financial feasibility study · performance of new and older properties, with newer hotel inventory...

P.O. Box 120055 ♦ 134 Laurel Heights ♦ San Antonio, Texas 78212 ♦ (210) 734.3434 ♦ SourceStrategies.org

10/24/2019

FINANCIAL FEASIBILITY STUDY

Limited Service Hotel

Wood County, Texas

P.O. Box 120055 ♦ 134 Laurel Heights ♦ San Antonio, Texas 78212 ♦ (210) 734.3434 ♦ www.SourceStrategies.org

October 24, 2019

FINANCIAL FEASIBILITY STUDY:

Limited Service Hotel Wood County, Texas

This study has been prepared to determine the financial feasibility of building and operating a

high quality limited service branded hotel in one of several potential recommended areas in

Wood County, Texas. Four potential locations in the county were examined for the purposes of

this report, with the details of the locations discussed in the Derivation Section (page 31) of this

study. The property is theoretically expected to open as a 65 unit limited service hotel in

January of 2021, though this opening date is not fixed. The hotel will be a needed addition to

the current lodging stock in the area, offering a product that is under-represented not only in

Wood County, but in the wider market area.

Project quality is planned to meet the physical and operating standards of a major high quality

national limited service hotel brand. This study is dependent upon the hotel operating as a high

quality limited service brand and meeting the requirements of a successful hotel project in this

local market area, and maintaining the operation in good standing with the franchisor through

its first ten years. The current level of quality and acceptance by hotel consumers for these

brands in Texas has been assumed in developing this financial feasibility study. Operating

costs are set at the level of similar limited service hotel results.

KEY FINDING: Developing and opening a quality limited service branded hotel in Wood

County should generate an unleveraged, pre-tax return on total invested capital exceeding 15%,

with a return on equity approaching 38% (DCF). This return on invested capital assumes that

improvements are completed at the estimated cost of $72,308 per unit, plus a land value of

$400,000. Project details follow:

2

Total Investment Land Value $ 400,000 Improvements Budget $ 4,700,000 @ $72,308 per key1

Total Investment $ 5,100,000 Pre-Tax Project Return 15.11%2 Pre-Tax Return on Equity 37.53%3

With a January 2021 opening, cash flow market projections for the subject Wood County hotel

before taxes and after renovation reserves, should be available for debt service, income tax and

dividends as follows:

Project Summary

Occupancy

Percent Average $

Rate* $ REVPAR Total

Revenue Cash Flow**

Year I 63.9% $72.84 $46.51 $1,153,128 $514,756

Year II 71.2% $76.48 $54.48 $1,350,807 $623,336

Year III 72.7% $79.54 $57.84 $1,434,026 $670,554

Year IV 72.3% $80.34 $58.12 $1,441,067 $664,985

Year V 72.1% $82.66 $59.58 $1,477,094 $681,653

Year VI 71.0% $84.31 $59.87 $1,484,347 $678,982

Year VII 70.7% $85.15 $60.16 $1,491,635 $672,842

Year VIII 70.3% $86.00 $60.46 $1,498,959 $666,441

Year IX 69.9% $86.86 $60.76 $1,506,319 $659,772

Year X 69.7% $87.73 $61.13 $1,515,571 $8,500,014 ***

*Year I ADR equates to approximately $69 in current market dollars. **Before Income Tax & Financing expense, but reflecting $878,436 in reserves for capital expenditures/property renovation ($11,871 per unit). ***Assumes valuing property at Year 10 cash flow at a 9% return-to-buyer, less 4% expense of sale, plus year 10 cash flow.

1. Developer estimates of land price and of development costs. 2. After reserve for on-going renovations and management fee. 3. Assuming 30% equity and 70% debt at a 5.5% pre-tax debt cost; calculated weighted average.

This study incorporates the recent fluctuations in the Texas hotel market, the rebound from

the 2008 national recession, and the continued impact of the Permian Basin and the Eagle

Ford Shale Oil and Gas developments. In our Market section, we highlight the historical hotel

performance in Texas, noting the effect of past recessions. Consequently, our market

projections consider how the lodging industry reacts in times of economic downturn and in

normal times. See the Market section for further details.

3

The above cash flow, assuming a Year 10 sale, has been discounted at the rate of 15.11% to a

present value of $5,099,643, essentially equaling the total budgeted investment of $5,100,000. This

15.11% is the project's unleveraged return, provided capital costs are kept at the estimated level.

Please note that if financial incentives were given by the city, this return would be even higher. An

estimated capital budget for construction and FF&E of $72,308 per unit 'turn-key' costs is

reasonable for a hotel of this size and quality, in our experience. If capital outlays vary from the

current budget for this project, returns will vary accordingly. The following table and graph illustrates

the linear nature of financial returns as capital requirements escalate or decline and revenue streams

remain stable.

Effect on Returns if Capital Investment Changes

Improvements Budget

Land Cost Total

Investment

Discounted Cash Flow

Variance Per Unit Total Total

Project On Equity

(85%) $61,462 $3,995,000 $400,000 $4,395,000 17.79% 46.47%

(90%) $65,077 $4,230,000 $400,000 $4,630,000 16.83% 43.27%

(95%) $68,692 $4,465,000 $400,000 $4,865,000 15.94% 40.30%

BUDGET $72,308 $4,700,000 $400,000 $5,100,000 15.11% 37.53%

(105%) $75,923 $4,935,000 $400,000 $5,335,000 14.33% 34.93%

(110%) $79,538 $5,170,000 $400,000 $5,570,000 13.60% 32.50%

(115%) $83,154 $5,405,000 $400,000 $5,805,000 12.91% 30.20%

$4,395 $4,630 $4,865 $5,100 $5,335 $5,570 $5,805

Total DCF Return 17.79% 16.83% 15.94% 15.11% 14.33% 13.60% 12.91%

Return on Equity 46.47% 43.27% 40.30% 37.53% 34.93% 32.50% 30.20%

0%

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Capital Budget ($000s)

DCF Project ReturnsIf Capital Investment Varies

Budget

4

The first stabilized year (Year III) shows the following results:

Year III (2023)

Room Revenues $1,372,274 Total Revenues $1,434,026 Income Before Fixed Costs $822,470 57.4% Net Income Before Tax & Fin. $628,912 43.9%

Cash Flow Before Financing $670,554 46.8% *

Occupancy % 72.7% Average Daily Rate $79.54 $ REVPAR $57.84 Per Occupied Room Cost $35.45 *Before deductions of loan principal and interest, before income tax deductions, and before any equity payout.

SUMMARY OF CRITICAL ASSUMPTIONS: Assumptions are summarized as follows (see

page 11 for full Market History and Projection study, and page 7 for Methodology):

1. An analysis of the Wood County Area Market4 reflect a mixture of mostly older and some

new hotels. Typically, a new hotel will have an inordinate advantage over older products. The

average hotel room in the local market is 20 years old, past the peak performing first ten years of the

life cycle of the typical hotel building, which becomes stylistically and structurally obsolete after 30+

years. This 30 year life cycle is significantly longer for high-rise/concrete structures. Out of 1,700

total rooms in the local market, 356, or 20% have been built since 2009, while 718, or 41% were

opened before 1999 (at least 20 years old). There is typically a wide and dramatic gap between the

performance of new and older properties, with newer hotel inventory easily outperforming older

hotels that are well past their peak performing years.

4. Cities of Emory, Mineola, Alba, Quitman, Yantis, Sulphur Springs, Greenville, Quinlan, Gilmer, Gladewater, Lindale.

The critical statistic used in this study is REVPAR. REVPAR means revenue per

available room per day, and reflects the average daily room revenue yield of every room

in a property or market (not just occupied rooms). REVPAR is generated by multiplying

occupancy times rate (i.e. REVPAR = % occupancy times average daily rate), and is the

most effective and important tool in the evaluation of the success of any lodging concern.

5

We are comfortable with market projections, and expect market demand growth levels in the

area to rise to a more typical level over the next nine years. With new supply being added

slowly, occupancy remains near the expected equilibrium level of 59% during the projection.

REVPAR is projected to grow at a 2.5% annual rate in the next five years (versus 3.5% annual

growth in the past nine years). Detailed local market history and projections commence on page 18.

Wood County Area Market

Year Occupancy

% $

REVPAR

2010 47.8% $28.43

2012 54.3% $32.18

2014 59.0% $36.25

2016 60.9% $38.87

2018 58.8% $39.51

Projected

2020 58.8% $41.23

2022 58.8% $43.32

2027 58.8% $49.01

Historical Annual Compound Growth Rates

Past 9 Year Average 2.2% 3.5%

Past 4 Year Average -0.1% 1.8%

Past 1 Year Average -0.9% 1.0%

Future Annual Compound Growth Rates

Next 9 Years 0.0% 2.5%

Next 5 Years 0.0% 2.5%

*Calendar Year basis.

2. Versus the local market's REVPAR dollar projections, the REVPAR index of the proposed

Limited Service Hotel ramps upwards, peaking at 131% of the market average REVPAR in

Year III. Thereafter, the REVPAR Index declines due to the normal aging cycle. Detailed REVPAR

derivation and subsequent projections commence on page 28.

6

Wood County Hotel Derivation

Data in 2019 $'s Year I Year II Year III

Base: Name & Quality 1.17 1.17 1.17

x Brand Age Adjustment 1.12 1.12 1.12

x Site Value Adjustment 0.90 0.90 0.90

x Size Adjustment 0.95 0.95 0.95

x Other Adjustments 1.00 1.00 1.00

x Newness Adjustment 0.98 1.12 1.16

= Performance Factor 111% 126% 131%

x Market REVPAR $39.58 $39.58 $39.58

= Projected Performance $43.79 $50.05 $51.84

The projected REVPAR performance of the subject hotel, versus the local area market average

REVPAR reflects the fact that this hotel is expected to perform at a level above the market

average in its peak years. The hotel's REVPAR index starts in Year I at 111% of the market, rises to

a peak of 131% of the market in Year III, then slowly loses ground versus the local area's typical

inflationary growth:

3. Expenses are set at the level of similar limited service hotel products from Host Almanac by

STR operating statistics, inflated at 3% per annum. See page 41 for details.

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REVPAR History & Projection Wood County Area vs Wood County Hotel

Wood County Area Wood County Hotel

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7

METHODOLOGY

To develop Pro Forma financial results for the proposed project, two major sets of assumptions

have been developed. First, the future market's average REVPAR is forecast on a reasonable

and economically-sound basis; the performance of the project is dependent on this market forecast

and varies from it only due to specific variables of the project. Second, the specific variables of the

project are combined and expressed as an index for each quarter of the forecast, an index that

is used to adjust the overall market performance to the specific project.

MARKET REVPAR FORECAST

A very large 13 County Area hotel market5 is examined historically and projected. The key in the

market projections is to stabilize the wider area market in the future at a sustainable, average

equilibrium for occupancy, a level which we have determined to be approximately 58% in rural

markets of this type. This occupancy level is highly relevant as a long-term, equilibrium occupancy, a

level where investors are more neutral about adding new hotel rooms to the market and an average

that will reoccur over long periods of time (e.g. 20 years).

After the wider market area is forecast, the performance of the local Wood County Area Market6 is

examined historically and projected. The key in the market projection is to stabilize this large market

in the future at a sustainable, average equilibrium for occupancy, a level which we have determined

to be approximately 59% in markets of this type. Over the 20 years from 1987 through 2007,

according to the Source Strategies, Inc. database, hotel occupancy in Texas has averaged 60%, and

62% in larger Texas metros. The REVPAR projection of the local market is then the pro forma

market environment of the project. This project will vary from the norm for only project-specific

differences, and then only relatively.

5 Counties of Wood, Rains, Hopkins, Franklin, Camp, Upshur, Smith, Van Zandt, Titus, Gregg, Smith, Hunt, Kaufman. 6 Cities of Emory, Mineola, Alba, Quitman, Yantis, Sulphur Springs, Greenville, Quinlan, Gilmer, Gladewater, Lindale.

8

PROJECT VARIABLES:

DEVELOPMENT OF PROJECT REVPAR INDICES

The first variable from the averages to be developed has to do with the fact that each product

type and brand have a typical and identifiable influence on REVPAR performance. This

variable is based on its consumer acceptance, its product definition, its level of quality, the price it

can command from the consumer, its marketing efforts, and other factors. The value of the brand and

product type is termed the Base Value.

The second adjustment used on the dollar value of the local area's REVPAR is the Brand Age

Adjustment. This is made to reflect the average age of similarly branded hotels on the subject

property's performance versus the market average. Typically, the opening dates of the same branded

hotels as the subject are examined in order to quantify this factor.

The third step to developing a project REVPAR index is to determine an adjustment based on

any deviation from a normal project. If the number of proposed rooms in the project is

significantly above or below the average for that brand, its performance will also vary from the norm.

A lower than average number of rooms should increase per room performance and vice versa. This is

due to the fact that consumer demand for a single brand is demand at the project's site, regardless of

the number of rooms offered by the hotel.

An empirical proof of this evaluation of Size is the major increase in volume enjoyed by numerous

hotels throughout Texas that have split into two branded operations, using two different names. For

example, the Hilton Hotel Towers Austin added $500,000 annually to revenues by splitting off its

adjacent, ground-based rooms as a Super 8 Motel. By creating another brand, the Super 8 began to

fill demand for budget properties in the immediate area, while the Hilton Towers kept its current

upscale customer base. Hence, smaller room counts than average generate higher occupancy than

average. Further proof is the correlation between project size and occupancy: the smaller the

property, the higher the occupancy.7

7. Study detailed in size factor derivation in analysis section.

9

Lastly, an 'Other' segment adjustment may be made if the proposed product type is under- or

over- supplied in the local market, or for other factors. For example, a product type commanding

10% of the Texas market - but zero locally - would command a higher daily rate or occupancy locally

because it is a relatively scarce commodity. Further, a subject product far exceeds the product quality

of the brand average, then a positive adjustment should be made. While there is usually a reasonably

consistent pattern of site factors for the brand properties selected, these factors often vary because of

unique situations: 1) visibility and access differences between nearby sites; 2) any large variation

from the norm in the usual number of rooms for a chain; 3) a nearby property's quality, the quality of

management, last renovation; 4) any major new commercial development nearby. Adjustments will

be made for these differences based on industry experience.

Then the REVPAR potential of the subject Site is developed in two ways. First, all other property

factors except site are calculated for the competitors, the site factor then being used to bring the

calculated REVPAR into a match with actual REVPAR performance. In other words, combining all

factors including a 'plugged' site factor results in the theoretical REVPAR projection equaling actual

REVPAR for each property studied, revealing the mathematical value of individual hotel sites.

With the development of the adjustments for Brand/Product type, overall Brand Age, Segment,

project Size, and Site, a revenue projection for the proposed operation begins to take form by

combining these factors into a combined index that is applied to the overall market-wide

REVPAR projection, resulting in the forecast of the project's dollar REVPAR. However, this

combined index changes as the project ages. Consequently, the physical Age of the individual

project impacts this REVPAR index. A +16% increase factor is applied to the combined

REVPAR index in the property’s peak performing Year III. A first-year start-up adjustment of -

2% and a second year adjustment of +12%, is followed by this +16% adjustment for Year III. This

factor reflects the major revenue-generating power of new versus old properties.

In Years 4 through 10 the REVPAR index is diminished at a rate of 1.96% per annum in order to

reflect aging and the normal life-cycle of a hotel. In Years 11-15, the aging impact accelerates

slightly to 2.2%. After year 15, a hotel’s aging decline slows to 1% for the later years of the hotel’s

life-cycle. In the event of a major property renovation, or conversion of an existing building for hotel

use. this factor can be adjusted as appropriate for the level of updates undertaken.

10

This pattern of declining performance with property aging is based on major studies of economic life-

cycle patterns. Our most recent study, an extensive review of aging for mid-market hotel properties,

was completed in March of 2019 and published in our quarterly newsletter, the Hotel Brand Report,

Issue #137. The study outlines the above described aging curve. This latest study’s results roughly

parallel previous aging studies we have conducted over the years, but does show a notably faster start

up period, which we attribute to increased visibility for new hotels through a prominent internet

presence, and the growing prominence of online hotel booking sites. Source Strategies aging studies

conducted over the years align with aging analysis conducted by large hotel corporations that we

have reviewed. Our latest Aging Study is attached as an Exhibit.

Combining all of these factors - Product Type, Brand Age, Site, Size, Segment (other), and

Newness (Age) - results in the REVPAR stream for the project. A REVPAR stream from

which room revenues, estimated rate, occupancy and room-nights sold are derived. At this

point, the investment and operational costs can be laid against the revenue line to generate pro

forma financial performance and discounted cash flow analysis.

The calculation of the statistic of Operating Costs Per Occupied Room (before fixed/capital costs are

deducted) is typically the important cost to examine carefully because it is highly stable and

predictable, regardless of occupancy and rate. The Host Almanac 2018: For the year 2017 by STR

with dollar costs inflated, and Source Strategies, Inc. financial models are the source of operating cost

statistics.

From national average occupancies, costs are categorized as fixed, semi-variable or variable,

resulting in the highly-leveraged profit performance characteristic of lodging products, depending on

occupancy and REVPAR performance (i.e. variable costs increase proportionately with higher

occupancy levels while fixed costs do not). Furthermore, with a capital expenditures profile provided

by the International Society of Hospitality Consultants' CapEx, A Study of Capital Expenditures in

the U.S. Hotel Industry, a method has been applied to determine an appropriate amount of renovation

reserves to ensure that the property is maintained at the franchisor's required level. All study-area

individual hotel/motel five year histories are included in the study, using the Source Strategies, Inc.

database of all Texas hotels and motels (includes each hotel’s brand, room count, room revenue,

occupancy, rate and REVPAR). The methodology of this database is attached as an exhibit.

11

MARKET REVPAR HISTORY: STATE OF TEXAS

1. Since 1980, the State of Texas has experienced generally strong growth, with occasional

periods of economic downturn, one of the worst being the recession that began in 2009. In 1982-

1983 the Texas market suffered through six consecutive quarters of major demand declines, with a

sharp plummet of 24% in the first quarter of 1983. Two years later, every quarter in 1986 posted

significant demand decreases of 19% or more.

Before the recession

starting in 2009, the most

recent period of decline

was in 2001, during which

the onset of a recession

was coupled, and

accelerated by, the terrorist

attacks of 9/11. Beginning

in the Third quarter of

2001, seven of the next

eight quarters showed

declining room demand,

and it was not until the first quarter of 2004 that healthy levels of growth resumed.

We have considered these historical market patterns in formulating our projections for all

markets. Though there are differences in each economic downturn, and areas across the state are

impacted differently depending on factors driving demand – particularly Oil & Gas development and

production - there is much that can be discerned from historical positive and negative trending

performances.

Historical quarterly periods of economic decline and recession are highlighted in the

Texas market data that follows overleaf, while more recent history shows the positive results of an

improving economy in Texas and the impacts of shale oil extraction:

12

1. Room-nights sold (derived from est. rate and actual revenues) 2. Occupancy nights sold divided by nights available for sale. 3. Avg. price for room-nights sold; Directories, Surveys, & experience. 4. $ Revenue per available room per day (room sales per day)

Supply Real ADR $ Rev.

901 2,128 214,051 11,805 $553,320 61.3 $46.87 $28.72 0 6.8 2.7 9.7

902 2,309 218,422 12,929 $621,759 65.0 $48.09 $31.28 1.1 5.6 4 9.8

903 2,486 222,992 12,865 $633,123 62.7 $49.21 $30.86 1.8 -2.3 7.4 4.9

904 2,194 215,429 10,640 $516,473 53.7 $48.54 $26.06 0.3 -2.9 6.1 3

911 2,284 216,154 11,566 $565,085 59.5 $48.86 $29.05 1.0 -2.0 4.2 2.1

912 2,448 219,862 12,773 $649,194 63.8 $50.82 $32.45 0.7 -1.2 5.7 4.4

913 2,488 220,995 13,246 $664,304 65.1 $50.15 $32.67 -0.9 3.0 1.9 4.9

914 2,286 217,641 11,080 $548,844 55.3 $49.53 $27.41 1.0 4.1 2.0 6.3

921 2,307 218,028 11,594 $590,250 59.1 $50.91 $30.08 0.9 0.2 4.2 4.5

922 2,484 221,953 12,745 $669,602 63.1 $52.54 $33.15 1.0 -0.2 3.4 3.1

923 2,544 223,066 13,701 $715,176 66.8 $52.20 $34.85 0.9 3.4 4.1 7.7

924 2,355 219,610 11,523 $591,250 57.0 $51.31 $29.26 0.9 4.0 3.6 7.7

931 2,358 219,849 11,895 $625,741 60.1 $52.60 $31.62 0.8 2.6 3.3 6.0

932 2,520 223,200 12,949 $706,243 63.8 $54.54 $34.77 0.6 1.6 3.8 5.5

933 2,582 225,251 14,012 $753,292 67.6 $53.76 $36.35 1.0 2.3 3.0 5.3

934 2,378 221,198 11,677 $616,985 57.4 $52.84 $30.32 0.7 1.3 3.0 4.4

941 2,410 222,093 12,409 $673,515 62.1 $54.27 $33.70 1.0 4.3 3.2 7.6

942 2,589 227,029 13,608 $767,336 65.9 $56.39 $37.14 1.7 5.1 3.4 8.7

943 2,660 229,750 13,943 $787,263 66.0 $56.46 $37.25 2.0 -0.5 5.0 4.5

944 2,470 225,865 12,265 $674,587 59.0 $55.00 $32.46 2.1 5.0 4.1 9.3

951 2,452 224,390 12,637 $740,927 62.6 $58.63 $36.69 1.0 1.8 8.0 10.0

952 2,599 228,476 13,653 $813,137 65.7 $59.56 $39.11 0.6 0.3 5.6 6.0

953 2,694 233,983 13,977 $828,759 64.9 $59.30 $38.50 1.8 0.2 5.0 5.3

954 2,597 231,786 12,357 $719,922 57.9 $58.26 $33.76 2.6 0.7 5.9 6.7

961 2,589 232,887 13,336 $827,453 63.6 $62.04 $39.48 3.8 5.5 5.8 11.7

962 2,730 238,395 14,015 $872,560 64.6 $62.26 $40.22 4.3 2.7 4.5 7.3

963 2,727 242,137 14,060 $874,796 63.1 $62.22 $39.27 3.5 0.6 4.9 5.6

964 2,660 241,218 12,583 $774,445 56.7 $61.55 $34.90 4.1 1.8 5.6 7.6

971 2,687 244,628 13,271 $854,727 60.3 $64.41 $38.82 5.0 -0.5 3.8 3.3

972 2,767 249,653 14,598 $956,235 64.3 $65.51 $42.09 4.7 4.2 5.2 9.6

973 2,831 253,789 14,778 $960,539 63.3 $65.00 $41.14 4.8 5.1 4.5 9.8

974 2,794 256,641 13,525 $874,113 57.3 $64.63 $37.02 6.4 7.5 5.0 12.9

981 2,839 257,550 14,425 $967,289 62.2 $67.06 $41.73 5.3 8.7 4.1 13.2

982 2,922 262,741 15,514 $1,059,745 64.9 $68.31 $44.32 5.2 6.3 4.3 10.8

983 3,011 270,046 16,048 $1,058,541 64.6 $65.96 $42.61 6.4 8.6 1.5 10.2

984 2,970 270,745 14,463 $944,329 58.1 $65.29 $37.91 5.5 6.9 1.0 8.0

991 3,037 276,858 15,264 $1,034,222 61.3 $67.76 $41.51 7.5 5.8 1.0 6.9

992 3,118 282,091 16,226 $1,134,795 63.2 $69.94 $44.21 7.4 4.6 2.4 7.1

993 3,209 289,244 16,682 $1,114,859 62.7 $66.83 $41.90 7.1 4.0 1.3 5.3

994 3,196 288,416 14,650 $974,591 55.2 $66.53 $36.73 6.5 1.3 1.9 3.2

CGR % Past 9 yrs 3.0% 3.0% 7.0% 0.0% 3.9% 3.9%

Past 4 yrs 5.5% 4.5% 8.2% -0.9% 3.6% 2.6%

Past 2 yrs 6.4% 5.8% 8.1% -0.6% 2.2% 1.6%

Past 1 yr 7.1% 3.9% 5.7% -3.0% 1.7% -1.3%

Hotel Market: State of Texas 1990 - 1999

Year & Qtr

# Htls &

Mtls # Rooms

Room-Nights

Sold 000's (1)

Total Room

Revenues

$ 000's

% Growth Vs. Prior Yr

% Occ. (2) $ Rate (3) $ RPAR (4)

13



001 3,211 288,840 15,995 $1,121,091 61.5 $70.09 $43.13 4.3 4.8 3.4 8.4

002 3,337 294,411 17,078 $1,236,477 63.7 $72.40 $46.15 4.4 5.3 3.5 9

003 3,369 299,065 17,169 $1,217,493 62.4 $70.91 $44.25 3.4 2.9 6.1 9.2

004 3,342 297,980 15,285 $1,068,043 55.8 $69.87 $38.96 3.3 4.3 5 9.6

011 3,384 300,781 16,560 $1,190,233 61.2 $71.87 $43.97 4.1 3.5 2.5 6.2

012 3,507 304,382 17,296 $1,241,862 62.4 $71.80 $44.83 3.4 1.3 -0.8 0.4

013 3,559 309,066 16,812 $1,164,068 59.1 $69.24 $40.94 3.3 -2.1 -2.4 -4.4

014 3,502 306,150 14,493 $960,198 51.5 $66.25 $34.09 2.7 -5.2 -5.2 -10.1

021 3,544 307,947 15,879 $1,110,468 57.3 $69.94 $40.07 2.4 -4.1 -2.7 -6.7

022 3,652 312,349 17,053 $1,226,509 60.0 $71.92 $43.15 2.6 -1.4 0.2 -1.2

023 3,674 316,462 16,544 $1,158,085 56.8 $70.00 $39.78 2.4 -1.6 1.1 -0.5

024 3,609 312,346 14,679 $985,295 51.1 $67.13 $34.29 2.0 1.3 1.3 2.6

031 3,636 314,854 15,307 $1,055,883 54.0 $68.98 $37.26 2.2 -3.6 -1.4 -4.9

032 3,744 316,970 16,706 $1,169,279 57.9 $69.99 $40.54 1.5 -2.0 -2.7 -4.7

033 3,768 321,781 16,723 $1,160,730 56.5 $69.41 $39.21 1.7 1.1 -0.8 0.2

034 3,694 318,369 14,869 $986,916 50.8 $66.37 $33.69 1.9 1.3 -1.1 0.2

041 3,706 321,083 16,178 $1,145,227 56.0 $70.79 $39.63 2.0 5.7 2.6 8.5

042 3,837 325,898 17,461 $1,235,685 58.9 $70.77 $41.67 2.8 4.5 1.1 5.7

043 3,871 330,490 17,646 $1,263,169 58.0 $71.58 $41.54 2.7 5.5 3.1 8.8

044 3,783 327,182 15,881 $1,079,679 52.8 $67.98 $35.87 2.8 6.8 2.4 9.4

051 3,804 327,276 16,978 $1,213,285 57.6 $71.46 $41.19 1.9 4.9 0.9 5.9

052 3,934 330,064 18,582 $1,391,341 61.9 $74.87 $46.32 1.3 6.4 5.8 12.6

053 4,001 336,006 19,064 $1,444,489 61.7 $75.77 $46.73 1.7 8.0 5.9 14.4

054 3,914 332,055 18,523 $1,382,624 60.6 $74.64 $45.26 1.5 16.6 9.8 28.1

061 3,927 332,581 18,894 $1,479,407 63.1 $78.30 $49.43 1.6 11.3 9.6 21.9

062 4,070 335,437 19,319 $1,610,518 63.3 $83.36 $52.76 1.6 4.0 11.3 15.8

063 4,130 341,794 19,727 $1,606,990 62.7 $81.46 $51.10 1.7 3.5 7.5 11.2

064 4,036 339,252 18,000 $1,440,662 57.7 $80.04 $46.16 2.2 -2.8 7.2 4.2

071 4,047 340,683 19,329 $1,614,425 63.0 $83.52 $52.65 2.4 2.3 6.7 9.1

072 4,209 344,229 19,881 $1,756,158 63.5 $88.33 $56.06 2.6 2.9 6.0 9.0

073 4,257 350,625 20,256 $1,738,845 62.8 $85.84 $53.91 2.6 2.7 5.4 8.2

074 4,160 347,986 18,580 $1,565,299 58.0 $84.25 $48.89 2.6 3.2 5.3 8.7

081 4,176 350,247 19,600 $1,735,629 62.2 $88.55 $55.06 2.8 1.4 6.0 7.5

082 4,358 355,814 20,550 $1,915,910 63.5 $93.23 $59.17 3.4 3.4 5.5 9.1

083 4,416 362,801 21,116 $1,903,181 63.3 $90.13 $57.02 3.5 4.2 5.0 9.5

084 4,213 355,845 19,176 $1,691,786 58.6 $88.23 $51.68 2.3 3.2 4.7 8.1

091 4,187 359,311 18,555 $1,587,078 57.4 $85.54 $49.08 2.6 -5.3 -3.4 -8.6

092 4,396 366,615 18,490 $1,606,301 55.4 $86.87 $48.15 3.0 -10.0 -6.8 -16.2

093 4,465 376,420 18,951 $1,585,946 54.7 $83.69 $45.80 3.8 -10.2 -7.1 -16.7

094 4,315 374,410 17,116 $1,366,465 49.7 $79.83 $39.67 5.2 -10.7 -9.5 -19.2

CGR % Past 9 yrs 2.5% 1.2% 3.2% -1.3% 1.9% 0.6%

Past 4 yrs 2.7% 0.0% 3.1% -2.6% 3.1% 0.4%

Past 2 yrs 3.3% -3.2% -4.0% -6.3% -0.9% -7.1%

Past 1 yr 3.7% -9.1% -15.2% -12.3% -6.7% -18.0%


Year & Qtr

# Htls &

Mtls # Rooms

Room-Nights

Sold 000's (1)

Total Room

Revenues

$ 000's % Occ. (2) $ Rate (3) $ RPAR (4)


14


The Texas lodging revenues increased 6.5% over the past year, while REVPAR rose 1.7% based on a

1.3% drop in occupancy and a 3% rate increase. Demand was up 3.3%, trailing supply gains of 4.7%.

