Review of Hotel Development GuidelinesArlington Entertainment District

Submitted to:Arlington Convention & Visitors Bureau

January2019

Arlington, Texas

Arlington’s Hotel Supply

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LowerRatedHotels

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No. Name of Hotel Chain Scale Tier Open Date Rooms1 Nite Star Inn & Suites Independent 1.00 Jul-08 60 2 Ranger Inn & Suites Independent 1.00 Jun-98 44 3 Motel 6 Arlington Economy 2.00 Feb-95 66 4 Motel 6 Arlington Economy 2.00 Jun-81 54 5 Extended Stay America Arlington Economy 2.00 Mar-95 138 6 Extended Stay America Arlington Six Flags Economy 2.00 Sep-97 137 7 Days Inn & Suites Arlington Near Six Flags Economy 2.00 Mar-73 104 8 Days Inn Dallas Arlington Six Flags AT&T Stadium Economy 2.00 Jun-77 87 9 Howard Johnson Express Inn Arlington Ballpark Six Flags Economy 2.00 Jun-67 98

10 Rodeway Inn Arlington Economy 2.00 Jun-62 93 11 Days Inn Arlington Economy 2.00 Nov-99 50 12 Studio 6 South Arlington Economy 2.00 Apr-95 142 13 Studio 6 Arlington Economy 2.00 Jun-87 105 14 Super 8 Arlington East Economy 2.00 Jun-01 48 15 Super 8 Arlington near AT&T Stadium Economy 2.00 Mar-99 50 16 InTown Suites Arlington Economy 2.00 Nov-98 121 17 InTown Suites Six Flags Economy 1.00 Mar-98 132 18 InTown Suites Arlington I20 Economy 2.00 Dec-97 133 19 Microtel Inn & Suites by Wyndham Dallas Arlington Economy 2.00 Oct-98 45 20 Red Roof Inn Arlington Economy 2.00 Jun-72 114 21 Candlewood Suites Arlington Midscale 3.00 Aug-98 125 22 Hawthorn Suites by Wyndham Arlington DFW South Midscale 3.00 May-83 129 23 Wingate By Wyndham Arlington Midscale 3.00 Feb-98 92 24 Baymont Inn & Suites Arlington @ Six Flags Drive Midscale 3.00 May-95 94 25 La Quinta Inns & Suites Arlington North Six Flags Drive Midscale 3.00 Aug-06 178 26 Sleep Inn Arlington Near Six Flags Midscale 3.00 Jan-97 126 27 La Quinta Inns & Suites Dallas Arlington South Midscale 3.00 May-97 128 28 Quality Inn @ Arlington Highlands Midscale 3.00 Dec-85 128

Higher RatedHotels

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No. Name of Hotel Chain Scale Tier Open Date Rooms29 Fairfield Inn & Suites Arlington Near Six Flags Upper Midscale 4.00 Aug-93 101 30 Hampton Inn Suites Dallas Arlington North Entertainment DUpper Midscale 4.00 May-10 103 31 TownePlace Suites Dallas Arlington North Upper Midscale 4.00 Jan-99 94 32 Comfort Suites Arlington Upper Midscale 4.00 Feb-09 108 33 Holiday Inn Arlington Northeast Rangers Ballpark Upper Midscale 4.00 Jun-08 147 34 Hampton Inn Suites Dallas Arlington South Upper Midscale 4.00 Nov-07 98 35 Trademark Hotel Collection Lux Hotel & Spa Upper Midscale 4.00 Jun-88 192 36 DoubleTree Arlington DFW South Upscale 5.00 Mar-83 237 37 Hilton Garden Inn Dallas Arlington Upscale 5.00 Jun-09 132 38 Residence Inn Arlington Upscale 5.00 Jul-95 114 39 Springhill Suites Dallas Arlington North Upscale 5.00 Jul-98 120 40 Courtyard Dallas Arlington Entertainment District Upscale 5.00 Mar-87 147 41 Crowne Plaza Suites Arlington Ballpark Stadium Upscale 5.00 Jan-86 200 42 Four Points by Sheraton Dallas Arlington Entertainment DisUpscale 5.00 Jul-96 102 43 Homewood Suites Dallas Arlington Upscale 5.00 Feb-01 89 44 Hyatt Place Dallas Arlington Upscale 5.00 Apr-96 127 45 Courtyard Dallas Arlington South Upscale 5.00 Feb-10 103 46 Holiday Inn Express & Suites Arlington I 20 Parks Mall Upscale 5.00 Sep-95 102 47 Residence Inn Dallas Arlington South Upscale 5.00 Nov-09 96 48 Hilton Garden Inn Dallas Arlington South Upscale 5.00 Jan-17 135 49 Homewood Suites Dallas Arlington South Upscale 5.00 Dec-16 101 50 Hilton Arlington Upper Upscale 6.00 Feb-83 308 51 Sheraton Hotel Arlington Upper Upscale 6.00 Apr-85 311

