The Lodging Industry

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The Lodging Industry
The Ritz-Carlton Naples, Florida
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Industry Scope

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

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Hotel Industry ProfitsNet Profit or Loss
Billion
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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  positions and have not been replaced by value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.

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1992 - 1998 Lodging Equity Offerings
Source NationsBanc Montgomery Securities
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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

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Average Management Franchise Fees
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Public C-Corporations
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Public REITs
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REIT Structures

• Normal REIT
• Paired Share
• Stapled or Paper Clip REIT

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Private Hotel Companies

• Hyatt
• Destination Hotels Resorts
• KSL Resorts
• Kimpton Group
• Joie de Vivre Hospitality

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Structure Example 1 Hyatt Regency Kauai
Hyatt Hotels
Hyatt Regency Kauai
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Structure Example 2 San Francisco Marriott
Host Marriott REIT
Marriott International
San Francisco Marriott
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Structure Example 3 Best Western Victorian Inn,
Monterey
Owner/Operator
Mom Pop
Franchisor
Best Western
Hotel
Best Western Victorian Inn
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Structure Example 4 Los Angeles Marriott
Owner
Meristar Hospitality Corp (REIT)
Mgmt Co.
MeriStar Hotel Resorts
Franchisor
Marriott Intl.
Hotel
Los Angeles Marriott
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Structure Example 5 Ritz-Carlton, Philadelphia
Owner
Starwood Hotels
Mgmt Co.
Ritz-Carlton/Marriott Intl.
Hotel
The Ritz-Carlton Philadelphia
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LIMITED SERVICE
FULL SERVICE

• No Food Beverage
• Midscale
• Economy
• Budget
• Suites/Extended Stay

• Food Beverage
• Deluxe
• Luxury
• Upscale
• Midscale
• Resorts
• Convention
• Suites/Extended Stay

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Deluxe

• Four Seasons
• Regent
• Ritz-Carlton
• The St. Regis Luxury Collection

The Regent Beverly Wilshire
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Full Service Luxury

• Hilton
• Hotel Sofitel
• Hyatt
• Meridien
• Inter-Continental
• Nikko
• Omni
• Marriott Hotels
• Westin
• Renaissance
• Sheraton
• Wyndham

Omni Mandalay Las Colinas, Texas
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Full Service Upscale

• Doubletree
• Crowne Plaza
• Hotel Novotel
• Radisson
• Embassy Suites
• Red Lion

Double Tree San Diego -Mission Valley
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Full Service Midscale with FB

• Best Western
• Courtyard
• Sheraton Four Points
• Holiday Inn
• Holiday Inn Select
• Howard Johnson
• Ramada

Howard Johnsons, Vermont
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Full Service Resort

• Lots of recreational activities.
• Trend towards mixing business (conferences) with
  pleasure.

Ritz-Carlton Kapalua
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Full Service Conference Center

• Typically located near convention centers.
• Large meeting and banquet areas.
• High volume.

San Antonio Marriott Rivercenter
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Full Service Casino

• Cost 1.6 Billion
• 3005 Rooms _at_ 185 ADR.
• 300 Million Art Collection.
• 15 Restaurants.
• Estimated EBITDA of 309 million on 950 million
  in revenue.
  

Bellagio, Las Vegas Mirage Resorts
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Limited Service Mid Scale without FB

• Comfort Inn
• Hampton Inn
• Hilton Garden Inn
• Holiday Inn Express
• La Quinta

Comfort Inn, West Virginia
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Limited Service Economy

• Days Inn
• Fairfield Inn
• Budgetel
• Red Roof Inn
• Travelodge

Red Roof Inn, Ohio
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Limited Service Budget

• Motel 6
• Budget Host Inn
• Budget Inn
• Econo Lodge
• Great Western
• Super 8
• Knights Inn

Motel 6 Prototype
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Extended Stay Upper Tier

• Hawthorn Suites
• Homewood Suites
• Residence Inn
• Candlewood Suites

Comfort Inn, West Virginia
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Hotel Census
As of 9/98
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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
  

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Top Markets of Rooms
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Statistics of Top 15 MSAs
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Hotel Organization Chart
General Manager
General Manager
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The Income Statement
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Hotel Revenues
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Trends in Revenue
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Hotel Expenses
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Payroll Costs
Source PKF Hotel Industry Trends 1998
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Profitability
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Hotel Occupancy Rate
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Occupancy by Segment
Source Bear, Stearns Co. 1999
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ADR RevPAR by Segment
Source Bear, Stearns Co. 1999
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Cap Rates
Source PKF Consulting
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Spread between 10 Year Treasury Cap Rates
Source PKF Consulting
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Hotel ConstructionContracts Awarded - F.W. Dodge
Million SF
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