From 1989 through “9/11,” revenue growth typically was above 8% annually.


101 4,347 378,818 18,986 $1,541,596 55.7 $81.20 $45.22 5.4 2.3 -5.1 -2.9

102 4,588 386,695 20,125 $1,725,238 57.2 $85.72 $49.03 5.5 8.8 -1.3 7.4

103 4,614 392,397 20,768 $1,734,977 57.5 $83.54 $48.06 4.2 9.6 -0.2 9.4

104 4,386 386,086 18,586 $1,534,439 52.3 $82.56 $43.20 3.1 8.6 3.4 12.3

111 4,373 387,566 20,892 $1,775,855 59.9 $85.00 $50.91 2.3 10.0 4.7 15.2

112 4,625 393,399 21,864 $1,940,404 61.1 $88.75 $54.20 1.7 8.6 3.5 12.5

113 4,606 398,406 22,536 $1,941,707 61.5 $86.16 $52.97 1.5 8.5 3.1 11.9

114 4,383 389,041 19,957 $1,702,649 55.8 $85.32 $47.57 0.8 7.4 3.3 11.0

121 4,386 390,487 22,184 $1,930,172 63.1 $87.01 $54.92 0.8 6.2 2.4 8.7

122 4,628 397,172 23,482 $2,162,378 65.0 $92.09 $59.83 1.0 7.4 3.8 11.4

123 4,637 402,068 23,386 $2,109,568 63.2 $90.20 $57.03 0.9 3.8 4.7 8.6

124 4,424 392,827 21,256 $1,902,427 58.8 $89.50 $52.64 1.0 6.5 4.9 11.7

131 4,472 395,935 23,080 $2,121,117 64.8 $91.90 $59.52 1.4 4.0 5.6 9.9

132 4,681 401,983 24,182 $2,347,253 66.1 $97.07 $64.17 1.2 3.0 5.4 8.5

133 4,712 405,252 23,798 $2,251,680 63.8 $94.62 $60.39 0.8 1.8 4.9 6.7

134 4,474 397,610 22,160 $2,080,850 60.6 $93.90 $56.88 1.2 4.2 4.9 9.4

141 4,542 402,095 23,913 $2,298,836 66.1 $96.13 $63.52 1.6 3.6 4.6 8.4

142 4,720 407,370 25,221 $2,558,737 68.0 $101.45 $69.02 1.3 4.3 4.5 9.0

143 4,796 410,685 25,090 $2,494,612 66.4 $99.43 $66.02 1.3 5.4 5.1 10.8

144 4,563 404,076 23,464 $2,294,653 63.1 $97.79 $61.73 1.6 5.9 4.1 10.3

151 4,618 408,802 24,730 $2,485,815 67.2 $100.52 $67.56 1.7 3.4 4.6 8.1

152 4,827 415,494 25,071 $2,615,111 66.3 $104.31 $69.16 2.0 -0.6 2.8 2.2

153 4,848 418,358 25,085 $2,557,970 65.2 $101.97 $66.46 1.9 0.0 2.6 2.5

154 4,586 412,332 23,192 $2,290,046 61.1 $98.74 $60.37 2.0 -1.2 1.0 -0.2

161 4,645 417,760 24,607 $2,468,662 65.4 $100.33 $65.66 2.2 -0.5 -0.2 -0.7

162 4,858 425,002 25,653 $2,718,156 66.3 $105.96 $70.28 2.3 2.3 1.6 3.9

163 4,929 429,484 24,907 $2,528,728 63.0 $101.53 $64.00 2.7 -0.7 -0.4 -1.1

164 4,673 424,368 23,226 $2,288,843 59.5 $98.55 $58.63 2.9 0.1 -0.2 -0.1

171 4,798 432,000 25,149 $2,619,326 64.7 $104.15 $67.36 3.4 2.2 3.8 6.1

172 5,062 440,100 26,027 $2,741,001 65.0 $105.31 $68.44 3.6 1.5 -0.6 0.8

173 5,251 450,700 27,150 $2,793,238 65.5 $102.88 $67.37 4.9 9.0 1.3 10.5

174 5,017 445,100 26,118 $2,702,107 63.8 $103.46 $65.99 4.9 12.5 5.0 18.1

181 5,104 455,800 27,747 $2,950,816 67.6 $106.35 $71.93 5.5 10.3 2.1 12.7

182 5,398 465,400 28,425 $3,159,647 67.1 $111.16 $74.60 5.7 9.2 5.6 15.3

183 5,500 469,300 27,437 $2,924,125 63.5 $106.58 $67.72 4.1 1.1 3.6 4.7

184 5,186 465,300 26,694 $2,778,499 62.4 $104.09 $64.91 4.5 2.2 0.6 2.8

191 5,311 475,300 28,017 $3,047,353 65.5 $108.77 $71.24 4.3 1.0 2.3 3.3

CGR % Past 9 yrs 2.5% 4.6% 7.7% 2.0% 2.9% 5.0%

Past 4 yrs 3.6% 2.9% 4.9% -0.6% 1.9% 1.3%

Past 2 yrs 4.7% 5.7% 8.3% 1.0% 2.5% 3.4%

Past 1 yr 4.7% 3.3% 6.5% -1.3% 3.0% 1.7%


Year & Qtr

# Htls &

Mtls # Rooms

Room-Nights

Sold 000's (1)

Total Room

Revenues

$ 000's % Occ. (2) $ Rate (3) $ RPAR (4)


15

PROJECTIONS & EXPECTATIONS

In making projections for the future, we

have considered the historical market

patterns for the state of Texas and for the

relevant sub-markets within Texas. We

have noted the recovery that started in

2010, but since has lost its strong growth

trends due to the decline in the price of

oil. With the recent rebound of oil prices,

the Oil & Gas areas demand increases

over the last three quarters has been the

strongest in a decade.

Ongoing projections reflect the

likelihood of revenue growth through

2019 maintaining reasonable and

normal revenue increases of at least

6% to 7% revenue growth year-over-

year. This assumes national GDP

growth of about 2.5% annually and

crude oil prices remain above $50

per barrel.

16

Market REVPAR History & Forecast:

2. Over the past nine years, the wide 13 county market had an average annual real demand

increase of 2.4% (room-nights sold), annual increase of 3.8% in total room revenues, and a

3.1% annual rise in REVPAR; note that the severe recession of 2009 and the subsequent

downturn in oil prices depressed performance numbers in many markets. Occupancy rose

1.7% per year over the nine years. Supply rose by only 0.6% per year, with room rates rising

1.4% annually.

Over the past four years, a gain of 1.8% per year in demand was coupled with a supply

increase of 2.4% annually. Revenues over this period rose an average of 2% per year, while

REVPAR fell 0.4% annually. Room rates were up just 0.3% on average. Occupancy was

down over the last four years, by 0.6% per year.

Over the last two years, demand rose 4% annually, coupled by only a 1.8% annual increase

in supply. These results caused occupancy to increase by 2.2% annually, and REVPAR to

rise by 2.2% per year. Rates increased 0.1% per year, and yearly revenues gained 4.1%.

Most recent history, the 12 months ending June 30, 2019, shows a small amount of new

supply being added to the market. Real demand rose 7.3%, rates were up 0.1%, and

revenues were up 8.3%; occupancy rose 5% as supply grew by 2.2%. REVPAR rose a

strong 6% for the average hotel room.

17

1. Roomnights sold (derived from est. rate and actual revenues). 2. Occupancy nights sold divided by nights available for sale. 3. Avg. price for roomnights sold; Directories, Surveys, & experience. 4. $ Revenue per available room per day (room sales per day)


93 142 8,321 390 $24,494 50.9 $62.84 $32.00

94 142 8,461 374 $22,005 48.0 $58.91 $28.27

101 147 8,646 380 $23,201 48.8 $61.05 $29.82

102 152 8,739 423 $28,009 53.2 $66.16 $35.22

103 145 8,661 410 $26,265 51.4 $64.14 $32.96 4.1 5.1 2.1 7.2

104 140 8,380 382 $23,452 49.6 $61.37 $30.42 -1.0 2.3 4.2 6.6

111 139 8,406 388 $23,896 51.3 $61.55 $31.59 -2.8 2.2 0.8 3.0

112 145 8,616 429 $28,849 54.7 $67.33 $36.79 -1.4 1.2 1.8 3.0

113 138 8,518 432 $28,060 55.1 $65.00 $35.81 -1.7 5.4 1.3 6.8

114 133 8,346 402 $25,373 52.3 $63.12 $33.04 -0.4 5.2 2.9 8.2

121 131 8,047 398 $25,974 55.0 $65.21 $35.86 -4.3 2.6 5.9 8.7

122 136 8,206 451 $30,421 60.5 $67.39 $40.74 -4.8 5.3 0.1 5.4

123 130 7,939 418 $28,322 57.3 $67.72 $38.78 -6.8 -3.1 4.2 0.9

124 128 7,924 402 $26,032 55.1 $64.75 $35.71 -5.1 0.0 2.6 2.6

131 128 7,886 401 $26,066 56.6 $64.94 $36.73 -2.0 0.8 -0.4 0.4

132 136 8,147 452 $31,300 61.0 $69.21 $42.22 -0.7 0.2 2.7 2.9

133 134 8,216 425 $28,735 56.3 $67.55 $38.02 3.5 1.7 -0.3 1.5

134 128 8,008 414 $26,789 56.2 $64.65 $36.36 1.1 3.1 -0.2 2.9

141 129 8,029 425 $27,399 58.7 $64.55 $37.92 1.8 5.8 -0.6 5.1

142 133 8,083 468 $32,890 63.6 $70.26 $44.71 -0.8 3.5 1.5 5.1

143 131 7,994 442 $31,374 60.1 $71.02 $42.66 -2.7 3.8 5.1 9.2

144 129 8,080 436 $29,422 58.6 $67.54 $39.58 0.9 5.2 4.5 9.8

151 134 8,433 454 $30,585 59.8 $67.37 $40.30 5.0 6.9 4.4 11.6

152 136 8,393 476 $34,677 62.3 $72.91 $45.40 3.8 1.6 3.8 5.4

153 132 8,283 439 $32,172 57.6 $73.25 $42.22 3.6 -0.6 3.1 2.5

154 130 8,340 422 $29,036 55.0 $68.75 $37.84 3.2 -3.1 1.8 -1.3

161 133 8,475 430 $27,598 56.3 $64.22 $36.18 0.5 -5.4 -4.7 -9.8

162 138 8,688 471 $33,433 59.5 $71.02 $42.29 3.5 -1.0 -2.6 -3.6

163 136 8,658 450 $32,761 56.5 $72.78 $41.13 4.5 2.5 -0.6 1.8

164 134 8,605 422 $29,037 53.3 $68.75 $36.68 3.2 0.0 0.0 0.0

171 135 8,693 433 $28,673 55.3 $66.27 $36.65 2.6 0.7 3.2 3.9

172 146 8,968 485 $35,612 59.5 $73.39 $43.64 3.2 3.1 3.3 6.5

173 139 8,866 454 $33,104 55.6 $72.97 $40.58 2.4 0.8 0.3 1.0

174 135 8,742 420 $28,321 52.2 $67.47 $35.21 1.6 -0.6 -1.9 -2.5

181 134 8,637 440 $28,405 56.6 $64.55 $36.54 -0.6 1.7 -2.6 -0.9

182 148 9,158 493 $36,278 59.1 $73.67 $43.53 2.1 1.5 0.4 1.9

183 141 8,979 465 $34,331 56.3 $73.78 $41.56 1.3 2.6 1.1 3.7

184 137 8,889 465 $32,054 56.8 $68.98 $39.20 1.7 10.7 2.2 13.2

191 142 9,076 484 $31,904 59.3 $65.88 $39.06 5.1 10.1 2.1 12.3

192 147 9,255 524 $38,268 62.2 $73.08 $45.44 1.1 6.3 -0.8 5.5

CGR % Past 9 yrs 0.6% 2.4% 3.8% 1.7% 1.4% 3.1%

Past 4 yrs 2.4% 1.8% 2.0% -0.6% 0.3% -0.4%

Past 2 yrs 1.8% 4.0% 4.1% 2.2% 0.1% 2.2%

Past 1 yr 2.2% 7.3% 8.3% 5.0% 1.1% 6.0%

# Htls &

Mtls # Rooms

Room-Nights

Sold 000's

(1)

Lodging Market History: 13 County Area


% Occ. (2) $ Rate (3) $ RPAR (4)

Total Room

Revenues

$ 000'sYear & Qtr

18

3. In the future, 13 county market occupancy is projected to remain near the estimated long-term

equilibrium occupancy level of 58% by 2025. For the next nine years, real demand (room nights

sold) is projected at an average 2.2% growth rate, trailing projected net supply growth of 2.4%. With

2.4% average daily rate inflation, market gross revenues should gain 4.7%, and REVPAR should

increase 2.2% annually during the nine year forecast.

These assumptions relative to demand, supply, and occupancy reflect the fact that over the past 20

years overall occupancy in Texas has averaged about 60%, a level considered to be 'Equilibrium

Occupancy' state-wide. This fact considers that larger and more successful metro area markets

generate higher overall occupancy and REVPAR numbers than state averages, while rural areas lag

these averages (Source Strategies, Inc. database).

'Equilibrium Occupancy' is further explained by the fact that new investment money will eventually

be attracted to an under-supplied market until market occupancy falls and lower returns on capital are

the result. The equilibrium occupancy point is where net, new supply is being added at about the

same rate as growth in demand, and where return on investment is in balance with the cost of capital.

Fueled by moderate, steady demand growth, the Metro market has room for appropriately-positioned

new development, added at similar rates to demand. Higher quality new lodging products at or above

mid-priced levels are performing very well in the market despite overall performance numbers being

moderated by the large number of older, obsolete, budget and independent hotels. These older,

existing competitors are highly vulnerable to the superior attractiveness of newly-built lodging. This

pattern can be seen in the success of chain operations at or above the mid-priced levels.

Note that REVPAR growth for every individual hotel unit is well below the total revenue growth of

the market, with average REVPAR in our projection growing a low 2.1% per annum over the next

five years (compared to 3.1% REVPAR average growth of the past nine years). Revenues are

forecast to grow by 4.4% per year on the strength of 2% growth in real demand and 2.4% growth in

price (room-rates). Occupancy over the next five years is expected to decline by 0.3% per year, as

supply rises 2.3% per year.

19

1. Roomnights sold (derived from est. rate and actual revenues) 2. Occupancy nights sold divided by nights available for sale. 3. Avg. price for roomnights sold; Directories, Surveys, & experience. 4. $ Revenue per available room per day (room sales per day)


193 145 9,114 484 $36,417 57.7 $75.26 $43.43 1.5 4.0 2.0 6.1

194 140 9,022 483 $34,004 58.2 $70.36 $40.97 1.5 4.0 2.0 6.1

201 146 9,212 504 $33,846 60.7 $67.20 $40.82 1.5 4.0 2.0 6.1

202 151 9,394 545 $40,591 63.7 $74.54 $47.48 1.5 4.0 2.0 6.1

203 150 9,342 491 $37,887 57.2 $77.14 $44.08 2.5 1.5 2.5 4.0

204 145 9,248 491 $35,377 57.7 $72.12 $41.58 2.5 1.5 2.5 4.0

211 151 9,442 511 $35,212 60.2 $68.88 $41.43 2.5 1.5 2.5 4.0

212 156 9,629 553 $42,230 63.1 $76.41 $48.20 2.5 1.5 2.5 4.0

213 155 9,575 499 $39,417 56.6 $79.07 $44.75 2.5 1.5 2.5 4.0

214 151 9,479 498 $36,805 57.1 $73.92 $42.20 2.5 1.5 2.5 4.0

221 156 9,679 519 $36,634 59.6 $70.60 $42.06 2.5 1.5 2.5 4.0

222 162 9,869 561 $43,935 62.5 $78.32 $48.92 2.5 1.5 2.5 4.0

223 160 9,814 506 $41,009 56.0 $81.04 $45.42 2.5 1.5 2.5 4.0

224 156 9,716 505 $38,291 56.5 $75.77 $42.84 2.5 1.5 2.5 4.0

231 162 9,920 527 $38,113 59.0 $72.36 $42.69 2.5 1.5 2.5 4.0

232 167 10,116 569 $45,709 61.9 $80.27 $49.65 2.5 1.5 2.5 4.0

233 166 10,060 514 $42,664 55.5 $83.07 $46.10 2.5 1.5 2.5 4.0

234 161 9,959 513 $39,837 56.0 $77.66 $43.48 2.5 1.5 2.5 4.0

241 167 10,168 535 $39,652 58.4 $74.17 $43.33 2.5 1.5 2.5 4.0

242 173 10,369 578 $47,554 61.3 $82.28 $50.40 2.5 1.5 2.5 4.0

243 172 10,311 521 $44,387 55.0 $85.14 $46.79 2.5 1.5 2.5 4.0

244 167 10,208 521 $41,446 55.4 $79.61 $44.13 2.5 1.5 2.5 4.0

251 173 10,423 548 $41,659 58.4 $76.03 $44.41 2.5 2.5 2.5 5.1

252 179 10,628 592 $49,962 61.3 $84.34 $51.66 2.5 2.5 2.5 5.1

253 178 10,569 534 $46,634 55.0 $87.27 $47.96 2.5 2.5 2.5 5.1

254 173 10,463 534 $43,544 55.4 $81.60 $45.24 2.5 2.5 2.5 5.1

261 179 10,683 562 $43,768 58.4 $77.93 $45.52 2.5 2.5 2.5 5.1

262 186 10,894 607 $52,491 61.3 $86.45 $52.95 2.5 2.5 2.5 5.1

263 184 10,833 548 $48,995 55.0 $89.46 $49.16 2.5 2.5 2.5 5.1

264 179 10,725 547 $45,748 55.4 $83.64 $46.37 2.5 2.5 2.5 5.1

271 186 10,950 576 $45,984 58.4 $79.88 $46.66 2.5 2.5 2.5 5.1

272 192 11,166 622 $55,149 61.3 $88.61 $54.27 2.5 2.5 2.5 5.1

273 191 11,104 561 $51,475 55.0 $91.69 $50.39 2.5 2.5 2.5 5.1

274 185 10,993 561 $48,064 55.4 $85.73 $47.53 2.5 2.5 2.5 5.1

281 192 11,224 590 $48,312 58.4 $81.87 $47.83 2.5 2.5 2.5 5.1

282 199 11,445 638 $57,941 61.3 $90.82 $55.63 2.5 2.5 2.5 5.1

283 198 11,382 575 $54,081 55.0 $93.98 $51.65 2.5 2.5 2.5 5.1

284 192 11,268 575 $50,497 55.4 $87.87 $48.71 2.5 2.5 2.5 5.1

291 199 11,505 605 $50,757 58.4 $83.92 $49.02 2.5 2.5 2.5 5.1

292 206 11,732 654 $60,874 61.3 $93.09 $57.02 2.5 2.5 2.5 5.1

293 205 11,666 590 $56,819 55.0 $96.33 $52.94 2.5 2.5 2.5 5.1

294 199 11,549 589 $53,054 55.4 $90.07 $49.93 2.5 2.5 2.5 5.1

301 206 11,792 620 $53,327 58.4 $86.02 $50.25 2.5 2.5 2.5 5.1

302 213 12,025 670 $63,955 61.3 $95.42 $58.45 2.5 2.5 2.5 5.1

CGR % Next 9 yrs 2.4% 2.2% 4.7% -0.2% 2.4% 2.2%

Next 5 yrs 2.3% 2.0% 4.4% -0.3% 2.4% 2.1%

HISTORY

CGR % Past 9 yrs 0.6% 2.4% 3.8% 1.7% 1.4% 3.1%

Past 4 yrs 2.4% 1.8% 2.0% -0.6% 0.3% -0.4%

Past 2 yrs 1.8% 4.0% 4.1% 2.2% 0.1% 2.2%

Lodging Market Projection: 13 County Area

% Growth Vs. Prior YrTotal Room

Revenues

$ 000's

% Occ.

(2) $ Rate (3) $ RPAR (4)

Year &

Qtr

# Htls &

Mtls # Rooms

Room-

Nights Sold

000's (1)

20

LOCAL MARKET PERFORMANCE

2. The subject hotel’s market in the Wood County Area8 currently generates a REVPAR of

$40, well below the Texas average of $70. This performance considers that the local market is in

a rural area away from a major metro and is lacking luxury or upscale products.

PERIOD: 12 MONTHS ENDING JUNE 30, 2019 HOTEL MARKET; WOOD COUNTY AREA TOWNS

# * EST. $ EST. #* RMS % RNS % AMT. % EST. $ $ BRAND HTL 000S RMS 000S RNS 000S AMT %OCC RATE RPAR COMFO STE 2 .1 8.3 35 9.6 3,071 12.4 68.2 86.94 59.26 BEST WEST 4 .2 13.7 53 14.4 3,949 16.0 62.0 74.61 46.24 HAMPTON 3 .2 12.1 52 14.0 5,432 21.9 68.3 105.28 71.90 HOLID EXP 2 .2 8.9 35 9.5 3,048 12.3 63.2 86.98 54.94 LA QUINTA 2 .1 7.4 31 8.3 2,309 9.3 66.0 75.44 49.81 TOT LTD SVE 11 .7 42.0 170 46.3 14,739 59.5 64.8 86.61 56.08 ECONOLODG 1 .0 2.8 7 1.9 219 .9 39.7 31.45 12.50 MOTEL 6 2 .1 8.3 31 8.4 1,112 4.5 59.3 36.17 21.45 SUPER 8 1 .1 3.0 11 3.0 465 1.9 58.9 41.65 24.52 TOT BUDGET 4 .2 14.1 49 13.3 1,796 7.3 55.3 36.75 20.34 $60-99ADR 3 .1 5.9 20 5.6 1,291 5.2 55.7 63.24 35.21 LT $60ADR 10 .4 25.1 80 21.8 2,862 11.6 51.1 35.76 18.26 TOT IND HTL 13 .5 30.9 100 27.3 4,153 16.8 51.9 41.34 21.47 TOT HOTELS 30 1.6 95.4 355 96.5 23,760 96.0 59.5 66.96 39.84 OTH LODGING CABINS 3 .0 .6 1 .3 133 .5 27.2 134.17 36.43 FISH CAMP 2 .0 2.4 6 1.5 500 2.0 36.6 90.20 33.03 RV PARK 1 .0 1.6 6 1.7 359 1.5 61.4 57.26 35.15 TOT OTH IND 6 .1 4.6 13 3.5 992 4.0 44.2 77.46 34.21 TOT OTHER 6 .1 4.6 13 3.5 992 4.0 44.2 77.46 34.21 TOT MARKET 36 1.7 100.0 368 100.0 24,752 100 58.8 67.32 39.58

* All figures annualized. Includes taxed and est non-tax room revenues. Independents are categorized by price: $100+, $60-99.99, and under $60).

8 Cities of Emory, Mineola, Alba, Quitman, Yantis, Sulphur Springs, Greenville, Quinlan, Gilmer, Gladewater, Lindale.

21

Local Market REVPAR History & Forecast:

3. Over the past nine years, the Wood County Area Market9 has shown real demand growth

(room-nights sold) of 1.8%, annual growth of 3.1% in total room revenues, and a 3.5% annual

increase in REVPAR. Occupancy grew 2.2% over each of the nine years. Supply fell by 0.4%

per year, with room rates rising 1.4% annually.

Over the past four years, demand rose 0.2% annually as supply increased at a slightly higher

0.3% rate per year. Revenues over this period rose by 2.2% per year, while REVPAR rose

1.8%, occupancy fell 0.1%, and room rates rose 2%.

Over the last two years, real demand fell by 2.8% annually, while supply also fell, by 1.8%

per year. Rates increased 2%, and yearly revenues fell by 0.8% per year. These results caused

occupancy to fall 0.9% annually, and REVPAR to rise by 1% per year.

In the latest year, demand rose by 0.9% while supply decreased by 0.7%. Rates rose 2.3% and

revenues rose by 3.2%, the highest level of the measured period. Occupancy was up by 1.6%

for the year and REVPAR rose by 4.1%. Market occupancy averaged 59%, above the ten-year

average occupancy of 56% for this market. This is a market is in a rural area away from a

major metropolitan area, with nearby dining, business and recreational interests. Over time,

our projection maintains the current occupancy at 59% as the market remains near to

equilibrium, which is a healthy level for a market such as this one.

9 Cities of Emory, Mineola, Alba, Quitman, Yantis, Sulphur Springs, Greenville, Quinlan, Gilmer, Gladewater, Lindale.

22

1.Roomnights sold (derived from est. rate and actual revenues) 2. Occupancy nights sold divided by nights available for sale. 3. Avg. price for roomnights sold; Directories, Surveys, & experience. 4. $ Revenue per available room per day (room sales per day)


93 34 1,698 80 4,850 50.9 60.94 31.05

94 33 1,719 75 4,306 47.1 57.81 27.23

101 36 1,805 74 4,174 45.2 56.80 25.70

102 41 1,875 87 5,412 50.9 62.29 31.72

103 35 1,751 77 4,664 47.9 60.38 28.95 3.1 -3.0 -0.9 -3.8

104 33 1,675 72 4,181 46.5 58.37 27.13 -2.6 -3.9 1.0 -2.9

111 33 1,683 70 3,924 46.0 56.30 25.90 -6.8 -5.2 -0.9 -6.0

112 38 1,779 86 5,384 53.2 62.49 33.26 -5.1 -0.8 0.3 -0.5

113 33 1,745 85 5,131 52.7 60.64 31.96 -0.3 9.6 0.4 10.0

114 31 1,715 74 4,375 47.1 58.89 27.73 2.4 3.8 0.9 4.6

121 31 1,676 74 4,337 49.2 58.47 28.75 -0.4 6.5 3.9 10.5

122 38 1,830 98 6,003 58.9 61.23 36.04 2.9 13.7 -2.0 11.5

123 32 1,716 82 5,053 52.2 61.29 32.01 -1.7 -2.6 1.1 -1.5

124 30 1,668 78 4,499 50.9 57.59 29.32 -2.7 5.1 -2.2 2.8

131 31 1,646 82 4,643 55.2 56.75 31.34 -1.8 10.2 -2.9 7.1

132 35 1,705 95 5,752 61.1 60.70 37.08 -6.8 -3.3 -0.9 -4.2

133 33 1,717 92 5,483 58.3 59.51 34.71 0.1 11.8 -2.9 8.5

134 30 1,651 88 5,044 57.9 57.39 33.21 -1.0 12.5 -0.3 12.1

141 30 1,626 82 4,630 56.0 56.47 31.64 -1.2 0.2 -0.5 -0.3

142 34 1,684 98 6,248 64.1 63.64 40.77 -1.2 3.6 4.8 8.6

143 31 1,596 86 5,593 58.7 64.88 38.09 -7.0 -6.4 9.0 2.0

144 29 1,662 88 5,164 57.2 59.04 33.77 0.7 -0.5 2.9 2.4

151 30 1,747 88 5,088 55.8 57.96 32.36 7.4 7.1 2.6 9.9

152 34 1,762 104 6,843 64.6 66.09 42.68 4.6 5.4 3.8 9.5

153 29 1,592 88 5,740 59.8 65.52 39.19 -0.3 1.6 1.0 2.6

154 27 1,558 80 5,043 55.8 63.10 35.18 -6.3 -8.7 6.9 -2.3

161 29 1,650 88 4,914 58.9 56.14 33.09 -5.6 -0.3 -3.1 -3.4

162 34 1,802 110 7,074 66.9 64.52 43.14 2.3 5.9 -2.4 3.4

163 32 1,774 101 6,724 61.8 66.63 41.20 11.4 15.2 1.7 17.1

164 30 1,720 90 5,790 56.6 64.70 36.59 10.4 12.0 2.5 14.8

171 31 1,757 92 5,461 58.1 59.40 34.53 6.5 5.0 5.8 11.1

172 36 1,858 107 7,198 63.1 67.42 42.57 3.1 -2.6 4.5 1.8

173 30 1,720 89 6,001 56.1 67.58 37.92 -3.0 -12.0 1.4 -10.8

174 30 1,720 86 5,671 54.3 65.99 35.84 0.0 -4.0 2.0 -2.1

181 28 1,624 87 5,247 59.5 60.30 35.90 -7.6 -5.3 1.5 -3.9

182 35 1,838 103 7,059 61.5 68.60 42.20 -1.1 -3.7 1.8 -1.9

183 31 1,742 93 6,407 58.1 68.84 39.98 1.3 4.8 1.9 6.8

184 29 1,685 88 5,876 56.9 66.60 37.90 -2.0 2.7 0.9 3.6

191 29 1,672 87 5,412 57.6 62.47 35.96 3.0 -0.5 3.6 3.1

192 32 1,754 100 7,057 62.5 70.72 44.21 -4.6 -3.0 3.1 0.0

CGR % Past 9 yrs -0.4% 1.8% 3.1% 2.2% 1.4% 3.5%

Past 4 yrs 0.3% 0.2% 2.2% -0.1% 2.0% 1.8%

Past 2 yrs -1.8% -2.8% -0.8% -0.9% 2.0% 1.0%

Past 1 yr -0.7% 0.9% 3.2% 1.6% 2.3% 4.1%

CGR % Past 9 yrs 0.6% 2.4% 3.8% 1.7% 1.4% 3.1%

Past 4 yrs 2.4% 1.8% 2.0% -0.6% 0.3% -0.4%

Lodging Market History: Wood County Area

Wider Market History


Year &

Qtr

# Htls &

Mtls # Rooms

Room-

Nights

Sold 000's

Total Room

Revenues

$ 000's % Occ. (2) $ Rate (3)

$ RPAR

(4)

23

4. Overall market occupancy is projected to rise, with 1.4% demand gains and supply rising at the

same 1.4% annually for the next nine years. This translates to occupancy remaining flat at a 59%

long-term equilibrium level. REVPAR should rise 2.5% annually in the period, based on rates rising

2.5% per year. This compares to an average level of REVPAR growth of 3.5% for the past nine

years.

