New York City Hotel Survey

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Michael Bloomberg, Click on the links below Mayor, New York City Hotel Survey for information on: New York City HVS International, in cooperation with New York University’s Preston Robert Tisch Center for New York City Hotel New York remains the Hospitality, Tourism, and Travel Administration, is pleased to present the fifth annual Manhattan Hotel Survey best destination in the Market Overview. Our research and findings indicate that in 2001, the Manhattan lodging market world for business and HVS International experienced a decline in operating performance prior to September, due primarily to a softening national recreational travel – economy; the terrorist attacks of September 11th further accelerated this decline. However, we forecast that was confirmed in The Preston Robert the carefully that by 2005, occupancy in Manhattan will reach 1999 levels and average rate will achieve 2000 levels. Tisch Center for researched and widely Hospitality, Tourism, read Condé Nast and Travel Traveler magazine, Administration which named New York City its “2002 Hot New York University City.” New York won Annual International that coveted Hospitality Investment designation based on HVS International is a global hospitality consulting organization with offices in New York, San Francisco, Conference the outstanding new Miami, Denver, Vancouver, Toronto, São Paulo, Buenos Aires, London, New Delhi, and Singapore. The hotels and restaurants organization has a professional staff of more than 150 industry specialists offering a wide range of Acknowledgements that have opened here services, including market feasibility studies, valuations, strategic analyses, development planning, and in the past 12 months. litigation support. Through its various divisions, HVS supplies unique hotel consulting expertise in the Manhattan Operating Five great new restaurants and three areas of executive search, environmental sustainability, timeshare consulting, food and beverage History new hotels in New operations, design consulting, gaming, operations analysis, asset management, operational management, York were listed by strategy development, convention facilities consulting, marketing communications, and investment New Supply Condé Nast Traveler; consulting. For more than 20 years, HVS International has provided consulting and valuation services to no other city hit the list over 10,000 hotels in all 50 states and more than 60 foreign countries. Members of the firm have authored Recent Changes to Hotel with that many entries. virtually all literature on the subject of hotel market studies and valuations, including seven textbooks and Supply in Manhattan over 300 articles. Condé Nast Traveler Proposed Hotels in got the story right: Manhattan There has never been a better time to visit the Manhattan Operating greatest city on earth – Statistics by Market and the safest big city Segment in the United States – and take in our incomparable cultural Manhattan Operating institutions, exciting Statistics by Neighborhood attractions, wonderful new restaurants, and unparalleled hotels. Manhattan Operating The successes of the The Preston Robert Tisch Center for Hospitality, Tourism, and Travel Administration at New York History and Forecast World Economic University is a dynamic and growing educational and research center located in the heart of Manhattan. Forum meeting in New The Tisch Center offers an extensive complement of hospitality and tourism academic programs of study, York in January of including two bachelor’s degree programs and four master’s degree programs (two on-site and two online). 2002 and the TriBeCa In concert with its location in the financial and hotel capital of the world, coursework is focused on the Click on the links below Film Festival in lower areas of asset management, financial analysis, revenue management, customer relationship management, Manhattan to read quotes from the and e-commerce relative to the international hospitality and tourism industry. As entrepreneurial educators, following individuals: demonstrate that the administrators and faculty are experienced in the profession and bring the reality of the industry into the Big Apple remains the premier city for world- classroom. The Tisch Center’s motto encapsulates its uniqueness — The City is our laboratory, the Michael Bloomberg, class conferences and industry is our faculty, and our students are the future of the profession. Mayor, events; that judgment New York City has been further confirmed by the recent New York University Annual International Hospitality Investment Conference Jonathan M. Tisch, decisions to hold the Chairman & CEO, Grammy Awards and For 19 years, HVS International has played an integral role in New York University ’s Annual International Loews Hotels; MTV Music Video Hospitality Industry Investment Conference. Once again, our team of professionals looks forward to Chairman, Awards shows here in Travel Business 2003. welcoming you to this prestigious event, which is scheduled for Sunday-Tuesday, June 2-4, 2002, at New York City’s Marriott Marquis Hotel. Roundtable During 2002, we Stephen Rushmore, anticipate that more President and Founder, than 32 million people Acknowledgements HVS International will visit New York City, and that New Randy Smith of Smith Travel Research has provided the Survey’s historical operating data. Smith Travel Joseph E. Spinnato, York will attract more Research continues to be the leading source of hospitality industry operating statistics. We would also like President, than 5.7-million to thank Donna Quadri of HotelRevMAX, a New York -based global data services firm, which has Hotel Association of international visitors. provided comprehensive hotel statistics for this survey. Additionally, in cooperation with the New York They’ll see a New York NYC, Inc. determined to recover University Preston Robert Tisch Center for Hospitality, Tourism, and Travel Administration’s Research from last year’s tragic Program, the data-gathering process was largely a contribution of two graduate students, Nan Hua and Randy Smith, events, rebuild, and Erica Leigh Weingarten, through the coordination of Dr. Mark M. Warner, Director of Graduate Programs. President, remain the Capital of HVS International is pleased to have been a part of this enriching educational process. Smith Travel Research the World. Cristyne L. Nicholas, President & CEO, NYC & Company Click here to visit the Dr. Lalia Rach, web site for New York University’s Preston Associate Dean, Robert Tisch Center for Preston Robert Tisch Center for Hospitality, Hospitality, Tourism, and Travel Tourism, and Travel Administration Administration, New York University

Click here to visit the HVS To download a printable International web site PDF version of this survey, click here.

