US LODGING INDUSTRY OVERVIEW Jan D. Freitag Vice President SMITH TRAVEL RESEARCH
Agenda Total US Overview Scales and Major Markets Pipeline Projections
U.S. Lodging Industry - Key Statistics June 2008 YTD (Prelim) % Change Hotels 49,672 2.0% Room Supply 4.5mm 2.2% Room Demand 2.7mm - 0.4% Occupancy 61.5% -2.6% A.D.R. $107.62 4.3% RevPAR $66.15 1.6% Room Revenue $54.3B 3.9%
Total United States Room Supply/Demand Percent Change Twelve Month Moving Average 1989 to May 2008 6 5.1% 4.0% 4.2% 4 1.8% 2 0-2 -4-6 0.6% Supply % Change Demand % Change -4.8% 1.0% 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 A Year Ago Fundamentals Were Worse
Total United States Occupancy/ADR Percent Change Twelve Month Moving Average 1989 to May 2008 10 8 6 4 2 0-2 -4-6 -8 6.8% 7.6% Occ % Chg ADR % Chg 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 5.4% -0.7% ADR Growth Is Slowing. But Not Dropping Rapidly
Total United States Room Rate Percent Change Jan 2003 May 2008 10 5 0-5 2003 2004 2005 2006 2007 JFMAM Summer Rate Growth Will Be Closely Watched
Total U.S. Occupancy and ADR Percent Change YTD through 7/5 10% May YTD 6/7 6/14 6/21 6/28 7/5 7/12 5% 0% 1.8% 4.5% 4.0% 3.0% 3.3% 5.4% 4.7% 0.6% -5% -2.2% -2.0% -3.9% -3.4% -5.8% -10% -9.6% -15% Occupancy %Chg ADR %Chg July 4 th Timing Helped and Hurt
Chain Scales and Major Markets
Chain Scales Supply/Demand Percent Change May 2008 YTD 10 5 3.3 3.3 1.7 1.9 5.8 3.6 5.0 2.2 2.2 0-5 Supply Demand -2.6-6.1-1.2-10 Luxury Upper Upscale Upscale Mid w F&B Mid wo F&B Economy Healthy Demand Growth, Except in Two Scales
10 Chain Scales Occupancy/ADR Percent Change May 2008 YTD Occupancy ADR 5 3.2 3.2 3.3 4.5 5.0 2.4 0-5 -1.5 Luxury -1.4 Upper Upscale -2.2-2.5-3.5-3.3 Upscale Mid w F&B Mid wo F&B Economy Rate Growth Around / Above Inflation Except for Economy Segment
8 Chain Scale ADR Percent Change Twelve Month Moving Average January 2008 To May 2008 4 0 Luxury Upper Upscale Upscale Mid With Mid W/O Economy Upper End Scales See ADR Deteriorate But at a High Level
Key 15 Markets Occupancy Percent Change May 2008 YTD Year over Year -8.2-4.5-4.4-3.8-3.2-2.4-2.2-2.2-2.0-1.4-1.0 0.1 0.4 1.4 1.5 1.8 1.9 Phoenix, AZ Philadelphia, PA-NJ Atlanta, GA Dallas, TX Chicago, IL Los Angeles-Long Beach, CA All Other Markets Total United States Top 25 Markets Washington, DC-MD-VA San Diego, CA New York, NY Orlando, FL Oahu Island, HI Boston, MA Miami-Hialeah, FL San Francisco/San Mateo, CA -10-8 -6-4 -2 0 2 4 Coastal OCC Holds So Far
Key 15 Markets ADR Percent Change May 2008 YTD Year over Year New York, NY Chicago, IL San Francisco/San Mateo, CA Phoenix, AZ Philadelphia, PA-NJ Boston, MA Los Angeles-Long Beach, CA Top 25 Markets Oahu Island, HI Total United States Dallas, TX San Diego, CA All Other Markets Washington, DC-MD-VA Orlando, FL Atlanta, GA Miami-Hialeah, FL 1.8 2.3 2.7 3.4 4.8 4.5 4.3 3.9 3.9 5.9 5.8 5.7 5.5 5.3 6.5 7.3 7.7 0 4 8 Strong Rate Growth Bodes Well for The Summer
Exchange Rate Impact on 2007 ADR % Change ADR $ % Change Currency % Change Atlanta, GA 12.7% Euro 3.4% Boston, MA 6.3% Euro -2.5% New York, NY 10.6% Euro 1.4% Orlando, FL -0.7% Euro -8.9% Washington, DC-MD-VA 3.7% Euro -4.8% Los Angeles-Long Beach, CA 9.0% Yen 4.0% Oahu Island, HI 7.4% Yen 2.5% San Diego, CA 2.9% Yen -1.9% San Francisco/San Mateo, CA 5.7% Yen 0.8% America Is On Sale!
