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FEASIBILITY STUDY FOR HOTEL DEVELOPMENTFor: The City of Summerside, Prince Edward Island, CanadaReport prepared by: PKF CONSULTING INC.

Prince Edward Island, Canada

INDEX

INTRODUCTION pg.1

PRELIMINARY SITE EVALUATION pg.2

ECONONMIC AND TOURISM OVERVIEW pg.6

STAKEHOLDER/DEMAND INTERVIEWS pg.20

COMPETITIVE ACCOMODATION pg.22 MARKET - SUPPLY ANALYSIS

COMPETITIVE ACCOMODATION pg.26HISTORIC DEMAND ANALYSIS

COMPETITIVE ACCOMODATION pg.30PROJECT DEMAND ANALYSIS

SUBJECT PROPERTY PROJECTION pg.35

IMPLICATIONS & CONSIDERATIONS pg.40

APPENDIX A pg.43GLOSSARY OF INDUSTRY TERMS

APPENDIX B pg.44ARICHECTURAL RENDERINGS

ABOUT SUMMERSIDE ECONOMIC DEVELOPMENT pg.45

Feasibility Study for Hotel Development

The City of Summerside has initiated a strategic process to diversify both in terms of quality infrastructure and economic development. It is our understanding that since its development in 2002, the $38 million multipurpose facility, Credit Union Place, has matured into a destination for a wide variety of local, regional and international events. Credit Union Place offers 2 NHL sized arenas (3,500 seats and 500 seats), a walking track, competitive and leisure pools, a 4 star restaurant, 8-lane bowling complex, and a convention centre for up to 500 delegates, and is also directly tied to outdoor sports fields, horse racing and stabling complex and a small casino.

As part of the long term strategy for this venue, which includes traditional recreation amenities (hockey arena, leisure pools and fitness), outdoor fields, horse racing and stabling complex, and small casino, the City has considered the need for additional branded hotel accommodations in Summerside.In July 2011, PKF Consulting Inc. (“PKF”) was retained by the City of Summerside to prepare a Market Feasibility Study for a proposed Hotel adjacent to the Credit Union Place facility in Summerside, PE. The study has focused on conducting market research with respect to the potential of additional lodging supply in the City of Summerside, and to determine whether the project is economically feasible.

In order to complete the work programme, PKF proposed a two-phase process. The Phase I Market Study work plan involved the following steps:

• Discussionswithkeystakeholdersandaccommodationoperators;• AreviewoftheexistingaccommodationmarketinthelocalSummersidehotelmarket,includingan

assessmentoftheexistingfacilitiesandestimateofmarketdemandsegmentation;• AnanalysisofhistoricandpotentialSportTourismandMeetings/Conferenceevents;• Anestimateoffuturegrowthinsupplyanddemandforhotelaccommodationinthecompetitive

marketarea;• PreliminaryevaluationofavailablesitesforhoteldevelopmentwithincloseproximitytotheCredit

Union Place, and their suitability for hotel development, as identified by the Steering Committee and otherstakeholders;and

• Documentationofstudyresearch,findingsandconclusions.

The findings and conclusions flowing from the aforementioned research programme are presented in the following sections.

OVERVIEW

pg.1 Summerside, Prince Edward Island, Canada

2.1 INTRODUCTION

Part of the study mandate was to provide an analysis of the Credit Union Place facility with respect to potential operating synergies with an on-site branded hotel. We have also considered the prospect of hotel development on other nearby sites in the Summerside area, as identified by the client group.

2.2 CREDIT UNION PLACE

TheCreditUnionPlace(C.U.P.)ComplexisCityownedandmanaged,andincludesrecreation,meeting/conventionspace,gaming,horseracingandstabling.ThecomplexislocatedinDowntownSummerside–borderedbyNotreDameStreettothesouth,GreenwoodDrive/RufusStreettothewest,NorthumberlandStreet to the east, and Willow Avenue to the north. Vehicle access to the site is available from the west, via eitherRufusStreetorGreenwoodDrive.ThelocationoftheCreditUnionPlacefacilitywithinSummersidehasbeen illustrated in Exhibits 2-1 and 2-2.

The complex covers two main parcels of land totalling 48.5 acres, both of which are City-owned. The western parcel covers 21.5 acres, inclusive of 476 paved stalls and 276 gravel stalls, for a total of 752 parking stalls altogether. Exhibit 2-3 illustrates the proposed location for the subject hotel development on the Credit Union Place property, in the south-west quadrant of the subject site.

Surrounding land uses include primarily residential and light commercial establishments. According to EconomicDevelopment,theCityiscurrentlyconsideringestablishmentofanewbusinessparkinthe60vacant acres north of the C.U.P. If accepted, this park is expected to cover an estimated 70,000 square feet of commercial land.

2.3 SUBJECT SITE – OVERALL FACILITIES

The following is a list of available recreational facilities:

SportsFacilities–Indoor

• Indooraquaticsfacilities–2pools&waterslide• Multi-usefitnessfacilities–yogastudio,squashcourts,etc• NHLsizeArenas–one3,500-seaticearena,one500-seatpracticeicesurface• Indoorwalkingtrack• Bowling–8laneconvertible5&10-pin

PRELIMINARY SITE EVALUATION

Feasibility Study for Hotel Development pg.2

SportsFacilities–Outdoor(CanadaGamesComplex)

• Outdoorsportsartificialturffield–football,soccer,fieldhockey• Tennis–3asphaltcourts• BeachVolleyball–4courtsw/NationalChampionshipaccreditation• GreenSpaceField(100mx107m)–multi-functionspaceforoutdooreventsandconcerts,future

location of proposed dome• FieldHouse–2washrooms,officespace,canteen,storageroom,electricalroom

SummersideRaceway&RedShoresCasino

•HorseRacing–1⁄2mileoutdoortrack•RacePaddock–10,500sq.ft.•StableBarn–80stalls•MultiuseBarn–63portablestalls•RedShoresCasinoatSummersideRaceway–40slots,2pokertables

ConferenceSpace–5,453squarefeet

•MainConferenceRoom(A-C)–4,620squarefeet(divisibleby3)•2MeetingRooms–833sq.ft.

Food&Beverage

•FiveElevenWestRestaurant–offerslunchservice(weekdays),dinnerservice(daily)•Catering–onandoff-site

Other

•Retail–535sq.m.•Parking–476off-streetpavedstalls,276overflowstalls

2.4 PRELIMINARY CONCLUSIONS

The C.U.P. facilities are in excellent condition, and the overall site is considered well-located within the City of Summerside. The food service, entertainment and recreational amenities at Credit Union Place provide not only potential synergies in operations, but also on-site demand generators for the proposed hotel.


EXHIBIT 2-1LOCATION OF CREDIT UNION PLACE IN SUMMERSIDE AND PRINCE EDWARD ISLAND

Credit Union Place 511NotreDameSt. Summerside, PE C1N 1T2


EXHIBIT 2-2SITE PLAN OF CREDIT UNION PLACE COMPLEX SUMMERSIDE, PE

EXHIBIT 2-3SITE PLAN OF CREDIT UNION PLACE – POTENTIAL HOTEL SITE SUMMERSIDE, PEI

Land area for prospective hotel development

Source: The City of Summerside


3.1 INTRODUCTION

The market potential of accommodation properties is influenced by National, Provincial and local economic conditions. Accordingly, the analysis has included a review of recent economic performance in Canada, the Province of Prince Edward Island, and the local Summerside market specifically.

3.2 NATIONAL ECONOMIC OVERVIEW

In late 2008 and throughout 2009 the Canadian economy was affected by the global economic and financial downturn. Now, two years into recovery, inflation is up, and price pressures are building momentum as the sharply higher prices for many key commodities pass through the production chain. Adding to the slightly softer economic output in the first quarter of 2011 is the dampening of consumer spending, in the wake of higher gas prices.

AccordingtorecentindicatoranalysisonbehalfofScotiabankGroup,CanadianandU.S.economieshavelostsomemomentumheadingintotheSummerof2011.IntheUnitedStates,realGDPgrowthwasestimatedto end the year at 2.3%, but is now expected to soften to 1.7% by year-end 2011. Scotiabank indicators cite generally cautious consumers as likely keeping US output growth on a slower trajectory, while Canada’s trade and ongoing competitive issues will keep this country around 2% as well. In Canada, consumer spending has droppedfroma2-1/2yearhighof3.3%in2010,toanestimated2.0%in2011,ashouseholds,facingsharplyhighergaspricesandrisingfoodcosts,cutbackondiscretionarypurchases.RecenteventsinJapanarealsocausing some disruption in domestic production (e.g. the large motor vehicle and parts sector). As a result, CanadianGDPgrowthisexpectedtodropfrom3.2%growthin2010to2.2%in2011,and2.1%in2012.

3.3 NATIONAL TRAVEL FORECAST

In 2008, Canada’s international travel markets, particularly the United States travel market, had not been performing well due to a strong Canadian dollar, new passport rules, high energy costs, and the slowdown of the U.S. economy. However, the domestic travel market was growing and was expected to continue expanding as a result of positive prospects for the Canadian economy. Total visitation to Canada increased by approximately 1.0% in 2008 despite a decline of 7.9% in visitation from the United States, after a 4.3% decline in 2007.

ECONOMIC AND TOURISM OVERVIEWDRAFT FOR DISCUSSION PURPOSES ONLY

Phase I – Draft Report PKF Consulting Inc. Market Feasibility Study for Hotel Development December 2011Summerside, PEI

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3.0 ECONOMIC AND TOURISM OVERVIEW

3.1 Introduction

The market potential of accommodation properties is influenced by National, Provincial and local economic

conditions. Accordingly, the analysis has included a review of recent economic performance in Canada, the

Province of Prince Edward Island, and the local Summerside market specifically.

3.2 National Economic Overview

In late 2008 and throughout 2009 the Canadian economy was affected by the global economic and financial

downturn. Now, two years into recovery, inflation is up, and price pressures are building momentum as the

sharply higher prices for many key commodities pass through the production chain. Adding to the slightly

softer economic output in the first quarter of 2011 is the dampening of consumer spending, in the wake of

higher gas prices.

According to recent indicator analysis on behalf of Scotiabank Group, Canadian and U.S. economies have

lost some momentum heading into the Summer of 2011. In the United States, real GDP growth was

estimated to end the year at 2.3%, but is now expected to soften to 1.7% by year-end 2011. Scotiabank

indicators cite generally cautious consumers as likely keeping US output growth on a slower trajectory, while

Canada’s trade and ongoing competitive issues will keep this country around 2% as well. In Canada,

consumer spending has dropped from a 2-1/2 year high of 3.3% in 2010, to an estimated 2.0% in 2011, as

households, facing sharply higher gas prices and rising food costs, cut back on discretionary purchases.

Recent events in Japan are also causing some disruption in domestic production (e.g. the large motor

vehicle and parts sector). As a result, Canadian GDP growth is expected to drop from 3.2% growth in 2010

to 2.2% in 2011, and 2.1% in 2012.

TABLE 3-1 CANADIAN REAL GDP PROJECTION

Percentage Change 2000-2009 2010 2011(f) 2012(f)

Real GDP 2.1% 3.2% 2.2% 2.1% Employment 1.6% 1.4% 1.6% 1.1% Source: Scotiabank Group; Global Forecast Update, September 1, 2011

3.3 National Travel Forecast

In 2008, Canada’s international travel markets, particularly the United States travel market, had not been

performing well due to a strong Canadian dollar, new passport rules, high energy costs, and the slowdown

of the U.S. economy. However, the domestic travel market was growing and was expected to continue

expanding as a result of positive prospects for the Canadian economy. Total visitation to Canada increased

by approximately 1.0% in 2008 despite a decline of 7.9% in visitation from the United States, after a 4.3%

decline in 2007.


DatafromtheConferenceBoardofCanadaindicatesthatdespitetheeconomicmeltdown,Canadarealizedan overall improvement in overnight travel growth of 1.7% in 2009, driven by gains within the domestic leisure market.However,itisimportanttonotethatthisincludesallsourcesoftravel,includingtheVFRmarket(VisitingFriendsandRelatives),anddespitetheincreaseintravelvolumes,overallexpendituresbyovernightvisitors in 2009 were down 6.3%. In terms of impacts on the accommodation sector, nationally, Canada lost 5.5 million occupied room nights in 2009 relative to 2008. The domestic market was estimated to increase by1.6%in2010,anddipto0.6%in2011,beforeclimbingbackto1.8%in2012.Domesticgrowthratesareexpected to average 2.7% per annum thereafter to 2015.

The overseas markets experienced a significant decrease in overnight travel volumes of 12.7% in 2009, or a loss of 712,000 overnight visitors. However, these overseas travel markets were estimated to achieve strong growth in 2010 of 4.0%, and to post healthy growth of 1.5% to 4.0% per annum through to 2015. Even with those growth levels, this market will represent about 5% of the total overnight visitors to Canada, or just over 6.3 million overnight visitors by 2014.

Canada saw about 900,000 fewer US overnight visitors in 2009, equating to a 6.7% decline from 2008 levels. The US market was estimated to post growth for the first time in almost 10 years in 2010, although at 0.4%, thisincreaseisnotdramatic,andwithcurrenteconomicchallenges,theConferenceBoardhasrevised2011forecasts such that the US market is expected to decline by 1.5%, and a further 0.7% in 2012. As of 2013, the US market should show modest improvements of approximately 1.5% per annum over the next few years, equating to an estimated 12.9 million overnight visits by 2015.

Looking forward, forecasts published in the Fall of 2011 indicate that while travel recovery is anticipated for Canada, it will be at modest levels of about 0.4% in 2011 and 1.5% in 2012. Total overnight visitor volumes were projected to modestly improve by 1.6% in 2010, with both domestic overnight business and leisure travelnotexpectedtorebounduntil2011.ThefollowingtablesummarizestheConferenceBoardofCanada’sprojections for overall overnight travel growth to the country for the 2010 to 2015 period.

DRAFT FOR DISCUSSION PURPOSES ONLY


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Data from the Conference Board of Canada indicates that despite the economic meltdown, Canada realized

an overall improvement in overnight travel growth of 1.7% in 2009, driven by gains within the domestic

leisure market. However, it is important to note that this includes all sources of travel, including the VFR

market (Visiting Friends and Relatives), and despite the increase in travel volumes, overall expenditures by

overnight visitors in 2009 were down 6.3%. In terms of impacts on the accommodation sector, nationally,

Canada lost 5.5 million occupied room nights in 2009 relative to 2008. The domestic market was estimated

to increase by 1.6% in 2010, and dip to 0.6% in 2011, before climbing back to 1.8% in 2012. Domestic

growth rates are expected to average 2.7% per annum thereafter to 2015.

The overseas markets experienced a significant decrease in overnight travel volumes of 12.7% in 2009, or a

loss of 712,000 overnight visitors. However, these overseas travel markets were estimated to achieve

strong growth in 2010 of 4.0%, and to post healthy growth of 1.5% to 4.0% per annum through to 2015.

Even with those growth levels, this market will represent about 5% of the total overnight visitors to Canada,

or just over 6.3 million overnight visitors by 2014.

Canada saw about 900,000 fewer US overnight visitors in 2009, equating to a 6.7% decline from 2008

levels. The US market was estimated to post growth for the first time in almost 10 years in 2010, although at

0.4%, this increase is not dramatic, and with current economic challenges, the Conference Board has

revised 2011 forecasts such that the US market is expected to decline by 1.5%, and a further 0.7% in 2012.

As of 2013, the US market should show modest improvements of approximately 1.5% per annum over the

next few years, equating to an estimated 12.9 million overnight visits by 2015.

Looking forward, forecasts published in the Fall of 2011 indicate that while travel recovery is anticipated for Canada, it will be at modest levels of about 0.4% in 2011 and 1.5% in 2012. Total overnight visitor

volumes were projected to modestly improve by 1.6% in 2010, with both domestic overnight business and

leisure travel not expected to rebound until 2011. The following table summarizes the Conference Board of

Canada’s projections for overall overnight travel growth to the country for the 2010 to 2015 period.

TABLE 3-2 NATIONAL OVERNIGHT TRAVEL FORECAST (% CHANGE)

2010 est 2011 f 2012 f 2013 f 2014 f 2015 f Domestic Origin (Total) 1.6 0.6 1.8 2.9 2.9 2.6 Domestic Pleasure -2.8 0.7 1.9 3.0 3.0 2.8 Domestic Business -3.0 2.2 2.5 3.0 2.8 2.5 United States Origin 0.4 -1.5 -0.7 1.4 1.5 1.5 Overseas Origin 4.0 1.5 2.6 3.7 4.0 3.9 Total Visitation 1.6 0.4 1.5 2.8 2.8 2.6 Source: Conference Board of Canada Travel Markets Outlook, Fall 2011; Statistics Canada

pg7 Summerside, Prince Edward Island, Canada

3.4 PROVINCIAL ECONOMIC OVERVIEW

Prince Edward Island is divided into three counties: Kings, Queens and Prince (moving from east to west). The entire Island covers 5,684 sq. km., and as of 2011, an estimated 143,200 residents.1 An estimated 55% of the Island’s population resides in Queens County, which is home to the City of Charlottetown, the Provincial capital.

As Canada’s smallest and only island Province, Prince Edward Island has historically depended on the land and the sea as the basis for its primary industries - agriculture, fisheries and tourism. However, the Provincial Governmentissucceedinginbringingdiversificationtotheeconomywithsupportforgrowthindustries,such as: aerospace, bioscience (including agriculture and fisheries), information technology, and renewable energy.2 A doubling of wind generating capacity was a key support for PEI’s economy in 2010.

TheConferenceBoardofCanada’sSummer2011ProvincialOutlookandScotiabankGroupProvincialForecastforSeptember2011indicatemixedperformanceandmoderateGDPgrowthoverthenextfewyears.Overall,theutilitiessectorgreatlycontributedtooveralleconomicactivityin2010,andsolidgrowthisexpected again in 2011. However, with weakness in the agricultural sector this year, stemming from a 20- year lowinpotatoacreage,combinedwithcutstopublicspending,GDPisexpectedtodeclinefrom2.0%growthin 2010 to 1.6% in 2011. Employment growth in Prince Edward Island is expected to be modest in 2011, as a result of the mixed growth of major industry, and only 800 new jobs are expected, with unemployment remaining over 11%.

