The Lodging Industry The Ritz-Carlton Naples, Florida

Industry Scope z35,000 Hotels in U.S. z3.7 million Rooms in U.S. zAnnual Revenues of $95 Billion yProfit of $19 Billion

Hotel Industry Profits Net Profit or Loss $Billion

Changing Sentiment in the Capital Markets zGeneral anxiety over trouble abroad and their impact on the US economy. zConcerns about overbuilding. zGeneral feeling that easy money has been made in the sector. zGrowth and momentum investors have sold their positions and have not been replaced by value investors. zCapital market response has led to equilibrium.

Lodging Equity Offerings Source: NationsBanc Montgomery Securities

Key Players zManagement Company ye.g. Marriott, Sheraton, Hyatt zFranchisor ye.g. Holiday Inn, Best Western, Sheraton zOwner - numerous possibilities yREIT yHotel Co. yPrivate Owner or Ownership Group yJoint Ventures

Average Management & Franchise Fees

Public C-Corporations

Public REITs

REIT Structures zNormal REIT zPaired Share zStapled or Paper Clip REIT

Private Hotel Companies zHyatt zDestination Hotels & Resorts zKSL Resorts zKimpton Group zJoie de Vivre Hospitality

Structure Example #1 Hyatt Regency Kauai OwnerMgmt Co. Hotel Hyatt Hotels Hyatt Regency Kauai

Structure Example #2 San Francisco Marriott Owner Mgmt Co. Hotel Marriott International Host Marriott REIT San Francisco Marriott

Structure Example #3 Best Western Victorian Inn, Monterey Best Western Mom & Pop Best Western Victorian Inn Owner/Operator Hotel Franchisor

Structure Example #4 Los Angeles Marriott Owner Mgmt Co. Hotel MeriStar Hotel & Resorts Meristar Hospitality Corp (REIT) Marriott Int’l. Franchisor Los Angeles Marriott

Structure Example #5 Ritz-Carlton, Philadelphia Owner Mgmt Co. Hotel Ritz-Carlton/Marriott Int’l. Starwood Hotels The Ritz-Carlton Philadelphia

Renaissance Hotels Ritz-Carlton

LIMITED SERVICE zNo Food & Beverage yMidscale yEconomy yBudget ySuites/Extended Stay z Food & Beverage yDeluxe yLuxury yUpscale yMidscale yResorts yConvention ySuites/Extended Stay FULL SERVICE

Deluxe zFour Seasons zRegent zRitz-Carlton zThe St. Regis Luxury Collection The Regent Beverly Wilshire Ritz-Carlton

Full Service Luxury zHilton zHotel Sofitel zHyatt zMeridien zInter-Continental zNikko zOmni zMarriott Hotels zWestin zRenaissance zSheraton zWyndham Omni Mandalay Las Colinas, Texas

Full Service Upscale zDoubletree zCrowne Plaza zHotel Novotel zRadisson zEmbassy Suites zRed Lion Double Tree San Diego -Mission Valley

Full Service Midscale with F&B zBest Western zCourtyard zSheraton Four Points zHoliday Inn zHoliday Inn Select zHoward Johnson zRamada Howard Johnson’s, Vermont

Full Service Resort z Lots of recreational activities. z Trend towards mixing business (conferences) with pleasure. Ritz-Carlton Kapalua

Full Service Conference Center zTypically located near convention centers. zLarge meeting and banquet areas. zHigh volume. San Antonio Marriott Rivercenter

Full Service Casino zCost: $1.6 Billion z3005 $185 ADR. z$300 Million Art Collection. z15 Restaurants. zEstimated EBITDA of $309 million on $950 million in revenue. Bellagio, Las Vegas Mirage Resorts

Limited Service Mid Scale without F&B zComfort Inn zHampton Inn zHilton Garden Inn zHoliday Inn Express zLa Quinta Comfort Inn, West Virginia

Limited Service Economy zDays Inn zFairfield Inn zBudgetel zRed Roof Inn zTravelodge Red Roof Inn, Ohio

Limited Service Budget zMotel 6 zBudget Host Inn zBudget Inn zEcono Lodge zGreat Western zSuper 8 zKnights Inn Motel 6 Prototype

Extended Stay Upper Tier zHawthorn Suites zHomewood Suites zResidence Inn zCandlewood Suites Comfort Inn, West Virginia

Hotel Census As of 9/98

Hotel Lingo zAverage Daily Rate (ADR) = Total Room Revenue / # of Rooms x 365 zOccupancy % = Total Room Nights / # of Rooms x 365 zRevenue Per Available Room (RevPAR) = ADR x Occupancy % zEBITDA = Earnings before Interest, Taxes, Depreciation and Amortization

Top Markets # of Rooms

Statistics of Top 15 MSA’s

Hotel Organization Chart General Manager

The Income Statement

Hotel Revenues

Trends in Revenue

Hotel Expenses

Payroll Costs Source: PKF Hotel Industry Trends 1998

Profitability

Hotel Occupancy Rate

Occupancy % by Segment Source: Bear, Stearns & Co. 1999

ADR & RevPAR by Segment Source: Bear, Stearns & Co. 1999

Cap Rates Source: PKF Consulting

Spread between 10 Year Treasury & Cap Rates Source: PKF Consulting

Hotel Construction Contracts Awarded - F.W. Dodge Million SF