Accelerating success.

Christopher A. Kraus, MAI

Senior Vice President

chris.kraus@pkfc.com | 406.582.8189

Colliers PKF Consulting USA

Washington State Hotel & Lodging Association

2010 Convention & Trade ShowOctober 11, 2010

I. National Economy and Hotel Market Overview

II. Seattle Market Overview and Four Year Forecast

III. Spokane Four Year Forecast

I. National Economy and Hotel Market Overview

II. Seattle Market Overview and Four Year Forecast

III. Spokane Four Year Forecast

Presentation Outline

2

Accuracy Assessment

3

Accuracy Assessment  2009 Actual 2010 Reforecast

YE 2009 Projections YE 2009 Projections YE 2010 Projections YE 2010 Projections  as of October 2009 Actual as of October 2009 as of October 2010National -18.5% -16.8% -2.7% 4.6%Seattle MSA -19.6% -19.8% 1.8% 1.9%Spokane MSA -8.1% -7.7% -0.5% 4.9%Source: Colliers PKF Consulting and Hospitality Research    

U.S. Lodging Market Overview

4

The Great Recession is Over…

5

Recessions since World War II

Duration in Months Peak-to-Trough % Change Jobless Rate

Peak Trough

RecessionPeak to Trough

ExpansionTrough to

PeakReal GDP

Industrial Production

Nonfarm Employment Low High

Change

Dec-07 Aug-09 20 73 -3.9% -19.2% -6.1% 4.4%10.2

% 5.9%

Mar-01 Nov-01 8 120 -0.4% -6.3% -2.0% 3.8% 6.3% 2.5%

Jul-90 Mar-91 8 92 -1.3% -4.3% -1.5% 5.0% 7.8% 2.8%

Jul-81 Nov-82 16 12 -2.9% -9.5% -3.1% 7.2%10.8

% 3.6%

Jan-80 Jul-80 6 58 -2.2% -6.2% -1.3% 5.6% 7.8% 2.2%

Nov-73 Mar-75 16 36 -3.1% -14.8% -2.7% 4.6% 9.0% 4.4%

Dec-69 Nov-70 11 106 -1.0% -5.8% -1.4% 3.4% 6.1% 2.7%

Apr-60 Feb-61 10 24 -1.3% -6.2% -2.3% 4.8% 7.1% 2.3%

Aug-57 Apr-58 8 39 -3.8% -12.7% -4.4% 3.7% 7.5% 3.8%

Jul-53 May-54 10 45 -2.7% -9.0% -3.3% 2.5% 6.1% 3.6%

Nov-48 Oct-49 11 37 -1.7% -8.6% -5.1% 3.4% 7.9% 4.5%

Average 10 57 -2.0% -8.3% -2.7% 4.4% 7.6% 3.2%Sources: NBER, BEA, FRB, BLS, Moody’s Economy.com

U.S. Total Employment Levels

6

1990 Q2109.8

1991 Q3108.3

2000 Q4132.5

2003 Q2129.8

2008 Q1137.9

2009 Q4129.6

2013 Q1137.6

100.00

105.00

110.00

115.00

120.00

125.00

130.00

135.00

140.00

145.00

1988

Q1

1988

Q3

1989

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1989

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1990

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1990

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1991

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1991

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1992

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1992

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1993

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1994

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1995

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2011

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2011

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2012

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2012

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2013

Q1

2013

Q3

8.3 Million Jobs Lost – 5 Years

From Peak-to-Peak

We’re Here

1990 Q2109.8

1991 Q3108.3

2000 Q4132.5

2003 Q2129.8

2008 Q1137.9

2009 Q4129.6

2013 Q1137.6

100.00

105.00

110.00

115.00

120.00

125.00

130.00

135.00

140.00

145.00

1988

Q1

1988

Q3

1989

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1989

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1990

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1990

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1991

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1991

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1992

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1992

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1993

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2011

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2011

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2012

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2012

Q3

2013

Q1

2013

Q3

12 Quarters

17 Quarters

20 Quarters

Economic Assumptions Driving Our Forecasts: Better Quicker

PayrollEmployment

Real Personal Income Real GDP CPI (Inflation)

