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The U.S. Lodging Industry - 2009: Been There; Done That; Doing It - - PowerPoint PPT Presentation

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The U.S. Lodging Industry - 2009: Been There; Done That; Doing It Again Presented to: CB Richard Ellis Hotels Hospitality Industry Outlook: Economic Recovery or Prolonged Retraction Washington DC March 10, 2009 Daniel H. Lesser Senior

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The U.S. Lodging Industry - 2009: Been There; Done That; Doing It Again

Presented to: CB Richard Ellis Hotels Hospitality Industry Outlook: Economic Recovery or Prolonged Retraction Washington DC March 10, 2009

Daniel H. Lesser Senior Managing Director – Industry Leader Hospitality & Gaming Group CB Richard Ellis, Inc. One Penn Plaza, Suite 1835 New York, NY 10119 USA Phone: 212.207.6064 Fax: 212.207.6069 Email: daniel.lesser@cbre.com

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CB Richard Ellis | Page 2

Agenda

Economic Review U.S. Lodging Industry Operating Metrics U.S. Lodging Industry Investment Metrics Closing Comments

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CB Richard Ellis | Page 3

Business-Driven Economy Succumbs

  • 5
  • 4
  • 3
  • 2
  • 1

1 2 3 4 5 2005 2006 2007 2008q1 2008q2 2008q3 2008q4

Consumer Driven GDP Business Driven GDP Government Driven GDP

Contribution to Headline GDP Growth (%)

Source: BEA and CBRE Torto Wheaton Research

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CB Richard Ellis | Page 4

  • 1,500
  • 1,000
  • 500

500 1,000 1,500

  • 14
  • 12
  • 10
  • 8
  • 6
  • 4
  • 2

2 4 6 8 10 12 14 16 1990s Today

Net Jobs Created per Quarter x 1000

1990q3

A Recession This Deep Cannot Resolve Itself Quickly

2008q1

Sources: CBRE/Torto Wheaton Research, Bureau of Labor Statistics.

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CB Richard Ellis | Page 5

  • 6
  • 4
  • 2

2 4 6

1974.3 1976.1 1977.3 1979.1 1980.3 1982.1 1983.3 1985.1 1986.3 1988.1 1989.3 1991.1 1992.3 1994.1 1995.3 1997.1 1998.3 2000.1 2001.3 2003.1 2004.3 2006.1 2007.3 2009.1 2010.3 2012.1

Percent Change in Employment

Total Nonfarm Employment Office Employment

Forecast

  • 2.73%
  • 2.1 Mil
  • .94%
  • 847 Th
  • 3.08%
  • 2.7 Mil
  • 1.39%
  • 1.5 Mil
  • 2.05%
  • 2.7Mil
  • 3.7%
  • 5.1 Mil

TWR Forecasts US Job Loses Worse than in Previous Cycles

CBRE Torto Wheaton Research Spring 2009 Office employment disproportionately hit 2008 Total Employment down 1.5% 2008 Office Employment down 2.2%

  • 6.7%
  • 1.1 Mil
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CB Richard Ellis | Page 6

  • 5

5 10 15 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 Personal Consumption Expenditures (Year-Over-Year Change, %)

Layoffs and Dwindling Confidence Have Led to Sharply Lower Consumer Spending…

Source: CBRE/TWR, BEA.

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CB Richard Ellis | Page 7

  • 2
  • 1

1 2 3 4 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Personal Savings Rate (3 Month Mvg Avg, %)

… And Higher Savings Rates

Source: CBRE/TWR, BEA.

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CB Richard Ellis | Page 8

Lending Has Shut Down Very Quickly

Source: Federal Reserve.

5 10 15 20 25 30 35 40 1975.1 1976.4 1978.3 1980.2 1982.1 1983.4 1985.3 1987.2 1989.1 1990.4 1992.3 1994.2 1996.1 1997.4 1999.3 2001.2 2003.1 2004.4 2006.3 2008.2 Net Borrowing as % of GDP

Net Borrowing and Lending as % of GDP

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CB Richard Ellis | Page 9

There is a Lot of Cash on the Sidelines

Source: CBRE/TWR, Federal Reserve Bank

5 10 15 20 25 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Money Market Mutual Funds as % of GDP

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CB Richard Ellis | Page 10

National U.S. Recessions

Dates Duration

  • Aug. 1929 to March 1933 (Depression)

