PKF consultant report

865 South Figueroa Street Suite 3500 Los Angeles CA 90017 Telephone (213) 680-0900 Telefax (213) 623-8240 www.pkfc.com

_________________________________ Member, PKF International, Ltd.

July 24, 2009 Mr. Peter Angelis UCLA Housing and Hospitality 360 De Neve Drive Sproul Hall, Room 182 Los Angeles, California 90095 Dear Mr. Angelis: Pursuant to your request, we have completed our analysis of the potential market demand and financial projections for a hotel and conference center (“the Center”) of recommended type and size to be located at the selected site options within the UCLA Campus in Westwood, of Los Angeles, California. This report summarizes and presents our findings, conclusions, recommendations and projections of financial performance for the proposed hotel and conference center. As in all studies of this type, the estimated results assume and are based upon competent and efficient management and presume no significant changes in the competitive position of the lodging industry in the market area from those set forth in this report. The conclusions reached are based upon our present knowledge of the area lodging market and regional conference center market as of the completion of our fieldwork, concluded in June 2009. The terms of our engagement are such that we have no obligation to revise this report or the estimated operating results to reflect events or conditions that occur subsequent to the date of the completion of our fieldwork. However, we are available to discuss the necessity for revision in view of changes in the economic or market factors affecting the proposed project. Since the estimated operating results are based on estimates and assumptions that are subject to uncertainty and variation, we do not represent them as results that will actually be achieved. This report is subject to the attached Statement of Assumptions and Limiting Conditions. This report has been prepared for your internal use in decision-making with regard to the type and size of the proposed facility. The report and its contents, however, may not be quoted in any appraisal, prospectus or other document without our prior written consent. We appreciate your cooperation extended to us during the course of our engagement and would be pleased to hear from you if we could be of further assistance in the interpretation of our findings and recommendations.

Sincerely,

PKF Consulting

Bruce Baltin Senior Vice President

ii TABLE OF CONTENTS

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SECTION I INTRODUCTION .......................................................................................................... I-1

SCOPE AND METHODOLOGY ............................................................................................ I-1 Table 1-1 .................................................................................................... I-2 Table 1-2 .................................................................................................... I-2

SECTION II

PROPERTY DESCRIPTION ............................................................................................ II-1 SITE DESCRIPTION .............................................................................................................. II-1

Table 2-1 ................................................................................................... II-2 Surrounding Area ...................................................................................................... II-4 Relationship to Demand Generators and Area Amenities ......................................... II-4

Table 2-2 ................................................................................................... II-4 RECOMMENDED HOTEL AND CONFERENCE CENTER FACILITIES ................................... II-5

Table 2-3 ................................................................................................... II-5 Comparable Facilities ............................................................................................... II-5

Table 2-4 ................................................................................................... II-6 Facility Design & Programming ................................................................................ II-6

Table 2-5 ................................................................................................... II-7 Parking ..................................................................................................................... II-7 Guest Rooms ............................................................................................................ II-8 Restaurant and Lounge ............................................................................................. II-8 Meeting Space .......................................................................................................... II-9

Larger Events ................................................................................................ II-9 Conference Center Programming ................................................................ II-10 IACC Criteria Review .................................................................................. II-11

Additional Recommended Facilities and Amenities ................................................ II-14 Branding ................................................................................................................. II-14 Management ........................................................................................................... II-14 CMP Rate (Complete Meeting Package) .................................................................. II-15

CONCLUSION ................................................................................................................... II-16

SECTION III AREA REVIEW .............................................................................................................. III-1

LOS ANGELES AREA REGIONAL CONCLUSIONS AND ECONOMIC OUTLOOK ............ III-1 Table 3-1 .................................................................................................. III-2 Table 3-2 .................................................................................................. III-3 Table 3-3 .................................................................................................. III-3

TOURISM INDICATORS ..................................................................................................... III-4 Table 3-4 .................................................................................................. III-4 Table 3-5 .................................................................................................. III-5

CONCLUSIONS .................................................................................................................. III-5 WESTWOOD OVERVIEW ................................................................................................... III-6 CONCLUSION .................................................................................................................... III-7

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SECTION IV MARKET ANALYSIS ..................................................................................................... IV-1

MARKET ANALYSIS OVERVIEW ......................................................................................... IV-1 CONFERENCE CENTER INDUSTRY OVERVIEW ................................................................ IV-1

Table 4-1 .................................................................................................. IV-4 Table 4-2 .................................................................................................. IV-4 Table 4-3 .................................................................................................. IV-5 Table 4-4 .................................................................................................. IV-6 Table 4-5 .................................................................................................. IV-6 Table 4-6 .................................................................................................. IV-7 Table 4-7 .................................................................................................. IV-7

The Meetings Market ............................................................................................... IV-8 Meeting Facilities Demand .......................................................................... IV-8

Table 4-8 .................................................................................................. IV-8 Table 4-9 .................................................................................................. IV-9

Industry Outlook ........................................................................................ IV-10 Comparable University Conference Centers .......................................................... IV-11

Table 4-10 .............................................................................................. IV-13 Operating Performance .............................................................................. IV-14 Market Demand Segmentation .................................................................. IV-14

Table 4-11 .............................................................................................. IV-14 Competitive Conference Center Market ................................................................. IV-14

Table 4-12 .............................................................................................. IV-15 Table 4-13 .............................................................................................. IV-17

Performance of the Competitive Conference Center Market .................................. IV-17 Table 4-14 .............................................................................................. IV-17

Market Demand Segmentation .................................................................. IV-18 Table 4-15 .............................................................................................. IV-18

National and Regional Hotel Market Overview ..................................................... IV-18 Competitive Local Hotel Market ............................................................................ IV-19

Table 4-16 .............................................................................................. IV-19 Table 4-17 .............................................................................................. IV-20

Historical Performance of the Competitive Local Hotel Market ................. IV-22 Table 4-18 .............................................................................................. IV-22

Market Demand Segmentation .................................................................. IV-23 Table 4-19 .............................................................................................. IV-23

Commercial Market Segment ..................................................................... IV-23 Leisure Market Segment ............................................................................. IV-23 Group Market Segment .............................................................................. IV-23

Future Changes in the Competitive Hotel and Conference Center Supply ............. IV-24 Conclusions and Outlook ...................................................................................... IV-24

SECTION V

ESTIMATES OF DEMAND ............................................................................................. V-1 INTRODUCTION ................................................................................................................. V-1 UCLA LODGING, CONFERENCE AND MEETING DEMAND ............................................. V-1

Table 5-1 ................................................................................................... V-3

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Table 5-2 ................................................................................................... V-4 Academic Department Demand ............................................................................... V-5 Non-UCLA Conference and Meeting Demand ......................................................... V-5 Benchmark Indicators of Demand............................................................................. V-5

Build-Up Approach ....................................................................................... V-6 Table 5-3 ................................................................................................... V-7

Fair Share and Market Penetration Approach ................................................ V-8 Table 5-4 ................................................................................................... V-8

Population Multiplier Approach ................................................................... V-9 Table 5-5 (Referenced from Table4-10) ................................................... V-10 Table 5-6 ................................................................................................. V-10

Estimated Performance ........................................................................................... V-11 Table 5-7 ................................................................................................. V-11

Estimated Market Mix ............................................................................................. V-11 Table 5-8 ................................................................................................. V-12

Complete Meeting Package (CMP) Analysis ............................................................ V-12 CMP Estimated Mix .................................................................................... V-12

Table 5-9 ................................................................................................. V-13 CMP Rates .................................................................................................. V-13

Table 5-10 ............................................................................................... V-13 Table 5-11 ............................................................................................... V-14

Estimated Average Daily Room Rate ....................................................................... V-14 Table 5-12 ............................................................................................... V-15 Table 5-13 ............................................................................................... V-15 Table 5-14 ............................................................................................... V-16

SECTION VI

FINANCIAL PROJECTIONS ......................................................................................... VI-1 BASIS OF PROJECTIONS ..................................................................................................... VI-1 INCOME AND EXPENSE ESTIMATES .................................................................................. VI-1 INFLATION ......................................................................................................................... VI-2

Table 6-1 .................................................................................................. VI-3 Table 6-2 .................................................................................................. VI-4

Projected Operating Results ..................................................................................... VI-5 Departmental Revenues ............................................................................... VI-5

Table 6-3 .................................................................................................. VI-5 Table 6-3 .................................................................................................. VI-6 Table 6-5 .................................................................................................. VI-6 Table 6-6 .................................................................................................. VI-6 Table 6-7 .................................................................................................. VI-7

Departmental Expenses................................................................................ VI-7 Table 6-8 .................................................................................................. VI-7 Table 6-9 .................................................................................................. VI-8 Table 6-10 ................................................................................................ VI-8 Table 6-11 ................................................................................................ VI-9

Undistributed Operating Expenses ............................................................... VI-9 Table 6-12 ................................................................................................ VI-9

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Table 6-13 .............................................................................................. VI-10 Table 6-14 .............................................................................................. VI-10 Table 6-15 .............................................................................................. VI-10

Fixed Expenses .......................................................................................... VI-11 Table 6-16 .............................................................................................. VI-11

Reserve for Replacement ....................................................................................... VI-11 REPRESENTATIVE YEAR OPERATING STATEMENT .......................................................... VI-12

Table 6-17 .............................................................................................. VI-13 ESTIMATED ANNUAL OPERATING RESULTS .................................................................. VI-14

Table 6-18 .............................................................................................. VI-15 Table 6-19 .............................................................................................. VI-16

UCLA Proposed Hotel & Conference Center

Section I

INTRODUCTION

Section I – Introduction


I-1

INTRODUCTION

UCLA Housing and Hospitality retained PKF Consulting to perform an analysis of the potential market demand and prepared estimates of operating performance for a hotel and conference center of some type and size (“the Center”) proposed for a site within the UCLA Campus in Westwood located in Los Angeles, California. SCOPE AND METHODOLOGY To determine whether the overall environment appears suitable to support a new hotel conference center, we conducted an analysis of the regional competitive conference center market and local competitive lodging market in which the subject would compete. This included, but was not limited to, the evaluation of the selected subject sites provided by UCLA and the Campus’ relationship to potential demand generators. Amid our fieldwork and research, we specifically:

• Identified meeting trends on a national, regional, and local level in terms of demand;

• Involved 45 academic CAO’s (Chief Administrative Officers) to participate in a survey to assess anticipated demand for meeting events and projected volume of hotel room nights;

• Conducted focus groups and meetings with key coordinators of school

departments

• Determined potential users of the proposed Center and researched trends associated with seasonal travel patterns;

• Validated the operating profile of the proposed Center and have provided

guidance for financial projections by preparing a five-year income and expense pro forma; and,

• Opined on the proposed facilities recommendations and commented on project

branding, management and rate positioning. For our analysis, we recommend the Center be positioned as an upscale, full-service (offering on-site food and beverage facilities), residential university conference center consisting of 276 guestrooms with approximately 35,000 square feet of meeting space. Our conclusions are based on the subject’s designation with IACC (International Association of Conference Centers). Our recommendations are also based, in part, on the expressed needs of administrators at UCLA and on our analysis of the strong competitive market in which the Center would operate. For the purposes of our analysis and projections, we have assumed that the Center will open on or about January 1, 2014.

Section I – Introduction


I-2

Based upon an analysis of the sources of demand available to the subject property and its estimated competitive position, we have estimated the average daily room rate that could potentially be achieved in a representative year, in current value dollars, and over the first five full years of operation. The table below outlines these estimates, beginning with an assumed opening date of January 2014.

Table 1-1 Proposed UCLA Hotel & Conference Center

Projected Market Performance Annual Percent Occupied Percent Occupancy Average Percent

Percent

Year Supply Change Rooms Change Percentage Daily Rate Change REVPAR Change 2014 100,740 N/A 62,800 N/A 62% $251.00 6.5% $156.47 N/A 2015 100,740 0.0% 66,900 6.5% 66 263.00 5.0 174.65 11.6% 2016 100,740 0.0 70,600 5.5 70 271.00 3.0 189.92 8.7 2017 100,740 0.0 70,600 0.0 70 279.00 3.0 195.53 3.0 2018 100,740 0.0 70,600 0.0 70 287.00 3.0 201.13 2.9 CAAG 0.0% 3.0% 3.4% 6.5% Source: PKF Consulting

The estimates of revenues, costs, and expenses are based on the proposed Center’s specific facilities and services and their operational characteristics. As a basis for our projections, we have analyzed the operating results of university conference center properties with similar characteristics that are believed to operate with efficient management and proper control of costs and expenses. The following table summarizes the estimated operating results for the first five years of operation for the proposed UCLA Hotel & Conference Center.


Summary of Estimated Annual Operating Results

Total Net Operating Ratio to

Year Revenue Income Total Revenues 2014 $13,944,000 $3,582,000 26% 2015 30,333,000 8,309,000 27 2016 32,621,000 9,239,000 28 2017 33,594,000 9,525,000 28 2018 34,647,000 9,859,000 28


Section II

PROPERTY DESCRIPTION & FACILITIES

Section II – Property Description


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PROPERTY DESCRIPTION

UCLA CAMPUS DESCRIPTION UCLA is a public research university located in Westwood, Los Angeles, California. The University was founded in 1919 and is the second-oldest general-purpose campus in the University of California system. UCLA comprises the College of Letters and Science (the primary undergraduate college) as well as undergraduate colleges of Arts and Architecture, Herb Alpert School of Music, Henry Samueli School of Engineering and Applied Science, Nursing, and Theater, Film, and Television, seven professional schools, and five professional Health Science schools. Since 2001, UCLA has enrolled over 33,000 total students annually. The University features seven general campus professional schools, and four professional schools for the health sciences. Collectively, these schools serve about 25,000 under-graduate and 11,000 graduate students, respectively. The UCLA College of Letters and Science has 34 academic departments and over 900 faculty, and houses the majority of UCLA's 129 undergraduate majors as well as Graduate students. Students at both levels are enrolled in the UCLA School of the Arts and Architecture, the Henry Samueli School of Engineering and Applied Science, and the School of Theater, Film, and Television, while the Graduate School of Education and Information Studies, the Anderson School of Management, the School of Public Affairs, and the School of Law serve graduate students. UCLA's undergraduate program is ranked 25th among "America's Best Colleges 2009: National Universities" by U.S. News & World Report, third among public universities in the United States. The University also ranks among the top 10 schools in the country with the most faculty awards. SITE DESCRIPTION According to the preliminary research provided by UCLA, two sites on Campus have been identified for consideration for the proposed project. Additional site and massing studies were also conducted internally through Campus authorities and each site option presents opportunities and challenges. Presented below is a summary of the potential site locations for the proposed Hotel & Conference Center.

Site 1 This site contains the existing UCLA Faculty Center and offers potential for the project to incorporate Faculty Club amenities. The site boasts excellent accessibility to travelers on Hilgard Avenue as well as for pedestrians passing through the eastern portion of Campus. Accessibility to the site is convenient from north and south bound traffic traveling on Hilgard Avenue. It is located approximately 1.0 mile north of Wilshire Boulevard and 0.6 miles south of Sunset Boulevard. In addition, the site is proximate to the W Hotel Westwood which may serve as overflow accommodations during larger conferences.

http://en.wikipedia.org/wiki/Research_university

http://en.wikipedia.org/wiki/Westwood,_Los_Angeles,_California

http://en.wikipedia.org/wiki/California

http://en.wikipedia.org/wiki/University_of_California

http://en.wikipedia.org/wiki/Herb_Alpert

http://en.wikipedia.org/wiki/Henry_Samueli_School_of_Engineering_and_Applied_Science

http://en.wikipedia.org/wiki/U.S._News_%26_World_Report



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Site 2 Located at the northeast entrance of UCLA’s campus, this site option consists of more than 13 acres and is currently where the Chancellor’s Residence resides. Visibility from Sunset Boulevard to the north is excellent but would be very limited by way of Hilgard Avenue or from other locations on Campus. Accessibility is good from surrounding arteries for vehicular traffic. The site is also adjacent to a private elementary school which may be sensitive to noise and safety issues related to the proposed project.

As we have not focused our analysis in this report on site selection or positioning based on the proposed project’s location, we have only reviewed the potential site options and have provided our opinion of impacts for planning and review purposes.

Table 2-1 UCLA Hotel & Conference Center Site Selection

Site Option Visibility Accessibility Size/Area Campus Convenience 1 + + +- ++ 2 +- + + +-

+ = positive impact, - = negative impact

Presented on the following page is a map of the UCLA Campus with the preliminary site options for the proposed Hotel & Conference Center.



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1

2



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Surrounding Area Overall, the subject sites are well-located in relation to both the UCLA Campus and the Westwood and surrounding communities. Both are within walking distance from the campus and other amenities. The proposed hotel and conference center would be close enough to the academic schools, athletic facilities, and faculty offices to make it easily accessible for university-related events, while not interfering with campus activities for non-university events. The two sites are also well-located to attract hotel and conference center demand from the greater Los Angeles area and surrounding regions. UCLA’s Campus is centrally located within Westwood Village and is less than two miles east of the 405 Freeway, three miles west of Beverly Hills attractions, five miles from beaches and the Pacific Ocean, and less than 15 miles from LAX Airport. Relationship to Demand Generators and Area Amenities Considering its location and the needs and desires indicated by University representatives, we expect demand for the Center will be predominantly related to UCLA. We have assumed that the Center will be utilized as the preferred or official lodging facility for visitors to the University. The subject sites are located proximate to many of UCLA’s key academic and professional schools, medical centers, and faculty and administrational offices. Thus, the Center will be especially well located to accommodate the lodging, conference and other function demand generated by these academic and learning programs. Currently, the Westwood and West Los Angeles lodging markets experience high demand for high-quality meeting facilities with accommodations. Historically, UCLA affiliates have had to find accommodations at the UCLA Guest House or many times at lodging facilities distant from Campus. The Center will also be very convenient to several of the University’s major athletic facilities, as summarized in the following table:

Table 2-2 Key UCLA Athletic Facilities

Facility Varsity Sports

Hosted Capacity* Distance to Sites

(miles) Pauley Pavilion Basketball/Volleyball 13,000 Less than 1.0 Jackie Robison Stadium Baseball 1,000 2.5 Drake Stadium Track & Field/Soccer/Pac 10 Events 11,700 Less than 1.0 Rose Bowl (Pasadena) Football 96,000 30 *Rounded Capacity Figures Source: PKF Consulting

The proximity of the Center’s site to many major athletic facilities supports its suitability to accommodate function and lodging demand generated by the competitions they host. Moreover, the subject site is relatively proximate to many of West Los Angeles’ commercial districts along Wilshire Boulevard and located in Beverly Hills, Century City, and Santa



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Monica, where corporate and leisure lodging demand in the market area is most prevalent. Thus, relative to supportive commercial businesses and leisure attractions, the subject center will be at a locational advantage in competing for typical commercial and leisure demand generated by the greater West Los Angeles. As a conference center, the subject will be well located relative to the area’s major commercial headquarter offices and will be a unique alternative to group business given its convenient residential setting. More so than other types of conference centers, university conference centers tend to attract meetings on a regional scale. Thus, the Center’s location and ease of accessibility from other urban areas in the Western US is considered advantageous. RECOMMENDED HOTEL AND CONFERENCE CENTER FACILITIES The scope of our work included the making of recommendations as to the size and type of the proposed center. Our facilities recommendations are based, in part, on the needs expressed by UCLA personnel that were interviewed and surveyed, the assumption that the facility would accommodate UCLA-based groups and meetings, and our perceptions of the facilities required to optimize the opportunities for conference market penetration. A summary of typical conference center facilities by type is presented as follows.

Table 2-3 Summary of Typical Conference Center Facilities

Average Number of

Guest Rooms

Dining Room/ Lounge Seats

# of Meeting Rooms

SF of Meeting Space

SF of Meeting Space/Guest

Room All Centers 218 307/80 32 33,361 153 Executive Centers 169 294/58 27 24,301 144 Corporate Centers 274 336/135 46 41,553 152 Resort Centers 280 314/78 28 35,922 128 College/University Centers 165 285/45 24 31,516 191 Source: PKF Consulting, Trends in the Conference Center Industry, 2008 Edition

The proposed property, developed as a conference center, would be most closely aligned with the attributes of University Conference Centers (due to its location primarily but also recommended facilities). The previous table indicates university conference centers have the highest ratio of meeting space at 191 square feet per guest rooms, of the four types of conference centers. The other three types of centers have a ratio ranging from 128 to 152 square feet of conference space per guest room. Comparable Facilities Based on discussions with UCLA planners and our review of new conference facilities which have recently been constructed, we recommend that the proposed Center be modeled similarly to the AT&T Executive Education and Conference Center located at the University of Texas at Austin.



