resort conference march 21 st, 2006 jan d. freitag, vp smith travel research

Resort ConferenceMarch 21st, 2006

Jan D. Freitag, VP

SMITH TRAVEL RESEARCH

Agenda

• Total US Overview

• Resort Locations

• Destination Resorts

• Condo Hotels

• Total US Projections

Total United StatesEstimated Revenue and ProfitabilityYears 1999 – 2005P

Life is good !

102.9

112.1

103.5 102.6105.3

123

22.1 22.516.2 14.2 12.8

16.720.8

113.7

39.2%

40.9%

37.1%

35.7%35%

36.6%37.5%

0

20

40

60

80

100

120

140

1999 2000 2001 2002 2003 2004 2005P25%

30%

35%

40%

45%

50%Revenue Income GOP

U.S. Lodging Industry - Key StatisticsLatest 12 Months - January 2006

% Change• Hotels 47,735 0.6%• Rooms 4.4mm 0.3%• Occupancy 63.3% 2.9%• A.D.R. $91.28 5.5%• RevPar $57.76 8.6%• Room Revenue $94B 9.0%

-6

-4

-2

0

2

4

6

1989 1991 1993 1995 1997 1999 2001 2003 2005

Supply % Change

Demand % Change

Total United StatesRoom Supply/Demand Percent ChangeTwelve Month Moving Average – 1989 to January 2006

Cyclicality Clearly Visible – Recent S/D Imbalance Spells Opportunity

0.3%

3.3%

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

1989 1991 1993 1995 1997 1999 2001 2003 2005

Occ % Chg

ADR % Chg

Total United StatesOccupancy/ADR Percent ChangeTwelve Month Moving Average – 1989 to January 2006

Divergence

Divergence?

If History Repeats Itself, Strong ADR Gains are Here to Stay

50

60

70

80

90

100

1989 1991 1993 1995 1997 1999 2001 2003 2005

Occupancy ADR

Total United StatesOccupancy Percent, Average Daily Rate, RevPARTwelve Month Moving Average – 1989 to January 2006

$86.36

$91.28

64.9%63.3%

Robust OCC and ADR Gains post 9/11

STR Chain ScalesSelected chains from each segment

• Luxury – Four Seasons, Ritz Carlton, Fairmont, W Hotels

• Upper Upscale – Doubletree, Hilton, Hyatt, Sheraton

• Upscale – Hilton Garden Inn, Courtyard, Crowne Plaza, Radisson

• Mid with F&B – Holiday Inn, Ramada, Best Western, Quality Inn

• Mid no F&B – Comfort Inn, HI Express, Country Inns & Suites

• Economy – Motel 6, Days Inn, ESA, Travelodge, Ramada Limited

-0.1

1.1 1.3

-2.6

1.2

0.0

3.8 3.6 3.7

0.6

5.0

3.6

-5

0

5

10

Luxury UpperUpscale

Upscale Mid w F&B Mid wo F&B Economy

SupplyDemand

Chain ScalesSupply/Demand Percent ChangeTwelve Months Ended January 2006

Business Traveler Drives Demand for Big Boxes

4.03.6

7.37.0

7.7 7.8

4.03.6

2.5 3.32.5

5.2

0

5

10

Luxury UpperUpscale


OccupancyADR

Chain ScalesOccupancy/ADR Percent Change Twelve Months Ended January 2006

Above Inflation Rate Growth Across all Chain Scales

11.3 10.911.7

5.9

13.1

7.88.79.7

11.810.2

11.4

7.8

0

10

20

Luxury UpperUpscale


RevPARRoom Revenue

Chain ScalesRevPAR/Room Revenue Percent Change Twelve Months Ended January 2006

Life is Good!

