -8 -6 -4 -2 0 2 4 6 Chicago, IL New York, NY Phoenix, AZ San Diego, CA San Francisco/San Mateo, CA

Top 25 US Markets All Other US Markets

Berlin Hong Kong SAR Dubai London Rio de Janeiro

Key 10 Global Markets

Occupancy Percent Change December 2008 YTD

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Global OCC Declines

-5 -4 -3 -2 -1 0 1 2 3 4 5 2005 2006 2007 2008 Total US Demand Resort Demand

Total US vs. Resort Locations

Demand Percent Change

Resort Demand Drops Faster / More Steeply

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U.S. Lodging Industry

Projections

As of January 2009

29

Total US Industry

Consecutive Quarterly Declines

Key Indicators

1990/1991

2001/2002 Current

---

---• Room Demand

3 5 4

• Occupancy

7

6

5 • Average Daily Rate

0 5 1

• RevPAR

5 5 2

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Total United States

Active Development Pipeline – Thousand of Rooms Change From Last Year

Source: STR / TWR / Dodge Construction Pipeline

1.7% 740 756 Total 12.4% 124 140 Pre-Planning -0.4% 616 613 Active Pipeline 6.0% 320 339 Planning 5.4% 84 89 Final Planning -12.6% 212 185 In Construction % Change December 2007 December 2008 Phase 31

Under Construction Pipeline Is Shrinking

Total United States

Abandoned Rooms

Year-over-year percent change

56% 75% 34% 70% 31% 17% 16% 10% 30% 50% 70% 90%

Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08

32

Source: STR / TWR / Dodge Construction Pipeline

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1.0 1.2 1.9 1.0 1.4 1.5 2.7 2.4 0.2 1.3 0.4 -0.1 -1.6 2.8 0.5 -1.6 1.3 4.0 -3 -2 -1 0 1 2 3 4 5 2003 2004 2005 2006 2007 2008 2009P 2010P 20 Yr Average Supply % Chg Demand % Chg

Total United States

Supply/Demand Percent Change 2003 – 2010P

33 0.4 _0.2 0.3 -4.2 -0.2 3.6 2.9 -4.0 -5 -4 -3 -2 -1 0 1 2 3 4 5 2003 2004 2005 2006 2007 2008 2009P 2010P

Total United States

Occupancy Percent Change 2003 – 2010P

20 Year Average: -0.4%

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Total United States

Occupancy Percent 2003 – 2010P 59.2 61.4 63.1 63.3 63.1 60.4 58 58.1 50 60 70 2003 2004 2005 2006 2007 2008 2009P 2010P

35 5.5 -2.0 2.4 4.2 6.2 2.4 0.2 7.5 -3 -1 1 3 5 7 2003 2004 2005 2006 2007 2008 2009P 2010P

Total United States

ADR Percent Change 2003 – 2010P

20 Year Average: 3.5%

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7.8 2.4 -5.9 5.7 -1.9 8.5 7.9 0.5 -10 -5 0 5 10 2003 2004 2005 2006 2007 2008 2009P 2010P

Total United States

RevPAR Percent Change 2003 – 2010P

20 Year Average: 3.4%

37 85.22 83.99 86.24 90.90 103.91 97.31 82.86 82.75 87.64 89.03 91.06 93.48 96.65 99.77 85.22 102.76 80 90 100 110 2000 2001 2002 2003 2004 2005 2006 2007 Nominal ADR Yr 2000, Grown by CPI

If year 2000 ADR had increased by CPI each year…

It took 6 years to recover from Rate Reductions in 2001