Accelerating success. Southern California Lodging Forecast Southern California Lodging Forecast November 10, 2011 Bruce Baltin, Jeff Lugosi, Mark Van Stekelenburg and Brandon Feighner PKF Consulting Los Angeles. How Good Should You Feel? The Road to Recovery Continues:

Question Last Year: What Was Top of Mind a Year Ago? Some said yes; most said no. Will there be a double dip recession?. 2

Then What Happened? 3 Period U.S. Demand U.S. Demand U.S. RevPAR Q % Q %9.1% Q %8.9% Q %8.1% 4 Quarter Average7.1%8.6% Most were correct. Source: Smith Travel Research

U.S. TOTAL EMPLOYMENT LEVELS ……are starting to gain 6 Years From Peak-to-Peak - 8 Million Jobs Lost Source: Moody’s Analytics We’re here 4 Years From Peak-to-Peak Million Jobs Lost 1.25 Years From Peak-to-Peak – 2.0 Million Jobs Lost

4-Quarter Moving Average – U.S. All Employment Change in Total Payroll Employment and Demand Average Daily Room Night Demand Forecast Source: PKF Hospitality Research, STR, Moody’s Analytics 5

4-Quarter Moving Average – U.S. All Corporate Profits Change in Corporate Profits and Demand Average Daily Room Night Demand Forecast Source: PKF Hospitality Research, STR, Moody’s Analytics

The More Education, the Lower the Unemployment Rate …

The Wealthier Represent a Growing Percentage of All Demand

Uncertainty Levels at an All Time High Source: Baker, Bloom and Davis

Would You Like to Be in the Banking Business?

The Hotel Market Cycle 11 Rapid Development Occupancy Declines, ADR Follows Development at Minimum Levels Lodging Decline, Leads Other Sectors Occupancy Recovers ADR and Margins Recover Development Picks Up Development Slows Lodging Recovers, Lags Other Sectors (Not this Time!) Long Run Occupancy Rapid Development Equilibrium ADR U.S. is Here A Year Ago The Long, Hard Climb Up Growth Hill

Demand Recovery Has Been Strong for Many 12 Market Number of Markets at or Above Past Peak as of Q All Hotels44 Upper-Priced46 Lower-Priced14 Setting the Stage for Attractive ADR Growth. Source: PKF-HR; STR

Economic Assumptions – U.S. Forecasts Economic Assumptions – U.S. Forecasts 13 Payroll Employment Real Personal Income Real GDPCPI (Inflation) %-1.9%-2.6%-0.3% %1.9%3.0%1.6% %0.9%2.1%2.9%2.5%1.6%3.0% %0.7%4.0%4.4%3.8%2.7%1.8%2.1% %1.8%5.0%3.9%4.1%3.5%2.5%2.8% L.R.A. 1.2%2.7% 2.9% Source: Moody’s Analytics, July 2011 L.R.A. = Long Run Average July 2011 Forecast (September in Red)

Long Term Average F2012F Supply2.2% 0.2%1.3%2.5%3.0%1.8%0.6%0.7% Demand 1.8% 0.5%0.7%-2.5%-6.1%7.5%4.5%3.1% Occupancy 62.0% 63.1%62.8%59.8%54.5%57.6%59.8%61.2% ADR 2.8% 7.6%6.4%2.9%-8.5%-0.1%3.2%4.8% RevPAR2.5% 7.9%5.9%-2.1%-16.6%5.5%7.2%7.3% National Horizon – 2011, 2012 And a Quicker Demand Turnaround For a Record Decline Source: PKF Hospitality Research – September-November 2011 Hotel Horizons ® Report, Smith Travel Research 14 Severe Rate Discounting Set the Stage Approaching Long Run Average

Recovery Timelines Mixed Across Markets: Year when ADR levels Surpass Previous Peak (4Q Moving Average) & Beyond Source: PKF Hospitality Research

National Hotel Horizons Source: PKF Hospitality Research – September-November 2011 Hotel Horizons ® Report, Smith Travel Research 16 National vs. Regional Lodging Comparison 2011 Year-End Estimates LocationOccADR RevPA R%Increase United States59.8%$101.28$ % Los Angeles County71.7%$122.14$ % Orange County70.7%$112.52$ % San Diego County68.6%$125.73$ %

National Hotel Horizons Source: PKF Hospitality Research – September-November 2011 Hotel Horizons ® Report, Smith Travel Research 17 National vs. Regional Lodging Comparison 2012 Year-End Forecasts LocationOccADR RevPA R%Increase United States61.2%$106.16$ % Los Angeles County73.0%$129.64$ % Orange County72.7%$119.80$ % San Diego County70.1%$134.00$ %

