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

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The Westin Denver International AirportHotel Market Analysis2008, ADR between 2009 and 2011 fluctuated between the low to mid-$140 range,a $20 difference. Specifically, the in-terminal hotels experienced a decline in ADRof 2.4 percent in 2008, 12.4 percent in 2009, and 0.5 percent in 2010. In 2011,ADR increased 4.7 percent over prior year levels. Through YTD June 2012, ADRfurther increased 1.5 percent to $150.62.As a result of the fluctuations in occupancy and ADR, RevPAR for the in-terminalhotels decreased at a CAGR of 3.0 percent over the past five years. In 2009, thein-terminal hotels experienced a decline in RevPAR of16.8 percent, which is in linewith the decline in RevPAR experienced by the overall U.S hotel segment. RevPARincreased 7.8 and 6.4 percent in 2010 and 2011, respectively, to $116.57, which isapproximately $15 below 2007 levels. Through YTD June 2012, RevPAR increased2.4 percent to $122.87.It should be noted that in-terminal hotels typically outperform their respective urbancounterparts due to their in-terminal location. The reason for this is that customersare typically willing to pay a premium for the convenience factor of an in-terminalhotel. This is especially true in the case of distressed passengers and travelers withearly AM flights who would prefer to be as close as possible to the airport and nothave to worry about logistics. As indicated, DIA is one of the busiest airportsthroughout the U.S. and benefits from its central location. The proposed Subject isprojected to benefit from its in-terminal location based on these factors.Additionally, as the other hotels in the immediate area are at least eight miles awayfrom DIA, the proposed Subject is projected to benefit even more so. Given its interminalstatus, the proposed Subject is projected to achieve an occupancy levelabove the overall competitive market. Additionally, because the hotel will beaffiliated with Starwood as a Westin hotel and will be located at one of the mosthighly trafficked airports in the U.S., we are of the opinion that the proposed Subjectwill also achieve a premium in ADR. Our projections of occupancy and ADR for theproposed Subject are presented in the following paragraphs.G. PROJECTED PERFORMANCE OF THE PROPOSED SUBJECT1. OccupancyIn order to project the future occupancy levels of the proposed Subject, we haveestimated the level of patronage by market segment that can be reasonablycaptured. The extent to which the Subject can capture demand from each marketsegment was estimated by performing a fair share penetration analysis.A hotel's fair share of the market is defined as the number of available rooms of theproposed Subject hotel divided by the total supply of available rooms in thecompetitive market, including the Subject. Factors indicating a hotel would possesscompetitive advantages suggest a market penetration in excess of 100 percent offair market share, while competitive weaknesses are reflected in penetration lessIV-37
The Westin Denver International AirportHotel Market Analysisthan 100 percent. We have formulated our assumptions and analysis on aprojected opening date of the hotel of August 1, 2015.Based on the expected attributes of the proposed Subject, we anticipate that it willhave various advantages within the market in location and in product quality. Asummary of the proposed Subject’s competitive advantages are presented in thefollowing statements.The proposed Subject will be a state-of-the-art, newly-built prototypefeaturing the latest in engineering, design, and innovation. Additionally, theproposed Subject will represent the newest upper upscale, full-service hotelin the Denver-Aurora lodging market and the highest quality hotel in theDenver Airport lodging market;The proposed Subject will be affiliated with Starwood Hotels and Resorts andthe Preferred Guest® reward program, which encompasses 850 hotelsworldwide. Furthermore, the Subject will benefit from the strong recognitionof the Westin hotel brand and will represent the only full service Starwoodaffiliated hotel in the Airport/East submarket;The proposed Subject will benefit from its designation as an in-terminal hotelat DIA, a central hub within the U.S. that represents one of the highesttrafficked airports nationwide. This central, strategic location will be asignificant advantage point with regard to attracting nationwide meetings andgroup demand that can easily converge at DIA without the inefficiency andcost of having to commute from the airport to an alternate meeting andlodging venue.With plenty of room for expansion surrounding DIA, the proposed Subject isalso situated to benefit from any future growth that might occur. This is aunique situation when compared to other major airports with in-terminalhotels, which typically do not have room for runway, concourse, or gateexpansions.In review of the aforementioned competitive advantages affecting the proposedSubject and after our analysis of the competitive market, similar airport markets,and, more specifically, in-terminal hotels, we project that the proposed Subject canachieve a stabilized market penetration level of 106 percent, more than its fair shareof demand. This results in a stabilized occupancy of 74 percent. During the firsttwo years of operation, we estimate the proposed Subject’s occupancy level to“ramp up” from 68 percent in 2015 to 72 percent in 2016 before stabilizing at 74percent in 2017. As previously stated, the in-terminal hotels that we analyzedthroughout the U.S. achieved an average occupancy of roundly 77 percent over thepast five years with the aggregate occupancy level ranging from a low of 72.2IV-38
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September 18, 2012Mr. Patrick HeckD
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The Westin Denver International Air
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SECTION IEXECUTIVE SUMMARY
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SECTION IIIPROPERTY DESCRIPTION
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The Westin Denver International Hot
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Appraisal for the Yountville Inn lo
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Sent via email to: patrick.heck@fly
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Mr. Patrick HeckJune 14, 2012Housto
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Mr. Patrick HeckJune 14, 2012In ord
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Mr. Patrick HeckJune 14, 20127. Mar
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ADDENDUM ESENSITIVITY ANALYSIS
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