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Expectations in a Time of Uncertainty

Expectations in a Time of Uncertainty. 2011 Southern California Lodging Forecast. Presented by: Bruce Baltin, Senior Vice President Mark Van Stekelenburg, Vice President Brandon Feighner, Associate COLLIERS PKF CONSULTING Los Angeles, CA. . Expectations…..Uncertainty. Macro Overview

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Expectations in a Time of Uncertainty

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  1. Expectations in a Time of Uncertainty 2011Southern California Lodging Forecast Presented by: Bruce Baltin, Senior Vice President Mark Van Stekelenburg, Vice President Brandon Feighner, Associate COLLIERS PKF CONSULTING Los Angeles, CA .

  2. Expectations…..Uncertainty Macro Overview 2011Southern California Lodging Forecast Q & A

  3. The Hotel Market Cycle Moving Past the Trough Rapid Development Rapid Development Development Picks Up Lodging Decline, Leads Other Sectors Equilibrium ADR 2013-2014 U.S. is Here Long Run Occupancy 2011-2012 A Year Ago ADR and Margins Recover Occupancy Declines, ADR Follows Development Slows Occupancy Recovers Development at Minimum Levels Lodging Recovers, Lags Other Sectors

  4. Current Forecast – September 2010 - a Quicker Turnaround ? Source: Colliers PKF Hospitality Research – September-November 2010 Hotel Horizons® Report, Smith Travel Research

  5. National Horizon September 2010 Update Record Decline A Quicker Turnaround? Record Increase Source: Colliers PKF Hospitality Research – September-November 2010 Hotel Horizons® Report, Smith Travel Research

  6. National Hotel Horizons (Preliminary 2011 Data) National vs. Regional Lodging Comparison Source: Colliers PKF Hospitality Research – Preliminary 2011 Hotel Horizons® Report, Smith Travel Research

  7. National Hotel Horizons (Preliminary 2011 Data) National vs. Regional Lodging Comparison Source: Colliers PKF Hospitality Research – Preliminary 2011 Hotel Horizons® Report, Smith Travel Research

  8. Recovery Timelines Mixed Across Markets: Distance to Long Run Average Occupancy Level Source: Colliers PKF Hospitality Research – September-November 2010 Hotel Horizons® Report, Smith Travel Research Updated 6/15/2010 - aw

  9. Recovery Timelines Mixed Across Markets: Year When ADR Levels Return to Previous Peak Source: Colliers PKF Hospitality Research – September-November 2010 Hotel Horizons® Report, Smith Travel Research Updated 6/15/2010 - aw

  10. Recovery Timelines Mixed Across Markets: Year When Nominal RevPAR Returns to Previous Peak Source: Colliers PKF Hospitality Research – September-November 2010 Hotel Horizons® Report, Smith Travel Research Updated 6/15/2010 - aw

  11. Revenue & Expenses2009 Annual Trends® The worst year on record is now behind us!

  12. Summary Headwinds Against the Economy – Uncertainty: * The November elections * Tax policy as of January 1, 2011 * Persistent high levels of unemployment * Continued weakness in housing * Airline capacity constraints Forecast bias = slight negative.

  13. Los Angeles County • JW Marriott/Ritz LA Live fully absorbed into downtown market, inducing additional demand – 24.8% RevPAR growth estimated for 2010 • Westside showing strong occupancy recovery, rate following. • West Hollywood, Hollywood, and West LA has a number of newly renovated hotels, poised for recovery.

  14. Los Angeles County • Santa Monica submarket expected to achieve highest 2010 submarket occupancy, followed by LAX and Arcadia/Monrovia. • 281,000 definite and tentative room nights on the 2011 convention calendar, 300,000+ for 2012 and 2013 as LA Inc and Downtown drive new business. • 2009 openings include AVIA Long Beach Hotel with 138 guestrooms and the 178-room Residence Inn, as well as the June 2009 opening of the 582-room Terranea. • 2010 openings include JW Marriott and Ritz LA Live, the W Hollywood, and the re-opening of Best Western Jamaica Bay in Marina Del Rey in December. • No openings expected for 2011.