Stronger manufacturing and improved tourism-related business activity (such as the new Convention Centre in Charlottetown), are expected to offset some of the decline in public investment for 2012, leading toanother1.6%increaseinrealGDP.FederalstimulusspendingissettoendinOctober2011,alossthatwill be compounded by lower spending from the Island’s $500-million public infrastructure plan. However, higherfoodpricesareexpectedtohelpspurmorepotatoproduction,andtheopeningoftheBioCommonsManufacturing Centre and new aerospace companies coming to the Island are expected to lead to higher manufacturing output, and spur business development over the near term in 2012. Labour markets are also expected to improve slightly in 2012, yet weak U.S. demand conditions could restrain export gains in aerospace and biomedical manufacturing, along with tourism activity.

Consequently,theoutlookforPEIisoneofsteadypositivegrowthinrealGDPof1.6%inboth2011and2012. Key economic indicators for Prince Edward Island are presented in Table 3-3.DRAFT FOR DISCUSSION PURPOSES ONLY


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TABLE 3-3 PRINCE EDWARD ISLAND

Key Economic Indicators (% change) Economic Indicator 2000-2009 2010 (e) 2011(f) 2012(f)

Real GDP (basic prices) 1.7% 2.0% 1.6% 1.6% Employment Growth Rate 1.3% 2.9% 0.8% 0.9%

Source: Scotiabank Economics – Global Forecast Update, September 1, 2011

3.5 Provincial Travel Forecast

The Travel Research Centre for the University of PEI provides statistical data to the Provincial

Government on an annual basis for all visitation modes and geographic origins. Table 3-4 provides an

overview of total travel to PEI from 2006 to 2010. As shown, total visits have increased by 4.8% over the

5 year period, with 11% of this growth coming from Ontario and Quebec. Ontario in particular drives a lot

of visiting friends and relative (VFR) demand. The U.S. market, which comprised 6.4% of 2010 visitation,

has decreased by over 8% since 2006, or over 7,100 annual visits, while the overseas market has

decreased by over half (50.4%). An estimated 78% of overall visitation to PEI is repeat, with 40-50% of

repeat visitors returning every 2 years.

TABLE 3-4 HISTORIC INBOUND VISITATION TO PEI – 2006-2010

Markets 2006 2007 2008 2009 2010% of Total

(2010) Atlantic Canada 793,608 806,485 770,278 825,456 832,987 67.8%Ontario/Quebec 263,762 272,799 238,656 277,489 293,014 23.8%Other Canada 19,018 22,221 24,483 22,817 18,861 1.5%Total Domestic 1,076,388 1,101,505 1,033,417 1,125,762 1,144,862 93.1%U.S. 86,259 87,523 77,733 85,331 79,158 6.4%Overseas 10,593 10,454 9,943 5,500 5,256 0.4%TOTAL 1,173,240 1,199,482 1,121,093 1,216,593 1,229,276 100.0%

Source: UPEI – Travel Research Centre

The Conference Board of Canada looks specifically at overnight visits to PEI and tracks the variation in

purpose of Domestic trip, along with geographic origin. According to most recent Fall 2011 - Travel

Market Outlooks, total overnight visitation to the Province (estimated at 707,000 visits – or 57.5% of

overall visitation to PEI) declined by 1.2% in 2009, while the PEI historic data indicated an overall gain of

8.5% - suggesting that much of this growth stemmed from domestic same-day traffic. It is interesting to

note that while there was an overall loss in overnight visitor volumes, there were gains in domestic leisure

travel in 2009, although much of this was in the VFR travel market (visiting friends and relatives). In 2010,

domestic overnight trips to the province increased by 1.5% over 2009 volumes; however, domestic

business travel alone fell by over 29%. The domestic market is projected to see a 0.2% decline in 2011,

with positive, albeit marginal growth, in 2012 and over the next four years.


3.5 PROVINCIAL TRAVEL FORECAST

TheTravelResearchCentrefortheUniversityofPEIprovidesstatisticaldatatotheProvincialGovernmenton an annual basis for all visitation modes and geographic origins. Table 3-4 provides an overview of total travel to PEI from 2006 to 2010. As shown, total visits have increased by 4.8% over the 5 year period, with 11%ofthisgrowthcomingfromOntarioandQuebec.Ontarioinparticulardrivesalotofvisitingfriendsandrelative(VFR)demand.TheU.S.market,whichcomprised6.4%of2010visitation,hasdecreasedbyover8%since 2006, or over 7,100 annual visits, while the overseas market has decreased by over half (50.4%). An estimated 78% of overall visitation to PEI is repeat, with 40-50% of repeat visitors returning every 2 years.

TheConferenceBoardofCanadalooksspecificallyatovernightvisitstoPEIandtracksthevariationinpurposeofDomestictrip,alongwithgeographicorigin.AccordingtomostrecentFall2011-TravelMarketOutlooks,totalovernightvisitationtotheProvince(estimatedat707,000visits–or57.5%ofoverallvisitationto PEI) declined by 1.2% in 2009, while the PEI historic data indicated an overall gain of 8.5% - suggesting that much of this growth stemmed from domestic same-day traffic. It is interesting to note that while there was an overall loss in overnight visitor volumes, there were gains in domestic leisure travel in 2009, although muchofthiswasintheVFRtravelmarket(visitingfriendsandrelatives).In2010,domesticovernighttripstotheprovinceincreasedby1.5%over2009volumes;however,domesticbusinesstravelalonefellbyover29%. The domestic market is projected to see a 0.2% decline in 2011, with positive, albeit marginal growth, in 2012 and over the next four years.

Long-haul tourism, which has yet to recover from the recession, is expected to continue to decline in 2011, with the persistent strength of the Canadian dollar, and high gasoline and food prices. U.S. visitation was estimated to have grown by 6.2% in 2010, but is projected to decline by almost the same amount in 2011 and by another 0.4% in 2012. The devastation of the tsunami and earthquake that struck Japan is expected to furtherrestrictgrowthinvisitationtoPEIfromOverseas.Overnightvisitationfelloff16.9%in2009asaresultof global economic challenges, yet rebounded in 2010. However, growth is projected to decline by 5.0% in 2011, with much of this loss coming from the Japanese market, before building up the pace again in 2012 and beyond.



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TABLE 3-3 PRINCE EDWARD ISLAND

Key Economic Indicators (% change) Economic Indicator 2000-2009 2010 (e) 2011(f) 2012(f)

Real GDP (basic prices) 1.7% 2.0% 1.6% 1.6% Employment Growth Rate 1.3% 2.9% 0.8% 0.9%

Source: Scotiabank Economics – Global Forecast Update, September 1, 2011

3.5 Provincial Travel Forecast

The Travel Research Centre for the University of PEI provides statistical data to the Provincial

Government on an annual basis for all visitation modes and geographic origins. Table 3-4 provides an

overview of total travel to PEI from 2006 to 2010. As shown, total visits have increased by 4.8% over the

5 year period, with 11% of this growth coming from Ontario and Quebec. Ontario in particular drives a lot

of visiting friends and relative (VFR) demand. The U.S. market, which comprised 6.4% of 2010 visitation,

has decreased by over 8% since 2006, or over 7,100 annual visits, while the overseas market has

decreased by over half (50.4%). An estimated 78% of overall visitation to PEI is repeat, with 40-50% of

repeat visitors returning every 2 years.

TABLE 3-4 HISTORIC INBOUND VISITATION TO PEI – 2006-2010

Markets 2006 2007 2008 2009 2010% of Total

(2010) Atlantic Canada 793,608 806,485 770,278 825,456 832,987 67.8%Ontario/Quebec 263,762 272,799 238,656 277,489 293,014 23.8%Other Canada 19,018 22,221 24,483 22,817 18,861 1.5%Total Domestic 1,076,388 1,101,505 1,033,417 1,125,762 1,144,862 93.1%U.S. 86,259 87,523 77,733 85,331 79,158 6.4%Overseas 10,593 10,454 9,943 5,500 5,256 0.4%TOTAL 1,173,240 1,199,482 1,121,093 1,216,593 1,229,276 100.0%

Source: UPEI – Travel Research Centre

The Conference Board of Canada looks specifically at overnight visits to PEI and tracks the variation in

purpose of Domestic trip, along with geographic origin. According to most recent Fall 2011 - Travel

Market Outlooks, total overnight visitation to the Province (estimated at 707,000 visits – or 57.5% of

overall visitation to PEI) declined by 1.2% in 2009, while the PEI historic data indicated an overall gain of

8.5% - suggesting that much of this growth stemmed from domestic same-day traffic. It is interesting to

note that while there was an overall loss in overnight visitor volumes, there were gains in domestic leisure

travel in 2009, although much of this was in the VFR travel market (visiting friends and relatives). In 2010,

domestic overnight trips to the province increased by 1.5% over 2009 volumes; however, domestic

business travel alone fell by over 29%. The domestic market is projected to see a 0.2% decline in 2011,

with positive, albeit marginal growth, in 2012 and over the next four years.


OverallovernightvisitationtoPrinceEdwardIslandisexpecttodeclinein2011by1.5%,butgrowby1.1%2012,andgrowthisprojectedbytheConferenceBoardacrossallsegmentsoutto2015.

Fromastrategicperspective,theTourismAdvisoryCouncilofPEI,inpartnershipwiththeDepartmentofTourismandCulture,TIAPEIandACOA,recentlyreleaseda5-yearTourismStrategyfortheprovince(Strategy2015: Momentum-Invention-Mobilization), which identifies 5 keys pillars to grow demand for PEI: Coastal, Culinary,Culture,Golf,andMeetings&Conventions.TheProvinceiscoordinatinganumberoffestivalsandtrade shows focused on these areas (i.e. Fall Flavours, Fusion, Contact East) that are intended to both garner involvementfromdifferentcommunitiesandspreaddemandacrosstheIsland.TheProvincialGovernmenthas also committed to working with Meetings and Conventions PEI (formerly PEI Convention Partnership) to ensure leads are being distributed in a variety of venues.

3.6 CITY OF SUMMERSIDE ECONOMIC OVERVIEW

The City of Summerside is PEI’s second largest city and the regional centre for all of Western PEI (Prince County), which encompasses 1,980 sq. km. or 35% of the Island’s land area. Summerside itself covers a total land area of 7,100 acres, or 28.7 sq. km. The City’s key trade area is estimated in excess of 45,000 people, representing about 35% of the Island population, and 75% of the Provincial population resides within a 1-hour drive from Summerside.

As shown in Table 3-6, the estimated population of Summerside was 14,800 residents in 2006, comprising about 11% of the Island’s overall population (135,900), and 33% of Prince County’s resident base (44,500).



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Long-haul tourism, which has yet to recover from the recession, is expected to continue to decline in

2011, with the persistent strength of the Canadian dollar, and high gasoline and food prices. U.S.

visitation was estimated to have grown by 6.2% in 2010, but is projected to decline by almost the same

amount in 2011 and by another 0.4% in 2012. The devastation of the tsunami and earthquake that struck

Japan is expected to further restrict growth in visitation to PEI from Overseas. Overnight visitation fell off

16.9% in 2009 as a result of global economic challenges, yet rebounded in 2010. However, growth is

projected to decline by 5.0% in 2011, with much of this loss coming from the Japanese market, before

building up the pace again in 2012 and beyond.

TABLE 3-5 PROVINCIAL OVERNIGHT TRAVEL FORECAST (% CHANGE)

2010 (e) 2011 (f) 2012 (f) 2013(f) 2014(f) 2015(f)

Domestic Origin 1.5 -0.2 1.3 2.1 2.1 2.1 Business -29.7 1.5 1.6 1.9 1.7 1.6 Pleasure 11.9 0.0 1.4 2.4 2.4 2.4United States Origin 6.2 -6.0 -0.4 1.9 2.0 1.8 Overseas Origin 54.5 -5.0 1.8 2.7 2.9 2.8 Total Visitation 4.3 -1.5 1.1 2.1 2.1 2.1 Source: Conference Board of Canada Travel Markets Outlook, Fall 2011

Overall overnight visitation to Prince Edward Island is expect to decline in 2011 by 1.5%, but grow by 1.1%

2012, and growth is projected by the Conference Board across all segments out to 2015.

From a strategic perspective, the Tourism Advisory Council of PEI, in partnership with the Department of

Tourism and Culture, TIAPEI and ACOA, recently released a 5-year Tourism Strategy for the province

(Strategy 2015: Momentum-Invention-Mobilization), which identifies 5 keys pillars to grow demand for PEI:

Coastal, Culinary, Culture, Golf, and Meetings & Conventions. The Province is coordinating a number of

festivals and trade shows focused on these areas (i.e. Fall Flavours, Fusion, Contact East) that are intended

to both garner involvement from different communities and spread demand across the Island. The

Provincial Government has also committed to working with Meetings and Conventions PEI (formerly PEI

Convention Partnership) to ensure leads are being distributed in a variety of venues.

3.6 City of Summerside Economic Overview

The City of Summerside is PEI’s second largest city and the regional centre for all of Western PEI (Prince

County), which encompasses 1,980 sq. km. or 35% of the Island’s land area. Summerside itself covers a

total land area of 7,100 acres, or 28.7 sq. km. The City’s key trade area is estimated in excess of 45,000

people, representing about 35% of the Island population, and 75% of the Provincial population resides

within a 1-hour drive from Summerside.



9

As shown in Table 3-6, the estimated population of Summerside was 14,800 residents in 2006, comprising

about 11% of the Island’s overall population (135,900), and 33% of Prince County’s resident base (44,500).

TABLE 3-6 REGIONAL POPULATION ESTIMATES FOR PRINCE EDWARD ISLAND

Location 2006

Census % of Total

(2011) City of Summerside 14,767 10.9% Other Prince County 29,732 21.9% City of Charlottetown (Metro) 58,625 43.2% Other Queens County 14,119 10.4% Kings County 18,608 13.7% TOTAL 135,851 100.0%

Source: Statistics Canada – 2006 Census, City of Summerside Technical Services 2009

In 2006, the median age of the population of Summerside was 44, with 82% of the population over 15 years,

of which 11,700 people were employed (80.6%). Table 3-7 graphically depicts population estimates for the

City of Summerside expected in 2011 and 2016. As shown, the population is expected to grow 1.7% by

year-end 2011 to approximately 15,000 residents, and increase to 15,400 by 2016 (another 2.4%). The data

indicates that the number of people aged 60 and over will increase by 35% from 2006 to 2016, while those

under 29 years will decrease by 7%.

TABLE 3-7 SUMMERSIDE POPULATION GROWTH ESTIMATES

Age Range 2006 2011(e) % change 2016(f) % change 0-14 2,568 2,366 -7.9% 2,316 -2.1% 15-29 2,957 2,979 0.7% 2,795 -6.2% 30-44 2,911 2,783 -4.4% 2,921 5.0%45-59 3,158 3,197 1.2% 3,068 -4.0% 60-74 1,981 2,432 22.8% 2,890 18.8%75+ 1,193 1,255 5.2% 1,384 10.3%TOTAL 14,768 15,012 1.7% 15,374 2.4%


Table 3-8 summarizes the nature of the labour force in Summerside by industry sector as of 2006,

according to the City of Summerside - Community Profile for 2010. As shown, Manufacturing, Retail Trade,

Health Care & Social Assistance, Public Administration and Accommodation & Food Services are the

leading sectors that provide over 60% of jobs in the surrounding area. The largest growth area since 2001

is the Health Care and Social Assistance.


In 2006, the median age of the population of Summerside was 44, with 82% of the population over 15 years, of which 11,700 people were employed (80.6%). Table 3-7 graphically depicts population estimates for the City of Summerside expected in 2011 and 2016. As shown, the population is expected to grow 1.7% by year-end 2011 to approximately 15,000 residents, and increase to 15,400 by 2016 (another 2.4%). The data indicates that the number of people aged 60 and over will increase by 35% from 2006 to 2016, while those under 29 years will decrease by 7%.

Table 3-8 summarizes the nature of the labour force in Summerside by industry sector as of 2006, according totheCityofSummerside-CommunityProfilefor2010.Asshown,Manufacturing,RetailTrade,HealthCare&SocialAssistance,PublicAdministrationandAccommodation&FoodServicesaretheleadingsectorsthatprovide over 60% of jobs in the surrounding area. The largest growth area since 2001 is the Health Care and Social Assistance.

3.6.1 TRANSPORTATION

Access to the City of Summerside is provided via the Transcanada Highway (1A) coming north from the Borden-Carletonarea,ProvincialHighways2and11,andsecondaryDistrictHighways107and117.ConfederationBridgeislocatedwithina20-minutedriveoftheDowntowncore,andtheclosestairaccessis provided at the Summerside Airport, which is located within a 5-minute drive. This airport is owned and operated by the Slemon Park Corporation and provides service for private, corporate, charter, and military flights, both domestic and international.



9

As shown in Table 3-6, the estimated population of Summerside was 14,800 residents in 2006, comprising

about 11% of the Island’s overall population (135,900), and 33% of Prince County’s resident base (44,500).

TABLE 3-6 REGIONAL POPULATION ESTIMATES FOR PRINCE EDWARD ISLAND

Location 2006

Census % of Total

(2011) City of Summerside 14,767 10.9% Other Prince County 29,732 21.9% City of Charlottetown (Metro) 58,625 43.2% Other Queens County 14,119 10.4% Kings County 18,608 13.7% TOTAL 135,851 100.0%


In 2006, the median age of the population of Summerside was 44, with 82% of the population over 15 years,

of which 11,700 people were employed (80.6%). Table 3-7 graphically depicts population estimates for the

City of Summerside expected in 2011 and 2016. As shown, the population is expected to grow 1.7% by

year-end 2011 to approximately 15,000 residents, and increase to 15,400 by 2016 (another 2.4%). The data

indicates that the number of people aged 60 and over will increase by 35% from 2006 to 2016, while those

under 29 years will decrease by 7%.