Agenda




• Condo Hotels


Resort Locations Key Statistics12 Month Moving Average January 2006

% Change• Hotels 3,890 -2.5%• Room Nights 214.6 m -1.8%• Demand 143.3 m -0.8%• Occupancy 66.7% 1.1%• ADR $127.06 6.0%• RevPAR $85.11 7.1%• Room Rev $18.3 b 5.2%

-10

-8

-6

-4

-2

0

2

4

6

8

1989 1991 1993 1995 1997 1999 2001 2003 2005

Supply % Change

Demand % Change

Resort LocationsRoom Supply/Demand Percent ChangeTwelve Month Moving Average – 1989 to January 2006

Supply Increase Used to be Somewhat Constant – Until 9/11

-0.8%

-1.8%

-10

-8

-6

-4

-2

0

2

4

6

8

1989 1991 1993 1995 1997 1999 2001 2003 2005

Demand % Change

Resort LocationsRoom Demand Percent Change PeaksTwelve Month Moving Average – 1989 to January 2006

Demand Peaks Every 48 months – Or Does it?

48 months 48 months 42 months

-10

-8

-6

-4

-2

0

2

4

6

8

1989 1991 1993 1995 1997 1999 2001 2003 2005

Occ % Chg

ADR % Chg

Resort LocationsOccupancy/ADR Percent ChangeTwelve Month Moving Average – 1989 to January 2006

Despite Decreasing OCC Growth, ADR Growth Should be Here to Stay

50

60

70

80

90

100

110

120

130

1989 1991 1993 1995 1997 1999 2001 2003 2005

OccupancyADR

Resort LocationsOccupancy Percent, Average Daily RateTwelve Month Moving Average – 1989 to January 2006

July 1997: 69.1%

OCC & ADR Rebound after 9/11 – but OCC still has a way to go

July 2001: $115

Jan 2006: $127

Jan 2006: 66.7%

ResortsDay of Week Analysis – Occupancy 2003 - 2005

54.2%

57.2%

60.2%

62.0%

63.6%

72.4%

76.0%

57.7%

63.9%65.4%

67.1%

61.1%

64.9%

66.6%67.8%

75.2%

78.3%

60.7%

78.4%

75.1%

57.5%

50%

55%

60%

65%

70%

75%

80%

Sun Mon Tue Wed Thu Fri Sat

200320042005

Nice Increases Midweek - but Have Weekends Peaked?

ResortsDay of Week Analysis – ADR 2003 - 2005

$113.20

$111.22 $111.07$112.37 $112.41

$113.92

$115.71

$118.63

$115.50 $115.95

$117.87

$126.76

$124.11 $124.02$125.68

$128.77

$131.71

$115.99

$122.27$120.85

$123.63

$100

$105

$110

$115

$120

$125

$130

$135


200320042005

~$8 Rate Growth Across the Board – a Good Sign for 2006

ResortsGroup vs. Transient ADR 2003 - 2005

$166.95$172.02$168.48

$172.92

$201.73

$183.02

$50

$100

$150

$200

Group Transient

2003 2004 2005

Group Rate Growth Lags Transient Rate Growth

ResortsDay of Week ADR - Group 2003 - 2005

$170.38

$166.79

$165.50$164.86

$166.54 $166.72

$168.67

$172.14

$166.81$166.17

$168.44

$177.00

$173.17

$171.77

$172.74

$171.56

$173.48

$168.49

$170.50

$167.69

$171.87

$160

$162

$164

$166

$168

$170

$172

$174

$176

$178


2003 2004 2005

2005 vs 2004: Moderate Daily Rate Growth (~3%) For Groups

ResortsDay of Week ADR – Transient2003 - 2005

$173.38

$170.34 $169.63

$172.37 $171.98 $172.54 $173.40

$183.55

$178.87$180.01

$184.33

$201.10

$197.95 $197.74

$202.25

$205.39$207.52

$179.73

$185.72$187.03

$197.50

$160

$170

$180

$190

$200

$210


2003 2004 2005

2005 vs 2004: Healthy Rate Increases Across All Days (~10%)

