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Market Study

Proposed Omni Convention Center Hotel

Dallas, Texas

Property Location:

Corner of Young Street and South Lamar Street Dallas, Texas 75202

Prepared by:

HVS Consulting and Valuation Services Division of DFW Hospitality Consulting, LLC 2601 Sagebrush Drive, Suite 101 Flower Mound, Texas 75028 (972) 899-5400 (972) 899-1057 FAX

Submitted to:

The City of Dallas 650 South Griffin Dallas, Texas 75202

2601 Sagebrush Drive, Suite 101

Flower Mound, Texas 75028

(972) 899-5400

(972) 899-1057 FAX

www.hvs.com

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June 8, 2009 Mr. Al Rojas City of Dallas 650 South Griffin Dallas, Texas 75202 (214) 939-2794 (214) 939-2795 FAX

Re: Proposed Omni Convention Center Hotel Dallas, Texas HVS Reference: 2009240020

Dear Mr. Rojas:

Pursuant to your request, we herewith submit our updated market study pertaining to the above-captioned property. We have inspected the real estate and analyzed the hotel market conditions in the Dallas area, as well as the pertinent nationwide hotel market conditions for convention headquarters hotels. We have studied the proposed project, and the results of our fieldwork and analysis are presented in this report.

We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings. This study is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein.

Sincerely, HVS CONSULTING AND VALUATION SERVICES DFW Hospitality Consulting, LLC

Shannon Sampson, Senior Project Manager [email protected], (512) 698-7325 Rod Clough, MAI, Managing Director [email protected], (214) 629-1136

www.hvs.com

mailto:[email protected]

mailto:[email protected]

HVS Consulting and Valuation Services Table of Contents

Table of Contents

Section Title 1 Summary of Salient Data and Conclusions

2 Nature of the Assignment

3 Description of the Proposed Site and Neighborhood

4 Market Area Analysis

5 Overview of the U.S. Meetings Industry

6 Supply and Demand Analysis

7 Description of the Proposed Project

8 Projection of Occupancy and Average Rate

9 Projection of Income and Expense

10 Statement of Assumptions and Limiting Conditions

11 Certification

Addenda

Explanation of the Penetration Analysis Qualifications

HVS Consulting and Valuation Services Summary of Salient Data and Conclusions 1-1

1. Summary of Salient Data and Conclusions

Project: Proposed Omni Convention Center Hotel Location: Corner of Young Street and South Lamar Street

Dallas, Texas 75202 Date of Inspection: March 4, 2009 Date of Report: June 8, 2009

Land Description

Area: 8.38 acres, or 364,824 square feet Zoning: CA-1(A) - Central Area - 1 Assessor's Parcel Number(s): 00000100347000000; 00000100279000000;

00000100354000000 Flood Zone: X

Improvements Outline

Expected Opening Date: January 1, 2012 Property Type: Full-service lodging facility Hotel Orientation: Convention headquarters facility Guestrooms: 1,000 Food and Beverage Facilities: Two restaurants, a lounge, a coffee kiosk Meeting Space: 80,000 square feet (grand total) Grand Ballroom Size: 32,500 square feet Junior Ballroom Size: 17,500 square feet Additional Facilities: An outdoor pool, an outdoor whirlpool, a fitness

center, a spa, a business center, retail outlets, and vending areas

Parking Spaces: 720


Executive Summary

The subject of the market study is a 364,824-square-foot (8.38-acre) parcel to be improved with a convention-headquarters, full-service lodging facility. Our analysis assumes the property will open on January 1, 2012 and will feature 1,000 rooms, two restaurants, a lounge, a coffee kiosk, 80,000 square feet of meeting space, an outdoor pool, an outdoor whirlpool, a fitness center, a spa, a business center, retail outlets, and vending areas. The hotel will also feature all necessary back-of-the-house space. The overview of facilities is presented in greater detail in Chapter Seven. The Omni Convention Center Hotel will be an impressive addition to Downtown Dallas. Omni hotels are well known for their urban architecture, spacious guestrooms, and high-end finishes. Each Omni guestroom features the Sensation Bar, a personal sundries counter that offers more than just drinks and snacks. Omni hotels also feature signature restaurants, among them Noé, 676 Restaurant and Bar, and Bob's Steak & Chop House. Many Omni properties also house a spa or offer in-room spa services. The proposed Omni Convention Center Hotel is expected to be designed in the same manner. Initial renderings of the hotel provide for an impressive, two-winged structure that merges together in a "V" shape. The addition of a new, state-of-the-art, convention headquarters Omni Hotel in Dallas is expected to attract large groups, events, and meetings from throughout the U.S. The hotel could also be complemented by a new College Football Hall of Fame, for which the government and local community leaders are actively campaigning. The site for this attraction would be adjacent to the hotel, and if built, would further strengthen not only the neighborhood’s appeal for tourism travel, but would also increase the hotel’s appeal for capturing NCAA and other sports-oriented groups.

Spurred by several major capital investments, and a renewed Uptown district, Dallas is experiencing its strongest economic cycle in recent history. Visionaries and important Dallas developers have incited over $6 billion in new investments. Projects such as the Magnolia and Hamilton’s Davis residential complex generated momentum in the mid- and late-90s, and major additional projects during the last several years show the force of change to be formidable. AT&T will move its headquarters to the CBD in 2009, and 7-Eleven recently relocated its corporate offices to Downtown Dallas, occupying 300,000 square feet in One Arts Plaza. Comerica relocated its headquarters from Detroit to the CBD in 2008, and Fireman’s Fund Insurance Company leased an additional 130,000+ square feet for expanding operations. These activities reflect the type of evolution occurring in the local market.

The market remained resilient through 2008, despite the accelerating national recession. The amount of office space occupied in the Dallas CBD increased considerably in 2008, with just over 20,500,000 square feet occupied as of the fourth quarter 2008, representing an increase of over 1,100,000 square feet since the fourth quarter of 2007, according to CB Richard Ellis. This number will likely moderate in 2009 as companies streamline operations to survive the downturn; however, once the economy stabilizes, the market will return to a growth mode quickly and from a higher base level than other national markets that experienced a greater correction in 2008.


Along with this relatively strong office environment, the development of other complementary uses has expanded considerably in recent years, with multiple high-density residential projects, retail and restaurant additions, and entertainment venues throughout the downtown and uptown areas. The Ritz-Carlton celebrated its opening on August 15, 2007, representing the first Ritz-Carlton property in Texas, a market long-dominated by Four Seasons and several notable independent luxury properties. Nearby, Victory Park is a new crown jewel for the city, with its hip W Hotel and Residences representing a type of ultra-modern hotel product never before available in the city. Victory Park now boasts ABC’s new television facility, featuring a highly visible configuration similar to that of NBC’s Today Show in New York City’s Rockefeller Center, and new music venues such as the House of Blues.

Room revenues for Dallas rose 2.7% in 2008 (versus the 0.7% growth rate for the nation as a whole), slowing from the 5.7% growth rate in 2007, according to Smith Travel Research. Although citywide occupancy declined by just over one point to 58.9% in 2008 (due in part to new supply), rates managed to increase by just over $2.00. Market conditions in the hotel sector began to deteriorate in the fourth quarter of 2008, and in January of 2009, occupancy levels fell just over seven points and rates fell by roughly $3.00, contributing to a RevPAR decline of 18.9% for the month.

The outlook for the industry and local hotel market is not favorable for the near term, with similar declines expected through at least the first two quarters of the year. While some normalization may occur in the second half of the year, net gains in RevPAR are not expected. The decline in travel is not only being impacted by general cutbacks in corporate spending and a propensity for personal savings over discretionary leisure travel spending, but also by the negative press put on the high-end corporate meetings industry in recent months. As the AHLA and industry leaders work with Washington to remedy the perspective being placed on the industry, as hotel companies proliferate advertising outlets with new campaigns targeted at changing the way people are viewing the meetings industry and travel in general, and corporations stabilize budgets and operations through 2009, we anticipate that the local hotel market will recover in the period of 2010 through 2012, with a primary acceleration of recovery in 2011 and 2012. This expectation is reflected in our forecasts.

This forecast recovery of the downtown Dallas hotel industry through the next decade will be dependent on the development of a headquarters hotel, which will enable the full salability of the Dallas Convention Center on the national stage. A vibrant, highly-utilized convention center typically serves as a vital component to a major city’s downtown visitation and downtown hotel utilization levels. The Dallas center remains underutilized due largely to the lack of an adjacent headquarters hotel, a requirement high on the priority list of today’s convention meeting planners. This stagnant downtown occupancy reality is underscored by the trends shown in the following table.


Table 1-1 Local Market Historical Supply and Demand Trends (STR)

YearAverage Daily Room Count

Available Room Nights Change

Occupied Room Nights Change Occupancy

Average Rate Change RevPAR Change

1998 5,412 1,975,217 — 1,289,688 — 65.3 % $123.74 — $80.79 — 1999 6,301 2,299,865 16.4 % 1,387,466 7.6 % 60.3 130.97 5.8 % 79.01 (2.2) %2000 6,436 2,349,090 2.1 1,444,260 4.1 61.5 133.74 2.1 82.22 4.12001 6,465 2,359,810 0.5 1,208,753 (16.3) 51.2 130.26 (2.6) 66.72 (18.9)2002 6,458 2,357,170 (0.1) 1,237,311 2.4 52.5 131.99 1.3 69.28 3.82003 6,458 2,357,170 0.0 1,201,003 (2.9) 51.0 128.02 (3.0) 65.23 (5.9)2004 6,458 2,357,170 0.0 1,254,152 4.4 53.2 120.59 (5.8) 64.16 (1.6)2005 6,458 2,357,170 0.0 1,251,277 (0.2) 53.1 128.10 6.2 68.00 6.02006 6,458 2,357,170 0.0 1,375,229 9.9 58.3 135.95 6.1 79.31 16.62007 6,458 2,357,170 0.0 1,273,756 (7.4) 54.0 142.05 4.5 76.76 (3.2)2008 6,458 2,357,170 0.0 1,316,102 3.3 55.8 142.13 0.1 79.36 3.4

Year-to-Date Through April

2008 6,458 774,960 — 476,571 — 61.5 % $150.86 — $92.77 — 2009 6,458 774,960 0.0 % 425,793 (10.7) % 54.9 142.11 (5.8) % 78.08 (15.8) %

1.8 % 0.2 % 1.4 % (0.2) %

Hotels Included in Sample

Fairmont Dallas 545 Jun-69Westin City Center Dallas 407 Jun-80Sheraton Hotel Dallas 1,840 Jun-59The Adolphus Hotel 422 Jun-12Renaissance Dallas Hotel 514 Jun-83Hyatt Regency Dallas 1,122 May-78Hilton Anatole 1,608 Jun-79

Total 6,458

Source: Smith Travel Research

Average Annual Compounded Change (1998-2008):

Numberof Rooms Opened

Year

As a result of the opening of Fort Worth’s Omni in January of 2009, Dallas is the only major Texas city without a hotel connected to or adjacent to its convention center. The following table summarizes the factors cited as important by meeting planners when choosing a destination and a host hotel within that destination.


Table 1-2 Factors in Choosing an Association Meeting Location and Facility

Top Factors When Choosing Location

Availability of Suitable Hotels 65 % 78 %Affordability of Destination 72 77Safety and Security of Destination 54 63Ease of Transportation 45 55Transportation Costs 48 53Distance Traveled by Attendees 62 48Clean and Unspoiled Environment 28 35Climate 19 21Availability of Recreational Facilities 13 18Sightseeing, Cultural Events, Attractions 12 52Mandated by By-Laws 20 20Glamorous/Popular Image of Location 9 11

Top Factors When Choosing Hotel Within Location

Number, Size, and Quality of Meeting Rooms 67 % 90 %Negotiable Food, Beverage, and Room Rates 70 84 Cost of Hotel or Meeting Facility 76 83 Quality of Food Service 61 70 Number, Size, and Quality of Sleeping Rooms 59 78 Efficiency of Billing Procedures 52 50 Availability of Meeting Support Services 43 54 Assignment of One Staff Person To Handle Meeting 45 46 Efficiency of Check-in/Check-out Procedures 39 42 Availability of Exhibit Space 28 53 Previous Experience in Dealing with Facility and Staff 40 49 Proximity to Shopping, Restaurants, Off-site Entertainment 19 28 Number, Size, and Quality of Suites 22 28 Proximity to Airport 26 20 Convenience to Other Modes of Transportation 28 26 Provision of Special Meeting Services 14 14 Meeting Rooms with Multiple High Speed Lines/Outlets 38 38 High Speed Internet 46 47 Other On-site Recreational Facilities 8 12 On-site Golf Course 6 7

AssociationMeetings Conventions


Source: 2008 Meetings Market Report, Meetings & Conventions Magazine


Once Dallas’ headquarters hotel opens, and with Downtown Dallas’ massive 1,840-room Adam’s Mark Hotel re-branded as a Sheraton, the city’s competitive position should be significantly enhanced in relation to capturing major conventions. This is underscored by the performance of other national headquarters facilities, as illustrated in the following table.1

Table 1-3 National Market Historical Supply and Demand Trends (STR)





1998 5,412 1,975,217 — 1,289,688 — 65.3 % $123.74 — $80.79 — 1999 6,301 2,299,865 16.4 % 1,387,466 7.6 % 60.3 130.97 5.8 % 79.01 (2.2) %2000 6,436 2,349,090 2.1 1,444,260 4.1 61.5 133.74 2.1 82.22 4.12001 6,465 2,359,810 0.5 1,208,753 (16.3) 51.2 130.26 (2.6) 66.72 (18.9)2002 6,458 2,357,170 (0.1) 1,237,311 2.4 52.5 131.99 1.3 69.28 3.82003 6,458 2,357,170 0.0 1,201,003 (2.9) 51.0 128.02 (3.0) 65.23 (5.9)2004 6,458 2,357,170 0.0 1,254,152 4.4 53.2 120.59 (5.8) 64.16 (1.6)2005 6,458 2,357,170 0.0 1,251,277 (0.2) 53.1 128.10 6.2 68.00 6.02006 6,458 2,357,170 0.0 1,375,229 9.9 58.3 135.95 6.1 79.31 16.62007 6,458 2,357,170 0.0 1,273,756 (7.4) 54.0 142.05 4.5 76.76 (3.2)2008 6,458 2,357,170 0.0 1,316,102 3.3 55.8 142.13 0.1 79.36 3.4


2008 6,458 774,960 — 476,571 — 61.5 % $150.86 — $92.77 — 2009 6,458 774,960 0.0 % 425,793 (10.7) % 54.9 142.11 (5.8) % 78.08 (15.8) %

1.8 % 0.2 % 1.4 % (0.2) %


Fairmont Dallas 545 Jun-69Westin City Center Dallas 407 Jun-80Sheraton Hotel Dallas 1,840 Jun-59The Adolphus Hotel 422 Jun-12Renaissance Dallas Hotel 514 Jun-83Hyatt Regency Dallas 1,122 May-78Hilton Anatole 1,608 Jun-790 6,458 Jan-000 0 Jan-000 0 Jan-000 0 Jan-000 0 Jan-000 0 Jan-000 0 Jan-000 0 Jan-00

Total 12,916




Year

1 Our selection of national markets included most southern- and middle-America destinations; we did not include Orlando and Las Vegas due to the differences in destination appeal and market depth.


These data reflect a 2008 RevPAR2 of $119.00 (rounded), roughly 50% higher than the average, with $79.00 (rounded) RevPAR experienced by the locally competitive set. Locally, 2008 RevPAR ranged from roughly $50.00 to just over $100.00 among each hotel, while the range in RevPAR for the national set ranged from the low $60-range to just over $170 (for hotels open for the full year). After eliminating the high and the low on the national scale, the range is a tighter $80 to $170 (rounded). Despite the current economic downturn that is impacting the hotel industry rather significantly in 2009, Dallas continues to transform. City leadership remains focused on maintaining growth and revitalization within the city. This leadership, together with a myriad of local developers and committed residents, deserves substantial credit for the city’s rebirth. The current phase of evolution, anchored by such hotel projects as the W, the Joule, the Ritz-Carlton, and the anticipated convention headquarters hotel, will help redefine the city’s position on the world stage by 2012. However, if the headquarters hotel is not added to the city’s landscape, the success of the city’s and downtown’s hotel industry will likely remain far behind where it should be for a city of this size and overall economic performance. As of May 2009, 13 major conventions have been secured in the “definite” category contingent on the addition of the headquarters hotel. These groups represent over 360,000 room nights and over $532 million dollars of economic impact, according to the Dallas CVB.3 Over 600,000 additional room nights have been booked on a tentative basis. The current, troubled hospitality sector results should not deter development. The industry is cyclical, and by 2011 the sector’s recovery should be well underway. The addition of the Omni in 2012 should help accelerate the recovery even further, contributing a new source of national convention demand (accustomed to paying higher room rates) not previously captured by the city. This stagnation is further illustrated by the local rate levels versus the national rate positions. The hollow circle represents the forecast stabilized occupancy level and average rate (in 2008 dollars) for the proposed property, the hollow diamond represents the position for the local competitive set, and the small diamonds represent the national competitors (further illustrated in table 6-14).

2 RevPAR = Occupancy x Average Rate (“Revenue per available room”) 3 Please refer to supporting table regarding definite groups contingent on the addition of a hotel in Chapter 8.


Chart 1-4 Comparison of 2008 Occupancy & Avg. Rate Levels – Local Hotels vs. National Convention Properties

100.00

120.00

140.00

160.00

180.00

200.00

220.00

240.00

45% 50% 55% 60% 65% 70% 75% 80% 85%

Occupancy Level

Average RateLevel

Chapter Nine details our income and expense projection, which is based on a review of comparable operations and local market revenue and expense factors. The tables on the following pages present our projection: first, a detailed forecast through the fifth projection year, including amounts per available room (PAR) and per occupied room (POR); second, a summary forecast through the tenth projection year. The forecasts pertain to calendar operating years beginning January 1, 2012, and are expressed in inflated dollars for each year. Table 1-6 also illustrates the total taxes forecast to be generated by the subject property.


Table 1-5 Detailed Forecast of Income and Expense

2012 (Calendar Year) 2013 2014 2015 Stabilized

Number of Rooms: 1000 1000 1000 1000 1000

Occupancy: 57% 63% 66% 68% 69%

Average Rate: $169.34 $181.33 $195.98 $204.80 $211.97

RevPAR: $96.52 $114.24 $129.35 $139.27 $146.26

Days Open: 365 365 365 365 365

Occupied Rooms: 208,050 %Gross PAR POR 229,950 %Gross PAR POR 240,900 %Gross PAR POR 248,200 %Gross PAR POR 251,850 %Gross PAR POR

REVENUE

Rooms $35,231 58.1 % $35,231 $169.34 $41,697 58.8 % $41,697 $181.33 $47,212 59.9 % $47,212 $195.98 $50,832 60.1 % $50,832 $204.80 $53,385 60.1 % $53,385 $211.97

Food 17,413 28.7 17,413 83.70 20,059 28.3 20,059 87.23 21,694 27.5 21,694 90.05 23,139 27.4 23,139 93.23 24,364 27.4 24,364 96.74

Beverage 3,096 5.1 3,096 14.88 3,566 5.0 3,566 15.51 3,857 4.9 3,857 16.01 4,114 4.9 4,114 16.57 4,331 4.9 4,331 17.20

Telephone 800 1.3 800 3.85 901 1.3 901 3.92 967 1.2 967 4.02 1,023 1.2 1,023 4.12 1,068 1.2 1,068 4.24

Spa/Health Club 2,068 3.4 2,068 9.94 2,396 3.4 2,396 10.42 2,597 3.3 2,597 10.78 2,775 3.3 2,775 11.18 2,924 3.3 2,924 11.61

Other Income 1,979 3.3 1,979 9.51 2,292 3.2 2,292 9.97 2,485 3.2 2,485 10.32 2,655 3.1 2,655 10.70 2,797 3.1 2,797 11.11

Total Revenues 60,587 100.0 60,587 291.22 70,911 100.0 70,911 308.38 78,812 100.0 78,812 327.16 84,537 100.0 84,537 340.60 88,870 100.0 88,870 352.87

DEPARTMENTAL EXPENSES *

Rooms 8,385 23.8 8,385 40.30 9,431 22.6 9,431 41.01 9,889 20.9 9,889 41.05 10,306 20.3 10,306 41.52 10,677 20.0 10,677 42.39

Food & Beverage 14,050 68.5 14,050 67.53 15,590 66.0 15,590 67.80 16,414 64.2 16,414 68.13 17,180 63.0 17,180 69.22 17,880 62.3 17,880 70.99

Telephone 735 91.9 735 3.53 824 91.4 824 3.58 862 89.1 862 3.58 897 87.7 897 3.62 929 87.0 929 3.69

Spa/Health Club 2,049 99.1 2,049 9.85 2,294 95.8 2,294 9.98 2,363 91.0 2,363 9.81 2,434 87.7 2,434 9.81 2,507 85.7 2,507 9.95

Other Expenses 1,047 52.9 1,047 5.03 1,105 48.2 1,105 4.80 1,152 46.3 1,152 4.78 1,196 45.0 1,196 4.82 1,236 44.2 1,236 4.91

Total 26,266 43.4 26,266 126.25 29,244 41.2 29,244 127.17 30,679 38.9 30,679 127.35 32,012 37.9 32,012 128.98 33,229 37.4 33,229 131.94

DEPARTMENTAL INCOME 34,321 56.6 34,321 164.96 41,667 58.8 41,667 181.20 48,133 61.1 48,133 199.81 52,525 62.1 52,525 211.62 55,641 62.6 55,641 220.93

UNDISTRIBUTED OPERATING EXPENSES

Administrative & General 4,350 7.2 4,350 20.91 4,837 6.8 4,837 21.04 5,067 6.4 5,067 21.04 5,267 6.2 5,267 21.22 5,447 6.1 5,447 21.63

Marketing 6,887 11.4 6,887 33.10 7,425 10.5 7,425 32.29 7,778 9.9 7,778 32.29 8,084 9.6 8,084 32.57 8,361 9.4 8,361 33.20

Prop. Operations & Maint. 1,911 3.2 1,911 9.19 2,402 3.4 2,402 10.45 2,789 3.5 2,789 11.58 3,121 3.7 3,121 12.58 3,396 3.8 3,396 13.48

Utilities 2,841 4.7 2,841 13.66 3,262 4.6 3,262 14.19 3,418 4.3 3,418 14.19 3,552 4.2 3,552 14.31 3,674 4.1 3,674 14.59

Total 15,989 26.5 15,989 76.85 17,927 25.3 17,927 77.96 19,052 24.1 19,052 79.09 20,023 23.7 20,023 80.67 20,877 23.4 20,877 82.89

HOUSE PROFIT 18,332 30.1 18,332 88.11 23,740 33.5 23,740 103.24 29,081 37.0 29,081 120.72 32,501 38.4 32,501 130.95 34,764 39.2 34,764 138.03

Management Fee 1,212 2.0 1,212 5.82 1,418 2.0 1,418 6.17 1,576 2.0 1,576 6.54 1,691 2.0 1,691 6.81 1,777 2.0 1,777 7.06

INCOME BEFORE FIXED CHARGES 17,120 28.1 17,120 82.29 22,322 31.5 22,322 97.07 27,505 35.0 27,505 114.18 30,811 36.4 30,811 124.14 32,986 37.2 32,986 130.98

FIXED EXPENSES

Insurance 927 1.5 927 4.46 955 1.3 955 4.15 984 1.2 984 4.08 1,013 1.2 1,013 4.08 1,044 1.2 1,044 4.14

Reserve for Replacement 1,212 2.0 1,212 5.82 2,127 3.0 2,127 9.25 3,152 4.0 3,152 13.09 4,227 5.0 4,227 17.03 4,443 5.0 4,443 17.64

Total 2,139 3.5 2,139 10.28 3,083 4.3 3,083 13.41 4,136 5.2 4,136 17.17 5,240 6.2 5,240 21.11 5,487 6.2 5,487 21.79

NET INCOME $14,981 24.6 % $14,981 $72.01 $19,239 27.2 % $19,239 $83.67 $23,369 29.8 % $23,369 $97.01 $25,570 30.2 % $25,570 $103.02 $27,499 31.0 % $27,499 $109.19

*Departmental expenses are expressed as a percentage of departmental revenues.


Table 1-6 Ten-Year Forecast of Income and Expense

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Number of Rooms: 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Occupied Rooms: 208,050 229,950 240,900 248,200 251,850 251,850 251,850 251,850 251,850 251,850

Occupancy: 57% 63% 66% 68% 69% 69% 69% 69% 69% 69%

Average Rate: $169.34 % of $181.33 % of $195.98 % of $204.80 % of $211.97 % of $218.33 % of $224.88 % of $231.63 % of $238.57 % of $245.73

RevPAR: $96.52 Gross $114.24 Gross $129.35 Gross $139.27 Gross $146.26 Gross $150.65 Gross $155.17 Gross $159.82 Gross $164.62 Gross $169.56

REVENUE

Rooms $35,231 58.1 % $41,697 58.8 % $47,212 59.9 % $50,832 60.1 % $53,385 60.1 % $54,986 59.8 % $56,636 59.6 % $58,335 59.6 % $60,085 59.6 % $61,888 59.6 %

Food 17,413 28.7 20,059 28.3 21,694 27.5 23,139 27.4 24,364 27.4 25,339 27.6 26,353 27.7 27,143 27.7 27,957 27.7 28,796 27.7

Beverage 3,096 5.1 3,566 5.0 3,857 4.9 4,114 4.9 4,331 4.9 4,505 4.9 4,685 4.9 4,825 4.9 4,970 4.9 5,119 4.9

Telephone 800 1.3 901 1.3 967 1.2 1,023 1.2 1,068 1.2 1,100 1.2 1,133 1.2 1,167 1.2 1,202 1.2 1,238 1.2

Spa/Health Club 2,068 3.4 2,396 3.4 2,597 3.3 2,775 3.3 2,924 3.3 3,041 3.3 3,162 3.3 3,289 3.4 3,420 3.4 3,557 3.4

Other Income 1,979 3.3 2,292 3.2 2,485 3.2 2,655 3.1 2,797 3.1 2,909 3.2 3,026 3.2 3,116 3.2 3,210 3.2 3,306 3.2

Total 60,587 100.0 70,911 100.0 78,812 100.0 84,537 100.0 88,870 100.0 91,880 100.0 94,994 100.0 97,876 100.0 100,845 100.0 103,905 100.0

DEPARTMENTAL EXPENSES*

Rooms 8,385 23.8 9,431 22.6 9,889 20.9 10,306 20.3 10,677 20.0 10,997 20.0 11,327 20.0 11,667 20.0 12,017 20.0 12,378 20.0

Food & Beverage 14,050 68.5 15,590 66.0 16,414 64.2 17,180 63.0 17,880 62.3 18,506 62.0 19,154 61.7 19,728 61.7 20,320 61.7 20,930 61.7

Telephone 735 91.9 824 91.4 862 89.1 897 87.7 929 87.0 957 87.0 986 87.0 1,015 87.0 1,046 87.0 1,077 87.0

Spa/Health Club 2,049 99.1 2,294 95.8 2,363 91.0 2,434 87.7 2,507 85.7 2,582 84.9 2,659 84.1 2,739 83.3 2,821 82.5 2,906 81.7

Other Expenses 1,047 52.9 1,105 48.2 1,152 46.3 1,196 45.0 1,236 44.2 1,273 43.8 1,312 43.3 1,351 43.3 1,391 43.3 1,433 43.3

Total 26,266 43.4 29,244 41.2 30,679 38.9 32,012 37.9 33,229 37.4 34,315 37.3 35,437 37.3 36,500 37.3 37,595 37.3 38,723 37.3




Marketing 6,887 11.4 7,425 10.5 7,778 9.9 8,084 9.6 8,361 9.4 8,611 9.4 8,870 9.3 9,136 9.3 9,410 9.3 9,692 9.3


Utilities 2,841 4.7 3,262 4.6 3,418 4.3 3,552 4.2 3,674 4.1 3,784 4.1 3,897 4.1 4,014 4.1 4,135 4.1 4,259 4.1

Total 15,989 26.5 17,927 25.3 19,052 24.1 20,023 23.7 20,877 23.4 21,537 23.4 22,219 23.4 22,885 23.4 23,572 23.4 24,279 23.4

HOUSE PROFIT 18,332 30.1 23,740 33.5 29,081 37.0 32,501 38.4 34,764 39.2 36,027 39.3 37,338 39.3 38,490 39.3 39,678 39.3 40,903 39.3

Management Fee 1,212 2.0 1,418 2.0 1,576 2.0 1,691 2.0 1,777 2.0 1,838 2.0 1,900 2.0 1,958 2.0 2,017 2.0 2,078 2.0


FIXED EXPENSES

Insurance 927 1.5 955 1.3 984 1.2 1,013 1.2 1,044 1.2 1,075 1.2 1,107 1.2 1,141 1.2 1,175 1.2 1,210 1.2


Total 2,139 3.5 3,083 4.3 4,136 5.2 5,240 6.2 5,487 6.2 5,669 6.2 5,857 6.2 6,034 6.2 6,217 6.2 6,405 6.2

NET INCOME $14,981 24.6 % $19,239 27.2 % $23,369 29.8 % $25,570 30.2 % $27,499 31.0 % $28,520 31.1 % $29,581 31.1 % $30,498 31.1 % $31,444 31.1 % $32,419 31.1 %1 1 1 1 1 1 1 1 1 1

State Occupancy Tax (6%) $2,114 $2,502 $2,833 $3,050 $3,203 $3,299 $3,398 $3,500 $3,605 $3,713

Sales Tax (6.25%) on Non Rooms 1,585 1,826 1,975 2,107 2,218 2,306 2,397 2,471 2,547 2,626

Local Occupancy Tax (7%) 2,466 2,919 3,305 3,558 3,737 3,849 3,965 4,083 4,206 4,332

Total Taxes $6,165 $7,246 $8,113 $8,715 $9,158 $9,454 $9,760 $10,055 $10,359 $10,671


% of

Gross


As illustrated, the hotel is expected to stabilize at a profitable level. Our positioning of each revenue and expense level is supported by comparable operations or trends specific to this market or this type of convention headquarters property.

HVS Consulting and Valuation Services Nature of the Assignment 2-1

2. Nature of the Assignment

The subject property is expected to serve as the primary convention headquarters hotel for groups utilizing the Dallas Convention Center in Downtown Dallas, Texas. The term “headquarters” is given to that hotel which serves as the center of operations for an event occurring in the city’s convention center. This hotel typically dedicates the largest room block to the event, sometimes devoting up to 90% of its room count during the peak day(s) of the convention to that specific group. The headquarters property also handles a majority of the food and beverage needs of the group (outside of those held in the convention center); in particular, receptions and banquet lunches and dinners. While the adjacent convention center may handle the large-scale exhibits and meetings, the convention headquarters hotel will often handle smaller ancillary meetings and breakouts, as well as pre- and post-group meetings.

The headquarters property typically features one of the larger room counts in the given market, as well as one or two of the larger ballrooms. The most prominent brands for a convention headquarters hotel include Gaylord, Hilton, Hyatt, Loews, Marriott, Omni, Peabory, Sheraton, and Westin. Our report will feature a review of regionally-significant headquarters hotels, as these facilities will compete with the subject property for regionally- and nationally-based meeting demand. The developer of the proposed subject property is the City of Dallas, which has entered into an agreement with Matthews Holdings Southwest as the City's representative to develop, design, and construct the proposed subject property, as well as numerous retail and restaurant venues adjacent to the proposed hotel. The subject site is currently owned by the City of Dallas; the City purchased three parcels totaling 8.3752 acres on June 19, 2008 for a reported purchase price of roughly $40 million from CP-Dallas L&Y LP, which is based in Cincinnati, Ohio. Prior to this sale, this entity had owned the subject site since 1999.

Definition of the Convention Headquarters Hotel

Ownership, Franchise, and Management Assumptions


The proposed hotel will be managed by Omni Hotels Management Corporation. Terms of this agreement call for a fixed base management fee equal to 2.0% of total projected revenues and a fixed fee equal to 0.65% of total projected revenues subordinate to debt service. We have reflected the base management fee of 2.0% of total revenues in our study. Please refer to the forecast of income and expense chapter for additional discussion pertaining to our management fee assumptions.

The proposed subject property will operate as an upscale, convention center headquarters, full-service hotel. As noted previously, the proposed subject property will be brand-managed by Omni, and brand-related costs are therefore included in our forecast of income and expense; a separate franchise fee line item is not applicable.

The effective date of the report is June 8, 2009. The subject site was inspected by Shannon Sampson on March 4, 2009; the site has been previously inspected by Rodney Clough, MAI.

The methodology used to develop this study is based on the market research and valuation techniques set forth in the textbooks authored by Hospitality Valuation Services for the American Institute of Real Estate Appraisers and the Appraisal Institute, entitled The Valuation of Hotels and Motels,4 Hotels, Motels and Restaurants: Valuations and Market Studies,5 The Computerized Income Approach to Hotel/Motel Market Studies and Valuations,6 Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations,7 and Hotels and Motels – Valuations and Market Studies.8

1. All information was collected and analyzed by the staff of DFW Hospitality Consulting, LLC.

4 Stephen Rushmore, The Valuation of Hotels and Motels. (Chicago: American Institute of Real Estate Appraisers, 1978). 5 Stephen Rushmore, Hotels, Motels and Restaurants: Valuations and Market Studies. (Chicago: American Institute of Real Estate Appraisers, 1983). 6 Stephen Rushmore, The Computerized Income Approach to Hotel/Motel Market Studies and Valuations. (Chicago: American Institute of Real Estate Appraisers, 1990). 7 Stephen Rushmore, Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations (Chicago: Appraisal Institute, 1992). 8 Stephen Rushmore and Erich Baum, Hotels and Motels – Valuations and Market Studies. (Chicago: Appraisal Institute, 2001).

Pertinent Dates

Scope of Work


2. The subject site has been evaluated from the viewpoint of its physical utility for the future operation of a hotel, as well as access, visibility, and other relevant factors.We have reviewed the planned scope of facilities for the proposed Omni Convention Center Hotel.

3. The surrounding economic environment, on both an area and neighborhood level, has been reviewed to identify specific hostelry-related economic and demographic trends that may have an impact on future demand for hotels.

4. Dividing the market for hotel accommodations into individual segments defines specific market characteristics for the types of travelers expected to utilize the area's hotels. The factors investigated include purpose of visit, average length of stay, facilities and amenities required, seasonality, daily demand fluctuations, and price sensitivity.

5. An analysis of existing and proposed competition provides an indication of the current accommodated demand, along with market penetration and the degree of competitiveness. Unless noted otherwise, we have inspected the competitive lodging facilities summarized in this report.

6. Documentation for an occupancy and average rate projection is derived utilizing the build-up approach based on an analysis of lodging activity.

7. A detailed projection of income and expense made in accordance with the Uniform System of Accounts for the Lodging Industry sets forth the anticipated economic benefits of the subject property.

HVS Consulting and Valuation Services Description of the Proposed Site and Neighborhood 3-1

3. Description of the Proposed Site and Neighborhood

The suitability of the land for the operation of a lodging facility is an important consideration affecting the economic viability of a property and its ultimate marketability. Factors such as size, topography, access, visibility, and the availability of utilities have a direct impact on the desirability of a particular site.

The site under consideration for the development of the Omni Hotel is located in the southwest quadrant of the intersection of Young Street and South Lamar Street. This site is in the city of Dallas, Texas.

The subject parcel measures approximately 8.38 acres, or 364,824 square feet. The parcel's adjacent uses are set forth in the following table.

Table 3-1 Subject Parcel's Adjacent Uses

Direction

North Young StreetSouth Dallas Convention Center, Ceremonial DriveEast South Lamar StreetWest South Market Street

Adjacent Use

Physical Characteristics


View of Subject Site

Aerial Photograph


View from Site to the North

View from Site to the South


View from Site to the East

View from Site to the West

Primary vehicular access to the proposed Omni Convention Center Hotel will likely be provided by South Lamar Street. Access should also be available from Young Street. The topography of the parcel is generally flat, and the site’s shape is rectangular.

Upon completion of construction, the subject site that is designated specifically for the convention hotel component will not contain any significant portion of undeveloped land that could be sold, entitled, and

Site Utility


developed for alternate use. The portion of the proposed site on which the hotel is to be constructed is expected to be fully developed with site or building improvements, which will contribute to the overall profitability of the hotel. We have taken into consideration the likely concurrent development of complementary uses on the balance (or unused portion) of the proposed site that is owned by the City of Dallas; however, our forecasts are not contingent on this development taking place.

It is important to analyze the site in regard to ease of access with respect to regional and local transportation routes and demand generators. The subject site is readily accessible to a variety of local, county, state, and interstate highways.

Access and Visibility


Map of Regional Access Routes

Primary regional access routes serving the Dallas/Fort Worth Metroplex include Interstates 20, 30, 35, and 45, as well as U.S. Highways 67, 75, and 287. Interstate 20 traverses the southern sector of the metro area and extends to such cities as Abilene and Midland to the west and Shreveport, Louisiana to the east. Interstate 30 commences in west Fort Worth and, after serving as a major east/west route through the metro area, extends in a northeasterly direction to Greenville and Texarkana. Interstate 35, which divides into eastern and western sections when passing through the respective Dallas and Fort Worth metro areas, provides access to Oklahoma City to the north and


Austin and San Antonio to the south. Interstate 45 commences near Downtown Dallas and extends in a southeasterly direction, providing access to the Houston metropolitan area. The subject market is served by a variety of additional local highways, which are illustrated on the map.

From Interstate 35E, motorists take the Commerce Street Exit and proceed east one-quarter mile to South Houston Street. Motorists make a right-hand turn onto South Houston Street and travel south for approximately one-quarter mile to Young Street. Motorists then execute a left-hand turn onto Young Street and travel for roughly one block to the subject site, which is located on the motorists’ right-hand side. The subject site is located at a busy intersection within Dallas' Central Business District (CBD) and adjacent to the Dallas Convention Center. The proposed Omni Convention Center Hotel is expected to have adequate signage at the street; thus, the proposed Omni Hotel should benefit from very good visibility from within its neighborhood. Overall, the subject site benefits from excellent accessibility, and the proposed Omni Hotel should enjoy very good visibility from within the local neighborhood.

The proposed Omni Hotel will be well served by the Dallas/Fort Worth International Airport, which is located approximately 16 miles to the northwest of the subject site. From the airport, motorists will take the South Exit and follow signs to State Highway 183. Motorists will travel eastbound to Interstate 35E and then proceed southbound on Interstate 35E until its intersection with Commerce Street, continuing to the subject site as previously noted. The proposed Omni Hotel will also be served by Dallas Love Field Airport, which is located approximately six miles northwest of the subject site.

The neighborhood surrounding a lodging facility often has an impact on a hotel's status, image, class, style of operation, and sometimes its ability to attract and properly serve a particular market segment. This section of the report investigates the subject neighborhood and evaluates any pertinent location factors that could affect its future occupancy, average rate, and overall profitability.

The subject neighborhood encompasses most of the Central Business District of Dallas, including the Arts District, the Government District, the West End, the Uptown District, and Victory Park; this neighborhood is generally defined by Turtle Creek Boulevard and Lemmon Avenue to the north, Interstate 35E to the west, Interstate 30 to the south, and U.S. Highway 75 to the east. In

Airport Access

Neighborhood


general, this neighborhood is in the revitalization stage of its life cycle, with aggressive pockets of redevelopment and continued growth, primarily throughout the retail/restaurant and high-density residential sectors. The current global economic climate has impacted the Dallas CBD, however, not in a significant way. According to local officials, corporate relocations to the Dallas CBD were at an all-time high in 2008, as were redevelopment projects in the area. Although growth has slowed in the market during the national economic downturn, numerous projects within the CBD were already underway before financing froze, and with solid lease commitments upon completion of construction. A major impact of the economic crisis has been the recent “space-hopping” among renters of restaurant, office, and retail space. When a suitable lower-rent property becomes available, many tenants are opting to move rather than pay a premium for their current lease. Within the immediate proximity of the site, land use is primarily commercial in nature. The neighborhood is characterized by mid- and high-rise office buildings, restaurants, upscale residential developments, entertainment venues, museums and cultural venues, and parking lots. According to the Office of Economic Development, over $157 million has been invested by the public during the last ten years due to the TIF increment. Highlights of downtown revitalization are as follows:

4.9 million square feet of vacant/obsolete space has been renovated since 1996, with an additional 1.0+ million under construction

Retail space spans roughly 170,000 square feet in the Main Street District of the CBD, including 20,000 square feet for Urban Market

One Arts Plaza (24 stories) and Hunt Consolidated Headquarters (400,000 square feet) were the first new-construction office buildings in the downtown market in over 20 years

TIF projects include the redevelopment of the massive downtown Mercantile Complex, to include 366 apartment units, 40,000 square feet of retail, and 431 parking spaces

Some specific businesses in the area include the Dallas Convention Center, Bank of America, Dallas City Hall, and BELO Corporation. Major changes in this neighborhood include the redevelopment of a number of historic office


buildings into upscale residential and mixed-use projects, the opening of The Joule hotel, the continuing development of the Victory Park complex, and the expansion of the Arts District. We note that a number of other projects involving office towers and/or mixed-use components are currently under development or have been proposed for the area. In general, we would characterize the neighborhood as 50% office/retail use, 10% hotel use, 5% residential use, 25% vacant or surface parking lots, and 10% other. The proposed subject property's opening should be a positive influence on the area; the hotel will be in character with and will complement surrounding land uses.

As noted previously, the Omni’s immediate surroundings could also benefit by a new College Football Hall of Fame, for which the government and local community leaders are actively campaigning. The site slated for this potential future attraction is adjacent to the hotel, and if built, would further strengthen not only the neighborhood’s appeal for tourism travel, but would also increase the hotel’s appeal for capturing NCAA and other sports-oriented groups.


Map of Neighborhood

Overall, the supportive nature of the development in the immediate area is considered appropriate for and conducive to the operation of a hotel. The combination of current redevelopment efforts in the CBD, complemented by the development of the Omni Convention Center Hotel and related projects, should not only transform Downtown Dallas's physical make-up, but improve the Dallas economy by creating jobs, generating revenue from operations, and attracting large numbers of conventioneers and visitors. Additional aspects pertaining to downtown attractions (American Airlines


Center) and the formidable increases in downtown residents are presented in the following chapter of our report.

