US Hotel Industry Overview

Memphis Update February 12, 2016

Jeff Higley, VP/Editorial Director, STR/Hotel News Now

@jeffhigley1 jeff@str.com

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1. Size matters: More mergers to come, say industry leaders.

2. Here we go again: Don’t underestimate supply growth.

3. Airbnb’s reach: NYC data dive says effect is minimal. Will that change if downturn accelerates?

4. Surprise: Deal pace will slow. Is distressed inventory far behind?

5. Shift of sentiment at ALIS: Dark clouds on the horizon?

5 Things I think I know

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What Wall Street Expects:

2016 What STR Expects:

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2015-16 Lodging stocks take a beating … and then some

• Baird/STR Hotel Stock Index drops 20% during 2015 • Index drops another 12.1% in January 2016 • Closed Thursday, Feb. 11 at 2732—down from 3900

one year earlier • Is this an indicator of what’s yet to come?

HotelStockIndex.com

OCC 65.6% ▴1.7% RECORD

Metric No. Status Remarks

ROOM REV $142B ▴7.4% RECORD

OCC ROOMS 1.2B ▴2.9% RECORD

AVAIL ROOMS 1.8B ▴1.1% RECORD

ADR $120 ▴4.4% RECORD

REVPAR $79 ▴6.3% RECORD

U.S. Hotels YE 2015

SOURCE: STR

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Total US RevPAR: NYC and Houston Dragged

Total US : +6.3% NYC: -1.7% Houston: -3.3% Total US excluding NYC & Houston: +6.9%

*RevPAR % Change December 2015 YTD

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Supply Growth Now Back Over 1%. Demand Growth Slows.

-0.8

-4.7

-7.1

7.7

-8

-4

0

4

8

1990 2000 2010

Supply % Change

Demand % Change

Total U.S., Supply & Demand % Change, 12 MMA 1/1990 – 12/2015

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ADR Growth Steady. Occ Growth Decelerating Rapidly.

-3.4

-6.7

-9.7

6.8 7.5

4.4

-10

-5

0

5

1990 2000 2010

Occ % Change

ADR % Change

Total U.S., ADR & OCC % Change, 12 MMA 1/1990 – 12/2015

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RevPAR Growth: It’s Going To Be OK (but Not Great)

-25

-20

-15

-10

-5

0

5

10

15

1990 2000 2010

Total U.S., RevPAR % Change, 1/1990 – 12/2015

56 Months 70 Mo. 80 Months 31 Mo

$30

$50

$70

$90

$110

$130

2007 2009 2011 2013 2015

Bill

ion

s

Total U.S. – Rooms Revenue 12 MMA, January 2005 – December 2015

Room Revenue > $142bn

• Luxury – Fairmont, Four Seasons, Ritz Carlton, JW Marriott

• Upper Upscale – Sheraton, Embassy Suites, Hyatt, Marriott

• Upscale – Radisson, Hilton Garden Inn, Residence Inn, Springhill Suites, Homewood Suites, Courtyard, Best Western Premier

• Upper Midscale – Fairfield Inn/Suites, Holiday Inn, Clarion, Hampton Inn/Suites, Best Western Plus, Country Inn & Suites

• Midscale – Best Western, Candlewood Suites, Quality Inn/Suites, La Quinta, Sleep Inn, Red Lion

• Economy – Americas Best Value Inn, Country Hearth Inn, Jameson Inn, Extended Stay America, Motel 6, Red Roof, Days Inn, Microtel

• Complete list: www.HotelNewsNow.com/chainscales

STR Chain Scales: Sample of brands

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Scales: Demand Growth Healthy. Upscale Supply Increases

0.7

1.3

4.1

1.3

0.1 0.2

1.2

2.0

4.8

3.3

2.1

1.6

Luxury Upper Upscale Upscale Upper Midscale Midscale Economy

Supply % Change

Demand % Change

*Supply / Demand % Change, by Scale, December 2015 YTD

RevPAR Composition: ADR Driven

0.5 0.7 0.7

1.9 2.1 1.4

4.2 4.0

4.9

4.3 4.2 5.0

4.7 4.8

5.6

6.3 6.3 6.5

Luxury Upper Upscale Upscale Upper Midscale Midscale Economy

ADR % Change Occupancy % Change RevPAR % Change

RevPAR % Change by Contribution of OCC / ADR % Change, by Scale Full Year 2015

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Scales: Upper End Hotels Are Very Busy