Agenda




• Condo Hotels


Destination Resort Key Statistics12 Month Moving Average January 2006

% Change• Hotels 317 1.0 %• Room Nights 57.7m - 0.5 %• Demand 38.8 m 1.2 %• Occupancy 67.3% 1.7 %• ADR $182.98 6.3 %• RevPAR $123.14 8.1 %• Room Rev $7.1 b 7.6 %

0.7% of US Hotel Supply generates 7.6 % of US Rooms Revenue

-10

-8

-6

-4

-2

0

2

4

6

8

10

1989 1991 1993 1995 1997 1999 2001 2003 2005

Supply % Change

Demand % Change

Destination ResortsRoom Supply/Demand Percent ChangeTwelve Month Moving Average – 1989 to January 2006

Segment Always Attracts New Supply – Except in the Most Recent Past

1.2%

-0.5%

-12-10

-8-6-4-202468

10

1989 1991 1993 1995 1997 1999 2001 2003 2005

Occ % Chg

ADR % Chg

Destination ResortsOccupancy/ADR Percent ChangeTwelve Month Moving Average – 1989 to January 2006

Above 6% Rate Growth Lasts Not Forever… But for Now

0

25

50

75

100

125

150

175

200

1989 1991 1993 1995 1997 1999 2001 2003 2005

OccupancyADR

Destination ResortsOccupancy Percent, Average Daily RateTwelve Month Moving Average – 1989 to January 2006

Still Room For Improvement Post 9/11 in Both Measures

May 1997: 70.6%

July 2001: $171

Jan 2006: $182

Jan 2006: 67.3%

50

55

60

65

70

75

80

January February M arch April M ay June July August Septem ber October Novem ber Decem ber

20002005

Destination ResortsMonthly Occupancy2000 vs. 2005

In the Off Season, Year 2000 Still Is the Benchmark To Beat

76.8%75.8%

130

140

150

160

170

180

January February M arch April M ay June July August Septem ber October Novem ber Decem ber

20002005

Destination ResortsMonthly ADR2000 vs. 2005

December Rate Differential Still $6

-$6

+$14

Destination ResortsDay of Week Analysis – Occupancy 2003 - 2005

54.7%

59.1%

62.4%

64.2%65.5%

71.0%

74.3%

66.7%67.9%

69.0%

58.8%

64.0%

68.2%69.5%

70.3%

74.3%

77.0%

58.9%

63.3%

77.1%

74.1%

50%

55%

60%

65%

70%

75%

80%


200320042005

Strong “Long Weekends” (Thu – Sat) But Have Fr/Sat Reached Their Peak?

Destination ResortsDay of Week Analysis – ADR 2003 - 2005

$145.74

$142.07$141.13

$142.44$143.62 $143.45

$144.43

$148.91

$143.75 $144.08

$147.31

$157.19

$153.11$152.18

$155.05

$156.61

$145.04

$148.75$148.19

$158.63

$151.83

$130

$135

$140

$145

$150

$155

$160


200320042005

Second Part of the Cycle: Rate Increase ‘04/’03: 2% - Rate Increase ‘05/’04: 6%

Agenda




• Condo Hotels


Definitions

• Condo Hotel Rooms:Rooms placed in Rental Pool

• Residences:Rooms not placed in Rental Pool

Total U.S.Summary of Condotel Pipeline – March 2006

Source: STR Condotel Pipeline, part of the STR / TWR / Dodge Construction Pipeline

229 Projects with a total of 98,142 reported* rooms

Rooms are broken out as follows ( % of total):