  15. Orange County • Affordable, accessible leisure destinations out performed all other market segments (Anaheim) • SNA passenger counts down 3.8% year-to-date, but well positioned for future years given current $0.5 billion expansion • Convention Center activity remains robust • Recent passage of 2% TID in Anaheim Resort Area

  16. Orange County • Coastal resorts achieving significant RevPAR recovery • Costa Mesa and Airport submarkets posting highest 2010 occupancies • Disneyland Resort continues to be a driving force for hotel demand • Expansion/Renovation of the Grand Californian & Disneyland Hotel • $1 Billion expansion of California Adventure • SpringHill Suites Anaheim opening in mid-2011 (NE of Disneyland SEC Ball & Walnut) • Only addition to supply, But the immediate Anaheim Area remains the most studied area in the County for proposed hotels

  17. San Diego County • Only new addition for 2011 is Hampton Inn Mission Valley in December2011/ January2012 (87 keys) • Marriott Escondido still on hold • 94-room Towne Place Vista and the 112-room Residence Inn San Marcos, both of which opened mid-2010 in I-15 Kearny Mesa market • Compression markets such as Mission Valley and South Bay posting slower recovery

  18. San Diego County • Downtown on its ways to absorbing 1,500 rooms annualized in 2009, including the Hilton, Se, and Residence Inn Gaslamp, market expected to reach 75% by 2011 • Other Changes in supply • Projects in pipeline still year+ away from breaking ground • Convention Center expansion lease still active, plans for $753 million expansion • Narco-terrorism and continued economic pressure drives demand from Mexico and other resort locations to SoCal.

  19. Inland Empire • Greater impact as a result of reliance mainly on commercial demand • Rate wars and lack of product differentiation lead to depressed Average Daily Rates • Significant supply added in 2005-2009 still being absorbed and will lengthen recovery period • Airlift remains contentious; Ontario exploring plans to take over • But 2010 WILL exhibit positive growth for the 1st time since 2007 • Short term, will be painful, but long-term fundamentals remain in tact as it is the only market for real growth in SoCal

  20. Coachella Valley • Three Distinct Markets - Based on quality and level of facilities (Down Valley Resorts, Palm Springs/Cathedral City and other Limited-Service) • Dependency on tourism and group demand has resulted in lower occupied rooms, discounted rates, and clever packaging • Continued RevPAR decline estimated for 2010, slower rate turnaround projected than other SoCal markets • Convention Calendar looks promising with 100K+ Room Nights for 2010 & 2011 • The group market should be returning in time for the 2011 peak season, which it missed in 2009 and 2010 • At long last, The Ritz Carlton will be reopening…

  21. Ventura County • Competitively priced coastal destination resulted in one of the smaller 2008/09 declines in Southern California • Leading SoCal markets in growth in occupied rooms for 2010 • Upward positioning of properties to maintain rate positioning

  22. Santa Barbara County • Set represents approximately 60% of Santa Barbara supply • Coastal Resorts leading recovery, return in group market. • High barriers to new hotel development, increased by economic pressure • Significant renovations at several properties has mitigated decline • North county has benefited from drive in vacations

  23. San Luis ObispoCounty • Popular drive destination for both Southern and Northern California achieved smallest decline of any SoCal market • Approximately 82% visitors arrive by automobile according to San Luis Obispo CVB – minimized impact of declining airline inventory • Lower starting RevPAR basis – 2007/08 increases in supply still being absorbed

  24. Coastal Market • “First Tier ($400+) highest 2010 RevPAR growth estimate at 24.8%, Tier 3 at 7.4% (>$275) and Tier 2 -0.8% ($275<--<$400) • Recent additions include • 2007 - Grand Del Mar • 2008 - Sheraton Carlsbad and Pelican Hill Resort • 2009 - ShorebreakHotel in Huntington Beach and the TerraneaResort in Rancho Palos Verdes. • No new hotels opened in 2010 or are expected to in 2011.

  25. Coastal Submarkets • Group demand starting to return, strong ADR growths expected in 2011, with First Tier leading the way. • Coastal SoCal continues to develop as a self-standing international group and leisure destination. • Significant additions to supply from 2005 to 2009 still being absorbed, but the good news is there is little in the pipeline

  26. Q & A What questions can we answer for you?

  27. Thank you for your time. 27

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