3.70 Nov-93 6,088 Citywide Totals/Averages

5Citywide Hotel Supply

1 Studio 6 Arlington 18 TownePlace Suites Dallas Arlington North 35 Super 8 Arlington near AT&T Stadium2 DoubleTree Arlington DFW South 19 InTown Suites Six Flags 36 Motel 6 3 Extended Stay America Arlington 20 Holiday Inn Arlington Northeast Rangers Ballpark 37 InTown Suites Arlington4 Nite Star Inn & Suites 21 Comfort Suites Arlington 38 Motel 6 Arlington5 Wingate By Wyndham Arlington 22 Days Inn Dallas Arlington Six Flags AT&T Stadium 39 Holiday Inn Express & Suites I 20 Parks Mall6 Residence Inn Arlington 23 Courtyard Dallas Arlington Entertainment District 40 Days Inn Arlington7 Hawthorn Suites by Wyndham Arlington DFW South 24 Sheraton Hotel Arlington 41 Super 8 Arlington East8 Candlewood Suites Arlington 25 Howard Johnson Express Inn Arlington Ballpark Six Flags 42 Studio 6 South Arlington9 Hilton Arlington 26 Ranger Inn & Suites 43 InTown Suites Arlington I2010 Fairfield Inn & Suites Arlington Near Six Flags 27 Baymont Inn & Suites Arlington @ Six Flags Drive 44 Microtel Inn & Suites by Wyndham Arlington11 Crowne Plaza Suites Arlington Ballpark Stadium 28 Sleep Inn Arlington Near Six Flags 45 La Quinta Inns & Suites Dallas Arlington South12 Red Roof Inn Arlington 29 Homewood Suites Dallas Arlington 46 Courtyard Dallas Arlington South13 La Quinta Inns & Suites Arlington North Six Flags Drive 30 Hyatt Place Dallas Arlington 47 Residence Inn Dallas Arlington South14 Extended Stay America Arlington Six Flags 31 Four Points by Sheraton Entertainment District 48 Quality Inn @ Arlington Highlands15 Hampton Inn Suites North Entertainment District 32 Days Inn & Suites Arlington Near Six Flags 49 Hilton Garden Inn Dallas Arlington South16 Hilton Garden Inn Dallas Arlington 33 Rodeway Inn Arlington 50 Homewood Suites Dallas Arlington South17 Springhill Suites Dallas Arlington North 34 Trademark Hotel Collection Lux Hotel & Spa 51 Hampton Inn Suites Dallas Arlington South

Arlington Entertainment District

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Arlington Entertainment District Hotels