TABLE 3-7 SUMMERSIDE POPULATION GROWTH ESTIMATES

Age Range 2006 2011(e) % change 2016(f) % change 0-14 2,568 2,366 -7.9% 2,316 -2.1% 15-29 2,957 2,979 0.7% 2,795 -6.2% 30-44 2,911 2,783 -4.4% 2,921 5.0%45-59 3,158 3,197 1.2% 3,068 -4.0% 60-74 1,981 2,432 22.8% 2,890 18.8%75+ 1,193 1,255 5.2% 1,384 10.3%TOTAL 14,768 15,012 1.7% 15,374 2.4%


Table 3-8 summarizes the nature of the labour force in Summerside by industry sector as of 2006,

according to the City of Summerside - Community Profile for 2010. As shown, Manufacturing, Retail Trade,

Health Care & Social Assistance, Public Administration and Accommodation & Food Services are the

leading sectors that provide over 60% of jobs in the surrounding area. The largest growth area since 2001

is the Health Care and Social Assistance.



10

TABLE 3-8 Labour Force by Industry Sector - City of Summerside

2006Industry Sector Employees % of Total Retail & Wholesale Trade 1,335 15.5% Manufacturing Industries 1,140 13.2% Health Care & Social Assistance 1,015 11.8% Government Service Industries 920 10.7% Primary Industries 520 6.0% Educational Services 420 4.9% Construction 385 4.5% Finance, Insurance & Real Estate 355 4.1% Transportation & Public Utility 255 3.0% Other Services 2,285 26.5% Total Labour Force 15 Years & Older 8,630 100.0%

Source: City of Summerside – Major Project Review 2010

3.6.1 Transportation

Access to the City of Summerside is provided via the Transcanada Highway (1A) coming north from the

Borden-Carleton area, Provincial Highways 2 and 11, and secondary District Highways 107 and 117.

Confederation Bridge is located within a 20-minute drive of the Downtown core, and the closest air access

is provided at the Summerside Airport, which is located within a 5-minute drive. This airport is owned and

operated by the Slemon Park Corporation and provides service for private, corporate, charter, and military

flights, both domestic and international. Regularly scheduled commercial flights are available through the

Charlottetown International Airport, which is serviced by Air Canada, WestJet, Delta and Sunwing, and

located within a 40-minute drive of Summerside’s downtown. According to the Charlottetown Airport’s 2010

Annual Report, passenger traffic for 2010 increased 4.3% versus 2009, with the 289,597 passenger

movements in 2010 being the highest on record in the airport’s history. Summerside also has a commercial

shipping port on Bedeque Bay, which remains ice-free from April through to December, and provides a

53,000 square-foot heated transit shed for regular shipments of: seed potatoes, aggregates, grains and

other products.

In terms of the nearest urban centres, Exhibit 3-1 shows Summerside’s relatively central location within 71

km of Charlottetown to the east, and 151 km from Moncton, NB, via Confederation Bridge. Halifax, NS is a

303 km drive from Summerside, via the ferry from Caribou Island in Nova Scotia to Wood Island in PEI.

3.6.2 Economic Profile

Summerside’s traditional economy has diversified considerably within the past 10 years, with a much

greater focus on Aerospace, ICT Enterprise, Education, Consumer Product Providers, and Advanced

Manufacturing.


RegularlyscheduledcommercialflightsareavailablethroughtheCharlottetownInternationalAirport,whichisservicedbyAirCanada,WestJet,DeltaandSunwing,andlocatedwithina40-minutedriveofSummerside’sdowntown.AccordingtotheCharlottetownAirport’s2010AnnualReport,passengertrafficfor2010increased4.3% versus 2009, with the 289,597 passenger movements in 2010 being the highest on record in the airport’s history. SummersidealsohasacommercialshippingportonBedequeBay,whichremainsice-freefromAprilthroughtoDecember,andprovidesa53,000square-footheatedtransitshedforregularshipmentsof:seedpotatoes,aggregates, grains and other products.

In terms of the nearest urban centres, Exhibit 3-1 shows Summerside’s relatively central location within 71 km ofCharlottetowntotheeast,and151kmfromMoncton,NB,viaConfederationBridge.Halifax,NSisa303km drive from Summerside, via the ferry from Caribou Island in Nova Scotia to Wood Island in PEI.

3.6.2 ECONOMIC PROFILE

Summerside’s traditional economy has diversified considerably within the past 10 years, with a much greater focus on Aerospace, ICT Enterprise, Education, Consumer Product Providers, and Advanced Manufacturing.

Table 3-9 details the top private and public sector employers in Summerside with over 50 full-time employees, as of 2011. Cavendish Farms, which produces frozen potato products for the retail and foodservice markets world-wide,isthelargestprivatesectoremployerinSummerside,whiletheSummersideTaxCentre–abranchoftheCanadaRevenueAgency–isthelargestpubliccentreemployer.TheTaxCentrehasanestimated 346 full-time employees, which doubles with contract workers annually from February to April. According to management, this seasonal base of workers lives within driving distance of the Tax Centre.



11

Table 3-9 details the top private and public sector employers in Summerside with over 50 full-time

employees, as of 2011. Cavendish Farms, which produces frozen potato products for the retail and

foodservice markets world-wide, is the largest private sector employer in Summerside, while the

Summerside Tax Centre – a branch of the Canada Revenue Agency – is the largest public centre employer.

The Tax Centre has an estimated 346 full-time employees, which doubles with contract workers annually

from February to April. According to management, this seasonal base of workers lives within driving

distance of the Tax Centre.

TABLE 3-9 2011 TOP EMPLOYERS IN SUMMERSIDE

(Over 50 Full-Time Employees) Company Full-Time Part-Time Private Sector Cavendish Farms 655 Vector Aerospace Engine Services Atlantic 400 10 Schurman Building Supplies, Construction, etc. 300 100 Amalgamated Dairies Limited 250 25 Testori Americas Corporation 208 5 Curran & Briggs Limited 165 Honeywell Aerospatiale Inc. 90 1 MDS-PRAD Technologies Corporation 57 Slemon Park Corporation 50 20 RadNet 25 Public Sector Summerside Tax Centre (Federal Government) 346 347 Prince County Hospital 451 Western School Board 300 Provincial Department of Education 110 City of Summerside 108 103 Holland College 95 Access PEI 88 Three Oaks Senior High School 65 P.E.I. Youth Centre 60 10

Source: City of Summerside Business Listing – June 2011

The City’s Economic Development department has focused the 2011 Economic Development Action Plan

on 2 key convergence sectors of competitive advantage: 1) Health IT and emerging knowledge based

industries; and 2) Transportation, Manufacturing and Food Systems.3 Within the latter area, Aerospace,

Transportation and Logistics, Advanced Manufacturing, and Agriculture and Food are considered

converging areas, and areas of opportunity include: incorporating Slemon Park and existing aerospace

business into the Summerside urban boundary, are well are development of new industrial lands to attract

new business. In the Health Care, ICT and Renewable Energy convergence sectors, the City already

3 2011 Summerside Economic Development Action Plan, p. 3


TheCity’sEconomicDevelopmentdepartmenthasfocusedthe2011EconomicDevelopmentActionPlanon 2 key convergence sectors of competitive advantage: 1) Health IT and emerging knowledge based industries;and2)Transportation,ManufacturingandFoodSystems.3Withinthelatterarea,Aerospace,Transportation and Logistics, Advanced Manufacturing, and Agriculture and Food are considered converging areas, and areas of opportunity include: incorporating Slemon Park and existing aerospace business into the Summerside urban boundary, are well are development of new industrial lands to attract new business.

IntheHealthCare,ICTandRenewableEnergyconvergencesectors,theCityalreadybenefitsfrombeingtheonly place in PEI with its own electric utility (46% of the City’s energy comes from renewable sources), and openingoftherecentlyretrofitted100,000-square-footHolmanBuilding.

AccordingtoamarketthresholdanalysisconductedaspartoftheSummersideRetailOpportunitiesStudyfor the Food Service Industry in 2006, Summerside is also lacking key tourist infrastructure, including full servicerestaurants.TheStudydemonstratesthatwhileSummersiderepresentsroughly1/3oftheProvincialpopulation and supports a trade area of 40,000 people, it has a “Market Pull Factor” of 0.90, which means that about 10% of the total retail trade in Summerside and Prince County is leaking to larger urban centres. The study identifies that the City’s Trade Area could support 5.4 additional restaurants in the local market area. This area has become a key area of interest for business development on the basis of both demand for foodservice and land availability.

In terms of overall land availability, Figure 3-1 shows that 50% (988 acres) of the available land in Summerside is Vacant, with 28% comprised of developed commercial land, and the remaining 22% made up of developed industrial land.

The following table outlines the value of building permits issued by the City of Summerside over the 2007 to 2010 period, and year-to-date August 2010 and 2011. The total number of residential permits has increased by 58% over the 2007-2010 period, while values have decreased by 29%. In comparison, the number of ICI permits has decreased by 47% but the value has increased by the same amount. Year-to-date August 2011 data shows a 220% increase in ICI permit values relative to the same period in 2010, and 6% increase in residential permit values, leading to an 82% overall increase in permit values.

FIGURE 3-1CITY OF SUMMERSIDE - LAND AVAILABILITY

988 Acres, 50%

548 Acres, 28%

440 Acres, 22%

Vacant Developed - Commercial

Developed - Industrial

Source: City of Summerside, 2008 (Current) Of�cial Plan


As shown in the previous table, 73 ICI building permits were issued in 2009, which decreased by 15% to 62 permits in 2010, but is up 129% year-to-date August 2011 over the same period in 2010. The following is a list of recently completed or proposed projects within Summerside:

• LinwoodFarms–126acresoffarmlandconvertedtoresidentialmixed-usedevelopmentin2010,atanestimatedvalueof$4Million;

• HolmanBuilding(250WaterStreet)–thispropertywasfit-uptoincorporatetheProvincialDepartmentofEducation(movedin2010fromCharlottetown)atavalueof$2Million;70,000sq.ft.hasbeenleasedtodate,includingCarestreamHealth;

• EastPrinceHealthFacility(SummersetManor)–theProvincialgovernmentiscurrentlyorganizingthedevelopmentofan88-bednursinghome,atavaluetobedetermined;

• DowntownSummersideRevitalization–roadandinfrastructuredevelopment,street-scapingandnewlightstandardsarecurrentlyunderwayintheDowntowncore,withanexpectedcompletiondateofDecember2011,andcurrentvalueof$1.9Million;

• Toyota(107WalkerAvenue)–plansareunderwayforthedevelopmentofanewToyotaofficebuildingatanestimatedvalueof$460,000;

• SummersideCommercialCentre(425Granville)–institutionalconversiontomixedresidentialandcommercialuseonGranvilleSt.betweenArnettAveandRyanSt.;thecommercialcomponentisexpectedtocoverapproximately8acres;

• DebertPropertyInvestments–starting$2.3MillionrenovationtotheKohlerBuilding(industrial);• DepartmentofHealthisaddingaDialysisUnitatacostof$1.9Million;and• WesternSchoolBoard–developingtheTOSHCareer/TechCentre,whichisanewbuildproject

estimated at a value of $4 Million.

POST-SECONDARY EDUCATION

Holland College was established in the Summerside area in 1979, and there are now 17 post-secondary programs offered at 5 centres: Marine Training Centre, Atlantic Police Academy, Aerospace Centre, Motive Power Centre, and the East Prince Centre for Learning and Work. According to an economic impact study produced by the College, an estimated 200 full-time students originate from out-of-province, and add $1.9 Million annually to the local economy, inclusive of meals, retail and accommodation spending.

OneofthemostsignificantrecenttransactionsinSummersidewasthepurchaseoftheWaterfrontPlaceMall in Summerside for an estimated $1.9 Million in April 2011 by Holland College. According to a recent article, Holland College is expanding its operations in downtown Summerside with a $9.4-million renovation to the Waterfront Mall, creating the Holland College Summerside Waterfront Campus. The Atlantic Canada OpportunitiesAgency(ACOA)isexpectedtocontribute$1Milliontotherenovations.

TABLE 3-10 BUILDING PERMIT VALUES & TOTAL PER MITS ISSUED - CITY OF SUMMERSIDE - 2007-2010, 2011YTD

2007 2008 2009 2010

YTDAug 2010

YTD Aug 2011

28 211 061 211 111 101 deussI stimreP laitnediseR latoT

513,7$ 420,41$ eulaV laitnediseR weN $6,213 $9,979 $6,860 $7,275

Total Commercial/Industrial Permits Issued 116 87 73 62 28 64

New Commercial, Institutional & Industrial $5,857 $8,305 $11,480 $8,638 $3,743 $11,990

641 041 222 581 891 712 deussI stimreP latoT

Total Value of Building Permits $15,620 $17,694 $18,618 $10,604 $19,265

Source: City of Summerside, Technical Services Department

$19,881


The College has hired 102 new employees for the Summerside campus, for 260 full-time students and 150 adultlearners.ConstructionbeganinearlyOctober,andwillinvolveabout125,000squarefeetofthemallarea, (80% of the facility) with 3 businesses remaining open. The campus is expected to be open for the September 2012 school year.

3.6.3 SUMMERSIDE TOURISM OVERVIEW

Tourism in Summerside is based predominantly around the beach and waterfront, as well as the historic landmarkslocatedinandaroundtheTown;andthestrengthoftheartsandculturalcommunity.AswiththerestoftheIsland,muchofthetouristactivityinSummersideisconcentratedaroundoutdoorandarts/culture/heritage activities, and is primarily summer-oriented. In addition to the numerous amenities provided by the CreditUnionPlaceComplexandSummersideRaceway,touristattractionsthatinducetraveltotheareainclude the following:

• CollegeofPipingandCelticPerformingArtsinCanada;• EptekNationalExhibitionCentre;• LefurgeyCulturalCentre;• PEISportsHallofFame;• WyattHeritagePropertiesArchives;• FeastDinnerTheatres;• HarbourfrontJubileeTheatre(featuringAnneandGilbertMusicalProductionfromJune–Sept);• Spinnaker’sLandingmarketplaceandrecreatedfishingvillage(openJune–Sept);• SilverFoxCurling&YachtClub;• SummersideGolfClub;• MusicandCulinaryFestivals;

Various outdoor recreational facilities:

• HarbourfrontBoardwalkwithasphaltfootandbikepathsoHiking,Biking&WalkingTrails• OutdoorTennis&BasketballCourts• Playgrounds,Parks&Greenspace–Over15Areas• FourBallDiamondsoBeaches

The following is a brief list of leisure and social events that took place in Summerside in 2011:

setaD stnevE laicoS/erusieL

Harlem Globetrotters Expo game

Daily Mini Concerts at College of Piping Anne & Gilbert performances at

52 tpeS-41 enuJ ertaehT edisruobraH

enuJ wohS otuA remmuS

enuJ )trecnoc( teksalP leoJ

yluJ )trecnoc( tsereveN

yluJ ediR lacisuM PMCR

Triple C Challenge (equestrian event)

These Kids Wear Crowns (concert)

tsuguA )trecnoc( attesoR yeH

tsuguA )trecnoc( eniW lirpA

tsuguA citnaltA wohS riA

tsuguA tisiV layoR

enuJ gnirehtaG dnalhgiH

Contact East Musical Showcase

seulB & feeB

)trecnoc( nhoJ notlE

April

August

July

July 5-Sep 1

September

SeptemberSeptember


As shown, many of the events that take place in Summerside occur during the month of June through September. The related tourism infrastructure is also very seasonal. For instance, the Spinnaker’s Landing market area, which provides direct access to the City’s waterfront and boardwalk, closes annually in mid September. Sports related tournaments relating to baseball, hockey, curling, boating and equestrian-related sports provide some additional demand, which has been analyzed in Section 4.0.

TheTourismResearchCentreattheUniversityofPEIconductedananalysisonovernightvisitationtoSummerside, based on the results of the PEI Exit Survey for the Period from July 1, 2007 to June 30, 2008. Table 3-11 provides a geographic profile of pleasure visitors who spent at least one night in Summerside during their stay.

DomesticvisitationaccountedforthemajorityofovernighttourismtoSummersidein2008at93%,or122,900 visits, of which 81,500 visits (66%) came from other parts of Atlantic Canada. American travelers accountedforabout5%ofovernightpleasurevisitors(6,800visits),whileOverseastravelersaccountedfor about 2% of overnight person visits to the area (2,700 visits). In total, 132,400 pleasure visitors stayed overnight in Summerside, which comprises an estimated 21% of all overnight visits to PEI in 2008, and 11% of overnight pleasure visits. Furthermore, total overnight visits to Summerside were estimated at 138,000 of which 132,400 were for pleasure purposes, suggesting that 5,500 visitors (4%) were staying overnight in Summerside for business or other purposes.

Table 3-12 provides a breakdown of the number of travel parties visiting Summerside by purpose of trip. The average party size for overnight pleasure visitors was 2.92 over the 2007-2008 period. As shown, almost half of all overnight pleasure trips to Summerside (22,100 or 48.6%) occurred during the summer months of July and August. About 54% of these trips (11,900) were for holiday purposes, while 13% were visiting friends andrelatives(VFR).Incomparison,duringtheWinterMonths(NovemberthroughApril),anestimated33%ofpleasurevisitswereforVFRpurposes.



15

RCMP Musical Ride July Triple C Challenge (equestrian event) July These Kids Wear Crowns (concert) August Hey Rosetta (concert) August April Wine (concert) August Air Show Atlantic August Royal Visit August Highland Gathering June Contact East Musical Showcase September Beef & Blues September Elton John (concert) September

As shown, many of the events that take place in Summerside occur during the month of June through

September. The related tourism infrastructure is also very seasonal. For instance, the Spinnaker’s Landing

market area, which provides direct access to the City’s waterfront and boardwalk, closes annually in mid

September. Sports related tournaments relating to baseball, hockey, curling, boating and equestrian-related

sports provide some additional demand, which has been analyzed in Section 4.0.

The Tourism Research Centre at the University of PEI conducted an analysis on overnight visitation to

Summerside, based on the results of the PEI Exit Survey for the Period from July 1, 2007 to June 30, 2008.

Table 3-11 provides a geographic profile of pleasure visitors who spent at least one night in Summerside

during their stay.

