The Global Hotel Industry - an STR Perspective The SHARE Center Supporting Hotel-related Academic Research and Education

Agenda Quick Intro to STR and STR Global WW Foundations and Categorizations Global Companies WW Processes and Reports Examples of Global Research

A Quick Introduction to STR and STR Global

Who is Smith Travel Research? The recognized leader in hotel benchmarking Sample over 75% of total U.S. room supply (99% of chain hotels) and nearly 50% of total global room supply Provide monthly, weekly, and daily STAR reports to over 43,000 hotels Founded in 1985 Impartial, timely, confidential, and accurate

Benchmarking 101: my hotel vs. the competition

Who does STR serve? Hotel companies and Hotels (most GM’s bonuses) Convention & Visitor Bureaus, Tourism and travel organizations, Hotel associations (endorsed by AHLA) Developers, Consultants, Appraisers (most bank loans) Wall Street/Accounting firms, Financial institutions Media (Wall St Journal, USA Today, …) National & international hotel conferences (keynotes) Hotel vendors (HBO, Sealy, Starbucks, …) Educators Government (GSA, FEMA, BLS, DOE/HS, NPS, Commerce, …)

A Brief History of STR 1985 – founded, started collecting hotel attribute info 1987 – started collecting monthly sales data 1992 – started collecting data outside US, NA then WW 1999 – started collecting daily data 2008 – launched STR Global 2008 – launched Hotel News Now 2009 – started STR Analytics, working with RRC 2009 – started HDC/Hotel Data Conference 2011 – launched the SHARE Center and HDC Europe

Hotel News Now Free electronic news service (www.hotelnewsnow.com ) Focus on data, performance, and industry issues Search capability for past articles Coverage of industry conferences Global emphasis also

STR Global - Background WW Benchmarking – originally 3 players Creation of STR Global – interest of major companies Recently celebrated 3-year anniversary! Offices and people on the ground London, UK (30); Singapore (5); Beijing, China (2) Also Italy, Dubai, Japan, Australia, Brazil, Indonesia, India Challenges getting started

What data does STR track? Hotel census data Attributes, geo. & non-geo. categorization, affiliations, & history US: 51K hotels WW: additional 90K hotels Rooms sales data Monthly & daily rooms available, rooms sold, & revenue US: 29K hotels WW: 14K hotels Segmented (Group/Transient) data US: 4K hotels (95% of Lux & Upper Up) WW: 1K hotels HOST data Annual Profit & Loss info; revenue, expenses, costs US: 6.5K hotels WW: 2K hotels Pipeline data Hotels under construction and projects in planning US: 4K projects WW: 4K projects

Lesser participation in Africa and parts of S. America and Mideast WW STAR Participation Lesser participation in Africa and parts of S. America and Mideast

WW Foundations and Categorizations

Terminology Differences “Lodging” – Lodging Review  Hotel Review “Tract”  “Sub-market” “CVB” – CVB Reports  Destination Reports “Benchmarking”  “Market Share” Index definitions “Occupancy Index”  MPI (Market Penetration Index) “ADR Index”  ARI (Average Rate Index) “RevPAR Index”  RGI (Revenue Generation Index) “Worldwide”  “Global” “Conference” hotel  “Congress” hotel

WW Geographic Categorization Continents Americas, Europe, Asia/Pacific, Mid East/Africa Sub-continents Americas: North America, Central America, South America, Caribbean Countries – based upon WTO definitions, irregularities Regions – 9 in US, 4 in Canada (5 in UK, 4 in Germany) Markets – major cities, also non-metro areas, or country Sub-markets – subsets of markets, in US called tracts Other areas or groups of countries: Eurozone, UK Regional, Gulf Coop. Council, BRIC, Benelux, Nordic, Scandinavia, …

Census & Sample by Sub-Continent 4 continents with 3 to 4 sub-continents each, 52.5K hotels in US Census=in the STR database, Sample=they submit performance data

Census/Sample by Top Countries Sorted by Census Rooms, Countries with 100K+ rooms

Census/Sample by Top Non-US Markets Sorted by Census Rooms, only metro markets

WW Non-geographic Categorization Scale versus Class Scale defined: Scales include just chain hotels Chains are placed in Scale based on average ADR of all hotels globally Separate Scale category for Independents Chains are in the same scale for whole world North America reports use Scale