43 months May 1937 to June 1938 13 months

  • Feb. 1945 to Oct. 1945

8 months

  • Nov. 1948 to Oct. 1949

11 months July 1953 to May 1954 10 months

  • Aug. 1957 to April 1958

8 months April 1960 to Feb. 1961 10 months

  • Dec. 1969 to Nov. 1970

11 months

  • Nov. 1973 to March 1975

16 months

  • Jan. 1980 to July 1980

6 months July 1981 to Nov. 1982 16 months July 1990 to March 1991 8 months March 2001 to Nov. 2001 8 months

Source: Smith Travel Research and National Bureau of Economic Research

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CB Richard Ellis | Page 11

National U.S. Recessions

Source: National Bureau of Economic Research

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CB Richard Ellis | Page 12

U.S. Recessions and Stock Market

Year Magnitude of Decline Months of Decline Months Until Full Recovery 1929 to 1933 (Depression) 83% 34 151 1937 50% 13 58 1946 22% 6 35 1962 22% 6 10 1970 29% 19 9 1974 43% 21 21 1987 30% 3 18 2002 45% 25 40 2008 47% 13* ??

Source: Center For Research In Security Prices (University of Chicago) * To date.

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CB Richard Ellis | Page 13

U.S. Lodging Industry Operating Metrics

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CB Richard Ellis | Page 14

Total United States

Room Supply/Demand Percent Change Twelve Month Moving Average – 1989 to December 2008

  • 6
  • 4
  • 2

2 4 6

1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 Supply % Change Demand % Change

Source: 2009 Smith Travel Research, Inc.

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CB Richard Ellis | Page 15

Total United States

Room Demand/Occ/ADR Percent Change Twelve Month Moving Average – 1989 to December 2008

  • 8
  • 6
  • 4
  • 2

2 4 6 8 10

1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 ADR % Chg Demand % Change Occ % Chg 2.4%

  • 1.6%
  • 4.2%

Source: 2009 Smith Travel Research, Inc.

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CB Richard Ellis | Page 16

Total United States

RevPAR Percent Change Twelve Month Moving Average – 1989 to December 2008

  • 12
  • 10
  • 8
  • 6
  • 4
  • 2

2 4 6 8 10 12

1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 RevPAR % Chg

Source: 2009 Smith Travel Research, Inc.

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CB Richard Ellis | Page 17

Total United States

Key Performance Indicators Percent Change December YTD

2.4 6.2 0.9

  • 0.4

5.8 1.3 2.7

  • 4.2
  • 1.6
  • 1.9
  • 5

5 10

Supply Demand Occupancy ADR RevPAR

2007 2008

Source: 2009 Smith Travel Research, Inc.

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CB Richard Ellis | Page 18

Total United States

Key Performance Indicators Percent Change 2008 – First 8 Months vs. Last 4 Months

  • 0.8

3.9

  • 0.3
  • 2.6

1.2 2.4 3.2

  • 7.5
  • 4.6
  • 8.2
  • 10
  • 5

5 10

Supply Demand Occupancy ADR RevPAR

Jan-Aug Sept-Dec

Source: 2009 Smith Travel Research, Inc.

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CB Richard Ellis | Page 19

Total United States

Demand Percent Change – Day of Week 2008 First 8 Months vs. Last 4 Months

  • 1.2

2.1

  • 4.1
  • 3.8
  • 10.0

1.8

  • 1.6
  • 0.2
  • 1.9
  • 0.8
  • 5.9

2.4

  • 3.5
  • 12.2
  • 14
  • 12
  • 10
  • 8
  • 6
  • 4
  • 2

2 4

Sun Mon Tue Wed Thu Fri Sat

Jan-Aug Sept-Dec

Source: 2009 Smith Travel Research, Inc.

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CB Richard Ellis | Page 20

Total United States

ADR Percent Change – Day of Week 2008 First 8 Months vs. Last 4 Months

2.6 0.3

  • 1.3
  • 1.5

3.3 4.1 4.3 4.4 4.1 3.7

  • 0.1

0.0 0.7

  • 0.3
  • 5

5

Sun Mon Tue Wed Thu Fri Sat

Jan-Aug Sept-Dec

Source: 2009 Smith Travel Research, Inc.

