Global Hotel Sector - Credit Suisse

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23 March 2011 Global

Equity Research

Global Hotel Sector Connections Series

Assessing the GEM opportunity ■ Playing growth in Emerging Consumer travel trends: Global travel is one

of our strategists chosen growth themes for 2011, strongly supported by findings from the Credit Suisse Research Institute Emerging Consumer survey and here we look at which hotel groups offer the best exposure.

■ Emerging Consumer survey supports growth thesis: The inaugural Credit Suisse Research Institute Emerging Consumer survey highlights strong confidence, rising discretionary spend and the importance of brandings as key themes – all critical for the hotel sector. Our analysis points to an 82% correlation between international travel and levels of GDP per capita, around c230 million more holidays in 2011 in the seven surveyed countries, and scope for a 5x increase in outbound Chinese travel over the next 10 years. The hotel sector is well positioned to take advantage with GEM accounting for 27% of existing rooms but 59% of room pipelines.

■ Sector scorecard favours the Asian economy operators, Hyatt, IHG and Starwood: Our sector scorecard considers GEM exposure, system growth, ownership structures, forecast profit growth, balance sheet strength and excess FCF generation. The Asian pure plays dominate (as does Rezidor) with Hyatt, IHG and Starwood the best placed of the large caps. Underperform rated Choice has the lowest score.

Exhibit 1: Implied 2011E mature market EBITDA multiples

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Millen

nium

&

Cop

thor

ne

Acc

or

Rez

idor

IHG

Hya

tt

Sta

rwoo

d

Mar

riott

Cho

cie

Source: Company data, Credit Suisse estimates

■ Valuation: The highest growth pure play Chinese economy operators (China Lodging, 7 Days) trade on 11-12x 2011E EBITDA for a 35%+ three-year EBITDA CAGR, whilst as shown in Exhibit 1 the implied 2011E mature market EBITDA multiple being priced into European stocks (2-9x, best value M&C) is well below that of the US peer group (13x with best value in Hyatt and least in Choice). For those looking for exposure to the Global Emerging Consumer Travel theme Credit Suisse has created a Delta One basket (Bloomberg ticket CSGLEMCT Index) giving exposure to Global hotels, Asian airlines and Duty free retailer Dufry.

The Credit Suisse Connections Series leverages our exceptional breadth of macro and micro research to deliver incisive cross-sector and cross-border thematic insights for our clients.

Research Analysts

Tim Ramskill, CFA 44 20 7883 7361

[email protected] Sanjeet Aujla

44 20 7888 0353 [email protected]

Gabriel Chan, CFA 852 2101 6523

[email protected] Joel Simkins

212 325 5380 [email protected]

Kevin Yin 852 2101 7655

[email protected]

Our analysis brings together our Asian, European and US hotel analysts

Focus on Global Emerging Markets growth opportunities linked to the Inaugural Credit Suisse Research Institute Emerging Consumer survey

Conclude direct Asian plays offer high growth and reasonable valuation

European stocks pricing significantly less of the GEM growth potential than US

Delta One basket to play Emerging Consumer Travel theme

23 March 2011

Global Hotel Sector 2

Focus on Global Emerging Markets Exhibit 2: Credit Suisse Research Institute Emerging

Consumer survey points to strong growth in travel

intensions

Exhibit 3: International holidays 82% correlated to GDP

per capita

0

10

20

30

40

50

60

70

Brazil China Indonesia India Russia Saudi Egypt

% o

f res

pond

ents

-3

0

3

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9

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15

18

% o

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ents

(chg

bet

w %

pla

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g to

take

ho

liday

in th

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xt 1

2 m

ths

vs th

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st 1

2 m

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Been on holiday in the last 12 mths Planning to take holiday in the next 12 mths Change (rhs)

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16000

SaudiArabia

Russia Brazil China Indonesia Egypt India0

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8

10

12

14

GDP per capita $ (LHS) International holiday % (RHS)

Source: Credit Suisse Emerging market consumer survey Source: Credit Suisse Emerging market consumer survey

Exhibit 4: Analysis of the survey implies 232 million more

holidays are planned for 2011 with 153 million in China

alone YoY change in planned holidays (millions)

Exhibit 5: GEM accounts for 27% of rooms across our

coverage universe % of rooms (Dec-10)

-20

0

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180

Brazil China Indonesia India Saudi Russia Egypt

0%

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Acc

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Mar

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Source: Company data, Credit Suisse estimates Source: Company data

Exhibit 6: GEM accounts for 59% of pipeline across our

global coverage universe GEM pipeline as % existing GEM room system

Exhibit 7: US stocks mature market EBITDA currently

c13x versus c2-9x for European stocks

0%

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iJi

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ong

&S

hang

hai

0.0

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Mill

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Mar

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Source: Company data Source: Credit Suisse estimates

23 March 2011


Table of contents Focus on Global Emerging Markets 2 GEM scorecard 4 Emerging Consumer Survey 2011 6 Current GEM exposure 13 Seizing the GEM growth opportunity 15 Consolidation opportunities 20 Valuation 1: Pricing GEM and mature market exposure 23 Valuation 2: Through the Credit Suisse HOLT® lens 25 Focus on Brazil 26 Focus on China 27 Focus on India 28 Focus on Middle East 29 Focus on Russia 30 7 Days Group Holdings Ltd. (SVN.N / SVN US) 31 Accor (ACCP.PA) 32 China Lodging Group (HTHT.OQ / HTHT US) 33 Choice Hotels (CHH) 34 Hyatt Hotels (H) 35 InterContinental Hotels (IHG.L) 36 Kosmopolito Hotels International Ltd. (2266.HK / 2266 HK) 37 Marriott International (MAR) 38 Millennium & Copthorne (MLC.L) 39 Rezidor Hotel Group (REZT.ST) 40 Shangri-la Asia (0069.HK / 69 HK) 41 Starwood Hotels and Resorts Worldwide, Inc. (HOT) 42

23 March 2011


GEM scorecard In this report, we assess the 12 global hotel stocks under our coverage with GEM exposure against a series of criteria, with each stock ascribed a score between 12 (best) and 1 (worst). We are broadly assessing the following six characteristics:

■ Global Emerging Markets exposure: assessed both on existing rooms and room pipeline.

■ System growth: both in total and specifically in GEM.

■ Business model: Both existing system and pipeline assessed with higher scores attributed to lower capital business models (franchising and management contracts).

■ Profit growth: Measured on basis of three-year EBITDA CAGR.

■ Balance sheet: Measured based on December 2010 net debt/EBITDA.

■ Incremental forecast potential: Measured on the basis of excess FCF to capture potential acquisition or cash return.

Exhibit 8: Global Hotels Scorecard In each category ranked 1(worst) to 12 (best) Existing

GEM mix Pipeline

GEM mix Pipeline growth

GEM pipeline growth

System breakdown

Pipeline breakdown

3 yr EBITDA

CAGR

Net debt/ EBITDA

Excess FCF

TOTAL

China Lodging 11 11 11 4 5 3 12 12 6 75

Rezidor 7 6 9 8 7 6 9 9 12 73

Kosmopolito 11 11 12 10 1 1 11 1 10 68

7 Days 11 11 10 3 4 4 10 11 3 67

Hyatt 3 4 5 11 8 10 7 10 8 66

Millennium & Copthorne 8 11 4 5 3 10 4 8 11 63

InterContinental 4 3 8 12 11 10 2 4 9 63

Starwood 6 7 6 9 9 10 5 3 7 62

Marriott 2 2 2 7 10 10 6 5 5 49

Shangri-La 9 8 7 2 2 2 8 2 1 41

Accor 5 5 3 6 6 5 3 6 2 41

Choice 1 1 1 1 12 10 1 7 4 38

Source: Company data, Credit Suisse estimates

■ Asian stocks score well: The direct plays on Asian growth score well given exposure, pace of room growth, EBITDA growth and balance sheet strength.

■ Rezidor top of the non-Asian companies: Reflecting growth potential driven by management contracts in GEM and strong FCF generation.

■ Hyatt, IHG and Starwood top ranked large cap names: All have significant GEM growth potential, low capital intensity growth plans and strong excess FCF generation.

■ Underperform rated Choice lowest ranked: Choice lowest ranked owing to its minimal GEM exposure plus lowest pipeline and profit growth.

23 March 2011


Delta One Basket Credit Suisse has created a Delta One basket of stocks to coincide with the publication of this note with the Bloomberg ticker CSGLEMCT Index. The constituents are detailed in Exhibit 9 and include 8 hotels, 3 Asian airlines and GEM duty free retailer Dufry. Those names with lower stock weightings reflect either liquidity constraints (7 Days, Millennium & Copthorne and Rezidor) or a relatively lower GEM exposure (Marriott).

Exhibit 9: Delta One Basket – Bloomberg ticker: CSGLEMCT Index Weight Recent research for non-hotel stocks

7 Days 5%

Air China 10% China Airline Sector: Growth risk remains ,dated 23 February 2011

AirAsia 10% AirAsia: FY10 beats street expectation despite higher fuel costs, dated 25 February 2011

Cathay Pacific 10% Cathay Pacific: Notes from the AIC, dated 22 March 2011

Dufry 10% Dufry: Time to revisit the Dufry Story, dated 18 February 2011

Hyatt 10%

IHG 10%

M&C 5%

Marriott 5%

Rezidor 5%

Shangri-La 10%

Starwood 10%

Source: Credit Suisse

23 March 2011


Emerging Consumer Survey 2011 The Credit Suisse Research Institute inaugural Emerging Consumer survey points to strong confidence, a positive shift in discretionary spending and the importance of international brands – all important considerations for the hotel sector. Our incremental analysis of the survey data points to an 82% correlation between GDP per capita growth and foreign travel intensions, more than 230 million incremental planned holidays in 2011 across the seven surveyed countries and the significance of urbanization trends for hoteliers.

Emerging Consumer Survey 2011 In January, the Credit Suisse Research Institute undertook an inaugural Emerging Consumer survey to establish a distinctive profile of the spending patterns and preferences of a consumer who is at the heart of a structural shift in global demand. To undertake this project, the Credit Suisse research Institute engaged the leading global market research firm AC Nielsen to conduct primary research on its behalf, interviewing close to 13,000 consumers across seven countries that together represent 3.2 billion people.

In the pages that follow, we focus on aspects of the survey we view as most relevant to the hotel sector and combine these with incremental analysis and data with a view to determine where growth opportunities look the most compelling.

Emerging Consumer survey: Key themes The Emerging Consumer survey highlighted a number of key themes of which we focus on four.

■ Confidence looks strong: 38% of survey respondents thought their personal finances would improve over the next six months compared with 9% expecting a deterioration. When asked about intentions to take a holiday in the next 12 months versus the prior 12 months, the net responses were overwhelmingly positive. We focus on travel intentions in greater detail below.

Exhibit 10: Have you been on holiday in the last 12

months? Are you planning to take holiday in the next 12

months?

Exhibit 11: Do you think the state of your own personal

finances over the next six months will be better, worse or

about the same?

0

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70

Brazil China Indonesia India Russia Saudi Egypt

% o

f res

pond

ents

-3

0

3

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9

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18

% o

f res

pond

ents

(chg

bet

w %

pla

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g to

take

ho

liday

in th

e ne

xt 1

2 m

ths

vs th

e la

st 1

2 m

ths)

Been on holiday in the last 12 mths Planning to take holiday in the next 12 mths Change (rhs)

63

45 4335 33

27

12

33

49 5462 62

63

50

4 6 3 3 5 10

38

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Brazil China India Saudi Indonesia Russia Egypt

% o

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pond

ents

Better Abou t the same Worse

Source: Credit Suisse Emerging Market Consumer survey E xhi bit 1: D elta O ne Bask et xxx xxxxxx x Wei ght Recen t resea rch f or non- hot el st ocks

7 Days 5%

Ai r Chi na 10% Chi na Ai rl ine Sect or: G row th ri sk r ema ins , dat ed 23 Febr uary 2011

Ai rA sia 10% Ai rA sia: FY10 beats str eet expect ati on despi te higher f uel costs, dat ed 25 Febr uary 2011

C at hay Pacif ic 10% C athay Pacif ic: N otes fr om th e AI C, dat ed 22 M arch 2011

D uf r y 10% Duf ry: T im e t o r evisit the Duf ry Stor y, dat ed 18 Febr uary 2011

H yat t 10%

I HG 10%

M &C 5%M arr iot t 5%

R ezi dor 5%

Sha ng ri -La 10%

St ar wood 10%

Sou rce: C ompany data, C redi t Suisse esti mat es Source: Credit Suisse Emerging Market Consumer survey

■ The shift to discretionary spending: As real incomes rise, the survey points to interesting potential shifts in spending from essential and useful items to discretionary areas – key for the hotel space. Both Exhibit 12 and Exhibit 13 indicate strong relationships between rising income and discretionary spend. The conclusion is that growth in demand for useful items (such as transport and arguably budget hotels) is likely to be strongest in the middle income emerging markets (China, Brazil, Russia) and there is likely to be greater focus in luxury items (and possibly Upscale and Luxury Hotels) in the higher income markets (such as Saudi Arabia).