The subject site will reportedly be served by all necessary utilities. We assume that these will be acquired from the most cost-effective providers within the local market.

Geological and soil reports were not provided to us or made available for our review during the preparation of this report. We are not qualified to evaluate soil conditions other than by a visual inspection of the surface; no extraordinary conditions were apparent.

We were not informed of any site-specific nuisances or hazards, and there were no visible signs of toxic ground contaminants at the time of our inspection. Because we are not experts in this field, we do not warrant the absence of hazardous waste, and we urge the reader to obtain an independent analysis of these factors.

According to the Federal Emergency Management Agency map illustrated below, the subject site is located in flood zone X.

Utilities

Soil and Subsoil Conditions

Nuisances and Hazards

Flood Zone


Copy of Flood Map and Cover

The flood zone definition for the X designation is as follows: areas outside the 500-year flood plain; areas of the 500-year flood; areas of the 100-year flood with average depths of less than one foot or with drainage areas less than one square mile and areas protected by levees from the 100-year flood.

According to the local planning office, the subject property is zoned as follows: CA-1(A) - Central Area - 1. This zoning designation allows for most commercial uses, including large office towers, retail outlets, service industries, and hotels and motels. Based on this information and our review of this zoning code, the subject property’s proposed use should conform to local zoning regulations. However, we do not warrant the subject property’s conformance with local zoning regulations and recommend an independent verification. We assume that all necessary permits and approvals will be secured (including an appropriate liquor license if applicable), and that the subject property will be constructed in accordance with local zoning ordinances, building codes, and all other applicable regulations. Our zoning analysis should be verified before any physical changes are made to the site.

Zoning


There are no known easements attached to the property that would significantly affect the utility of the site or marketability of this project. We do assume that appropriate connections will be made between the subject building and the convention center in order to maximize the synergy between the hotel and the center.

We have analyzed the issues of size, topography, access, visibility, and the availability of utilities. The subject site is located within the Central Business District and is proximate to the Arts District, the West End, Victory Park, and Uptown. The site is also located adjacent to the Dallas Convention Center and along the main DART Rail Line, which provides easy access to other areas of the city. In general, the site should be well suited for future hotel use, with acceptable access, visibility, and topography for an effective operation.

Easements and Encroachments

Conclusion

HVS Consulting and Valuation Services Market Area Analysis 4-1

4. Market Area Analysis

The economic vitality of the market area and neighborhood surrounding the subject site is an important consideration in forecasting lodging demand and future income potential. Economic and demographic trends that reflect the amount of visitation provide a basis from which to project lodging demand. The purpose of the market area analysis is to review available economic and demographic data to determine whether the local market will undergo economic growth, stabilize, or decline. In addition to predicting the direction of the economy, the rate of change must be quantified. These trends are then correlated based on their propensity to reflect variations in lodging demand, with the objective of forecasting the amount of growth or decline in visitation by individual market segment, i.e. commercial, meeting and group, and leisure.

The market area for a lodging facility is the geographical region where the sources of demand and the competitive supply are located. The subject property is located in the city of Dallas, the county of Dallas, and the state of Texas. Nestled in the rolling prairies of north-central Texas, Dallas is a sophisticated, bustling metropolis that has earned its reputation in the marketplace of the world. Less than 30 miles separate Dallas from neighboring Fort Worth, leading to the coinage of "Metroplex” to describe the two cities and their surrounding suburbs. Dallas’ economy is highly diversified, and the city is the leading commercial, marketing, and industrial center of the southwest; as such, Dallas boasts a broadly diverse business climate, led by the technology sector. Major industries include defense, financial services, information technology and data, life sciences, telecommunications, and transportation. It has been reported that approximately 50% of jobs in the region are service-oriented, belonging to such fields as healthcare, recreation and tourism, and financing.

Market Area Definition


Dallas

The subject property’s market area can be defined by its Metropolitan Statistical Area (MSA): Dallas-Fort Worth-Arlington, TX MSA. The MSA is the most standard definition used in comparative studies of metropolitan areas. The federal government defines an MSA as a large population nucleus, which, together with adjacent counties, has a higher degree of social integration. The following exhibit illustrates the market area.


Map of Local Market Area

Texas is situated in the southern United States and measures roughly 262,015 square miles. It is bordered by Louisiana and Arkansas to the east, the Gulf of Mexico to the southeast, Mexico to the south and southwest, New Mexico to the west, and Oklahoma to the north. Texas is the second largest state and is characterized predominately by open plains. Interstate 35 bisects the state on a north/south axis, while Interstates 10 and 20 provide regional east/west access.

Texas Overview


The capital of Texas is Austin, located in the central part of the state. Other major cities include Dallas/Fort Worth (north), Houston (south), San Antonio (south), among many others that provide economic benefits. Although the weather varies somewhat among the state's different regions, winters are mild and summers are warm. Precipitation is plentiful in areas, allowing the state to be the nation's greatest cotton producer. Oil is an important element of Texas' natural resource production. Manufactured goods include chemical and allied products, petroleum and coal products, food and kindred products, and transportation equipment. A primary source of economic and demographic statistics used in this analysis is the Complete Economic and Demographic Data Source published by Woods & Poole Economics, Inc. – a well-regarded forecasting service based in Washington, D.C. Using a data base containing more than 900 variables for each county in the nation, Woods & Poole employs a sophisticated regional model to forecast economic and demographic trends. Historical statistics are based on census data and information published by the Bureau of Economic Analysis. Projections are formulated by Woods & Poole, and all dollar amounts have been adjusted for inflation, thus reflecting real change. The data are summarized in the following table.

Economic and Demographic Review


Table 4-1 Economic and Demographic Data Summary

Average AnnualCompounded Change

1990 2000 2008 2015 1990-00 2000-08 2008-15

Resident Population (Thousands)Dallas County 1,863.5 2,225.9 2,379.3 2,483.3 1.8 % 0.8 % 0.6 %Dallas-Fort Worth-Arlington, TX MSA 4,014.3 5,197.3 6,206.3 6,868.8 2.6 2.2 1.5Dallas-Fort Worth, TX CMSA 4,283.2 5,525.3 6,572.4 7,268.5 2.6 2.2 1.4State of Texas 17,056.8 20,951.8 24,219.2 26,539.1 2.1 1.8 1.3United States 249,622.8 282,217.0 306,045.0 327,310.6 1.2 1.0 1.0

Per-Capita Personal Income*Dallas County $30,512.0 $39,055.0 $37,551.0 $41,645.0 2.5 (0.5) 1.5Dallas-Fort Worth-Arlington, TX MSA 28,064.0 36,810.0 34,833.0 37,932.0 2.7 (0.7) 1.2Dallas-Fort Worth, TX CMSA 27,550.0 36,124.0 34,375.0 37,441.0 2.7 (0.6) 1.2State of Texas 23,454.0 30,680.0 31,266.0 34,214.0 2.7 0.2 1.3United States 26,222.0 32,341.0 34,603.0 37,739.0 2.1 0.8 1.2

W&P Wealth IndexDallas County 120.2 122.0 110.5 111.9 0.2 (1.2) 0.2Dallas-Fort Worth-Arlington, TX MSA 110.7 115.9 103.6 103.4 0.5 (1.4) (0.0)Dallas-Fort Worth, TX CMSA 108.3 113.4 101.9 101.7 0.5 (1.3) (0.0)State of Texas 92.2 95.8 91.5 91.7 0.4 (0.6) 0.0United States 100.0 100.0 100.0 100.0 0.0 0.0 0.0

Food & Beverage Sales (Millions)*Dallas County $2,752.1 $3,580.5 $4,586.7 $5,282.9 2.7 3.1 2.0Dallas-Fort Worth-Arlington, TX MSA 4,876.0 7,063.2 9,871.0 11,966.4 3.8 4.3 2.8Dallas-Fort Worth, TX CMSA 5,061.8 7,338.1 10,231.0 12,399.5 3.8 4.2 2.8State of Texas 16,697.6 23,734.2 32,479.7 39,139.0 3.6 4.0 2.7United States 249,352.8 322,246.1 411,452.9 484,208.0 2.6 3.1 2.4

Total Retail Sales (Millions)*Dallas County $23,536.2 $32,914.7 $38,627.2 $43,641.2 3.4 2.0 1.8Dallas-Fort Worth-Arlington, TX MSA 44,468.1 68,799.3 89,257.2 106,491.6 4.5 3.3 2.6Dallas-Fort Worth, TX CMSA 46,679.8 72,206.4 93,428.9 111,405.5 4.5 3.3 2.5State of Texas 160,671.3 245,089.0 310,820.4 368,078.4 4.3 3.0 2.4United States 2,409,078.7 3,321,730.6 3,957,496.4 4,579,122.0 3.3 2.2 2.1

* Inflation Adjusted

Source: Woods & Poole Economics, Inc.


The U.S. population has grown at an average annual compounded rate of 1.0% from 2000 to 2008. The county’s population has grown more slowly than the nation’s population; the average annual growth rate of 0.8% between 2000 and 2008 reflects a gradually expanding area. Following this population trend, per-capita personal income contracted slowly, at 0.8% on average annually for the county between 2000 and 2008. Local wealth indexes have remained stable in recent years, registering a relatively high 110.5 level for the county in 2008. These data underscore the health of the Dallas market and the wealth level that is present; this level should support an upper-upscale headquarters facility and the price point forecast for this property in our report.

Food and beverage sales and retail sales continue to show positive change within the county, the state, and the nation; a continued 2.0% average annual growth rate is anticipated for the county’s food and beverage sales from 2008 through 2015. A modestly slower 1.8% positive average annual change is expected in county retail sales through 2015. This trend is healthy and supportive of the development of a headquarters hotel property that would contain a significant food and beverage operation.

The characteristics of an area's workforce provide an indication of the type and amount of transient visitation likely to be generated by local businesses. Sectors such as finance, insurance, and real estate (FIRE); wholesale trade; and services produce a considerable number of visitors who are not particularly rate sensitive. The government sector often generates transient room nights, but per-diem reimbursement allowances often limit the accommodations selection to budget and mid-priced lodging facilities. Contributions from manufacturing, construction, transportation, communications, and public utilities (TCPU) employers can also be important, depending on the company type.

The following table sets forth the county workforce distribution by business sector in 1990, 2000, and 2008, as well as a forecast for 2015.

Workforce Characteristics


Table 4-2 Historical and Projected Employment (000s) Average Annual

Compounded ChangePercent Percent Percent Percent

Industry 1990 of Total 2000 of Total 2008 of Total 2015 of Total

Farm 1.0 0.1 % 1.1 0.1 % 1.1 0.1 % 1.2 0.1 % 0.6 % 0.2 % 0.8 %Agriculture Services, Other 8.8 0.6 13.8 0.7 17.4 0.9 18.9 0.9 4.7 2.9 1.2Mining 31.8 2.2 17.1 0.9 14.4 0.8 15.1 0.7 (6.0) (2.2) 0.7Construction 57.1 3.9 107.3 5.6 104.4 5.5 115.2 5.4 6.5 (0.3) 1.4Manufacturing 190.3 13.1 193.6 10.2 149.7 7.8 151.6 7.1 0.2 (3.2) 0.2Trans., Comm. & Public Utils. 84.2 5.8 145.5 7.7 131.4 6.9 145.3 6.8 5.6 (1.3) 1.4Total Trade 341.8 23.5 426.2 22.4 395.8 20.7 425.0 19.9 2.2 (0.9) 1.0 Wholesale Trade 118.5 8.1 149.5 7.9 137.8 7.2 152.6 7.1 2.3 (1.0) 1.5 Retail Trade 223.3 15.3 276.7 14.6 258.0 13.5 272.5 12.8 2.2 (0.9) 0.8Finance, Insurance, & Real Estate 179.5 12.3 207.6 10.9 224.2 11.7 237.2 11.1 1.5 1.0 0.8Services 428.6 29.4 632.1 33.3 701.5 36.7 838.6 39.3 4.0 1.3 2.6Total Government 133.4 9.2 155.1 8.2 172.6 9.0 188.0 8.8 1.5 1.3 1.2 Federal Civilian Govt. 30.2 2.1 28.7 1.5 27.0 1.4 27.7 1.3 (0.5) (0.8) 0.4 Federal Military Govt. 9.1 0.6 7.4 0.4 6.9 0.4 6.9 0.3 (2.1) (0.8) 0.0 State & Local Govt. 94.0 6.5 119.0 6.3 138.6 7.2 153.3 7.2 2.4 1.9 1.4

TOTAL 1,456.5 100.0 % 1,899.6 100.0 % 1,912.4 100.0 % 2,136.0 100.0 % 2.7 % 0.1 % 1.6 %

MSA 2,526.3 — 3,501.1 — 4,162.1 — 4,398.5 — 3.3 % 2.2 % 0.8 %U.S. 139,380.9 — 170,512.7 — 194,464.2 — 203,211.4 — 1.9 1.7 0.6

Source: Woods & Poole Economics, Inc.

1990-2000 2000-2008 2008-2015


This source reports that significant employment growth occurred in the services sector between 1990 and 2008. During this time frame, services employment increased from 428,600 persons (rounded) to 701,500 persons (rounded), reflecting an increase of 64%. Woods & Poole forecasts indicate expected employment growth at a rate of 1.6% annually through 2015. This strengthening trend in employment growth is a positive factor and indicates an economy enduring the current national recession. The following table reflects radial demographic trends for our market area measured by three points of distance from the intersection of South Griffin and Commerce in Downtown Dallas.

Radial Demographic Snapshot


Table 4-3 Demographics by Radius

Population 2012 Projection 16,276 147,802 347,143 2007 Estimate 14,203 144,176 345,332 2000 Census 11,188 138,559 342,269 1990 Census 6,223 123,995 312,335

Growth 2007-2012 14.6% 2.5% 0.5% Growth 2000-2007 26.9% 4.1% 0.9% Growth 1990-2000 79.8% 11.7% 9.6%

Households 2012 Projection 2,920 53,568 122,661 2007 Estimate 2,358 52,074 122,775 2000 Census 1,446 49,906 123,401 1990 Census 452 43,471 114,440

Growth 2007-2012 23.8% 2.9% -0.1% Growth 2000-2007 63.1% 4.3% -0.5% Growth 1990-2000 219.9% 14.8% 7.8%

Income2007 Est. Average Household Income $102,724 $62,702 $67,7862007 Est. Median Household Income 69,341 40,315 41,5292007 Est. Per Capita Income 25,888 23,795 24,706

2007 Est. Civ Employed Pop 16+ by Occupation* 2,902 60,641 143,886 Management, Business, and Financial Operations 779 9,464 21,559 Professional and Related Occupations 814 10,320 26,347 Service 168 10,009 22,463 Sales and Office 736 13,180 34,469 Farming, Fishing, and Forestry 3 106 282 Construction, Extraction and Maintainance 121 9,659 19,212 Production, Transportation and Material Moving 281 7,905 19,554

0.00 - 1.00 miles 0.00 - 3.00 miles 0.00 - 5.00 miles

Source: Claritas, Inc.

This source reports a population of 14,203 within a one-mile radius of the selected intersection, and 2,358 households within this same radius. What is most telling is the 2012 forecast, which shows substantial growth concurrent with the ongoing residential loft development of Downtown Dallas. This strengthening factor is seen as a critical component to reinventing the downtown landscape and moving toward a more highly utilized


neighborhood, and one that is also considered more attractive and salable to national convention meeting planners. As noted previously, Downtown Dallas is showing significant strength in major business and industry development. Comerica relocated to the area from Detroit, and AT&T, Inc. moved its corporate headquarters to the neighborhood as well. This trend reversed a history of decline and stagnation that had been experienced on the corporate stage in the downtown area for decades.

Providing additional context for understanding the nature of the regional economy, the following table presents a list of the major employers in the subject property’s market.

Table 4-4 Major Employers

Number ofRank Firm Employees

1 Wal-Mart Stores, Inc. 34,8712 AMR Corporation 25,0763 AT&T, Inc. 16,6004 Baylor Health Care System 14,7305 Lockheed Martin Aeronautics Company 14,0006 Verizon Communications, Inc. 14,0007 Texas Health Resources 13,4948 HCA North Texas Division 12,0009 Texas Instruments 11,30010 Citigroup 10,625

Source: Dallas Morning News

The following bullet points highlight major demand generators for this greater Dallas market:

AT&T, Inc. provides telecommunications devices and services to consumers and businesses around the world. With over 300,000 employees and annual revenue of approximately $115 billion, AT&T was ranked the twelfth-largest company in the world by Forbes in 2008. AT&T announced in June of 2008 that it will move its headquarters and 700 of its top executives from San Antonio to downtown Dallas. Wayport, a company that manages wireless Internet services, was acquired in

Major Business and Industry


December of 2008 by AT&T. This acquisition will expand AT&T's Wi-Fi Hotspot operation to more than 80,000 locations worldwide. In December of 2008, AT&T announced that it would eliminate 12,000 jobs worldwide in 2009, mostly from landline telephone operations; the company announced in March of 2009 that is was adding roughly 3,000 jobs to the wireless operations and spending approximately $19 billion in capital improvements for this division. Although the current economic climate is prompting cut-backs in corporate travel this year, the strengthening of the AT&T presence in downtown Dallas should bode well for the market over the longer term.

The wholesale merchandise industry is important within this region. The Dallas Market Center (DMC) is one of the largest hospitality demand generators in the city. The complex of specialized wholesale and display facilities is one of the world’s largest merchandise marts. The Dallas Market Center conducts some 50 markets annually, attracting more than 400,000 retail buyers from 50 states and 84 countries. These markets offer hundreds of daily events and seminars geared toward the retail industry. The DMC complex includes the Dallas Merchandise Center, the World Trade Center, and the International Apparel Mart, all located within seven million square feet in six contiguous buildings. With an estimated $7.5 billion of wholesale transactions annually, the Dallas Market Center attracts buyers and vendors who require in excess of 750,000 hotel room nights annually. The current economic crisis will inevitably prompt lower levels of activity at the DMC in 2009; however, as the economy picks up steam in 2010 through 2012, hotel demand from this source should normalize and strengthen. This will be well timed for the opening of the Omni Convention Center Hotel.

The medical sector is one of prominence in the Dallas economy. The University of Texas Southwestern Medical Center ranks among the top academic medical centers in the world. It includes three degree-granting institutions: Southwestern Medical School, Southwestern Graduate School of Biomedical Sciences, and Southwestern Allied Health Sciences School. The three schools train some 2,300 medical, graduate, and allied health students, residents and postdoctoral fellows each year. The faculty members and residents provide medical care to nearly 75,000 hospitalized patients and oversee more than 1.7 million outpatients annually. Affiliated hospitals include Parkland Memorial, Children’s Medical, Zale Lipshy University, and St. Paul University hospitals. Recent news in this sector includes the University of Texas Southwestern's proposed BioCenter, to be located within the Southwestern Medical District. The


13-acre BioCenter is expected to feature approximately 500,000 square feet of laboratory, office, and research space. The first phase of construction, which will include the opening of the first building, is expected to be completed in the summer of 2009.

The Dallas economy has enjoyed strengthening and economic expansion in recent years, which stems directly from diversification of key drivers and industries. The Central Business District (CBD), Victory, and Uptown areas benefit from new office space construction and new residential projects. Given the current economic climate and overall health of many manufacturing and banking corporations, cutbacks in employment and corporate travel are occurring in the Dallas market. While this has begun to impact the local market in the recent past, and in 2009 in particular, important economic developments will fuel the recovery in the 2010 through 2012 period. The nearby Trinity River Project has begun infrastructure improvements and residential construction. This project is the most complex and the largest urban development effort ever undertaken by the City of Dallas; the project will increase flood protection for the area, create new outdoor recreational amenities for city residents, protect and expand the Great Trinity Forest, provide transportation improvements through the area, and stimulate economic development and neighborhood revitalization in areas adjacent to the project. The CBD continues to attract global corporations, as evidenced by the relocations of the corporate headquarters of Comerica, from Detroit to Downtown Dallas in 2007, and AT&T from San Antonio to the CBD in 2008. Additionally, two major leisure-demand generators planned for 2009/10 include the Dallas Center for the Performing Arts and Woodall Rodgers Park. Therefore, although the national and local economy is expected to slow considerably during the first three quarters of 2009, the Dallas area's diversified combination of deeply rooted anchors, telecommunications industry growth, and tourism should support a recovery following this current correction. We have considered these positive aspects in our forecasts; however, we have also been careful to take into consideration market-demand attributes in 2009 to reflect the currently declining trends in local and national travel.

The following table presents historical unemployment rates for the proposed subject property’s market area.

Unemployment Statistics


Table 4-5 Unemployment Statistics

Year

1998 4.4 % 3.3 % 4.9 % 4.9 %1999 4.2 3.1 4.7 4.52000 4.7 3.6 4.4 4.22001 6.4 4.7 5.0 4.02002 8.9 6.5 6.4 4.72003 8.9 6.6 6.7 5.82004 7.9 5.8 6.0(d) 6.02005 5.7 5.2 5.4(d) 5.52006 5.3 5.3 4.9(d) 5.12007 4.6 4.3 4.4(d) 4.6

Recent Month - November2007 4.5 % 4.1 % 4.2 % 4.7 %2008 6.3 5.7 5.4 6.8

City of

* Letters shown next to data points reflect revised population controls and/or model re-estimation implemented by the BLS.

Texas U.S.

Source: U.S. Bureau of Labor Statistics

Dallas MSA

The national unemployment rate was 4.6% in 2007, reflecting no overall change from 2006. During the first half of 2007, the national unemployment rate was below that of the corresponding period in 2006; however, 2007 unemployment rates rose for the months of September through December to levels higher than those of the corresponding months in 2006. The unemployment rate increased dramatically in 2008. Following job losses of over 1.0 million in the last two months of 2008, year-end unemployment is expected to increase to 7.0, the highest unemployment rate since 1993. Given the present instability of the U.S. economy and financial markets, it is almost certain that unemployment rates will remain heightened in 2009. Locally, the unemployment rate was 4.6% in 2007; for this same area in 2008, the most recent month’s unemployment rate registered at 6.3%, versus 4.5% for the same month in 2007.

Unemployment rates in the city of Dallas declined between 2003 and 2007. The most recent comparative period illustrates a notable increase, and heightened unemployment is likely to remain the norm for the Dallas area through much of 2009. As the economy emerges from recession in 2010 through 2012, local employment should strengthen at entities such as AT&T,


Inc. and Comerica, which have recently expanded operations in the market. Moreover, our interviews with economic development officials reflect a promising outlook for the area, as the Trinity River Project, the Lower Oak Lawn Development, the Arts District, and the Uptown District continue construction efforts.

Trends in occupied office space are typically among the most reliable indicators of lodging demand, because firms that occupy office space often exhibit a strong propensity to attract commercial visitors. Thus, trends that cause changes in vacancy rates or in the amount of occupied office space may have a proportional impact on commercial lodging demand, and a less direct effect on meeting demand. The following table details office space statistics for the pertinent market area.

Table 4-6 Office Space Statistics

Sub-Market

Central Expressway 12,357,833 16.04 % $20.53 30,084Dallas CBD 27,672,812 25.84 18.98 (334,097)East Dallas 5,497,071 11.30 15.52 (10,752)Far North Dallas 32,245,858 20.42 26.84 64,389Fort Worth CBD 7,649,640 11.98 28.73 (20,264)Las Colinas 22,257,256 27.25 21.01 177,153LBJ Freeway 19,922,272 21.52 17.52 (18,895)Lewisville/Denton 5,115,856 26.61 17.84 126,755Mid Cities 13,674,405 18.30 17.00 39,432North Fort Worth 755,688 4.45 19.12 0NE Fort Worth 1,758,864 14.08 16.75 (11,036)Preston Center 3,742,357 8.09 28.26 (51,558)Richardson/Plano 14,371,343 18.14 19.37 149,310South Forth Worth 7,255,321 8.24 19.91 46,090SW Dallas 1,478,337 12.09 14.41 (3,531)Stemmons Freeway 9,494,855 33.00 14.13 55,676Uptown/Turtle Creek 9,288,667 17.99 30.42 186,794

Totals 194,538,435 20.69 % $19.39 425,550

Net Rentable Vacancy Average Asking Sale & Lease Activity (SF)

Source: CBRE, Fourth Quarter 2008 Trends Report

Area (SF) Rate Lease Rate

Overall, office vacancy represented 20.69% in the greater market area, and the area’s lease rate was $19.39. The subject property’s location is contained in

Office Space Statistics


the category named Dallas CBD. This category shows a vacancy rate of 25.84% and a lease rate of $18.98. The CBD office market has emerged as one of the most desired locations in Dallas due to the abundance of Class A office space, as well as revitalization efforts throughout the CBD. With the second-most rentable square feet among all of Dallas' submarkets, the low vacancy rates, and the increasing rental rates, the CBD office market proves to be a major hub for much of the city's growth and demand. While the current economic downturn will slow employment growth and hotel demand in the CBD during the next twelve months, the pace of office space absorption remains strong overall, and new available space in the development pipeline should quickly be absorbed. This submarket is particularly driven by necessary redevelopments in response to tenant demand for Class A and Trophy space. This submarket has become a prime choice for financial institutions, telecommunications conglomerates, and large law firms. These tenants continue to add jobs and absorb new office space. This should, in turn, lead to greater demand for lodging within the CBD. A convention center serves as a gauge of visitation trends to a particular market. Convention centers also generate significant levels of demand for area hotels and serve as a focal point for community activity. Typically, hotels within the closest proximity to a convention center – up to three miles away – will benefit the most. Hotels serving as headquarters for an event benefit the most by way of premium rates and hosting related banquet events. During the largest of conventions, peripheral hotels may benefit from compression within the city as a whole.

The Dallas Convention Center contains a total of 1,150,000 square feet of net rentable space. The center offers two ballrooms of 27,000 and 20,000 square feet, respectively; a theater with 1,770 opera-style seats; and an arena that features seating for approximately 9,800. In 1997, the Dallas City Council funded a $125-million expansion and renovation of the center. The expansion, which debuted on September 26, 2002, added a 203,000-square-foot exhibit hall contiguous with the center’s main exhibit level. The hall is now marketed as the world’s largest column-free exhibit space.

Convention Activity


Convention Center

The following table illustrates recent use statistics for this facility.

Table 4-7 Convention Center Statistics

Percent PercentYear Change Change

2001 33 — 480,389 — 2002 38 15.2 % 791,200 64.7 %2003 36 (5.3) 808,400 2.22004 32 (11.1) 714,500 (11.6)2005 32 0.0 735,025 2.92006 40 25.0 743,289 1.12007 39 (2.5) 911,360 22.62008 36 (10.0) 868,077 (4.7)

Number of Conventions Number of Delegates

Source: Dallas Convention and Visitors Bureau

The Dallas Convention and Visitors Bureau (DCVB) attributed the decline in 2003 and 2004 to several factors, including the construction occurring at the convention center during this time, a changeover in management at the Dallas Convention and Visitors Bureau in 2003, and an increasingly competitive convention environment. After slow attendee growth in 2005 and 2006, significant growth was seen in attendance in 2007. After reaching an all-time high in attendance for 2007, the number of attendees slipped in


2008; however, we note that the 2008 attendance figure is the second highest over the illustrated period shown. We have reflected an decrease in meeting and group travel in 2009, and a year of very slow growth in 2010, in order to appropriately reflect the decrease in convention travel during this economic downturn that is being experienced nationwide. The addition of the new headquarters hotel in 2012 should significantly enhance the salability of the center after this point; this expectation is built into our growth rates for the meeting and group segment over the longer term. These aspects will be discussed in greater detail in the Supply and Demand Analysis chapter of our report. Airport passenger counts are important indicators of lodging demand. Depending on the type of service provided by a particular airfield, a sizable percentage of arriving passengers may require hotel accommodations. Trends showing changes in passenger counts also reflect local business activity and the overall economic health of the area.

Dallas/Fort Worth International Airport is one of the nation's largest airports and serves as headquarters for American Airlines, which generates over 80% of the airport’s activity. A new international terminal and a Grand Hyatt hotel opened at the airport in the summer of 2005. A high-speed tram system, Skylink, was also completed in 2005 to transport passengers among the airport's five terminals. In 2007, the airport received the prestigious “Highest in Customer Satisfaction for Large Airports” award from J.D. Power and Associates. A $45-million renovation of Terminals A, B, C, and E is expected to be completed by year-end 2009; updates are planned to include restroom renovations, new flight information display screens, lighting improvements, and jet bridge and ramp equipment upgrades. The following table illustrates recent operating statistics for the primary airport facility serving the proposed subject property’s submarket.

Airport Traffic


Table 4-8 Airport Statistics - DFW International Airport

Year

1999 60,000,127 — — 2000 60,771,052 1.3 % 1.3 %2001 55,150,693 -9.2 -4.12002 52,814,185 -4.2 -4.22003 53,253,607 0.8 -2.92004 59,412,217 11.6 -0.22005 59,176,265 -0.4 -0.22006 60,226,138 1.8 0.12007 59,802,556 -0.7 0.02008 57,093,187 -4.5 -0.6

*Annual average compounded percentage change from the previous year**Annual average compounded percentage change from first year of data

Source: Dallas/Fort Worth International Airport

TrafficPercent PercentPassengerChange* Change**

Local (DFW International) Passenger Traffic vs. National Trend

750

850

950

1,050

1,150

1,250

1,350

1,450

1,550

1,650

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: HVS, Local Airport Authority

NationalActivity

48,000

50,000

52,000

54,000

56,000

58,000

60,000

62,000

Local Activity

National Passenger Activity (Millions) Local Passenger Activity (000)

This facility recorded just over 57 million passengers in 2008. The change in passenger traffic between 2007 and 2008 was -4.5%. The following table illustrates recent operating statistics for the secondary airport facility serving the proposed subject property’s submarket.


Table 4-9 Airport Statistics - Dallas Love Field

Year

1999 6,820,687 — — 2000 7,077,549 3.8 % 3.8 %2001 6,685,618 -5.5 -1.02002 5,622,754 -15.9 -6.22003 5,588,930 -0.6 -4.92004 5,889,756 5.4 -2.92005 5,909,599 0.3 -2.42006 6,874,717 16.3 0.12007 7,953,385 15.7 1.92008 8,060,792 1.4 1.9

*Annual average compounded percentage change from the previous year**Annual average compounded percentage change from first year of data

Passenger PercentChange**

Source: Dallas Love Field

PercentTraffic Change*

Dallas Love Field is a public airport located northwest of Dallas, Texas. Love Field was the primary airport for Dallas until Dallas/Fort Worth International Airport opened in 1974. Love Field celebrated 85 years in the aviation industry in 2002 and was designated as a Texas State Historical Site in 2003. Love Field is now Dallas’ secondary airport and is primarily serviced by Southwest Airlines. Other airlines serving the facility include Continental Express, American Airlines, and American Eagle. Air traffic registered nearly eight million passengers in 2007. Annual increases in passenger traffic at Dallas Love Field can be attributed to Southwest Airlines' ability to offer more routes. A law repealing the Wright Amendment was enacted in October of 2006. The Wright Amendment, a federal law governing traffic at Dallas Love Field Airport, originally limited most non-stop flights to destinations within Texas and neighboring states. The new law eliminates some of the restrictions imposed by the Wright Amendment and leaves others intact until 2014. Southwest Airlines began offering one-stop or connecting service between Love Field and 25 destinations outside the Wright zone on October 19, 2006. Year-to-date, decreased passenger traffic is attributed to Southwest Airlines cutting nearly 200 flights from its winter schedule.

The market benefits from a variety of tourist and leisure attractions in the area. The peak season for tourism in this area is from May to September. During other times of the year, weekend demand comprises travelers passing through en route to other destinations, people visiting friends or relatives,

Tourist Attractions


and other similar weekend demand generators. Primary attractions in the area include the following:

The Dallas Museum of Art, established in 1903, features more than 23,000 works of art. The Dallas Museum of Art is the anchor of the Dallas Arts District and serves as the cultural center for the city with diverse programming, ranging from exhibitions and lectures to concerts and literary readings.

The Nasher Sculpture Center opened in 2003 at a cost of $70 million and features an extraordinary collection of sculpture and art. The Center is situated adjacent to the Dallas Museum of Art.

The American Airlines Center hosts the Dallas Mavericks basketball team and the Dallas Stars hockey team, as well as many high-profile concerts, special events, and shows.

The West End entertainment district features a multitude of restaurants, shops, and bars. This historic area, which is replete with buildings from the late 19th and early 20th centuries, is also home to the Holocaust Museum, the Sixth Floor Museum, and the "Old Red" Courthouse and Museum.

Nasher Sculpture Center


Furthermore, we note that the potential granting of the future College Football Hall of Fame to the site adjacent to the Omni would further solidify the market’s growing popularity for tourism demand. This section discussed a wide variety of economic indicators for the pertinent market area. The economic health of this market area has remained relatively stable, despite the nation's economic fluctuations during the historical period shown. After a period of rapid economic expansion mid-decade, the market area has entered into a period of slower growth, as the local economy is affected by the national economic conditions. Our market interviews and research revealed that expansion has slowed at many private-sector employers while the healthcare sector remains strong. Areas in the market, such as the CBD, the Market Center, and the Medical Center, benefit from revitalization efforts, new office space construction, and new medical facilities, respectively, and the current national economic slowdown appears to have minimally affected this market. However, we note that the underlying rate of the nation's economic recovery is still unknown, and the true impact of the global economic climate to Dallas—and the convention and meetings market—is uncertain. Based on the diversity of Dallas' economic and employment base, the outlook for the area is generally optimistic.

Our analysis of the outlook for this specific market also considers the broader context of the national economy. According to a recent World Bank report, "The stresses in the financial markets in the United States that first emerged in the summer of 2007 transformed themselves into a full-blown global financial crisis in the fall of 2008." In the US, credit markets froze, the stock market crashed, and consumer spending dropped at the fastest rate since the 1930s. While the near-term outlook is problematic, this downturn must be considered in the context of the economic picture over the longer term. Economic activity is cyclical in nature, and past downturns in the national economy have been followed by periods of growth and recovery. Thus, over the longer term, the outlook includes a return to stable growth, with the potential for a period of strong growth as the economy rebounds from the current conditions.

Conclusion

HVS Consulting and Valuation Services Overview of the United States Meetings Market 5-1

5. Overview of the United States Meetings Market

Meetings represent an important source of income for hotels. These events are generally planned for ten or more people, depending on the needs of the group and the capacity of the hotel’s function space or nearby convention center. Meetings can be classified into many different categories, such as corporate, association, and SMERFE; SMERFE is an acronym for meetings that are social, military, educational, religious, fraternal, or ethnic in purpose. This national trends overview will focus on the corporate and association meetings categories.

Meetings & Conventions Magazine publishes a bi-annual report on the meetings industry, named the Meetings Market Report. This well-respected study has been published since 1974 and represents a compilation of reports and opinions of meeting planners. We have illustrated samples of data from this report in this overview. The latest report was published in June of 2008, which includes mainly 2007 data. The next report will be published in June of 2010, which will cover 2009 data.

It is important to note that these estimated industry figures do not represent the nominal total output for the industry; however, HVS believes the trends indicated are representative of the convention industry at large. The data shown represent estimates of the total number of events, attendees, and expenditures generated by subscribers to Meetings & Conventions Magazine; the publication estimates that the data represent roughly 80% of total spending in the industry in 2007. Membership consists of 55,452 corporate meeting planners and 14,643 association meeting planners, according to the most recently published information; the most recent survey included 684 complete responses from corporate and association meeting planners.

The following table provides a summary of the number of meetings, number of attendees, and dollars of expenditures from 1985 through 2007, with data recorded at each odd-year interval.


Table 5-1 Summary of National Corporate, Convention, and Association Meetings Market

Total Number of MeetingsYear

1985 706,100 12,200 185,400 903,7001987 807,200 12,700 181,700 1,001,6001989 866,800 12,600 186,600 1,066,0001991 806,200 10,200 215,000 1,031,4001993 801,300 11,800 206,500 1,019,6001995 797,100 10,900 175,600 983,6001997 783,900 11,300 189,500 984,7001999 835,700 11,600 174,200 1,021,5002001 844,100 11,800 177,700 1,033,6002003 890,900 12,200 155,600 1,058,7002005 1,020,300 12,700 210,600 1,243,6002007 1,080,400 13,700 227,000 1,321,100

Total Number of AttendeesYear

1985 39,800,000 13,500,000 18,200,000 71,500,0001987 47,300,000 10,700,000 16,300,000 74,300,0001989 58,400,000 13,600,000 21,700,000 93,700,0001991 49,600,000 8,600,000 22,600,000 80,800,0001993 55,100,000 10,700,000 18,700,000 84,500,0001995 49,300,000 13,000,000 15,100,000 77,400,0001997 49,900,000 11,700,000 17,900,000 79,500,0001999 51,111,111 12,188,889 15,600,000 78,900,0002001 51,500,000 12,500,000 15,900,000 79,900,0002003 56,400,000 12,400,000 15,800,000 84,600,0002005 79,742,000 18,930,000 37,847,000 136,519,0002007 84,068,000 19,681,000 37,473,000 141,222,000

Total Expenditures (In Billions)Year

1985 7.5 12.7 11.2 31.41987 7.1 11.8 10.0 28.91989 9.7 15.0 14.9 39.61991 8.7 11.0 15.3 35.01993 10.6 15.5 14.3 40.41995 8.6 16.8 12.0 37.41997 10.8 16.7 14.3 41.81999 10.2 16.3 13.7 40.22001 10.3 16.6 13.9 40.92003 14.9 16.0 13.7 44.62005 31.8 33.6 41.8 107.22007 30.2 34.6 38.1 102.9

Sources: 1996, 2000, 2002, 2004, 2006. & 2008 Meetings Market Reports, Meetings & Conventions Magazine

Corporate Convention Association Total




As noted in the above summary, the total number of meetings peaked first in 1989 at just over one million. By 1991, the quantity of meetings began to decline until a turning point in the mid-1990s. Through its decline and recovery, the number of meetings closely bracketed the one million mark through 2003, with meetings increasing to over 1,200,000 in 2005 and surpassing 1,300,000 in 2007. The number of corporate meetings steadily increased from the low point in 1997, and while numbers for 2000 were not tracked, the number of meetings would have likely significantly surpassed 1999 trends, as the economy peaked in this year, and millennium-related travel and meetings were at an all-time high. Furthermore, were the 2000 data shown, statistics for 2001 would have likely shown a decline from activity levels in this year. As the economy has recovered from the economic turmoil caused by the events of September 11, 2001, corporate meeting activity has once again increased, with over 1,000,000 meetings each in 2005 and 2007. This represents the highest level of activity in the illustrated trend period, surpassing the previous high recorded in 2003.

The number of conventions has continued to realize gradual increases since 1995, reaching an all-time high of 13,700 in 2007. Non-convention association meetings increased to a 14-year high, reflecting over 227,000 events in 2007. Growth in all sectors has resulted in a 22-year high in the total number of all meetings held in 2007.

Meeting attendance also increased from 2001 through 2007, continuing to show steady growth and reaching a total of roughly 141 million attendees in 2007. Overall attendance reached the highest level in 2007, concurrent with the historic high in number of meetings.

Expenditures in the convention and association meeting categories remained fairly stable between 1995 and 2003, while corporate meeting expenditures began to increase in 2003. All three categories experienced significant increases in 2005; that year, total meeting expenditures reached the $107 billion mark, primarily attributed to the rise in total number of meetings and attendees. Spending in 2007 was stagnant when compared with the previous period, with corporate and association expenditures decreasing during this period, while convention expenditures noted a slight increase; overall meeting spending amounted to roughly $103 billion.

In 2006, Meetings & Conventions Magazine embarked on a major overhaul of its survey management and methodology. This new methodology results in substantial changes in the statistics shown for the number of meetings,


attendees, and total expenditures generated by the industry beginning in 2005. Data based on the new methodology are not consistent with data from prior years, from 1985 through 2003. Therefore, HVS developed an extrapolation formula intended to show the real growth trends in the industry over this longer period. HVS used data published by Meetings & Conventions Magazine in the 2006 and 2008 editions of the Meetings Market Report, along with travel industry growth trend data published by the Travel Industry Association of America, to estimate a more accurate reflection of spending trends in the meetings industry between 1985 and 2007.

Table 5-2 Extrapolation of the National Corporate, Convention, and Association Meetings Market

71.5 65.8

90.279.7

92.0 85.295.2 91.6 93.1

101.8 107.3 102.9

0

25

50

75

100

125

150

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Bill

ions

Sources : HVS, TIA, Meetings Market Report

Corporate meetings consist of an integral component of the convention segment, and its attendees consist of over two-thirds of all meeting, group, and convention attendees. Corporate groups tend to have a low double occupancy of 1.1 to 1.5, while social groups are likely to have somewhat higher double occupancy rates ranging from 1.5 to 1.9.

Corporate groups generally meet during the work week, thus generating lodging demand on Monday through Thursday nights. The average length

Trends in Corporate Meetings


of stay for typical meetings and conventions ranges from two to three days. According to the 2008 Meetings Market Report, the average duration of a corporate meeting is 2.7 days, with a six-month planning window. Feeder markets are an important factor influencing corporate meeting demand. Generally, facilities that attract travelers from distant areas are characterized by greater room-night demand and longer lengths of stay than those destinations that draw a more local clientele.

Corporate groups are one of the most profitable components of this segment, exhibiting limited price-sensitivity and often sponsoring banquets and other events that generate revenue for the host hotel.

According to the 2008 Meetings Market Report, 57% of corporate expenditures went to the host hotel, with 31 out of the 58 points allocated to hotel rooms and 26 points allocated to food and beverage costs. The remaining 43% was spent on air transportation, speakers and AV equipment, entertainment, ground transportation, and third-party fees.

The following table illustrates a breakdown of corporate meeting purpose by number of meetings and number of attendees.

Table 5-3 Number of Meetings and Attendees by Type of Corporate Meeting

Type of Corporate Meeting

Training and Educational Seminars 302,512 28 % 12,610,200 15 %Sales and Marketing Meeting 226,884 21 18,494,960 23 Management Meetings 205,276 19 7,566,120 9 Professional and Technical Meetings 118,844 11 9,247,480 11 New Product Introductions 32,412 3 9,247,480 11 Group Incentive Meetings 75,628 7 13,450,880 16 Stockholder Meetings 10,804 1 2,522,040 3 Other Meetings 108,040 10 10,088,160 12

Total Corporate Meetings 1,080,400 100 % 83,227,320 100 %

% of Total % of Total


Number in Past Year Attendance in Past Year

As illustrated in the preceding table, training and education-related meetings represent the most frequent and most attended type of corporate meeting, followed by sales and marketing meetings. Management-related meetings came in third per number of meetings in the past year.