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Table 2-4

AT&T Conference Center Meeting Space Capacity (SF)

Tiered Amphitheater 300

Divisible Ballroom 800

Tiered Classrooms (3) 90

Tiered Classrooms (4) 65

Flat Classrooms (5)

Breakout Rooms (12) Hotel

Guestrooms 276

Suites 4

Parlors 17

Food & Beverage

Carillon Fine Dining

Tejas Conference Dining

Gabriel Light Dining

OneTwenty5 Coffee Bar

Facility Design & Programming The proposed UCLA Center should be positioned to match the lodging and meeting needs of the University. We believe that the Center would be optimally designed as an upscale/higher-quality university conference center consisting of 250 to 300 guest rooms and suites, sufficient to accommodate a wide range of the market-rate groups and leisure travel. Based on the aforementioned site options and for our analysis purposes, we have recommended that the subject consist of 276 guest rooms and approximately 35,000 square feet of meeting space. Additionally, the subject facility should be designed for potential designation with IACC (International Association of Conference Centers) and complement the surrounding buildings constructed on UCLA’s Campus. Interior design should continue the University theme, thus providing a “sense of place,” while also providing a sophisticated living and working environment for leisure, business and academic travelers. Presented in the table below is a summary of our recommendations for guestrooms and meeting/other facilities relative to the proposed UCLA Hotel & Conference Center:



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Recommended Facilities

Project 275,000 to 300,000 GSF

Hotel Type Full-Service University Conference Center Four-Star Quality & Service

GUESTROOMS Total 276 King Bed 138 (50%) Queen/Double 124 (45%) Suites 14 (5%)

MEETING SPACE Square Feet (SF) Total 35,000 IACC Designated Per Guest Room 125 Ballroom 9,000 Divisible by 3 to 5 Junior Ballroom 3,500 Divisible by 2 Meeting & Breakout Rooms 9,500 10-15 rooms / 750 to 1,500 SF Boardrooms (2) 1,500 Each 750 SF Theaters (2) 7,500 300-seat and 75 to 100-seat Conference Dining Room 4,000 250 to 300 seats Outdoor Courtyard N/A Outdoor Functions and breakout space Permanent Break Stations

In Several Locations

FOOD & BEVERAGE Three-Meal Restaurant 100 - 150 seats Lobby Bar/Lounge Coffee Bar Room Service

AMENITIES

Fitness Center Spa Services Swimming Pool Business Center Sundries Store Shuttle Service *Does not include Pre-function or Circulation space Source: PKF Consulting

Parking With their relatively larger inventories of meeting space, conference centers tend to experience greater visitation than traditional hotels of similar size, resulting in greater parking space requirements. We have assumed that UCLA’s proposed Center will be located adjacent to a parking facility or incorporate sub-level parking that will service both the Center and the surrounding Campus. The typical parking space requirement for conference centers falls in the range of 1.0 to 1.3 spaces per guest room and is determined by the demand level during peak visitation periods, typically during the evening when most hotel guests are present and banquets or receptions are in session. Given these factors and that the parking arrangements may be shared, we recommend that the parking space allocated to support the Center be sized at the higher end of the typical range.



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Consideration should also be made for employee parking needs that may be accommodated in the same parking facility, or an auxiliary facility intended for campus employee use if applicable. Employee parking needs typically range from 0.3 to 0.4 spaces per guest room for this type of facility. Guest Rooms The guest rooms should be designed, equipped and furnished to provide a comfortable environment for work and relaxation. All amenities expected of a high-quality conference center hotel should be provided, including high-speed internet access, remote-controlled television with cable programming, two-line telephone with voicemail services, in-room hair dryer, coffee maker and iron and ironing board. Given the target markets for the Center, we recommend the quality of furnishings and finishings be comparable to those found in other full-service, four-star facilities. There should be a sufficient number (approximately 45-50 percent) of guest rooms equipped with two queen/double beds and/or pull-out sofa beds to accommodate visiting athletic teams. Guest rooms should range in size from 325 to 375 square feet. We also recommend the Center have five to ten larger one-bedroom suites for special-need and higher-rated travelers such as VIP visitors to the University. The guest rooms should be located together in a single “tower” atop or near the main hotel lobby. The number of guest rooms per floor will depend on site area constraints, building codes and the selected floor configuration. A reasonable scenario for the subject would be a double-loaded or offset slab configuration ranging from 8 to 10 guestroom floors of 28 to 35 rooms per floor. These two cost-effective configurations are relatively efficient options for elevator cores, egress stairs and service functions. Restaurant and Lounge With limited fine dining options on the UCLA Campus, the proposed center should be full-service (offering on-site food & beverage) in nature. As such, we propose the Center have a three-meal, casual dining restaurant open to guests and the public. The restaurant design should emphasize group dining, while also recognizing the needs of individual guests and the potential for faculty and staff to dine in the space. To accommodate these needs, the restaurant should have a segregated private dining area or separate dining room for medium-sized groups of up to 50 to 75 diners. To support group and casual individual diner service, the restaurant should have a flexible buffet service area. The restaurant should also support in-room dining service. Due to the Center’s integration with the Campus, we expect the restaurant to be reasonably attractive to University faculty and administrators, as well as to residential patrons. We recommend the Center have a lounge located in, or nearby, the restaurant serving refreshments and light fare. Similar to the restaurant, the lounge is expected to be



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reasonably attractive to both guests and UCLA faculty and administrators seeking a somewhat more sophisticated dining and social setting. Meeting Space We recommend 35,000 square feet of meeting space or 127 square feet per guest room. The International Association of Conference Centers (IACC) requires 125 square feet of meeting space for a center to qualify for the prestigious IACC designation. This designation enhances a conference center’s ability to attract a wide range of group demand. The proposed Center will be positioned to service larger university and non-university events and group functions. Thus, function space must be sufficiently flexible and sophisticated to satisfy a wide range of meeting formats. We believe the following recommended meeting space program achieves the optimal balance of types and capacities of space to support the Center’s utility to the University and its competitiveness in the wider conference market. The subject facility should be designed to optimally enable and manage pedestrian movement throughout public spaces. If possible, all meeting spaces should be located on the ground level in a “wing” off of the main hotel lobby and restaurant to minimize congestion. We also recommend the meeting space wing have a dedicated group entrance away from the main hotel lobby. Depending on the final design priorities, conference and function space should ideally be located on one to two floors to best accommodate the flow of conferees during break periods and to/from the guest room tower. In determining the most appropriate meeting space recommendations for the Center, we have ensured that they:

• Satisfy the widest range of the most common needs of constituencies within the UCLA Campus community; and

• Position the Center to be competitive for non-University meetings and conferences.

Larger Events

Our discussions with UCLA representatives uncovered the need for conference and banquet space suitable for events of up to 400 persons, and many more for smaller banquets, meetings, seminars, conferences and symposia currently organized by the University. These representatives indicated that the limited on-campus meeting space and difficulties in booking this space in advance restrict their ability to host events on Campus. As such, many of these meetings and banquets are currently held in hotels in the local market area, such as at the W Hotel, The Beverly Hilton, Hyatt Century Plaza and other hotels. The lack of a venue of sufficient quality and size has also precluded the University from pursuing academic conferences and has restricted the University from itself creating larger conferences.



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Conference Center Programming Based on IACC requirements and the type of groups the conference center will host, we recommend a combination of flat-floored and tiered-seating conference rooms with audio-visual and state-of-the-art classroom technological capability. These rooms should be equipped with network connections and broadcast capability to deliver content remotely as well as to on-site meeting attendees. As they relate to UCLA users, conference rooms will be most appropriate for workshops, seminars, group discussions and lecture-style learning administered by the various academic schools, athletic programs, and faculty or administrational officers. Our meeting space recommendations (not including pre-function or circulation spaces) include:

• A 9,000 square-foot ballroom, sufficient to accommodate larger banquets from 500 to 750 persons. The ballroom should be divisible into several sections in order to accommodate various group sizes and needs.

• A junior ballroom of 3,500 square feet divisible into two sections would enable a large event to have a separate room for vendors and trade show exhibits.

• 5 to 7 conference rooms of 750 to 1,500 square feet each for mid-size meetings

and executive education. The conference rooms must be audio/visual and internet-capable for use by instructional meetings, conferences and symposia and should be easily accessible to back-of-house food and beverage support areas. Seating and table arrangements should also be flexible to enable a variety of gatherings. We recommend some of these rooms be designed with classroom-style tiered seating.

• 5 to 10 “break-out” rooms of 250 to 350 square feet each for small meetings and

interviews. Two medium-sized boardrooms of approximately 750 square feet for focused and high-level meetings.

• We also recommend exploration of the potential for theater or amphitheater

space. Depending on the needs of the academic schools, a 5,000 square-foot amphitheater may be built to accommodate some 300 persons, with a smaller theater of 2,500 square feet to satisfy seating of 75 to 100 persons.

• An upscale 250-seat Conference Dining Room for special food and beverage functions. This type of room is specifically requested by many non-university groups that visit properties for a longer duration of stay.

• Permanent break stations located in several strategic locations throughout the Center. We also recommend the option of an outdoor courtyard area as extra break out space and various informal functions.



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• Pre-function spaces should be sufficient in size to efficiently accommodate the ingress and egress of function attendees. These spaces should be carefully designed to effectively segregate meeting areas from the hotel and from students and other non-meeting participants in the facility. A conference foyer should be incorporated to provide access to the meeting space wing from the hotel lobby and directly from the street.

IACC Criteria Review

There are industry criteria and guidelines that have been established to ensure your facility provides conferees with the highest quality service and experience. The most widely recognized criteria are those developed by the International Association of Conference Centers (IACC). IACC membership eligibility requires that conference centers and conference resorts meet or exceed their Universal Criteria that includes 30 standards covering priority of business, conference room design, conference and business service, food & beverage, technology and guest rooms (where applicable). To better understand what makes up an IACC recognized conference center, resort or hotel, below are the Universal Criteria established by IACC for membership:

Priority of Business 1. A minimum of 60% (based on net area) of meeting space in the conference center is

dedicated, single-purpose conference space. 2. Dedicated conference rooms are separated from living and leisure areas.

3. Dedicated conference rooms available to clients on a 24-hour basis for storage of

materials.

4. The name of an ancillary conference center (where the conference center approved by IACC is part of a larger hospitality complex, resort or convention hotel) readily identifies the conference center and clearly differentiates the conference center from the remainder of the complex (e.g., the Executive Meeting Center at the Bruins Hotel, not the Bruins Hotel & Conference Center).

5. A minimum of 60 percent of total revenue from guest rooms, meeting space, food &

beverage, conference technology (A/V) and conference services is conference related. (If conference center is non-residential or ancillary to a resort or convention hotel, 70% of total sales of the conference center is generated from conferences).

6. Conference center offers and promotes a package plan which includes conference

rooms, guest rooms, three meals, continuous refreshment service, conference services and basic conference technology. (Non-residential package includes conference rooms, lunch, continuous refreshment service, conference services and basic conference technology.)

7. Average group size -- 75 people or less.



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Conference Room Design 1. Conference center has sufficient inventory so that all dedicated conference space (no

less than 60 percent of all meeting space) can be set up using ergonomically designed chairs that have arms and that swivel and tilt synchronously and that allow height adjustment. Chairs shall have a rounded or waterfall edge on the front of the seat pan. Chairs shall have a minimum width of 18 inches; a depth of 16-17 inches for chairs with non-adjustable seat pans; and seat height within the range of 15 1/2 to 20 1/2 inches. The seat and inside back of the chair shall be fully upholstered or constructed of Pellicle(r) or like material. The arms and outside back of the chair may be fully upholstered or constructed of ABS molded plastic, Pellicle(r) or Pellicle-like material. The base of the chair shall be of five-prong design with casters.

2. Conference center has sufficient inventory so that all dedicated conference space (no less than 60 percent of all meeting space) can be set up using tables that are at least 24 inches wide and that have a non-reflective, hard writing surface with a high-pressure laminate or hardwood veneer finish. Tables shall be of sufficient length to allow at least 30 inches of space per occupant. The edge of the table shall be comprised of a high-pressure laminate finish or a decorative edge banding material that is constructed of vinyl or wood products. Tables shall have a reverse "T" style leg mechanism or its equivalent with offset legs that are permanently affixed or that fold, and that do not impinge upon the tables' occupants. (Draped, skirted banquet tables are not acceptable.)

3. Controllable level of lighting (50-70 foot candles at tabletop).

4. Climate-controlled conference rooms; conference rooms built after 1993 should have

individual climate controls.

5. Dedicated conference rooms have wall surfaces suitable for tacking or other display of flip chart-type sheets.

6. Acoustical rating for sound transmission through all walls of conference rooms meets or

exceeds 50-60 NIC (Noise Isolation Class) for all fixed walls and 45-50 NIC for all operable walls.

7. Ambient sound levels within all conference rooms range from 25-35 NC (Background

Noise Criteria) or less, and Reverberation Time (RT) falls between 0.8 and 1.2 seconds at mid-frequencies.

8. Amplified sound is available for all conference rooms over 1000 square feet.

9. Each dedicated conference room has one in-room telephone outlet, simultaneous

Internet connectivity and adequate electrical outlets throughout the room.

10. Dedicated conference rooms have unobstructed interior views.



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Conference and Business Services 1. Conference center staff includes skilled conference planners who are thoroughly

proficient in providing effective meeting room setups, menu and special event planning, conference technology (A/V) equipment and services, and other special needs of the client.

2. If conference center is ancillary to a resort or convention hotel, it must have a separate,

dedicated conference services department which does not also serve the overall complex.

3. A designated conference planner is assigned to each conference group.

4. The conference center offers staffed business services from a central location.

Food & Beverage 1. Separate dining and conference facilities, with at least one dining area available

specifically for the convenience of conference groups.

2. Dining facilities designed to accommodate groups on a flexible meeting schedule (at convenience of group), at least for breakfast and lunch.

3. Conference center provides continuous refreshment service outside of meeting rooms

unless requested otherwise by the client.

4. Minimum number of dining seats to accommodate the capacity of the conference facility for lunch in two seatings of one hour each.

Technology 1. On-site standard conference technology included as part of the conference package: flip

charts, microphones and image and video display equipment. 2. Conference center offers and promotes a package plan that includes computer and

video image display equipment in the main meeting room.

3. Skilled technicians proficient in providing creative program consultation; equipment setup, operation and instruction; and immediate response to service needs.

Guest Rooms (Not applicable to non-residential centers) 1. Guest rooms include adequate work station(s) for the occupant(s), appropriate

reading/work lighting, a phone line with simultaneous Internet connectivity and appropriate seating.

2. Guest rooms are separated from conference and leisure areas to allow maximum

privacy and comfort.



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Additional Recommended Facilities and Amenities In addition to the recommended 276 guest rooms, restaurant, lounge and meeting space, we recommend that the proposed Center offer the following facilities and amenities: A business center A gift/sundry shop A permanent lounge in the meeting space wing for pre-and post-meeting breaks Wireless internet throughout the property Dedicated shuttle service for groups travelling within the campus and to/from the

airport Fitness Center Swimming Pool

It is common for guests of university conference centers to utilize existing campus fitness facilities, in lieu of a dedicated hotel fitness center. This arrangement may also be sufficient for the subject’s proposed center given its proximity to the John Wooden Center. While we note that spa amenities are a trend at newer hotels and conference centers, we do not believe this is a necessity for the subject center. The lack of such a facility is not expected to materially degrade the Center’s competitiveness and, given the propensity of spas to represent a net cost center at many properties, an on-site spa would likely have a negative impact on financial results. Branding We do not believe an affiliation with a national lodging chain is necessary to support the competitiveness of the proposed center. Rather, the design and décor of the facility should establish a “sense of place” that secures its connection with the UCLA “brand.” Sense of place design is an established and effective tool utilized by hotels to establish identity and enhance the guest experience and is commonly employed at university-affiliated hotels and conference centers. From the standpoint of physical appearance, the Center may establish this objective through modest, sensible University-themed décor and color-scheming in guest rooms, meeting spaces and other public areas. Through “branding” the proposed Center with a strong association with UCLA, the Center will be best positioned to capture business generated by the University. This University “branding” will also optimize the Center’s appeal to outside sources of business through an image connection with the University’s respected reputation and also differentiate the product from local competition. Management An important assumption in our analysis and projections of operating performance for the proposed hotel and conference center is the competent and efficient management of the



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property by a reputable and knowledgeable hotel management firm. Ideally, the contracted management firm should have experience in the operation of university hotels and conference centers. For UCLA planning purposes, we have also included a list of IACC approved management companies and operators for review.

IACC Approved Operators Management Companies ARAMARK - Harrison Lodging Benchmark Hospitality Creative Dining Services Destination Hotels & Resorts DOLCE Hotels & Resorts Marenzana Group Pyramid Hotel Group Scanticon Hospitality Sodexo Conferencing

Experienced Chain Brands Hilton Hotels Wyndham Hotels & Resorts Source: IACC

CMP Rate (Complete Meeting Package) With an IACC designation, the proposed Center will be positioned to sell group meeting packages in order to host large meetings and functions. We suggest that the Center use a point system to determine CMP prices, since many meeting planners own their own A/V equipment. However, we recommend that the subject charge the following meeting package rates:

• Complete meeting package* (CMP) rate of $390.00 (Single & Double Occupancy average)

• Modified meeting package** (MMP) rate of $340.00

• Day meeting package*** (DMP) of $210.00

* The CMP includes conferee guestroom, full American breakfast, hot and cold luncheon buffet, four-course dinner, continuous refreshment breaks, conference space on a 24-hour hold, conference services, basic A/V package (LCD projector included), business center services (unlimited photocopying, faxing and computer usage), two telephone rooms for conference calling and brief meetings, and service charges covering gratuity for food and beverage.

** The MMP Includes conferee guestroom, full American breakfast, hot and cold luncheon buffet, continuous refreshment breaks, conference space on a 24-hour hold, conference services, basic A/V package (LCD projector included), business center services (unlimited photocopying, faxing and computer usage), two telephone rooms for conference calling and brief meetings, and service charges covering gratuity for food and beverage.



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*** The DMP includes hot and cold luncheon buffet, continuous refreshment breaks, conference space on a 24-hour hold, conference services, basic A/V package (LCD projector included), business center services (unlimited photocopying, faxing and computer usage), two telephone rooms for conference calling and brief meetings, and service charges covering gratuity for food and beverage.

The $390.00 CMP rate can be broken down to approximately $220.00 for rooms, $100.00 for food and beverage, $53.00 for conference services, and $14.00 for other. CMP rates will be discussed in further detail in Section V of this report. CONCLUSION The proposed UCLA Hotel and Conference Center will be well-located to attract both university-related events and demand generated by the greater Los Angeles and surrounding communities. We consider the subject sites selected to be well-suited for hotel and conference center development with convenient access and good visibility. The recommended facilities program for the proposed UCLA Hotel and Conference Center is appropriate for both the university and market in type, size and quality. The amount of meeting space recommended would allow the subject property to qualify for the prestigious IACC designation, which would enhance its ability to attract group demand and sustain the project over the long-term.

UCLA Hotel Conference Center

Section III

AREA REVIEW

Section III – Area Review


III-1

AREA REVIEW

LOS ANGELES AREA REGIONAL CONCLUSIONS AND ECONOMIC OUTLOOK Los Angeles County includes 88 incorporated cities, covers an area of 4,752 square miles, and has an estimated population of more than ten million people. In the past 80 years, the county has evolved into a large commercial/industrial urban community and become the business and financial center of California and the Western United States. The regional economy has become more diversified with a larger number of people employed in services, home-based businesses, motion picture production, computer software development, and other professional services. According to the Department of Finance, the population of Los Angeles County increased by 0.9 percent over last year and now stands at approximately 10,393,000 people. Population in the county continues to grow every year, fueling the county with the intellectual stimulus and raw manpower needed to support the prominent regional economy.

The national economy is currently enduring difficult times with its troubled financial markets, weakened US dollar, declining employment, and inflated oil and food prices. Although the future of the US economy is uncertain at this point, the diversity in business coupled with an educated labor pool and sophisticated infrastructure allows for some sense of stability within the county. Nevertheless, 2008 was a difficult year for Los Angeles County’s economy, especially during the fourth quarter. According to the 2009-2010 Economic Outlook for Los Angeles County, 2009 is expected to bring negative growth. Several major industries face a variety of significant challenges this year, many of which may carry into 2010.

