Midwest Lodging Investors Summit U.S. Hotel Industry Overview

Jeff Higley VP/Editorial Director

STR/HotelNewsNow.com

www.hotelnewsnow.com Click on “Hotel Data Presentations”

(free registration required)

3

Supply / Demand Drive Results. Pricing Power Is Back (?)

% Change

• Room Supply* 727 mm 0.3%

• Room Demand* 430 mm 3.5%

• Occupancy 59% 3.2%

• ADR $104 4.2%

• RevPAR $62 7.5%

• Room Revenue* $45 bn 7.9%

YTD May 2012, Total US Results * All Time High

4

YTD May 2012:

Highest Demand - EVER

(430 Million Rooms Sold)

5

-8

-4

0

4

8

1990 2000 2010

Supply Demand

Demand Growth Expected To Revert To Mean. Supply Not An Issue

-6.9%

-0.9%

- 4.7%

*Total US, Supply & Demand % Change, 12 MMA 1990 – 5/2012

8.0%

4.0%

6

-10

-5

0

5

1990 2000 2010

Demand ADR

ADR Rebound Trajectory Flattens Out (Too?) Early

-6.9%

-4.7%

-0.9%

-4.6%

-0.2%

-8.7%

4.0%

*Total US, ADR & Demand % Change, 12 MMA 1990 – 5/2012

7

2000 2002 2004 2006 2008 2010 2012F

Nominal ADR

2000 / 2007 Grown by CPI

2000 ADR Grown By CPI

* Total US, ADR $ and Inflation Adjusted ADR $, 2000 – 2013F 2000 – 2010 CPI from bls.gov, 2011 – 2013 CPI from Blue Chip Economic Indicators

$85

$101

$104

$85

$107 $109

$107

$117

2013F

Inflation Adjusted ADRs Well Out Of Reach

2007 ADR Grown By CPI

8

3.1

2.6

3.9

2.9

4.1

3.7

4.0

3.5

4.2 4.0

4.4

3.5

4.2 4.1 3.9

3.7 3.6

Jan-11 Jul-11 Jan-12

* Total US, ADR $ % Change, by Month, 1/11 – 5/12

ADRs Are Growing (But Comps Get More Difficult)

9

Chicago & Regional Markets

10

Chicago - Key Performance Statistics May YTD 2012

% Change

• Hotels 716

• Rooms 108k -0.4%

• Rooms Sold 10 million 6.0%

• Occupancy 60.5% 6.4%

• ADR $113.74 5.7%

• RevPAR $68.77 12.5%

• Room Revenue $1.1 billion 12.1%

11

30

40

50

60

70

80

J F M A M J J A S O N D

20 Yr Avg 2012

Chicago Occupancy Seasonality 20 Year Average vs. 2012 May YTD

2008 Smith Travel Research, Inc.

76.3 % - 20 Year June Average

64.6% - 20 year average annual occupancy

12

-15

-10

-5

0

5

10

15

2000 2002 2004 2006 2008 2010 2012

Supply % Change

Demand % Change

Demand Returning to Sustainable Levels – Supply Flat

4.2%

-9.3%

Total Chicago Market Twelve Month Moving Average 2000 thru May 2012

13

-20

-15

-10

-5

0

5

10

15

2000 2002 2004 2006 2008 2010 2012

Occ % Chg

ADR % Chg

Total Chicago Market Occupancy/ADR Percent Change Twelve Month Moving Average – 2000 to May 2012

-7.2%

4.7%

4.6%

-13.4%

-12.4%

-15.0%

14

5.9

5.3

11.5

8.0

6.4

15.0

0

5

10

15

20

Occ ADR RevPAR

Weekday Weekend

Chicago Weekday / Weekend Percent Change May YTD 2012

Weekends = Friday / Saturday

15

$90

$100

$110

$120

$130

$140

2000 2002 2004 2006 2008 2010 2012

60 Months

44 Months

Chicago ADR, 12 MMA, Jan ’00 – May 2012

Chicago ADR Recovery - 2 Years Away?