The following table illustrates the percentage of corporate meeting planners that utilize various types of facilities during a given year. Since the majority of meeting planners organize more than one meeting per year, the percentages will sum to greater than 100%.

Table 5-4 Types of Hotels Used by Corporate Meeting Planners

Types of Hotels Used

Downtown Hotels 75 %Resort Hotels (not including golf resorts) 48Suburban Hotels 45Convention Centers 45Airport Hotels 29Golf Resorts 27Suite Hotels 20Gaming Facilities 18Residential Conference Centers 11Non-residential Conference Centers 8Cruise Ships 9


Corporate Meetings

Downtown hotels, proximate to a city's central business district, are most likely to be recipients of corporate meeting demand, primarily due to the large percentage of businesses located in midtown areas. Resort hotels are the second-most-used hotel type. As noted in the preceding table, 75% of meeting planners use downtown hotels and 45% use convention centers.

The following table summarizes the factors cited as important by meeting planners when choosing a destination and a host hotel within that destination.


Table 5-5 Factors in Choosing a Corporate Meeting Location and Facility


Affordability of Destination 75 % 75 %Availability of Suitable Hotels 80 78 Ease of Transportation 64 64 Safety and Security of Destination 63 81 Distance Traveled by Attendees 62 50 Clean and Unspoiled Environment 37 48 Climate 36 92 Mandated by Corporate Policy 32 32 Transportation Costs 52 62 Availability of Recreational Facilities 21 78 Sightseeing, Cultural Events, Attractions 48 82 Glamorous/Popular Image of Location 45 71 Reputation for Being Environmentally Friendly 37 24


Cost of Hotel or Meeting Facility 81 % 59 %Negotiable Food, Beverage, and Room Rates 82 61 Number, Size, and Quality of Meeting Rooms 82 63 Quality of Food Service 75 64 Number, Size, and Quality of Sleeping Rooms 74 63 Efficiency of Billing Procedures 51 45 Availability of Meeting Support Services 54 31 Efficiency of Check-in/Check-out Procedures 43 41 Assignment of One Staff Person To Handle Meeting 48 42 Previous Experience in Dealing with Facility and Staff 45 36 Convenience to Other Modes of Transportation 32 39 Proximity to Airport 31 27 Meeting Rooms with Multiple High Speed Lines/Outlets 49 30 Availability of Exhibit Space 39 19 Number, Size, and Quality of Suites 25 44 Proximity to Shopping, Restaurants, Off-site Entertainment 19 36 Provision of Special Meeting Services 37 25 Other On-site Recreational Facilities 37 38 On-site Golf Course 8 27 Green Practices at the Facility 51 42


(except Incentive Trips) Incentive TripsCorporate Meetings

Incentive Trips(except Incentive Trips)Corporate Meetings Group

Group


As the preceding table indicates, location factors cited as most important include the availability of suitable hotels, affordability, safety, and ease of transportation. A balance therefore must exist between what constitutes a suitable yet affordable hotel.

We note that corporate planners reported an average room rate of $184.00 for hotel accommodations, but this number is somewhat skewed by higher-priced destinations (53% of respondents noted accepting rates of $176.00 or more). Approximately 91% of respondents accepted room rates more than $100.00, while 9% accepted room rates below $100.00. Given the current average rate level of the downtown Dallas market (discussed in the following chapters), Dallas is well positioned to take advantage of a rate increase following the addition of a market-appropriate, first-class, meetings-destination hotel.

Following the economic downturn of late 2000 into 2001 and the subsequent recovery, approximately 21% of meeting planners in the latest survey reported the 2007 meeting budgets remained unchanged versus 2006 budget levels. Of the remaining participants, 33% noted an increase in the budget, while 46% noted a decrease.

One of the after-effects of the terrorist attacks of September 11, 2001, was that more corporate meetings were planned closer to home; fewer meetings were planned outside of the United States (27% in 2005 vs. 36% in 2001). However, the percentage of corporate planners intending to use foreign or off-shore destinations increased to 35% in 2007.

Association demand is generally divided on a geographical basis: the most common categories are national, regional, and state associations. Depending on their nature, these associations may be more rate-sensitive than commercial groups. This is particularly true when members are not reimbursed by their employers, but must pay to attend (i.e., guestroom and conference fees). The scheduling pattern of associations also depends on the nature of the group. Professional associations and/or those supported by members' employers often meet on weekdays, while other associations prefer to hold events on weekends.

While an event may span three to four days, the majority of delegates mainly seek accommodations for one or two nights during the event. Therefore, event attendance typically mimics a curve, with fewer room nights booked the first and last nights of the event, and more rooms required during the

Trends in Association Meetings


middle. According to the 2008 Meetings Market Report, the average duration of an association meeting is two days, with a ten-month planning window, while the planning window for a corporate meeting is six months.

According to the 2008 Meetings Market Report, 64% of association expenditures went to the host hotel (versus 57% for corporate meetings), with 37 out of the 64 points allocated to food and beverage costs (versus 26 points for corporate meetings) and 27 points allocated to hotel costs (versus 31 points for corporate meetings). Hence, associations are apt to spend more on food and beverage and less on hotel rooms, when compared to corporate groups. The remaining 35% is spent on remaining meeting needs. The following table illustrates a breakdown of association meeting purpose by number of meetings and number of attendees.

Table 5-6 Number of Meetings and Attendees by Type of Association Meeting

Type of Association Meeting

Training and Educational Seminars 56,800 25 % 7,119,870 19 %Board Meetings 68,100 30 1,873,650 5 Professional and Technical Meetings 40,900 18 8,244,060 22 Regional/Local Chapter Meetings 27,200 12 4,496,760 12 Other Off-Premises Meetings 34,000 15 15,738,660 42

Total Association Meetings 227,000 100 % 37,473,000 100 %

Number in Past Year % of Total


Attendance in Past Year % of Total

As noted in the preceding table, board meetings represent the highest number of association meetings, while training and educational-related meetings constitute the second-highest number of events, followed by professional and technical meetings. However, due to the nature of board meetings, these events encompass far less attendees.

The following table illustrates the percentage of association meeting planners that utilize various types of facilities during a given year; these data are illustrated for conventions and non-convention association meetings. Since the majority of meeting planners organize more than one meeting per year, the percentages will sum to greater than 100%.


Table 5-7 Types of Hotels Used by Association Meeting Planners

Types of Hotels Used

Downtown Hotels 62 % 68 %Suburban Hotels 15 36Resort Hotels (not including golf resorts) 24 36Suite Hotels 12 13Airport Hotels 8 22Golf Resorts 7 14Gaming Facilities 5 5Residential Conference Centers 3 9Non-residential Conference Centers 2 6Cruise Ships 1 3Other Facilities 2 27

Conventions Association Meetings


Downtown hotels are most likely to be used by meeting planners for conventions and association meetings. The table indicates that considerable potential exists for the proposed subject property’s downtown Dallas site to capture this type of demand given its proposed location adjacent to the Dallas Convention Center.

The following table summarizes the factors cited as important by meeting planners when choosing a destination and a host hotel within that destination.


Table 5-8 Factors in Choosing an Association Meeting Location and Facility


Availability of Suitable Hotels 65 % 78 %Affordability of Destination 72 77Safety and Security of Destination 54 63Ease of Transportation 45 55Transportation Costs 48 53Distance Traveled by Attendees 62 48Clean and Unspoiled Environment 28 35Climate 19 21Availability of Recreational Facilities 13 18Sightseeing, Cultural Events, Attractions 12 52Mandated by By-Laws 20 20Glamorous/Popular Image of Location 9 11


Number, Size, and Quality of Meeting Rooms 67 % 90 %Negotiable Food, Beverage, and Room Rates 70 84 Cost of Hotel or Meeting Facility 76 83 Quality of Food Service 61 70 Number, Size, and Quality of Sleeping Rooms 59 78 Efficiency of Billing Procedures 52 50 Availability of Meeting Support Services 43 54 Assignment of One Staff Person To Handle Meeting 45 46 Efficiency of Check-in/Check-out Procedures 39 42 Availability of Exhibit Space 28 53 Previous Experience in Dealing with Facility and Staff 40 49 Proximity to Shopping, Restaurants, Off-site Entertainment 19 28 Number, Size, and Quality of Suites 22 28 Proximity to Airport 26 20 Convenience to Other Modes of Transportation 28 26 Provision of Special Meeting Services 14 14 Meeting Rooms with Multiple High Speed Lines/Outlets 38 38 High Speed Internet 46 47 Other On-site Recreational Facilities 8 12 On-site Golf Course 6 7

Meetings Conventions



Association


As the preceding table indicates, location factors cited as most important include the availability of suitable hotels, affordability, safety, and ease of transportation. Association planners reported an average room rate of $172.00 for hotel accommodations, roughly $12.00 lower than the corporate mark of $184.00.

Again contrasting the economic downturn of late 2000 into 2001 with the recovery seen through 2007, approximately 48% of association meeting planners in the latest survey reported that the 2007 meeting budgets remained unchanged versus 2006 budget levels. Of the remaining participants, 47% noted an increase in the budget, and only 5% noted a decrease. Budget anticipations for 2008 in this survey suggest a slight contraction: 41% of budgets are expected to remain unchanged, 46% of budgets are expected to increase, and 13% of budgets are expected to decrease.

Nationwide, the meeting and convention segment of the market has exhibited a strong preference for planning events during the late spring/early summer and fall months, with September, October, the first three weeks of November, and June representing the strongest months. The table below depicts the breakdown of percentages for the favorability of planning meetings in each month throughout the year.

Meeting and Convention Timing and Seasonal Patterns


Table 5-9 Frequency and Seasonality of Major Conventions

Frequency

Every Other Year 4 %Annually 68Twice a Year 12Other 6No Major Convention 10

Seasonality

January 7 %February 6March 8April 10May 6June 6July 8August 4September 10October 18November 12December 5

Meetings & Conventions Magazine

Percentage

Source: 2008 Meetings Market Report,

Percentage

As the table above indicates, summer months are popular for group business to a lesser degree, for lifestyle and vacation reasons. The summer months are oftentimes selected by those groups in need of a price discount, which generally occurs during this season. Association meetings typically display slightly different characteristics than commercial meetings. State and regional associations often hold their meetings during the summer season, contributing to the annual occupancies of lodging facilities with meeting space at a time when commercial activity and room rates may be at their lowest, typically from May through August. Association gatherings are generally larger than corporate meetings and utilize a convention center and require larger amounts of exhibition and/or meeting space.

Trends in convention and meeting activity have shown considerable increases from 2003 through 2007. Although demand has experienced a correction in 2008 and 2009, the industry is expected to recover over the longer term,

Conclusion


underscoring the economic importance of large convention centers and, more recently, headquarters hotels.

The data suggest that meeting planners select downtown, convention center-proximate hotels for logistical convenience. The new meeting paradigm for planners has turned to housing attendees as close to the primary meeting space as possible, thereby alleviating extra costs associated with transportation, as well as eliminating the need to constantly negotiate pricing, events, and transportation with multiple hotels. As such, every major city in the United States now has or is in the process of establishing a convention headquarters hotel.

HVS Consulting and Valuation Services Supply and Demand Analysis 6-1

6. Supply and Demand Analysis

In the economic principle of supply and demand, price varies directly, but not proportionately, with demand and inversely, but not proportionately, with supply. In the lodging industry, supply is measured by the number of guestrooms available, and demand is measured by the number of guestrooms occupied; the net effect of supply and demand toward equilibrium results in a prevailing price, or average rate. The purpose of this section is to investigate current supply and demand trends as indicated by the current competitive market, and set forth a basis for the projection of future supply and demand growth. We also provide an overview of national occupancy and average rate trends, both on an overall basis and by chain scale.

An integral component of the supply and demand relationship that has a direct impact on the availability of lodging demand is the current and anticipated supply of competitive lodging facilities. To evaluate an area’s competitive environment, the following steps should be taken.

Identify the area’s lodging facilities and determine which are expected to be directly and indirectly competitive with the proposed subject property.

In addition to the proposed subject property, determine whether additional hotel rooms will enter the market in the foreseeable future (net of attrition).

Quantify the number of existing and proposed hotel rooms available in the market.

Review the rate structure, occupancy levels, market orientation, facilities, and amenities of each competitor.

Based on an evaluation of the occupancy, rate structure, market orientation, chain affiliation, location, facilities, amenities, reputation, and quality of each area hotel, as well as the comments of management representatives, we have identified several properties that are expected to be primarily competitive

SUPPLY


with the proposed subject property in the local market. Additional lodging facilities within the national market have been judged to be important secondary competitors.

The U.S. lodging industry has entered a period of RevPAR decline, driven primarily by supply increases, weakening demand, and slowing average rate growth. While year-end results for 2007 reflected 1.2% growth in room nights sold, representing a slight gain on the 1.1% growth in 2006, the trends for 2008 reflected a decline of 1.6%, accelerating from the decline of 0.3% registered near the mid-point of 2008. The increase in available rooms also went from 2.4% mid-year 2008 to 2.7% by the conclusion of 2008, contributing to an occupancy decline of 4.2% for the year. The increase in supply for 2008 was up from a 1.4% increase in 2007 and a 0.6% increase in 2006. Occupancy declined from 63.1% to 60.4% in 2008, an accelerated drop from the 0.3-point loss in national occupancy between 2007 and 2008.

Average rate growth continued to decelerate in 2008, with a nearly 4.0% gain registered mid-year diminishing to a 2.4% increase by year-end, compared with increases of 5.9% in 2007 and 7.0% in 2006. These trends contributed to a 1.9% RevPAR decline in 2008, down significantly from a 5.7% RevPAR gain in 2007 and a 7.5% gain in 2006.

Overall National Trends Overview


National Occupancy and Average Rate Trends

United States 63.1 % 60.4 % (4.3) % $104.04 $106.55 2.4 % $65.65 $64.36 (2.0) %

RegionNew England 61.1 % 59.4 % (2.8) % $118.62 $120.90 1.9 % $72.48 $71.81 (0.9) %Middle Atlantic 66.7 64.8 (2.8) 148.49 152.50 2.7 99.04 98.82 (0.2)South Atlantic 62.2 58.7 (5.6) 104.44 106.08 1.6 64.96 62.27 (4.1)East North Central 57.6 55.6 (3.5) 90.12 91.70 1.8 51.91 50.99 (1.8)East South Central 59.3 56.1 (5.4) 74.88 77.94 4.1 44.40 43.72 (1.5)West North Central 59.2 57.6 (2.7) 76.10 79.09 3.9 45.05 45.56 1.1West South Central 62.1 62.4 0.5 83.54 87.77 5.1 51.88 54.77 5.6Mountain 66.3 61.4 (7.4) 101.16 103.31 2.1 67.07 63.43 (5.4)Pacific 68.5 65.4 (4.5) 122.07 125.12 2.5 83.62 81.83 (2.1)

PriceLuxury 70.4 % 67.1 % (4.7) % $167.01 $168.43 0.9 % $117.58 $113.02 (3.9) %Upscale 64.7 62.0 (4.2) 113.81 115.96 1.9 73.64 71.90 (2.4)Midprice 60.2 57.6 (4.3) 81.95 84.21 2.8 49.33 48.50 (1.7)Economy 57.6 55.1 (4.3) 61.56 62.94 2.2 35.46 34.68 (2.2)Budget 59.2 57.2 (3.4) 50.42 51.56 2.3 29.85 29.49 (1.2)

LocationUrban 68.5 % 66.7 % (2.6) % $149.43 $154.26 3.2 % $102.36 $102.89 0.5 %Suburban 63.3 60.3 (4.7) 90.34 92.45 2.3 57.19 55.75 (2.5)Airport 69.4 66.5 (4.2) 99.74 101.83 2.1 69.22 67.72 (2.2)Interstate 57.9 55.3 (4.5) 67.08 70.04 4.4 38.84 38.73 (0.3)Resort 65.9 62.2 (5.6) 144.04 145.28 0.9 94.92 90.36 (4.8)Small Metro/Town 57.1 55.3 (3.2) 79.13 81.78 3.3 45.18 45.22 0.1

Occupancy Average Room Rate

Source: STR - December 2008 Lodging Review

% Change 20072007 2008 % Change 2007 2008

RevPAR

2008 % Change

The year-end statistics for 2008 reflect national hotel occupancy of 60.4%, down fom 63.1% during 2007. Year-end 2008 average rate was $106.55, roughly two dollars higher than the $104.04 level for 2007. This gain is similar to the 2007 increase over the 2006 level. In this period of economic decline, both urban and small metro/town areas reported a minimal net gain in RevPAR, while all other categories contracted. The resort and suburban categories showed the greatest RevPAR declines. All price categories registered a RevPAR decline, with mid-price and budget hotels faring best with RevPAR declines under 2.0%. By region, West North Central and West South Central still registered RevPAR gains, with West South Central achieving a notably strong gain of 5.6%. Conversely, the South Atlantic and Mountain regions contracted at levels in excess of 4.0%.


Table 6-1 National Occupancy and Average Rate Trends

50

52

54

56

58

60

62

64

66

68

70

Source: STR

Occupancy Percentage

$30

$40

$50

$60

$70

$80

$90

$100

$110

Average Rate

Occupancy 63.4 63.4 64.3 63.5 61.9 62.7 63.6 64.8 65.1 65.0 64.5 63.7 63.3 63.7 59.8 59.1 59.1 61.3 63.1 63.3 63.1 60.4

Average Rate 53.01 54.81 56.83 58.55 58.66 59.51 61.11 63.52 66.57 70.96 75.11 78.52 81.87 85.92 84.45 83.35 83.11 86.24 90.95 97.89 104.04 106.55

RevPAR 33.58 34.78 36.56 37.19 36.30 37.28 38.86 41.14 43.35 46.10 48.41 50.05 51.81 54.77 50.50 49.26 49.12 52.87 57.39 61.96 65.65 64.36

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

After experiencing years of strong pricing power, managers are now facing a much tougher economic climate where rate discounting is becoming more prevalent in order to keep primary accounts in place. Industry professionals are attempting to maintain rate integrity by offering more complimentary services to top accounts, including breakfast coupons or free Internet access. In some markets, this practice should contribute to better average rate stability than that seen in past cycles; however, this will have an adverse impact on profitability. Furthermore, a shift in market mix at full-service hotels from less price-sensitive corporate groups to more budget-conscious meeting-space users is negatively impacting the net overall average rates.

Also pertinent to this analysis is a review of lodging statistics by chain scale; this provides greater indication of differences between price segments and occupancies based on product-quality level.

Lodging Performance by Chain Scale


Table 6-2 Operating Results by Chain Scale

Luxury 71.5 % 67.9 % (5.0) % $288.63 $288.79 0.1 % $206.54 $195.87 (5.2) %Upper Upscale 71.2 68.7 (3.5) 159.85 157.81 (1.3) 112.36 109.75 (2.3)Upscale 69.2 66.8 (3.5) 119.82 118.50 (1.1) 82.05 80.09 (2.4)Mid-scale w/ F&B 59.0 55.8 (5.4) 88.26 85.63 (3.0) 50.52 49.23 (2.6)Mid-scale w/o F&B 65.4 62.3 (4.7) 90.19 87.20 (3.3) 57.02 56.16 (1.5)Economy 56.9 54.4 (4.4) 54.32 53.78 (1.0) 30.62 29.55 (3.5)Independents 61.2 58.6 (4.2) 104.51 101.58 (2.8) 62.14 61.27 (1.4)


2008 % Change 2007 2008Occupancy Average Room Rate RevPAR

2007 2008 % Change 2007 % Change

RevPAR Results by Chain Scale


$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

RevPAR

Luxury $157.53 $173.72 $193.00 $206.54 $195.87

Upper Upscale $90.76 $100.12 $107.32 $112.36 $109.75

Upscale $65.58 $72.13 $78.35 $82.05 $80.09

Mid-scale w/ F&B $42.11 $45.85 $48.90 $50.52 $49.23

Mid-scale w/o F&B $44.36 $49.60 $53.97 $57.02 $56.16

Economy $26.45 $28.48 $29.89 $30.62 $29.55

Independents $51.74 $54.19 $58.16 $62.14 $61.27

2004 2005 2006 2007 2008

The RevPAR change among the luxury chains reflected a 5.2% decline in 2008, with the majority of the contraction occurring in the fourth quarter. This is a


sharp contrast to the category’s 7.0% gain in 2007 and the 10.0%+ gains seen in 2004 through 2006. While several categories showed RevPAR gains mid-year, no category was able to hold onto this gain by the end of 2008. RevPAR growth seen through mid-year 2008 decelerated then turned negative as occupancy cuts grew more significant in the third and fourth quarters. Although average rate growth in a few categories equaled or exceeded the rate of inflation, significant decreases in occupancy offset these increases, resulting in RevPAR contraction across most categories. Moreover, increases in supply accelerated slightly, which compounded the adverse affect on occupancy levels. Indications for 2009 point to a continued deterioration in both occupancy and average rate levels, as recessionary conditions prevalent in the national economy are causing dramatic decreases in both corporate and consumer spending. Falling demand levels are putting pressure on average rates, as some hotel managers seek to support occupancy levels with rate discounts or shifts in market mix to more price-sensitive users. As a result, year-end 2009 forecasts anticipate RevPAR growth to moderate from the 2008 decline of 1.9% to year-to-date levels, to a further contraction of 8.0% to 10.0% on a national average. As is evident in the statistics by region and product type, some areas and hotel categories will fare better than others, but realizing RevPAR increases in 2009 will be challenging. While a period of stability is predicted for 2010, a period of recovery is expected to accelerate into 2011 and 2012. The 1,000-room Proposed Omni Convention Center Hotel will be located in Dallas, Texas. The greater market surrounding the proposed subject property offers 213 hotels and motels, spanning 33,442 rooms. The two largest hotels are the 1,840-room Sheraton and the 1,608-room Hilton Anatole.

Of this larger supply set, the proposed subject property is expected to compete with a smaller set of local hotels based on various factors, as previously mentioned. These factors may include location, price point, product quality, length of stay (such as an extended-stay focus vs. non-extended-stay focus), room type (all-suite vs. standard), hotel age, or brand, among other factors. We have reviewed these pertinent attributes and established an expected competitive set based upon this review.

Smith Travel Research (STR) is an independent research firm that compiles data on the lodging industry and routinely used by typical hotel buyers. STR has compiled historical supply and demand data for a group of hotels

Historical Supply and Demand Data – Local Set


considered applicable to this analysis for the proposed subject property. This information is presented in the following table, along with the market-wide occupancy, average rate, and rooms revenue per available room (RevPAR). RevPAR is calculated by multiplying occupancy by average rate and provides an indication of how well rooms revenue is being maximized.

We have taken qualitative consideration of the other, smaller boutique and branded hotels that exist in Downtown Dallas. However, in light of the considerable size of the proposed convention headquarters hotel, we have not included them in the quantative analysis set forth in this chapter. A typical group customer or meeting planner seeking to book a large, 1,000-room convention headquarters property is distinctly different than a planner seeking a small group venue. This also relates to transient demand as well.


Table 6-3 Local Historical Supply and Demand Trends





1998 5,412 1,975,217 — 1,289,688 — 65.3 % $123.74 — $80.79 — 1999 6,301 2,299,865 16.4 % 1,387,466 7.6 % 60.3 130.97 5.8 % 79.01 (2.2) %2000 6,436 2,349,090 2.1 1,444,260 4.1 61.5 133.74 2.1 82.22 4.12001 6,465 2,359,810 0.5 1,208,753 (16.3) 51.2 130.26 (2.6) 66.72 (18.9)2002 6,458 2,357,170 (0.1) 1,237,311 2.4 52.5 131.99 1.3 69.28 3.82003 6,458 2,357,170 0.0 1,201,003 (2.9) 51.0 128.02 (3.0) 65.23 (5.9)2004 6,458 2,357,170 0.0 1,254,152 4.4 53.2 120.59 (5.8) 64.16 (1.6)2005 6,458 2,357,170 0.0 1,251,277 (0.2) 53.1 128.10 6.2 68.00 6.02006 6,458 2,357,170 0.0 1,375,229 9.9 58.3 135.95 6.1 79.31 16.62007 6,458 2,357,170 0.0 1,273,756 (7.4) 54.0 142.05 4.5 76.76 (3.2)2008 6,458 2,357,170 0.0 1,316,102 3.3 55.8 142.13 0.1 79.36 3.4


2008 6,458 774,960 — 476,571 — 61.5 % $150.86 — $92.77 — 2009 6,458 774,960 0.0 % 425,793 (10.7) % 54.9 142.11 (5.8) % 78.08 (15.8) %

1.8 % 0.2 % 1.4 % (0.2) %


Fairmont Dallas 545 Jun-69Westin City Center Dallas 407 Jun-80Sheraton Hotel Dallas 1,840 Jun-59The Adolphus Hotel 422 Jun-12Renaissance Dallas Hotel 514 Jun-83Hyatt Regency Dallas 1,122 May-78Hilton Anatole 1,608 Jun-79

Total 6,458




Year


Local Historical Supply and Demand Graph

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

19981999

20002001

20022003

20042005

20062007

2008

Source: STR

RoomNights

30

40

50

60

70

80

90

100

Occupancy%

Room Supply Room Demand Occupancy

It is important to note some limitations of the STR data. Hotels are occasionally added to or removed from the sample, and not every property reports data in a consistent and timely manner; these factors can influence the overall quality of the information by skewing the results. These inconsistencies may also cause the STR data to differ from the results of our competitive survey. Nonetheless, STR data provide the best indication of aggregate growth or decline in existing supply and demand, and thus these trends have been considered in our analysis.

The average daily room count in 2008 was 6,458 for this reporting set, showing an average annual rate of change of 1.8% over the period. Opening dates, as available, are presented for each reporting hotel in the previous table. Lodging trends have recently faded in Dallas as the local economy has begun endure the effects of the slowing national economy. While large telecommunications and energy companies in the area, as well as the healthcare sector, have increased business activity as Dallas continues to grow at a rate well beyond the national average, the deteriorating national economy has begun to slow growth in the local market. After the CBD achieved a market-wide occupancy level in 2008 higher than the year prior, January occupancy is at the lowest level since 2005. Moreover, since October of 2008, monthly occupancy levels for the local market have shown notable declines when compared with the same periods of the previous year; we expect these declines to continue through the first three quarters of 2009.


Although overall economic growth in Dallas has slowed, revitalization efforts within the downtown area have been moving westward, as evidenced by the extremely successful revitalization projects within the Uptown and Victory Districts; these districts are now home to the most desired office and retail spaces in Dallas. In addition, The University of Texas Southwestern Medical Center continues to expand, with several construction projects currently underway that will increase the size of the hospitals that make up the Medical Center. Furthermore, passenger traffic at Dallas' Love Field Airport has increased steadily since 2006, which has contributed to an overall increase in demand in this market. While the economic downturn is expected to have an adverse affect on demand during most of 2009, the local market is well positioned to persevere through the troubling macroeconomic situation over the long term due to the city's diverse commercial industries, redevelopment efforts, and world-class entertainment venues. Monthly occupancy trends are presented in the following table.


Table 6-4 Local Monthly Occupancy Trends

Month 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

January 77.4 % 69.1 % 69.3 % 64.6 % 56.5 % 50.2 % 61.0 % 51.3 % 63.3 % 67.8 % 64.1 % 52.7 %February 73.4 66.2 67.8 64.1 64.1 62.2 65.9 65.1 63.8 60.0 63.7 57.6March 70.5 58.7 68.6 72.2 58.9 57.7 64.0 58.3 68.4 63.0 60.4 53.7April 64.4 62.2 61.1 54.6 56.7 45.6 54.6 60.6 61.9 53.8 57.9 56.0May 67.4 72.7 60.1 47.0 46.2 53.5 44.4 42.0 60.8 49.3 51.5 — June 70.7 61.1 64.8 47.5 56.3 55.5 56.6 48.9 53.6 56.6 66.9 — July 64.1 56.6 58.4 58.7 57.9 51.2 58.5 46.9 58.0 52.9 53.5 — August 63.1 57.6 59.9 55.0 54.1 54.8 44.5 50.6 50.1 47.3 48.5 — September 63.6 57.1 66.1 33.2 46.3 42.8 53.3 56.1 61.6 52.6 60.9 — October 73.7 72.2 75.4 49.2 56.6 61.7 59.2 67.1 63.9 62.2 62.1 — November 60.6 55.7 54.4 42.3 44.1 41.3 46.3 56.5 57.5 49.1 48.5 — December 41.2 35.1 33.0 26.6 33.0 35.4 31.3 35.2 37.8 34.1 33.2 —

Annual Occupancy 65.3 % 60.3 % 61.5 % 51.2 % 52.5 % 51.0 % 53.2 % 53.1 % 58.3 % 54.0 % 55.8 % —

Year-to-Date 71.4 64.0 66.7 63.9 59.0 53.8 % 61.3 % 58.6 64.4 % 61.2 % 61.5 % 54.9 %



The data reflect an overall local market occupancy level of 55.8% in 2008, which compares to 54.0% for 2007. The overall average occupancy level for the calendar years presented equates to 54.2%.

Monthly average rate trends are presented in the following table.


Table 6-5 Local Monthly Average Rate Trends

Month 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

January $127.90 $138.28 $142.24 $143.11 $136.73 $129.72 $126.15 $125.58 $135.23 $148.61 $150.71 $143.46February 125.54 135.15 135.70 141.67 157.83 138.80 120.09 135.67 141.11 149.65 152.41 145.48March 126.33 133.78 138.32 147.48 146.10 138.94 128.12 127.28 144.03 148.66 151.47 139.71April 124.54 134.27 138.05 127.02 135.59 128.55 116.02 129.78 134.69 138.61 148.77 139.94May 124.46 146.64 135.60 128.64 130.35 130.27 118.82 120.41 138.65 141.33 144.24 — June 125.35 125.77 133.35 125.83 138.39 128.57 119.29 118.28 135.58 142.36 135.04 — July 110.93 113.01 110.65 114.10 118.98 115.62 117.88 114.66 122.17 127.44 127.24 — August 105.06 109.72 112.24 108.01 107.28 115.89 107.86 114.32 123.23 127.90 117.76 — September 125.51 127.33 137.87 138.33 128.17 134.44 128.87 129.32 134.69 146.45 147.33 — October 132.04 149.12 159.95 140.35 133.30 136.80 127.66 141.51 153.22 154.82 153.86 — November 139.79 129.58 131.14 125.96 123.43 120.29 121.03 153.01 138.94 140.10 139.53 — December 105.73 109.87 109.23 103.98 116.41 108.43 103.27 111.64 119.14 125.79 122.27 —

Annual Average Rate $123.74 $130.97 $133.74 $130.26 $131.99 $128.02 $120.59 $128.10 $135.95 $142.05 $142.13 —

Year-to-Date $126.18 $135.49 $138.69 $140.61 $144.23 $134.48 $122.91 $129.71 $138.88 $146.66 $150.86 $142.11



This data reflects an overall local market average rate level of $142.13 in 2008, which compares to $142.05 for 2007. The average across all calendar years presented for average rate equates to $132.99. Average rate growth in the local market has been strong in recent years, registering positive growth since 2004. The entrances of new, high-quality hotels in the Downtown Dallas market and renovations to existing hotels have allowed local hotel operators to increase average rates on a consistent basis. The rate growth began to slow in 2008, and the trailing month-to-month data from October 2008 through January 2009 illustrate how average rate has begun to deflate congruent with the national economy. We note that this pace of average rate movement is similar to the typical trend across the United States, as average rate growth has recently slowed due to the sluggish national economy. These occupancy and average rate trends resulted in a RevPAR level of $79.36 in 2008. We note the national average for RevPAR was $65.65 for 2008, which is approximately $2.00 lower than the 2007 level.

A review of the historical monthly and day-of-week occupancy and average rate performance shows the patterns of market-wide demand in the local market. The following table shows the occupancy and average rate performance by month and day of week for the subject property’s local market, as provided by Smith Travel Research.

Table 6-6 Local Seasonality: Occupancy By Month and Day of Week

Month Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Month

May - 08 38.0 % 56.1 % 68.9 % 63.3 % 46.2 % 42.8 % 49.1 % 51.5 %Jun - 08 47.8 65.7 77.3 80.5 76.9 63.7 61.1 66.9Jul - 08 30.1 45.3 69.0 69.2 59.3 51.2 41.4 53.5Aug - 08 31.1 46.7 54.0 59.3 47.2 58.4 45.4 48.5Sep - 08 40.0 59.7 65.9 67.1 69.1 65.6 58.0 60.9Oct - 08 40.7 62.4 71.8 64.9 59.9 66.1 67.7 62.1Nov - 08 29.5 46.6 50.6 60.4 53.7 52.8 50.0 48.5Dec - 08 23.3 24.1 28.7 42.0 31.3 37.7 46.5 33.2Jan - 09 30.3 59.7 65.0 67.5 55.5 54.6 38.8 52.7Feb - 09 36.8 59.0 61.3 65.0 63.0 55.3 62.7 57.6Mar - 09 37.4 50.8 58.5 58.6 57.3 58.2 59.0 53.7Apr - 09 36.3 61.0 63.2 58.8 51.4 64.9 57.0 56.0

Average 35.2 % 52.9 % 60.7 % 62.7 % 55.8 % 55.9 % 52.5 % 53.7 %


Seasonality and Demand Patterns


Table 6-7 Local Seasonality: Average Rate By Month and Day of Week


May - 08 $133.02 $152.06 $155.34 $158.40 $151.57 $125.63 $126.36 $144.24Jun - 08 131.00 130.11 137.38 140.92 141.21 135.73 126.43 135.04Jul - 08 128.68 134.02 129.84 129.96 130.96 115.01 116.13 127.24Aug - 08 111.05 122.55 121.61 122.82 119.93 116.18 109.70 117.76Sep - 08 143.51 147.99 151.59 159.84 151.29 140.03 132.12 147.33Oct - 08 148.22 157.04 161.53 155.14 153.82 152.48 146.38 153.86Nov - 08 138.33 143.36 145.39 149.67 145.33 131.09 124.97 139.53Dec - 08 113.09 128.13 128.33 127.60 128.62 116.82 112.52 122.27Jan - 09 137.45 148.89 148.50 149.43 148.27 134.14 131.65 143.46Feb - 09 144.37 152.29 152.68 151.39 145.34 137.53 133.74 145.48Mar - 09 143.99 144.22 147.42 142.80 142.38 128.49 127.30 139.71Apr - 09 142.54 147.95 147.66 148.89 141.17 126.97 122.97 139.94

Average $135.36 $143.27 $144.68 $144.95 $142.72 $131.16 $126.62 $138.84


The peak demand periods suggest the timing and nature of unaccommodated demand and serve as a basis for our forthcoming estimate of this demand category presented later in this chapter (as applicable).

The following table summarizes the important operating characteristics of the future local competitors and the aggregate national competitors. This information was compiled from personal interviews, inspections, lodging directories, and our in-house library of operating data. The table also sets forth each property’s penetration factors; penetration is the ratio between a specific hotel’s operating results and the corresponding data for the market. If the penetration factor is greater than 100%, the property is performing better than the market as a whole; conversely, if the penetration is less than 100%, the hotel is performing at a level below the market-wide average.


Table 6-8 Local Competitors – Operating Performance

Est. Segmentation Estimated 2006 Estimated 2007 Estimated 2008

Weighted Annual Room Count

Weighted Annual Room CountM

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Weighted Annual Room CountProperty Occ. Occ.

Hyatt Regency 1,122 80 % 15 % 5 % 1,122 69 - 73 % $129 - 139 1,122 62 - 66 % $137 - 147 1,122 62 - 66 % $137 - 147Hilton Anatole 1,608 85 10 5 1,608 63 - 67 138 - 148 1,608 55 - 59 145 - 155 1,608 55 - 59 145 - 155Sheraton (Formerly Adam's Mark) 1,840 90 5 5 1,840 40 - 44 112 - 122 1,840 38 - 42 115 - 125 1,840 38 - 42 115 - 125Westin City Center 407 50 40 10 407 66 - 70 144 - 154 407 62 - 66 155 - 165 407 62 - 66 155 - 165Fairmont 545 55 35 10 545 60 - 64 134 - 144 545 57 - 61 136 - 146 545 57 - 61 136 - 146Renaissance 514 55 40 5 514 63 - 67 118 - 128 514 61 - 65 117 - 127 514 61 - 65 117 - 127The Adolphus Hotel 422 45 40 15 422 60 - 64 153 - 163 422 61 - 65 157 - 167 422 61 - 65 157 - 167

Sub-Totals/Averages 6,458 74 % 19 % 7 % 6,458 59.2 % $135.23 6,458 54.9 % $140.40 6,458 55.7 % $142.69

National Competition 19,647 77 % 12 % 11 % 8,687 69.6 % $163.46 8,687 72.1 % $169.94 9,387 68.3 % $173.95

Totals/Averages 26,105 76 % 15 % 9 % 15,145 65.2 % $152.52 15,145 64.7 % $159.27 15,845 63.2 % $162.72



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Average RateAverage Rate


Number of Rooms Occ. Average Rate


Map of Local Competition

Our survey of the competitive hotels in the local market shows a range of lodging types and facilities. Each primary competitor was inspected and evaluated. Descriptions of our findings are presented below.


Hyatt Regency

The Hyatt Regency is owned by Hunt Reunion Joint Venture and is operated by Hyatt. Facilities include three restaurants, two lounges, a coffee bar, an outdoor pool and whirlpool, a fitness center, a business center, and a gift shop. The hotel houses approximately 160,000 square feet of meeting space, inclusive of a 30,000-square-foot ballroom and a 20,000-square-foot junior ballroom. The hotel, which was built in 1978, underwent a $72-million expansion in 2000, which included 183 additional guestrooms and roughly 90,000 additional square feet of meeting space. In 2003, the guestrooms received new softgoods, wall vinyl, and carpeting; guest bathrooms received new fixtures and granite countertops; and guest corridors received new carpet. Renovations for 2003 totaled an estimated cost of $15 million. The hotel most recently underwent renovations in 2007/08; improvements to the Reunion tower included a major transformation of the three usable floors, including the conversion of the top level into a Wolfgang Puck eatery, converting the second level to event space, and upgrading to the observation deck. Improvements to the Union Station tower included a new roof, new air-conditioning units, and renovations to the tower's event area and office space. The large portion of convention business accommodated is a direct result of the hotel's proximity to the Dallas Convention Center, its substantial room supply, and its extensive meeting facilities. However, the Hyatt is not within walking distance of the convention center and is distanced from several entertainment districts. Overall, the property appeared to be in very good condition. Its accessibility is inferior to that of the subject site, and its visibility is similar to the expected visibility of the Proposed Omni Convention Center Hotel.

Hyatt Regency 300 Reunion Boulevard Dallas, TX


Hilton Anatole

The Hilton Anatole is owned by Trammell Crow Holdings and is operated by Hilton. This full-service property features five restaurants and lounges, including the five-star Nana restaurant; lighted outdoor tennis courts; a health club facility and a spa; an indoor and outdoor swimming pool; and a business center. The property completed an expansion project in December of 2003. This expansion added approximately 17,000 square feet of meeting space to the West Wing, inclusive of two junior ballrooms measuring roughly 6,500 square feet and 7,500 square feet each. In 2007/08, the hotel underwent a $57-million renovation. Guestrooms received new flat-panel televisions, furniture, select softgoods, carpet, and art, while the guest bathrooms received new marble flooring and granite countertops. Select public areas were renovated in a similar fashion as well, and the V-SPA was added as a service venue for the hotel. The property currently offers approximately 341,000 square feet of pre-function and meeting space, the largest component of function space provided by a single hotel in the primary competitive set. The meeting space encompasses six ballrooms, as well as approximately 76 meeting rooms, breakout rooms, boardrooms, permanent theaters, lecture halls, pavilions, private dining rooms, and a separate conference center. With its extensive meeting space and room supply, the Hilton Anatole is able to accommodate several groups simultaneously; however, the hotel is located outside Dallas' CBD, and transportation is required to travel to the Dallas Convention Center. Overall, the property appeared to be in very good condition. Its accessibility is similar to that of the subject site, and its visibility is similar to the expected visibility of the Proposed Omni Convention Center Hotel.

Hilton Anatole 2201 Stemmons Freeway Dallas, TX


Sheraton (Formerly Adam's Mark)

The Sheraton was recently purchased as an Adam's Mark by Chartres Lodging Group LLC; the hotel was converted to a Sheraton in April of 2008. Facilities include three restaurants, two lounges, an indoor/outdoor pool and whirlpool, a health center, a business center, a gift shop, and a flower shop. The hotel features approximately 230,000 square feet of meeting space inclusive of a 40,000 square foot ballroom; roughly 190,000 square feet of the hotel's meeting space is located across the street from the hotel in a three-level conference center. The hotel includes a 500-room hotel tower built in 1959, with the remaining rooms converted from two office adjoining office towers in 1998. In 2005, select guestrooms received new softgoods and carpet. The hotel is scheduled to undergo a property-wide $87-million renovation in 2008/09 to modernize the property and meet the latest Sheraton brand standards. The hotel is the largest in the city and located within the Central Business District; however, as an Adam's Mark, this hotel traditionally lagged the competition in rate and occupancy, due largely to its brand and lack of continual renovations. The Sheraton is expected to increase its penetration in all market segments once the conversion is complete. Overall, the property appeared to be in good condition. Its accessibility is similar to that of the subject site, and its visibility is similar to the expected visibility of the Proposed Omni Convention Center Hotel.

Sheraton (Formerly Adam's Mark) 400 North Olive Dallas, TX


Westin City Center

The Westin is owned by LaSalle Hotel Advisors and is operated by Starwood. Facilities include a restaurant, a lounge, a fitness center, a business center, and a gift shop. The hotel houses roughly 22,000 square feet of meeting space, with a ballroom encompassing 8,600 square feet. The hotel, which was built in 1980, was renovated in 2006; upgrades included new guestroom softgoods, select furniture, carpet, and wall vinyl. Public areas also received new carpet and wall vinyl at this time. The Westin is located in the Plaza of the Americas, which offers numerous shopping and restaurant venues. The Westin captures most of its demand from companies located within the Plaza of the Americas. Overall, the property appeared to be in very good condition. Its accessibility is similar to that of the subject site, and its visibility is similar to the expected visibility of the Proposed Omni Convention Center Hotel.