Stephen Rushmore Roland de Milleret William D. Lee President Senior Associate Consulting & Valuation Analyst HVS International HVS International HVS International HVS International acknowledges our copy http://www.hvsinternational.com/emails/NYC%20Survey/2002/cover.htm 5/9/2002 NYC Hotel Survey Page 2 of

and web editor:

Sarah Beth Nickl

Frank P. Dougherty Lalia Rach, Ed.D Mark M. Warner, Ed.D Senior Vice President Associate Dean Director of Graduate Programs HVS International The Preston Robert Tisch Center for The Preston Robert Tisch Center for Hospitality, Tourism, and Travel Hospitality, Tourism, and Travel Administration Administration

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Jonathan M. Tisch, Click on the links below Chairman and CEO, Manhattan for information on: Loews Hotels; Chairman, Travel Business Roundtable New York City Hotel Operating History Survey This year’s hotel survey – which shows the recent HVS International decline in the New York City In 2001, the Manhattan lodging market experienced decreased performance levels for the first time in hotel market – is clearly nine years, primarily due to the impact of the national economic downturn, which was compounded by The Preston Robert reflective of the impact that the a significant increase in supply, a softening in demand, and the September 11th terrorist attacks. Tisch Center for slowing economy and the However, we expect the Manhattan lodging market to recover by the beginning of 2003. Hospitality, Tourism, September 11th terrorist and Travel attacks have had on the local Administration hotel market. However, as a According to data provided by Smith Travel Research (STR) , a 9.7% decrease in demand and an 11.4% result of the combined efforts drop in average rate between 2000 and 2001 resulted in a 22.3% decline in marketwide revenue per New York University put forth by both the available room (RevPAR) during the same period. However, during the longer term historical period of Annual International government and the hotel 1988 to 2001, Manhattan lodging demand rose at an average annual compounded rate of 0.8%, while Hospitality Investment industry to help get people Conference traveling again, there is a average rate and RevPAR increased by 4.0% and 3.3%, respectively. Although the national economy stumbled during 2001, most economic indicators for the New York metropolitan area (including sense that the recovery may begin sooner than first employment levels, retail sales, population trends, office vacancy rates, and trade statistics) suggest Acknowledgements anticipated; signs of an initial further growth in the middle- and long -term future. As such, we anticipate a recovery from the rebound are expected to begin Manhattan Operating in the second half of 2002. economic downturn by the beginning of 2003, and we believe that demand and occupancy levels in History 2003 and beyond will be dictated by normal economic influen ces and the interaction of supply and demand. New Supply

Based on the data from STR, 10,303 new rooms became available in Manhattan between 1988 and Recent Changes to Hotel 2001. As indicated in the following table, the bulk of these rooms entered the market in two distinct Supply in Manhattan cycles: 3,425 rooms entered the market between 1989 and 1992, and 5,511 rooms were added between 1997 and 2001. In 2001, the amount of available rooms citywide increased significantly, tremendously Proposed Hotels in

impacting the entire Manhattan hotel market; during this period, the market was trying to absorb 1,711 Manhattan new rooms, while demand was declining as a result of the economic slowdown. It is notable that Manhattan Operating Visit the HVS International between 1992 and 1995, supply rose by only 534 rooms, down considerably from the rapid expansion Statistics by Market web site for hospitality- experienced between 1989 and 1992. Additionally, despite the remarkable strength of the market Segment industry publications, between 1995 and 1998, only 1,705 new rooms became available. Conversely, 1,660 new rooms including: entered the market in 1999, followed by 1,573 new rooms in 2000 , and 1,711 in 2001; these annual Manhattan Operating The Rushmore room supply increases were the highest experienced in Manhattan since 1990. Statistics by Monthly Letter Neighborhood Canadian Lodging Outlook Manhattan Operating Hotel Development Manhattan Operating History History and Forecast Cost Survey The 2001 Hotel Franchise Fees No. of % Occupied % Avg. % % Analysis Guide Year Rooms Chg. Occ. Rooms Chg. Rate Chg. RevPAR Chg. Click on the links below The HVS 1988 50,567 79.5 % 14,669,464 $118.81 $94.43 International Journal to read quotes from the 1989 50,262 (0.6) % 78.5 14,409,284 (1.8) % 128.45 8.1 % 100.89 6.8 % following individuals: 1990 51,725 2.9 71.5 13,491,758 (6.4) 132.15 2.9 94.44 (6.4) Michael Bloomberg, 1991 52,318 1.1 68.0 12,985,547 (3.8) 125.12 (5.3) 85.08 (9.9) Mayor, HVS International Presents 1992 53,687 2.6 68.0 13,326,528 2.6 123.58 (1.2) 84.04 (1.2) New York City

1993 53,635 (0.1) 70.6 13,820,421 3.7 125.77 1.8 88.79 5.6 The June 2002 Jonathan M. Tisch, HVS International Journal 1994 54,135 0.9 75.5 14,909,928 7.9 133.59 6.2 100.80 13.5 Chairman & CEO, Loews Hotels; 1995 54,221 0.2 78.4 15,510,627 4.0 146.23 9.5 114.61 13.7 Click here to view the Chairman, journal. 1996 54,468 0.5 80.6 16,030,338 3.4 160.41 9.7 129.34 12.9 Travel Business

1997 55,359 1.6 81.9 16,541365 3.2 175.33 9.3 143.53 11.0 Roundtable

1998 55,926 1.0 82.5 16,844,016 1.8 192.23 9.6 158.62 10.5 Stephen Rushmore, 1999 57,586 3.0 80.6 16,935,877 0.5 206.62 7.5 166.48 5.0 President and Founder, Click here to visit the web site for New York University ’s HVS International 2000 59,159 2.7 83.8 18,088,605 6.8 222.14 7.5 186.09 11.8 Preston Robert Tisch Center for Hospitality, Tourism, and 2001 60,870 2.9 73.5 16,325,469 (9.7) 196.71 (11.4) 144.54 (22.3) Joseph E. Spinnato, Travel Administration President, Hotel Association of 13 -Year Average Compounded Change: 0.8 % 4.0 % 3.3 % NYC, Inc. Source: Smith Travel Research Randy Smith, Click here to visit the President, HotelRevMAX web site Smith Travel Research

Cristyne L. Nicholas, President & CEO, back to top NYC & Company

next page Dr. Lalia Rach, Associate Dean, Preston Robert Tisch Center for Hospitality, Tourism, and Travel Administration, New York University

To download a printable PDF version of this survey, click here.