23 March 2011


Exhibit 12: % respondents taking foreign holidays Exhibit 13: Expenditure on entertainment

0%

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0 5000 10000 15000 20000

Avg monthly household income (PPP $)

China Russia Saudi Arabia

% respondents taking foreign holidays

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300

400

500

0 1000 2000 3000 4000 5000 6000 7000 8000

Avg mthly household income (PPP, US$)

Brazil China Russia

Mthly spending on entertainment (PPP, US$)

Source: Credit Suisse Emerging Market Consumer survey Source: Credit Suisse Emerging Market Consumer survey

■ The inequality of income: As shown in Exhibit 14, given their population size, China and India are likely to be attractive markets for companies looking for growth opportunities; we also note that differing income levels within countries will drive different consumer preferences.

Exhibit 14: Household income distribution by market Number (in millions) of households earning % of households in each market earning

less than US$1,000 per mth greater than US$2,000 per mth

less than US$1,000 per mth greater than US$2,000 per mth

Brazil 32.9 10.8 57% 19% China 176.8 66.6 50% 19% India 198.1 37.0 66% 12% Indonesia 51.1 0.6 91% 1% Russia 18.0 11.7 39% 25% Egypt 16.1 0.5 87% 3% Saudi Arabia 0.2 4.8 3% 80%

Source: Credit Suisse Emerging Market Consumer survey, Credit Suisse Global Wealth Database, 2010

■ International versus local brands: Consistent with observations about the shift from essential to discretionary spending, the survey shows there are clear patterns of consumption of branded goods as income levels improve. As an example, Exhibit 15 shows the relative indifference of consumers in shifting away from local or unbranded dairy products as incomes rise (bottled water showed similar trends). In contrast, as an illustrated in Exhibit 16, consumers tend to move to international brands as incomes rise when purchasing cars (trends also replicated for perfumes).

23 March 2011


Exhibit 15: Purchases of local/unbranded dairy brands as

% of total purchases

Exhibit 16: Planned purchases of local car brands as % of

total purchases

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120%

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Avg mthly household income (PPP, US$)% re

spon

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s th

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ocal

dai

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rand

s

Brazil China India Russia

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0 1000 2000 3000 4000 5000 6000 7000 8000Avg mthly household income (PPP, US$)

% re

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s th

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lan

to b

uy a

loca

l car

bra

nd

Russia India China


Emerging Consumer survey: Travel trends A portion of the survey specifically addressed consumption of travel services and future intentions. However, before addressing the trends demonstrated by the survey, it is worth considering the levels of GDP per capita and also the proportion of GDP that is consumption driven in each of the surveyed countries (as illustrated in Exhibit 17) as this will in part explain differences within the survey output.

Exhibit 17: GDP per capita and consumption as % GDP, 2009

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SaudiArabia

Russia Brazil China Indonesia Egypt India0%

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GDP per capita $ (LHS) Consumption share of GDP % (RHS)

Source: IMF, EIU, UN

■ International holidays 82% correlated to GDP per capita: The survey shows the tendency to take holidays is relatively consistent across the seven countries in a range of c40-60% (Exhibit 18). However, there is a greater tendency towards international travel in countries with higher GDP per capita. Exhibit 21 shows a strong relationship between the % of respondents who took an international holiday and GDP per capita. Note the correlation would rise to 94% if Brazil were removed from the data set.

23 March 2011



months? % of respondents

Exhibit 19: Where did you go on holiday? % of respondents

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100

China Egypt India Saudi Brazil Russia Indonesia

Yes No

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At home Elsewhere in the country International Destination.


■ Outbound Chinese travel could rise five fold in 10 years: Using the Russian data from our survey as a benchmark suggests a doubling of GDP per capita in China would lead to a fivefold increase in international travel to c9% of the population or 120 million people over 10 years, assuming GDP per capita growth averages 7.2%.

Exhibit 20: What was the main form of transport that you

used to reach your holiday destination? % of respondents

Exhibit 21: International holidays 82% correlated to GDP

per capita

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Car Bus Train Ship Aeroplane

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Russia Brazil China Indonesia Egypt India0

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GDP per capita $ (LHS) International holiday % (RHS)

Source: Credit Suisse Emerging market consumer survey Source: Credit Suisse Emerging market consumer survey

■ Current confidence reflected in intentions to travel: When asked about taking holidays in the next 12 months, all except Egypt showed rising expectations relative to the prior 12 months, with the increase greatest in Brazil and China.

23 March 2011


Exhibit 22: Are you planning to go on holiday in next 12


Exhibit 23: Where are you planning to go for your next

holiday? % of respondents

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100


Yes No

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At home Elsewhere in the country International Destination.


■ Survey implies 232 million holidays in next 12 months: If we pro-rate the survey findings across the populations of each country, this implies a total of 232 million more holidays are planned for the coming 12 months on a base of 1.3 billion people, a rise of 18%. The impact of Chinese consumer intentions is significant with 153 million more holidays expected there.


months? Are you planning to take holiday in the next 12

months? LHS % of respondents; RHS (change pts YoY)

Exhibit 25: Our survey implies 232 million more holidays

planned for 2011 with 153 in China alone YoY change in planned holidays (millions)

0

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70

Brazil China Indonesia India Saudi Russia Egypt-4

-2

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Last year Next year Change pts (RHS)

-20

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Brazil China Indonesia India Saudi Russia Egypt

Source: Credit Suisse Emerging Market Consumer survey Source: Company data, Credit Suisse estimates

■ Urbanisation a driver of travel leisure intensions: As shown in Exhibit 26 there was a tendency in all countries for holidaying to be more prevalent for consumers in urban areas (by an average 11percentage points). Of the surveyed countries, China is expected to experience the greatest shift in urban population over the next decade (Source: UN). If Chinese behaviour demonstrated in our 2011 survey in urban and rural areas is unchanged, the expected shift in mix alone will likely drive 9% growth in holidaying over the next 10 years.

23 March 2011




Exhibit 27: Urbanisation mix shift implies 9% growth in

holidays over 10 years Urbanisation rate %

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80

Chi

na

Egy

pt

Indi

a

Sau

di

Bra

zil

Rus

sia

Indo

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a

Urban Rural

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100

Chi

na

Egy

pt

Indi

a

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Rus

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Indo

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a

2010 2020

Source: Credit Suisse Emerging market consumer survey Source: UN

Emerging Consumer Survey: Link to growth themes Our Global equity strategists focused on nine growth themes in 2011 Outlook: Sectors, themes and styles (dated 17 December 2010) with one being global travel. The principal argument is that, as emerging market consumers become richer, they are likely to travel more. World Bank data suggest that each $1,000 increase in GDP per capita increases flight departures per capita by around 4.5% (the IMF projects GDP per capita to grow from around $6,000 today to around $8,500 by 2015).

Exhibit 28: On World Bank data, each $1,000 increase in

GDP per capita is associated with a 4.5% increase in flight

departures per capita

Exhibit 29: When developed countries were at the same

level of development as emerging markets are today,

transportation was among the fastest growing areas of

consumer spending

Malaysia Argentina

BrazilTurkey

MexicoRussia

Poland

Croatia

Slovak RepublicSaudi Arabia

Korea

Czech Republic

Portugal

GreeceSpain

Japan

United Kingdom

France

Germany

United States

Austral ia

Finland

R2 = 0.75

0

5

10

15

20

25

30

5,000 15,000 25,000 35,000 45,000 55,000GDP per capita, US$

Flig

ht d

epar

ture

s pc

(/10

00)

4.6%

10.4%9.7%

7.2% 6.8% 6.2% 6.2%5.4%

4.6% 4.3%3.0%

0%

2%

4%

6%

8%

10%

12%

PC

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from

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S, J

apan

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nce

Source: World Bank, IMF Source: Credit Suisse Global Strategy (2011 Outlook: Sectors,

themes and styles, dated 17 December 2010)

23 March 2011


We note that when developed markets were at roughly the level of development emerging markets are today, transportation was the fastest growth area within consumer spending after telecommunication, growing on average by around 10% per year in real terms, compared with real consumer spending growth of around 8%. Boeing recently forecast that China’s passenger air traffic would grow at an annual rate of 7.9% pa over the next 20 years. Credit Suisse’s China airlines analyst, Ingrid Wei, forecasts China’s international air passenger traffic will grow at 15-20% in 2011.

Our strategists focused on the following as plays on strong structural growth of global travel: 1) beneficiaries of growth in Asian air travel tourism (eg, Air Asia, Air China, Singapore Airlines and Malaysia Airports); 2) Duty free (eg, Dufry) and 3) hotels – which is our focus throughout this report.

23 March 2011


Current GEM exposure The four Asian hotel stocks under our coverage are all pure plays on home market growth opportunities. Of the European and Asian peers, M&C, Rezidor and Starwood have leading positions. Owned/leased operating structures are most favoured by the Asian Upscale players with principally US focused players (Choice, IHG, Marriott and Starwood) at the other extreme (driven by management contracts and franchising). Choice has the least appealing existing emerging markets exposure.

Exhibit 30: Existing GEM exposure % of rooms (December-10)

0%

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100%

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Hom

e In

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Sha

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Man

darin

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Hon

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hang

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Rez

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Sta

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Hya

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Mar

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Cho

ice

Source: Company data. Note: throughout our analysis we have defined GEM as all markets outside US, Canada, Western Europe and Japan.

■ 27% of hotel systems are skewed to GEM: Of the 12 stocks within our global coverage, the current mix of GEM Markets rooms is 27%. As we discuss in more detail on page 16, the pipelines of these same operators are 59% skewed to these higher growth geographies.

■ M&C, Rezidor and Starwood have leading GEM positions: Among the non-Asian listed companies, M&C, Rezidor and Starwood have greatest GEM exposure.

■ EBITDA margins a function of market and model: As shown in Exhibit 31 EBITDA margins are a function of geography with a relatively close link between Exhibit 30 and Exhibit 31, although IHG benefits from low owned/leased exposure (see Exhibit 32).

23 March 2011


Exhibit 31: Group EBITDA margins (December 2010) %

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60%In

terC

ontin

enta

l

Kos

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Sha

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Hom

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Cho

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Sha

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iJi

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Chi

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Man

darin

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Sta

rwoo

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Acc

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Hya

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Rez

idor

Mar

riott

Source: Company data

Exhibit 32: Asset light structures more typical for mature market operators (Dec-10) Existing room system mix %

0%

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100%

Cho

ice

Inte

rCon

tinen

tal

Mar

riott

Sta

rwo

od

Hya

tt

Re

zido

r

Sh

ang

hai

Jinj

iang

Acc

or

Hom

e In

ns

Chi

na L

odg

ing

7 D

ays

Mill

enn

ium

&C

opth

orn

e

Sh

angr

i-La

Ho

ng

Ko

ng &

Sh

angh

ai

Ko

smo

polit

o

Owned/leased Managed Franchised


23 March 2011


Seizing the GEM growth opportunity Benchmarking the opportunity Exhibit 33: Brand penetration by market %, unless otherwise stated

0%

10%

20%

30%

40%

50%

60%

70%

80%

Italy

Rus

sia

Chi

na

ME

NA

Bra

zil

Eur

ope

Ger

man

y

Indi

a

Fra

nce

Spa

in

UK

US

Source: Accor Investor Day 2010, Jones Lang LaSalle, HVS

■ Brand penetration could at least double in most GEM regions: The US branded penetration (i.e. branded hotels as a % of the total market) at 70% is comfortably the highest globally but the 40% seen currently in major European markets sets a realistic benchmark for GEM, in our view. It implies a doubling of branded hotels is justified across China, the Middle East and Brazil.

