Feasibility Study of Expansion of Headquarters Hotel Capacity Franklin County Convention Facilities Authority Columbus, Ohio

Submitted to: William C. Jennison Executive Director Franklin County Convention Facilities Authority 400 North High Street Columbus, OH 43215 (614) 645-3900 (614) 645-3906 FAX

Prepared by: HVS Convention, Sports & Entertainment Facilities Consulting A Division of HVS International 4445 West Erie, Suite 1-A Chicago, IL 60610 (312) 587-9900 Phone (312) 587-9908 Fax Web Site: www.hvsinternational.com

December 21, 2001

HVS International Table of Contents

Table of Contents

Transmittal Letter

1. Executive Summary 2. Description of the Land and Neighborhood 3. Area Economic Analysis 4. Downtown Hotel Market Analysis 5. Convention / Meeting Industry Trends 6. Convention Center Demand Analysis 7. Hotel Occupancy Projections 8. Statement of Assumptions and Limiting Conditions 9. Certification

December 21, 2001

Mr. William C. Jennison Executive Director Franklin County Convention Facilities 400 North High Street Columbus, OH 43215 (614) 645-3900 (614) 645-3906 FAX

445 West Erie Re: Feasibility Study- Expansion of Suite 1-A Headquarters Hotel Capacity Chicago, IL 60610 Columbus, Ohio (312) 587-9900 fax (312) 587-9908 www.hvsinternational.com

Dear Mr. Jennison:

Pursuant to your request, we herewith submit our feasibility study

pertaining to the above-captioned study. We have inspected the site and

facilities and analyzed the hotel market conditions in the Columbus

area. The conclusions reached are based upon our present knowledge of

lodging conditions in the competitive market, as of the completion of

our fieldwork and research on September 12, 2001.

We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our New York findings. The feasibility study is subject to the comments made Denver throughout this report and to all assumptions and limiting conditions San Francisco set forth herein. Miami Orlando Chicago Vancouver Very sincerely yours, Toronto London New Delhi Singapore Mexico City

São Paulo Buenos Aires HVS Convention, Sports &

Entertainment Facilities Consulting

HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Executive Summary 1-1

1. Executive Summary

Assignment Overview The Franklin County Convention Facilities Authority (FCCFA) retained HVS International to analyze the feasibility of developing additional full-service convention hotel capacity in downtown Columbus, in the immediate vicinity of the Greater Columbus Convention Center (GCCC). To this end, HVS International personnel worked to understand the downtown lodging market, identify its key demand generators, uncover trends in occupancy and average rate, and determine the implications of the development of a new convention headquarters hotel; also, to understand the relationship between the broader downtown Columbus economic condition and the downtown lodging market. We also performed a detailed analysis of the broader convention center competitive market, in order to frame the GCCC’s operating characteristics in a larger context. The convention center market analysis was intended to understand the likely direction of the center’s usage, under a variety of scenarios. We have developed projections for the subject hotel market and the convention center assuming that no new hotel development action is taken, as well as under the assumption that an additional 500 rooms of headquarters hotel capacity enter the market as of January 1, 2005.

New Capacity Issues HVS International was specifically directed to analyze the site located on a city block bounded by High Street to the east, Convention Center Drive to the south, Front Street to the west, and Vine Street to the north. The site is located across High Street from the GCCC. Development on this site would presume that a whole new hotel was constructed, as opposed to the possible expansion of the existing Hyatt Regency affiliate that currently operates as the GCCC’s primary headquarters hotel. (It is our understanding that an expansion of the Hyatt Regency with up to 350 new rooms has been considered in the recent past.)

In our analysis, we have developed occupancy rate projections for an additional 500-room headquarters hotel. This phase of the assignment does not include the financial projections that would be necessary to determine whether the construction of a new hotel or an expansion of the Hyatt

HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Executive Summary 1-2

Regency would be more optimal. Although a Hyatt expansion would likely be easier to finance and complete and less expensive to operate, the construction of a whole new hotel with an additional first-class brand name would heighten the lodging market’s profile and improve the marketability of the convention center.

Site Conclusions Key conclusions pertaining to the subject site, as identified above, are noted below.

• The site was found to have sufficient size and physical utility, with strong connections to key downtown demand generators. • Based on our research, no alternative site offers superior or comparable advantages. • Our research indicated that no significant zoning restrictions would be placed on the development in terms of either height or size. • City officials supervising new construction on the site would be more concerned with design and architectural issues. • City officials reported that an elevated, pedestrian walkway would likely be prohibited. Neighborhood Key conclusions pertaining to neighborhood influences are noted below. Analysis • Downtown Columbus consists of two increasingly distinct sub- sectors: 1) a vibrant northern sector, and 2) a stagnant southern sector. • The downturn in the downtown neighborhood’s quality becomes most apparent in the vicinity of Capitol Square. • Hotels in the north outperform those to the south by a significant margin. • Two southern sector hotels are currently struggling to maintain viable occupancy rates: the Adam’s Mark and Westin Great Southern. The Hyatt Capitol Square has also been adversely affected by the decline in the health of Columbus’s urban core. • Development of a new headquarters hotel risks further isolating southern sector hotels, and increases risk of further financial distress for these owners. • Potential outcomes for the “at risk” hotels (the Adam’s Mark and the Westin Great Southern) are a pivotal question in determining the

HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Executive Summary 1-3

prospects for the proposed headquarters hotel. We have identified three likely outcomes, without identifying which is most likely or preferable: 1) a revival of the surrounding neighborhood resulting in renewed occupancy and firm rental rates at the existing hotels; 2) continued operation as a hotel use, but with a lower-rated brand and market orientation; and 3) an adaptation of the real estate to a residential or other alternate use. Area Economic Key conclusions pertaining to the area economic analysis are noted below. Analysis • The Columbus area enjoys the benefits of a truly diverse economic base. Franklin County and the broader Columbus area have experienced consistent economic growth in past decades. • Columbus is an important center of research and development, the home of a large and dynamic state university, and an important regional center for commerce, health care, and retail services. • In 2001, the Columbus economy sent out mixed signals. Employment levels were up, but real estate vacancy rates were also increasing. • Downtown office market trends are similar to those affecting the downtown hotel market: weakness in urban core, strength to the north. Downtown Hotel Key conclusions pertaining to the hotel market analysis are identified as Lodging Market follows. Analysis • Of the eleven identified hotels, only five (containing 1,381 rooms) would likely be perceived as being within “walking distance” of the convention center. • The year-to-date downturn in the competitive market is attributed to the loss of commercial demand previously generated by The Limited, Bank One, and Borden. In addition, the terrorist attacks of September 11th exacerbated weakening economic conditions. • When balanced, the downtown Columbus lodging market should generate occupancy rates of 65% to 70%. The market is expected to finish 2001 at approximately 60% occupancy. • The downtown lodging market’s average rate growth was weak between 1996 and 2000 when compared to other hotel markets throughout the nation.

HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Executive Summary 1-4

• In last four years, 472 rooms with only 5,600 additional square feet of meeting space have entered the market. • The Adam’s Mark is the only full-service hotel to open since 1989, and its brand identification is limited. Thus, recent inventory increases do little to raise the city’s profile. Hotel Occupancy Assuming no new hotel is constructed Projections • 2002 is expected to be a down year for convention demand. Recovery anticipated in meeting and group segment, thereafter. • Marketwide occupancy should decline in 2002, but recover gradually and return to balanced conditions in 2006 and 2007. • In these projections, we make no specific assumptions regarding outcomes for hotels such as the Westin and the Adam’s Mark, which are currently struggling to maintain viable occupancy rates. These hotels’ revival would appear to be contingent upon significant redevelopment of Columbus’s urban core. Assuming a 500-room convention hotel opens in 2005

• The number of incremental room nights generated by the GCCC, strictly associated with and attributable to the opening of the hypothetical headquarters hotel, is projected to stabilize at 71,800. • Beyond this GCCC-related demand component, we have added another 20% in order to account for demand induced by the hotel’s additional marketing efforts and incremental meeting space. • This induced demand component equates to approximately 47 points of occupancy at the new 500-room hotel. The hotel’s remaining 15-20 points will come out of the existing demand base. • Marketwide occupancy rates are set back approximately two years, reflecting the time necessary to absorb the new headquarters hotel. • We project a gradual build-up to stabilized occupancy of 67% for the new hotel, reflecting a market penetration factor of 105%. Conclusion At this point, it appears that the development of the proposed headquarters hotel would likely serve to further isolate existing hotels such as the Westin and the Adam’s Mark, which are struggling to maintain viable occupancy rates. A new hotel development in Columbus’s northern sector would be likely to draw demand away from those properties that are already struggling

HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Executive Summary 1-5

to generate viable occupancy rates. The fact that the construction of the proposed subject property would possibly make use of public funds and be developed by a municipal agency (the FCCFA) requires that such development be highly sensitive to the project’s potential impact on the market’s existing hotels.

HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Description of the Land and Neighborhood 2-1

2. Description of the Land and Neighborhood

The purpose of this section of the narrative is to investigate the utility of the subject site and determine the degree to which the surrounding neighborhood would support a new convention headquarters hotel.

Definition of Subject At the direction of the FCCFA, we have analyzed the land located on a city Site block bounded by High Street to the east, Convention Center Drive to the south, Front Street to the west, and Vine Street to the north. The site is located across High Street from the GCCC.

Site Characteristics The size of the subject land is not precisely defined at this point. The FCCFA owns the majority of the city block in question, including the existing five- level West Parking Garage. Other land on the block is improved with a surface parking lot used for the convention center, a bike path, and various mid-rise buildings fronting High and Vine Streets. These buildings typically feature ground level retail and residential units on the upper levels.

The primary developable portion of the site consists of a rectangular surface parking lot measuring ±52,500 square feet, located along High Street. In the event the sites of the mid-rise buildings and the bike path were included, the size of this rectangular lot increases to ±63,350 square feet. Extending from this site along Convention Center Drive is a second pad site of ±16,875 square feet. Thus, the developable capacity of the land totals ±80,000 square feet, or approximately two acres. In addition, the adjacent parking garage may reportedly be expanded to include additional capacity, presumably providing the facilities necessary to support the proposed hotel.

Based on our experience, as well as our consultations with Jonathan Nehmer of HVS/Jonathan Nehmer + Associates, it appears that the block has sufficient capacity to support the construction of a large convention headquarters hotel. As will be described later in this section, the land is not significantly constrained by zoning limitations. According to city zoning representatives, the land is not subject to either height or density limitations. As such, the size is considered to be adequate for the prospective use. HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Description of the Land and Neighborhood 2-2

The subject site has some unorthodox features. Ground level drops below High Street mid-way along the subject block and continues to slope downward gently from north to south, as High Street becomes an elevated overpass. High Street and Convention Center Drive do not intersect; rather, High Street passes over Convention Center Drive. Directly south of the subject site, across Convention Center Drive, a railway line extends in an east- west direction, parallel to (and just below) Nationwide Boulevard. An elevated embankment bounds the rail line to the south. The embankment rises up to meet High Street on the other side of the rail line, so that High Street again becomes ground level. The land in the immediate vicinity of the subject site was presumably dug out in this manner in order to create a sound barrier for the railway traffic, or otherwise sink the railway traffic below the downtown’s street level. High Street essentially bridges this excavated area, which includes the subject site.