TABLE 3-11 TOTAL OVERNIGHT TOURIST VISITATION TO

SUMMERSIDE, 2008

Tourism Markets Total

Visitors % of Total New Brunswick 31,500 23.8% Nova Scotia 50,000 37.8% Quebec 13,200 9.9% Ontario

25,000 18.9% Rest of Canada 3,300 2.5% Domestic 122,900 92.8% New England 3,000 2.2% Rest of US 3,800 2.9% United States 6,800 5.1% International 2,700 2.1% Overnight Pleasure Visits 132,400 100.0% Total Overnight to Summerside 138,000 Total Overnight to PEI (est) 638,000

Source: Tourism Research Centre, UPEI – PEI Exit Survey; Statistics Canada TSRC, ITS


OfthetotalovernightvisitorstoSummerside(126,900),anestimated56%stayedovernightineitheraHotel,Motel,Resort,Inn,B&B,cottage,orotherroofedaccommodation,generatinganestimated71,000roomnights. Anecdotal information indicates that Summerside is considered more of a “day trip” destination for many visitors to PEI. Although recent statistical data was not available, preliminary results of a 2010 Tourism Study conducted by UPEI indicates that 11% of total pleasure visitors to PEI stayed overnight in Summerside, and that 46.5% of total pleasure travellers visited Summerside for one or more purposes (participating in specific activities, visiting some attractions, dining, etc.), including same-day and overnight stays.

3.6.4 MEETINGS & CONVENTIONS IN SUMMERSIDE

In addition to the Veterans Convention Centre at Credit Union Place, there are a number of facilities in Summerside that draw meetings and convention business. This is a key growth area for the City of Summerside, and integral to the success of the subject hotel development, as this business can drive demand during the shoulder periods, which is traditionally softer from a tourism perspective.



16

Domestic visitation accounted for the majority of overnight tourism to Summerside in 2008 at 93%, or

122,900 visits, of which 81,500 visits (66%) came from other parts of Atlantic Canada. American travelers

accounted for about 5% of overnight pleasure visitors (6,800 visits), while Overseas travelers accounted

for about 2% of overnight person visits to the area (2,700 visits). In total, 132,400 pleasure visitors stayed

overnight in Summerside, which comprises an estimated 21% of all overnight visits to PEI in 2008, and

11% of overnight pleasure visits. Furthermore, total overnight visits to Summerside were estimated at

138,000 of which 132,400 were for pleasure purposes, suggesting that 5,500 visitors (4%) were staying

overnight in Summerside for business or other purposes.

Table 3-12 provides a breakdown of the number of travel parties visiting Summerside by purpose of trip.

The average party size for overnight pleasure visitors was 2.92 over the 2007-2008 period. As shown,

almost half of all overnight pleasure trips to Summerside (22,100 or 48.6%) occurred during the summer

months of July and August. About 54% of these trips (11,900) were for holiday purposes, while 13%

were visiting friends and relatives (VFR). In comparison, during the Winter Months (November through

April), an estimated 33% of pleasure visits were for VFR purposes.

TABLE 3-12 PRIMARY REASON FOR TRIP TO SUMMERSIDE BY SEASON - 2007/2008

Summer Fall Winter Spring TOTAL TRIPS Primary Reason for Trip (Jul-Aug/07) (Sep-Oct/07) (Nov/07-Apr/08) (May-Jun/08) (Jul/07-Jun/08)

Holiday/Vacation 11,900 54.3% 2,500 32.5% 500 4.9% 1,400 26.4% 16,400 36.1%Short getaway 2,900 13.2% 2,200 28.6% 400 3.9% 0 0.0% 5,500 12.1%Visit friends and/or relatives 3,100 14.2% 1,100 14.3% 3,400 33.0% 0 0.0% 7,700 17.0%Visit second Home, cottage, condo 300 1.4% 200 2.6% 0 0.0% 300 5.7% 800 1.8%Attend events, festivals, attractions 1,000 4.6% 600 7.8% 1,400 13.6% 900 17.0% 3,900 8.6%Other Pleasure 2,700 12.3% 1,100 14.3% 4,600 44.7% 2,700 50.9% 11,100 24.4%Overnight Pleasure Trips (Travel Parties) 21,900 48.2% 7,700 17.0% 10,300 22.7% 5,300 11.7% 45,400 100.0%

Source: Tourism Research Centre, UPEI – PEI Exit Survey

Of the total overnight visitors to Summerside (126,900), an estimated 56% stayed overnight in either a

Hotel, Motel, Resort, Inn, B&B, cottage, or other roofed accommodation, generating an estimated 71,000

room nights. Anecdotal information indicates that Summerside is considered more of a “day trip” destination

for many visitors to PEI. Although recent statistical data was not available, preliminary results of a 2010

Tourism Study conducted by UPEI indicates that 11% of total pleasure visitors to PEI stayed overnight in Summerside, and that 46.5% of total pleasure travellers visited Summerside for one or more

purposes (participating in specific activities, visiting some attractions, dining, etc.), including same-day

and overnight stays.


Table 3-13 provides a summary of primary event space in Summerside, which is estimated to total 31 rooms and70,000squarefeetofmeetingspace,withanadditional34,000squarefeetofexhibition/tradeshowspace at the Credit Union Place arenas. The total banquet capacity of the meeting venues is 5,860, with capacity for 2,400 in the arena space (exhibition capacity).

As shown, Credit Union Place hosts an estimated 8% of meeting space in Summerside, while 22% is located atoneof5hotels,andtheremaining70%ofspaceislocatedatothervenuesthroughouttheCity.Despitetheseeminglyimpressiveamountofmeeting/exhibitionspaceinSummerside,particularlyforacommunityof15,000people,availabledataindicateslimitedovernightdemandbeingdrivenbytheMeetings&Conference(M&C)market.

TheTourismResearchCentreconductedanotherexitsurveyonbehalfofUPEIin2009focusingonnon-residentmeetings&conventiondelegatesinPEI.Theresultsofthissurveyindicatethatatotal200regional,national and international conferences were held in PEI in 2009, generating an estimated 17,420 non-resident delegates. It should be noted that this data was generated by the PEI Convention Partnership, which did not include results of Summerside events in 2009. In terms of overnight stays, the survey demonstrated that 4.9% of delegates stayed in Summerside for at least one night, generating an estimated 3,200 room nights.



17

3.6.4 Meetings & Conventions in Summerside

In addition to the Veterans Convention Centre at Credit Union Place, there are a number of facilities in

Summerside that draw meetings and convention business. This is a key growth area for the City of

Summerside, and integral to the success of the subject hotel development, as this business can drive

demand during the shoulder periods, which is traditionally softer from a tourism perspective.

Table 3-13 provides a summary of primary event space in Summerside, which is estimated to total 31

rooms and 70,000 square feet of meeting space, with an additional 34,000 square feet of exhibition/trade

show space at the Credit Union Place arenas. The total banquet capacity of the meeting venues is 5,860,

with capacity for 2,400 in the arena space (exhibition capacity).

TABLE 3-13 SUMMARY OF EVENT VENUE SPACE - SUMMERSIDE, PE

Meeting Venues Total

Rooms

TotalSquareFootage

TotalBanquet Capacity

Largest Room -Sq.Ft.

Credit Union Place Conference Centre 1 4,620 380 4,620Meeting Rooms 2 833 54 459Subtotal - Credit Union Place 3 5,453 434 5,079Hotels Causeway Bay Linkletter Inn 1 3,976 280 2,375Loyalist Lakeview Resort & Conference Centre 3 4,795 390 3,317Quality Inn - Summerside Garden of the Gulf 1 510 34 510Slemon Park Hotel & Conference Centre 3 6,196 250 4,332Subtotal - Hotels 8 15,477 954 10,534Other Venues Centre-Belle Alliance 6 4,624 470 2,600Eptex National Exhibition Centre 2 2,850 375 1,890Habourfront Theatre (fixed seats) 1 7,740 527 7,740Habourfront Theatre (lobby space) 4 5,822 1,270 2,405Lefurgey Cultural Centre 3 968 55 464Royal Canadian Legion 2 3,920 200 2,240Silver Fox Curling & Yacht Club 1 20,000 1,200 20,000Shipyard Market 1 2,800 375 2,800Subtotal - Other Venues 20 48,724 4,472 40,139TOTAL MEETING SPACE 31 69,654 5,860 55,752EXHIBITION SPACE (C.U.P. Arenas) 2 34,000 2,400 17,000TOTAL MEETING/EXHIBITION SPACE 33 103,654 8,260 72,752

Source: City of Summerside, “Triggering the Senses” – Veterans Convention Centre brochure; PKF Consulting research


3.7 SUMMARY

From a national perspective, while overall travel recovery is anticipated, it will be at modest levels of less than 1% in 2011, and 1.5% in 2012. Provincial economic forecasts indicate stronger manufacturing and improved tourism-related business activity in the long term (especially with the opening of the new Convention Centre in Charlottetown), however, travel forecasts suggest no increase in visitation until 2012. Continued declines in US travel to Canada, and the devastations in Japan have caused serious implications for all 2011 forecasts. However, the Provincial Tourism Strategy provides a solid plan for increasing key areas of demand in both the leisuresectorandmeeting&conventionindustryinawaythatisintendedtoshowcasethestrengthsofallPEI communities.

Overall,manyopportunitiesexistforgrowthintheCityofSummerside.ThroughdevelopmentofastronglabourforceandsupportofEconomicDevelopmentservices–particularlyinthe2primaryconvergencesectorsareasofHealthITandknowledgeindustries;andTransportation,ManufacturingandFoodSystems–Summersidewillbebetterpositionedtoachieveasustainableeconomy.ContinuedfocusongrowthintheAerospace and Health IT sectors is already helping to attract more business demand to the Summerside area, which hopefully will make up for softer travel forecasts. Furthermore, with the new Convention Centre opening in Charlottetown, there may be many opportunities to attract smaller regional meetings and conference events to the local market.

Asdiscussed,DomesticpleasurevisitationaccountedforthemajorityofovernighttourismtoSummerside2008(93%or122,900visits),leavingBusiness/CorporateandM&Ctraveldemandtocompriseanestimated4% of overnight visitation volumes. Furthermore, almost half of overnight visitation is occurring during the Summer months (July-August). Challenges stem from limitations in local tourism infrastructure, which is highly seasonalinnature,andintheMeeting/Conferencesector,whichconsistsofasubstantialnumberofvenuesand 70,000 sq.ft. of meeting space, but limitations in terms of supply in the accommodation sector, which is further discussed in Section 5.0 of this report.


STAKEHOLDER / DEMAND INTERVIEWS

4.1 CORPORATE & MEETING/CONFERENCE DEMAND

Aspartofthisstudy,PKFConsultingandtheCityofSummerside’sEconomicDevelopmentdepartmentcontacted stakeholders from a variety of public and private sector businesses throughout the Summerside and Charlottetown area. It was suggested that these stakeholders are currently or might potentially generate corporate,meeting/conferenceorothergroupeventdemandforhotelaccommodationsinSummerside–orhave insight into tourism in the City. Focus was placed primarily on businesses located within Summerside with 50 or more employees. The City of Summerside supplemented this analysis by contacting and encouraging businesses to participate in an online survey, which had been modified by the suggested outline provided by PKF. Telephone interviews and online surveys were completed by 20 stakeholders between September12andOctober7,2011.

The corporate survey was completed by 10 companies, representing 19% of the overall workforce in Summerside. The survey was organized in order to provide an estimate of existing and potential demand for overnight corporate accommodation, and off-site meeting and conference use in Summerside.

For the purposes of this study, data relating to the total number of room nights generated by inbound corporate business has been used in order to complete the accommodation analysis. Please note that our results do not include those bookings made by suppliers or other corporate travelers who make their own traveland/oraccommodationarrangements.Thosecompaniesthatdonothostvisitingcorporateexecutivesor trainers were also not included in our analysis.

The responses received relative to current inbound corporate demand for Summerside and the potential for future accommodation development are summarized below:

• Estimateddemandgeneratedbythecorporate/commercialsegmentis900occupiedroomnightsannually;

• Respondentbusinessesareexpectinggrowthbetween0to10%withinthenext5years,foranaverageof5%,oranadditional50occupiedroomnightsannually;

• Anestimated40%ofroomnightsarebookedintheSpring(ApriltoJune),followedbySummer(JulytoSeptember)at21%,16%intheWintermonths(JanuarytoMarch),and15%inFall(OctobertoDecember);

• MostcompaniesreserveroomsattheLoyalistLakeviewResort&ConferenceCentre(89%),QualityInn&SuitesGardenoftheGulf(67%),andSlemonParkHotel&ConferenceCentre(22%)--allofwhicharelocatedinSummerside.One-thirdofrespondentsalsocitedtheHolidayInnExpressCharlottetown,asasecondorthirdoption.Otherpropertiesmentionedinclude:HarbourTerrace,CausewayBay–LinkletterInn,andSummersideMotel.

The main reasons for choosing a particular hotel facility are price and location, as opposed to quality of facilities,orthehotelbrand;

• 75%ofrespondentsdonothavedifficultyinsecuringroomsthroughouttheyear,while25%findtroubleinJulyandAugust;

• 63%ofrespondentswerehappywithavailableaccommodations,


• Ofthe38%whowerenotcontentwithaccommodations,limitedfoodserviceandchoicein foodservice(bothonandoff-site)wasmentionedasakeylimitation;• Respondentshaveshownaneedforoff-sitemeetingfacilities.Acombinationofhotels,college

facilities, banquet halls, and other event venues currently being used, within Summerside and Charlottetown. The most frequently used facilities in Summerside are the Credit Union Place (78% of respondents),SlemonParkResort(44%),andLoyalistResort(33%).OtherfacilitiesmentionedweretheSummersideLegion,SummersideGolfCourse,andHolmanBuildinginSummerside,aswellastheStanleyBridgeResort;and

• Mostrespondents(78%)weresatisfiedwiththemeetingfacilitiescurrentlybeingusedinSummerside.

4.2 EVENT ANALYSIS

PKF spoke to a number of stakeholders in the Summerside area about existing and potential events that are currentlycomingtotheCity.AsindicatedbyEconomicDevelopment,thereisconcernthatanumberofmajorevents that have been hosted, or could potentially be hosted in Summerside, have encountered difficulties due to lack of accommodations, and are currently being held outside the area. The following table provides a summary of the existing and potential demand generated from these events in 2010.

As identified in Table 4-1, there are approximately 23,200 room nights generated annually for sporting and leisure events in the Summerside area, which are currently being accommodated by a mix of Summerside and Charlottetown hotels and resorts. There is also an estimated 4,300 additional room nights that could potentially be hosted in Summerside stemming from the start of the Summerside Storm basketball season,the newWaterfrontCampusforHollandCollege,andvariouseventsscheduledforthenextyear(i.e.CBCHockeyNightinCanadaandtheCapitalOneGrandSlamofCurling,bothin2012).

In addition to sporting and leisure events, the City has potential to draw a number of mid to large meetings andconferences(150-300delegates),withadditionalmeeting/eventspace.Thereislittleinthewayofhistoricdata,butdatadrawnfromtheUPEIProfileofNon-ResidentMeetings&ConventionDelegates(2009),suggests at least 5% of delegates attending meetings in PEI are staying in Summerside for at least 1 night. This corresponds to an estimated 890 occupied room nights. Further, with the opening of the new Convention Centre in Charlottetown, it is anticipated that Summerside’s Credit Union Place and other meeting facilities will have the opportunity to host smaller regional events, particularly in the 100-200 group size.

The potential sporting events and conferences are expected to generate new demand in the market, and for a new Hotel in Summerside. As this demand is tied to event utilization, and therefore fluctuates throughout the year, it creates strong peak period demand (predominantly weekends), but is not a consistent year round weekday and weekend source of demand. The estimated room night potential from these events is discussed further in Section 6.0.



21

The main reasons for choosing a particular hotel facility are price and location, as opposed to quality of facilities, or the hotel brand;

75% of respondents do not have difficulty in securing rooms throughout the year, while 25% find trouble in July and August;

63% of respondents were happy with available accommodations,

Of the 38% who were not content with accommodations, limited foodservice and choice in foodservice (both on and off-site) was mentioned as a key limitation;

Respondents have shown a need for off-site meeting facilities. A combination of hotels, college facilities, banquet halls, and other event venues currently being used, within Summerside and Charlottetown. The most frequently used facilities in Summerside are the Credit Union Place (78% of respondents), Slemon Park Resort (44%), and Loyalist Resort (33%). Other facilities mentioned were the Summerside Legion, Summerside Golf Course, and Holman Building in Summerside, as well as the Stanley Bridge Resort; and

Most respondents (78%) were satisfied with the meeting facilities currently being used in Summerside.

4.2 Event Analysis

PKF spoke to a number of stakeholders in the Summerside area about existing and potential events that are

currently coming to the City. As indicated by Economic Development, there is concern that a number of

major events that have been hosted, or could potentially be hosted in Summerside, have encountered

difficulties due to lack of accommodations, and are currently being held outside the area. The following

table provides a summary of the existing and potential demand generated from these events in 2010.

TABLE 4-1 SUMMERSIDE EVENT ANALYSIS - 2010

Festivals (Music & Culinary) 200 Theatre 4,300 Fundraisers/Local Banquets 300 Music Concerts 3,000 College of Piping / Heritage Properties Events 7,000 Consumer / Trade Shows 5,300 Various Sporting Events (Curling, Yachting, Baseball, Hockey, Soccer, Equestrian) 2,900 Other Social Events 200 Total 23,200

Source: PKF Consulting Inc, Stakeholder interviews

As identified in Table 4-1, there are approximately 23,200 room nights generated annually for sporting and

leisure events in the Summerside area, which are currently being accommodated by a mix of Summerside

and Charlottetown hotels and resorts. There is also an estimated 4,300 additional room nights that could

potentially be hosted in Summerside stemming from the start of the Summerside Storm basketball season,


COMPETITIVE ACCOMMODATION MARKET SUPPLY ANALYSIS

5.1 INTRODUCTION

Thepotentialhotelisexpectedtodrawaportionoftheexistingcorporate,leisure,meeting/conferenceandgovernment/otherdiscounteddemandfromthelocalSummersidehotelmarket,aswellasfromtransienthotels in the Charlottetown market. In the following paragraphs, we discuss the historic and projected supply and demand of each of these competitive accommodation markets.

5.2 ACCOMMODATION SUPPLY

The Summerside accommodation market consists of a range of accommodation types, including branded hotels, motels, inns, budget and bed and breakfast operations, providing in excess of 500 available guest rooms per day. For the purposes of this analysis, we have limited the accommodation sample to hotels, motels and resorts with over 29 rooms, which would provide the primary set of competitive properties for the subject hotel in Summerside.

As of year-end 2010, the supply of competitive properties with over 29 rooms in Summerside was comprised of 6 primary properties providing a total of 472 guest rooms. The table below identifies the properties that would be considered to be directly competitive with the subject property. Exhibit 5-1 identifies the location of these properties, while Exhibit 5-2 provides information on the facilities of each property.