Westin City Center 650 North Pearl Street Dallas, TX


Fairmont

The Fairmont is owned by DiNapoli Capital Partners and is operated by Fairmont Hotels & Resorts. Facilities include a restaurant, a lounge, an outdoor pool, a business center, and a gift shop. The hotel features approximately 60,000 square feet of meeting space, inclusive of an 18,000-square-foot ballroom and 15,000-square-foot junior ballroom. The hotel, which has been a Dallas landmark since 1969, completed a $14-million renovation in 2008. This renovation focused on three floors, which were converted to Fairmont's exclusive Gold Rooms. This hotel captures high-rated transient and group demand because of its well-appointed facilities and reputation as a destination property in Dallas. Overall, the property appeared to be in very good condition. Its accessibility is similar to that of the subject site, and its visibility is inferior to the expected visibility of the Proposed Omni Convention Center Hotel.

Fairmont 1717 North Akard Street Dallas, TX


Renaissance

The Renaissance is owned by Market Center Hotel Investments Ltd. and is operated by Marriott International. Facilities include two restaurants, a lounge, a rooftop pool, an indoor whirlpool and sauna, a fitness center, a business center, and a gift shop. The hotel offers roughly 19,000 square feet of meeting space, inclusive of two 4,600-square-foot ballrooms. The hotel, which was built in 1982, was renovated in 2008; upgrades included new guestroom softgoods, carpet, wall vinyl, and art, as well as a new bedding package. Public areas, including the food and beverage venues, received new furniture, carpet and tile, and area décor. The Renaissance captures a majority of its demand from the Dallas Market Center and is not a major supplier of rooms for functions held at the Dallas Convention Center. Overall, the property appeared to be in very good condition. Its accessibility is similar to that of the subject site, and its visibility is similar to the expected visibility of the Proposed Omni Convention Center Hotel.

Renaissance 2222 Stemmons Freeway Dallas, TX


The Adolphus Hotel

The Adolphus is owned by Dallas Commerce Association LP and Adolphus Joint Venture, entities owned in part by Metropolitan Life, and the hotel is operated by Noble House Hotels. Facilities include three restaurants (including the critically acclaimed French Room), the seasonal Tea Room, a lounge, a fitness center, a gift shop, and a floral shop. Guests also have access to The Texas Club, a private athletic club located within the CBD. The Adolphus is one of Dallas’ trophy properties, built at the time of the city’s oil boom and at the height of the city’s agricultural industry. Guestrooms are housed in the original 1912 tower and in an adjoining and adjacent west tower, which was constructed in the 1940s. By the 1970s and after decades of operation, the hotel’s small guestrooms became dated and in need of renovation. The hotel subsequently closed in 1979 and reopened in 1981. During the two-year project, the hotel was completely renovated, and the room configuration was changed to allow for more spacious guestrooms and larger guest bathrooms. The hotel reopened with its current room count. Guestrooms at the Adolphus, which include 23 suites, feature classic Queen Anne furniture and marble and brass bathrooms. Meeting space at the hotel totals roughly 23,000 square feet and includes two grand ballrooms and 17 additional meeting rooms. The Adolphus continually undergoes minor improvements, with the latest upgrade occurring in 2006 when new flat-panel televisions were added to the guestrooms. Overall, the property appeared to be in very good condition. Its accessibility is similar to that of the subject site, and its visibility is inferior to the expected visibility of the Proposed Omni Convention Center Hotel.

The Adolphus Hotel 1321 Commerce Street Dallas, TX


We have also reviewed the market of headquarters hotels located adjacent to convention centers throughout the nation to determine whether any may compete with the proposed subject property on a national basis. Based on our review of geographical location, similar target markets, branding, and similar factors, we have included a nationally significant component to our competitive set and quantitative analysis. The room count of each national competitor has been weighted based on its assumed degree of competitiveness with the proposed subject property in the future. By assigning degrees of competitiveness, we can assess how the subject property and its competitors may react to various changes in the national market, including new supply, changes to demand generators, and renovations or franchise changes of existing supply. The following table sets forth a Smith Travel Research trend report for a sub-set of these competitors. Table 6-14 reflects the full list of competitors considered in this section of our analysis.

National Competitors


Table 6-9 National Competitor Historical Supply and Demand Trends





1998 5,412 1,975,217 — 1,289,688 — 65.3 % $123.74 — $80.79 — 1999 6,301 2,299,865 16.4 % 1,387,466 7.6 % 60.3 130.97 5.8 % 79.01 (2.2) %2000 6,436 2,349,090 2.1 1,444,260 4.1 61.5 133.74 2.1 82.22 4.12001 6,465 2,359,810 0.5 1,208,753 (16.3) 51.2 130.26 (2.6) 66.72 (18.9)2002 6,458 2,357,170 (0.1) 1,237,311 2.4 52.5 131.99 1.3 69.28 3.82003 6,458 2,357,170 0.0 1,201,003 (2.9) 51.0 128.02 (3.0) 65.23 (5.9)2004 6,458 2,357,170 0.0 1,254,152 4.4 53.2 120.59 (5.8) 64.16 (1.6)2005 6,458 2,357,170 0.0 1,251,277 (0.2) 53.1 128.10 6.2 68.00 6.02006 6,458 2,357,170 0.0 1,375,229 9.9 58.3 135.95 6.1 79.31 16.62007 6,458 2,357,170 0.0 1,273,756 (7.4) 54.0 142.05 4.5 76.76 (3.2)2008 6,458 2,357,170 0.0 1,316,102 3.3 55.8 142.13 0.1 79.36 3.4


2008 6,458 774,960 — 476,571 — 61.5 % $150.86 — $92.77 — 2009 6,458 774,960 0.0 % 425,793 (10.7) % 54.9 142.11 (5.8) % 78.08 (15.8) %

1.8 % 0.2 % 1.4 % (0.2) %


Fairmont Dallas 545 Jun-69Westin City Center Dallas 407 Jun-80Sheraton Hotel Dallas 1,840 Jun-59The Adolphus Hotel 422 Jun-12Renaissance Dallas Hotel 514 Jun-83Hyatt Regency Dallas 1,122 May-78Hilton Anatole 1,608 Jun-790 6,458 Jan-000 0 Jan-000 0 Jan-000 0 Jan-000 0 Jan-000 0 Jan-000 0 Jan-000 0 Jan-00

Total 12,916




Year


National Competitor Historical Supply and Demand Graph

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

19981999

20002001

20022003

20042005

20062007

2008

Source: STR

RoomNights

30

40

50

60

70

80

90

100

Occupancy%

Room Supply Room Demand Occupancy

The average daily room count in 2008 was 18,819 for this reporting set, showing an average annual rate of change of 1.8% over the period. Opening dates, as available, are presented for each reporting hotel in the previous table. Monthly occupancy trends are presented in the following table.


Table 6-10 National Competitor Monthly Occupancy Trends

Month 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

January 77.4 % 69.1 % 69.3 % 64.6 % 56.5 % 50.2 % 61.0 % 51.3 % 63.3 % 67.8 % 64.1 % 52.7 %February 73.4 66.2 67.8 64.1 64.1 62.2 65.9 65.1 63.8 60.0 63.7 57.6March 70.5 58.7 68.6 72.2 58.9 57.7 64.0 58.3 68.4 63.0 60.4 53.7April 64.4 62.2 61.1 54.6 56.7 45.6 54.6 60.6 61.9 53.8 57.9 56.0May 67.4 72.7 60.1 47.0 46.2 53.5 44.4 42.0 60.8 49.3 51.5 — June 70.7 61.1 64.8 47.5 56.3 55.5 56.6 48.9 53.6 56.6 66.9 — July 64.1 56.6 58.4 58.7 57.9 51.2 58.5 46.9 58.0 52.9 53.5 — August 63.1 57.6 59.9 55.0 54.1 54.8 44.5 50.6 50.1 47.3 48.5 — September 63.6 57.1 66.1 33.2 46.3 42.8 53.3 56.1 61.6 52.6 60.9 — October 73.7 72.2 75.4 49.2 56.6 61.7 59.2 67.1 63.9 62.2 62.1 — November 60.6 55.7 54.4 42.3 44.1 41.3 46.3 56.5 57.5 49.1 48.5 — December 41.2 35.1 33.0 26.6 33.0 35.4 31.3 35.2 37.8 34.1 33.2 —

Annual Occupancy 65.3 % 60.3 % 61.5 % 51.2 % 52.5 % 51.0 % 53.2 % 53.1 % 58.3 % 54.0 % 55.8 % —

Year-to-Date 71.4 64.0 66.7 63.9 59.0 53.8 % 61.3 % 58.6 % 64.4 % 61.2 % 61.5 % 54.9 %



These data reflect an overall occupancy level among the selected national competitors of 68.1% in 2008, which compares to 71.8% for 2007. The overall average occupancy level for the calendar years presented equates to 69.0%. Lodging trends within the selected national competitors have experienced continual increases since 2005, even with the influx of new supply. However, we note that during the trailing six-month period, occupancy for convention center headquarters hotels illustrates a decline from the previous comparative period. The decrease in occupancy can be attributed to the troubling national economy, as companies and associations pare their conference attendance rolls in an effort to cut costs. Although we expect occupancy within the selected national market to decline in 2009, the declines should be mitigated by the inherent demand found in conventions. Convention attendance should decline during the near term; however, scheduled major conventions are not expected to be cancelled entirely. National corporate, convention, and association business, both in terms of attendees and dollars spent, continues to grow year-over-year; this trend has allowed headquarters hotels to achieve higher rate levels, even in light of deteriorating occupancy, as headquarters hotels are less affected by corporate meeting spending during economic downturns. Overall, the national market outlook is cautiously optimistic, as both the resilience of the local economy and the national convention market is expected to endure the current economic crisis.

Monthly average rate trends are presented in the following table.


Table 6-11 National Competitor Monthly Average Rate Trends

Month 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

January $127.90 $138.28 $142.24 $143.11 $136.73 $129.72 $126.15 $125.58 $135.23 $148.61 $150.71 $143.46February 125.54 135.15 135.70 141.67 157.83 138.80 120.09 135.67 141.11 149.65 152.41 145.48March 126.33 133.78 138.32 147.48 146.10 138.94 128.12 127.28 144.03 148.66 151.47 139.71April 124.54 134.27 138.05 127.02 135.59 128.55 116.02 129.78 134.69 138.61 148.77 139.94May 124.46 146.64 135.60 128.64 130.35 130.27 118.82 120.41 138.65 141.33 144.24 — June 125.35 125.77 133.35 125.83 138.39 128.57 119.29 118.28 135.58 142.36 135.04 — July 110.93 113.01 110.65 114.10 118.98 115.62 117.88 114.66 122.17 127.44 127.24 — August 105.06 109.72 112.24 108.01 107.28 115.89 107.86 114.32 123.23 127.90 117.76 — September 125.51 127.33 137.87 138.33 128.17 134.44 128.87 129.32 134.69 146.45 147.33 — October 132.04 149.12 159.95 140.35 133.30 136.80 127.66 141.51 153.22 154.82 153.86 — November 139.79 129.58 131.14 125.96 123.43 120.29 121.03 153.01 138.94 140.10 139.53 — December 105.73 109.87 109.23 103.98 116.41 108.43 103.27 111.64 119.14 125.79 122.27 —

Annual Average Rate $123.74 $130.97 $133.74 $130.26 $131.99 $128.02 $120.59 $128.10 $135.95 $142.05 $142.13 —

Year-to-Date $126.18 $135.49 $138.69 $140.61 $144.23 $134.48 $122.91 $129.71 $138.88 $146.66 $150.86 $142.11



These data reflect an overall national market average rate level of $174.16 in 2008, which compares to $169.10 for 2007. The average across all calendar years presented for average rate equates to $162.01. These occupancy and average rate trends resulted in a RevPAR level of $118.66 in 2008.

A review of the historical monthly and day-of-week occupancy and average rate performance shows the patterns of demand among the selected national competitors. The following table shows the occupancy and average rate performance by month and day of week for this national market, as provided by Smith Travel Research.

Table 6-12 National Competitor Seasonality: Occupancy By Month and Day of Week


May - 08 38.0 % 56.1 % 68.9 % 63.3 % 46.2 % 42.8 % 49.1 % 51.5 %Jun - 08 47.8 65.7 77.3 80.5 76.9 63.7 61.1 66.9Jul - 08 30.1 45.3 69.0 69.2 59.3 51.2 41.4 53.5Aug - 08 31.1 46.7 54.0 59.3 47.2 58.4 45.4 48.5Sep - 08 40.0 59.7 65.9 67.1 69.1 65.6 58.0 60.9Oct - 08 40.7 62.4 71.8 64.9 59.9 66.1 67.7 62.1Nov - 08 29.5 46.6 50.6 60.4 53.7 52.8 50.0 48.5Dec - 08 23.3 24.1 28.7 42.0 31.3 37.7 46.5 33.2Jan - 09 30.3 59.7 65.0 67.5 55.5 54.6 38.8 52.7Feb - 09 36.8 59.0 61.3 65.0 63.0 55.3 62.7 57.6Mar - 09 37.4 50.8 58.5 58.6 57.3 58.2 59.0 53.7Apr - 09 36.3 61.0 63.2 58.8 51.4 64.9 57.0 56.0

Average 35.2 % 52.9 % 60.7 % 62.7 % 55.8 % 55.9 % 52.5 % 53.7 %


Seasonality and Demand Patterns


Table 6-13 National Competitor Seasonality: Average Rate By Month and Day of Week


May - 08 $133.02 $152.06 $155.34 $158.40 $151.57 $125.63 $126.36 $144.24Jun - 08 131.00 130.11 137.38 140.92 141.21 135.73 126.43 135.04Jul - 08 128.68 134.02 129.84 129.96 130.96 115.01 116.13 127.24Aug - 08 111.05 122.55 121.61 122.82 119.93 116.18 109.70 117.76Sep - 08 143.51 147.99 151.59 159.84 151.29 140.03 132.12 147.33Oct - 08 148.22 157.04 161.53 155.14 153.82 152.48 146.38 153.86Nov - 08 138.33 143.36 145.39 149.67 145.33 131.09 124.97 139.53Dec - 08 113.09 128.13 128.33 127.60 128.62 116.82 112.52 122.27Jan - 09 137.45 148.89 148.50 149.43 148.27 134.14 131.65 143.46Feb - 09 144.37 152.29 152.68 151.39 145.34 137.53 133.74 145.48Mar - 09 143.99 144.22 147.42 142.80 142.38 128.49 127.30 139.71Apr - 09 142.54 147.95 147.66 148.89 141.17 126.97 122.97 139.94

Average $135.36 $143.27 $144.68 $144.95 $142.72 $131.16 $126.62 $138.84


The peak demand periods suggest the timing and nature of unaccommodated demand and serve as a basis for our forthcoming estimate of this demand category presented later in this chapter.


Table 6-14 National Competitor(s) – Operating Performance

Est. Segmentation Estimated 2006 Estimated 2007 Estimated 2008


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Total

PropertyNumber of

RoomsCompetitive

Level Occ. Average Rate Occ. Average Rate Occ. Average Rate

Hilton Americas Houston 1,203 75 % 15 % 10 % 75 % 902 63 - 67 % $140 - $150 902 62 - 66 % $142 - $152 902 62 - 66 % $142 - $152Omni Hotel @ CNN Center Atlanta 1,067 70 20 10 70 747 60 - 64 165 - 175 747 62 - 66 172 - 182 747 62 - 66 172 - 182Hilton Riverside New Orleans 1,616 75 10 15 70 1,131 56 - 60 139 - 149 1,131 65 - 69 151 - 161 1,131 65 - 69 151 - 161Hyatt Regency McCormick Place Chicago 800 75 15 10 65 520 66 - 70 178 - 188 520 68 - 72 182 - 192 520 68 - 72 182 - 192Hyatt Regency Convention Center Denver 1,100 80 15 5 65 715 65 - 69 147 - 157 715 72 - 76 156 - 166 715 72 - 76 156 - 166Hyatt Manchester Grand San Diego 1,625 80 10 10 50 813 73 - 77 209 - 219 813 78 - 82 207 - 217 813 78 - 82 207 - 217Marriott San Diego 1,362 85 5 10 50 681 80 - 85 205 - 215 681 80 - 85 210 - 220 681 80 - 85 210 - 220Hilton Convention Center Austin 800 80 20 10 50 400 74 - 78 154 - 164 400 74 - 78 166 - 176 400 74 - 78 166 - 176Renaissance Grand St. Louis 1,073 70 15 15 40 429 63 - 67 117 - 127 429 65 - 69 117 - 127 429 65 - 69 117 - 127Marriott Downtown Kansas City 983 70 20 10 40 393 52 - 56 101 - 111 393 50 - 54 102 - 112 393 50 - 54 102 - 112Gaylord Texan 1,511 85 5 10 40 604 72 - 76 161 - 171 604 73 - 77 168 - 178 604 73 - 77 168 - 178Marriott Rivercenter San Antonio 1,001 75 5 20 30 300 76 - 80 163 - 173 300 76 - 80 177 - 187 300 76 - 80 177 - 187Opryland Nashville 2,881 85 5 10 30 864 78 - 82 140 - 150 864 78 - 82 150 - 160 864 78 - 82 150 - 160Marriott Downtown Indianapolis 622 70 20 10 30 187 70 - 74 149 - 159 187 71 - 75 153 - 163 187 71 - 75 153 - 163Grand Hyatt San Antonio 1,003 75 15 10 75 0 0 0.00 0 0 0.00 567 53 - 58 167 - 177Sheraton Phoenix Downtown 1,000 70 20 10 40 0 0 0.00 0 0 0.00 134 25 - 30 158 - 168

Totals/Averages 19,647 77 % 12 % 11 % 50 % 8,687 69.6 % $163.46 8,687 72.1 % $169.94 9,387 68.3 % $173.95


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The national competitive set includes headquarters hotels located adjacent to each property's respective convention center, as well as the Gaylord Texan, which is located in Grapevine, Texas. The selected cities compete with the City of Dallas for national conventions, as well as large corporate and association meetings and events. In addition to illustrating each hotel, we have also included recent event data for each convention center.

Map of Nationally-Significant Competition

New hotels also considered in our analysis (but not reflected on table 6-14 due to date of opening) include the Grand Hyatt San Antonio, the Sheraton Phoenix, and the Omni Fort Worth. Other pending convention hotel projects have been qualitatively considered and are discussed later in this chapter.


Hilton Americas Houston

The 1,203-room Hilton of the Americas is located adjacent to Houston's George R. Brown Convention Center, and the two properties are connected via a skywalk. The hotel opened in December of 2003. This facility was developed in coordination with public and private interests in conjunction with the expansion of the convention center in 2003. The hotel is owned by the Houston Convention Center Hotel Corporation and is operated by Hilton Hotels. In September of 2008, city officials announced that the hotel was available for purchase, with the proceeds potentially used for the development of a second convention headquarters hotel. This hotel’s facilities include a casual-dining restaurant, a lounge, a fine-dining restaurant, a coffee shop, an indoor pool and whirlpool, a fitness center, a business center, and a gift shop. This hotel also boasts more than 91,000 square feet of on-site meeting space, affording the operation considerable meeting and banquet opportunities. The hotel houses the largest ballroom in Houston, measuring over 40,000 square feet, as well as highly flexible breakout meeting space. The hotel has required only nominal renovations since its opening. The Hilton of the Americas is in very good condition and offers modern, artistically designed facilities and upscale amenities. While the Hilton benefits from its convention center headquarters hotel designation and its proximity to the convention center, the property is substantially distanced from the primary corporate concentration of commercial-transient demand generators. Therefore, the Hilton has not historically accommodated any measurable corporate-transient demand and is not expected to in the future.

Hilton Americas Houston


George R. Brown Convention Center

The George R. Brown Convention Center, located in downtown Houston, finished a $165-million expansion in 2003 that increased its rentable meeting and exhibition space to over one million square feet. The Center’s expanded facilities include three new exhibit halls totaling 401,500 square feet and 60 meeting rooms consisting of roughly 78,000 square feet. The expansion of the convention complex included the addition of the $285-million Hilton of the Americas headquarters convention center hotel. Table 6-15 Convention Center Statistics


2001 284 — 1,725,394 — 2002 287 1.1 % 1,710,011 (0.9) %2003 262 (8.7) 1,550,667 (9.3)2004 293 11.8 1,538,075 (0.8)2005 269 (8.2) 1,663,791 8.22006 271 0.7 1,603,739 (3.6)2007 293 8.1 1,694,614 5.7

Number of Meetings Number of Delegates

Source: Indiana Convention Center & RCA Dome

These data illustrate that the Center produced considerably more room nights for the market beginning in 2003 compared to prior years. By this time, the convention center expansion was nearing completion, and the addition of the


Hilton of the Americas allowed accommodation of some larger citywide conventions. The Greater Houston Convention and Visitors Bureau (GHCVB) attributed the increase to the booking cycles and marketability of Houston as a convention destination, including the completion of expansion construction that was occurring at the convention center prior to 2003. Citywide convention activity is expected to continue to climb, with a considerable increase in definite conventions and room nights booked in 2008 through 2011, representing levels closer to those achieved from 2004 to 2007. For the fiscal year ending June 30, 2008, the convention center reported that rental income from conventions, tradeshows, and other events was nearly $2.75 million, a reported 22.7% increase over the previous year's almost $2.24 million. Booked room nights associated with the shows and events grew at an even greater rate, jumping 48.6% to 385,241 from 259,283, according to convention center representatives and the GHCVB. Two major events that helped the Center in 2007/08 were the American Wind Energy Association's WINDPOWER Conference & Exhibition, which attracted 776 exhibitors and 13,000 attendees, and the Helicopter Association International's Heli-Expo, which hosted 565 exhibitors and 17,356 attendees. The convention center did not reportedly sustain any major damage Hurricane Ike; however, three conventions were canceled due to the storm.


Omni Hotel @ CNN Center Atlanta

The 1,067-room Omni is connected to Philips Arena and the Georgia World Congress Center. Facilities include two restaurants, a lounge, a coffee shop, a business center, a concierge desk, a gift shop, an outdoor swimming pool, a spa, a whirlpool, and a fitness center. In addition, the hotel offers approximately 120,000 square feet of dedicated meeting space, inclusive of a 19,864-square-foot ballroom. The hotel, which was built in 1974, underwent an extensive expansion in 2003 that included an additional 600-room tower and approximately 70,000 square feet of meeting space; since this time, the hotel has undergone continual minor upgrades and renovations. Georgia World Congress Center

Located in the heart of Downtown Atlanta, the Georgia World Congress Center (GWCC) features 1.4 million square feet of exhibit space contained in twelve exhibit halls, 105 meeting rooms that constitute 305,000 square feet of

Omni Hotel @ CNN Center Atlanta


space, two grand ballrooms, two landscaped plazas, and a 1,740-seat auditorium, making it one of the nation’s five-largest convention centers in terms of prime exhibit space. During the 1996 Centennial Olympic Games, the GWCC hosted seven sporting events and served as the International Broadcast Center. The International Association for Exhibitions and Events announced the selection of Atlanta as the host city for their 2009 Expo, and the GWCC will house the main events on its complex, which includes the Georgia Dome and Centennial Olympic Park. The Georgia International Convention Center, located approximately ten miles from Downtown Atlanta and adjacent to Hartsfield-Jackson Atlanta International Airport, is a multi-purpose facility with 150,000 square feet of divisible exhibit hall space, a 40,000-square-foot ballroom, and over 20,000 square feet of pre-function space and meeting rooms. Construction of an Automated People Mover is underway to enable event attendees to travel directly from the airport to the convention center; the project is anticipated to be completed in the fall of 2009. Table 6-16 Convention Center Statistics


2001 284 — 1,725,394 — 2002 287 1.1 % 1,710,011 (0.9) %2003 262 (8.7) 1,550,667 (9.3)2004 293 11.8 1,538,075 (0.8)2005 269 (8.2) 1,663,791 8.22006 271 0.7 1,603,739 (3.6)2007 293 8.1 1,694,614 5.7



These data illustrate that the city produced more room nights for the market in 2006 compared to 2005, despite a decrease in the number of events. The Atlanta Convention and Visitors Bureau (ACVB) attributed the increase in room nights to several factors, including the ongoing renovations occurring at area hotels, the expansion of the Omni Hotel being realized, as well as conventions that were relocated to the area after Hurricane Katrina. According to local hoteliers, three large medical events supported a high average daily rate for the market in 2006. The ACVB reports that the booking pace for 2009 is on par with 2007 and 2008. Although 2009 is slightly off pace,


it is expected that bookings for 2009 will increase as local hotels such as the Marriott and the Hilton complete their renovation projects. Hilton Riverside New Orleans

Located along the banks of the Mississippi, the 1,616-room Hilton Riverside is the largest hotel in New Orleans and adjoins the convention center and Harrah’s Casino. This property is owned and operated by Hilton. Facilities include roughly 134,000 square feet of meeting space, three restaurants, a rooftop bar, and a business center. In addition, the hotel is equipped with a full-service health club that includes racquetball and squash courts, indoor tennis courts, and an indoor swimming pool and whirlpool. Opened in 1977, the property underwent an extensive renovation in 2003. The $37-million renovation included a complete guestroom refurbishment, as well as upgrades to all public areas and meeting rooms.

Hilton Riverside New Orleans


Ernest N. Morial Convention Center

The primary convention facility serving the southeastern Louisiana region is located in New Orleans. The Ernest N. Morial Convention Center opened in January 1985; at the time, this facility offered approximately 381,000 square feet of exhibit space and roughly 100,000 square feet of meeting space. As a result of a 1991 expansion, the convention center grew to approximately 667,000 square feet of contiguous exhibit space and roughly 165,000 square feet of second- and third-floor meeting space. A $280-million project was completed in the first quarter of 1999, adding more exhibition space, for a total of 1.1 million square feet of contiguous space. New Orleans now boasts one of the largest contiguous exhibition spaces in the country. The Center also houses a 4,000-seat theater, divisible into four parts – a feature that no other convention center in the country currently offers. The expansion of the Center allows the city to host citywide conventions back to back. Such potential bodes well for area hotels, as the burden of the downtime between conventions will be lessened.




2001 284 — 1,725,394 — 2002 287 1.1 % 1,710,011 (0.9) %2003 262 (8.7) 1,550,667 (9.3)2004 293 11.8 1,538,075 (0.8)2005 269 (8.2) 1,663,791 8.22006 271 0.7 1,603,739 (3.6)2007 293 8.1 1,694,614 5.7



The impact of Hurricane Katrina is evident in the dramatically slow booking pace for 2007. Tentative room nights in the following years indicate improving activity at this facility; as such, 2009 and beyond provide an optimistic outlook. Although the convention center was able to retain some of the larger events in future years, some conventions have altogether relocated to other cities. Smaller conventions that fill the convention center are particularly lacking, as these groups are more flexible in scheduling events and have not committed themselves to the destination following Hurricane Katrina. The largest event on the books is the American Auto Dealer Association Annual Convention in 2009. Based on our research and interviews with representatives of the Convention and Visitors Bureau and others knowledgeable in the local lodging industry, meeting and group activity driven by the convention center is expected to build momentum through 2010.


Hyatt Regency McCormick Place Chicago

The 800-room Hyatt Regency McCormick Place is located adjacent to Chicago’s McCormick Place Convention Center. The hotel is owned by the Metropolitan Pier and Exposition Authority (MPEA) and is operated by Hyatt. This property opened in 1998 and features two restaurants, a lounge, a coffee shop, and indoor heated pool, a fitness center, a business center, and approximately 43,500 square feet of meeting space. The hotel underwent extensive renovations in 2007, during which all guestrooms were completely renovated and received the brand-standard Hyatt Grand Beds. The property’s public areas also received upgrades at this time, and the dining area was expanded to house the current configuration of two restaurants and a lounge. Although several hotels in Chicago boast higher room counts, these hotels are located in Downtown Chicago, approximately three miles from the convention center. The Hyatt almost exclusively captures demand generated by the convention center due to its low room count relative to the size of the McCormick Place Convention Center. Due to this limited room count, the MPEA has plans to add 600 units to the property; however, these plans have not been approved because of a lack of usable land parcels proximate to the convention center.

Hyatt Regency McCormick Place Chicago


McCormick Place Convention Center

Owned and operated by the Metropolitan Pier and Exposition Authority (MPEA), Chicago's McCormick Place is North America's premier convention facility. McCormick Place completed an $800-million expansion in August of 2007, which added more than 900,000 square feet to the convention center. The West Building offers a 470,000-square-foot exhibit hall, 250,000 square feet of meeting space, and Chicago's largest ballroom. McCormick Place offers three other state-of-the-art buildings, the South and North Buildings and Lakeside Center (formerly the East Building). These buildings have a combined total of 2.2 million square feet of exhibit space, 1.6 million square feet all on one level, making it the nation's largest convention center. The North Building features over 700,000 square feet of exhibition space, 29 meeting rooms, service areas, and support facilities. The Lakeside Center at McCormick Place concentrates on hosting mid-sized trade shows and conventions, while the South building offers an additional 840,000 square feet of exhibition space and 170,000 square feet of meeting space. McCormick Place also features the Arie Crown Theater. The entire McCormick Place complex is linked by a 50,000-square-foot pedestrian promenade, referred to as the Grand Concourse, containing retail shops and other visitor amenities.




2001 284 — 1,725,394 — 2002 287 1.1 % 1,710,011 (0.9) %2003 262 (8.7) 1,550,667 (9.3)2004 293 11.8 1,538,075 (0.8)2005 269 (8.2) 1,663,791 8.22006 271 0.7 1,603,739 (3.6)2007 293 8.1 1,694,614 5.7



These data illustrate that the number of shows and conventions at McCormick Place fluctuated between 2001 and 2006. After weakening in 2005, attendance for the facility strengthened in 2006 with over two million delegates. This upward trend continued into 2007 when the facility hosted 112 conventions, up significantly from the previous year due to the completion of the West Building.


Hyatt Regency Convention Center Denver

The Hyatt Regency Denver is located at the Colorado Convention Center. The property opened on December 20, 2005 at a total construction cost of $285 million. The hotel is owned by the Denver Convention Center Authority and is operated by Hyatt Hotels and Resorts. The Hyatt Regency offers a variety of food and beverage outlets, including Altitude Restaurant; a 24-hour coffee and gift shop; the Strata Bar; and the Peaks Lounge, which is the hotel's rooftop bar on the 27th level. The guestrooms are well appointed, each featuring the signature Hyatt Grand Bed and a flat-screen television. The hotel contains just over 60,000 square feet of meeting space, inclusive of a 30,000-square-foot ballroom. Recreational amenities include a 6,700-square-foot health club, which includes an indoor lap pool and sun deck, among other amenities. A leased spa is also an offered facility.

Hyatt Regency Convention Center Denver


Colorado Convention Center

The Colorado Convention Center was built in 1990 at 14th and Stout Streets, along the western side of Downtown Denver. The center contained 292,000 square feet of contiguous exhibit space and 100,000 square feet of meeting space, including a 35,000-square-foot ballroom and 46 meeting rooms. Groundbreaking on the $268-million expansion of the Colorado Convention Center took place on April 29, 2002. Fentress Bradburn Architects Ltd. designed the expansion, and Hensel Phelps Construction Co. of Greeley was selected as the general contractor. Completed in December of 2004, the expansion almost doubled the size of the Center. The Center offers 584,000 square feet of exhibit space on one level, 100,000 square feet of meeting space, and two ballrooms consisting of 35,000 and 50,000 square feet, as well as a 5,000-fixed-seat lecture hall. Together, these spaces comprise approximately 769,000 square feet.




2001 284 — 1,725,394 — 2002 287 1.1 % 1,710,011 (0.9) %2003 262 (8.7) 1,550,667 (9.3)2004 293 11.8 1,538,075 (0.8)2005 269 (8.2) 1,663,791 8.22006 271 0.7 1,603,739 (3.6)2007 293 8.1 1,694,614 5.7



Convention activity is increasing at a feverish pace, now that both the convention center expansion is completed and the new 1,100-room Hyatt headquarters hotel is open. The hotel, which opened one year after the Center's expansion, was a cornerstone for securing Denver's first major citywide convention in years – the CEDIA Expo. This event took place in 2006, 2007, and 2008, and will return in 2009. Other similar major events are expected to follow given the City's new offering and its ability to sell the center in conjunction with the new Hyatt.


Hyatt Manchester Grand San Diego

The Hyatt Manchester Grand Hotel is the largest hotel in San Diego at 1,625 guestrooms and approximately 127,898 square feet of meeting space. The property was expanded in August of 2003 from the original 875 guestrooms, adding a tower containing 750 guestrooms and a substantial 85,000 square feet of meeting space. With the expansion, the property now serves as a headquarters hotel for the San Diego Convention Center (SDCC) and is also able to accommodate self-contained groups given its expansive meeting space facilities. Property management maintains that roughly 50% of the hotel’s meeting and group business is generated by in-house functions, with the balance coming from the adjacent SDCC. Following the hotel’s expansion in 2003, the hotel’s occupancy declined incrementally to approximately 66.0%, resulting in a RevPAR decrease of $7.00 (rounded). The hotel’s average rate recorded minimal growth in 2003, and strong demand in 2004 helped the Hyatt rebound to pre-expansion occupancy levels. The Hyatt’s rooms segmentation is heavily weighted toward meeting and group demand.

Hyatt Manchester Grand San Diego


Marriott San Diego

The Marriott Hotel & Marina, with 1,362 guestrooms and over 100,000 square feet of meeting space, is the second-largest hotel in the San Diego downtown market and is a headquarters hotel for the SDCC. The property is located on Harbor Drive, adjacent to the Center, and overlooks the San Diego Bay. The hotel was renovated from 2001 through 2004, and remains in good condition today. As the most convenient hotel relative to the convention center, the Marriott is heavily oriented toward meeting and group demand, which constituted 85% of its market mix in 2007. Due to its substantial meeting space, the hotel accommodates a large amount of self-contained, in-house groups, in addition to group demand related to the adjacent SDCC. The Marriott Marina has enjoyed continuous RevPAR growth since 2003 and has consistently remained the RevPAR leader in the downtown San Diego market.

Marriott San Diego


San Diego Convention Center

The San Diego Convention Center (SDCC) contains a total of 525,701 square feet of exhibit space on the ground level and 90,000 square feet of space on the upper level, including 72 meeting/banquet rooms and two ballrooms. The pre-function space includes the lobby, registration, and circulation areas and totals 284,494 square feet. The SDCC opened in November of 1989 and doubled in size after an expansion in 2001. The San Diego Board of Port Commissioners has agreed to work with the San Diego Convention Center Corp. to examine the feasibility of its proposal to add about one-half million square feet of exhibit space along the waterfront by 2014. Table 6-20 Convention Center Statistics


2001 284 — 1,725,394 — 2002 287 1.1 % 1,710,011 (0.9) %2003 262 (8.7) 1,550,667 (9.3)2004 293 11.8 1,538,075 (0.8)2005 269 (8.2) 1,663,791 8.22006 271 0.7 1,603,739 (3.6)2007 293 8.1 1,694,614 5.7




This information illustrates that the Center remains a popular destination for major conventions, with 2006 growth formidable, and attendance reached an all-time high in 2007. Delegate counts are now approaching one million on an annual basis, with the number of major events bracketing 70.


Hilton Convention Center Austin

The 31-story, 800 room Hilton Austin Convention Center’s soft opening took place in December of 2003, with January 1, 2004 serving as the official opening. The hotel is a publicly financed project, owned by an entity of the City of Austin - Austin Convention Enterprises, Inc. and managed by Hilton Hotels Corporation. The property is located adjacent to the Austin Convention Center and Convention Parking Garage, one block from the 6th Street Entertainment District. As the designated convention center hotel, the AAA Four-Diamond Hilton is the largest in the market, containing 70,000 square feet of meeting and pre-function space. This full-service property features two restaurants, 24-hour room service, a coffee shop, and a lobby bar. For recreation and business, additional amenities include a health club and spa, an outdoor swimming pool, a business center, and two executive levels.

Hilton Convention Center Austin


Austin Convention Center

The Austin Convention Center (ACC) expansion, which doubled the size of the facility, was unveiled on May 18, 2002. The $110-million expansion brought the size of the facility to roughly 881,400 gross square feet, encompassing six city blocks. The ACC now features roughly 246,097 square feet of contiguous and column-free exhibition space within five exhibit halls. The expansion also included the addition of the Grand Ballroom, measuring approximately 43,300 square feet. Located in tech-heavy Austin, the ACC facility integrated the most up-to-date technological and telecommunication capabilities into the expansion project. According to the ACC, the telecommunications infrastructure now enables the facility to support gigabit Ethernet over its fiber-optic network. The Center’s technological capabilities are expected to make exhibitions and trade shows a more "hands-on" experience for both attendees and exhibitors.




2001 284 — 1,725,394 — 2002 287 1.1 % 1,710,011 (0.9) %2003 262 (8.7) 1,550,667 (9.3)2004 293 11.8 1,538,075 (0.8)2005 269 (8.2) 1,663,791 8.22006 271 0.7 1,603,739 (3.6)2007 293 8.1 1,694,614 5.7



Based on the presented data, it is evident that Austin is emerging as a popular, important convention destination in the South Central United States. It should be noted that fewer citywide conventions are able to be booked in odd-numbered years due to the congregation of the Texas Legislature from January through May, which captures the bulk of CBD room supply during that time. Over time, it is expected that the new destination convention facilities in Austin will allow the market to more effectively penetrate tier-two and some tier-one markets, from the standpoint of capturing convention-type meeting and group demand.


Renaissance Grand St. Louis

The Renaissance St. Louis Grand & Suites Hotel is owned by Gateway Hotel Partners and operated by Marriott International. Facilities include four on-site restaurants and cocktail lounges, an indoor pool and whirlpool, a business center, a gift shop, a Starbucks Coffee lounge, an exercise room, and 70,000 square feet of meeting space. The Renaissance Grand Hotel, formerly known as the Lennox Hotel, opened in April of 2002. It was developed by Historic Restoration, Inc., and the hotel is now the headquarters hotel for the adjacent America’s Center. The hotel benefits from it location proximate to the America’s Center, strong national brand affiliation, and newly renovated product offering.

Renaissance Grand Hotel St. Louis


America’s Center Convention Complex

America's Center, which includes the St. Louis Executive Conference Center and the Edward Jones Dome, is the area's primary meeting venue. Originally constructed in 1977 as the Cervantes Convention Center, the center was expanded in 1993 and now provides more than 500,000 square feet of prime exhibit space. The Edward Jones Dome, a convention facility and stadium that was formerly called the Trans World Dome, seats over 64,000 people and was constructed in 1995 following the demolition of a Sheraton Hotel, which had previously occupied the site. The St. Louis Executive Conference Center is located on the third floor of the America's Center. It is reportedly the only conference center in the U.S. that is located inside a convention center and that has also been certified by the International Association of Conference Centers.




2001 284 — 1,725,394 — 2002 287 1.1 % 1,710,011 (0.9) %2003 262 (8.7) 1,550,667 (9.3)2004 293 11.8 1,538,075 (0.8)2005 269 (8.2) 1,663,791 8.22006 271 0.7 1,603,739 (3.6)2007 293 8.1 1,694,614 5.7



The Center has historically underperformed in relation to its capacity, due primarily to the absence of an official convention center hotel (as the former Sheraton, demolished in 1995, served as the headquarters hotel) and the overall limited room supply in the area. However, these factors have begun to change in recent years. Local hoteliers and industry professionals report that convention business in 2003 was considered weak due in part to the several-year delay of the restoration of the Renaissance Grand Hotel, which hindered future bookings. In 2005 and 2006, the center noted high increases in convention activity, back to levels achieved in stronger convention years. This increase is largely due to the opening of the Renaissance Grand Hotel, which now serves as the official hotel of the convention center. Located directly across the street from the America’s Center, the hotel is inducing conventions that may not have previously considered St. Louis an attractive convention destination. Delegate attendance at this facility registered a slight decrease in 2007. According to the CVB, the decline may be due in large part to the national economic slowdown, but representatives were not able to provide any additional insight at the time of this report.


Marriott Downtown Kansas City

The Marriott, owned by a partnership between Kansas City Power & Light and Kansas City Southern, is operated under a Marriott franchise. Facilities include four food and beverage outlets, including two restaurants and two lounges; an indoor pool; a fitness center; a business center; a gift shop; and 93,374 square feet of meeting and exhibit space. The hotel, which was built in 1985, expanded in 1997 into the block southeast of the original hotel; this expansion is connected to the original hotel via an enclosed walkway. The new tower abuts the historic Muelhebach Hotel. The Marriott is the city’s convention center hotel and relies greatly upon in-house and citywide convention demand. The convention segment tends to be more price-sensitive in nature than commercial-transient demand, which is less prevalent in this neighborhood and thus only modestly impacts a hotel of 983 guestrooms.

Marriott Downtown Kansas City


Kansas City Convention Center

Located on eight city blocks in Downtown Kansas City and connected to the new Power & Light District, the Kansas City Convention Center dominates the city skyline with its brilliant Art Deco pylons. The Kansas City Convention Center offers 388,800 square feet of column-free exhibit space on one floor, another 55,000 square feet of additional space on two levels, 45 meeting rooms, a 46,000-square-foot ballroom, a 2,400-seat fine arts theater, and an arena with seating for over 10,700 people. The Conference Center portion of the facility features up to 19 additional meeting rooms, a 33,000-square-foot lobby, a 24,000-square-foot ballroom, and the Municipal Auditorium, which is an Art Deco landmark with four self-contained venues, including the Music Hall, Arena, Little Theatre, and Exhibition Hall. The facility is connected to major downtown hotels and underground parking by glass-enclosed skywalks and below-ground walkways.




