Reno Tahoe Insights and Analysis Copies of the various research reports conducted to establish our target demographic and their travel habits. 1.1 VISITOR ORIGINATION ANALYSIS As of May 16, 2016 Produced by OnStrategy Page 1 of 14 Visitor Origination Analysis EXECUTIVE SUMMARY Key Purpose The purpose of the Visitor Origination Analysis is: • To determine the origination of visitors to Reno-Tahoe • To assess the effectiveness of marketing expenditures by the RSCVA on a quarterly basis • To provide hotel properties comparative data to identify potential market opportunities Data Range: Hotel occupied cash room nights from January 1, 2015 – December 31, 2015 representing the following properties: Atlantis Casino Resort Spa, Eldorado Resort Casino, Grand Sierra Resort and Casino, Harrah’s Casino Hotel Reno, Nugget Casino Resort, Peppermill Resort Spa Casino, Sands Regency Casino Hotel and Silver Legacy Resort Casino. Data Highlights • The data set represents about 70% of Reno-Tahoe cash occupied hotel room nights in 2015. • Northern Nevada, Bay Area, California’s Central Valleys and Southern California collectively represent ~60% of total occupied hotel room nights in the destination. o Approximately 50 percent of all occupied hotel rooms in 2015 originated in California, with the highest concentration coming from the San Francisco Bay Area and about 5 percent from Southern California. o The Sacramento MSA has a substantial number of web session views, representing 9 percent of total occupied room nights, which is the second-largest producing MSA for room nights. o Reno-Sparks plus Nevada Nonmetropolitan represented 252,036 hotel room nights in 2015, or about 9 percent of total occupied room nights. • Canadian and international room nights account for less than 1 percent of overall hotel room nights. • There is a statistically significant correlation between per capita income and room nights. Seattle has a substantial per capita personal income, second to only San Francisco on the west coast. Marketing Opportunities The following represent market expansion opportunities: The Northern California market is not fully saturated. San Francisco MSA represents a significant number of hotel rooms, equating to approximately 15 percent of the Reno- Tahoe area total. However, the 416,957 gross cash occupied room nights are about 9 percent of the MSA’s potential visitors (ages 23-29, ages 30-49 and ages 50-69). In some market settings 20 to 25 percent might represent a significant amount, where the market may begin to become saturated. However, in this study repeat visitors have not been identified and the number of repeats from Northern California is undoubtedly substantial. Thus, there is likely more market to penetrate with younger-aged demographics, and any gains will require increased resources due to the saturation. The Southern California market has significant potential due to size, air lift and lack of market penetration. Los Angeles MSA, with 8,554,000 potential visitors from the ages of 23 to 69. Currently, the Reno/Sparks area is not unknown to this market as there were 86,980 visitor nights last year, representing 3.0 percent of the area total. There is strong air service from the three MSA airports with seat capacity expected to increase by 30 percent in fall 2016. Southern California visitation is not even close to surpassing Northern California, and the size of the market warrants a priority focus along with consideration of the surrounding population areas. Seattle MSA has the second highest per capita income on the West Coast. Produced by OnStrategy Page 2 of 14 Visitor Origination Analysis Seattle MSA, with 2,357,000 potential visitors from the ages of 23 to 69, with 2 percent visiting Reno-Tahoe last year. In addition, this MSA has a substantial per capita personal income at $58,205 which is highest on the West Coast except for the San Francisco area. Per capita personal income has shown to have a positive correlation with room nights. While air service is currently constrained, discussions are ensuing to increase flights. International visitation is extremely low. North America international visitor travel is very low, with Canada and Mexico together representing 0.50 percent of the total hotel occupied room nights in the destination. Additional analysis should be conducted to develop an adequate understanding of International markets. Canada has been considered a solid marketplace of Reno/Sparks visitors, however the recorded room nights do not support that as it represents just 0.49 percent of area total occupied hotel room nights. Mexico also requires additional work to fully understand the impact of visitors in the RSCVA market (0.03 percent), especially because there is a non-stop flight from Guadalajara. The