23

5.0 COMPETITIVE ACCOMMODATION MARKET – SUPPLY ANALYSIS

5.1 Introduction

The potential hotel is expected to draw a portion of the existing corporate, leisure, meeting/conference and

government/other discounted demand from the local Summerside hotel market, as well as from transient

hotels in the Charlottetown market. In the following paragraphs, we discuss the historic and projected

supply and demand of each of these competitive accommodation markets.

5.2 Accommodation Supply

The Summerside accommodation market consists of a range of accommodation types, including branded

hotels, motels, inns, budget and bed and breakfast operations, providing in excess of 500 available guest

rooms per day. For the purposes of this analysis, we have limited the accommodation sample to hotels,

motels and resorts with over 29 rooms, which would provide the primary set of competitive properties for the

subject hotel in Summerside.

As of year-end 2010, the supply of competitive properties with over 29 rooms in Summerside was

comprised of 6 primary properties providing a total of 472 guest rooms. The table below identifies the

properties that would be considered to be directly competitive with the subject property. Exhibit 5-1

identifies the location of these properties, while Exhibit 5-2 provides information on the facilities of each

property.

TABLE 5-1 PRIMARY COMPETITIVE ACCOMMODATION MARKET - 2010

CITY OF SUMMERSIDE Hotel Name Number of

Rooms

Causeway Bay - Linkletter Inn & Convention Centre 108 Econo Lodge Summerside 40 Loyalist Lakeview Resort & Conference Centre 103 Quality Inn & Suites - Garden on the Gulf 94 Slemon Park Hotel & Conference Centre 88 Mulberry Motel 39 TOTAL 472

Source: PKF Consulting

The Causeway Bay - Linkletter Inn & Convention Centre is located at 311 Market Street, in Downtown

Summerside. This 108-room property offers a full-service 150-seat restaurant, on-site lounge, and indoor

pool with outdoor patio. It also features about 4,000 square feet of meeting space. This property was

recently purchased and is considered to be in fair condition.


TheCausewayBay-LinkletterInn&ConventionCentreislocatedat311MarketStreet,inDowntownSummerside. This 108-room property offers a full-service 150-seat restaurant, on-site lounge, and indoor pool with outdoor patio. It also features about 4,000 square feet of meeting space. This property was recently purchased and is considered to be in fair condition.

TheEconoLodgeSummersideislocatedat80AllWeatherHighway(Hwy2),northoftheCity’sDowntown.This 40-room limited service property opened in 1990, and was renovated in 2004. The hotel features an indoor pool and complimentary breakfast service.

LoyalistLakeviewResort&ConferenceCentreisa103-roomhotellocatedat195HarbourDrive,acrossfromthewaterfrontboardwalkinDowntownSummerside.Openedin1991inanideallocation,withfull-servicerestaurant,tavern/lounge,poolandsauna,andalmost5,000squarefeetofmeetingspace,thiswasconsidered a premium property in Summerside. The hotel is now somewhat dated and many of the public areas have fallen into disrepair.

TheQualityInn&Suites-GardenontheGulfislocatedat618WaterStreetEast.This94-roompropertyoffers over-sized rooms, 510 square feet of meeting space, breakfast room, indoor and outdoor pool, and on-site9-holegolfcourse.ItislocatednextdoortotheBrothers2Restaurantanddinnertheatre.Thispropertyhas received continuous brand-standard upgrades, and is considered to be in good condition.

TheSlemonParkHotel&ConferenceCentreislocatedat12RedwoodAve,inSlemonPark,andanestimated7kmfromDowntownSummerside.FormerlyresidencesfortheCFBBaseSummerside,thisproperty opened as a hotel in 2005 with 118 rooms, which was reduced to 88 rooms as of September 2009. ThehotelishosttoAnson’sRestaurant,whichprovideslocalcateringservices,and6,200squarefeetofmeeting space, and is considered to be in fair condition.

The Mulberry Motel is located at 6 Water Street. This one-storey property opened in 1945, and offers limited amenities,butbenefitsfromgoodvisibilityenteringDowntownSummerside.


5.3 PROPOSED SUPPLY CHANGES

AccordingtotheCityofSummerside’sEconomicDevelopmentDepartment,thereareseveralproposedand/or rumoured developments at different sites around the City, however, no site plans have been submitted. For the purposes of this analysis, PKF has only considered the implications of the subject hotel entering the market in 2014.

EXHIBIT5-1COMPETITIVEHOTELMARKETINSUMMERSIDE,PE

EXHIBIT 5-1 COMPETITIVE HOTEL MARKET IN SUMMERSIDE, PE

# on Map

Hotel Name TotalRooms

1 Linkletter Inn & Convention Centre 108 2 Econo Lodge Summerside 40 3 Loyalist Lakeview Resort & Conference Centre 103 4 Quality Inn - Garden on the Gulf 94 5 Slemon Park Hotel & Conference Centre 88 6 Mulberry Motel 39


EXHIBIT 5-2 FACILITY CHART OF COMPETITIVE PROPERTIES

SUMMERSIDE, PEI

Meeting Facilities Property Guestrooms

Food & Beverage Facilities # of

Rooms TotalSq Ft

Maximum Capacity

On-Site Recreation Facilities & Services

Causeway Bay – LinkletterInn & Convention Centre

1081 restaurant, 1

lounge 1 3,976 265

Indoor pool with patio, free high-speed internet, kitchenettes, guest laundry, business centre

Econo Lodge Summerside Indoor pool, kitchenettes, free high-speed internet, complimentary breakfast

Lakeview Loyalist Resort & Conference Centre

103

Prince William Dining Room and Crown & Anchor

Tavern

Indoor pool, sauna, kitchenettes, free high speed internet, business centre

Quality Inn & Suites Garden on the Gulf

Indoor and outdoor pools, �tness room, free high speed internet, 9-hole golf course, suites with mini fridge

Slemon Park Hotel & Conference Centre

Anson’s Restaurant

Breakfast room only

Breakfast room only

Suites, full-service restaurant, high speed internet service

A/N A/N A/N ylno moor tsafkaerB 93 letoM yrrebluMHousekeeping units, 30” cable tv’s


116

40

3 6,196 400

94 1 510 34

3 4,795 320

A/N A/N A/N


COMPETITIVE ACCOMMODATION MARKET HISTORIC DEMAND ANALYSIS

The following section provides an overview of the historic operating performance of the subject Summerside accommodation market.

Table 6-1 presents a summary of the historic occupancy and average daily rates achieved by the competitive set from 2006 through 2010, and for year-to-date September 2010 and 2011, the details of which are provided in Exhibit 6-1.

Overthe2006to2010period,theprimarycompetitivemarkethasconsistentlyachievedoccupanciesinthe43-48% range. In 2008, occupied room nights increased by 7.8% and grew a further 1.6% in 2009, driven primarilyoffmajoreventsinthearea,suchastheCanadaGames.Withtheclosureof30roomsattheSlemonPark Hotel in Fall 2009, supply declined by 2.0%, and with increased demand, the resulting occupancy reachedahighof48.0%in2009.Demanddeclinedby9.2%in2010,withlaggingeffectsoftheglobalrecession on long-haul travel patterns, leading to a decline in occupancy from 48.0% to 45.4%. Year to date September 2011 figures show a significant increase in occupied room nights of 4.5% relative to the same periodin2010.EventssuchastheRoyalVisit,andAtlanticAirShowandRCMPMusicalRideweresignificantdrivers in the first half of this year.

Average daily rate growth in the competitive market grew 4.4% in 2007, and continued for the first 8 months of2008,resultingina0.1%decreasebyyear-end,foranADRof$87.80anddeclinedbyafurther0.4%in2009. As with many Canadian markets, in an effort to regain market share, several Summerside properties cut theirratesin2010,leadingtoa5.1%declineandayear-endADRof$83.01–lowerthanitwasin2006.YeartodateSeptember2011figuresshowaslightdecreaseinADRby0.4%.

the fact that more families have time available for travel with children out of school etc. The winter season is the most challenging for Summerside properties, with occupancy rates falling to between 18% and 50%. Spring and Fall tend to be slightly stronger demand periods for this market, which is supported, at least in part,bysomelevelofmeeting/conferencebusinessdemandduringtheseseasons.

Exhibit 6-1 provides detail on the historic market performance of the local market.



25

6.0 COMPETITIVE ACCOMMODATION MARKET – HISTORIC DEMAND ANALYSIS

The following section provides an overview of the historic operating performance of the subject Summerside

accommodation market.

Table 6-1 presents a summary of the historic occupancy and average daily rates achieved by the

competitive set from 2006 through 2010, and for year-to-date September 2010 and 2011, the details of

which are provided in Exhibit 6-1.

TABLE 6-1 COMPETITIVE SUMMERSIDE ACCOMMODATION MARKET

HISTORIC OPERATING PERFORMANCE 2006-2010, 2011 YTD September YTD YTD

Competitive Market 2006 2007 2008 2009 2010 10-Sep 11-SepRooms 502 502 502 492 472 472 472Available Room Nights 183,230 183,230 183,230 179,580 172,280 128,856 128,856 Occupied Room Nights 79,048 78,769 84,920 86,243 78,273 59,622 62,320Occupancy 43.1% 43.0% 46.3% 48.0% 45.4% 46.3% 48.4%ADR $84.21 $88.65 $83.42 $87.44 $81.90 $83.68 $84.01RevPar $36.33 $38.11 $38.66 $41.99 $37.21 $38.72 $40.63Source: PKF Consulting

Over the 2006 to 2010 period, the primary competitive market has consistently achieved occupancies in the

43-48% range. In 2008, occupied room nights increased by 7.8% and grew a further 1.6% in 2009, driven

primarily off major events in the area, such as the Canada Games. With the closure of 30 rooms at the

Slemon Park Hotel in Fall 2009, supply declined by 2.0%, and with increased demand, the resulting

occupancy reached a high of 48.0% in 2009. Demand declined by 9.2% in 2010, with lagging effects of the

global recession on long-haul travel patterns, leading to a decline in occupancy from 48.0% to 45.4%. Year

to date September 2011 figures show a significant increase in occupied room nights of 4.5% relative to the

same period in 2010. Events such as the Royal Visit, and Atlantic Air Show and RCMP Musical Ride were

significant drivers in the first half of this year.

Average daily rate growth in the competitive market grew 4.4% in 2007, and continued for the first 8 months

of 2008, resulting in a 0.1% decrease by year-end, for an ADR of $87.80 and declined by a further 0.4% in

2009. As with many Canadian markets, in an effort to regain market share, several Summerside properties

cut their rates in 2010, leading to a 5.1% decline and a year-end ADR of $83.01 – lower than it was in 2006.

Year to date September 2011 figures show a slight decrease in ADR by 0.4%.

Summer (July to September) represents the peak demand season for the competitive set, with occupancy

levels ranging from 50% to 85%. This is not surprising given the more favourable weather conditions, and Feasibility Study for Hotel Development pg.26

6.1 MARKET MIX BY SEGMENT

DemandforhotelaccommodationapplicabletothecompetitiveSummersideaccommodationmarketconsistsoffourbroaddemandsegments.Theseincludethecorporate/commercialsegment,thetourist/leisuresegment,themeeting/conferencesegment,andthegovernment/otherdiscountsegment.Onthebasisof PKF research and discussions with hotel management, estimated market segmentation for the competitive market for 2010 is presented in the table below.

As illustrated, it has been estimated that the breakdown of sources of rooms demand in 2010 for the competitivemarketwas:5.9%corporate/commercial,5.1%meeting/conference,70.4%tourist/leisureand18.6%government/other.Thefollowingparagraphsdiscussthemarketsegmentationforthecompetitivemarket.

TheCorporate/Commercialsegmentaccountedfor4,578or5.9%oftotaloccupiedroomnightsinthecompetitivemarketin2010.Generallyspeaking,thissegmentincludesdemandfromtransientcommercialtravellers, as well as locally generated individual and volume (or preferred) corporate accounts, but excludes groupbasedcorporateactivitythatisgeneratedforthepurposeofconductingmeetingand/orconferenceson or near the premises. Within the market, this demand is generated by both transient commercial travellers as well as by individual or volume business originating from the area’s industrial parks, or other private sector businesses.

TheMeeting/Conferencesegmentaccountedfor4,000or5.1%oftheoccupiedroomnightsinthemarketin2010. This segment includes rooms demand generated for the purpose of attending meetings, seminars or conferences on the premises. This is driven by the 3 hotels in the market with substantial meeting space, the Credit Union Place Complex, and various other venues in the area.

Asshown,theTourist/Leisuresegmentisthelargestgeneratorofroomsinthecompetitivemarket,accounting for 54,939 or 70.4% of the occupied room nights in 2010. This market consists of demand generated by transient leisure travellers, as well as by individuals and groups whose primary reason for visiting Summerside is for tourist, leisure, sport and recreation purposes. It includes a wide variety of markets includingindividuals,families,the“VFR”market(visitingfriendsorrelatives),aswellasgroupsthatvisitthearea for the primary purpose of being involved in sport tournaments and other event activities.



26

the fact that more families have time available for travel with children out of school etc. The winter season is

the most challenging for Summerside properties, with occupancy rates falling to between 18% and 50%.

Spring and Fall tend to be slightly stronger demand periods for this market, which is supported, at least in

part, by some level of meeting/conference business demand during these seasons.

Exhibit 6-1 provides detail on the historic market performance of the local market.

6.1 Market Mix by Segment

Demand for hotel accommodation applicable to the competitive Summerside accommodation market

consists of four broad demand segments. These include the corporate/commercial segment, the

tourist/leisure segment, the meeting/conference segment, and the government/other discount segment. On

the basis of PKF research and discussions with hotel management, estimated market segmentation for the

competitive market for 2010 is presented in the table below.

TABLE 6-2 HISTORIC MARKET MIX - 2010

SUMMERSIDE, PEI 2010 % of Demand

Corporate/Commercial 4,578 5.9%Meeting/Convention 4,000 5.1%Tourist/Leisure 54,939 70.4%Government/Other 14,500 18.6%Total 78,016 100.0%


As illustrated, it has been estimated that the breakdown of sources of rooms demand in 2010 for the

competitive market was: 5.9% corporate/commercial, 5.1% meeting/conference, 70.4% tourist/leisure and

18.6% government/other. The following paragraphs discuss the market segmentation for the competitive

market.

The Corporate/Commercial segment accounted for 4,578 or 5.9% of total occupied room nights in the

competitive market in 2010. Generally speaking, this segment includes demand from transient commercial

travellers, as well as locally generated individual and volume (or preferred) corporate accounts, but excludes

group based corporate activity that is generated for the purpose of conducting meeting and/or conferences

on or near the premises. Within the market, this demand is generated by both transient commercial

travellers as well as by individual or volume business originating from the area’s industrial parks, or other

private sector businesses.

The Meeting/Conference segment accounted for 4,000 or 5.1% of the occupied room nights in the market

in 2010. This segment includes rooms demand generated for the purpose of attending meetings, seminars


As discussed in Section 4.0 of this report, the estimated 23,200 room nights deriving from major social and sporting events in the area, have been partially included in this segment of demand. The balance of visitors areeitherstayinginnearbyresorts,motelsandB&Bs,orstayingovernightinotherlargermarkets,suchasMoncton and Charlottetown.

TheGovernment/Otherdiscountsegmentisthesecondlargestgeneratorofroomsdemandinthecompetitivemarkets, accounting for 18.6% of overall demand within the competitive market generating 14,500 occupied room nights in 2010. This segment includes civil servants travelling on government business, including visitorstotheSummersideTaxCentreandProvincialDepartmentofEducation,whichrecentlymovedfromCharlottetown to Summerside. A portion of demand generated by the 200 non- resident full-time students from Holland College has been included in this segment, with the remainder being absorbed by smaller motels and inns in the surrounding area.

6.2 MARKET DEMAND IMPLICATIONS

The following table provides a comparison of the Summerside competitive market and 4 other Atlantic Canada markets in 2009, 2010 and year-to-date September 2011.

As shown in Table 6-3, despite challenging economic conditions, the Halifax and St. John’s market remained in the mid 60% to low 70% range over the 2009 and 2010 period. These two cities have strong commercial and industrial economies, and are considered popular tourist destinations. Moncton is developing into a corporate hub for Atlantic Canada, and has also remained in the high 50% to mid 60% range, while Charlottetown as a key Atlantic Canada tourist destination, has returned to the high 50% range as of year-to-date September 2011. It should be recognized that occupancy levels were in the mid 60% range prior to 2008 in the City of Moncton, however, the City witnessed an estimated 28% increase in hotel room supply over the past 4 years. Hotels get built in response to the demand for accommodation, and the growth in available room nights (supply) is in response to the growth in demand. Thus, in Moncton, the decline in occupancy levels in 2009 and 2010, over previous levels, provides an indication of how demand is being accommodated by new supply. In comparison, the primary competitive Summerside hotel market has consistently achieved occupancies in the 45% to 48% range, 2 to 26 percentage points lower than the other competitive markets, with declining supply levels over the past 3 years, and average daily rates have ranged from $30 to $60 lower than the Atlantic Canada competitors.

Typically a competitive hotel market that is performing well, in stable economic times, will achieve occupancy levels of 60% or better. Some of the hotels in that market will be in the upper 60% to 70% range, achieving more than their fair share of demand. Summerside is a market that has operated at less than 60% for a number of reasons, including: proximity to larger urban markets (Charlottetown, Moncton), the small size of the community, the quality of existing accommodations, and limited foodservice and retail infrastructure to satisfy existing demand.



27

or conferences on the premises. This is driven by the 3 hotels in the market with substantial meeting space,

the Credit Union Place Complex, and various other venues in the area.

As shown, the Tourist/Leisure segment is the largest generator of rooms in the competitive market,

accounting for 54,939 or 70.4% of the occupied room nights in 2010. This market consists of demand

generated by transient leisure travellers, as well as by individuals and groups whose primary reason for

visiting Summerside is for tourist, leisure, sport and recreation purposes. It includes a wide variety of

markets including individuals, families, the “VFR” market (visiting friends or relatives), as well as groups that

visit the area for the primary purpose of being involved in sport tournaments and other event activities. As

discussed in Section 4.0 of this report, the estimated 23,200 room nights deriving from major social and

sporting events in the area, have been partially included in this segment of demand. The balance of visitors

are either staying in nearby resorts, motels and B&Bs, or staying overnight in other larger markets, such as

Moncton and Charlottetown.

