Economic Outlook® Four Seasons and the Hospitality Industry Team Synergos Presents Economic Outlook® Four Seasons and the Hospitality Industry March 3, 2006

Agenda Introductions Hospitality Industry Analysis Firm Analysis Forecasts, Projections & Recommendations Economic Environment Macro Summary

Hospitality Industry Analysis

U.S. hotel industry consists of about 48,000 companies with combined annual revenue of $90 billion. Market Structure What is the Hosp industry? Structure of industry Focus area is Lodging Quick Breakdown 4

The Hospitality Industry (includes lodging operations, food/beverage service, and travel/tourism) 5 Basic Types of Hotels commercial, resort, residential, extended-stay, and casino Luxury Hotels determined by room rates, which are at the top 15% of rate structure. The hospitality industry is extremely broad and includes lodging operations, food and beverage service, and travel/tourism. Our presentation today will concentrate on one aspect of the hospitality industry-the luxury lodging segment. Some of the biggest brand names in this segment include the Four Seasons, Fairmont Hotels & Resorts, Starwood Hotels & Resorts Worldwide, and the Ritz-Carlton. In the luxury lodging segment, hotels provide opulence, truly superior customer service, and inspiring physical surroundings. HIGHLIGHT should be the top two sections. The bottom section will shown later to bridge into the firm analysis Luxury Chain Upscale Market Mid-Price Food Service Mid Price Limited Food Service Economy/Budget Extended Stay Luxury Lodging Segment

Hotel Property Locations Market Structure Types of Rooms Room Rates Hotel Property Locations Locations Urban - Urbanized areas in metropolitan areas of 150,000 and up. Population size can vary dependent on market orientation Suburban - Suburbs of urbanized areas. Distance from center city varies based on population and market orientation. Airport - Properties in close proximity of International Airports that primarily serve demand emanating from airport traffic. Distance from airports varies. Interstate - Properties in close proximity of major interstate highways whose primary source of business is through interstate travel. Interstate properties located in suburban areas have the suburban classification. Resort - Properties located in resort areas where the primary source of business is from leisure destination travel. Small Metro/Town - Metropolitan small-town areas with less than 150,000 people. Size can vary dependent on market orientation. Suburban locations do not exist in proximity to these areas. Income Business income for business travelers- Household wealth Currency Fluctuations- Price of Related Goods Transportation\Airline Industry Oil Tastes Hotel Amenities Location Expectations Weather Terrorism Demand: include age Source: U.S. Department of Commerce, International Trade Administration, Office of Travel & Tourism Industries Hotel Base: 48,000

Distribution of Lodging Customer Base Year Biz Travel Leisure Travel Age/% of Total Average Income (HH) in USD Average Number of Nights 2004 50% 35-54/52% 72,600 => 3 (37%) Biz => 3 (27%) Leisure 2003 52% 48% 35-54/53% 82,800 => 3 (36%) Biz 2002 54% 46% 35-54/54% 81,600 => 3 (33%) Biz 2001 57% 43% 69,147 => 3 (26%) Leisure Corporate policies have tightened over period, which helps explain the shift in leisure travel. Socio-demographics factors play an role in the lodging market. Age distribution, income distribution, occupation and gender are significant variables in determining hotel room demand. Demand changes for different days of the week Strong tourist markets have a higher demand during the weekend while business center have a higher demand during the week Could result in price discrimination Leisure travel has increased and business travel has decreased as a percent of travel Source: AHLA, 2004

Lodging Industry Spending (as % of Real GDP) Primary research indicates that the most influential factors that affect the lodging industry is the overall condition of the economy, gasoline prices, security concerns consolidation among the meetings and events industries and US government-imposed travel restrictions/requirements. According Impact of World Events (such as 9/11, SARs), Tech Bubble Burst, Travel Anxiety, Tightening of Security, Visa Restrictions Source from: Bureau of Economics, 2005

Expense Structure of the Lodging Industry Lodging Expense Composition Labor comprises 45% of the lodging industry annual expense. Source from: PKF Hospitality Research

Industry Expense Challenges

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Market Profile – Demographics & Tastes Captive audience – inelastic service 12 Source: Cornell University

Major Players in Luxury Segment Four Seasons Le Merdien Ritz-Carlton The Peninsula Fairmont Loews Starwood St. Regis Luxury hotels currently make up 17.6% of the total hotel market share. The luxury segment is the fastest growing segment in the late 1990s and the trend continued into the 2000s. According to the Urban Land Institute Property Performance Forecast survey “the luxury segment of the industry has significantly outperform the mid-priced and economy segment through mid 2000s. Currently, eight hotel companies account fore two thirds of the branded hotel proprieties. Top players comprise 17% of total hotel market share Source from: Urban Land Institute Survey, 2004

Luxury segment enjoys higher profit margins While profits margins have shrunk from 01 to 03, there was a rebound in 2004. GOP Margins 14 Source from: Four Seasons Investor Relations

Welcome to Four Seasons Mingalaba Willkommen Welcome to Four Seasons Ukwemukela Beinv'nu Maliu mai Willkommen Akwaba