WW Non-geographic Categorization Class defined: Needed since there are so many more independent hotels Chain hotels in same group as in scale (no difference). Why? Sometimes this presents problems (i.e.: Holiday Inn). Includes independent hotels based on ADR of independent relative to ADR of similar chain hotels on country by country basis, recalibrated once a year Same names as for Scale WW reports use Class

Additional WW Non-geo. Categorization Star Rating Different systems in different countries Location Price Types and Features: Boutique, Golf, Spa, Resort, Ski, Conference/Congress, Casino, Extended Stay, … User-defined based on needs of companies

Currency Issues Daily Data Monthly Data Exchange rates obtained from Oanda.com Monthly Data Use exchange rate on last day of month Multiple Time Periods (YTD, running-12, week) Uses different exchange rate of each time period included Fluctuation (can be significant) and change (new/switch) Constant Currency Many companies request this data for aggregating numbers across countries Current and prior year data is based on January conversion rate

Time-Related Issues Weekday/Weekend YTD/Fiscal Year Holidays Other than typical Friday and Saturday night, UAE is Thu to Fri YTD/Fiscal Year Other than January to December, India is April to March Holidays Many more Time Zones Country like China has 6 Reports/data, processing, and support are needed around the globe on a timely basis

Global Companies

Major Parent Companies in the World Sorted by Census Rooms, all are US companies except for Accor

Top WW Hotel Companies/Chains Sorted by Census Rooms

Additional WW Hotel Companies/Chains Sorted by Census Rooms

Chain Hotels versus Independents Percentages based on Number of Rooms 2011 Smith Travel Research, Inc. WW percentage (40/60) is based on hotels in STR database, much harder to find WW independents, probably closer to 30/70 or 20/80

More Independents - Ramifications Some countries have very few Chain hotels Italy has < 5% Brand hotels And largest Brand has no more than 25 hotels There can be much more owner involvement More chance to be family business Could be multi-generation business Hotel is extension of who the owner is, very personal Very proud of hospitality More passionate, feeling of calling/destiny More detail oriented, very concerned about the numbers Many hotels started as guest houses/bed & breakfasts

Other US vs. Non-US Differences Disparity of operating practices Different countries, hotels want to be different, buck the system Holiday is a right, an entitlement, longer times and more often Systems can be less sophisticated Confidentiality issues Countries in EU requires one more hotel in comp set Many countries openly share data

CVB Related Issues STR frequently works with country or regional hotel associations or tourism boards, including: Australia -- Vienna -- Brussels Calgary -- Ontario -- Toronto Caribbean -- Denmark -- Germany Hungary -- Bali -- Ireland Italy -- Kuwait -- Netherlands Bonaire -- Auckland -- Puerto Rico Stockholm -- Trinidad -- England Scotland -- Latin America -- Virgin Islands These organizations help to identify hotels and also help with categorizations such as STAR Ratings They also receive and STR Destination Reports

Global Industry Conferences There are hotel and tourism conferences around the world where STR frequently presents data, including: International Tourism Fair & Hotel Investment Forum in Berlin STR Hotel Data Conf. Europe & Hotel Investment Conf. Europe Russia & CIS Hotel Investment Conference Arabian Hotel Investment Conference in Dubai Hotel Investment Conf. Asia Pac. (Hong Kong, Japan, Singapore) Hotel Investment Forum India Caribbean Tourism Conf. & Carib. Hotel & Resort Investment Conf. Central/Latin America Hotel Investment Conference Canada Hotel Investment Conference These conferences are tracked by HNN

Expansion Scenarios US companies expanding outside the US All major companies: Starwood Marriott Interstate/Jin Jiang Hot locations: BRIC Non-US companies expanding in the US Companies: Taj Jumeirah Yotel Gateway locations Non-US companies expanding outside the US

Global Processes and Reporting

Hotel Census Database Differences Hotel definitions more varied (castles, hostels, palaces, guest houses, pub accommodations, pension (midscale B&B), manor/country house) Language differences when it comes to name and address data Geographic differences such as state and zip/postal code Format differences when it comes to fields like phone number and zip code Hotel name vs. legal entity Rooms and beds – single, double, twin

Competitive Set Differences Same basic confidentiality-related rules apply, slight differences in some areas In some places, comp sets can be harder to fill Reports also compare subject hotel to industry segments Most common is Market Class or Market Collapsed Class Collapsed Class using the following groupings: Luxury & Upper Upscale Upscale & Upper Midscale Midscale & Economy