The Government/Other discount segment is the second largest generator of rooms demand in the

competitive markets, accounting for 18.6% of overall demand within the competitive market generating

14,500 occupied room nights in 2010. This segment includes civil servants travelling on government

business, including visitors to the Summerside Tax Centre and Provincial Department of Education, which

recently moved from Charlottetown to Summerside. A portion of demand generated by the 200 non-

resident full-time students from Holland College has been included in this segment, with the remainder

being absorbed by smaller motels and inns in the surrounding area.

6.2 Market Demand Implications

The following table provides a comparison of the Summerside competitive market and 4 other Atlantic

Canada markets in 2009, 2010 and year-to-date September 2011.

TABLE 6-3 MAJOR ATLANTIC CANADA MARKET PERFORMANCE SUMMARY

2009 2010 YTD Sep 2010 YTD Sep 2011 Summerside - Occ % 48% 45% 46% 47% Summerside - ADR $87 $83 $84 $81 Charlottetown - Occ % 50% 50% 54% 58% Charlottetown - ADR $123 $120 $125 $120 Moncton - Occ % 56% 61% 63% 63% Moncton - ADR $118 $116 $117 $116 St. John's - Occ % 67% 70% 72% 72% St. John's - ADR $130 $133 $134 $140 Halifax - Occ % 63% 64% 68% 66% Halifax - ADR $124 $124 $125 $127



Year to Date

September

TOTA

L CO

MPETITIVE M

AR

KET

20062007

20082009

20102010

2011R

ooms

502502

502492

472472

472A

nnual Occupancy

43.1%43.0%

46.3%48.0%

45.4%46.3%

48.4%A

verage Daily R

ate$84.21

$87.93$87.80

$87.44$83.01

$83.68$84.01

RevPar

$36.33$37.80

$40.69$41.99

$37.71$38.72

$40.63A

vailable Room

Nights

183,230183,230

183,230179,580

172,280128,856

128,856O

ccupied Room

Nights

79,04878,769

84,92086,243

78,27359,622

62,320R

oom R

evenue$6,656,924

$6,925,899$7,455,658

$7,540,991$6,497,227

$4,989,349$5,235,393

MA

RK

ET GR

OW

TH2006

20072008

20092010

20102011

Available R

ooms

na0.0%

0.0%-2.0%

-4.1%na

0.0%O

ccupied Room

Nights

na-0.4%

7.8%1.6%

-9.2%na

4.5%A

verage Daily R

at ena

4.4%-0.1%

-0.4%-5.1%

na0.4%

Com

pounded Annual

Grow

th Rate (C

AG

R)

Total Grow

thM

arket Segmentation

Total Com

petitive Market

2006 - 20102006 - 2010

2010%

Available R

ooms

-1.5%-6.0%

4,5785.9%

Occupied R

oom N

ights-0.2%

-1.0%4,000

5.1%A

verage Daily R

ate-0.4%

-1.4%54,939

70.4%R

evPar

0.9%3.8%

14,50018.6%

Total Market

78,016100.0%

CO

MPETITIVE M

AR

KET

Linkletter Inn & C

onvention Centre

Econo Lodge S

umm

ersideLoyalist Lakeview

Resort &

Conference C

entreQ

uality Inn Garden on the G

ulfS

lemon P

ark Hotel &

Conference C

entreM

ulberry Motel

Hotel 7

Hotel 8

Hotel 9

Hotel 10

Hotel 11

Hotel 12

Hotel 13

Hotel 14

Hotel 15

Hotel 16

Hotel 17

Source: P

KF C

onsulting Inc.

Corporate

Meeting/C

onferenceLeisure

Gov't/O

ther

EXHIB

IT 6-1SU

MM

ERSID

E, PEI H

ISTOR

IC M

AR

KET PER

FOR

MA

NC

ED

RA

FT FOR

INTER

NA

L DISC

USSIO

N O

NLY

HISTO

RIC

MA

RK

ET PERFO

RM

AN

CE (A

NN

UA

L)

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

$160.00

$180.00

$200.00

20062007

20082009

2010

YEAR

S

AVERAGE DAILY RATE($)

0.0%

30.0%

60.0%

90.0%

OCCUPANCY (%)

Average D

aily Rate

RevP

arA

nnual Occupancy


7.1 INTRODUCTION

As described in Section 6.0, the Summerside competitive accommodation market has recently been operating in the mid to high 40% range, but is challenged by a number of conditions, including proximity to larger urban markets, seasonality of tourist demand, small corporate base in the community, and limited retail and foodservice infrastructure. Nevertheless, with concerted effort, demand growth is expected over the next 5 years from a variety of sources.

Stakeholder interviews indicate that there is some level of organic growth expected in Summerside, particularlyfromthecorporatemarket(e.g.,theaerospaceindustry),andtheMeetings/Conventionmarket.Also, based on the research that PKF has conducted for this study, it is evident that there is business that would be staying in the Summerside market, if some of the existing conditions were improved. Improvements tothequalityofaccommodations,amoreproactiveapproachtomeetings&conventions,abroaderbaseof tourist attractions, and better promotion of Summerside as a destination, would certainly help to grow demand in the City. Part of this growth would be from new or induced demand to Summerside. In other words, if a new hotel property was developed under such conditions, it would bring demand that was not already coming to Summerside based on lack of supply. Typically, one would see this type of growth in a market that has much stronger overall occupancy levels, or has strong demand on a seasonal basis.

New demand could also be derived from regional meetings and conventions being driven to Summerside with the opening of the new Charlottetown Convention Centre. Another source of growth would be from unsatisfied demand in the Summerside market, due to issues such as quality of existing accommodations.

The following section provides an analysis of competitive accommodation market demand over the 2011 to 2016 period. PKF has looked at the potential of a new Hotel entering the entering the market as of January 1, 2014.

7.2 OVERALL DEMAND

Withnewgrowthinthecorporate,meeting/conventionbusiness,touristandgovernment/otherdiscountsegments, the addition of an 80-room property to the competitive market would attract new (induced) and unsatisfieddemandintherangeof13,400occupiedroomnightstotheSummersidemarketin2014.Basedupon our research and analysis, we believe that this level of demand is possible and reasonable, if conditions in the Summerside market are improved, as described in the preceding section.

We have also considered a second scenario for the potential of a 120-unit property. For this size of property tobedeveloped,demandwouldneedtogrowby20,600occupiedroomnightsfromthesesamesources–or7,200moreroomnightsthanan80-roomhotel.BasedonPKF’sresearchandexperience,itisunlikelythatthislevelofdemandcanbeachievedbefore2016/2017.TheCityneedstofurtherevolveasadestination,and the subject 80-unit property would need to operate for 3 or 4 years, before additional hotel supply could be absorbed in the competitive market. Also, a prudent investor would be more likely to start with 80-rooms and consider moving to 120-rooms when Summerside has more demand generators in place.

COMPETITIVE ACCOMMODATION MARKETPROJECTED DEMAND ANALYSIS


COMPETITIVE ACCOMMODATION MARKETPROJECTED DEMAND ANALYSIS

It should be noted that hotels are generally built to satisfy demand that already exists. In general, hotels do notattractdemand–saveandexceptwhenalocationisalreadyconsidereda“destination”.Inthatrespect,anew hotel would assist in attracting more demand, but will not attract demand in and of itself.

Consequently, we have only analyzed the results of an 80-room property entering the Summerside market in 2014. Table 7-1 summarizes the levels of overall demand for the competitive accommodation market that would be required in order to maintain occupancy levels to support a new 80-room hotel in Summerside over the 2010 to 2016 period, the details of which are provided in Exhibit 7-1.

A brief description of the projected performance of each major market segment is presented below and detailed projections by market segment are provided in Exhibit 7-1.

7.3 CORPORATE/COMMERCIAL MARKET

At5.9%ofdemandin2010,thecorporate/commercialsegmentisnotasignificantgeneratorofroomsdemand in the competitive market. However, based on the year to date results, and a positive outlook for the corporate sector in 2011, this segment of demand is projected to realize an increase of 5.0% in 2011. With continued economic recovery, and considering the growth expectations mentioned by the responding sample of the Summerside Corporate Survey (see Section 4.0), demand for the corporate segment is expect to result in a 2.5% increase in 2012, and another 2.0% increase in 2013.

With the opening of the subject 80-unit hotel, demand is expected to grow by an estimated 25.0% (1,200 occupied room nights) in 2014, followed by 3.0% growth in 2015, 2.0% in 2016, and 1.0% in 2017.

7.4 MEETING/CONFERENCE MARKET

Meeting/conferencedemandaccountedfor5.1%ofoveralldemandin2010or4,000occupiedroomnights.Basedontheyeartodateresults,themeeting/conferencesegmentofdemandisprojectedtorealizemodestgrowth of 3.0% in 2011, and 2.0% in 2012. With the opening of the Charlottetown Convention Centre in 2013, which is expected to generate over 6,600 incremental new room nights to that City, it is anticipated that many of the smaller regional meetings will be displaced into other Provincial markets. As a result, PKF has projectedapotentialincreaseof16.8%(700occupiedroomnights)indemandformeetings/conferencesinthe Summerside market.



30

We have also considered a second scenario for the potential of a 120-unit property. For this size of

property to be developed, demand would need to grow by 20,600 occupied room nights from these same

sources – or 7,200 more room nights than an 80-room hotel. Based on PKF’s research and experience, it is

unlikely that this level of demand can be achieved before 2016/2017. The City needs to further evolve as a

destination, and the subject 80-unit property would need to operate for 3 or 4 years, before additional hotel

supply could be absorbed in the competitive market. Also, a prudent investor would be more likely to start

with 80-rooms and consider moving to 120-rooms when Summerside has more demand generators in

place.

It should be noted that hotels are generally built to satisfy demand that already exists. In general, hotels do

not attract demand – save and except when a location is already considered a “destination”. In that respect,

a new hotel would assist in attracting more demand, but will not attract demand in and of itself.

Consequently, we have only analyzed the results of an 80-room property entering the Summerside market

in 2014. Table 7-1 summarizes the levels of overall demand for the competitive accommodation market

that would be required in order to maintain occupancy levels to support a new 80-room hotel in Summerside

over the 2010 to 2016 period, the details of which are provided in Exhibit 7-1.

TABLE 7-1 ACCOMMODATION DEMAND PROJECTIONS

COMPETITIVE SUMMERSIDE ACCOMMODATION MARKET 2010

Actual 2011 2012 2013 2014 2015 2016 2017Market Occupancy 45.3% 47.3% 48.5% 49.7% 49.2% 50.1% 51.0% 51.5% Occupied room nights 78,016 81,547 83,491 85,631 99,067 100,949 102,805 103,833 Demand growth - 4.5% 2.4% 2.6% 15.7% 1.9% 1.8% 1.0%


A brief description of the projected performance of each major market segment is presented below and

detailed projections by market segment are provided in Exhibit 7-1.

7.3 Corporate/Commercial Market

At 5.9% of demand in 2010, the corporate/commercial segment is not a significant generator of rooms

demand in the competitive market. However, based on the year to date results, and a positive outlook for

the corporate sector in 2011, this segment of demand is projected to realize an increase of 5.0% in 2011.

With continued economic recovery, and considering the growth expectations mentioned by the responding

sample of the Summerside Corporate Survey (see Section 4.0), demand for the corporate segment is

expect to result in a 2.5% increase in 2012, and another 2.0% increase in 2013.


With increased room inventory in the market at the subject 80-room hotel in 2014, and synergies provided by meeting space at Credit Union Place, this segment is projected to realize a further increase of 23.6% (1,000 occupiedroomnights)in2014.Demandisexpectedtonormalizeat2.0%in2015and2016,and1.0%in2017.

7.5 TOURIST/LEISURE MARKET

Asmentioned,thetourist/leisuresegmentisthelargestroomnightgeneratorinthecompetitivemarket,accountingfor70.4%ofoveralldemandin2010.Basedonyeartodateresults,alongsidepent-updemandfrom the leisure travel and the Summerside Storm basketball team’s beginning its opening season in the fall, this segment of demand is projected to realize an increase of 5.0% in 2011, 2.5% in 2012, and 2.0% in 2013.Duetotheincreaseinroominventoryprojectedwiththeopeningofthesubjecthotelandotherprojectsimpacting the tourism market across PEI in line with the 2015 Tourism Strategy, it is anticipated that the marketwillbeabletoaccommodategreatervolumesoftourist/leisuredemand.

Supply induced demand is expected to result in further growth of 17.0% (10,300 occupied room nights) in 2014. The expectation of new sporting competitions and other celebrations bringing demand to the Credit Union Place complex is expected to boost leisure segment demand growth by another 2.0% in 2015 and 2016, and a further 1.0% in 2017.

7.6 GOVERNMENT/ OTHER DEMAND

Thegovernment/othersegmentofdemandaccountedfor18.6%ofoveralldemandwithinthecompetitivemarketin2010.Basedonyeartodateresults,government/otheraccommodationdemandisprojectedtorealize modest growth of 3.0% in 2011, and 2.0% in 2012, before dropping to 1.0% in 2013. The newly establishedProvincialDepartmentofEducation,andopeningoftheHollandCollegeWaterfrontCampusin2012 are key drivers in this segment.

With the opening of the subject 80-unit hotel, demand growth in this segment is expected to rise to 5.0% (800 occupied room nights) in 2014, before dropping to 1.0% in 2015 through to 2017, as demand levels return to normal.

7.7 AVERAGE DAILY RATE GROWTH

In terms of average daily rate, the primary competitive market witnessed relatively strong growth over the 2006-2007 period, before declining in 2008 and 2009, and dropping by 5.1% in 2010, due to the global economiccrisisandratediscounting.YeartodateSeptember2011ADRisup0.4%overthesameperiodin 2010, due to several key events, including: the Elton John concerts, Contact East Music trade show, and opening season of the Summerside Storm, which helped to drive rate in the latter part of the year.

AssummarizedinTable7-2below,averagedailyratesareprojectedtoseea2.5%increasein2011.ADRisprojected to increase by 2.5% in 2012 and 2013, before increasing to by 3.0% in 2014 with the subject hotel entering the market, and dropping back to 2.5% for the remainder of the projection period.


7.8 CONCLUSION

Basedontheprecedinganalysis,Table7-3belowprovidesasummaryoftheoccupancyandaveragedailyrate projections for the competitive market over the projection period.



32

established Provincial Department of Education, and opening of the Holland College Waterfront Campus in

2012 are key drivers in this segment.

With the opening of the subject 80-unit hotel, demand growth in this segment is expected to rise to 5.0% (800 occupied room nights) in 2014, before dropping to 1.0% in 2015 through to 2017, as demand levels

return to normal.

7.7 Average Daily Rate Growth

In terms of average daily rate, the primary competitive market witnessed relatively strong growth over the

2006-2007 period, before declining in 2008 and 2009, and dropping by 5.1% in 2010, due to the global

economic crisis and rate discounting. Year to date September 2011 ADR is up 0.4% over the same period

in 2010, due to several key events, including: the Elton John concerts, Contact East Music trade show, and

opening season of the Summerside Storm, which helped to drive rate in the latter part of the year.

As summarized in Table 7-2 below, average daily rates are projected to see a 2.5% increase in 2011. ADR

is projected to increase by 2.5% in 2012 and 2013, before increasing to by 3.0% in 2014 with the subject

hotel entering the market, and dropping back to 2.5% for the remainder of the projection period.

TABLE 7-2 AVERAGE DAILY RATE GROWTH PROJECTIONS


Actual 2011 2012 2013 2014 2015 2016 2017Market Average Daily Rate $83.01 $85.08 $87.21 $89.39 $92.07 $94.37 $96.73 $99.15Rate Growth - 2.5% 2.5% 2.5% 3.0% 2.5% 2.5% 2.5%


7.8 Conclusion

Based on the preceding analysis, Table 7-3 below provides a summary of the occupancy and average daily

rate projections for the competitive market over the projection period.

TABLE 7-3 OVERALL PROJECTIONS

COMPETITIVE SUMMERSIDE ACCOMMODATION MARKET 2010 2011 2012 2013 2014 2015 2016 2017

Market Occupancy 45.3% 47.3% 48.5% 49.7% 49.2% 50.1% 51.0% 51.5%Average Daily Rate $83.01 $85.08 $87.21 $89.39 $92.07 $94.37 $96.73 $99.15




32

established Provincial Department of Education, and opening of the Holland College Waterfront Campus in

2012 are key drivers in this segment.

With the opening of the subject 80-unit hotel, demand growth in this segment is expected to rise to 5.0% (800 occupied room nights) in 2014, before dropping to 1.0% in 2015 through to 2017, as demand levels

return to normal.

7.7 Average Daily Rate Growth

In terms of average daily rate, the primary competitive market witnessed relatively strong growth over the

2006-2007 period, before declining in 2008 and 2009, and dropping by 5.1% in 2010, due to the global

economic crisis and rate discounting. Year to date September 2011 ADR is up 0.4% over the same period

in 2010, due to several key events, including: the Elton John concerts, Contact East Music trade show, and

opening season of the Summerside Storm, which helped to drive rate in the latter part of the year.

As summarized in Table 7-2 below, average daily rates are projected to see a 2.5% increase in 2011. ADR

is projected to increase by 2.5% in 2012 and 2013, before increasing to by 3.0% in 2014 with the subject

hotel entering the market, and dropping back to 2.5% for the remainder of the projection period.

TABLE 7-2 AVERAGE DAILY RATE GROWTH PROJECTIONS


Actual 2011 2012 2013 2014 2015 2016 2017Market Average Daily Rate $83.01 $85.08 $87.21 $89.39 $92.07 $94.37 $96.73 $99.15Rate Growth - 2.5% 2.5% 2.5% 3.0% 2.5% 2.5% 2.5%


7.8 Conclusion

Based on the preceding analysis, Table 7-3 below provides a summary of the occupancy and average daily

rate projections for the competitive market over the projection period.

