State of the Hotel Industry

September 24, 2015

2015 Texas Trends Hotel Industry Report Hotel & Lodging Association of Greater Houston

The Houston Story

Starting with Record High Occupancies/Rates with Minimum New Supply

Oil Price Drop Reducing Occupancies/Rates

New Supply Reducing Occupancies/Rates

Positive Factors Providing Some Relief

Temporary DownturnStill Above Long-Term Average

Stabilize in 2017

Redemption in 2018 and 2019

I. The Economy

II. Lodging Forecasts U.S.

III. Lodging Forecasts - Texas

IV. Houston Submarkets

Presentation Outline

Factors Affecting Economic Forecasts

Collapse in Energy & Other Commody Prices

Chinese Economic Slowdown

Value of U.S. Dollar

U.S. Monetary Policy Normalization

Iran Nuclear Deal

Source: Moodys Analytics, July 2015

United States: Economic Outlook

Employment

Personal Income

GDP

CPI (Inflation)

2014 1.9% 2.6% 2.4% 1.6%

2015 2.2% 4.2% 2.4% 0.4%

2016 2.2% 3.8% 3.0% 2.7%

2017 2.2% 4.1% 2.9% 2.8%

2018 1.6% 3.4% 2.7% 2.8%

2019 0.9% 2.0% 2.2% 2.6%

Houston: Economic Outlook

Employment

Personal Income

GMP

CPI (Inflation)

2014 3.5% 4.8% 5.4% 2.8%

2015 1.9% 4.3% 2.4% 0.0%

2016 1.6% 2.6% 2.3% 3.0%

2017 3.1% 4.7% 3.4% 3.0%

2018 2.6% 5.3% 3.8% 2.9%

2019 1.8% 3.6% 3.2% 2.6%

Source: Moodys Analytics, July 2015

June 2015

Source: Texas Work Force Commission

United States 6.3% 5.5%

Texas 5.5% 4.4%

Austin 4.4% 3.3%

Dallas/Fort Worth 5.4% 4.0%

Houston 5.4% 4.5%

San Antonio 5.1% 3.8%

June 2014

* Not seasonally adjusted

Unemployment Comparison*

Influence of Texas Oil Factor

Recovery of the Oil & Gas Industry

Oil Prices Remain Low Through 2016

Oil Markets Begin Rebalance in Mid-2016

Drilling Returns in Early 2017

Industry Rebounds in 2018 & 2019

I. The Economy

II. Lodging Forecast U.S.

III. Lodging Forecast - Texas



Hotel Horizons

Econometric Forecasting Model Smith Travel Research historical lodging data,

pipeline data

Moodys Economy.com economic forecasts

Five-Year Forecasts of Supply, Demand, Occupancy, ADR, RevPAR 59 Major U.S. Markets

Updated Quarterly

United States: 2nd Quarter 2015

= Below/Above Long Run Average

Long Term

Average 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F

Supply 1.9% 0.4% 0.4% 0.6% 0.8% 1.1% 1.8% 2.3% 2.5% 2.7%

Demand 2.0% 4.7% 2.7% 2.0% 4.3% 3.3% 2.2% 1.6% 1.4% 0.8%

Occupancy 62.0% 60.0% 61.4% 62.2% 64.4% 65.8% 66.1% 65.6% 64.9% 63.7%

ADR 3.0% 3.8% 4.2% 3.8% 4.5% 5.0% 5.9% 6.3% 5.3% 3.4%

RevPAR 3.2% 8.1% 6.6% 5.2% 8.2% 7.2% 6.3% 5.5% 4.1% 1.5%

Source: PKF Hospitality Research Hotel Horizons Report (2nd Quarter 2015), Smith Travel Research