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CB Richard Ellis | Page 21

Total United States

Demand Percent Change – Chain Scale 2008 First 8 Months vs. Last 4 Months

1.9

  • 1.6
  • 0.4
  • 2.2
  • 4.7

3.6 1.0 1.6

  • 6.2
  • 0.3
  • 4.6
  • 3.6
  • 6.0
  • 9.3
  • 10
  • 5

5

Total US Luxury Upper Upscale Upscale Mid W Mid W/O Economy

Jan-Aug Sept-Dec

Source: 2009 Smith Travel Research, Inc.

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CB Richard Ellis | Page 22

Total United States

ADR Percent Change – Chain Scale 2008 First 8 Months vs. Last 4 Months

1.7

  • 1.3

1.7

  • 0.7

4.2 2.3 2.0 2.6 4.0 3.8

  • 0.6
  • 1.5
  • 4.1

0.9

  • 5

5

Total US Luxury Upper Upscale Upscale Mid W Mid W/O Economy

Jan-Aug Sept-Dec

Source: 2009 Smith Travel Research, Inc.

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CB Richard Ellis | Page 23

Increasing Occupancy and ADR

Chain Scales – Percent of Properties Year End 2007 – 3rd & 4th Quarters 2008

51.7 48.6 42.1 40.5 35.5 18.6 22.7 23.7 20.6 21.7 19.1 2.8 7.1 10 11.9 12.4 14 38.4

10 20 30 40 50 60

Luxury Upper Upscale Upscale Mid With Mid W/O Economy

2007 YE Q3 2008 Q4 2008

Source: 2009 Smith Travel Research, Inc.

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CB Richard Ellis | Page 24

Declining Occupancy and ADR

Chain Scales – Percent of Properties Year End 2007 – 3rd & 4th Quarters 2008

4.1 2.2 6.2 5.5 10.8 28.5 16.4 17.2 23.3 20.6 24.9 60 53.8 42.5 34.7 33.1 31.7 8.1

25 50 75

Luxury Upper Upscale Upscale Mid With Mid W/O Economy

2007 YE Q3 2008 Q4 2008

Source: 2009 Smith Travel Research, Inc.

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CB Richard Ellis | Page 25

Total U.S. vs. Resort Locations

Demand Percent Change Twelve Month Moving Average – 2005 to December 2008

  • 5
  • 4
  • 3
  • 2
  • 1

1 2 3 4 5

2005 2006 2007 2008 Total U.S. Demand Resort Demand

Resort Demand Drops Faster / More Steeply

Source: 2009 Smith Travel Research, Inc.

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CB Richard Ellis | Page 26

Total U.S. Lodging Industry

Consecutive Quarterly Declines/Key Indicators 1990/1991 2001/2002 Current Room Demand 3 5 4 Occupancy 7 6 5* Average Daily Rate 5 1 RevPAR 5 5 2 Room Revenue 2 5 1

Source: 2009 Smith Travel Research, Inc. * 8 out of the last 10 quarters

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CB Richard Ellis | Page 27

Total United States

Active Development Pipeline – Rooms/Change From Last Year

Phase December 2008 December 2007 Difference % Change In Construction 185,119 211,694

  • 26,575
  • 12.6%

Final Planning 88,539 83,985 4,554 5.4% Planning 339,234 319,963 19,271 6.0% Active Pipeline 612,892 615,642

  • 2,750
  • 0.4%

Pre-Planning 139,951 124,472 12,729 12.4% Total 752,843 740,114 12,729 1.7%

Source: STR / TWR / Dodge Construction Pipeline

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CB Richard Ellis | Page 28

Total United States

Abandoned Rooms Year-over-year percent change

56% 75% 34% 70% 31% 17% 16%

10% 30% 50% 70% 90% Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08

Source: STR / TWR / Dodge Construction Pipeline

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CB Richard Ellis | Page 29

Total United States

Supply/Demand Percent Change 2003 – 2010P

1.0 1.2 1.9 1.0 1.4 1.5 2.7 2.4 0.2 1.3 0.4

  • 0.1
  • 1.6

2.8 0.5

  • 1.6

1.3 4.0

  • 3
  • 2
  • 1

1 2 3 4 5

2003 2004 2005 2006 2007 2008 2009P 2010P 20 Yr Average Supply % Chg Demand % Chg

Source: 2009 Smith Travel Research, Inc.

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CB Richard Ellis | Page 30

Total United States

Occupancy Percent 2003 – 2010P

59.2 61.4 63.1 63.3 63.1 60.4 58.1 58.2

50 60 70

2003 2004 2005 2006 2007 2008 2009P 2010P

Source: 2009 Smith Travel Research, Inc.