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Stephen Rushmore, New Supply Click on the links below for President and Founder, information on: HVS International In 2001, eight new hotels opened in Manhattan, resulting in a 2.8% marketwide room supply New York City Hotel New York City hotel values increase, despite the fact that four hotels (representing approximately 3.8% of the city’s lodging Survey were hard hit by the declining supply) were damaged or destroyed by the September 11th terrorist attacks. While Manhattan is economy and the events of often seen as a collection of neighborhoods, the impact of these new rooms has been felt citywide. HVS International September 11th. However, HVS International estimates The Preston Robert Tisch that a typical hotel in the City Four new hotels, totaling 733 rooms, entered the Manhattan market in the first half of 2002. Three Center for Hospitality, had already lost approximately additional lodging facilities encompassing a total of 1,004 rooms are anticipated to open by the end Tourism, and Travel 34% of its value prior to of 2002, bringing the total new supply for this year to 1,737 rooms; this translates to a 1.5% supply Administration September 11th. While hotel increase over 2001. The opening of the 860-room Westin in Times Square will account for values continued to fall after approximately half of the new supply entering the market in 2002. The Westin will be the largest New York University the terrorist attacks, a massive addition to the city’s supply of first-class, convention-oriented hotels since the Crowne Plaza Times Annual International advertising campaign designed Hospitality Investment to lure travelers back to the Big Square opened in 1991. This additional supply is expected to further affect the city’s declining Conference Apple seems to have been average daily rate and occupancy percentage. Approximately 70% of the city’s new supply will be effective in neutralizing located in the Manhattan’s Midtown West neighborhood, with 17% in Midtown East, and 13% Acknowledgements travelers’ apprehensions. Downtown. Manhattan Operating By the end of 2001, hotel History values in New York City were down by 38%, indicating that a Recent Changes to Hotel Supply in Manhattan 4% terrorist value decline still New Supply remained in the market. We forecast hotel values in New # of Recent Changes to Hotel York City will begin to recover Hotel Name Location Type Rms Open Developer Supply in Manhattan during 2002 and will probably Midtown West reach the 2000 record value Holiday Inn 32nd & Bwy Mid- Scale 531 Sep ’ 98 Thurcon Properties Proposed Hotels in levels in approximately five to Courtyard by Marriott 114 W. 40th (Bwy & 6th) Mid- Scale 244 Nov ’98 Granite Park (Harry Gross) Manhattan six years. Millennium Bwy Addition 44th (Bwy & 6th) Luxury 125 Nov ’98 CDL Hotels Manhattan Operating Time Hotel 224 W. 49th St. Boutique 192 Jun ’ 99 Hampshire Hotels* Statistics by Market Philips Club Addition Bwy & 67th Timeshare 92 Nov ’99 Millennium Partners Segment Joseph E. Spinnato, On the Ave. Bwy & 77th Mid- Scale 250 Dec ’ 99 PMG President, Manhattan Operating Herald Hotel 34th & Bwy (SE Cnr) Ext. Stay 60 Jan ’ 00 JEMB Realty Hotel Association Statistics by Neighborhood of NYC, Inc. St. Moritz Closed 6th & Central Pk. S. Mid- Scale (689) Jan ’ 00 Millennium Partners Red Roof Inn 6 W. 32nd Economy 171 Jun ’ 00 Apple Core Hotels Manhattan Operating The attack on the World Trade Hilton Times Square 42nd (7th & 8th) Upscale 455 Jun ’ 00 Forest City Ratner History and Forecast Center on September 11, 2001, Sofitel 44th (5th & 6th) Upscale 398 Jul ’ 00 Accor created an unprecedented situation in New York City. The Muse 130 W. 46th Boutique 200 Aug ’00 Cornerstone Coupled with an already Hudson Hotel 57th (8th & 9th) Mid- Scale 821 Nov ’00 Ian Schrager Hotels declining economy, the Bryant Park Hotel 40th (5th & 6th) Boutique 130 Feb ’ 01 Pilevsky & McNally Click on the links below to read quotes from the decrease in travelers to the The Chambers Hotel 56th (5th & 6th) Boutique 77 Feb ’ 01 Ira Drukier & Richard Born area had a severe impact on following individuals: Comfort Inn 442 W. 36th (9th & 10th) Economy 56 Jun ’ 01 Heena Hotel, LLC the hospitality industry. Still, it W - Times Square 47th & Bwy (SW Cnr) Boutique 509 Dec ’ 01 Intell Real Estate/Starwood is during times of hardship that Michael Bloomberg, character is truly tested – and Best Western 522 - 24 W 38th (10th & 11th) Economy 83 Jan ’ 02 Unigroup Hotel, LLC Mayor, we are all inspired by the City Club Hotel 55 W 44th Boutique 65 Jan ’ 02 Metropolitan Hotels, LLC New York City outpouring of support that the Ritz-Carlton 6th & Central Pk. S. Luxury 287 May ’02 Millennium Partners hospitality industry showed to emergency workers and the Jonathan M. Tisch, Chairman & CEO, families of victims – welcoming *renovation of Consulate Hotel them with a place to call home Loews Hotels; and providing warm meals and Chairman, Travel Business other supplies. In kind, Midtown East Roundtable individuals from across the Peninsula Closed 5th & 55th Luxury (242) Jan ’ 98 Closed for renovation globe visited New York Beverly Hotel Closed 50th & Lexington All -Suite (186) Jan ’ 98 Bought & closed by Manhattan East following the tragedy to show Suites Stephen Rushmore, their solidarity with the city Avalon Hotel 16th E. 32nd Boutique 100 Apr ’98 President and Founder, and to demonstrate that they Fitzpatrick Grand Central 44th (Lex & 3rd) Boutique 155 Sep ’ 98 Fitzpatrick Hotels HVS International would not allow terrorists to Courtyard by Marriott 53rd & 3rd Mid- Scale 320 Nov ’98 Witkoff Group dictate their lives. Joseph E. Spinnato, Peninsula Reopened 5th & 55th Luxury 242 Jan ’ 99 Reopened after renovation President, Now, with the attacks nearly Benjamin Hotel** 50th & Lexington All -Suite 209 Apr ’99 Reopened after $40M ren. Hotel Association of NYC, nine months behind us, we are Hotel Giraffe Park Ave. S. & 26th Boutique 73 Dec ’ 99 Henry Kallan Inc.