■ Penetration of hotels significant below mature markets: Additionally, growth is justified by comparing penetration of rooms per head of population across markets, with 18 rooms per 1,000 urban inhabitants in the US versus 4 in China and less than 2 in the Middle East/Africa and Brazil.

23 March 2011


Exhibit 34: Benchmarking emerging market potential Total rooms per 1,000 urban inhabitants, unless otherwise stated

0.0

5.0

10.0

15.0

20.0

25.0

30.0In

dia

Bra

zil

Rus

sia

ME

NA

Chi

na UK

Ger

man

y

Fra

nce

US

Italy

Source: Accor investor day, Credit Suisse research

Pipeline comparison ■ 59% of hotel pipelines are skewed to GEM: The 12 global stocks included within our

analysis have a combined pipeline of c650,000 rooms of which 59% are in GEM.

■ 55% of US and European listed players are in GEM: If we exclude the Asian listed players, which tend to be focused on home regions, the pipeline mix is still 55% linked to GEM with M&C, Starwood, Rezidor, Accor and IHG above this average.

Exhibit 35: GEM pipeline mix % of room pipeline in GEM (December 2010)

0%

20%

40%

60%

80%

100%

7 D

ays

Chi

na L

odgi

ng

Hom

e In

ns

Kos

mop

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Mill

enni

um &

Cop

thor

ne

Sha

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ng

Sha

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La

Sta

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d

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idor

Acc

or

Hya

tt

Inte

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tinen

tal

Mar

riott

Cho

ice

Hon

g K

ong

&S

hang

hai


23 March 2011


Pipeline quality varies by region ■ Not all pipelines are equal: Breakdowns of pipeline data between hotels in the pre-

opening stage, under construction and planning stages are not readily available for individual companies across all markets. However, aggregate market data enable comparisons between regions and countries that we believe are significant.

Exhibit 36: Industry pipeline Pipeline as % existing

Exhibit 37: Proportion of pipeline under construction %

0%

5%

10%

15%

20%

25%

Mid

dle

Ea

st/A

fric

a

Asi

a P

aci

fic US

Ce

ntra

l/S

.A

me

rica

Can

ada

Car

ibb

ean

/Me

xico

Eu

rope

Pipeline under construction Pipeline not under construction

0%

10%

20%

30%

40%

50%

60%

70%

Asi

a P

acifi

c

Mid

dle

Eas

t/Afr

ica

Car

ibbe

an/M

exic

o

Cen

tral

/S.

Am

eric

a

Eur

ope

Can

ada

US

Source: STR Source: STR

■ Greatest growth in GEM: Pipeline growth plans are greatest in emerging markets with the pipeline of new hotels equal to 21% of existing supply in the Middle East and 10% in Asia Pac versus 6% in the US and 3% in Europe.

■ Highest quality pipeline in GEM: Equally important is the quality of pipelines which we measure as rooms under construction as a % of the total pipeline. Again the GEM regions trend better with over 50% of pipelines under construction versus just 17% in the US.

■ Pipeline plans supported by structural growth and broader vested interests: We believe government support for the sector (indirect and direct investment) and low penetration of hotel rooms per head of population are key factors supporting the more robust growth in GEM.

Exhibit 38: US pipeline quality has fallen but now stable US$ in millions, unless otherwise stated

Exhibit 39: Asia Pac pipeline quality sustained US$ in millions, unless otherwise stated

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

Se

p-0

7

No

v-0

7

Jan-

08

Mar

-08

May

-08

Jul-0

8

Sep

-08

No

v-0

8

Jan-

09

Ma

r-09

May

-09

Jul-0

9

Se

p-0

9

No

v-0

9

Jan-

10

Ma

r-10

May

-10

Jul-1

0

Se

p-1

0

Nov

-10

Jan-

11

In construction Not in construction

0

50,000

100,000

150,000

200,000

250,000

300,000

Jun-

09

Jul-0

9

Aug

-09

Sep

-09

Oct

-09

Nov

-09

Dec

-09

Jan-

10

Feb

-10

Mar

-10

Apr

-10

May

-10

Jun-

10

Jul-1

0

Aug

-10

Sep

-10

Oct

-10

Nov

-10

Dec

-10

In construction Not in construction

Source: STR Source: STR

Comparing growth plans ■ Global pipelines represent 21% more rooms: The combined pipelines of our

coverage universe imply 21% more planned rooms in total. This splits 44% in GEM and 12% in mature markets.

23 March 2011


■ Asia pure plays offer greatest system growth potential: The expected room growth of Kosmopolito, China Lodging and 7 Days is supported by the largest pipelines relative to existing systems.

■ IHG, Starwood and Rezidor set for greatest mix shift: The Asian pure plays will remain home market focused but it is IHG, HOT and REZ who are set to experience the greatest proportionate shift to GEM.

Exhibit 40: Total room growth Pipeline as % existing room system (Dec-10)

Exhibit 41: GEM room growth GEM pipeline as % existing GEM room system (Dec-10)

0%

20%

40%

60%

80%

Kos

mop

olito

Chi

na L

odgi

ng

7 D

ays

Man

darin

Orie

ntal

Rez

idor

Inte

rCon

tinen

tal

Sha

ngri-

La

Sha

ngha

iJi

njia

ng

Sta

rwoo

d

Hya

tt

Hom

e In

ns

Mill

enni

um &

Cop

thor

ne

Acc

or

Mar

riott

Cho

ice

Hon

g K

ong

&S

hang

hai

0%

20%

40%

60%

80%

Inte

rCon

tinen

tal

Hya

tt

Kos

mop

olito

Sta

rwoo

d

Rez

idor

Mar

riott

Acc

or

Mill

enni

um &

Cop

thor

ne

Chi

na L

odgi

ng

7 D

ays

Sha

ngha

iJi

njia

ng

Sha

ngri-

La

Cho

ice

Hon

g K

ong

&S

hang

hai

Source: Company data Source: Company data

■ Asset light growth dominates: We estimate 92% of total planned room additions (all geographies) are under asset light management contracts and franchises.

■ Preference for asset light growth: Broadly, we prefer growth via asset light mechanisms although higher returns for budget operators support differing approaches dependent on brand positioning. Notably IHG, Marriott and Starwood have not a single owned/leased hotel in their pipelines.

Exhibit 42: Existing room system mix % of system by ownership type (Dec-10)

Exhibit 43: Pipeline room mix % of pipeline by ownership type (Dec-10)

0%

20%

40%

60%

80%

100%

Cho

ice

Inte

rCon

tinen

tal

Mar

riott

Sta

rwoo

d

Hya

tt

Rez

idor

Sha

ngha

iJi

njia

ng

Acc

or

Hom

e In

ns

Chi

na L

odgi

ng

7 D

ays

Mill

enni

um &

Cop

thor

ne

Sha

ngri-

La

Hon

g K

ong

&S

hang

hai

Kos

mop

olito


0%

20%

40%

60%

80%

100%

Cho

ice

Inte

rCon

tinen

tal

Mar

riott

Sta

rwoo

d

Hya

tt

Hon

g K

ong

&S

hang

hai

Mill

enni

um &

Cop

thor

ne

Rez

idor

Sha

ngha

iJi

njia

ng

Acc

or

7 D

ays

Chi

na L

odgi

ng

Sha

ngri-

La

Kos

mop

olito


Source: Company data Source: Company data

■ Asian players lead EBITDA growth expectations: As shown in Exhibit 44, our (and where applicable consensus) forecast EBITDA growth is greatest for the Asian stocks led by China Lodging and Kosmopolito. Rezidor offers the greatest potential non-Asian growth profile with Hyatt the best of the US operators.

23 March 2011


Exhibit 44: 2010A-2013E EBITDA CAGR %

0%

10%

20%

30%

40%

50%C

hina

Lod

ging

Kos

mop

olito

7 D

ays

Rez

idor

Man

darin

Orie

ntal

*

Sha

ngri-

La

Hya

tt

Hon

g K

ong

&S

hang

hai*

Mar

riott

Sta

rwoo

d

Mill

enni

um &

Cop

thor

ne

Acc

or

Inte

rCon

tinen

tal

Cho

ice

Source: Company data, Credit Suisse estimates, * based on the BLOOMBERG PROFESSIONAL™ service

23 March 2011


Consolidation opportunities Branded operators dominate the US hotel market with the five largest US players controlling 45% of the market. We expect that more fragmented emerging markets will likely consolidate over time as mature market FCF is recycled into higher growth regions. Here we highlight companies generating significant excess FCF, with strong balance sheets and portfolio gaps as potential buyers, namely Marriott, Starwood, Hyatt and IHG. However, significant private shareholdings in most of the emerging market pure plays could prove a barrier to M&A. Additionally, we suspect the Economy Lodging segment will be consolidated by local rather than international players as occurred in the UK for example.

Assessing the opportunities ■ Four hotels groups will each generate more than $750m of excess FCF over

three years: As shown in Exhibit 45, we expect significant post dividend excess FCF to be generated by the largest stocks under our coverage. On our forecasts, Starwood, Hyatt, IHG and Marriott should all generate excess FCF of over $750m over the next three years and none has any balance sheet concerns (net debt/EBITDA below 2.5x in all cases).

Exhibit 45: 2011-2013E accumulated excess FCF US$ in millions, unless otherwise stated

Exhibit 46: December 2010A net debt/EBITDA x

0

200

400

600

800

1000

Sta

rwoo

d

Hya

tt

Inte

rCon

tinen

tal

Mar

riott

Mill

enni

um &

Cop

thor

ne

Acc

or

Kos

mop

olito

Chi

na L

odgi

ng

7 D

ays

Cho

ice

Rez

idor

Sha

ngri-

La

-2.0

0.0

2.0

4.0

6.0

8.0

10.0C

hina

Lod

ging

7 D

ays

Hya

tt

Rez

idor

Mill

enni

um &

Cop

thor

ne

Cho

ice

Acc

or

Mar

riott

Inte

rCon

tinen

tal

Sta

rwoo

d

Sha

ngri-

La

Kos

mop

olito

Source: Company data, Credit Suisse estimates Source: Company data

■ Chinese economy segment fragmented: The high growth Chinese Economy segment is fragmented. We would expect consolidation over the coming years but believe international operators are likely to avoid the largely owned/leased operations given lower returns relative to franchising and management contracts in the Upscale segment. That said, Accor (a significant Economy operator) was linked to Motel 168 in a Reuters article on 24 February 2011.

23 March 2011


Exhibit 47: China's top 10 branded economy hotels (as of 1H10-end) Ranking Brand Hotel

counts Hotel

room counts

Room Rate Establish Listing Note

1H10 (2009) Units Mkt shr Units Mkt shr per hotel

(Rmb)

1 (1) 如家 (Home Inn)

674 14.6% 78,231 15.5% 116 177 2002.6 2006.10 (US)

The largest budget hotel operator in China with two sub-brands: Home

Inn Express (main brand) and Yitel (premium brand for midscale

hotels). 2 (2) 锦江之星

(Jinjiang Inn) 358 7.8% 48,035 9.5% 134 181 1996.5 2006.12

(China) Jinjiang Inn (600754.CH) is the

budget hotel brand under Jinjiang International Group (2006.HK)

3 (4) 7天 (7 Days Inn)

399 8.7% 39,561 7.8% 99 165 2005.3 2009.11 (US)

Owns the largest number of registered membership (14mn as of 2010 Q3) and superior IT platform.

4 (3) 莫泰 168 (Motel 168)

220 4.8% 37,004 7.3% 168 190 2002 Private Two sub-brands: Motel 168 (main brand) and Motel 268 (premium brand). MS Private Equity owns

part of Motel 168 5 (5) 汉庭 (Han

Ting) 294 6.4% 33,718 6.7% 115 200 2005.4 2010.3

(US) Owns three sub-brands: HanTing

Seasons (premium brand), Express (main brand) and Hi-inn (low-end).

Founded by Ji Qi (Co-founder/former CEO of Ctrip and

Home inn). 6 (6) 格林豪泰

(GreenTree Inn)

232 5.0% 23,623 4.7% 102 200 2004.11 Private Under GreenTree Inns Hotel Management Group which was

founded by several American investment enterprises and is the

only wholly owned foreign hotel enterprise in China.

7 (7) 速 8 (Super 8)

167 3.6% 15,595 3.1% 93 207 1974 (US);

2004.4 (China)

2006.7 (US)

Under Wyndham Worldwide which is one of the world's largest

hospitality companies across six continents. Entered China in 2004.

