Frostburg, Maryland • Hotel Feasibility Study Page B-1

CONCLUSIONS

The Market research and analysis, as described in this report, indicate that the composition, strength, and projected demand for lodging accommodations in Frostburg, Maryland, are sufficient to support the proposed 44 room Cobblestone Hotel.

Market Area Analysis (Section C)

Frostburg with a population of 9,002 at the 2010 census, is a city in Allegany County, Maryland, and is located at the head of the Georges Creek Valley in Western Maryland. It is part of the Cumberland, MD-WV Metropolitan Statistical Area that had a population of 103,299 in 2010. It is approximately 135 miles west of the Baltimore and Washington D.C. area and approximately 100 miles south east of Pittsburgh.

Cumberland, the largest city in Allegany County, with a population of 20,859 at the 2010 census is just eight miles east of Frostburg. Cumberland is also referred to as “The Queen City”, as it was once the second largest city in Maryland at the height of the industrial revolution, but declined after World War II. It has a rich heritage with several historic structures and a charming downtown pedestrian mall. Cumberland is now home to several

Frostburg, Maryland • Hotel Feasibility Study Page B-2

business parks, the Western Maryland Health System, serving Allegany County and the Allegany College of Maryland. It is also the western terminus of the C&O Canal towpath, a 185 mile foot or bicycle path that connects Cumberland to Washington, D.C.

Coal mining was the first major economic draw to Frostburg and the surrounding area, but the industry faced problems in its early manifestation. The mountains of western Maryland and Frostburg proved to make transportation of coal very difficult. Not until the completion of the railroads did the coal industry in Frostburg begin to flourish. The Mount Savage Railroad was the first to build a rail line to Frostburg in 1852, and it connected to the B&O Railroad in Cumberland, as well as the C&O Canal. The Cumberland and Pennsylvania Railroad (C&P) took over the Mount Savage line in 1854, and expanded with the construction of a tunnel under Frostburg, and a rail line southward to Piedmont, West Virginia. This railroad and tunnel were used to transport coal between Frostburg and George's Creek.

Another major economic turn for Frostburg was the manufacture of fire brick beginning in 1864, utilizing the high-grade fire clays which are found in the area. One of the main businesses that formed was the Big Savage Fire Brick Company, still one of the main suppliers of fire bricks on the East Coast.

It’s railroad heritage is showcased with The Western Maryland Scenic Railroad that runs a loop that begins and ends in Cumberland at Canal Place. The line stops in Frostburg at the Frostburg Depot for ninety minutes so passengers may shop or eat lunch. Here the steam engine of the train is detached, rotated on the turntable and reattached to the other end of the train for its journey back. These maneuverings takes about fifteen minutes and attract a lot of attention from the passengers, most of whom are usually tourists. Surrounding the depot are The Great Allegheny Passage Hiking/Biking Trail, the Thrasher Carriage Museum and a couple of small restaurants and cafes. Approximately 40,000 people ride the scenic railroad each year.

The City of Frostburg is home to Frostburg State University (FSU), a public university within the University System of Maryland with an enrollment of 5,400 students. It employs approximately 900 people making it the largest employer in Frostburg.

Frostburg State University partnered with Allegany County to develop the infrastructure for the Allegany Business Center Technology Park, a 56-acre parcel of land located on the FSU campus. The Active Network is the Research Center’s main employer with over 400 people. Active Network is the technology leader in activity & participant management software with online registration and event management solutions.

Also located in the Allegany Business Center is the University’s Sustainable Energy Research Facility (SERF), which serves as an academic center for residential–quality sustainable energy technologies and research. The facility joins the University’s ongoing exploration of alternative forms of energy production, including the Wind-Solar Energy Program (WISE), to establish the University as an important regional center for energy issues and policy.

Frostburg, Maryland • Hotel Feasibility Study Page B-3

The Appalachian Laboratory is adjacent to Frostburg State University. Faculty at the Laboratory conduct research in aquatic ecology, landscape and watershed ecology, conservation biology and restoration ecology, behavioral and evolutionary ecology, and study both freshwater and terrestrial ecosystems of Maryland and other locations in the United States and the world. They employ approximately 60 people.

Frostburg State University has developed a strategic master plan that will expand the Universities offerings in the next ten years. The expected growth of the campus, along with the Allegany Business Center Technology Park adjacent to the University will change the face of Frostburg.