net non-North American market is limited with just about 11,975 gross room nights or 0.42 percent. Additional Market Opportunities • MSAs with potential growth include both Phoenix and San Diego, based upon population and the areas’ recognition of the Reno/Sparks destination through room night occupancy. • The Sacramento MSA comprises a large geographic area and contributes a significant number of room nights being in the second position in the Top 25 MSA’s. This representation can bode well for promoting concerts and ticketed events. • New York City generated ~31,000 room nights or 1% of the total cash occupied in 2015. While this is a potential market to grow awareness, all growth must be facilitated through air service whereas the other market opportunities do have drive potential. • The Reno-Sparks MSA is the number three producer of room nights, and when combined with Nevada Nonmetropolitan Area, yields about 252,000 room nights or about 9 percent of the total. Such a significant representation in the marketplace probably warrants additional research to fully understand the consumer behavior impacting these room nights. 2015 ROOM NIGHT SUMMARY 2015 Recorded Totals % of Market Domestic Room Nights (current number of Room Nights) 1,905,905 67% International Room Nights 9,021 0.31% Canadian Room Nights 9,851 0.34% Unknown* 134,844 5% Total Room Nights 2,059,621 - Cash Occupied Room Night Total 2,863,949 - *Majority of unknowns are unverifiable domestics. Produced by OnStrategy Page 3 of 14 Visitor Origination Analysis METHODOLOGY IN DETAIL The Visitor Origination Analysis was completed in tandem with the RSCVA strategic planning process to obtain a more data- driven understanding of visitor origination to the Reno-Tahoe destination. The information garnered from the analysis was specifically used to inform the Leisure Travel & Tourism Sales portions of the RSCVA’s 5-year strategy. The analysis is a collective effort, including self-reported data from 9 hotel properties in the destination and compiled and analyzed by a third party company, OnStrategy. For this study, data were requested from ten major hotels, representing about 80 percent of the total hotel cash room nights occupied during 2015. Currently, this study represents nine hotels or 70 percent of the market. The 2013 and 2014 data will be utilized for benchmarking as the planning process moves forward. However, only 2015 data are represented due to timeliness need of the information. The data were scrubbed and separated into US Only, Canada Only, International and Unknown. The geocoded data were aggregated into Metropolitan Statistical Areas (MSA’s) to analyze areas of room night concentration for identification of primary and secondary markets for potential future resource investment. MSA’s were chosen for aggregation vehicles as the concept is readily understood and significant amount of demographic data are readily available for developing criteria on which to make investment choices. Tables follow with some of the available information. The geocoded data allow for “heat map” production to provide a truly visual understanding of visitor origination. In addition, airline passenger departure information from various destination cities – both non-stop and connecting – was provided by Reno-Tahoe International Airport Authority (RTIA). This information is over-laid on top of generating MSA’s. The RTIA data is the actual number of “visitors” to Reno, not just a total count of all passengers. Visitor information does not identify where passengers stayed during their visit to the Reno area. A question can arise as to how representative the current 70 percent data sample is of the total hotel room night population. In other words, is this good enough to be basing million dollar decisions on? Given that decisions are impacting the complete RSCVA hotel area and not a specific location, i.e. downtown Reno or Lake Tahoe, the confidence level is 99% with a 1% +/- confidence interval any decision made will have a strong representation across the area. For sake of better understandability, the analyzed number of recorded domestic room nights of 1,905,905 was grossed up by a 70% factor. This method is utilized when comparing specific market segments or MSA’s. Moving forward into 2016 with a complete ten hotel data set, more in-depth analysis can be conducted as 2015 will provide a solid basis for benchmarking. For example, changes in MSA occupancy can be mapped on a monthly or quarterly basis, seasonal variations can be tracked, impact of different types of promotional campaigns can be evaluated, analysis of airline traffic, etc. Hotel Properties Included in Analysis: Atlantis Casino Resort Spa, Eldorado Resort Casino, Grand Sierra Resort and Casino, Harrah’s