CBRE AR 10-31-2018 Presentationphgcdn.com/pdfs/uploads/2018_Annual_Conference/CBRE_Presentat… · CBRE HOTELS 5 3 3.5 4 4.5 5 5.5 Mar-88 Mar-89 Mar-90 Mar-91 Mar-92 Mar-93 Mar-94

CBRE HOTELS

The World’s Leading Hotel Experts.

Mark Woodworth – Senior Managing DirectorCBRE Hotels’ Americas Research

Positive Outlook for Most….……Growing Pains for Some

STATE OF THE U.S. LODGING INDUSTRY

October 31, 2018CBRE HOTELSThe World’s Leading Hotel Experts.

2CBRE HOTELS

AGENDA

• THE ECONOMY• LABOR• OUR FORECASTS• WHAT COULD END THE CURRENT CYCLE?• THE CONUNDRUM• A LOOK AT HISTORIC HOTELS

First Watch on a Long Voyage

THE ECONOMY

4CBRE HOTELS

QUESTION:

• What happens is you have no customers?

First Watch on a Long Voyage

5CBRE HOTELS

3

3.5

4

4.5

5

5.5

Mar

-88

Mar

-89

Mar

-90

Mar

-91

Mar

-92

Mar

-93

Mar

-94

Mar

-95

Mar

-96

Mar

-97

Mar

-98

Mar

-99

Mar

-00

Mar

-01

Mar

-02

Mar

-03

Mar

-04

Mar

-05

Mar

-06

Mar

-07

Mar

-08

Mar

-09

Mar

-10

Mar

-11

Mar

-12

Mar

-13

Mar

-14

Mar

-15

Mar

-16

Mar

-17

Mar

-18

Rooms sold including Airbnb Rooms sold Linear (Rooms sold)

WELL IN EXCESS OF WHAT HISTORICAL TRENDS WOULD SUGGESTMORE PEOPLE RENTING ROOMS

Source: STR, Airdna, U.S. Census, CBRE Hotels’ Americas Research, Q2 2018.

RATIO OF ANNUAL ROOMS SOLD TO WORKING-AGE POPULATION OF THE U.S.

6CBRE HOTELS

EMPLOYMENT GAINS & LODGING DEMAND

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

-850

-650

-450

-250

-50

150

350

550

750

2004

2004

2004

2005

2005

2005

2006

2006

2006

2007

2007

2007

2008

2008

2008

2009

2009

2009

2010

2010

2010

2011

2011

2011

2012

2012

2012

2013

2013

2013

2014

2014

2014

2015

2015

2015

2016

2016

2016

2017

2017

2017

2018

U.S. Emp. Jobs Net Change (3 Month MA) 200 Ths Net New Jobs Upper Priced Demand (Y-o-Y Change)

LEADING ECONOMIC INDICATORSPERCENT CHANGE IN THE LAST 6 MONTHS

9.3%8.3%

13.7%11.3% 8.7%

8.4%8.0% 8.4%

-30.0%

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0% Leading Economic Indicators (% change in the last 6 months) U.S. Hotel Demand

6 to 8 month lag

Economic indicators trending up

Source: The Conference Board, CBRE Hotels’ Americas Research, STR, August 2018

Positive Contributions from the ISM® new orders index, the financial components and consumer expectations more than offsetting the only negative contribution from building permits.

LowestUnemployment

In Years

RisingWages

TaxCuts

RecordStock

MarketDon't Forget What

Happened To The Person Who Suddenly Got

Everything They Always Wanted ...

They Lived Happily Ever After….

IncreasingCorporate

Profits

3+%GDP

Growth

Unfortunately, economic theorysuggests otherwise

Inflation

10CBRE HOTELS

INFLATION - AS MEASURED BY CPIRECENT MODERATE GROWTH – EXPECTATIONS VARY

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

2011 2012 2013 2014 2015 2016 2017 2018

CPI CORE CPI

THE OUTLOOK FOR THE DRIVERS THAT ARE MOST IMPORTANT TO HOTELS REMAINS FAVORABLE

-2.7%

2.0%

-1.9%

-8.2%

-5.4%

-0.5%

1.3%

3.9%1.7%

3.9%

2.7%2.5%

-1.5%

2.9%

0.8%

4.6%

3.2%

1.7%

0.5%

0.5%

3.6%

0.5%

3.2%3.2%

-1.0%

5.1%4.9%

1.9%

3.3%

3.3%

1.0%0.4%

1.5%2.3%1.9%

1.8%

1.8%3.0%2.8%

2.3%2.2%

4.2%3.5% 3.1%

2.7%2.0%

1.6%

0.9%0.0%

0.4%1.6%

2.6%

-10

-8

-6

-4

-2

0

2

4

6

8

10

I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

(GOVERNMENT) Government consumption expenditures and gross investment

TRADE (Net exports of goods and services)