These assumptions relative to demand, supply, and occupancy reflect the fact that over the past 20

years overall occupancy in Texas has averaged about 60%, a level considered to be 'Equilibrium

Occupancy' state-wide. This fact considers that larger and more successful metro area markets

generate higher overall occupancy and REVPAR numbers than state averages, while rural and

Interstate highways areas lag these averages (per the Source Strategies, Inc. database). 'Equilibrium

Occupancy' is further explained by the fact that new investment money will eventually be attracted to

an under-supplied market until market occupancy falls and lower returns on capital are the result.

The equilibrium occupancy point is where net, new supply is being added at about the same rate as

growth in demand, and where return on investment is in balance with the cost of capital. The local

area market is currently operating at a very healthy level and has room for new development. Higher

quality new lodging products at or above mid-priced levels are performing extremely well in the

market. Any older, existing competitors are vulnerable to the superior attractiveness of newly-built,

major-branded lodging. This pattern can be seen in the success of chain operations at or above the

mid-priced levels. Given our growth assumptions, room supply consequently grows from 1,713

rooms currently to 1,942 in 2026, 13% higher and representing 229 net new rooms (gross new

openings, less closings).

REVPAR growth for every individual hotel unit is below the total revenue growth of the

market, with average REVPAR in our projection rising 2.5% per annum over the next five

years. Revenues during this upcoming period are forecast to rise by 3.9% per year on demand gains

of 1.4% per year and 2.5% annual increase in prices (room-rates). Occupancy over the next five years

is expected to be flat as supply rises by an expected 1.4% per year. If supply should grow 200 rooms

over forecast (+10%), without demand also growing faster than forecast, average individual hotel

REVPAR would decline by 9% versus the projection, dropping from the estimated REVPAR of $49

to $45 by the end of 2026.

24

1.Roomnights sold (derived from est. rate and actual revenues) 2. Occupancy nights sold divided by nights available for sale. 3. Avg. price for roomnights sold; Directories, Surveys, & experience. 4. $ Revenue per available room per day (room sales per day)


193 32 1,759 94 6,635 58.1 70.56 40.99 1.0 1.0 2.5 3.6

194 30 1,702 89 6,081 56.9 68.27 38.84 1.0 1.0 2.5 3.5

201 30 1,689 87 5,601 57.5 64.03 36.85 1.0 1.0 2.5 3.5

202 33 1,772 101 7,307 62.5 72.49 45.32 1.0 1.0 2.5 3.5

203 32 1,786 95 6,903 58.1 72.33 42.01 1.5 1.5 2.5 4.0

204 30 1,727 90 6,327 56.9 69.97 39.81 1.5 1.5 2.5 4.0

211 30 1,714 89 5,827 57.5 65.63 37.77 1.5 1.5 2.5 4.0

212 33 1,798 102 7,602 62.5 74.30 46.46 1.5 1.5 2.5 4.0

213 33 1,813 97 7,182 58.1 74.13 43.07 1.5 1.5 2.5 4.0

214 31 1,753 92 6,582 56.9 71.72 40.81 1.5 1.5 2.5 4.0

221 31 1,740 90 6,062 57.5 67.27 38.72 1.5 1.5 2.5 4.0

222 34 1,825 104 7,909 62.5 76.16 47.62 1.5 1.5 2.5 4.0

223 34 1,840 98 7,471 58.1 75.99 44.14 1.5 1.5 2.5 4.0

224 32 1,780 93 6,848 56.9 73.51 41.83 1.5 1.5 2.5 4.0

231 32 1,766 91 6,307 57.5 68.96 39.68 1.5 1.5 2.5 4.0

232 35 1,852 105 8,228 62.5 78.06 48.81 1.5 1.5 2.5 4.0

233 35 1,867 100 7,773 58.1 77.89 45.25 1.5 1.5 2.5 4.0

234 33 1,806 95 7,124 56.9 75.35 42.87 1.5 1.5 2.5 4.0

241 33 1,792 93 6,561 57.5 70.68 40.68 1.5 1.5 2.5 4.0

242 36 1,880 107 8,560 62.5 80.01 50.03 1.5 1.5 2.5 4.0

243 36 1,895 101 8,087 58.1 79.83 46.38 1.5 1.5 2.5 4.0

244 34 1,833 96 7,412 56.9 77.24 43.94 1.5 1.5 2.5 4.0

251 34 1,819 94 6,826 57.5 72.45 41.69 1.5 1.5 2.5 4.0

252 37 1,908 109 8,906 62.5 82.01 51.28 1.5 1.5 2.5 4.0

253 37 1,924 103 8,413 58.1 81.83 47.54 1.5 1.5 2.5 4.0

254 34 1,861 97 7,711 56.9 79.17 45.04 1.5 1.5 2.5 4.0

261 34 1,847 96 7,102 57.5 74.26 42.73 1.5 1.5 2.5 4.0

262 38 1,937 110 9,265 62.5 84.06 52.56 1.5 1.5 2.5 4.0

263 38 1,953 104 8,753 58.1 83.87 48.72 1.5 1.5 2.5 4.0

264 35 1,889 99 8,023 56.9 81.15 46.17 1.5 1.5 2.5 4.0

271 35 1,874 97 7,389 57.5 76.11 43.80 1.5 1.5 2.5 4.0

272 39 1,966 112 9,639 62.5 86.17 53.88 1.5 1.5 2.5 4.0

273 39 1,982 106 9,107 58.1 85.97 49.94 1.5 1.5 2.5 4.0

274 36 1,917 100 8,347 56.9 83.17 47.32 1.5 1.5 2.5 4.0

281 36 1,902 99 7,687 57.5 78.02 44.90 1.5 1.5 2.5 4.0

282 40 1,996 114 10,029 62.5 88.32 55.22 1.5 1.5 2.5 4.0

283 40 2,012 108 9,474 58.1 88.12 51.19 1.5 1.5 2.5 4.0

284 37 1,946 102 8,684 56.9 85.25 48.51 1.5 1.5 2.5 4.0

291 37 1,931 100 7,997 57.5 79.97 46.02 1.5 1.5 2.5 4.0

292 41 2,026 115 10,433 62.5 90.53 56.60 1.5 1.5 2.5 4.0

293 41 2,042 109 9,857 58.1 90.32 52.47 1.5 1.5 2.5 4.0

294 38 1,975 103 9,034 56.9 87.38 49.72 1.5 1.5 2.5 4.0

301 38 1,960 102 8,320 57.5 81.97 47.17 1.5 1.5 2.5 4.0

302 42 2,056 117 10,855 62.5 92.79 58.02 1.5 1.5 2.5 4.0

CGR % Next 9 yrs 1.4% 1.4% 4.0% 0.0% 2.5% 2.5%

Next 5 yrs 1.4% 1.4% 3.9% 0.0% 2.5% 2.5%

CGR % Past 9 yrs -0.4% 1.8% 3.1% 2.2% 1.4% 3.5%

Past 4 yrs 0.3% 0.2% 2.2% -0.1% 2.0% 1.8%

Past 2 yrs -1.8% -2.8% -0.8% -0.9% 2.0% 1.0%

Lodging Market Projection: Wood County Area

Total Room

Revenues

$ 000's % Occ. (2) $ Rate (3)

HISTORY


Year &

Qtr

# Htls &

Mtls

$ RPAR

(4)# Rooms

Room-

Nights

Sold 000's

(1)

25

5. A graph of the REVPAR history and projection for the local market shows recent

fluctuations followed by an expected slow and steady growth pattern for the area:

$20

$25

$30

$35

$40

$45

$50

$55

$60

$65

20

10

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26

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27

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28

20

29

20

30

REVPAR History & Projection Wood County Area vs 13 County Area

Wood County Area 13 County Area

Begin Projection

Year & Quarter

Re

ven

ue

per

Ava

ilab

le R

oo

m p

er D

ay

26

6. The occupancy projection for the local market is for a return to normal levels, correcting

after the fluctuations of recent years. We expect local occupancy to decline very slightly in the

near-term before rising back to an equilibrium occupancy in the 59% average range in the

later years of our forecast:

35

40

45

50

55

60

65

70

20

10

20

11

20

12

20

13

20

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20

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26

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27

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28

20

29

20

30

Occupancy History & Projection Wood County Area vs. 13 County Area

Wood County Area 13 County Area

Begin Projection

Year & Quarter

Occ

up

ancy

Per

cen

tage

27

7. The Room Nights Sold history and projection graph shows the reasonable nature of the ‘trend’

expectations for the local market. With recent healthy growth, assuming typical population,

economic, and infrastructure growth, we expect normal demand growth to continue in the near future:

20

40

60

80

100

120

1402

01

0

20

11

20

12

20

13

20

14

20

15

20

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20

30

Room Nights Sold History & Projection Wood County Area

Wood County Area

Begin Projection

Year & Quarter

Ro

om

-Nig

hts

So

ld (

dem

and

) 0

00

s

28

PROJECT REVPAR - DEVELOPMENT OF INDICES

Within the above market REVPAR forecast, the expected performance of the proposed hotel is based

on six factors. All six factors are independent and modify the market's projected REVPAR average to

reflect the subject property's particular characteristics. First, what is the Base Value? It is the effect

of the Brand, including specified product quality levels. Second, what is the effect of the brand's

overall Age on its average performance? Third, what is the effect of the project's Size, or room-

count, on results? Fourth, are there any ‘Other’ adjustments needed to account for various factors,

including under- or over-supply in the product's Segment in which the project will compete? Fifth,

what is the effect of the normal Life Cycle patterns on the project (e.g. the effect of the project's

Newness compared to older competition on its unstoppable way to obsolescence)? And sixth, what is

the likely influence of the selected Site on results?

1. The Base Value factor sets property type/brand/product quality at an assumed level for a

combined level of reasonable limited service hotel products selected that would be good choices for

the Wood County area market.10 We looked at both available brands and products that would be good

choices for the market. The limited service products Sleep Inn and Best Western are popular brands

that allow for properties to be built to suit local conditions and needs, while Microtel and Studio 6

offer a more value oriented product that would be suitable for extended stays. The combined

REVPAR average for these four brands offers a reasoned expectation for a new hotel in the local

market, putting the Base Value at 117% of the average of the Exhibit IV market REVPAR average.11

Utilizing the existing REVPAR performance for the selected brands illustrates the basic expectations

of REVPAR performance for the project:

Combined REVPAR $50.69 / Exhibit IV Average REVPAR $43.31 = 1.17 or 117%

This sample of several very good limited service hotels in Texas markets firmly establishes the basic

REVPAR performance that can be expected when operating such a hotel in a market such as the

proposed location (s).

10. We utilized a combined brand value of Best Western, Sleep Inn, Microtel, & Studio 6, which produced an average REVPAR of $50.69. 11. The Exhibit IV hotel market excludes metro areas, Luxury, Odessa & Midland, the luxury, upscale, mid/upscale/suite segments, and products priced over $150 per night. This large market was selected to closely mimic the local market situation/mix and to provide a wider body of information from which to draw the characteristics of specific brand performance.

29

2. The second adjustment factor, Brand Aging, is set at 1.11 (111%), reflecting the average age

of the selected comparable products in the Exhibit IV market, 2005. This factor adjusts for the

effect of the average age of the existing hotels on the brand's current performance. Please see Exhibit

VI: Start-Up Performance of New Hotels and Motels for a full description of our study of the

impact of the overall newness or age of a group of same branded hotels on REVPAR performance.

The brand age adjustment, or life-cycle adjustment, for other brands includes:

BRAND AGING: TEXAS MARKETS

Brand Average Opening Brand Aging Adjustment Sleep Inn 2010 0.99

Holiday Inn Express 2008 1.03 Hampton Inn & Suites 2007 1.05

Fairfield Inn 2005 1.11 Best Western 2003 1.12

La Quinta 2000 1.16

3. The property Size factor - reflecting room count - is set at 0.95 (95%). The average size of the

selected brands for this study is 56 rooms, giving this hotel, at 65 units, a size penalty for being larger

than the norm. The size factor assigns a premium if the property is smaller than average and a penalty

to the property if it is larger than average. The size adjustment is necessary because demand is not

affected by the number of rental rooms offered, as the individual consumer only needs one room:

customers do not care whether a hotel offers 100, 125 or 150 rooms and their purchasing behavior

will be the same regardless of how many rooms the property offers. Keeping a project conservatively

sized assures a higher per-unit revenue yield, particularly in very competitive markets like the local

area.

The highly-positive effect on revenues and return on capital due to building small, and not 'over-

sizing' projects is best explained in Exhibit V: A Study of the Effect of Hotel Size on Performance

in the Texas Hotel Industry - The Case for Downsizing New Hotels. This study that can be

replicated with any brand, in almost any situation. The net effect of building small is to run higher

occupancy and rate, thereby increasing brand REVPAR by building a below-average number of

rental units.

4. Fourth, the Segment or Other adjustment factor is set at 100%, with no penalty or premium.

30

5. Fifth, the Aging Adjustment factor reflects the standard hotel life cycle: 98% (-2%) in Year I;

112% for Year II; 116% for Year III; followed by a 1.96% annual decline in the REVPAR index in

Years IV through X. The aging factor is supported by extensive studies of hotel life-cycles conducted

by Source Strategies, Inc, with our latest study being published in April of 2019 (Hotel Brand Report

newsletter, Issue #137) This Aging Study is also presented as an Exhibit at the end of this document.

6. The last factor, Site, is set at 0.90 (90%), or below average for the local market, and

reasonable when the sites of currently operating nearby competition are measured.

The 4 sites examined around the Wood County area that we would recommend were roughly

equivalent in value for different reasons, as demand for hotels in this area is fairly regional. As long

as access is available without difficulty, sites on Texas Highway 37 or 11 in Winnsboro, FM 17 in

Lake Fork, Quitman, the county seat, and the larger city of Mineola, all appeared to have good access

and varying degrees of visibility. In our opinion, focusing on a site which is in the most commercially

active area available would be the best choice, and not one that would be impinged upon by

residential areas.

With the evaluation of the current sites around this location, we have an easy analysis of the site

potential. The site values for this property, as well as for nearby existing competitors have been

developed by quantifying the influence site has had on their performance. Applying known

adjustment factors to existing properties, except for a site factor, lets us solve for the site value itself.

Source Strategies' site methodology 'backs into' the value of the site by matching actual performance

against known factors, using the site factor as the 'plugged number.' The differences between the

closest key competitors appear to be both explainable and reasonable. The site value is 'plugged' so

that projected REVPAR versus market approaches the actual REVPAR over the past 12 months.

Overall, current performance of nearby existing competition would indicate that a 90% site

value for the Limited Service Hotel would be a reasonable estimate of the site:

31

DERIVATION OF LOCAL COMPETITION

Best

Western Lake Fork Best

Western Hampton Executive

Inn

Data in 2019 $'s Emory Marina Mineola Sulphur Sp. Gilmer

Base: Name & Quality 1.19 0.74 1.19 1.63 0.74

x Brand Age Adjustment 1.16 1.23 1.16 1.01 1.23

x Site Value Adjustment 0.91 0.94 0.84 1.12 0.93

x Size Adjustment 1.03 1.07 1.03 1.00 1.08

x Other Adjustments 1.00 1.20 0.90 1.00 0.95

x Newness Adjustment 1.05 0.81 0.95 1.01 0.85

= Performance Factor 135% 88% 102% 186% 73%

x Market REVPAR $39.58 $39.58 $39.58 $39.58 $39.58

= Projected Performance $53.59 $34.97 $40.28 $73.79 $28.90

REVPAR latest 12 months $53.51 $35.08 $40.34 $73.63 $28.92

Index (Proj. Vs Actual) 100 100 100 100 100

Units in Above Subject 50 36 50 70 35

Average Units 54 43 54 70 43

Size Adjustment (33%) 3 7 3 0 8

Year Built 2012 1986 2007 2010 1999

Combining all six factors affecting a hotel's REVPAR performance, we calculate that the proposed

hotel's REVPAR will achieve 131% of the market average REVPAR in Year III, declining slowly

thereafter:

Wood County Hotel Derivation

Data in 2019 $'s Year I Year II Year III

Base: Name & Quality 1.17 1.17 1.17

x Brand Age Adjustment 1.12 1.12 1.12

x Site Value Adjustment 0.90 0.90 0.90

x Size Adjustment 0.95 0.95 0.95

x Other Adjustments 1.00 1.00 1.00

x Newness Adjustment 0.98 1.12 1.16

= Performance Factor 111% 126% 131%

x Market REVPAR $39.58 $39.58 $39.58

= Projected Performance $43.79 $50.05 $51.84

32

COMBINING THE ABOVE MARKET REVPAR PROJECTION AND THE HOTEL'S REVPAR INDEX TO DEVELOP REVENUES, OCCUPANCY, AND RATE

Using the projected Year III REVPAR index of 131%, the above process generates a theoretical

REVPAR of $51.84 in 2019 market dollars. This is the result of the Year III performance index of

131% (1.31) multiplied by the current market average REVPAR of $39.58.

Therefore, if the property were open today and were in its third year of operation, it should

theoretically be operating at the following level against 2018 market results: a $51.84 REVPAR

computes to gross room revenues of approximately $1,230,000 ($51.84 times 65 units times 365

days). Please note that the actual effect on the market due to the introduction of this project and other

new hotels is fully reflected in subsequent pro forma market projections and financials.

In latest year's dollars (2019), this projection for the project's theoretical Year III revenue breaks

down seasonally as follows:

Quarter First Second Third Fourth Year III

Room Revenues $272,480 $338,863 $317,576 $300,918 $1,229,838

% of Year 22.2% 27.6% 25.8% 24.5% 100

Seasonal Index 90 111 102 97 100

REVPAR$ $46.58 $57.29 $53.11 $50.32 $51.84

Source Strategies, Inc.'s projections of a reasonable rate and occupancy mix, a split of the subject

hotel's REVPAR for occupancy and rate, in latest year dollars, would be as follows:

Quarter First Second Third Fourth Year III

ADR - $ $67.53 $76.34 $70.46 $70.46 $71.29

Occupancy % 69.0% 75.0% 75.4% 71.4% 72.7%

REVPAR$ $46.58 $57.29 $53.11 $50.32 $51.84

33

TESTS FOR REASONABILITY

Comparisons made here support the reasonable nature of market and subject projections:

1. Individual property projections depend importantly on the projection of local market REVPAR -

forecast to rise at a conservative rate through 2026, starting at the current level. Over the next nine

years market REVPAR is projected to rise 2.5% per year, compared to a 3.5% increase on average

over the past nine years. REVPAR encompasses the net effects of room supply, room-night demand

and prices. Over the next nine years, we are comfortable with the 1.4% real compound demand gain

projected for the market, the projected lower net supply growth of 1.4% annually, and prices going up

2.5%. The resulting level of overall occupancy is 59% (equilibrium).

2. The derived Base Value of 1.17 (117%) for a Limited Service Hotel is reasonable when compared

to the Base Values of other hotels in these same markets. The hierarchy of REVPAR indices for

various brands is shown below:

REVPAR INDEX COMPARISON12

Brand REVPAR Index Hampton Inn 163

Holiday Express 157 Candlewood Suites 144

Selected Ltd.Service 117 Microtel 101

Quality Inn 98 Motel 6 76

Looking at the combined REVPAR of the 52 new hotels (post 2005 opening) of the four selected

limited brands13 of hotels in non-metro areas we find they had a high REVPAR average of $67.13.

This is a strong performance that we would not expect to be replicated in the Wood County area

market, but it is a good indicator of the potential for the products in non-metro areas.

3. Developing actual adjustment factors for the existing properties - so that their projected REVPAR

equals actual REVPAR - indicates why the REVPAR index projection has a high probability of being

achieved. The REVPAR differences between the closest key competitors appear to be both

12. Best Western, Sleep Inn, Studio 6, Microtel. 13. Unadjusted for physical aging of each brand.

34

explainable and reasonable, using the standard, Source Strategies' adjustment factor quantification.

For each property, revenues are driven first by chain name affiliation and product type, and are

further adjusted for size, segment, hotel age and site location. The REVPAR Index is then multiplied

by the actual local area market average to generate dollar REVPAR. We also include the theoretical

Year III performance of the subject hotel, as if it were open today and in its third year of operation,

as follows:

REVPAR DERIVATION

SUBJECT: Wood

County Hotel

Derivation Best

Western Lake Fork Best

Western Hampton Executive

Inn

Data in 2019 $'s Year III Emory Marina Mineola Sulphur Sp. Gilmer

Base: Name & Quality 1.17 1.19 0.74 1.19 1.63 0.74

x Brand Age Adjustment 1.12 1.16 1.23 1.16 1.01 1.23

x Site Value Adjustment 0.90 0.91 0.94 0.84 1.12 0.93

x Size Adjustment 0.95 1.03 1.07 1.03 1.00 1.08

x Other Adjustments 1.00 1.00 1.20 0.90 1.00 0.95

x Newness Adjustment 1.16 1.05 0.81 0.95 1.01 0.85

= Performance Factor 131% 135% 88% 102% 186% 73%

x Market REVPAR $39.58 $39.58 $39.58 $39.58 $39.58 $39.58

= Projected Performance $51.84 $53.59 $34.97 $40.28 $73.79 $28.90

Actual Past Year n/a 53.51 35.08 40.34 73.63 28.92

Index (Proj./Actual) n/a 100 100 100 100 100

Year Opened n/a 2012 1986 2007 2010 1999

# Rooms 65 50 36 50 70 35

35

4. The projected REVPAR performance of the Limited Service Hotel versus the local market average

reflects the fact that this hotel will be new, well-sized, and will offer a known brand and sought after

product type in a reasonable location near local amenities and attractions:

$20

$25

$30

$35

$40

$45

$50

$55

$60

$65

$70

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REVPAR History & Projection Wood County Area vs Wood County Hotel


Begin Projection

Year & Quarter

Rev

en

ue

per

Ava

ilab

le R

oo

m p

er D

ay

36

5. The graphically projected occupancy performance of the Limited Service Hotel versus the local

market average reflects the fact that this hotel will be above the overall market average because of its

branding, size, location, and newness:

6. An analysis of the Wood County Area Market14 reflect a mixture of mostly older and some

new hotels. Typically, a new hotel will have an inordinate advantage over older products. The

average hotel room in the local market is 20 years old, past the peak performing first ten years of the

life cycle of the typical hotel building, which becomes stylistically and structurally obsolete after 30+

years. This 30 year life cycle is significantly longer for high-rise/concrete structures. Out of 1,700

total rooms in the local market, 356, or 20% have been built since 2009, while 718, or 41% were

opened before 1999 (at least 20 years old). There is typically a wide and dramatic gap between the

14. Cities of Emory, Mineola, Alba, Quitman, Yantis, Sulphur Springs, Greenville, Quinlan, Gilmer, Gladewater, Lindale.

35

40

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Occupancy History & Projection Wood County Area vs. Wood County Hotel


Begin Projection

Year & Quarter

Occ

up

ancy

Per

cen

tage

(Selected Zip Codes)

37

performance of new and older properties, with newer hotel inventory easily outperforming older

hotels that are well past their peak performing years.

Well established consumer research strongly indicates that to consumers 'new' means 'clean,' and 'old'

means 'dirty', with cleanliness the number one consumer selection factor in lodging.

Wood County Area Hotel Market

Year Open # Rooms Hotel

2018 42 GUEST INN & SUITES

2016 12 SUNSET RESORT

2016 22 429 MARINA AND RESORT

2012 50 BEST WESTERN PLUS

2011 77 COMFORT SUITES

2010 70 HAMPTON INN

2010 18 COPPER LAKE STATE PARK

2009 65 LA QUINTA INN & SUITES

2008 65 COMFORT SUITES

2008 62 LA QUINTA INN & SUITES

2007 50 BEST WESTERN INN

2007 72 CLARION POINTE (FMR HIEXP)

2006 75 HAMPTON INN & SUITES

2005 79 BEST WESTERN (FMR LA QUINTA INN AND SUITES)

2001 80 HOLIDAY EXPRESS & SUITES

2001 62 HAMPTON INN

2000 60 DAYS INN & SUITES

2000 40 BUDGET INN

1999 35 EXECUTIVE INN (FMR RAMADA LTD)

1998 52 SUPER 8

1997 36 REGENCY INN (FMR BWEST)

1996 28 ALBANY INN & RV CAMPGROUND

1996 19 BENT TREE MOTEL

1996 55 BEST WESTERN (FMR EXPRESS/COMFO)

1995 52 MOTEL 6 (FMR DAYS/EXEC)

1986 36 LAKE FORK MARINA

1984 90 MOTEL 6

1984 48 ECONO LODGE (FMR QUALY/DAYS/HOLID)

1983 39 GILMER INN

1982 72 TRAIL DUST INN

1979 134 EXPRESS INN (FMR QUALY/DAYS/RAM/GKEY/HOL)

1972 57 KNIGHTS INN (FMR AMERICAN INN)

38

2009+ (10yrs)35620%

1999+ (11-20)68039%

Older than 1999 (21+)71841%

Local Hotel Inventory Age

39

PRO FORMA: Applying the project derivation factor (131% Year III) to the quarterly local market

REVPAR forecast results in the following progression:

PROJECT REVPAR PROJECTION

Year & Qtr Local

Market Subject Hotel

Subj/Local Index Annualized

211 37.77 41.79 111

212 46.46 51.40 111

213 43.07 47.65 111

214 40.81 45.15 111 111

221 38.72 48.96 126

222 47.62 60.21 126

223 44.14 55.82 126

224 41.83 52.89 126 126

231 39.68 51.97 131

232 48.81 63.92 131

233 45.25 59.26 131

234 42.87 56.15 131 131

241 40.68 52.23 128

242 50.03 64.24 128

243 46.38 59.55 128

244 43.94 56.42 128 128

251 41.69 53.53 128

252 51.28 65.84 128

253 47.54 61.04 128

254 45.04 57.84 128 128

261 42.73 53.80 126

262 52.56 66.17 126

263 48.72 61.34 126

264 46.17 58.12 126 126

271 43.80 54.06 123

272 53.88 66.49 123

273 49.94 61.64 123

274 47.32 58.40 123 123

281 44.90 54.33 121

282 55.22 66.82 121

283 51.19 61.94 121

284 48.51 58.69 121 121

291 46.02 54.59 119

292 56.60 67.15 119

293 52.47 62.24 119

294 49.72 58.98 119 119

301 47.17 54.86 116

302 58.02 67.48 116

303 53.91 62.70 116

304 51.09 59.41 116 116

CGR %

9 Yrs 2.5% 3.1%

First 5 Yrs 2.5% 5.2%

*CGR% measured from open date

40

This REVPAR forecast is then extended to room revenues - multiplying REVPAR by the number of

days in each quarter and by the number of rooms in the project - and to occupancy, estimated rate and

to room-nights sold:

RESULTING PROJECTION: Wood County Limited Service

Year & Qtr

Resulting Room

Revenues Annual Basis Estimated

% Occ ADR

Room Nights Sold

Annual Basis

RNS % Occ ADR

211 $244,483 60.6 $69.00 3543

212 $304,045 65.9 $78.00 3898

213 $284,945 66.2 $72.00 3958

214 $269,999 $1,103,472 62.7 $72.00 3750 15149 63.9% $72.84

221 $286,394 67.6 $72.45 3953

222 $356,167 73.5 $81.90 4349

223 $333,793 73.8 $75.60 4415

224 $316,284 $1,292,638 70.0 $75.60 4184 16901 71.2% $76.48

231 $304,038 69.0 $75.35 4035

232 $378,110 75.0 $85.18 4439

233 $354,357 75.4 $78.62 4507

234 $335,770 $1,372,274 71.4 $78.62 4271 17252 72.7% $79.54

241 $305,531 68.6 $76.10 4015

242 $379,966 74.7 $86.03 4417

243 $356,097 75.0 $79.41 4484

244 $337,418 $1,379,012 71.1 $79.41 4249 17165 72.3% $80.34

251 $313,169 68.3 $78.38 3995

252 $389,465 74.4 $88.48 4402

253 $364,999 74.7 $81.67 4469

254 $345,854 $1,413,487 70.8 $81.67 4235 17101 72.1% $82.66

261 $314,707 67.3 $79.95 3936

262 $391,378 73.3 $90.25 4337

263 $366,791 73.6 $83.31 4403

264 $347,552 $1,420,427 69.8 $83.31 4172 16848 71.0% $84.31

271 $316,252 66.9 $80.75 3916

272 $393,299 72.9 $91.15 4315

273 $368,592 73.3 $84.14 4381

274 $349,258 $1,427,402 69.4 $84.14 4151 16763 70.7% $85.15

281 $317,805 66.6 $81.56 3897

282 $395,230 72.6 $92.06 4293

283 $370,402 72.9 $84.98 4359

284 $350,973 $1,434,410 69.1 $84.98 4130 16678 70.3% $86.00

291 $319,365 66.3 $82.37 3877

292 $397,171 72.2 $92.98 4271

293 $372,221 72.5 $85.83 4337

294 $352,696 $1,441,453 68.7 $85.83 4109 16594 69.9% $86.86

301 $320,933 65.9 $83.20 3857

302 $399,121 71.8 $93.91 4250

303 $374,961 72.3 $86.69 4325

304 $355,293 $1,450,308 68.5 $86.69 4098 16531 69.7% $87.73

CGR %

9 Yrs 3.1% 1.0% 2.1% 1.0%

First 5Yrs 5.2% 2.1% 3.0% 2.1%

-CGR% measured from open date-

41

OPERATING COSTS15

Profitability and returns reflect the above revenue projections and the following other critical

assumptions: operating costs per occupied room approximate Select & Limited Service hotels of

similar size, rate, and occupancy and include appropriate fixed, semi-fixed and variable costs (Host

Almanac 2018: For the year 2017 by STR, and Source Strategies, Inc. data).