Four Seasons Mission and Overall Goal Focus on management of properties and not ownership 70 hotels and resorts with more than 46 different owners Leverage Brand as a competitive advantage Enhancing industry position and overall profitability through international expansion 29 announced development projects Employee staff is greatest asset – highest employee satisfaction; low turn-over Source from: Four Seasons TEAM SYNERGOS FOUR SEASONS 16

Four Seasons Mission and Overall Goal Highest Employee Satisfaction Low Turnover Focus on management of properties and not ownership 70 hotels and resorts with more than 46 different owners Leverage Brand as a competitive advantage Enhancing industry position and overall profitability through international expansion 29 announced development projects Employee staff is greatest asset – highest employee satisfaction; low turn-over Source from: Four Seasons TEAM SYNERGOS FOUR SEASONS 17

Four Seasons Mission and Overall Goal Value of the Brand Global Presence Operations Expertise Focus on management of properties and not ownership 70 hotels and resorts with more than 46 different owners Leverage Brand as a competitive advantage Enhancing industry position and overall profitability through international expansion 29 announced development projects Employee staff is greatest asset – highest employee satisfaction; low turn-over Source from: Four Seasons TEAM SYNERGOS FOUR SEASONS 18

Four Seasons Mission and Overall Goal Industry Leading Margins Smart Investments Focus on management of properties and not ownership 70 hotels and resorts with more than 46 different owners Leverage Brand as a competitive advantage Enhancing industry position and overall profitability through international expansion 29 announced development projects Employee staff is greatest asset – highest employee satisfaction; low turn-over Source from: Four Seasons TEAM SYNERGOS FOUR SEASONS 19

Four Seasons Mission and Overall Goal Selection of Property Sites Preferred Partner Focus on management of properties and not ownership 70 hotels and resorts with more than 46 different owners Leverage Brand as a competitive advantage Enhancing industry position and overall profitability through international expansion 29 announced development projects Employee staff is greatest asset – highest employee satisfaction; low turn-over Source from: Four Seasons TEAM SYNERGOS FOUR SEASONS 20

Four Seasons Mission and Overall Goal Significant Growth Leverage Expertise Focus on management of properties and not ownership 70 hotels and resorts with more than 46 different owners Leverage Brand as a competitive advantage Enhancing industry position and overall profitability through international expansion 29 announced development projects Employee staff is greatest asset – highest employee satisfaction; low turn-over Source from: Four Seasons TEAM SYNERGOS FOUR SEASONS 21

Four Seasons Mission and Overall Goal The Golden Rule Focus on management of properties and not ownership 70 hotels and resorts with more than 46 different owners Leverage Brand as a competitive advantage Enhancing industry position and overall profitability through international expansion 29 announced development projects Employee staff is greatest asset – highest employee satisfaction; low turn-over Source from: Four Seasons TEAM SYNERGOS FOUR SEASONS 22

Business Model: Management vs. Ownership Management allows lower capital expenses. The Four Seasons believes that emphasis on management services vs. hotel ownership is the best use of their expertise and provides the company and shareholders with premium returns and manageable risk. Revenues from management services are derived from long-term, broadly-based contracts. With a relatively low corporate cost base, this continues to result in a high-margin business. In 2004, for example, the management operating margin (excluding reimbursed costs) was 69.3%. Since the corporate cost based is relatively small, the infrastructure generally does not require major expansion as new hotels are added. The management business for the Four Seasons is not capital intensive, and the vast majority of capital to fund their growth program comes from strong, local capital partners who bring opportunities to the Four Seasons. The Four Seasons business model, continues to enhance its industry position and overall profitability through a focused, international expansion program that capitalizes on their strengths of its core management operations and the value of its brand name. The Corporation believes that the strength of its brand name, its global marketing presence and its operation expertise result in RevPAR premiums and strong operating profitability for luxury hotels under its management and provide Four Seasons with a competitive advantage in obtaining new management contracts worldwide. The company’s gross margin is significantly higher than the hospitality industry average of 26.7% and the luxury lodging sector average of 43.3%. TEAM SYNERGOS FOUR SEASONS 23 Source from: UBS Investment Research, 2006

Firm Analysis - Corporate Expenses Increase in corporate expenses to support new hotel growth and expansion - mainly staffing. Four Seasons Corporate Expense ($US) TEAM SYNERGOS FOUR SEASONS 24 Source from: Cornell University – Four Seasons Analysis

Brand Strength and Strategies Four Seasons Hotels and Resorts ranks highest in overall guest satisfaction Company Values Employees focus on customer service The Golden Rule Strategic Partnership with Investors Marketing Strategy Outperformed all competitors – highest RevPAR Four Seasons Hotels and Resorts ranks highest in overall guest satisfaction 45% of customers mention Four Seasons unaided vs. next closest competitor (Ritz-Carlton at 27%). Company Values Employees focus on customer service The Golden Rule Strategic Partnership with Investors Find local investors to finance ownership of properties Arranges management contracts with Four Seasons Faster expansion into emerging markets around the world Limits expenses and exposure Marketing Strategy Outperformed all competitors – highest RevPAR