New Hotel Additions 2015 - 2017

New York MSA 22,000 to 25,000

Houston MSA 8,000 to 10,000

Austin MSA 6,000 to 8,000

U.S. Hotel Markets - Supply

0.1% 0.3%

0.3%

0.7%

0.9%

1.8%

6.2%

7.4%

7.9%

8.4%

8.4%

0% 5% 10%

Tucson

Oakland

Hartford

Sacramento

Norfolk-VA

National Average

Cleveland

New York

Houston

Austin

Pittsburgh

Greatest and Least Change in Supply Forecast Change 2015 to 2016

Source: PKF Hospitality Research, a CBRE Company, October 2015 Hotel Horizons reports

U.S. Hotel Markets - Demand

Greatest and Least Change in Demand Forecast Change 2015 to 2016


0.5% 0.7% 0.7%

1.0% 1.0%

2.2% 4.7%

5.3% 5.6%

6.3%

6.4%

0% 4% 8%

San FranciscoNew Orleans

HartfordSan Diego

SacramentoNational

SavannahAustin

New YorkPittsburghCleveland

U.S. Hotel Markets - Occupancy

Greatest and Least Change in Occupancy Forecast Change 2015 to 2016


-5.6%

-2.8%

-2.8%

-2.0%

-1.7%

0.4%

1.5%

1.7%

1.9%

2.2%

2.5%

-8% -4% 0% 4%

Houston

Austin

Miami

Pittsburgh

Albany/New York

National Average

Oakland

Norfolk-VA Beach

Columbia

Richmond

Tucson

I. The Economy


III. Lodging Forecast Texas



56.7% 60.6%

63.6% 66.2% 68.6% 69.0% 67.5% Occupancy

$89.47 $91.75 $94.11

$99.25 $103.67 $107.00 $110.00

$50.69 $55.63 $59.81

$65.65 $71.13 $73.99 $74.41 ADR

RevPAR

2010 2011 2012 2013 2014 2015F 2016F

250,312 254,399 257,474 259,228 261,475 268,234

281,918

Supply

Texas Summary

Austin: 2nd Quarter 2015


Long Term

Average 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F

Supply 3.2% 2.4 0.7% 2.8% 2.2% 7.6% 8.4% 5.9% 3.6% 2.4%

Demand 4.3% 6.9% 3.2% 7.4% 3.6% 6.7% 5.3% 4.5% 2.9% 2.5%

Occupancy 66.5% 66.7% 68.3% 71.4% 72.4% 71.8% 69.8% 68.8% 68.4% 68.4%

ADR 4.1% 5.9% 7.7% 5.4% 6.6% 5.9% 4.6% 3.5% 2.2% 2.3%

RevPAR 5.4% 10.5% 10.4% 10.2% 8.0% 5.1% 1.7% 2.1% 1.5% 2.3%


Austin: Upper-Priced


Long Term

Average 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F

Supply 4.1% 2.8% 0.2% 2.0% 2.5% 12.7% 11.8% 9.4% 4.3% 2.0%