Estimates of operating costs take into account the lower costs of the West South Central region of the

United States, which had an average Per Occupied Room Cost of $55.23 (including royalties) in 2017

in Limited Service hotels - versus a national average of $65.08 - or 84.9% of the U.S. average. The

following cost comparisons have all been adjusted to reflect this 15.1% lower-cost environment that

may be expected in operating a hotel in the West South Central (WSC) region.

Rooms only Operating Costs per Occupied Room (before Fixed Charges) are estimated as:

Operating Costs per Occupied Room

Year

Cost per Occupied

Room

Room Nights Sold

Annual Operating

Cost

Year I $33.39 15,149 $505,762

Year II $34.44 16,901 $582,086

Year III $35.45 17,252 $611,556

a) $46.61 in the Host Almanac for Suburban hotels in 2017, adjusted to Southwest the WSC region of the USA. This POR cost translates to $49.45 when inflated 3% annually to Year 2019 dollars. b) $60.65 in the Host Almanac for Upper-Midscale hotels in 2017, adjusted to WSC USA. This POR cost translates to $64.35 when inflated to Year 2019 dollars. c) $46.99 in the Host Almanac for Interstate hotels in 2017, adjusted to WSC USA. This POR cost translates to $49.85 when inflated to Year 2019 dollars. d) $67.77 in the Host Almanac for Upscale hotels in 2017, adjusted to WSC USA. This translates to $71.90, when inflated to Year 2019 dollars. e) $31.58 in the Host Report for Midscale/Economy hotels, 2017 data, adjusted to WSC USA. This POR cost translates to $33.50 when inflated to Year 2019 dollars.

15. The calculation of the statistic of Operating Costs Per Occupied Room (before fixed/capital costs are deducted) is typically the important cost to examine carefully because it is highly stable and predictable, regardless of occupancy and rate. Looking at costs on a percentage basis can be highly misleading because of the high variability in average room revenues.

42

- Versus room revenues: a necessary marketing expense of 7% in Year I and thereafter. Marketing

includes reservation and advertising fees, sales expense, local advertising and the always important

outdoor billboards. A 5% annual franchise fee was also charged for this project.

A reserve for renovations is taken and subtracted from projected cash flows annually; such

renovation reserves amount to $789,412 in the first ten years ($12,145 per unit). Reserves insure that

future revenue streams continue by maintaining product quality at high levels as required by the

franchisor. Reserves are based on an extensive 2001 study, CapEx, by the International Society of

Hospitality Consultants. The study shows that required reserves average 5.5% over a 20 year period.

We have applied this reasonable 5.5% annual reserve annually for the first ten years.

- Total capital of $5,100,000 is allocated for the development of the project. The estimated total turn-

key cost (excluding land) of $72,308 per unit is average, in our experience. Land has been given an

estimated value of $400,000. Should capital needs vary, then returns would change proportionately.

The estimates of necessary capital include:

Total Investment Land Value $ 400,000 Improvements Budget $ 4,700,000 @ $72,308 per key16

Total Investment $ 5,100,000

<PROFIT & LOSS STATEMENTS FOLLOW OVERLEAF>

16. Developer estimates of land price and of development costs.

43

Wood County Hotel, Year I

Land Value: $400,000 Opening Date: 1/1/2021 # Rooms: 65 Cost Per Key: $72,308

QUARTER: First Second Third Fourth Year

Roomnights Sold 3,543 3,898 3,958 3,750 15,149

Roomnights Available 5,850 5,915 5,980 5,980 23,725

Occupancy % 60.6% 65.9% 66.2% 62.7% 63.9%

Average Rate $69.00 $78.00 $72.00 $72.00 $72.84

REVPAR $41.79 $51.40 $47.65 $45.15 $46.51

% Revenues

Room Revenues $244,483 $304,045 $284,945 $269,999 $1,103,472 95.7%

Other Revenue $11,002 $13,682 $12,823 $12,150 $49,656 4.3%

Total Sales $255,484 $317,727 $297,768 $282,149 $1,153,128 100.0%

Operating Expense - Payroll

Administration $14,052 $17,475 $16,377 $15,518 $63,422 5.5%

Housekeeping $10,630 $11,694 $11,873 $11,250 $45,446 3.9%

Laundry $4,252 $4,678 $4,749 $4,500 $18,179 1.6%

Front Desk $12,401 $13,643 $13,851 $13,125 $53,021 4.6%

Miscellaneous $3,832 $4,766 $4,467 $4,232 $17,297 1.5%

Taxes/Benefits $7,227 $8,361 $8,211 $7,780 $31,578 2.7%

Total Payroll $52,393 $60,617 $59,528 $56,405 $228,943 19.9%

Room Expense

Linen & Laundry $4,252 $4,678 $4,749 $4,500 $18,179 1.6%

Comp. F & B $4,429 $4,873 $4,947 $4,687 $18,936 1.6%

Total Room $8,681 $9,550 $9,696 $9,187 $37,115 3.2%

Other Expense

Phone Lines $5,315 $5,847 $5,936 $5,625 $22,723 2.0%

Electric/Utility $10,630 $11,694 $11,873 $11,250 $45,446 3.9%

Maintenance & Repair $2,555 $3,177 $2,978 $2,821 $11,531 1.0%

Total Other $18,499 $20,718 $20,787 $19,696 $79,701 6.9%

General & Administration

Marketing & Advertising $17,114 $21,283 $19,946 $18,900 $77,243 6.7%

Franchise Fee $12,224 $15,202 $14,247 $13,500 $55,174 4.8%

Credit Card $6,112 $7,601 $7,124 $6,750 $27,587 2.4%

Tot Admin & Gen $35,450 $44,087 $41,317 $39,150 $160,003 13.9%

Total Op Expense $115,024 $134,972 $131,328 $124,439 $505,762 43.9%

Income Before Fixed $140,461 $182,756 $166,440 $157,710 $647,366 56.1%

Fixed Charges

Insurance $5,110 $6,355 $5,955 $5,643 $23,063 2.0%

Property Tax $10,219 $12,709 $11,911 $11,286 $46,125 4.0%

Deprec SL 39 Yrs. $30,128 $30,128 $30,128 $30,128 $120,513 10.5%

Tot Capital Expense $45,457 $49,192 $47,994 $47,057 $189,700 16.5%

Income Before Tax & Fin $95,003 $133,564 $118,446 $110,653 $457,666 39.7%

Depreciation AddBack $30,128 $30,128 $30,128 $30,128 $120,513 10.5%

Renovation Reserve -$14,052 -$17,475 -$16,377 -$15,518 -$63,422 -5.5%

Cash Flow Before Tax & Fin $111,080 $146,217 $132,197 $125,263 $514,756 44.6%

44

Wood County Hotel, Year II - X


Year 2 3 4 5 6 7 8 9 10 CGR Yr 2-10

Roomnights Sold 16,901 17,252 17,165 17,101 16,848 16,763 16,678 16,594 16,531 1.0%

Roomnights Available 23,725 23,725 23,725 23,725 23,725 23,725 23,725 23,725 23,725 0.0%

Occupancy % 71.2% 72.7% 72.3% 72.1% 71.0% 70.7% 70.3% 69.9% 69.7% 1.0%

Average Rate* $76.48 $79.54 $80.34 $82.66 $84.31 $85.15 $86.00 $86.86 $87.73 2.1%

REVPAR $54.48 $57.84 $58.12 $59.58 $59.87 $60.16 $60.46 $60.76 $61.13 3.1%

Room Revenues $1,292,638 $1,372,274 $1,379,012 $1,413,487 $1,420,427 $1,427,402 $1,434,410 $1,441,453 $1,450,308 3.0%

Other Revenues $58,169 $61,752 $62,056 $63,607 $63,919 $64,233 $64,548 $64,865 $65,264 3.1%

Total Revenues $1,350,807 $1,434,026 $1,441,067 $1,477,094 $1,484,347 $1,491,635 $1,498,959 $1,506,319 $1,515,571 3.1%

Operating Expense - Payroll

Administration $65,166 $66,958 $68,800 $70,692 $72,636 $74,633 $76,685 $78,794 $80,961 2.8%

Housekeeping $52,096 $54,641 $55,861 $57,182 $57,886 $59,178 $60,499 $61,849 $63,308 3.8%

Laundry $20,839 $21,856 $22,344 $22,873 $23,154 $23,671 $24,199 $24,740 $25,323 3.8%

Front Desk $60,779 $63,748 $65,171 $66,713 $67,533 $69,041 $70,582 $72,157 $73,859 3.8%

Miscellaneous $19,828 $20,796 $21,261 $21,764 $22,031 $22,523 $23,026 $23,540 $24,095 3.8%

Taxes/Benefits $34,993 $36,480 $37,350 $38,276 $38,918 $39,847 $40,799 $41,773 $42,808 3.4%

Total Payroll $253,701 $264,480 $270,786 $277,499 $282,158 $288,893 $295,789 $302,853 $310,355 3.4%

Room Expense

Linen & Laundry $20,839 $21,856 $22,344 $22,873 $23,154 $23,671 $24,199 $24,740 $25,323 3.8%

Comp. F & B $21,707 $22,767 $23,275 $23,826 $24,119 $24,657 $25,208 $25,770 $26,378 3.8%

Total Room $42,545 $44,624 $45,620 $46,699 $47,273 $48,328 $49,407 $50,510 $51,702 3.8%

Other Expense

Phone Lines $26,048 $27,321 $27,930 $28,591 $28,943 $29,589 $30,249 $30,925 $31,654 3.8%

Electric $52,096 $54,641 $55,861 $57,182 $57,886 $59,178 $60,499 $61,849 $63,308 3.8%

Repairs & Maint. $20,262 $21,510 $21,616 $22,156 $22,265 $22,375 $22,484 $22,595 $22,734 7.8%

Total Other $98,407 $103,472 $105,407 $107,930 $109,093 $111,141 $113,232 $115,368 $117,696 4.4%

General & Administration

Marketing & Advert $90,485 $96,059 $96,531 $98,944 $99,430 $99,918 $100,409 $100,902 $101,522 3.1%

Franchise Fee $64,632 $68,614 $68,951 $70,674 $71,021 $71,370 $71,721 $72,073 $72,515 3.1%

Credit Card $32,316 $34,307 $34,475 $35,337 $35,511 $35,685 $35,860 $36,036 $36,258 3.1%

Total Admin & Gen $187,433 $198,980 $199,957 $204,956 $205,962 $206,973 $207,989 $209,011 $210,295 3.1%

Total Oper Expense $582,086 $611,556 $621,770 $637,083 $644,487 $655,335 $666,418 $677,742 $690,046 3.5%

Gross Op Profit $768,721 $822,470 $819,297 $840,011 $839,860 $836,300 $832,540 $828,577 $825,525 2.7%

45

Wood County Hotel, Year II - X


Year 2 3 4 5 6 7 8 9 10 CGR Yr 2-10

Roomnights Sold 16,901 17,252 17,165 17,101 16,848 16,763 16,678 16,594 16,531 1.0%

Roomnights Available 23,725 23,725 23,725 23,725 23,725 23,725 23,725 23,725 23,725 0.0%

Occupancy % 71.2% 72.7% 72.3% 72.1% 71.0% 70.7% 70.3% 69.9% 69.7% 1.0%

Average Rate* $76.48 $79.54 $80.34 $82.66 $84.31 $85.15 $86.00 $86.86 $87.73 2.1%

REVPAR $54.48 $57.84 $58.12 $59.58 $59.87 $60.16 $60.46 $60.76 $61.13 3.1%

Room Revenues $1,292,638 $1,372,274 $1,379,012 $1,413,487 $1,420,427 $1,427,402 $1,434,410 $1,441,453 $1,450,308 3.0%

Other Revenues $58,169 $61,752 $62,056 $63,607 $63,919 $64,233 $64,548 $64,865 $65,264 3.1%

Total Revenues $1,350,807 $1,434,026 $1,441,067 $1,477,094 $1,484,347 $1,491,635 $1,498,959 $1,506,319 $1,515,571 3.1%

Total Oper Expense $582,086 $611,556 $621,770 $637,083 $644,487 $655,335 $666,418 $677,742 $690,046 3.5%

Income Before Fixed Charges $768,721 $822,470 $819,297 $840,011 $839,860 $836,300 $832,540 $828,577 $825,525 2.7%

Fixed Charges

Insurance $23,697 $24,348 $25,018 $25,706 $26,413 $27,139 $27,886 $28,652 $29,440 2.8%

Property Tax $47,394 $48,697 $50,036 $51,412 $52,826 $54,279 $55,771 $57,305 $58,881 2.8%

Depr. SL 39 Yrs. $120,513 $120,513 $120,513 $120,513 $120,513 $120,513 $120,513 $120,513 $120,513 0.0%

Total Fixed Charges $191,603 $193,558 $195,567 $197,631 $199,752 $201,931 $204,170 $206,470 $208,834 1.1%

Income Before Tax & Financing $577,118 $628,912 $623,731 $642,380 $640,108 $634,369 $628,371 $622,107 $616,691 3.4%

Depr. AddBack $120,513 $120,513 $120,513 $120,513 $120,513 $120,513 $120,513 $120,513 $120,513 0.0%

Renovation Reserve -$74,294 -$78,871 -$79,259 -$81,240 -$81,639 -$82,040 -$82,443 -$82,848 -$83,356 3.1%

Cash Flow Bef Tax & Fin $623,336 $670,554 $664,985 $681,653 $678,982 $672,842 $666,441 $659,772 $653,847 2.7%

PO Box 120055 134 Laurel Heights, San Antonio, TX 78212 210-734-3434 Fax 210-735-7970 www.SourceStrategies.Org

46

October 24, 2019

OPINION

This report is based on independent opinion, surveys and research from sources

considered reliable. No representation is made as to accuracy or completeness and no

contingent liability of any kind can be accepted.

The study projections are dependent on the developer building and operating a high

quality limited service hotel brand, like those listed in this report, including certain

amenities, and spending the appropriate operating funds necessary to generate projected

revenues, most especially budgeted funds for aforementioned amenities and for

marketing, including a listing in the American Automobile Association Texas Tourbook.

It is our opinion that this report fairly and conservatively represents the room revenues,

profitability and return on investment performance that can be achieved by developing

and operating a 65 unit Limited Service Hotel at the aforementioned sites in Wood

County, Texas.

Please contact us with any questions at (210) 734-3434.

Respectfully submitted,

Todd Walker, Bruce H. Walker, President Chairman

47

EXHIBITS:

I 13 County Market, Wood County Area, Aggregated Basis II Local Market History: By Segment and Brand, Past Five Years, Annual Basis III Individual Hotel/Motel Histories Local Market IV Non-Metro Areas of Texas Excluding Metros, and the Luxury, Upscale, Mid/Upscales, & Suite Segments, & Products Over $150 per Night V The Case For Downsizing Hotels VI Start-up Performance of New Hotels VII CAPEX Study of Capital Expenditures VIII Preparer Qualifications and Client List IX Source Strategies Database Methodology X Hotel Brand Report Newsletter (separate file)

© Copyright SOURCE STRATEGIES, INC. | All Rights Reserved | SourceStrategies.org

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LODGING MARKET: 13 COUNTY AREA # Rnights $ Rooms Hotels # sold 1 Revenues % $ $ YRQ Motels Rooms (000s) (000 s) OCC2 Rate3 RPAR4 --- ------ ------ ------- ---------- ---- ----- ----- 093 142 8,321 389.8 24,494 50.9 62.84 32.00 094 142 8,461 373.5 22,005 48.0 58.91 28.27 *TOTAL 2009 763.3 46,498 49.4 60.92 30.12 101 147 8,646 380.0 23,201 48.8 61.05 29.82 102 152 8,739 423.4 28,009 53.2 66.16 35.22 103 145 8,661 409.5 26,265 51.4 64.14 32.96 104 140 8,380 382.1 23,452 49.6 61.37 30.42 *TOTAL 2010 1,595.0 100,927 50.8 63.28 32.13 111 139 8,406 388.2 23,896 51.3 61.55 31.59 112 145 8,616 428.5 28,849 54.7 67.33 36.79 113 138 8,518 431.7 28,060 55.1 65.00 35.81 114 133 8,346 402.0 25,373 52.3 63.12 33.04 *TOTAL 2011 1,650.3 106,177 53.4 64.34 34.34 121 131 8,047 398.3 25,974 55.0 65.21 35.86 122 136 8,206 451.4 30,421 60.5 67.39 40.74 123 130 7,939 418.2 28,322 57.3 67.72 38.78 124 128 7,924 402.0 26,032 55.1 64.75 35.71 *TOTAL 2012 1,670.0 110,749 57.0 66.32 37.79 131 128 7,886 401.4 26,066 56.6 64.94 36.73 132 136 8,147 452.2 31,300 61.0 69.21 42.22 133 134 8,216 425.4 28,735 56.3 67.55 38.02 134 128 8,008 414.3 26,789 56.2 64.65 36.36 *TOTAL 2013 1,693.3 112,890 57.5 66.67 38.35 141 129 8,029 424.5 27,399 58.7 64.55 37.92 142 133 8,083 468.1 32,890 63.6 70.26 44.71 143 131 7,994 441.7 31,374 60.1 71.02 42.66 144 129 8,080 435.7 29,422 58.6 67.54 39.58 *TOTAL 2014 1,770.0 121,084 60.3 68.41 41.23 151 134 8,433 454.0 30,585 59.8 67.37 40.30 152 136 8,393 475.6 34,677 62.3 72.91 45.40 153 132 8,283 439.2 32,172 57.6 73.25 42.22 154 130 8,340 422.3 29,036 55.0 68.75 37.84 *TOTAL 2015 1,791.2 126,471 58.7 70.61 41.44 161 133 8,475 429.7 27,598 56.3 64.22 36.18 162 138 8,688 470.8 33,433 59.5 71.02 42.29 163 136 8,658 450.2 32,761 56.5 72.78 41.13 164 134 8,605 422.3 29,037 53.3 68.75 36.68 *TOTAL 2016 1,773.0 122,829 56.4 69.28 39.10 171 135 8,693 432.7 28,673 55.3 66.27 36.65 172 146 8,968 485.2 35,612 59.5 73.39 43.64 173 139 8,866 453.6 33,104 55.6 72.97 40.58 174 135 8,742 419.8 28,321 52.2 67.47 35.21 *TOTAL 2017 1,791.3 125,710 55.7 70.18 39.06 181 134 8,637 440.0 28,405 56.6 64.55 36.54


49

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I

LODGING MARKET: 13 COUNTY AREA # Rnights $ Rooms Hotels # sold 1 Revenues % $ $ YRQ Motels Rooms (000s) (000 s) OCC2 Rate3 RPAR4 --- ------ ------ ------- ---------- ---- ----- ----- 171 135 8,693 432.7 28,673 55.3 66.27 36.65 172 146 8,968 485.2 35,612 59.5 73.39 43.64 173 139 8,866 453.6 33,104 55.6 72.97 40.58 174 135 8,742 419.8 28,321 52.2 67.47 35.21 *TOTAL 2017 1,791.3 125,710 55.7 70.18 39.06 181 134 8,637 440.0 28,405 56.6 64.55 36.54 182 148 9,158 492.5 36,278 59.1 73.67 43.53 183 141 8,979 465.3 34,331 56.3 73.78 41.56 184 137 8,889 464.7 32,054 56.8 68.98 39.20 *TOTAL 2018 1,862.5 131,068 57.2 70.37 40.27 191 142 9,076 484.3 31,904 59.3 65.88 39.06 192 147 9,255 523.6 38,268 62.2 73.08 45.44 *TOTAL 2019 1,007.9 70,171 60.8 69.62 42.30 *TOTAL 17,368.0 1,174,576 56.2 67.63 38.00 1. Roomnights sold (derived from est. rate and actual room revenues) 2. Occupancy: nights sold divided by nights available for sale(x 100) 3. Average price for each roomnight sold;from Directories and surveys 4. $ Revenue per available room per day (room sales per day)


50

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I

HOTEL MARKET; WOOD COUNTY AREA TOWNS # RNIGHTS $ ROOMS Hotels # SOLD 1 REVENUES % $ $ YRQ Motels ROOMS (000S) (000 S) OCC2 Rate3 RPAR4 --- ------ ------ ------- ---------- ---- ----- ----- 093 34 1,698 79.6 4,850 50.9 60.94 31.05 094 33 1,719 74.5 4,306 47.1 57.81 27.23 *TOTAL 2009 154.1 9,156 49.0 59.43 29.12 101 36 1,805 73.5 4,174 45.2 56.80 25.70 102 41 1,875 86.9 5,412 50.9 62.29 31.72 103 35 1,751 77.2 4,664 47.9 60.38 28.95 104 33 1,675 71.6 4,181 46.5 58.37 27.13 *TOTAL 2010 309.3 18,432 47.7 59.60 28.43 111 33 1,683 69.7 3,924 46.0 56.30 25.90 112 38 1,779 86.2 5,384 53.2 62.49 33.26 113 33 1,745 84.6 5,131 52.7 60.64 31.96 114 31 1,715 74.3 4,375 47.1 58.89 27.73 *TOTAL 2011 314.8 18,813 49.8 59.77 29.78 121 31 1,676 74.2 4,337 49.2 58.47 28.75 122 38 1,830 98.0 6,003 58.9 61.23 36.04 123 32 1,716 82.4 5,053 52.2 61.29 32.01 124 30 1,668 78.1 4,499 50.9 57.59 29.32 *TOTAL 2012 332.8 19,892 52.9 59.78 31.64 131 31 1,646 81.8 4,643 55.2 56.75 31.34 132 35 1,705 94.8 5,752 61.1 60.70 37.08 133 33 1,717 92.1 5,483 58.3 59.51 34.71 134 30 1,651 87.9 5,044 57.9 57.39 33.21 *TOTAL 2013 356.6 20,922 58.2 58.67 34.12 141 30 1,626 82.0 4,630 56.0 56.47 31.64 142 34 1,684 98.2 6,248 64.1 63.64 40.77 143 31 1,596 86.2 5,593 58.7 64.88 38.09 144 29 1,662 87.5 5,164 57.2 59.04 33.77 *TOTAL 2014 353.8 21,635 59.0 61.14 36.10 151 30 1,747 87.8 5,088 55.8 57.96 32.36 152 34 1,762 103.5 6,843 64.6 66.09 42.68 153 29 1,592 87.6 5,740 59.8 65.52 39.19 154 27 1,558 79.9 5,043 55.8 63.10 35.18 *TOTAL 2015 358.9 22,714 59.1 63.30 37.40 161 29 1,650 87.5 4,914 58.9 56.14 33.09 162 34 1,802 109.6 7,074 66.9 64.52 43.14 163 32 1,774 100.9 6,724 61.8 66.63 41.20 164 30 1,720 89.5 5,790 56.6 64.70 36.59 *TOTAL 2016 387.6 24,502 61.1 63.22 38.65


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I

HOTEL MARKET; WOOD COUNTY AREA TOWNS # RNIGHTS $ ROOMS Hotels # SOLD 1 REVENUES % $ $ YRQ Motels ROOMS (000S) (000 S) OCC2 Rate3 RPAR4 --- ------ ------ ------- ---------- ---- ----- ----- 171 31 1,757 91.9 5,461 58.1 59.40 34.53 172 36 1,858 106.8 7,198 63.1 67.42 42.57 173 30 1,720 88.8 6,001 56.1 67.58 37.92 174 30 1,720 85.9 5,671 54.3 65.99 35.84 *TOTAL 2017 373.4 24,331 58.0 65.15 37.80 181 28 1,624 87.0 5,247 59.5 60.30 35.90 182 35 1,838 102.9 7,059 61.5 68.60 42.20 183 31 1,742 93.1 6,407 58.1 68.84 39.98 184 29 1,685 88.2 5,876 56.9 66.60 37.90 *TOTAL 2018 371.2 24,589 59.0 66.24 39.11 191 29 1,672 86.6 5,412 57.6 62.47 35.96 192 32 1,754 99.8 7,057 62.5 70.72 44.21 *TOTAL 2019 186.4 12,469 60.1 66.89 40.21 *TOTAL 3,498.8 217,454 55.9 62.15 34.74 1. Roomnights sold (derived from est. rate and actual room revenues) 2. Occupancy: nights sold divided by nights available for sale(x 100) 3. Average price for each roomnight sold;from Directories and surveys 4. $ Revenue per available room per day (room sales per day)


52

EXH

IBIT

II

PERIOD: 12 MONTHS ENDING JUN 30, 2019 HOTEL MARKET; WOOD COUNTY AREA TOWNS # * EST. $ EST. # RMS % RNS % AMT. % EST. $ $ BRAND HTL 000S RMS 000S RNS 000S AMT %OCC RATE RPAR ----- --- ---- ---- ------ ---- -------- ---- ---- ---- ---- HOTELS COMFO STE 2 .1 8.3 35 9.6 3,071 12.4 68.2 86.94 59.26 BEST WEST 4 .2 13.7 53 14.4 3,949 16.0 62.0 74.61 46.24 HAMPTON 3 .2 12.1 52 14.0 5,432 21.9 68.3 105.28 71.90 HOLID EXP 2 .2 8.9 35 9.5 3,048 12.3 63.2 86.98 54.94 LA QUINTA 2 .1 7.4 31 8.3 2,309 9.3 66.0 75.44 49.81 TOT LTD SVE 11 .7 42.0 170 46.3 14,739 59.5 64.8 86.61 56.08 ECONOLODG 1 .0 2.8 7 1.9 219 .9 39.7 31.45 12.50 MOTEL 6 2 .1 8.3 31 8.4 1,112 4.5 59.3 36.17 21.45 SUPER 8 1 .1 3.0 11 3.0 465 1.9 58.9 41.65 24.52 TOT BUDGET 4 .2 14.1 49 13.3 1,796 7.3 55.3 36.75 20.34 $60-99ADR 3 .1 5.9 20 5.6 1,291 5.2 55.7 63.24 35.21 LT $60ADR 10 .4 25.1 80 21.8 2,862 11.6 51.1 35.76 18.26 TOT IND HTL 13 .5 30.9 100 27.3 4,153 16.8 51.9 41.34 21.47 TOT HOTELS 30 1.6 95.4 355 96.5 23,760 96.0 59.5 66.96 39.84 OTH LODGING CABINS 3 .0 .6 1 .3 133 .5 27.2 134.17 36.43 FISH CAMP 2 .0 2.4 6 1.5 500 2.0 36.6 90.20 33.03 RV PARK 1 .0 1.6 6 1.7 359 1.5 61.4 57.26 35.15 TOT OTH IND 6 .1 4.6 13 3.5 992 4.0 44.2 77.46 34.21 TOT OTHER 6 .1 4.6 13 3.5 992 4.0 44.2 77.46 34.21 TOT MARKET 36 1.7 100.0 368 100.0 24,752 100 58.8 67.32 39.58 * All figures annualized. Includes taxed and est non-tax room revenues. Independents are categorized by price and product type (Hotels and other)