TABLE 7-3 OVERALL PROJECTIONS

COMPETITIVE SUMMERSIDE ACCOMMODATION MARKET 2010 2011 2012 2013 2014 2015 2016 2017

Market Occupancy 45.3% 47.3% 48.5% 49.7% 49.2% 50.1% 51.0% 51.5%Average Daily Rate $83.01 $85.08 $87.21 $89.39 $92.07 $94.37 $96.73 $99.15



Dem

and Projections2010

20112012

20132014

20152016

20172018

Corporate

occupied room nights

4,5784,807

4,9275,025

6,2826,470

6,5996,665

6,665dem

and growth

5.0%2.5%

2.0%25.0%

3.0%2.0%

1.0%0.0%

Meeting/C

onferenceoccupied room

nights4,000

4,1204,202

4,9096,066

6,1876,311

6,3746,374

demand grow

th3.0%

2.0%16.8%

23.6%2.0%

2.0%1.0%

0.0%Leisureoccupied room

nights54,939

57,68659,129

60,31170,564

71,97573,415

74,14974,149

demand grow

th5.0%

2.5%2.0%

17.0%2.0%

2.0%1.0%

0.0%G

ov't/Other


14,50014,935

15,23315,386

16,15516,316

16,48016,644

16,644dem

and growth

3.0%2.0%

1.0%5.0%

1.0%1.0%

1.0%0.0%

Market Projections

20102011

20122013

20142015

20162017

2018Total D

emand


78,01681,547

83,49185,631

99,067100,949

102,805103,833

103,833dem

and growth

4.5%2.4%

2.6%15.7%

1.9%1.8%

1.0%0.0%

Total Supplyavailable room

nights172,280

172,280172,280

172,280201,480

201,480201,480

201,480201,480

supply growth

0.0%0.0%

0.0%16.9%

0.0%0.0%

0.0%0.0%

Market O

ccupancy45.3%

47.3%48.5%

49.7%49.2%

50.1%51.0%

51.5%51.5%

Market A

verage Daily R

ate$83.01

$85.08$87.21

$89.39$92.07

$94.37$96.73

$99.15$101.63

Market R

evPar$37.59

$40.27$42.26

$44.43$45.27

$47.28$49.36

$51.10$52.37

rate growth

2.5%2.5%

2.5%3.0%

2.5%2.5%

2.5%2.5%

Source: P

KF C

onsulting Inc.

EXHIB

IT 7-1SU

MM

ERSID

E, PEI A

CC

OM

MO

DA

TION

MA

RK

ET PRO

JECTIO

NS

DR

AFT FO

R IN

TERN

AL D

ISCU

SSION

ON

LY

EXHIBIT7-1

SUMMERSIDE,P

EIA

CCOMMODATIO

NM

ARKETP

ROJE

CTIO

NS


8.1PreliminaryHotelDevelopmentProgram

As identified by the Steering Committee, the primary interest in building a proposed hotel in Summerside istoaccommodatecorporate,leisure,andmeeting/conferencedemandthatiscurrentlybeinglosttootheraccommodation markets outside the City (primarily Charlottetown). Part of PKF’s mandate on this project has been to quantify that lost demand, determine the appropriate size of hotel that would be appropriate for Summerside, and to consider where the hotel should be built.

OurPhaseIresearchindicatesthatthereisamarketopportunitytobuildahotelinSummerside.However,it will be challenging to make economic sense of the project. As a result, we would recommend that the subject hotel should be branded, and the number of rooms not be excessive. To maximize the viability of the proposed hotel, the brand chosen will need to leverage the strengths of the Credit Union Place site, particularlywithrespecttoleisureandmeeting/conferencedemand,butshouldalsohavesufficientamenitiestocatertocorporateandotherdiscounteddemand(particularlygovernment-based).Ourresearchconfirmsthat a significant portion of the proposed hotel’s demand will be generated from the leisure market segment, followedbythecorporate,meeting/conferenceandgovernmentmarkets.Typicallytheleisuresegmenthasarequirement for double rooms to accommodate group double occupancy and families.

As described in Section 7.0, we have analyzed the results of a Focused-Service hotel with 80 units, including a mix of standard rooms and suites, entering the market as of January 1, 2014.

8.2 Subject Property Projections

The following analysis projects future occupancy and market penetration levels for the proposed subject Summerside Hotel, based on numerous factors, including economic influences, and the actual and projected supply/demandrelationshipinthecompetitivemarket.Furtherassumptionsinclude:

•Theproposedpropertywouldoperateasan80-roomFocused-ServiceHotel,whichwouldenterthemarketasofJanuary1,2014;and•Nosignificantchangesinthemarketovertheprojectionperiodthatwouldimpactthecurrentstatusofthecompetitive rooms supply other than as currently identified.

In projecting occupancy performance of the proposed subject property over the projection period, the concept of “fair market share” has been utilized. This concept states that a property will attract rooms demand in the same proportion as its share of rooms supply. The basic assumption is that all things are equal, however, different properties achieve different levels of market penetration based on various competitive factors including location, product and facilities, customer preferences, pricing and marketing strategies. Market penetrations in excess of 100.0% indicate that a hotel possesses competitive advantages relative to the market as whole, competitive weaknesses are reflected in penetrations of less than 100.0%.

SUBJECT PROPERTY PROJECTIONS


Four primary segments were identified as areas the subject property would likely generate demand from:•Corporate/Commercial•Meeting/Conference•Leisure-FIT•Government/OtherDiscountedSources

8.2.1Corporate/CommercialSegment

IntheCorporate/Commercialmarketsegment,theproposedhotelisexpectedtocapturemorethanits“fairshare” of market demand, and achieve a penetration of 130.0% in its third and stabilized year. The quality, location, and surrounding amenities of the hotels in the Summerside area are such that a new product could reasonably attract a large portion of the existing corporate business, draw business currently being displaced toCharlottetown,andpotentiallyinducenewbusinesstothearea.BasedontheCorporateSurvey,andconsidering seasonal demand patterns and capacity constraints of the proposed property, we have estimated an increase of approximately 1,250 new room nights to the local Summerside market as a result of the new Hotelenteringthemarketin2014.Overall,at130%penetrationinitsstabilizedyear,thisequatesto1,243occupied room nights per annum, suggesting that the subject property would be the primary beneficiary of any incremental corporate demand to the area.

8.2.2Meeting/ConferenceSegment

Althoughwewouldnotrecommendpositioningtheproposedhotelasameeting/conferencedestinationhotelinthetraditionalsense,theproposedhotelwouldbenefitstronglyfromtheMeeting&Conferencemarket,primarilycompetingforregionalmeetingsandexecutiveretreats.Basedonoureventanalysisandknowledgeof the area, and under the assumption that the new Charlottetown Convention Centre will open as planned in 2013, we estimate that a new Hotel with 80 rooms next to the 5,453 square feet of meeting space at Credit Union Place, could help to generate an estimated 1,200 room nights to the Summerside area in 2014. As a mid-sized property with comparatively small meeting space, the proposed subject hotel is expected to penetrate the competitive accommodation market at 130.0% in its stabilized year, equating to 1,189 occupied roomnights.Itisexpectedthatthehotel’sMeeting/Conferencebusinesswouldbepredominantlycapturedfromaregionaldemandbase,andindirectcompetitionwithsmalltomid-sizeResortsthroughouttheProvince and Atlantic Canada.



34

competitive factors including location, product and facilities, customer preferences, pricing and marketing

strategies. Market penetrations in excess of 100.0% indicate that a hotel possesses competitive

advantages relative to the market as whole, competitive weaknesses are reflected in penetrations of less

than 100.0%.

Four primary segments were identified as areas the subject property would likely generate demand from:

Corporate/Commercial Meeting/Conference Leisure-FIT Government/Other Discounted Sources

8.2.1 Corporate/Commercial Segment

In the Corporate/Commercial market segment, the proposed hotel is expected to capture more than its

“fair share” of market demand, and achieve a penetration of 130.0% in its third and stabilized year. The

quality, location, and surrounding amenities of the hotels in the Summerside area are such that a new

product could reasonably attract a large portion of the existing corporate business, draw business currently

being displaced to Charlottetown, and potentially induce new business to the area. Based on the Corporate

Survey, and considering seasonal demand patterns and capacity constraints of the proposed property, we

have estimated an increase of approximately 1,250 new room nights to the local Summerside market as a

result of the new Hotel entering the market in 2014. Overall, at 130% penetration in its stabilized year, this

equates to 1,243 occupied room nights per annum, suggesting that the subject property would be the

primary beneficiary of any incremental corporate demand to the area.

TABLE 8-1 SUBJECT PENETRATION – CORPORATE/COMMERCIAL MARKET

2014 2015 2016 2017 2018Market Penetration Rate 120.0% 125.0% 130.0% 128.7% 128.7%Demand Captured (Occupied Room Nights) 1,092 1,172 1,243 1,243 1,243

Ratio to Total Demand 6.6% 6.7% 6.8% 6.8% 6.8% Source: PKF Consulting

8.2.2 Meeting/Conference Segment

Although we would not recommend positioning the proposed hotel as a meeting/conference destination

hotel in the traditional sense, the proposed hotel would benefit strongly from the Meeting & Conferencemarket, primarily competing for regional meetings and executive retreats. Based on our event analysis and

knowledge of the area, and under the assumption that the new Charlottetown Convention Centre will open

as planned in 2013, we estimate that a new Hotel with 80 rooms next to the 5,453 square feet of meeting

space at Credit Union Place, could help to generate an estimated 1,200 room nights to the Summerside



35

area in 2014. As a mid-sized property with comparatively small meeting space, the proposed subject hotel

is expected to penetrate the competitive accommodation market at 130.0% in its stabilized year, equating to

1,189 occupied room nights. It is expected that the hotel’s Meeting/Conference business would be

predominantly captured from a regional demand base, and in direct competition with small to mid-size

Resorts throughout the Province and Atlantic Canada.

TABLE 8-2 SUBJECT PENETRATION – MEETING/CONFERENCE MARKET



8.2.3 Leisure/Tourist Segment

The Leisure/Tourist market consists of demand generated by individuals whose primary reason for visiting

the area is for tourist/leisure/recreation purposes, such as independent tourists, and the “VFR” market

(visiting friends or relatives), as well as demand generated by groups whose primary purpose is of a leisure

or transient nature such as reunions, bus tours, and weddings. Our projections assume that the subject

hotel will benefit from the quality of product, as well as the property’s proposed location next to Credit Union

Place and resulting operational synergies. Again considering seasonal demand patterns and capacity

constraints, we have estimated an increase of approximately 16% in occupied room nights to the local

market with the opening of the subject hotel in 2014, and that the proposed hotel would penetrate the

competitive market at 130.0% in its third and stabilized year. This equates to a total of 13,832 occupied

room nights, and represents 75.1% of the hotel’s overall demand. Incremental Tourist/Leisure demand will

be derived from local and regional festivals and events being developed for Summerside, theatre and

sporting events, attractions (i.e. College of Piping, Spinnaker’s Market, etc.), and transient leisure travel.

TABLE 8-3 SUBJECT PENETRATION – LEISURE/TOURIST MARKET



8.2.4 Government/Other Segment

The Government/Other discount segment accounts for approximately 19% of overall demand within the

competitive accommodation market. This segment includes civil servants travelling on government


8.2.3Leisure/TouristSegment

TheLeisure/Touristmarketconsistsofdemandgeneratedbyindividualswhoseprimaryreasonforvisitingtheareaisfortourist/leisure/recreationpurposes,suchasindependenttourists,andthe“VFR”market(visiting friends or relatives), as well as demand generated by groups whose primary purpose is of a leisure ortransientnaturesuchasreunions,bustours,andweddings.Ourprojectionsassumethatthesubjecthotelwill benefit from the quality of product, as well as the property’s proposed location next to Credit Union Place and resulting operational synergies. Again considering seasonal demand patterns and capacity constraints, we have estimated an increase of approximately 16% in occupied room nights to the local market with the opening of the subject hotel in 2014, and that the proposed hotel would penetrate the competitive market at 130.0% in its third and stabilized year. This equates to a total of 13,832 occupied room nights, and represents 75.1%ofthehotel’soveralldemand.IncrementalTourist/Leisuredemandwillbederivedfromlocalandregional festivals and events being developed for Summerside, theatre and sporting events, attractions (i.e. College of Piping, Spinnaker’s Market, etc.), and transient leisure travel.

8.2.4Government/OtherSegment

TheGovernment/Otherdiscountsegmentaccountsforapproximately19%ofoveralldemandwithinthecompetitive accommodation market. This segment includes civil servants travelling on government business and other guests who enjoy discounted rates, such as students of Holland College. It is expected that the subject property will penetrate the market segment at 90.0% of fair share by the property’s third and stabilized year, and will be comprised primarily of government-based demand, as opposed to discounting for student groups. This represents 2,150 occupied room nights.

8.2.5RatePositioningThe rate positioning for the proposed hotel is unique given the location and source of demand through its segmentation.Onasegmentationbasis,theproposedhotelwouldachievecomparableaveragedailyrates(ADR)totheupperendofthelocalhotelmarketwithintheGovernment/Othersegments,however,thepropertywouldexpecttodriveamuchgreaterratewithintheCorporate,LeisureandMeeting/Conferencesegments.AverageDailyratesforthesubjecthotelareprojectedtobeabovefairshare,reaching135.0%ratepenetration or $130.59 by property’s third and stabilized year.



35

area in 2014. As a mid-sized property with comparatively small meeting space, the proposed subject hotel

is expected to penetrate the competitive accommodation market at 130.0% in its stabilized year, equating to

1,189 occupied room nights. It is expected that the hotel’s Meeting/Conference business would be

predominantly captured from a regional demand base, and in direct competition with small to mid-size

Resorts throughout the Province and Atlantic Canada.

TABLE 8-2 SUBJECT PENETRATION – MEETING/CONFERENCE MARKET



8.2.3 Leisure/Tourist Segment

The Leisure/Tourist market consists of demand generated by individuals whose primary reason for visiting

the area is for tourist/leisure/recreation purposes, such as independent tourists, and the “VFR” market

(visiting friends or relatives), as well as demand generated by groups whose primary purpose is of a leisure

or transient nature such as reunions, bus tours, and weddings. Our projections assume that the subject

hotel will benefit from the quality of product, as well as the property’s proposed location next to Credit Union

Place and resulting operational synergies. Again considering seasonal demand patterns and capacity

constraints, we have estimated an increase of approximately 16% in occupied room nights to the local

market with the opening of the subject hotel in 2014, and that the proposed hotel would penetrate the

competitive market at 130.0% in its third and stabilized year. This equates to a total of 13,832 occupied

room nights, and represents 75.1% of the hotel’s overall demand. Incremental Tourist/Leisure demand will

be derived from local and regional festivals and events being developed for Summerside, theatre and

sporting events, attractions (i.e. College of Piping, Spinnaker’s Market, etc.), and transient leisure travel.

TABLE 8-3 SUBJECT PENETRATION – LEISURE/TOURIST MARKET



8.2.4 Government/Other Segment

The Government/Other discount segment accounts for approximately 19% of overall demand within the

competitive accommodation market. This segment includes civil servants travelling on government DRAFT FOR DISCUSSION PURPOSES ONLY


36

business and other guests who enjoy discounted rates, such as students of Holland College. It is expected

that the subject property will penetrate the market segment at 90.0% of fair share by the property’s third and

stabilized year, and will be comprised primarily of government-based demand, as opposed to discounting for

student groups. This represents 2,150 occupied room nights.

TABLE 8-4 SUBJECT PENETRATION – GOVERNMENT/OTHER MARKET


Ratio to Total Demand 12.8% 12.2% 11.7% 11.7% 11.7%Source: PKF Consulting

8.2.5 Rate Positioning

The rate positioning for the proposed hotel is unique given the location and source of demand through its

segmentation. On a segmentation basis, the proposed hotel would achieve comparable average daily rates

(ADR) to the upper end of the local hotel market within the Government/Other segments, however, the

property would expect to drive a much greater rate within the Corporate, Leisure and Meeting/Conference

segments. Average Daily rates for the subject hotel are projected to be above fair share, reaching 135.0%

rate penetration or $130.59 by property’s third and stabilized year. This rate positioning is comparable to

newer focused service properties in the Charlottetown market, however rates would be constrained by the

weekday corporate business originating locally.

8.2.6 Overall Projections for a Proposed 80-Room Hotel in Summerside

The following table summarizes the preliminary subject projections for 2014-2018.

Source: PKF Consulting Inc.

Exhibit 8-1 summarizes the projected market position of the property over the 2014-2018 period relative to

the Summerside competitive accommodation market. At a stabilized 63.1% occupancy, the property will be

outperforming the market by an estimated 12 points in occupancy.

Demand for the property in Year 3, its stabilized year of operation, is projected to stem from the following

sources.

TABLE 8-5 SUBJECT 80-ROOM HOTEL PROJECTIONS

SUMMERSIDE, PEI 2014 2015 2016 2017 2018

Subject Occupancy 56.6% 59.8% 63.1% 63.1% 63.1%Subject Average Daily Rate $124.30 $127.40 $130.59 $133.85 $137.20


This rate positioning is comparable to newer focused service properties in the Charlottetown market, however rates would be constrained by the weekday corporate business originating locally.

8.2.6OverallProjectionsforaProposed80-RoomHotelinSummerside


Exhibit 8-1 summarizes the projected market position of the property over the 2014-2018 period relative to the Summerside competitive accommodation market. At a stabilized 63.1% occupancy, the property will be outperforming the market by an estimated 12 points in occupancy.

DemandforthepropertyinYear3,itsstabilizedyearofoperation,isprojectedtostemfromthefollowingsources.

Basedonstakeholderinterviews,generalseasonalityconstraints,andresearchandanalysisofaccommodation demand in both the Summerside and overall PEI, a new hotel entering the Summerside market could likely be sustained at a stabilized occupancy level of 63.0%, and maximum market penetration level of 123.5%. At 80-rooms, this means that a new hotel would need to attract approximately 18,400 occupied room nights to Summerside. Some of this demand already exists in the market, some would be unsatisfied demand returning to Summerside, and some would need to be induced from other sources, which is further discussed in the following section.



36

business and other guests who enjoy discounted rates, such as students of Holland College. It is expected

that the subject property will penetrate the market segment at 90.0% of fair share by the property’s third and

stabilized year, and will be comprised primarily of government-based demand, as opposed to discounting for

student groups. This represents 2,150 occupied room nights.