Demand 5.4% 6.8% 2.6% 5.1% 3.5% 9.5% 7.4% 6.5% 3.2% 3.1%

Occupancy 70.4% 72.6% 74.3% 76.5% 77.3% 75.1% 72.1% 70.2% 69.5% 70.2%

ADR 4.3% 6.4% 8.2% 6.2% 6.3% 5.6% 4.3% 3.0% 2.1% 2.1%

RevPAR 5.7% 10.5% 10.8% 9.3% 7.3% 2.6% 0.3% 0.3% 1.0% 3.3%


Dallas: 2nd Quarter 2015


Long Term

Average 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F

Supply 2.4% 0.8% 1.4% 0.3% 0.2% 1.6% 4.3% 5.0% 4.1% 3.7%

Demand 3.5% 9.1% 4.7% 5.5% 5.8% 5.1% 3.6% 3.3% 3.1% 2.5%

Occupancy 61.0% 59.1% 61.1% 64.3% 67.8% 70.2% 69.7% 68.6% 67.9% 67.1%

ADR 2.2% 3.4% 1.1% 5.0% 3.4% 5.4% 5.5% 4.3% 3.7% 2.9%

RevPAR 3.4% 11.9% 4.5% 10.5% 9.1% 9.0% 4.7% 2.6% 2.7% 1.7%


Fort Worth: 2nd Quarter 2015


Long Term

Average 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F

Supply 3.0% 1.3% 1.1% 0.4% 1.6% 0.5% 1.8% 3.6% 3.5% 3.6%

Demand 3.6% 7.1% 2.8% 4.0% 4.5% 4.1% 3.1% 3.3% 2.6% 2.2%

Occupancy 61.0% 59.4% 60.4% 62.6% 64.4% 66.7% 67.6% 67.3% 66.8% 65.8%

ADR 3.2% 1.1% -1.3% 1.2% 3.3% 3.6% 4.1% 3.4% 3.4% 3.0%

RevPAR 3.9% 6.9% 0.4% 4.8% 6.4% 7.3% 5.4% 3.1% 2.5% 1.5%


San Antonio: 2nd Quarter 2015



Long Term

Average 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F

Supply 3.2% 2.5% 1.4% 0.3% 0.5% 0.2% 2.5% 3.0% 3.1% 3.1%

Demand 3.6% 7.2% 5.3% -0.5% 3.4% 2.5% 2.1% 2.3% 2.7% 2.0%

Occupancy 65.0% 61.2% 63.5% 63.0% 64.8% 66.3% 66.0% 65.5% 65.2% 64.6%

ADR 3.0% 0.1% 1.4% 4.6% 2.4% 3.1% 3.1% 2.7% 2.5% 1.7%

RevPAR 3.5% 4.7% 5.3% 3.8% 5.4% 5.5% 2.7% 1.9% 2.1% 0.7%

.

The Houston market is really complicated.

I had to upgrade my crystal ball to come up with the forecast.

New Hotel Supply - 8,000 to 10,000 rooms

Oil Price Decline - Exploration Rigs Bottom Out - Service Company Layoffs - Energy Corridor, Westchase,

Northwest, Galleria, CBD Hit Hardest

- Corporate Travel Down - Corporate Group Cancellations

Exxon Move to New Campus

Reduced Compression

Housing Market Deceleration

Petrochemical Plant Expansion - East Houston / Bay Area - Driven By Low Oil Prices - 100 Projects Worth $80 Billion