8 (8) 宜必思 (ibis Hotel)

42 0.9% 7,661 1.5% 182 202 2004.4 (China)

2003.6 (France)

Under Accor, one of the world's leading hotel manager operating

hotels ranging from budget to upscale worldwide. Entered China

in 2004. 9 (9) 中州快捷

(Hotel Home)

25 0.5% 3,148 0.6% 126 143 2002.3 Private Focus on Henan Province; Udner Zhongzhou International Group, the

largest hotel group in middle and west China.

10 (12) 城市客栈 (City Inn)

19 0.4% 2,695 0.5% 142 237 2005 Private Focus on Guangdong; Under OCT International (华侨城), a leading professional hotel management

company (midscale + budget hotels)

Source: Inntie, Company data

■ Existing ownership a potential barrier to consolidation: As shown in Exhibit 48, many Asian operators have significant holders that may prove a barrier to M&A. Some are founders, others quasi governmental although others may have a shorter term investment horizon.

23 March 2011


Exhibit 48: Asia hotel groups overview US$ in billions, unless otherwise stated Company Rooms

(000s) Market cap

($bn) Free float Major holders Notes

Shangri-La 30 7.3 42% 42% Kuok Group Own and manage 66 hotels

Hong Kong & Shanghai Hotels

3 2.5 42% 51% Michael Kadoorie Peninsula

Mandarin Oriental 10 2.0 26% 74% Jardine Matheson 42 hotels (18 Asia, 12 Amer; 12 EMEA)

Shanghai Jinjiang 48 1.7 48% 51% Govt owned Budget China

Home Inns 84 1.3 49% 53% Veritas Asset Management Budget China; Nasdaq listing

China Lodging 34 1.0 69% 14% Qi Ji Budget China

7 Days 46 0.9 15% 32% Warburg Pincus; 25% Boguan He Budget China

Kosmopolito 4 0.4 27% 73% Varitronix (LCD player) 3-4 star segment (50% HK)

Source: Company data, Bloomberg

Credit Suisse Global analysts views Exhibit 49: Consolidation views Consolidation and merger views

Asia Pac

7 Days 7 Days is likely to gain market share through greenfield project, rather than M&A, given its business model.

China Lodging China Lodging has diversified product lines and is likely to consider M&A if the valuation is reasonable.

Shangri-La M&A unlikely as pursuing a owned/leased organic growth strategy

Kosmopolito The company has stated that it may divest some of its assets.

Europe

Accor Company indicated acquisitions in China a possibility. Linked to Motel 168 (China budget player) in Reuters article in February.

InterContinental IHG has indicated a desire to bulk out presence in Chinese Luxury/Upper Upscale segment via acquisition or via organic development.

Millennium & Copthorne We expect M&C to be a net seller of assets over the medium term but the company has retained the option to acquire and balance sheet would enable this.

Rezidor Carlson has a 50.1% stake in the company, which could increase over time - currently focusing on organic development of Radisson & Park Inn brands in EMEA, therefore we think M&A unlikely.

US

Choice The company has mentioned an interest in acquiring a brand and that it would look into more Upscale segments to diversify away from Economy.

Hyatt Company has not ruled out adding brands - potentially in Upper Upscale segment.

Marriott Company indicated acquisitions remain an option - more likely to be focused on building brand like Edition than targeting new markets.

Starwood Starwood has indicated it would do another Le Meridien type deal if the opportunity arose.

Source: Company comments, Credit Suisse research

23 March 2011


Valuation 1: Pricing GEM and mature market exposure Our valuation analysis is summarised in Exhibit 50, where we have applied a series of EBITDA multiple to GEM EBITDA to back out the multiple being paid for the mature market portion of European and US operators. We consider three valuation multiples for the GEM businesses:

■ The average current Asia Pac 2011E peer multiple calendarised of 12.8x

■ A low case of 11x and a high case of 15x

■ We apply the 2013E GEM EBITDA mix (i.e. giving credit for relatively near term GEM expansion) at these multiples and derive the implied multiples being paid for the mature market EBITDA streams.

Exhibit 50: What price emerging markets exposure? US$ in millions, unless otherwise stated Scenario 1 Scenario 2 Scenario 3

2011E EBITDA multiple

EBITDA mix GEM

2011-2013E EBITDA

CAGR

GEM EBITDA multiple

Mature market

EBITDA multiple

GEM EBITDA multiple

Mature market

EBITDA multiple

GEM EBITDA multiple

Mature market

EBITDA multiple

Asia Pac

7 Days 11.9 100% 35%

China Lodging 10.9 100% 40%

Shangri-La 15.3 100% 19%

Kosmopolito (calendarised) 13.2 100% 40%

Average 12.8 100% 33%

Europe

Accor 6.6 14% 12% 12.8 5.6 11.0 5.9 15.0 5.2

InterContinental 9.6 25% 10% 12.8 8.5 11.0 9.1 15.0 7.8

Millennium & Copthorne 7.3 50% 13% 12.8 1.7 11.0 3.6 15.0 -0.5

Rezidor 8.8 40% 29% 12.8 6.1 11.0 7.3 15.0 4.6

Average 8.1 32% 16% 12.8 5.5 11.0 6.5 15.0 4.3

US

Choice 13.3 2% 4% 12.8 13.3 11.0 13.3 15.0 13.3

Hyatt 12.7 9% 18% 12.8 12.7 11.0 12.9 15.0 12.5

Marriott 13.0 9% 16% 12.8 13.0 11.0 13.2 15.0 12.8

Starwood 12.9 28% 16% 12.8 12.9 11.0 13.6 15.0 12.1

Average 13.0 12% 13% 12.8 13.0 11.0 13.3 15.0 12.7

Source: Credit Suisse estimates; Thomson Reuters. Note priced based on 17 March closing prices.

Key observations:

■ The forecast EBITDA growth from the pure play Asia stocks is at least twice that of Europe and the US players.

■ The Asian peer group trades on a broadly similar EBITDA multiple to the US players.

■ On our base case (scenario 1) the US stocks are pricing in a c13x 2013 EBITDA multiple for the mature market EBITDA stream versus c6x for the European names.

■ The stocks that screen as pricing the lowest multiple for mature market EBITDA (see Exhibit 51) are Millennium & Copthorne, and Accor.

23 March 2011


■ If we adopt a more generous 15x EBITDA multiple for the emerging market exposure (in line with Shangri-La) then Starwood and Marriott emerge as the most attractively valued among the US names, with Choice the most expensive.

■ The Asian stocks with the cheapest multiples and greatest EBITDA growth potential are 7 Days and China Lodging.

Exhibit 51: Implied mature market 2011E EBITDA multiple

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Mill

enni

um &

Cop

thor

ne

Acc

or

Rez

idor

Inte

rCon

tinen

tal

Hya

tt

Sta

rwoo

d

Mar

riott

Cho

cie

Source: Credit Suisse estimates; Thomson Reuters. Note chart priced based on 17 March closing prices.

23 March 2011


Valuation 2: Through the Credit Suisse HOLT® lens ■ Comparison of forecast and market implied CFROI®: We have run two screens

from Credit Suisse HOLT across the global hotel sector including, where possible, listed stocks not under our coverage. In Exhibit 52 we rank stocks based on the gap between year 1 forecast CFROI and the market implied CFROI being currently priced in. The stocks furthest to the left are cheapest on this basis and those to the right have greatest CFROI improvement being priced in. We also derive a HOLT economic P/E in Exhibit 53 which is compared with history.

Exhibit 52: Comparison of historic and forecast CFROIs with market expectations %

0

5

10

15

20

25

30

35

40

Mill

enn

ium

&C

op

tho

rne

Ch

ina

Lo

dg

ing

Wh

itb

read

Acc

or

Ho

ng

Ko

ng

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han

gh

ai

Ho

me

Inn

s &

Ho

tels

Ko

smo

po

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Ch

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So

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7 D

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Sh

ang

hai

Jin

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r

NH

Ho

tele

s

Man

dar

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Inte

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nen

tal

Sh

ang

ri-L

aA

sia

Sta

rwo

od

Mar

rio

tt

CF

RO

I %

0

5

10

15

20

25

30

35

40

CF

RO

I %

CFROI - 5yr median CFROI - LFY Forecast CFROI Mkt Implied CFROI

Source: HOLT. Note chart priced based on 17 March close prices

Exhibit 53: HOLT economic P/E x

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Wh

itb

read

Ko

smo

po

lito

Mill

enn

ium

&C

op

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Acc

or

Mar

rio

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Ho

me

Inn

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Rez

ido

r

Ch

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Man

dar

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Inte

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ng

Ko

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han

gh

ai

Sh

ang

hai

Jin

Jian

g

NH

Ho

tele

s

Eco

no

mic

P/E

(x)

Current 5yr median 10yr median

Source: HOLT. Note chart priced based on 17 March close prices

23 March 2011


Focus on Brazil Exhibit 54: Origin of guests, 2009

Exhibit 55: Type of guest, 2009

Domestic85%

International15%

Tour operators

13%

Groups10%

Crew1%

Other5%

Transient business/

leisure23%

Corporate rates48%

Source: Jones Lang LaSalle Source: Jones Lang LaSalle

Exhibit 56: Branded market share, 2009

Exhibit 57: New room openings Number of rooms

Accor20%

Atlantica11%Other

54%

Sol Meliá3%

BHG5%

Blue Tree4%

Nacional Inn3%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2008 2009 2010 2011E 2012E

Source: Jones Lang LaSalle, Accor Source: Lodging Econometrics

■ There are currently 175 hotel (28,104 rooms) projects in the pipeline, largely concentrated in economy and mid-scale segments, of which c55% are under construction.

■ The market consists of c400k hotels, but only c26% of rooms are Chain affiliated (but this is only c8% of hotels).

■ The government has issued a cUS$550m line of credit to the hotel industry for refurbishments and construction ahead of the World Cup in 2014 and Summer Olympic Games in 2016.

23 March 2011


Focus on China Exhibit 58: Market is dominated by domestic, 2009

Exhibit 59: … and business travellers, 2009

Domestic85%

International15%

Business73%

Leisure27%

Source: InterContinental Hotels Source: InterContinental Hotels

Exhibit 60: Branded to continue taking share Number of rooms ‘000s, unless otherwise stated

Exhibit 61: Branded RevPAR premium v unbranded, 2009 %

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2010 2030EBranded Unbranded

11% CAGR

4% CAGR

-10%

0%

10%

20%

30%

40%

50%

5* Internationalbrand

5* Domestic brand 4* Internationalbrand

4* Domestic brand


Exhibit 62: Branded market share

Exhibit 63: Exposure to gateway/primary cities Number of rooms

IHG10%

Wyndham10%

Starwood5%

Marriott4%

Other65%

Accor6%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

IHG Marriott Accor Starwood Shangri-La

Hyatt Hilton

Gateway & Primary cities Other cities

Source: InterContinental Hotels Source: Marriott Hotels

■ Share of branded hotels will likely increase from 20% in 2010 to c50% in 2030E (implying 11% CAGR branded room growth).

■ 35% of hotels are owned by the state, with the balance in private hands (50% local, 15% foreign). IHG expects private ownership to rise to 80% by 2015.

■ 79% of the 336k room pipeline is currently under construction, demonstrating high visibility. To put this into perspective, whilst India and China have broadly similar populations, India’s pipeline is just 25% of that of China.

23 March 2011


Focus on India Exhibit 64: Market mix by geography, 2009

Exhibit 65: Market mix by purpose of stay, 2009

International26%

Domestic74%

Leisure40%

Business60%

Source: Federation of Hotel & Restaurant Associations of India Source: Federation of Hotel & Restaurant Associations of India

Exhibit 66: Presence of branded operators Number of rooms

Exhibit 67: New openings set to accelerate Number of rooms

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Starwood Marriott IHG Hyatt Accor Hilton

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2008 2009 2010 2011E 2012E

Source: Marriott Investor Day 2010 Source: Lodging Econometrics

■ 40% of the existing room stock is chain affiliated.

■ 50% of the current 80k room pipeline is under construction. The total pipeline accounts for 55% of the existing roomstock, and is the world’s 3rd largest pipeline.

■ The pace of new openings implies c10% CAGR room growth over the next couple of years.