53

EXH

IBIT

II

PERIOD: 12 MONTHS ENDING JUN 30, 2018 HOTEL MARKET; WOOD COUNTY AREA TOWNS # * EST. $ EST. # RMS % RNS % AMT. % EST. $ $ BRAND HTL 000S RMS 000S RNS 000S AMT %OCC RATE RPAR ----- --- ---- ---- ------ ---- -------- ---- ---- ---- ---- HOTELS COMFO STE 2 .1 8.2 33 8.9 2,778 11.6 62.9 85.18 53.60 BEST WEST 4 .2 13.6 53 14.6 3,883 16.2 62.1 73.15 45.46 HAMPTON 3 .2 12.0 51 14.0 5,577 23.3 67.5 109.36 73.82 HOLID EXP 2 .2 8.8 36 9.9 3,134 13.1 65.1 86.81 56.49 LA QUINTA 2 .1 7.4 26 7.0 1,872 7.8 55.4 72.88 40.37 TOT LTD SVE 11 .7 41.7 166 45.5 14,466 60.3 63.1 87.22 55.04 ECONOLODG 2 .1 3.9 11 3.1 325 1.4 46.0 28.52 13.12 MOTEL 6 2 .1 8.2 33 9.0 1,127 4.7 63.5 34.27 21.75 SUPER 8 1 .1 3.0 10 2.7 399 1.7 50.9 41.26 21.02 TOT BUDGET 5 .3 15.2 54 14.8 1,851 7.7 56.5 34.31 19.37 $60-99ADR 2 .1 5.2 18 4.8 1,085 4.5 53.7 61.58 33.04 LT $60ADR 10 .4 24.9 81 22.1 2,724 11.4 51.5 33.76 17.37 TOT IND HTL 12 .5 30.1 98 27.0 3,809 15.9 51.8 38.75 20.09 TOT HOTELS 30 1.6 95.2 351 96.2 22,904 95.5 58.5 65.30 38.18 OTH LODGING CABINS 4 .0 .7 2 .5 214 .9 35.5 127.81 45.34 FISH CAMP 2 .0 2.4 6 1.6 541 2.3 39.1 91.25 35.70 RV PARK 1 .0 1.6 6 1.7 320 1.3 61.5 50.93 31.33 TOT OTH IND 7 .1 4.8 14 3.8 1,075 4.5 46.2 77.40 35.73 TOT OTHER 7 .1 4.8 14 3.8 1,075 4.5 46.2 77.40 35.73 TOT MARKET 37 1.7 100.0 365 100.0 23,979 100 57.9 65.76 38.07 * All figures annualized. Includes taxed and est non-tax room revenues. Independents are categorized by price and product type (Hotels and other)


54

EXH

IBIT

II

PERIOD: 12 MONTHS ENDING JUN 30, 2017 HOTEL MARKET; WOOD COUNTY AREA TOWNS # * EST. $ EST. # RMS % RNS % AMT. % EST. $ $ BRAND HTL 000S RMS 000S RNS 000S AMT %OCC RATE RPAR ----- --- ---- ---- ------ ---- -------- ---- ---- ---- ---- HOTELS COMFO STE 2 .1 8.0 35 8.9 3,045 12.1 66.9 87.77 58.75 BEST WEST 4 .2 13.2 52 13.5 4,058 16.1 61.4 77.39 47.52 HAMPTON 3 .2 11.6 52 13.3 5,703 22.7 68.3 110.50 75.49 HOLID EXP 2 .2 8.6 34 8.7 2,836 11.3 61.1 83.65 51.12 LA QUINTA 2 .1 7.1 28 7.2 2,098 8.3 60.5 74.83 45.25 TOT LTD SVE 11 .7 40.5 166 42.7 14,695 58.4 63.2 88.54 55.92 ECONOLODG 1 .0 2.4 10 2.7 282 1.1 67.7 27.15 18.39 MOTEL 6 2 .1 8.0 33 8.5 1,145 4.6 63.9 34.57 22.10 SUPER 8 1 .1 2.9 11 2.9 563 2.2 60.5 49.04 29.65 TOT BUDGET 4 .2 13.3 55 14.1 1,990 7.9 63.8 36.19 23.10 $60-99ADR 1 .0 1.0 2 .6 209 .8 37.2 85.49 31.77 LT $60ADR 12 .6 32.7 118 30.4 4,244 16.9 55.9 35.84 20.02 TOT IND HTL 13 .6 33.7 121 31.1 4,452 17.7 55.3 36.84 20.38 TOT HOTELS 30 1.7 95.5 377 96.8 24,183 96.1 60.8 64.23 39.05 OTH LODGING CABINS 2 .0 .5 1 .4 184 .7 40.2 131.83 52.95 FISH CAMP 3 .0 2.4 6 1.5 547 2.2 37.2 93.90 34.89 RV PARK 1 .0 1.6 5 1.4 258 1.0 52.0 48.58 25.26 TOT OTH IND 6 .1 4.5 13 3.2 989 3.9 42.7 78.91 33.67 TOT OTHER 6 .1 4.5 13 3.2 989 3.9 42.7 78.91 33.67 TOT MARKET 36 1.8 100.0 389 100.0 25,172 100 60.0 64.70 38.81 * All figures annualized. Includes taxed and est non-tax room revenues. Independents are categorized by price and product type (Hotels and other)


55

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IBIT

II

PERIOD: 12 MONTHS ENDING JUN 30, 2016 HOTEL MARKET; WOOD COUNTY AREA TOWNS # * EST. $ EST. # RMS % RNS % AMT. % EST. $ $ BRAND HTL 000S RMS 000S RNS 000S AMT %OCC RATE RPAR ----- --- ---- ---- ------ ---- -------- ---- ---- ---- ---- HOTELS COMFO STE 2 .1 8.6 34 9.4 2,779 12.2 66.2 80.94 53.62 BEST WEST 4 .2 14.2 51 13.9 3,715 16.3 59.5 73.11 43.50 HAMPTON 3 .2 12.5 49 13.4 5,090 22.4 64.8 103.89 67.36 HOLID EXP 2 .2 9.2 36 10.0 2,915 12.8 65.5 80.21 52.54 LA QUINTA 2 .1 7.7 28 7.6 1,983 8.7 59.9 71.45 42.78 TOT LTD SVE 11 .7 43.6 164 44.9 13,703 60.2 62.4 83.60 52.14 ECONOLODG 1 .0 1.3 6 1.6 145 .6 74.6 25.48 19.01 MOTEL 6 2 .1 8.6 33 9.2 1,021 4.5 64.6 30.53 19.71 SUPER 8 1 .1 3.2 12 3.4 431 1.9 64.4 35.23 22.69 TOT BUDGET 4 .2 13.0 51 14.1 1,597 7.0 65.5 31.09 20.36 $60-99ADR 2 .1 3.2 10 2.6 552 2.4 49.3 57.87 28.55 LT $60ADR 10 .4 26.8 94 25.8 3,230 14.2 58.3 34.37 20.03 TOT IND HTL 12 .5 30.0 104 28.4 3,782 16.6 57.3 36.54 20.94 TOT HOTELS 29 1.6 95.2 353 96.8 21,861 96.0 61.6 61.91 38.11 OTH LODGING CABINS 1 .0 .5 1 .3 116 .5 33.3 126.94 42.27 FISH CAMP 3 .0 2.6 6 1.6 576 2.5 38.2 96.19 36.71 RV PARK 1 .0 1.7 5 1.3 218 1.0 45.3 47.12 21.34 TOT OTH IND 5 .1 4.8 12 3.2 910 4.0 40.2 78.93 31.76 TOT OTHER 5 .1 4.8 12 3.2 910 4.0 40.2 78.93 31.76 TOT MARKET 34 1.7 100.0 365 100.0 22,771 100 60.5 62.45 37.81 * All figures annualized. Includes taxed and est non-tax room revenues. Independents are categorized by price and product type (Hotels and other)


56

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IBIT

II

PERIOD: 12 MONTHS ENDING JUN 30, 2015 HOTEL MARKET; WOOD COUNTY AREA TOWNS # * EST. $ EST. # RMS % RNS % AMT. % EST. $ $ BRAND HTL 000S RMS 000S RNS 000S AMT %OCC RATE RPAR ----- --- ---- ---- ------ ---- -------- ---- ---- ---- ---- HOTELS COMFO STE 3 .2 11.9 44 12.0 3,004 13.2 59.6 68.36 40.74 BEST WEST 4 .2 13.8 54 14.8 3,950 17.4 63.3 73.09 46.25 HAMPTON 3 .2 12.2 51 13.9 5,011 22.1 67.3 98.55 66.32 HOLID EXP 2 .2 9.0 38 10.3 2,865 12.6 67.7 76.27 51.63 LA QUINTA 2 .1 7.5 29 7.9 1,992 8.8 62.3 69.01 42.98 TOT LTD SVE 11 .7 42.6 171 46.9 13,818 60.9 65.2 80.65 52.58 DAYS INN 1 .1 3.1 11 2.9 372 1.6 56.7 34.59 19.61 ECONOLODG 1 .0 1.3 4 1.1 102 .5 54.1 24.49 13.24 MOTEL 6 1 .1 5.3 22 6.1 663 2.9 67.8 29.79 20.20 QUALITY 1 .1 5.5 18 5.0 679 3.0 54.4 36.97 20.12 SUPER 8 1 .1 3.1 10 2.8 354 1.6 54.7 34.07 18.63 TOT BUDGET 5 .3 18.2 66 18.1 2,171 9.6 58.7 32.91 19.33 $60-99ADR 1 .0 1.1 2 .6 174 .8 35.0 75.61 26.46 LT $60ADR 9 .4 21.0 68 18.6 2,405 10.6 52.3 35.43 18.52 TOT IND HTL 10 .4 22.1 70 19.2 2,579 11.4 51.4 36.74 18.90 TOT HOTELS 29 1.6 94.8 351 96.3 21,571 95.1 60.0 61.38 36.86 OTH LODGING LT $60ADR 2 .0 .4 1 .3 130 .6 40.3 141.42 56.95 TOT IND HTL 2 .0 .4 1 .3 130 .6 40.3 141.42 56.95 CABINS 2 .0 .6 1 .4 165 .7 38.3 111.84 42.88 FISH CAMP 3 .0 2.5 6 1.6 548 2.4 37.6 92.85 34.93 RV PARK 1 .0 1.7 5 1.4 274 1.2 51.2 52.41 26.84 TOT OTH IND 6 .1 4.8 13 3.5 987 4.3 42.4 78.28 33.18 TOT OTHER 8 .1 5.2 14 3.7 1,117 4.9 42.2 82.56 34.87 TOT MARKET 37 1.7 100.0 365 100.0 22,688 100 59.1 62.17 36.75 * All figures annualized. Includes taxed and est non-tax room revenues. Independents are categorized by price and product type (Hotels and other)


57

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III

HOTEL MARKET; WOOD COUNTY AREA TOWNS E 3 YR AVG P CITY ADDR ZIP S EST 4 OP ADJ 1 T ---- ---- --- T AVG. % -- ----- - # TAXABLE GROSS ADJ 1 DAILY OCC $ 5 YRQ RMS BRAND REVENUE REVENUE FACTOR 2 RATE EST REVPAR --- ---- ----- ------- -------- ------ - ----- --- ------ ALBA 275 COUNTY ROAD 75410 LAKE FORK MARINA 86 1.035 F 151 36 76,935 79,628 .000 G 71.71 34 24.58 152 36 192,270 198,999 .000 G 99.30 61 60.74 153 36 104,240 107,888 .000 G 94.66 34 32.57 154 36 79,640 82,427 .000 G 76.23 33 24.89 161 36 91,671 94,879 .000 G 77.83 38 29.28 162 36 185,295 191,780 .000 G 106.32 55 58.54 163 36 97,210 103,160 1.061 101.50 31 31.15 164 36 70,452 72,918 .000 G 76.50 29 22.02 171 36 91,765 94,977 .000 G 81.39 36 29.31 172 36 186,301 192,822 .000 G 94.23 62 58.86 173 36 103,331 106,646 1.032 87.67 37 32.20 174 36 72,638 75,180 .000 G 77.23 29 22.70 181 36 93,060 96,317 .000 G 80.11 37 29.73 182 36 204,758 212,000 1.035 99.01 65 64.71 183 36 93,743 97,000 1.035 G 90.78 32 29.29 184 36 71,133 74,000 1.035 G 75.14 30 22.34 191 36 90,206 93,000 1.035 G 80.03 36 28.70 192 36 190,519 197,000 1.035 G 100.10 60 60.13 ALBANY 424 E US HIGHWA 76430 ALBANY INN & RV CAMPGROUND 96 1.100 V 151 28 72,118 81,073 1.124 51.38 63 32.17 152 28 78,675 85,798 1.091 55.03 61 33.67 153 28 65,067 65,722 1.010 53.03 48 25.51 154 28 48,012 50,392 1.050 43.42 45 19.56 161 28 49,868 51,243 1.028 44.33 46 20.33 162 28 48,288 50,708 1.050 47.21 42 19.90 163 28 63,584 65,984 1.038 50.59 51 25.61 164 28 74,313 77,393 1.041 50.59 59 30.04 171 28 56,117 59,060 1.052 46.51 50 23.44 172 28 49,871 55,723 1.117 45.96 48 21.87 173 28 55,571 64,393 1.159 51.06 49 25.00 174 28 81,496 93,366 1.146 55.67 65 36.24 181 28 67,407 77,801 1.154 45.79 67 30.87 182 28 76,480 84,635 1.107 51.27 65 33.22 183 28 83,099 87,859 1.057 55.07 62 34.11 184 28 87,417 94,855 1.085 56.56 65 36.82 191 28 74,550 83,455 1.119 55.74 59 33.12 192 28 86,277 93,082 1.079 61.83 59 36.53 EMORY 381 W LENNON DR 75440 BENT TREE MOTEL 96 1.350 H 152 19 41,294 42,044 1.018 42.88 57 24.32 153 19 37,359 37,758 1.011 42.40 51 21.60 162 19 38,509 39,343 1.022 45.16 50 22.75 163 19 42,263 57,055 .000 G 48.09 68 32.64 164 19 36,211 36,610 1.011 42.22 50 20.94 171 19 33,654 45,433 .000 G 38.99 68 26.57


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E 3 YR AVG P CITY ADDR ZIP S EST 4 OP ADJ 1 T ---- ---- --- T AVG. % -- ----- - # TAXABLE GROSS ADJ 1 DAILY OCC $ 5 YRQ RMS BRAND REVENUE REVENUE FACTOR 2 RATE EST REVPAR --- ---- ----- ------- -------- ------ - ----- --- ------ EMORY 381 W LENNON DR 75440 BENT TREE MOTEL 96 1.350 H 172 19 49,621 58,945 1.188 46.89 73 34.09 173 19 47,384 66,060 1.394 55.18 68 37.79 174 19 33,528 44,529 1.328 44.81 57 25.47 192 19 37,075 47,952 1.293 48.06 58 27.73 1026 E LENNON D 75440 BEST WESTERN PLUS 12 1.030 H 151 50 BWEST 94,737 96,368 1.017 55.90 38 21.42 152 50 BWEST 203,991 210,111 .000 G 66.51 69 46.18 153 50 BWEST 150,271 155,925 1.038 66.26 51 33.90 154 50 BWEST 145,564 146,399 1.006 62.79 51 31.83 161 50 BWEST 107,588 108,281 1.006 56.27 43 24.06 162 50 BWEST 138,568 142,725 .000 G 65.58 48 31.37 163 50 BWEST 164,183 169,051 1.030 70.88 52 36.75 164 50 BWEST 159,000 163,770 .000 1 68.88 52 35.60 171 50 BWEST 141,663 143,708 1.014 61.21 52 31.94 172 50 BWEST 224,793 231,537 .000 G 72.50 70 50.89 173 50 BWEST 160,443 165,256 .000 G 70.07 51 35.93 174 50 BWEST 153,191 156,234 1.020 65.45 52 33.96 181 50 BWEST 137,621 145,366 1.056 59.28 54 32.30 182 50 BWEST 213,014 215,086 1.010 74.19 64 47.27 183 50 BWEST 188,387 189,840 1.008 73.16 56 41.27 184 50 BWEST 171,273 172,098 1.005 65.34 57 37.41 191 50 BWEST 143,751 146,663 1.020 58.04 56 32.59 192 50 BWEST 225,875 227,597 1.008 74.26 67 50.02 GILMER 920 US HIGHWAY 75644 EXECUTIVE INN (FMR RAMADA 99 1.040 H 151 35 78,373 88,311 1.127 54.79 51 28.04 152 35 102,001 107,704 1.056 59.29 57 33.82 153 35 91,634 98,711 1.077 60.19 51 30.66 154 35 75,527 77,473 1.026 51.44 47 24.06 161 35 76,715 84,945 1.107 45.98 59 26.97 162 35 70,000 72,800 .000 1 35.45 64 22.86 163 35 90,171 92,609 1.027 31.91 90 28.76 164 35 75,157 78,287 1.042 30.30 80 24.31 171 35 95,273 99,936 1.049 43.59 73 31.73 172 35 86,268 88,757 1.029 48.03 58 27.87 173 35 77,526 83,433 1.076 47.09 55 25.91 174 35 72,999 73,514 1.007 44.66 51 22.83 181 35 68,923 72,266 1.049 41.94 55 22.94 182 35 84,119 85,783 1.020 49.72 54 26.93 183 35 77,449 78,102 1.008 45.79 53 24.26 184 35 91,201 92,275 1.012 46.54 62 28.66 191 35 88,725 89,106 1.004 51.86 55 28.29 192 35 109,392 109,954 1.005 54.72 63 34.52 1018 HWY 271 S 75644 GILMER INN 83 1.100 H 151 39 65,798 73,546 1.118 36.59 57 20.95


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E 3 YR AVG P CITY ADDR ZIP S EST 4 OP ADJ 1 T ---- ---- --- T AVG. % -- ----- - # TAXABLE GROSS ADJ 1 DAILY OCC $ 5 YRQ RMS BRAND REVENUE REVENUE FACTOR 2 RATE EST REVPAR --- ---- ----- ------- -------- ------ - ----- --- ------ GILMER 1018 HWY 271 S 75644 GILMER INN 83 1.100 H 152 39 67,278 74,006 .000 G 37.70 55 20.85 153 39 66,052 78,749 1.192 39.61 55 21.95 154 39 60,684 65,260 1.075 40.60 45 18.19 161 39 89,951 90,506 1.006 42.74 60 25.79 162 39 72,731 80,004 .000 G 41.36 54 22.54 163 39 57,482 63,230 .000 G 39.06 45 17.62 164 39 58,554 64,409 .000 G 39.45 45 17.95 171 39 69,101 76,011 .000 G 39.56 55 21.66 172 39 53,251 54,757 1.028 40.36 38 15.43 173 39 71,427 74,500 1.043 43.12 48 20.76 174 39 68,386 76,766 1.123 43.29 49 21.40 181 39 57,950 66,477 1.147 36.03 53 18.94 182 39 76,066 89,010 1.170 40.62 62 25.08 183 39 69,080 83,382 1.207 40.57 57 23.24 184 39 81,913 97,973 1.196 43.22 63 27.31 191 39 66,363 72,241 1.089 35.27 58 20.58 192 39 67,275 72,829 1.083 37.69 54 20.52 GLADEWATER 1009 BROADWAY A 75647 REGENCY INN (FMR BWEST) 97 1.150 H 151 105 92,119 151,593 1.646 35.68 45 16.04 152 80 132,964 152,909 .000 G 39.17 54 21.00 162 36 45,542 52,373 .000 G 36.35 44 15.99 163 36 34,222 39,355 .000 G 35.50 33 11.88 164 36 38,758 44,572 .000 G 32.83 41 13.46 171 36 37,540 43,171 .000 G 33.21 40 13.32 172 36 57,860 66,539 .000 G 36.26 56 20.31 173 36 32,662 37,561 .000 G 33.58 34 11.34 174 36 38,890 44,724 .000 G 33.75 40 13.50 181 36 46,902 53,937 .000 G 33.66 49 16.65 182 36 52,024 59,828 .000 G 36.29 50 18.26 183 36 43,729 50,000 1.150 G 35.55 42 15.10 184 36 43,887 50,000 1.150 G 34.97 43 15.10 191 36 49,910 57,000 1.150 G 34.92 50 17.59 192 36 64,476 74,000 1.150 G 36.32 62 22.59 GREENVILLE 5103 INTERSTATE 75401 CONTINENTAL MOTEL (FMR ECO 88 1.400 H 151 37 45,346 64,786 1.429 25.60 76 19.46 152 37 49,942 67,962 1.361 27.11 74 20.18 153 37 45,727 58,517 1.280 27.00 64 17.19 154 37 42,866 54,581 1.273 25.64 63 16.03 161 37 47,797 57,932 1.212 24.47 71 17.40 162 37 54,477 74,647 1.370 27.23 81 22.17 163 37 44,488 73,826 1.659 27.75 78 21.69 171 37 37,171 51,991 1.399 25.77 61 15.61 172 37 42,371 59,081 1.394 26.28 67 17.55 3001 MUSTANG CR 75402 BEST WESTERN (FMR LA QUINT 05 1.160 H 151 79 BWEST 293,807 345,639 1.176 68.88 71 48.61


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E 3 YR AVG P CITY ADDR ZIP S EST 4 OP ADJ 1 T ---- ---- --- T AVG. % -- ----- - # TAXABLE GROSS ADJ 1 DAILY OCC $ 5 YRQ RMS BRAND REVENUE REVENUE FACTOR 2 RATE EST REVPAR --- ---- ----- ------- -------- ------ - ----- --- ------ GREENVILLE 3001 MUSTANG CR 75402 BEST WESTERN (FMR LA QUINT 05 1.160 H 152 79 BWEST 388,383 446,748 1.150 79.49 78 62.14 153 79 BWEST 271,771 365,100 1.343 73.01 69 50.23 154 79 BWEST 279,668 332,290 1.188 69.03 66 45.72 161 79 BWEST 253,178 299,922 1.185 62.66 67 42.18 162 79 BWEST 346,804 434,429 1.253 79.88 76 60.43 163 79 BWEST 382,858 448,505 1.171 87.20 71 61.71 164 79 BWEST 354,719 407,688 1.149 81.72 69 56.09 171 79 BWEST 285,222 325,172 1.140 68.43 67 45.73 172 79 BWEST 326,480 392,823 1.203 77.41 71 54.64 173 79 BWEST 318,271 373,572 1.174 77.30 66 51.40 174 79 BWEST 344,702 370,629 1.075 74.98 68 50.99 181 79 BWEST 266,921 308,335 1.155 63.92 68 43.37 182 79 BWEST 374,317 441,990 1.181 83.04 74 61.48 183 79 BWEST 346,034 415,347 1.200 95.66 60 57.15 184 79 BWEST 291,684 342,671 1.175 75.89 62 47.15 191 79 BWEST 270,055 319,802 1.184 67.95 66 44.98 192 79 BWEST 311,780 377,121 1.210 78.67 67 52.46 2005 CENTER POI 75402 COMFORT SUITES 11 1.025 H 151 77 COMFS 279,471 296,803 1.062 60.26 71 42.83 152 77 COMFS 327,219 337,643 1.032 67.09 72 48.19 153 77 COMFS 339,109 353,949 1.044 72.49 69 49.96 154 77 COMFS 315,517 339,508 1.076 69.11 69 47.93 161 77 COMFS 255,939 273,866 1.070 59.28 67 39.52 162 77 COMFS 370,493 428,237 1.156 79.13 77 61.12 163 77 COMFS 401,867 433,651 1.079 82.74 74 61.22 164 77 COMFS 349,300 381,421 1.092 78.70 68 53.84 171 77 COMFS 339,491 362,457 1.068 76.15 69 52.30 172 77 COMFS 397,822 407,566 1.024 85.46 68 58.17 173 77 COMFS 339,081 345,195 1.018 86.24 56 48.73 174 77 COMFS 315,898 327,237 1.036 76.63 60 46.19 181 77 COMFS 259,177 262,930 1.014 61.96 61 37.94 182 77 COMFS 429,956 435,854 1.014 87.31 71 62.20 183 77 COMFS 353,801 366,369 1.036 79.94 65 51.72 184 77 COMFS 387,423 401,837 1.037 80.44 71 56.72 191 77 COMFS 356,185 369,572 1.038 73.81 72 53.33 192 77 COMFS 483,898 499,205 1.032 93.28 76 71.24 1215 INTERSTATE 75402 EXPRESS INN (FMR QUALY/DAY 79 1.250 H 151 105 92,119 151,593 1.646 35.68 45 16.04 152 80 132,964 162,382 1.221 37.26 60 22.31 153 80 114,835 125,074 1.089 33.78 50 16.99 154 80 89,582 93,420 1.043 30.35 42 12.69 161 80 112,192 117,683 1.049 28.97 56 16.34 162 134 209,100 280,740 1.343 29.10 79 23.02 163 134 159,363 205,473 1.289 28.35 59 16.67 164 134 114,045 132,663 1.163 25.65 42 10.76


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E 3 YR AVG P CITY ADDR ZIP S EST 4 OP ADJ 1 T ---- ---- --- T AVG. % -- ----- - # TAXABLE GROSS ADJ 1 DAILY OCC $ 5 YRQ RMS BRAND REVENUE REVENUE FACTOR 2 RATE EST REVPAR --- ---- ----- ------- -------- ------ - ----- --- ------ GREENVILLE 1215 INTERSTATE 75402 EXPRESS INN (FMR QUALY/DAY 79 1.250 H 171 134 102,535 117,702 1.148 23.58 41 9.76 172 134 193,657 236,328 1.220 26.64 73 19.38 173 134 121,076 141,673 1.170 25.19 46 11.49 174 134 90,895 115,757 1.274 23.60 40 9.39 181 134 85,036 108,178 1.272 20.16 44 8.97 182 134 97,521 142,687 1.463 24.98 47 11.70 183 134 108,057 140,198 1.297 25.62 44 11.37 184 134 56,752 79,056 1.393 23.28 28 6.41 191 134 97,883 110,750 1.131 25.74 36 9.18 192 134 144,246 169,539 1.175 27.77 50 13.90 1209 I 30 FRONT 75402 GUEST INN & SUITES 18 1.010 H 192 42 75,807 76,307 1.007 62.14 32 19.97 1209 INTERSTATE 75402 GUEST INN & SUITES (FMR EC 96 1.200 H 161 42 ECONO 58,143 63,763 1.097 23.33 72 16.87 162 42 ECONO 68,415 80,776 1.181 27.48 77 21.13 163 42 ECONO 54,750 75,501 1.379 29.47 66 19.54 164 42 ECONO 54,419 74,324 1.366 28.69 67 19.23 171 42 ECONO 52,105 66,832 1.283 25.40 70 17.68 172 42 ECONO 40,415 65,249 1.614 25.09 68 17.07 173 42 ECONO 40,413 58,778 1.454 25.64 59 15.21 174 42 ECONO 29,890 49,401 1.653 23.91 53 12.78 182 42 38,946 48,157 1.237 26.27 48 12.60 183 42 46,584 56,000 1.200 G 27.59 53 14.49 3001 KARI LN 75402 HAMPTON INN & SUITES 06 1.080 H 151 75 HAMPT 502,250 542,430 .000 G 108.34 74 80.36 152 75 HAMPT 475,574 513,620 .000 G 111.75 67 75.26 153 75 HAMPT 447,330 483,116 .000 G 111.13 63 70.02 154 75 HAMPT 388,926 420,040 .000 G 101.09 60 60.88 161 75 HAMPT 408,555 441,239 .000 G 96.40 68 65.37 162 75 HAMPT 474,516 512,477 .000 G 105.25 71 75.09 163 75 HAMPT 547,415 591,208 .000 G 121.19 71 85.68 164 75 HAMPT 491,914 531,267 .000 G 112.02 69 77.00 171 75 HAMPT 478,130 516,380 .000 G 104.70 73 76.50 172 75 HAMPT 518,323 559,789 .000 G 107.42 76 82.02 173 75 HAMPT 490,922 530,196 .000 G 104.69 73 76.84 174 75 HAMPT 485,635 524,486 .000 G 108.34 70 76.01 181 75 HAMPT 468,702 506,198 .000 G 102.15 73 74.99 182 75 HAMPT 472,810 510,635 .000 G 106.60 70 74.82 183 75 HAMPT 469,535 507,000 1.080 G 109.46 67 73.48 184 75 HAMPT 461,825 499,000 1.080 G 103.94 70 72.32 191 75 HAMPT 405,283 438,000 1.080 G 93.97 69 64.89 192 75 HAMPT 522,424 564,000 1.080 G 105.08 79 82.64 2901 MUSTANG XI 75402 HOLIDAY EXPRESS & SUITES 01 1.100 H 151 80 HIEXP 364,207 396,379 1.088 76.03 72 55.05