As a result of these site characteristics, the subject land is located below High Street at a varying depth that reaches a high of about twenty feet. We do not consider this characteristic of the subject land to be a mitigating factor with regard to its use. From discussions with city planners, it is our understanding that direct access to the site may be provided from High Street, should the design call for a main entrance on this level. Whereas the site may alternately be accessed by both Vine Street and Convention Center Drive, High Street represents the primary north-south corridor serving downtown Columbus. The design of a hotel on the subject site would most likely make use of High Street as the primary point of entry. As for the design of any improvements located below High Street, a convention headquarters hotel would have many potential uses for these floors, including parking, service areas, or certain meeting facilities.

Regional Access It is important to analyze the site in regards to ease of access with respect to regional and local transportation routes and demand generators. The subject site is well connected to the network of interstate highways serving the Greater Columbus area. Interstates 70 and 71 intersect in downtown Columbus, and are further supported by Interstates 270 and 670, local extensions of the interstate system.

Interstate 70 extends in an east-west direction across the country, originating near Baltimore, Maryland and terminating in Utah. Regionally, it connects Columbus with Pittsburgh (189 miles to the east) and Indianapolis (175 miles to the west). Interstate 71 travels in a northeast-southwest direction, originating in Cleveland (144 miles to the northeast), terminating in HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Description of the Land and Neighborhood 2-3

Louisville, Kentucky (205 miles to the southwest). Apart from Cleveland and Louisville, Interstate 71 provides an important connection with Cincinnati, 104 miles to the southwest.

Interstate 270 forms a beltway around Columbus, surrounding downtown at a radius that varies from five to ten miles, while Interstate 670 covers a distance of approximately ten miles, originating near Port Columbus International Airport to the east, then continuing westbound through downtown. Two important federal highways also support Greater Columbus. U.S. Highway 23 travels in a north-south direction through central Ohio, and passes through downtown Columbus via High Street. U.S. Highway travels through central Ohio in a northwest-southeast direction, and passes through downtown Columbus via Spring Street, approximately three blocks south of the subject site.

Columbus is within 550 miles of more than 50 percent of the United States population. Table 2-1 identifies Columbus’s location relative to nearby population centers.

Table 2-1 Distance from Population Centers Drive Time Point of Origin Distance (Hours)

Dayton 70 1.3 Cincinnati 104 1.8 Cleveland 144 2.5 Indianapolis 175 3.0 Pittsburgh 189 3.2 Detroit 192 4.0 Louisville 207 3.5 Chicago 358 6.0 St. Louis 420 7.0 Toronto 440 7.5

Within a 1,000-mile radius, Columbus has access to 78 percent of the United States' gross domestic product and over 80 percent of Canada's business activity.

Local Access Direct access to the subject site varies depending upon the point of origin. and Visibility Motorists arriving from the east or west via Interstate 70 take the Fourth Street exit, continue northbound for approximately one mile, turn left onto HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Description of the Land and Neighborhood 2-4

Nationwide Boulevard, and then turn right onto High Street. The subject site is midway along the next block, on the left.

Motorists arriving from Port Columbus International Airport follow Interstate 670 westbound for approximately six miles, and then take the Convention Center exit, which connects directly to High Street. The subject site is located approximately two blocks to the south, on the right side of the street.

Motorists arriving from the south via Interstate 71 connect to Interstate 70, and follow the directions noted above. Interstate 71 motorists arriving from the north may either connect to Interstate 670 and use the Convention Center exit, or continue further to the south and use the Spring Street exit. Spring Street crosses High Street approximately one-half mile to the west. The subject site is then located approximately three blocks to the north, on the left.

Overall, the means of directly accessing the subject site is straightforward and logical, enhancing the land’s utility for the proposed use. In addition, in the event the subject land is improved with a convention headquarters hotel, the property will likely be constructed in a high-rise manner, providing a highly conspicuous presence in the downtown skyline. The property can be expected to be highly visible.

Access to Local Based on our research, the downtown hotel market’s demand is currently Demand Generators divided among the three primary segments in the following manner: 48 percent meeting and convention, 41 percent commercial, and 11 percent leisure. The majority of the market’s meeting demand is generated by the activities of the GCCC. Local hotel operators identify the GCCC as the single most important source of downtown lodging demand. The subject property, as a new convention headquarters hotel, is proposed as a means of further enhancing the marketability of the GCCC. Therefore, the subject site is located in its immediate vicinity.

As for commercial demand, this segment’s demand has receded in recent years, owing to a reduction in room nights generated by firms such as Bank One and The Limited. Historically, the three most important sources of downtown commercial lodging demand have been Nationwide Insurance (whose corporate headquarters are one block south of the subject site), Bank One, and The Limited. In the past two years, Bank One has relocated its corporate headquarters from Columbus to Chicago and consolidated its Columbus presence in a northern suburb (Polaris). As for The Limited, in the HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Description of the Land and Neighborhood 2-5

past year, most of this company’s demand has been redirected to the new Hilton in Easton (a suburb to the northeast), as the owner of The Limited also owns the Hilton. Following these recent developments, the most important sources of downtown commercial lodging demand are Nationwide, American Electric Power, Executive Jet, Huntington Bank, and Columbia Gas. These companies also account for a share of the market’s meeting demand, and are generally located within the urban core of downtown, at distances ranging from one block to one mile from the subject site.