BUSINESS (Gross private domestic investment)

CONSUMERS (Personal consumption expenditures)

Lodging Demand

Source: BEA, Moody’s Analytics, CBRE Hotels Americas’ Research Hotel Horizons, STR, August 2018

12CBRE HOTELS

A PICTURE ECONOMISTS ARE THINKING A LOT ABOUT NOW

LABORIMPACT OF TIGHTENING LABOR MARKETS

14CBRE HOTELS

TOTAL PAYROLL & BENEFITS AS A PERCENT OF TOTAL EXPENSES(THRU GOP)

50.2%

50.8%

47.4%

46.7%

44.0%

45.0%

46.0%

47.0%

48.0%

49.0%

50.0%

51.0%

52.0%

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

Source: CBRE Trends® in the Hotel Industry Survey

15CBRE HOTELS

TOTAL PAYROLL & BENEFITS AS A PERCENT OF TOTAL REVENUE

Source: CBRE Trends® in the Hotel Industry Survey

31.0%

34.6%

30.2%

32.7%

28.9%

32.1%

26.0%

27.0%

28.0%

29.0%

30.0%

31.0%

32.0%

33.0%

34.0%

35.0%

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

3%

4%

5%

6%

7%

8%

9%

10%

0%

2%

4%

6%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

BLS - Change in Average Hourly Compensation for Hospitality Employees

U.S. Unemployment Level

Source: Bureau of Labor Statistics

2018 Trends® In The Hotel IndustryAnnual Change in Hospitality Industry Employee Hourly Compensation versus Unemployment Rate

70.2%

47.9%

4.5%

67.4%

80.8%77.1% 79.3%

86.2%80.6%

66.4%59.1%

61.6%

44.4%

8.6%

58.9%

72.3% 70.4% 70.4%78.2%

70.0%

59.3%52.3%

0%

20%

40%

60%

80%

100%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Total Operating Revenue (Total Revenue)* Profit* (GOP 2015 - 2017, NOI before 2015)

FEWER HOTELS ARE ABLE TO ACHIEVE INCREASESON THE TOP AND BOTTOM LINES Percent of Hotels in Trends® Sample Posting an Increase from Prior Year

Note: * 11th edition of USALI in 2015, (10th edition of USALI from 2007 to 2014) Source: 2018 Trends® in the Hotel Industry

18CBRE HOTELS

U.S. POPULATION BY AGE – 2017 – CENSUS ESTIMATESHOW OLD ARE WE?

Source: U.S. Census, Calculatedriskblog.com

19CBRE HOTELS

HOW OLD WE WILL BE?U.S. POPULATION BY AGE – 2017 – CENSUS ESTIMATES

How Old We Are How Old We Will Be

Source: U.S. Census, Calculatedriskblog.com

20CBRE HOTELS

WHERE WILL WE FIND WORKERS?10 YEAR CHANGE IN WORKING AGE POPULATION

Source: U.S. Census, Moody’s Analytics, Q3 2018.

24.8%

15.2%

18.8%

12.2%

9.8% 9.1%

17.4%18.5%

9.4%

13.6%

11.3%

3.8%

1.7%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030

21CBRE HOTELS

LABOR FORCE PARTICIPATION

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

16 to 19 20 to 24 25 to 34 35 to 44 45 to 54 55 to 64 65 to 74 75 +

1996 2006 2016

Sources: BLS.gov, Roger Tutterow – Kennesaw State University

22CBRE HOTELS

THE OUTLOOK FOR LABOR FORCE GROWTH

OUR FORECASTS - NATIONAL

JOHN KENNETH GALBRAITH

“There are two kinds of forecasters:…those who don’t know,…and those who don’t know they don’t know.”