2009 -4.3% -4.3% -1.9% -2.0% -2.6% -2.4% -0.3% -0.3%

2010 -0.5% -0.7% 0.8% 0.6% 2.7% 2.3% 1.6% 1.5%

2011 1.0% 0.1% 2.6% 2.4% 3.1% 1.4% 1.6% 0.8%

2012 2.5% 1.9% 4.8% 3.6% 5.0% 3.8% 2.5% 2.8%

2013 3.3% 3.2% 4.7% 3.8% 4.2% 4.5% 2.9% 3.1%

Source: Moody’s Economy.com, September 2010(July 2010)

7

The Hotel Market Cycle

8

Rapid Development

Lodging Decline, Leads Other Sectors

Development Picks Up

Long RunOccupancy

Equilibrium ADR

Rapid Development

Occupancy Declines, ADR Follows

Development at Minimum

Levels

Lodging Decline, Leads Other Sectors

Occupancy Recovers

ADR and Margins Recover

Development Picks Up

Development Slows

Lodging Recovers, Lags Other Sectors

Long RunOccupancy

Rapid Development

Equilibrium ADR

U.S. is Here2011-2012A Year Ago

Moving Past the Trough

2013-2014

Current Forecast – October 2010- a Quicker Turnaround

9?

Q1 Q2 Q3 Q4 Q1 Q2 Q3F Q4F

Supply 3.2% 3.1% 3.2% 3.1% 2.9% 2.3% 1.8% 1.4%

Demand -8.1% -8.1% -5.0% -1.4% 5.3% 8.7% 8.6% 6.4%

Occupancy -11.0% -10.9% -7.9% -4.4% 2.3% 6.2% 6.7% 5.0%

ADR -7.7% -9.7% -9.8% -7.6% -4.3% 0.0% 0.8% 0.8%

RevPAR -17.8% -19.6% -16.9% -11.7% -2.1% 6.2% 7.6% 5.9%

2009 2010

Long Term Average 2006 2007 2008 2009 2010F 2011F 2012F

Supply 2.2% 0.2% 1.3% 2.5% 3.1% 2.0% 1.1% .08%

Demand 1.5% 0.5% 0.8% -2.1% -5.9% 7.3% 3.2% 4.9%

Occupancy 62.2% 63.1% 62.8% 60.0% 54.7% 57.5% 58.7% 61.0%

ADR 2.9% 7.6% 6.4% 2.8% -8.8% -0.6% 3.8% 6.3%

RevPAR 2.3% 7.9% 5.9% -1.9% -16.8% 4.6% 5.9% 10.6%

National HorizonOctober 2010 Update

A Quicker Turnaround?

Record Decline

Record Increase

Source: Colliers PKF Hospitality Research – September-November 2010 Hotel Horizons® Report, Smith Travel Research

10

Recovery Will Be Strong Through 2013

11

+64.6% - 1943

-22.4% - 1938

-19.4% - 2001

-35.4% - 2009

-40%

0%

40%

80%

1937 1942 1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2013F

+10.8% - 2011F+17.9% - 2012F+21.7% - 2013F

Note: * Before deductions for capital reserve, rent, interest, income taxes, depreciation, and amortization.

Source: Colliers PKF-HR, Trends® in the Hotel Industry sample.

Seattle Lodging Market Overview

12

Seattle Lodging Market Overview

Long Term

Average 2002 2003 2004 2005 2006 2007 2008 2009

Supply 3.4% 3.5% 1.7% 1.8% 0.3% 2.9% 2.5% 2.7% 3.1%

Demand 3.1% 0.2% 3.8% 5.1% 6.2% 6.3% 3.2% -2.7% -6.9%

Occupancy 71.1% 61.8% 63.0% 65.1% 68.9% 71.2% 71.7% 68.0% 61.4%

ADR 3.3% -3.5% -1.5% 2.6% 6.1% 11.5% 7.5% 3.5% -11.1%

RevPAR 3.1% -6.6% 0.5% 5.9% 12.3% 15.2% 8.3% -1.9% -19.8%

Source: Colliers PKF Hospitality Research – September-November 2010 Hotel Horizons® Report, Smith Travel Research

13

Factors Impacting Lodging Demand

LOCAL ECONOMY

WASHINGTON STATE CONVENTION AND

TRADE CENTER

SEA-TAC AIRPORTLODGING SUPPLY14

Historical Projection

Employment levels return to 2008 levels in 2012.