buoyed by the facts that the Habitat 57th & Lexington Economy 220 Dec ’ 99 PMG economy is on the upswing and Randy Smith, Thirty Thirty E. 29th (Park & Lex.) Mid- Scale 251 Apr ’00 PMG occupancies are continuing to President, improve at our city hotels. Library Hotel 229 Madison @ 41st Boutique 60 Aug ’00 Henry Kallan Smith Travel Research Although the hospitality Dylan Hotel 52 E. 41st Boutique 108 Sep ’ 00 Morris Moinian/Allied Hosp. industry will remain Park South Hotel 12 2 E. 28th Boutique 143 Sep ’ 01 Atlantic Stars Cristyne L. Nicholas, challenged throughout 2002, it Le Marquis 12 E. 31st Mid- Scale 123 Sep ’ 01 Le Marquis Associates President & CEO, is important to note that not NYC & Company one HANYC member has closed due to financial reasons **(formerly the Beverly) brought about by the economy, Dr. Lalia Rach, and indeed, memberships have Associate Dean, actually increased. By year’s Preston Robert Tisch Upper West Side Center for Hospitality, end, we expect to be well on Quality Inn 94th & Bwy Mid- Scale 251 Jun ’ 99 Hampshire Hotels our way to complete recovery. Tourism, and Travel Hotel 71 (Comfort Inn) 31 W. 71st Mid- Scale 88 Jun ’ 99 Hampshire Hotels Administration, New York University

SoHo Mercer Hotel Prince & Mercer Boutique 75 Jan ’98 Balaz & Partners

TriBeCa Grand 6th & White Boutique 203 May ’ 00 Hartz Mountain Industries To download a printable W Hotel Union Sq. (Park & 15th) Boutique 270 Nov ’00 Starwood/Related Cos. PDF version of this survey, 60 Thompson Street 60 Thompson Boutique 100 Aug ’01 Pomeranc Group click here.

Downtown Holiday Inn Gold & Platt Mid- Scale 138 Jul ’ 99 RD Management Wall Street Inn 9 S. William Boutique 46 Jul ’ 99 Norman Rutta

Regent Hotel 55 Wall Luxury 144 Dec ’ 99 Sidney Kimmel, Jones NY

Embassy Suites Battery Park City All -Suite 463 Jun ’ 00 Forest City Ratner http://www.hvsinternational.com/emails/NYC%20Survey/2002/NewSupply.htm 5/9/2002 NYC Hotel Survey Page 2 of

Embassy Suites Closed Battery Park City All -Suite (463) Sep ’ 01 Forest City Ratner

Millenium Hilton Closed 55 Church Luxury (561) Sep ’ 01 CDL Hotels

Marriott Fin’ l Ctr Closed 85 West Luxury (504) Sep ’ 01 Host Marriott Corp.

Marriott WTC Closed 3 World Trade Ctr Luxury (818) Sep ’ 01 Host Marriott Corp. Howard Johnson 135 E. Houston Economy 46 Dec ’ 01 Metro One Hotel, LLC

Ritz-Carlton 2 West Luxury 298 Jan ’ 02 Millennium Partners

Marriott Fin’ l Ctr Reopened 85 West Luxury 504 Jan ’ 02 Host Marriott Corp. Source: HVS International

Between 2002 and 2004, up to 4,470 rooms may enter the Manhattan market, causing a potential 6.5% increase in supply; however, significant barriers to entry remain, and only the most financially feasible projects are likely to reach fruition. These barriers include high construction costs, prohibitive land costs, and a lack of available sites. Moreover, hotel debt financing is extremely difficult to secure, particularly now that a number of new projects are poised to enter the market. We believe that the investment community will continue to be a formidable barrier to entry for new hotel development.

Proposed Hotels in Manhattan

# of Est. Hotel Name Location Type Rms Open Developer Rating Midtown West Westin 8th (42nd & 43rd) Convention 860 Sep ’ 02 Tishman Realty & Cons. 5 Hampton Inn W. 24th (6th & 7th) Mid- Scale 144 Oct ’ 02 Hersha Hospitality 5 Lambs Club 44th (6th & 7th) Mid- Scale 135 Jan ’ 03 Hampshire Hotels 2 Hampton Inn 48th & 8th, NW cnr Mid- Scale 175 Jan ’ 03 Hampshire Hotels 2 Sheraton Four Points W. 25th (6th & 7th) Mid- Scale 158 Jan ’ 03 Unigroup Hotel, LLC 5 Hampton Inn W. 31st (6th & 7th) Mid- Scale 136 May ’03 Hersha Hospitality 3 Mandarin Oriental 59th & Bwy Luxury 250 Jan ’ 04 Time Warner, et. al. 5 Residence Inn 39th & 6th Ext.-Stay 414 Jan ’ 04 Harry Gross 2 Courtyard by Marriott 54th & Bwy, NW cnr 1st Class 80 Mar ’04 Harry Gross 3

Midtown East Mid -Scale Hotel 45th (2nd & 3rd) Mid- Scale 200 On Hold Gama Holdings 3 Boutique Hotel 1 E. 35th Boutique 219 Jan ’ 03 Metro One Hotel, LLC 3 Luxury Hotel 60 E. 55th Luxury 113 Jul ’03 Davis & Partners 3

Savoy/Connaught 59th & Lexington Luxury 200 Jan ’ 04 Vornado 2

Downtown Hampton Inn 320 Pearl Mid- Scale 65 Early ’ 01 Hersha Hospitality 3 Mid -Scale Hotel Bowery & E. 4th Mid- Scale 210 Jan ’ 03 Private Developer 1

Greenwich Village Htl Hudson & 13th Boutique 195 Jun ’03 Madison Equities 2 Astor Place Hotel Astor & Lafayette Boutique 100 Jun ’03 Schrager & Related Cos. 2

Ratings Key: 5 = Under construction 4 = Financing in place; not under construction 3 = Land acquired; no financing in place; likely to occur 2 = Rumored development; less than 50% chance of reaching fruition 1 = Rumored development; unlikely