-$10.56

-$23.42

16

Chicago Quarterly RevPAR Percent Change: 2010 – 1Q 2012

-6.4

11.9 13.0 13.0

12.0

10.1

6.6 8.3

14.5

10.4

-10

-5

0

5

10

15

20

1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 2Q 11 3Q 11 4Q 11 1Q 12 Apr-May

17

38.3

16.9

13.7

12.8

11.4

3.5 4.0

UPPER UPSCALE

UPSCALE

INDEPENDENT

LUXURY

UPPER MIDSCALE

MIDSCALE

ECONOMY

Chicago Chain Scales - Revenue Share (%) Twelve Months Ending May 2012

Annual Chicago revenue room = $2.9 billion

18

5.5

3.3 2.9

6.9

3.8

1.1

6.5

3.1

5.6

4.8

0.9

3.8

0

5

10

Luxury Upper Upscale

Upscale Upper Mid Midscale Economy

Occupancy ADR

Chicago Chain Scales Occupancy/ADR Percent Change First Quarter 2012

19

Key Regional Markets: Occupancy May YTD 2012

% Change

• Chicago 60.5% 6.4%

• Cincinnati 52.8% 2.3%

• Cleveland 54.9% 6.8%

• Columbus 59.2% 4.6%

• Detroit 57.5% 3.0%

• Indianapolis 58.4% 8.8%

• Kansas City 53.9% 2.1%

• Memphis 61.0% 6.9%

• Milwaukee 54.0% 1.8%

• Minneapolis 58.2% -0.2%

• Nashville 64.8% 10.6%

• St. Louis 57.2% 4.6%

20

Key Regional Markets: ADR May YTD 2012

% Change

• Chicago $113.74 5.7%

• Cincinnati $83.93 2.0%

• Cleveland $87.29 3.8%

• Columbus $84.95 5.0%

• Detroit $79.25 2.9%

• Indianapolis $98.01 15.5%

• Kansas City $83.94 5.2%

• Memphis $78.22 3.6%

• Milwaukee $88.42 4.4%

• Minneapolis $94.70 3.8%

• Nashville $95.38 3.9%

• St. Louis $84.79 5.1%

21

Key Regional Markets: RevPAR May YTD 2012

% Change

• Chicago $68.66 12.5%

• Cincinnati $44.33 3.3%

• Cleveland $47.90 10.8%

• Columbus $50.27 9.8%

• Detroit $45.53 6.0%

• Indianapolis $57.22 25.6%

• Kansas City $45.28 7.4%

• Memphis $47.68 10.8%

• Milwaukee $47.76 6.4%

• Minneapolis $55.14 3.6%

• Nashville $61.76 14.9%

• St. Louis $48.51 9.9%

22

Chicago Sub Markets

23

24

-2.5

0.4

-1.8 -2.4

0.2 0.3

1.5

0.0 -0.3

7.0

2.0

3.9

10.0

7.1 6.1

10.1

-5

0

5

10

15

North Northwest OHare Dupage County

South Downtown Lake County

Southwest

Supply Demand

Chicago Sub Markets Supply/Demand Percent Change May YTD 2012

25

2.2

6.6

3.8

6.5

9.8

6.8

4.5

10.2

6.3

2.8

4.7

5.7

2.3

6.6 5.8

2.0

0

5

10

15

North Northwest OHare Dupage County

South Downtown Lake County

Southwest

Occupancy ADR

Chicago Sub Markets Occupancy/ADR Percent Change May YTD 2012

26

53.4

55.4

56.8

57.1

58.7

59.0

63.2

65.9

40 50 60 70

Northwest

Southwest

Lake County

DuPage County

South

North

OHare

Downtown

Chicago Sub Markets Occupancy Percent May YTD 2012

27

$74.33

$75.48

$75.57

$85.36

$86.89

$91.04

$100.71

$160.75

$50 $75 $100 $125 $150 $175

South

Northwest

Southwest

Lake County

DuPage County

North

Ohare

Chicago Downtown

Chicago Sub Markets ADR May YTD 2012

28

Chicago Projections

29

Chicago Pipeline Outlook – Construction and Final Planning May 2012

Phase May 2012

In Construction 1,438

Final Planning 1,755

Active Pipeline 3,193

• Current Stock: 107,647 Rooms • Earliest new supply is scheduled for June 2013 (Hyatt McCormick 460-room tower) • Flat supply for next 12 months

