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

The Westin Denver International AirportStatement of Estimated Annual Operating ResultsB. BASIS FOR CASH FLOW PROJECTIONSIn order to develop our estimate of the net operating income (cash flow) for theSubject for both a stabilized year of operation and for the first ten years of operationof the hotel, we have analyzed in detail the following:1) The 2011 year-end financial performance of six in-terminal hotels locatedthroughout North America deemed most comparable to the Subject interms of performance and size;2) The 2011 year-end financial performance of five Westin hotels locatedthroughout the U.S. deemed most comparable to the Subject in term ofperformance and size; and,3) Our general knowledge of the performance of upper upscale hotels in theDenver region.As stated, in order to develop our estimate of the NOI (cash flow) for the Subject forboth a stabilized year of operation and for the first ten years of operation, we haverelied upon the operating performance of in-terminal hotels located throughoutNorth American and five comparable Westin hotels located throughout the U.S.This information was obtained from confidential financial statements submitted incompilation of the 2012 edition (summarizing year-end 2011 data) of PKFConsulting’s publication Trends in the Hotel Industry. The hotels are generallycomparable due to their size, location, national affiliation, operating concept, andmarket orientation.The six in-terminal hotels range in size from 336 to 860 guestrooms. Occupanciesfor the comparable in-terminal hotels ranged from 74.5 to 85.2 percent, and ADRsranged from $109.65 to $167.46 in 2011. The gross operating profit (“GOP”),before the deduction management fees, property taxes, insurance, and reserve forcapital replacements, for the comparable in-terminal hotels ranged from 24.7 to 38.7percent of total revenue with an average of 36.6 percent. The NOI for thecomparable in-terminal hotels, after the deduction of a reserve for replacementexpense of four percent of gross revenues, ranged from 13.3 to 33.4 percent of totalrevenue, with an average of 26.5 percent. On the following two pages, we havesummarized the financial statements for these comparable in-terminal hotels. Forreasons of confidentiality, we have not disclosed the identity of the specific hotels.V-2