Employment Levels and Unemployment Rate

15

Seattle - Job Market Outlook

1,550,000

1,600,000

1,650,000

1,700,000

1,750,000

1,800,000

1,850,000

1,900,000

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

Employment Levels Unemployment Rate

Historical Projection

Downtown SeattleLodging Supply Change

16

Property Location New Rooms Status Date Open

Sheraton - Union Street Tower 6th & Union 415 Open June 2007

Arctic Club 3rd & Cherry 120 Open July 2008

Four Seasons 1st & Union 147 Open November 2008

The Hyatt at Olive 8 8th & Olive 346 Open January 2009

Maxwell Hotel 3rd & Roy 140 Open March 2010

Hyatt Place 6th & Denny 158 Open June 2010

Courtyard by Marriott 2nd & Cherry 262 Open June 2010

Recently Opened   1,588    

Hampton Inn & Suites 7th & Jackson 137 Proposed TBD

1st & Stewart 1st & Stewart +/-100 Proposed TBD

Hummingbird Development 5th & Virginia 185 Proposed TBD

Candela Hotel 2nd & Pike 150 Proposed TBD

Greyhound Property 8th & Stewart +/- 1,200 Proposed TBD

The "1" Hotel 2nd & Pine 120 Proposed TBD

Hotel Ava 8th & Pine 190 Proposed TBD

Proposed & On Hold   2,082    

Seattle Convention & Visitors BureauConvention Calendar Outlook

17

2007 was the strongest convention year on record 

Total Number of Booked Room

Nights

2005 453,839 -

2006 485,775 7%

2007 550,184 13%

2008 514,286 -7%

2009 454,717 -12%

2010 400,182 -12%

2011 376,494 -6%

2012 255,579 -32%

2013 217,541 -15%

2014 139,237 -36%

2015 125,129 -10.1%

2016 55,745 -55.4%20

0520

0620

0720

0820

0920

1020

1120

1220

1320

1420

1520

160

100,000

200,000

300,000

400,000

500,000

600,000

Total Future Room Nights Total Room Nights

Sea-TacAirport Passenger Statistics

18

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

Total International Passengers Total Domestic PassengersSource: Bureau of Transportation Statistics

Record numbers in 2008 – nearly 32.2 million total passengers

First eight months of 2010 show decline of

0.2%

Passenger count decreased by only

3.0% in 2009

How Will This Impact Seattle?

19

Seattle Four Year ForecastAll Hotels

20

Long Term

Average 2005 2006 2007 2008 2009 2010P 2011P 2012P 2013P

Supply 3.4% 0.3% 2.9% 2.5% 2.7% 3.1% 2.4% 0.7% 0.4% 1.0%

Demand 3.1% 6.2% 6.3% 3.2% -2.7% -6.9% 7.8% 4.7% 3.6% 2.9%

Occupancy 71.1% 68.9% 71.2% 71.7% 68.0% 61.4% 64.6% 67.2% 69.3% 70.6%

ADR 3.3% 6.1% 11.5% 7.5% 3.5% -11.1% -3.2% 5.0% 5.4% 5.9%

RevPAR 3.1% 12.3% 15.2% 8.3% -1.9% -19.8% 1.9% 9.1% 8.8% 7.9%

Source: Colliers PKF Hospitality Research – September-November 2010 Hotel Horizons® Report, Smith Travel Research

Sample represents greater Seattle area consisting of more than 40,000 hotel rooms

How About Spokane?

21

Spokane Four Year ForecastAll Hotels

22

2004 2005 2006 2007 2008 2009 2010P 2011P 2012P 2013P

Supply 0.4% 0.4% -1.9% 5.3% 0.0% 1.3% 5.0% 0.5% 1.0% 1.0%

Demand 8.6% 0.8% 0.3% 7.3% -2.8% -4.5% 8.7% 3.3% 2.6% 2.0%

Occupancy 59.3% 59.6%

60.9%

62.0%

60.3%

56.9% 58.9% 60.5% 61.5% 62.1%

ADR 4.1% 4.4% 9.2% 8.8% 4.4% -2.1% 1.3% 3.5% 4.5% 3.0%

RevPAR 12.7% 4.8%11.6%

10.8%

1.5% -7.7% 4.9% 6.4% 6.2% 4.0%

Note: Sample represents Spokane County, consisting of more than 7,000 hotel rooms

Questions?