25CBRE HOTELS

U.S. NATIONAL FORECAST – ALL HOTELSLong Run

Average 2015 2016 2017 2018F 2019FSupply 1.9% 1.0% 1.5% 1.8% 2.0% 1.9%

Demand 2.0% 2.5% 1.5% 2.6% 2.3% 1.9%

Occupancy 62.2% 65.4% 65.4% 65.9% 66.1% 66.1%

ADR 3.1% 4.5% 3.1% 2.1% 2.8% 2.6%

RevPAR 3.3% 6.1% 3.2% 2.9% 3.1% 2.6%

Source: STR, CBRE Hotels’ Americas Research, Hotel Horizons® September-November 2018

U.S. TOP 25 MARKETS – ALL HOTELS

Long Run

Average 2015 2016 2017 2018F 2019FSupply 1.8% 1.1% 2.1% 2.4% 2.8% 3.7%

Demand 2.2% 2.6% 1.8% 3.0% 2.8% 3.1%

Occupancy 67.3% 73.5% 73.3% 73.7% 73.7% 73.3%

ADR 3.1% 4.3% 2.7% 1.7% 3.1% 2.3%

RevPAR 3.5% 5.8% 2.5% 2.2% 3.1% 1.8%


2019 RevPAR Change Outlook:Okay for Some; Disappointing for Others.

Greater Than 3% Between 1% and 3% Between 0% and 1% Less Than 0%


MARKET OUTLOOK

Occupancy Levels will Decline in 30 of our 60 Top U.S. Markets this Year, but in 44 Markets in 2019.Average Daily Rate Growth will Exceed 2.0% in 41 Markets this Year and in 35 Markets in 2019.

29CBRE HOTELS

(30.0)%

(20.0)%

(10.0)%

0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

San

Jos

e-S

anta

Cru

zN

ashv

ille

Oak

land

San

Fra

ncis

coLo

s An

gele

sD

enve

rO

ahu

Cha

rlotte

Cin

cinn

ati

Tam

paB

osto

nA

nahe

imS

eattl

eIn

dian

apol

isC

harle

ston

Loui

sville

Orla

ndo

Aus

tinD

ayto

nSa

cram

ento

Kans

as C

ityC

olum

bus

Dal

las

Mia

mi

Fort

Laud

erda

leD

etro

itJa

ckso

nville

Atla

nta

Col

umbi

aS

aint

Lou

isM

inne

apol

isS

alt L

ake

City

Fort

Wor

thS

an D

iego

Cle

vela

ndM

emph

isR

ichm

ond

Wes

t Pal

m B

each

Long

Isla

ndM

ilwau

kee

New

ark

Har

tford

New

Orle

ans

Alb

uque

rque

Nor

folk

-VA

Bea

chC

hica

goP

hila

delp

hia

Hou

ston

Was

hing

ton

DC

Pitt

sbur

ghO

mah

aP

hoen

ixS

an A

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New

Yor

kP

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avan

nah

Ral

eigh

-Dur

ham

Alb

any

Bal

timor

e

REAL REVPAR CHANGE FROM PRE-RECESSION PEAKNOT ALL MARKETS HAVE FULLY RECOVERED FROM THE LAST RECESSION.

Markets in Expansion

Source: CBRE Hotels’ Americas Research; STR, Q2 2018.

Markets in Recovery Markets in Recession

What Could End the Current Cycle?

31CBRE HOTELS

WHAT COULD END THE CURRENT CYCLE?

4. Oil/Energy Price Increases5. Asset Price Bubble

1. The Economy 2. Over Building 3. Unpredictable Demand Shock

PIPELINE SLOWS

194,455 190,260

0

50,000

100,000

150,000

200,000

250,000

2014 2015 2016 2017 2018

Source: STR, July 2018.

Number of Rooms Under Construction

33CBRE HOTELS

0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

Aus

tinS

eattl

eN

ashv

ille

Sav

anna

hC

harle

ston

Den

ver

Dal

las

Cha

rlotte

New

Yor

kLo

uisv

ille

Fort

Wor

thC

olum

bus

Por

tland

Bos

ton

Kan

sas

City

Cin

cinn

ati

Milw

auke

eH

oust

onS

an J

ose-

San

ta…

Ral

eigh

-Dur

ham

Fort

Laud

erda

leM

inne

apol

isN

ewar

kS

an F

ranc

isco

Tam

paS

alt L

ake

City

Det

roit

Indi

anap

olis

Pitt

sbur

ghH

artfo

rdO

mah

aLo

s A

ngel

esB

altim

ore

Day

ton

New

Orle

ans

Chi

cago

Mem

phis

San

Ant

onio

Phi

lade

lphi

aM

iam

iA

tlant

aW

ashi

ngto

n D

CS

acra

men

toS

an D

iego

Pho

enix

Jack

sonv

ille

Orla

ndo

Alb

uque

rque

Cle

vela

ndLo

ng Is

land

Sai

nt L

ouis

Nor

folk

-VA

Bea

chO

akla

ndA

nahe

imA

lban

yR

ichm

ond

Tucs

onO

ahu

Wes

t Pal

m B

each

Col

umbi

a

SUPPLY CHANGE 2018 - FORECAST

42 markets where the average supply growth is forecast to be greater than 2%.