In this analysis, we have not identified government and airline crews as separate demand segments, considering demand from these sources to be components of the commercial demand segment. Columbus is Ohio’s state capital. The state’s administrative departments, legislators, and lobbyists generate the majority of the downtown lodging market’s government demand. The capitol building is situated approximately one mile south of the subject site, near Capitol Square. Demand from airline crews are generated by the commercial airlines serving Port Columbus International Airport, which is located approximately six miles east of downtown Columbus.

The downtown lodging market draws leisure demand from two key sources: The Ohio State University and the Nationwide Arena. The university is located approximately two miles north of downtown Columbus; it hosts six football games each fall, and also generates demand from other sporting events, ceremonies (such as graduation), and orientation periods. The university also recently opened the Jerome Schottenstein Center, a state-of- the-art auditorium and performance venue. The $145-million Nationwide Arena opened in 2000 and is the home of the National Hockey League's Columbus Blue Jackets. The arena seats 19,500, and is used as a venue for concerts and special events. It is located approximately two blocks south of the subject site. Nationwide Arena is the centerpiece of the Arena District, and is the engine of growth driving the burgeoning northern end of downtown Columbus.

Other attractions in downtown Columbus include the City Center Mall, the Columbus Museum of Art, and the Ohio and Palace Theaters, as well as distinctive neighborhoods (described below) such as Short North and German Village. These attractions are important in establishing the character of downtown Columbus, and are central to the marketability of the GCCC, but tend not to function as hotel demand generators in their own right. They are generally located within one mile of the subject site. HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Description of the Land and Neighborhood 2-6

Table 2-2 summarizes the downtown market’s key demand generators, and their distance from the subject site.

Table 2-2 Distance from Demand Generators Distance from Demand Generator Subject Site

Greater Columbus Convention Center 0.0 blocks Nationwide Life Insurance Headquarters 1.0 block Nationwide Arena 2.0 blocks Short North Arts District 2.0 blocks American Electric Power 4.0 blocks Huntington Bank 8.0 blocks Columbia Gas 8.0 blocks City Center Mall 9.0 blocks State Capitol 9.0 blocks Columbus Museum of Art 9.0 blocks German Village 1.0 mile The Ohio State University 2.0 miles Port Columbus International Airport 6.0 miles

As will be noted in the Neighborhood Analysis, downtown Columbus is essentially aligned in a linear fashion, and is increasingly characterized by a healthy, vibrant northern sector and a stagnant southern sector. The subject site is located in the northern sector, and is proximate to the GCCC, the Nationwide Arena, and the most important sources of commercial lodging demand. Overall, the site is extremely well located with respect to the downtown lodging market’s key demand generators.

Zoning According to representatives of the City of Columbus, the subject site is zoned as follows.

Downtown District

Within the Downtown District, the subject land is located within the “core” sub-district, which expressly permits a variety of high-density development, including hotels, offices, and residential development. Zoning officials characterize the design code in this jurisdiction as innovative and permissive. The Downtown Zoning Commission is a single body overseeing the entire permitting process, and would reportedly approach a development such as the subject property proactively. No restrictions on height or building density HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Description of the Land and Neighborhood 2-7

apply in this district. At this stage, it appears that zoning commission concerns would most likely relate to architectural issues.

One important limitation was noted in our interviews. It is our understanding that the commission is likely to prohibit an elevated pedestrian walkway, such as is currently in use between the GCCC and the Crowne Plaza Hotel. Whereas such an elevated corridor is considered to detract from street life (and therefore a more vibrant sense of neighborhood), the commission would reportedly be more amenable to the possibility of a subterranean ground connection to the GCCC.

Alternate Sites and In the course of our fieldwork, and at the request of the FCCFA, we also Possible Expansion of investigated the possibility that an alternate site may be available which Hyatt Regency might also serve as a headquarters hotel site. Vacant land located on the northern end of the GCCC, across Goodale Boulevard, is potentially adaptable to the use in question. However, a number of factors limit its use. This land is bounded by access ramps to Interstate 670, which limits its aesthetic appeal. In addition, the land is slightly more peripheral to the thriving Arena District, limiting the quality of its surrounding influences. The land may also prove to be insufficient in size, requiring the closure of Goodale Boulevard. Finally, a more logical long-term use of this land is for another expansion of the GCCC, which would also require the closure of Goodale Boulevard.

A few other sites in the broader area surrounding the GCCC are vacant or otherwise adaptable for hotel development; however, no other site is located on the immediate perimeter of the GCCC. Thus, based on our inspection of the land surrounding the convention center, and discussions with city officials, we have determined that the block bounded by High Street, Convention Center Drive, Front Street, and Vine Street is the best site available for a new convention headquarters hotel serving the GCCC. The site is directly across from the GCCC and is located in the midst of the Arena District, downtown Columbus’s most vibrant neighborhood.

It is our understanding that an expansion of the Hyatt Regency of approximately 350 rooms has been considered in the past, although such a project has never progressed to any material extent. The expansion of the Hyatt Regency, an existing headquarters hotel attached to the GCCC, may be viewed as an alternative to the development of a separate and distinct headquarters hotel. Although a Hyatt expansion would likely be easier to finance and complete and less expensive to operate, the construction of a HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Description of the Land and Neighborhood 2-8

whole new hotel with an additional first-class brand name would heighten the lodging market’s profile and improve the marketability of the convention center. In this analysis, we have not made a specific cost-benefit analysis of the possible expansion of the Hyatt Regency.

Assumptions and We have made a number of assumptions as to the use and utility of the Limitations subject site, identified as follows.