Frostburg enjoys a healthy tourism trade that includes visitors to the historic downtown area, the arts district, and the areas many festivals. Maryland is the first state to create art districts to help stimulate the economy. Two of the most popular tourism draws are the Western Maryland Scenic Railroad that stops in Frostburg and the 315 mile Great Allegheny Passage hiking and biking trail that links to the C&O Canal Towpath in Cumberland and creates a continuous, off-road trail experience 320 miles from Washington, DC to near Pittsburgh. The Passage goes through Frostburg on its way to Pittsburgh.

Frostburg has evolved from a mining town in the shadows of Cumberland to a city that has an economic base that includes diversified industry in its two business parks, a University town with Frostburg State University on the cusp of a major growth and a healthy tourism industry that attracts thousands each year.

Site and Area Evaluation (Section D)

The site for the proposed Cobblestone Hotel is ideally located at the northeast quadrant of the Interchange of Interstate 68 and Exit 33 in Frostburg. I-68 provides a major transportation route in western Maryland and northern West Virginia and also provides an alternative to the Pennsylvania Turnpike for westbound traffic from Washington, D.C. and Baltimore.

This exit is the gateway to Frostburg State University and the Allegany Business Center Technology Park. The exit is prime for development as a commercial hub. The 12 acre commercial site is expected to be developed with restaurants and additional commercial properties.

Frostburg, Maryland • Hotel Feasibility Study Page B-4

Supply and Demand Analysis (Section E)

Frostburg is served by two nationally franchised hotels that are located at exit 34 off I-68 in Frostburg; The Hampton Inn and the Days Inn & Suites. Allegany County has four nationally franchised hotels in LaVale, approximately nine miles east of Frostburg; The Comfort Inn & Suites, the Best Western, The Super 8 and the Econo Lodge, and two nationally franchised hotels in Cumberland, approximately 11 miles east of Frostburg; the Fairfield Inn & Suites and the Ramada. The closest nationally franchised hotel to the west of Frostburg is the Comfort Inn in Grantsville approximately 15 miles on I-68 in neighboring Garrett County.

The Market Set of rooms used for this study that include the Frostburg, LaVale and Cumberland area had a 52.3% occupancy in 2008 prior to the national recession that began to show a decline in Occupancy, Average Daily rate and Revenue Per Available Room in 2009. The occupancy dropped only 4% between 2009 and 2011, showing the relatively recession proof climate of the area. As the nation and the market area began to rebound from the recession in 2012, Occupancy, Average Daily Rate and Revenue Per Available Room were all on the rise in 2013. Occupancy for the Market Set in 2013 was 53.8%, which is a 3% increase of the pre -recession level, showing that the area is in a growth pattern.

Proposed Facilities and Services (Section F)

The Market Research for this Feasibility Study has revealed that there is sufficient demand for a 44-room upscale, mid-priced, limited-service hotel. The findings of the field research for this feasibility study have recommended a Cobblestone Hotel.

The Cobblestone Hotel Brand exemplifies a true mid-priced interior corridor hotel with guest room amenities expected by the traveling public in 2014. The hotel is reminiscent of a Hilton Hampton Inn or a Holiday Inn Express.

The two-story building can be adapted to three stories if required by site constraints. Each hotel incorporates local architecture and exterior features of décor. An oversized porte-co-chère welcomes each guest.

A gas flame natural stone fireplace and mantel establishes a warm, friendly welcome into the hotel lobby.

Breakfast Area

The self-served hot breakfast area has table seating for 12 and eight bar stools. Breakfast is served at 6:00 a.m. to 9:00 a.m. weekdays, and 7:00 a.m. to 10:00 a.m. on weekends, featuring premium Wolfgang Puck coffee, available 24 hours a day.

Frostburg, Maryland • Hotel Feasibility Study Page B-5

Social Bar

The eight bar stools are adjacent to the front desk offering, depending upon local ordinances:

• Full liquor, beer and wine, or• Beer and wine, or• Gourmet coffee and tea• Certain hotels also heat and sell frozen pizza.

Each Cobblestone Hotel location is subject to local ordinances and the volume of revenue and expenses are minimal, due to the size of the hotel. The proforma of this study did not factor the monetary amounts of this very well received guest amenity.

All Cobblestone Hotels feature a Retail Center and Guest Fitness Center/Laundry.