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E 3 YR AVG P CITY ADDR ZIP S EST 4 OP ADJ 1 T ---- ---- --- T AVG. % -- ----- - # TAXABLE GROSS ADJ 1 DAILY OCC $ 5 YRQ RMS BRAND REVENUE REVENUE FACTOR 2 RATE EST REVPAR --- ---- ----- ------- -------- ------ - ----- --- ------ GREENVILLE 2901 MUSTANG XI 75402 HOLIDAY EXPRESS & SUITES 01 1.100 H 152 80 HIEXP 460,222 506,244 .000 G 89.14 78 69.54 153 80 HIEXP 405,365 451,336 1.113 88.06 70 61.32 154 80 HIEXP 320,087 366,860 1.146 78.94 63 49.85 161 80 HIEXP 323,077 341,547 1.057 70.66 67 47.44 162 80 HIEXP 462,451 510,942 1.105 90.65 77 70.18 163 80 HIEXP 475,534 507,941 1.068 97.58 71 69.01 164 80 HIEXP 310,647 318,524 1.025 81.39 53 43.28 171 80 HIEXP 338,034 353,546 1.046 72.94 67 49.10 172 80 HIEXP 392,607 472,252 1.203 87.80 74 64.87 173 80 HIEXP 397,894 417,731 1.050 86.85 65 56.76 174 80 HIEXP 300,952 585,394 1.945 102.67 77 79.54 181 80 HIEXP 330,913 366,524 1.108 71.16 72 50.91 182 80 HIEXP 471,723 517,859 1.098 93.54 76 71.13 183 80 HIEXP 440,904 464,207 1.053 93.87 67 63.07 184 80 HIEXP 377,238 416,774 1.105 89.61 63 56.63 191 80 HIEXP 396,106 436,836 1.103 87.76 69 60.67 192 80 HIEXP 567,336 621,007 1.095 104.99 81 85.30 5000 INTERSTATE 75402 KNIGHTS INN (FMR AMERICAN 72 1.100 H 151 57 41,293 47,907 1.160 24.14 39 9.34 152 57 64,856 70,883 1.093 23.38 58 13.67 153 57 53,371 60,006 1.124 22.11 52 11.44 154 57 37,346 48,543 1.300 19.50 47 9.26 161 57 58,246 70,622 1.212 21.47 64 13.77 162 57 91,802 116,001 1.264 30.53 73 22.36 163 57 81,648 89,259 1.093 27.98 61 17.02 164 57 56,373 60,595 1.075 25.42 45 11.56 171 57 64,303 66,529 1.035 25.28 51 12.97 172 57 28,593 31,452 .000 G 21.63 28 6.06 173 57 63,867 71,535 1.120 25.87 53 13.64 174 57 55,633 60,011 1.079 24.12 47 11.44 181 57 60,445 65,390 1.082 24.67 52 12.75 182 57 76,376 91,998 1.205 25.72 69 17.74 183 57 52,580 77,723 1.478 26.03 57 14.82 184 57 KNIGH 48,122 69,735 1.449 25.73 52 13.30 191 57 KNIGH 46,912 58,079 1.238 24.35 46 11.32 192 57 KNIGH 46,370 76,165 1.643 24.66 60 14.68 5107 INTERSTATE 75402 MOTEL 6 84 1.150 H 151 90 MTL 6 140,465 149,454 1.064 28.95 64 18.45 152 90 MTL 6 167,281 184,376 1.102 29.79 76 22.51 153 90 MTL 6 143,509 153,607 1.070 28.38 65 18.55 154 90 MTL 6 120,957 125,459 1.037 27.98 54 15.15 161 90 MTL 6 124,231 136,248 1.097 26.24 64 16.82 162 90 MTL 6 175,480 212,009 1.208 33.03 78 25.89 163 90 MTL 6 182,827 218,867 1.197 35.96 74 26.43 164 90 MTL 6 146,750 161,517 1.101 33.30 59 19.51


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E 3 YR AVG P CITY ADDR ZIP S EST 4 OP ADJ 1 T ---- ---- --- T AVG. % -- ----- - # TAXABLE GROSS ADJ 1 DAILY OCC $ 5 YRQ RMS BRAND REVENUE REVENUE FACTOR 2 RATE EST REVPAR --- ---- ----- ------- -------- ------ - ----- --- ------ GREENVILLE 5107 INTERSTATE 75402 MOTEL 6 84 1.150 H 171 90 MTL 6 142,733 162,199 1.136 31.28 64 20.02 172 90 MTL 6 186,972 200,984 1.075 34.08 72 24.54 173 90 MTL 6 168,375 192,892 1.146 34.76 67 23.30 174 90 MTL 6 134,845 155,317 1.152 31.15 60 18.76 181 90 MTL 6 130,802 154,909 1.184 28.53 67 19.12 182 90 MTL 6 179,731 203,747 1.134 36.36 68 24.88 183 90 MTL 6 174,771 185,270 1.060 36.34 62 22.38 184 90 MTL 6 130,083 131,013 1.007 35.86 44 15.82 191 90 MTL 6 139,331 150,364 1.079 35.56 52 18.56 192 90 MTL 6 173,603 178,094 1.026 35.82 61 21.75 5118 INTERSTATE 75402 ROYAL INN (FMR DAYS) 70 1.625 H 151 50 32,436 49,126 .000 25.00 44 10.92 152 50 35,654 48,758 .000 27.00 40 10.72 161 50 40,767 56,035 .000 27.00 46 12.45 162 50 58,583 93,986 1.604 32.00 65 20.66 163 50 37,380 61,640 1.649 29.13 46 13.40 172 50 41,158 51,908 1.261 29.17 39 11.41 182 50 41,951 72,896 1.738 29.47 54 16.02 5010 HIGHWAY 69 75402 SUPER 8 98 1.125 H 151 52 SUPR8 70,723 74,432 1.052 29.72 54 15.90 152 52 SUPR8 88,929 105,238 1.183 33.98 65 22.24 153 52 SUPR8 94,888 106,749 .000 G 32.11 69 22.31 154 52 SUPR8 60,891 68,502 .000 G 30.63 47 14.32 161 52 SUPR8 89,301 100,464 .000 G 30.10 71 21.47 162 52 SUPR8 138,574 155,029 1.119 46.54 70 32.76 163 52 SUPR8 160,409 180,460 .000 G 53.98 70 37.72 164 52 SUPR8 115,128 116,372 1.011 45.15 54 24.33 171 52 SUPR8 108,205 111,537 .000 43.69 55 23.83 172 52 SUPR8 132,636 154,367 1.164 51.42 63 32.62 173 52 SUPR8 107,174 120,571 .000 G 40.81 62 25.20 174 52 SUPR8 62,130 69,896 .000 G 34.48 42 14.61 181 52 SUPR8 74,087 74,271 1.002 35.28 45 15.87 182 52 SUPR8 112,969 134,141 1.187 51.96 55 28.35 183 52 SUPR8 123,863 123,927 1.001 41.75 62 25.90 184 52 SUPR8 98,958 99,022 1.001 40.70 51 20.70 191 52 SUPR8 94,220 106,000 1.125 G 37.73 60 22.65 192 52 SUPR8 121,367 136,493 1.125 46.00 63 28.84 LINDALE 3501 S MAIN ST 75771 BEST WESTERN (FMR EXPRESS/ 96 1.030 H 151 55 BWEST 200,357 206,368 .000 G 68.42 61 41.69 152 55 BWEST 267,967 276,006 .000 G 80.07 69 55.15 153 55 BWEST 227,885 234,722 .000 G 76.54 61 46.39 154 55 BWEST 192,493 198,268 .000 G 69.43 56 39.18 161 55 BWEST 182,083 187,545 .000 G 66.43 57 37.89 162 55 BWEST 265,549 273,515 .000 G 81.87 67 54.65


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E 3 YR AVG P CITY ADDR ZIP S EST 4 OP ADJ 1 T ---- ---- --- T AVG. % -- ----- - # TAXABLE GROSS ADJ 1 DAILY OCC $ 5 YRQ RMS BRAND REVENUE REVENUE FACTOR 2 RATE EST REVPAR --- ---- ----- ------- -------- ------ - ----- --- ------ LINDALE 3501 S MAIN ST 75771 BEST WESTERN (FMR EXPRESS/ 96 1.030 H 163 55 BWEST 217,061 223,573 .000 G 76.98 57 44.18 164 55 BWEST 227,874 234,710 .000 G 80.08 58 46.39 171 55 BWEST 164,355 169,286 .000 G 64.91 53 34.20 172 55 BWEST 258,606 266,364 .000 G 80.30 66 53.22 173 55 BWEST 218,227 224,774 .000 G 78.98 56 44.42 174 55 BWEST 196,614 202,215 1.028 73.39 54 39.96 181 55 BWEST 153,240 202,215 1.320 54.16 75 40.85 182 55 BWEST 222,676 229,356 .000 G 66.80 69 45.83 183 55 BWEST 220,099 227,000 1.030 G 73.47 61 44.86 184 55 BWEST 219,602 226,000 1.030 G 71.31 63 44.66 191 55 BWEST 158,713 163,000 1.030 G 55.97 59 32.93 192 55 BWEST 165,744 169,344 1.022 56.95 59 33.83 200 CENTENNIAL 75771 COMFORT SUITES 08 1.015 H 151 65 COMFS 290,915 292,684 1.006 87.53 57 50.03 152 65 COMFS 394,437 405,560 1.028 99.92 69 68.56 153 65 COMFS 335,654 339,902 1.013 91.19 62 56.84 154 65 COMFS 333,330 336,279 1.009 92.65 61 56.23 161 65 COMFS 285,750 288,030 1.008 89.65 55 49.24 162 65 COMFS 408,512 419,293 1.026 106.32 67 70.89 163 65 COMFS 342,861 345,654 1.008 94.17 61 57.80 164 65 COMFS 361,569 370,329 1.024 97.97 63 61.93 171 65 COMFS 322,719 325,365 1.008 87.93 63 55.62 172 65 COMFS 415,071 418,733 1.009 106.53 66 70.79 173 65 COMFS 351,102 357,387 1.018 97.42 61 59.76 174 65 COMFS 335,136 341,720 1.020 92.66 62 57.14 181 65 COMFS 311,846 315,128 1.011 83.64 64 53.87 182 65 COMFS 388,181 392,535 1.011 98.50 67 66.36 183 65 COMFS 378,390 387,273 1.023 103.13 63 64.76 184 65 COMFS 353,391 364,622 1.032 93.49 65 60.97 191 65 COMFS 321,113 330,624 1.030 84.83 67 56.52 192 65 COMFS 342,575 351,732 1.027 91.65 65 59.46 22580 COUNTY RO 75771 CROSSROADS BED AND BREAKFA 04 1.240 151 9 39,255 45,308 1.154 160.76 35 55.94 22049 FM 1995 75771 GOLF RESORT CHALLENGE @ GA 00 1.070 N 152 15 64,743 69,275 .000 G 122.12 42 50.75 153 15 38,716 41,426 .000 G 114.57 26 30.02 162 15 69,720 74,600 .000 G 134.83 41 54.65 163 15 47,764 51,107 .000 G 115.09 32 37.03 172 15 49,148 52,588 .000 G 119.23 32 38.53 182 15 61,916 66,000 1.066 125.91 38 48.35 183 15 37,161 40,000 1.070 G 113.45 26 28.99 3505 S MAIN ST 75771 HAMPTON INN 01 1.050 H 151 62 HAMPT 356,818 372,176 1.043 100.78 66 66.70


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0 E 3 YR AVG P CITY ADDR ZIP S EST 4 OP ADJ 1 T ---- ---- --- T AVG. % -- ----- - # TAXABLE GROSS ADJ 1 DAILY OCC $ 5 YRQ RMS BRAND REVENUE REVENUE FACTOR 2 RATE EST REVPAR --- ---- ----- ------- -------- ------ - ----- --- ------ LINDALE 3505 S MAIN ST 75771 HAMPTON INN 01 1.050 H 152 62 HAMPT 453,204 472,146 1.042 121.11 69 83.68 153 62 HAMPT 412,084 422,044 1.024 119.14 62 73.99 154 62 HAMPT 398,576 418,505 .000 G 111.90 66 73.37 161 62 HAMPT 367,657 386,040 .000 G 104.92 66 69.18 162 62 HAMPT 477,501 501,376 .000 G 130.37 68 88.86 163 62 HAMPT 440,844 462,886 .000 G 122.78 66 81.15 164 62 HAMPT 412,255 432,868 .000 G 120.22 63 75.89 171 62 HAMPT 385,238 404,500 .000 G 106.82 68 72.49 172 62 HAMPT 477,058 500,911 .000 G 120.69 74 88.78 173 62 HAMPT 377,435 396,307 .000 G 111.31 62 69.48 174 62 HAMPT 378,937 397,884 .000 G 111.11 63 69.76 181 62 HAMPT 364,258 382,471 .000 G 104.18 66 68.54 182 62 HAMPT 432,097 454,000 1.051 113.45 71 80.47 183 62 HAMPT 403,054 423,000 1.050 G 108.71 68 74.16 184 62 HAMPT 359,633 378,000 1.050 G 101.12 66 66.27 191 62 HAMPT 317,469 333,000 1.050 G 94.16 63 59.68 192 62 HAMPT 389,633 409,000 1.050 G 107.61 67 72.49 204 CENTENNIAL 75771 LA QUINTA INN & SUITES 08 1.025 H 151 62 LAQUN 214,126 218,093 1.019 68.37 57 39.08 152 62 LAQUN 308,467 309,928 1.005 79.88 69 54.93 153 62 LAQUN 258,278 260,771 1.010 78.55 58 45.72 154 62 LAQUN 249,268 250,843 1.006 72.69 60 43.98 161 62 LAQUN 190,710 200,726 1.053 65.69 55 35.97 162 62 LAQUN 314,668 322,157 1.024 81.25 70 57.10 163 62 LAQUN 279,297 298,657 1.069 79.41 66 52.36 164 62 LAQUN 232,412 266,441 1.146 76.54 61 46.71 171 62 LAQUN 218,381 224,002 1.026 64.66 62 40.14 172 62 LAQUN 331,887 335,250 1.010 80.35 74 59.42 173 62 LAQUN 270,280 272,475 1.008 77.98 61 47.77 174 62 LAQUN 167,534 172,630 1.030 60.74 50 30.26 181 62 LAQUN 197,754 201,698 1.020 62.68 58 36.15 182 62 LAQUN 302,841 305,452 1.009 84.85 64 54.14 183 62 LAQUN 251,087 263,971 1.051 78.49 59 46.28 184 62 LAQUN 274,519 304,955 1.111 78.26 68 53.46 191 62 LAQUN 197,850 222,698 1.126 62.35 64 39.91 192 62 LAQUN 218,964 239,531 1.094 67.10 63 42.45 13307 COUNTY RO 75771 MOTEL 6 (FMR DAYS/EXEC) 95 1.120 H 151 52 MTL 6 87,045 91,499 1.051 34.48 57 19.55 152 52 MTL 6 109,196 116,364 1.066 37.05 66 24.59 153 52 MTL 6 96,137 107,673 .000 G 33.86 66 22.51 154 52 MTL 6 79,948 89,542 .000 G 32.06 58 18.72 161 52 MTL 6 68,540 76,765 .000 G 29.06 56 16.40 162 52 MTL 6 107,248 120,118 .000 G 35.93 71 25.38 163 52 MTL 6 109,273 122,386 .000 G 38.69 66 25.58 164 52 MTL 6 91,447 102,421 .000 G 37.69 57 21.41


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E 3 YR AVG P CITY ADDR ZIP S EST 4 OP ADJ 1 T ---- ---- --- T AVG. % -- ----- - # TAXABLE GROSS ADJ 1 DAILY OCC $ 5 YRQ RMS BRAND REVENUE REVENUE FACTOR 2 RATE EST REVPAR --- ---- ----- ------- -------- ------ - ----- --- ------ LINDALE 13307 COUNTY RO 75771 MOTEL 6 (FMR DAYS/EXEC) 95 1.120 H 171 52 MTL 6 74,934 83,926 .000 G 33.22 54 17.93 172 52 MTL 6 83,120 93,094 .000 G 34.42 57 19.67 173 52 MTL 6 96,634 108,230 .000 G 39.18 58 22.62 174 52 MTL 6 81,125 90,860 .000 G 35.42 54 18.99 181 52 MTL 6 79,944 89,537 .000 G 32.70 59 19.13 182 52 MTL 6 117,654 131,772 .000 G 40.35 69 27.85 183 52 MTL 6 106,953 120,000 1.120 G 38.43 65 25.08 184 52 MTL 6 108,782 122,000 1.120 G 35.36 72 25.50 191 52 MTL 6 91,183 102,000 1.120 G 33.00 66 21.79 192 52 MTL 6 113,027 123,260 1.091 39.39 66 26.05 MINEOLA 100 DEBBY LANE 75773 BEST WESTERN INN 07 1.050 H 151 50 BWEST 184,641 188,653 1.022 78.82 53 41.92 152 50 BWEST 249,428 255,405 1.024 91.60 61 56.13 153 50 BWEST 234,745 242,105 1.031 89.68 59 52.63 154 50 BWEST 191,258 194,313 1.016 82.42 51 42.24 161 50 BWEST 167,886 172,059 1.025 77.00 50 38.24 162 50 BWEST 222,754 227,390 1.021 86.80 58 49.98 163 50 BWEST 240,184 245,840 1.024 92.43 58 53.44 164 50 BWEST 200,839 203,916 1.015 82.43 54 44.33 171 50 BWEST 187,181 190,448 1.017 77.89 54 42.32 172 50 BWEST 236,299 241,881 1.024 85.08 62 53.16 173 50 BWEST 239,705 244,961 1.022 91.68 58 53.25 174 50 BWEST 192,935 195,493 1.013 81.75 52 42.50 181 50 BWEST 157,593 166,127 1.054 70.83 52 36.92 182 50 BWEST 214,728 241,373 1.124 83.42 64 53.05 183 50 BWEST 220,131 252,177 1.146 85.89 64 54.82 184 50 BWEST 194,809 218,178 1.120 79.65 60 47.43 191 50 BWEST 185,537 218,563 1.178 76.20 64 48.57 192 50 BWEST 242,097 283,920 1.173 92.41 68 62.40 QUINLAN 10636 BLACK BAS 75474 429 MARINA AND RESORT 16 1.010 F 182 22 49,895 50,394 .000 G 128.25 20 25.17 192 22 39,166 39,166 1.000 107.63 18 19.56 7873 FM 2101 75474 PENINSULA RANCH & LODGING 14 .000 N 172 8 67,341 80,203 .000 G 157.17 70 110.17 10283 MCKENZIE 75474 SUNSET RESORT 16 1.010 N 182 12 56,027 56,587 .000 G 146.15 35 51.82 192 12 42,071 42,071 1.000 125.59 31 38.53 QUITMAN 3035 W STATE HI 75783 BIG BASS LODGE 13 1.050 F 152 16 51,355 53,923 .000 G 283.82 13 37.03 162 16 48,255 50,668 .000 G 293.75 12 34.80 172 16 42,367 44,485 .000 G 273.05 11 30.55 2919 W STATE HI 75783 OAK RIDGE RESORT 2D Q 02 1.080 F 152 12 45,870 49,540 .000 G 78.98 57 45.37


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E 3 YR AVG P CITY ADDR ZIP S EST 4 OP ADJ 1 T ---- ---- --- T AVG. % -- ----- - # TAXABLE GROSS ADJ 1 DAILY OCC $ 5 YRQ RMS BRAND REVENUE REVENUE FACTOR 2 RATE EST REVPAR --- ---- ----- ------- -------- ------ - ----- --- ------ QUITMAN 2919 W STATE HI 75783 OAK RIDGE RESORT 2D Q 02 1.080 F 162 12 44,738 48,317 .000 G 84.11 53 44.25 172 12 36,087 38,974 .000 G 80.11 45 35.69 SULPHUR SPRI 1529 INDUSTRIAL 75482 BUDGET INN 00 1.050 H 151 40 55,516 58,292 .000 G 31.04 52 16.19 152 40 71,329 74,895 .000 G 34.85 59 20.58 153 40 77,469 80,057 1.033 35.51 61 21.75 154 40 70,577 74,106 .000 G 36.26 56 20.14 161 40 69,812 73,303 .000 G 36.52 56 20.36 162 40 84,926 90,390 1.064 41.02 61 24.83 163 40 84,858 89,190 1.051 42.98 56 24.24 164 40 62,398 63,295 1.014 37.65 46 17.20 171 40 63,352 68,305 1.078 37.80 50 18.97 172 40 64,077 70,604 1.102 39.26 49 19.40 173 40 72,771 80,417 1.105 44.82 49 21.85 174 40 75,144 78,256 1.041 39.96 53 21.27 181 40 72,001 75,044 1.042 34.29 61 20.85 182 40 79,019 89,584 1.134 42.25 58 24.61 183 40 89,671 106,414 1.187 47.45 61 28.92 184 40 73,450 96,228 1.310 44.79 58 26.15 191 40 65,282 87,408 1.339 41.41 59 24.28 192 40 78,388 99,723 1.272 43.27 63 27.40 411 INDUSTRIAL 75482 CLARION POINTE (FMR HIEXP) 07 1.035 H 151 72 HIEXP 219,848 226,655 1.031 59.46 59 34.98 152 72 HIEXP 324,373 338,565 1.044 75.56 68 51.67 153 72 HIEXP 301,076 310,501 1.031 77.01 61 46.88 154 72 HIEXP 280,780 292,705 1.042 75.56 58 44.19 161 72 HIEXP 258,558 300,061 1.161 74.08 63 46.31 162 72 HIEXP 299,538 340,971 1.138 82.27 63 52.04 163 72 HIEXP 299,082 304,024 1.017 86.62 53 45.90 164 72 HIEXP 281,614 292,410 1.038 80.95 55 44.14 171 72 HIEXP 259,703 276,723 1.066 76.69 56 42.70 172 72 HIEXP 302,832 310,557 1.026 81.09 58 47.40 173 72 HIEXP 314,978 320,252 1.017 87.92 55 48.35 174 72 HIEXP 266,525 279,199 1.048 81.95 51 42.15 181 72 HIEXP 290,765 305,088 1.049 80.37 59 47.08 182 72 HIEXP 330,709 341,846 1.034 84.21 62 52.17 183 72 HIEXP 311,426 318,899 1.024 81.91 59 48.14 184 72 CLARI 295,587 303,950 1.028 78.01 59 45.89 191 72 CLARI 166,647 181,125 1.087 64.16 44 27.95 192 72 CLARI 270,431 305,511 1.130 77.36 60 46.63 1690 FARM ROAD 75482 COPPER LAKE STATE PARK 10 1.010 H 151 18 33,921 34,260 .000 G 74.36 28 21.15 152 18 59,441 60,035 .000 G 79.64 46 36.65 153 18 66,605 67,271 .000 G 84.42 48 40.62


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E 3 YR AVG P CITY ADDR ZIP S EST 4 OP ADJ 1 T ---- ---- --- T AVG. % -- ----- - # TAXABLE GROSS ADJ 1 DAILY OCC $ 5 YRQ RMS BRAND REVENUE REVENUE FACTOR 2 RATE EST REVPAR --- ---- ----- ------- -------- ------ - ----- --- ------ SULPHUR SPRI 1690 FARM ROAD 75482 COPPER LAKE STATE PARK 10 1.010 H 154 18 41,035 41,445 .000 G 86.19 29 25.03 161 18 55,293 55,846 .000 G 86.98 40 34.47 162 18 53,255 53,788 .000 G 92.63 35 32.84 163 18 62,165 62,787 .000 G 98.64 38 37.91 164 18 38,223 38,605 .000 G 77.59 30 23.31 171 18 45,570 46,026 .000 G 78.53 36 28.41 172 18 60,733 61,340 .000 G 84.84 44 37.45 173 18 58,881 59,470 .000 G 85.70 42 35.91 174 18 45,390 45,844 .000 G 75.42 37 27.68 181 18 36,118 36,479 .000 G 57.81 39 22.52 182 18 50,210 51,000 1.016 G 74.22 42 31.14 183 18 62,063 63,000 1.010 G 90.73 42 38.04 184 18 36,625 37,000 1.010 G 75.29 30 22.34 191 18 46,696 47,000 1.010 G 74.24 39 29.01 192 18 71,995 73,000 1.010 G 74.29 60 44.57 1521 INDUSTRIAL 75482 DAYS INN & SUITES (FMR HOM 00 1.060 H 151 60 59,644 71,571 1.200 35.05 38 13.25 152 60 84,771 98,192 1.158 34.86 52 17.98 153 60 87,194 97,902 1.123 35.56 50 17.74 154 60 73,846 84,690 1.147 31.20 49 15.34 161 60 62,498 69,406 1.111 27.06 47 12.85 162 60 112,459 121,489 1.080 32.11 69 22.25 163 60 111,758 118,179 1.057 34.13 63 21.41 164 60 121,504 129,481 1.066 34.85 67 23.46 171 60 98,915 105,281 1.064 31.33 62 19.50 172 60 141,910 153,716 1.083 44.48 63 28.15 173 60 121,979 132,876 1.089 43.50 55 24.07 174 60 131,604 136,607 1.038 43.24 57 24.75 181 60 119,674 136,607 1.141 35.71 71 25.30 182 60 144,519 146,090 1.011 44.75 60 26.76 183 60 145,672 148,849 1.022 46.05 59 26.97 184 60 118,342 145,768 1.232 43.17 61 26.41 191 60 DAYS 120,235 129,247 1.075 42.80 56 23.93 192 60 DAYS 142,632 149,887 1.051 44.79 61 27.45 1495 INDUSTRIAL 75482 ECONO LODGE (FMR QUALY/DAY 84 1.100 H 164 48 46,447 51,092 .000 G 26.28 44 11.57 171 48 ECONO 51,548 55,522 1.077 26.61 48 12.85 172 48 ECONO 73,980 104,985 1.419 37.34 64 24.04 173 48 ECONO 43,422 54,359 1.252 30.95 40 12.31 174 48 ECONO 44,680 48,629 1.088 28.88 38 11.01 182 48 ECONO 56,420 65,459 1.160 37.24 40 14.99 183 48 ECONO 52,649 60,320 1.146 33.78 40 13.66 184 48 ECONO 40,853 46,839 1.147 28.84 37 10.61 191 48 ECONO 51,522 51,670 1.003 29.55 40 11.96 192 48 ECONO 50,769 60,151 1.185 33.31 41 13.77