• We assume that the subject site will be served by all the necessary utilities, including (as needed) electricity, natural gas, oil, water, sewage, telephone, cable television, and waste management. • Geological and soil reports were not provided to the consultants or made available for review during the preparation of this report. We are not qualified to evaluate soil conditions other than by a visual inspection of the surface. No extraordinary conditions were apparent. • We assume that any necessary easements or other rights of way will be secured in order to allow for the efficient construction and operation of the proposed hotel. • The consultants have not been informed of any site-specific nuisances or hazards, and there were no visible signs of toxic ground contaminants at the time of our inspection. Because we are not experts in this field, we do not warrant the absence of hazardous waste. • City zoning representatives indicated that the subject site is not located in a flood zone of significant risk. We assume that no special insurance coverage will be required based on the site’s location relative to flood plains. • We assume that all necessary permits and approvals will be secured (including an appropriate liquor license), and that the subject property will be constructed in accordance with local zoning ordinances, building codes, and all other applicable regulations.

Neighborhood Analysis Downtown Columbus may be defined by Fourth Street to the east, Interstate 70 to the south, Front Street to the west, and Interstate 670 to the north. The neighborhood is approximately 1.5 miles in length (north-to-south) and three blocks in width (east to west). The neighborhood may be classified as urban, featuring a mix of high-density commercial, institutional, and residential uses. The overall quality of the neighborhood is difficult to categorize as it HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Description of the Land and Neighborhood 2-9

essentially consists of two separate sectors: 1) a northern sector that is vibrant and rapidly maturing, and 2) a stagnant southern sector. The division of the two sectors is not strict; rather, it happens gradually, but may generally be identified as occurring near Gay Street, which intersects with High Street approximately five blocks south of the subject site.

The subject site is located squarely in the northern sector of downtown Columbus, across High Street from the GCCC, one block north of Nationwide Insurance’s headquarters, and two blocks northeast of the Nationwide Arena. The GCCC was constructed in 1993 as an expansion of the Ohio Center, which was built in 1980. With the February 2001 completion of an $85 million capital improvement project, the GCCC was expanded from 1.4 million to 1.7 million square feet. The subject site is also in the immediate vicinity of the Hyatt Regency (which connects directly to the GCCC), the Crowne Plaza Hotel (which connects via a pedestrian walkway to the GCCC), and the Hampton Inn & Suites, which opened in October 2000.

The Nationwide Arena (Arena) opened in 2000, and gives its name to the so- called “Arena District,” a master-planned community defined by Front Street to the east, Spring Street to the south, Neil Avenue to the west, and Vine Street to the north. This mixed-use district already contains:

• An eight-screen movie theater; • The PromoWest Pavilion, an indoor/outdoor performing arts and concert facility with interior seating for up to 2,500; • The McPherson Commons, a three-acre public park on the former site of the Ohio Penitentiary; and • A variety of good quality dining establishments, including Gordon Biersch, Chipotle, Buca di Peppo, the Black & Blue Grille, O’Shaughnessy’s Public House. Once it is completely built out, the Arena District will contain 1.5 million square feet of office space, 300,000 square feet of retail, restaurant, and entertainment space, and 350 apartments.

Other restaurants in the immediate vicinity of the Arena and GCCC districts include Jillian’s, Braddock’s, Strada, the Martini Bistro, Barley’s Ale House, and The Japanese Steak House. The subject site is located on the cusp of the Arena District. HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Description of the Land and Neighborhood 2-10

In March 2004, the Nationwide Arena will host the first and second rounds of the National Collegiate Athletic Association (NCAA) Men’s Basketball Tournament.

Another nearby sub-neighborhood is the Short North Arts District, which originates on High Street, just to the north of Interstate 670 (which High Street passes over). The Short North district is actually outside the downtown neighborhood, as defined above, beginning on its northern edge and continuing to the north toward the campus of The Ohio State University. The Short North district houses an eclectic array of studios and restaurants; this neighborhood is highly supportive of visitation to the GCCC, as it is within walking distance of the convention facility. It would also have a direct impact on the experience of guests of the proposed subject property.

Moving south of the Arena and GCCC districts, the nature of the downtown neighborhood’s development becomes more oriented toward high-rise office buildings. The development is particularly concentrated in the area of Capitol Square, which is centered near the intersection of High and State Streets. It is in this general area where the downturn in the neighborhood’s quality becomes apparent. As will be detailed later in this narrative, the downtown Columbus office market has experienced increases in vacancy in recent years. The older, core office buildings surrounding Capitol Square are reportedly bearing the brunt of this downturn, losing tenants to the Arena District, as well as the suburbs. Although some of the vacancy increase may be attributed to an increase in supply, more conspicuous causes include the declining quality of the surrounding neighborhood, the high cost of parking in the immediate vicinity of Capitol Square, and the lack of amenities and ancillary facilities available in more modern and better located office buildings.

The City Center Mall is also located in the vicinity of Capitol Square. The mall does feature some good quality tenants, including Marshall Field’s, and is reported to be approximately 70 percent occupied; however, the quality of the mall’s improvements and stores has declined in recent years. The mall is located on the east side of High Street, but connects to a Lazarus store on the west side of High Street. The Lazarus store improvements occupy nearly half a city block, but only a small portion of the store is open. The facility is deteriorating, and provides an example of the distressed and declining quality of the downtown district’s southern sector.

The revitalization of the downtown neighborhood’s southern sector is pertinent to this analysis because of the fact that five of the downtown HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Description of the Land and Neighborhood 2-11

neighborhood’s eleven hotels are located south of Gay Street, in the midst of the stagnating area. These hotels include the Adam’s Mark, the Doubletree Guest Suites, the Hyatt Capitol Square, the Holiday Inn City Center, and the Westin Great Southern. Reflecting the influence of the surrounding neighborhoods, the hotels in the northern sector tend to outperform the hotels in the southern sector by a significant margin. Among these five hotels, the Adam’s Mark and Westin Great Southern are engaged in a struggle to maintain occupancy under their current market orientation. Future outcomes for these “at risk” hotels are a pivotal question in determining the prospects for the proposed headquarters hotel. The fact that the construction of the proposed subject property would possibly make use of public funds and be developed by a municipal agency (the Franklin County Convention Facilities Authority) requires that such development be highly sensitive to the project’s potential impact on the market’s existing hotels.