TABLE 8-4 SUBJECT PENETRATION – GOVERNMENT/OTHER MARKET


Ratio to Total Demand 12.8% 12.2% 11.7% 11.7% 11.7%Source: PKF Consulting

8.2.5 Rate Positioning

The rate positioning for the proposed hotel is unique given the location and source of demand through its

segmentation. On a segmentation basis, the proposed hotel would achieve comparable average daily rates

(ADR) to the upper end of the local hotel market within the Government/Other segments, however, the

property would expect to drive a much greater rate within the Corporate, Leisure and Meeting/Conference

segments. Average Daily rates for the subject hotel are projected to be above fair share, reaching 135.0%

rate penetration or $130.59 by property’s third and stabilized year. This rate positioning is comparable to

newer focused service properties in the Charlottetown market, however rates would be constrained by the

weekday corporate business originating locally.

8.2.6 Overall Projections for a Proposed 80-Room Hotel in Summerside



Exhibit 8-1 summarizes the projected market position of the property over the 2014-2018 period relative to

the Summerside competitive accommodation market. At a stabilized 63.1% occupancy, the property will be

outperforming the market by an estimated 12 points in occupancy.

Demand for the property in Year 3, its stabilized year of operation, is projected to stem from the following

sources.

TABLE 8-5 SUBJECT 80-ROOM HOTEL PROJECTIONS

SUMMERSIDE, PEI 2014 2015 2016 2017 2018

Subject Occupancy 56.6% 59.8% 63.1% 63.1% 63.1%Subject Average Daily Rate $124.30 $127.40 $130.59 $133.85 $137.20



37

TABLE 8-6 PROJECTED STABILIZED MARKET MIX BY SEGMENT

80-ROOM HOTEL SUMMERSIDE, PEI

SegmentOccupied

Room Nights Percentage of Total Demand

Corporate 1,243 6.8% Meeting/Conference 1,189 6.5% Leisure/Tourist 13,832 75.1% Government/Other 2,150 11.7% TOTAL 18,414 100.0%


Based on stakeholder interviews, general seasonality constraints, and research and analysis of

accommodation demand in both the Summerside and overall PEI, a new hotel entering the Summerside

market could likely be sustained at a stabilized occupancy level of 63.0%, and maximum market penetration

level of 123.5%. At 80-rooms, this means that a new hotel would need to attract approximately 18,400

occupied room nights to Summerside. Some of this demand already exists in the market, some would be

unsatisfied demand returning to Summerside, and some would need to be induced from other sources,

which is further discussed in the following section.


SUPPLY 2014 2015 2016 2017 201880-UNIT FOCUSED-SERVICE HOTEL 80 80 80 80 80Total Supply 552 552 552 552 552Fair Share of Supply 14.5% 14.5% 14.5% 14.5% 14.5%

DEMAND PROJECTIONS 2014 2015 2016 2017 2018Corporateoccupied room nights 6,282 6,470 6,599 6,665 6,665fair share of demand 910 938 956 966 966penetration rate 120.0% 125.0% 130.0% 128.7% 128.7%total demand captured 1,092 1,172 1,243 1,243 1,243ratio to total demand 6.6% 6.7% 6.8% 6.8% 6.8%Meeting/Conferenceoccupied room nights 6,066 6,187 6,311 6,374 6,374fair share of demand 879 897 915 924 924penetration rate 120.0% 125.0% 130.0% 128.7% 128.7%total demand captured 1,055 1,121 1,189 1,189 1,189ratio to total demand 6.4% 6.4% 6.5% 6.5% 6.5%Leisureoccupied room nights 70,564 71,975 73,415 74,149 74,149fair share of demand 10,227 10,431 10,640 10,746 10,746penetration rate 120.0% 125.0% 130.0% 128.7% 128.7%total demand captured 12,272 13,039 13,832 13,832 13,832ratio to total demand 74.3% 74.7% 75.1% 75.1% 75.1%Gov't/Otheroccupied room nights 16,155 16,316 16,480 16,644 16,644fair share of demand 2,341 2,365 2,388 2,412 2,412penetration rate 90.0% 90.0% 90.0% 89.1% 89.1%total demand captured 2,107 2,128 2,150 2,150 2,150ratio to total demand 12.8% 12.2% 11.7% 11.7% 11.7%

Total Demandoccupied room nights 99,067 100,949 102,805 103,833 103,833total demand captured 16,527 17,460 18,414 18,414 18,414market occupancy 49.2% 50.1% 51.0% 51.5% 51.5%market penetration 115.1% 119.3% 123.6% 122.4% 122.4%Project Occupancy 56.6% 59.8% 63.1% 63.1% 63.1%

RATE PROJECTIONS 2014 2015 2016 2017 2018Market Average Daily Rate $92.07 $94.37 $96.73 $99.15 $101.63% Growth 3.0% 2.5% 2.5% 2.5% 2.5%Rate Penetration Subject 135.0% 135.0% 135.0% 135.0% 135.0%Project Average Daily Rate 124.30$ 127.40$ 130.59$ 133.85$ 137.20$ Market RevPar $45.27 $47.28 $49.36 $51.10 $52.37Subject RevPar Penetration 155.4% 161.1% 166.8% 165.2% 165.2%Subject RevPar 70.35$ 76.18$ 82.35$ 84.41$ 86.52$ Source: PKF Consulting Inc. 19-Dec-11 03:55 PM

DRAFT FOR INTERNAL DISCUSSION ONLY

EXHIBIT 8-180-UNIT FOCUSED-SERVICE HOTEL

SUMMERSIDE, PEI PROJECT PROJECTIONS

EXHIBIT8-180-UNITFOCUSED-SERVICEHOTELSUMMERSIDE,PEIPROJECTPROJECTIONS


Through the Phase I research for this study, PKF has determined that there is a demand for a new Hotel that spans across many segments of the overnight accommodation market in Summerside. Stakeholder interviews and subsequent analysis confirm that there is a “need” for additional hotel facilities in Summerside. The majority of the existing accommodation product is inadequate from a quality perspective, and with a limited number of units available, there are peak periods wherein potential demand cannot be accommodated. This is particularly true for leisure demand during the summer months, during festivals and events year round, and for sports tourism driven by Credit Union Place. However, the study also identifies that the depth of the market is limited, and there would be significant risk and challenges in building such a facility, whatever the size.

Itshouldbeunderstoodthathotelsarebuiltinordertosatisfybusiness;theydogenerallyattractdemand.Inthe absence of other major demand generators in Summerside, it would be necessary for a new hotel to do a better job of capturing what demand is already coming to the market or leaking out of the market. Success ofanewhotelwouldalsodependoneffectivemanagementofexistingMeeting&Conferencefacilitiesinthesurroundingmarket,andgrowingCorporate,LeisureandGovernmentdemandinthecompetitivemarket.

In order to provide the Steering Committee with a better understanding of the prospective opportunities for hotel development at the subject site, and what levels of demand would need to be accommodated for a new hotel to be sustainable in the Summerside market, we considered two scenarios:

1.AFocused-Servicehotelwith80units,includingamixofstandardroomsandsuites;and2. A Focused-Service hotel with 120 units, including a mix of standard rooms and suites.

Ouranalysisdeterminedthatwithnewgrowthinthecorporate,meeting/conventionbusiness,touristandgovernment/otherdiscountsegments,theadditionofan80-roompropertytothecompetitivemarketwouldattract new (induced) and unsatisfied demand in the range of 13,400 occupied room nights in 2014. If a 120-unit property were developed, demand would need to grow by 20,600 occupied room nights from these samesources,inordertomaintainthesamemarketoccupancylevel–adifferenceof7,200occupiedroomnights.BasedonPKF’sresearchandexperience,wedeterminedthatitisunlikelythatthislevelofdemandcanbeachievedbefore2016/2017.TheCityneedstofurtherevolveasadestination,andthesubject80-unit property would need to operate for 3 or 4 years, before additional hotel supply could be absorbed in the competitive market. Also, a prudent investor would be more likely to start with 80-rooms and consider moving to 120-rooms when Summerside has more demand generators in place.

Asdiscussed,hotelsarebuilttocapturedemandthatalreadyexists,nottoattractdemand–saveandexceptwhen a location is already considered a “destination”. In that respect, a new hotel would assist in attracting more demand, but will not attract demand in and of itself.

Consequently, we have only analyzed the results of an 80-room property entering the Summerside market in 2014. In order to sustain 16% growth in overnight accommodation demand with an 80-room property, a lot of things need to transpire in the Summerside community. We have discussed the fact that any demand growthissetagainstaverylimitedbase–constrictedbyissuesofseasonality,airlift,proximityoflargerurbancentres, and limited retail and foodservice infrastructure.

IMPLICATIONS & CONSIDERATIONS FOR HOTEL DEVELOPMENT


Attracting more demand to the City will require a certain evolution. It means making Summerside more of amust-seedestination,andincreasingthenumberofdemandgenerators–particularlyforthecorporate,tourist,andmeeting/conferencesegments.Inordertogeneratemoredemandforeachofthesesegments,that will eventually translate into occupied room nights for a hotel, some strategic planning needs to be implemented in Summerside.

It is essential to start by focusing on the largest source of demand, which has been identified in this report astheLeisure/Touristsegment,helptobuildanameforSummersideinthetouristlexicon.Thismayrequirea complete tourism re-branding, or developing a tourism theme for the community. Such a process would involve significant local stakeholder involvement. The City and local tourism authorities will also need to make further in-roads with the Provincial Tourism office, and create a new Tourism Marketing Strategy that should focus first on driving same-day trips, such as from cruise ship guests landing in Charlottetown, or from golfers in the Cavendish area could be very persuasive. Along with the heritage properties and traditional music, the theatre,artgalleryandretailneartheSummersidewaterfrontaresignificantattractors–particularlyforday-trippers. The challenge would then be to extend day-trips into overnight stays, and extend the summer traffic into year-round traffic. Unfortunately, the majority of attractions and supporting infrastructure in Summerside islimitedtothesummermonths,withmanyestablishmentsclosingafterLabourDay.Inparticular,attractionsand foodservice are considered limited in Summerside, and not conducive to retaining visitors to the area for overnight stays. It will be essential for the City to work with existing operators to change this perception. Onemethodwouldbetoattendretail-basedtradeshowstoattractnewspecialtyretailandfoodservicetothe area. Another is to work with current retail owners to enhance and improve the curb appeal and product offering.

RetailandfoodserviceinfrastructurearealsokeydemandgeneratorsfortheCorporate/Commercialsegment,and improvements to these attractors are essential. Accommodations are also perceived as tired, and limited in terms of both amenities and level of quality. Anecdotal information from the corporate sector indicates that localcompaniesarebookinglocally,however,over1/3ofthesearenotsatisfiedwiththeaccommodations,and many of their suppliers are staying in Charlottetown. The threat of a new hotel opening in the community may be enough to drive improvements to product offerings, but the City would benefit from working with hotel operatorsonanaccommodationstandards/qualityimprovementstrategythatcouldhelptodrivedemandtoALLhotelsintheCity.ItisourunderstandingthattheCity’sEconomicDevelopmentdepartmentisworkingonbringinganewbusinessparktoSummerside–70,000sq.ft.,whichcouldsupport4to6newbusinesses.Efforts in this area need to be augmented, and once a quality strategy is in place, the City needs to work with existing business to ensure they are staying in Summerside. A key target could be the Aerospace industry, which is growing in nearby Slemon Park, with another 300 employees expected in this industry over the next 3-5 years.

FromaMeeting/Conferencesegmentperspective,thenewConventionCentreopeninginCharlottetownandamandatefromthegovernmenttogrowMeetings&ConventiondemandacrosstheProvince,providepotentialopportunitiesforSummerside.TheCitymustchoosetoparticipatewiththeMeeting&ConventionsPrinceEdwardIslanddestinationmarketingorganization.Giventheavailable70,000squarefeetofmeetingspace, and prime facilities at Credit Union Place, Summerside is in a strong position to grow the small to mid-sized regional conference market and executive retreat market, but the City will need Provincial help to gain exposure.RegionalandnationalsportconferenceandAGMhostingisanotherpotentialareaforgrowthinSummerside.

All of these opportunities should assist in growing demand for a potential hotel in Summerside. The biggest threats lie in the seasonality and limitations to both the tourist season and supporting infrastructure in the area, particularly with respect to foodservice establishments and attractions.


From a positive perspective, building a hotel next to Credit Union Place would provide excellent benefits for theleisureandmeeting/conferencemarkets,including:sporthostingfacilities,conferencespace,gaming,andavailablefoodservice.NearbyattractionssuchastheCollegeofPiping,whichhoststheHighlandGamesandMini-concertsthroughoutthesummer,aswellastheAnneandGilbertproductionattheHarboursideTheatre, already generate leisure demand from national and international sources. The Silver Fox Yacht &CurlingClubalsohasalonghistoryofbonspielsandregattas,therebyincreasingthesporthostingcapabilities for the City, and the waterfront and boardwalk are attractive to tourists whether they are staying in the City or just passing through. Furthermore, a location next to the C.U.P. would provide complementary benefits to the hotel in terms of foodservice, security, maintenance and other potential operational synergies.

We believe there is an opportunity to grow the amount of demand in Summerside, and much of this would accrue to a new Hotel. However, there are limits to what one could reasonably expect in the way of new demand growth. To be specific, we have identified through this study that there is business that could be generated in Summerside with a new facility that is currently staying elsewhere, there is an opportunity to attractdemandthatwouldbeincrementaltoexistingdemand–forinstance,demandbeingpushedoutofCharlottetownwiththeopeningofthenewConventionCentre–andthereisorganicgrowthprojectedwithinSummerside’s business community.

It should be noted, however, that even if the demand levels that we have projected for a new hotel could be achieved, it is likely that the economics for such a facility would be very challenging. It will be necessary to lookcarefullyattheFacilityRecommendationsandFinancialAnalysistoquantifytheviabilityofthisproject,and if necessary, make suggestions for development programs.


APPENDIX AGLOSSARY OF INDUSTRY TERMS

SUPPLY: AVAILABLE ROOM NIGHTS (ARNS)

AvailableRoomsNightsreferstothetotalnumberofrooms at a property multiplied by the total number of nights the property is open during a given operating season. For example, a 25-room property open year- round(365nights)wouldhave9,125AvailableRoomNights.

DEMAND: OCCUPIED ROOM NIGHTS (ORNS)

OccupiedRoomsNightsreferstothesumofthenumber of nights that each available unit was occupied at a given property during one operating season.

OCCUPANCY RATE

OccupiedRoomsrefertothetotalnumberofroomsoccupied by transient, group and contract guests, without consideration to the number of guests in eachroom.OccupancyRateisexpressedasthepercentage of rooms occupied out of the total rooms available at a property. The calculation is:OccupancyRate(%)=(RoomsOccupied/RoomsAvailable) x 100

AVERAGE DAILY RATE (ADR)

Although room rates may vary seasonally, by market segment, or by room type within a property, most properties calculate an overall average daily rate (ADR).Thisraterevealstheaverageratechargedperoccupied room and is calculated by dividing total rooms revenue for a period (usually one year), by the number of rooms occupied during that period. The calculation is as follows:ADR=TotalRoomsRevenue/RoomsOccupied

ROOMS REVENUE PER AVAILABLE ROOM (REVPAR)

RevPARmeasurestheroomsrevenueyieldaproperty achieves, relative to the rooms available in the property for a period of time (usually one year).

Themetricisinfluencedby2factors–occupancyandoverallaveragedailyrates(ADR).RevPARcanbe used to compare rooms revenue results with prior period results or to compare actual to budgeted results. In additional, since the rooms revenue is scaled by the number of rooms at the property, it can be used as one comparison of the rooms revenue yield of a property to its competitors or comparable properties. The calculation is as follows:RevPAR=TotalRoomsRevenue/RoomsAvailable

MARKET SEGMENTATION

Referstothesubdividingofamarketintodistinctsubsets of users that behave in the same way or have similar needs. The hotel market segments most commonlyusedareCorporate,Meeting/Conference,Leisure,andGovernment/Other.

MARKET POSITIONING / MARKET PENETRATION

In assessing the market position, the level of market penetration and the concept of “fair market share” are used. This concept states that a property will attract demand in the same proportion as its share ofsupplyandgenerateanADRequaltothatofitscompetitors. The basic assumption is that all things are equal, however, different properties achieve different levels of market penetration based on variouscompetitivefactorsincluding;location,facilities, accessibility, visibility, ambiance, marketing, pricing strategy, management emphasis and product quality. A property attaining a market penetration above 100% is outperforming the market, while a property attaining a market penetration below 100% is under performing the market.

MarketPenetrationRate(%)=(SubjectHotelOccupancy%/OverallMarketOccupancy%)x100


APPENDIX BARCHITECTURAL RENDERINGS


main entry plaza aerial

NW Perspective

site plan

main entry plaza

SE Perspective

SW Perspective

NE Perspective

site plan with track

SummersideEconomicDevelopment(SEDO)isSummerside’sleadeconomicdevelopmentagency,committed to marketing Summerside’s competitive advantages, pro-business climate and superior lifestyle across Canada and around the world.

Ourorganizationworksproactively,collaborativelyandresponsivelywithbusiness,partneragencies, educational institutions, the community and all levels of government. We focus on leveraging Summerside’s key strengths and entrepreneurial philosophy to sustain economic growth andcreatewealth.Ourkeysectorsofgrowth–ICT,E-HealthandAerospace–alongwithourtraditional industries, provide a unique environment that enable companies to thrive and grow. SEDOconcentratesitsactivitiesondevelopingthesesectorswithanexperiencedteamofeconomicdevelopment professionals dedicated to each sector.

Some of our key services include:

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policy development • Custommarketanalysisbyuser-definedgeographicarea

Using a hands-on approach, we are furthering the success and growth of existing businesses, helping small and medium-sized businesses grow their markets globally and promoting Summerside as the ideal location for business investment.

Contact us if you have any questions regarding our ICT sector. We are here to assist you in every way possible to ensure your interest in Summerside results in a favourable experience.

ABOUT SUMMERSIDE’S ECONOMIC DEVELOPMENT ORGANIZATION


Prince Edward Island, Canada

Michael Thususka Ec.D.,Director,EconomicDevelopment

City of Summerside 275 Fitzroy Street Summerside PE C1N 1H9

direct line: 902.432.1255mobile: 902.432.0103facsimile: 902.436.9296e-mail: [email protected]

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