■ However, we note land is expensive and must be purchased without financing, which restricts the scope for limited service brand penetration

23 March 2011


Focus on Middle East Exhibit 68: Market mix by geography, 2009

Exhibit 69: Market mix by purpose of stay, 2009

International59%

Domestic41%

Business64%

Leisure36%


Exhibit 70: Existing system & pipelines, Sept-10 Number of rooms

Exhibit 71: Pipeline market share

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

IHG Starwood Accor Hilton Marriott Rotana Rezidor M&C

Rooms Pipeline

IHG9%

Accor9%

Rotana9%

Starwood6%Hilton

6%

Other49%

Marriott12%

Source: Lodging Econometrics Source: InterContinental Hotels

Exhibit 72: Middle East room openings Number of rooms

Exhibit 73: Type of hotel owners, 2009 %

0

5,000

10,000

15,000

20,000

25,000

30,000

2008 2009 2010 2011E 2012E

Hight Net Worth

Individuals, 29%

Government/Royal, 26%

Mega Developler,

17%

Public/Pivate sector, 28%


■ There are 116k rooms in the Middle East and Africa pipeline (vs Q208 peak of 164k), with Dubai and Abu Dhabi accounting for c33% of projects.

■ The pipeline and new openings have been impacted by delays and cancellations given financing issues.

■ Recent geopolitical turmoil in the region could further impact development.

■ 55% of the pipeline is currently under construction.

■ 20% of existing hotel room supply is branded.

23 March 2011


Focus on Russia Exhibit 74: Guest origin, 2009

Exhibit 75: Type of guest, 2009

Domestic79%

International21%

Business65%

Leisure35%

Source: PKF Source: PKF

Exhibit 76: Branded market share, 2009

Rezidor33%

Marriott19%

IHG19%

Accor13%

Starwood3%

Hyatt3%

Hilton3%

Wyndham4%

Kempinski3%

Source: Rezidor Investor Day 2010

■ Room rates are among the highest in Europe driven by undersupply of hotel rooms.

■ The country will host the Winter Olympics in 2014 (in Sochi) and World Cup in 2018, which are likely to act as catalysts for hotel development.

■ Only c10% of total hotel room supply is branded. In particular, the country lacks branded hotels within the Economy segment.

23 March 2011


Asia Pacific / China Lodging

7 Days Group Holdings Ltd. (SVN.N / SVN

US) Company Update

Simple, easy and fast ■ China’s second-largest economy hotel operator with a 9.3% market

share: 7 Days operated 568 hotels and covered 89 cities in China, as of end-2010. Franchised hotels account for 43% of total hotels and management plans to raise this to over 50%. 7 Days targets a younger generation offering competitive room rates at the expense of location attractiveness. It plans to expand to more second and third-tier cities.

■ Keeping everything simple, easy and standard: 7 Days maintains one brand, one hotel format and one discounting policy. We believe that this simple business model enables the company to replicate hotels more rapidly across the whole country. Based on its strong online booking system and club membership, 7 Days is able to access its targeted consumers more accurately in a cost efficient way, which fits with its low-price strategy. As of 4Q10, the company had 16.5 mn club members. Some 70% of room nights booked through the company’s own booking website and 99.7% of room nights in 4Q10 are sold to club members, resulting in a lower-than-peer sales and marketing ratio.

■ New hotel openings to accelerate in 2011: 7 Days’ opening plan of 290 for 2011 compares with its 231 hotel openings in 2010. It also compares with Home Inns’ hotel openings of 260-280 and China Lodging’s hotel opening of 200 in 2011. This is due mainly to the accelerating franchised hotel openings. We expect the franchised hotel weighting to rise from 43% in 2010 to nearly 60% in 2013. We believe that the split shift will not only help 7 Days to establish network rapidly, but also drive up its overall margin.

■ Valuation and catalysts: Our DCF-based target price of US$27.9 implies 17.1x 2011E EV/EBITDA and 41.0x 2011E P/E, matching a 46% earnings CAGR for 2010-13E (representing a PEG of 0.7x). Catalysts include higher occupancy rates, a quicker ramp-up period, and stronger operation leverage.

Share price performance

010203040

Nov-09 Mar-10 Jul-10 Nov-10

050100150200

Price (LHS) Rebased Rel (RHS)

The price relative chart measures performance against the MSCI China Free index which closed at 64.19 on 18/03/11 On 18/03/11 the spot exchange rate was US$1./US$1

Performance Over

1M 3M 12M Absolute (%) -0.5 -7.2 85.6 Relative (%) 3.0 -5.0 83.9

Financial and valuation metrics

Year 12/10A 12/11E 12/12E 12/13E Revenue (Rmb mn) 1,498.9 2,016.3 2,563.0 3,104.8 EBITDA (Rmb mn) 350.4 504.9 686.5 848.3 EBIT (Rmb mn) 169.6 288.4 421.5 535.8 Net income (Rmb mn) 133.2 224.3 326.9 414.8 EPS (CS adj.) (Rmb) 2.66 4.48 6.52 8.28 Change from previous EPS (%) n.a. 0 0 0 Consensus EPS (Rmb) n.a. 4.17 6.06 — EPS growth (%) 505.0 68.4 45.7 26.9 P/E (x) 47.9 28.4 19.5 15.4 Dividend yield (%) — — — — EV/EBITDA (x) 17.4 12.1 8.6 6.8 P/B (x) 4.6 3.7 3.1 2.6 ROE 10.2 14.6 17.4 18.5 Net debt/equity (%) net cash net cash net cash net cash

Source: Company data, Thomson Reuters, Credit Suisse estimates.

*Stock ratings are relative to the relevant country benchmark. ¹Target price is for 12 months. [V] = Stock considered volatile (see Disclosure Appendix).

Research Analysts

Kevin Yin 852 2101 7655

[email protected]

Rating OUTPERFORM* [V] Price (18 Mar 11, US$) 19.36 Target price (US$) 27.90¹ Chg to TP (%) 44.1 Market cap. (US$ mn) 962.58 (US$ 962.58) Enterprise value (Rmb mn)

6,086 Number of shares (mn) 49.72 Free float (%) 22.46 52-week price range 24.97 - 9.31

23 March 2011


Europe / France Travel & Leisure

Accor (ACCP.PA) Company Update

Lowest GEM exposure in Europe ■ The least exciting GEM play in Europe: Relative to peers, we believe

Accor has the lowest exposure to GEM in our European coverage (excluding WTB). However, the stock remains significantly leveraged to a RevPAR recovery given low margins and a predominantly owned/leased system whilst asset restructuring is a key driver. We were disappointed by the lack of detail from the CEO’s debut at the February results and await the H2 Investor Day for any new details on brand positioning, restructuring and cash returns.

■ Other drivers dominate the equity story: We believe a lack of detailed disclosure of profits by geography and business model and limited pipeline data doesn’t enhance Accor’s opportunity to be considered an emerging markets play. However, what we know is that 14% of 2010A EBITDA was generated in emerging markets and around 50% of its pipeline is in those regions. However, in our global hotels scorecard Accor came 11 of 12 suffering from lower than average EBITDA growth, a relatively small pipeline and less impressive excess FCF generation. For us, our Outperform rating reflects the operational leverage and restructuring options at Accor coupled with a cheap valuation. At our target price, the stock would trade on a 2012E EV/EBITDA of only 7.4x and our GEM valuation analysis implies investors are being asked to pay just 5.6x EBITDA for the mature market profit streams (assuming 12.8x for GEM profits). Potential acquisition activity in the Chinese Economy segment could further shift the balance but we think there are better opportunities for emerging markets exposure among the European hotels.

■ Catalysts: Q1 revenues (20 April); asset disposal news; H2 2011 Investor day.

■ Target price of €39.8 implies 29% potential upside: Our target price is based on the average of our DCF and sum-of-the-parts. At our target price Accor would trade on a 2012E PE of 23x but an EV/EBITDA of just 7.4x. With 29% potential upside to our TP, we retain an Outperform rating.


17

27

37

Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10

Price Price relative

The price relative chart measures performance against the Europe Dow Jones Stoxx index which closed at 273.22 on 18/03/11 On 18/03/11 the spot exchange rate was Eu .71 /US$1

Performance Over

1M 3M 12M Absolute (%) -13.1 -6.4 -24.0 Relative (%) -5.5 -5.4 -23.6


Year 12/10A 12/11E 12/12E 12/13E Revenue (Eu m) 5,948.0 6,402.3 6,846.7 7,241.0 EBITDA (Eu m) 880.00 1,003.09 1,101.53 1,187.82 Net Income (Eu m) 280.0 323.6 384.5 426.9 CS adj. EPS (Eu) 1.23 1.43 1.69 1.88 Prev. EPS (Eu) — — — — ROIC (%) 8.60 9.73 12.71 15.23 P/E (adj., x) 25.00 21.63 18.21 16.40 P/E rel. (%) 196.0 205.5 193.6 — EV/EBITDA 8.7 6.7 5.5 4.6

Dividend (12/11E, Eu) 0.72 IC (12/11E, Eu m) 3,950.8 Dividend yield (%) 2.3 EV/IC 1.7 Net debt (12/11E, Eu m) -192.1 Current WACC 9.6 Net debt/equity (12/11E, %) -4.6 Free float (%) 100.0 BV/share (12/11E, Eu) 17.0 Number of shares (m) 225.46

Source: FTI, Company data, Thomson Reuters, Credit Suisse Securities (EUROPE) LTD. Estimates.

*Stock ratings are relative to the coverage universe in each analyst's or each team's respective sector. ¹Target price is for 12 months.

Research Analysts


[email protected]

Sanjeet Aujla 44 20 7888 0353

[email protected]

Julia Pennington 44 20 7888 0157

[email protected]

Rating OUTPERFORM* Price (18 Mar 11, Eu) 30.86 Target Price (Eu) 39.80¹ Market cap. (Eu m) 6,957.64 Enterprise value (Eu m) 6,765.6

23 March 2011


Asia Pacific / China Travel & Leisure

China Lodging Group (HTHT.OQ / HTHT US) Company update

Growth quality to underpin long term success ■ China’s fifth-largest economy hotel operator with a 7.8% market share:

China Lodging (Han Ting) operated 438 hotels in 65 Chinese cities, as of 2010. Franchised hotels accounted for 45% of total hotels and management targets 50% in the future. Han Ting has a diversified branding strategy: Han Ting Express (the mass segment), Seasons (the mid-scale segment) and Hi-inn ( the low-priced segment). It plans to adjust the brand mix to 76:11:13 in three to five years’ time. Han Ting targets a relatively even geographical distribution for its hotels in first, second and third-tier cities.

■ A good balance in growth momentum and growth quality: We estimate Han Ting’s adjusted core EBITDA will experience a 38.7% CAGR over 2010-13E and 31.0% in 2010-15E, outpacing 7 Days and Home Inns. Han Ting achieves a higher occupancy rate, RevPAR, core EBITDA and net margin, despite charging higher room rates. Han Ting’s earnings are less vulnerable under an inflationary environment. We expect Han Ting’s stronger capability in translating hotel expansion into earnings growth to further underpin its long-term growth.

■ High RevPAR to underpin growth quality: Han Ting’s RevPAR is Rmb169 2010 (excl EXPO contribution), higher than its major peers (Rmb144 for 7 Days and Rmb164 for Home Inns). Han Ting’s pricing strategy matches its philosophy of focus on growth quality. Also, the company has strict control on IRR of every single leased hotel cross China. Compared with its peers, Han Ting is more cautious on franchised hotel opening. 50% of its 2011 planned hotel opening is franchised hotels, compared with Home Inns’ 61% and 7 Days’ 72%. Han Ting’s strategy would lead to a slower opening pace and a lower blended margin, but likely better growth quality.

■ Valuation and catalysts: Our DCF-based target price of US$26.9 implies 17.1x 2011E EV/EBITDA and 44.7x 2011E P/E, matching a 52.2% normalized earnings CAGR for 2010-13E (representing a PEG of 0.86x). Catalysts include higher occupancy rates, quicker ramp-up period for new hotels, and stronger operation leverage.