With respect to tourism in the Los Angeles area, domestic and international overnight visitation and expenditures have risen in recent years with passenger counts at area airports reaching record highs. However, year-end passenger counts were down for 2008 almost reaching post 9/11 levels, due to the decrease in international and corporate travel. The combination of decreased travel and new hotel supply to the area will have a negative impact on the hotel market in terms of occupancy. LAX airport has an enormous impact on tourism and travel in the greater Los Angeles area as many international tourists use LAX as a gateway to the United States. The following table provides both domestic and international passenger counts for LAX International Airport from 1995 to 2008, and year to date figures through April as compared to the prior period last year.



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Table 3-1 Los Angeles International Airport

Passenger Counts 1995-2008 & YTD April

Year Domestic International Total 1995 40,500,000 13,400,000 53,900,000 1996 43,900,000 14,000,000 57,900,000 1997 45,300,000 14,600,000 59,900,000 1998 46,100,000 15,100,000 61,200,000 1999 45,000,000 16,500,000 64,280,000 2000 49,900,000 17,400,000 67,300,000 2001 45,700,000 15,900,000 61,600,000 2002 41,400,000 14,800,000 56,200,000 2003 40,300,000 14,600,000 54,900,000 2004 44,200,000 16,500,000 60,700,000 2005 44,000,000 17,500,000 61,500,000 2006 44,100,000 16,900,000 61,000,000 2007 45,200,000 17,200,000 62,400,000 2008 43,100,000 16,700,000 59,800,000 CAAC

(1995-2008) 0.5% 1.7% 0.8%

YTD April 08 13,887,796 5,557,943 19,445,739 YTD April 09 12,566,735 4,706,917 17,273,652

Change (9.5%) (15.3%) (11.2%) Source: Los Angeles World Airports and PKF Consulting

As the level of economic growth began to moderate and rising fuel costs limited operators from adding capacity, passenger counts flattened out at approximately 61.0 million total passengers in 2006 and increased in 2007 to 62.4 million. Between 1995 and 2008, total passenger counts increased at a compound average annual rate of 0.8 percent, in which record levels of approximately 67.3 million people were achieved in 2000. Both domestic and international travel for 2008, are comparably lower with regards to travel statistics from 2007. Similarly, year to date traffic through April, 2009 is also down 11.2 percent. These significant drops can be attributed to the ailing economy and trouble in the airline industry, which have all led to a decrease in travel. Office market activity is an excellent indicator of the county’s economy. During the past few years Los Angeles County has demonstrated positive economic trends and growth indicators. The employment market and overall economy showed upward trends while the commercial real estate market demonstrated a renewed demand for office space. However, the county’s office market will definitely be challenged in the short-term as deteriorating economic fundamentals and a weakening job market cause the demand for office space to decrease. With the regional economy expected to remain weak well into 2009, vacancy rates are forecasted to climb by another 50 to 100 basis points Basin-wide by the end of the year to nearly 15 percent. In addition, it is expected that both rental rates and asking sales prices will continue to decline as the office market continues its correction from the credit-fueled boom of the last few years.



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Table 3-2 Greater Los Angeles Basin

Office Market Q3 2007 - Q3 2008

Period Total Existing Vacancy

Rate Net Absorbed/(Deleted) Under Construction

(Square Feet) (Square Feet) (Square Feet) Q3 07 286,033,300 10.3% (1,151,900) 4,821,400 Q4 07 287,496,700 10.8 (675,100) 5,720,900 Q1 08 287,996,800 11.8 (2,085,800) 6,456,500 Q2 08 288,897,500 12.5 (787,600) 8,023,900 Q3 08 290,297,000 13.7 (183,800) 10,285,000

Source: Colliers International

The main demand generator for large convention and meeting activity in Los Angeles is the Los Angeles Convention Center, which contributes a large number of annual group room nights to the Los Angeles hotel market. The center, which completed a major expansion in 1993, offers approximately 720,000 square feet of exhibit hall space and 150,000 square feet of meeting space split between its two halls. Its enclosed space makes it one of the largest meeting and convention facilities in the country. The following table presents the actual and projected room nights generated by the Los Angeles Convention Center through 2010, based on definite and tentative convention bookings as of May 2009. It can be anticipated that additional conventions will be booked in 2009 and 2010 as the convention center hotel comes to fruition.

Table 3-3 Los Angeles Convention Center Current and Projected Activity Year Total Room Nights* 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

353,308 349,325 390,564 274,212 205,824 214,110 226,414 187,225 171,463 112,876 231,695 178,376 137,187

* (Definite Only) Source: L.A. Inc. and PKF Consulting

The cyclical nature of bookings from year to year reflects a typical pattern for most convention markets, in part because many major conventions either meet in alternate years or in alternate cities. Numbers for 2005 through 2007 showed a lower than average room night count as convention groups remained smaller, fewer conventions were booked, and groups reserved room nights independently and therefore did not get counted as convention center bookings. However, with growing anticipation for the new convention center hotel booking pace has notably improved as of late. Reportedly, LA Inc. is beginning



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to book significantly higher number of groups and this strong booking pace is carrying over into the current fiscal year. TOURISM INDICATORS In terms of the hotel market, 2008 was characterized by a modest growth in average daily rate amid a slight decline in demand as represented by occupied room nights. This slowdown in the overall county lodging market comes after a period of year-over-year growth in which a number of submarkets had been operating at above capacity levels. As the economy began to falter in 2008, these hotel submarkets either slowed in growth or reversed to a decline in terms of both occupancy and average daily rate, and are expected to continue to decline through 2009, with expected positive growth towards recovery beginning in 2010 and 2011. According to CIC Research and L.A. Inc., total overnight visitation to Los Angeles County in 2004 was up notably as compared to 2003 at approximately 24.3 million people, equal to a 9.5 percent year over year increase. Year-end 2005 figures reflect solid growth at 2.9 percent, while 2006 and 2007 realized more moderate increases of 1.6 percent and 1.9 percent, respectively. In 2008, overnight visitation remained relatively flat at 26 million. The following table summarizes the number of visitors to Los Angeles County and their direct spending between 1995 and 2008, as well as a forecast for 2009.

Table 3-4 Overnight Visitor Volumes and Expenditures – L.A. County

Year

Overnight Visitation (Millions)

Percent Change

Direct Spending (Billions)

Percent Change

1995 22.1 N/A $9.7 N/A 1996 23.2 4.9% 10.5 8.3% 1997 23.6 1.7 11.3 7.6 1998 23.5 (0.4) 11.9 5.3 1999 23.8 0.9 12.3 3.4 2000 24.2 1.7 13.3 8.1 2001 22.8 (6.8) 12.2 (8.3) 2002 22.1 (3.1) 11.3 (7.4) 2003 22.2 0.1 11.0 (2.7) 2004 24.3 9.5 12.0 9.1 2005 25.0 2.9 12.9 7.7 2006 25.4 1.6 13.5 4.7 2007 25.9 1.9 14.2 4.2 2008 26.0 0.4 13.5 (5.2)

2009F 25.2 (3.2) 12.8 (5.5) CAAC 1.3% 2.6%

F = Forecast Source: CIC Research and L.A. Inc.

Overall growth across the market showed relatively strong numbers prior to 2001. However, the depression in the travel industry that ensued on top of a softening economy erased a large amount of the gains that had accumulated since 1995. While 2002 and 2003 show a slow-moving improvement in overall visitation, corresponding spending levels decreased as travel companies and hotels discounted their services and people became



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more wary of spending large sums during their trips. A robust level of visitation occurred during 2004 through 2007 with a new record high of direct spending in 2007 of approximately $14.2 million. The number of total overnight visitors totaled 26 million in 2008, a 0.4 percent increase over 2007. According to the International Trade Administration Office of Travel and Tourism Industries, Los Angeles is ranked second in terms of the total number of overseas visitors in the United States. Overall, between 1995 and 2008, overnight visitation has increased on a compounded annual level at 1.3 percent, and direct spending has increased 2.6 percent annually over the same period The following table displays our Los Angeles County lodging sample set in terms of average daily and total annual rooms supply, annual occupied rooms, market occupancy percentage, and average daily room rate. These statistics illustrate the total lodging supply and demand for the county, including all types of lodging properties. Overall occupancy levels and average daily room rates have been extrapolated from PKF Consulting’s monthly publication, Trends in the Hotel Industry. The table presented below includes the sum of our aggregated sub markets, representing more than 95 percent of the total existing lodging supply in Los Angeles County.

Table 3-5 Los Angeles County 2009

Historical Market Performance of the Competitive Supply Daily Annual Percent Occupied Percent Market Average Percent

Percent

Year Supply Supply Change Rooms Change Occupancy Daily Rate Change REVPAR Change 2003 96,777 35,323,605 N/A 24,252,256 N/A 68.7% $119.23 N/A $ 81.86 N/A 2004 97,555 35,607,575 1.5% 26,033,236 7.3% 73.1 126.89 6.4% 92.77 13.3% 2005 96,380 35,178,700 0.8 26,731,625 2.7 76.0 137.22 8.1 104.27 12.4 2006 95,354 34,804,210 -1.2 26,930,979 0.7 77.4 153.31 11.7 118.63 13.8 2007 96,077 35,068,007 0.8 27,033,832 0.4 77.1 165.36 7.9 127.47 7.5 2008 97,542 35,602,826 1.5 26,668,968 -1.3 74.9 172.03 4.0 128.86 1.1 2009F 100,694 36,753,146 3.2 26,119,901 -2.1 71.1 153.32 -10.9 108.96 -15.4 CAAG 0.7% 0.7% 1.2% 4.3% 4.9% Source: PKF Consulting

Compound Average Annual Growth is the weighted average over the given time period of growth rate and reflects what has occurred on average during the period in any given year. CONCLUSIONS Los Angeles is home to a very large population base. Los Angeles is also the center of the entertainment industry and numerous media companies ensuring adequate press coverage. Overall, the existing infrastructure and amenity base in Los Angeles are good and provide a destination allure to many individual tourists and the group meetings base. Coupled with the creation of a viable residential base, Los Angeles is steadily becoming a place that can sustain its own tourism segment. Despite a nationwide economic slowdown and troubled residential market, the long term outlook for Los Angeles remains positive.



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WESTWOOD OVERVIEW Westwood is an upscale urban community with a diverse mixture of businesses, theatres, museums, and affluent neighborhoods. The area is also home to the University of California, Los Angeles, a world-renowned and prestigious academic institution. Established in 1929, Westwood is bordered by Sunset Blvd, Wilshire Blvd, Hilgard Ave, and Gayley Ave on the North, South, East and West ends, respectively.

This western region of Los Angeles is centrally located and surrounded by some of the county’s most desirably areas. These include communities such as: Beverly Hills, Bel Air, Brentwood, Santa Monica, and Century City. This location gives Westwood excellent access to Los Angeles’ finest attractions and business hubs.

With ease of accessibility and a plethora of amenities, Westwood hosts many national and international firms. A strong corporate environment, mixed with local cultural and entertainment attractions, has made this area an enticing alternative to other Southern California regions. Westwood’s strong appeal and success as an ideal business and tourist environment can be related to several factors, including the following:

Businesses - Westwood is the professional home to numerous businesses, including both national and international banks, CPA firms, law firms, real estate companies, and medical practices.

Amenities - Offering a unique combination of critical mass and immediate access to the most desirable attractions in Los Angeles, Westwood benefits from an extraordinary amenity package including the following:

Amenities Description Shopping

Westwood Village offers a unique shopping experience that tailors to a variety of individuals and needs. This shopping district, located near the UCLA campus, includes shops from casual to the designer/specialty.

Restaurants

Along with many options in the Westwood Village, the area also lends itself as the host to numerous restaurants. Westwood offers the ability to sit-down or take-out, with flavors that span from across the globe.

Entertainment

Westwood is rich in culture and offers an individual many activities to enjoy. Some of these attractions include: Armand Hammer Museum of Art, UCLA Fowler Museum of Cultural History, Murphy Sculpture Garden, Bruin Theatre, Geffen Playhouse and UCLA Performing Arts Center.

Access - Complementing its rich amenity package, Westwood offers exceptional access to many attractions around the Los Angeles area:



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LA Attractions Miles Century City 1 Rodeo Drive 2 20th Century Fox Studios 3 Beverly Center Shopping Center 3 Getty Museum 4 Sunset Strip 5 Pacific Ocean 5 Sony Pictures Studios 5 Santa Monica Pier & 3rd Street Promenade 5 Mann's Chinese Theater 6 LACMA 6 Hollywood 6 Staples Center 10 LA Convention Center 10 Getty Museum in Malibu 12 Disney Hall 12 Ahmanson Theatre 12 Los Angeles Zoo 12 Universal Studios 15 Disneyland 45

CONCLUSION In summary, there are few other master-planned developments in Los Angeles, or lodging markets in the United States which offer Westwood’s combination of proximity to major centers of commerce, world-class shopping, recreational and cultural amenities, and key transportation linkages within a 30-minute drive. These unique qualities, and its centrality to the UCLA Campus, indicate a bright sustained future for the overall Westwood market.


Section IV

MARKET ANALYSIS

Section IV – Market Analysis


IV-1

MARKET ANALYSIS

MARKET ANALYSIS OVERVIEW The proposed hotel and conference center at UCLA should be positioned as a university conference center that will be marketed locally, regionally, nationally and internationally. If a university conference center were developed, it would include high quality conference space designed to serve a variety of conference groups and would also be suitable to accommodate a variety of social functions. In this section of the report we will provide an overview of the conference center industry, with a brief discussion of selected university conference centers, provide an overview of the local hotel market and the competitive conference center market and summarize any additions to the local lodging supply which we learned of during the course of our research that would be competitive with the subject. CONFERENCE CENTER INDUSTRY OVERVIEW Within North America, the earliest conference centers were begun in the 1960’s with the adaptive re-use of large manor houses. From that point forward North America experienced a surge of conference center development, which included both new construction and the adaptive re-use of mansions. The growth during the early years was of corporate proprietary centers, as well as learning centers owned by not-for-profit institutions, public sector institutions, and colleges and universities. It has been estimated that by 1975, there were more than 80 U.S. based corporately owned or operated proprietary learning centers. By the mid-1980’s, it was generally assumed that a world class conference center offered well-designed meeting rooms with acoustics, lighting, and furnishings designed to maximize productivity with technology which focused on facilitating presentations to groups of less than fifty executives. During the last 20 years, the corporate conference center market has experienced significant changes. Within North America, it is now estimated that less than 15 conference centers owned by corporations are for the exclusive use of their employees. Most corporate conference centers market their excess capacity to other corporations and associations seeking high quality meeting venues. Further, as the conference center industry has expanded, conference centers have been differentiated based on demand served and location. According to the International Association of Conference Centers (IACC), a conference center is defined as a “facility whose primary purpose is to accommodate small- to medium-size meetings.” The primary difference between a conference center and a hotel or resort with meeting space, is its ability to accommodate groups in a self-contained, dedicated meeting environment. Conference centers tailor their facilities and services to the specific needs of the meeting planner, and provide all the necessary arrangements for a complete schedule of activities from arrival to departure. Pricing structures for conference



IV-2

centers typically include a single rate per conferee for necessary services, the Complete Meeting Package. Included within the CMP are lodging accommodations, meals, beverage and snack breaks, meeting services, and most audio/visual equipment services as well as other items such as transportation. Conference centers are classified into four general categories, briefly described as follows: Executive Conference Centers generally cater to corporations, associations, and other organizations that emphasize quality of accommodations and services over price, and were developed primarily to satisfy demand for upper-level management meetings and education/training seminars. Executive conference centers typically include sophisticated equipment and are staffed with professional conference coordinators. Examples of these types of centers include the following:

• Hamilton Park Executive Conference Center is located in Florham Park, New Jersey with 219 guest rooms and over 30,300 square feet of meeting space. The market segmentation of accommodated overnight demand includes percent conference demand, percent commercial transient demand and percent leisure demand. Continuing education, management and other training, as well as professional and technical seminars constitute the majority of group business accommodated at Hamilton Park, though the property also accommodates social functions.

• Tarrytown House Estate and Conference Center is located in Tarrytown, New York with 212 guest rooms and 30,000 square feet of meeting space. The market segmentation of accommodated overnight demand includes percent conference demand, percent commercial transient demand, percent leisure demand, with the rest from miscellaneous sources. The conference demand is primarily comprised of continuing educational and management meetings, and this property also accommodates social events.

Corporate Conference Centers are corporate-owned, and are generally used for in-house conferences. Size, facilities, and overall quality vary with the individual corporation’s needs for meetings and lodging accommodations. Examples of these types of centers include the following:

• IBM Learning Center, located in Armonk, New York, has 182 guest rooms and 15,000 square feet of meeting space. The market segmentation of overnight-accommodated demand includes percent conference demand and percent commercial transient demand. Conference demand consists primarily of continuing education, management and other training, and secondarily professional and technical seminars. It does not accommodate social functions.



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• American Airlines Training Center is located in Fort Worth, Texas with 299 guest rooms and 75,000 square feet of meeting space. The market segmentation of overnight-accommodated demand includes percent conference demand and percent leisure transient demand. Most of the conference demand is continuing educational and management meetings, followed by other management meetings. The property also hosts some social events.

Conference Resorts satisfy similar needs to those of executive or corporate centers, with greater emphasis on recreation and social activities for conferees, and are typically in resort locations. Examples of these types of centers include the following:

• Cheyenne Mountain Conference Resort is located in Colorado Springs, Colorado with 316 guest rooms and 40,000 square feet of meeting space. The market segmentation of accommodated overnight demand includes percent conference and group demand, percent commercial transient demand and percent leisure demand. Conference demand was lead by sales/incentive meetings followed by other management meetings. It also accommodates social functions.

• Estancia La Jolla Hotel & Spa is located in La Jolla, California, with 210 guest

rooms and 21,500 square feet of meeting space. The market segmentation of accommodated overnight demand includes percent conference demand, percent commercial transient demand and percent leisure demand. Conference demand consisted mostly of management meetings. The property also accommodates social events.

College/University Conference Centers are developed by, and/or are associated with colleges or universities, and typically cater to technical, academic or university-related meetings demand. Users of college/university centers are generally more price-sensitive than those of the other three types of centers. Examples include the following:

• Fluno Center for Executive Education, located in Madison, Wisconsin, features 100 guest rooms and 40,000 square feet of meeting space. The market segmentation of accommodated overnight demand includes percent conference and group demand and percent leisure demand. Nearly all of the conference demand was continuing education related and the property does not accommodate social events.

• University Place is located in Indianapolis, Indiana, with 278 guest rooms and

25,000 square feet of meeting space. The market segmentation of accommo-dated overnight demand includes percent conference demand, percent corporate and percent leisure transient demand. Conference demand was lead by continuing education and management training, and was followed by other management meetings. The property also hosts social events.



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A summary of typical conference center facilities by type is presented as follows.

Table 4-1 Summary of Typical Conference Center Facilities

Average Number of # Of Meeting Rooms

SF of Meeting Space

S.F. of Meeting Space/Guest Room Type of Center

Guest Rooms

Dining Room/ Lounge Seats

All Centers 218 307/80 32 33,361 153 Executive Centers 169 294/58 27 24,301 144 Corporate Centers 274 336/135 46 41,553 152 Resort Centers 280 314/78 28 35,922 128 College/University Centers 165 285/45 24 31,516 191 Source: PKF Consulting, Trends in the Conference Center Industry, 2008 Edition

The proposed property would be most closely aligned with the attributes of University Conference Centers (due to its location primarily but also recommended facilities and rate positioning). The previous table indicates university conference centers have the highest ratio of meeting space at 191 square feet per guest rooms, of the four types of conference centers. The other three types of centers have a ratio ranging from 128 to 152 square feet of conference space per guest room. The Median 2007 Complete Meeting Package (CMP) rates, along with median allocations, by type of conference center are summarized in the following table.

Table 4-2 2007 Median CMP Rates & Allocations

Type of Center College/ CMP Allocation Executive Corporate Resort University

CMP Rate $306 $277 $317 $271 Allocated to: Rooms 192 146 195 155 Food 77 80 82 78 Conference Services 27 42 27 36 Other 10 9 13 2 Source: PKF Consulting, Trends in the Conference Center Industry, 2008 Edition

As summarized in the previous table, median CMP rates are highest at executive and resort centers, with both corporate and college/university centers generally achieving lower rates, an indication of differences in their market orientations. This is the result of corporate centers being wholly owned by a specific company, and university centers, where the company or the university is the primary user, the CMP rate is often artificially suppressed relative to the high-quality facilities offered. As an additional gauge of conference center performance, the following table summarizes average occupancy and average daily room rate (ADR) levels, and resulting revenue per available room (RevPAR), as well as Total RevPOR, (revenue per occupied room), achieved in 2007 for all centers and the four individual types of centers. The demonstrated patterns of performance coincide with relative CMP levels, with executive and resort centers



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experiencing the highest levels of performance, and corporate and college/university centers the lowest. Resort centers had the highest ADR of all conference center types. It is also noteworthy that resort conference centers achieved the greatest total RevPOR, due to market position advantages and the presence of added resort amenities that often include more extensive spas and in many cases golf.

