Hotel Industry: Key Trends That Impact Congress Centres International Association of Congress Centres Graz, Austria 17 July 2007 Stephen D. Powell SVP Worldwide Sales

Topics Industry Performance Consolidation Key Growth Areas Outlook for 2009 Hotel Operations – Pricing Strategies Hotels and Convention Centres –Relationships

2007 is shaping up to be another strong year in the global hotel industry Global demand drivers are robust –Best global economy in 40 years –Inflation is in check –Unemployment is at multi-decade lows –Corporate profits moderating but still growing Supply growth is increasing, but remains modest Occupancy stable at levels enabling continued rate gains

The global economy is very strong and is expected to remain so for the next two years Source: International Monetary Fund World Economic Outlook Database, April 2007 Worldwide Real GDP Growth

Unemployment remains low, and in industrialized countries is well below the mid-1990’s peak G7 Global Unemployment Source: International Monetary Fund World Economic Outlook Database, April 2007

Tourism is up 6.3% April YTD, above the prior two years, and ahead of the 4% gain expected at year end International Tourist Arrivals Change Over Prior Period Source: UNWTO World Tourism Barometer

Source: HotelBenchmark; Smith Travel Research/The Bench RevPAR Change by Region May YTD Rate growth continues to be the primary driver of performance around the world

RevPAR Change by Market May YTD Most key global cites are also seeing substantial rate growth Source: HotelBenchmark; Smith Travel Research

In Europe, demand grew at a slightly lower rate in the first quarter while supply growth remained flat European Supply & Demand Monthly Change Source: Smith Travel Research/The Bench

U.S. demand growth has slowed while supply is on the increase U.S. Supply & Demand Monthly Change Source: Smith Travel Research

Rapid Development ADR Declines Minimal Development Development Increases ADR Increases Occupancy Increases Occupancy Declines Development Slows Long Run Occupancy Where we are Buyer’s MarketSeller’s Market Where we were Source: PKF Recognise Where We Are!

Industry Performance : Summary Sound global fundamentals are driving demand Industry is doing well and will continue to through Qtr 3 of 2008 Supply has started to grow, but remains at modest levels Supply and Demand forecasted to intersect in late 2008 Demand growth in most markets is unprecedented High occupancies supporting continued rate growth Rate growth is beginning to slow down in many markets RevPar growth driven by rate rather than occupancy 2008 looks positive for the industry, but growth will continue to decline Continued Strength of Global Lodging Market

Mergers/Acquisitions/Consolidation Hilton Deal –Blackstone buys Hilton for $26bn –Purchase price exceeds stock value by 40% –15x Multiple EBIT for Hilton vs. 7-12x Multiple –Blackstone claims strategic vs. financial investment Comments from the financial analysts –Too much capital for too few assets –Assets yield cash –More purchase opportunities in the industry –Starwood, Marriott, IHG and others are appealing to investors

Key Growth Areas China –All major brands represented –88,000 rooms added by 2009 India –All major brands represented –45,000 rooms added by 2009 North America –Lodging Supply Growth: 1.1% to 3.5% from 2006 to 2009 United Kingdom Middle East

Growth by Segment Balanced Growth Globally –Luxury/Upscale to Midscale to Budget Number of Hotels –Indexes to limited service Number of Rooms –Indexes to Upscale (larger room inventory) Urban growth –Suburban growth outpaces CBD development

Outlook for 2009 Supply Begins to Meet Demand Rate growth begins to decline Occupancy growth declines Pressure on profit margins Pressure for improved hotel performance from those owners that paid high multiples for the asset Some hotels preparing now by optimising levers and adjusting overheads

Current Pricing Strategies The Impact on the Convention Market Corporate Transient Demand Pricing Strategies –Preference for Corporate Transient Rate Yield Drives Less Flexibility –Internet Drives Transparent Pricing –Connectivity: Less Allocations Real time availability and pricing

SundayMondayTuesdayWednesdayThursdayFridaySaturday Corporate Transient vs. Meetings Price Point 1 $350 Price Point 2 $280

Future Pricing Strategies The Impact on the Convention Market Dynamic Pricing (Flex Rates) Value to the Customer –% Discount rather than Fixed Discount Rate –% Discount from BAR (Best Available Rate or Market Rate) –Supply and Demand Pricing –Customer Protection: BAR must be competitive in the market Confluence of Negotiated Corporate Transient Rate Programs with Volume Meeting Rate

Hotels and Convention Centres The Relationship What are the Key Performance Drivers? –For the Convention Centre? –For the Hotel? Marketing and Sales Plan Alignment? –Local Trade Events or Meetings/Exhibitions with inbound travelling delegates? –Focus on destination marketing –Price Sensitivity in Peak and Off-Peak Real Estate? What is the primary focus? –Guest Rooms or Function/Exhibition Space? Or –Delicate Balance of Both?

Hotels and Convention Centres Future Development Increasing preference for branded hotels in the business segment –Brand alignment and distribution with meetings market Brand fit with the destination –Luxury, Upscale, Midscale –New property inventories decreasing “Asset-light” branded hotel companies –Major branded hotels companies prefer NOT to own –Investor Concerns Can hotel stand alone and achieve financial performance targets? Accessibility of the destination? Preference for mixed use development: exhibition space, office, retail, hotel, etc. Land prices Local planning agreed: planning and parking regulations, local government support, tax incentives or inducements

Hotel Industry: Key Trends That Impact Congress Centres International Association of Congress Centres Graz, Austria 17 July 2007