TMC Research & Development

2016 NCAA Final Four

2017 Super Bowl

Convention Activity - Marriott Marquis

Southwest International-Hobby

2018/2019 Oil/Gas Rebound

Houston Local Demand Factors

Houston: 2nd Quarter 2015


Long Term

Average 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F

Supply 2.5% 1.9% 0.9% 0.6% 1.3% 2.8% 7.9% 4.9% 3.2% 2.1%

Demand 4.0% 10.9% 10.3% 6.3% 5.1% -1.8% 1.8% 2.9% 6.5% 4.8%

Occupancy 62.2% 60.0% 65.6% 69.3% 71.9% 68.7% 64.9% 63.6% 65.6% 67.4%

ADR 3.1% 2.5% 3.9% 7.8% 5.9% 1.0% -2.1% 1.4% 3.1% 4.2%

RevPAR 4.8% 11.6% 13.6% 13.9% 9.9% -3.5% -7.6% -0.5% 6.4% 6.9%


Houston: Upper-Priced


Long Term

Average 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F

Supply 2.3% 3.3% 1.5% 1.1% 1.7% 3.8% 11.3% 6.2% 3.6% 2.3%

Demand 3.6% 11.3% 8.2% 4.0% 3.3% -1.4% 3.1% 4.1% 7.4% 5.8%

Occupancy 64.9% 65.7% 70.0% 72.0% 73.1% 69.4% 64.3% 63.0% 65.4% 67.6%

ADR 3.5% 3.0% 4.3% 8.9% 5.4% -0.5% -2.8% 1.1% 2.9% 3.8%

RevPAR 5.0% 10.9% 11.2% 12.0% 7.1% -5.6% -9.9% -1.0% 6.7% 7.3%


Houston: Lower-Priced


Long Term

Average 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F

Supply 2.7% 0.9% 0.5% 0.3% 1.0% 2.1% 5.5% 3.9% 2.9% 2.0%

Demand 4.3% 10.6% 12.0% 8.1% 6.5% -2.0% 0.9% 2.0% 5.7% 4.0%

Occupancy 60.4% 56.1% 62.5% 67.4% 71.0% 68.2% 65.3% 64.1% 65.9% 67.2%

ADR 2.7% 1.3% 5.0% 8.1% 8.2% 2.9% -1.9% 1.0% 2.9% 4.2%

RevPAR 4.7% 11.0% 17.0% 16.5% 14.1% -1.1% -6.2% -0.8% 5.7% 6.2%


I. The Economy


III. Lodging Forecast - Texas



Houston Summary

55.1% 60.0%

65.6% 69.3% 71.9% 69.0%

65.0% Occupancy

$87.97 $90.15 $93.64 $100.97

$106.96 $108.00 $105.50

$48.47 $54.13

$61.41 $69.92

$76.89 $74.26 $68.60

ADR

RevPAR

2010 2011 2012 2013 2014 2015F 2016F

72,461 73,807 74,461 74,926 75,897 78,228

84,130

Supply

Houston CBD

61.2% 63.3%

67.6% 70.6%

73.3% 69.0%

64.0%

Occupancy

$144.10 $147.58 $155.30

$170.25 $174.05 $178.50 $175.00

$88.19 $93.42 $104.98

$120.20 $127.58 $123.17

$112.00

ADR

RevPAR

2010 2011 2012 2013 2014 2015F 2016F

5,085 5,430 5,416 5,399 5,571

6,060 6,642

Supply

Galleria / Greenway Plaza

68.4% 73.0%

77.0% 77.4% 76.7% 74.0%

69.5%

Occupancy

$118.77 $126.31 $133.02

$148.53 $157.40

$150.00 $147.00

$81.24 $92.21

$102.43 $114.96 $120.73 $111.00

$102.17

ADR

RevPAR

2010 2011 2012 2013 2014 2015F 2016F

8,116 7,963 7,835 7,798 7,800 7,801 8,403

Supply

Texas Medical Center / Reliant Park

58.4% 62.5%

65.8% 69.2% 69.9% 68.5% 66.5%

Occupancy

$96.43 $100.03 $104.94

$113.86 $121.74 $122.00 $119.00

$56.32 $62.52

$69.05 $78.79

$85.10 $83.61 $79.14

ADR

RevPAR

2010 2011 2012 2013 2014 2015F 2016F

5,518 5,525 5,529 5,550 5,549 5,494 5,640

Supply

Bush Intercontinental Airport

53.5% 60.5%

66.6% 70.3% 73.5% 71.0%

67.0%

Occupancy

$68.07 $67.74 $70.84 $75.24

$81.56 $85.00 $83.00

$36.42 $40.98

$47.18 $52.89

$59.95 $60.35 $55.61

ADR

RevPAR

2010 2011 2012 2013 2014 2015F 2016F

12,096 11,754 11,973 11,964 12,004 12,427 12,778

Supply

Bay Area / Hobby Airport