Table 4-3 2007 Average Occupancy, ADR, RevPAR and Total RevPOR

Total Type of Center Occupancy ADR RevPAR 1 RevPOR 2

All 59.2% $140.83 $83.37 $354.27 Executive 52.7 159.24 88.92 409.53 Corporate 63.0 118.29 74.52 307.01 Resort 65.4 170.18 111.30 443.87 College/University 51.9 127.12 65.98 286.10 Note: (1) Room revenue per available room. Note: (2) Total of all revenue sources per occupied room. Source: PKF Consulting, Trends in the Conference Center Industry, 2008 Edition

Overall demand accommodated by the conference centers (and hotels) may be categorized into three primary segments, briefly described as follows:

Commercial: Individual travelers for business purposes, including government employees, typically paying comparatively higher room rates and utilizing hotels Monday through Thursday, with noticeable lulls in the summer months and around holidays. In addition to private business travelers, demand in this segment includes individual traveling government employees. As it relates to UCLA, commercial demand can most commonly be attributed to faculty/administrative applicants and new hires, visiting academics, speakers, panel participants, medical affiliates, researchers, consultants and other professionals, corporate recruiters, performers and other individuals engaged directly in business related to the University.

Leisure: Individual travelers for leisure purposes are typically more rate sensitive and utilize hotels on weekends year-round, during the summer months and over some holidays. As it relates to UCLA, leisure demand can most commonly be attributed to continuing education program attendees not associated with a group, families of current students, UCLA alumni, prospective students, athletic patrons and other non-business overnight visitors to the campus.

Conference & Group: Groups of 10 or more including business meeting attendees; SMERF (social, military, educational, religious and/or fraternal) organizations; and tour groups. Room rates tend to be discounted somewhat for group business, especially during periods of otherwise weak demand. As it relates to UCLA, group demand can most commonly be attributed to visiting academic and athletic contingents from other universities, executive education residency groups, medical conferences, continuing education seminar and workshop groups, and academic and other conference attendees.



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With respect to demand, conference and group demand is the major source of business for all types of centers, though both transient commercial and leisure demand remains a consistent source of business as well. The levels of transient demand are driven by property location followed by individual property marketing efforts to fill during off peak periods. The distribution of occupied rooms by type of center is presented in the following table.

Table 4-4 Distribution of Occupied Rooms (%)

Market Segmentation (%)

Type of Center Conference

& Group Commercial Leisure Other All 70.2% 12.5% 13.7% 3.6% Executive 74.6 10.2 12.5 2.8 Corporate 73.5 17.3 6.4 2.8 Resort 67.5 8.3 23.8 0.3 College/University 62.8 11.0 15.2 10.9 Source: PKF Consulting, Trends in the Conference Center Industry, 2008 edition

Within the university conference center market, demand is predominantly derived from two major market segments, conference demand and leisure travelers, with varying levels of commercial transient guests and other demand, location dependent. The following table summarizes the sources of conference demand by meeting type for all conference centers and each of the four types of centers.

Table 4-5 Conference Demand Sources

Type of Center

Source All Executive Corporate Resort College/

University Business Organizations 34.8% 36.3% 53.3% 53.7% 20.9% Trade Associations 8.3 10.0 9.3 10.5 6.8 Academic Institutions 31.4 7.8 10.2 6.0 53.5 Professional Seminars 7.2 1.4 1.8 3.8 11.7 Government Organizations 3.4 6.7 3.3 3.5 2.6 In-House 8.5 0.0 20.7 15.6 3.3 Other 6.4 37.8 1.5 6.9 1.1 Total 100% 100% 100% 100% 100% Source: PKF Consulting, Trends in the Conference Center Industry, 2008 edition

The preceding provides an additional indication of the market orientations of the various types of conference centers, with university centers realizing the majority of their demand from academic institutions, not surprisingly, as compared with the other three types of centers deriving the majority of their demand from business organizations, or corporations. Within the conference industry, demand can be segmented by meeting type, which varies by conference center classification. However, training/continuing education was a predominant source of demand for university and corporate conference centers. At resort and executive centers, management planning meetings represented the greatest source of conference demand followed by training/continuing education related conferences second.



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These differences highlight the unique characteristics of a university conference center that have significantly higher levels of training and continuing education conferences as a result of the university’s ability to provide this kind of content to conferees. The following figures are indicative of each category of conference center's demand by meeting type.

Table 4-6 Conference Demand By Meeting Type

Type of Center

Type of Meeting All Executive Corporate Resort College/

University Training/Continuing Ed 51.9% 31.8% 42.7% 23.2% 70.4% Management Planning 25.6 34.9 34.1 37.5 15.8 Professional/Technical 9.2 6.1 11.4 11.9 8.3 Sales Meetings 8.2 8.1 7.5 18.7 5.0 Other 5.1 19.1 4.3 8.6 0.5 Total 100.0% 100.0% 100.0% 100.0% 100.0% Source: PKF Consulting, Trends in the Conference Center Industry, 2008 edition

In addition to conferences, in an effort to expand sources of revenue, Residential Centers typically serve other sources of business. These include social events and we have quantified the average number of social and other events accommodated at conference centers by property type, as follows: Executive 92, Corporate 46, Resort 190 and College/University 136. Included in other types of business for College University Centers, by percent reporting these other sources were weddings (56%), transient lodging (67%), exhibits/trade shows (67%), catering on-site (100%) and catering off-site (44%). The following table summarizes the scope of attendance by type of center for local, regional, national and international sources.

Table 4-7 Scope of Conference Attendance By Center Type

Type of Center

Type of Conference All Executive Corporate Resort College/

University Local 59.6% 76.1% 65.9% 43.3% 58.6% Regional 24.6 11.5 13.0 25.9 32.0 National 13.9 10.7 15.7 30.9 8.5 International 1.9 1.8 5.4 0.3 1.0 Total 100.0% 100.0% 100.0% 100.0% 100.0% Source: PKF Consulting, Trends in the Conference Center Industry, 2008 edition

The previous table indicates university conference centers capture the most regional demand of the four types, accommodating 32 percent of attendance from this scope of conference. However, national demand was less at university centers as compared with the other three types of centers. International demand was lower at university centers and highest at corporate centers. The conference center industry has evolved and matured into its own niche, a response to increasing demand on the part of groups desiring a dedicated, fully staffed and equipped meeting environment. The evolution of the industry has resulted in the development of



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different types of conference centers to satisfy varying needs on the part of users, including price and quality levels. A university center at UCLA’s Campus would provide a new facility to serve the University and provide an attractive alternative destination for meeting planners in the region. The Meetings Market The following paragraphs focus on the number of meetings, expenditures, attendees and characteristics of meetings from the perspective of meeting planners for corporations, associations, and for the government sector.

Meeting Facilities Demand Corporate meetings can be divided into several principal categories, including training seminars, management meetings, professional or technical meetings, sales-related meetings and other miscellaneous activities. Meetings & Convention Magazine conducts a biannual survey of the meetings market, key results of which are presented in the following discussion. The average number of various types of meetings planned, average attendance and length of stay for these types of corporate meetings are summarized in the following table. Training seminars and educational meetings are the category of meetings planned the most, or 18.7 on average by meeting planners, followed by sales/marketing meetings. Management meetings had the lowest average attendance with an average of 44 attendees. Of the eight types of meetings highlighted, five had an average attendance in the 93 to 97-person range. Larger-scale meetings, as compared with corporate meetings, dominate association meetings with hundreds of attendees, on average. However, Board Meetings averaged 30 attendees and Training/Educational Seminars averaged 122 attendees. These smaller meetings are most appropriate for conference center facilities and are most consistent with the dominant source of meetings for these specialized facilities as previously noted. The other three types of meetings attracted between 374 and 935 attendees, typically too large for conference center facilities but can be hosted in more traditional hotel ballroom spaces with banquet style chairs to maximize capacity.

Table 4-8 Summary of Types of Corporate Meetings

Type of Meeting Average Number

Planned Average

Attendance Average Number

of Days Sales/Marketing Meetings 10.3% 96 2.8 Management Meetings 6.6 44 2.2 Training/Educational Seminars 18.7 93 2.5 Professional/Technical Meetings 9.1 97 2.3 New Product Introductions 5.1 97 2.0 Group Incentive Meetings/Trips 4.6 113 4.1 Stockholder Meetings 6.4 93 1.8 Other Meetings 7.8 210 2.2 Total/Average 17.9 150 2.6 Source: 2007 Meetings Market Report Conducted for Northstar Travel Media by CIC Research, Inc.



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A listing of facility selection criteria by corporate meeting planners for all meeting and for group incentive trips is summarized in the following table.

Table 4-9 Facility Selection Criteria Considered Very Important - By Corporate Meeting Planners

All Group Selected Factors Considered “Very Important” Meetings Incentive Trips

Number, size and quality of meeting rooms 82% 39% Cost of hotel or meeting facility 81 64 Negotiable food, beverage and room rates 80 82 Number, size and quality of sleeping rooms 72 78 Quality of food service 71 90 Efficiency of billing procedures 62 67 Availability of meeting support services and equipment, i.e., audio visual 58 28 High-speed Internet access 58 47 Assignment of one staff person to handle all aspects of meeting 57 63 Efficiency of check-in and check-out procedures 53 61 Meeting rooms with multiple high speed phone lines and computer outlets 52 32 Previous experience in dealing with facility and its staff 49 44 Convenience to other modes of transportation 38 35 Proximity to airport 30 24 Availability of exhibit space 26 17 Number, size and quality of suites 24 59 Proximity to shopping, restaurants, off-site entertainment 21 54 Provision of special meeting services such as pre-registration 15 32 On-site recreational facilities (i.e. swimming, tennis, spa, etc.) 13 67 On-site golf course 10 43 Note: (1) Except for Group Incentive Source: 2007 Meetings Market Report Conducted for Northstar Travel Media by CIC Research, Inc.

The previous table indicates that at the top of the list for all meetings are the number, size and quality of meeting rooms, followed by the cost of the hotel or meeting facility. This indicates the balance planners seek between price and quality. The ability to negotiate fees, the number size and quality of sleeping rooms, as well as the quality of food service were also top considerations by planners for all meetings. For group incentive trips, quality of food service was at the top of the list and the number, size and quality of meeting rooms was not considered very important. Also for group incentive trips, recreational amenities were very important considerations for meeting planners. These types of meetings are best suited to resort positioned facilities. As this industry-wide review indicates, the meetings market is large and is widely dispersed across property types. Many good-quality hotels offer highly competitive rates and some have adopted elements from conference centers, in some cases developing a conference services department. As a result, conference centers face continuing competitive pressure and are finding that differentiation through quality customer service and superior facilities is imperative in order to maintain a competitive advantage and a base of repeat customers.



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Industry Outlook Meeting Professionals International (MPI) publishes Future Watch 2009, which summarizes results from their survey of MPI members who are meeting professionals. The following are key highlights of this survey.

• Both meeting planners and suppliers expect that global economic uncertainty will lead to continued reductions in bookings, travel, meeting and event budgets, staffing and event attendance. This overall trend will continue, they say, until the broader economy begins to rebound.

• In the second half of 2008, organizations cancelled an average of 4.1 meetings, representing eight percent of the total for that year. For 2009, organizations have thus far cancelled an average of 3.4 meetings, representing seven percent of scheduled meeting activity, at an average value of $200,000 per meeting.

• While the corporate, association and government sectors all anticipate reductions to their meeting budgets in 2009, the anticipated impact on the corporate sector is most pronounced. 17 percent of corporate meeting planners expect reductions in their meeting budgets in 2009. Of association meeting planners surveyed, 12 percent expect budget cuts. Of government meeting planners surveyed, 10 percent expect budget cuts.

• Survey respondents generally see virtual meetings as an important trend. Many predict a shift to internet-based learning as a way to control meeting and travel costs. However, they are not convinced that the enabling technologies are ready for mass market use.

Overall, the Future Watch 2009 outlook anticipates the meetings market to track the economic cycle, with tightening corporate, association and government sector budgets negatively impacting expenditures on meetings in the near-term.

Reflecting the economic downturn, recent trends in corporate meeting planning indicate a general shift away from higher-profile and accordingly higher-priced meeting venues to more practical venues. From a locational standpoint, destinations that enable reduced travel costs, such as cities with airports at which low-cost airlines have a significant presence, have become more attractive, especially to incentive-travel planners. In addition to seeking savings on travel, meeting planners are taking advantage of the “buyer’s market” for meetings and events, compelling venues to increasingly compete on price. Corporate meeting planners are becoming more hesitant to organize meetings at high-profile and expensive destinations—especially at resorts—in response to public criticism of perceived excesses. This trend, colloquially referred to as the “AIG Effect,” is thought to be contributing to sharply weakened demand in the luxury and resort hotel segments, which have been the hardest-hit of all hotel market segments. While the nature of resort and



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luxury settings for meetings implies high costs, tighter corporate budgets may impact all segments of the meetings market for hotels and conference centers. In February of this year the U.S. Travel Association issued voluntary conference guidelines for firms receiving federal bailout funding. Significant inclusions in these recommendations were caps on the cost of trips awarded as bonuses to 10 percent of an employee’s salary and to ensure at least 90 percent of incentive program attendees be employees other than firm’s top executives. Technological advances in web-based interfacing and media are also having an impact on the meetings market. The Institute for Corporate Productivity reports that to reduce expenses, 33 percent of 800 companies surveyed said they are increasing the use of technology in lieu of physical travel. Larger companies especially report increased use of web conferencing, videoconferencing and teleconferencing. However, many planners recognize that the change in medium can, in many instances, negatively affect the message. Long and complex meetings, training sessions that include role playing, and meetings where sensitive information is transferred or training is conducted are inherently not ideal candidates for online implementation. While it appears that the in-person format will remain an inherent necessity for many types of meetings, the ability of conference centers to “sell” the meeting experience (as opposed to an array of amenities and services) to consumers will be important to the industry moving forward as web-based and other technological meeting techniques are further refined. Comparable University Conference Centers We have identified 16 university hotels and conference centers located on 13 university campuses, in a variety of locations in the United States, as representative of the general range of university hotel and conference center operational characteristics. Taken on the whole, this group of 16 properties can be considered generally comparable to the facility proposed for UCLA. The properties and their respective universities are identified and described in the table on the following page. Selected 2007 operating performance data are presented for each of the properties (most recent data available). Preliminary operating results for 2008 indicate levels of performance generally consistent with 2007 where 2009 first quarter performance is expected to have been negatively impacted due to the economic effects. In terms of total enrollment, the selected comparable universities ranged from a low of 3,300 at Babson College to a high of 85,600 at Penn State University, The selected universities had a wide range of research dollars in 2005 (most recent data available), from none at Babson College to the University of Wisconsin, ranked third nationally in terms of research dollars with $798.1 million. In 2006, UCLA was ranked 3rd, at $811.5 million, ranking as one of the top universities in terms of research dollars. The selected properties ranged in size from 100 to 305 rooms. Meeting space at each property ranged from 11,600 to 50,000 square feet. The amount of meeting space per guest room at each property ranged from 56 to 400 square feet. One of the conference



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centers was not open to the public but dedicated exclusively to the needs of the university it serves. The respective ratios of room-nights accommodated to each university’s total student and faculty count for the 16 properties ranged from 0.4 to 10.8, with a weighted average of 2.0. By eliminating the outlying highest (10.8) and lowest (0.4) ratios from the sample, the weighted average increases to 2.1.



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Table 4-10 Summary of Selected Comparable University Hotels & Conference Centers

Institution Research $ 20061

(Millions) Research

$ Rank 20061 Lodging/Conference Center Facility Guest Rooms

2007 Meeting Space Institution Room Nights/ Total

Enrollment and Faculty 2

Estimated Occupancy

Estimated ADR Total SF

SF/Guest Room

Total Student Enrollment

Total Faculty

Total Enrollment &

Faculty

University of Pennsylvania 676.1 9 Hilton Inn at Penn 238 16,900 71

23,980 4,038 28,018 Steinberg Conf. Center 3 101 15,000 149

Penn State University 567.6 15 Nittany Lion Inn 223 19,700 88

85,600 5,335 90,935 Penn Stater Conf. Center 300 45,700 152

Duke University 657.1 10 Washington Duke Inn 271 18,100 67

12,991 2,730 15,721 R. David Thomas Conf. Center 113 15,200 135

Auburn University 126.5 112 Hotel at Auburn & Dixon Conf. Center 246 19,300 78 24,137 1,176 25,313

Northwestern University 419.9 33 James L. Allen Center 150 50,000 333 15,129 2,925 18,054

University of Wisconsin 831.9 2 Fluno Center 100 40,000 400 42,041 2,054 44,095

Indiana-Purdue Universities 213.0 79 University Place 278 25,000 90 29,764 3,079 32,843

Babson College N/A N/A Babson Executive Conf. Center 211 22,500 107 3,300 236 3,536

University of New Hampshire 115.1 119 New England Center 115 11,600 101 14,071 1,223 15,294

University of North Carolina 443.8 30 Paul Rizzo Center 120 20,000 167 27,700 3,200 30,900

University of Florida 565.5 16 Hilton Hotel & Conf. Center 248 14,000 56 50,912 2,077 52,989

Georgia Institute of Technology 440.9 31 Georgia Tech Hotel & Conf. Center 252 20,300 81 18,742 961 19,703

Emory University 345.9 43 Emory Inn & Conf. Center 305 19,600 64 12,570 3,600 16,170 Sample Mean Average 450.3 41.6

204 23,300 134 27,764 2,510 30,275

Sample Range 0 - 831.9 N/A - 2

100 - 305 11,600 - 50,000 56 - 400 3,300 - 85,600 236 - 5,335 3,536 - 90,935

UCLA 811.5 3 38,896 2,654 41,550 (1) The Top American Research Universities 2008 Annual Report - The Center for Measuring University Performance (2) Based on room-nights at the noted lodging facilities; does not include other demand generated by the university (3) Not open to general public (4) Weighted Average Source: PKF Consulting; Respective Properties; Institution Web Sites



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Operating Performance Occupancy levels at the selected university hotels and conference centers ranged from a low of 45 to 50 percent, to a high of 80 to 85 percent. Average daily room rates ranged from a low of $100 to $110, to a high of $160 to $170.

Market Demand Segmentation Market demand segmentation varied widely by facility with the more traditional hotel university properties having a mix of conference or group demand in the low 30 percent range, whereas true conference oriented facilities had a mix of between 50 to 100 percent conference or group demand. The more traditional university hotels accommodated more transient demand comprised of corporate or leisure travelers also accounting for as much as 30 or more percent of demand accommodated in each segment. In contrast, the more a property was oriented to conference groups, the less transient demand was accommodated, which varied based on a variety of factors including location. The following table summarizes specific estimates of market segmentation for selected university hotels and conference centers for which segmentation data is available.

Table 4-11

Selected Comparable University Hotels and Conference Centers 2007 Market Demand Segmentation

Property Conference

Commercial Leisure & Group Fluno Center University Place Babson Executive Conf. Ctr. New England Center Paul Rizzo Center Hilton Gainesville Georgia Tech Hotel & Conf Ctr. Emory Inn & Conf. Ctr. Source: PKF Consulting

As the preceding table indicates, the conference and group segment was the predominant market segment in seven of the eight selected conference centers. Competitive Conference Center Market In addition to accommodating demand generated by UCLA, the proposed Center may compete for conference and meeting demand unrelated to the University. Due to the nature of competition in the conference center industry, the most material competition for this demand is likely to come from other residential conference centers in the region. The proposed center may compete to varying degrees with a number of other conference centers in the region. However, we have selected a group of four conference centers, identified in the table and map on the following two pages, which we believe represent the most relevant indirect competition to the subject.