Data Loading and Checking Differences Data coming from more small companies and independents Data entry via web site More corporate formats and flexibility Data arriving in variety of currencies, operating currency can be different than local currency Many more special events, also recurring events in different countries (Air show-Paris vs. London) Also political (war, bombing) and weather-related events Even more error checking

Customer Service and Sales Differences 24-hour support required Language and cultural differences In US much of support is handled through corporate office, person at hotel calls HQ for questions More emphasis on web, i.e. changing comp sets, accessing data, multi-lingual web site Willingness to share data, more suspicion, less well known Some areas of the world more technologically advanced and have higher expectations

Global Methodology Issues Participation more varied Year-over-year participation differences – more care required to ensure consistency Some areas may not have any hotels in Scale/Class group No modeled data STR models data only in the US, estimating non-participants based on participants Will expand to other countries as participation allows Hotels close for holidays, just a week or two Different than US seasonal close

STAR Reports Similar Hotels outside North America receive daily reports by early afternoon in addition to Weekly and Monthly reports Hotels outside US and Canada do not receive a Monthly Summary Page Hotels outside US and Canada receive a Monthly and Weekly tab identical to the Comp Set page which compares them to a Class segment Hotels can select their currency Many hotels have multiple comp sets

Daily STAR Property Report – Table of Contents Available in 19 NA markets and most all non-NA markets

Daily STAR Property Report – Running Month-to-Date Daily data delivered the next day

Monthly STAR Report – Summary page for NA hotels Subject property is compared to the comp set and to various industry segments (market, tract, scale, class)

Industry pages similar to Comp Set pages for non-NA hotels Subject property versus comp set over a longer period of time

Additional Reports and Data Files are Similar to the US Corporate Reports and Data Files Also available in Constant Currency Destination Reports With various WW Industry Segments, many span countries & US Publications Global Hotel Review, Country Reports, Pipeline Reports Ad-Hoc Reports Trends, Pipeline, P&L, Forecasts , Census Database, Ad-hoc Industry Data Files – select currency

Global Destination Report - sample . Month & YTD data for various industry segments

Global Hotel Reviews & Country Reports Monthly Reviews displaying performance of countries and major markets for 4 continents: Americas -- Asia/Pacific Europe -- Mid East/Africa Monthly Country Reports displaying smaller cities and class breakdowns available for countries or areas: Canada -- UK (weekly) -- Central/Eastern Europe Germany -- Italy -- Iberian Peninsula Nordics -- Benelux -- Australia/New Zealand China -- India -- Gulf Cooperative Council Southeast Asia -- South Africa

Global Hotel Review for Americas – Table of Contents

Americas Hotel Review – Global Performance Overview of Month & YTD data for continents, subcontinents, and major markets/cities

Americas Hotel Review – Countries page Month & YTD data for all countries in a continent Page in US Dollars, page in Local Currency, page in Euro Local Currency page displays ISO code and exchange rate

WW Hotel Pipeline Outlook for Asia/Pac

Examples of Global Research

The industry often behaves similarly – 2009 down, 2010 up Global Occupancy Percent Change Annual 2008, 2009, & 2010 North America 2008 2009 2010 -4.6% -8.8% 5.7% Europe 2008 2009 2010 -4.3% -6.5% 5.3% Central America 2008 2009 2010 -3.0% -16.8% 6.9% Asia Pacific 2008 2009 2010 -7.8% -6.5% 8.9% Caribbean 2008 2009 2010 -4.5% -4.2% 0.7% Source: Global performance review – inconsistent sample UK – (£) US, MEA, ASIA Pacific – ($) Europe (€) Inconsistent sample South America 2008 2009 2010 1.4% -7.0% 9.4% MidEast & Africa 2008 2009 2010 0.6% -11.4% 0.8% 2010 Smith Travel Research, Inc. The industry often behaves similarly – 2009 down, 2010 up 52

Demand is back ... YTD Nov 2010, YOY % change, supply, demand, RevPAR Central & South America $ Asia Pacific $ North America $ Middle East & Africa $ Europe € Jan to Nov 2010 % change of supply, demand and revPAR All in USD, Europe in Euros (therefore blue) All with positive revPAR %chg Just the ME: 9.2% supply, 8.6% demand but -5.8 % revPAR SUPPLY

Good news - Q4 stable RevPAR % change YOY USD – boxes YTD NA MEA $59 $96 RevPAR % change YOY USD – boxes YTD Europe $85/€64 AP $87 Samples from Jan 08 to Nov10 In USD Europe shown in Euros YOY % change (NOT seasonal) Declines started before Sept 08, LB crash accelerated it but did not start it (similar like 2001 case); bounces due to weak Q4, 2008 and Q1, 2009; but good to see bounce happening and now in Q4, 10 stablising Boxes: YTD results Jan to Nov 2010