Source: HVS International

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Randy Smith, Manhattan Operating Statistics Click on the links President, below for Smith Travel Research information on: HVS International compiled data provided by HotelRevMAX, a New York -based hotel performance data We are happy to report company, to illustrate the effects of the September 11th terrorist attacks on different classes of hotels in New York City that the bottom line for Manhattan. The following table compares the performance of a representative sample of Manhattan hotels Hotel Survey New York City is that we for January through August and September through December, as well as year -end figures for both 2000 are seeing signs of a and 2001; results are broken down by market segment: boutique, first-class, luxury, and tourist. HVS International rebound – though clearly, the cutbacks in business The Preston Robert travel are being felt in the Operating Statistics By Market Segment* Tisch Center for Big Apple as well as in Hospitality, some of the other key Tourism, and urban markets. Travel Boutique Administration Occupancy is down; as of the year-to-date through New York February of 2002, % % % % % University Annual Period Supply Chg. Demand Chg. Occ. Chg. ADR Chg. RevPAR Chg. occupancy was down International 8.2%, placing New York in Jan. - Aug. Hospitality the “middle of the pack” ’00 935,588 768,401 82.1 % $244.53 $200.83 Investment of the top 25 markets. As Conference a basis for comparison, ’01 1,318,961 41.0 % 954,002 24.2 % 72.3 (11.9) 231.34 (5.4) % 167.33 (16.7) % San Francisco was down Sept. - Dec. Acknowledgements 21.7%; Miami, down ’00 512,426 416,853 81.3 299.76 243.85 12.0%; Chicago, down Manhattan 13.0%; and Boston, down ’01 679,767 32.7 467,019 12.0 68.7 (15.5) 214.97 (28.3) 147.69 (39.4) Operating History 13.6%. Essentially, New Year -End York’s 8.2% occupancy New Supply decline is not so severe, ’00 1,448,014 1,185,254 81.9 263.96 216.06 considering how other markets are suffering, with ’01 1,998,728 38.0 1,421,021 19.9 71.1 (13.1) 225.96 (14.4) 160.65 (25.6) Recent Changes to much lower occupancies. Hotel Supply in Manhattan Currently, the greatest Tourist challenge for hoteliers is Proposed Hotels in the decline in room rates. Manhattan % % % % % As of the year-to-date Period Supply Chg. Demand Chg. Occ. Chg. ADR Chg. RevPAR Chg. through February, New Jan. - Aug. Manhattan York’s room rates were Operating Statistics down 10.3%, while San ’00 1,699,936 1,352,301 79.6 % $173.97 $138.39 by Market Segment Francisco and Boston ’01 1,769,944 4.1 % 1,301,939 (3.7) % 73.6 (7.5) 167.14 (3.9) % 122.95 (11.2) % suffered respective Manhattan decreases of 18.0% and Sept. - Dec. Operating Statistics 13.0%. New York’s 10.3% ’00 886,754 742,676 83.8 216.59 181.40 by Neighborhood room rate decrease is higher than the industry ’01 923,139 4.1 641,488 (13.6) 69.5 (17.0) 156.98 (27.5) 109.09 (39.9) Manhattan average by a long shot. In Year -End general, tremendous room Operating History rate decreases are ’00 2,586,690 2,094,977 81.0 189.08 153.14 and Forecast impacting all markets, not just New York City. Room ’01 2,693,083 4.1 1,943,427 (7.2) 72.2 (10.9) 163.79 (13.4) 118.20 (22.8) rate decreases are difficult to recoup as hotels are First-Class Click on the links certain to encounter below to read quotes customer resistance. In from the following fact, decreases in room % % % % % individuals: rates can take two to three Period Supply Chg. Demand Chg. Occ. Chg. ADR Chg. RevPAR Chg. years to recover. The hotel Jan. - Aug. industry does not like to Michael Bloomberg, hear this. ’00 4,741,194 4,083,077 86.1 % $219.43 $188.97 Mayor, New York City ’01 4,781,859 0.9 % 3,758,348 8.0 % 78.6 (8.7) 217.00 (1.1) % 170.55 (9.7) % That said, as the economy continues to turn around, Sept. - Dec. Jonathan M. Tisch, Chairman & CEO, demand is going to ’00 2,553,197 2,199,389 86.1 270.33 232.87 continue to rise. As long Loews Hotels; as occupancies firm up ’01 2,344,429 (8.2) 1,772,741 (19.4) 75.6 (12.2) 201.81 (25.3) 152.60 (34.5) Chairman, and move up, our Year -End Travel Business prediction is that the New Roundtable York City market will see a ’00 7,294,391 6,282,466 86.1 237.24 204.33 rebound over the next year Stephen Rushmore, ’01 7,126,288 (2.3) 5,531,089 (12.0) 77.6 (9.9) 212.13 (10.6) 164.65 (19.4) to 18 months. President and Founder, Luxury HVS International

Click here to visit the Joseph E. Spinnato, % % % % % President, HVS International web site Period Supply Chg. Demand Chg. Occ. Chg. ADR Chg. RevPAR Chg. Hotel Association of Jan. - Aug. NYC, Inc. ’00 1,431,111 1,162,694 81.2 % $342.87 $278.56 Randy Smith, ’01 1,453,031 1.5 % 1,064,345 (8.5) % 73.2 (9.8) 329.07 (4.0) % 241.04 (13.5) % President, Sept. - Dec. Smith Travel Research ’00 727,124 612,407 84.2 431.05 363.04 ’01 728,142 0.1 507,726 (17.1) 69.7 (17.2) 333.70 (23.3) 230.59 (36.5) Cristyne L. Year -End Nicholas, President & CEO, Click here to visit the web ’00 2,158,235 1,775,101 82.2 373.29 307.02 NYC & Company site for New York ’01 2,181,173 1.1 1,572,071 (11.4) 72.1 (12.4) 329.60 (11.7) 237.56 (22.6) University’s Preston Dr. Lalia Rach, Robert Tisch Center for Associate Dean, Hospitality, Tourism, and Aggregate Preston Robert Travel Administration Tisch Center for Hospitality, % % % % % Tourism, and Period Supply Chg. Demand Chg. Occ. Chg. ADR Chg. RevPAR Chg. Travel Jan. - Aug. Administration, HVS International New York Presents ’00 8,807,829 7,366,473 83.6 % $233.18 $195.02 University http://www.hvsinternational.com/emails/NYC%20Survey/2002/MarketSeg.htm 5/9/2002 NYC Hotel Survey Page 2 of