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Table 4-12 Competitive Conference Center Market

MAP CODE 1 2 3 4

CALIFORNIA Estancia La Jolla Hotel &

Spa Chaminade Hotel & Executive

Conference Center Doubletree Hotel & Executive Meeting

Center Pacific Palms Hotel & Conference

Center

Property Details Location San Diego, CA Santa Cruz, CA Berkeley, CA City of Industry, CA

College/University Near UCSD Near University of Santa Cruz, California Near UC Berkeley N/A Year Opened 2004 1979 1972 1979 IACC Certified Yes Yes Yes Yes Guest Rooms 210 156 378 292 Avg Occupancy (Range) % of University-Related Demand (Estimated)

Average Daily Rate (Range) CMP Rate (Range) Rating 4-Diamond 4-Diamond 3-Diamond 3-Diamond Management Destination Hotels &

Resorts Benchmark Hospitality Hilton Hotels Majestic

Base Management Fee (of total revenues) Meeting Rooms 32 12 13 28 Total Meeting SF 21,500 12,000 13,000 45,000 Largest Ballroom SF 5,750 2,600 5,088 12,000 Meeting Space/Guest Room 102 77 34 154 Source: PKF Consulting



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Competitive Conference Center Map

Proposed UCLA Hotel & Conference Center



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As the map indicates, the selected competitive conference centers are located throughout northern and southern California, from Berkeley, California in the north, and La Jolla to the south. All are well-situated with good access to regional highways and are easily accessible from major urban centers. The UCLA Campus site is located centrally between the northernmost and southernmost centers. These competitive conference centers cater primarily to the collegiate/university affiliated segments as well as the business and association community in and around their respective areas and regions. We estimate approximately 95 percent of meetings accommodated at these conference centers originate locally or regionally, while national and international meetings account for some five percent of total annual meetings accommodated. Based on our discussions with each property’s management at the abovementioned facilities, these conference centers accommodate significant levels of demand for continuous and executive education, university fundraising events, research seminars, corporate training, business summits and business and association conferences. The following table presents our estimate of the mix of meetings accommodated by these conference centers by type.


Estimated 2008 Meetings by Type Type of Meeting Percent

Training/Continuing Ed/Research/Executive 50% Management Planning 25% Professional/Technical 12% Sales Meetings 13% Total 100% Source: PKF Consulting

Performance of the Competitive Conference Center Market Trends from 2008 for the competitive set of conference centers are summarized in the following table.

Table 4-14 Historical Market Performance of the

Competitive Conference Centers

Year Annual Supply

Occupied Rooms

Market Occupancy

Average Daily Rate RevPAR

2008 378,140 266,783 70.6% $169.36 $119.48 Source: PKF Consulting

In 2008, the defined competitive supply of conference center rooms offered an average of 1,036 rooms per night, or 378,140 available annual room-nights, and accommodated 266,783 occupied room-nights. Amid the four properties, Average Daily Rate (ADR) ranged from $140 to $220 with an aggregate ADR of $169.36. The combination of occupancy and ADR resulted in market-wide RevPAR of $119.48 in 2008.



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Market Demand Segmentation The estimated mix of demand accommodated by the competitive set of conference centers in 2008 is presented in the following table.


Estimated 2008 Mix of Demand Market Segment Room Nights Percent

Commercial 61,000 23% Leisure 35,700 13% Conference & Group 170,100 64% Total 267,000 100% Source: PKF Consulting

As the preceding table indicates, conference and group demand (64 percent) is estimated to represent the predominant demand segment, with the commercial (23 percent) and leisure (13 percent) segments considerably less substantial. It is important to note that many of the properties selected in this competitive set are also popular with leisure travelers due to their proximately to beaches and high-demand leisure attractions. Overall, the mix of demand estimated for these centers are comparable to the experience of the typical executive or corporate conference centers for which 70 to 75 percent of accommodated room-night demand is classified as conference and group. As the subject will be positioned as a university hotel conference center, we have acknowledged the competitive conference center market as supply that will indirectly compete with the subject for regional and international demand. However, due to California’s limited supply of analogous conference center competition and the subject’s key location in West Los Angeles, we have placed greater significance on the performance of the subject’s local competitive hotel market. National and Regional Hotel Market Overview According to the March 2009 edition of Quarterly Trends in the Hotel Industry, produced by PKF Hospitality Research (“PKF-HR”), trends in the 50 largest U.S. metropolitan areas in 2008 were reflective of the slowing national economy. Hotel occupancy decreased 2.7 points from 2007, from 63.1 percent to 60.4 percent, and average daily room rate (ADR) increased 2.4 percent, from $104.04 to $106.56, resulting in a 1.9-percent decrease in room revenue per available room (RevPAR), an important indicator of hotel market performance. According to PKF-HR, U.S. lodging industry performance is expected to slow through the first quarter of 2010. Because of the extended slowdown of the U.S. economy, PKF-HR forecasts a 17.5 percent decline in RevPAR in 2009. The forecasted decline would be one of the largest annual declines in RevPAR since 1930 and, following the 1.9 percent RevPAR decline for 2008, is reflective of the worsening near-term outlook for the lodging industry. The drop in RevPAR is the result of declines in both occupancy and ADR. PKF-HR is forecasting a 4.9 point decline in occupancy, and a 10.2 percent decline in ADR, the



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greatest decline since 1940. The projected occupancy level of 55.5 percent is seven percentage points below the long-term average occupancy level for U.S. hotels tracked by STR of 62.7 percent. Waning demand in the near-term, combined with a weak recovery (by historical standards) and substantial supply growth is anticipated to keep hotel occupancies below 60 percent through 2012. This sustained period of low occupancy will apply substantial strain on unit-level profitability over the next several years, especially if ADR growth remains stagnant. With the development pipeline severely constrained beyond 2009, and with the potential for supply contraction due to profitability challenges, the outlook for the competitive hotel market environment in 2011 and beyond is much more encouraging. By 2011, all 50 markets covered by PKF-HR forecasts are projected to once again achieve performance gains. Competitive Local Hotel Market In addition to competing for conference and other group demand on a regional scale with other conference centers, the subject will compete with hotels in the local area for both transient and group demand. The subject will be located in Westwood in Los Angeles. As such, the local competitive hotel market includes hotel properties located in Westwood, Century City, and Beverly Hills. The hotels that are considered competitive have been selected based on their facilities, location, market orientation, rate structure, UCLA affiliations, and discussions with management. While the subject center will compete to varying degrees with a number of hotels in the market area, the following table presents eight hotels that we consider most representative of the competitive environment in which the Center will operate.

Table 4-16 Competitive Local Hotel Market Characteristics

Meeting Space - Square Feet

Map Code Hotel

# of Rooms

Year Opened/Renovated

Chain Scale Total Largest

Per Guest Room

1 Hyatt Century Plaza 724 2001/2008 Upscale 100,000 50,000 138 2 Intercontinental Century City 366 1988/2005 Upscale 12,000 4,000 33 3 Beverly Hilton 571 1955/2005 Upscale 60,000 16,300 105 4 W Hotel Westwood 258 1997/2007 Upscale+ 5,300 1,540 21 5 Hotel Angeleno 209 1971/2006 Midscale+ 2,800 700 13 6 Luxe Hotel Sunset Blvd 161 1947/2006 Upscale 11,681 4,400 73 7 Palomar Hotel (former W. on Wilshire) 268 1972/2008 Upscale 5,000 2,100 19

Source: PKF Consulting

The selected competitive hotels are all full-service in nature and have mostly similar market positions in the upscale range of service and physical quality (the midscale Hotel Angeleno is the exception). All of the properties in the competitive set are also affiliated with a lodging chain or recognized third-party operator. The local competitive set hotels’ sizeable



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meeting space inventories orient them to varying degrees toward the group segment. The competitive hotels are located within a three-mile radius of the UCLA Campus. As the hotel in the market possessing the highest perceived quality of facilities, the W Hotel Westwood is estimated to be the market leader in terms of ADR by a relative wide margin. Benefitting from the patronage of its national group and meetings business, the Hyatt Century Plaza is estimated to have experienced the highest occupancy in 2008. The following table summarizes the current negotiated room rates that each hotel maintains with UCLA and our estimates for occupied rooms associated with the University and overall occupancy level ranges for each hotel in 2008.

Table 4-17 2008 UCLA Demand in the Competitive Local Hotel Market

Competitive Hotel Market Rooms Total

Available

UCLA Coded

Occupied Room Nts

*Estimated Room Nights

Booked Outside of

UCLA Code

Total Room Nights

Affiliated with UCLA

UCLA Avg Contracted

Rate Hyatt Century Plaza 724 264,260 Intercontinental Century City 366 133,590 Beverly Hilton 571 208,415 W Hotel Westwood 258 94,170 Hotel Angeleno 209 76,285 Luxe Summit Bel Air 161 58,765 Palomar Hotel (former W. on Wilshire) 268 97,820

Total / Weighted Average 2,557 933,305 * Estimates derived from hotel property representatives Source: PKF Consulting

As the preceding table indicates, occupied room nights associated with UCLA in 2008 was estimated to have been 7,795 within the local competitive set of hotels. With an array of transient business being accommodated in the area, property representatives commented that many UCLA-related room nights go un-coded throughout the year, and are thus difficult to track. Per our discussions with property representatives, we estimate that average room rates negotiated with UCLA from the competitive set hotels ranged from

for Monday through Thursday bookings. It should be noted that the higher-level contracted room rates can be attributed to the local hotel market’s strength and ability to garner price premiums over other markets in the region. For this reason, we have estimated the subject’s rate positioning to be much higher than typical university conference center hotels in the country. With the absence of a true conference center facility in the West Los Angeles area, these hotels have historically accommodated conference demand in addition to group demand more typically attracted to full-service hotels. Presented on the following page is a map indicating the locations of the seven selected competitive hotels in relation to the proposed Center.



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Local Competitive Hotel Market Map

SUBJECT CENTER



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In terms of their locational relationship to the Campus of UCLA, the W Hotel and The Palomar Hotel are the most competitive of the existing hotels. Hotel Angeleno and Luxe Hotel’s location on the west side of the 405 Freeway inconveniences travelers commuting to and from the UCLA Campus during high-traffic periods in the morning and early afternoon. The Hyatt, InterContinental, and Beverly Hilton are somewhat more distant, though are nonetheless very popular venues for UCLA conferences, meetings and banquets.

Historical Performance of the Competitive Local Hotel Market Historical trends over the past five years and year-to-date May 2008 and 2009 for the competitive set of local hotels are summarized in the following table (Reference Table 4-16).

Table 4-18 Historical Market Performance of the Competitive Supply

Annual Percent Occupied Percent Market Average Percent

Percent Year Supply Change Rooms Change Occupancy Daily Rate Change REVPAR Change 2004 943,890 N/A 652,150 N/A 69.1% $159.32 N/A $110.07 N/A 2005 931,115 -1.4% 613,687 -5.9% 65.9 184.17 15.6% 121.39 10.3% 2006 931,115 0.0 668,625 9.0 71.8 211.07 14.6 151.56 24.9 2007 903,010 -3.0 662,890 -0.9 73.4 230.69 9.3 169.35 11.7 2008 933,305 3.4 671,689 1.3 72.0 240.23 4.1 172.89 2.1

CAAG -0.3% 0.7% 10.8% 11.9% 08 May YTD 388,725 N/A 283,205 N/A 72.9% $249.45 N/A $181.74 N/A 09 May YTD 388,725 0.0% 258,876 -8.6% 66.6% 227.36 -8.9% 151.41 -16.7% Source: PKF Consulting

In 2008, the defined competitive supply of hotel rooms offered an average of 2,557 rooms per night, or 933,305 available annual room-nights, and accommodated 671,689 occupied room-nights, indicating an aggregate annual occupancy level of 72.0 percent, a 1.3 percent increase in occupied rooms from 2007. ADR increased by 4.1 percent in 2008 to $240.23 as healthy rate growth in the first half of the year was tempered by declines in the fourth quarter. The combination of occupancy and ADR resulted in market-wide RevPAR of $172.59, a 2.1 percent increase from 2007. Over the five-year period 2004 through 2008, supply decreased at a misleading compound annual rate of 0.3 percent, with supply changes attributable to Hotel Angeleno and Palomar Hotel undergoing renovations in 2005 through 2007. Due to fluctuating occupancies attributed to ramping products, accommodated demand increased nominally at a compound annual rate of 0.7 percent. The repositioning of the Hyatt in 2005 also caused a dip in occupied rooms for this market. Trends in supply and demand resulted in relatively steady occupancy levels in the low- to mid-70 percent range over the five-year period, culminating in a five-year high of 73.4 percent in 2007. The competitive supply’s ADR increased at a strong compound annual rate of 10.8 percent from 2004 through 2008. Yearly ADR growth ranged from 15.6 percent in 2004 to a moderated 4.1 percent in 2008, reflecting the introduction of newly renovated properties



IV-23

and changes in flags for some hotels. The combination of occupancy and ADR trends over the five-year period resulted in a robust 11.9 percent compound annual growth in RevPAR. As is the case in many hotel markets throughout the US, year-to-date results through May of 2009 are reflective of the economic downturn from a year ago. Accommodated demand declined sharply, by 8.6 percent from May 2008, while ADR similarly declined, by 8.9 percent, resulting in a trenchant RevPAR decline of 16.7 percent.

Market Demand Segmentation The estimated mix of demand accommodated by the competitive set of local area hotels in 2008 is presented in the following table (Reference Table 4-16 for hotel list).

Table 4-19 Competitive Local Hotel Market Estimated 2008 Mix of Demand

Market Segment Room Nights Percent Commercial 327,000 49% Leisure 185,500 28% Conference & Group 159,200 24% Total 672,000 100% Source: PKF Consulting

As the preceding table indicates, commercial demand (49 percent) is estimated to represent the predominant demand segment, with the conference and group segment (24 percent) and the leisure segment (28 percent) making up the difference. Each market segment is discussed in the following paragraphs, followed by a summary table setting forth our estimated growth in demand by market segment.

Commercial Market Segment The properties within the competitive set capture corporate demand generated from business located in West Los Angeles, Westwood, Century City, Bel Air, and Beverly Hills. Corporate offices in the immediate area of the subject hotel include but are not limited to housing developers, communications companies, numerous attorneys, pharmaceutical companies, entertainment brokers and others. Additionally, UCLA’s campus has visiting affiliates, medical doctors, and other individual business travelers who are accommodated in the Westwood area.

Leisure Market Segment The leisure market segment includes visitors traveling for pleasure and those visiting area attractions such as entertainment in Hollywood and shopping attractions in Beverly Hills. The prestigious residential neighborhoods within Westwood, and Bel Air, as well as UCLA, also generate leisure demand for the local competitive supply via visiting family members.

Group Market Segment The group market segment is primarily derived from groups attending meetings or conferences in the Los Angeles area or at local properties. Catering events such as



IV-24

weddings, Bar Mitzvahs, and SMERF (social, military, education, religious, and fraternal) groups also make up a portion of this demand segment. Future Changes in the Competitive Hotel and Conference Center Supply We are aware of no other planned hotel projects in the local area that would be competitive with the subject proposed center. There are tentative plans and rumors relative to the following properties:

1. Beverly Hilton - In 2006, plans were unveiled for a $500-million expansion to the Beverly Hilton Hotel property. The plans require an amendment to Beverly Hills' general plans three-story height limit in order to build two 13-story condominium towers and a 15-story “condo hotel,” where rooms would be rented to guests when their owners are away. The Beverly Hilton would be renovated into a smaller, 402-room hotel, renamed the Beverly Hilton Oasis. A 120-room Waldorf-Astoria Beverly Hills hotel is also to be planned for the project.

2. Hyatt Century City - Local owner Michael Rosenfeld with the D.E. Shaw Group have tentative plans, to be reviewed by the city, to remove the existing 724-room hotel and transform it into a mixed-use residential site with a 240-room boutique hotel offering. Faced with opposition from preservationist groups, the project is speculated to take years for approval. If the overall project were to be realized in the future, 100,000 square feet of key local meeting facilities would be removed from the competitive market, giving UCLA more cause to fill a void for meetings demand in the West Los Angeles market.

Being that these rumors are speculative in nature and have not been approved by city official, we cannot assume that the subject’s competitive supply will be changed. Given the relatively long-term horizon for the opening of the subject center, we cannot rule out the possibility of other hotel openings that would be materially competitive with the subject. However, the current economic environment has slowed the pipeline for hotel development in this very high barrier-to-entry market. Stresses on the commercial lending market have constricted financing in almost all cases to projects requiring loans of less than $20 million, essentially disqualifying most large, full-service hotel projects from consideration. As the economy recovers and the lending environment eases, the probability of new projects in the local hotel and regional conference center markets that could be considered competitive may increase Conclusions and Outlook The conference center industry is a specialized segment of the lodging industry that has evolved into four categories of conference centers, including university conference centers



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with which the characteristics of the proposed subject property are most closely aligned. These centers were developed to meet the needs of the particular university they serve, primarily accommodating university demand for training and continuing education-related conferences. They generally experience lower occupancy levels than do the other three types of conference centers. We have summarized university hotels and conference centers that each have established operations and are considered to meet the needs of the universities they serve. The current economic down-cycle has challenged both the local hotel and competitive conference center markets. Demand in both of these markets, influenced in both cases to large extents by the business sector, has waned in recent months. However, this period of decline is expected to end as the business sector recovers and the economy at large improves over the mid-term. The recovery of both competitive markets should be aided by the lack of new supply apparent in the pipeline and may be accelerated by a potential reduction in competitive supply in the mid-term should one or more properties close or realign. In conclusion, the subject’s local competitive hotel market should be a key indicator of the occupancy and room rate premiums which will be forecasted for the proposed Center as noted in the following sections of this report.


Section V

ESTIMATES OF DEMAND

Section V – Estimates of Demand


V-1

ESTIMATES OF DEMAND

INTRODUCTION This section of the report will discuss our analysis of demand for the proposed conference center, including demand related to UCLA and from outside sources. This analysis will inform our estimated levels of accommodated demand, occupancy, average room rate and market mix for the Center. UCLA LODGING, CONFERENCE AND MEETING DEMAND Our analysis included the gathering of primary input via meetings with and surveys of representatives of several of the academic and administrative units within UCLA in order to evaluate demand for lodging meetings and conferences. The following summarizes generally our findings from this input.

The faculty and staff assessed many of the meetings and conferences held at market-rate venues which they hold or may hold in the future.

Some UCLA conferences currently utilize the “Guest House” for lodging and meeting for its locational convenience. Many other UCLA conferences are accommodated at on-campus meeting venues, such as the Student Centers or The Lewis Center or other facilities.

Most UCLA schools and colleges host annual award/recognition dinners with 100 to 250 or more attendees that could reasonably be accommodated at the Center.

Many functions that survey responders and interviewees described as “conferences” were one-day functions for which a small minority, if any, attendees required overnight lodging.

In addition to the many academic departments at UCLA schools and colleges, there are many centers and institutes of varying prominence that, in some cases, sponsor conferences of a regional, national or international scope.

Lodging demand from visiting varsity athletics teams was significant, though some visiting teams, notably for football, and those competing at venues farther from the Center would likely seek accommodation elsewhere.

The University generates a significant level of extended-stay demand related to faculty and professionals visiting the UCLA Campus. This demand is currently accommodated at local apartment complexes in the area which could be feasibly accommodated at the subject center in most cases.

While it was evident that there exists varying levels of price sensitivity across the UCLA units, many of the off-campus functions accommodated by hotels within the market area are done so at market rates.



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Not including the on-campus “Guest House”, facilities most commonly utilized included the Tiverton and the W Hotel in Westwood, and the Hyatt in Century City.

Intra-campus transportation and accessibility were common concerns, with the desire for a dedicated shuttle service to transport meeting attendees between the proposed center and other locations on the UCLA Campus considered important.

The table on the following page summarizes aggregate findings by many UCLA constituencies from which we have received input and identified total group-related demand patterns which were estimated for the year of June 2008 through May 2009.