Luxury Supply % Change: South America is Hot! * LUX Supply Change ,12 MMA Jan’ 08– Mar ‘11

Luxury ADR % Change: Better, But Not As Great as ‘08 * LUX ADR Change ,12 MMA Jan’ 08– Mar ‘11

Surprising ADR pick up European rolling-12 % change demand and ADR € Rolling-12 ADR % chg and demand % chg Europe Jan 01 to Nov 2010

At least pointing into the right direction Middle East, rolling-12 % change demand and ADR $ Rolling-12 ADR % chg and demand % chg Middle East only Jan 01 to Nov 2010

Asia Pacific Rolling-12 RevPAR, Occ, ADR % growth. 2004 to Mar. 2011 $ 94 -5 % -24% $89.2 Jan ‘08 Rolling-12 revPAR Europe in Euros, rest in USD

Asia Pacific Rolling-12 Occ & ADR. 2004 - YTD 2011 Rolling-12 revPAR Europe in Euros, rest in USD

Total United States and Europe ADR Percent Change Twelve Month Moving Average – 1998 to January 2010 2008 Smith Travel Research, Inc.

Total United States and Europe Room Supply Percent Change Twelve Month Moving Average – 1998 to January 2010 2008 Smith Travel Research, Inc.

Total United States and Europe Room Demand Percent Change Twelve Month Moving Average – 1998 to September 2009 2008 Smith Travel Research, Inc.

Total United States and Europe Occupancy Percent Change Twelve Month Moving Average – 1998 to January 2010 2008 Smith Travel Research, Inc.

Americas – Occupancy Percent Change Twelve Month Moving Average – Jan 1999 to Jan 2010 Caribbean (May, -7.9) North America (August, -9.6) Central America (November, -17.2) 2010 Smith Travel Research, Inc.

Americas – ADR Percent Change ($USD) Twelve Month Moving Average – Jan 1999 to Jan 2010 Caribbean (September, -17.2) Central America (December, -5.6) North America (January, -9.1) 2010 Smith Travel Research, Inc.

Europe – Eurozone vs non-Eurozone Demand Percent Change – 12 Month Moving Average Jan 2008 – Jan 2010

Europe – Eurozone vs non-Eurozone ADR (€) Jan 2008 – Jan 2010 11/08

Europe – Eurozone vs non-Eurozone Occupancy Jan 2008 – Jan 2010

Central America by Class – Occupancy % Change Annual 2008, Annual 2009, and February 2010 YTD 2010 Smith Travel Research, Inc.

Central America by Class – ADR % Chg ($USD) Annual 2008, Annual 2009, and February 2010 YTD 2010 Smith Travel Research, Inc.

Occupancy - Luxury / Upper Upscale Full Year 2010 / YTD March 2011 > 85% < 50% Year to date, August Aug 08 Selected Asian Markets Left vertical axis: Occupancy Right vertical axis: average room rate in USD Following on from the %changes on prior slide: Whilst Taba and Alexandria showed high increases in ADR – they are coming from a low base achieving ($39 in Taba and $102 in Alexandria) ADR differences in Egyptian cities due to type of destination (Taba, Sharm: holiday / Cairo, Alexandria: business orientated) Dubai achieved $305 and 84% (highest ADR and Occ within the selected city sample) Occupancy: Most cities report between 70% and 80% occupancy apart from Nairobi which suffered due to the political turmoil following the elections in Dec 2007 ADR: different picture Clear difference between cities on the Arabian Peninsula (Dubai, Muscat, Riyadh) and cities on the African continent

Average Rate - Luxury / Upper Upscale Full Year 2010 / YTD March 2011 (USD) >$280 <$125 Year to date, August Aug 08 Selected Asian Markets Left vertical axis: Occupancy Right vertical axis: average room rate in USD Following on from the %changes on prior slide: Whilst Taba and Alexandria showed high increases in ADR – they are coming from a low base achieving ($39 in Taba and $102 in Alexandria) ADR differences in Egyptian cities due to type of destination (Taba, Sharm: holiday / Cairo, Alexandria: business orientated) Dubai achieved $305 and 84% (highest ADR and Occ within the selected city sample) Occupancy: Most cities report between 70% and 80% occupancy apart from Nairobi which suffered due to the political turmoil following the elections in Dec 2007 ADR: different picture Clear difference between cities on the Arabian Peninsula (Dubai, Muscat, Riyadh) and cities on the African continent

Luxury Occupancy: Selling 7 of 10 Rms (Except in Beijing) … * Select Luxury Class Markets, OCC %, Q1 ’09 -’11

ADR ($/£) : Room Rate Recovery (…sort of…) * Select Luxury Class Markets, ADR, Q1 ’09 -’11

Comparative Countries - Occupancy % Chg December 2009 YTD 2010 Smith Travel Research, Inc.