’01 9,323,795 5.9 % 7,078,634 (3.9) % 75.9 (9.2) 226.61 (2.8) % 172.04 (11.8) % The June 2002 Sept. - Dec. HVS International To download a Journal ’00 4,679,501 3,971,325 84.9 288.15 244.54 printable PDF

’01 4,675,477 (0.1) 3,388,974 (14.7) 72.5 (14.6) 214.45 (25.6) 155.44 (36.4) version of this Click here to view the survey, click here. journal. Year -End ’00 13,487,330 11,337,798 84.1 252.44 212.20 ’01 13,999,272 3.8 10,467,608 (7.7) 74.8 (11.1) 222.67 (11.8) 166.50 (21.5) Source: HotelRevMAX *Statistics based on selected hotels from a large database

In the boutique market segment, supply increased at 38.0% (550,714 rooms) between 2000 and 2001, posting a 41.0% increase (383,373 rooms) prior to September, 2001, and a 32.7% increase (167,341 rooms) during the last four months of the year. During the same respective periods, demand in this segment increased by 24.2% and 12.0% over the corresponding periods of the previous year. We note that only the first-class market segment registered an overall decline in room supply between 2000 and 2001, at -2.3%. This decrease can be attributed to the closings of the Embassy Suites Battery Park, the Millennium Hilton, the Marriott Financial Center, and the Marriott World Trade Center following the September 11th terrorist attacks. We note that while both the Marriott Financial Center (January, 2002) and the Embassy Suites Battery Park (May, 2002) have since reopened, the Marriott Financial Center was completely destroyed in the attacks; as of the time of this survey, no definite plans had been set for this property. Additionally, the currently closed Millennium Hilton will reportedly re-open sometime in the future, after undergoing extensive renovations.

As a result of the economic slowdown and an influx of new supply, all four segments registered decreases in occupancy, average rates, and RevPAR from January through August of 2001 compared to the same period of 2000. The tragic events of September 11, 2001, further challenged Manhattan ’s lodging industry, causing steeper declines across all segments. We note that the untimely attacks occurred at the beginning of Manhattan’s peak season, negatively impacting the performance of the city’s lodging industry.

The boutique segment felt the greatest impact of the economic downturn and the substantial increase in supply, with a 16.7% decrease in RevPAR prior to September of 2001 compared to the same period of 2000. On a full-year basis, the boutique segment also registered the largest RevPAR decline in 2001, dropping by 25.6% over the previous year.

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Cristyne L. Nicholas, According to HotelRevMAX, between 2000 and 2001, the Upper East Side of Manhattan experienced Click on the links below President & CEO, the greatest growth in supply prior to August, at 52.3%; this neighborhood also saw the greatest for information on: NYC & Company increase for the entire year, at 36.6%. Post September, the Midtown West neighborhood showed the New York City Hotel The New York City tourism largest increase in supply, at 14.8%. We note that the only significant decrease in supply that occurred Survey industry is on its way to in Manhattan post September of 2001 occurred in the Downtown neighborhood. This decrease was recovering from the the result of the closings of the Embassy Suites Battery Park, the Millennium Hilton, the Marriott HVS International downturn in business Financial Center, and the Marriott World Trade Center following the September 11th terrorist resulting from the events of attacks. The Preston Robert this past fall. Tisch Center for Hospitality, Tourism, Citywide hotel occupancy Five of Manhattan’s seven neighborhoods registered decreases in demand in 2001 compared to 2000. and Travel rates for the first quarter of The Upper East Side achieved the city’s greatest increase in demand in 2001, with 18.2% more Administration 2002 were within five demand this year than in 2000, primarily due to a 36.4% growth prior to September. The Midtown percentage points of the West neighborhood also posted a moderate increase in demand between 2000 and 2001; however, we New York University corresponding period of note that this area registered the only increase in demand in the city after September. Annual International 2001. Although average Hospitality Investment daily room rates remain Conference down from last year, the As a result of significant supply increases and the softening national economy, all of the overall picture is far more neighborhoods in Manhattan registered declines in occupancy and average daily rate prior to Acknowledgements promising than anyone September, with the exception of Times Square, which posted a slight increase in average rate, at could have projected this 2.2%. The September 11th terrorist attacks further accelerated the declines in occupancy and ADR Manhattan Operating past fall. Year-end 2001 figures have yet to be throughout Manhattan. History released, but the latest New Supply projections reflect a loss of Operating Statistics By Neighborhood 5.4-million visitors from 2000, down 14% to 32 Recent Changes to million. Direct visitor Hotel Supply in spending will be down $2 Central Park South Manhattan billion – that’s a 12% drop from last year to $14.9 Proposed Hotels in billion. Domestic visitors % % % % % Manhattan are returning more quickly Period Supply Chg. Demand Chg. Occ. Chg. ADR Chg. RevPAR Chg. than the smaller but more Jan. - Aug. Manhattan Operating lucrative international ’ 00 630,562 474,307 75.2 % $307.90 $231.60 Statistics by Market market. Furthermore, the Segment leisure market is returning ’ 01 630,244 (0.1) % 411,416 (13.3) % 65.3 (13.2) 296.81 (3.6) % 193.75 (16.3) % faster than the business Sept. - Dec. market. Part of this Manhattan Operating downturn is due to the ’ 00 317,034 254,531 80.3 395.40 317.45 Statistics by recession, part due to the Neighborhood ’ 01 313,906 (1.0) 199,048 (21.8) 63.4 (21.0) 299.33 (24.3) 189.81 (40.2) effects of September 11th, and part due to the fact Year- End Manhattan Operating that, by all accounts, 2000 History and Forecast was a banner year that ’ 00 947,596 728,838 76.9 338.26 260.17