Source: CBRE Hotels’ Americas Research Q2 2018

The Conundrum

CONUNDRUM

A question or problem having only a conjectural answer.

Conjecture: Without Evidence

GH&LA SAVANNAH | AUGUST 31, 2017

36CBRE HOTELS

54

56

58

60

62

64

66

68

(20)

(15)

(10)

(5)

0

5

10

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Occupancy (%)% Change in RADR/Occ/RRevPAR

Real ADR (∆RADR) ∆Occupancy ∆RRevPAR Occ (4-Qtr Moving Average)

Q2 2015

Notes: Previous historical peak occupancy 66% (2017 Q4), Current occupancy 66.1% (2018 Q1) Sources: CBRE Hotels' Americas Research, STR Q2 2018.

STR HISTORY OF U.S. HOTEL FINANCIAL PERFORMANCE, 1989-2018 Q2

Gap

37CBRE HOTELS

54

56

58

60

62

64

66

68

-11.0

-9.0

-7.0

-5.0

-3.0

-1.0

1.0

3.0

5.0

7.0

9.0

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Occupancy (%)% Change in ADR/Occ/RevPAR

Real ADR (∆RADR) ∆Occupancy Additional Contribution from Modeled ∆RADR ∆RRevPAR Occ (4-Qtr Moving Average)

2015 Q2

Notes: Previous historical peak occupancy 66% (2017 Q4), Current occupancy 66.1% (2018 Q1) Sources: CBRE Hotels' Americas Research, STR Q2 2018.

MODELED ADR - IF HISTORY WAS REPEATED!

38CBRE HOTELS

With (37)New York, NYSan Francisco/San Mateo, CAMiami/Hialeah, FLAustin, TXAnaheim/Santa Ana, CACharlotte, NC‐SCDenver, COOahu Island, HIPittsburgh, PABoston, MAHouston, TXFort Lauderdale, FLNashville, TNNew Orleans, LAPortland, OROakland, CAFort Worth/Arlington, TXSan Diego, CASeattle, WA

San Jose/Santa Cruz, CACharleston, SCWest Palm Beach/Boca Raton, FLTampa/St Petersburg, FLNewark, NJDallas, TXChicago, ILLos Angeles/Long Beach, CAWashington, DC‐MD‐VAAlbany/Schenectady, NYBaltimore, MDLouisville, KY‐INRaleigh/Durham/Chapel Hill, NCAtlanta, GAPhiladelphia, PA‐NJLong IslandSavannah, GASt Louis, MO‐IL

Without (23)Columbus, OHCincinnati, OH‐KY‐INPhoenix, AZDetroit, MIJacksonville, FLMinneapolis/St Paul, MN‐WIMilwaukee, WISan Antonio, TXOrlando, FLCleveland, OHColumbia, SCOmaha, NESalt Lake City/Ogden, UTMemphis, TN‐AR‐MSSacramento, CAKansas City, MO‐KSRichmond/Petersburg, VAHartford, CTIndianapolis, INDayton/Springfield, OHTucson, AZAlbuquerque, NMNorfolk/Virginia Beach, VA

CITIES WITH THE DISEASE AND THOSE WITHOUT (TOTAL = 60)

39CBRE HOTELS

1. Nothing Unusual Here! – the current occupancy/ ADR growth relationship is typical of past relationships at this point in the cycle.

2. Real vs. Nominal Rates Disguise – Perhaps nominal ADR growth rates are abnormal but real growth rates are typical.

3. Aggregation Bias – the national trend in occupancy and ADR since 2014 occurred because some chain scales, locations, and/or cities have driven the national result.

4. Extraordinary and Localized Supply Growth – High rates of supply change in city markets or important hotel submarkets compromised managements’ opportunities to increase ADR while high occupancy is preserved.

5. Sharing Economy Discounts – Airbnb-style flexible supply is limiting extraordinary rate increases during high-demand periods that in the past boosted average rates.

HYPOTHESES INCLUDE: POSSIBLE REASONS FOR THE PARADOX

1. Chain Redemption Policies – Hotels follow rate policies that boost occupancy to levels in which reimbursement by chains for rooms purchased with points is maximized.