V-3

Table 5-1

UCLA Conference Center

A

B C D E F G H Market Demand Assessment Survey Results Total Individuals Total Number Total Individuals Average Total No. Total Individuals Average Total No. TOTAL Sample Period: June 2008 through May 2009 in Attendance Of Events Needing Overnight Mid Week Mid Week Needing Overnight Weekend Weekend Room Nights

Demand Summary

at Group Meetings

Accommodations Stay in Days Room Nights Accommodations Stay in Days Room Nights Information shown is from the 39 academic CAO's

responding out of the 45 surveyed. or Conferences

Mid Week (SUN thru THUR)

Weekend (FRI & SAT)

(SUN thru THUR)

(FRI & SAT)

Quarter

B x C = D

E x F = G D + G = H Total Demand

Summer Quarter (Jul, Aug, Sept)

2,403 47 1,712 3.60 6,156 1,454 1.61 2,339 8,495

Fall Quarter (Oct, Nov, Dec)

7,355 72 1,652 2.28 3,763 670 1.71 1,146 4,909

Winter Quarter (Jan, Feb, Mar)

6,291 74 1,344 2.14 2,877 1,057 1.80 1,899 4,776

Spring Quarter (Apr, May, Jun)

6,987 94 1,777 2.56 4,540 836 1.47 1,226 5,766

All Periods

23,036 287 6,485 2.67 17,336 4,017 1.65 6,610 23,946

Frequency

Quarter

Annual


2,323 46 1,677 3.61 6,051 1,454 1.61 2,339 8,390 (default)


6,751 65 1,485 2.32 3,449 617 1.69 1,043 4,492


5,579 57 1,061 2.08 2,204 910 1.82 1,654 3,858


6,405 81 1,584 2.65 4,192 690 1.77 1,223 5,415

All Periods

21,058 249 5,807 2.74 15,896 3,671 1.70 6,259 22,155

One-Time


80 1 35 3.00 105 0 0.00 0 105


529 6 112 1.82 204 53 1.94 103 307


552 14 158 2.99 473 47 2.02 95 568


113 4 24 2.00 48 1 3.00 3 51

All Periods

1,274 25 329 2.52 830 101 1.99 201 1,031

Every 2 years


0 0 0 0.00 0 0 0.00 0 0


0 0 0 0.00 0 0 0.00 0 0


50 1 50 1.00 50 50 2.00 100 150


326 5 71 1.35 96 130 1.00 130 226

All Periods

376 6 121 1.21 146 180 1.28 230 376

Every 3 years


0 0 0 0.00 0 0 0.00 0 0


75 1 55 2.00 110 0 0.00 0 110


110 2 75 2.00 150 50 1.00 50 200


143 4 98 2.08 204 15 2.00 30 234

All Periods

328 7 228 2.04 464 65 1.23 80 544



V-4

Table 5-2 UCLA Conference Center

Market Demand Assessment Survey Results

Total Number Average Number Average # of Individuals Max Group Size Average # of Individuals Max Group Size Sample Period: June 2008 through May 2009

Of Events Individuals Needing Overnight Needing Overnight Needing Overnight Needing Overnight

Per Event Summary in Attendance Accommodations Accommodations Accommodations Accommodations

at Group Meeting Mid Week Mid Week Weekend Weekend

or Conference (SUN thru THUR) (SUN thru THUR) (FRI & SAT) (FRI & SAT)

Quarter

Per Event Per Event

Per Event

Total Demand


47 51.13 36.43 180 30.94 165


72 102.15 22.94 114 9.31 97


74 85.01 18.16 150 14.28 150


94 74.33 18.90 90 8.89 105

All Periods

287 80.26 22.60 180 14.00 165

Frequency

Quarter

Annual


46 50.50 36.46 180 31.61 165 (default)


65 103.86 22.85 114 9.49 97


57 97.88 18.61 150 15.96 150


81 79.07 19.56 90 8.52 105

All Periods

249 84.57 23.32 180 14.74 165

One-Time


1 80.00 35.00 35 0.00 0


6 88.17 18.67 40 8.83 30


14 39.43 11.29 100 3.36 20


4 28.25 6.00 20 0.25 1

All Periods

25 50.96 13.16 100 4.04 30

Every 2 years


0 0.00 0.00 0 0.00 0


0 0.00 0.00 0 0.00 0


1 50.00 50.00 50 50.00 50


5 65.20 14.20 30 26.00 100

All Periods

6 62.67 20.17 50 30.00 100

Every 3 years


0 0.00 0.00 0 0.00 0


1 75.00 55.00 55 0.00 0


2 55.00 37.50 50 25.00 50


4 35.75 24.50 50 3.75 15

All Periods

7 46.86 32.57 55 9.29 50



V-5

Academic Department Demand Typically, university conference centers attract profitable demand for lodging and meeting space from executive education programs administered by the university’s School of Business. The Anderson School of Management at UCLA administers one of the most successful arrays of executive education programs through its Price & Ziman Centers. Our experience with a variety of universities indicates those with successful executive education programs generate revenues sufficient to support in part or in whole, a university conference center on campus. The proposed center is planned to be located near the Anderson School Building and the Business School would expect to utilize the Center for support of its executive education programs and donor events and activities. Other key academic schools which would bolster demand for annual group events and meetings include but are not limited to the following:

• Henry Samueli School of Engineering and Applied Science • UCLA School of Law • David Geffen School of Medicine

Non-UCLA Conference and Meeting Demand As discussed in the Market Analysis section of this report, the regional competitive conference center market accommodated some 266,800 room nights in 2008 that were attributed to the conference and group market segment. We have also shown that some 50 percent of meetings accommodated by the competitive conference center market can be classified as training or continuing education in nature. Typically possessing facilities most closely aligned with education and training needs, university conference centers such as the proposed Center tend to be particularly competitive for these types of meetings. As a university conference center in a higher education setting, the Center should be most attractive to smaller “think-tank” corporate and association groups and small- to mid-sized groups inclined to interact with the research facilities, academics and other resources available at UCLA. As such, the Center’s facilities should be competitive for these elements of the existing defined conference and meetings market in the region. As the Center’s primary intention is to service the needs of the University, demand from these outside sources is anticipated to represent a supplementary, though profitable and attractive, component of the Center’s business. Benchmark Indicators of Demand Our estimates of stabilized accommodated demand and resultant occupancy level for the proposed hotel and conference center are informed by three distinct analytical approaches:



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• The build-up approach; • The fair share and market penetration approach; • The population multiplier approach.

Although an exact calculation regarding potential demand capture is not possible, these three benchmark approaches to estimating demand provide a collective assurance that the proposed hotel and conference center could compete effectively for lodging and meeting demand. These three approaches are discussed and demonstrated separately in the paragraphs on the following pages.

Build-Up Approach The build-up approach estimates demand levels individually from the commercial, leisure and conference and group market segments. This method is typically administered through a direct sampling of demand sources (in this case UCLA University) and supplemented where necessary by knowledge of comparable demand sources. By surveying and meeting UCLA faculty and administrators, we have used this method to estimate current and potential future levels of room-night demand generated by the University. From the survey (Table 5-1) which assessed demand for hotel accommodations and meeting attendance, we quantified a total of approximately 24,000 existing annual room-nights which were generated by UCLA during the period of June 2008 through May 2009. Based on the surveys completed by the school respondents, we have estimated that more or less than 20 percent of the total annual room nights are attributable to commercial and leisure transient demand, or approximately 4,800 room nights. These hotel rooms are related to visiting speakers, academics, professionals, recruits and administrative/faculty applicants, and continuing education program attendees. According to trends at other university-based hotel conference centers we estimate that 80 percent of these room nights were derived from the conference and groups segment. This room-night demand was most likely generated by smaller conferences, residencies, meetings, banquets, retreats, and other group functions. It is important to note that these estimates of existing room-night demand for 2008 and 2009 were determined by 39 academic CAO’s (of the 45 surveyed at UCLA), and most likely understates actual demand levels, as the University does not formally track this information on an aggregate basis. Thus, room-night data is rendered incomplete in most cases. In addition, many UCLA visitors - especially transient leisure and commercial visitors - organize their own accommodations and thus are generally not included in these demand estimates.



V-7

Our research of university hotels and conference centers indicates that the typical property of this type, averaging 165 guest rooms, accommodates approximately 14,000 transient room-nights annually, accounting for 37 percent of total accommodated room-nights. This indicator supports our belief that transient commercial and leisure room-nights generated by UCLA were substantially understated or void in our survey responses. From our knowledge of comparable on-campus hotel conference centers and considering the distinct characteristics associated with UCLA and the Westwood area, we estimate UCLA could generate 15,000 to 17,000 annual room-nights attributable to the transient commercial and leisure segments. This estimate is 10,200 to 12,200 room-nights above the 4,800 estimated from the academic CAO responses. These estimated incremental room-nights are predominantly related to visiting families and prospective students, sporting event spectators, newly-relocated faculty and administrators, and professionals doing business with UCLA. One portion of this incremental room-night demand includes major regularly scheduled campus events. These events, such as student move-in, homecoming, parent’s weekend, football and basketball games, graduation, and class reunions generate considerable levels of room-night demand that were not included in the 24,000 room nights quantified from our survey. These events alone typically result in 15 to 25 “sell-out” nights at prominent university conference centers in the US. The following table summarizes estimates of periods of peak leisure transient demand generated by UCLA and the resulting room-nights that could be accommodated by the Hotel Conference Center. Note these estimates quantify only room-nights that could be accommodated by the Center, thus total demand levels should still be understated.


Peak Leisure Transient Demand Periods Typical Room-Nights

Event Time of Year Duration Generated* 2008/2009 Numbers Student Move-In August 2 nights 560 12,000 - 17,000 new students/yr Homecoming October 2 nights 560

Parent’s Weekend October 3 nights 840 20,000 - 25,000 freshman & sophomores Football Games Fall 6 nights 1,680 6 Home games/yr (Although Distant) Basketball Games Winter/Spring 6 nights 1,680 18 Home games/yr Spring Graduation May/June 3 nights 840 10,000 - 12,000 graduates/yr Class Reunions October/May 2 nights 560 3-5 Functions per year Total (Rounded) 24 nights 6,700 *That could be accommodated by the Center Source: PKF Consulting

As the preceding indicates, these events alone could be reasonably expected to generate 24 “sell-out” nights and a total of some 6,700 room-nights that could be accommodated by the Center. Due to the desirability of on-campus accommodation during these periods, demand during these periods is least price-sensitive and the Center’s location will make it particularly competitive.



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Thus, the build-up method indicates annual room-night demand currently generated by the University ranges from 34,200 to 36,200 room-nights.

Fair Share and Market Penetration Approach The fair share approach estimates the level of demand that, when total market demand is distributed evenly across all competitors, a given property should be expected to accommodate. A given property’s fair share is simply the ratio of the number of rooms in that particular property to the number of rooms in the defined primary competitive supply. Thus, the proposed center’s overall fair share of demand in the combined competitive conference center and local hotel markets will be 6.7 percent upon opening in 2014 and in each subsequent projection year. Market penetration, or penetration rate, is the ratio of captured demand to fair share of demand. Factors indicating competitive advantages are typically reflected in penetration rates above 100 percent, while, conversely, competitive disadvantages are reflected in penetration rates below 100 percent. The following table demonstrates the accommodated demand conclusion based on fair share and penetration for the proposed center (Reference Table 4-12 and Table 4-16 for hotel and conference center list).


Fair Share, Penetration and Estimates of Stabilized Accommodated Demand by Segment Markets Subject Center 2008 Estimated

Markets and Room-Night Fair Fair Share Stabilized Accommodated Segments Demand Share Room-Nights Penetration Demand

Local Hotels Commercial 327,000 9.9% 32,400 24% 7,800 Leisure 185,500 9.9% 18,400 55% 10,100 C & G 159,200 9.9% 15,800 175% 27,700

Total-Hotels 671,700 9.9% 66,600 68% 45,600 Conference Centers Commercial 61,000 21.0% 12,800 0% 0 Leisure 35,700 21.0% 7,500 0% 0 C & G 170,100 21.0% 35,700 70% 25,000

Total-Conf. Ctrs. 266,800 21.0% 56,000 45% 25,000 Total-All 938,500 6.7% 62,500 113% 70,600 C & G = Conference & Group Source: PKF Consulting

As the above table indicates, this method yields an estimate of total annual accommodated demand upon stabilization of 70,600 room-nights, equal to 113 percent of fair share, considered reasonable given the support of the University as a demand source. Our estimates of penetration vary widely by market segment and are reflective of the Center’s ability to compete for various demand segments as determined by its market orientation, location in Westwood, newness, type and quality of facilities.



V-9

In the competitive local hotel market, the Center will be least competitive for commercial demand due to its location on UCLA’s campus, with the vast majority of accommodated demand from this segment related to the University. As such, the Center is estimated to capture only 24 percent of its fair share of commercial demand. In the leisure segment, the Center will be competitive for higher-rated travelers and travelers for whom location is most important. The Center should also be highly competitive for leisure demand during major university-wide events, such as graduation, football games and reunions. As such, the Center is estimated to capture 55 percent of its fair share of leisure demand. The Center should be most competitive for demand from the conference and group segment, due to its market orientation as a conference center and affiliation with UCLA, which generates high levels of conference and group demand in the local area. As such, the Center is estimated to capture 175 percent of its fair share of conference and group demand. In the competitive conference center market, the Center will not compete for leisure or commercial demand due to its remoteness from other competitive conference center properties. The Center will, however, compete most directly for smaller to mid-sized conferences and meetings accommodated in the market. As this demand source is intended to be supplementary to demand related to the University, scheduling and capacity constraints will inevitably arise which will inhibit the Center’s ability to fully penetrate this market. Additionally, there are some meetings that are location-sensitive and may have ties with the area universities near the competitive properties. As such, the Center is estimated to capture 70 percent of its fair share of conference and group demand.

Population Multiplier Approach This approach estimates demand levels based on the subject market population, in this case the population of students and faculty at UCLA. With the availability of a facility such as the proposed center, the potential for new meetings and conferences that was expressed in the survey and in planning meetings suggests that group demand generated by UCLA would increase significantly from the current level. Considering the potential for an increase in conferencing at UCLA with the new subject facility, we expect demonstrated levels of room-night demand generated by UCLA would be significantly higher at the proposed center. This expectation is supported, in part, by the experiences of other comparable university conference centers as discussed in the market analysis section of this report. Below is a summary of this table:



V-10

Table 5-5 (Referenced from Table4-10) Summary of Selected Comparable University Hotels & Conference Centers

2007 Room

Nights/Total Enrollment & Faculty 2 Institution

Lodging/Conference Center Facility

Guest Rooms

Estimated Occupancy

Total Enrollment &

Faculty

University of Pennsylvania Hilton Inn at Penn 238 28,018 Steinberg Conf. Center 3 101

Penn State University Nittany Lion Inn 223 90,935 Penn Stater Conf. Center 300

Duke University Washington Duke Inn 271 15,721 R. David Thomas Conf. Center 113 %

Auburn University Hotel at Auburn & Dixon Conf. Center 246 25,313

Northwestern University James L. Allen Center 150 18,054 University of Wisconsin Fluno Center 100 44,095 Indiana-Purdue Universities University Place 278 32,843 Babson College Babson Executive Conf. Center 211 3,536 University of New Hampshire New England Center 115 15,294

University of North Carolina Paul Rizzo Center 120 30,900

University of Florida Hilton Hotel & Conf. Center 248 52,989 Georgia Institute of Technology

Georgia Tech Hotel & Conf. Center 252 19,703

Emory University Emory Inn & Conf. Center 305 16,170 Sample Mean Average 204

30,275 2.0 4

Sample Range 100 - 305 45 - 75% 3,536 - 90,935 0.4 - 10.8 UCLA 41,550 (1) The Top American Research Universities 2008 Annual Report - The Center for Measuring University Performance (2) Based on room-nights at the noted lodging facilities; does not include other demand generated by the university (3) Not open to general public (4) Weighted Average Source: PKF Consulting; Respective Properties; Institution Web Sites

Whereas the approximate 24,000 annual room-nights quantified directly from our survey implies a room-night to student and faculty ratio of 0.4 (24,000/41,550), ratios for comparable centers ranged from 0.4 to 10.8 with a weighted average of 2.0. While a number of factors discussed in this report contribute to the distinct room-night generation potential of UCLA, it is reasonable based on the experiences of comparable universities for the Center as recommended to accommodate between 1.7 and 1.9 room-nights per student and faculty combined. This estimate yields an estimated range of 70,635 and 78,945 annual accommodated room-nights. These three approaches to benchmarking estimates of accommodated demand for the Center yielded a range of mutually supportive conclusions. The following table summarizes these conclusions.


Summary of Approach Conclusions Approach Conclusion Quantity

Build-Up 34,200 – 36,200 Room-nights generated by UCLA Survey Fair Share and Market Penetration 70,600 Total accommodated demand Population Multiplier 70,635 – 78,945 Total accommodated demand Source: PKF Consulting



V-11

Estimated Performance The proposed center is expected to be predominantly competitive for demand related to UCLA and corporate, association and social conferences and other meetings in the region. Due to its location on campus and within Westwood, the Center’s competitiveness for transient commercial and leisure demand unrelated to UCLA is expected to be evident but minimal. We anticipate the majority of demand accommodated by the Center to be generated by the University, with outside conferences and meetings representing a supplementary demand source. These expectations form the basis of our estimates of occupancy and market segmentation for the proposed center. To project occupancy levels for the Center, we have accounted for the nature, degree and seasonality of lodging demand related to UCLA and opined on the level of demand that a facility such as the proposed center could reasonably capture from the regional conference and meeting market. Our projections of accommodated demand and resultant occupancy levels for the first five years of operation for the proposed 276-room center are presented in the following table.


Estimated Occupancy

Year

Room-Nights Available

(A)

Room-Nights Accommodated

(B) Occupancy

(B/A) 2014 100,740 62,800 62% 2015 100,740 66,900 66%

2016* 100,740 70,600 70% 2017 100,740 70,600 70% 2018 100,740 70,600 70%

*Estimated Stabilization Source: PKF Consulting

As the previous table indicates, accommodated demand and occupancy are projected to increase gradually over the initial three years of operation, from 62 percent in 2014 to 70 percent in 2016 and thereafter. This period of increasing occupancy, known as the “ramp-up” period, is typical of hotels and conference centers as they are introduced and gain market acceptance. In this, case, we anticipate occupancy increases during the ramp-up period to largely result from improving competitiveness for non-University conferences and meetings in the region as the Center establishes a positive repute. Estimated Market Mix Our estimated market mix for the proposed center upon stabilization is presented in the following table.



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Estimated Stabilized Mix of Demand Market Segment Room-Nights* Percent

Commercial 11,000 16% Leisure 13,600 19% Conference & Group 46,000 65% Total 70,600 100% *Rounded Source: PKF Consulting

As the preceding table indicates, conference and group demand (65 percent) is estimated to represent the predominant demand segment, with the leisure (19 percent) and commercial (16 percent) segments less substantial but still significant. This estimate is comparable to the experience of the typical university conference center, for which over 60 percent of accommodated demand is classified as conference and group. Due to the Center’s site on campus and away from the central business district of West Los Angeles, commercial and leisure demand is anticipated to be predominantly University related. Within the conference and group segment, we estimate approximately 60 percent, or some 27,500 room-nights, of accommodated demand to be directly related to UCLA. The remaining 40 percent of accommodated conference and group demand, or 18,500 room-nights, is estimated to come from non-University sources, the majority of which are now accommodated in the competitive local hotel and competitive conference center markets. Additionally, we estimate 50 to 60 percent of occupied rooms (or 12,300 to 14,760 room-nights) derived from commercial and leisure segments to be university related. Thus, total room-nights related to UCLA are estimated to represent between approximately 56 and 60 percent of overall demand accommodated by the Center. Within the overall market for room-night demand related to the University, the Center is estimated to be most competitive for group and conference demand due to its orientation toward this segment. All but the most price-sensitive elements of UCLA group demand, for example most continuing education groups, should be highly attracted to the Center. Due to its recommended rate positioning (discussed next in this section) the Center is estimated to be somewhat less competitive for the most price sensitive commercial and leisure demand. In addition, the Center’s location on Campus, compared to competitive local hotels along Wilshire and Santa Monica Boulevard, may inhibit its competitiveness for leisure and commercial demand. However, the Center will likely be the “top of mind” alternative for commercial and leisure visitors to UCLA. Complete Meeting Package (CMP) Analysis

CMP Estimated Mix With respect to demand, conference demand is the major source of business for all types of centers, though social/transient demand remains a consistent source of business as well.



V-13

Ranges of singular and double occupancy demand composition by type of center in 2008 are presented in the following table.

Table 5-9 2008 Conference Center Demand Composition

Monthly Ranges (%) Single Occupancy Double Occupancy

Type of Center Conference Social/Transient Conference Social/Transient Resort Centers 79% 80% 21% 20% Executive Centers 84% 82% 16% 18% Corporate Centers 90% 92% 10% 8% College/University 78% 85% 22% 15% Source : PKF Consulting,

Based on the table above, we estimate that 20 to 25 percent of the subject’s total conference and group demand will be in double-occupied rooms. This equates to approximately 10,350 room nights occupied in a representative year.

CMP Rates

The proposed Center, like other conference centers, will charge its conference guests a complete meeting package rate, which covers a full plan including guest room rental, meeting room rental, coffee breaks, three meals and basic audio-visual requirements. The basic rate is charged on a per guest basis; therefore, more revenue is derived from groups with higher multiple occupancy. Given the all-inclusive nature of services provided by the property, the average revenue per guest day and per occupied room are more meaningful indicators of the property’s performance than average daily rate. Departmental revenues are typically arrived at through an allocation process whereby management allocates CMP revenue to individual departments. These allocations can vary among conference center properties, making departmental comparisons between properties more difficult, and making comparisons with hotels very difficult. CMP allocations also vary by season depending upon the location of the center.