Los Angeles County Historical Market Performance of the Competitive Supply AnnualPercentOccupiedPercentMarketAveragePercent YearSupplyChangeRoomsChangeOccupancyDaily RateChangeREVPARChange ,555N/A27,524,300N/A77.3%$153.32N/A$118.51N/A , %27,072, %77.0% % % , %25,834, %74.2% % % ,2204.1%24,363, %67.3% % % ,4422.2%26,432,4418.5%71.4% % % 2011 E101,7700.4%28,072,4386.2%75.5% % % 2012 F101, %28,457,4571.4%76.9% % % CAAG0.6% 2.1% 2.0% Source: PKF Consulting Downtown Los Angeles Renaissance; LA Live Hotels, Convention Center, Wilshire Grand closing Westside and Santa Monica hotels extremely well performing Luxury hotels exhibiting strong rate growth after being shunned in 2009 Continued evolution of Hollywood as high-quality hotel market Compression to secondary markets as primary markets are maxed out

Orange County Historical Market Performance of the Competitive Supply AnnualPercentOccupiedPercentMarketAveragePercent YearSupplyChangeRoomsChangeOccupancyDaily RateChangeREVPARChange ,192,230N/A12,444,937N/A72.4%$120.64N/A$87.32N/A ,214,5955.9%13,177,5585.9%72.3% % % ,976,7154.2%13,431,0101.9%70.8% % % ,302,5671.7%12,485, %64.7% % % ,529,4551.2%13,498,5888.1%69.1% % % 2011 E19,574,1870.2%13,988,8033.6%71.5% % % 2012 F19,655,8110.4%14,349,7712.6%73.0% % % CAAG2.3% 2.4% 0.8% 1.0% Source: PKF Consulting Strength of the Anaheim destination for business and leisure Significant renovations at Disney’s Amusement Parks and hotels Maturation of Coastal Resorts Recent addition of the Courtyard OC Airport and planned February 2012 addition of the Residence Inn San Juan Capistrano.

San Diego County Historical Market Performance of the Competitive Supply AnnualPercentOccupiedPercentMarketAveragePercent YearSupplyChangeRoomsChangeOccupancyDaily RateChangeREVPARChange ,676,761N/A8,829,077N/A75.6%$161.70N/A$122.27N/A ,858,8501.6%8,894,7750.7%75.0% % % ,269,5973.5%8,838, %72.0% % % ,999,8406.0%8,619, %66.3% % % ,185,6251.4%9,220,8797.0%69.9% % % 2011 E13,260,8150.6%9,584,4803.9%72.3% % % 2012 F13,392,9751.0%9,799,5912.2%73.2% % % CAAG2.3% 1.8% -0.3% -0.8% Source: PKF Consulting San Diego County Bay Areas back to peak levels Strong performance of North County and planned hotel development Proposed San Diego Convention Center and Hilton expansion Significant hotel renovations: La Costa, Marriott Marquis, Hyatt Manchester

Inland Empire Historical Market Performance of the Competitive Supply AnnualPercentOccupiedPercentMarketAveragePercent YearSupplyChangeRoomsChangeOccupancyDaily RateChangeREVPARChange 20062,245,845N/A1,624,035N/A72.3%$98.97N/A$71.57N/A 20072,344,3954.4%1,674,4203.1%71.4% % % 20082,484,1906.0%1,629, %65.6% % % 20092,725,8209.7%1,576, %57.8% % % 20102,814,8803.3%1,726,8109.6%61.3% % % 2011 E2,869,6301.9%1,815,3095.1%63.3% % % 2012 F2,944,4552.6%1,884,2543.8%64.0% % % CAAG4.6% 2.5% -2.0% -4.0% Source: PKF Consulting Supply additions at the lowest level since 2001 During the Economic downturn hotels were also hurt by foreclosures, bankruptcies, and changes in ownership/management Demand returning, but at somewhat depressed rates Supply additions (Embassy, Hyatt Place) will be challenging in the short-term, but are improving the hotel stock in the region Similar story with the temporary closing of the Riverside Convention Center Long-term will be an area of growth once fundamentals return

Coachella Valley Coachella Valley Market Historical Market Performance of the Competitive Supply AnnualPercentOccupiedPercentMarketAveragePercent YearSupplyChangeRoomsChangeOccupancyDaily RateChangeREVPARChange 20063,353,955N/A2,180,476N/A65.0%$143.81N/A$93.50N/A 20073,272, %2,008, %61.4% % % 20083,509,5977.2%2,018,2030.5%57.5% % % 20093,736,6426.5%1,884, %50.4% % % 20103,787,9701.4%1,912,2071.4%50.5% % % 2011 E3,748, %2,052,1877.3%54.7% % % 2012 F3,787,9701.0%2,144,3204.5%56.6% % % CAAG2.5% -0.3% -0.2% -2.9% Source: PKF Consulting Resurgence in demand in 2011; especially group demand after nearly two years Renovations will help to further stimulate demand in 2012 Upscale and luxury hotels leading the way, thus strong ADR growth Downtown Palm Springs epicenter of proposed development Stronger convention calendar for Palm Springs in Ritz-Carlton remains a real Question, but Rael and Rosewood PD are approved