Comparative Countries - ADR % Change ($USD) December 2009 YTD 2010 Smith Travel Research, Inc.

China’s Luxury Hotel Industry Beijing China’s Luxury Hotel Industry - A First Look - Chengdu Shanghai Shenzhen HK Sanya

Supply & Demand % Change: Unbelievable Growth *World Expo 2010 * Supply & Demand % Change, Luxury Class By Market, YTD June ’10 2010 STR Global Limited

Occupancy Growth Off The Charts. ADR Growth Muted. *World Expo 2010 * OCC & ADR (CYN) % Change, Luxury Class By Market, YTD June ’10 2010 STR Global Limited

Occupancy Change: Major European Markets Recover Well OCC % Change, Major Markets, Full Year 2008, 2009, August YTD 2010

ADR Change: Major European Markets Recover Well ADR % Change, Major Markets, Full Year 2008, 2009, August YTD 2010

Supply in Olympic Cities Census % change YOY YOY % change supply Olympic Year –1 Olympic Year Olympic Year +2 ANIMATION London supply: current supply plus current-expected pipeline (as of Dec 2010) to Dec 2012 Feb 2012: 29 days!

Demand in Olympic Cities Occupied rooms % change YOY YOY % change demand Olympic Year –1 Olympic Year Olympic Year +2 ANIMATION Atlanta 1996 Sydney 2000 Athens 2004 Beijing 2008

RevPAR achieved in Olympic YR RevPAR USD Olympic YEAR revPAR in USD Atlanta 1996 Sydney 2000 Athens 2004 Beijing 2008 London 2010 monthly results

2011 Year End revPAR Forecast -10% to -5% -5% to 0% 0% to 5% 5% to 10% 10% to 15% 15% to 20% 20% + Munich Berlin Amsterdam Budapest Dusseldorf Rome Moscow Birmingham Athens Copenhagen Madrid Prague Frankfurt Brussels Dublin Milan Heathrow Cologne Edinburgh London Up Up Glasgow Gatwick London Up Hamburg London Mid Newcastle Istanbul Malmo Stockholm Leeds Oslo Vienna Lisbon Reg. UK Lux London Reg. UK Mid London Lux Warsaw Manchester Paris Reg. UK Reg. UK Up Up Reg. UK Up Stuttgart Budapest, Warsaw, Copenhagen are in Euros not local currency (local currency, except where noted)

Asia Pacific Pipeline Total of 346,300 rooms in the pipeline Year to date, August 08 In Local Currency Selected Asian markets % change of occupancy and ADR on prior timeframe ADR growth in all but one market Occupancies are declining Room supply in China will increase about 16% over the next 3-5 years. India - an increase of just under 50%.

Active Pipeline In Asia Keeps Heating Up *Active Pipeline Rooms (‘000), Q4 ’09 vs. Q4 ‘10 Source: STR/ STR Global/McGraw-Hill Construction

Europe Pipeline – 587 hotels Comprehensive Pipeline Outlook Dec 09 Comprehensive Pipeline review Dec 2009 –Europe by country (total 587 hotels in pipeline) in construction: Ground has been broken or the owner is finalizing bids on the prime contract Final Planning: the project will go out for bids or construction will start within 4 months Planning: an architect or engineer has been selected for the project and plans are underway. Initial approvals have usually been granted.

MEA Pipeline – 442 hotels Comprehensive Pipeline Outlook Dec 09 Comprehensive Pipeline review Dec 2009 –MEA (total 442 hotels in pipeline) in construction: Ground has been broken or the owner is finalizing bids on the prime contract Final Planning: the project will go out for bids or construction will start within 4 months Planning: an architect or engineer has been selected for the project and plans are underway. Initial approvals have usually been granted.

Questions? Steve Hood steve@str.com 615-824-8664, extension 3315 www.strglobal.com