75.3 74.2 74.3

67.6

59.5 58.3

75.0 73.6 73.8

66.4

58.3 57.5

Luxury Upper Upscale Upscale Upper Midscale Midscale Economy

2015 2014

*OCC %, by Scale, December YTD 2015 & 2014

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RevPAR December 2015 YTD: Winner: CA. Loser: Oil Markets.

Market RevPAR %

Change Market RevPAR %

Change

Macon/Warner Robbins, GA

18.6 Ohio Area

(1.9)

San Jose/Santa Cruz, CA

17.3 Houston, TX

(3.3)

Oakland, CA

15.7 Texas North

(4.1)

Chattanooga, TN-GA

15.5 West Virginia

(4.5)

California North Central

14.9 New Mexico South

(5.4)

Fort Myers, FL

14.7 Augusta, GA-SC

(6.7)

Knoxville, TN

14.5 Oklahoma Area

(10.0)

Portland, OR

14.2 Texas South

(11.4)

Tampa/St Petersburg, FL

13.8 Texas West

(19.2)

Greenville/Spartanburg, SC

13.7 North Dakota

(20.9)

*December 2015 YTD RevPAR: Best / Worst Performing Markets

High Occ = Higher ADR (Except in NYC)

Market Occ % ADR % Change

Nashville, TN 73.5 8.7

Phoenix, AZ 65.9 8.0

Seattle, WA 76.2 7.8

Tampa/St Petersburg, FL 71.8 7.7

Los Angeles/Long Beach, CA 79.7 7.5

Washington, DC-MD-VA 70.7 3.0

Oahu Island, HI 85.3 3.0

New Orleans, LA 69.7 2.3

Houston, TX 68.5 1.6

New York, NY 84.7 -1.6

Top 25: Top 5 / Bottom 5 Performing ADR % Markets Full Year 2015

Markets 26-50: Markets Around San Francisco Lead

Market Occ % ADR % Change

San Jose/Santa Cruz, CA 77.6 14.6

Oakland, CA 79.6 12.0

Portland, OR 74.9 9.9

Knoxville, TN 59.0 8.5

Richmond/Petersburg, VA 61.9 7.7

Cleveland, OH 63.1 3.7

San Antonio, TX 64.9 3.1

Pittsburgh, PA 65.1 2.3

Oklahoma City, OK 62.3 2.1

Baltimore, MD 67.1 1.4

Markets 26-50: Top 5 / Bottom 5 Performing ADR % Markets Full Year 2015

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12.4

6.0 5.8 3.8 2.2

-1.7

80.8 81.2 83.7 84.4 84.7 84.7

2010 2011 2012 2013 2014 2015

RevPAR % Change Occupancy

NYC YTD RevPAR & Occupancy: Full House But No RevPAR Growth

* NYC RevPAR % Change & Absolut Occupancy, December YTD, by year

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Houston: Oil Price Predicts Houston Room Demand

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

$35

$45

$55

$65

$75

$85

$95

$105

2014 2015

Crude Oil Futures Price / Barrel (LHS)

Demand % Change (RHS)

*Monthly Oil price Future / Barrel vs. Houston, TX Room Demand % Change 1/2014 – 12/2015 http://www.investing.com/commodities/crude-oil

Group Demand Growth Slows Rapidly

-2%

-1%

1%

2%

3%

4%

5%

6%

7%

2012 2013 2014 2015

Demand % Change

ADR % Change

1.9%

3.8%

Group Demand and ADR % Change 12 MMA, January 2012 – December 2015 NOTE: Data is for upper tier hotels only (Luxury & Upper Upscale classes)