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No. Name of Hotel Chain Scale Tier Open Date Rooms1 Nite Star Inn & Suites Independent 1.00 Jul-08 60 2 Ranger Inn & Suites Independent 1.00 Jun-98 44 3 Days Inn Dallas Arlington North Collins Economy 2.00 Jun-77 87 4 Extended Stay America Arlington Six Flags Economy 2.00 Sep-97 137 5 Howard Johnson Express Inn Arlington Ballpark Six Flags Economy 2.00 Jun-67 98 6 Red Roof Inn Economy 2.00 Jun-72 114 7 Baymont Inn & Suites Arlington Midscale 3.00 May-95 94 8 Candlewood Suites Arlington Midscale 3.00 Aug-98 125 9 Hawthorn Suites by Wyndham Arlington DFW South Midscale 3.00 May-83 129 10 La Quinta Inns & Suites Arlington North Six Flags Drive Midscale 3.00 Aug-06 178 11 Days Inn & Suites Arlington Near Six Flags Economy 2.00 May-18 104 12 Sleep Inn Arlington Near Six Flags Midscale 3.00 Jan-97 126 13 Wingate By Wyndham Arlington Midscale 3.00 Feb-98 92 14 Comfort Suites Arlington Upper Midscale 4.00 Feb-09 108 15 Fairfield Inn & Suites Arlington Near Six Flags Upper Midscale 4.00 Aug-93 101 16 Hampton Inn Suites Dallas Arlington North Entertainment District Upper Midscale 4.00 May-10 103 17 Holiday Inn Arlington Northeast Rangers Ballpark Upper Midscale 4.00 Jun-08 147 18 Four Points by Sheraton Dallas Arlington Entertainment District Upper Midscale 4.00 Jul-96 102 19 TownePlace Suites Dallas Arlington North Upper Midscale 4.00 Jan-99 94 20 Courtyard Dallas Arlington Entertainment District Upscale 5.00 Mar-87 147 21 Crowne Plaza Suites Arlington Ballpark Stadium Upscale 5.00 Jan-86 200 22 Hilton Garden Inn Dallas Arlington Upscale 5.00 Jun-09 132 23 Homewood Suites Dallas Arlington Upscale 5.00 Feb-01 89 24 Hyatt Place Dallas Arlington Upscale 5.00 Apr-96 127 25 Residence Inn Arlington Upscale 5.00 Jul-95 114 26 Springhill Suites Dallas Arlington North Upscale 5.00 Jul-98 120 27 Hilton Arlington Upper Upscale 6.00 Feb-83 308 28 Sheraton Hotel Arlington Upper Upscale 6.00 Apr-85 311

4.01 Jul-92 3,591 District Totals / Averages

Arlington Entertainment District8

1 Nite Star Inn & Suites 15 Courtyard by Marriott2 Wingate By Wyndham 16 Sheraton Hotel 3 Residence Inn 17 Howard Johnson Express Inn 4 Hawthorn Suites by Wyndham 18 Crowne Plaza Suites5 Hilton Arlington 19 Red Roof Inn6 Fairfield Inn & Suites 20 La Quinta Inns & Suites7 Extended Stay America 21 Ranger Inn & Suites8 Candlewood Suites 22 Baymont Inn & Suites 9 Hampton Inn Suites 23 Sleep Inn 10 Hilton Garden Inn 24 Homewood Suites 11 Springhill Suites 25 Hyatt Place 12 TownePlace Suites 26 Four Points by Sheraton 13 Holiday Inn 27 Days Inn & Suites 14 Comfort Suites 28 Days Inn

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Economic Development

Projects

TEXAS Live!Opening 2018-2019$250 Million Cost100,000+ sq. ft. entertainment35,000 sq. ft. conference center300-room luxury hotel

Texas Rangers BallparkOpening 2020-2021$1.0 Billion Cost42,000 SeatsRetractable Roof

RevPAR Peaked in 2016

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YTD Oct: $87.04 YTD Oct: $83.60YTD Oct: $83.02

Higher RevPAR in Entertainment District

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Arlington’s Hotel Building Cycles

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191

956

442

2,383

305

1,811

Average Age of Arlington’s Hotels

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Citywide Average Age: 24 Years Entertainment District Average Age: 25 Years

Average Age Wood Construction: 22 YearsAverage Age Steel/Concrete Construction: 27 Years

Average Age Wood Construction: 23 YearsAverage Age Steel/Concrete Construction: 28 Years

Hotel Supply by Chain Scale

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104

1,717

1,000843

1,805

619

15Hotel’s Average Quality – Citywide and Entertainment District

Citywide Average Quality: Midscale Entertainment District Average Quality: Upper Midscale