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CB Richard Ellis | Page 31

Total United States

Occupancy Percent Change 2003 – 2010P

0.4 0.2 0.3

  • 4.2
  • 0.2

3.6 2.9

  • 3.9
  • 5
  • 4
  • 3
  • 2
  • 1

1 2 3 4 5 2003 2004 2005 2006 2007 2008 2009P 2010P

20 Year Average: -0.4%

2009 Smith Travel Research, Inc.

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CB Richard Ellis | Page 32

Total United States

ADR Percent Change 2003 – 2010P

5.5

  • 2.0

2.4 4.2 6.1 2.4 0.2 7.5

  • 3
  • 1

1 3 5 7 2003 2004 2005 2006 2007 2008 2009P 2010P

20 Year Average: 3.5%

Source: 2009 Smith Travel Research, Inc.

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CB Richard Ellis | Page 33

Total U.S. Room Rates

Actual vs. Inflation Adjusted 2000 - 2007

85.22 83.99 86.24 90.90 103.91 97.31 82.86 82.75 87.64 89.03 91.06 93.48 96.65 99.77 85.22 102.76

80 90 100 110 2000 2001 2002 2003 2004 2005 2006 2007

Nominal ADR Yr 2000, Grown by CPI

If year 2000 ADR had increased by CPI each year…

Rate cuts on ’01 Were Felt for 6 Years

Source: 2009 Smith Travel Research, Inc.

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CB Richard Ellis | Page 34

Total United States

RevPAR Percent Change 2003 – 2010P

7.8 2.6

  • 5.9

5.7

  • 1.9

8.5 7.9 0.5

  • 10
  • 5

5 10 2003 2004 2005 2006 2007 2008 2009P 2010P

20 Year Average: 3.4%

Source: 2009 Smith Travel Research, Inc.

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CB Richard Ellis | Page 35

Long-Term Occupancy Levels and Profits

Note: STR change in method in 2002. Source: 2009 Smith Travel Research, Inc.

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CB Richard Ellis | Page 36

U.S. Lodging Industry Investment Metrics

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CB Richard Ellis | Page 37

2009 Travel Trends Air Travel on Sale Air/Lift Capacity Cuts to Continue Ancillary Fees Proliferate Trimming & Downgrading Travel Spending Pursuing The Road Warrior International Bargains Abound Increase in Empty Hotel Rooms & Rental Cars Decline on Meetings and Attendance Right-sizing the Regional Jet Resurgence of Internet Fares

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CB Richard Ellis | Page 38

U.S. Recessions and Lodging Cycles

Source: National Bureau of Economic Research

U.S. Recessions Months Lodging Cycles Months

  • Dec. 1969 to Nov. 1970

11

  • Feb. 1969 to Feb. 1971

24

  • Nov. 1973 to March 1975

16

  • Aug. 1974 to May 1975

9

  • Jan. 1980 to July 1980

6

  • Oct. 1979…
  • July 1981 to Nov. 1982

16 … to May 1982 31 July 1990 to March 1991 8

  • Feb. 1990 to March 1991

13 March 2001 to Nov. 2001 8

  • Sept. 2000 to Sept. 2003

37

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CB Richard Ellis | Page 39

2009: What’s In & What’s Out

CHANGING MARKET DYNAMICS IN OUT

On-Book Lending CMBS Conservative Leverage High Octane Capital Stack Equity In-Deal Cash Out Financing Risk Based Pricing Inefficient Pricing of Capital Correspondent & Relationship Lending Loan Brokerage High Touch Loan Servicer Securitized/Impersonal Servicer Amortization- 30 Year Schedule Amortization- Interest Only Reserves Funded in Cash No Funded Escrow 450+/- Spreads 100+/- Spreads

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CB Richard Ellis | Page 40

Maturing CMBS Mortgages

$0 $20,000,000,000 $40,000,000,000 $60,000,000,000 $80,000,000,000 $100,000,000,000 $120,000,000,000 2008 2009 2010 2011 2012 2013 2014 2015

Healthcare Hotel Industrial Mixed (Other) Multifamily Office Retail Source: RealPoint 2008