5.3%

-1.5%

3.6%

Balanced ADR Growth for Transient & Group

1.3

3.7

5.1

0.7

3.8

4.5

Occupancy ADR RevPAR

Transient Group

24.1% $44.21

Segmentation % Change Full Year 2015 NOTE: Data is for upper tier hotels only (luxury & upper upscale classes)

45.5% $212.72 $183.76 $96.76

6 Years of Group RevPAR Growth

1.2

6.8 6.2 6.3 4.3

-0.3

-23.6

4.7 5.5 3.9

2.0

6.7

-28

-23

-18

-13

-8

-3

2

7

12

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

ADR % Change

Occupancy % Change

RevPAR % Change

Group RevPAR % Change by Contribution of Occ / ADR % Change 2003 – 2015 Annual NOTE: Data is for upper tier hotels only (luxury & upper upscale classes)

4.5

13.5

9.5 9.2 8.5 8.1 8.1

7.4 6.5 6.4 6.2 5.9

5.2 4.7 4.4 4.3 3.7 3.5

2.9

1.3 1.3 0.9

-0.1 -0.3

-5.5 -5.5

Group RevPAR Declines in 4 of Top 25 Markets

Group RevPAR % Change, Top 25 Markets Full Year 2015

MEETING PLANNING TRENDS

SOME THINGS TO KNOW

MEETING SIZE

MEETING REQUIREMENTS

CONVENTION CENTERS

INFORMATION SOURCES

ADVERTISING

MEETING SIZE

Meetings of 1000+ attendees make up the largest major meeting segment.

0%

10%

20%

30%

40%

50%

60%

Less than 300 300-999 1000+

Overall CMP planners Non-CMP planners

OVERALL ATTENDANCE AT LARGEST MEETING PLANNED IN LAST YEAR

MEETING REQUIREMENTS

Meeting planners are more demanding than ever when selecting a meeting site.

CONSIDERATIONS RATED “VERY IMPORTANT” IN SITE SELECTION

50% 60% 70% 80% 90% 100%

Clean/attractive city

Attractive conference hotels

# of hotel rooms available

Convenient airline service

Easy for delegates to get to

Food and lodging costs

Travel costs to destination

Good value for the money

2015

2013

COSTS

CONVENIENCE

CLEAN/ ATTRACTIVE

CONVENTION CENTER

Cost, logistics and service considerations are very important to meeting planners when selecting a convention center.

“VERY IMPORTANT” CONVENTION CENTER CONSIDERATIONS

• Reasonable facility rental rates

• Adequate breakout rooms

• Adequate seating for largest session

• Competent management

• Wireless internet

• Helpful staff

• Proximity to hotels

INFORMATION SOURCES Sources that are personal or directly connected to a meeting planner are found to be the most trustworthy and highly valued.

“VERY IMPORTANT” INFORMATION SOURCES

83% 76%

58% 57% 56% 45%

Past experience Attendee feedback Hotel website Colleaguerecommendations

Hotel rating/userreview sites

Destinationwebsite

Hotel Pipeline

In Construction – Vertical construction on the physical building has begun. (This does not include construction on any sub-grade structures.) Final Planning – construction will begin within the next 12 months. Planning – construction will begin in more than 13 months. Unconfirmed - Potential projects that remain unconfirmed at this time.

Un

de

r C

on

trac

t STR Pipeline Phases

Un

de

r C

on

trac

t

2015 Supply Increase: Now 2 Million More Rooms Available Per Month

1.1 1.1

1.4 1.5

1.4 1.6

1.7 1.6

1.8

1.9 2.0

2.2

January February March April May June July August September October November December

U.S. Supply Change (millions of room nights) 2015 by Month

Top 26 Markets Have ~50% Of U/C Rooms

69.4 71.3 72.5

107.9

67.0

81.0

Top 26 Markets Rest of the US

In Construction

Final Planning

Planning

U.S. Pipeline, Rooms (‘000s), Top 26 Markets vs. All Other Markets December 2015

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US Pipeline: Construction Today Will Impact 2016 / 2017

