Milan, Italy 2005 2006 2007 2008 Years

Rooms supply in Milan has Milan is a predominantly commercial market, home to some of the Upscale Rooms Supply biggest Italian banks, more than 40 foreign banks and the Italian remained fairly stable over the 2,750 10 % stock exchange (Borsa Italiana). Milan is renowned as a centre of last few years. However, like 8% European markets such as Paris, design and fashion, centred on Quadrilatero della Moda, in the 2,500 heart of the city. 6% the Milan market is expecting 4% The city’s exhibition 2,250 significant additions to its luxury Main Feeder Markets 2% Japan centre and trade fair hotel supply over the next three 11% USA complex drives a 2,000 0% years. A Bulgari Hotel opened in 2008 2009 2010 2011 2012 9% considerable amount 2004, and the world’s first Other of business for the Rooms Change Armani Hotel will open in 2010 44% UK Source : ISTAT, HVS Research 8% region and is on Via Manzoni. considered to be the Over the last ten years the Milan market has seen a consolidation of largest trade fair its supply around leading international brands. The absorption of Spain complex in the world. 8% this new supply will have to be underpinned by increased efforts in The The main source Germany promoting Milan as a leisure destination and the interest Netherlands Russia France 7% markets for Milan are 3% surrounding the World Fair hosted by the city in 2015 for six months. 4% 6% Japan, the USA and Source: IATS Milan the UK. Upscale Hotel Performance The general stability of the Milan hotel market is due mainly to a Average daily rate fairly diversified demand generated by the corporate and meeting 350 68% (ADR) increased by 66% markets and, to a lesser extent, by leisure travellers, who typically 300 around 2% a year and 64% 250 revenue per available include Milan as part of a tour of Italy’s main cities, rather than 62% visiting solely the city of Milan. Despite its many cultural 200 60% room (RevPAR) by 4% attractions, Milan still has the potential to improve the levels of Market Snapshot 150 58% a year from 2005 to 56% 2008, indicating the leisure demand. The most recent transaction in the market was 100 54% 50 stable levels of the sale of the Nhow Hotel in December 2007. The sale of the Four 52% demand of recent Seasons Milan in 2006 was a record for a single asset in terms of 0 50% price per room: almost €1.7 million. Milan, Italy 2005 2006 2007 2008 years. Any increase in

ADR (€) RevPA R Occ A verage Occupancy occupancy, however, is Property Transactions Sale Date Room s Sale Price (€) Price/Room (€) still constrained by low Source : HVS Research Nhow Hotel Dec-07 245 97,000,000 396,000 demand at weekends and in the summer months. The second half Excelsior Hotel Gallia Nov-06 237 100,000,000 422,000 August 2009 Four Seasons M ilan Apr-06 118 200,000,000 1,695,000 of 2008, however, saw a severe decline in occupancy due to the reliance of hotels on business demand. In the first quarter of 2009, Source: HVS Research occupancy has continued to decline, and pressure on average rate The hotel market in Milan relies primarily on has caused RevPAR to decline, according to some estimates, by Seasonality significant volumes of business demand more than 20%. (approximately 60-70% of the total hotel 800,000 90% demand), with peak demand from Tuesday 700,000 80% Value per Room Milan’s values per room grew at a compound 70% annual rate of 0.3% from 2000 to 2008. Milan’s to Friday. The periods of lowest occupancy 600,000 450 23% 60% trading results have been negatively impacted are, consequently, the traditional holiday 500,000 425 18% 50% 400 months of July, August and December. A 400,000 13% by the current economic downturn because of 40% 375 weekdays/weekend seasonality factor exists. 300,000 8% the city’s reliance on international visitation and 30% 350 Luxury hotels, however, have been able to 200,000 3% the drop in domestic business demand. An 20% 325 attract the Middle Eastern market in the -2% occupancy-led 3.9% drop in RevPAR caused 100,000 10% 300 values to slump by 13.6%, to €361,400, in 2008. summer months to mitigate the reduced — 0% 275 -7% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec domestic demand. Room rates typically peak 250 -12% Since there has been no significant economic in March, April and September, with the Arrivals Bednights Occupancy 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 improvement in the Milan market, we expect arrival of events such as the annual furniture Value per Room (000€) Change (%) hotel values to continue to decline further in fair and the women’s fashion weeks. Source : HVS Research Source : HVS Hotel Valuation Index 2009.

Please contact the authors to purchase the full market report. Sophie Perret, [email protected] or Pierre Ricord, [email protected]. HVS London Office – www.hvs.com