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The Lodging Industry

The Lodging Industry. The Ritz-Carlton Naples, Florida. Industry Scope. 35,000 Hotels in U.S. 3.7 million Rooms in U.S. Annual Revenues of $95 Billion Profit of $19 Billion. Hotel Industry Profits Net Profit or Loss. $Billion. Changing Sentiment in the Capital Markets.

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The Lodging Industry

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  1. The Lodging Industry The Ritz-Carlton Naples, Florida

  2. Industry Scope • 35,000 Hotels in U.S. • 3.7 million Rooms in U.S. • Annual Revenues of $95 Billion • Profit of $19 Billion

  3. Hotel Industry ProfitsNet Profit or Loss $Billion

  4. Changing Sentiment in theCapital Markets • General anxiety over trouble abroad and their impact on the US economy. • Concerns about overbuilding. • General feeling that easy money has been made in the sector. • Growth and momentum investors have sold their positions and have not been replaced by value investors. • Capital market response has led to equilibrium.

  5. 1992 - 1998 Lodging Equity Offerings Source: NationsBanc Montgomery Securities

  6. Key Players • Management Company • e.g. Marriott, Sheraton, Hyatt • Franchisor • e.g. Holiday Inn, Best Western, Sheraton • Owner - numerous possibilities • REIT • Hotel Co. • Private Owner or Ownership Group • Joint Ventures

  7. Average Management & Franchise Fees

  8. Public C-Corporations

  9. Public REITs

  10. REIT Structures • Normal REIT • Paired Share • Stapled or Paper Clip REIT

  11. Private Hotel Companies • Hyatt • Destination Hotels & Resorts • KSL Resorts • Kimpton Group • Joie de Vivre Hospitality

  12. Owner Mgmt Co. Hotel Structure Example #1Hyatt Regency Kauai • Hyatt Hotels • Hyatt Regency • Kauai

  13. Owner Mgmt Co. Hotel Structure Example #2San Francisco Marriott Host Marriott REIT • Marriott International • San Francisco Marriott

  14. Structure Example #3Best Western Victorian Inn, Monterey Owner/Operator Mom & Pop Franchisor • Best Western Hotel • Best Western Victorian Inn

  15. Structure Example #4Los Angeles Marriott Owner Meristar Hospitality Corp (REIT) Mgmt Co. • MeriStar Hotel & Resorts Franchisor • Marriott Int’l. Hotel • Los Angeles Marriott

  16. Structure Example #5Ritz-Carlton, Philadelphia Owner Starwood Hotels Mgmt Co. • Ritz-Carlton/Marriott Int’l. Hotel • The Ritz-Carlton Philadelphia

  17. Ritz-Carlton Renaissance Hotels

  18. No Food & Beverage Midscale Economy Budget Suites/Extended Stay Food & Beverage Deluxe Luxury Upscale Midscale Resorts Convention Suites/Extended Stay LIMITED SERVICE FULL SERVICE

  19. Ritz-Carlton Deluxe • Four Seasons • Regent • Ritz-Carlton • The St. Regis Luxury Collection The Regent Beverly Wilshire

  20. Full ServiceLuxury • Hilton • Hotel Sofitel • Hyatt • Meridien • Inter-Continental • Nikko • Omni • Marriott Hotels • Westin • Renaissance • Sheraton • Wyndham Omni Mandalay Las Colinas, Texas

  21. Full ServiceUpscale • Doubletree • Crowne Plaza • Hotel Novotel • Radisson • Embassy Suites • Red Lion Double Tree San Diego -Mission Valley

  22. Full ServiceMidscale with F&B • Best Western • Courtyard • Sheraton Four Points • Holiday Inn • Holiday Inn Select • Howard Johnson • Ramada Howard Johnson’s, Vermont

  23. Full ServiceResort • Lots of recreational activities. • Trend towards mixing business (conferences) with pleasure. Ritz-Carlton Kapalua

  24. Full ServiceConference Center • Typically located near convention centers. • Large meeting and banquet areas. • High volume. San Antonio Marriott Rivercenter

  25. Full ServiceCasino • Cost: $1.6 Billion • 3005 Rooms @ $185 ADR. • $300 Million Art Collection. • 15 Restaurants. • Estimated EBITDA of $309 million on $950 million in revenue. Bellagio, Las Vegas Mirage Resorts

  26. Limited ServiceMid Scale without F&B • Comfort Inn • Hampton Inn • Hilton Garden Inn • Holiday Inn Express • La Quinta Comfort Inn, West Virginia

  27. Limited ServiceEconomy • Days Inn • Fairfield Inn • Budgetel • Red Roof Inn • Travelodge Red Roof Inn, Ohio

  28. Limited ServiceBudget • Motel 6 • Budget Host Inn • Budget Inn • Econo Lodge • Great Western • Super 8 • Knights Inn Motel 6 Prototype

  29. Extended StayUpper Tier • Hawthorn Suites • Homewood Suites • Residence Inn • Candlewood Suites Comfort Inn, West Virginia

  30. Hotel Census As of 9/98

  31. Hotel Lingo • Average Daily Rate (ADR) =Total Room Revenue / # of Rooms x 365 • Occupancy % =Total Room Nights / # of Rooms x 365 • Revenue Per Available Room (RevPAR) =ADR x Occupancy % • EBITDA =Earnings before Interest, Taxes, Depreciation and Amortization

  32. Top Markets # of Rooms

  33. Statistics of Top 15 MSA’s

  34. Hotel Organization Chart General Manager General Manager

  35. The Income Statement

  36. Hotel Revenues

  37. Trends in Revenue

  38. Hotel Expenses

  39. Payroll Costs Source: PKF Hotel Industry Trends 1998

  40. Profitability

  41. Hotel Occupancy Rate

  42. Occupancy % by Segment Source: Bear, Stearns & Co. 1999

  43. ADR & RevPAR by Segment Source: Bear, Stearns & Co. 1999

  44. Cap Rates Source: PKF Consulting

  45. Spread between 10 Year Treasury & Cap Rates Source: PKF Consulting

  46. Hotel ConstructionContracts Awarded - F.W. Dodge Million SF

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