• Hotel Rooms: 34,166 35%

• Condo Hotel Rooms: 48,678 50%

Total Affecting Nightly Room Supply: 82,844 85%

• Non-rental Residences: 13,938 14%

• Timeshare Rooms: 1,360 1%

* Some projects have not yet reported room counts

Total U.S.Top 10 Condotel MSAsMarch 2006

28,288

11,576

10,084

6,880

3,712 3,699 3,215 3,073 2,911 2,672

0

5,000

10,000

15,000

20,000

25,000

30,000

Las Vegas Miami - FortLauderdale

Non-MSA Orlando NYC / NJ Chicago Tampa / ST.Pete

Myrtle Beach Boston San Diego

59.2

61.363.1

52.7

56.0

59.4

63.4

66.9 67.6

40

45

50

55

60

65

70

2003 2004 2005

Total US

CondoHotels

Destination Resorts

Annual Occupancy 2003 - 2005Total US vs. Condo Hotels vs. Destination Resorts

%

$82.86 $86.24$90.83

$168.44

$179.26

$194.18

$148.77 $151.85$158.68

40

60

80

100

120

140

160

180

200

220

2003 2004 2005

Total US

CondoHotels

Destination Resorts

Annual ADR 2003 - 2005Total US vs. Condo Hotels vs. Destination Resorts

$

Condotel:Data Reporting Topics• Reporting Availability

Static vs. Fluctuating Rooms Available

• Reporting Rooms SoldIssue: Owner Occupied, Non-Revenue Generating Rooms

• Reporting Rooms RevenueThe Rule: No Restatements after 120 days

• Comp Set IssuesChoosing a Condotel in your Comp Set will likely do more harm than good

Agenda




• Condo Hotels


Lodging Industry Issues

• Supply Growth Remains Benign – Construction Costs, Condo Conversions

• Higher Operating Costs – Insurance, Labor, Amenities, Energy

• Solid Demand Growth – Degrees of Good, Some Not So Good

• Changing Demand – Experience Travel, Baby Boomers

• Occupancy Growth Slows – Varies Widely by Market

• Aggressive Pricing – Could Double CPI, Control of Internet Pricing

• Transportation Problems – Troubled Airlines, Gasoline, Infrastructure

• Higher Industry Profits – More Difficult for each Property

• Global Issues – Terrorism, Bird Flu, Currency Fluctuations

• Outlook – Great ‘till ‘08?

U.S. Economic OutlookBlue Chip Economic Indicators – March 2006

2005A 2006F 2007F

Real GDP +3.6% +3.4% +3.0%

CPI (= Inflation) +3.4% +2.9% +2.4%

Corporate Profits + 17.1% +9.5% +4.6%

Disp Personal Income +1.5% +3.5% +3.2%

Unemployment Rate 5.1% 4.8% 4.7%

1.6

3.1

0.4

1.21.1

0.6

4.2

3.3

0.3

1.4

0

1

2

3

4

5

2002 2003 2004 2005 2006P

Supply % Chg

Demand % Chg

Total United StatesSupply/Demand Percent Change2002 – 2006P

2.9

3.6

0.3

1.9

-1.2

-2

-1

0

1

2

3

4

2002 2003 2004 2005 2006P

Total United StatesOccupancy Percent Change2002 – 2006P

59 59.2

63.1

61.3

64.3

55

60

65

70

2002 2003 2004 2005 2006P

Total United StatesOccupancy Percent2002 – 2006P

4.1

5.3

-1.5

6.0

0.1

-2.0

0.0

2.0

4.0

6.0

8.0

2002 2003 2004 2005 2006P

Total United StatesADR Percent Change2002 – 2006P

Total United StatesReal Room Rates – (Base Year = 2000)

Year End 2000 - 2005

$81.73

$78.63

$80.43$79.28

$85.31

$77.62

75

80

85

90

2000 2001 2002 2003 2004 2005

Total United StatesNominal Room Rates2000 – 2006P

85.2283.99

86.24

90.83

96.28

101.75

82.8682.75

75

80

85

90

95

100

105

2000 2001 2002 2003 2004 2005 2006P

If Yr. 2000 Rate Had Grown at 3% over 6 years:

8.48.07.8

0.4

-2.7

-10.0

-5.0

0.0

5.0

10.0

2002 2003 2004 2005 2006P

Total United StatesRevPAR Percent Change2002 – 2006P

Thank You for Your Attention!

[email protected]

www.smithtravelresearch.com

resort conference march 21 st, 2006 jan d. freitag, vp smith travel research

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