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Hotels under Construction

Guestrooms: 136Chain: Upscale

Stories: 4/5Planned Opening: March 2019

Guestrooms: 300Chain: Luxury

Stories: 14Planned Opening: August 2019

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Planned Hotels

Guestrooms: 120Chain: Upscale

Stories: 4Planned Opening: 2020

Guestrooms: 268Chain: Upper-Midscale

Stories: 9Planned Opening: 2020

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Missing Upscale Brands

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Missing Upper-

Upscale & Luxury Brands

Current Unified Development Code

Full-Service Requirements(Allowed in District)

Guestrooms 200

Room Size 350 sq. ft.

Mtg. Space 10,000 sq. ft.

Swimming Pool Required

3-Meal Restaurant Required

Restaurant Seats 200

Room Service 24-hour

Bell Service 24-hour

Concierge Service 12-hour

Business Ctr. – Keyed Access

Limited-Service Requirements(Not Allowed in District)

No Guestroom Minimum

Room Size 350 sq. ft.

Mtg. Space 5,000 sq. ft.

Swimming Pool Required

Limited-Service Restaurant

Restaurant Seats 40% x Rooms

No Rooms Service

No Bell Service

No Concierge

Business Ctr. – Keyed Access

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Recommendations

1. Clarify policy objectives.

2. Consider using published chain scales as a proxy for quality.

3. Prioritize certain development sites or zones in district.

4. Address outdated service and facility requirements.

5. Consider special set of standards for independent hotels.

6. Different standards for new-construction vs. conversions.

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Recommendation #1

Clarify Policy Objectives Related to Hotel Development.

A. Encourage Development that Will Increase District’s ADR? Full-service vs. Limited-Service might not be the best metric. Some limited-service brands would likely bring up ADR average. Fear limited-service will dilute demand for higher-rated hotel development? Private capital attracted to Upper-Midscale and Upscale chains. Upper-upscale and Luxury may require large subsidies.

B. Construction Quality? Is the real policy goal Higher ADRs or Construction Quality? Consider height requirements or building material requirements. 4-story (wood frame) vs. 6-story (steel frame)

C. Under Demolished? UDC has aided this. Average existing hotel is over 25 years old. Obsolete products can survive if newer products are not allowed. Consider minimum standards for conversions and/or independent.

D. Can Some Lower-Rated Hotels be Good? Displace older, obsolete hotel products. Introduce popular brands/products to Arlington. Offer varying price points to attract wider range of tourists.

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Recommendation Status #1

Clarified Top Policy Objectives

A. Increase Average RatesB. Increase Average Building QualityC. Encourage Redevelopment of Blighted Areas

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Recommendation #2

Consider using published chain scales as a proxy for quality.

A. Clarity and Certainty Chain scales are published annually. Every U.S. brand is included in one, and only one, chain scale. No ambiguity or debate. Transparent for everybody to observe.

B. Matches Policy Objective Higher chain scale = higher-rated hotel brand. Chain scale tied directly to a brand’s Average Daily Rate (ADR).

C. Quality Control Built-In Chain acts as watchdog to protect brand. If brand’s ADR declines STR will reduce chain scale. If individual hotel’s scores drop Brand will remove flag.

D. Helps Avoid Unintended Consequences UDC currently would allow certain low-rated, full-service brands.

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Recommendation Status #2

Agreed to use language directly related to policy goals:

A. Use Chain Scale as guideline for increasing ratesB. Require concrete or steel frame construction to improve average

building qualityC. Require and enforce annual property inspections to ensure no code

violations

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Recommendation #3

Prioritize certain development sites or zones in district.

A. Key Sites (e.g. parcels adjacent to 5 major attractions) Luxury or Upper-Upscale Perhaps Minimum Room Count Perhaps Minimum Investment Amount

B. Priority Zone (e.g. within 1 block of major attractions or at key highway interchanges) Upscale or higher Extended-stay brands allowed?

