PKF Hotel Market Demand and Financial Analysis - DIA Business ...

The Westin Denver International AirportHotel Market Analysis1. Historical Performance of the In-Terminal HotelsPresented in the following table is the historical performance of the in-terminallodging market from 2007 through 2011, as well as YTD June 2011 and 2012.The Westin Denver International AirportHistorical Performance of the Competitive MarketAnnual Percent Occupied Percent Market Percent PercentYear Supply Change Rooms Change Occupancy ADR Change RevPAR Change2007 1,941,435 - 1,556,749 - 80.2% $164.46 - $131.87 -2008 1,941,435 0.0% 1,476,369 -5.2% 76.0% $160.58 -2.4% $122.11 -7.4%2009 1,941,435 0.0% 1,401,656 -5.1% 72.2% $140.74 -12.4% $101.61 -16.8%2010 1,941,435 0.0% 1,517,808 8.3% 78.2% $140.08 -0.5% $109.51 7.8%2011 1,941,435 0.0% 1,542,975 1.7% 79.5% $146.67 4.7% $116.57 6.4%CAGR 0.0% - -0.2% - - -2.8% - -3.0% -YTD Jun '11 970,718 - 784,654 - 80.8% $148.43 - $119.98 -YTD Jun '12 970,718 0.0% 791,873 0.9% 81.6% $150.62 1.5% $122.87 2.4%Source: PKF Consulting USADemand at the in-terminal hotels decreased at a CAGR of 0.2 percent over the pastfive years with occupancy ranging from a low of 72.2 percent in 2009 to a high of80.2 percent in 2007. Similar to the performance of most lodging markets acrossthe U.S., demand declined in 2008 and 2009 as a result of the economic downturn.The in-terminal hotels experienced a decline of 5.2 and 5.1 percent in 2008 and2009, respectively. As the economy began to improve and air travel returned toprior year levels, demand at the in-terminal hotels increased 8.3 percent in 2010,resulting in an occupancy level of 78.2 percent. Demand further increased 1.7percent in 2011, resulting in an occupancy level of nearly 80 percent. Occupancyfor the in-terminal hotels remained flat over prior year levels at approximately 81percent through YTD June 2012. It is worth noting that an overall occupancy ofapproximately 80 percent represents the maximum level of performance for thissample of hotels given market segmentation and demand seasonality and explainsthe flat five-year CAGR in demand and minimal YTD demand growth.It is also worth noting that over the five year historical period, the occupancy for thein-terminal hotels has averaged 77.2 percent and that the average size of the 12hotels is 443 rooms. When reviewing the local DIA competitive airport hotels, thefive year occupancy average was lower at 74 percent and yet the average hotel sizewas much smaller at 198 rooms. This indicates that there is a clear competitiveadvantage, which translates into an occupancy performance premium, for interminalhotels when compared to their respective competitors that are notphysically attached to the airport.ADR for the in-terminal hotels decreased at a CAGR of 2.8 percent between 2007and 2011. While the aggregate ADR was in the low to mid-$160 range in 2007 andIV-36