In the course of our fieldwork, we have interviewed many of Columbus’s civic leaders, in order to understand the decline of the southern downtown sector, and discuss the types of initiatives and developments that might reverse current trends. A consensus emerged among those we interviewed that a renewal of the downtown’s southern sector must be triggered by increased residential development. Although some residential development appears to be taking shape in the Arena District, the remainder of the downtown neighborhood is generally undersupplied with regard to housing. A number of interesting residential neighborhoods flank downtown Columbus, including Short North (which marks the meeting of the city’s Victorian and Italian Villages), German Village, and Olde Towne East. However, residential development has yet to “jump the interstate,” and become a meaningful presence in the city’s urban core. The fact that both public and private civic leaders acknowledge this shortage is encouraging, although Columbus’s inherently conservative approach to financing new development was also repeatedly acknowledged as an impediment to progress.

From the standpoint of the southern sector’s “at risk” hotels, the three outcomes that appear to be most likely include: 1) a revival of the surrounding neighborhood resulting in renewed occupancy and firm rental rates at the existing hotels; 2) continued operation as a hotel use, but with a lower-rated brand and market orientation; and 3) an adaptation of the real estate to a residential or other alternate use. We cannot opine as to which of these outcomes is most likely or preferable; however, options (1) and (3) are likely to result in a revival of downtown hotel occupancy levels, increasing HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Description of the Land and Neighborhood 2-12

the prospects for the proposed headquarters hotel. Option (2) will perhaps represent some recognition on the part of the “at risk” hotel owner-operators that the southern sector will not recover in the near term; thus, hotel development that would otherwise be feasible or logical in the northern sector should no longer be foregone.

At this point, it appears that the development of the proposed headquarters hotel would likely further isolate the “at risk” hotels, drawing demand away from properties that are already struggling to generate viable occupancy rates, making outcomes (2) and (3) more likely. Although these outcomes may result at any rate, the development of the proposed headquarters hotel should not be the agent of this change unless outcome (3) is planned and deemed a desirable goal.

The issues raised in this section with regard to the potential outcomes in the downtown’s southern sector will be referred to in further detail later in this narrative, as part of the analysis of the downtown lodging market and the forecast of future occupancy levels.

Conclusions The following bullet points identify the key observations and conclusions reached in this portion of the narrative.

• The precise size of the subject land is not defined at this point, although the scope of the FCCFA holdings on the city block in question appears to be more than adequate to support large-scale hotel development. • The manner in which the subject land slopes well below the grade of High Street is somewhat unorthodox, but is not expected to be a mitigating factor regarding the site’s prospective development. From discussions with city planners, it is our understanding that direct access to the site may be provided from High Street, should the design call for a main entrance on this level. • The subject site is well connected to the network of interstate highways serving the Greater Columbus area. In addition, the means of directly accessing the subject site from the highway system is straightforward and logical. • In the event the subject land is improved with a convention headquarters hotel, the property will likely be constructed in a high-rise manner, providing a highly conspicuous presence in the downtown skyline. • The subject site is extremely well located with respect to the downtown lodging market’s key demand generators. The subject site is proximate to HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Description of the Land and Neighborhood 2-13

the GCCC, the Nationwide Arena, and the most important sources of downtown commercial lodging demand. The GCCC is the single most important source of downtown lodging demand. • According to city zoning representatives, the land is not subject to height or density limitations; however, it is our understanding that the commission is currently inclined to prohibit an elevated pedestrian walkway, such as is currently in use between the GCCC and the Crowne Plaza Hotel. • Downtown Columbus has become increasingly bifurcated in recent years, consisting of a vibrant northern sector anchored by the GCCC and the Nationwide Arena, and a stagnating southern sector characterized by the high vacancy rates in the vicinity of Capitol South. • The bifurcated character of downtown extends to the downtown lodging market, where the hotels in the northern sector tend to outperform the hotels in the southern sector. Two full-service hotels in particular (the Adam’s Mark and the Westin Great Southern) are engaged in a struggle to maintain occupancy under their current market orientation. • A consensus emerged among those civic leaders we interviewed that a renewal of the downtown’s southern sector must be triggered by increased residential development. Rather than requiring additional commercial development, renewal in the southern sector should manifest itself through the increased occupancy and refurbishment of existing facilities. Columbus’s inherently conservative approach to financing new development was repeatedly acknowledged as an impediment to progress. • Potential outcomes for the “at risk” hotels are a pivotal question in determining the prospects for the proposed headquarters hotel. We have identified three likely outcomes, without identifying which is most likely or preferable: 1) a revival of the surrounding neighborhood resulting in renewed occupancy and firm rental rates at the existing hotels; 2) continued operation as a hotel use, but with a lower-rated brand and market orientation; and 3) an adaptation of the real estate to a residential or other alternate use. These conclusions and observations will be developed further and applied in later sections of this narrative, as part of our forecast of future downtown hotel occupancy levels. HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Area Economic Analysis 3 -1

3. Area Economic Analysis

The economic vitality of the market area surrounding the subject property is an important consideration in forecasting lodging demand and income potential. Economic and demographic trends that reflect the amount of visitation provide a basis from which to project hostelry demand. The purpose of the market area analysis is to review available economic and demographic data to determine whether the local market will undergo economic growth, stabilize, or decline. In addition to predicting the direction of the economy, the rate of change must be quantified. These trends are then correlated based on their propensity to reflect variations in lodging demand with the objective of forecasting the amount of growth or decline in transient visitation by individual market segment (e.g., commercial, meeting and group, and leisure).