Phase 2015 2014 % Change

In Construction 141 120 17%

Final Planning 180 122 47%

Planning 147 170 -13%

Under Contract 469 413 14%

*Total US Pipeline, by Phase, ‘000s Rooms, December 2015 and 2014

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Limited Service Construction Has Been Strong For 2 Years

7.4 11.5

49.2 48.0

5.3 1.5

17.7

Luxury UpperUpscale

Upscale UpperMidscale

Midscale Economy Unaffiliated

*US Pipeline, Rooms Under Construction , ‘000s Rooms, by Scale, December 2015

69%

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Construction In Top 26 Markets: 20 With 2%+ Of Supply

*US Pipeline, Top 26 Markets, U/C Rooms as % of Existing Supply, December 2015

Market Rooms U/C % Of Existing

Oahu Island, HI 175 0.6%

Norfolk/Virginia Beach, VA 300 0.8%

St Louis, MO-IL 407 1.1%

Atlanta, GA 1,255 1.3%

San Francisco/San Mateo, CA 751 1.5%

New Orleans, LA 618 1.6%

Orlando, FL 2,600 2.1%

Detroit, MI 954 2.3%

Las Vegas, NV 3,905 2.3%

Phoenix, AZ 1,536 2.5%

Chicago, IL 2,964 2.7%

Tampa/St Petersburg, FL 1,233 2.8%

Washington, DC-MD-VA 3,339 3.1%

San Diego, CA 1,951 3.2%

Denver, CO 1,794 4.1%

Anaheim/Santa Ana, CA 2,328 4.2%

Los Angeles/Long Beach, CA 4,240 4.3%

Minneapolis/St Paul, MN-WI 1,949 5.0%

Boston, MA 2,627 5.0%

Philadelphia, PA-NJ 2,343 5.1%

Nashville, TN 1,982 5.1%

Dallas, TX 4,177 5.2%

Seattle, WA 2,232 5.3%

Houston, TX 5,710 7.1%

Miami/Hialeah, FL 3,920 7.6%

New York, NY 14,090 12.0%

Forecast: Where Are We Headed?

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Notable Calendar Shifts Impacting Lodging Performance Data in 2016:

Super Bowl: From Phoenix to San Francisco

Easter: From April to March

Jewish Holidays: From September to October

April and December will have two more Weekend days (Net +)

May will have two fewer Weekend days (Net -)

Leap Day February 29th (No Impact To Results) See: http://www.str.com/Media/Default/Documents/STR_leap_year_methodology.pdf

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Total United States Key Performance Indicator Outlook (% Change vs. Prior Year) 2016 - 2017

Outlook

2016 Forecast

2017 Forecast

Supply 1.7% 1.9%

Demand 2.3% 2.1%

Occupancy 0.6% 0.2%

ADR 4.4% 4.3%

RevPAR 5.0% 4.5%

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Total United States Chain Scale Key Performance Indicator Outlook 2016F by Chain Scale

2016 Year End Outlook

Chain Scale Occupancy

(% chg) ADR

(% chg) RevPAR (% chg)

Luxury 0.4% 4.5% 4.9%

Upper Upscale 0.5% 4.6% 5.2%

Upscale -0.2% 4.5% 4.3%

Upper Midscale 0.4% 4.1% 4.5%

Midscale 0.5% 3.5% 4.0%

Economy 0.9% 3.7% 4.6%

Independent 0.6% 4.4% 5.1%

Total United States 0.6% 4.4% 5.0%

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Total United States Chain Scale Key Performance Indicator Outlook 2017F by Chain Scale

2017 Year End Outlook

Chain Scale Occupancy

(% chg) ADR

(% chg) RevPAR (% chg)

Luxury 0.1% 4.7% 4.8%

Upper Upscale 0.1% 4.6% 4.7%

Upscale -0.6% 3.8% 3.2%

Upper Midscale -0.1% 3.7% 3.6%

Midscale 0.6% 4.1% 4.7%

Economy 0.4% 3.4% 3.9%

Independent 0.3% 4.4% 4.7%

Total United States 0.2% 4.3% 4.5%

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