Presented by: Rick Pastorino

CapEx Spending in Hotels�

Historical Trends & What the Future Holds

ISHC CapEx 2014

Is 4% enough?

ISHC CapEx 2014  Presentation on the findings from the 4th Edition of

the “ISHC CapEx 2014 – A Study of Capital Expenditures in the Hotel Industry” 

 Collaboration between the ISHC and HAMA  More than 20 industry experts from these two

preeminent industry organizations contributed to the publication •  Supported by data collected from over 500 U.S.

hotels  Study covers the six-year period from 2007-2012

Road Map  Explore CapEx Spending for:

•  All Properties•  Full Service•  Select Service•  Extended Stay•  Ownership Type

 Explore CapEx + R&M Spending for Same Categories

All Properties

All Properties – By Year

9.7%11.6%

7.9%5.5% 6.8%

9.7%

3.9%4.2%

4.7%

4.6%3.9%

4.1%

0%

3%

6%

9%

12%

15%

18%

2007 2008 2009 2010 2011 2012

% of

Tot

al R

even

ue

CapEx% R&M%

All Properties – Ownership Type

Capital Spending by Ownership Type All Properties 2007 – 2012

  

By Total Revenue Per Room Per YearCapEx CapEx + R&M CapEx CapEx + R&M

Total Sample 8.3% 12.9% $3,702 $5,755

REIT 9.5% 14.0% $4,965 $7,371

Non-REIT 4.0% 8.7% $1,171 $2,518

All Properties – CapEx Spend by Ownership Type

9.5%

4.0%

0%

2%

4%

6%

8%

10%

REIT Non-REIT

All Properties – Property Type

8.3% 8.8%

3.9% 4.9%

4.6% 4.6%

4.6%4.7%

0%

3%

6%

9%

12%

15%

All Properties Full Service Select Service Extended Stay

CapEx % R&M %

All Properties – Spend Percentage by Age

0%

5%

10%

15%

20%

25%

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 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40Year

Capital Expenditures/Total Revenue Reserve for Replacement

*Please note that in Year 33, there is an outlying data point that impacts the results for that year.

All Properties – Percentage by Location

8.3% 8.1% 9.0% 8.0% 8.5%5.7% 6.5%

4.6% 4.5%4.5% 5.0% 4.9%

4.3%4.8%

0%

3%

6%

9%

12%

15%

All Properties Urban Resort Suburban Airport Small Town/Metro

Interstate

Cap Ex / Total Rev R&M / Total Rev

All Properties – Percentage by ADR

6.9%9.5% 8.5%

5.1%

6.3%4.5%

0%

3%

6%

9%

12%

15%

18%

<$100 $100-$125 >$125

Cap Ex / Total Rev R&M / Total Rev

Full-Service

Full Service – Percentage by Year

14

10.0%12.2%

8.1%5.8% 7.4%

10.7%

3.9%4.2%

4.8%

4.6%3.8%

4.2%

0%

3%

6%

9%

12%

15%

18%

2007 2008 2009 2010 2011 2012

CapEx% R&M%

Full Service – Per Available Room

15

$8,625 $9,811

$5,105 $3,898$6,021

$8,043

$3,390$3,350

$3,009$3,097

$3,117

$3,121

$0

$2,500

$5,000

$7,500

$10,000

$12,500

$15,000

2007 2008 2009 2010 2011 2012

CapEx R&M

Full Service – CapEx Spend by Ownership Type�

10.1%

3.6%

0%

3%

6%

9%

12%

REIT Non-REIT

Full Service - CapEx Spend by Age

0.5%

4.6% 4.9%

8.3%9.8% 10.0% 9.6%

0%

3%

6%

9%

12%

1 to 5 yrs 6 to 10 yrs 11 to 15 yrs

16 to 20 yrs

21 to 25 yrs

26 to 30 yrs

31+ yrs

% of

Tot

al R

even

ue

Full Service – 6-Year Running Average

0%

3%

6%

9%

12%

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 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

Year

Capital Expenditures/Total Revenue Reserve for Replacement

Select-Service

Select Service - Percentage by Year

20

3.8% 4.2%5.7%

3.3% 2.9%4.3%

3.7% 4.0%

4.5%

4.3% 4.1%3.8%

0%

3%

6%

9%

12%

2007 2008 2009 2010 2011 2012

CapEx% R&M%

Select Service – Per Available Room

$1,418 $1,351 $1,737$981 $938

$1,511

$1,394 $1,271$1,369

$1,292 $1,323

$1,337

$0

$1,000

$2,000

$3,000

$4,000

2007 2008 2009 2010 2011 2012

Total CapEx PAR Total R&M PAR

Select Service - CapEx Spend by Age

0.8%

5.5% 5.2%5.7%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

1 to 5 yrs 6 to 10 yrs 11 to 20 yrs 21+ yrs

% of

Tot

al R

even

ue

Select Service – CapEx Spend by Year

0%

2%

4%

6%

8%

10%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20Year

Capital Expenditures/Total Revenue Reserve for Replacement

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

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 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40Year

Capital Expenditures/Total Revenue Reserve for Replacement

Select Service: 6 Year Running Average

Extended-Stay

Extended Stay – Percentage by Year

5.4% 7.0% 6.9%4.0% 2.8%

5.1%

4.4%4.6% 4.7%

4.6%4.4%

4.4%

0%

3%

6%

9%

12%

15%

2007 2008 2009 2010 2011 2012

% of

Tot

al R

even

ue

CapEx% R&M%

Extended Stay – Per Available Room

$2,175 $2,456 $2,334$1,394 $888

$1,740

$1,755 $1,605 $1,604

$1,600$1,424

$1,500

$0

$1,000

$2,000

$3,000

$4,000

$5,000

2007 2008 2009 2010 2011 2012

CapEx PAR R&M PAR

Extended Stay – CapEx Spend by Age

1.0%

4.6%5.3%

9.8%

0%

3%

6%

9%

12%

1 to 5 yrs 6 to 10 yrs 11 to 20 yrs 21+ yrs

% of

Tot

al R

even

ue

Historical Capital Spending

6.9%6.1%

5.1%

8.8%

3.7%

5.5% 4.9%3.9%

5.9%4.9%

0%

3%

6%

9%

12%

CapEx 1995 CapEx 2000 CapEx 2007 CapEx 2014

% of

Tot

al R

even

ue

Full-Service Limited-Service Extended-Stay

ISHC CapEx 2014 – Key Takeaways  CapEx Increases with Age  Economic Cycles Influence CapEx Spend &

Associated Metrics (% & $ PAR)  Year 8: Point of No Return  REITs Spend 2 X’s as much as Non-REITs  R&M: Narrow range over the course of the study -

3.9% to 4.7%

ISHC CapEx 2014

4% is not enough long term.

ISHC CapEx 2014 can be ordered at:

www.ahlei.org/�

ISHCCapEx2014/