1. Proprietary & Confidential Information of Avendra, LLC ©2014 This document contains information that is proprietary to Avendra, LLC and must remain confidential. It may not be used, disclosed, copied or distributed except as expressly permitted by an authorized Avendra representative. HAMA Spring 2014 Meeting Best Practices in Procurement May 6, 2014

2. Proprietary & Confidential Information of Avendra, LLC ©2014 A GENDA o Importance of Procurement in Hotel Management o Defining “Procurement” o Emerging Trends and Best Practices – Transforming from Purchasing/Procurement to Supply Chain Management o Summary o Q & A 2

3. Proprietary & Confidential Information of Avendra, LLC ©2014 3 A 2013 STUDY BY M C K INSEY AND C OMPANY R EVEALED A S TRONG C ORRELATION B ETWEEN P URCHASING H EALTH AND C ORPORATE P ERFORMANCE 20.2 3.5 2.7 1.9 Procurement leaders Middle of the pack Procurement followers 4.9 3.8 2.8 0.4 0.1 -0.1 17.0 10.9 Confidence level of correlations >99% Average survey scores across all drivers Scale 1-5 Percent Annual procurement savings Annual reduction of COGS Average EBITDA margin Better procurement practices… …result in higher performance Procurement leaders Middle of the pack Procurement followers

4. Proprietary & Confidential Information of Avendra, LLC ©2014 P ROCUREMENT H AS I MPLICATIONS AND I MPACT W ELL B EYOND P URCHASE P RICE Potential Procurement Impact on Hotel Management Quality o Right products for right application o Consistency of product performance o Driving perception of value to customer Service o Products and services available when needed o Supplier flexibility and knowledge of customer business Cost o Optimal life cycle costs o Adequate Indemnity and Risk protection Internal Controls o Establishing strong fiduciary relationship over the spend. 4

5. Proprietary & Confidential Information of Avendra, LLC ©2014 5 D EFINING “P ROCUREMENT ”

6. Proprietary & Confidential Information of Avendra, LLC ©2014 D EFINING “P ROCUREMENT ” MethodDepth of Contracting Breadth of Approach and Practices Utilized Purchasing Contracts mainly with Point of Commerce (POC) suppliers or no contracts (i.e. transactional buys) Often three bid on high volume items and list price on “tail” Service, quality and price accuracy managed by transaction Procurement Agreements and contracts with many POC suppliers, some manufacturer deals on high profile items (e.g. Coke/Pepsi, Starbucks) Pricing is usually negotiated discount off list Certain elements of service, quality and price accuracy negotiated in contract Supply Chain Management Contracts through out the supply chain (growers, shippers, manufacturers, POC) Pricing mechanisms linked to commodity (e.g formula pricing, cost plus) Service, quality, price accuracy stipulated in contract and managed in overall relationship 6

7. Proprietary & Confidential Information of Avendra, LLC ©2014 S UPPLY CHAIN M ANAGEMENT VS. T RANSACTIONAL P URCHASING - PROVIDING CONTROLS Ongoing Service, Quality and Price Management Vendor Selection and Contracting Transactional Purchasing Supply chain management approach:  Drive lowest cost by bringing scale and commitment to supplier  Manage property-level compliance through spend reporting and field support  Manage service, quality and price performance through a longer term relationship Aggregate Purchases Manage Supplier Performance Monitor Compliance Traditional 3-bid procurement focus:  Control deal and process by individual purchasing transaction  Bid each purchase and verify price/quantity by 3-way match Page 7

8. Proprietary & Confidential Information of Avendra, LLC ©2014 The key to Supply Chain Management is focusing on where the cost exists and where there is leverage. S UPPLY C HAIN M ANAGEMENT 1-3% Margin Raw Materials 30% Margin Manufacturer Barriers To Entry Capex Brand 1-2% Margin Distributor Weighted Leverage Points Freight 50-60% Cost 8

9. Proprietary & Confidential Information of Avendra, LLC ©2014 Approach to Cost Management in the Supply Chain o Insert oneself at optimal point in supply chain o Make offering compelling to each part of the supply chain o Reduce supply chain costs, don’t focus only on profit S UPPLY C HAIN M ANAGEMENT Properties Distributor Tight definition of service levels Cost-plus: definition of cost is key Control cost into distributor for ~80% of $ volume Drive collaborative (i.e. with customers) process to aggregate Determine real alternatives (more=leverage) Sell ability to take cost out of their business Clearly defined specifications (key to making supply chain more efficient Manufacturer Materials Provider Go to raw materials to manage key cost drivers of manufactured items Supply Chain 9

10. Proprietary & Confidential Information of Avendra, LLC ©2014 S UPPLY C HAIN M ANAGEMENT Benefits of Supply Chain Management Challenges of Supply Chain Management Better Opportunities to: Understand and strategically manage costs Proactively and efficiently manage service levels Ensure consistent product and service quality/adherence to specifications over geographies and time Provide efficient and effective internal controls over procurement processes Effectively manage risk at critical parts of the supply chain Difficult and/or expensive to acquire: Sufficient aggregated spend to be able to negotiate “upstream” Required expertise in commodities and supply chain operations Infrastructure to provide necessary reporting, oversight, QA, and property assistance Tools and resources to provide efficient and effective supplier management and auditing 10

11. Proprietary & Confidential Information of Avendra, LLC ©2014 PARTNER CONTRACTING ENHANCEMENT MANAGEMENT INFRASTRUCTURE FLEXIBILITY / ABILITY TO CUSTOMIZE OVERALL VALUE ADD Point of Commerce Manufacturing Supply Chain-Wide Internal Compliance Suppliers Property Specific Portfolio wide E-Commerce Providers Group Purchasing Organizations (GPO’s) Property-Level Consultants Supply Chain Service Providers E NHANCING P ROCUREMENT BY U TILIZING P ARTNERS Strong contribution Little to no contribution

12. Proprietary & Confidential Information of Avendra, LLC ©2014 S UMMARY Procurement is important to property profitability and guest experience “Best Practices” procurement provides significant value – but can be difficult to achieve Companies utilize different procurement partners to complement their internal procurement efforts 12

13. Proprietary & Confidential Information of Avendra, LLC ©2014 Q UESTIONS AND A NSWERS 13