2. Changes in the Demand Mix Since 2014 Favoring Lower-Rate Business – mix shifted to greater contribution of lower rate leisure/weekend business. Length of stay also might be a factor.

3. Shortened Booking Times Since 2014 Leading to Rate Stagnation – option value increase due to ‘last minute’ replacement booking may be lowering ADR growth (noting that more restrictive cancellation policies have appeared the past 12 months).

4. OTAs Gaining Market Share Since 2014 Leading to Larger Differentials Between Gross and Net ADR – The reported ADR received by hotels from OTA booking may markedly differ from actual rates paid by guests. OTAs are thus anchoring lower rates.

5. Better Management Practices – improvement creates a situation in which flow through to NOI of occupancy and ADR changes have converged to the extent that owners have become more indifferent.

6. Slow Wage Growth Translates into Slow ADR Growth – wage cost push pressures are low.7. Hotel Managers Responsible for Rate Setting have been acting Irrationally (Overly Timid about Raising

Rates).

HYPOTHESES INCLUDE: POSSIBLE REASONS FOR THE PARADOX

A Look at Historic Hotels

42CBRE HOTELS

THE FOLLOWING DATA IS BASED ON A SAMPLE OF A 204 PROPERTIES THAT ARE MEMBERS OF HISTORIC HOTELS OF AMERICA, AND PROVIDE THEIR DATA TO STR.

HISTORICAL AND FORECAST DATA

HISTORIC HOTELS PERFORMANCE

43CBRE HOTELS

-2%

-1%

0%

1%

2%

3%

4%

5%

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

F

20

19

F

Historic Hotels of America All U.S. Hotels

Annual Change

CHANGE IN SUPPLY

Forecast

Source: STR, CBRE Hotels’ Americas Research – September –November 2018 Hotel Horizons®

44CBRE HOTELS

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

F

20

19

F


Annual Change

CHANGE IN DEMAND

Forecast


45CBRE HOTELS

50%

55%

60%

65%

70%

75%

80%

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

F

20

19

F


ANNUAL OCCUPANCY

Forecast

Annual Occupancy Level


46CBRE HOTELS

-12%

-8%

-4%

0%

4%

8%

12%

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

F

20

19

F


Annual Change

AVERAGE DAILY RATE

Forecast


47CBRE HOTELS

-20%

-16%

-12%

-8%

-4%

0%

4%

8%

12%

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

F

20

19

F


Annual ChangeREVPAR

Forecast


48CBRE HOTELS

Long Run Average 2015 2016 2017 2018F 2019F

Supply 0.5% 0.3% 1.8% 1.0% 0.3% 0.6%

Demand 0.8% 1.6% 2.1% 1.9% 0.5% 1.5%

Occupancy 68.2% 72.9% 73.2% 73.8% 74.0% 74.6%

ADR 3.3% 3.9% 2.6% 1.1% 2.1% 1.9%

RevPAR 3.7% 5.2% 2.9% 2.0% 2.3% 2.8%

Source: CBRE Hotels’ Americas Research - Hotel Horizons® Custom Forecast – October 2018; STR

RECORD HIGH OCCUPANCY LEVELS TO CONTINUE

U.S. BASELINE FORECAST – HISTORIC HOTEL SAMPLEOCCUPANCY PEAKS AND THE ADR CONUNDRUM PERSISTS

FINANCIAL BENCHMARKINGHISTORIC VS CONTEMPORARY HOTELS

50 HISTORIC HOTELS OF AMERICA | OCTOBER 31, 2018CBRE

• From CBRE’s Trends® in the Hotel Industry database, we pulled operating performance data for two sets of properties• Upper-upscale and luxury hotels open through 1967 (historic sample)• Upper-upscale and luxury hotel open since 1967 (contemporary sample)

• All properties reported operating data each year from 2009 through 2017.• Historic properties may, or may not, be a member of Historic Hotels of

America.• Both samples consist of independent and chain-affiliated hotels.

