Thomas E. Callahan, CPA, CRE, FRICS, MAI

Co-President & Chief Executive Officer -West

thomas.callahan@pkfc.com

San Francisco Hospitality Market Update

April 18, 2012

Where Are We Headed?

San Francisco Lodging Market

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Historical Occupancy and ADR of theSan Francisco Lodging Market

3

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

$100

$110

$120

$130

$140

$150

$160

$170

$180

$190

$200

35%

45%

55%

65%

75%

85%

$150

$143

$123

$117

$118$125

$138

$149

$156

$134$136

$155

80.3%

64.8%

61.0%

62.7%

67.8% 71.4%72.7%

74.9%

75.0% 71.2%

75.1%

78.9%

2010 RevPAR Growth50 Major Markets

4

New Orleans

New York

Denver

Chicago

Minneapolis

Oahu

San Francisco

Newark

Oakland

Fort Lauderdale

Hartford

Total US

Albuquerque

Kansas City

San Antonio

Salt Lake City

Fort Worth

San Diego

Jacksonville

Sacramento

Austin

Washington DC

Philadelphia

Phoenix

Tucson

Houston

-5.0% -3.0% -1.0% 1.0% 3.0% 5.0% 7.0% 9.0% 11.0% 13.0% 15.0%

Source: Smith Travel Research

2011 RevPAR Growth50 Major Markets

5

San Francisco

Nashville

Miami

Detroit

West Palm Beach

Los Angeles

Newark

Minneapolis

Richmond

Philadelphia

Indianapolis

Fort Worth

Columbus

Cincinnati

Total US

Phoenix

Denver

Fort Lauderdale

Sacramento

Saint Louis

Cleveland

New Orleans

Jacksonville

Memphis

Washington DC

Albuquerque

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0%

Source: Smith Travel Research

San Francisco MSA Economic Assumptions

6

PayrollEmployment

Real Personal Income Real GDP CPI (Inflation)

2009 -5.2% -0.2% -3.7% 0.7%

2010 -1.1% 1.2% 2.2% 1.4%

2011 0.7% 3.5% 1.4% 2.6%

2012F 2.2% 2.3% 4.7% 2.7%

2013F 1.6% 2.3% 2.1% 2.9%

L.R.A. 0.2% 2.9% 1.9% 3.0%

San Francisco MSAAll Hotels

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2008 2009 2010 2011 2012F 2013F 2014FLong-Run

Average

Occupancy 75.0% 71.2% 75.1% 78.9% 79.7% 79.9% 80.2% 71.9%

% Change 0.1% -5.1% 5.5% 5.1% 0.9% 0.3% 0.5% -

ADR $156.41 $133.52 $136.21 $155.07 $171.17 $181.61 $191.58 -

% Change 5.3% -14.6% 2.0% 13.8% 10.4% 6.1% 5.5% 3.1%

RevPAR $117.25 $95.02 $102.28 $122.42 $136.38 $145.08 $153.73 -

% Change 5.4% -19.0% 7.6% 19.7% 11.4% 6.4% 6.0% 3.7%

Improved Occupancy = Better ADR Performance in 2012

San Francisco MSAUpper-Priced Hotels

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2008 2009 2010 2011 2012F 2013F 2014FLong-Run

Average

Occupancy 76.3% 73.3% 77.7% 80.6% 80.8% 80.6% 80.7% 73.0%

% Change 0.3% -4.0% 6.0% 3.8% 0.3% -0.3% 0.1% -

ADR $185.46 $157.60 $160.81 $182.53 $201.92 $214.85 $226.63 -

% Change 4.1% -15.0% 2.0% 13.5% 10.6% 6.4% 5.5% 2.5%

RevPAR $141.51 $115.49 $124.88 $147.09 $163.25 $173.22 $182.86 -

% Change 4.4% -18.4% 8.1% 17.8% 11.0% 6.1% 5.6% 3.2%

Improved Occupancy = Better ADR Performance in 2012

San Francisco MSALower-Priced Hotels

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2008 2009 2010 2011 2012F 2013F 2014FLong-Run