Market Area Overview The subject site is located in the City of Columbus, Franklin County, and the State of Ohio. Franklin County is one of six counties that constitute the Columbus Metropolitan Statistical Area (MSA); the remaining five are Fairfield, Licking, Madison, Delaware, and Pickaway. Columbus is the capital of Ohio and is the largest city in the state in terms of both population and geographic size; it is also the state’s fastest growing city. With a population of approximately 670,000, Columbus is the 15th largest city in the United States. Columbus also offers two international airports (one of which is strictly defined as a cargo airport), a Foreign Trade Zone, and offers non-stop commercial flights to 32 cities.

Columbus is notable for its diverse economy. It is home to seven Fortune 500 companies. Nationally recognized companies such as Wendy’s, Worthington Industries, CompuServe, Red Roof Inns, Longaberger, Bank One, and The Limited were founded in Columbus. The city is also notable for its strong investment in culture and arts, as well as its institutions of higher learning, including The Ohio State University.

Demographic Review Table 3-1 shows the demographic and economic review which sets forth population, per-capita income, food and beverage sales, and retail sales for HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Area Economic Analysis 3 -2

Franklin County, the Columbus MSA, the State of Ohio, and the United States as a whole. The data pertains to historical results for 1980, 1990, and 2000, as well as forecasts for 2010. While not directly correlated with hotel room night demand, population and retail sales serve as a general measure of a market's health. The per-capita income reflects the economic well being of the populace.

Table 3-1 Demographic and Economic Review

Average Annual Percent Change 1980 1990 2000 2010 1980-00 1990-00 2000-10 Resident Population (Thousands) Franklin County 871.5 964.7 1,035.1 1,107.9 0.9 % 0.7 % 0.7 % Columbus MSA 1,218.0 1,350.3 1,503.9 1,647.4 1.1 1.1 0.9 State of Ohio 10,803.6 10,861.8 11,299.1 11,723.7 0.2 0.4 0.4 United States 227,225.6 249,464.7 275,148.3 299,644.5 1.0 1.0 0.9 Per-Capita Personal Income* Franklin County $18,811.0 $23,971.0 $29,420.0 $33,012.0 2.3 % 2.1 % 1.2 % Columbus MSA 18,197.0 22,990.0 28,369.0 31,614.0 2.2 2.1 1.1 State of Ohio 18,294.0 21,945.0 26,296.0 30,169.0 1.8 1.8 1.4 United States 18,444.0 22,871.0 27,323.0 30,927.0 2.0 1.8 1.2 W&P Wealth Index Franklin County 102.0 104.8 107.7 106.7 Columbus MSA 98.7 100.5 103.8 102.2 State of Ohio 99.2 96.0 96.2 97.5 United States 100.0 100.0 100.0 100.0 Food and Beverage Sales (Gross)* Franklin County $840.1 $1,163.8 $1,515.1 $1,864.0 3.0 % 2.7 % 2.1 % Columbus MSA 1,023.0 1,419.5 1,922.8 2,412.8 3.2 3.1 2.3 State of Ohio 7,550.3 9,397.4 11,899.0 14,239.9 2.3 2.4 1.8 United States 163,115.8 216,297.9 276,476.5 348,529.1 2.7 2.5 2.3 Total Retail Sales (Millions)* Franklin County $7,860.1 $10,623.6 $15,720.1 $18,472.1 3.5 % 4.0 % 1.6 % Columbus MSA 9,844.0 13,030.3 19,752.2 23,579.6 3.5 4.2 1.8 State of Ohio 78,433.4 87,405.5 117,825.5 133,774.9 2.1 3.0 1.3 United States 1,733,908.9 2,089,724.5 2,848,644.5 3,399,787.9 2.5 3.1 1.8 * I n f l a t i on A d j u s t e d Source: Woods & Poole Economics, Inc.

HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Area Economic Analysis 3 -3

The populations of Franklin County and the Columbus MSA increased at average annual rates of 0.9% and 1.1% between 1980 and 2000, respectively. The rate of growth in these areas is roughly comparable to the national rate of population growth (1.0%) over the same period, but well in excess of the statewide rate of growth (0.2%). Similar trends were noted between 1990 and 2000. Over this period, Franklin County population growth decelerated to 0.7%, while the MSA’s rate of growth remained steady at 1.1% per year. Between 2000 and 2010, the county’s rate of population growth is projected at 0.7% per year, compared to 0.9% for the MSA. Again, the regional rates of growth are expected to be in line with national averages, and exceed statewide rates of growth. The trends allude to Columbus’s strong economic position within the state of Ohio.

Historically, rates of per capital personal income growth in Franklin County and the Columbus MSA have exceeded the rates of growth noted for the state and the nation. Between 1980 and 2000, county and MSA rates of growth equated to 2.3% and 2.2% per year, respectively, compared to 1.8% for the state and 2.0% for the nation. Similar rates of growth were noted between 1990 and 2000. Through 2010, a significant deceleration in per capital personal income growth is anticipated for all of the surveyed populations.

The W&P Wealth Index measures each population’s relative affluence by dividing the per capita personal income by the national average. (Therefore, the national W&P Wealth Index is always 100.0). Between 1980 and 2000, the subject county and MSA experienced strong gains in their relative affluence. By 2000, Franklin County’s per capita personal income equated to approximately 108% of the national average, while the Columbus MSA’s results equated to approximately 104% of the national average. In contrast, Ohio’s relative affluence declined between 1980 and 2000. These figures generally correlate with the disposable income of the populace and also tend to be highly correlated with attainable average daily room rental levels.

