December 2013 I January 2014 I HotelManagement.net

THE HEADLINESJANUARY

Fiscal cliff sidestepped, but industry stillcautious about political environment

U.S. taxpayers breathed a sigh of relief when January's

fiscal cliff was avoided, and hoteliers were happy to

have some increased clarity in order to plan for the

future. However, worries over payroll tax increases,

higher capital gains taxes and the uncertain debt

ceiling continued to loom over hoteliers well into 2013,

particularly those interested in buying and selling

properties.

Wyndham, Choice, Aimbridge get inon Jameson Inn portfolio dealThe first significant portfolio deal of the year

involved the distressed Jameson Inn portfolio

of hotels. In December 2012 America's Best

Franchising purchased the brand name and 12

properties operating under the name from Argila

Jameson Brand in an all-cash deal. In early January,

owner Colony Capital tapped Aimbridge Hopsitality

to manage 103 former Jameson Inns comprising

the rest of the portfolio. Forty-nine of those became

Baymont Inn & Suites hotels, six became Howard

Johnsons and one became a Days Inn. Forty-two

others became Quality Inns, two became Comfort

Inns and two became Econo Lodges.

FEBRUARY

Hotels dive into ADA regulationsFeb. 1 marked the date for hotels with swimming pools

fitting certain size guidelines to comply with updated

Americans with Disabilities Act legislation requiring

pool lifts. The industry fought these updates for a year

and ended up winning an extension to the compliance

date. While some organizations continue to push back,

the pool lift issue is essentially a done deal, and hotel

owners and operators continue to educate themselves

on the best practices for choosing and installing lifts.

Katherine Lugar appointedpresident/CEO of AH&LA

In late February Katherine Lugar, former EVP of the

Retail Industry Leaders Assn., was named to succeed

longtime American Hotel & Lodging Assn. president and

CEO Joe Mclnerney. Lugar, who officially took the seat

in April, made government advocacy a primary mission.

In the first months of her leadership the AH&LA would

change its membership model and begin the transition

to boost its advocacy activities.

See 2013 headlines I Page 6

IHIF: Investmentopportunities growin Europe, Russiaand AfricaThe annual International

Hotel Investment Forum

in Berlin delved into

Europe's overall weak economic performance

but showcased economists bullish on investment

and development in the regions. In addition to

opportunities in the eurozone, show speakers

explored development in Russia and Africa.

INTERNATIONALHOTEL INVESTMENT FORUM

Berlin, Germany

December 2013 I January 2014 I HotelManagement.net

2013 headlinesContinued from page 4

The Hyatt House Minot in Minot, N.D. (shown here in

a rendering) opened in late May to cater to the local oil

and natural gas mining industry surrounding the B a ^

Formation.

North Dakota's hotel construction boomThe North Dakota Division of Tourism in March released

data showing 80 new hotels sprung up primarily around

the Bakken formation between 2002 and 2012, with

slightly more than 50 percent constructed since 2011.

The investment spotlight turned on oil- and natural gas-

rich regions in North Dakota, Texas and Pennsylvania,

among other states as fertile ground for ground-up hotel

development to house long-term oil field workers and

cater to the city growth surrounding the regions.

Cloud-based PMS gain momentum asindustry streamlines technology

In 2013 "cloud" became a major buzzword in the hotel

industry, referring to all sorts of data storage and

communication strategies. Property-management

systems proved to be advantageous systems to

migrate to the cloud. Vendors and hoteliers lauded the

advantages of cloud-based PMS, particularly to reduce

stress on a hotel's infrastructure.

Legendary hotel industry trailblazer,developer Hammons dies at 94

John Q. Hammons, hotel developer and

philanthropist, died in May at 94. Over the span

of a 52-year career in the lodging industry,

he developed 210 hotels in 40 states, having

"introduced the hospitality industry to signature-

style, full-service hotels featuring atrium lobbies,

expansive meeting and convention space,

large guestrooms, podium check-in stations

and complete business traveler amenities that

have become staples in a guest's exceptional

experience," according to a statement from John

Q. Hammons Hotels & Resorts. "Hammons was a

giant in the hospitality industry and was unwavering

in his commitment to exceptional quality and

service and to giving back to the community,"

said Jacqueline Dowdy, CEO of John 0 Hammons

Hotels & Resorts. "He was a great mentor and

friend and will be missed by all who came to know

him, but his legacy will live on forever."

