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

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The Westin Denver International AirportHotel Market AnalysisAs previously presented, the comparable in-terminal hotels located throughout theU.S. and Canada achieved an average occupancy level of 77.2 percent over thepast five years, ranging from a low of 72.2 percent to a high of 80.2 percent. Astabilized occupancy level below the average annual occupancy of the in-terminalhotels is deemed reasonable for the proposed Subject given its size, which is largerthan most in-terminal hotels, as well as our projected ADR for the proposed Subject,which will be discussed in the following paragraphs. On a stabilized basis, weestimate the proposed Subject to receive approximately 60 percent of its demandfrom the transient market segment, 30 percent of its demand from the group marketsegment, and approximately 10 percent of its demand from the contract/crewmarket segment.2. Projected Average Daily Room RateIn order to project the future ADR of the Subject, we first estimated a hypotheticalADR if the Subject were open as of year-end 2012. Based on our analysis of thecompetitive market, the performance of the surrounding Westin hotels locatedthroughout the Denver region, and the performance of other in-terminal hotelslocated throughout the U.S., we are of the opinion that the Subject could achieve ahypothetical ADR of $180 stated in 2012 value dollars. This would position theSubject above the estimated 2012 year-end ADR of the Westin Tabor Centerlocated in downtown Denver and above the Marriott Gateway and Embassy Suites,both of which are located proximate to the airport. This hypothetical ADR of $180would position the Subject below the Ritz-Carlton and the Four Seasons but abovethe remainder of the previously identified competitive market. In addition, this ratepositions the proposed Subject above the average of the comparable in-terminalairport hotels we evaluated throughout the U.S.After concluding to a hypothetical ADR, we then projected the ADR growth of themarket based on current trends. As previously discussed, the competitive marketexperienced an increase in ADR of 4.2 percent in 2010 and 2011. Through YTDJune 2012, ADR for the overall competitive market was relatively unchanged.Through year-end 2012, ADR is projected to increase modestly. Specifically, weproject ADR to increase 3.0 percent through year-end 2012. In 2013 and 2014,more aggressive rate growth of 7.0 and 6.0 percent, respectively, is projected as thelocal, national, and global economy continues to improve and properties achievetheir long-run average occupancy levels, thus giving way to an emphasis on ADRgrowth. Going forward, ADR growth is projected to taper to 5.0 percent in 2015, 4.0percent in 2016, and 3.0 percent per annum thereafter, which is in line with theassumed long-term outlook on inflation. This projected ADR growth would result inan ADR of $215 for the proposed Subject upon opening in 2015. However, as aresult of some discounting, which is expected as the proposed Subject is introducedinto the market, the Subject’s projected ADR in 2015 is expected to beapproximately $209.IV-41
The Westin Denver International AirportHotel Market AnalysisThe proposed Subject will undoubtedly represent the most superior asset in theprimary competitive market. Due to the inferior product and location of the hotelscomprising the competitive airport lodging market, the proposed Subject is projectedto outperform these hotels. We project the proposed Subject to achieve an ADRlevel at the midpoint of the range indicated by the hotels comprising the competitivedowntown lodging market. Lastly, when benchmarked against other in-terminalhotels located throughout the U.S. and Canada, we project the proposed Subject toachieve an ADR at the high-end of the range as it will represent the newest state-ofthe-artin-terminal hotel located at one of the busiest airports in the U.S. with acentral location.The following table summarizes our estimated annual market performance for theSubject from 2015 through 2019, representing the first five years of operation.The Westin Denver International AirportProjected PerformanceHypothetical Market Introductory Actual Percent Subject Market Market PercentYear ADR Growth Discount ADR Change Occupancy Occupancy Penetration RevPAR Change2012 $180.00 - 0.0% $180.00 - - - - -2013 $193.00 7.0% 0.0% $193.00 7.0% - - - -2014 $205.00 6.0% 0.0% $205.00 6.0% - - - -2015¹ $215.00 5.0% 3.0% $209.00 2.0% 68% 72% 94% $142.12 -2016 $224.00 4.0% 0.0% $224.00 7.0% 72% 72% 100% $161.28 13.5%2017 $231.00 3.0% 0.0% $231.00 3.0% 74% 70% 105% $170.94 6.0%2018 $238.00 3.0% 0.0% $238.00 3.0% 74% 70% 105% $176.12 3.0%2019 $245.00 3.0% 0.0% $245.00 3.0% 74% 70% 105% $181.30 2.9%¹ Assumed opening of the proposed Subject on August 1, 2015Note: Numbers may not foot due to roundingSource: PKF Consulting USAAlthough it is possible that the Subject will experience growth in occupancy andADRs above those estimated above, it is also possible that sudden economicdownturns, unexpected additions to room supply, or other external factors will forcethe property below the selected point of stability. Consequently, the estimatedoccupancy and ADR levels are representative of the most likely potential operationsof the Subject over the projection period based on our analysis of the market as ofthe date of this report.IV-42
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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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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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