010203040

Mar-10 Jul-10 Nov-10

100120140160180


The price relative chart measures performance against the MSCI China Free index which closed at 64.19 on 18/03/11 On 18/03/11 the spot exchange rate was US$1./US$1

Performance Over

1M 3M 12M Absolute (%) 5.8 -12.1 — Relative (%) 9.4 -10.0 —


Year 12/10A 12/11E 12/12E 12/13E Revenue (Rmb mn) 1,738.5 2,397.5 3,313.4 4,171.4 EBITDA (Rmb mn) 438.4 556.1 847.0 1,072.4 EBIT (Rmb mn) 269.4 315.7 527.5 673.4 Net income (Rmb mn) 228.9 244.4 399.4 513.0 EPS (CS adj.) (Rmb) 3.91 3.95 6.45 8.29 Change from previous EPS (%) n.a. 0 0 0 Consensus EPS (Rmb) n.a. 3.44 6.18 — EPS growth (%) 255.0 1.1 63.4 28.5 P/E (x) 30.6 30.2 18.5 14.4 Dividend yield (%) — — — — EV/EBITDA (x) 14.0 11.4 6.9 5.3 P/B (x) 2.8 3.4 2.9 2.4 ROE 20.7 11.5 17.2 18.5 Net debt/equity (%) net cash net cash net cash net cash



Research Analysts

Kevin Yin 852 2101 7655

[email protected]

Rating OUTPERFORM* [V] Price (18 Mar 11, US$) 18.17 Target price (US$) 26.90¹ Chg to TP (%) 48.0 Market cap. (US$ mn) 1,095 (US$ 1,095) Enterprise value (Rmb mn)

6,317 Number of shares (mn) 60.26 Free float (%) 25.04 52-week price range 27.07 - 13.90

23 March 2011


Americas / United States Restaurants

Choice Hotels (CHH) Company update

Franchising model and lower tier brands limit CHH’s emerging markets opportunity ■ Choice Hotels provides the least exposure and growth opportunities

into emerging markets among the US-based lodging companies. CHH employs a franchise-only business model, which is a limiting factor considering that most expansion into GEM comes in the form of management contracts. In addition, Choice’s brand portfolio skews towards the lower end of the chain scale, and most of the development opportunities in emerging markets (especially China and India) are in the 4 to 5 star property class. We think that the limited unit growth opportunity for CHH both domestically and internationally will continue to be a drag on shares.

■ We believe investors will continue to favor early cycle recovery stories like H, HOT, and MAR which have leverage to elements of owned real estate, incentive fee growth, and strong positions in full-service upper-upscale/luxury segments as well as international pipelines. We do not see too much potential downside in CHH shares (our target price of US$35 provides 9% downside to the current price). Also, with limited escalation in royalty rates, we see few levers for CHH to materially boost EPS growth in the next few years.

■ Catalysts: 1) 1Q11E EPS 2) improvement in economy-scale RevPAR trends 3) accelerated share repurchases or increased dividends and 4) improvement in hotel construction financing.

■ Valuation: Our target price on CHH shares of $35 is based on an 18.5x multiple of our 2013 EPS estimate. This equates to a multiple of 12x our 2013 EBITDA estimate discounted back to a one-year point.


29

34

39

Mar-10 Jun-10 Sep-10 Dec-10

Daily Mar 22, 2010 - Mar 18, 2011, 3/22/10 = US$34.44

Price Indexed S&P 500

On 03/18/11 the S&P 500 index closed at 1279.2

Quarterly EPS Q1 Q2 Q3 Q4 2010A 0.26 0.45 0.68 0.42 2011E 0.25 0.47 0.61 0.41 2012E 0.26 0.49 0.64 0.43


Year 12/10A 12/11E 12/12E 12/13E EPS (CS adj.) (US$) 1.81 1.74 1.83 1.89 Prev. EPS (US$) — — — — P/E (x) 21.3 22.2 21.1 20.4 P/E rel. (%) 144.0 172.3 185.4 — Revenue (US$ m) 596.1 635.7 659.9 680.7 EBITDA (US$ m) 170.9 178.7 186.0 192.2 OCFPS (US$) 2.43 1.86 1.95 2.02 P/OCF (x) 15.8 20.7 19.8 19.1 EV/EBITDA (current) 14.4 13.5 12.7 12.0 Net debt (US$ m) 161 114 62 7 ROIC (%) 106.40 96.46 90.05 83.75

Number of shares (m) 59.55 IC (12/11E, US$ m) 1,040.13 BV/share (current, US$) -0.91 EV/IC (x) 2.3 Net debt (current, US$ m) 162.0 Dividend (12/10A, US$) — Net debt/tot. cap. (current, %) 6.6 Dividend yield (%) —

Source: Company data, Credit Suisse estimates.

*Stock ratings are relative to the relevant country benchmark. ¹Target price is for 12 months.

Research Analysts

Joel Simkins 212 325 5380

[email protected]

Rating UNDERPERFORM* Price (18 Mar 11, US$) 38.61 Target price (US$) 35.00¹ 52-week price range 41.25 - 29.57 Market cap. (US$ m) 2,299.38 Enterprise value (US$ m) 2,412.88

23 March 2011



Hyatt Hotels (H) Company Update

Solid expansion into GEM, but US owned assets will contribute majority of EBITDA ■ Hyatt is second only to Starwood among US lodging companies in its

current exposure and expansion plans into emerging markets. About 21% of Hyatt’s current portfolio is located in emerging markets, which should increase as 59% of the pipeline will come from GEM. While we believe Hyatt is making a meaningful push into emerging markets through management contracts, EBITDA will be driven largely by the company’s owned portfolio, which has only about 8.8% of its rooms in GEM. The total owned portfolio accounted for approximately 72% of overall EBITDA for Hyatt in 2010.

■ We remain positive on H shares as the company has considerable leverage in a lodging recovery due to its large owned portfolio. Hyatt is well positioned for selective acquisitions with about $1.6bn in cash and an additional $1.1bn in liquidity. Given management’s stated strategy, we believe H is constantly evaluating opportunistic dispositions given the rising valuations for lodging assets in key markets. We continue to look for more colour on asset sales as the next immediate catalyst for H shares. Furthermore, we are pleased that Hyatt is making a strong push for international expansion with 70% of its current pipeline (32,000 rooms) located outside of North America.

■ Catalysts: 1) Update on corporate rates, 2) improvement in trading liquidity through stock sales, 3) owned assets sales, 4) international pipeline growth.

■ Valuation: We are reiterating our $54 target price based on a multiple of 12x our 2013 EBITDA estimate discounted back to a one-year forward point.


33384348


Daily Mar 22, 2010 - Mar 18, 2011, 3/22/10 = US$37.91





Year 12/10A 12/11E 12/12E 12/13E EPS (CS adj.) (US$) 0.31 0.48 0.98 1.43 Prev. EPS (US$) — — — — P/E (x) 138.8 88.6 43.3 29.8 P/E rel. (%) 938.8 685.8 379.5 — Revenue (US$ m) 3,527.0 3,829.3 4,278.2 4,744.4 EBITDA (US$ m) 476.0 545.8 670.7 781.3 OCFPS (US$) 2.58 2.09 2.59 3.03 P/OCF (x) 17.7 20.4 16.4 14.0 EV/EBITDA (current) 14.8 13.0 10.3 8.4 Net debt (US$ m) -339 -303 -514 -842 ROIC (%) 1.31 2.36 3.94 5.43

Number of shares (m) 173.94 IC (12/11E, US$ m) 2,203.59 BV/share (current, US$) 29.5 EV/IC (x) 3.2 Net debt (current, US$ m) -323.3 Dividend (12/10A, US$) — Net debt/tot. cap. (current, %) -3.8 Dividend yield (%) —



Research Analysts


[email protected]

Rating OUTPERFORM* Price (18 Mar 11, US$) 42.50 Target price (US$) 54.00¹ 52-week price range 49.57 - 34.98 Market cap. (US$ m) 7,392.65 Enterprise value (US$ m) 7,090.06

23 March 2011


Europe / United Kingdom Travel & Leisure

InterContinental Hotels (IHG.L) Company Update

Asset light GEM growth play ■ Remains top sector pick in Europe: With 22% potential upside to our

target price, we retain IHG as our preferred large cap pick in the European Hotel space. The company has built an enviably strong pipeline of GEM hotels which supports a three-year EBITDA CAGR of 18% in this segment. With investors being asked to pay just 8.5x 2011E mature market EBITDA currently, the stock looks exceptional value relative to global peers and we reiterate our Outperform rating.

■ Large cap European play on GEM: Within our large cap European coverage (ACCP, IHG and WTB) we see IHG as the best placed to leverage emerging market opportunities. The company ranked 7 of 12 in our global scorecard held back by relatively low existing GEM exposure and EBITDA growth but benefiting from a significant pipeline which is skewed to GEM and supports a three-year EBITDA CAGR of 18% in those geographies. The group’s pipeline at 205,000 rooms is nearly twice the size of nearest rival Marriott (105,000 rooms), with 58% of those rooms in GEM and 100% being either managed or franchised. The current business model and future growth should continue to support EBITDA margins at the top end of the peer group. Further investment in a Chinese Luxury or Upscale brand (a stated aim for the company) could further enhance the importance of the GEM story for IHG.

■ Catalysts: IHG Q1 results May, asset disposal news, RevPAR data points.

■ Retain 1560p target price, 22% upside potential: IHG now trades on a 2011E EV/EBITDA of 10.1x versus Marriott at 13.3x, with the implied 32% premium above the 23% average over the last five years. Based on our GEM valuation analysis, the differential is greater still. Valuing both companies GEM EBITDA on 12.8x (in line with the Asian peers) it implies the mature market EBITDA multiple ascribed to IHG is 8.5x versus 13.0x for Marriott – a 53% premium that we find difficult to justify and thus reiterate our Outperform rating.


519

1019



The price relative chart measures performance against the Index - United Kingdom FTSE All Share index which closed at 2973.64 on 18/03/11 On 18/03/11 the spot exchange rate was £.87/Eu 1. - Eu .71/US$1

Performance Over

1M 3M 12M Absolute (%) -11.2 3.2 27.0 Relative (%) -5.8 5.7 23.4


Year 12/10A 12/11E 12/12E 12/13E Revenue (US$ m) 1,628.0 1,736.7 1,891.2 2,007.7 EBITDA (US$ m) 552.00 646.82 736.31 791.24 Pre-tax profit (US$ m) 382.0 478.6 564.3 619.1 CS adj. EPS (US$) 0.96 1.16 1.35 1.46 Prev. EPS (US$) — — — — ROIC (%) 32.38 38.28 46.70 52.50 P/E (adj., x) 21.56 17.77 15.28 14.13 P/E rel. (%) 170.3 162.3 154.2 — EV/EBITDA 12.2 10.1 8.4 7.5

Dividend (12/11E, p) 0.57 IC (12/11E, US$ m) 1,004.2 Dividend yield (%) 0.0 EV/IC 6.5 Net debt (12/11E, US$ m) 513.8 Current WACC 9.6 Net debt/equity (12/11E, %) 104.8 Free float (%) 100.0 BV/share (12/11E, US$) 1.7 Number of shares (m) 289.73



Research Analysts


[email protected]


[email protected]


[email protected]

Rating OUTPERFORM* Price (18 Mar 11, p) 1,274.00 Target Price (p) 1,560.00¹ Market cap. (US$ m) 5,993.45 Enterprise value (US$ m) 6,512.3

23 March 2011


Asia Pacific / Hong Kong Lodging

Kosmopolito Hotels International Ltd. (2266.HK / 2266 HK)

Company Update

A regional hotel chain in the making ■ Proven track record in value creation: KHI operates a portfolio of 15

boutique, value, mid-scale and upscale hotels in Hong Kong, China and Malaysia, with another seven in the pipeline. Over the past 10 years, the company has adopted a flexible development strategy – acquiring and converting old buildings into hotels. Such a strategy has proven to be value accretive.

■ Robust pipeline warrants further growth: KHI is expected to raise its room capacity from 3,889 now to 6,295 in the next three years by opening seven new hotels. We expect the next ramp-up of new hotels to drive a 107.6% earnings CAGR between FY3/10 and FY3/13E, albeit from a low base due to the H1N1 outbreak and the financial crisis in 2008-09.

■ Rebranding exercise to enhance value further: KHI will start a rebranding exercise to consolidate its portfolio into four new brands to enhance customer awareness and facilitate the development of a centralised reservation system. Furthermore, KHI is actively seeking hotel management contracts, which may serve to accelerate its portfolio expansion.

■ Rated OUTPERFORM, valuation based on NAV: KHI has a substantial capacity expansion pipeline, which should nearly double its room inventory in three years. We believe it is more reasonable to value KHI on its net asset value (NAV), instead of any earnings-based valuation metrics, as such a metric will fail to capture its strong core earnings growth potential in the next five years. Our rating on KHI is Outperform and our target price at HK$2.56 is based on a 40% discount to its FY3/12E NAV.