U.S. Pipeline
Total United States Room Supply Percent Change Jan 2003 May 2008 3.0 2.5 2.0 1.5 1.0 0.5 0.0-0.5 2003 2004 2005 2006 2007 JFMAM Summer Will See More Supply Increases
Total United States Active Development Pipeline (Thousands of Rooms) Change From Last Year Phase May 2008 May 2007 Difference % Change In Construction 206 189 + 17 9.3% Final Planning 106 50 + 56 112.3% Planning 359 302 + 57 19.0% Active Pipeline 672 541 + 131 24.2% Pre-Planning 159 94 + 64 67.9% Total 831 636 + 195 30.7% U/C Rooms Off The High of Dec. 2007 Source: STR / TWR / Dodge Construction Pipeline
60 50 40 Total United States Rooms In Construction by Scale In Thousands May 2008 58.8 52.1 43.9 30 20 23.9 10 7.3 9.3 11.3 0 Luxury Upper Upscale Upscale Mid w F&B Mid w/o F&B Economy Unaffiliated Source: STR / TWR / Dodge Construction Pipeline Development is in Growth Scales
Markets with Highest Construction Activity May 2008 Market # Rooms % of Existing Supply Las Vegas 19,212 12.5 New York 9,108 10.9 Orlando 5,133 4.5 Phoenix 4,622 8.5 Washington, DC 4,598 4.8 Chicago 4,454 4.3 LA-Long Beach, CA 3,801 4.1 Source: STR / TWR / Dodge Construction Pipeline The Usual Suspects
Projections
Total United States Estimated Revenue and Profitability Years 1997-2007 160 140 Revenue GOP Income 133.4 139.4 50% 120 100 80 40.3% 40.2% 93.1 85.6 102.9 39.2% 112.1 40.9% 103.5 102.6 37.1% 105.3 113.7 35.7% 35.0% 36.6% 122.7 38.8% 41.3% 41.3% 45% 40% 60 35% 40 20 17.0 20.9 22.1 22.5 16.2 14.2 12.8 16.7 22.6 26.6 28.0 30% 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 25%
Total U.S. Hotel Rooms Sold vs. GDP Change Quarterly Change 1988 to Q1 2008 6 8 5 GDP % Chg Demand % Chg 6 4 4 3 2 2 0 1-2 0-4 -1-6 -2 1989q1 1992q1 1995q1 1998q1 2001q1 2004q1 2007q1-8
5 Total U.S. Supply/Demand Percent Change 2002 2009P 4 3 2 1 0 Supply % Chg 4.0 Demand % Chg 1.6 1.3 1.0 0.3 0.4-0.1 2.8 0.5 0.2 2.4 2.4 1.41.2 1.3 1.0 1.9 1.8-1 2002 2003 2004 2005 2006 2007 2008P 2009P 20 Yr Average
4 Total U.S. Occupancy Percent Change 2002 2009P 3.6 3 2.9 2 1 0 0.3 0.4 20 Year Average: -0.1% -0.2-1 -2-1.2-1.4-1.1 2002 2003 2004 2005 2006 2007 2008P 2009P
Total US Occupancy Percent 2002 2009P 70 61.4 63.1 63.3 63.2 62.3 61.6 60 59.0 59.2 50 2002 2003 2004 2005 2006 2007 2008P 2009P
7 5 3 Total U.S. ADR Percent Change 2002 2009P 20 Year Average: 3.5% 7.4 5.9 5.5 4.2 4.4 4 1-1 -1.5 0.1-3 2002 2003 2004 2005 2006 2007 2008P 2009P
10 Total U.S. RevPAR Percent Change 2002 2009P 7.9 8.5 7.5 5 5.7 20 Year Average: 3.4% 3 2.8 0 0.5-2.7-5 2002 2003 2004 2005 2006 2007 2008P 2009P
2008 Lodging Industry Takeaways Accelerating Supply Growth Pipeline Attrition? Slowing Economy = Slower Demand Growth Top Markets may outperform Weak Dollar = U.S. Bargain Leisure feels greater impact than business? Revenue Management Discipline?