2001 284 — 1,725,394 — 2002 287 1.1 % 1,710,011 (0.9) %2003 262 (8.7) 1,550,667 (9.3)2004 293 11.8 1,538,075 (0.8)2005 269 (8.2) 1,663,791 8.22006 271 0.7 1,603,739 (3.6)2007 293 8.1 1,694,614 5.7



The number of citywide conventions dropped in 2003 after a banner year in 2002. The number of events and delegates has diminished somewhat due to a shift in focus from larger convention business to filling in gaps in order to provide immediate benefit for hoteliers. However, the City's efforts and focus have returned to bringing in large groups. Discussions with officials at the Convention and Visitor's Association revealed that several groups have revoked contracts for conventions in Kansas City, including Wal-Mart and Skills USA. Not only have these groups out-grown the space at the Kansas City Convention Center, the city does not offer enough hotel rooms that are within walking distance to the Center. As such, the booking pace for 2009 is down. Other groups have committed to Kansas City after 2010, which should help citywide convention activity in the future.


Gaylord Texan

The Gaylord Texan Resort opened in April of 2004 and has quickly become a meeting and convention powerhouse for North Texas. In its first year of operation, this property was able to induce a majority of its demand into the greater D/FW market as a result of its expansive facilities. This 1,511-room property features over 400,000 square feet of meeting and convention space. Set in the city of Grapevine, Texas, the resort offers views of Lake Grapevine. Resort guests enjoy lakeside dining, a 25,000-square-foot world-class spa and fitness facility, and championship golf at the Cowboys Golf Club. The convention building is located southwest of the hotel building known as the Riverwalk wing. An indoor passage and several outdoor paths connect the two structures. The Convention Center offers 400,000 square feet of convention, meeting, exhibit, and pre-function space, which is located on three levels. Exhibit offices and permanent registration desks are located on the exhibit and ballroom levels. The resort has three ballrooms: the Yellow Rose Ballroom is located in the Lone Star Wing, and the Texas and Grapevine Ballrooms are located in the Convention Center. This facility is privately managed, and usage statistics were not available for this facility upon our request. However, reports from the market reflect that the facility is well utilized.

Gaylord Texan


Marriott Rivercenter San Antonio & Grand Hyatt

The 1,001-room Marriott Rivercenter, which is often marketed as a headquarters hotel facility, along with the 512-room Marriott Riverwalk, is located one block from San Antonio’s convention center. The Marriott Rivercenter originally opened in 1988 and remains a corporately owned and operated facility together with the Marriott Riverwalk, which was originally constructed in the late 1970s. With 60,000 square feet of on-site meeting space, the Marriott Rivercenter has historically been considered the area’s premier meeting and convention destination hotel. In addition to its location within one block of the convention center, the property is attached to the upscale Rivercenter Mall and the Riverwalk, and is a short walk from the Alamo. This property offers among the largest amount of function space to complement the hotel’s 915 guestrooms and 86 suites; additionally, the hotel features four food and beverage venues, retail space, and well-appointed guestroom amenities. Based on its location, amenities, and facilities, the Marriott Rivercenter accommodates a majority of meeting and convention-oriented (group) demand; this segment accounts for nearly 75% of the hotel’s total occupancy. According to management representatives, of this meeting and group demand, roughly 60% comprises in-house groups, while the remaining 40% is considered citywide convention/group in nature. This hotel has undergone select guestroom and public-area upgrades and renovations in the last several years, which have allowed the Marriott Rivercenter to remain in a highly competitive position within the market.

Marriott Rivercenter San Antonio and the Grand Hyatt


The Grand Hyatt San Antonio is City owned and operated by the Global Hyatt Corporation. The hotel is located adjacent to the Henry B. Gonzalez Convention Center, situated directly on the Riverwalk. The Grand Hyatt, which opened in 2008, offers 115,000 square feet of flexible meeting and event space, including the 21,186-square-foot Lone Star Ballroom; the 30,562-square-foot Texas Ballroom, with a reception capacity for 3,158 guests; 5,200 square feet of balcony space for unique parties, meetings, and events; an outdoor patio; and 29 breakout rooms. In addition to its 1,003 stylish guestrooms and suites, other facilities include the Achiote River Café, the ultra-chic Bar Rojo, the Terrace Bar, a 24-hour Perks Coffee & More market, a full-service business center, the 24-hour Hyatt Stay Fit gym, and an outdoor heated pool with sundeck. The hotel features contemporary urban design aesthetics blended with traditional Latin culture. Bold interiors incorporate dramatic lighting and a vibrant color palette, while the hotel’s modern exterior represents a sleek beacon of glass and light. Interior design details, such as original sculptures and artwork by local artists, further create a symbolic representation of the city’s modern and traditional influences.

Henry B. Gonzales Convention Center

According to the San Antonio Convention and Visitors Bureau, San Antonio is ranked as one of the top-ten host cities by the membership of the American


Society of Association Executives, the National Association for Environmental Management, and the International Automotive Media Conference. This recognition indicates that San Antonio is ideally suited to host conventions, corporate meetings, incentive groups, and expositions. San Antonio has more than 7,000 committable hotel rooms within eight blocks of the San Antonio Convention Center. Also known as the Henry B. Gonzalez Convention Center, this facility is the city’s principal meeting venue, located at the intersection of Market and Alamo Streets. Following an expansion that was completed in 2001, the convention center now contains a total of over 1.3 million square feet, including 440,000 square feet of contiguous exhibition space, a 40,000-square-foot ballroom, 113,000 square feet of meeting space (divisible 59 ways), and a 2,500-seat performing arts theater. Other meeting venues in the city include the HemisFair Arena, the San Antonio Municipal Auditorium, and the Alamodome. Table 6-24 Convention Center Statistics


2001 284 — 1,725,394 — 2002 287 1.1 % 1,710,011 (0.9) %2003 262 (8.7) 1,550,667 (9.3)2004 293 11.8 1,538,075 (0.8)2005 269 (8.2) 1,663,791 8.22006 271 0.7 1,603,739 (3.6)2007 293 8.1 1,694,614 5.7



Citywide convention activity in San Antonio was not immediately impacted by the terrorist attacks of September 11, 2001, and the subsequent economic downturn; however, attendance declined in 2003 and remained flat in 2004, reflecting the drop in citywide convention booking activity during the recession. The market rebounded in 2005 and has maintained levels of activity on par with those attained prior to the downturn. The 2008 opening of the 1,000-room Grand Hyatt Hotel, which serves as a headquarters hotel for the convention center, is expected to assist the city in sustaining strong levels of citywide convention demand. With 115,000 square feet of on-site meeting space, this hotel is also well positioned to accommodate large groups within its facilities.


Opryland Nashville

The Opryland Nashville is a convention destination in its own right and, with nearly 3,000 rooms, is able to capture many large events seeking a mid-America destination. The hotel offers exhibit space of nearly 300,000 square feet, and ballroom space surpassing 127,000 square feet (not including a significant amount of pre-function space). A multitude of food and beverage facilities, an indoor atrium, outdoor pools, a full-service spa, salon, and fitness center complete the experience.

Opryland Nashville


Marriott Downtown Indianapolis

This property is the newest full-service hotel in Indianapolis and the closest to the Indianapolis Convention Center, to which it is connected via a skywalk. The Marriott features two restaurants, a coffee shop, an indoor pool and whirlpool, a fitness center, a business center, and a gift shop. The hotel offers approximately 40,000 square feet of meeting space, inclusive of a 21,000-square-foot ballroom. The property also features the most rooms, meeting space, and amenities in the market. The hotel bears the well-known Marriott brand name, allowing Indianapolis to compete for larger, higher-rated national convention demand. As the Marriott is known as the convention hotel in Indianapolis, it does not attract a significant amount of higher-rated transient demand.

Marriott Downtown Indianapolis


Indiana Convention Center

Located in the heart of Downtown Indianapolis, the Indiana Convention Center & RCA Dome complex now houses more than 400,000 square feet of column-free exhibit space and approximately 140,000 square feet of meeting space. The RCA Dome floor alone offers 95,000 square feet of versatile exhibit space. The Indiana Convention Center, which opened in 1972, is the first of only two convention centers in the nation directly connected to a domed stadium. In 1984, the first expansion added the air-supported dome stadium and two additional exhibit halls. On July 13, 2000, the Indiana Convention Center & RCA Dome opened an additional 100,000 square feet of column-free exhibit space. This addition brought the total prime exhibit-space available to approximately 403,000 square feet. The convention center and RCA Dome are currently expanding. A new stadium, which serves as a multi-use venue that is positioned south of the current RCA Dome, opened in the fall of 2008. The new stadium can seat a crowd of over 63,000. Plans call for the demolition of the RCA Dome to make way for the expansion of the Indiana Convention Center, which is to be completed by 2010. By then, exhibit space in the combined facility will total approximately 730,000 square feet, plus additional meeting, ballroom, and pre-function space.




2001 284 — 1,725,394 — 2002 287 1.1 % 1,710,011 (0.9) %2003 262 (8.7) 1,550,667 (9.3)2004 293 11.8 1,538,075 (0.8)2005 269 (8.2) 1,663,791 8.22006 271 0.7 1,603,739 (3.6)2007 293 8.1 1,694,614 5.7



Indianapolis has historically enjoyed a consistent convention market. The ongoing construction of Lucas Oil Stadium and the planned expansion of the convention center should eventually help draw even more events, with a higher number of delegates, to the area. Over the past several years, the number of events and delegates hosted at the current facility has fluctuated somewhat because of changes in the amount of available space, as well as national economic factors. The Indianapolis Convention and Visitors Association anticipates that convention attendance will decline significantly in 2009 and 2010, when the convention center's capacity will be reduced due to the construction of the expansion. Attendance is expected to increase sharply, surpassing all current and previous levels, when the newly expanded facility becomes fully operational. The project is scheduled to be completed in the fall of 2010. It is important to consider any new hotels that may have an impact on the proposed subject property’s operating performance. Based upon our research and inspection (as applicable), new supply considered in our analysis is presented in the following table.

Supply Changes


Table 6-26 New Supply

Total

Proposed PropertyNumber of

Rooms Competitive

LevelEstimated

Opening Date Developer Development Stage

Proposed Omni Convention Center Hotel 1,000 100 % January 2, 2012 Matthews SouthwestEarly DevelopmentOmni Fort Worth 604 40 January 1, 2009 Omni Hotels Recently Opened

Totals/Averages 1,604

The Omni Fort Worth is also a new convention headquarters hotel being developed by Omni, with roughly $28 million provided by the City in various incentives. The Omni opened in January of 2009 and is located adjacent to the city's convention center, which was expanded in 2003. The 604-unit property features a Bob's Steak & Chop House, the Wine Thief Lounge, the Mokara Salon & Spa, and approximately 68,000 square feet of meeting space; condominium residences occupy the top floors of the structure. Group bookings have been strong, with two 20,000-room-night events contracted from 2009 through 2015.

While we have taken reasonable steps to investigate proposed hotel projects and their status, due to the nature of real estate development, it is impossible to determine with certainty every hotel that will be opened in the future, or what their marketing strategies and effect in the market will be. Depending on the outcome of current and future projects, the future operating potential of the proposed subject property may be positively or negatively affected. Future improvement in market conditions will raise the risk of increased competition. Our forthcoming forecast of stabilized occupancy and average rate is intended to reflect such risk.

We have identified various properties that are expected to be competitive to some degree with the proposed subject property. We have also investigated potential increases in competitive supply in the national submarket of convention center headquarters hotels. The Proposed Omni Convention Center Hotel should enter a dynamic market of varying product types and price points. Next, we will present our forecast for demand change, using this historical supply data presented as a starting point.

The following table presents the most recent trends for the subject hotel market as tracked by HVS. These data pertain to the competitors discussed previously in this section; performance results are estimated, rounded for the

Supply Conclusion

DEMAND


competition, and in some cases weighted if there are secondary competitors present. In this respect, the information in the table differs from the previously presented STR data, and is consistent with the supply and demand analysis developed for this report.

Table 6-27 Historical Market Trends

Year

Est. 2006 3,603,548 — 5,527,870 — 65.2 % $152.52 — $99.43 — Est. 2007 3,579,066 (0.7) % 5,527,870 0.0 % 64.7 159.27 4.4 % 103.12 3.7 %Est. 2008 3,652,410 2.0 5,783,539 4.6 63.2 162.72 2.2 102.76 (0.3)

Avg. Annual Compounded Chg., Est. 2006-Est. 2008: 0.7 % 2.3 % 3.3 % 1.7 %

Accommodated Room Nights % Change

Room Nights Available

Market RevPAR % Change% Change% Change

Market Occupancy Market ADR

For the purpose of demand analysis, the overall market is divided into individual segments based on the nature of travel. Based on our fieldwork, area analysis, and knowledge of the local lodging market, we estimate the 2008 distribution of accommodated-room-night demand as follows. Table 6-28 Accommodated Room Night Demand

Marketwide

Market Segment

Meeting and Group 2,784,591 76 %Commercial 532,227 15Leisure 335,592 9

Total 3,652,410 100 %

Percentage of Total

Accommodated Demand

The market’s demand mix comprises meeting and group demand, with this segment representing roughly 76% of the accommodated room nights in this Dallas submarket. The remaining portion comprises commercial at 15%, with the final portion leisure in nature at 9%.

Demand Analysis Using Market Segmentation


Using the distribution of accommodated hotel demand as a starting point, we will analyze the characteristics of each market segment in an effort to determine future trends in room night demand.

The meeting and group market includes meetings, seminars, conventions, trade association shows, and similar gatherings of ten or more people. Peak convention demand typically occurs in the spring and fall. Because of vacations, the summer months represent the slowest period for this market segment; winter demand varies. Although there are numerous classifications within the meeting and group segment, the primary categories considered in this analysis are corporate groups, associations, and SMERFE (social, military, ethnic, religious, fraternal, and educational) groups.

Corporate groups are one of the most profitable components of this segment, because they exhibit limited price sensitivity and often sponsor banquets and other events that generate revenue for the host hotel. This demand may take the form of training programs, sales meetings, division conferences, and similar events with a business purpose. Corporate groups generally meet during the work week, thus generating lodging demand on Monday through Thursday nights. Association demand is generally divided on a geographical basis: the most common categories are national, regional, and state associations. Depending on their nature, these associations may be more rate sensitive than commercial groups. The scheduling pattern of associations also depends on the nature of the group. The SMERFE market consists of groups that are social, military, ethnic, religious, fraternal, or educational in nature. These groups are budget-conscious, and have a strong preference for weekend and summer meeting times, when rates are generally lowest.

Group travel is experiencing a downturn nationwide, as major corporations are curtailing spending on travel during this difficult economic climate. Negative press and comments from the Administration on corporate meetings spending have also had a toll on meeting and group demand. Industry leaders are working hard to fight the negative stigma, and over time, concurrent with the recovery of the national economy, meeting and group demand should normalize. Therefore, we have taken into consideration the current economic climate when forecasting near-term demand changes, but we do expect a recovery over the longer term, as has been proven to be the case following each of the last recessionary periods. The addition of the Dallas property in 2012 should also support demand growth within the segment after its opening, as the Dallas Convention Center should see an increase in bookings and overall utilization.

Meeting And Group Segment


Future meeting and group demand is closely related to growth in the commercial segment. Because most meetings have either a direct or an indirect business purpose, the economic considerations that have an impact on commercial travel also affect meeting and group demand. The exception is non-commercial meetings, which are tied to the economic factors that influence leisure travel. It should be noted that meetings and similar events are booked in advance, and thus growth in this segment tends to lag slightly behind increases in commercial demand. Considering these historical trends, we project demand change rates of -7.0% in 2009, 0.5% in 2010, and 2.5% in 2011. After these first three projection years, we have forecast demand change rates of 4.0% in 2012 and 4.0% in 2013.

These growth rates are considered appropriately conservative in light of current economic conditions, but also appreciate the changing landscape of the convention headquarters supply levels, as set forth previously in our report. The new Grand Hyatt in San Antonio, which opened in 2008, will support new demand growth in this market, despite the weaker national economy. This, in addition to other similar factors, has been built into our growth rate assumptions.

The commercial segment consists of individual businesspeople who are visiting various firms in the subject property’s market. This demand is strongest Monday through Thursday nights, declines significantly on Friday and Saturday, and increases somewhat on Sunday. In markets where the weekday occupancy often exceeds 90%, some unaccommodated commercial demand is likely to be present. The typical length of stay for commercial guests ranges from one to three days, and the rate of double occupancy is a low 1.2 to 1.3 people per room. Commercial demand is relatively constant throughout the year, although some declines are noticeable in late December and during other holiday periods.

The commercial segment includes numerous smaller classifications; however, the primary categories considered in this analysis are individual business travelers and high-volume corporate accounts. Most individual business travelers are visiting firms in the immediate area or passing through en route to other destinations. Their lodging choices are influenced by brand loyalty (and frequent traveler programs in particular), as well as location and convenience with respect to businesses and amenities. High-volume corporate accounts are generated by local companies; demand in this sub-segment may include employees of the firm or its affiliates, and often consists of training groups. These companies typically designate hotels as “preferred”

Commercial Segment


accommodations; in return, the selected lodging facilities generally offer a significant discount from their published rates. Typically, these rates are negotiated on an annual basis, and the size of the discount is tied to the number of room nights produced.

The current contraction in travel has intensified over the last several months, as corporations have turned to their travel budgets as a source of curtailing spending. We expect this severe cutback in corporate travel to extend through much of 2009, with a stabilization occurring toward the end of the year. As noted previously in this report, a major factor considered in our forecast of the market's recovery includes the renewed vibrancy of Downtown Dallas and surrounding areas, such as Uptown, Victory Park, and the Dallas Market Center/Oak Lawn Design District, which is evidenced by the number of new commercial, residential, retail, and cultural components under development. The relocation of Comerica's corporate headquarters from Detroit to Downtown Dallas in 2007 and the June 2008 announcement by AT&T that it was moving its corporate headquarters from San Antonio to Downtown Dallas are factors that should support demand growth in this segment in 2010 and beyond. Other important demand generators in the area include the Dallas Market Center, which attracts considerable commercial demand as a result of the wholesale events that are held frequently throughout the year, and The University of Texas Southwestern Medical Center. Parkland Memorial Hospital, Children's Medical Center, and numerous smaller companies throughout the immediate area add to this growing market segment.

All of the economic and demographic data presented earlier have some influence on commercial lodging demand; the trends that have the most direct correlation are changes in FIRE, service, wholesale trade, and total employment; occupied office space; and air passenger counts. Considering these historical trends, we project demand change rates of -8.0% in 2009, 1.0% in 2010, and 3.0% in 2011. After these first three projection years, we have forecast demand change rates of 5.0% in 2012 and 4.0% in 2013.

The leisure market segment consists of individuals and families who are spending time in the area or passing through en route to other destinations. Their travel purposes may include sightseeing, recreation, visiting friends and relatives, or numerous other non-business activities. Leisure demand is strongest Friday and Saturday nights and all week during holiday periods and the summer months. These peak periods are negatively correlated with

Leisure Segment


commercial visitation, underscoring the stabilizing effect of capturing weekend and summer tourist travel.

The typical length of stay ranges from one to four days, depending on the destination and travel purpose, and the rate of double occupancy typically ranges from 1.8 to 2.5 people per room. Price sensitivity tends to vary with product type. All-suite properties with inclusive food and beverage will tend to drive strong leisure room rates, while highway properties with limited amenities typically offer more discounted leisure room rates.

While personal spending for leisure travel is experiencing a decline in 2009, the array of amenities and continued development of Downtown Dallas as a leisure destination should support the recovery of this segment in 2010 and beyond. The sports and entertainment events held at the American Airlines Center and the historical attractions offered by the City of Dallas draw significant leisure demand. Attractions such as the Sixth Floor Museum, the JFK Memorial and Dealey Plaza, Old City Park, Dallas Aquarium, and the entertainment areas of West End and Deep Ellum all contribute to this demand. The Dallas Arts District, the largest urban cultural district in the country, is anchored by the Dallas Museum of Art and the Nasher Sculpture Center. The Dallas Center for the Performing Arts, an estimated $275-million project in the heart of the Arts District, will be completed in 2009. Upon completion of the Center, Dallas will be the only city in the world with buildings designed by four Pritzker Prize-winning architects in one contiguous block. Another project that is expected to increase Dallas' attractiveness as a leisure destination is the planned Woodall Rodgers Park, an estimated $100-million, 5.2-acre urban park over Woodall Rodgers Freeway, which will connect Uptown, Downtown, and the Arts District.

Future leisure demand is related to the overall economic health of the region and the nation. Trends showing changes in state and regional unemployment and disposable personal income often have a strong correlation to non-commercial visitation. Of the economic and demographic data presented earlier in this report, trends in retail sales, retail sector employment, total employment, and air traffic counts tend to have the strongest influence on leisure demand. Considering these historical trends, we project demand change rates of -6.0% in 2009, 0.5% in 2010, and 2.0% in 2011. After these first three projection years, we have forecast demand change rates of 3.5% in 2012 and 3.0% in 2013.


The purpose of segmenting the lodging market is to define each major type of demand, identify customer characteristics, and estimate future growth trends. Starting with an analysis of the local area, three segments were defined as representing the subject property’s lodging market. Various types of economic and demographic data were then evaluated to determine their propensity to reflect changes in hotel demand. Based on this procedure, we forecast the following average annual compounded market segment growth rates.

Table 6-29 Average Annual Compounded Market Segment Growth Rates

Annual Growth RateMarket Segment

Meeting and Group -7.0 % 0.5 % 2.5 % 4.0 % 4.0 % 3.0 % 2.0 % 2.0 %Commercial -8.0 1.0 3.0 5.0 4.0 2.5 2.0 1.5Leisure -6.0 0.5 2.0 3.5 3.0 2.5 1.5 1.0

Base Demand Growth -7.1 % 0.6 % 2.5 % 4.1 % 3.9 % 2.9 % 2.0 % 1.8 %

2009 2010 2011 2012 20142013 2015 2016

While local economic conditions bear the greatest significance on the forecast of demand change presented in this section, our forecast also takes into consideration the currently sluggish economic climate on a national level. As previously discussed, the national economy is in a state of decline; the gross national product contracted by 0.5% in the third quarter of 2008, after posting a 2.8% increase in the second quarter. Moreover, unemployment remains on the rise, and the financial sector remains strained by the subprime crisis. Accordingly, we expect demand to continue its decline for most of 2009, following the similar trend of 2008 for the U.S. hotel industry overall. Together with the continued introduction of new supply, this decline in demand is expected to produce a compounded negative effect on the national average occupancy level.

A table presented earlier in this section illustrated the accommodated-room-night demand in the subject property’s competitive market. Because this estimate is based on historical occupancy levels, it includes only those hotel rooms that were used by guests. Latent demand, which reflects potential room-night demand that has not been realized by the existing competitive supply, can be divided into unaccommodated demand and induced demand.

Conclusion

Latent Demand


Unaccommodated demand refers to individuals who are unable to secure accommodations in the market because all the local hotels are filled. These travelers must defer their trips, settle for less-desirable accommodations, or stay in properties located outside the market area. Because this demand did not yield occupied room nights, it is not included in the estimate of historical accommodated-room-night demand. If additional lodging facilities are expected to enter the market, it is reasonable to assume that these guests will be able to secure hotel rooms in the future, and it is therefore necessary to quantify this demand.

Unaccommodated demand is further indicated if the market is at all seasonal, with distinct high and low seasons; such seasonality indicates that although year-end occupancy may not average in excess of 70%, the market sells out many nights during the year.

The following table presents our estimate of unaccommodated demand in the subject market.

Table 6-30 Unaccommodated Demand Estimate

Market Segment

Meeting and Group 2,784,591 6.1 % 169,325Commercial 532,227 1.9 9,972Leisure 335,592 0.9 2,869

Total 3,652,410 5.0 % 182,165

Accommodated Room Night Demand

Unaccommodated Demand Percentage

Unaccommodated Room Night Demand

Our interviews with market participants found that the local market generally sells out on most major convention days, as well as most Tuesday and Wednesday nights during the peak travel season in a normal or typical year. While the 2009 economic climate may limit these sell-out nights, a typical year or normalized year for the market reaches its capacity during several times of the year. Other special events held in Dallas' world-class sporting arenas and entertainment venues will sell out area hotels. A portion of this demand, which is turned away in a typical year, should return to the market concurrent with the supply increase. Accordingly, we have forecast 5.0% of the base-year demand to be classified as unaccommodated, based upon an analysis of monthly and weekly peak demand and sell-out trends.

Unaccommodated Demand


Induced demand represents the additional room nights that are expected to be attracted to the market following the introduction of a new demand generator. Situations that can result in induced demand include the opening of a new manufacturing plant, the expansion of a convention center, or the addition of a new hotel with a distinct chain affiliation or unique facilities.

A hotel such as the subject property will induce new groups to the local market; however, our analysis incorporates a significant nationally-selected competitive set, and therefore the subject property’s nationally-derived market share will be captured from demand already largely present within these hotels in our analysis. Therefore, due to this nature of our constructed analysis, we have not included an additional estimate of induced demand.

Based upon a review of the market dynamics in the subject property’s competitive environment, we have forecast growth rates for each market segment. Using the calculated potential demand for the market, we have determined market-wide accommodated demand based on the inherent limitations of demand fluctuations and other factors in the market area.

The following table details our projection of lodging demand growth for the subject market, including the total number of occupied room nights and any residual unaccommodated demand in the market.

Induced Demand

Accommodated Demand and Market-wide Occupancy


Table 6-31 Accommodated Demand

2,647,338 2,669,002 2,751,501 2,943,095 3,060,819 3,152,643 3,215,696 3,280,01099,803 91,875 78,398 0 0 0 0 0

-4.9 % 0.8 % 3.1 % 7.0 % 4.0 % 3.0 % 2.0 % 2.0 %

493,008 498,432 514,313 544,871 566,666 580,833 592,449 601,3365,814 5,379 4,612 0 0 0 0 0

-7.4 % 1.1 % 3.2 % 5.9 % 4.0 % 2.5 % 2.0 % 1.5 %

316,445 318,171 324,803 337,554 347,681 356,373 361,719 365,3361,709 1,574 1,336 0 0 0 0 0

-5.7 % 0.5 % 2.1 % 3.9 % 3.0 % 2.5 % 1.5 % 1.0 %

3,456,791 3,485,605 3,590,617 3,825,521 3,975,166 4,089,849 4,169,864 4,246,682107,327 98,828 84,347 0 0 0 0 0

-5.4 % 0.8 % 3.0 % 6.5 % 3.9 % 2.9 % 2.0 % 1.8 %

16,297 16,315 16,297 16,297 16,297 16,297 16,297 16,297

Proposed Omni Convention Center Hotel ¹ 1,000 1,000 1,000 1,000 1,000Omni Fort Worth ² 242 242 242 242 242 242 242 242

Extension to existing supplyGaylord Texan A 83 200 200 200 200 200 200

Available Rooms per Night 16,539 16,640 16,739 17,739 17,739 17,739 17,739 17,739Nights per Year 365 365 365 365 365 365 365 365Total Supply 6,036,626 6,073,426 6,109,626 6,474,626 6,474,626 6,474,626 6,474,626 6,474,626Rooms Supply Growth 4.4 % 0.6 % 0.6 % 6.0 % 0.0 % 0.0 % 0.0 % 0.0 %

Marketwide Occupancy 57.3 % 57.4 % 58.8 % 59.1 % 61.4 % 63.2 % 64.4 % 65.6 %

¹ Opening in January 2012 of the 100% competitive, 1000-room Proposed Omni Convention Center Hotel² Opening in January 2009 of the 40% competitive, 604-room Omni Fort WorthA Change of room count in August 2010 of the 40% competitive, Gaylord Texan

20162012 2013 2014 20152009 2010 2011

Meeting and GroupOccupied Room NightsResidual DemandAccommodated Demand Growth

CommercialOccupied Room NightsResidual DemandAccommodated Demand Growth

LeisureOccupied Room NightsResidual DemandAccommodated Demand Growth

Existing SupplyProposed Supply

TotalsOccupied Room NightsResidual DemandAccommodated Demand Growth

Our forecast occupancy levels for the market as a whole reflect our consideration of the changing national economic landscape and the outlook that general expansion of the economy will minimize in the future when compared to the expansion experienced during the several years leading up to 2008.

HVS Consulting and Valuation Services Description of the Proposed Project 7-1

7. Description of the Proposed Project

The quality of a lodging facility's physical improvements has a direct influence on marketability, attainable occupancy, and average room rate. The design and functionality of the structure can also affect operating efficiency and overall profitability. This section investigates the subject property's planned physical improvements and personal property in an effort to determine how they are expected to contribute to attainable cash flows.

Our analysis assumes the property will open on January 1, 2012, and the hotel feature 1,000 rooms, two restaurants, a lounge, a coffee kiosk, 80,000 square feet of meeting space, an outdoor pool, an outdoor whirlpool, a fitness center, a spa, a business center, retail outlets, and vending areas. The hotel should also feature all necessary back-of-the-house space.

Rendering of the Proposed Omni Convention Center Hotel

Project Overview


The hotel will be full-service in nature and with the finish-out typical of a first-class, convention headquarters hotel. The hotel’s facility is expected to be of high quality, conforming at a minimum to the brand-specific guidelines set forth by Omni. Our forecast assumes that the property will be maintained in a competitive condition, undergoing regular renovations of softgoods and case goods funded primarily by a reserve for replacement.

The quality of a lodging facility's physical improvements has a direct influence on marketability, attainable occupancy, and average room rate. The design and functionality of the structure can also affect operating efficiency and overall profitability. The hotel's facilities are expected to be of a high quality level for the national convention market, and similar in finish and first-class feel to the Hyatt Regency Denver, the Hilton Austin, or the new Grand Hyatt in San Antonio. Hence, the proposed subject property's guestrooms are expected to be upscale and comfortable as the hotel facilities are expected to serve as the host hotel for conventions, in-house groups, and transient travelers. By the time of its opening, the hotel’s product design and quality should place it as the preeminent hotel in the downtown full-service lodging market.

Omni Hotels is a privately-owned company headquartered in Irving, Texas, which operates first-class and luxury hotels and resorts throughout the United States, Canada, and Mexico. The Dunfey family of New England founded the company in 1958; it was subsequently owned by Aetna Insurance and Aer Lingus, World International Holdings Ltd., and Wharf Holdings Ltd. of Hong Kong. In February of 1996, TRT Holdings, Inc. of Corpus Christi, Texas, purchased Omni Hotels/North America. The company's portfolio comprises 35 owned and managed properties, four franchised properties, and one property under development. Omni Hotels' strategy is to establish a global hotel brand, chiefly through ownership and management contracts of numerous full-service, luxury hotels and resorts located in key primary and secondary cities in North America and internationally. Omni Hotels properties offer four-diamond amenities and services including complimentary wireless high-speed Internet access, in-room speaker phones with dual lines and voice mail, data port/modem connections, complimentary guest robes, business and fitness centers, exquisite décor, and gourmet dining. Omni Hotels also offers airline miles and additional services through its preferred guest and children’s programs.

Product Quality Category and Brand Affiliation


Based on our inspection and research in the national headquarters hotel industry, the following table summarizes the facilities that are expected to be available at the subject property.

Table 7-1 Proposed Facilities Summary

Guestroom Configuration

King 350 Queen/Queen 600 Suite 50

Total 1,000

Food & Beverage Facilities

Casual Restaurant (Buffet) 250 - 300Upscale Restaurant 125 - 175Lounge 75 - 125Coffee Kiosk 15 - 25

Meeting & Banquet Facilities

Ballroom 32,500 Ballroom Pre-Function Space 7,000 - 10,000Junior Ballroom 17,500 Junior Pre-Function Space 4,000 - 7,000Additional Meeting Space 30,000 Additional Pre-Function Space 4,000 - 7,000

80,000

Amenities

Outdoor Swimming PoolOutdoor WhirlpoolVending Areas

Total (Not Including Pre-Function Space)

Square Footage

Fitness CenterBusiness Center

Retail Outlets

Number of Units (Est.)

Seating Capacity (Est.)

Once guests enter the site, ample parking will likely be available in a parking garage adjacent to the hotel structure. Site improvements should include free-standing signage at the main entrance point to the site, which should direct motorists to the hotel's main entrance (additional signage is also expected to be placed on the exterior of the building). We assume that all signage will adequately identify the property and meet Omni brand standards. Landscaping should allow for a positive guest impression and competitive exterior appearance. Sidewalks should be present along the front entrance and around the perimeter of the hotel. Several walkways are

Summary of the Facilities

Site Improvements and Hotel Structure


expected to integrate the property with the Dallas Convention Center. Other site improvements are expected to include an outdoor pool with sundeck. The expected site improvements for the property should be adequate to provide for an upscale lodging experience. It is important to note that we have assumed the future development of a 1,000-unit Omni Hotel; many aspects of the future facilities and potential design characteristics referenced throughout this report refer to facilities that would be expected of an Omni Hotel.

Omni San Diego


Omni Charlotte

The hotel structure is expected to be constructed of steel, reinforced concrete, and concrete panels. The exterior finish will likely consist of glass panels and will feature indigenous stone accents on the ground level and near the main entrance. Several elevators and stairways will provide internal vertical transportation within the main structure. The hotel roof will most likely be constructed of concrete and will be appropriately covered with an impermeable membrane. Double-paned windows will reduce noise transmission into the rooms. Heating and cooling will be provided by centralized systems. Overall, the future building components should be normal for a hotel of this type and should meet the standards for this market. We assume that all structural components will meet local building codes, and no significant defaults will occur during construction that would impact the future operating potential of the hotel or delay its assumed opening date.

Guests should enter the hotel through a single set of automatic doors that open to a breezeway, and then through a second set of automatic doors. The lobby should be large and appropriate for an Omni Hotel. The lobby walls are expected to be attractively finished with an upscale material that is in line with first-class hotel standards and the Dallas market; moreover, we would expect locally inspired artwork to be featured prominently in this space. The front desk should feature a high-quality stone countertop and is expected to be installed with appropriate property management and telephone systems.

Lobby


The furnishings and finishes in this space should offer an appropriate first impression, and the design of the space should lend itself to adequate efficiency. The specific design concept will be finalized with input from Omni Hotels. We assume that all property management and guestroom technology will be appropriately installed for the effective management of hotel operations.

Arguably, the two most important factors in choosing any city’s convention center and its convention headquarters hotel are the size of the available room block at the hotel and the size of the center’s and hotel’s main ballroom. In this sub-section, we will discuss the guestrooms.

Meeting planners prefer to have a majority of their constituents within the larger headquarters room block. If a convention is able to house the majority of constituents at a singular property, less coordination efforts are needed between hotels. Moreover, the meeting planner has a greater chance at capturing the attendee for more convention-related events if the attendee is being housed within the property. Smaller room blocks are made at surrounding hotels as necessary, typically within proximity to the convention center and headquarters hotel.

Convention travelers themselves also prefer to be within the headquarters hotel. Often, meeting attendees want to escape to their guestrooms between meetings for breaks, to drop-off or pick-up materials, or handle other necessities. It is also the most easy and preferred access to the meetings at the beginning and end of the day’s sessions. If staying at a nearby hotel, guests often have to reserve more time for transportation to and from the meeting facility and cannot escape to guestrooms between sessions.

Many years ago, the presence of the substantial headquarters hotel was more of an exception to the norm. As such, large conventions were willing to split up their attendees among many different hotels, as well as settling for a smaller headquarters hotel block. However, the market has now shifted as most cities have built substantial headquarters hotel properties. Substantial room blocks are now available in large hotels located adjacent to the region’s most significant convention centers. Meeting planners now have their pick of facilities, which offer substantial room blocks within the headquarters hotel. Dallas is the only major city without a headquarters hotel, or without a headquarters hotel under construction.

Guestrooms


Table 7-2 Hotel Presence in Competitive Convention Cities

Convention Proposed/Planned Adjacent ExistingCenter Headquarters Hotel Headquarters Hotel Primary Hotel

Opryland Nashville — 2,881-rm hotel —

San Diego Convention Center — 1,625-rm Hyatt (Expanded) 1,362-rm Marriott (Adj.)

New Orleans — 1,616-rm Hilton 1,100 Sheraton

Grapevine New 500-rm Expansion 1,511-rm Texan —

Houston — 1,203-rm Hilton 977-rm Hyatt Regency

Dallas Subject of Study N/A 1,122-rm Hyatt Regency

Denver — 1,100-rm Hyatt 1,225-rm Sheraton

St. Louis — 1,073-rm Renaissance 910-rm Hyatt Regency

Atlanta Georgia World Congress — 1,067-rm Omni 1,675-rm Marriott

San Antonio — 1,004-rm Grand Hyatt 1,001-rm Marriott

Phoenix — 1,000-rm Sheraton Hotel (Oct. 08) —

Kansas City — 983-rm Marriott 731-rm Hyatt Regency

Chicago McCormick Place Studying Additional Hotel 800-rm Hyatt Regency 2,019-rm Hyatt Regency

Austin — 800-rm Hilton 446-rm Hyatt Regency

Indianapolis Studying Addt'l 1,200-rm Sheraton 622-rm Marriott 573-rm Westin

Fort Worth — 604-rm Omni (Jan. 09) 504-rm Renaissance

The hotel is expected to feature standard and suite-style guestroom configurations, and guestrooms will be present on floors above the lobby and meeting space levels within the single building. The rooms will be of a standard size and are expected to offer typical amenities for this upscale product type. As an Omni, the centerpiece of each room will be the Serta Pillowtop Sleeper, which offers a popular sleeping experience, replete with upscale linens, comfortable mattresses, and plush pillows. In addition to the standard furnishings, rooms are expected to also feature an iron and ironing board, a coffeemaker, and high-speed Internet access. Suites are expected to feature a larger living area and other upgraded amenities. Overall, the guestrooms should offer a competitive upscale product when compared with the nation's other convention headquarters properties.


Typical Omni Guestroom Sleeping Area

Typical Omni Guestroom Living Area

Guestroom bathrooms are expected to be of standard size, with a shower-in-tub, commode, and single sink with vanity area, featuring a high-quality stone countertop. The floors should be finished with tile, and the walls


should be finished with a vinyl wall-covering. Bathrooms are expected to feature a hairdryer and complimentary toiletries. Overall, the bathroom design should appeal to the upscale traveler and conform to Omni brand standards.

Typical Omni Guest Bathroom Vanity Area


Typical Omni Guest Bathroom Shower

We assume management will create no-smoking rooms as needed; this type of amenity costs very little and requires no structural changes. We expect that the number of rooms allocated for this purpose will be increased or reduced depending on demand and guest response.

The interior guestroom corridors are expected to be wide and functional, permitting the easy passage of housekeeping carts. Corridor carpet, wall vinyl, signage, and lighting should be in keeping with the overall look and design of the rest of the property.

As a convention headquarters Omni, the hotel is expected to offer two full-service restaurants, a lounge, room service, and banquet operations. We would expect on-site outlets to be relatively upscale due to the hotel's service level, along with the presence of the adjacent convention center. One restaurant should be relatively large, with a built-in buffet operation to allow for serving a larger group of guests quickly. A secondary, concept restaurant will likely serve as an alternative, smaller dining venue. The lounge should be high-energy and is expected to be located on the second floor, in keeping with the emerging trends in convention hotel bars and lounges. The hotel's primary focus in the food and beverage department will be centered on banquet operations. The furnishings of the restaurants and lounge are

Food and Beverage Facilities


expected to be of a similar style and finish as lobby and guestroom furnishings.

Bob’s Steak & Chop House

Overall, the proposed Omni is expected to offer a competitive offering of food and beverage facilities for a property of this type. We would expect outlets to be designed with large groups in mind, accounting for efficiency and volume while maintaining a modern, appealing design for the convention traveler.

The following table illustrates a competitive review of the other hotels in the competitive area, as well as regionally and nationally significant hotels. The table provides specifics relating to each hotel’s guestrooms and suites, current industry ratings, and food and beverage facilities.


Table 7-3 Guestroom Count, Suite Mix, Food and Beverage Outlets – Competitive Review

Year Mobil AAAHotel Name Opened Stars Diamonds

Selected Local CompetitorsSheraton (Formerly Adam's Mark) 1,840 1959 — — 211 11.5 % 1 2 2Hilton Anatole 1,608 1979 3 4 130 8.1 1 3 1Gaylord Texan 1,511 2004 — 4 124 8.2 1 5 3Dallas Hyatt 1,122 1978 3 4 42 3.7 1 2 2Fort Worth Omni 614 2009 — — 89 14.5 1 2 2

Selected National CompetitionOpryland Nashville 2,881 1977 4 — 165 5.7 % 2 7 4San Diego Grand Hyatt 1,625 1992 3 4 95 5.9 1 2 2New Orleans Hilton 1,616 1977 3 4 73 4.5 1 2 3San Diego Marriott 1,362 1984 3 4 55 4.0 0 3 1Houston Hilton Americas 1,203 2003 3 4 66 5.5 1 2 1Denver Hyatt Regency 1,100 2005 — 4 71 6.5 1 1 2St. Louis Renaissance Grand 1,073 2003 — 4 189 17.6 1 3 2Atlanta Omni 1,067 1974 3 4 31 2.9 1 1 1San Antonio Grand Hyatt 1,003 2008 — — 95 9.5 0 2 2Phoenix Sheraton 1,000 2008 — — 48 4.8 1 0 1Kansas City Marriott 983 1985 3 3 37 3.8 0 3 2Chicago Hyatt McCormick 800 1998 3 — 48 6.0 1 0 1AustinHilton 800 2003 3 4 95 11.9 1 1 1Indianapolis Marriott 622 2001 3 4 21 3.4 1 1 1

Concept/Numberof Rooms Lounge

Current Ratings

Total Fine% Suitesof Total

SuitesFood and Beverage Facilities

Casual

As noted previously, the size and capacity of the headquarters hotel’s meeting space is of utmost importance, and the size of the hotel’s grand ballroom is typically one of the most critical factors. While meeting planners may use the convention center’s ballroom(s) throughout their event, planners typically prefer to have the closing banquet or other selected events in the ballroom of the headquarters hotel. Even if the convention center has a large ballroom, the headquarters hotel must also have a large ballroom in order to house these special convention-related events. The ballroom must also be large enough to support large in-house groups that may be utilizing the hotel while the convention center is not in use.

The proposed hotel is expected to be developed with roughly 80,000 square feet of modern and technologically advanced meeting space (including pre-function space). We expect integration of a fully-divisible grand ballroom

Meeting and Banquet Space


measuring roughly 33,000 square feet, a junior ballroom encompassing approximately 17,000 square feet, and additional, primary meeting space. Furthermore, we expect additional smaller breakout rooms, secondary meeting rooms, and boardroom-type spaces to total roughly 30,000 square feet. Public restrooms and a business center will be integrated into this space, as well as additional reception and hallway areas. Overall, this offering of meeting space is considered competitive and appropriate for a convention headquarters hotel, and the direct connection to the Dallas Convention Center and the availability of its vast meeting space offering should place the Omni in a favorable competitive position on the national convention stage.