METHODOLOGY

FINANCIAL BENCHMARKING


2017 PROFILE OF SAMPLES

HISTORIC* VS CONTEMPORARY HOTELS

Note: * Open before 1967, Luxury and Upper-UpscaleSource: Trends® in the Hotel Industry

52

624

78.4%

$277.87$217.79

25

513

76.6%

$238.78$182.86

0

100

200

300

400

500

600

700

Average Age(Years)

Average Size(Rooms)

Occupancy ADR RevPAR

Historic* Contemporary


PERCENT OF TOTAL REVENUE

HISTORIC* VS CONTEMPORARY HOTELS2017 COMPARATIVE PERFORMANCE

Note: * Open before 1967 Luxury and Upper-Upscale** Income before deduction for income taxes, interest, depreciation, and amortization.Source: Trends® in the Hotel Industry

29.0%

54.8%

33.9%

24.3%30.7%

60.1%

37.6%

26.2%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

F&B Revenue Departmental Profit Gross Operating Profit EBITDA**



TOTAL LABOR COSTS


Metric Historic Contemporary

Dollars Per Available Room $53,685 $35,007

Dollars Per Occupied Room $187.67 $125.24

Percent of Total Revenue 38.8% 33.0%



SELECT EXPENSES - $PAR AND % OF TOTAL REVENUE


$6,269

$3,747

$1,138

$4,378

$2,925

$870

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

Maintenance $PAR Utilities $PAR Insurance $PAR


4.5%

4.1%2.7%

2.8%

0.8% 0.8%



COMPOUND ANNUAL CHANGE 2009-2017

HISTORIC* VS CONTEMPORARY HOTELSTOTAL OPERATING REVENUE

5.8%

3.8%

4.9%

3.9%

6.5%

5.3%

0% 5% 10%

Full-Service

Resorts

All Hotels

Historic* ContemporaryNote: * Open before 1967, Luxury and Upper-UpscaleSource: Trends® in the Hotel Industry



HISTORIC* VS CONTEMPORARY HOTELSTOTAL OPERATING EXPENSES**

4.3%

1.6%

3.4%

2.8%

4.2%

3.7%

0% 3% 6%

Full-Service

Resorts

All Hotels

Historic* ContemporaryNote: * Open before 1967, Luxury and Upper-Upscale** Before deduction for management fees and non-operating income and expenses.Source: Trends® in the Hotel Industry



HISTORIC* VS CONTEMPORARY HOTELSGROSS OPERATING PROFIT**

8.8%

8.2%

8.0%

6.6%

12.4%

9.5%

0% 5% 10% 15% 20%

Full-Service

Resorts

All Hotels

Historic* ContemporaryNote: * Open before 1967, Luxury and Upper-Upscale** Income before deduction for management fees and non-operating income and expenses.Source: Trends® in the Hotel Industry

SUMMARY THOUGHTS FIRST WATCH ON A LONG VOYAGE

1.The fundamentals remain attractive across the vast majority of markets.2. Industry growth will persist comfortably through 2018 and likely beyond.3.Markets will soften in 2020 – plan for a slowdown (not a downturn)! 4.High occupancy levels should provide leverage to achieve reasonable

ADR increases this year and next; scale of new supply in some markets represents a strong headwind.

5. Increasing hotel construction will continue; the threat of over building is the exception and not the rule.

6. Increasing labor costs will become more of an issue. Profit growth will remain good, but not great, for most.

7.The outlook for the domestic lodging industry remains favorable well into 2020. Historic Hotels will continue to outperform!

59CBRE HOTELS

THANKS

MARK WOODWORTHSenior Managing Director+ 1 404 812 [email protected]

CBRE © 2018 All Rights Reserved. All information included in this proposal pertaining to CBRE—including but not limited to itsoperations, employees, technology and clients—are proprietary and confidential, and are supplied with the understanding thatthey will be held in confidence and not disclosed to third parties without the prior written consent of CBRE. This proposal isintended solely as a preliminary expression of general intentions and is to be used for discussion purposes only. The partiesintend that neither shall have any contractual obligations to the other with respect to the matters referred herein unless and until adefinitive agreement has been fully executed and delivered by the parties. The parties agree that this proposal is not intended tocreate any agreement or obligation by either party to negotiate a definitive lease/purchase and sale agreement and imposes noduty whatsoever on either party to continue negotiations, including without limitation any obligation to negotiate in good faith or inany way other than at arm’s length. Prior to delivery of a definitive executed agreement, and without any liability to the other party,either party may (1) propose different terms from those summarized herein, (2) enter into negotiations with other parties and/or (3)unilaterally terminate all negotiations with the other party hereto.

The information contained in this document has been obtained from sources believed reliable. While CBRE, Inc. does not doubtits accuracy, CBRE, Inc. has not verified it and makes no guarantee, warranty or representation about it. It is your responsibility toindependently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for exampleonly and do not represent the current or future performance of the property. The value of this transaction to you depends on taxand other factors which should be evaluated by your tax, financial and legal advisors. You and your advisors should conduct acareful, independent investigation of the property to determine to your satisfaction the suitability of the property for your needs.

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