Solid fundamentals push higher pricingBy April, the industry was experiencing continuing

improved occupancy, average daily rate and revenue

per available room, leading to improved hotel pricing,

according to brokers. Brokers said pricing definitely was

returning to peak levels and in some markets surpassing

it. Markets like New York, San Francisco, Miami and

Chicago showed strong pricing levels, and midscale

hotel products with branded loyalty programs showed

the most promise.

New York Hilton Midtown givesroomservice the red light

In late May Hilton Worldwide made news by announcing

it would end roomservice at its huge New York Hilton

Midtown in August. Instead, the brand opened an

outpost of its new grab-and-go Herb n' Kitchen F&B

See 2013 headlines I Page 8

HITEC: It's all about the CloudThis year's annual hotel technology show addressed all facets of cloud computing, answering questions like:

How can moving projects and systems to the cloud save money and create efficiency? What does it mean

for security? How much do operators really need to know about the cloud and what vendors should they

choose? The major takeaway: Hotel owners and operators migrate functions to the cloud so they don't have

to worry about technical minutiae, but the process still requires a good amount of planning.

H NEWS December 2013 I January 2014 I HotelManagement.net

2013 headlinesContinued from page 6

concept, saying the demand for roomservice at the

midtown Manhattan property just wasn't there, since the

majority of guests preferred to sample neighborhood

fare. The end result: Hotels around the world are taking

a closer look at how the service pencils out at their own

properties.

J.D. Power study shows overall guestsatisfaction hits seven-year high

ß After two years of consistent

declines in hotel guest

satisfaction, a report from

J.D. Power shows that guest

satisfaction is finally on the

rise. Not only is this the first

year where guest satisfaction is

posting gains, satisfaction also

reached its highest levels of the

past seven years, according

to J.D. Power's 2013 North America Hotel Guest

Satisfaction Index Study. Of a possible 1,000 points,

guest satisfaction is averaging 777 points, up 20 points

from 2012. This is the highest score on the satisfaction

index since 2006. The largest increases in satisfaction

were found in the areas of reservations, costs and fees

and check-in/check-out.

rr •

AUGUST

Comparing year-to-date for 2013

with the same period in 2012,the number of major sales douhied.

184Total volume of major

transactions

>300Projected total volume of

major transactions

Source: HVS/STE Hotel Valuation Index

Hotel valuations point upwardAccording to HVS International data, hotel values had

returned to their 2006 levels by summer, which helped

jump-start a significant boost in hotel transactions by

the middle of the year. Looking back to 2006, the value

that year of $99,000 per room dropped dramatically by

50 percent during the following three years to $56,000

per room, according to the HVS Hotel Valuation Index,

compiled in conjunction with STR. However, once

the industry recovery got under way in 2010, values

increased roughly 20 percent a year through 2012.

HVS and STR have projected that this vaiue growth

will continue at an average of 12 percent for each of

the next three years. "In 2016, valuations will probably

reach their stabilization point and start to plateau," said

HVS President and CEO Stephen Rushmore Jr. "As in

See 2013 headlines I Page 10

SEPTEiVIBER

Lodging Conference: It's a sellers' marketIt's a sellers' market, and by September's Lodging Conference,

hotel owners were taking advantage of that—or at least

preparing to—while operators continued to contribute to the

overall transactions climate with strong operating fundamentals.

The general feeling was optimistic, as industry executives

shared examples of pricing near peak, operating fundamentals

at or surpassing peak levels, and transaction volume on

pace. High demand for undervalued assets in a favorable

pricing environment among various types of buyers (whether

private equity investors, real estate investment trusts, foreign

investors or others) makes 2013 "a great opportunity to acquire,

rebrand and reiaunch properties," said Joel Eisemann, chief

development officer, the Americas, for IHG. In order to optimize

those opportunities, all parties—franchisor, owner, developer and

manager—are working to make deals pencil out while time is on

the industry's side.

FORSALE

m•fe|i

Midscale development hits a sweet spotThe midscale and upper-midscale segments got a lot of love from investors and developers in 2013, thanks to

manageable construction and labor costs and higher profit margins. According to PKF Hospitality Research,

2012 midscale hotels had the highest percentage gains in net operating income and total revenue.

cording to Lodging Econometrics, the upper-midscale and upscale segments accounted for 76 percent

of all hotel projects in the pipeline at year's end 2012. Hotel Management gathered a roundtable of midscale

franchisors in September to discuss the value propositions behind this hot segment.

Raj Trivedi, EVP franchise and

CDO at La Quinta Inns & Suites

(middle), says that while U.S.

brands historically have expanded

overseas, brands that are more

recognized In other parts of the

world may soon expand to the U.S.