Typical Ballroom


Typical Boardroom

Most meeting planners prefer that all meeting space is located on one floor, which typically causes an increase in traffic between the uses of each space. The meeting space should feature the latest in technology, preferably offering a greater capability than the present hotels in the market. This feature, in addition to the brand new finish and construction, should afford the subject property an appropriate competitive position in the local, regional, and national markets.

The following table illustrates a competitive review of the other hotels in the competitive area, as well as regionally and nationally significant hotels. The table provides specifics regarding each hotel’s proximity to the convention center and includes information pertaining to each hotel’s grand ballroom space, junior ballroom space, total meeting space, exhibit space, and number of breakout rooms.


Table 7-4 Meeting Space – Competitive Review

How far to Total ExhibitHotel Name center? Meet. Sp. Space

Selected Local CompetitorsSheraton (Formerly Adam's Mark) 1 Mile 40,000 24,624 122,800 67 40,000Hilton Anatole 2 1/2 Miles 28,400 17,400 346,275 216 73,000Gaylord N/A 49,900 32,375 400,000 265 180,288Dallas Hyatt 1/4 Mile 30,000 19,400 160,000 143 55,000Fort Worth Omni Adjacent 18,788 9,586 68,000 111 2,808

Selected National CompetitionOpryland Nashville N/A 55,314 29,298 600,000 208 263,000San Diego Grand Hyatt Adjacent 29,000 10,000 120,000 74 34,000New Orleans Hilton Adjacent 26,894 24,139 127,000 79 20,582San Diego Marriott Adjacent 23,108 15,111 110,000 81 25,254Houston Hilton Americas Adjacent 39,138 29,170 91,500 76 0Denver Hyatt Regency Adjacent 31,000 14,847 60,000 55 0St. Louis Renaissance Grand Adjacent 20,106 11,094 45,000 42 0Atlanta Omni Adjacent 19,864 14,196 120,000 112 15,000San Antonio Grand Hyatt Adjacent 31,000 21,000 115,000 115 18,000Phoenix Sheraton Adjacent 29,000 15,000 95,000 95 0Kansas City Marriott Adjacent 17,040 15,080 91,570 93 12,000Chicago Hyatt McCormick Adjacent 11,948 0 36,900 46 0AustinHilton Adjacent 27,452 15,608 71,111 89 0Indianapolis Marriott Adjacent 21,008 8,320 38,794 63 0

BallroomJuniorGrand

BallroomPer

Room

Meeting Space Square Feet

As illustrated, the larger properties tend to offer ballrooms of 30,000 square feet or larger. The larger headquarters hotels under construction at this time typically feature ballrooms of 40,000 to 60,000 square feet on average. The ballroom must offer the latest in available technology and a competitive ceiling height that allows for proper visibility of the stage area and overhead exhibits or screens.

Junior ballrooms vary in size in the sample and are not always prevalent. The inclusion of a junior ballroom is essential for the proposed subject hotel. Typically, the junior ballroom can be used for exhibits or dining, while the grand ballroom is used for general sessions, or the like. The junior ballroom can also allow the hotel to host two groups simultaneously, with the smaller group utilizing the junior ballroom space. As such, an advantageous hotel design separates these two spaces somewhat so that two simultaneous groups do not necessarily conflict with one another.


Separate exhibit space is not absolutely needed in the case of the proposed subject hotel. For smaller meetings requiring exhibits, the pre-function space of the grand ballroom can typically be utilized, or the junior ballroom can be utilized for this function (or a portion of a divided grand ballroom). Larger events requiring significant exhibits will most likely utilize the adjacent convention center.

The number of breakout rooms should be at least 20 for the headquarters property. These breakout spaces can also be incorporated into a divisible junior and grand ballroom. The additional space provided by breakout rooms should add up to the previously stated additional meeting space planned for the hotel.

The hotel is expected to offer an outdoor pool with sundeck, an outdoor whirlpool, and a fitness area as recreational facilities. Restrooms should be present off of the pool area. A full-service spa will also be an integral component of the hotel’s design.

Other amenities are expected to include a business center and select retail, as well as vending areas on each floor with ice machines. Overall, the supporting facilities should be appropriate for an upscale, full-service hotel and are expected to meet Omni brand standards. The following table illustrates a competitive review of the other hotels in the competitive area, as well as regionally and nationally significant hotels. The table details each hotel’s amenity set, such as the number of retail outlets and the recreational amenities offered.

Recreational Amenities

Additional Amenities


Table 7-5 Retail and Recreational Amenities – Competitive Review

Numberof Retail Indoor Outdoor Whirlpool/ Fitness

Hotel Name Outlets Pool Pool Hot Tub Center Other (List)

Selected Local CompetitorsSheraton (Formerly Adam's Mark) 2 Y Y Y YHilton Anatole 5+ Y Y Y Y Tennis court, spa, basketball, racquetballGaylord 8 Y Y Y Y Spa, jogging trails (outdoor), golf courseDallas Hyatt 1 N Y Y YFort Worth Omni 1 Y N Y Y Full-service spa

Selected National CompetitionOpryland Nashville 11 Y Y Y Y Golf courseSan Diego Grand Hyatt 3 N Y Y Y Spa ServicesNew Orleans Hilton 4 N Y Y Y 11 tennis, 4 racquetball, 3 squash courtsSan Diego Marriott 1 N Y Y Y Massage, 6 Tennis Crts, Sauna, Hertz Car RentalHouston Hilton Americas 2 N Y Y YDenver Hyatt Regency 2 Y Y Y Y FedEx and Kinko's, spa, and Enterprise Car RentalSt. Louis Renaissance Grand 1 Y N Y Y Jogging Atlanta Omni 4 N Y N Y CNN Studio Tour, Spa servicesSan Antonio Grand Hyatt 3 N Y Y Y Fitness conciergePhoenix Sheraton 1 N Y Y YKansas City Marriott 1 Y N N YChicago Hyatt McCormick 1 Y N N Y Sauna, outdoor sundeckAustinHilton 1 N Y Y Y Health club and spaIndianapolis Marriott 1 Y N Y Y

Recreational Amenities

The subject property will be served by the necessary back-of-the-house space, including an in-house laundry facility, administrative offices, and adequate kitchen facilities to service the needs of the hotel's food and beverage operation. These spaces should be adequate for a hotel of this type and should allow for the efficient operation of the property under competent management.

We assume that the property will be built according to all pertinent codes and brand standards. Moreover, we assume its construction will not create any environmental hazards (such as mold) and that the property will fully comply with the Americans with Disabilities Act. Our analysis assumes that, after its opening, the hotel will require ongoing upgrades and periodic renovations in order to maintain its competitive level in this market. These costs should be adequately funded by the forecasted

Back-of-the-House, ADA, and Environmental

Capital Expenditures


reserve for replacement, as long as a successful, ongoing preventive-maintenance program is employed by hotel staff.

Overall, the subject property should offer a well-designed, functional layout of support areas and guestrooms. All typical and market-appropriate features and amenities appear to be included in the hotel's initial design. We assume that the building will be fully open and operational on the assumed opening date and will meet all local building codes and brand standards. Furthermore, we assume that the hotel staff will be adequately trained to allow for a successful opening and that pre-marketing efforts will have introduced the product to major local accounts at least one year in advance of the opening date.

Conclusion

HVS Consulting and Valuation Services Projection of Occupancy and Average Rate 8-1

8. Projection of Occupancy and Average Rate

Along with average rate results, the occupancy levels achieved by a hotel are the foundation of the property's financial performance and market value. Most of a lodging facility's other revenue sources (such as food, beverages, and telephone income) are driven by the number of guests, and many expense levels also vary with occupancy. To a certain degree, occupancy attainment can be manipulated by management. For example, hotel operators may choose to lower rates in an effort to maximize occupancy. Our forecasts reflect an operating strategy that we believe would be implemented by a typical, professional hotel management team to achieve an optimal mix of occupancy and average rate.

The subject property's forecasted market share and occupancy levels are based upon its anticipated competitive position within the market, as quantified by its penetration rate. The penetration rate is the ratio of a property's market share to its fair share. A complete discussion of the concept of penetration is presented in the addenda.

In the following table, the penetration rates attained by the primary competitors and the aggregate secondary competitors are set forth for each segment for the base year.

Penetration Rate Analysis

Historical Penetration Rates by Market Segment


Table 8-1 Historical Penetration Rates

Property

Hyatt Regency 106 % 104 % 55 % 101 %Hilton Anatole 108 66 53 97Sheraton (Formerly Adam's Mark) 73 21 34 62Westin City Center 65 274 109 100Fairmont 72 240 109 100Renaissance 69 261 52 95The Adolphus Hotel 60 278 165 101Secondary Competition 110 88 125 108

Over

all

Mee

ting

and

Grou

p

Com

mer

cial

Leis

ure

Because the supply and demand balance for the competitive market is dynamic, there is a circular relationship between the penetration factors of each hotel in the market. The performance of individual new hotels has a direct effect upon the aggregate performance of the market, and consequently upon the calculated penetration factor for each hotel in each market segment. The same is true when the performance of existing hotels changes, either positively (following a refurbishment, for example) or negatively (when a poorly maintained or marketed hotel loses market share).

A hotel’s penetration factor is calculated as its achieved market share of demand divided by its fair share of demand. Thus, if one hotel’s penetration performance increases, thereby increasing its achieved market share, this leaves less demand available in the market for the other hotels to capture and the penetration performance of one or more of those other hotels consequently declines (other things remaining equal). This type of market share adjustment takes place every time there is a change in supply, or a change in the relative penetration performance of one or more hotels in the competitive market.

Our projections of penetration, demand capture, and occupancy performance for the subject property account for these types of adjustments to market share within the defined competitive market. Consequently, the actual penetration factors applicable to the subject property and its competitors for each market segment in each projection year may vary somewhat from the penetration factors delineated in the previous tables.

Forecast of Subject Property’s Occupancy


The following tables set forth, by market segment, the projected adjusted penetration rates for the subject property and each hotel in the competitive set.

Table 8-2 Meeting and Group Segment Adjusted Penetration Rates

Hotel 2008 2009 2010 2011 2012 2013 2014 2015 2016

Hyatt Regency 106 % 109 % 108 % 107 % 106 % 106 % 106 % 106 % 106 %Hilton Anatole 108 110 108 107 106 106 106 106 106Sheraton (Formerly Adam's Mark) 73 70 94 100 102 101 101 101 101Westin City Center 65 65 64 63 63 63 63 63 63Fairmont 72 71 70 70 69 69 69 69 69Renaissance 69 73 72 71 71 70 70 70 70The Adolphus Hotel 60 59 58 58 57 57 57 57 57Secondary Competition 110 109 105 104 104 103 103 103 103Proposed Subject Property — — — — 106 111 113 114 114Omni Fort Worth — 101 104 108 109 108 108 108 108

The proposed Omni Convention Center Hotel is expected to become the foremost choice for meeting and group demand in Dallas. While several properties in the competitive market, including the Hilton Anatole, encompass far more meeting space, these hotels are not located proximate to the convention center. The proposed subject hotel is expected to compete with other headquarters hotels in the United States for national conventions and events, which will enable the proposed subject property to capture meeting and group demand that would not normally appear in the Dallas market. Therefore, we believe that the proposed hotel will become a leading choice for national corporate and association meetings given the upscale nature of the proposed function space and its modern, technologically advanced capabilities, as well as its proposed location adjacent to the Dallas Convention Center.


Table 8-3 Commercial Segment Adjusted Penetration Rates

Hotel 2008 2009 2010 2011 2012 2013 2014 2015 2016


Within the commercial segment, the proposed subject hotel’s penetration is positioned at an appropriate level by the stabilized period due to its location within Dallas' CBD, as well as the expected strength of the Omni brand in capturing commercial demand associated with corporate travelers. However, we do expect the Omni to focus primarily on the group customer; therefore, our forecast penetration rate in the commercial segment is appropriately modest.

Table 8-4 Leisure Segment Adjusted Penetration Rates

Hotel 2008 2009 2010 2011 2012 2013 2014 2015 2016


The proposed subject property’s leisure penetration rate is positioned appropriately within the range of existing competitors and takes into


consideration the primarily group-focus of the hotel, as well as its convention center-adjacent location. The continued development of leisure amenities within the downtown Dallas area was considered, as well as the potential development of complementary uses adjacent to the subject site, such as retail venues and restaurants. Despite these leisure-venue developments, the hotel is expected to retain a convention-group focus during most periods of the year.

Penetration levels may adjust slightly downward for existing competition by the stabilized year. However, the overall base of business is forecast to be more significant by then (due to the increased size of the supply base); hence, the resulting occupancy level is not similarly lower. Essentially, the existing hotels are getting a slightly smaller piece of the pie, but the pie itself is much larger once the convention headquarters hotel opens.

These positioned segment penetration rates result in the following market segmentation forecast.

Table 8-5 Market Segmentation Forecast – Subject Property

Meeting and Group 84 % 84 % 84 % 84 % 84 %Commercial 11 12 12 12 12Leisure 4 5 5 5 5

Total 100 % 100 % 100 % 100 % 100 %

2012 2013 2014 2015 2016

The subject property's occupancy forecast is set forth as follows, with the adjusted projected penetration rates used as a basis for calculating the amount of captured market demand.


Table 8-6 Forecast of Subject Property's Occupancy

Market Segment

Meeting and GroupDemand 2,943,095 3,060,819 3,152,643 3,215,696 3,280,010Market Share 6.0 % 6.3 % 6.4 % 6.4 % 6.4 %Capture 175,375 191,716 200,656 206,292 210,418Penetration 106 % 111 % 113 % 114 % 114 %

CommercialDemand 544,871 566,666 580,833 592,449 601,336Market Share 4.3 % 4.7 % 4.8 % 4.9 % 4.9 %Capture 23,576 26,564 28,122 28,987 29,729Penetration 77 % 83 % 86 % 87 % 88 %

LeisureDemand 337,554 347,681 356,373 361,719 365,336Market Share 2.7 % 3.0 % 3.1 % 3.2 % 3.2 %Capture 9,180 10,601 11,061 11,425 11,739Penetration 48 % 54 % 55 % 56 % 57 %

Total Room Nights Captured 208,131 228,882 239,839 246,704 251,886

Available Room Nights 364,999 365,000 365,000 365,000 365,000

Subject Occupancy 57 % 63 % 66 % 68 % 69 %

Marketwide Available Room Nights 6,474,626 6,474,626 6,474,626 6,474,626 6,474,626

Fair Share 5.6 % 5.6 % 5.6 % 5.6 % 5.6 %

Marketwide Occupied Room Nights 3,825,521 3,975,166 4,089,849 4,169,864 4,246,682

Market Share 5.4 % 5.8 % 5.9 % 5.9 % 5.9 %

Marketwide Occupancy 59 % 61 % 63 % 64 % 66 %

Total Penetration 97 % 102 % 104 % 105 % 105 %

2013 2014 2015 20162012

We have chosen to use a stabilized occupancy level of 69%, with a stabilized level of captured room nights of roughly 250,000 per year. We note that the Dallas CVB has been actively securing groups in anticipation of the addition of a hotel. The following table illustrates those major conventions that have booked definite as of May 2009, continent on the addition of a headquarters hotel.


Table 8-7 City’s Strong Pre-Bookings Pace – Definites Contingent On The Addition Of The Hotel

Total EconomicMarket Segment Attendance Impact

Association (Cultural, Fine Arts, Libraries) January 2012 10,000 4,500 17,550 $25,809,030Transportation (Automotive, Aviation) February 2012 15,000 3,999 15,596 22,935,625Association (Scientific, Technology) September 2012 30,000 9,000 35,100 51,618,060Association (Hobby, Vocational) January 2013 25,000 7,000 27,300 40,147,380SISO - 60 January 2013 30,000 11,000 42,900 63,088,740Association (Government, Public Admin.) May 2013 7,500 4,200 16,380 24,088,428Corporate (High Tech) August 2013 5,800 3,060 11,934 17,550,140Association (Scientific, Technology) September 2013 30,000 9,000 35,100 51,618,060Association (Medical, Health) November 2013 33,000 15,000 58,500 86,030,100Corporate (High Tech) August 2013 5,800 3,060 11,934 17,550,140Association (Scientific, Technology) September 2014 12,000 9,000 35,100 51,618,060Association (Hobby, Vocational) January 2015 25,000 7,000 27,300 40,147,380Association (Hobby, Vocational) January 2017 25,000 7,000 27,300 40,147,380

Total: 12 Meetings 254,100 92,819 361,994 $532,348,523

Total Rooms


Meeting Date Peak Rooms

It is important to note that the two major conventions booked for the first quarter of the hotel’s operation will help the hotel significantly in building its first year occupancy level, as the first quarter of a hotel’s operation typically garners the least occupancy. The following table illustrates the tentative group bookings contingent on the addition of the hotel.


Table 8-8 City’s Strong Pre-Bookings Pace – Tentatives Contingent On The Addition Of The Hotel

Total EconomicMarket Segment Attendance Impact

Association (Environmental) May 2012 13,000 8,000 31,200 $45,882,720Association (Education) June 2012 8,000 3,130 12,207 17,951,614Corporate (High Tech) October 2012 5,800 3,200 12,480 18,353,088Association (Environmental) June 2013 5,000 8,000 31,200 45,882,720Association (Medical, Health) October 2013 10,000 4,000 15,600 22,941,360Association (Hobby, Vocational) November 2013 9,500 4,000 15,600 22,941,360Transportation (Automotive, Aviation) February 2014 15,000 3,000 11,700 17,206,020Association (Education) November 2014 20,000 6,500 25,350 37,279,710Association (Medical, Health) March 2015 7,500 3,500 13,650 20,073,690Association (Trade, Comm., Business) April 2015 10,000 3,208 12,511 18,398,971Association (Medical, Health) May 2015 16,000 7,275 28,373 41,724,599Association (Scientific, Technology) September 2015 30,000 9,000 35,100 51,618,060Association (Scientific, Technology) October 2015 5,000 2,800 10,920 16,058,952Association (Education) March 2016 15,000 7,500 29,250 43,015,050Association (Medical, Health) November 2017 15,000 6,800 26,520 39,000,312Association (Medical, Health) November 2017 33,000 15,000 58,500 86,030,100Association (Medical, Health) May 2018 16,000 7,011 27,343 40,210,469Association (Hobby, Vocational) September 2018 15,000 6,500 25,350 37,279,710Association (Medical, Health) May 2019 16,000 7,011 27,343 40,210,469Association (Hobby, Vocational) September 2019 15,000 6,500 25,350 37,279,710Association (Education) November 2020 20,000 6,500 25,350 37,279,710Real Estate 25 November 2020 18,000 8,000 31,200 45,882,720Association (Medical, Health) November 2021 33,000 15,000 58,500 86,030,100Association (Medical, Health) May 2024 16,000 7,011 27,343 40,210,469

Total: 24 Meetings 366,800 158,446 617,940 $908,741,683


Meeting Date Peak Rooms Total Rooms

These booking pace statistics have been considered and incorporated into our build-up of occupancy during the early operating years of the Omni. We note that the nationally significant competitors achieved occupancy levels that ranged from roughly 51% to 78% (exclusive of newly opened hotels); after eliminating the low and high, the range was 63% to 76% in 2008. The majority of hotel occupancy levels bracketed the 70% mark. Our stabilized occupancy level is considered rather conservative, at below the 70-percent mark, due to the following:

Proposed supply that has just opened or has yet to open (Omni Fort Worth, Grand Hyatt San Antonio, Phoenix


Sheraton), as well as early planning projects now in progress (Indianapolis JW Marriott)

The anticipated expansion of the Gaylord Texan

The seasonality limitations for the Dallas market during its off

seasons (mid-summer and late November through December)

Qualitative considerations of supply increases occurring outside of the defined competitive set of cities

The evolving economic cycle, and the appreciation that the

first half of 2007 was a strong period overall for the industry These projections reflect years beginning January 1, 2012, corresponding to the first projection year for the subject property’s forecast of income and expense.

Table 8-9 Forecast of Occupancy

Subject

Year

2012 57 %2013 632014 662015 682016 69

Property's Occupancy

The stabilized occupancy is intended to reflect the anticipated results of the property over its remaining economic life, given any and all changes in the life cycle of the hotel. Thus, the stabilized occupancy excludes from consideration any abnormal relationship between supply and demand, as well as any non-recurring conditions that may result in unusually high or low occupancies. Although the subject property may operate at occupancies above this stabilized level, we believe it equally possible for new competition and temporary economic downturns to force the occupancy below this selected point of stability.


One of the most important considerations in estimating the value of a lodging facility is a supportable forecast of its attainable average rate, which is more formally defined as the average rate per occupied room. Average rate can be calculated by dividing the total rooms revenue achieved during a specified period by the number of rooms sold during the same period. The projected average rate and the anticipated occupancy percentage are used to forecast rooms revenue, which in turn provides the basis for estimating most other income and expense categories.

Although the average rate analysis presented here follows the occupancy projection, these two statistics are highly correlated; in reality, one cannot project occupancy without making specific assumptions regarding average rate. This relationship is best illustrated by revenue per available room (RevPAR), which reflects a property's ability to maximize rooms revenue. The following table summarizes the historical average rate and the RevPAR of the subject property’s future primary competitors.

Table 8-10 Base Year Average Rate and RevPAR of the Competitors

Property

Hyatt Regency $137 - 147Hilton Anatole 145 - 155Sheraton (Formerly Adam's Mark) 115 - 125Westin City Center 155 - 165Fairmont 136 - 146Renaissance 117 - 127The Adolphus Hotel 157 - 167

Average - Local Competitors $142.69Average - National Competitors 173.95

Overall Average $162.72

Estimated 2008 Average Room Rate

The defined locally competitive market realized an overall average rate of $142.69 in the 2008 base year, improving from the 2007 level of $140.40. The Adolphus achieved the highest estimated average rate in the local competitive market because of its luxury product offering and popularity among individual corporate and leisure travelers. In the national competitive set, the Marriott San Diego achieved the highest estimated rate because of the hotel's

Average Rate Analysis

Competitive Position


ideal waterfront location; the city's numerous leisure venues and favorable weather also contribute to the Marriott's ability to command higher rates. The selected rate position for the proposed subject property, in base-year dollars, takes into consideration economic movement within the local market as well as national convention trends. Our rate position reflects the proposed hotel's ability to achieve locally high rates as a result of its new facilities and product scope. The proposed subject property is positioned appropriately among the selected national competitors based upon location, facilities, and appeal of the city's attractions.

We have selected the rate position of $170.00, in base-year dollars, for the proposed subject hotel. We note that the range in rates in the nationally-significant competitive set was approximately $120 to $225; after eliminating the low and high indication, the range is roughly $125 to $215. The average is shown in the previous table at $175 (rounded), and the majority of rates range from $150 to $190. Our selected position is not considered aggressive or overly optimistic, it is considered appropriate in light of all factors, including seasonality, the Dallas destination, and the other advantanges and disadvantages offered by the competitive locations.

It is important to note that hotel room rate increases do not necessarily conform to the underlying monetary inflation rate because lodging facilities are influenced by market conditions such as the relationship between supply and demand. A hotel’s ability to raise room rates is affected by a number of factors, including the following:

Supply and Demand Relationships – The relationship between supply and demand is one of the factors that determine hotel occupancies and average rates. Strong markets where lodging demand is increasing faster than supply are often characterized by rate growth that exceeds inflation. Markets that are overbuilt or suffering from declining demand are unlikely to exhibit any significant increases in average rates.

Inflationary Pressures – Price increases caused by inflation affect hotel room rates by eroding profit margins and encouraging operators to raise prices. This strategy is effective only in markets that are characterized by a healthy supply and demand relationship.

Improving the Competitive Standard – When a new lodging facility enters a mature market, its rates may be set higher than the market-wide average in an effort to justify the development costs. This may allow other competitors to achieve corresponding gains by effectively raising the

Average Rate Changes


amount the market will bear. However, if the addition to supply has a severe impact on the occupancy levels of other hotels, price competition may ensue.

Property-Specific Improvements – Changes that make a hotel more or less attractive to guests can have an impact on average rate. An expansion, renovation, upgrading, or the introduction of additional facilities and amenities may enable greater-than-inflationary room rate increases. Likewise, deferred maintenance may make a property less competitive, engendering a decline in room rates.

In determining average rate projections, changes that occur prior to occupancy stabilization are generally attributable to factors that are specific to the property and the market. After a hotel achieves a stabilized occupancy, room rates are generally expected to continue to increase at the underlying inflation rate throughout the remainder of the projection period.

As illustrated previously, the average rate for the locally competitive market averaged $140.40 in 2007, before reaching $142.69 in 2008. Based upon our research and analysis, we would expect average rates to decline in the near term. During these difficult economic times, corporations have been successful in obtaining room rate reductions in their corporate rates. Moreover, fewer sold-out nights are generating premium rates for the last rooms normally sold on peak demand nights. With a normalization expected toward the end of 2009 and into 2010, we would expect a strong recovery in rates to ensue in 2011, continuing into the opening years of the proposed subject property.

Based on these considerations, the following table illustrates the projected average rate and the growth rates assumed. As a context for the average rate growth factors, note that we have applied a base underlying inflation rate of 3.0% annually throughout our projection period.


Table 8-11 Market and Subject Property Average Rate Forecast

Year

Base Year 63.2 % — $162.72 — — $170.00 104.5 %2009 57.3 -7.0 % 151.33 — -6.0 % 159.80 105.62010 57.4 -2.0 148.30 — -0.5 159.00 107.22011 58.8 3.0 152.75 — 3.5 164.57 107.72012 59.1 5.0 160.39 57.0 5.0 172.79 107.72013 61.4 6.0 170.01 63.0 6.0 183.16 107.72014 63.2 7.0 181.92 66.0 7.0 195.98 107.72014 64.4 4.5 190.10 68.0 4.5 204.80 107.72015 65.6 3.5 196.75 69.0 4.5 211.97 107.7

Average Rate Growth

Average Rate

Average Rate Penetration

Market (Calendar Year) Subject Property (Calendar Year)

OccupancyAverage Rate

Growth Average Rate Occupancy

As illustrated above, a -6.0% rate of change is expected for the subject property's positioned 2008 room rate in 2009. This is followed by change rates of -0.5% and 3.5% in 2010 and 2011, respectively. We have forecast the proposed subject property's positioned room rate to change in tandem with forecast market-wide trends. Accordingly, the 2008-positioned rate contracts in the first projection year, shows stability in 2010, and then appropriately reflects a recovery in 2011 through stabilization. By the time the Omni Convention Center Hotel opens in 2012, the downtown Dallas hotel market should be well on its way to recovery from the 2008/09 downturn. Our forecast reflects this expected market recovery pattern, a pattern that has proven to be the case during each of the last several industry correction periods. The proposed subject property’s penetration rate is forecast to reach 107.7% by the stabilized period.

A new property must establish its reputation and a client base in the market during its ramp-up period; as such, the proposed subject property’s average rates in the initial operating period have been discounted to reflect this likelihood. We forecast 2.0% and 1.0% discounts to the proposed subject property’s forecast room rates in the first two operating years, which would be typical for a new operation of this type.

In addition to these property- and market-specific factors, our forecasts of occupancy and average rate for the proposed subject property consider the changing national economic landscape. Our forecast levels reflect the more


conservative economic outlook that exists for 2008 and 2009 for the nation as a whole, relative to the ramp-up experienced in recent years. The following average rates will be used to project the subject property's rooms revenue; this forecast begins January 1, 2012 and corresponds with our financial projections.

Table 8-12 Forecast of Average Rate

Year

2012 57 % $172.79 2.0 % $169.342013 63 183.16 1.0 181.332014 66 195.98 0.0 195.982015 68 204.80 0.0 204.802016 69 211.97 0.0 211.97

OccupancyAverage Rate Before

Discount DiscountAverage Rate After

Discount

HVS Consulting and Valuation Services Projection of Income and Expense 9-1

9. Projection of Income and Expense

In this chapter of our report, we have compiled a forecast of income and expense for the proposed subject property. This forecast is based on the facilities program set forth previously, as well as the occupancy and average rate forecast discussed previously.

The forecast of income and expense is expressed in current dollars for each year. The stabilized year is intended to reflect the anticipated operating results of the property over its remaining economic life, given any or all applicable stages of build-up, plateau, and decline in the life cycle of the hotel. Thus, income and expense estimates from the stabilized year forward exclude from consideration any abnormal relationship between supply and demand, as well as any nonrecurring conditions that may result in unusual revenues or expenses. The ten-year period reflects the typical holding period of large real estate assets such as hotels. In addition, the ten-year time frame provides for the stabilization of income streams and comparison of yields with alternate types of real estate. The forecasted income streams reflect the future benefits of owning specific rights in income-producing real estate.

In order to project future income and expense for the proposed subject property, we have included a sample of individual comparable operating statements from our database of hotel statistics. We have also provided a composite operating statement from a set of comparable Omni hotels. All financial data are presented according to the three most common measures of industry performance: ratio to sales (RTS), amounts per available room (PAR), and amounts per occupied room night (POR). A composite statement is also illustrated. These historical income and expense statements will be used as benchmarks in our forthcoming forecast of income and expense.

Comparable Operating Statements


Table 9-1 Comparable Operating Statements: Ratio to Sales

Comp 1 Comp 2 Comp 3 Comp 4 Comp 5 Comp 6

Year: 2007/08 2007 2007 2005/06 2005/06 2005/06Number of Rooms: 1070 to 1320 730 to 910 1100 to 1350 720 to 880 720 to 880 800 to 990

Days Open: 366 365 365 365 365 365Occupancy: 81% 72% 70% 74% 68% 71%

Average Rate: $209 $138 $131 $145 $161 $168

RevPAR: $169 $99 $92 $108 $110 $119REVENUE Rooms 58.6 % 63.3 % 66.8 % 60.9 % 61.7 % 53.4 % Food & Beverage 30.6 31.1 28.5 30.1 35.2 37.3 Telephone 1.5 1.9 2.3 1.3 1.1 1.2 Other Operating Departments 8.0 0.0 0.0 0.0 0.0 2.2 Other Income 1.3 3.7 2.3 7.7 2.0 5.8 Total 100.0 100.0 100.0 100.0 100.0 100.0 DEPARTMENTAL EXPENSES* Rooms 31.1 25.0 32.0 24.3 20.4 29.1 Food & Beverage 72.1 66.8 74.0 68.0 75.5 60.4 Telephone 86.8 53.2 49.4 70.3 81.2 106.0 Other Operating Departments 23.0 0.0 0.0 0.0 0.0 13.5 Other Expenses 1.4 4.6 4.5 46.8 0.0 31.1 Total 43.5 37.8 43.8 39.8 40.0 41.5DEPARTMENTAL INCOME 56.5 62.2 56.2 60.2 60.0 58.5OPERATING EXPENSES Administrative & General 5.9 7.5 9.2 6.5 6.4 8.6 Marketing 5.9 8.3 6.4 6.6 9.3 5.2 Property Operations & Maintenance 3.5 4.3 5.4 3.7 3.6 4.8 Utilities 3.5 3.5 4.3 5.0 3.4 4.0

Total 18.8 23.6 25.3 21.8 22.6 22.6

HOUSE PROFIT 37.7 38.6 30.9 38.4 37.4 35.9

Management Fee 3.5 3.0 2.3 3.4 1.8 3.5

INCOME BEFORE FIXED CHARGES 34.3 35.6 28.6 35.1 35.5 32.4FIXED EXPENSES Property Taxes 4.1 9.6 3.9 0.0 0.0 2.4 Insurance 2.0 0.8 1.0 0.7 1.3 0.5 Reserve for Replacement 4.0 4.0 4.0 3.3 3.9 4.0 Total 10.1 14.4 8.9 4.0 5.2 6.9NET INCOME 24.2 % 21.2 % 19.7 % 31.1 % 30.3 % 25.5 %

* Departmental expense ratios are expressed as a percentage of departmental revenues


Table 9-2 Comparable Operating Statements: Amounts Per Available Room




Average Rate: $209 $138 $131 $145 $161 $168

RevPAR: $169 $99 $92 $108 $110 $119REVENUE Rooms $62,029 $36,281 $33,560 $39,283 $40,023 $43,545 Food & Beverage 32,449 17,843 14,332 19,410 22,843 30,380 Telephone 1,571 1,061 1,176 843 691 1,016 Other Operating Departments 8,427 0 0 0 0 1,815 Other Income 1,396 2,124 1,139 4,948 1,311 4,763 Total 105,872 57,309 50,207 64,483 64,868 81,520 DEPARTMENTAL EXPENSES Rooms 19,295 9,060 10,731 9,536 8,156 12,684 Food & Beverage 23,388 11,921 10,607 13,198 17,238 18,336 Telephone 1,364 564 582 593 561 1,076 Other Operating Departments 1,936 0 0 0 0 246 Other Expenses 20 97 51 2,314 0 1,484 Total 46,003 21,642 21,971 25,640 25,955 33,825DEPARTMENTAL INCOME 59,869 35,667 28,237 38,843 38,913 47,695OPERATING EXPENSES Administrative & General 6,295 4,303 4,614 4,170 4,130 6,991 Marketing 6,218 4,756 3,197 4,261 6,021 4,248 Property Operations & Maintenance 3,677 2,448 2,723 2,408 2,329 3,891 Utilities 3,685 2,018 2,155 3,219 2,199 3,278

Total 19,874 13,526 12,689 14,058 14,679 18,409

HOUSE PROFIT 39,995 22,141 15,548 24,785 24,234 29,286

Management Fee 3,723 1,719 1,166 2,174 1,178 2,853

INCOME BEFORE FIXED CHARGES 36,271 20,423 14,381 22,611 23,056 26,433FIXED EXPENSES Property Taxes 4,358 5,497 1,963 0 0 1,969 Insurance 2,085 441 516 458 825 423 Reserve for Replacement 4,235 2,292 2,008 2,126 2,513 3,260 Total 10,679 8,230 4,488 2,584 3,338 5,652NET INCOME $25,592 $12,193 $9,893 $20,027 $19,718 $20,781


Table 9-3 Comparable Operating Statements: Amounts Per Occupied Room




Average Rate: $209 $138 $131 $145 $161 $168

RevPAR: $169 $99 $92 $108 $110 $119REVENUE Rooms $208.72 $138.06 $131.36 $144.55 $161.48 $167.54 Food & Beverage 109.19 67.90 56.10 71.43 92.16 116.89 Telephone 5.29 4.04 4.60 3.10 2.79 3.91 Other Operating Departments 28.35 0.00 0.00 0.00 0.00 6.98 Other Income 4.70 8.08 4.46 18.21 5.29 18.33 Total 356.24 218.07 196.53 237.29 261.72 313.65 DEPARTMENTAL EXPENSES Rooms 64.92 34.47 42.00 35.09 32.91 48.80 Food & Beverage 78.70 45.36 41.52 48.56 69.55 70.55 Telephone 4.59 2.15 2.28 2.18 2.26 4.14 Other Operating Departments 6.52 0.00 0.00 0.00 0.00 0.95 Other Expenses 0.07 0.37 0.20 8.51 0.00 5.71 Total 154.79 82.35 86.00 94.35 104.72 130.14DEPARTMENTAL INCOME 201.45 135.72 110.53 142.93 157.00 183.51OPERATING EXPENSES Administrative & General 21.18 16.37 18.06 15.34 16.66 26.90 Marketing 20.92 18.10 12.52 15.68 24.29 16.34 Property Operations & Maintenance 12.37 9.32 10.66 8.86 9.40 14.97 Utilities 12.40 7.68 8.44 11.84 8.87 12.61

Total 66.87 51.47 49.67 51.73 59.22 70.83

HOUSE PROFIT 134.57 84.25 60.86 91.21 97.78 112.68

Management Fee 12.53 6.54 4.57 8.00 4.75 10.98

INCOME BEFORE FIXED CHARGES 122.05 77.71 56.29 83.21 93.03 101.70FIXED EXPENSES Property Taxes 14.66 20.92 7.68 0.00 0.00 7.57 Insurance 7.02 1.68 2.02 1.68 3.33 1.63 Reserve for Replacement 14.25 8.72 7.86 7.82 10.14 12.54 Total 35.93 31.32 17.57 9.51 13.47 21.75NET INCOME $86.12 $46.39 $38.72 $73.70 $79.56 $79.95


Table 9-4 Comparable Operating Statements: Composite Statement

Number of Rooms: 5,733Days Open: 365Occupancy: 73.2% Amount per Amount per

Average Rate: $161.49 Percentage Available Occupied

RevPAR: $118.18 of Revenue Room RoomREVENUE Rooms $247,299 60.1 % $43,136 $161.49 Food & Beverage 131,868 32.1 23,002 86.11 Telephone 6,322 1.5 1,103 4.13 Other Operating Departments 11,687 2.8 2,039 7.63 Other Income 14,060 3.4 2,452 9.18 Total 411,236 100.0 71,731 268.54 DEPARTMENTAL EXPENSES Rooms 69,106 27.9 12,054 45.13 Food & Beverage 91,425 69.3 15,947 59.70 Telephone 4,688 74.2 818 3.06 Other Operating Departments 2,533 21.7 442 1.65 Other Expenses 3,340 23.8 583 2.18 Total 171,092 41.6 29,843 111.72DEPARTMENTAL INCOME 240,144 58.4 41,888 156.82OPERATING EXPENSES Administrative & General 29,581 7.2 5,160 19.32 Marketing 27,267 6.6 4,756 17.81 Property Operations & Maintenance 16,998 4.1 2,965 11.10 Utilities 15,957 3.9 2,783 10.42

Total 89,803 21.8 15,664 58.64

HOUSE PROFIT 150,341 36.6 26,224 98.17

Management Fee 12,513 3.0 2,183 8.17

INCOME BEFORE FIXED CHARGES 137,828 33.5 24,041 90.00FIXED EXPENSES Property Taxes 13,882 3.4 2,421 9.07 Insurance 4,890 1.2 853 3.19 Reserve for Replacement 16,021 3.9 2,795 10.46 Total 34,793 8.5 6,069 22.72

NET INCOME $103,035 25.1 % $17,972 $67.28

The following statement reflects a composite of five larger Omni, group-oriented properties.


Table 9-5 Comparable Operating Statements: Omni Composite Statement

Year: 2007Number of Rooms: 3,553

Days Open: 365Occupancy: 68.9% Amount per Amount per

Average Rate: $173.44 Percentage Available OccupiedRevPAR: $119.46 of Revenue Room Room

REVENUE Rooms $154,924 59.8 % $43,604 $173.44 Food & Beverage 83,835 32.3 23,595 93.85 Telephone 2,310 0.9 650 2.59 Spa/Health Club 2,456 0.9 691 2.75 Other Income 15,670 6.0 4,410 17.54 Total 259,195 100.0 72,951 290.17

DEPARTMENTAL EXPENSES Rooms 31,111 20.1 8,756 34.83 Food & Beverage 52,140 62.2 14,675 58.37 Telephone 2,056 89.0 579 2.30 Spa/Health Club 2,065 84.1 581 2.31 Other Expenses 7,342 46.9 2,067 8.22

Total 94,714 36.5 26,657 106.03

DEPARTMENTAL INCOME 164,482 63.5 46,294 184.14

OPERATING EXPENSES Administrative & General 16,731 6.5 4,709 18.73 Marketing 24,293 9.4 6,837 27.20 Property Operations & Maintenance 10,650 4.1 2,997 11.92 Utilities 11,633 4.5 3,274 13.02

Total 63,308 24.4 17,818 70.87

HOUSE PROFIT $101,174 39.1 % $28,476 $113.26

We will refer to the comparable operating data in our discussion of each line item, which follows later in this section of the report.

The forecast of income and expense is intended to reflect the consultants’ subjective estimate of how a typical buyer would project the subject property's future operating results.

HVS uses a fixed and variable component model to project a lodging facility's revenue and expense levels. This model is based on the premise that hotel revenues and expenses have one component that is fixed and another that

Premise of Forecast

Fixed and Variable Component Analysis


varies directly with occupancy and facility usage. A projection can be made by taking a known level of revenue or expense and calculating its fixed and variable components. The fixed component is then increased in tandem with the underlying rate of inflation, while the variable component is adjusted for a specific measure of volume such as total revenue.

The following table illustrates the revenue and expense categories that can be projected using this fixed and variable component model. These percentages show the portion of each category that is typically fixed and variable; the middle column describes the basis for calculating the percentage of variability, while the last column sets forth the fixed percentage that has been utilized in this valuation.


Table 9-6 Range of Fixed and Variable Ratios

SelectedCategory Percent Fixed Percent Variable Index of Variability Fixed Ratio

Revenues Food 25 - 50 50 - 75 Occupancy 15 % Beverage 0 - 30 70 - 100 Food Revenue 0 Telephone 10 - 40 60 - 90 Occupancy 10 Other Income 30 - 70 30 - 70 Occupancy 10

Departmental Expenses Rooms 50 - 70 30 - 50 Occupancy 60 Food 35 - 60 40 - 65 Food Revenue 55 Beverage 55 - 75 25 - 45 Beverage Revenue 55 Telephone 40 - 60 40 - 60 Telephone Revenue 60 Other Expenses 30 - 70 30 - 70 Other Income 70

Undistributed Operating Expenses Administrative & General 65 - 85 15 - 35 Total Revenue 75 Marketing 65 - 85 15 - 35 Total Revenue 75 Franchise Fee 0 100 Occupancy 0 Prop. Operations & Maint. 55 - 75 25 - 45 Total Revenue 75 Utilities 75 - 95 5 - 25 Total Revenue 75

Management Fee 0 100 Total Revenue 0

Fixed Expenses Property Taxes 100 0 Total Revenue 100 Insurance 100 0 Total Revenue 100 Reserve for Replacement 0 100 Total Revenue 0

Our fixed and variable projection model is based upon variables that we input for each revenue and expense item for a “base year,” which in this case is the year 2008. The base-year forecast sets forth the ratios to revenue, amounts per available room, or amounts per occupied room, which we believe can be achieved at the stated base-year average rate and occupancy. Our input variables are derived from the comparable hotel statements. The model then calculates a base-year forecast of income and expense in these base-year dollars.