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CB Richard Ellis | Page 41

U.S. Hotel Property Sales

$18 $22 $22 $7 $9 $9 $21 $5 $3 $8 $45

$0 $20 $40 $60 $80 $100 2005 2006 2007 2008

One-Off Portfolio Privatization Billions

Source: Real Capital Analytics, Inc. 2009

$30 $39 $88 $12

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CB Richard Ellis | Page 42

U.S. Hotel Investment Diagnostics – Cap/Mortgage Rates

5.0% 6.0% 7.0% 8.0% 9.0% 10.0%

200 300 400 500 600 700

2 5 2 6 2 7 2 8

Cap Rate Spread to US Treasuries bps Avg Cap Rates Mortgage Rates Source: Real Capital Analytics, Inc. 2009

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CB Richard Ellis | Page 43

U.S. Hotel Transaction Considerations in 2009 Seller:

  • Have the right price expectations (the peak is long

gone)

  • Select a closer, not just a buyer
  • Need to be flexible on timing, particularly for the

closing period

  • Closely monitor operations—to insure close of

escrow Buyer:

  • Have the right price expectations (just because it is

for sale does not mean it is a fire sale; “for sale” ≠ “fire sale”)

  • Be aware that there is still competition in the market
  • Demonstrated ability to close is extremely important
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CB Richard Ellis | Page 44

U.S. Hotel Investment Diagnostics – Price Per Unit/Sales Volume

$100 $125 $150 $175 $200 $0 $5 $10 $15 $20 '05 '06 '07 '08 Billions Volumes Thousands Avg $K/Unit

Source: Real Capital Analytics, Inc. 2009

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CB Richard Ellis | Page 45

Where are Cap Rates Going?

Three Main Drivers of Cap Rate Change When Cash Flows Decelerate

Cap Rates Increase

When Interest Rates Increase

So do Cap Rates

Volatility

The more there is, the higher the Cap Rate

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CB Richard Ellis | Page 46

Hotel Cap Rates

Implied Cap Rate Assumed $50 Million Sale Trailing 12 Months

Gross Revenues $18,000,000 100.00% GOP Before Mgt Fees and Reserves $4,320,000 24.0% 8.6% Gross Management Fee $540,000 3.0% Incentive Management Fee $180,000 1.0% Reserve for Replacement $900,000 5.0% NOI After Base Management Fee $3,780,000 21.0% 7.6% NOI After Base & Incentive Management Fee $3,600,000 20.0% 7.2% NOI After Base & Incentive Management Fee & Reserves $2,700,000 15.0% 5.4%

Projected Year One Implied Cap Rate Assumed $50 Million Sale

$ % of Gross Revenues Gross Revenues $20,000,000 100.00% GOP Before Management Fee $5,200,000 26.0% 10.4% Base Management Fee $600,000 3.0% Incentive Management Fee $200,000 1.0% Reserve for Replacement $1,000,000 5.0% NOI After Base Management Fee $4,600,000 23.0% 9.2% NOI After Base & Incentive Management Fee $4,400,000 22.0% 8.8% NOI After Base & Incentive Management Fee & Reserves $3,400,000 17.0% 6.8% $ % of Gross Revenues

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CB Richard Ellis | Page 47

U.S. Hotel Capital Stack Returns and Price Movements

2005 Early 2006 Late 2006 Early 2007 (Peak) Late 2007 Mid 2008 Late 2008 DEBT Debt to Value 60% 70% 75% 80% 75% 65% 55% Interest Rate 6.00% 6.50% 6.20% 5.75% 6.50% 7.10% 8.00% Amortization 25 30 I/O I/O 30 25 25 Debt Constant 7.7% 7.6% 6.2% 5.8% 7.6% 8.6% 9.3% EQUITY Equity to Value 40% 30% 25% 20% 25% 35% 45% Equity Dividend 10% 10% 9% 8% 9% 10% 11% Weighted Average Cost of Capital (WACC) 8.6% 8.3% 6.9% 6.2% 7.9% 9.1% 10.0% Implied Value of $1,000 NOI $11,575 $12,035 $14,493 $16,129 $12,597 $11,034 $9,956 % Change WACC from Previous Period N/A

  • 4%
  • 17%
  • 10%

28% 14% 11% % Change WACC from 2005 N/A N/A

  • 20%
  • 28%
  • 8%

5% 16% % Change WACC from Peak N/A N/A N/A N/A 28% 46% 62% % Change Value from Previous Period N/A 4% 20% 11%