Hotel Guest Rooms

The guest room key is a Radio Frequency Identification (RFID) lock technology.

All guest rooms feature:

• Hospitality Center of refrigerator/freezer, microwave and coffee maker• Full open closet with ironing board, iron and luggage rack• Free-standing lamps and 42-inch High Definition television• Bedside convenience electric and USB outlets• Full-size bath, shower/tub and two framed dressing mirrors

Each hotel has one or two Extended Stay Suites with a full kitchen, parlor with sofa bed and a separate King bedroom. Certain hotels feature a Celebration King Room with a whirlpool tub for two.

Frostburg, Maryland • Hotel Feasibility Study Page B-6

The Hotel Feasibility Study for each Cobblestone Hotel delineates the hotel features that should be included to meet that community’s hotel market. These market-driven amenities are the basis of overall hotel profitability and may not be included in an individual property as they are selected on meeting the guests’ needs:

1. Flexibility in offering 30-50 guest rooms2. Electronic sliding front door3. Guest elevator to upper floors4. Indoor swimming pool5. Meeting room for 30 guests6. Additional extended-stay rooms7. Separate Conference Center building for 100-500 guests8. Sun Patio adjacent to the indoor pool with evening fire pit9. Guest room safe10. Exterior architectural design to the local market

The selection of the hotel market-driven features establishes a lower construction cost. However, the key to operating the 30-50 room hotel profit is the multi-tasking of all employees. A typical 30-50 room Cobblestone Hotel has only three full time and four to five part-time employees.

Cobblestone Hotel Frostburg, Maryland Proposed Room Mix

15 King Room 25 Queen/Queen Room

2 Celebration Suite 2 King Extended Stay Suite

44 Total Rooms Source: Interim Hospitality Consultants

The proposed hotel will also incorporate an elevator, indoor swimming pool, sun deck with evening fire pit and shuttle service to take guests to the Great Allegheny Passage trail approximately two miles from the hotel.

Projected Utilization of the Proposed Hotel (Section G)

Based upon the occupancy of the Cobblestone Hotel, the proposed hotel’s Total Market Penetration and underlying assumptions are summarized as follows:

Frostburg, Maryland • Hotel Feasibility Study Page B-7

1. Leisure: Due to the hotel being marketed as the number one quality product inthe mid-priced limited-service hotel classification, the hotel’s projectedpenetration of fair market share will range from 101.8% to 101.9% over the five-year projection period.

2. Commercial: The fair market share of commercial business is projected to rangefrom 101.8% to 101.9%. This can be achieved with a professional sales marketingeffort. If for any reason the tourist business declines through seasonality orenergy shortages, state and local commercial solicitation must be made to offsetthe decline.

3. Occupancy: The projected occupancy should be attainable if the property is builtas described, professionally operated in all facets, and business of the areacontinues to be positive. In years 3 to 5, additional competition may materializeto substantially reduce the projections.

These projections are based on estimates and assumptions developed in connection with the Feasibility Study. However, certain assumptions may not materialize, and unanticipated events and circumstances may occur; therefore, actual results achieved during the projection period may vary from the forecasts, and the variations may be material.

Proposed Cobblestone Hotel

Frostburg, Maryland

Year Occupancy Average

Daily Rate Room

Revenue 2017 54% $103.00 $895,700 2018 55% $106.00 $936,300 2019 56% $109.00 $980,300 2020 57% $112.00 $1,025,270 2021 58% $115.00 $1,074,140

Source: Interim Hospitality Consultants

Financial Analysis (Section H)

Projections of annual operating returns for the Cobblestone Hotel were prepared for five years, 2017 through 2021. The projections are based on the results of operations of comparable facilities and our conclusions regarding the environment in which the hotel would operate.

Frostburg, Maryland • Hotel Feasibility Study Page B-8

Proposed Cobblestone Hotel

Frostburg, Maryland

Year Total

Revenue Net Operating Income Before Debt Service

2017 $956,570 $389,850 40.8% 2018 $998,130 $417,690 41.8% 2019 $1,043,250 $444,180 42.6% 2020 $1,088,870 $482,280 44.3% 2021 $1,139,520 $507,230 44.5%

Source: Interim Hospitality Consultants

Cobblestone Hotels

Information on Cobblestone Hotels is presented on the following pages.