01234

Oct-10 Feb-11

8090100110120


The price relative chart measures performance against the MSCI China Free index which closed at 64.19 on 18/03/11 On 18/03/11 the spot exchange rate was HK$7.8/US$1

Performance Over

1M 3M 12M Absolute (%) -7.9 -19.3 — Relative (%) -4.7 -17.3 —


Year 3/10A 3/11E 3/12E 3/13E Revenue (HK$ mn) 616.3 816.1 1,278.4 1,708.7 EBITDA (HK$ mn) 201.2 341.7 584.2 839.4 EBIT (HK$ mn) 132.9 246.8 454.5 683.2 Net income (HK$ mn) 45.8 123.2 251.9 409.6 EPS (CS adj.) (HK$) 0.03 0.06 0.13 0.20 Change from previous EPS (%) n.a. 0 0 0 Consensus EPS (HK$) n.a. — — — EPS growth (%) -42.6 114.0 104.5 62.6 P/E (x) 52.5 24.5 12.0 7.4 Dividend yield (%) — 1.4 2.9 4.7 EV/EBITDA (x) 32.1 18.6 11.2 7.3 P/B (x) 16.4 1.1 1.0 0.9 ROE 32.4 8.4 8.8 13.1 Net debt/equity (%) 1,869.3 120.3 118.9 94.0



Research Analysts


[email protected]

Rating OUTPERFORM* [V] Price (18 Mar 11, HK$) 1.51 Target price (HK$) 2.56¹ Chg to TP (%) 69.5 Market cap. (HK$ mn) 3,020.00 (US$ 387.19) Enterprise value (HK$ mn) 6,342 Number of shares (mn) 2,000.00 Free float (%) 27.00 52-week price range 2.05 - 1.49

23 March 2011



Marriott International (MAR) Company update

Leaning more towards US growth, GEM exposure less compelling than competitors ■ Among the large cap US lodging companies, Marriott has the lowest

percentage of its current portfolio dedicated to emerging markets, with 11% of total rooms. In addition, the majority of MAR’s pipeline is focused on domestic expansion with emerging markets only representing about 33% of room growth. We believe Marriott has shown solid results in ramping up to about 21,400 rooms in China, given the company’s late entry into the market in 1997. The company will continue to focus on expanding its Ritz Carlton presence in order to capitalize on the appetite for luxury brands in China. With that being said, we view most of Marriott’s upside coming from growth in units and incentive fees in the US.

■ MAR remains a lower risk opportunity for investors looking for exposure to a global lodging recovery, in our view, given the company’s asset-light business model, significant distribution across many segments and brands, as well as its strong balance sheet and willingness to return capital to shareholders. We believe the recent timeshare announcement highlight’s management creativity. While we are favoring HOT (Starwood) and H (Hyatt), given owned asset operating leverage, we believe investors may consider MAR given its leverage to mid-late cycle lodging trends.

■ Catalysts: 1) Incremental RevPAR improvements in key markets 2) increases in dividend payout 3) incremental hotel announcements 4) potential strategic acquisitions 5) completion of timeshare spin-off.

■ Valuation: Our target price of $50 on MAR is based on a multiple of 13x our 2013 EBITDA estimate discounted back to a one-year forward point.


25303540


Daily Mar 22, 2010 - Mar 18, 2011, 3/22/10 = US$29.55





Year 12/10A 12/11E 12/12E 12/13E EPS (CS adj.) (US$) 1.15 1.41 1.71 2.15 Prev. EPS (US$) — — — — P/E (x) 33.0 26.9 22.2 17.7 P/E rel. (%) 223.0 208.4 194.3 — Revenue (US$ m) 11,691.0 12,910.2 14,527.6 16,297.0 EBITDA (US$ m) 1,044.6 1,199.2 1,374.1 1,627.4 OCFPS (US$) 3.11 1.89 2.19 2.63 P/OCF (x) 13.4 20.1 17.3 14.5 EV/EBITDA (current) 15.5 13.3 11.3 9.3 Net debt (US$ m) 2,324 2,101 1,762 1,262 ROIC (%) 14.07 15.39 17.03 19.11

Number of shares (m) 364.25 IC (12/11E, US$ m) 4,741.05 BV/share (current, US$) 4.4 EV/IC (x) 3.4 Net debt (current, US$ m) 2,311.4 Dividend (12/10A, US$) — Net debt/tot. cap. (current, %) 15.5 Dividend yield (%) —



Research Analysts


[email protected]

Rating OUTPERFORM* Price (18 Mar 11, US$) 37.97 Target price (US$) 50.00¹ 52-week price range 42.54 - 28.74 Market cap. (US$ m) 13,830.39 Enterprise value (US$ m) 15,931.35

23 March 2011


Europe / United Kingdom Travel & Leisure

Millennium & Copthorne (MLC.L) Company upadte

High existing GEM exposure supports short term although lacks system growth ■ Attractive existing market exposure: 55% of 2010 EBITDA was generated

in GEM and we believe exposure to GEM will remain attractive in the near term and support our 2011E EPS forecasts, 11% above consensus. The primary drivers of the investment case are reinvestment which is not reflected in forecasts and potential asset disposals rather than system growth. With the stock having underperformed the European sector by 4% YTD, we reiterate our Outperform rating and note 26% potential upside to our target price.

■ GEM market exposure and restructuring potential are key with FCF a notable attraction: The existing footprint of M&C links well to the GEM exposure thesis with 55% of 2010 EBITDA generated in GEM – the highest of any of the European or US stocks under our coverage. We are more bullish on the outlook for Asian RevPAR growth in 2011 than both the US and Europe and as such the near-term EPS growth at M&C is impressive (2010-2012E EPS CAGR 19%). However, the group is principally an asset play rather than a system growth play with re-investment in existing hotels the likely area of earnings upside. We estimate the re-investment plan (£100m in four hotels) could boost 2013 EPS by 12-16%. Additionally, we highlight the cumulative FCF generation of c£500m between 2010-2013E and strong balance sheet (2010A net debt/EBITDA of 0.2x) leaves the group with scope for reinvestment and potential cash returns.

■ Catalysts: M&C report Q1 results on 6 May.

■ Target price implies 26% potential upside: Our target price is the average of our DCF (610p) and adjusted NAV per share (680p). On our forecasts, M&C trades on a 2011E PE of 13.7x for a 2010-2012E EPS CAGR of 19%. With scope for benefits from the reinvestment programme still to be factored into forecasts, we retain our Outperform rating.


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The price relative chart measures performance against the Index - United Kingdom FTSE All Share index which closed at 2973.64 on 18/03/11 On 18/03/11 the spot exchange rate was £.87/Eu 1. - Eu .71/US$1

Performance Over

1M 3M 12M Absolute (%) -14.6 -7.4 12.1 Relative (%) -9.4 -5.2 8.9


Year 12/10A 12/11E 12/12E 12/13E Revenue (£ m) 743.7 801.9 837.1 864.6 EBITDA (£ m) 176.80 221.14 249.33 262.85 Pre-tax profit (£ m) 127.0 166.6 190.2 208.0 CS adj. EPS (p) 29.42 37.35 42.36 46.01 Prev. EPS (p) — — — — ROIC (%) 4.78 5.88 6.52 6.85 P/E (adj., x) 17.35 13.67 12.05 11.09 P/E rel. (%) 137.0 124.9 121.6 — EV/EBITDA 9.9 7.4 6.1 5.4

Dividend (12/11E, p) 12.45 IC (12/11E, £ m) 2,258.1 Dividend yield (%) 2.4 EV/IC 0.72 Net debt (12/11E, £ m) 52.7 Current WACC 9.4 Net debt/equity (12/11E, %) 2.4 Free float (%) 46.5 BV/share (12/11E, £) 6.5 Number of shares (m) 313.29



Research Analysts


[email protected]


[email protected]


[email protected]

Rating OUTPERFORM* Price (18 Mar 11, p) 510.50 Target Price (p) 645.00¹ Market cap. (£ m) 1,599.33 Enterprise value (£ m) 1,635.3

23 March 2011


Europe / Sweden Travel & Leisure

Rezidor Hotel Group (REZT.ST) Company update

An asset light approach to EMEA emerging markets ■ European SMID Focus List stock: Rezidor holds the Master Franchise

Agreement with Carlson Hotels to rollout the Radisson Blu and Park Inn brands within the EMEA region. We believe company offers attractive growth prospects in the Middle East & Africa (MEA) and Eastern European regions.

■ Not just an operational gearing play: Whilst Rezidor is highly geared to cyclical recovery (1% RevPAR moves FY11E EBITDA by 5%), given the significance of fixed leases, particularly in Western European, we believe investors will gradually become more interested in the GEM aspect of the investment thesis. The stock ranked 2 of 12 on our Global Scorecard highlighting the scope for GEM to drive investor interest, in our view.

■ Asset light growth in emerging markets: Rezidor’s total pipeline of 21k rooms represents c30% of its existing room stock, implying strong near-term room growth. Whilst c35% Rezidor’s existing room portfolio is located in MEA and Eastern Europe, these regions account for c70% of its pipeline. Critically, all of the company’s exposure in these regions are in asset light management and franchised contracts (with few financial guarantees), which generate 50%-70% EBITDA margins. Therefore, the region will continue to be a meaningful profit driver as the company expands. We estimate the improving business mix towards management/franchised in the regions should improve group EBITDA margin by c250bps over the next three years.

■ Valuation attraction becoming more visible: The stock is currently trading on a FY11E EV/EBITDA of 9.0x, which falls materially to 6.5x in FY12E given the strong earnings growth profile (we forecast 50% FY10-13 EBITDA CAGR). On our blue sky scenario, if we assume the company reaches peak RevPAR levels by FY14 - applying a 15x P/E multiple to the earnings and discounting back using a WACC of 8.2%, we derive a fair value of SKr 65, offering 75% potential upside.


12

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32

42



The price relative chart measures performance against the Sweden Affarsvalden WAL index which closed at 337.06 on 18/03/11 On 18/03/11 the spot exchange rate was SKr8.9/Eu 1. - Eu .71/US$1

Performance Over

1M 3M 12M Absolute (%) 8.5 -7.9 24.1 Relative (%) 9.8 -3.7 14.6


Year 12/10A 12/11E 12/12E 12/13E Revenue (Eu m) 785.7 871.9 933.8 987.2 EBITDA (Eu m) 31.40 64.34 86.46 106.27 Net Income (Eu m) -4.2 19.2 34.0 46.4 CS adj. EPS (Eu) -0.03 0.13 0.23 0.32 Prev. EPS (Eu) — — — — ROIC (%) -5.18 104.78 117.66 123.55 P/E (adj., x) NM 31.75 17.93 13.15 P/E rel. (%) NM 787.6 499.1 — EV/EBITDA 18.8 9.0 6.5 5.0

Dividend (12/11E, SKr) 0.04 IC (12/11E, Eu m) 162.7 Dividend yield (%) 0.12 EV/IC 3.6 Net debt (12/11E, Eu m) -31.7 Current WACC 8.2 Net debt/equity (12/11E, %) -16.3 Free float (%) 49.9 BV/share (12/11E, Eu) 1.3 Number of shares (m) 146.31



Research Analysts


[email protected]


[email protected]


[email protected]

Rating OUTPERFORM* Price (18 Mar 11, SKr) 37.10 Target Price (SKr) 50.00¹ Market cap. (Eu m) 609.96 Enterprise value (Eu m) 578.2

23 March 2011


Asia Pacific / Hong Kong Lodging

Shangri-la Asia (0069.HK / 69 HK) Company update

Upcycle continues with room rate hike to drive further earnings growth ■ Room rate hike the next driver: Having seen a strong 30% YoY growth in

revenue per available room (RevPAR) in 1H10, which had been driven largely by an improvement in occupancy rate, we expect the strong growth to remain, with rising room rate as the next driver, which may lead to an upside surprise to our original forecast.

■ Strong industry statistics: Industry statistics show that the occupancy rate of luxury hotels in Hong Kong and Singapore are now close to their peaks in 2007 (when Shangri-La achieved record-high recurring profit), while room rates started to rise in August 2010. Industry statistics also indicate that RevPARs have recorded 27% growth in both cities YTD and are 12-20% below their previous peaks.