surpassed all expectations, ’ 01 944,150 (0.4) 610,464 (16.2) 64.7 (15.9) 297.90 (11.9) 192.61 (26.0) making it a misleading benchmark for the Click on the links below industry. Visitor projections Downtown to read quotes from the for 2002 are set to stabilize. following individuals: NYC & Company is forecasting an increase of % % % % % nearly 1% in overall Period Supply Chg. Demand Chg. Occ. Chg. ADR Chg. RevPAR Chg. Michael Bloomberg, visitors over last year, to Jan. - Aug. Mayor, 32.3 million. Despite the New York City ’ 00 707,853 621,350 87.8 % $240.21 $210.86 short-term downturn in visitors, we remain bullish ’ 01 916,353 29.5 % 710,161 14.3 % 77.5 (11.7) 239.05 (0.5) % 185.26 (12.1) % Jonathan M. Tisch, on tourism. Major hotel Chairman & CEO, Sept. - Dec. development continues, Loews Hotels; with notable examples ’ 00 426,308 354,946 83.3 283.65 236.17 Chairman, including the recently Travel Business ’ 01 193,977 (54.5) 153.380 (56.8) 79.1 (5.0) 237.43 (16.3) 187.74 (20.5) opened W Times Square, Roundtable the Ritz-Carlton Battery Year- End Park City and the Ritz- Stephen Rushmore, Carlton Central Park ’ 00 1,134,161 976,296 86.1 256.09 220.44 President and Founder, South, and the soon-to - ’ 01 1,110,330 (2.1) 863,541 (11.5) 77.8 (9.7) 238.57 (6.8) 185.54 (15.8) HVS International come Westin Times Square. In short, New York remains as vital and dynamic as Grand Central Joseph E. Spinnato, ever, and the question is President, not whether we will return Hotel Association of to our recent record-setting % % % % % NYC, Inc. boom in tourism, but how Period Supply Chg. Demand Chg. Occ. Chg. ADR Chg. RevPAR Chg. soon. Jan. - Aug. Randy Smith, President, ’ 00 963,890 792,679 82.2 % $187.99 $154.60 Smith Travel Research ’ 01 1,161,783 20.5 % 859,489 8.4 % 74.0 (10.0) 187.24 (0.4) % 138.52 (10.4) % Cristyne L. Nicholas, HVS Divisions Sept. - Dec. President & CEO, ’ 00 582,847 489,363 84.0 232.84 195.49 NYC & Company HVS Consulting ’ 01 580,988 (0.3) 376,498 (23.1) 64.8 (22.8) 177.44 (23.8) 114.99 (41.2) Services Dr. Lalia Rach, HVS Valuation Year- End Services Associate Dean, ’ 00 1,546,737 1,282,042 82.9 205.11 170.01 Preston Robert Tisch Asset Management Center for Hospitality, & Operational ’ 01 1,742,771 12.7 1,235,987 (3.6) 70.9 (14.4) 184.26 (10.2) 130.68 (23.1) Advisory Services Tourism, and Travel Eco Services Administration, New York University Executive Search Midtown East Food & Beverage Services HVScompass % % % % % Interior Design Period Supply Chg. Demand Chg. Occ. Chg. ADR Chg. RevPAR Chg. To download a Timeshare Jan. - Aug. printable PDF version

Services of this survey, click Gaming Services ’ 00 2,229,786 1,892,469 84.9 % $272.85 $231.57 here. Investment ’ 01 2,405,225 7.9 % 1,801,541 (4.8) % 74.9 (11.7) 255.39 (6.4) % 191.29 (17.4) % Services HVS/The Ference Sept. - Dec. Group: ’ 00 1,180,464 1,009,893 85.6 333.91 285.66 http://www.hvsinternational.com/emails/NYC%20Survey/2002/Neighbor.htm 5/9/2002 NYC Hotel Survey Page 2 of

Operational & ’ 01 1,250,221 5.9 912,161 (9.7) 73.0 (14.7) 248.13 (25.7) 181.04 (36.6) Management Strategy Year- End Development ’ 00 3,410,250 2,902,362 85.1 294.10 250.30 Technology Strategies ’ 01 3,655,446 7.2 2,713,702 (6.5) 74.2 (12.8) 252.95 (14.0) 187.78 (25.0) HVS Convention, Sports, & Entertainment Midtown West Facilities Consulting HVS Capital % % % % % Period Supply Chg. Demand Chg. Occ. Chg. ADR Chg. RevPAR Chg. Corp. HVS Special Jan. - Aug. Hospitality Assets ’ 00 2,113,395 1,745,195 82.6 % $216.00 $178.37 Group ’ 01 2,312,064 9.4 % 1,767,152 1.3 % 76.4 (7.4) 206.94 (4.2) % 158.17 (11.3) % Sept. - Dec. ’ 00 1,051,294 892,428 84.9 271.26 230.27 ’ 01 1,206,763 14.8 916,087 2.7 75.9 (10.6) 193.97 (28.5) 147.25 (36.1) Click here to visit the HotelRevMAX web site Year- End ’ 00 3,164,689 2,637,623 83.3 234.69 195.60 ’ 01 3,518,827 11.2 2,683,239 1.7 76.3 (8.5) 202.51 (13.7) 154.42 (21.1)

Times Square

% % % % % Period Supply Chg. Demand Chg. Occ. Chg. ADR Chg. RevPAR Chg. Jan. - Aug. ’ 00 1,976,694 1,697,080 85.9 % $201.19 $172.73 ’ 01 1,876,525 (5.1) % 1,537,638 (9.4) % 81.9 (4.6) 205.54 2.2 % 168.42 (2.5) % Sept. - Dec. ’ 00 1,086,142 933,314 85.9 250.11 214.92 ’ 01 1,093,957 0.7 816,358 (12.5) 74.6 (13.2) 186.68 (25.4) 139.31 (35.2) Year- End ’ 00 3,062,836 2,630,394 85.9 218.55 187.69 ’ 01 2,970,482 (3.0) 2,353,996 (10.5) 79.2 (7.7) 199.00 (8.9) 157.70 (16.0)

Upper East Side

% % % % % Period Supply Chg. Demand Chg. Occ. Chg. ADR Chg. RevPAR Chg. Jan. - Aug. ’ 00 227,852 172,925 75.9 % $268.10 $203.47 ’ 01 347,085 52.3 % 235,838 36.4 % 67.9 (10.5) 250.88 (6.4) % 170.47 (16.2) % Sept. - Dec. ’ 00 159,698 133,632 83.7 301.13 251.98 ’ 01 182,390 14.2 126,384 (5.4) 69.3 (17.2) 261.15 (13.3) 180.96 (28.2) Year- End ’ 00 387,550 306,557 79.1 282.50 223.46 ’ 01 529,475 36.6 362,222 18.2 68.4 (13.5) 254.47 (9.9) 174.09 (22.1)

