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

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Mr. Patrick HeckJune 14, 20127. Market Share EstimatesAs a starting point for our estimate of the proposed hotel’s operating performance,we will relate the property’s size to the competitive supply, both existing andpotential. This ratio, called fair share, is then related to projected competitivedemand and adjusted to reflect the share of the market which we would reasonablyexpect the property to capture in its first five years of operation based onidentifiable attributes demanded in the market such as: location, price, quality, andamenities. Based on this analysis, we will develop our projection of the potentialoccupancy and average room rate the hotel could achieve over its first five years ofoperation.8. Projected Operating ResultsUsing our market research as a basis, we would develop a detailed cash flowforecast for the first ten years of operation of the proposed hotel. This forecastwould include all revenues and expenses and result in a “bottom line” of incomebefore depreciation, amortization, interest, and taxes on income (“EBITDA”).Since the estimated operating results will be based on estimates and assumptions,which are subject to uncertainty and variation, we will not represent them as resultsthat will actually be achieved. The estimated operating results will be used toevaluate the overall feasibility of the project.9. Formal Report PresentationAt the conclusion of our foregoing analysis, we will prepare a detailed reportoutlining our conclusions and recommendations concerning the proposed hoteldevelopment. The report will be presented in a format generally acceptable tomajor sources of debt and equity financing and franchise and managementorganizations. Furthermore, if required, the report will be designed for inclusion inan Offering Memorandum (“OM”) associated with a bond offering to finance thehotel. Though the exact format of the reports will evolve as the engagementprogresses, the following probable section headings provide an outline of theexpected final reports.• Introduction (Project Concept and Study Methodology)• Summary of Conclusions and Recommendations• Area Economic/Demographic Review• Site Location Evaluation• Competitive Supply and Demand• Recommended Facilities• Market Position - Subject Property• Statement of Estimated Annual Operating Result- 7 -
Mr. Patrick HeckJune 14, 2012D. Anticipated Delivery DateWe should be able to commence the engagement within approximately two weeksof receiving your authorization to proceed. Barring unforeseen circumstances, weenvision completing our market and cash flow projections within approximately twoadditional weeks. The formal report will require an additional one to two weeks tocomplete, but per your request, a draft copy of our report will be provided to you nolater than August 1, 2012.E. Professional FeesOur fees are commensurate with services rendered and are based on timeexpended by our professionals, charged at our normal billing rates as indicatedbelow, and are not in any way contingent upon the results of our work. Our normalhourly billing rates at this time are as follows.Executive and Senior Vice PresidentsVice PresidentsAssociatesConsultants$350 - $500$250 - $325$175 - $225$125 - $150Given the nature of this assignment, our fees will be charged on a per diem basis atthe billing rates stated above for all professional time associated with the project,from commencement of the assignment until completion, including all meetings,revisions, and updates. While not limited to this amount, our estimated fees tocomplete the full updated analysis and formal report would be between $30,000and $35,000. It should be noted that this professional fee does not include the timeassociated with meetings with bond underwriters and legal counsel, our review ofthe offering circular, and updates to our analysis. Our experience in other projectsof this type is that the additional fee for this “follow-up” work typically ranges frombetween $20,000 and $30,000. Accordingly, our total professional fee for thisengagement may range from between $50,000 and $65,000.Should a representative of PKF Consulting be required to attend committeemeetings or presentations, our fees will continue to be billed to you on a per diembasis. As a point of reference, my billing rate is $350 per hour, and the averagebilling rate for a consultant is approximately $225 per hour.In addition to our professional fees, we require reimbursement for any out-of-pocketexpenses incurred in the performance of the assignment. Such expenses mayinclude transportation and lodging costs, out-of-pocket expenses incurred by uswhile in the field, supplies, and report printing costs.- 8 -
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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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SECTION VSTATEMENT OF ESTIMATED ANN
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