  • 22%
  • 12%
  • 10%

% Change Value from 2005 N/A N/A 25% 39% 9%

  • 5%
  • 14%

% Change Value from Peak N/A N/A N/A N/A

  • 22%
  • 32%
  • 38%
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CB Richard Ellis | Page 48

U.S. Hotel Price Changes (Implied Value of $1000 NOI)

2005 8.6% Early 2006 8.3% Late 2006 6.9% Early 2007 (Peak) 6.2% Late 2007 7.9% Mid 2008 9.1% Late 2008 10.0%

25.0% 20.0% 15.0% 10.0% 5.0% 0.0%

  • 5.0%
  • 10.0%
  • 15.0%
  • 20.0%
  • 25.0%

$14,469 $15,043 $18,116 $20,161 $15,746 $13,793 $12,445 $13,891 $14,442 $17,391 $19,355 $15,116 $13,241 $11,947 $13,312 $13,840 $16,667 $18,548 $14,486 $12,689 $11,450 $12,733 13,238 $15,942 $17,742 $13,856 $12,138 $10,952 $12,154 $12,636 $15,217 $16,935 $13,226 $11,586 $10,454 $11,575 $12,035 $14,493 $16,129 $12,597 $11,034 $9,956 $10,997 $11,433 $13,768 $15,323 $11,967 $10,482 $9,458 $10,418 $10,831 $13,043 $14,516 $11,337 $9,931 $8,961 $9,839 $10,229 $12,319 $13,710 $10,707 $9,379 $8,463 $9,260 $9,628 $11,594 $12,903 $10,077 $8,827 $7,965 $8,682 $9,026 $10,870 $12,097 $9,447 $8,276 $7,467

Change in NOI Change in Weighted Cost of Capital

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CB Richard Ellis | Page 49

U.S. Hotel Price Change (%) Since Peak (Early 2007)

Early 2007 (Peak) 6.2% Late 2007 7.9% Mid 2008 9.1% Late 2008 10.0%

25.0% 20.0% 15.0% 10.0% 5.0% 0.0%

  • 5.0%
  • 10.0%
  • 15.0%
  • 20.0%
  • 25.0%

25.0%

  • 2.4%
  • 14.5%
  • 22.8%

20.0%

  • 6.3%
  • 17.9%
  • 25.9%

15.0%

  • 10.2%
  • 21.3%
  • 29.0%

10.0%

  • 14.1%
  • 24.7%
  • 32.1%

5.0%

  • 18.0%
  • 28.2%
  • 35.2%

0.0%

  • 21.9%
  • 31.6%
  • 38.3%
  • 5.0%
  • 25.8%
  • 35.0%
  • 41.4%
  • 10.0%
  • 29.7%
  • 38.4%
  • 44.4%
  • 15.0%
  • 33.6%
  • 41.8%
  • 47.5%
  • 20.0%
  • 37.5%
  • 45.3%
  • 50.6%
  • 25.0%
  • 41.4%
  • 48.7%
  • 53.7%

Change in NOI Change in Weighted Cost of Capital

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CB Richard Ellis | Page 50

Closing Comments

Forecast 2009 national US hotel occupancy of 58% would be lowest level since 1971 Near term compression of average daily rates Near term supply/demand imbalance will drag average rate growth Right sizing of hotel operational expenses Reduced spending on capital expenditures Lowest room starts since 1993; capital market turmoil slows new construction for next several years Industry profits will decline during 2009, third period since 1980’s Airline capacity cuts are real and expected to continue in 2009 Relief in oil prices helps, but impact in minimal Not much available product currently on the market for sale, but attractive investment opportunities invariably will surface Not as many distressed assets as one might think; at least not yet Hotel owners do not want to be perceived as selling in distress or a fire sale Available hotel investment capital has better options today (e.g., higher yielding notes, loan portfolios) KEEP THE FAITH

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SLIDE 51

The U.S. Lodging Industry - 2009: Been There; Done That; Doing It Again

Presented to: CB Richard Ellis Hotels Hospitality Industry Outlook: Economic Recovery or Prolonged Retraction Washington DC March 10, 2009

Daniel H. Lesser Senior Managing Director – Industry Leader Hospitality & Gaming Group CB Richard Ellis, Inc. One Penn Plaza, Suite 1835 New York, NY 10119 USA Phone: 212.207.6064 Fax: 212.207.6069 Email: daniel.lesser@cbre.com