30

-0.2

3.7 4.0 4.7

8.8

-0.2

3.4 3.6

4.9

8.6

1.2

2.8

1.5

4.1

5.7

-5

0

5

10

Supply Demand Occ ADR RevPAR

2011 2012 F 2013 F

Chicago Key Performance Indicators Percent Change Full Year 2011 Actual & 2012 / 2013 Forecast

31

Chicago Occupancy Percent Full Year Actual 2007 – 2011 / 2012 & 2013 Forecast

67.5

63.1

56.2

61.7

64.2

66.5 67.5

55

60

65

70

75

2007 2008 2009 2010 2011 20012F 2013F

32

$129.75 $132.20

$113.50 $112.82

$118.11

$123.80

$128.89

$75

$100

$125

$150

2007 2008 2009 2010 2011 2012F 2013F

Chicago

Average Daily Rate Full Year Actual 2007 – 2011 / 2012 & 2013 Forecast

33

U.S. Markets

34

Top 25 26 - 50 51 - 75 76 - 94

Top 94 Metro Markets By Size

Orlando, FL

Chicago, IL

Washington, DC-MD-VA

New York, NY

Los Angeles-Long Beach, CA

Atlanta, GA

Dallas, TX

Houston, TX

Phoenix, AZ

San Diego, CA

Anaheim-Santa Ana, CA

San Francisco/San Mateo, CA

Boston, MA

Miami-Hialeah, FL

Tampa-St Petersburg, FL

Philadelphia, PA-NJ

Detroit, MI

Seattle, WA

Denver, CO

St Louis, MO-IL

Norfolk-Virginia Beach, VA

Minneapolis-St Paul, MN-WI

New Orleans, LA

Nashville, TN

Oahu Island, HI

San Antonio, TX

Riverside-San Bernardino, CA

Baltimore, MD

Kansas City, MO-KS

Charlotte, NC-SC

Indianapolis, IN

Fort Worth-Arlington, TX

Knoxville, TN

Fort Lauderdale, FL

Austin, TX

San Jose-Santa Cruz, CA

Myrtle Beach, SC

Cincinnati, OH-KY-IN

Jacksonville, FL

Raleigh-Durham-Chapel Hill, NC

Portland, OR

Columbus, OH

Sacramento, CA

Oakland, CA

Pittsburgh, PA

Oklahoma City, OK

Memphis, TN-AR-MS

Richmond-Petersburg, VA

Cleveland, OH

Salt Lake City-Ogden, UT

Louisville, KY-IN

Greensboro-Winston Salem, NC

Newark, NJ

Charleston, SC

Albuquerque, NM

Birmingham, AL

Tucson, AZ

Milwaukee, WI

West Palm Beach-Boca Raton, FL

Greenville-Spartanburg, SC

Savannah, GA

Tulsa, OK

Maui Island, HI

Long Island

Daytona Beach, FL

Harrisburg, PA

Hawaii-Kauai Islands

Omaha, NE

Hartford, CT

Buffalo, NY

Scranton--Wilkes-Barre, PA

Mobile, AL

Little Rock, AR

Fort Myers, FL

Albany/Schenectady, NY

Columbia, SC

Dayton-Springfield, OH

Grand Rapids, MI

Lexington, KY

Des Moines, IA

Colorado Springs, CO

Jackson, MS

Rochester, NY

Macon/Warner Robbins, GA

Bergen-Passaic, NJ

Chattanooga, TN-GA

Allentown-Reading, PA

Florida Keys

Augusta, GA-SC

Madison, WI

Melbourne-Titusville, FL

Sarasota-Bradenton, FL

Syracuse, NY

35

-10

-5

0

5

10

2002 2007 2012

Top 25 26-50 51-75 76-94

Demand Performance Distinctly Different This Time

*Metro markets by size, in 25 market increments, Demand % Change, 12 MMA 1990 – 5/2012

36

-12

-8

-4

0

4

8

12

2002 2007 2012

Top 25 26-50 51-75 76-94

ADR Swings in Top 25 Markets Most Erratic

*Metro markets by size, in 25 market increments, ADR % Change, 12 MMA 1990 – 5/2012

