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

The Westin Denver International AirportHotel Market AnalysisThe ADR for the competitive airport lodging market decreased at a CAGR of 4.1percent over the past five years with ADR ranging from a low of $106.34 in 2010 toa high of $131.93 in 2008. During the height of the Great Recession (2009), theidentified competitive market experienced a significant decline in ADR of 18.4percent. This decrease resulted in an ADR of $107.71, an approximately $24decline. The market ADR further declined 1.3 percent in 2010 to $106.34, the fiveyearlow ADR level achieved by the competitive airport lodging market. Throughyear-end 2011, ADR increased a modest 1.6 percent over prior year levels,resulting in an ADR of $108. Through YTD June 2012, ADR increased from$106.79 to $108.76 or 1.8 percent.As a result of fluctuations in occupancy and ADR, RevPAR declined at a CAGR of3.6 percent between 2007 and 2011. In 2009, the competitive market experienceda decline in RevPAR of 19.0 percent, primarily as a result of an 18.4 percentdecrease in ADR. Comparatively, the U.S. overall lodging market experienced adecline in RevPAR of only 16.7 percent during this time. Through YTD June 2012,RevPAR increased 2.1 percent over prior year levels, resulting in RevPAR of$83.17, which is below 2007 levels.A majority of demand at the hotels comprising the competitive airport lodgingmarket is from the transient market segment (approximately 55 percent) with groupdemand representing the second largest market segment (approximately 30percent). Based on conversations with management of the competitive hotels, weunderstand that the airport lodging market attracts group business that prefers theconvenience of being near the airport. The remainder of demand in the competitiveairport lodging market is comprised of contract/crew demand. The competitiveairport lodging market also benefits from distressed passenger demand, which iscreated due to flight cancellations which are primarily attributable to inclementweather and airplane mechanical malfunctions. Demand for the full-service hotelscomprising the competitive airport lodging market is typically highest between themonths of May and September.2. Competitive Downtown Lodging MarketAs previously stated, given the fact that the proposed Subject will represent thehighest quality hotel in the airport submarket, we have also identified a sample ofcompetitive full-service hotels in downtown Denver. While these hotels are locatedapproximately 25 miles from the proposed Subject, it is likely that the proposedSubject will compete with these hotels for group demand associated mainly withcorporate groups and national associations that involve attendees that must travelto Denver by air. The Subject will also compete with these hotels for transientdemand that would prefer the convenience of an airport location but that have totravel downtown due to the current lack of quality, upper upscale accommodationsand/or lack of Starwood affiliated, full-service hotels in the airport market. As aresult, a review of the performance of these hotels, both in aggregate and on anIV-15