■ Earnings revised up due to strong industry trends: Note that the improvement in the room rate is an even stronger earnings driver to hotel operators, as most benefits go straight to their bottom line. On the back of strong industry trends, we had revised up our FY10-12 earnings forecasts by 5-15% (see Shangri-La Asia: Up-cycle continues with room rate hike tro drive further earnings growth, dated 3 January 2011).

■ Maintain OUTPERFORM: Our target price of HK$25.20 is based on a mid-cycle valuation of 30x FY11E P/E. We maintain our Outperform rating.


010203040


80100120140160


The price relative chart measures performance against the HANG SENG index which closed at 22685.22 on 18/03/11 On 18/03/11 the spot exchange rate was HK$7.77/US$1

Performance Over

1M 3M 12M Absolute (%) -2.0 -11.2 27.0 Relative (%) 3.7 -9.5 21.5


Year 12/09A 12/10E 12/11E 12/12E Revenue (US$ mn) 1,230.0 1,532.7 1,842.1 2,131.7 EBITDA (US$ mn) 342.2 509.3 630.6 715.6 EBIT (US$ mn) 128.3 273.4 371.4 436.7 Net income (US$ mn) 255.5 248.3 333.5 385.0 EPS (CS adj.) (US$) 0.09 0.09 0.11 0.12 Change from previous EPS (%) n.a. 0 0 0 Consensus EPS (US$) n.a. 0.07 0.10 0.12 EPS growth (%) 54.9 -3.1 25.2 14.3 P/E (x) 27.6 28.5 22.7 19.9 Dividend yield (%) 0.6 1.2 1.5 1.8 EV/EBITDA (x) 27.8 19.1 15.1 13.2 P/B (x) 1.7 1.6 1.4 1.4 ROE 6.2 5.7 6.9 7.1 Net debt/equity (%) 40.6 43.8 33.5 30.5



Research Analysts


[email protected]

Rating OUTPERFORM* Price (18 Mar 11, HK$) 19.10 Target price (HK$) 25.20¹ Chg to TP (%) 31.9 Market cap. (HK$ mn) 59,772 (US$ 7,663) Enterprise value (US$ mn) 9,747 Number of shares (mn) 3,129.45 Free float (%) 49.90 52-week price range 22.55 - 13.34

23 March 2011



Starwood Hotels and Resorts Worldwide, Inc. (HOT)

Company update

Greatest exposure to GEM for US-based lodging companies ■ With 73% of its pipeline in emerging markets, Starwood represents the

best way to play the opportunity in GEM for US-based lodging companies. China alone represents nearly 50% of HOT’s pipeline, which we believe is evidence of the impressive traction that the Sheraton brand has achieved in that market. While Starwood’s growth prospects are compelling in GEM, the company already has significant exposure to emerging countries in its current portfolio with about 32% of total rooms. Starwood has the largest operating platform in Asia Pacific for US-based companies, with 169 properties compared with Marriott’s 118 and Hyatt’s 56. The company has developed an impressive foothold of 62 properties in China following its initial expansion to the market in 1985. Given its first-mover advantage in China, and the success of Sheraton brand there, we believe it will be difficult for other US-based lodging companies to catch up with Starwood’s expansion plans.

■ We believe Starwood is well positioned to capitalise on the global lodging recovery. Domestically, HOT should benefit from the lack of supply growth, which will help drive pricing as demand continues to strengthen. HOT will also grow earnings through expansion into emerging markets, especially China where Sheraton is well positioned. With a strong balance sheet, growing excess cash, and asset sale opportunities, we expect HOT to increasingly return capital to shareholders.

■ Catalysts: 1) Incremental asset sale announcements throughout 2011 and 2012, 2) expansion of room pipeline, 3) 1Q11 earnings.

■ Valuation: Our $73 target price is based on a multiple of 12.0x our 2013 EBITDA estimate, discounted back to a one-year forward point.


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Daily Mar 22, 2010 - Mar 18, 2011, 3/22/10 = US$43.82





Year 12/10A 12/11E 12/12E 12/13E EPS (CS adj.) (US$) 1.25 1.65 2.26 3.05 Prev. EPS (US$) — — — — P/E (x) 46.2 34.9 25.5 19.0 P/E rel. (%) 312.6 270.6 224.0 — Revenue (US$ m) 5,071.0 5,535.6 6,231.1 6,875.0 EBITDA (US$ m) 879.0 1,000.4 1,160.7 1,361.4 OCFPS (US$) 3.57 3.38 4.01 4.79 P/OCF (x) 17.0 17.1 14.4 12.1 EV/EBITDA (current) 15.1 13.2 11.0 9.0 Net debt (US$ m) 2,231 2,152 1,783 1,243 ROIC (%) 11.69 9.54 11.51 14.03

Number of shares (m) 190.65 IC (12/11E, US$ m) 5,114.62 BV/share (current, US$) 13.7 EV/IC (x) 2.6 Net debt (current, US$ m) 2,246.7 Dividend (12/10A, US$) — Net debt/tot. cap. (current, %) 19.1 Dividend yield (%) —



Research Analysts


[email protected]

Rating OUTPERFORM* [V] Price (18 Mar 11, US$) 57.81 Target price (US$) 73.00¹ 52-week price range 65.09 - 40.82 Market cap. (US$ m) 11,021.49 Enterprise value (US$ m) 13,173.87

23 March 2011


Companies Mentioned (Price as of 18 Mar 11) 7 Days Group Holdings Ltd. (SVN.N, $19.36, OUTPERFORM [V], TP $27.90) Accor (ACCP.PA, Eu30.86, OUTPERFORM, TP Eu39.80, MARKET WEIGHT) Air China (0753.HK, HK$6.87, NEUTRAL [V], TP HK$8.00) AirAsia (AIRA.KL, RM2.45, OUTPERFORM, TP RM4.30) Cathay Pacific (0293.HK, HK$17.58, OUTPERFORM, TP HK$23.50) China Lodging Group (HTHT.OQ, $18.17, OUTPERFORM [V], TP $26.90) Choice Hotels (CHH, $38.61, UNDERPERFORM, TP $35.00) Dufry (DUFN.S, SFr104.10, OUTPERFORM, TP SFr130.00, OVERWEIGHT) Home Inns & Hotels Management Inc (HMIN.OQ, $39.39) Hyatt Hotels (H, $42.50, OUTPERFORM, TP $54.00) InterContinental Hotels (IHG.L, 1274.00 p, OUTPERFORM, TP 1560.00 p, MARKET WEIGHT) Kosmopolito Hotels International Ltd. (2266.HK, HK$1.51, OUTPERFORM [V], TP HK$2.56) Marriott International (MAR, $37.97, OUTPERFORM, TP $50.00) Millennium & Copthorne (MLC.L, 510.50 p, OUTPERFORM, TP 645.00 p, MARKET WEIGHT) NH Hoteles (NHH.MC, Eu4.76) Rezidor Hotel Group (REZT.ST, SKr37.10, OUTPERFORM, TP SKr50.00, MARKET WEIGHT) Shanghai Jinjiang International Hotels Development (600754.SS, Rmb20.32) Shangri-la Asia (0069.HK, HK$19.10, OUTPERFORM, TP HK$25.20) Starwood Hotels and Resorts Worldwide, Inc. (HOT, $57.81, OUTPERFORM [V], TP $73.00) Whitbread (WTB.L, 1621.00 p, OUTPERFORM, TP 2230.00 p, MARKET WEIGHT)

Disclosure Appendix Important Global Disclosures Gabriel Chan, CFA, Tim Ramskill, CFA, Joel Simkins, Kevin Yin & Sanjeet Aujla each certify, with respect to the companies or securities that he or she analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities. Analysts’ stock ratings are defined as follows: Outperform (O): The stock’s total return is expected to outperform the relevant benchmark* by at least 10-15% (or more, depending on perceived risk) over the next 12 months. Neutral (N): The stock’s total return is expected to be in line with the relevant benchmark* (range of ±10-15%) over the next 12 months. Underperform (U): The stock’s total return is expected to underperform the relevant benchmark* by 10-15% or more over the next 12 months. *Relevant benchmark by region: As of 29th May 2009, Australia, New Zealand, U.S. and Canadian ratings are based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe**, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. Some U.S. and Canadian ratings may fall outside the absolute total return ranges defined above, depending on market conditions and industry factors. For Latin American, Japanese, and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; for European stocks, ratings are based on a stock’s total return relative to the analyst's coverage universe**. For Australian and New Zealand stocks a 22% and a 12% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively, subject to analysts’ perceived risk. The 22% and 12% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively, subject to analysts’ perceived risk. **An analyst's coverage universe consists of all companies covered by the analyst within the relevant sector. Restricted (R): In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

23 March 2011


Analysts’ coverage universe weightings are distinct from analysts’ stock ratings and are based on the expected performance of an analyst’s coverage universe* versus the relevant broad market benchmark**: Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months. Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months. Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months. *An analyst’s coverage universe consists of all companies covered by the analyst within the relevant sector. **The broad market benchmark is based on the expected return of the local market index (e.g., the S&P 500 in the U.S.) over the next 12 months. Credit Suisse’s distribution of stock ratings (and banking clients) is:

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*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

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Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties. Important Regional Disclosures Singapore recipients should contact a Singapore financial adviser for any matters arising from this research report.

Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares. Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report. For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit http://www.csfb.com/legal_terms/canada_research_policy.shtml.

Credit Suisse Securities (Europe) Limited acts as broker to MLC.L.

The following disclosed European company/ies have estimates that comply with IFRS: ACCP.PA, IHG.L, MLC.L, NHH.MC, REZT.ST, DUFN.S.

As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.

Principal is not guaranteed in the case of equities because equity prices are variable. Commission is the commission rate or the amount agreed with a customer when setting up an account or at anytime after that.

To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. • Gabriel Chan, CFA, non-U.S. analyst, is a research analyst employed by Credit Suisse (Hong Kong) Limited. • Tim Ramskill, CFA, non-U.S. analyst, is a research analyst employed by Credit Suisse Securities (Europe) Limited. • Kevin Yin, non-U.S. analyst, is a research analyst employed by Credit Suisse (Hong Kong) Limited. • Sanjeet Aujla, non-U.S. analyst, is a research analyst employed by Credit Suisse Securities (Europe) Limited. Where this research report is about a non-Taiwanese company, written by a Taiwan-based analyst, it is not a recommendation to buy or sell securities Important Credit Suisse HOLT Disclosures With respect to the analysis in this report based on the Credit Suisse HOLT methodology, Credit Suisse certifies that (1) the views expressed in this report accurately reflect the Credit Suisse HOLT methodology and (2) no part of the Firm’s compensation was, is, or will be directly related to the specific views disclosed in this report. The Credit Suisse HOLT methodology does not assign ratings to a security. It is an analytical tool that involves use of a set of proprietary quantitative algorithms and warranted value calculations, collectively called the Credit Suisse HOLT valuation model, that are consistently applied to all the companies included in its database. Third-party data (including consensus earnings estimates) are systematically translated into a number of default variables and incorporated into the algorithms available in the Credit Suisse HOLT valuation model. The source financial statement, pricing, and earnings data provided by outside data vendors are subject to quality control and may also be adjusted to more closely measure the underlying economics of firm performance. These adjustments provide consistency when analyzing a single company across time, or analyzing multiple

23 March 2011


companies across industries or national borders. The default scenario that is produced by the Credit Suisse HOLT valuation model establishes the baseline valuation for a security, and a user then may adjust the default variables to produce alternative scenarios, any of which could occur. Additional information about the Credit Suisse HOLT methodology is available on request. The Credit Suisse HOLT methodology does not assign a price target to a security. The default scenario that is produced by the Credit Suisse HOLT valuation model establishes a warranted price for a security, and as the third-party data are updated, the warranted price may also change. The default variables may also be adjusted to produce alternative warranted prices, any of which could occur. CFROI®, HOLT, HOLTfolio, HOLTSelect, ValueSearch, AggreGator, Signal Flag and “Powered by HOLT” are trademarks or service marks or registered trademarks or registered service marks of Credit Suisse or its affiliates in the United States and other countries. HOLT is a corporate performance and valuation advisory service of Credit Suisse. Additional information about the Credit Suisse HOLT methodology is available on request. For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at www.credit-suisse.com/researchdisclosures or call +1 (877) 291-2683. Disclaimers continue on next page.

23 March 2011 Americas / United States

Equity Research

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Global Hotel Sector - Credit Suisse