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E 3 YR AVG P CITY ADDR ZIP S EST 4 OP ADJ 1 T ---- ---- --- T AVG. % -- ----- - # TAXABLE GROSS ADJ 1 DAILY OCC $ 5 YRQ RMS BRAND REVENUE REVENUE FACTOR 2 RATE EST REVPAR --- ---- ----- ------- -------- ------ - ----- --- ------ SULPHUR SPRI 1202 MOCKINGBIR 75482 HAMPTON INN 10 1.040 H 151 70 HAMPT 272,763 282,690 1.036 74.73 60 44.87 152 70 HAMPT 381,917 397,085 1.040 91.58 68 62.34 153 70 HAMPT 361,193 372,829 1.032 92.83 62 57.89 154 70 HAMPT 346,446 360,304 .000 G 92.74 60 55.95 161 70 HAMPT 316,157 344,199 1.089 86.32 63 54.63 162 70 HAMPT 406,921 427,500 1.051 98.25 68 67.11 163 70 HAMPT 413,220 432,294 1.046 105.55 64 67.13 164 70 HAMPT 372,407 384,328 1.032 95.49 62 59.68 171 70 HAMPT 372,505 387,184 1.039 96.44 64 61.46 172 70 HAMPT 486,655 499,734 1.027 113.31 69 78.45 173 70 HAMPT 437,009 449,371 1.028 117.98 59 69.78 174 70 HAMPT 424,234 446,602 1.053 110.26 63 69.35 181 70 HAMPT 474,725 489,194 1.030 112.47 69 77.65 182 70 HAMPT 461,903 490,013 1.061 113.09 68 76.93 183 70 HAMPT 437,730 456,419 1.043 109.67 65 70.87 184 70 HAMPT 404,383 416,707 1.030 99.29 65 64.71 191 70 HAMPT 418,046 446,830 1.069 103.25 69 70.93 192 70 HAMPT 504,766 561,203 1.112 125.07 70 88.10 1344 EATON DR 75482 LA QUINTA INN & SUITES 09 1.060 H 151 65 LAQUN 175,322 178,943 1.021 56.47 54 30.59 152 65 LAQUN 261,815 280,127 1.070 68.94 69 47.36 153 65 LAQUN 212,495 228,051 1.073 65.13 59 38.14 154 65 LAQUN 213,209 235,834 1.106 66.50 59 39.44 161 65 LAQUN 191,438 216,854 1.133 67.90 55 37.07 162 65 LAQUN 243,235 267,906 1.101 71.89 63 45.29 163 65 LAQUN 233,302 250,160 1.072 74.81 56 41.83 164 65 LAQUN 247,863 256,319 1.034 74.81 57 42.86 171 65 LAQUN 195,696 202,116 1.033 70.30 49 34.55 172 65 LAQUN 244,845 264,653 1.081 75.38 59 44.74 173 65 LAQUN 206,129 222,961 1.082 78.24 48 37.28 174 65 LAQUN 195,110 208,503 1.069 73.46 47 34.87 181 65 LAQUN 226,524 227,797 1.006 69.20 56 38.94 182 65 LAQUN 235,460 260,000 1.104 G 73.23 60 43.96 183 65 LAQUN 280,831 286,352 .000 78.76 61 47.88 184 65 LAQUN 287,050 304,304 1.060 75.30 68 50.89 191 65 LAQUN 293,376 311,093 1.060 75.59 70 53.18 192 65 LAQUN 361,990 375,993 1.039 85.18 75 63.57 1233 S BROADWAY 75482 ROYAL INN 78 1.185 H 182 26 37,215 49,952 1.342 33.72 63 21.11 183 26 32,184 45,550 1.415 34.04 56 19.04 184 26 30,960 40,966 1.323 32.88 52 17.13 1521 SHANNON RD 75482 TRAIL DUST INN 82 1.065 H 151 72 118,055 131,619 1.115 40.84 50 20.31


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E 3 YR AVG P CITY ADDR ZIP S EST 4 OP ADJ 1 T ---- ---- --- T AVG. % -- ----- - # TAXABLE GROSS ADJ 1 DAILY OCC $ 5 YRQ RMS BRAND REVENUE REVENUE FACTOR 2 RATE EST REVPAR --- ---- ----- ------- -------- ------ - ----- --- ------ SULPHUR SPRI 1521 SHANNON RD 75482 TRAIL DUST INN 82 1.065 H 152 72 210,661 228,097 1.083 49.52 70 34.81 153 72 206,081 232,339 1.127 52.49 67 35.08 154 72 171,335 195,065 1.139 49.77 59 29.45 161 72 130,212 153,933 1.182 46.63 51 23.76 162 72 193,237 205,575 1.064 51.79 61 31.38 163 72 224,747 240,571 1.070 56.94 64 36.32 164 72 226,114 241,233 1.067 56.94 64 36.42 171 72 211,540 225,290 .000 G 52.40 66 34.77 172 72 262,146 278,681 1.063 62.37 68 42.53 173 72 212,529 227,300 1.070 62.15 55 34.31 174 72 194,149 204,465 1.053 59.80 52 30.87 181 72 190,315 209,554 1.101 53.53 60 32.34 182 72 244,709 251,265 1.027 62.55 61 38.35 183 72 277,246 285,768 1.031 69.85 62 43.14 184 72 244,263 249,987 1.023 59.70 63 37.74 191 72 193,681 206,114 1.064 51.43 62 31.81 192 72 247,034 253,048 1.024 61.62 63 38.62 YANTIS 1609 COUNTY ROA 75497 HIDDEN LAKES HUNTING RESOR 08 1.010 N 181 13 50,858 51,367 .000 G 170.57 26 43.90 191 13 50,622 50,622 1.000 166.99 26 43.27 285 PRIVATE ROA 75497 LODGES AT LAND'S END 09 1.050 N 152 12 40,879 42,923 .000 G 97.28 40 39.31 182 12 38,363 40,000 1.043 86.47 42 36.63 ENDNOTES: --------- 1. Factor used to adjust taxable to gross revenues. Area factor used if property data not available. Taxable equals 89% of gross Statewide. 2. A number or a 'Y' indicates quarter's revenues were estimated. 3. Estimated Average Daily Rate (e.g. 60-85% of 'rack single'); 4. Occupancy derived from calculated roomnights sold (gross room revenues divided by Average Daily Rate), divided by roomnights available. 5. Total REVenues Per Available Room per day, or 'REVPAR'; Prepared from State Comptroller, chain directories and private records. Includes all quarterly reports exceeding $35,000 (otherwise omitted).


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PERIOD: 12 MONTHS ENDING JUN 30, 2019 LODGING MARKET: TEXAS NON-METRO AREAS, EXCLUDING LUXURY, UPSCALE, MID/UPSCALE, SUITES, & ROOMS OVER $150 PER NIGHT # * EST. $ EST. # RMS % RNS % AMT. % EST. $ $ BRAND HTL 000S RMS 000S RNS 000S AMT %OCC RATE RPAR ----- --- ---- ---- ------ ---- -------- ---- ---- ---- ---- CANDLWOOD 5 .3 .6 76 .7 7,167 .9 66.6 93.73 62.45 COMFO STE 14 .9 1.7 196 1.9 14,733 1.9 62.2 75.13 46.76 TOWNPLACE 2 .1 .3 32 .3 3,519 .5 66.0 108.33 71.52 TOT MIN STE 21 1.3 2.7 305 2.9 25,419 3.3 63.7 83.33 53.06 BEST WEST 76 4.1 8.2 929 8.8 76,205 9.8 62.7 81.99 51.41 CNTRY INN 1 .1 .1 10 .1 593 .1 45.4 61.79 28.02 COMFO INN 14 .8 1.6 180 1.7 15,522 2.0 63.9 86.26 55.16 FAIRFIELD 8 .6 1.3 152 1.4 13,954 1.8 64.8 92.10 59.64 HAMPTON 42 2.7 5.5 648 6.1 69,767 8.9 65.7 107.68 70.74 HOLID EXP 68 4.7 9.6 1,142 10.8 117,282 15.0 66.1 102.65 67.86 LA QUINTA 42 2.8 5.7 653 6.2 57,245 7.3 63.6 87.67 55.75 SLEEP INN 6 .3 .6 68 .6 6,383 .8 66.0 93.79 61.94 WINGATE 1 .1 .2 21 .2 2,095 .3 66.1 98.77 65.24 TOT LTD SVE 258 16.2 32.7 3,803 36.0 359,045 46.0 64.5 94.41 60.90 MAINSTAY 2 .1 .2 19 .2 1,365 .2 66.0 71.91 47.42 STUDIO 6 7 .4 .9 102 1.0 5,415 .7 65.3 52.88 34.50 OTHER EXT 1 .1 .1 12 .1 445 .1 67.0 36.45 24.40 TOT EXT STA 10 .6 1.1 134 1.3 7,226 .9 65.5 54.08 35.42 BAYMONT 9 .5 1.1 117 1.1 8,020 1.0 59.1 68.70 40.61 BST VALUE 25 1.3 2.5 239 2.3 10,517 1.3 52.2 43.95 22.93 DAYS INN 42 2.2 4.6 470 4.4 27,485 3.5 57.3 58.53 33.55 ECONOLODG 15 .7 1.5 130 1.2 5,500 .7 47.9 42.24 20.24 MICROTEL 7 .4 .8 94 .9 6,226 .8 65.8 66.51 43.78 MOTEL 6 25 1.6 3.3 349 3.3 19,335 2.5 59.2 55.44 32.84 QUALITY 32 1.9 3.8 404 3.8 28,581 3.7 59.8 70.73 42.28 RAMADA 2 .3 .5 63 .6 5,250 .7 66.0 83.19 54.90 RED ROOF 4 .2 .4 39 .4 2,413 .3 50.8 62.21 31.63 RODEWAY 7 .5 .9 66 .6 2,959 .4 39.1 45.06 17.63 SUPER 8 36 2.0 4.0 429 4.1 24,779 3.2 59.3 57.79 34.24 SURE STAY 3 .2 .3 33 .3 1,718 .2 59.3 52.57 31.17 TRAVELODG 3 .1 .2 28 .3 1,699 .2 65.9 60.35 39.79 OTHER BUD 22 1.0 2.0 191 1.8 10,374 1.3 53.4 54.46 29.06 TOT BUDGET 232 12.8 25.9 2,650 25.1 154,857 19.9 56.7 58.44 33.14 $100+ ADR 44 1.1 2.3 256 2.4 29,275 3.8 61.8 114.46 70.69 $60-99ADR 101 4.0 8.2 863 8.2 64,267 8.2 58.4 74.44 43.51 LT $60ADR 242 8.9 18.0 1,664 15.7 70,254 9.0 51.4 42.23 21.71 TOT IND HTL 387 14.0 28.5 2,783 26.3 163,796 21.0 54.3 58.86 31.95 TOT HOTELS 908 44.9 91.0 9,675 91.5 710,344 91.1 59.1 73.42 43.37 TOT ST RENT 14 .1 .1 13 .1 1,483 .2 49.1 115.39 56.61 APARTMENT 1 .0 .1 6 .1 446 .1 46.2 76.32 35.22 BED N BRK 11 .1 .3 19 .2 2,448 .3 36.6 125.60 45.95 CABINS 74 1.1 2.2 172 1.6 16,011 2.1 43.4 93.33 40.46 CONDOS 6 .1 .2 11 .1 864 .1 35.2 77.52 27.29 DUDE RNCH 2 .0 .0 3 .0 296 .0 40.1 100.90 40.46 EVENT VEN 2 .0 .0 1 .0 78 .0 36.6 103.26 37.76 FISH CAMP 7 .1 .2 14 .1 1,362 .2 44.6 98.49 43.95 MAN CAMPS 32 2.6 5.4 606 5.7 41,397 5.3 62.8 68.30 42.86 RENT POOL 4 .1 .3 26 .2 3,148 .4 48.0 122.70 58.86 RV PARK 11 .1 .3 25 .2 2,008 .3 51.4 79.16 40.72 TOT OTH IND 150 4.4 8.9 883 8.4 68,056 8.7 55.1 77.11 42.48 TOT OTHER 164 4.5 9.0 895 8.5 69,539 8.9 55.0 77.66 42.70 TOT MARKET 1,072 49.3 100.0 10,570 100.0 779,883 100 58.7 73.78 43.31

* All figures annualized. Includes taxed and estimated non-tax room revenues. Independents are categorized by price: $100+, $60-99.99, and under $60)


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A Study of the Effect of Hotel Size on Performance in the Texas Hotel Industry

The Case for Downsizing New Hotels

By Douglas W. Sutton and Bruce H. Walker

Source Strategies has long contended that the number of rooms a developer offers in a new property is one of the key

factors in determining a venture's relative success or failure. It is every bit as important to size a hotel project properly as

it is to select the appropriate brand, and to develop in a suitable market and location. We have previously conducted

extensive studies of the lodging market that support our hotel sizing contention, and we have taken this opportunity to re-

examine the issue using our extensive database of hotel and motel performance for the State of Texas.

Before delving into the numbers that define the role of room count in a hotel's performance, we should first highlight the

basic industry theory of 'right-sizing' a property. The premise offered by many inexperienced developers is "If I can make

a profit constructing a 50 room hotel in a given market, it would be twice as profitable to develop 100 rooms." In

virtually all cases nothing could be farther from the truth. At some point adding rooms to a project reaches a point of

diminishing returns, and the investment in the additional rooms cannot be economically justified.

To illustrate this point, mentally divide our hypothetical 100 room project into two 50 room hotels. The initial 50 rooms

may perform very well, with occupancies over 70% and a very strong rate structure. However, the second 50 rooms are

only utilized when there is overflow from the first hotel because its rooms are 100% occupied. Effectively, the second 50

rooms may only attain an occupancy of 30% or less. This low level of occupancy may prompt the general manager to

lower rates to bolster occupancy, but this is a losing battle. Ultimately, overbuilding causes REVPAR erosion in the

property, and in the market as a whole.

Today's developers and lenders would not seriously consider involvement in a 50 room project operating at this low level,

but often times they accomplish the same end by pushing for more rooms in a project than the market can effectively

support. If we now mentally put these two 50 room properties back together (one operating at 70%, the other at 30%

occupancy), what we end up with is an oversized 100 room hotel that is running a mediocre 50% occupancy.

Over-sizing a hotel makes it difficult, if not impossible, to be competitive in a marketplace. There are a finite number of

room-nights sold to be divided among existing hotels in the market, and developing a more conservatively sized property

helps insure that a profitable level of those room-nights can be captured. Building a hotel is not the 'Field of Dreams'.... If

you build it - they won't come.... With the exception of destination resorts and some unique convention hotels, people do

not go someplace because there is a hotel. Rather, they stay in a hotel because they want to be near someplace.


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Builders who construct too many rooms usually put themselves in unenviable financial situations. Many hotels which we

see put up for sale were developed with far too many rooms. The owners, having had difficulty getting a return on their

investment, are often trying to get out from under a bad investment. There are even drastic cases of properties bulldozing

entire wings to provide additional parking, because those extra rooms are a financial burden, remaining unsold the vast

majority of the time.

Now that we've outlined the basic economic benefits of 'building small', let's look into hotel performance numbers and

see if they support this development principle. We analyzed two separate hotel samplings: First we will look at Comfort

Inns across Texas as a selected brand sampling. Then we will look at all branded hotels built during a given period of

time for a more diverse sampling.

COMFORT INN - ANALYSIS OF SIZING AND ITS IMPACT ON PERFORMANCE

In our initial analysis, we selected a sampling of Texas Comfort Inn branded properties ranging in size from 36 to 75

rooms; they are all 'Limited Service' hotels. We excluded those properties located in exclusive, higher priced markets,

since they would naturally support larger room counts while maintaining strong performance levels and would distort the

findings. The resulting sample included 55 Comfort Inn hotels located across Texas.

The following chart of performance statistics from the latest year on file (12 months ending September 30, 1999) clearly

illustrates the consistent curve, showing marked declines in performance as room count increases. This decline was

exhibited in all three measures shown, Occupancy, Average Daily Rate, and REVPAR:

Looking only at occupancy, the following graph gives a clear depiction of the notable negative impact of larger room

counts on a hotel's ability to maintain an acceptable level of room-nights sold. Properties with lower room counts were

clearly able to sustain a higher level of occupancy. Average occupancy ranged from 66.9% for properties of 36-40 rooms,

downward to a much lower 43.8% average occupancy for properties in the 71-75 room size bracket.

Rooms Occupancy Rate REVPAR

36-40 66.9% $55.25 $36.95

41-45 65.3% $57.34 $37.45

46-50 66.5% $57.38 $38.17

51-55 62.8% $56.02 $35.20

56-60 61.8% $54.26 $33.55

61-65 56.6% $55.33 $31.33

66-70 44.6% $45.71 $20.41

71-75 43.8% $44.20 $19.38

Combined: 52 63.2% $55.46 $35.03

SIZING ANALYSIS12 Months Ending September 30, 1999


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When looking at REVPAR, the following graph follows a very similar performance curve, ranging from an average

REVPAR of $36.95 for properties of 36-101 units, downward to a mediocre $19.38 average REVPAR for properties in

the 71-35 unit size bracket. Note that the downward slide in both graphs did not begin until room counts exceeded 35

units. Prior to that, a mild upward trend is experienced. This appears to indicate that, on average, 50 rooms is the

'optimum' size for a Comfort Inn in Texas markets (excluding high priced areas). Of course, this is an average number for

this type of market. Each project must be examined on an individual basis to determine the proper size to develop within

its given market.

The above chart and graphs clearly illustrates that Developers often missed the mark, building more rooms than

'optimum.' 'Optimum' is defined as generating the highest return on invested capital, and is closely tied to occupancy and

REVPAR generation.

Analyzing the above data provides a measure of the effect of over building. For the typical range of rooms for Comfort

Inn projects (40-75 rooms) outside of higher priced areas, the occupancy dropped 23.1 points (a full 35%) from 66.9% to

43.8% as room counts escalated. With a 35 room increase in rooms from the 36-40 room size bracket to the 71-75 room

size bracket, a resulting 35% drop in occupancy is experienced.

40%

45%

50%

55%

60%

65%

70%

36-40 41-45 46-50 51-55 56-60 61-65 66-70 71-75

Occ

up

ancy

%

Roomcount

Comfort Inn Sizing StudyOccupany vs Roomcount (1999 Data)

$15

$20

$25

$30

$35

$40

36-40 41-45 46-50 51-55 56-60 61-65 66-70 71-75

REV

PA

R $

Roomcount

Comfort Inn Sizing StudyREVPAR vs Roomcount (1999 Data)


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The key question, is how to apply this principle to a given hotel project. Naturally, each project would have to be judged

on its individual merits, but looking at an 'average' project for a single brand and product is very revealing. All are

Comfort Inns. All are very similar products in similar market environments, leaving size as the major variable in

performance.

In our sampling, the average project is 65 rooms in size. At this size, the average occupancy is 62.8%. If we built 36%

fewer rooms (42 rooms) our average occupancy would rise a moderate 6.5% to 66.9%. Conversely, if we built 36% more

than average, (71 rooms) our average occupancy plummets by 42.5% to 43.8%.

Clearly there are some basic economic principles at work. Comfort Inns are conservatively-sized. Building smaller than

the average of 65 rooms yields slightly higher occupancies, but the ability to charge ever higher rates as size decreases is

marginal. As rates rise, some consumers perceive lost value and will stay at another property. On the other side of the

coin, properties built larger than the average 65 rooms suffer serious occupancy declines. At some point the need for

additional rooms that was envisioned by the optimistic developer is simply not there, and the extra rooms only serve to

depress the overall performance of the property.

BRANDED HOTELS - ANALYSIS OF SIZING AND ITS IMPACT ON PERFORMANCE

In our second analysis, we selected a sampling of all Texas branded hotels constructed from 1970-1975; 91 properties

across Texas, predominantly 'Full Service'. Our sampling was limited to hotels of less than 135 rooms. We once again

excluded those properties located in exclusive, higher priced markets. For our analysis we examined performance results

from the year 1985 when all subject hotels were 10 to 15 years old, well into their aging life cycles.

The following chart of performance statistics from 1985 for branded properties throughout Texas clearly illustrates the

downward curve, with definite erosion in performance measures as room count increases:

With occupancy declines being the strongest indicator of the negative impact of building too large, the following graph

provides a clear picture of the descending performance slide as room counts increase. Once again, properties with lower

# of Hotels Rooms Occupancy Rate REVPAR

2 00-44 70.0% $37.88 $26.50

3 45-59 73.9% $36.13 $26.71

7 60-74 66.8% $31.10 $20.77

14 75-89 62.7% $31.65 $19.86

29 90-104 60.9% $32.42 $19.75

16 105-119 57.8% $26.25 $15.18

20 120-134 55.5% $29.35 $16.28

Combined: 91 98 59.8% $30.34 $18.14

1985 Performance Results

SIZING ANALYSIS


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room counts were more insulated from market competition and were therefore able to be more competitive in both

favorable and depressed market environments. Average occupancy ranged from 70% for properties of 58 rooms or less,

downward to a much lower 55.5% average occupancy for properties in the 120-134 room size bracket, after peaking at

73.9% in the 45-59 size range.

As with the Comfort Inn analysis, the above data provides a measure of the effect of over building. However, since a

number of varying brands are considered in this sample, the typical size of these projects ranges from about 40 to 135.

This is a wider range than the Comfort sampling, since many of the brands in this sample typically have larger room

counts than a Comfort Inn. This is partially due to some brands' ability to support higher room counts, and partially due to

the tendency to overbuild in the early 1970s, when all hotels in this sample were constructed.

While the 65 room average for our Comfort Inn sample is reasonably close to optimum sizing for that brand, the 98 room

average for this analysis appears to be oversized. In our assessment, the optimum average number of rooms for this

sampling would have been 60 to 41 rooms, depending upon brand. In 1985, this roomcount supported occupancies near

70%, with an average REVPAR of almost $27. Compare this to the average capacity of 98 rooms attaining a much lower

average occupancy of 60.9% and REVPAR below $20. Clearly this lower level of performance can be attributed to over-

sizing projects in the early 1970s.

Looking at our average (oversized) roomcount of 98 rooms, increasing the size by 30% (135 rooms) would cause

occupancy to slide 10% from 60.9% to 55.5%. On the other hand, making the average project smaller (58 rooms, or 75%

smaller) would improve occupancy to 73.9%, or a healthy 21% increase.

For the sake of comparison, let us assume that the average property was more appropriately sized at about 58 rooms. If

the project size were increased to 135 rooms, the largest range in our sample, occupancy would suffer a significant 33%

decline from optimum levels.

40%

45%

50%

55%

60%

65%

70%

75%

80%

00-44 45-59 60-74 75-89 90-104 105-119 120-134

Occ

up

ancy

%

Roomcount

Sizing Impact on PerformanceOccupany vs Roomcount (1985 Data)


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Of course this assumes that locational differences are not significant. We believe this is true; the large sample and clear

correlation between size and performance support this conclusion.

SUMMARY

The data is clear. In most cases, small hotels outperform large hotels, with the exception of higher-priced markets where

competitive barriers to entry exist (e.g. lack of land, excessive land cost, building restrictions, etc.).

Common sense explains this occurrence: a successful 100 room hotel will inevitably prompt the development of one or

more new, small hotels of similar quality in the immediate area. In a competitive market environment, the smaller hotel

has a distinct advantage and wins - almost every time.


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AN ANALYSIS OF HOTEL AGING FOR MID-MARKET HOTEL PROPERTIES

By Doug Sutton, Executive Vice President, Source Strategies, & Paul Vaughn, Senior Vice President, Source Strategies.

(Excerpted from the Hotel Brand Report, Issue 137, May 2019)

In ongoing efforts to ensure that our Feasibility Study methodology is as accurate as possible, Source Strategies has

engaged in an updated investigation of the effects of aging on hotel properties. This article, the first of three deep dives

into the hotel property life-cycle, focuses on mid-market limited service properties. This study was conducted

independently from previous aging studies, with a significantly expanded sample, and a more in-depth analysis of various

product types. While we expected to find that there is still a readily identifiable and quantifiable aging curve, this

research would update our aging model, as it is based upon the most current available data and incorporates the latest

lodging market conditions, with the impact of internet booking sites, current customer preferences, mandated renovation

and maintenance regimens along with stricter brand quality controls for product lines that are mid-market and higher.

KEY FINDING: There is a clearly identifiable aging life-cycle for hotels. This study found that hotels in the mid-

market sector ramp-up after opening and peak in Year 3 at a premium of about 16% compared to the expected 20

year average performance. The performance level is determined by comparing the hotel’s annual REVPAR17 to that of

the local market as an index. The process is detailed later in this study. After Year 3, a hotel’s performance will

gradually lose ground to the market as the property ages. This analysis found that the period of above average

performance ranged from Years 2 through 10, with performance continuing to soften as properties age beyond

that point. This is an inevitable process, and while a diligent maintenance and renovation program can lessen the

effect of aging, it cannot eliminate it entirely. As cited in our previous aging studies, “The consumer almost always

picks new over old because, to them, 'new' means 'clean' and 'new' means 'value.”

METHODOLOGY:

Identifying our Sample Group of Hotels:

For this analysis we identified a sampling of mid-market hotels that recently completed their tenth year of operation.

Selection criteria for our study sample follows:

Opened in 2008

Prominent mid-market limited service brands: Best Western, Comfort Inn, Comfort Suites, Courtyard by

Marriott, Hampton Inn, Hilton Garden Inn, Holiday Inn Express, Holiday Inn, Homewood Suites, La Quinta,

Residence Inn

Not located in prominent central business districts (CBD)/metropolitan downtowns

Room count of 150 rooms or less

Additional atypical properties were excluded from our sample for reasons outlined below

17 Revenue per Available Room per Day, a prominent hotel industry statistic.


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As all hotels in this sample were opened in 2008 we were able to specifically look at the most recent 10-year pool of data

that is available. We selected prominent branded properties and excluded notably larger properties and those located in

CBD areas. We eliminated any property where we identified outside factors that may have had undue influence on the

hotel property. In doing this, we made every effort to select a sample where aging could be isolated as the primary

variable on each hotel’s performance over its first 10 years of operation. Outside factors which led us to exclude some

properties from our analysis included brand changes; volatile hurricane, flood and oil markets; changes in hotel room

count; and periods of closure. Further, any properties with widely fluctuating performance, indicating management

issues, change of ownership, renovation periods, area road construction, or other non-typical outside influences were also

eliminated from our study sample.

Assigning a REVPAR Index:

To assign a REVPAR Index, we first compiled REVPAR performance data for each hotel in our selected sample of mid-

market properties. We then identified the local area market for each selected property and compiled annual REVPAR

performance data for each hotel’s respective local market. These local markets were selected to accurately represent the

subject’s competitive set, and included from 15 to 25 surrounding properties. Rural properties may have a market

consisting of area counties, while more urban properties may have a market defined by one or more area zip codes.

After compilation of both hotel and market data, we then compared each individual property’s REVPAR performance to

that of its associated market as an index for each year of operation. The formula for deriving our REVPAR Index is

(Property REVPAR / Market REVPAR = Index). If the property matched the performance of its market, the resulting

Index would be 1.00. If the property’s performance exceeded the market by 20%, the resulting Index would be 1.20.

Conversely, if the property’s performance trailed that of its surrounding market by 20%, the Index would be 0.80.

Identifying an Aging Curve:

By measuring the property’s REVPAR performance versus that of its surrounding market, we can reliably identify and

plot the impact of aging on each selected property over time, by brand and product category, since we are effectively

neutralizing the influence of market fluctuations. In a hotel’s peak performing years, properties will have the highest

measured performance Index, while in early ramp-up, or later age impacted years, we would expect a measurably lower

Index versus the local market.


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ANALYSIS AND FINDINGS:

We identified 84 qualifying hotel properties across 11 subject mid-market brands that

opened in 2008. In analyzing this sample, we found that average performance begins

with a softer first year REVPAR index (130%) before a notable jump in Year 2 (148%),

and a milder increase to a peak level in Year 3 (153%). After peaking in Year 3,

performance begins to gradually decline as properties age. Our average Year 10

REVPAR Index (133%) was about a year from receding back to the level of the initial

year of operation. This indicates that the expected period of elevated performance (the

top of the curve) ranges from Years 2 through 10 in our aging life cycle, with age

induced performance gradually receding below average beyond Year 10.

In recent years, hoteliers have expressed to us that in the age of the Internet, with

immediate online visibility and easy booking, hotels do not suffer as much of a slow

start-up period as our previous studies have indicated. We found this to have some validity, but as outlined below there is

still a definite life-cycle with a three-year ramp-up period.

Figure 1 shows the progression of REVPAR Indices over the first 10 years of operation in our sample. The table shows

a weighted average REVPAR Index (by room count) of all 84 properties in our sample. The above described ramp-up,

peak, and subsequent decline are readily apparent. This sampling showed an average 2% (1.96%) decline in years 4-10

after the Year 3 peak.

The 10-Year Aging by Brand graph (Figure 2) illustrates both the weighted average aging curve for all 84 hotels (in red),

as well as individual brand aging curves that comprised this average. Of note, higher performing products have a more

pronounced aging curve than brands with a lower average REVPAR.


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This process is reflective of the particular mix of chain properties, a

mix which produced REVPAR moderately higher than their market

average. Brands with higher average REVPAR will generally be

higher on the graph above indicating their positioning at or above

their respective local market averages (1.0). To eliminate the effect

of a specific mix of chains, we then interpolated the scale to be

relative to the 20-year life-cycle of a specific property so that the

application of the year-by-year REVPAR indices to any project

would result in averaging 1.0 over the first twenty years of operation.

The performance shown in the table at right (Figure 3) starts at a

higher index, and peaks at a higher level than previous research has

indicated. As a reference, this table also lists previously studied, and

long cited analysis numbers. Note that the numbers do show a

moderately higher starting point from previously cited aging patterns, but a notable three year ramp-up period to peak

performance is still the norm. Offsetting this moderately faster start-up position, the aging decline after a hotel peaks has

shown to be slightly accelerated from past analysis.

Since we needed to look at the most recent aging performance possible to determine the current aging cycle, we analyzed

a sizable sample limited to 10 year old hotels. It goes without saying that there is no extended data beyond year 10

available for this sample of hotel properties. Therefore, to determine the aging curve beyond 10 years we extracted an

additional wider pool of data for a sample of hotels operating beyond the 10 year point. We were able to determine

reliable factors of aging decline experienced by a similar hotel beyond 10 years. We found an average decline of

approximately 2.2% in Year 10-15 of a hotel’s life, decelerating to a slower 1% decline after Year 15 of operation. Note

that we are only using the later year declines from this sample set to allow us to see a later period in a hotel’s life cycle

(years 11-20). This second pool of hotels all opened from 1994-1998 and their first 10 years of data are not as current or

relevant to this analysis.