He is flanked by Jessica Junker, CIO

of Cobblestone Hotels, right, and

Ron Burgett, EVP, lodging and brand

development. Red Lion Hotels.

December 2013 I January 2014 I HotelManagement.net

2013 headlinesContinued from page 8

any cycle, you reach a high point, which then starts to

moderate. All things being equal, the industry therefore

should have at least two to two-and-a-half more good

years."

Hilton Worldwide preps for IPOIn mid September, Blackstone Group made known its

intention to take Hilton Worldwide public through an

initial public offering of up to $1.25 billion. While trading

is expected to begin in early 2014, sources are reporting

Blackstone will retain ownership of a majority of voting

shares. The New York Times estimated the company's

value could approximate $30 billion before trading. Hilton

was taken private by Blackstone in 2007 during a $26.7

billion deal, counted among one of the largest leveraged

buyouts to take place before the 2008 financial crash.

OCTOBER

The changing face of group travelWhile 2013 was characterized by general optimism

across the board, one segment felt the pinch—group

business. Today's group performance troubles stem

from the recession-era shunning of perceived bloated,

corporate-subsidized pleasure trips in the name of

business. Over the past few years the overall group

segment of hotel business has struggled to return to

profitability, and while groups are coming back, most

agree they often look a little bit different than they did

before. On the demand side, STR's SVP of strategic

development Jan Freitag said that despite selling more

rooms than ever, "our data shows that indeed group

NOVEMBER

GMs earning more, spending more and getting more socialAccording to the results of this year's Hotel Management Voice of the GM survey, now is a good time to

be a hotel general manager. Salaries showed upward movement this year, as 58 percent of GMs reported

earning $60,000 or more per year. The majority of this year's respondents said their operating and purchasing

budgets were up this year, and they made the most of it. Technology was a big spending focus in 2013, most

notably in wireless infrastructure. But even more than technology, bedding and softgoods spending topped

GMs' lists this year. Finally, more and more GMs are getting involved in social media efforts to boost their

property's profile. The fastest-growing social channel in popularity? Pinterest.

Did you upgrade any of the following pieces of technology equipment in the last 12 months?

Í

Televisions

12.8%

Telephones

2.3%

Wireless infrastructureincluding adding bandwidth

40.0%

Property-managementsystems

5.5%

In-roomentertainment

2.8%

PTAC/HVAC

9.5%

Did not performany upgrades

22.0%

What piece of technology are you considering upgrading next?

Televisions

14.7%

Telephones

10.9%

Wireless infrastructureincluding adding bandwidth

22.3%

Property-managementsystems

15.3%

In-roomentertainment

10.1%

Lighting

16.0%

How long since yourproperty was lastrenovated?

Less than 1 year

1 to 3 years

When will the next renovationof your hotel occur?

Within 6 months

13 to 18 months4 to 5 years

6 to 10 years 18.7%

More than 10 years ago 5.0%

19 to 24 months

2 to 3 years

4 or more years

19.5%

Have you made anybrand-mandatedchanges/upgradesat your property inthe last 12 months?

Yes 53.2%No 46.8%

Source: All charts Hotel Management 2013 Voice of The GM Survey

Government shutdownputs squeeze on nationalpark lodgingsWhen the U.S. federal government

shut down from Oct. 1 to Oct.

16, many lodgings felt the loss,

particularly those within federally

funded national parks and those

catering to government travel. Park

lodging operators reported losses

in the millions per day during the

shutdown. Midway through the

shutdown some states stepped

up to strike deals with their federal

counterparts to get parks and

park operations open again on

the condition that they would be

reimbursed later. This move helped

some lodgings through the worst

part, but year-end operating results

will show the after-effects of this

legislative measure.

demand has not recovered." According to STR, total

group demand in 2013 so far is 2 percent lower than

it was in 2007. Despite the changing metrics, industry

experts agree that group business isn't going away—it

is changing and today's operator needs to recognize

that.

Recovery momentum picks up outsidemajor gateway marketsAccording to the September 2013 edition of Hotel

Horizons, PKF Hospitality Research forecast in the Oct.

21 issue of Hotel Management that properties located

outside the nation's major lodging markets will achieve

superior growth in pertormance in 2014. During the year,

PKF-HR predicts hotels operating in secondary, tertiary

and rural markets will enjoy an aggregate revenue per

available room gain of 8.5 percent in 2014. This is the

result of a 2.8-percent increase in occupancy and a

5.5-percent boost in average daily rate. While larger

markets will continue to lead the recovery, secondary

and tertiary markets will enjoy improved operating

fundamentals in 2014, according to PKF-HR.

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