The actual forecast is derived by adjusting each year’s revenue and expense by the amount fixed (the fixed expense multiplied by the inflated base-year amount) plus the variable amount (the variable expense multiplied by the inflated base-year amount) multiplied by the ratio of the projection year’s


occupancy to the base-year occupancy (in the case of departmental revenue and expense) or the ratio of the projection year’s revenue to the base-year’s revenue (in the case of undistributed operating expenses). Fixed expenses remain fixed, increasing only with inflation. Our discussion of the revenue and expense forecast in this report is based upon the output derived from the fixed and variable model. This forecast of revenue and expense is accomplished through a step-by-step approach, following the format of the Uniform System of Accounts for the Lodging Industry. Each category of revenue and expense is estimated separately and combined at the end in the final statement of income and expense.

A general rate of inflation must be established that will be applied to most revenue and expense categories. The following table shows inflation estimates made by economists at some noted institutions and corporations.

Inflation Assumption


Table 9-7 Inflation Estimates

PreviousProjections Versus 12 Months Earlier)

through June DecemberName Firm December 2008 2009 2009

Scott Anderson Wells Fargo & Co. 4.4 % (0.6) % 0.2 %Paul Ashworth Capital Economics 3.0 (2.0) 1.0Nariman Behravesh Global Insight 6.6 (3.6) 0.2Richard Berner/David Greenlaw Morgan Stanley 4.8 (1.8) 0.4Ram Bhagavatula Combinatorics Capital 3.2 (1.0) 1.0Jay Brinkmann Mortgage Bankers Association 4.3 (1.8) 0.6Joseph Carson AllianceBernstein 4.2 (1.0) 0.0Mike Cosgrove Econoclast 3.8 (0.5) 0.4Lou Crandall Wrightson ICAP 4.7 (1.8) 1.3Joan Crary/Stanley Sedo RSQE, U. of Michigan 3.7 (0.4) 1.8J. Dewey Daane Vanderbilt University 4.5 1.0 1.0Richard DeKaser National City Corporation 3.0 (2.0) 2.0Douglas Duncan Fannie Mae 4.0 (1.5) 0.1Brian Fabbri BNP Paribas 4.8 (1.9) 1.8Maria Fiorini Ramirez/Joshua Shapiro MFR, Inc. 4.0 (1.1) 0.0Stephen Gallagher Societe Generale 4.6 (2.2) 1.6Ethan S. Harris/Dean Maki Barclays Capital 5.2 (1.8) 2.5Ethan S. Harris Lehman Brothers 3.3 — — Maury Harris UBS 4.0 (0.2) 2.0Jan Hatzius Goldman Sachs & Co. 4.2 (1.0) 0.4Tracy Herrick The Private Bank 4.3 1.0 0.5Stuart Hoffman PNC Financial Services Group 3.9 0.2 1.2Peter Hooper/Joseph A. LaVorgna Deutsche Bank Securities Inc. 4.3 (0.5) 0.4Gene Huang FedEx Corp. 3.7 (0.5) 1.3William B. Hummer Wayne Hummer Investments LLC 3.4 (1.0) 0.9Dana Johnson Comerica Bank 2.8 (2.0) 1.1Kurt Karl Swiss Re 6.1 (2.4) 0.7Bruce Kasman JP Morgan Chase & Co. 4.2 (1.7) 0.8Paul Kasriel The Northern Trust 3.6 (2.2) 1.8Daniel Laufenberg Ameriprise Financial 3.3 1.3 2.2Edward Leamer/David Shulman UCLA Anderson Forecast 3.7 (1.2) 0.1Mickey D. Levy Bank of America 2.9 (1.8) 1.5John Lonski Moody's Investors Service 3.3 (1.5) 1.5David Malpass Encima Global LLC — 0.3 1.8Dean Maki Barclays Capital 5.2 — — Jim Meil/Richard Kaglic Eaton Corp. 3.8 (1.0) 0.8Mark Nielson, Ph. D. MacroEcon Global Advisors 4.2 4.5 4.8Michael P. Niemira International Council of Shopping Centers 3.0 0.4 2.1Nicholas S. Perna Perna Associates 3.5 (1.5) 1.1Joel Prakken/Chris Varvares Macroeconomic Advisers 4.5 1.4 (0.9)Arun Raha Economic and Revenue Forecast Council — (1.4) 3.4David Resler Nomura Securities International Inc. 4.5 — — John Ryding/Conrad DeQuadros RDQ Economics — (1.0) 2.0Ian Shepherdson High Frequency Economics 4.4 (2.5) 1.5John Silvia Wachovia Corp. 3.2 (1.4) 2.5Allen Sinai Decision Economics Inc. 3.8 (0.8) 2.8James F. Smith Western Carolina Univ. and Parsec Financial Mgmt. (0.4) 0.9 1.0Sung Won Sohn California State University 3.5 1.1 1.9Neal Soss Credit Suisse 4.8 (2.0) 2.2Stephen Stanley RBS Greenwich Capital 4.2 (1.8) 1.7Susan M. Sterne Economic Analysis 2.8 0.8 1.1Diane Swonk Mesirow Financial 4.7 (1.9) 0.0Bart van Ark The Conference Board 4.6 (2.1) (0.2)Brian S. Wesbury/Robert Stein First Trust Advisors, L.P. 4.5 (1.4) 2.5William T. Wilson National Bank of Kuwait 3.8 0.9 (2.3)David Wyss Standard and Poor's 6.6 (2.2) (2.3)Lawrence Yun National Association of Realtors 2.9 (0.8) 1.2

Averages 4.0 % (0.9) % 1.1 %

Actual Inflation for the Period 3.8 %

Source: wsj.com, January 15, 2009

Projected Increase in Consumer Price Index (Annualized Rate


As the preceding table indicates, the financial analysts who were surveyed in late-2008 anticipated inflation rates ranging from -4.0% to 6.6% (on an annualized basis) for the six-month period ending June 2009; the average estimate was -0.9%. The same group forecast 4.0 % inflation for the six-month period ending December 2008, and the actual inflation rate during this period was 3.8 %.

As a further check on these inflation projections, we have reviewed historical increases in the Consumer Price Index (CPI-U). Because the value of real estate is predicated on cash flows over a relatively long period, inflation should be considered from a long-term perspective.

Table 9-8 National Consumer Price Index (All Urban Consumers)

National Consumer Percent ChangeYear Price Index from Previous Year

1999 166.6 — 2000 172.2 3.4 %2001 177.1 2.82002 179.9 1.62003 184.0 2.32004 188.9 2.72005 195.3 3.42006 201.6 3.22007 207.3 2.82008 215.3 3.8

Average Annual Compounded Change,1999 - 2008: 2.9 %2004 - 2008: 3.3

Source: Bureau of Labor Statistics

Between 1999 and 2008, the national CPI increased at an average annual compounded rate of 2.9%; from 2004 to 2008, the CPI rose by a modestly higher average annual compounded rate of 3.3%. In 2008, the CPI increased by 3.8%, a increase from the levels of 3.2% and 2.8% recorded in 2006 and 2007, respectively.

In consideration of the most recent trends, the projections set forth previously, and our assessment of probable property appreciation levels, we have applied an underlying inflation rate of 3.0% annually. This stabilized inflation rate takes into account normal, recurring inflation cycles. Inflation is


likely to fluctuate above and below this level during the projection period. Any exceptions to the application of the assumed underlying inflation rate are discussed in our write-up of individual income and expense items.

Based on an analysis that will be detailed throughout this section, we have formulated a forecast of income and expense. The following table presents a detailed forecast through the fifth projection year, including amounts per available room and per occupied room. The second table illustrates our ten-year forecast of income and expense, presented with a lesser degree of detail. The forecasts pertain to years beginning January 1, 2012 and are expressed in inflated dollars for each year.

Table 9-9 also illustrates the total taxes forecast to be generated by the proposed subject property.

Summary of Projections

Table 9-9 Detailed Forecast of Income and Expense

2012 (Calendar Year) 2013 2014 2015 Stabilized

Number of Rooms: 1000 1000 1000 1000 1000

Occupancy: 57% 63% 66% 68% 69%

Average Rate: $169.34 $181.33 $195.98 $204.80 $211.97

RevPAR: $96.52 $114.24 $129.35 $139.27 $146.26

Days Open: 365 365 365 365 365

Occupied Rooms: 208,050 %Gross PAR POR 229,950 %Gross PAR POR 240,900 %Gross PAR POR 248,200 %Gross PAR POR 251,850 %Gross PAR POR

REVENUE

Rooms $35,231 58.1 % $35,231 $169.34 $41,697 58.8 % $41,697 $181.33 $47,212 59.9 % $47,212 $195.98 $50,832 60.1 % $50,832 $204.80 $53,385 60.1 % $53,385 $211.97

Food 17,413 28.7 17,413 83.70 20,059 28.3 20,059 87.23 21,694 27.5 21,694 90.05 23,139 27.4 23,139 93.23 24,364 27.4 24,364 96.74

Beverage 3,096 5.1 3,096 14.88 3,566 5.0 3,566 15.51 3,857 4.9 3,857 16.01 4,114 4.9 4,114 16.57 4,331 4.9 4,331 17.20

Telephone 800 1.3 800 3.85 901 1.3 901 3.92 967 1.2 967 4.02 1,023 1.2 1,023 4.12 1,068 1.2 1,068 4.24

Spa/Health Club 2,068 3.4 2,068 9.94 2,396 3.4 2,396 10.42 2,597 3.3 2,597 10.78 2,775 3.3 2,775 11.18 2,924 3.3 2,924 11.61

Other Income 1,979 3.3 1,979 9.51 2,292 3.2 2,292 9.97 2,485 3.2 2,485 10.32 2,655 3.1 2,655 10.70 2,797 3.1 2,797 11.11

Total Revenues 60,587 100.0 60,587 291.22 70,911 100.0 70,911 308.38 78,812 100.0 78,812 327.16 84,537 100.0 84,537 340.60 88,870 100.0 88,870 352.87

DEPARTMENTAL EXPENSES *

Rooms 8,385 23.8 8,385 40.30 9,431 22.6 9,431 41.01 9,889 20.9 9,889 41.05 10,306 20.3 10,306 41.52 10,677 20.0 10,677 42.39

Food & Beverage 14,050 68.5 14,050 67.53 15,590 66.0 15,590 67.80 16,414 64.2 16,414 68.13 17,180 63.0 17,180 69.22 17,880 62.3 17,880 70.99

Telephone 735 91.9 735 3.53 824 91.4 824 3.58 862 89.1 862 3.58 897 87.7 897 3.62 929 87.0 929 3.69

Spa/Health Club 2,049 99.1 2,049 9.85 2,294 95.8 2,294 9.98 2,363 91.0 2,363 9.81 2,434 87.7 2,434 9.81 2,507 85.7 2,507 9.95

Other Expenses 1,047 52.9 1,047 5.03 1,105 48.2 1,105 4.80 1,152 46.3 1,152 4.78 1,196 45.0 1,196 4.82 1,236 44.2 1,236 4.91

Total 26,266 43.4 26,266 126.25 29,244 41.2 29,244 127.17 30,679 38.9 30,679 127.35 32,012 37.9 32,012 128.98 33,229 37.4 33,229 131.94




Marketing 6,887 11.4 6,887 33.10 7,425 10.5 7,425 32.29 7,778 9.9 7,778 32.29 8,084 9.6 8,084 32.57 8,361 9.4 8,361 33.20


Utilities 2,841 4.7 2,841 13.66 3,262 4.6 3,262 14.19 3,418 4.3 3,418 14.19 3,552 4.2 3,552 14.31 3,674 4.1 3,674 14.59

Total 15,989 26.5 15,989 76.85 17,927 25.3 17,927 77.96 19,052 24.1 19,052 79.09 20,023 23.7 20,023 80.67 20,877 23.4 20,877 82.89

HOUSE PROFIT 18,332 30.1 18,332 88.11 23,740 33.5 23,740 103.24 29,081 37.0 29,081 120.72 32,501 38.4 32,501 130.95 34,764 39.2 34,764 138.03

Management Fee 1,212 2.0 1,212 5.82 1,418 2.0 1,418 6.17 1,576 2.0 1,576 6.54 1,691 2.0 1,691 6.81 1,777 2.0 1,777 7.06


FIXED EXPENSES

Insurance 927 1.5 927 4.46 955 1.3 955 4.15 984 1.2 984 4.08 1,013 1.2 1,013 4.08 1,044 1.2 1,044 4.14


Total 2,139 3.5 2,139 10.28 3,083 4.3 3,083 13.41 4,136 5.2 4,136 17.17 5,240 6.2 5,240 21.11 5,487 6.2 5,487 21.79

NET INCOME $14,981 24.6 % $14,981 $72.01 $19,239 27.2 % $19,239 $83.67 $23,369 29.8 % $23,369 $97.01 $25,570 30.2 % $25,570 $103.02 $27,499 31.0 % $27,499 $109.19


Table 9-10 Ten-Year Forecast of Income and Expense

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Number of Rooms: 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

Occupied Rooms: 208,050 229,950 240,900 248,200 251,850 251,850 251,850 251,850 251,850 251,850

Occupancy: 57% 63% 66% 68% 69% 69% 69% 69% 69% 69%

Average Rate: $169.34 % of $181.33 % of $195.98 % of $204.80 % of $211.97 % of $218.33 % of $224.88 % of $231.63 % of $238.57 % of $245.73

RevPAR: $96.52 Gross $114.24 Gross $129.35 Gross $139.27 Gross $146.26 Gross $150.65 Gross $155.17 Gross $159.82 Gross $164.62 Gross $169.56

REVENUE

Rooms $35,231 58.1 % $41,697 58.8 % $47,212 59.9 % $50,832 60.1 % $53,385 60.1 % $54,986 59.8 % $56,636 59.6 % $58,335 59.6 % $60,085 59.6 % $61,888 59.6 %

Food 17,413 28.7 20,059 28.3 21,694 27.5 23,139 27.4 24,364 27.4 25,339 27.6 26,353 27.7 27,143 27.7 27,957 27.7 28,796 27.7

Beverage 3,096 5.1 3,566 5.0 3,857 4.9 4,114 4.9 4,331 4.9 4,505 4.9 4,685 4.9 4,825 4.9 4,970 4.9 5,119 4.9

Telephone 800 1.3 901 1.3 967 1.2 1,023 1.2 1,068 1.2 1,100 1.2 1,133 1.2 1,167 1.2 1,202 1.2 1,238 1.2

Spa/Health Club 2,068 3.4 2,396 3.4 2,597 3.3 2,775 3.3 2,924 3.3 3,041 3.3 3,162 3.3 3,289 3.4 3,420 3.4 3,557 3.4

Other Income 1,979 3.3 2,292 3.2 2,485 3.2 2,655 3.1 2,797 3.1 2,909 3.2 3,026 3.2 3,116 3.2 3,210 3.2 3,306 3.2

Total 60,587 100.0 70,911 100.0 78,812 100.0 84,537 100.0 88,870 100.0 91,880 100.0 94,994 100.0 97,876 100.0 100,845 100.0 103,905 100.0

DEPARTMENTAL EXPENSES*

Rooms 8,385 23.8 9,431 22.6 9,889 20.9 10,306 20.3 10,677 20.0 10,997 20.0 11,327 20.0 11,667 20.0 12,017 20.0 12,378 20.0

Food & Beverage 14,050 68.5 15,590 66.0 16,414 64.2 17,180 63.0 17,880 62.3 18,506 62.0 19,154 61.7 19,728 61.7 20,320 61.7 20,930 61.7

Telephone 735 91.9 824 91.4 862 89.1 897 87.7 929 87.0 957 87.0 986 87.0 1,015 87.0 1,046 87.0 1,077 87.0

Spa/Health Club 2,049 99.1 2,294 95.8 2,363 91.0 2,434 87.7 2,507 85.7 2,582 84.9 2,659 84.1 2,739 83.3 2,821 82.5 2,906 81.7

Other Expenses 1,047 52.9 1,105 48.2 1,152 46.3 1,196 45.0 1,236 44.2 1,273 43.8 1,312 43.3 1,351 43.3 1,391 43.3 1,433 43.3

Total 26,266 43.4 29,244 41.2 30,679 38.9 32,012 37.9 33,229 37.4 34,315 37.3 35,437 37.3 36,500 37.3 37,595 37.3 38,723 37.3




Marketing 6,887 11.4 7,425 10.5 7,778 9.9 8,084 9.6 8,361 9.4 8,611 9.4 8,870 9.3 9,136 9.3 9,410 9.3 9,692 9.3


Utilities 2,841 4.7 3,262 4.6 3,418 4.3 3,552 4.2 3,674 4.1 3,784 4.1 3,897 4.1 4,014 4.1 4,135 4.1 4,259 4.1

Total 15,989 26.5 17,927 25.3 19,052 24.1 20,023 23.7 20,877 23.4 21,537 23.4 22,219 23.4 22,885 23.4 23,572 23.4 24,279 23.4

HOUSE PROFIT 18,332 30.1 23,740 33.5 29,081 37.0 32,501 38.4 34,764 39.2 36,027 39.3 37,338 39.3 38,490 39.3 39,678 39.3 40,903 39.3

Management Fee 1,212 2.0 1,418 2.0 1,576 2.0 1,691 2.0 1,777 2.0 1,838 2.0 1,900 2.0 1,958 2.0 2,017 2.0 2,078 2.0


FIXED EXPENSES

Insurance 927 1.5 955 1.3 984 1.2 1,013 1.2 1,044 1.2 1,075 1.2 1,107 1.2 1,141 1.2 1,175 1.2 1,210 1.2


Total 2,139 3.5 3,083 4.3 4,136 5.2 5,240 6.2 5,487 6.2 5,669 6.2 5,857 6.2 6,034 6.2 6,217 6.2 6,405 6.2

NET INCOME $14,981 24.6 % $19,239 27.2 % $23,369 29.8 % $25,570 30.2 % $27,499 31.0 % $28,520 31.1 % $29,581 31.1 % $30,498 31.1 % $31,444 31.1 % $32,419 31.1 %1 1 1 1 1 1 1 1 1 1

State Occupancy Tax (6%) $2,114 $2,502 $2,833 $3,050 $3,203 $3,299 $3,398 $3,500 $3,605 $3,713

Sales Tax (6.25%) on Non Rooms 1,585 1,826 1,975 2,107 2,218 2,306 2,397 2,471 2,547 2,626

Local Occupancy Tax (7%) 2,466 2,919 3,305 3,558 3,737 3,849 3,965 4,083 4,206 4,332

Total Taxes $6,165 $7,246 $8,113 $8,715 $9,158 $9,454 $9,760 $10,055 $10,359 $10,671


% of

Gross


The following description sets forth the basis for the forecast of income and expense. We anticipate that it will take five years for the subject property to reach a stabilized level of operation. Each revenue and expense item has been forecast based upon our review of the subject's operating budget and comparable income and expense statements. Our forecast is based upon calendar years beginning January 1, 2012 and is expressed in inflated dollars for each year.

Rooms revenue is determined by two variables: occupancy and average rate. We projected occupancy and average rate in a previous section of this report. The subject property is expected to stabilize at an occupancy level of 69% with an average rate of $211.97 in 2016. Following the stabilized year, the subject property’s average rate is projected to increase along with the underlying rate of inflation.

Food and beverage revenue is generated by a hotel's restaurants, lounges, coffee shops, snack bars, banquet rooms, and room service. In addition to providing a source of revenue, these outlets serve as an amenity that assists in the sale of guestrooms. With the exception of properties with active lounges or banquet facilities that draw local residents, in-house guests generally represent a substantial percentage of a hotel's food and beverage patrons. In the case of the Proposed Omni Convention Center Hotel, food and beverage department will include two restaurants, a lounge, a coffee kiosk; moreover, banquet space is expected to span 80,000 square feet.

Although food and beverage revenue varies directly with changes in occupancy, the small portion generated by banquet sales and outside capture is relatively fixed. The comparable statements illustrated per-occupied-room collections for food and beverage revenue between $56.10 and $116.89. The composite statement indicated an average food and beverage revenue collection of $85.49 per occupied room. In total, food and beverage revenue represented 32.1% of total revenue on average. The average for the Omni composite statement was a similar 32.3%.

We project food and beverage revenue to be $83.70 and $14.88 per occupied room, respectively, in the first projection year. These per-occupied-room amounts increase to $96.74 and $17.20 for respective food and beverage revenue categories by the stabilized year. In the stabilized year, total food and beverage revenue totals 32.3% of total revenue, which is supported by the comparable operations. The proposed subject property's food and beverage operation is expected to be an important component of the hotel.

Forecast of Income and Expense

Rooms Revenue

Food and Beverage Revenue


Therefore, based upon our review of comparable operating statements, we have positioned this property at an appropriate level given its planned facility and price point. We would expect future moderate growth to occur within this category after the hotel's opening.

Telephone revenue is generated by hotel guests who charge local and long-distance calls to their rooms, and by individuals who use the property's public telephones. With the continued proliferation of cell phones and other wireless communications media, telephone revenue levels are expected to be relatively flat. According to the comparable operating statements, telephone revenue ranged from $2.79 to $5.29 on a per-occupied-room basis, or 1.5% of total revenue; the Omni statement reflects an average of 0.9% of total revenue for this category. We forecast the subject’s property’s telephone revenue to stabilize at $4.24 per occupied room by the stabilized year, 2016. This is equivalent to 1.2% of total revenue.

The proposed subject property's spa operation is expected to be a featured component of the hotel. Therefore, we have positioned this property at an appropriate level given its planned scope of facility and price point. We would expect future moderate growth to occur within this category after the hotel's opening, as the spa should generate income from both guests and walk-in business. We forecast the subject property’s spa/health club income to stabilize at $11.61 per occupied room by the stabilized year, 2016, or 3.3% of total revenue.

Other income is derived from sources other than guestrooms, food and beverage, and telephone services. Comparables in this category show revenue collections ranging from $4.46 to $18.33 on a per-occupied-room basis, with $9.18 as an average. Changes in this revenue item through the projection period result from the application of the underlying inflation rate and projected changes in occupancy. We forecast the subject’s property’s other income to stabilize at $11.11 per occupied room by the stabilized year, 2016. The proposed subject property's other income sources are expected to be generated primarily from the hotel's retail outlets, business center services, in-room movie and game charges, and vending areas. Based on our review of operations with a similar extent of offerings, we have positioned an appropriate revenue level for the proposed subject property.

Rooms expense consists of items related to the sale and upkeep of guestrooms and public space. Salaries, wages, and employee benefits account for a substantial portion of this category. Although payroll varies somewhat with

Telephone Revenue

Spa/Health Club Income

Other Income

Rooms Expense


occupancy (because managers can schedule maids, bell personnel, and house cleaners to work when demand requires), much of a hotel's payroll is fixed. Front desk personnel, public area cleaners, the housekeeper, and other supervisors must be maintained at all times. As a result, salaries, wages, and employee benefits are only moderately sensitive to changes in occupancy.

Commissions and reservations are usually based on room sales, and thus are highly sensitive to changes in occupancy and average rate. While guest supplies vary 100% with occupancy, linens, and other operating expenses are only slightly affected by volume.

The comparables illustrated rooms expense ranging between 20.4% and 32.0% of rooms revenue; overall, rooms expense of the comparable properties equated to 27.9% of rooms revenue (or $45.13 per occupied room). The Omni statement reflects a lower average of 20.1% of rooms revenue, as Select Guest charges and group commissions are allocated to the sales and marketing line item. Due to the fact that this property will be Omni operated, we have forecast our pro forma with a similar allocation of expenses. We have projected rooms expense for the subject property at 23.8% in the first year, stabilizing at 20.0% in 2016.

Food expenses consist of items necessary for the primary operation of a hotel's food and banquet facilities. The costs associated with food sales and payroll are moderately to highly correlated to food revenues. Items such as china, linens, and uniforms are less dependent on volume. Although the other expense items are basically fixed, they represent a relatively insignificant factor. Beverage expenses consist of items necessary for the operation of a hotel’s lounge and bar areas. The costs associated with beverage sales and payroll are moderately to highly correlated to beverage revenues.

The comparables illustrated food and beverage expense ranging between 60.4% and 75.5% of food and beverage revenue; overall, food and beverage expense of the comparable properties equated to 65.3% of food and beverage revenue. The comparable operations of Omni hotels reflect an average expense level of 62.2%. We have projected a stabilized expense ratio of 62.3% in 2016. The proposed subject property's food and beverage operation is expected to be efficiently managed and operate at an expense level that is in line with other comparable operations.

Food and Beverage Expense


Telephone expense consists of all costs associated with this department. In the case of small hotels with automated systems, the operation of telephones may be an additional responsibility of front desk personnel; however, most large properties employ full-time operators. The bulk of the telephone expense consists of the cost of local and long-distance calls billed by the telephone companies that provide these services. With the decrease in telephone usage and revenues, the actual cost of calls has decreased. However, the labor costs associated with a dedicated switchboard staff remain in place, as the principal role of these individuals is to direct incoming calls, and respond to and/or direct calls from hotel guests. Consequently, in those hotels with a dedicated switchboard staff, the profitability of the telephone department has decreased, and in many instances these departments now operate at a loss. In properties where the calls are handled by the front desk staff, profit levels have decreased, but most continue to generate a modest profit margin.

The comparables illustrated telephone expense ranging between 49.4% and 106.0% of telephone revenue; overall, telephone expense of the comparable properties equated to 74.2% of telephone revenue. We have projected a stabilized expense ratio of 87.0% in 2016. We note that the comparable Omni operations reported a telephone expense level of 89.0% of telephone revenues.

The proposed subject's spa operation is expected to be efficiently managed and operate at a market-appropriate level. We have projected a stabilized expense ratio of 85.7% in 2016. Comparable Omni spa operations reflected an expense level of 84.1%.

Other income expense consists of costs associated with other income, and is dependent on the nature of the revenue. For example, if a hotel leases its gift shop to an outside operator, the gift shop expenses are limited to items such as rental fees and commissions. If the property operates its own gift shop, both revenues and expenses will be higher, and the hotel is responsible for the cost of goods sold, payroll, and so forth.

The comparables illustrated other income expense ranging between 1.4% and 46.8% of other income. We have projected a stabilized expense ratio of 44.2% in 2016. Expenses related to the proposed subject property's other income sources should be minimal and associated with the other revenue components discussed previously.

Telephone Expense

Spa/Health Club Expense

Other Income Expense


Administrative and general expense includes the salaries and wages of all administrative personnel who are not directly associated with a particular department. Expense items related to the management and operation of the property are also allocated to this category.

Most administrative and general expenses are relatively fixed. The exceptions are cash overages and shortages; commissions on credit card charges; provision for doubtful accounts, which are moderately affected by the number of transactions or total revenue; and salaries, wages, and benefits, which are very slightly influenced by volume.

The composite result for the comparable operations equated to $5,160 per available room (or 7.2% of total revenue) for this expense, with a range from 5.9% to 9.2% of total revenue. The Omni comparable operations reflected an expense level of 6.5% of total revenues in this category. Based upon our review of the comparable operating data and the expected scope of facility for the proposed subject property, we have positioned the administrative and general expense level at a market- and property-supported level. We have projected administrative and general expense for the subject property to stabilize at $5,447 per available room by 2016; this equates to 6.1% of total revenue.

Marketing expense consists of all costs associated with advertising, sales, and promotion; these activities are intended to attract and retain customers. Marketing can be used to create an image, develop customer awareness, and stimulate patronage of a property's various facilities.

The marketing category is unique in that all expense items, with the exception of fees and commissions, are totally controlled by management. Most hotel operators establish an annual marketing budget that sets forth all planned expenditures. If the budget is followed, total marketing expenses can be projected accurately.

Marketing expenditures are unusual because although there is a lag period before results are realized, the benefits are often extended over a long period. Depending on the type and scope of the advertising and promotion program implemented, the lag time can be as short as a few weeks or as long as several years. However, the favorable results of an effective marketing campaign tend to linger, and a property often enjoys the benefits of concentrated sales efforts for many months.

Administrative and General Expense

Marketing Expense


The composite result for the comparable operations equated to $4,756 per available room (or 6.6% of total revenue) for this expense, with a range from 5.2% to 9.3% of total revenue. The Omni comparable operations reflected an expense level of 9.4% of total revenues in this category, with items such as Select Guest fees, marketing fees, and group commissions allocated to this line item. Based upon our review of the comparable operating data and the expected scope of facility for the proposed subject property, we have positioned the marketing expense level at a market- and property-supported level. We have projected marketing expense for the subject property to stabilize at $8,361 per available room by the stabilized year, 2016; this equates to 9.4% of total revenue and reflects the Omni-specific allocations expected at this property going forward.

As previously discussed, the subject is expected to be brand operated; as such, no franchise agreement will exist and no franchise fees are expected to be required throughout the ten-year forecast period.

Property operations and maintenance expense is another expense category that is largely controlled by management. Except for repairs that are necessary to keep the facility open and prevent damage (e.g., plumbing, heating, and electrical items), most maintenance can be deferred for varying lengths of time.

Maintenance is an accumulating expense. If management elects to postpone performing a required repair, they have not eliminated or saved the expenditure; they have only deferred payment until a later date. A lodging facility that operates with a lower-than-normal maintenance budget is likely to accumulate a considerable amount of deferred maintenance.

The age of a lodging facility has a strong influence on the required level of maintenance. A new or thoroughly renovated property is protected for several years by modern equipment and manufacturers' warranties. However, as a hostelry grows older, maintenance expenses escalate. A well-organized preventive maintenance system often helps delay deterioration, but most facilities face higher property operations and maintenance costs each year, regardless of the occupancy trend. The quality of initial construction can also have a direct impact on future maintenance requirements. The use of high-quality building materials and construction methods generally reduces the need for maintenance expenditures over the long term.

Franchise Fee

Property Operations and Maintenance


The comparable operations indicated an average property operations and maintenance expense of $2,965 per available room, ranging from $2,329 to $3,891; the average expense level was 4.1% of total revenue. The Omni comparable operations also reflected an expense level of 4.1% of total revenues in this category. We expect the proposed subject property's maintenance operation to be well managed, and expense levels should stabilize at a typical level for a property of this type. The hotel will also benefit from its new construction, which should require less maintenance overall. Changes in this expense item through the projection period result from the application of the underlying inflation rate and projected changes in occupancy. Property operations and maintenance expense has been forecast to be $3,396 per available room, or 3.8% of total revenue, in the stabilized year, 2016.

The utilities consumption of a lodging facility takes several forms, including water and space heating, air conditioning, lighting, cooking fuel, and other miscellaneous power requirements. The most common sources of hotel utilities are electricity, natural gas, fuel oil, and steam. This category also includes the cost of water service.

Total energy cost depends on the source and quantity of fuel used. Electricity tends to be the most expensive source, followed by oil and gas. Although all hotels consume a sizable amount of electricity, many properties supplement their utility requirements with less expensive sources, such as gas and oil, for heating and cooking.

The comparable operations indicated an average utilities expense of $2,783 per available room (3.9% of total revenue), ranging from $2,018 to $3,685. The Omni comparable operations reflected an expense level of 4.5% of total revenues in this category. Changes in this utilities item through the projection period result from the application of the underlying inflation rate and the projected changes in occupancy. We have projected utilities expense for the subject property to stabilize at $3,674 per available room by the stabilized year, 2016, or 4.1% of total revenue.

Management expense consists of the fees paid to the managing agent contracted to operate the property. Some companies provide management services and a brand-name affiliation (first-tier management company), while others provide management services alone (second-tier management company). Some management contacts specify only a base fee (usually a percentage of total revenue), while others call for both a base fee and an

Utilities Expense

Management Fee


incentive fee (usually a percentage of defined profit). Basic hotel management fees are almost always based on a percentage of total revenue, which means they have no fixed component. While base fees typically range from 2% to 4% of total revenue, incentive fees are deal specific and often are calculated as a percentage of income available after debt service and, in some cases, after a preferred return on equity. Total management fees for the subject property have been forecast at 2.0% of total revenue.

As the City of Dallas owns the subject site, the proposed Omni Convention Center Hotel will not be subject to property taxes. For the purpose of this study, we have therefore assumed a property tax liability of zero.

The insurance expense category consists of the cost of insuring the hotel and its contents against damage or destruction by fire, weather, sprinkler leakage, boiler explosion, plate glass breakage, and so forth. General insurance costs also include premiums relating to liability, fidelity, and theft coverage.

Insurance rates are based on many factors, including building design and construction, fire detection and extinguishing equipment, fire district, distance from the firehouse, and the area's fire experience. Insurance expenses do not vary with occupancy.

Insurance rates for hotels remained relatively low throughout the latter half of the 1990s, as competition among the insurance companies kept prices low. Beginning in 2001, insurance rates began to increase substantially. The terrorist attacks strained the financial resources of the insurance and reinsurance industries, resulting in further increases in insurance costs in 2002 and 2003. Since this period, insurance costs have stabilized.

The comparable properties we identified indicated a range of $423 to $2,085 per available room. Based on these levels, we project the subject property's insurance expense at $1,044 per available room by the stabilized year. In subsequent years, this amount is assumed to increase in tandem with inflation.

Furniture, fixtures, and equipment are essential to the operation of a lodging facility, and their quality often influences a property's class. This category includes all non-real estate items that are capitalized, rather than expensed. The furniture, fixtures, and equipment of a hotel are exposed to heavy use and must be replaced at regular intervals. The useful life of these items is

Property Taxes

Insurance Expense

Reserve for Replacement


determined by their quality, durability, and the amount of guest traffic and use.

Periodic replacement of furniture, fixtures, and equipment is essential to maintain the quality, image, and income-producing potential of a lodging facility. Because capitalized expenditures are not included in the operating statement but nevertheless affect an owner's cash flow, a forecast of income and expense should reflect these expenses in the form of an appropriate reserve for replacement.

The International Society of Hospitality Consultants (ISHC) undertook a major industry-sponsored study of the capital expenditure requirements for full-service/luxury, select-service, and extended-stay hotels. The most recent findings of the study were published in a report in 20079. Historical capital expenditures of well-maintained hotels were investigated through the compilation of data provided by most of the major hotel companies in the United States. A prospective analysis of future capital expenditure requirements was also performed based upon the cost to replace short- and long-lived building components over a hotel's economic life. The study showed that the capital expenditure requirements for hotels vary significantly from year to year, and depend upon both the actual and effective age of a property. The results of this study showed that hotel lenders and investors are requiring reserves for replacement ranging from 4% to 5% of total revenue.

Based on the results of this study, our review of comparable lodging facilities, and our industry expertise, we estimate that a reserve for replacement of 5.0% of total revenues is sufficient to provide for the timely and periodic replacement of the subject property's furniture, fixtures, and equipment. This amount is ramped up during the initial projection period.

In this section, we presented a forecast of income and expense for the proposed subject property. This forecast was presented in calendar years, reflecting inflated dollars beginning in 2012. Our cash flow projections follow from previously discussed occupancy and average rate projections set forth in the previous chapter. As noted, it is assumed that the subject property would

9 The International Society of Hotel Consultants, CapEx 2007, A Study of Capital Expenditure in the U.S. Hotel Industry.

Conclusion


be built with the facilities listed in the proposed facility chapter of this report, and that the hotel would be first-class in nature and be branded as such.

Our report assumes that the pre-selling of the hotel will begin no later than mid-year 2010, and that a certain pre-booking pace will be maintained between this time and the opening of the hotel. Additionally, our projections assume that management will sell the guestrooms of the hotel at a price point commensurate with a first-class, full-service hotel, at the rate levels set forth in the average rate subsection of this report. Should a strategy of considerable rate discounting be employed, our operating projections would be impacted.

Finally, we assume that the relationship between the hotel, the convention center, and the Dallas CVB will be a positive and effective one, as the convention center would serve as the hotel’s primary demand generator. In conclusion, our analysis reflects a profitable operation, with net income expected to total 31.0% of total revenue by the stabilized year. The stabilized total revenue comprises primarily rooms revenue and food and beverage revenue, with a secondary portion derived from other income sources. On the cost side, departmental expenses total 37.4% of revenue by the stabilized year, while undistributed operating expenses total 23.4% of total revenues; this assumes that the property will be operated competently by a well-known hotel operator. After a 2.0% of total revenues management fee, and 6.2% of total revenues in fixed expenses, a net income ratio of 31.0% is forecast by the stabilized year.

HVS Consulting and Valuation Services Statement of Assumptions and Limiting Conditions 10-1

10. Statement of Assumptions and Limiting Conditions

1. This report is set forth as a market study of the proposed subject property; this is not an appraisal report.

2. This report is to be used in whole and not in part.

3. No responsibility is assumed for matters of a legal nature, nor do we render any opinion as to title, which is assumed to be marketable and free of any deed restrictions and easements. The property is evaluated as though free and clear unless otherwise stated.

4. We assume that there are no hidden or unapparent conditions of the sub-soil or structures, such as underground storage tanks, that would impact the property’s development potential. No responsibility is assumed for these conditions or for any engineering that may be required to discover them.

5. We have not considered the presence of potentially hazardous materials or any form of toxic waste on the project site. The consultants are not qualified to detect hazardous substances, and we urge the client to retain an expert in this field if desired.

6. The Americans with Disabilities Act (ADA) became effective on January 26, 1992. We have assumed the proposed hotel would be designed and constructed to be in full compliance with the ADA.

7. We have made no survey of the site, and we assume no responsibility in connection with such matters. Sketches, photographs, maps, and other exhibits are included to assist the reader in visualizing the property. It is assumed that the use of the described real estate will be within the boundaries of the property described and that no encroachment will exist.

8. All information, financial operating statements, estimates, and opinions obtained from parties not employed by DFW Hospitality


Consulting, LLC are assumed to be true and correct. We can assume no liability resulting from misinformation.

9. Unless noted, we assume that there are no encroachments, zoning violations, or building violations encumbering the subject property.

10. The property is assumed to be in full compliance with all applicable federal, state, local, and private codes, laws, consents, licenses, and regulations (including a liquor license where appropriate), and that all licenses, permits, certificates, franchises, and so forth can be freely renewed or transferred to a purchaser.

11. All mortgages, liens, encumbrances, leases, and servitudes have been disregarded unless specified otherwise.

12. None of this material may be reproduced in any form without our written permission, and the report cannot be disseminated to the public through advertising, public relations, news, sales, or other media.

13. We are not required to give testimony or attendance in court by reason of this analysis without previous arrangements, and only when our standard per-diem fees and travel costs are paid prior to the appearance.

14. If the reader is making a fiduciary or individual investment decision and has any questions concerning the material presented in this report, it is recommended that the reader contact us.

15. We take no responsibility for any events or circumstances that take place subsequent to the date of our field inspection.

16. The quality of a lodging facility's on-site management has a direct effect on a property's economic viability. The financial forecasts presented in this analysis assume responsible ownership and competent management. Any departure from this assumption may have a significant impact on the projected operating results.

17. The estimated operating results presented in this report are based on an evaluation of the overall economy and neither take into account nor make provision for the effect of any sharp rise or decline in local or national economic conditions. To the extent that wages and other operating expenses may advance during the economic life of the property, we expect that the prices of rooms, food, beverages, and services will be adjusted to at least offset those advances. We do not warrant that the estimates will be attained, but they have been


prepared on the basis of information obtained during the course of this study and are intended to reflect the expectations of a typical hotel investor.

18. This analysis assumes continuation of all Internal Revenue Service tax code provisions as stated or interpreted on either the date of value or the date of our field inspection, whichever occurs first.

19. Many of the figures presented in this report were generated using sophisticated computer models that make calculations based on numbers carried out to three or more decimal places. In the interest of simplicity, most numbers have been rounded to the nearest tenth of a percent. Thus, these figures may be subject to small rounding errors.

20. It is agreed that our liability to the client is limited to the amount of the fee paid as liquidated damages. Our responsibility is limited to the client, and use of this report by third parties shall be solely at the risk of the client and/or third parties. The use of this report is also subject to the terms and conditions set forth in our engagement letter with the client.

21. Evaluating and comprising financial forecasts for hotels is both a science and an art. Although this analysis employs various mathematical calculations to provide value indications, the final forecasts are subjective and may be influenced by our experience and other factors not specifically set forth in this report.

22. This study was prepared by DFW Hospitality Consulting, LLC. All opinions, recommendations, and conclusions expressed during the course of this assignment are rendered by the staff of DFW Hospitality Consulting, LLC as employees, rather than as individuals.

HVS Consulting and Valuation Services Certification 11-1

11. Certification

The undersigned hereby certify that, to the best of our knowledge and belief:

1. the statements of fact presented in this report are true and correct;

2. the reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions;

3. we have no (or the specified) present or prospective interest in the property that is the subject of this report and no (or the specified) personal interest with respect to the parties involved;

4. we have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment;

5. our engagement in this assignment was not contingent upon developing or reporting predetermined results;

6. our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined result or direction in performance that favors the cause of the client, the attainment of a stipulated result, or the occurrence of a subsequent event directly related of the intended use of this study;

7. our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice;

8. Shannon Sampson personally inspected the property described in this report; Rod Clough, MAI has also inspected the site in the past;

9. Shannon Sampson provided significant assistance to Rod Clough, MAI, and that no one other than those listed above and the undersigned prepared the analyses, conclusions, and opinions concerning the real estate that are set forth in this report;

10. the reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the

HVS Consulting and Valuation Services Certification 11-2

Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute;

11. the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives; and

12. as of the date of this report, Rod Clough, MAI has completed the requirements of the continuing education program of the Appraisal Institute.

Shannon Sampson Senior Project Manager Rod Clough, MAI Managing Director DFW Hospitality Consulting, LLC

HVS Consulting and Valuation Services Penetration Explanation 1

Penetration Explanation

Let us illustrate the penetration adjustment with an example.

A market has three existing hotels with the following operating statistics:

Base Year Occupancy and Penetration Levels

Estimated Market Segmentation

Property Number of

Rooms Fair Share Commercial Meeting Leisure Occupancy Penetration Hotel A 100 23.5% 60% 20% 20% 75.0% 100.8% Hotel B 125 29.4 70 10 20 65.0 87.4 Hotel C 200 47.1 30 60 10 80.0 107.5 Total/Average 425 100.0% 47% 38% 15% 74.4% 100.0%

Based upon each hotel’s room count, market segmentation, and annual occupancy, the annual number of room nights accommodated in the market from each market segment can be quantified, as set forth below.