By using the average declines

experienced in years 11-20 we

can expand the table in Figure 4:

These figures can then be plotted

on a graph and extended over a

thirty year period with a 1%

decline per year as follows in

Figure 5:


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Using these factors, we were able to extrapolate an extended aging curve for mid-market limited service hotels as shown

in green in Figure 6, reliably defining the expectation of the extended aging impact on a prospective mid-market hotel

development. The previous aging curve is shown in blue for reference.

It should be noted that beyond 10 years in a hotel’s life cycle, many other factors are more prevalent that will affect the

hotel’s performance. As a hotel ages, it may fail to meet the same quality standards, and is will frequently be reflagged

with a less prominent brand, or it

may become an independent

(unbranded) hotel. This can

coincide with ownership changes,

major remodeling projects, and

other influencing factors. In the

later years of these hotels' life-

cycles, they often downgrade to

budget properties due to their

declining quality. Though these

other factors are considered

‘outside influences’ in how they

impact a property, they are actually

very closely tied to a hotel’s

inevitable long term aging cycle.

Summary

In conclusion, the aging cycle of a hotel property directly affects the performance of that property. The performance will

start just below its 20-year average performance, ramp up to 116% of that average before gradually declining over time.

Using this information, Source Strategies can more accurately predict the performance of hotel projects in feasibility

studies, valuations and other performance analysis.


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CapEx: A STUDY OF CAPITAL EXPENDITURES IN THE US HOTEL INDUSTRY

The following is a summary of the International Society of Hospitality Consultants' 2000 "CapEx Study, A Study of

Capital Expenditures in the US Hotel Industry" as it applies to limited service properties:

The objective of our historical analysis in CapEx 2000 was to determine what has been spent in the past to maintain a

hotel in good, competitive condition. Hotel owners and management companies were contacted to provide data for the

study.

Definition of CapEx

"Capital Expenditure" is defined as: investments of cash or the creation of liability to acquire or improve an asset, e.g.,

land, buildings, building additions, site improvements, machinery, equipment; Comparatively, the "reserve for

replacement" for a hotel asset has been narrowly defined as the funds set aside for the periodic replacement of furniture,

fixtures and equipment (FF&E). The reserve was not contemplated to fund the replacement of major building

components, such as roofs, elevators, and chillers.

For this study the term has been defined as: the cost of replacing worn out FF&E, as well as the cost of;

- updating design and decor - curing functional and economic obsolescence... - complying with franchisors' brand requirements - technology improvements - product change to meet market demands - adhering to government regulatory requirements - replacing all short- and long-lived building components due to wear and tear

Although many equity investors frequently argue against the necessity of a reserve, particularly if the investor does not

plan to hold the property for greater than five years, the requirement for and amount of reserves are typically contractual

issues between ownership, lender, manager, and/or franchisor/franchisee.

Significant Findings of CapEx 2000

The average amount spent per year by limited-service hotels in the survey was determined to be 5.5% of total revenue for

the time period covered by CapEx 2000 (1988-1998). As these limited-service hotels have matured, CapEx has increased,

underscoring one of our principal findings that CapEx requirements increase as a hotel ages. CapEx Spending is highly

dependent upon a hotel's point in its life cycle. The following chart shows the range of CapEx spending (as a percentage

of total revenues) over a 25-year time period; the table following the chart identifies the specific ranges of CapEx

spending as a percentage of total revenues by year.


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Percentage Range of CapEx Spending by Year

Year Minimum Maximum

1 1.7% 4.5%

2 1.7% 3.3%

3 1.5% 3.2%

4 1.3% 3.6%

5 3.2% 6.2%

6 4.8% 6.8%

7 4.2% 5.9%

8 3.6% 5.2%

9 4.8% 7.0%

10 8.4% 11.9%

11 4.7% 6.6%

12 5.4% 9.4%

13 4.7% 9.9%

14 4.7% 7.8%

15 3.4% 5.7%

16 5.1% 12.4%

17 5.1% 10.5%

18 2.5% 9.7%

19 2.9% 8.1%

20 2.4% 8.7%

21 2.4% 7.0%

22 3.2% 6.8%

23 5.1% 17.0%

24 3.5% 12.9%

25 5.1% 10.2%

Minimum

Maximum

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

% o

f R

even

ues

Years

Average CapEx Range by Yearas a Ratio to Total Sales


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As the data indicates, CapEx spending increases over time for all (U.S.) hotels, with large differences in both the level of

CapEx spending and timing across different hotels. The data illustrates that, over time, the minimum and maximum

levels of CapEx spending generally widens as a hotel increases in age.

For limited-service hotels, the first major increase in spending occurs in the sixth year, which likely represents the

replacement of soft goods. The first major spike occurs in year 10, which is likely to be the result of a rooms and

corridors renovation. Smaller spikes in CapEx spending occur in the following years, with the next major spending spike

occurring in year 17, which is likely building and some mechanical renovation and replacement.

The following series of tables illustrates limited-service CapEx spending levels in various demographic categories:

CapEx 2000- Limited Service Hotels by Location

Location

Average Age in Years

CapEx/ Total

Revenue

CapEx per Room per

Year

All Properties 12 5.5% $1,111

Airport 9.8 5.4% $1,268

Urban 15.2 4.3% $820

Small City/Hwy 9.2 5.1% $773

Suburban 10.5 5.7% $1,172

0%

2%

4%

6%

8%

10%

12%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

% o

f R

even

ues

Years

CapEx to Total RevenueLimited Service Hotels

4% Reserve


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CapEx 2000- Limited Service Hotels by Average Daily Rate

Location


CapEx/ Total

Revenue

CapEx per Room per

Year


< $60 12.7 5.0% $687

$60-$80 12.5 6.3% $1,134

> $80 12 5.3% $1,570

CapEx 2000- Limited Service Hotels by Property Size

Location


CapEx/ Total

Revenue

CapEx per Room per

Year


< 100 rooms 8.7 3.3% $475

100-150 rooms 10.3 5.4% $1,107

> 150 rooms 20 6.9% $1,360

CapEx 2000- Limited Service Hotels by Age of Property

Property Age

CapEx/ Total

Revenue

CapEx per Room per

Year

All Properties 5.5% $1,111

> 15 yrs old 6.5% $1,372

5-15 yrs old 4.8% $897

< 5 yrs old 3.0% $547

Overall, the study details the varying levels of capital required to keep a hotel competitive in its life cycle. Historically,

many operators have held no more than 3-4% of gross revenues in reserve, a level which may be sufficient for FF&E

replacement, but is woefully inadequate for other required expenditures.18

18 Data compiled and organized from the CapEx report of the International Society of Hospitality Consultants, copyright 2000.


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ABOUT SOURCE STRATEGIES

Source Strategies, Inc. is the leading hotel consultant in Texas, providing Financial Feasibility Studies, Appraisal Market Packages, Litigation Support and Data Analysis. Source publishes extensive market and individual hotel statistics: the Hotel Performance Factbook, the Hotel Brand Report and the Hotel Markets Report.

Source Strategies maintains the most accurate and comprehensive Texas hotel database, covering 98% of all hotels. Source is the only provider of individual, hotel-by-hotel data, trends and financial projections in Texas.

Bruce Walker, Todd Walker, Douglas Sutton, Paul Vaughn and Amanda Sykes are the team behind the Source Strategies hotel consultancy, with over 100 years of hospitality industry experience.

Source data is based on the Texas State Comptroller audited tax files for the period of 1980 to the present, making it more accurate than voluntary samples. Source researches and writes over 100 Hotel Financial Feasibility Studies annually – a key part in the underwriting of $1 billion in new hotel investment. Beyond lenders and developers, Source’s client list includes TxDOT and the Texas Governor’s Tourism Office (1988 – 2016). Services detailed below and at SourceStrategies.org.

The Texas Hotel Performance Factbook: Contains every hotel and motel’s Revenue, REVPAR, Occupancy Numbers, etc. compared to last year and summarized by zip, city and metro. Factbooks contain 3-month data or 12-month data.

Financial Feasibility Studies: Over 100 Hotel Feasibility Studies annually. Texas’ lenders insist on a Source study because of the speed, accuracy and high value.

The Hotel Brand Report: Newsletter that is the only industry source tracking each brand’s performance, as well as product and price segments. Includes top 500 hotels every quarter.

Hotel Markets Report: Geographic Breakdowns of Texas Markets – metro, county and city by quarter and by past 12 months.

Appraisal Market Packages: Five- and ten-year market and individual property histories that show market and individual property trends.

Litigation Support and Data Analysis: Almost any question can be analyzed and proved with the powerful Source database. Extensive testimonial experience.

Contacts us at (210) 734-3434 or visit SourceStrategies.org!

Bruce H. Walker, Chairman & Founder [email protected] Todd A. Walker, President & COO [email protected] Douglas W. Sutton, Executive Vice President [email protected] Paul J. Vaughn, Senior Vice President [email protected] Amanda B. Sykes, Administration Manager [email protected]

Endorsed by the Texas Hotel & Lodging Association


REF

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BRUCE H. WALKER

Bruce Walker is the founder and chairman of Source Strategies, Texas’ leading hotel consultancy. His experience includes working with some of the world’s most recognizable consumer companies (Holiday Inn, Hampton Inns, Howard Johnson, Procter & Gamble, Crest, Secret, Scope, La Quinta). Bruce Walker leveraged his innovative marketing and branding work to develop Source Strategies into a key resource for the Texas lodging industry.

CAREER HIGHLIGHTS

1987-Present: Source Strategies, Inc. Founder and Chairman. Practice includes 100+ hotel feasibility studies annually for individual developers. Maintain Database Texas hotels and motels. Litigation support and expert testimony. Publisher and writer of The Hotel Brand Report, the Texas Hotel Performance Factbook and the Texas Hotel Markets Report.

1986-1987: La Quinta Motor Inns, Inc. Senior Vice President, Marketing. Repositioned brand with the ad campaign “Just Right Overnight,” new corporate logo, extensive couponing and premium-quality king rooms.

1984-1985: Portel Videotex Network. President. Home-banking, home-shopping start-up. 1976-1983: Holiday Corporation. Vice President, Marketing (1975-79), President of

Subsidiaries (1979-82), Senior Vice President, Central/Strategic Planning (1980-83). Initiated the first hotel frequent traveler’s program, and the classic ad campaign, “The Best Surprise is No Surprise.” Developed and launched the Hi-Net satellite reception network to Holiday Inn hotels (HBO, CNN and ESPN). Created prototypes and strategic plans for new chains Hampton Inns and Embassy Suites, and recommended sale of Holiday Inn chain (sold 1989 to Bass PLC).

1969-1975: Howard Johnson Company. Assistant to the President, Director Disney World Development, Director Restaurant Marketing.

1964-1968: Procter & Gamble Company. International Brand Manager. Introduced Scope, Secret and Crisco Oil into Canada; Crest and Tempo into the United Kingdom.

EDUCATION

Amherst College, BA, 1961, Economics. Harvard Business School, MBA, 1963. Boston Consulting Group seminars. Hotel/Motel Valuation and Investment Seminar, April 1992. Appraisal Institute

PUBLICATIONS AND SEMINARS

The Appraisal Journal: New Option in Hotel Appraisals: Quantifying the Revenue Enhancement Value of Hotel Brands. 2012. Co-written with Doug Sutton.

The Cornell Quarterly, “What’s Ahead: A Strategic Look at Lodging Trends.” 1993 Hotel & Motel Management, “Hoteliers Should Examine Hotels’ Life Cycles.” 1994 Hotel Brand Report, written and published quarterly since 1987. Speeches to Urban Land Institute, Appraisal Institute, Real Estate Counseling Group of America,

Texas Hotel & Lodging Association, O’Connor & Associates, and metro hotel associations.


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TODD ANDERSON WALKER

Todd Walker is the president of Source Strategies, Inc. and has served over 20 years as the main communicator to Source clients. He has authored over 800 hotel studies for Texas developers and lenders equating to approximately $750 million in capital projects annually since 2005.

CAREER HIGHLIGHTS

1994 – Present: Source Strategies, Inc. President (2016-present), Senior Vice President, (1997-2016). Major contributor to Source Strategies in its achieving market status as the largest supplier of Hotel Financial Feasibility Studies to Texas’ developers and lending institutions. Completed over 800 Financial Feasibility Studies successfully, encompassing over thirty different brands now operating successfully in Texas, New Mexico, Louisiana, Kansas, Colorado, Oklahoma and other states. Studies include major and local market assessments and projections, proposed hotel’s revenue generation, ten-year cash flow forecasts and the projection of return on capital investment. Responsible for sales and operation of Source Strategies’ publications, including the Texas Hotel Performance Factbook and the Hotel Brand Report newsletter. Contributes as analyst, writer and editor to Hotel Brand Report newsletter and the Texas Hotel Performance Factbook, including ‘Results from 1995, 2004, & 2005: Limited Service Dominates’ (2005), ‘First Quarter 2004, The Best Increase Since the Year 2000’ (2004), ‘Age Matters, Size Matters’ (2005). Provides litigation support, analysis and strategy for hotel litigation and testimony.

1997: Toronto Globe & Mail Newspaper. Assistant Editor of Business Publications. The Globe & Mail is Canada’s national newspaper. Wrote business articles and edited publications. Edited InfoGlobe.

EDUCATION

University of Toronto. Bachelor of Arts with Honors in English and History, 1994.


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DOUGLAS W. SUTTON

Doug Sutton is Executive Vice President of Source Strategies, Inc. and the lead analyst in the practice.

CAREER HIGHLIGHTS

1996-Present: Source Strategies, Inc. Executive Vice President developing hotel feasibility studies, proprietary Source Strategies database software development and maintenance, undertaking complicated analytical studies and writing for Source publications.

Completed over 800 Financial Feasibility Studies successfully, encompassing over thirty-two different brands in Texas, New Mexico, Louisiana, Kansas, Nebraska, Iowa and Oklahoma. Studies include market assessments and projections, proposed hotel’s revenue generation and ten-year cash flow forecasts and the projection of return on capital investment.

Responsible for programming and maintaining Source database of Texas hotels and motels.

Contributing analyst and writer to Hotel Brand Report newsletter and the Texas Hotel Performance Factbook, including ‘Hot Brands & Dying Brands’, ‘Development Since 9/11: Winners & Losers’, ‘Higher Priced Brands in Turmoil, Mid-Priced Brands Prosper’.

Provides in-depth and extreme analysis and strategy for hotel litigation and testimony.

1994-1996: University Health System, San Antonio. Decision Support Analyst. Provided data analysis to all levels of hospital management. Prepared numerous medical studies, grant support documents, cost-analysis studies, staffing studies, and other decision support analysis. Developed vertical software applications to allow departments to track and study their individual patient populations.

1987-1994: Systems IV Professionals, Inc. President. Consulting firm specializing in data analysis and customized software development utilizing FOCUS database software. Created major applications, including a long distance network analysis system for a major carrier; system allowed the carrier to determine the effect of various network changes before implementation to facilitate selection of the most cost efficient network possible.

1983-1987: United States Air Force. Captain and Information Services Officer, Directorate of Special Weapons, Kelly AFB, Texas. Duties included writing and maintaining software to manage the Air Force Nuclear weapons arsenal, tracking nuclear component parts and supplies, and acquisition and installation of major secure computer network.

EDUCATION

Troy State University. Bachelor of Science in Computer and Information Science, 1983.

PUBLICATIONS AND SEMINARS

The Appraisal Journal: New Option in Hotel Appraisals: Quantifying the Revenue Enhancement Value of Hotel Brands. 2012. Primary analyst and co-author.

Numerous articles for the Hotel Brand Report newsletter.


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PAUL J. VAUGHN

Paul Vaughn is a business technology consultant and writer and has consulted for businesses from manufacturers to retailers, non-profits to law firms, for more than 25 years. He has extensive experience working with data of all types and developing database-driven web sites.

CAREER HIGHLIGHTS

2016 – Present: Source Strategies, Inc. Senior Vice President with extensive knowledge of database management, industry analysis and methodology. Developed and managed Source Strategies website.

2009 – 2016: Sanford-Brown College. Department Chair for the Technology programs including Visual Communications, Web Design & Development, Internet Marketing and Information Technology. Responsible for hiring and managing instructors, retaining and mentoring students, marketing programs, and teaching courses.

2001 – 2016: Dingus Design. Principal. Major projects with a variety of clients including Source Strategies, LumiQuest (international marketing campaign in print and on the web), Digital Pro Lab (managed transition from Photo Express to Digital Pro Lab branding), Wilshire Homes, Fotoseptiembre USA international photography festival (created database-driven website), City of San Antonio Office of Cultural Affairs (launched city’s Fall Arts Festivals web site), Zeitgraph (launch of Steelhouse Lofts website) and many more. Provided business technology consulting and training.

2008 – 2011: Southwest School of Art. Adjunct Technology Instructor.

2001 – 2009: San Antonio Express-News / MySanAntonio.com. Wrote weekly technology column for the Sunday Business section of the newspaper.

1993 – 2001: River City Silver – Photo & Digital Imaging. Director of Digital Services – Managed transition from traditional photographic workflow to digital workflow. Worked with clients including the San Antonio Convention & Visitors Bureau, The Adkins Agency, Anderson Advertising, Goodman Sign Art and the UT Health Science Center.

1988 – 1993: Quest Productions. Production Manager – Designed and produced corporate presentations for clients including Valero, USAA, Kinetic Concepts and Procermex.

EDUCATION

Texas State University, Bachelor of Fine Art in Graphic Communications, 1988. Center for Excellence in Education (CEE), Various courses on management, technology

and training, 2010-2015. Adobe Certified Expert, Dreamweaver and Contribute


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AMANDA B. SYKES

Amanda Sykes is the Administration Manager of Source Strategies. She brings a business and accounting background to ensure that all account issues and contacts are handled efficiently and professionally.

CAREER HIGHLIGHTS

2006-Present: Source Strategies, Inc. Responsible for sales and operations of Source Strategies’ publications, duties include Texas Hotel Performance Factbook and Hotel Brand Report newsletter. Manage Accounts Receivables, billing and collections.

Contributes as analyst, writer and editor to Hotel Brand Report newsletter and the Texas Hotel Performance Factbook.

Maintains AP, AR, publication delivery and verification of the Source database.

2003-2005: Valero Energy Corporation. Associate Accountant.

EDUCATION

Southern Methodist University, Bachelor of Business Administration, 2001. Southern Methodist University, Masters of Science in Accounting, 2002.


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FINANCIAL FEASIBILITY STUDIES SAMPLE PROJECTS

AmeriSuites Austin NW College Station Denton Fort Worth Stockyards San Antonio Waco

Baymont Inn Katy Area New Braunfels

Best Value Houston Houston SW San Antonio Waller

Best Western Inn & Suites Addison Andrews Big Spring Bridgeport Cameron Cleveland Copperas Cove Dickinson Franklin Halletsville La Grange Lake Dallas Laredo Levelland Lumberton Pearsall Pilot Point Rosenberg Schulenberg Temple Tomball Wakeeney, KS

Candlewood Suites Beaumont Irving DFW Friendswood Houston Westheimer San Antonio Toyota San Marcos Temple Wichita Falls

Clarion Hotel O’Brien San Antonio

Comfort Inn & Suites Fredericksburg Navasota Pampa Pharr Bay City College Station Copperas Cove Deer Park Elmendorf Georgetown Katy Area Hobbs, NM Longview Pasadena Quanah San Antonio San Antonio North Sugarland Longview Webster

Country Inn & Suites Arlington

Econo Lodge Dallas Lake Charles Port Arthur Texas City

Embassy Suites Laredo Lubbock McAllen

Fairfield Inn by Marriott Livingston Laredo San Marcos

Hampton Inn & Suites Austin Pecan Park Austin Ben White Cedar Park Corpus Christi Del Rio Galveston Gainesville Greenville Hillsboro Katy Area Houston Beltway 8 Greenville Nipomo, CA Rosenberg Seguin Schertz South Austin Texarkana Waxahachie

Hawthorn Suites Ltd Marble Falls

Hilton Hotel Fort Worth CC

Hilton Garden Inn Amarillo Corpus Christi Granbury Houston Beltway 8 Killeen Odessa New Braunfels

Temple


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Sample Projects Continued Holiday Express Odessa Alvarado Amarillo Atlanta Austin Buda Cameron Center Cleburne Corsicana Desoto Galveston Gatesville La Grange La Porte Lampasas Manvel Pearland Orange San Antonio I-10 West San Antonio Toyota San Marcos Sherman Texarkana Wichita Falls

Holiday Inn Austin (Select) Dallas North Frisco San Antonio

Homewood Suites Houston Katy Freeway Norman, OK Marble Falls McAllen Odessa New Braunfels Waco Wichita Falls

Independent Hotels St. George, Marfa Crescent Hotel, New Orleans Dacoma Inn Houston Executive Inn Tyler Fairmont Hotel San Antonio First Choice Inn Grand Prairie Garden Inn San Antonio Killeen Inn Laredo Inn Luxury Suites Canton Palms Hotel South Padre Palace Inn Houston Passport Houston San Antonio Inn & Suites

Hotel Indigo Alamo Plaza San Antonio

La Quinta Inn & Suites Boerne Cedar Hill Gun Barrel City Keene Palestine Pasadena Pearland Rockwall San Antonio San Antonio I-10W San Antonio Toyota Seguin Tomball

Marriott Hotel Dallas Convention Center Colorado Springs CC JW Marriott, Houston

Quality Inn & Suites Katy San Antonio East

Waco

Red Roof Inn Katy Area Pharr Stafford Temple

Staybridge Suites San Antonio South Padre Island

Studio 6 Bay City Tyler Winnie

Super 8 Austin East Beaumont Conroe Copperas Cove Fort Stockton Humble Killeen Livingston Pharr Plainview Rosenberg San Antonio South

TownePlace Suites Killeen Universal City

Travelodge Killeen San Antonio

Westin San Antonio Riverwalk

Wingate Inn & Suites Odessa

San Antonio


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SAMPLE STUDIES, DATA AND LITIGATION SUPPORT 1. Contracted by the Texas’ Governors Office of Economic Development, Tourism Division (1988 – 2016) to assess Texas tourism promotion efforts and to aid in marketing Texas. 2. Provided over 1,000 ten-year custom local hotel market histories to MAI appraiser clients (Appraisal Market Packages). 3. Developed numerous competitive REVPAR performance studies versus local area market averages. This unique analysis technique highlights trends and deviations in performance, regardless of market movement; a REVPAR index versus market average shows how well a property has performed. By limiting study to a single variable, truly scientific conclusions can be made as to cause and effect. Deviations from trend can be related to specific, causal events such as management problems or outside influence (e.g. new highway construction, brand change, new competition); if there is no effect from an event, studies confirm the absence of any impact). If there is an effect, the degree is measurable and apparent. This study approach is among Source's most important work, frequently the basis for expert witness testimony by Source's principal Bruce Walker. Examples of major studies include: a) the (lack of) induced demand from opening large North hotels in Texas, 1980 through 2003; b) the impact of adding a second luxury hotel of the same brand in a local market, or removing a hotel of the same name, on the performance of the pre-existing property; 3) Studies to separate and quantify hotel Business Value - and the separate Real Estate Value - for tax assessment disputes. The most important study here was to determine the average revenue effect of adding or removing the "Marriott Hotel" name to numerous hotel properties from 1980 through 1995. Source Strategies has produced values for the Marriott Austin hotel and the Marriott Rivercenter hotel San Antonio, both with- and without- the Marriott name for real property tax disputes. Clients included USAA, the Bexar County Appraisal District, and Texas Department of Transportation (TxDOT). Frequent litigation clients have included the TxDOT through Texas Attorney General's Office for condemnation valuation and damage cases (Days Inn Houston I-45N, Motel 6 Ft. Worth, Holiday Inn Houston I-45N, La Quinta Houston I-45N, Holiday Inn Lubbock, Austin Hawthorn Suites South, Chariot Inn, Malibu Grand Prix, Dallas Sheraton, San Antonio Holiday Select Airport, Coit Towers Hotel Dallas, Erie County PA Hotel Owners vs. Convention Authority, Bandera Motel San Antonio), USAA, Bexar County Appraisal District, Capital Income Properties (Hilton Nassau Bay, Austin Marriott North), American Liberty, Dosani Brenham Inn, Wes-Tex Management El Campo. Hospitality (Homeplace Inn), Ramada Bannister Austin (lock manufacturer), Rodeway Inn I-10 West (bank's non-funding of a committed loan), Homer J. Rader, and Siu Ft Worth and San Antonio Inn (bankruptcies), Holiday/Clarion (loss due to change of brand), United Fire (Wingate McAllen performance due to construction issues), Hyatt Regency San Antonio (arbitration re: introduction of second Hyatt in CVB), Drury Inn Riverwalk. 4. Numerous studies to determine the effect on revenues and cash flow of brand name alternatives, whether in new builds or in changing to or from a brand name. This technique is used extensively in feasibility work to predict revenue performance of new hotel projects under various brand name alternatives. 5. Represented Host Marriott before Real Estate Tax Appeal Board, Virginia. 6. Drafted national lending guidelines for Heller Small Business Finance for lodging projects under $5 million. 7. Presentations to bank lending committees to explain the economics of the lodging industry, particularly the effect of market demand and supply, equilibrium occupancy, cost structures, and the effect of brand name on REVPAR and ROIC. 8. Analysis of alternative markets to determine their potential for new lodging: alternative metro areas, alternative sites, and strategically, for an expanding chain. 9. Consumer intercept and secondary data studies, including the effect of a new hotel or a potential name change.


(210) 734-3434 SourceStrategies.org

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Methodology of Texas Hotel/Motel Reports Texas Hotel/Motel Quarterly Reports are prepared on a custom basis for private and public clients. Reports are prepared by Source Strategies of San Antonio, Texas, based on the SSI proprietary database. Data sources include the following: Room Revenues: State of Texas Comptroller records are the source of taxable and gross room revenues for all properties. All properties exceeding $36,000 in the current quarter are included; allowing the Source Strategies database to cover. As a 98% of Texas lodging industry market. Gross room revenues (including Non-taxable) were reported to the Comptroller starting in the third quarter of 1990. To account for the missing non-taxable revenues prior to the third quarter of 1990, Source Strategies increases each individual property's taxable-only, reported revenues by variable factors averaging 12% to reflect this untaxed volume (e.g. government business, over 30-day stays, charitable and educational purchases). Starting in the third quarter of 1990, hotels and motels were required by the Texas Comptroller to report both taxable and gross room revenues. Approximately 80% of properties usually comply, allowing the development of adjustment factors for all hotels and motels, even if only taxable revenues are reported. For example, taxable room revenues are adjusted accordingly higher if a hotel reports only taxable revenues (i.e. where taxable equals gross room revenues). Properties that make no report or only partial reports are estimated based on the taxable and gross revenues of the past five quarter trends and performance of similar hotels. If and when they subsequently report accurately, their actual revenues 'overwrite' our estimates. Room Counts: these are checked annually in chain directories, the Texas American Automobile Association Tour Book, brand websites and telephoning to hotels; properties checked account for approximately 80% of revenues. For independent properties too small to be listed, the room counts reported to the state are used (unless they appear unreasonable; if so, a telephone contact is made). As a result, the 'CHAIN' occupancies and room counts appear to be very close to 'actual', while independent room counts could be slightly overstated. Reports are split into CHAIN and INDEPENDENT categories. Average Daily Rates are estimated with the aid of financial reports, appraisers, private S.S.I. surveys, chain and AAA directories and another reliable industry database. Room-nights sold are derived from the above revenues, divided by Average Daily Rates. Room-nights available are calculated from Room Counts (times days in the period). Occupancy is calculated from room-nights sold and room-nights available. All occupancy figures reported represent fully weighted averages, as calculations are always made after sub-totaling or totaling room-nights sold and room-nights available.

"CHAINS" are defined as one of the "Top 70+" brands, and include the following names: Four Seasons, Gaylord, Westin, ZaZa, W, Hilton, Hyatt, Inter-Continental, Marriott, Omni, Renaissance, Wyndham, Embassy, Homewood, Residence, Staybridge, Clarion, Courtyard, Crowne Plaza, Indigo, Doubletree, Hilton Garden Inn, Holiday Inn, Radisson, Sheraton, Candlewood, Comfort Suites, Hawthorn, Quality Suites, SpringHill, TownePlace, Baymont, Best Western, Comfort Inn, Country Inn, Drury, Fairfield, Hampton, Holiday Express, La Quinta, Wingate, Budget Suites, Extended Stay America, Intown, Value Place, Studio Plus, Studio 6, Best Value, Days, Econo Lodge, Howard Johnson, Microtel, Motel 6, Quality Inn, Ramada, Red Roof, Super 8, Home2 Suites and Tru.

Accuracy: Room counts and Room Revenues are within 2%. On an overall basis, the change in average daily rates reported by Source Strategies Inc. have typically been within a few tenths of one-percent of other private research firms operating in the Texas market.

financial feasibility study · performance of new and older properties, with newer hotel inventory...

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