Average

Occupancy 72.5% 67.3% 70.4% 75.9% 77.5% 78.5% 79.4% 69.6%

% Change -0.4% -7.2% 4.6% 7.8% 2.1% 1.3% 1.2% -

ADR $100.29 $85.43 $86.76 $101.36 $111.62 $118.00 $125.32 -

% Change 6.2% -14.8% 1.6% 16.8% 10.1% 5.7% 6.2% 1.9%

RevPAR $72.71 $57.49 $61.09 $76.95 $86.51 $92.63 $99.53 -

% Change 5.8% -20.9% 6.3% 26.0% 12.4% 7.1% 7.4% 2.1%

Improved Occupancy = Better ADR Performance in 2012

San Francisco Projected Performance2012 Quarterly Performance

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Q1 2012 Q2 2012 Q3 2012 Q4 2012 Annual

Occupancy 71.5% 82.1% 89.4% 75.7% 79.7%

% Change 1.9% 1.1% 0.2% 0.7% 0.9%

ADR $161.70 $166.98 $177.01 $177.71 $171.17

% Change 12.7% 12.4% 8.9% 8.3% 10.4%

RevPAR $115.65 $137.07 $158.16 $134.55 $136.38

% Change 14.9% 13.6% 9.1% 9.0% 11.4%

2011 RevPAR Growth50 Major Markets

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Miami

New Orleans

Tampa

Los Angeles

Sacramento

Richmond

Boston

Newark

Oahu

Salt Lake City

Austin

Portland

Minneapolis

Cleveland

Long Island

Phoenix

Tucson

Baltimore

Raleigh-Durham

New York

Philadelphia

Kansas City

Denver

Washington DC

Dallas

Fort Worth

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%

Source: PKF Hospitality Research

San Francisco Hotel Market ADRGrowth at 3% per Year Based on Performance in 2011

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1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

E

2013

E

2014

E

$100

$120

$140

$160

$180

$200

$220

$240

$260

$100

$120

$140

$160

$180

$200

$220

$240

$260

$128 $135

$150

$143

$123

$117 $118

$125

$138

$149

$156

$134$136

$155

$171

$182

$192

$227

San Francisco Major Hotels: Projected Net Operating Income Dollars per Room and Ratio to Total Revenue

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2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

F

2013

F

2014

F$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

$28,884

$18,047

$10,386

$7,389$8,273$9,785

$10,922$12,789

$16,355

$7,739$8,435

$12,369

$15,812$17,612

$19,645

37.0%

29.9%

21.1%

15.6%15.8%17.6%18.3%

20.2%

24.3%

14.1%14.7%

20.2%

23.8%25.2%

26.8%

NOI per Room NOI

San Francisco Historical PerformanceOccupancy and RevPAR Correlation

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Year OCC ADR % Change RevPAR % Change

1995 73.4% $97.35 3.5% $71.43 7.4%

1996 77.8% $105.37 8.2% $81.98 14.8%

1997 79.7% $117.47 11.5% $93.62 14.2%

1998 78.0% $128.15 9.1% $100.02 6.8%

1999 76.4% $134.67 5.1% $102.93 2.9%

2000 80.3% $149.78 11.2% $120.29 16.9%

2001 64.8% $143.09 -4.5% $92.76 -22.9%

2011 and 2012 Major San Francisco Transactions

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Hotel Property Sale DateSales Price

Price per Room

Cap. Rate

Hotel Milano 4/12 $30.0 M $277,778 1.5%Marriott SFO 3/12 $112.7 M $164,526 6.0%

Hotel Abri 1/12 $21.9 M $240,000 3.8%Huntington Hotel 11/11 $52.5 M $303,571 -Crescent Hotel 11/11 $14.0 M $168,675 5.7%Villa Florence 10/11 $67.2 M $369,231 5.0%

Mandarin Oriental 8/11 $63.0 M $398,734 3.5%Hotel Adagio 7/11 $42.3 M $247,076 3.9%

The Opal Hotel 5/11 $12.8 M $83,882 7.8%Westin Market Street 3/11 $170.0 M $254,873 -

JW Marriott 2/11 $96.0 M $284,866 2.0%Tuscan Inn 2/11 $52.3 M $236,425 6.7%

Argonaut Hotel 2/11 $84.0 M $333,333 5.0%

Some Things To Think About

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1. Personal incomes and corporate profit growth will continue, but at less robust levels. Lodging demand growth in 2012, while still positive, will pale relative to the past two years. Higher room rates will impede demand growth as well.

2. Unemployment will remain high – helps to keep labor costs in check and profit growth up.

3. Oil is a wild card for 2012 – too big an increase will undermine the economy – lodging demand will suffer as a result.

4. Overall, the second half of 2012 will be better than the first half as the future political leadership of the U.S. becomes clear.

Thank You

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