37

Top 25 Markets Occupancy Percent Change May 2012 YTD

-2

0

2

4

6

8

10

12

38

Top 25 Markets ADR Percent Change May 2012 YTD

-2

0

2

4

6

8

10

12

39

Top 25 Markets RevPAR Percent Change May 2012 YTD

-2 0 2 4 6 8

10 12 14 16 18

40

Chain Scale Review

41

STR Chain Scales Selected chains from each segment www.HotelNewsNow.com/chainscales.pdf

• Luxury – W Hotel, Four Seasons, Ritz Carlton

• Upper Upscale – Sheraton, Hilton, Marriott, Hyatt Regency

• Upscale – Best Western Premier, Courtyard, Hilton Garden Inn, Crowne Plaza

• Upper Midscale – Best Western Plus, Lexington, Hampton Inn, Holiday Inn, Fairfield Inn, Comfort Inn

• Midscale – Best Western, La Quinta Inns & Suites, Quality Inn, Wingate

• Economy – Americas Best Value Inn, Red Roof Inns, Days Inn, Super 8, Econolodge

42

Scales: Strong Demand Growth, Supply Not An Issue

-0.9

0.2

1.5 1.8

0.6

-0.2

2.8 3.1

4.3

5.8

3.9

1.7

Luxury Upper Upscale Upscale Upper Midscale Midscale Economy

Supply

Demand

*Supply / Demand % Change, by Scale, YTD May‘12 Upper Mid / Midscale: Same Store Basis to Account for Best Western Reclassification

43

Good Beginning to 2012

3.7

2.9 2.8

3.9

3.3

2.0

4.9

4.0 4.3

3.8

3.2

4.3

Luxury Upper Upscale Upscale Upper Midscale Midscale Economy

Occupancy

ADR

*OCC / ADR % Change, by Scale, YTD May ‘12 Upper Mid / Midscale: Same Store Basis to Account for Best Western Reclassification

44

Upper End Sells 7 out of 10 Rooms Every Night

72.5

70.5 69.6

65.6

59.0

57.0

72.1

70.1 70.3

62.2

54.3 53.9

Luxury Upper Upscale Upscale Upper Midscale*

Midscale* Economy

2007 12 Months end 5/12

*Absolute OCC %, by Scale, YE 2007 & 12 Months ending 5/12 Upper Mid / Midscale: Same Store Basis to Account for Best Western Reclassification

45

ADR Growth Is Strong – But Not Strong Enough (...yet)

$293

$159

$121

$94

$75

$54

$266

$150

$114 $95

$73

$51

Luxury Upper Upscale Upscale Upper Midscale*

Midscale* Economy

2007

12 Months end 5/12

*Absolute ADR $, by Scale, YE 2007 & 12 Months ending 5/12 Upper Mid / Midscale: Same Store Basis to Account for Best Western Reclassification

46

Segmentation Review

47

Transient Demand Breaks Records, But....

10

12.5

15

17.5

20

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2007 2011 2012

*Transient Demand in Millions of Rooms; 2007, 2011, 2012 Data is for upper tier hotels only (LUX & UU chains, & Upper Tier independents)

Mill

ion

s

48

… Transient ADR Still Lags 2007 Results

$140

$150

$160

$170

$180

$190

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2007 2011 2012

*Transient ADR $, 2007, 2011, 2012 Data is for upper tier hotels only (LUX & UU chains, & Upper Tier independents)

49

5.3

4.6

6.4

5.4

5.9

5.1 5.0

3.7

4.7 4.3

4.6

3.7 3.8 3.4

4.0

5.5

4.2

Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12

*Transient ADR % by Month, 1/11 – 5/12 Data is for upper tier hotels only (LUX & UU chains, & Upper Tier independents)

We Expect Transient ADR Growth To Continue

50

Group Demand Has Not Changed Over Time, But…

4

6

8

10

12

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Millio

ns

2007 2011 2012

*Group Demand in Millions of Rooms, 2007, 2011, 2012 Data is for upper tier hotels only (LUX & UU chains, & Upper Tier independents)

51

… Group ADRs Still Depressed (& Could Dampen Future Absolute ADRs)

$130

$140

$150

$160

$170

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2008 2011 2012

*Group ADR $, 2008, 2011, 2012 Data is for upper tier hotels only (LUX & UU chains, & Upper Tier independents)

