2010 Southern California Lodging Forecast

1. 2010Southern California Lodging Forecast Where? When? & How Long Presented by: Bruce Baltin, Senior Vice President Mark Van Stekelenburg, Vice President Brandon Feighner, Associate PKF Consulting Los Angeles, CA

2. Revised Economic Expectations Lead to Revised Lodging Forecasts Date of Forecast: Source: Moody's Economy.com

3. The Great Recession Is Over… Business confidence diffusion index Lehman Iraq invasion Bear Stearns Source: Moody’s Economy.com 3

4. …But it Is One for the Record Books Recessions since World War II 4

5. The Correlation of Income and Employment to Demand

6. The Hotel Market CycleWe Are at the Bottom Rapid Development Development Picks Up Equilibrium ADR Rapid Development Lodging Decline, Leads Other Sectors L.T. Average U.S. is Here Long Run Occupancy ADR and Margins Recover Occupancy Declines, ADR Follows Development Slows Occupancy Recovers Development at Minimum Levels Lodging Recovers, Lags Other Sectors

7. The Bad News Begins to Get Better

8. National Horizon A Slow Recovery from a Deep Fall = Below/Above Long Run Average Source: PKF Hospitality Research – Preliminary August 2009 Hotel Horizons® Report, Smith Travel Research

9. Thoughts to Consider • Nine Consecutive Quarters of Demand Contraction Will End in Q2 2010. Supply/Demand Imbalance; Capital Market Turmoil Will Keep Development at a Standstill. • For the Consumer, a Buyer’s Market Will Persist into 2011. Eight Consecutive Quarters of Rate Declines, However, Will End in Q3 2010, Leading to • Profit Growth in 2011.

10. U.S. HotelsAnnual Change in Unit-Level NOI* +14.1% - 2011F -7.1% - 1991 -19.4% - 2001 -39.1% - 2009F Note: * Before deductions for capital reserves, rent, interest, income taxes, depreciation, and amortization. Source: PKF Hospitality Research

11. Southern CaliforniaExecutive Summary • Commercial demand coming back slowly, though faster than group demand • 1st through 3rd Quarter 2009 continued the declines of 4th Q 2008 • Year-end 2009 Decrease in occupancy of 7 to 10 percent in many markets. ADR decline of 5 to 12 percent. • RevPAR declines in 2009 is in the 5 to 30% range, most submarkets in the 20 to 25% range • Expect limited improvement in occupancy levels and negative or minimal ADR growth in 2010 of -2 to 2% • RevPAR projected to be flat in 2010 in most markets • 2009/10 – “The Bottom Years” – 2011 brings positive RevPAR growth

12. Then, Now…& LaterOccupancy

13. Then, Now…& LaterADR

14. Then, Now…& LaterRevPAR

15. Los Angeles County • 1,001 Room JW/Ritz at LA Live set to open February 15. • In 2008, 14 submarkets achieved occupancies 70%+. For 2009, only 3 submarkets: Santa Monica, LAX, and Hollywood, are estimated to achieve 70%+ • Smallest 2009 declines in ADR include Downtown, Long Beach, South Bay, & Valencia. All other submarkets estimated to exceed 8% ADR decline • All markets projected to experience RevPAR declines in 2009 of 13% to 28% • Constrained supply growth going forward will assist recovery

16. Los Angeles County Submarkets

17. Los Angeles County Submarkets

18. Los Angeles County Submarkets

19. San Diego County • Significant supply additions in recent years compounded occupancy declines amidst slowdown in demand • Compression markets taking hits – North City - UTC, South Bay, and North Coastal • Submarkets facing 2009 RevPAR declines of 18 to 27% • 2010+ convention calendar remains relatively strong

20. San Diego Sub-Markets

21. San Diego Sub-Markets

22. Coastal Market • “AIG” effect continues at higher-end resorts • Significant additions need to be absorbed, including Terranea, Pelican, and Shorebreak • Higher rated properties taking significant RevPAR hit • declining revenue capture in other operating departments

23. Coastal Market Sub-Markets

24. Orange County • Affordable, accessible leisure destinations out performed all other market segments (Anaheim) • High-end corporate and group hotels continue to suffer from the “AIG Effect” • Discounting will continue well into 2010 • SNA passenger counts down 6.0% year-to-date • Disney developments and marketing prowess help to mitigate severe demand declines • Convention Center activity remains robust

25. Orange County Sub-Markets

26. Orange County Sub-Markets

27. Ontario (Inland Empire) • Greater impact as a result of reliance mainly on commercial demand • Significant supply added in 2005-2008 still being absorbed and will lengthen recovery period • Short term will be painful, but long-term fundamentals remain in tact as it is the only market for real growth in SoCal

28. Inland Empire Sub-Markets

29. Coachella Valley • New categorization of Down Valley properties based on quality and level of facilities • Dependency on tourism has resulted in lower occupied rooms, discounted rates, and clever packaging • Occupancy down due to loss of group business, shorter booking windows, reduced airline inventory, and ongoing issues with seasonality

30. Coachella Valley Sub-Markets

31. Santa Barbara County • Coastal Resorts severely impacted by slowdown in groups and reduction in ancillary spend • High barriers to new hotel development, increased by economic pressure • Significant renovations at several properties has mitigated decline

32. Santa Barbara Sub-Markets

33. Santa Barbara Sub-Markets

34. Ventura County • Competitively priced coastal destination resulted in one of the smaller declines in Southern California • Upward positioning of properties to maintain rate positioning

35. Ventura County Sub-Markets

36. Ventura County Sub-Markets cont.

37. San Luis Obispo • 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

38. San Luis Obispo Sub-Markets

39. San Luis Obispo Sub-Markets

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

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