Forecasting Projections Recommendations 26

Forecasting

GDP Forecast Less business income for the business traveler and slowing demand among business travelers for luxury hotels Slowing GDP The GDP growth slowed in 2005. GDP growth is expected to continue to decline over next three years and flatten out in 2008. What does this mean for the hotel industry? Slowing GDP growth will mean less business income for the business traveler in the US. Slowing demand in the business traveling segment change the demand for higher priced hotels during the next three years. TEAM SYNERGOS FOUR SEASONS 28 Source from: Economic Forecast of the Nation; Dr. Rajeev Rhawan

Hotel Industry Supply US. Hotel Supply Forecast Supply slows in alignment with GDP Remains higher than industry due to inelasticity of price Industry supply trends growth is expected to slow in alignment with the GDP forecast. The luxury segment will growth trends will align with rest of the hotel industry trends. It will also continue to remain higher than other segments in the industry due to the inelasticity of price when it comes to the affluent leisure traveler. Growth trends align with rest of segment. Source of segment data: PriceWaterhouse Coopers (December 2005)

Hotel Industry Demand TEAM SYNERGOS FOUR SEASONS 30 The slowed growth in supply will increase demand and occupancy rates in the coming years. In 2002, the demand for the Luxury and Upper scale segment hotels were neck in neck averaging 74%. When the economic downturn in 2001, business incomes diminished and prompted business travelers to downgrade choices from higher priced luxury hotels to upper scale hotels as their travel budgets were tightened. We expect this trend to continue during the next three years but at a slower growth rate that aligns with GDP expectations. Primary research indicates that the most influential factors that affect the lodging industry is the overall condition of the economy, gasoline prices, security concerns consolidation among the meetings and events industries and US government-imposed travel restrictions/requirements. TEAM SYNERGOS FOUR SEASONS 30 Source of segment data: PriceWaterhouse Coopers (December 2005)

Demand Forecast of Hotel Industry The four seasons kept their room rates higher than their competitors during the economic downturn of 2001. Although their occupancy suffered slightly, the Four Seasons was able to maintain higher Revenue per Average than their competitors. Other Luxury segment competitors not only suffered declines in occupancy as you saw on the last slide but they also suffered from lowering their rates. Source of segment data: PriceWaterhouse Coopers (December 2005) Source of Four Seasons: 2003 and 2004 Four Seasons Annual Reports TEAM SYNERGOS FOUR SEASONS 31

Expansion Opportunities US markets are mature necessitating a growth for increasing returns to scale. 1/3 of Four Seasons business is comprised of individual business travelers. Our first recommendation for the Four Seasons is to continue to expand their hotel management service business in emerging business markets with high potential of growth and price it more competitively to attract the business traveler. What markets do we recommend that they expand? Middle East, China, and Japan Because business travelers demand services such as Technology access Good Room Service Business Facilitities Amenities and Services targeted toward making guest feel at home, we should suggest the focus is these markets should be geared to business traveler demand rather than leisure travel. Business Traveler Market - Expand hotel management service business in emerging business markets: With high potential for growth Leisure Market Attract High Income Leisure traveler through the combination of SPA and Leisure activities in beachfront locations Penetrate further into Middle East, North Africa, and Eastern European Markets and Asia/Pacific Influence of Politics: Taxes, regulations and legislation related to the hotel industry differs from one market to another. Hotel’s impact on the environment Government regulations and social activisim could restrict development Politcal unrest could affect demand Recommended Expansion *Source: Four Seasons Investor Relations TEAM SYNERGOS FOUR SEASONS 32

Macro Summary 33

Factors Influencing Macro Economic Impacts Terrorism OIL Prices TERRORISM Growing Global Uncertainly About Safety and Security Airplane safety Terrorism Considerations (Risks) Influence of Politics Cultural Relationships Currency Fluctuation Competition from other Properties The Lodging Industry is linked to the Tourism Industry Travel and tourism is the nation’s largest services export industry, and one of America’s largest employers. In fact, it is the first, second, or third largest employer in 30 of the 50 states. The tourism industry includes more than 15 interrelated businesses, from lodging establishments, airlines, and restaurants to cruise lines, car rental firms, travel agents, and tour operations The United States receives a larger share of world international tourism receipts than any other country in the world. In 2004, 46.1 million international travelers visited the United States, a 12 percent increase in travel from 2003. Figures for 2004 reveal that international visitor spending in the United States increased by 17 percent, resulting in $93.3 billion in total travel receipts. American spending was a record $89.3 billion (a increase of 14%) outside the United States. Influence of Politics: Taxes, regulations and legislation related to the hotel industry differs from one market to another. Hotel’s impact on the environment Government regulations and social activisim could restrict development Politcal unrest could affect demand OIL PRICES Source: PKF Hospitality Research

Employment Growth Rate Employment in hospitality follows trend of the overall employment growth rate but remains above rate TEAM SYNERGOS FOUR SEASONS 35 Source of segment data: PriceWaterhouse Coopers (December 2005)

US Dollar to World Currency If dollar weakens, business travel could decrease affecting international demand 36

US Dollar to World Currency 37

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