52

2.6 2.4 2.4

0.3

3.7

2.0 2.0 1.7

3.0 2.7

3.7

-0.5

2.8 2.6

2.2

4.2

2.3

Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12

*Group ADR % by Month, 1/11 – 4/12 Data is for upper tier hotels only (LUX & UU chains, & Upper Tier independents)

Group ADR Expectation Still Depressed

53

Pipeline

54

Rooms Pipeline Still Not An Issue in 2012

Phase May 2012 May 2011 Dec 2007

In Construction 60 50 211

“Planned Pipeline” 230 261 204

Active Pipeline 290 311 415

*Total US Pipeline, in ‘000s of rooms, by Phase by Year Planned Pipeline includes projects in Final Planning and Planning phases Source: STR / McGraw-Hill Construction Dodge

55

Upscale / Upper Midscale Sees Activity

1.6

7.7

17.4 19.5

3.0 1.0

12.0

Luxury Upper Upscale Upscale Upper Midscale Midscale Economy Unaffiliated

*Rooms In Construction by Scale (‘000s), 5/12 Source: STR / McGraw-Hill Construction Dodge

56

Rooms (‘000s) With Open Dates Reported

Date 1 Year

Out 2 Years

Out 3 Years

Out 4+ Years

Out Dec-09 124 130 5 140 Dec-10 75 94 4 142 Dec-11 70 91 34 111

Developers Are Looking Three Years Out

Source: STR / McGraw-Hill Construction Dodge

57

Distribution Channels

Demand Share by Channel for Total US

9.3

15.7 13.7

8.1

53.3

10.1

16.2

12.9

8.4

52.3

10.9

17.0

13.7

9.3

49.1

0

10

20

30

40

50

60

OTA Brand.com CRS/Voice GDS Prop Direct/Other

2009 2010 2011

YTD June 2009, 2010 and 2011 (Percent of Total Room Nights)

Revenue Share by Channel for Total US

6.9

17.3 17.7

10.4

47.7

7.1

18.3 16.9

10.9

46.7

8.0

19.4 17.3

11.9

43.4

0

10

20

30

40

50

OTA Brand.com CRS/Voice GDS Prop Direct/Other

2009 2010 2011

YTD June 2009, 2010 and 2011 (Percent of Total Room Revenue)

ADR by Channel for Total US

109

128 127

89

78

97

55

99

110

127 126

87

70

90

54

97

115

128

89

75

97

56

101

50

60

70

80

90

100

110

120

130

Brand.com CRS/Voice GDS Prop Direct/Other

OTA - Merchant

OTA - Retail OTA- Opaque STAR Total

2009 2010 2011

YTD June 2009, 2010, and 2011 (in Dollars)

Channel Demand Share by Scale for US

8

18

25

14

36

8

22 24

14

32

7

22

15 15

40

7

21

10 11

52

11 15

7 5

62

11 10

3 1

76

0

10

20

30

40

50

60

70

80

90

OTA Brand.com CRS/Voice GDS Prop Direct/Other

Luxury Upper Upscale

Upscale Upper Midscale

Midscale Economy

June YTD 2011 (Percent of Total Room Nights)

Similar to Annual 2010 numbers, with some exceptions Voice & GDS high at top, OTA & Direct at bottom, Brand in up/mid

Looking ahead

63

U.S. Hotel Industry Forecast 2012 / 2013 Key Performance Indicator % Change 2012

Forecast 2013

Forecast

Supply 0.5% 1.1%

Demand 2.0% 1.8%

Occupancy 1.5% 0.7%

ADR 4.0% 4.6%

RevPAR 5.5% 5.4%

64

2012 Chain-Scale Forecast Key Performance Indicator % Change

Chain Scale

Occupancy (% chg)

ADR (% chg)

RevPAR (%chg)

Luxury +2.6% +5.1% +7.9%

Upper Upscale +1.5% +4.2% +5.7%

Upscale +2.3% +4.6% +7.1%

Upper Midscale +1.4% +4.0% +5.5%

Midscale +2.8% +1.4% +4.3%

Economy +1.4% +3.1% +4.5%

Independent +0.5% +3.5% +4.0%

Total United States 1.5% 4.0% 5.5%

*Key Performance Indicator Forecast, by Scale, 2012

65

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