Market-wide Room Night Demand

Market Segment Annual Room Night Demand

Percentage of Total

Commercial 54,704 47.4 % Meeting 43,481 37.7 Leisure 17,246 14.9 Total 115,431 100.0 %

The following discussion will be based upon an analysis of the commercial market segment. The same methodology is applied for each market segment to derive an estimate of a hotel’s overall occupancy. The chart below sets forth


the commercial demand accommodated by each hotel. Each hotel’s commercial penetration factor is computed by:

1) calculating the hotel’s market share % of commercial demand (commercial room nights accommodated by subject hotel divided by total commercial room nights accommodated by all hotels) and

2) dividing the hotel’s commercial market share % by the hotel’s fair share %.

The following chart sets forth each hotel’s fair share, commercial market share, and commercial penetration factor.

Commercial Segment Penetration Factors

Property Number of

Rooms Fair Share Commercial

Capture Commercial

Market Share Commercial Penetration

Hotel A 100 23.5% 12,973 30.0% 127.6% Hotel B 125 29.4 14,054 37.9 129.0 Hotel C 200 47.1 27,677 32.0 68.1 Total/Average 425 100.0% 54,704 100.0% 100.0%

When a new 100-room hotel enters the market, the fair share of each hotel changes due to the new denominator, which has increased by the 100 rooms that have been added to the market.

Commercial Segment Fair Share

Property Number of

Rooms Fair Share Hotel A 100 19.0% Hotel B 125 23.8 Hotel C 200 38.1 New Hotel 100 19.0 Total 525 100.0%


The new hotel’s penetration factor is projected for its first year of operation. It is estimated that the hotel will capture (penetrate) only 85% of its fair share as it establishes itself in the market. The new hotel’s market share and room night capture can be calculated based upon the hotel’s estimated penetration factor. The market share of the existing hotels and that of the new hotel are added up and they no longer equal 100% because of the new hotel’s entry into the market. The market share of each hotel must be adjusted to reflect the change in the denominator, which constitutes the sum of each hotel’s market share.

This adjustment can be mathematically calculated by dividing each hotel’s market share percentages by the new denominator of 97.1%. The resulting calculations reflect each hotel’s new adjusted market share. The sum of the adjusted market shares equals 100%, indicating that the adjustment has been successfully completed. Once the market shares have been calculated, the penetration factors can be recalculated (adjusted market share divided by fair share) to derive the adjusted penetration factors based upon the new hotel’s entry into the market. Note that each existing hotel’s penetration factor actually increases because the new hotel is capturing (penetrating) less than its fair share of demand.

Commercial Segment Projections (Year 1)

Property Number of

Rooms Fair Share Hist./Proj.

Penetration Factor Hist./Proj. Market

Share Adjusted

Market Share Adjusted Penetration

Factor Projected Capture

Hotel A 100 19.0% 127.6 % 24.3% 25.0% 131.4% 13,687 Hotel B 125 23.8 129.0 30.7 31.6 132.8 17,299 Hotel C 200 38.1 68.1 25.9 26.7 70.1 14,600 New Hotel 100 19.0 85.0 16.2 16.7 87.5 9,117 Total 525 100.0% 97.1% 100.0% 54,704

In its second year of operation, the new hotel is projected to penetrate above its fair share of demand. A penetration rate of 130% has been chosen, as the new hotel is expected to perform at a level commensurate with Hotel A and Hotel B in this market segment. The same calculations are performed to adjust market share and penetration factors. Note that now the penetration factors of the existing hotels decline below their original penetration rates due to the new hotel’s above-market penetration. Also note that after the market share adjustment, the new hotel retains a penetration rate commensurate


with Hotel A and Hotel B, though the penetration rates of all three hotels have declined by approximately nine percentage points due to the reapportionment of demand.

Once the market shares of each hotel have been adjusted to reflect the entry of the new hotel into the market, the commercial room nights captured by each hotel may be projected by multiplying the hotel’s market share percentage by the total commercial room-night demand. This calculation is shown below.

Commercial Segment Projections (Year 2)

Property Number of

Rooms Fair Share Hist./Proj.

Penetration Factor Hist./Proj. Market

Share Adjusted

Market Share Adjusted Penetration

Factor Projected Capture

Hotel A 100 19.0% 131.4 % 25.0% 23.1% 121.5% 12,662 Hotel B 125 23.8 132.8 31.6 29.3 122.9 16,004 Hotel C 200 38.1 70.1 26.7 24.7 64.8 13,507 New Hotel 100 19.0 130.0 24.8 22.9 120.3 12,531 Total 525 100.0% 97.1% 100.0% 54,704

HVS Consulting and Valuation Services Qualifications of Shannon Sampson

HVS Consulting and Valuation Services - Dallas 2601 Sagebrush Drive, Suite 101 Flower Mound, Texas 75028 (512) 698-7325 Fax (972) 899-1057

Shannon L. Sampson Employment 2006 – Present HVS CONSULTING AND VALUATION SERVICES

Dallas/Fort Worth, Texas 2005 – 2006 SOUTH SHORE HARBOUR RESORT & CONFERENCE

CENTER League City, Texas

2003 – 2004 THE UNIVERSITY OF TEXAS SOUTHWESTERN

MEDICAL CENTER Dallas, Texas

Education and Other Training THE UNIVERSITY OF TEXAS AT AUSTIN

Bachelor of Arts Other Specialized Training Classes Completed: Uniform Standards of Professional Appraisal Practice – 15

hours Basic Appraisal Procedures – 30 hours Basic Appraisal Principles – 30 hours General Appraiser Income Approach – 60 hours

Published Articles HVS Journal, “HVS Market Intelligence Report: Houston,

Texas,” December 2007

HVS Journal, “HVS Market Intelligence Report: San Antonio, Texas,” June 2008


Examples of Corporate and Institutional Clients Served American Property Management AMHB AppleReit Archon Barclays Beach Business Bank Bear Stearns Beck Group BLX BMC Capital Cabi Developers Capital One Cathay Bank Citigroup Global City of Beaumont City of Dallas Community South CreditVest, Inc. Deutsche Bank Dominion Advisory Group, Inc. Endeavor Holdings, Inc. Franke Realtors GE Commercial Finance Goldman Sachs HANMI Bank High Trust Bank Hodges Ward Elliott Investcorp Jackson Hotel LLC JP Morgan Chase The Leddy Companies Lehman Brothers Manhattan Capital, LLC Moody National Companies Natixis Real Estate Capital Nock Investments, LLC Northmarq Capital NRB of Chicago Ocean Capital O’Connor Capital Olympia Equity Advisors Palomar Austin

Presidian Principal Real Estate Advisors Pritchard Associates, Inc. Redico Sandstone Austin Venture, LLC SCS Capital Corp. Silverton Bank Smith Land Development, LLC Societe Generale Texas Credit Theater Square LP TVO Groupe Twin City Bank UBS United SA Federal Credit Union Unity Bank US Metro Bank Wachovia Wereldhave USA


Examples of Properties Appraised or Evaluated ALABAMA Hampton Inn, Bessemer Comfort Suites, Daphne ARIZONA Days Inn, Kingman Super 8, Kingman ARKANSAS Radisson, Fayetteville Embassy Suites, Hot Springs CALIFORNIA Hilton, Burbank FLORIDA Proposed Hotel, Key West DoubleTree, Tallahassee ILLINOIS Hampton Inn, Lombard Residence Inn Ohare Rosemont,

Rosemont Hampton Inn, Schaumburg Hampton Inn, Westchester INDIANA Days Inn, Decatur Residence Inn, Fort Wayne

Proposed Hotel, Peru LOUISIANA Proposed Candlewood Suites,

Baton Rouge Proposed Hotel, Baton Rouge MISSISSIPPI Proposed Homewood Suites,

Flowood Holiday Inn Express, Flowood NEVADA DoubleTree Club Airport, Las

Vegas Proposed Holiday Inn, Las Vegas Thunder Inn, Las Vegas NORTH CAROLINA Proposed Hilton Garden Inn,

Durham OKLAHOMA Proposed Destination Resort,

Ardmore TEXAS Western Inn, Abilene Proposed Wyndham,

Arlington/Grand Prairie Days Inn, Austin DoubleTree Club, Austin DoubleTree Guest Suites, Austin

Embassy Suites Town Lake, Austin Embassy Suites North, Austin Holiday Inn Express Airport,

Austin Holiday Inn Express Hotel & Suites,

Austin Hotel San Jose, Austin Hyatt Summerfield Suites, Austin Marriott at the Capitol, Austin Omni Downtown, Austin Proposed Palomar, Austin Proposed SH 130 Hotel, Austin Proposed Sleep Inn, Austin Proposed Upscale Themed Hotel,

Austin Proposed Waller Boutique Hotel,

Austin Super 8, Austin Holiday Inn Express, Bastrop Holiday Inn, Beaumont Proposed Downtown Hotel,

Beaumont Relax Inn, Bryan Proposed Independent Hotel, Clute AmeriSuites (Hyatt Place

Conversion), College Station Baymont Inn & Suites, Conroe Proposed Headquarters Hotel,

Dallas Proposed Hotel, El Paso TownePlace Suites, Fort Worth Proposed Staybridge Suites, Frisco Sheraton Stonebriar, Frisco Proposed Hilton Garden Inn,

Granbury Courtyard by Marriott Westchase,

Houston Courtyard by Marriott West

University, Houston Hampton Inn Hobby Airport,

Houston Marriott, Houston Palace Inn, Houston Proposed Mandarin Oriental,

Houston


Renaissance Greenway Plaza, Houston

Residence Inn Westchase, Houston Residence Inn West University,

Houston SpringHill Suites Reliant Park,

Houston Vista Express Inn, Houston Holiday Inn Express, Huntsville Proposed Hampton Inn, Hutto Hampton Inn, Laredo Proposed Best Western, Marlin Proposed Courtyard by Marriott,

New Braunfels Motel 6, Orange Proposed Cambria Suites, Plano Comfort Inn, San Antonio Embassy Suites Airport, San

Antonio Embassy Suites Northwest I-10, San

Antonio Hampton Inn, San Antonio Hampton Inn & Suites, San

Antonio Holiday Inn, San Antonio Howard Johnson, San Antonio Microtel Inn & Suites, San Antonio Proposed Boutique Hotel, San

Antonio Proposed El Matador Hotel, San

Antonio Proposed Riverwalk Hotel, San

Antonio Proposed Sheraton, San Antonio Proposed Starwood Luxury

Collection, San Antonio Sheraton Gunter, San Antonio Super 8, San Antonio Travelodge, San Antonio Proposed Full-Service Hotel,

Seabrook Proposed Westin, Seabrook Casa Bella Resort, South Padre

Island

Proposed Full-Service Hotel, South Padre Island

Proposed Hilton Falconhead, Village of Bee Cave

Comfort Suites, Webster Proposed Fairfield Inn & Suites,

Westover Hill

HVS International, D/FW, Texas Qualifications of Rod Clough, MAI

HVS Consulting and Valuation Services 2601 Sagebrush Drive, Suite 101 Flower Mound, Texas 75028 (972) 899-5400 Fax (972) 899-1057

Rod Clough, MAI Employment 2001 – Present HVS INTERNATIONAL

Dallas/Fort Worth, Texas Managing Director

2003 – Present US HOTEL APPRAISALS Dallas/Fort Worth, Texas Managing Director

1995 – 2001 HVS INTERNATIONAL Mineola, New York; Boulder, Colorado

1994 – 1995 THE MIRAGE

Las Vegas, Nevada (Rooms Division Management)

1993 HYATT REGENCY DENVER DOWNTOWN

Denver, Colorado (Rooms Division Management)

1991 – 1994 THE STATLER HOTEL AND JW MARRIOTT

EXECUTIVE EDUCATION CENTER Cornell University, Ithaca, New York (Rooms Division Management)

1988 – 1990 UNIVERSITY OF COLORADO CATERING

Boulder, Colorado (Food and Beverage Management)


Professional Affiliations Appraisal Institute – Designated Member (MAI) Cornell Hotel Society American Hotel and Motel Association

Education and Other Training CORNELL UNIVERSITY Bachelor of Science - Hotel Administration With Honors Appraisal Institute Classes Completed: 410 – Standards of Professional Practice Part A 420 – Standards of Professional Practice Part B 510 – Advanced Income Capitalization 520 – Highest and Best Use and Market Analysis 530 – Adv. Sales Comparison and Cost Approach 540 – Report Writing and Valuation Analysis 550 – Advanced Applications Other Specialized Training Classes Completed: TALCB-ACE - Income Property Analysis - 2003 24-Hour Comprehensive Appraisal Workshop - 2002 Mandatory 8-Hour Broker Standards - 2001 Update Anatomy of a Mortgage, URAR – 2005 USPAP – 2001, 2003, 2004, 2005, 2006 Update Solutions Approach – Appraisal Institute, 2006 Certified General Appraiser Classes Completed, through the University of Colorado Continuing Education Department: NCRE-200 Registered Appraiser NCRE-201 Basic Appraisal Applications NCRE-203 Small Residential Income Properties NCRE-208 Standards and Ethics NCRE-211 Certified Residential NCRE-215 Appraisal Principles and Advanced Applications NCRE-216 Income Capitalization NCRE-219 Commercial Case Studies

State Certifications (Sample)

Alabama, Arkansas, Arizona, California, Colorado, Georgia, Kansas, Kentucky, Louisiana, Michigan, Missouri, Nebraska, New Mexico, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, Washington


Speaking Engagements University of Colorado – Resort Tourism, October 2000

Urban Land Institute Conference “Developing Resorts in Mexico”, Cancun, Mexico, April 2000 Default Loan Conference, Dallas/Fort Worth, Texas “Hotel Trends Overview,” Frisco, Texas, May 2002 “Appraisals and Valuations,” Grapevine, Texas, March 2004 Pennsylvania State University – Hotel Management, October 2002 AAHOA National Convention and Tradeshow “Hotel Investment Trends Overview,” Grapevine, Texas, April 2004 FIABI World Conference “Worldwide Trends in the Hotel Industry,” Houston, Texas, May 2004

Published Articles Mortgage Banking, “Have Hotels Reached Their Peak?”

July 1997

Colorado Business Journal, “Tracking Denver’s Hotel Projects,” October 1998

HVS International Journal, “The Survival of the Full-Service Hotel,” June 1999

Boulder County Business Report, “An Emerging Market,” August 2000

HVS International Journal, “Evaluating an Emerging Hotel Market,” September 2000

Colorado Real Estate Journal, “What Denver Submarkets Still Have Upside Hotel Potential?” September 2000

HVS International Journal, “Central America Insight: Hotel Branding.” December 2000

Colorado Real Estate Journal, “Appraisal Hot Topics.” January 2001


Published Articles (Continued) HVS International Journal, “The Texas Hotel Industry: Stabilization on the Horizon.” February 2002

Hotel News Resource & HVS International Lodging Report, “What does the bankruptcy of Enron mean for the downtown Houston hotel industry?” February 2002

Real Estate Finance Journal, “Apartment or hotel? Today’s budget, extended-stay hotels blur the line between property types.” Spring 2002

HVS International Journal, “The Upside: Potential Returns Can Be Big When Buying Hotels In The Down Cycle.” June 2002

HVS International Global Hospitality Report, “U.S. Lodging Industry Update.” March 2003

HVS International Global Hospitality Report, “Texas Convention Centers Overview.” October 2003

HVS International Global Hospitality Report, “Houston’s Hotels Get Ready For Superbowl Sunday.” January 2004

HVS International Global Hospitality Report, “Lower Cost Hotels Hold RevPAR in 2003.” February 2004

HVS International Global Hospitality Report, “U.S. Hotels Improve RevPAR in 2003.” February 2004

HVS International Global Hospitality Report, “Transactions Activity Gains Momentum in 2004.” June 2004

HVS Major and Mid-Market Transactions Reports, Annual Publications, 2004 - 2007

HVS Library (www.hvs.com), “HVS Market Intelligence Report: Dallas.” August 25, 2007

Mentions Real Estate Forum, “Las Vegas Update” September 2000

Business Travel Executive, “Home Style” September 2000

http://www.hvs.com/


Examples of Corporate and Institutional Clients Served 3D/International Aereal Bank AEW Capital Management Amstar Group, Ltd. Argones Properties Aries Capital Arlington Hospitality Ashford Financial Corporation Baltimore Development Corp. Banc One Bank of America Bay County Planning Authority Bear Stearns Broadway Bank CapEx Corporation Capital Center Incorporated Capital Company of America Capitol Hotel Group CapStar Hotels CB Richard Ellis CDC Mortgage Capital, Inc. Chase Manhattan Bank CIBC Commercial Mortgage CIGNA Investment Management Citicorp Real Estate, Inc. Citizens Financial Services, FSB City of Dallas, TX City of Fort Worth, TX City of Huntsville, AL CNL Hospitality Corporation Commercial Capital Initiatives, Inc. Credit Lyonnais Credit Suisse First Boston CRIIMI Mae Services, Inc. Crow Holdings DAIWA Securities Depfa Bank Deutsche Bank Securities Dresner Bank Fairmont Hotel Management Co. Faison, Inc. FelCor Lodging Trust, Inc.

Finova Capital Corporation First Financial Bancorp First Midwest Bank First Mortgage Corporation First Source Bank First Union Bank Firstar Bank FirsTier Bank Fremont Investment and Loan Frost National Bank Gatehouse Capital GE Capital Gencom GMAC Golf Lodging, LLC Griffin Group Hamilton Properties Corp. HEI Hotels Heller Financial Hodges Ward Elliott Hospitality Properties Trust Horizon Bank Hyatt Corporation IFGP Corporation (Insignia) ITLA Funding Corporation Jackson Creek Development Co. Jefferson Banking Company JER Partners JP Morgan Kimberly Clark Landmark Organization Leddy Ventures Lehman Brothers, Inc. Lennar Partners Lincoln National Life Magnolia Hotels Marathon Bank Marshall Investments Mercantile National Bank Mercury Capital Merrill Lynch Midland Loan Miller & Schroeder National Republic Bank of Chicago Neptune Hospitality Advisors

Nomura Norwest Financial OCWEN Financial Group Orix Capital Markets Paine Webber Pia Investments, Inc. Peabody Hotels PNC Bank Premier Commercial Bank President Casinos President Development Group Presidio Hotel Group Prime Hospitality Pullman Bank and Trust Quorum Hotels and Resorts Ryan Companies Sage Hospitality Resources Samantha Investments Shaner Hotel Group Signature Hospitality Resources Simon DeBartolo Group Simpson, Thacher, & Bartlett Starwood Lodging Corporation Stearns Bank Stevens Holtze Corporation Stonebridge Companies Sumitomo Bank Ltd. Temecula Bank Terrabrook The Blackstone Group UBS Warburg UBS Paine Webber Unity Bank US Bancorp Piper Jaffray Washington Mutual Waxahachie 37, LLC Waypoint Bank Weglarz Group Wells Fargo Bank Western Security Bank White Lodging Services Corp. Windmill Inns Winegardner & Hammons, Inc. Woodbine Development Corp. WR Henderson Construction


PORTFOLIO ANALYSIS Various Portfolios of Lodgian-

Owned Hotels, Various Locations Annual Portfolio of AEW-owned

Hotels, Various Locations Portfolio of 9 Boykin Hotels, Various

Locations Portfolio of 5 Blackacre Hotels,

Various Locations Portfolio of 36 Sunburst Hotels,

Various Locations Portfolio of 6 Innkeepers Hotels,

Various Locations Portfolio of 8 FelCor Hotels, Various

Locations Portfolio of 10 GF Management-

Owned Hotels, Various Locations Portfolio of 96 Hilton Hotels,

Various Locations ALABAMA Holiday Inn Redmont, Birmingham The Tutweiler, Birmingham Proposed Marriott Hotel,

Birmingham Holiday Inn, Birmingham Proposed Hotel, Huntsville Adam’s Mark, Mobile Ramada, Montgomery Residence Inn by Marriott,

Montgomery ALASKA Hampton Inn, Searcy ARIZONA EconoLodge, Flagstaff Holiday Inn, Flagstaff Sleep Inn, Mesa

Proposed Residence Inn by Marriott, Mesa

Hampton Inn, Phoenix Proposed Kierland Hotel, Phoenix Holiday Inn Express, Sahuarita Hyatt Regency, Scottsdale Proposed Hilton Garden Inn,

Scottsdale MainStay Suites, Tempe Proposed Suite Hotel, Tucson Super 8, Tucson ARKANSAS Days Inn, Little Rock Hilton, Little Rock Hampton, Searcy Holiday Inn, Springdale Hampton Inn & Suites, Springdale CALIFORNIA Proposed Sheraton Resort, Aliso

Viejo Sheraton, Anaheim Marriott’s Laguna Cliffs Resort,

Dana Point Proposed AmeriHost, Fresno Hilton Garden Inn, Calabasas Chase Suites, Fullerton Comfort Inn, Hanford Chateau Marmont, Los Angeles Le Parc Suites, Los Angeles Super 8, Los Angeles Hyatt Regency, Monterey Hyatt Rickey’s, Palo Alto Proposed AmeriHost, Palmdale Westin Mission Hills, Rancho

Mirage Hilton Garden Inn, Rancho Mirage Best Western, Santa Barbara Shutters on the Beach, Santa Monica Comfort Suites, Stevenson Ranch

COLORADO Fairfield Inn, Aurora Proposed Fairfield Suites by

Marriott, Aurora Econo Lodge/Quality Inn, Boulder Proposed Embassy Suites, Boulder Sandy Point Inn, Boulder Comfort Inn, Brighton Hampton Inn, Colorado Springs Holiday Inn, Colorado Springs Embassy Suites, Colorado Springs Comfort Inn, Colorado Springs Eight Proposed TownePlace Suites,

Denver Area Adam’s Mark, Denver Best Western Landmark Hotel,

Denver Brown Palace, Denver Comfort Inn Downtown, Denver Courtyard by Marriott Downtown,

Denver DoubleTree Stapleton, Denver Embassy Suites East, Denver Embassy Suites Southeast, Denver Executive Tower Inn, Denver Fairfield Inn by Marriott Central,

Denver Glenarm Place, Denver Hampton Inn DIA, Denver Holiday Inn Downtown, Denver Holtze Executive Place, Denver Hotel Teatro, Denver Hyatt Regency Denver Tech Center,

Denver Hyatt Regency Downtown, Denver Proposed Marriott Convention

Center Hotel, Denver Westin Tabor Center, Denver Comfort Suites, Dillon Proposed Windmill Inn, Douglas

County Proposed Stonegate Hotel, Douglas

County

PARTIAL LIST OF HOTELS AND MOTELS APPRAISED OR EVALUATED BY RODNEY G. CLOUGH, MAI


Embassy Suites South, Englewood Hampton Inn, Englewood Proposed Conference Center Hotel,

Fort Collins Proposed Hampton Inn & Suites,

Glendale Proposed Courtyard and Residence

Inn by Marriott, Golden Proposed Hampton Inn, Golden Proposed Homewood Suites,

Golden Comfort Suites, Littleton Fairfield Inn by Marriott, Littleton Proposed Marriott Hotel, Littleton Proposed SpringHill Suites by

Marriott, Littleton Proposed Courtyard and Residence

Inn by Marriott, Longmont Hampton Inn, Loveland Proposed Inn at Palmer Divide

Resort & Conference Center, Palmer

Hampton Inn, Pueblo Proposed Hotel, Thornton Proposed Hotel, Trinidad Comfort Suites I-25 North,

Westminster Proposed Fairfield Inn by Marriott I-

25 North, Westminster CONNECTICUT Village Motel, Clinton Comfort Inn, Cromwell Radisson, Cromwell Holiday Inn, East Hartford Holiday Inn Express, East Windsor Proposed Hilton Garden Inn,

Fairfield Residence Inn by Marriott, Meriden Best Western, Mystic Heritage Inn, Southbury Westport Inn, Westport

DELAWARE Proposed Courtyard by Marriott,

Newark Courtyard by Marriott, Wilmington McIntosh Hotel, Wilmington Wyndham, Wilmington DISTRICT OF COLUMBIA Best Western New Hampshire DoubleTree Embassy Row Hilton Latham Hotel Park Hyatt Proposed Convention Hotel FLORIDA Ritz-Carlton, Amelia Island Comfort Inn, Bradenton Fairfield Inn by Marriott, Brandon Courtyard by Marriott, Brandon Howard Johnsons, Deerfield Beach Marriott, Ft. Lauderdale Grenelefe Gold and Tennis Resort,

Haines City Fairfield Inn (Proposed),

Jacksonville Holiday Inn Sunspree, Jacksonville

Beach Marriott, Jacksonville Hyatt Regency, Key West Ramada, Kissimmee Econo Lodge, Kissimmee Holiday Inn Select, Kissimmee Ritz-Carlton, Manalapan Summerfield Suites, Miami Best Western, Miami Beach Holiday Inn Express, Orlando Peabody, Orlando Residence Inn International Drive,

Orlando Residence Inn Seaworld, Orlando Casa Monica Hotel, St. Augustine

Proposed Golf Lodge, Sarasota DoubleTree, Tallahassee Floridan Hotel, Tampa Hilton Garden Inn North, Tampa Hyatt Regency Downtown, Tampa Hyatt Regency Westshore, Tampa Sheraton (Proposed), Tampa Marriott, West Palm Beach Residence Inn, West Palm Beach GEORGIA Clubhouse Inn, Atlanta Crowne Plaza Ravinia, Atlanta Days Inn Merchandise Mart, Atlanta Marriott Century City, Atlanta Hyatt Regency, Atlanta Wyndham Garden Midtown,

Atlanta Hampton Inn, Austell Fairfield Inn, Augusta Holiday Inn, Augusta Sheraton, Augusta Residence Inn by Marriott,

Hapeville Hyatt Regency, Savannah Westin, Savannah HAWAII Kahala Resort, Honolulu Kona Beach Hotel, Kailua-Kona Embassy Suites, Maui Marriott, Waikiki Beach IDAHO Red Lion Parkcenter Suites, Boise Proposed Hotel, Sun Valley ILLINOIS Proposed Hilton Garden Inn,

Aurora Courtyard by Marriott, Bedford Park


Fairfield Inn by Marriott, Bedford Park

Hampton Inn, Bedford Park Proposed Holiday Inn Express,

Bedford Park Sleep Inn, Bedford Park Proposed Hotel, Carbondale Carlton Inn, Chicago Days Inn, Chicago Hotel 71, Chicago Hyatt at University Village, Chicago Hyatt Regency O’Hare, Chicago The Fairmont, Chicago Hyatt Regency, Deerfield Holiday Inn, Hillside Hyatt Regency, Oak Brook Proposed Residence Inn by Marriott,

Schaumburg Proposed SpringHill Suites by

Marriott, Schaumburg Crowne Plaza, Springfield Holiday Inn Express, Springfield INDIANA Courtyard, Bloomington Proposed Residence Inn by Marriott,

Carmel Proposed SpringHill Suites by

Marriott, Carmel Staybridge Suites, Fishers Courtyard by Marriott, Goshen American Inn, Hammond AmeriSuites North, Indianapolis Days Inn, Indianapolis Proposed Hilton Hotel, Indianapolis Radisson North, Indianapolis Proposed Hilton Garden Inn,

Indianapolis New England Suites, Indianapolis Fairfield Inn by Marriott,

Indianapolis Residence Inn by Marriott,

Indianapolis Super 8, Indianapolis

Courtyard by Marriott, Mishawaka Proposed SpringHill Suites by

Marriott, Mishawaka Fairfield Inn, Noblesville Super 8, Markle Fairfield Inn, Princeton Hampton Inn, Terre Haute IOWA Collins Plaza Marriott, Cedar Rapids Embassy Suites, Des Moines Ramada West, Des Moines Savery, Des Moines KANSAS Proposed Lake Clinton Resort &

Conference Center, Lawrence Clubhouse Inn, Overland Park Holtze Inn, Overland Park Red Carpet Inn, Topeka Broadview Hotel, Wichita Clubhouse Inn, Wichita KENTUCKY Holiday Inn, Bowling Green Clarion Hotel, Covington Super 8, Florence Hyatt Regency, Louisville Proposed Residence Inn by Marriott,

Louisville Proposed SpringHill Suites by

Marriott, Louisville LOUISIANA Holiday Inn, Alexandria Best Western, Baton Rouge Courtyard by Marriott, Lafayette Best Western, Lake Charles Quality Inn and Suites, Metairie Best Western, New Orleans Hyatt Regency, New Orleans

Le Meridien, New Orleans Proposed Convention Headquarters

Hotel, New Orleans Best Western, Shreveport Clarion, Shreveport Holiday Inn, Shreveport Proposed Convention Hotel,

Shreveport MAINE TownePlace Suites, Scarborough MARYLAND Holiday Inn, Aberdeen Convention Center Hotel

(Proposed), Baltimore Hyatt Regency, Baltimore Paramount Hotel, Baltimore Radisson, Baltimore Proposed Broadway Hotel,

Baltimore Proposed Campus Hotel, Fairfax Hilton, Gaithersburg Residence Inn, Greenbelt Comfort Inn, Frederick Hilton Garden Inn, Linthicum Holiday Inn, Linthicum Woodfin Suites, Rockville MASSACHUSETTS Ramada Inn, Bedford Wyndham, Billerica Copley Plaza Hotel, Boston Residence Inn by Marriott, Boston Residence Inn, Dedham Hampton Inn, Lawrence Hampton Inn, Worcester MICHIGAN Grand Traverse Resort, Acme

Township


Residence Inn, Ann Arbor Proposed Conference Center, Bay

City Holiday Inn, Bay City Courtyard by Marriott, Benton

Harbor Sleep Inn, Charlevoix New England Suites, Grand Rapids Courtyard by Marriott, Flint Harley Hotel, Lansing Drury Inn, Troy MINNESOTA Days Inn, Austin Holiday Inn, Austin Proposed Sheraton, Columbia

Heights Proposed Sheraton, Duluth Staybridge Suites, Eagan Hawthorn Suites, Edina Super 8, Fairmont Holiday Inn, Fairmont Hyatt Regency, Minneapolis Proposed Sheraton, Minneapolis Best Western, Rochester Colonial Inn, Rochester Days Inn Downtown, Rochester Days Inn South, Rochester Econo Lodge, Rochester Econo Lodge South, Rochester Super 8, Rochester Travelodge, Rochester Comfort Inn, Wilmar Days Inn, Wilmar Holiday Inn, Wilmar MISSISSIPPI Broadwater Beach Hotel, Biloxi Crystal Inn, Gulfport Proposed Conference Center,

Jackson Proposed Hotel, Meridien Ramada, Natchez

Annabelle Inn, Vicksburg Proposed Staybridge Suites,

Vicksburg MISSOURI Clayton Athletic Club, Clayton MainStay Suites, Kansas City Proposed Hotel President, Kansas

City Mayfair, St. Louis St. Louis Athletic Club, St. Louis NEBRASKA Days Inn, Norfolk Clubhouse Inn, Omaha Country Inn & Suites, Omaha Embassy Suites, Omaha NEVADA Hyatt Regency Lake Tahoe, Incline

Village Alexis Park, Las Vegas Courtyard by Marriott, Las Vegas Embassy Suites, Las Vegas Holiday Inn Express, Las Vegas Proposed Mountain Spa Resort, Las

Vegas Residence Inn by Marriott, Las

Vegas NEW HAMPSHIRE Best Western, Keene Residence Inn by Marriott,

Merrimack Crowne Plaza, Nashua NEW JERSEY Grand Hotel, Cape May Marquis de Lafayette, Cape May Holiday Inn Select, Clark

Hamilton Park Conference Center, Florham Park

TownePlace Suites, Mount Laurel Howard Johnson Plaza, Saddle

Brook NEW MEXICO DoubleTree, Albuquerque Fairfield Inn by Marriott,

Albuquerque Hilton, Albuquerque SpringHill Suites, Las Cruces Comfort Inn, Santa Fe Holiday Inn, Santa Fe NEW YORK Crowne Plaza, Albany Ardsley Acres, Ardsley Hotel Gregory, Brooklyn Park Plaza, Cheektowaga LaGuardia Ramada, East Elmhurst Holiday Inn, Grand Island Best Western, Holtsville Grand Hyatt, New York City Roosevelt Hotel, New York City Four Points, Niagara Falls Holiday Inn Select, Niagara Falls Holiday Inn Express, Poughkeepsie Staten Island Hotel, Staten Island Radisson, Syracuse Tarrytown House, Tarrytown NORTH CAROLINA Cricket Inn, Charlotte Wyndham Garden, Charlotte Hampton Inn, Concord Proposed Currituck Hotel, Corolla Marriott, Durham Radisson, High Point Hampton Inn, Matthews Hampton Inn, Pineville Super 8, Raleigh


Hampton Inn, Statesville Holiday Inn, Statesville Holiday Inn Express, Statesville Econo Lodge, Wilson Holiday Inn Select, Winston-Salem NORTH DAKOTA Hilton Garden Inn, Grand Forks OHIO Embassy Suites, Blue Ash Residence Inn by Marriott, Blue Ash Days Inn, Cambridge Four Points, Cincinnati Hyatt Regency, Columbus Holiday Inn, Dayton Hawthorn Suites, Dublin Days Inn, Mason Red Roof Inn, Mason Hampton Inn, Streetsboro Proposed Hotel, Youngstown OKLAHOMA Sheraton, Oklahoma City Adam’s Mark, Tulsa Courtyard by Marriott, Tulsa Holiday Inn Select, Tulsa Holiday Inn Express, Weatherford OREGON Ramada, Corvallis Proposed Downtown Hotel,

Portland Ramada Airport, Portland PENNSYLVANIA Hilton Garden Inn, Gettysburg Holiday Inn Express, Harrisburg Mainstay Suites, King of Prussia Sleep Inn, King of Prussia

Sheraton, Langhorne Hampton Inn, Manheim Hampton Inn, Oaks Park Hyatt at the Bellevue,

Philadelphia Sheraton Rittenhouse Square,

Philadelphia Wyndham, Philadelphia Hawthorn Suites, Pittsburgh Holiday Inn, Pittsburgh Marriott, Pittsburgh Proposed Renaissance, Pittsburgh Comfort Inn, Stanton Hampton Inn, State College Comfort Inn, West Mifflin Holiday Inn, York RHODE ISLAND Newport Harbor Hotel, Newport Residence Inn, Warwick SOUTH CAROLINA Proposed Inn, Charleston Fairfield Inn by Marriott, North

Charleston Super 8, North Charleston Fairfield Inn by Marriott, Columbia Ramada, Columbia Holiday Inn Express, Fort Mill Comfort Inn, Hardeeville Proposed Golf Lodge, Myrtle Beach TENNESSEE Marriott, Chattanooga River Terrace Hotel, Gatlinburg Clubhouse Inn, Knoxville Holiday Inn, Memphis Proposed Marriott, Memphis Hilton Garden Inn, Nashville Holiday Inn Express, Nashville Hotel Preston, Nashville

TEXAS Metroplex Projects Proposed SpringHill Suites by

Marriott, Addison Lexington Hotel Suites, Arlington Proposed Hotel, Arlington Suburban Lodge North, Arlington Suburban Lodge South, Arlington Hawthorn Suites, Arlington Holiday Inn West, Bedford Adam’s Mark, Dallas Convention Center Hotel

(Proposed), Dallas Davis Hotel (Proposed), Dallas DoubleTree Lincoln Center, Dallas DoubleTree Market Center, Dallas DoubleTree Club, Dallas Embassy Suites Galleria, Dallas The Grand, Dallas Fairmont Hotel, Dallas Hawthorn Suites, Dallas Holiday Inn Market Center, Dallas Holiday Inn Select Central

Expressway, Dallas Hotel Sante Fe, Dallas Magnolia Hotel, Dallas Suburban Lodge, Dallas W (Proposed), Dallas Wilson World, Dallas Wyndham Garden Park Central,

Dallas Hilton Garden Inn (Proposed),

Duncanville Best Western, Duncanville Westin Stonebriar, Frisco Convention Center Hotel and T&P

(Proposed), Fort Worth Courtyard by Marriott, Fort Worth Green Oaks Hotel, Fort Worth Hyatt Regency DFW Airport, Fort

Worth Ramada Plaza, Fort Worth Renaissance, Fort Worth Residence Inn, Fort Worth


TownePlace Suites, Fort Worth Best Western, Haltom City Country Inn & Suites, Irving Holiday Inn Select DFW North,

Irving Holiday Inn Select DFW South,

Irving Marriott D/FW Airport, Irving Wyndham Garden Las Colinas,

Irving Convention Hotel (Proposed), Plano DoubleTree Legacy, Plano Mainstay Suites, Plano Hawthorn Suites, Richardson Omni Hotel, Richardson Radisson, Richardson Hilton Garden Inn (Proposed),

Rockwall Proposed Hotel, Waxahachie Proposed Full-Service Resort,

Westlake Austin Metro Projects Embassy Suites (Proposed), Bee

Caves DoubleTree Club, Austin Embassy Suites Arboretum, Austin Four Points by Sheraton, Austin Hawthorn Suites, Austin Central Hawthorn Suites, Austin Northwest Hawthorn Suites, Austin South Hilton Downtown, Austin Hilton Inn/Super 8, Austin Holiday Inn South, Austin Homewood Suites, Austin Marriott at the Capitol, Austin Residence Inn and Courtyard

Downtown (Proposed), Austin Residence Inn by Marriott South,

Austin SpringHill Suites, Austin Residence Inn by Marriott, Round

Rock Houston Metro Projects

Homewood Suites, Clear Lake Adam’s Mark, Houston Best Western, Houston Courtyard and Residence Inn,

(Proposed) Houston Crowne Plaza, Houston Days Inn Astrodome, Houston Hawthorn Suites, Houston Holiday Inn Astrodome, Houston Homewood Suites (Proposed),

Houston Hyatt Regency Intercontinental,

Houston Embassy Suites South, Houston Magnolia Hotel, Houston NASA Hotel (Proposed), Houston Radisson Town and Country,

Houston Renaissance (Proposed), Houston Residence Inn by Marriott, Houston Sheraton Astrodome, Houston Sheraton Suites, Houston Travelodge, Houston Westin Galleria & Oaks, Houston Wellesley Inn & Suites, Houston Kingwood Athletic Club, Kingwood Courtyard by Marriott, Sugarland San Antonio Metro Projects Holiday Inn, New Braunfels Bandera Motel, San Antonio Best Western, San Antonio Concord Athletic Club, San Antonio Courtyard by Marriott, San Antonio Crossroads Inn, San Antonio Days Inn, San Antonio Hampton Inn, San Antonio Hawthorn Suites, San Antonio Hyatt Regency Hill Country, San

Antonio Holiday Inn Riverwalk North/Four

Points by Sheraton, San Antonio Holiday Inn Northeast, San Antonio Holiday Inn Northwest, San

Antonio

Fairfield Inn by Marriott, San Antonio

Proposed All-Suite Riverwalk Hotel, San Antonio

Proposed Sheraton, San Antonio Concord Athletic Club, San Antonio D&D Motel, Von Ormy Other Texas Areas Ambassador Suites, Abilene Courtyard by Marriott, Abilene Ambassador, Amarillo Days Inn, Amarillo Hampton Inn, Amarillo Holiday Inn Express, Amarillo Clarion, Corpus Christi Convention Hotel (Proposed),

Corpus Christi Embassy Suites, El Paso Hilton Garden Inn UTEP

(Proposed), El Paso Marriott, El Paso Hampton Inn, Laredo Best Western, Longview Best Western, Marshall Embassy Suites, McAllen Days Inn, Orange Best Western (Proposed), Riviera Radisson, South Padre Island Holiday Inn, Tyler Residence Inn, Tyler Clarion, Waco Best Western, Weslaco Hampton Inn, Wichita Falls UTAH Hilton Garden Inn, Layton Crystal Inn, Murray Peery Hotel, Salt Lake City Proposed Embassy Suites, Sandy Crystal Inn, West Valley City VIRGINIA


Hilton Hotel and Towers, Arlington DoubleTree Hotel, Crystal City Hyatt Regency, Crystal City Sheraton, Crystal City Courtyard by Marriott, Dulles Lansdowne Resort, Lansdowne Marriott Norfolk Ritz-Carlton, Pentagon City Renaissance, Portsmouth Days Inn, South Boston Proposed Golf Lodge, Virginia

Beach WASHINGTON Proposed Fairfield Suites by

Marriott, Bothell Best Western, Federal Way Embassy Suites, Seattle La Quinta, Seattle Ramada, Seattle Holiday Inn Express, Spokane Quality Inn Valley Suites, Spokane Embassy Suites, Tukwila WEST VIRGINIA Embassy Suites, Charleston Marriott, Charleston WISCONSIN Hilton Garden Inn, Appleton Embassy Suites, Brookfield Residence Inn, Glendale Hilton Garden Inn, Green Bay Marriott, Madison Hyatt Regency, Milwaukee Hilton Garden Inn, Oshkosh WYOMING Hampton Inn, Cheyenne Proposed Hampton Inn & Suites,

Green River

AmeriHost Inn, Pinedale INTERNATIONAL Hyatt Regency, Aruba Proposed Resort, Bahamas Hyatt Regency, Dorado Beach,

Puerto Rico Hyatt Regency, Cerromar, Puerto

Rico Elbow Beach Hotel, Paget, Bermuda Hyatt Regency, Vancouver, BC Carambola Resort, St. Croix, US

Virgin Islands Proposed Hotel, St. Croix, US Virgin

Islands Hotel Parador del Sol, Acapulco,

Mexico Hotel Plaza Las Glorias, Acapulco,

Mexico Park Royal, Acapulco, Mexico Sheraton, Acapulco, Mexico El Pueblito, Cancun, Mexico Park Royal Piramides, Cancun,

Mexico Sheraton, Cancun, Mexico Westin Regina, Cancun, Mexico Park Royal, Cozumel, Mexico Radisson Resort, Ixtapa, Mexico Hotel Plaza Las Glorias, Manzanillo,

Mexico Desire Resort, Los Cabos, Mexico Esperanza, Los Cabos, Mexico Park Royal, Los Cabos, Mexico Proposed Luxury Resort, Los Cabos,

Mexico Sheraton, Mexico City, Mexico Paraiso de la Bonita, Puerto Morelos,

Mexico Hotel Sierra Golf & Spa, Puerto

Vallarta, Mexico Westin Regina, Puerto Vallarta,

Mexico

Hotel Plaza Las Glorias, San Carlos, Mexico

Hotel Plaza Las Glorias, Tijuana, Mexico

Continental Plaza Hotel, Zacatecas, Mexico

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