Manhattan Aggregate

% % % % % Period Supply Chg. Demand Chg. Occ. Chg. ADR Chg. RevPAR Chg. Jan. - Aug. ’ 00 8,850,032 7,396,005 83.6 % $233.29 $194.96 ’ 01 9,649,279 9.0 % 7,323,235 (1.0) % 75.9 (9.2) 225.83 (3.2) % 171.39 (12.1) % Sept. - Dec. ’ 00 4,803,787 4,068,107 84.7 287.15 243.18 ’ 01 4,822,202 0.4 3,499,916 (14.0) 72.6 (14.3) 214.93 (25.2) 155.99 (35.9) Year- End ’ 00 13,653,819 11,464,112 84.0 252.41 211.93 ’ 01 14,471,481 6.0 10,823,151 (5.6) 74.8 (10.9) 222.30 (11.9) 166.26 (21.5) Source: HotelRevMAX

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Dr. Lalia Rach, Manhattan Operating History and Forecast Click on the links below for Associate Dean, information on: Preston Robert Tisch Center for Hospitality, The substantial increase in competition in the Manhattan lodging market as well as the slowed New York City Hotel Survey Tourism, and Travel economy challenges hotel operators to effectively price and promote their properties. The additional Administration, 2,240 rooms entering the market in 2003 and 2004 will further widen the available choices for guests. HVS International New York University

Assuming no further terrorist activity against a travel-related entity, we believe that the Manhattan The Preston Robert Tisch As a result of the recession Center for Hospitality, and the September 11th lodging market’s 2002 occupancy levels will slightly decline, and that 2003 will be dictated by the Tourism, and Travel terrorist attacks, the normal influences of economic conditions as well as by the interaction of supply and demand. Thus, Administration structural changes in the we assume that the terrorist attacks will have limited long-term impact on travel activity in the New daily business process may York City market. Furthermore, as New York continues to re-establish itself as the financial and in fact be the harbinger of New York University Annual tourism capital of the world, we expect that the lodging market will rebound by early 2003, returning International Hospitality a new golden age for the hotel industry. We have to 1999 occupancy levels by 2005. Significant new supply entering the market in 2002 will put Investment Conference not been an industry further downward pressure on citywide average rates; however, pending the economic recovery, we Acknowledgements known for embracing rapid anticipate that average rates will grow in subsequent years, reaching 2000 levels by 2005. or innovative change, but perhaps this period in time Manhattan Operating History has underscored the need Based on an analysis of the historical data and a review of proposed hotels, we have prepared the for more out-of -the-box following forecast for the Manhattan lodging market. New Supply thinking, more creativity, and a more active Recent Changes to Hotel management style. Consider how much Manhattan Operating History and Forecast Supply in Manhattan stronger we are today because of the changes that Proposed Hotels in were forced on the industry No. of % Occupied % Avg. % % Manhattan as a result of the declining Year Rooms Chg. Occ. Rooms Chg. Rate Chg. RevPAR Chg. economy and the self - 1988 50,567 79.5 % 14,669,464 $118.81 $94.43 Manhattan Operating inflicted problems of over- Statistics by Market Segment supply in the late 1980s and 1989 50,262 (0.6) % 78.5 14,409,284 (1.8) % 128.45 8.1 % 100.89 6.8 % early 1990s. Until recently, 1990 51,725 2.9 71.5 13,491,758 (6.4) 132.15 2.9 94.44 (6.4) Manhattan Operating one major issue remained 1991 52,318 1.1 68.0 12,985,547 (3.8) 125.12 (5.3) 85.08 (9.9) Statistics by Neighborhood – the leaders of our 1992 53,687 2.6 68.0 13,326,528 2.6 123.58 (1.2) 84.04 (1.2) companies were either Manhattan Operating History hoteliers who understood 1993 53,635 (0.1) 70.6 13,820,421 3.7 125.77 1.8 88.79 5.6 and Forecast the concept of service and 1994 54,135 0.9 75.5 14,909,928 7.9 133.59 6.2 100.80 13.5 hospitality or developers who held return on 1995 54,221 0.2 78.4 15,510,627 4.0 146.23 9.5 114.61 13.7 investment as the ultimate 1996 54,468 0.5 80.6 16,030,338 3.4 160.41 9.7 129.34 12.9 and only goal. But now, as Click on the links below to we face an even greater 1997 55,359 1.6 81.9 16,541,365 3.2 175.33 9.3 143.53 11.0 read quotes from the following challenge, the leaders of 1998 55,926 1.0 82.5 16,844,016 1.8 192.23 9.6 158.62 10.5 individuals: our industry understand 1999 57,586 3.0 80.6 16,935,877 0.5 206.62 7.5 166.48 5.0 that to succeed they must Michael Bloomberg, be both – and the 2000 59,159 2.7 83.8 18,088,605 6.8 222.14 7.5 186.09 11.8 Mayor, companies that will soar 2001 60,870 2.9 73.5 16,325,469 (9.7) 196.71 (11.4) 144.54 (22.3) New York City will have leaders who combine the financial Jonathan M. Tisch, savvy, the brand 2002 62,607 2.9 72.9 16,651,978 2.0 192.78 (2.0) 140.48 (2.8) Chairman & CEO, knowledge, and the service 2003 63,903 2.1 74.2 17,318,058 4.0 198.56 3.0 147.43 4.9 Loews Hotels; skills necessary to move Chairman, global companies. 2004 64,847 1.5 76.8 18,183,960 5.0 209.48 5.5 160.93 9.2 Travel Business Roundtable 2005 64,847 0.0 80.7 19,093,158 5.0 222.05 6.0 179.12 11.3 Source: Smith Travel Research Stephen Rushmore, President and Founder, Click here to visit the HVS International HVS International web site Joseph E. Spinnato, back to top President, Hotel Association of NYC, Inc.

Randy Smith, President, Smith Travel Research

Cristyne L. Nicholas, President & CEO, NYC & Company

Dr. Lalia Rach, Associate Dean, Preston Robert Tisch Center for Hospitality, Tourism, and Travel Administration, New York University

To download a printable PDF version of this survey, click here.

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