49.7% 53.0%

58.1% 62.4%

68.1% 67.5% 64.0% Occupancy

$70.47 $69.81 $71.54 $75.35

$80.54 $82.00 $79.50

$35.02 $37.00 $41.56

$47.02 $54.85 $55.35 $50.88

ADR

RevPAR

2010 2011 2012 2013 2014 2015F 2016F

6,314 6,464 6,573 6,670 6,645 6,669

7,145

Supply

Southwest Houston / Sugar Land

52.7% 55.7% 64.1%

72.2% 72.5% 70.5% 68.0% Occupancy

$68.80 $70.79 $72.72 $78.11

$84.89 $86.50 $84.50

$36.26 $39.43 $46.61

$56.40 $61.55 $60.98 $57.46

ADR

RevPAR

2010 2011 2012 2013 2014 2015F 2016F

6,216 6,600 6,476 6,459 6,581 6,582 6,676

Supply

Katy Freeway / Westchase

55.8% 63.2%

68.1% 72.6% 73.1%

68.0% 62.5%

Occupancy

$85.60 $89.67 $95.61

$104.76 $112.96 $109.50 $106.00

$47.76 $56.67

$65.11 $76.06

$82.57 $74.46

$66.25

ADR

RevPAR

2010 2011 2012 2013 2014 2015F 2016F

9,786 10,069 10,386 10,547 10,508 11,110

12,139

Supply

Northwest Houston

54.4%

61.9% 66.9% 69.5% 70.5%

64.0% 60.0%

Occupancy

$72.52 $73.86 $78.74

$86.43 $93.73 $95.50 $92.00

$39.45 $45.72

$52.68 $60.07

$66.08 $61.12

$55.20

ADR

RevPAR

2010 2011 2012 2013 2014 2015F 2016F

6,590 6,560 6,670 6,899 7,147 7,574

8,181

Supply

East Houston / Baytown

45.4% 48.5% 58.2% 61.2%

71.6% 67.5% 67.0% Occupancy

$58.89 $58.48 $60.28 $63.58 $66.83

$71.00 $69.00

$26.74 $28.36

$35.08 $38.91

$47.85 $47.96 $46.23 ADRRevPAR

2010 2011 2012 2013 2014 2015F 2016F

6,938 7,290 7,384 7,382 7,448 7,561

7,628

Supply

Galveston

47.0% 52.5%

56.6% 57.7% 60.1% 59.5% 58.5%

Occupancy

$98.30 $103.69 $110.05 $113.09

$115.79 $120.00 $118.00

$46.20 $54.44

$62.29 $65.25 $69.59 $71.40 $69.03

ADR

RevPAR

2010 2011 2012 2013 2014 2015F 2016F

6,171 6,407 6,402 6,549 6,651 6,658

6,808

Supply

North / The Woodlands

51.0% 55.9%

59.9% 63.8% 66.9% 66.0% 61.5% Occupancy

$99.34 $101.73 $105.62 $110.67

$118.35 $123.00 $120.00

$50.66 $56.87

$63.27 $70.61 $79.18 $81.18 $73.80

ADR

RevPAR

2010 2011 2012 2013 2014 2015F 2016F

5,802 6,152 6,219 6,258 6,644 6,950

8,898

Supply

For a Copy of This Presentation Please Visit

www.houstonhotels.org or

Contact: Randy McCaslin Email: [email protected]

713.621.5252 Ext. 21

Slide Number 1The Houston StorySlide Number 3Slide Number 4Factors Affecting Economic ForecastsUnited States: Economic OutlookHouston: Economic OutlookUnemployment Comparison*Slide Number 9Influence of Texas Oil FactorRecovery of the Oil & Gas IndustrySlide Number 12Hotel HorizonsSlide Number 14New Hotel Additions 2015 - 2017U.S. Hotel Markets - SupplyU.S. Hotel Markets - DemandU.S. Hotel Markets - OccupancySlide Number 19Slide Number 20Slide Number 21Slide Number 22Slide Number 23Slide Number 24Slide Number 25Slide Number 26Slide Number 27Slide Number 28Slide Number 29Slide Number 30Slide Number 31Slide Number 32Slide Number 33Slide Number 34Slide Number 35Slide Number 36Slide Number 37Slide Number 38Slide Number 39Slide Number 40Slide Number 41Slide Number 42Slide Number 43Slide Number 44Slide Number 45

Documents

State of the Hotel Industry