Ventura County Historical Market Performance of the Competitive Supply AnnualPercentOccupiedPercentMarketAveragePercent YearSupplyChangeRoomsChangeOccupancyDaily RateChangeREVPARChange 20061,574,610N/A1,085,348N/A68.9%$98.27N/A$67.74N/A 20071,603,8101.9%1,080, %67.4% % % 20081,620,9651.1%1,069, %66.0% % % 20091,574, %983, %62.5% % % 20101,634,8353.8%1,059,8197.8%64.8% % % 2011 E1,650,5301.0%1,065,0590.5%64.5% % % 2012 F1,650,5300.0%1,092,4342.6%66.2% % % CAAG0.8% 0.1% 0.2% -0.5% Source: PKF Consulting Ventura County Slower growth market, evidenced in the 0.1% CAAG of occupied rooms Pockets of strength in the County; such as Camarillo, but the Oxnard submarket is estimated to experience a decline in demand in More often than not demand is shifted to newly opened or renovated hotels rather than induced into the market Potential to boost tourism to the region; Ojai is one example Dependence on Government could be a long-term threat to hotel performance

Santa Barbara County Historical Market Performance of the Competitive Supply AnnualPercentOccupiedPercentMarketAveragePercent YearSupplyChangeRoomsChangeOccupancyDaily RateChangeREVPARChange 20061,860,040N/A1,329,952N/A71.5%$171.75N/A$122.81N/A 20071,856, %1,321, %71.2% % % 20081,880,4801.3%1,303, %69.3% % % 20091,939,9753.2%1,239, %63.9% % % 20101,950,9250.6%1,315,6496.1%67.4% % % 2011 E1,950,9250.0%1,350,5442.7%69.2% % % 2012 F1,970,2701.0%1,408,3424.3%71.5% % % CAAG1.0% 0.8% Source: PKF Consulting Santa Barbara County RevPAR performance indicates a forecasted return to peak 2007 levels Continues to evolve as a destination; Hyatt & Bacara to further the Riviera experience Future hotels to included: El Encanto and Miramar Growth opportunities in North County; Santa Ynez Valley BID as a example Goleta, very strong performance, and locale for supply additions, which should be absorbed given relatively affordability and strength of demand drivers, especially UCSB

San Luis Obispo Combined Historical Market Performance of the Competitive Supply AnnualPercentOccupiedPercentMarketAveragePercent YearSupplyChangeRoomsChangeOccupancyDaily RateChangeREVPARChange 20061,278,595N/A862,335N/A67.4%$128.04N/A$86.36N/A 20071,417, %943,5249.4%66.6% % % 20081,503,8006.1%983,7104.3%65.4% % % 20091,522,7801.3%952, %62.6% % % 20101,541,7601.2%985,2083.4%63.9% % % 2011 E1,557,8201.0%1,030,3884.6%66.1% % % 2012 F1,579,3551.4%1,061,4293.0%67.2% % % CAAG3.6% 3.5% 0.8% 0.7% Source: PKF Consulting San Luis Obispo County Drive market, which benefits from proximity to S. CA and SF Wine industry continues to drive leisure demand, especially in Paso Robles The area’s Wine Country Alliance serves as a model for collaborative marketing City of San Luis Obispo remains a strong market, with hotels in early planning Supply changes include the opening of the Hampton Inn Arroyo Grande and the conversion of the Mission Inn to a Hilton Garden Inn

Coastal Market Historical Market Performance of the Competitive Supply AnnualPercentOccupiedPercentMarketAveragePercent YearSupplyChangeRoomsChangeOccupancyDaily RateChangeREVPARChange 20062,478,411N/A1,748,223N/A70.5%$305.06N/A$215.18N/A 20072,531,4272.1%1,782,8242.0%70.4% % % 20082,669,4885.5%1,789,4900.4%67.0% % % 20092,975, %1,703, %57.3% % % 20103,086,5013.7%1,896, %61.4% % % 2011 E3,086,5010.0%2,047,8268.0%66.3% % % 2012 F3,125,9211.3%2,136,8104.3%68.4% % % CAAG3.9% 3.4% 0.1% -0.4% Source: PKF Consulting Southern California Coastal Market Absorption of new supply in recent years (Grand Del Mar, Pelican Hill, Terranea) Limited future supply growth (Hilton Carlsbad) will facilitate demand growth Rates are also projected to increase as the newer hotels complete an elongated ramp up World-class Coastal Resorts successful in attracting international demand

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