Lodging Industry Update

2014 Hospitality Asset Managers Association Fall ConferenceScott D. BermanU.S. Industry Leader, Hospitality & Leisure

September 17, 2014

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Agenda

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U.S. Economic Performance

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Sources: Macroeconomic Advisers, PwC

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1.1%

Lodging Supply and Demand Growth in the U.S.

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Average Lodging Demand Outpaces Lodging Supply

Sources: STR; Bureau of Economic Analysis; Bureau of Labor Statistics; Macroeconomic Advisers, LLC, PwC

1.8%

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Lodging PerformanceU.S. Top 25 Markets vs All Other U.S. Markets

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Percentage Change in RevPARFY14 RevPAR growth is narrowing between the top 25

markets and all other U.S. markets.

Source: STR

2.1%

0.5%

2.0%

1.8%

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Lodging Performance“Hottest” Top 25 Markets in FY14

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Percentage Change in RevPAR

Source: STR

Nashville

San Francisco

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Lodging Performance

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Luxury and Upper Upscale Room Rate Leaders

Source: STR

$223

$244

$272

$282

$314

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PwC U.S. Lodging Outlook

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2014Demand

Supply

Occupancy + ADR = RevPAR

↑ 4.0%

↑ 1.0%

↑ 3.1%

↑ 4.4%

↑ 7.6%

2015Demand

Supply

Occupancy + ADR = RevPAR

↑ 2.7%

↑ 1.6%

↑ 1.1%

↑5.7%

↑ 6.9%

Source: PwC Hospitality Directions U.S., August 2014

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A Focus on Greater Miami & the Beaches

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Miami Lodging Performance

Source: STR

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Recent Miami Hotel Transactions

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Soho Beach House

March 2014

Value: $81.5 Million $/Key: $1.6 Million Seller: WP Carey (REIT) Buyer: N/A Rooms: 50 Source: RCA

St. Regis Bal Harbour

January 2014

Value: $213 Million $/Key: $1 Million Seller: Starwood Buyer: Al Faisal Rooms: 207 Source: RCA

Raleigh Hotel

April 2014

Value: $69.3 Million $/Key: $561 K Seller: sbe Hotels Buyer: The Raleigh Group Rooms: 105 Source: RCA

Casa Moderna

January 2014

Value: $37.5 Million $/Key: $670 K Seller: Africa Israel IG Buyer: CGI Merchant Group Rooms: 56 Source: RCA

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New Brands Emerging in Greater Miami & the Beaches

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Sources: Marriott International, Hotel-Online, Lodging Magazine, Miami Herald, Hospitality Net, Travel Weekly

Latin American/Spanish

Asian

Domestic

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Rise of the Sharing Economy

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Sources: Uber, New York Times, Miami Herald, NBC News, Local 10 (ABC)

Founded in 2009Represented in 37 countries and 70+ citiesValued at $18.2B

Founded in 2012Represented in 64 markets in the U.S.Valued at $700 M

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Activism in the IndustryKey Issues

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Sources: Airbnb, FlipKey, HomeAway, American Hotel & Lodging Association, TravelClick, Forbes

Short-Term Online Rentals

Online Travel Agencies

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Activism in the IndustryKey Issues

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Sources: American Hotel & Lodging Association, CNN Money, Businessweek, Chicago Tribune

Labor

Living Wage Battles

•Recent Approvals:- Seattle: $15.00 by 2017, passed in June 2014- San Diego: $11.50 by 2017, passed in August 2014

•Proposed Increases:- Los Angeles: $15.37 by 2017- Chicago: $13.00 by 2018

NLRB – Joint Employer Decision

What are the implications for the hotel industry?

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Activism in the IndustryAdditional Issues

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Source: American Hotel & Lodging Association

American Hotel & Lodging Association 2014 Policy Agenda

•Improving employer access to a seasonal workforce

•Altering the Affordable Care Act

•Ensuring new federal tax proposals are pro-business

•Supporting growth in foreign visitors through programs such as Jobs Originating through Launching Travel

•Stifling patent assertion entities and their related lawsuits

•Extending the Terrorism Risk Insurance program

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PwC Megatrends

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“A pattern or movement which has a major impact on business or society as a whole.” PwC groups them into five megatrends:

1.Demographic Shifts

2.Shift in Economic Power

3.Accelerating Urbanization

4.Climate Change and Resource Scarcity

5.Technological Breakthroughs

Source: PwC

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PwC Megatrends1. Demographic Shifts

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Sources: UN Population Division, World Population Prospects, 2 FT, Oxfam, ‘The World’s Women,’ UN, PwC Talent Mobility 2020 and Beyond

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PwC Megatrends2. Shift in Economic Power

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Sources: OECD, UNESCO, Chinese National Bureau of Statistics, NASSCOM, UNCTAD, The Economist, IMF, World Economic Outlook, PwC

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PwC Megatrends3. Accelerating Urbanization

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Sources: New York Times, Brookings Institution, The Future Build, UN Habitat, United Nations, UN Department of Economic and Social Affairs, PwC

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PwC Megatrends4. Climate Change and Resource Scarcity

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Sources: National Intelligence Council, M. Pidwirny, BP Statistical Review of World Energy, Intergovernmental Panel on Climate Change,IEA, Carbon Tracker, Hellar and Keoleian, PwC

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PwC Megatrends5. Technological Breakthroughs

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Sources: Experian, Cisco Internet Business Solutions Group, Forbes, C. Frey and M. Osborne, Nike, IDC, MIT Technology Review, Facebook, UN Population Division, World Population Prospects, PwC

PwC

PwC Megatrends

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Something for All of Us to Think About – Implications on the Hospitality Industry

•Increasingly dynamic and segregated customers

•Rising operating costs

•Emergence of new, technology-driven competition, opportunities, and resources

Source: PwC

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“Where are we now and where are we headed?”

PwC

PwC demonstrates its capabilities with sector-specific thought leadership

• Hospitality Directions – U.S.

• Hospitality Directions – Europe

•Manhattan Lodging Index

• Five Megatrends and Possible Implications

• Experience Radar 2012 - Consumer Insight for the US Hospitality Industry

• Convention and Congress Center Annual Report

• Global Gaming Outlook

• Global Sports Market Outlook

• South African Hospitality Outlook

• Emerging Trends in Real Estate®

• PwC Real Estate Investor Survey

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PwC

pwc.com

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scott.berman@us.pwc.com

@berman_scott