Table 5-10 2008 CMP Rates

Competitive Conference Center Market No. Property CMP Rate Range 1 Estancia La Jolla Hotel & Spa 2 Chaminade Hotel & Executive Conference Center 3 Doubletree Hotel & Executive Meeting Center Berkeley 4 Pacific Palms Hotel & Conference Center


Based on average comparable allocation ratios previously discussed in Section IV of this report in Table 4-2, we have developed the following table which presents an estimated breakdown for the subject’s CMP rates in terms of single and double occupancy. We estimate that the subject will garner an average CMP rate of $390 (for single and double occupancies combined). We find this estimate to be reasonable given the range of the



V-14

competitive conference center CMP rates and the room rate premiums expected for the subject Center.

Table 5-11 CMP Daily Package Allocation

Estimate of Breakdown for the Subject Rack Rates Deployed

TOTAL PACKAGE $450 % of Total Pkg $350 % of Total Pkg

Allocation Single

Double (per person)

Room $255 56% $155 56% Food 118 26% 118 26% Conference Services 62 14% 62 14% Other 20 4% 20 4%

BREAKDOWN

% of Total Allocation

% of Total Allocation

Room Rate $255

$155 FOOD

Breakfast $21 18% $21 18% Lunch 35 30% 35 30% Dinner 62 52% 62 52%

CONFERENCE Coffee Break $28 45% $28 45%

Meeting charges 20 32% 20 32% Conference Audio-Visual 14 23% 14 23%

OTHER CHARGES Service Credits $18 90% $18 90%

Bellman/Poterage & Other 2 10% 2 10% AVG CMP RATE FOR SUBJECT $390 (in Today's Dollars 09) Source: PKF Consulting

Estimated Average Daily Room Rate Our estimate of average daily room rate for the proposed center account for the estimated mix of demand to be accommodated by the Center and trends in room rates in the local hotel, regional conference center and university conference center markets. Our estimate also considers the room rate and CMP levels currently paid by the various university conference centers and IACC designated facilities throughout the country. Weighing these factors, we estimate an ADR of $220 (in 2009 dollars) for the proposed Center upon stabilization, varying with inflation. Our estimate of $220 is the aggregate result of varying component ADR levels for each market segment. The subject is estimated to deploy an average CMP rate of $390 which, after allocated service expenses, derives an ADR of $220 in today’s dollars. These ADR levels have been summarized in the following table.



V-15


ADR by Stabilized Mix of Demand ADR Rooms

Market Segment Percent Room-Nights* 2009 $ Revenue Transient Portion

Commercial 16% 11,000 $245 $2,695,000 Leisure 19% 13,600 $235 $3,196,000

Group Portion Conference & Group (UCLA) 39% 27,500 $200 $5,500,000 Conference & Group (non-UCLA) 26% 18,500 $225 $4,162,500

CMP Rated Group (40%) Total/Average 100% 70,600 $220 $15,550,000* *Rounded Source: PKF Consulting

The following table references actual 2008 ADR results for the two defined competitive markets and estimated 2008 ADRs for each market’s individual constituent properties.

Table 5-13 Comparable Market 2008 Estimated ADRs Comparable Property/Market 2008 ADR

Hyatt Century Plaza InterContinental Century City Beverly Hilton W Hotel Westwood Hotel Angeleno Luxe Summit Bel Air Palomar Hotel Local Competitive Hotel Market Total $238.91 Estancia La Jolla Resort & Spa Chaminade Hotel & Executive Conference Center Doubletree Hotel & Executive Meeting Center Pacific Palms Hotel & Conference Center Competitive Conference Center Market Total $169.36 Subject Proposed UCLA Hotel & Conference Center $220.00* Estimated Average CMP Rate $390.00* *Expressed in 2009 Dollars Source: PKF Consulting

As evidenced by the previous two tables, the estimated market segment ADRs for the Center are competitive with, and comparable to, ADRs in the local hotel and conference center markets. The Center’s estimated ADR indicates a rate position just below that of the local hotel market but significantly above that of the competitive conference center market. We feel this ADR is reasonable and attainable, considering the newness and uniqueness of the property, the strength of the local hotel market and location of the UCLA Campus, and the estimated mix of demand related to the University. Our projections of accommodated demand, occupancy, ADR and resultant RevPAR for the first five years of operation for the proposed center beginning January 1, 2014 are presented in the following table.



V-16

Table 5-14 Projected Market Performance of the Subject Hotel

Annual Percent Occupied Percent Occupancy Average Percent

Percent Year Supply Change Rooms Change Percentage Daily Rate Change REVPAR Change 2014 100,740 N/A 62,800 N/A 62% $251.00 6.5% $156.47 N/A 2015 100,740 0.0% 66,900 6.5% 66 263.00 5.0 174.65 11.6% 2016 100,740 0.0 70,600 5.5 70 271.00 3.0 189.92 8.7 2017 100,740 0.0 70,600 0.0 70 279.00 3.0 195.53 3.0 2018 100,740 0.0 70,600 0.0 70 287.00 3.0 201.13 2.9 CAAG 0.0% 3.0% 3.4% 6.5% Source: PKF Consulting

As the preceding table indicates, occupied rooms are projected to grow most rapidly in 2014 and 2015. This growth is attributable to increasing levels of accommodated demand from non-University groups during the initial “ramp-up period.” ADR also grows most rapidly, by 6.5 and 5.0 percent, respectively, in 2014 and 2015. This most rapid ADR growth is also attributable to increasing accommodated demand from non-University groups, who will be accommodated at relatively high room-rates as demonstrated previously in our estimates of ADR by market segment.


Section VI

FINANCIAL PROJECTIONS

Section VI – Financial Projections


VI-1

FINANCIAL PROJECTIONS

BASIS OF PROJECTIONS On the basis of our evaluation of market findings relative to the proposed center we have prepared projections of financial performance which we believe could be experienced by a facility of the type, size and caliber as described in the previous sections of this report. Our projections have been made for the proposed Center in a representative year and for the first ten years of operation beginning January 1, 2014, the projected opening date. Our projections have been prepared in conformity with the Uniform System of Accounts for Conference Centers, the generally accepted industry standard for financial reporting. A critical assumption necessary to our projections is that of professional and competent management. Additional assumptions include the following:

• The Center will open on or about January 1, 2014, with year one of our projections representing six months of actual operating results;

• The Center will contain 276 high-quality guest rooms and suites;

• The Center will operate as an upscale, full-service, independent property and be

IACC designated;

• Guestrooms at the Center will offer a competitive level of amenities; and

• The Center will offer an inventory of meeting space similar to that recommended previously in this report, a three-meal restaurant, a lounge, a business center, fitness center, and other amenities.

INCOME AND EXPENSE ESTIMATES In developing our estimates of operating performance for the proposed center, we have considered historical trends within the defined competitive hotel and conference center markets and our knowledge of operating results for comparable hotels and conference centers. Presented later in this section are the actual 2008 operating results for five selected comparable residential conference centers, all of which are university conference centers. The comparable input was provided in confidence and the identities of the conference centers are not revealed. All five properties experienced generally comparable performance levels as that expected of the proposed center, with similar market orientations. As mentioned previously, the Uniform System of Accounts for Conference Centers, recommended by the International Association of Conference Centers and in general use



VI-2

throughout the industry, has been used in the classification of the various items of income and expenses. In conformity with this system of classification, direct expenses, or departmental expenses, are charged to the appropriate revenue-producing departments of the Center and in this case include expenses for rooms, food and beverage, conference services, other operated departments and rentals and other income. General overhead items, which are applicable to the operations of the Center as a whole, are classified as undistributed expenses and include administrative and general expenses, sales and marketing, utility costs, property operations and maintenance and management fees. Fixed expenses are those necessary to maintain the Center's availability to potential guests and include property taxes and insurance. INFLATION To more accurately assess the potential operating performance of the proposed center, we have projected operating income and expenses in inflated dollars. We have assumed a 3.0 percent annual inflation rate over the projection period. This rate reflects the consensus long-term outlook for the future movement of prices. Note that, except where otherwise noted, estimated dollar amounts for income and expense items are expressed in current 2009-value dollars, within the context of a representative year of operation at a stabilized occupancy level. These estimates have been adjusted for the effects of inflation, and fixed and variable relationships within certain expense items, for our multi-year projection. Unless otherwise noted, revenue and departmental expense items, which tend to vary with occupancy, have been projected on a per occupied room (POR) basis, while undistributed and fixed expenses, which tend to be more fixed in nature, have been projected on a per available room (PAR) basis. We have also included an annual reserve for replacement of short-lived items, such as furniture, fixtures and equipment in our projections. This item is typically not reflected in hotel income statements, but is considered a necessary inclusion when projecting future financial results. Actual 2008 financial results for the five selected comparable properties are presented on the following two pages and are represented as properties “A, B, C, D and E”.



VI-3

Table 6-1 UCLA Hotel & Conference Center

Operating Results of Comparable Conference Centers

Conference Center A

Conference Center B

Conference Center C

Ratio Per Room P.O.R.


Ratio Per Room P.O.R. Revenues

Rooms

48.1% $39,701 $149.68

52.7% $28,586 $131.18

43.2% $29,399 $162.64 Food & Beverage

30.2% 24,892 93.85

26.6% 14,435 66.24

32.9% 22,393 123.87

Conference Services

15.9% 13,087 49.34

16.4% 8,914 40.90

19.1% 13,000 71.92 Other Operated Departments

5.9% 4,850 18.29

3.0% 1,645 7.55

4.8% 3,264 18.05

Rentals and Other Income

0.0% 0 0.00

1.2% 659 3.03

0.0% 0 0.00 Total Revenues

100.0% 82,530 311.16

100.0% 54,239 248.91

100.0% 68,056 376.48

Departmental Expenses

Rooms

16.6% 6,606 24.90

31.8% 9,099 41.76

19.2% 5,653 31.27 Food & Beverage

62.9% 15,662 59.05

85.5% 12,340 56.63

71.6% 16,043 88.75

Conference Services

64.3% 8,418 31.74

51.4% 4,579 21.01


48.1% 2,332 8.79

63.9% 1,052 4.83

8.7% 284 1.57

Total Departmental Expenses

40.0% 33,018 124.48

49.9% 27,070 124.23

36.7% 24,974 138.15

Departmental Profit

60.0% 49,512 186.67

50.1% 27,169 124.68

63.3% 43,082 238.32

Undistributed Expenses

Administrative & General

7.4% 6,084 22.94

11.4% 6,189 28.40

7.6% 5,202 28.78

Marketing

4.0% 3,335 12.58

6.8% 3,687 16.92

7.2% 4,882 27.01 Property Operation and Maintenance

3.6% 2,960 11.16

5.2% 2,795 12.83

5.3% 3,578 19.79

Utility Costs

3.4% 2,815 10.61

5.4% 2,920 13.40

3.5% 2,390 13.22 Other Undistributed Expenses

0.0% 0 0.00

0.0% 0 0.00

0.0% 0 0.00

Total Undistributed Operating Expenses

18.4% 15,194 57.28

28.7% 15,591 71.55

23.6% 16,052 88.80

Gross Operating Profit

41.6% 34,318 129.38

21.3% 11,578 53.13

39.7% 27,030 149.53

Management Fee

2.0% 1,651 6.22

3.6% 1,959 8.99

4.3% 2,909 16.09

Fixed Expenses

Property Taxes

3.6% 2,938 11.08

0.0% 0 0.00

0.1% 74 0.41

Insurance

0.7% 572 2.16

0.0% 0 0.00

1.3% 900 4.98 Total Fixed Expenses

4.3% 3,510 13.23

0.0% 0 0.00

1.4% 974 5.39

Net Operating Income

35.3% 29,157 109.93

17.7% 9,619 44.14

34.0% 23,147 128.05

FF&E Reserve

4.0% 3,301 12.45

0.0% 0 0.00

1.6% 1,122 6.21

Net Operating Income After Reserve

31.3% $25,856 $97.48

17.7% $9,619 $44.14

32.4% $22,025 $121.84




VI-4


Operating Results of Comparable Conference Centers

Conference Center D

Conference Center E

Weighted Average 1



Ratio Per Room P.O.R. Revenues

Rooms

50.1% $35,412 $140.67

47.2% $26,794 $150.95

48.2% $32,736 $144.79 Food & Beverage

33.4% 23,634 93.88

31.0% 17,619 99.26

30.7% 20,869 92.30

Conference Services

12.2% 8,629 34.28

21.1% 11,983 67.51


4.3% 3,018 11.99

0.7% 412 2.32

4.2% 2,863 12.66

Rentals and Other Income

0.0% 0 0.00

0.0% 0 0.00

1.0% 659 2.91 Total Revenues

100.0% 70,693 280.81

100.0% 56,808 320.05

100.0% 67,923 300.41


Rooms

20.6% 7,282 28.93

22.8% 6,113 34.44

21.9% 7,154 31.64 Food & Beverage

63.2% 14,928 59.30

75.6% 13,317 75.03

69.5% 14,506 64.15

Conference Services

33.4% 2,879 11.44

48.7% 5,831 32.85


43.7% 1,319 5.24

164.7% 678 3.82

42.6% 1,221 5.40

Total Departmental Expenses

37.4% 26,408 104.90

45.7% 25,939 146.14

41.1% 27,687 122.45

Departmental Profit

62.6% 44,285 175.91

54.3% 30,869 173.91

59.2% 40,236 177,96



6.0% 4,269 16.96

6.8% 3,856 21.72

7.7% 5,245 23.20

Marketing

3.8% 2,686 10.67

4.3% 2,428 13.68

5.1% 3,436 15.20 Property Operation and Maintenance

3.7% 2,642 10.50

5.6% 3,182 17.93

4.4% 2,972 13.14

Utility Costs

3.1% 2,181 8.66

2.9% 1,638 9.23

3.6% 2,476 10.95 Other Undistributed Expenses

0.0% 0 0.00

0.0% 0 0.00

0.0% 0 0.00


16.7% 11,778 46.78

19.5% 11,104 62.56

20.8% 14,129 62.49


46.0% 32,507 129.12

34.8% 19,764 111.35

38.4% 26,107 115.47

Management Fee

2.3% 1,591 6.32

4.0% 2,272 12.80

2.9% 2,000 8.85

Fixed Expenses

Property Taxes

2.7% 1,923 7.64

0.0% 0 0.00

2.4% 1,633 7.22

Insurance

0.0% 0 0.00

0.9% 509 2.87

1.0% 677 2.99 Total Fixed Expenses

2.7% 1,923 7.64

0.9% 509 2.87

3.4% 2,310 10.22


41.0% 28,993 115.17

29.9% 16,983 95.68

32.1% 21,797 96.40

FF&E Reserve

0.0% 0 0.00

4.9% 2,785 15.69

3.5% 2,406 10.64


41.0% $28,993 $115.17

25.0% $14,199 $79.99

28.5% $19,391 $85,76




VI-5

Projected Operating Results Our projections of operating revenues and expenses for the proposed center are explained in the paragraphs on this and the following pages, followed by a statement of operating results for a representative year in 2009 value dollars and a ten-year period beginning January 1, 2014, the projected opening date.

Departmental Revenues Rooms Revenue from guestroom rentals is a result of two factors: occupancy level, or occupied room nights, and average daily room rate (ADR). Our projection of room revenue is based on the occupancy and ADR estimates discussed in the previous section, as summarized in the following table. For projection purposes, we have created a half-fiscal year for the subject for its first year of operations.

Table 6-3 Proposed UCLA 300-room Conference Center

Estimated Rooms Revenue

Average Annual Rooms

Year Daily Rate 1 Occupancy Revenue 2014 $250.00 62.0% $ 7,808,000 2015 262.00 66.0 17,420,000 2016 270.00 70.0 19,040,000 2017 278.00 70.0 19,605,000 2018 287.00 70.0 20,239,000 Note: (1) Inflated at 3.0 percent Source: PKF Consulting

Food and Beverage Department Revenue included in this category is derived from the sale of food and beverages at the restaurant, lounge, room service, and in-room bar sales. In conference centers such as the proposed subject center, revenue in this category is also generated by an allocation from the complete meeting package plan related to banquets, refreshment/snack breaks and other food and beverage services rendered to groups. Food and beverage revenues were projected for a stabilized year of operation of the Center by estimating the numbers of guests from each market segment, the percentages of each category of hotel guest that could be expected to eat at the Center for each of the meal periods and the average food and beverage check for the appropriate outlet for each meal. Outside restaurant, lounge and banquet sales were also estimated separately. Our estimates for a stabilized year resulted in food and beverage sales of approximately $100 per occupied room in 2009 dollars, which is comparable and in the higher-range of revenue levels experienced at the comparable properties. These estimates resulted in total stabilized-year food and beverage department revenues of just over $7 million. The following table displays the total and per occupied room estimated food and beverage revenue amounts in a stabilized year alongside those of the comparable conference centers.



VI-6

Table 6-3 Food & Beverage Revenue

Total Amount Per Occupied Room

Comparables A $6,272,691 $ 93.85

B 4,012,986 66.24 C 4,724,821 123.87 D 7,208,235 93.88 E 2,114,267 99.26 Weighted Average N/A 92.30 Subject Stabilized Year $7,058,000 $100.00

Conference Services Department Revenue allocated to this department is related to meeting room, audio visual and other rentals, day-guest charges and business center services included in the complete meeting package. The comparable university conference centers ranged from $34.28 to $71.92 in 2008 dollars. We have estimated revenue from these sources for a representative year to be $50.00 per occupied room in 2009 dollars, based on projected levels of accommodated meeting demand and comparable property input.

Table 6-5 Conference Services Revenue

Per Occupied Room Comparables

A $49.34 B 40.90 C 71.92 D 34.28 E 67.51 Weighted Average 47.75 Subject Stabilized Year $50.00

Other Operated Departments Revenue included in this category is derived from other departments operated by the Center such as telecommunications, in-room movie rentals, internet access charges, laundry services, and other miscellaneous sources of operated department income. We have removed $10 per occupied room for estimated parking revenues for the subject as the garage and valet will be operated by a third-party through UCLA. Thus, we have estimated income from these sources for a representative year to be $5.00 per occupied room in 2009 dollars, based on the lower-range of the comparable input.

Table 6-6 Other Operated Departments Revenue

Per Occupied Room Comparables

A $18.29 B 7.55 C 18.05 D 11.99 E 2.32 Weighted Average 12.66 Subject Stabilized Year $5.00



VI-7

Rentals and Other Income from this category is derived from activities not directly operated by the Center such as vending and other commissions, “no show” revenues, income from interest, and cash discounts. We estimated income from these sources, expressed on a net basis in accordance with the Uniform System of Accounts for Hotels, at $1.50 per occupied room in a representative year in 2009 dollars, based on comparable input.

Table 6-7 Rentals and Other Income

Per Occupied Room Per Day

Comparables A $0.00 - B 3.03 502 C 0.00 0 D 0.00 0 E 0.00 0 Weighted Average 3.03 100 Subject Stabilized Year $1.50 $290


Rooms Expenses consist of salaries and wages, employee benefits, commissions, contract cleaning, laundry and uniform cleaning, linens, operating supplies, reservations and reservation systems’ costs, and other items related to the rooms department. Upon stabilization, we estimate that the rooms department expense for the Center will equal 26.0 percent of rooms revenue, or $57.25 per occupied room, in 2009 dollars. Our estimate of rooms department expenses is slightly higher than the comparable conference center input due to the fact the labor contracts are expected to be negotiated at higher wages at the subject. We find this estimate to be reasonable given our experience with payroll trends in this industry segment and relative wage rate levels in the region.

Table 6-8 Rooms Expense

Per Occupied Room Ratio to Rms Revenue Comparables

A $24.90 16.6% B 41.76 31.8% C 31.27 19.2% D 28.93 20.6% E 34.44 22.8% Weighted Average 31.64 21.9% Subject Stabilized Year $57.25 26.0%

Food and Beverage Department Expenses include all expenditures related to the operations of the food and beverage department including salaries and wages, cost of food and beverage sold, the cost of supplies and equipment, contract cleaning and other related expenses. The comparable conference centers experienced food and beverage expenses that ranged between 62.9 and 85.5 percent of food and beverage revenues. Upon



VI-8

stabilization, we estimate that the subject would achieve a food and beverage expense of 72 percent of food and beverage revenues, which is in line with the weighted average of the comparable facilities.

Table 6-9 Food & Beverage Expense

Ratio to F&B Rev.