C. Lower Priority Zone Upper-Midscale allowed? Extended-Stay brands allowed?

D. Conversions Are existing hotels allowed to reduce chain scales as they age? Consider certain investment requirements or tax implications. Consider minimum requirements if becoming independent.

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Recommendation Status #3

Prioritize certain development sites or zones in district.

A. Initial decision to only allow luxury and upper-upscale chain scales to be built in entertainment district

B. No decision yet about whether to create zones that would allow lower chain scales within entertainment district

C. Expanded analysis to look at citywide inventory of hotels, as reflected in this updated presentation

D. Upscale chain scale allowed within city, but not within entertainment district

E. Still discussing whether Upper-Midscale, Midscale, and Economy hotels should be allowed

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Recommendation #4

Address outdated service and facility requirements.

A. Eliminate Service Requirements (or revise) Room service 24-hour Bell service 24-hour Concierge 12-hour

B. Eliminate Facility Requirements (or revise) Meeting space Restaurant meals served Restaurant seating Business center keyed-access Pool requirement?

C. Do Such Requirements Really Add Anything? Current UDC requirements don’t directly address policy goals Chain scale requirement would directly address ADR Building materials requirement would address Construction Quality

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Recommendation Status #4

Addressed outdated service and facility requirements:

A. Agreed that current UDC requirements don’t directly address identified policy goals

B. Agreed that some current UDC requirements are outdated and arbitrary

C. Agreed to eliminate most or all of these outdated and arbitrary requirements

D. Still debating whether some such requirements should be maintained, even though they only address policy goals indirectly and could become outdated in the future

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Recommendation #5

Consider requirements for independent hotels.

A. Probably Rare Desirable brands are available Most investors will prefer national branding Difficult to obtain debt financing

B. Quality Control No brand to keep quality control scores No brand to threaten removal of flag No brand to force renovation plans (PIPs) Can be especially vulnerable during recessions Can experience downward QC if CapEx is avoided

C. Design and Construction Quality Recommend more intensive planning/review process ADR reporting requirement (to allow comparison vs. chain scales) Consider minimum investment per guestroom Consider taxing structure with fixed component (per RN sold)

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Recommendation Status #5

Considered separate track for independent hotels:

A. Agreed independent hotels should require closer scrutiny during the review and approval process because there is no “chain scale”

B. Each will need to be reviewed on a case-by-case basisC. Review process may require input from outside expertsD. Review process and time required to approve such projects may be

considerably longer than for developments that have a defined chain scale

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Recommendation #6

Standards for hotel conversion projects.

A. Economic Life of Hotels Average about 40 years 20-year franchise agreement 10-year extension of franchise after major CapEX investment (PIP) 10-year license after conversion to lower chain scale Renew with lower chain scale or become independent

B. What if Owner Converts Down? Accept this as normal economic trend Consider a CapEx requirement Consider taxing structure that discourages downward conversions (e.g.

portion of tax on PAR or POR rather than sales)C. What if Owner Converts to Independent?

Do you need to meet requirement for new construction of independent hotels?

Perhaps this should trigger a planning/review process. Some markets can become “under-demolished” Consider policies that encourages demolition / redevelopment

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Recommendation Status #6

Hotel conversion projects:

A. Agreed that developers can replace an existing hotel (inside or outside entertainment district) with a new hotel of a higher chain scale, so long as existing hotel is demolished or converted to meet new brand standards

B. Still discussing what to do for hotel owners that want to rebrand to same or lower chain scale as existing hotels age. May consider revenue-neutral taxing structure that discourages downward conversions (e.g. portion of tax on PAR or POR rather than sales)

C. Still discussing what to do if owners convert to an independent brand that is no longer within published chain scales.

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Disclaimers & Disclosures

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1. This analysis is for informational purposes only and is not intended as an offer or solicitation.

2. This is not an appraisal and the consultants who contributed to this report were not acting as appraisers in the preparation of this analysis.

3. Any projections included in this document are based on various factors, including the consultant’s judgement. There is no guarantee that projections will be attained. Actual results may vary materially from projections described in this document.

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Hotel Appraisers & AdvisorsHans Detlefsen, MPP, MAI

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