Comparables A 62.9% B 85.5% C 71.6% D 63.2% E 75.6% Weighted Average 69.5% Subject Stabilized Year 72.0%

Conference Services Department Expenses allocated to this department include salaries and wages for the conference director and assistants, business center, and set-up housemen. Other operating expenses typically include such items as audio visual supplies, equipment rental, decorations, and the supplies and equipment used by the conference department. The comparable expense ratios ranged from 23.0 percent to 64.3 percent in 2008. We have estimated expenses related to these sources for a representative year to be 44.0 percent of conference services revenues in 2009 dollars.

Table 6-10 Conference Services Expense

Ratio to Revenue.


Other Operated Departments Expenses for other operated departments have been estimated at 48.0 percent of revenues in a representative year. This expense item is mainly attributable to miscellaneous operating wages and operating expenses for the previously-mentioned revenue sources. A number of activities classified in this category, such as in-room movie rentals and internet access charges, are expected to produce positive net incomes. However, the impact of telecommunications expenses, which now far outweigh telecommunications revenues due to the proliferation of cellular phone usage, have driven up the overall expense ratio attributed to this category.



VI-9

Table 6-11 Other Operated Departments Expense

Ratio to O.O.D. Rev.


Undistributed Operating Expenses

These expenses were determined after the preparation of staffing schedules, where relevant, and a review of the operating results of the other comparable conference centers. Administrative and General is the expense category which includes the salary and wages of the general manager’s office staff, the accounting office staff, security expense, cash overages and shortages, credit card commissions, bad debt expenses, data processing, executive office expenses, general and liability insurance, professional fees and travel. Our estimates of these expenses equated to $6,626 per available room or 6.9 percent of total revenues in the stabilized year. This figure is within the range of the comparable centers.

Table 6-12 Administrative and General

Per Available Room Ratio to Total Rev. Comparables

A $6,084 7.4% B 6,189 11.4% C 5,202 7.6% D 4,269 6.0% E 3,856 6.8% Weighted Average 5,245 7.8% Subject Stabilized Year $6,626 6.9%

Sales and Marketing expense includes the cost of staff, advertising, printing of brochures and other costs associated with the subject center’s sales and marketing program. Expenses were estimated at $4,700 per available room, or 4.9 percent of total revenues in a stabilized year. We also assumed an inefficiency of 10.0 percent of sales and marketing expenses in the first year to support initial marketing efforts during the property’s ramp up period.



VI-10

Table 6-13 Marketing



Property Operations and Maintenance expenses are a function of building age and usage and comprise engineering salaries, wages, employee benefits, normal maintenance of the building, normal maintenance of electrical, mechanical and refrigeration equipment and engineering operating supplies. We estimated $4,075 per available room for the subject Center, or 4.2 percent of total revenues, in the stabilized year. This figure is well within the range of the comparable input.

Table 6-14 Property Operation and Maintenance



Utility Costs to operate the proposed center have been estimated on the basis of the facility size, industry trends and, importantly, the assumption that the Center will be physically equivalent to a LEED Silver facility, which should significantly reduce utility costs. It should be noted that utility cost behaviors are most closely tied to the pricing structures of individual local providers, resulting in significant cost variances amongst different geographic locations. With the above factors taken into account, utility costs were estimated to be $3,311 per available room, or 3.4 percent of total revenue, for a stabilized year.

Table 6-15 Utility Costs





VI-11

Management Fees: Our analysis and projections assume competent and efficient management by an experienced hotel operator. While a management contract has not yet been agreed upon, we estimate base management fees at 3.0 percent of total revenues in each projection year, considered a typical industry benchmark.

Fixed Expenses These expenses tend not to vary with operating performance and are often subject to the unique geographic and/or physical characteristics of the property. Property Taxes: The subject property is in the real estate taxing jurisdiction of the Ventura County Assessor’s Office. Proposition 13 limits property taxes to one percent of the assessed value as of the current fiscal year, plus city, special district, and county bonds. Assessed values are further limited to a two percent increase per year, except upon sale or major alterations of the property. In either of these two events, the property is re-appraised to current market value, usually as evidenced by the sales price or the construction cost. For the purposes of this estimation of operating performance, we have utilized a 1.1 percent tax rate, which equates to a property tax assessment of approximately $943,000 in a representative year. Insurance premiums for hotels and conference centers have increased rapidly in recent years. Insurance premiums were estimated at $700 per available room in the stabilized year, based on comparable conference center input, and are expected to vary with inflation.

Table 6-16 Insurance

Per Available Room Comparables

A $572 B 0 C 900 D 0 E 509 Weighted Average 677 Subject Stabilized Year $700

Reserve for Replacement In order to account for the necessary periodic replacement of short-lived items, such as furnishings, fixtures and equipment necessary to the operation of the Center, annual reserves were projected equivalent to 2.0 percent of total revenue in year one, 3.0 percent in year two then to increase to a stabilized level of 4.0 percent per year thereafter. The percentages in the early years reflect the newly-constructed nature of the Center.



VI-12

REPRESENTATIVE YEAR OPERATING STATEMENT The following page contains our estimates of annual operating results for the subject property in a representative year based on the aforementioned analysis, stated in 2009 value dollars.



VI-13


Representative Year of Operation

Stated in 2009 Dollars Number of Units:

276

Number of Annual Rooms Available:

100,740

Number of Rooms Occupied:

70,577

Annual Occupancy:

70%

Average Daily Rate:

$220.00

Revenue Per Available Room:

$154.13

Amount Ratio Per Room P.O.R.

Revenues

Rooms

$15,527,000 58.4% $56,257 $220.00

Food & Beverage

7,058,000 26.6% 25,572 100.00 Conference Services

3,529,000 13.3% 12,786 50.00

Other Operated Departments

353,000 1.3% 1,279 5.00 Rentals and Other Income

106,000 0.4% 384 1.50

Total Revenues

26,573,000 100.0% 96,279 376.51


Rooms

4,037,000 26.0% 14,627 57.20

Food & Beverage

5,082,000 72.0% 18,413 72.01 Conference Services

1,553,000 44.0% 5,627 22.00


169,000 47.9% 612 2.39 Total Departmental Expenses

10,841,000 40.8% 39,279 153.60

Departmental Profit

15,732,000 59.2% 57,000 222.90



1,829,000 6.9% 6,627 25.91 Marketing

1,297,000 4.9% 4,699 18.38

Property Operation and Maintenance

1,125,000 4.2% 4,076 15.94 Utility Costs

914,000 3.4% 3,312 12.95


5,165,000 19.4% 18,714 73.18


10,567,000 39.8% 38,286 149.72

Management Fee

797,000 3.0% 2,888 11.29

Fixed Expenses

Property Taxes

943,000 3.5% 3,417 13.36

Insurance

193,000 0.7% 699 2.73 Total Fixed Expenses

1,136,000 4.3% 4,116 16.10


8,634,000 32.5% 31,283 122.33

FF&E Reserve

1,063,000 4.0% 3,851 15.06


$7,571,000 28.5% $27,431 $107.27




VI-14

ESTIMATED ANNUAL OPERATING RESULTS The previous analysis provided for the income and expenses incurred in the operation of the subject in a stabilized year. In the following analysis, we provide estimated income and expenses for the subject during each year of the holding period anticipated for a typical investor. Our estimate of the performance for the subject in the stabilized year is used as a basis for our analysis, considering the effects of inflation, business development, and varying occupancy.

Presented on the following pages are the subject property's estimated annual operating results for the years 2014 through 2023, which reflects nine full years of operation and incorporating a half-fiscal year for year one.



VI-15


Projected Operating Results

Year One – Half-Fiscal Operating Period

2014

2015

2016

2017

2018 Number of Units:

138

276

276

276

276


50,370

100,740

100,740

100,740

100,740 Number of Rooms Occupied:

31,230

66,490

70,520

70,520

70,520

Annual Occupancy:

62.0%

66.0%

70.0%

70.0%

70.0% Average Daily Rate:

$250.00

$262.00

$270.00

$278.00

$287.00


$155.00

$172.92

$189.00

$194.60

$200.90

Amount Ratio

Amount Ratio

Amount Ratio

Amount Ratio

Amount Ratio

Revenues

Rooms

$7,808,000 56.0%

$17,420,000 57.4%

$19,040,000 58.4%

$19,605,000 58.4%

$20,239,000 58.4%

Food & Beverage

4,091,000 29.3%

8,427,000 27.8%

8,680,000 26.6%

8,941,000 26.6%

9,209,000 26.6% Conference Services

1,810,000 13.0%

3,970,000 13.1%

4,337,000 13.3%

4,467,000 13.3%

4,601,000 13.3%


181,000 1.3%

397,000 1.3%

434,000 1.3%

447,000 1.3%

460,000 1.3% Rentals and Other Income

54,000 0.4%

119,000 0.4%

130,000 0.4%

134,000 0.4%

138,000 0.4%

Total Revenues

13,944,000 100.0%

30,333,000 100.0%

32,621,000 100.0%

33,594,000 100.0%

34,647,000 100.0%


Rooms

2,185,000 28.0%

4,675,000 26.8%

4,958,000 26.0%

5,106,000 26.0%

5,265,000 26.0%

Food & Beverage

2,945,000 72.0%

6,068,000 72.0%

6,250,000 72.0%

6,437,000 72.0%


796,000 44.0%

1,747,000 44.0%

1,908,000 44.0%

1,965,000 44.0%

2,024,000 44.0%


87,000 48.1%

191,000 48.1%

208,000 47.9%

214,000 47.9%

221,000 48.0% Total Departmental Expenses

6,013,000 43.1%

12,681,000 41.8%

13,324,000 40.8%

13,722,000 40.8%

14,140,000 40.8%

Departmental Profit

7,931,000 56.9%

17,652,000 58.2%

19,297,000 59.2%

19,872,000 59.2%

20,507,000 59.2%



1,031,000 7.4%

2,156,000 7.1%

2,248,000 6.9%

2,315,000 6.9%

2,385,000 6.9% Marketing

827,000 5.9%

1,549,000 5.1%

1,595,000 4.9%

1,643,000 4.9%

1,693,000 4.9%


641,000 4.6%

1,332,000 4.4%

1,372,000 4.2%

1,413,000 4.2%

1,456,000 4.2% Utility Costs

520,000 3.7%

1,082,000 3.6%

1,124,000 3.4%

1,158,000 3.4%

1,192,000 3.4%


3,019,000 21.7%

6,119,000 20.2%

6,339,000 19.4%

6,529,000 19.4%

6,726,000 19.4%


4,912,000 35.2%

11,533,000 38.0%

12,958,000 39.7%

13,343,000 39.7%

13,781,000 39.8%

Management Fee

418,000 3.0%

910,000 3.0%

979,000 3.0%

1,008,000 3.0%

1,039,000 3.0%

Fixed Expenses

Property Taxes

521,000 3.7%

1,173,000 3.9%

1,197,000 3.7%

1,221,000 3.6%

1,245,000 3.6%

Insurance

112,000 0.8%

231,000 0.8%

238,000 0.7%

245,000 0.7%

252,000 0.7% Total Fixed Expenses

633,000 4.5%

1,404,000 4.6%

1,435,000 4.4%

1,466,000 4.4%

1,497,000 4.3%


3,861,000 27.7%

9,219,000 30.4%

10,544,000 32.3%

10,869,000 32.4%

11,245,000 32.5%

FF&E Reserve

279,000 2.0%

910,000 3.0%

1,305,000 4.0%

1,344,000 4.0%

1,386,000 4.0%


$3,582,000 25.7%

$8,309,000 27.4%

$9,239,000 28.3%

$9,525,000 28.4%

$9,859,000 28.5%




VI-16


Projected Operating Results

2019

2020

2021

2022

2023 Number of Units:

276

276

276

276

276


100,740

100,740

100,740

100,740

100,740 Number of Rooms Occupied:

70,520

70,520

70,520

70,520

70,520

Annual Occupancy:

70.0%

70.0%

70.0%

70.0%

70.0% Average Daily Rate:

$295.00

$304.00

$313.00

$322.00

$332.00


$206.50

$212.80

$219.10

$225.40

$232.40

Amount Ratio

Amount Ratio

Amount Ratio

Amount Ratio

Amount Ratio

Revenues

Rooms

$20,803,000 58.4%

$21,438,000 58.4%

$22,073,000 58.4%

$22,707,000 58.3%

$23,413,000 58.4%

Food & Beverage

9,485,000 26.6%

9,770,000 26.6%

10,063,000 26.6%

10,365,000 26.6%


4,739,000 13.3%

4,881,000 13.3%

5,027,000 13.3%

5,178,000 13.3%

5,333,000 13.3%


474,000 1.3%

488,000 1.3%

503,000 1.3%

518,000 1.3%

533,000 1.3% Rentals and Other Income

142,000 0.4%

146,000 0.4%

151,000 0.4%

155,000 0.4%

160,000 0.4%

Total Revenues

35,643,000 100.0%

36,723,000 100.0%

37,817,000 100.0%

38,923,000 100.0%

40,114,000 100.0%


Rooms

5,417,000 26.0%

5,581,000 26.0%

5,747,000 26.0%

5,916,000 26.1%

6,097,000 26.0%

Food & Beverage

6,829,000 72.0%

7,034,000 72.0%

7,245,000 72.0%

7,462,000 72.0%


2,085,000 44.0%

2,148,000 44.0%

2,212,000 44.0%

2,278,000 44.0%

2,347,000 44.0%


227,000 47.9%

234,000 48.0%

241,000 47.9%

249,000 48.1%

256,000 48.0% Total Departmental Expenses

14,558,000 40.8%

14,997,000 40.8%

15,445,000 40.8%

15,905,000 40.9%

16,386,000 40.8%

Departmental Profit

21,085,000 59.2%

21,726,000 59.2%

22,372,000 59.2%

23,018,000 59.1%

23,728,000 59.2%



2,456,000 6.9%

2,530,000 6.9%

2,606,000 6.9%

2,683,000 6.9%

2,764,000 6.9% Marketing

1,743,000 4.9%

1,796,000 4.9%

1,849,000 4.9%

1,905,000 4.9%

1,962,000 4.9%


1,499,000 4.2%

1,544,000 4.2%

1,591,000 4.2%

1,638,000 4.2%

1,687,000 4.2% Utility Costs

1,228,000 3.4%

1,265,000 3.4%

1,303,000 3.4%

1,342,000 3.4%

1,382,000 3.4%


6,926,000 19.4%

7,135,000 19.4%

7,349,000 19.4%

7,568,000 19.4%

7,795,000 19.4%


14,159,000 39.7%

14,591,000 39.7%

15,023,000 39.7%

15,450,000 39.7%

15,933,000 39.7%

Management Fee

1,069,000 3.0%

1,102,000 3.0%

1,135,000 3.0%

1,168,000 3.0%

1,203,000 3.0%

Fixed Expenses

Property Taxes

1,270,000 3.6%

1,295,000 3.5%

1,321,000 3.5%

1,348,000 3.5%

1,375,000 3.4%

Insurance

260,000 0.7%

267,000 0.7%

275,000 0.7%

284,000 0.7%

292,000 0.7% Total Fixed Expenses

1,530,000 4.3%

1,562,000 4.3%

1,596,000 4.2%

1,632,000 4.2%

1,667,000 4.2%


11,560,000 32.4%

11,927,000 32.5%

12,292,000 32.5%

12,650,000 32.5%

13,063,000 32.6%

FF&E Reserve

1,426,000 4.0%

1,469,000 4.0%

1,513,000 4.0%

1,557,000 4.0%

1,605,000 4.0%


$10,134,000 28.4%

$10,458,000 28.5%

$10,779,000 28.5%

$11,093,000 28.5%

$11,458,000 28.6%


ADDENDA

STATEMENT OF ASSUMPTIONS AND LIMITING CONDITIONS This report is made with the following assumptions and limiting conditions: Economic and Social Trends - The consultant assumes no responsibility for economic, physical or demographic factors which may affect or alter the opinions in this report if said economic, physical or demographic factors were not present as of the date of the letter of transmittal accompanying this report. The consultant is not obligated to predict future political, economic or social trends. Information Furnished by Others - In preparing this report, the consultant was required to rely on information furnished by other individuals or found in previously existing records and/or documents. Unless otherwise indicated, such information is presumed to be reliable. However, no warranty, either express or implied, is given by the consultant for the accuracy of such information and the consultant assumes no responsibility for information relied upon later found to have been inaccurate. The consultant reserves the right to make such adjustments to the analyses, opinions and conclusions set forth in this report as may be required by consideration of additional data or more reliable data that may become available. Hidden Conditions - The consultant assumes no responsibility for hidden or unapparent conditions of the property, subsoil, ground water or structures that render the subject property more or less valuable. No responsibility is assumed for arranging for engineering, geologic or environmental studies that may be required to discover such hidden or unapparent conditions. Hazardous Materials - The consultant has not been provided any information regarding the presence of any material or substance on or in any portion of the subject property or improvements thereon, which material or substance possesses or may possess toxic, hazardous and/or other harmful and/or dangerous characteristics. Unless otherwise stated in the report, the consultant did not become aware of the presence of any such material or substance during the consultant’s inspection of the subject property. However, the consultant is not qualified to investigate or test for the presence of such materials or substances. The presence of such materials or substances may adversely affect the value of the subject property. The value estimated in this report is predicated on the assumption that no such material or substance is present on or in the subject property or in such proximity thereto that it would cause a loss in value. The consultant assumes no responsibility for the presence of any such substance or material on or in the subject property, nor for any expertise or engineering knowledge required to discover the presence of such substance or material. Unless otherwise stated, this report assumes the subject property is in compliance with all federal, state and local environmental laws, regulations and rules. Zoning and Land Use - Unless otherwise stated, the projections were formulated assuming the hotel to be in full compliance with all applicable zoning and land use regulations and restrictions. Licenses and Permits - Unless otherwise stated, the property is assumed to have all required licenses, permits, certificates, consents or other legislative and/or administrative authority from any local, state or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based. Engineering Survey - No engineering survey has been made by the consultant. Except as specifically stated, data relative to size and area of the subject property was taken from sources considered reliable and no encroachment of the subject property is considered to exist. Subsurface Rights - No opinion is expressed as to the value of subsurface oil, gas or mineral rights or whether the property is subject to surface entry for the exploration or removal of such materials, except as is expressly stated. Maps, Plats and Exhibits - Maps, plats and exhibits included in this report are for illustration only to serve as an aid in visualizing matters discussed within the report. They should not be considered as surveys or relied upon for any other purpose, nor should they be removed from, reproduced or used apart from the report.

STATEMENT OF ASSUMPTIONS AND LIMITING CONDITIONS (continued)

Legal Matters - No opinion is intended to be expressed for matters which require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate consultants. Right of Publication - Possession of this report, or a copy of it, does not carry with it the right of publication. Without the written consent of the consultant, this report may not be used for any purpose by any person other than the party to whom it is addressed. In any event, this report may be used only with proper written qualification and only in its entirety for its stated purpose. Testimony in Court - Testimony or attendance in court or at any other hearing is not required by reason of rendering this appraisal, unless such arrangements are made a reasonable time in advance of said hearing. Further, unless otherwise indicated, separate arrangements shall be made concerning compensation for the consultant's time to prepare for and attend any such hearing. Archeological Significance - No investigation has been made by the consultant and no information has been provided to the consultant regarding potential archeological significance of the subject property or any portion thereof. This report assumes no portion of the subject property has archeological significance. Compliance with the American Disabilities Act - The Americans with Disabilities Act ("ADA") became effective January 26, 1992. We assumed that the property will be in direct compliance with the various detailed requirements of the ADA. Definitions and Assumptions - The definitions and assumptions upon which our analyses, opinions and conclusions are based are set forth in appropriate sections of this report and are to be part of these general assumptions as if included here in their entirety. Dissemination of Material - Neither all nor any part of the contents of this report shall be disseminated to the general public through advertising or sales media, public relations media, news media or other public means of communication without the prior written consent and approval of the consultant(s). Distribution and Liability to Third Parties - The party for whom this report was prepared may distribute copies of this appraisal report only in its entirety to such third parties as may be selected by the party for whom this report was prepared; however, portions of this report shall not be given to third parties without our written consent. Liability to third parties will not be accepted. Use in Offering Materials - This report, including all cash flow forecasts, market surveys and related data, conclusions, exhibits and supporting documentation, may not be reproduced or references made to the report or to PKF Consulting in any sale offering, prospectus, public or private placement memorandum, proxy statement or other document ("Offering Material") in connection with a merger, liquidation or other corporate transaction unless PKF Consulting has approved in writing the text of any such reference or reproduction prior to the distribution and filing thereof. Limits to Liability - PKF Consulting cannot be held liable in any cause of action resulting in litigation for any dollar amount which exceeds the total fees collected from this individual engagement. Legal Expenses - Any legal expenses incurred in defending or representing ourselves concerning this assignment will be the responsibility of the client.

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