As with trends in personal income, food and beverage sales levels in Franklin County and the Columbus MSA have historically grown faster than food and beverage sales levels in the state and the nation. Between 1980 and 2000, county and MSA rates of growth equated to 3.0% and 3.2% per year, respectively, compared to 2.3% for the state and 2.7% for the nation. Similar rates of growth were noted between 1990 and 2000. Through 2010, a deceleration in food and beverage sales growth is anticipated for all of the surveyed populations. HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Area Economic Analysis 3 -4

Franklin County posted strong retail sales growth of 3.5% between 1980 and 2000, matching the rate of growth posted for the Columbus MSA. This rate of growth was well in excess of the growth rates noted for the state and the nation over the same period. Between 1990 and 2000, all of the surveyed populations experienced a strong surge in retail sales levels, owing to dramatic increases in consumer spending throughout the nation. Through 2010, decelerated growth rates are projected for all the surveyed populations.

Work Force The characteristics of an area's workforce provide an indication of the type Characteristics and amount of transient visitation likely to be generated by local businesses. Sectors such as finance, insurance, and real estate (FIRE), wholesale trade, and services produce a considerable number of visitors who are not particularly rate sensitive. The government sector often generates transient room nights, but per-diem reimbursement allowances often limit the accommodations selection to budget and mid-priced lodging facilities. Contributions from manufacturing, construction, and transportation, communications, and public utilities (TCPU) employers can also be important, depending upon the company type. Table 3-2 shows the Franklin County workforce distribution by business sector in 1980, 1990, and 2000, as well as a forecast for 2010. HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Area Economic Analysis 3 -5

Table 3-2 Historical and Projected Employment - Franklin County (000s) Average Annual Compounded Percent Change Percent Percent Percent Percent 1980- 1990- 2000- Industry 1980 of Total 1990 of Total 2000 of Total 2010 of Total 2000 2000 2010

Farm 1.3 0.2 % 1.1 0.2 % 0.8 0.1 % 0.7 0.1 % (2.6) % (3.2) % (1.5) % Agriculture Services, Other 2.6 0.5 5.9 0.8 6.9 0.8 7.6 0.8 4.9 1.6 1.0 Mining 1.5 0.3 1.7 0.2 1.2 0.1 1.4 0.1 (1.2) (3.7) 1.6 Construction 23.4 4.5 32.1 4.6 40.0 4.7 43.7 4.6 2.7 2.2 0.9 Manufacturing 72.6 13.9 66.5 9.6 64.9 7.6 61.3 6.5 (0.6) (0.2) (0.6) Trans., Comm. & Public Utils. 24.6 4.7 29.6 4.3 40.6 4.8 45.1 4.8 2.5 3.2 1.1 Total Trade 122.2 23.4 168.4 24.3 206.0 24.2 229.1 24.2 2.6 2.0 1.1 Wholesale Trade 27.2 5.2 34.3 5.0 42.2 5.0 48.6 5.1 2.2 2.1 1.4 Retail Trade 95.1 18.2 134.1 19.4 163.8 19.3 180.4 19.1 2.8 2.0 1.0 Finance, Ins., & Real Estate 53.3 10.2 75.6 10.9 97.6 11.5 114.7 12.1 3.1 2.6 1.6 Services 125.1 23.9 202.1 29.2 273.1 32.1 315.2 33.3 4.0 3.1 1.4 Total Government 95.8 18.3 109.8 15.8 119.0 14.0 128.3 13.5 1.1 0.8 0.8 Federal Civilian Govt. 11.3 2.2 12.9 1.9 13.3 1.6 13.3 1.4 0.8 0.3 0.1 Federal Military Govt. 3.7 0.7 4.2 0.6 3.3 0.4 3.3 0.3 (0.5) (2.5) (0.0) State & Local Govt. 80.9 15.5 92.6 13.4 102.4 12.0 111.7 11.8 1.2 1.0 0.9 Totals 522.4 100.0 % 692.7 100.0 % 849.9 100.0 % 947.1 100.0 % 2.5 % 2.1 % 1.1 % Source: Woods and Poole Economics, Inc.

Between 1980 and 2000, the county’s total employment increased at an average annual rate of 2.5%, with the rate of growth slowing slightly to 2.1% per year between 1990 and 2000. Through 2010, the rate of growth is expected to slow further, to 1.1%.

Historically, the county’s economic expansion over the past two decades has been paced by the growth of the services and FIRE sectors, both of which tend to correlate with commercial business travel. The services sector grew at an average annual rate of 4.0% between 1980 and 2000. This sector’s share of total employment increased from approximately 24% in 1980 to approximately 32% in 2000.

The FIRE sector occupies a strategic position with respect to the control of investment capital, property transfers, and the provision of insurance. The professional firms operating in this sector often generate a considerable amount of commercial hotel demand. Between 1980 and 2000, the FIRE sector grew at an average annual rate of 3.1%, slowing to 2.6% between 1990 and 2000. HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Area Economic Analysis 3 -6

Among the sectors of significant size, a decline in manufacturing employment was noted between 1980 and 2000. Mirroring trends noted throughout the nation, the manufacturing sector’s share of total county employment declined from approximately 14% in 1980 to approximately 8% in 2000.

The following narrative describes the various sectors of the Columbus area economy in greater detail. The headings do not necessarily match up with the sector-naming convention shown in the preceding table. Some of the sectors identified in the following text (such as distribution) cover employment in more than one of the sectors identified in the preceding table.

Distribution

Because of its strategic location and its strong transportation infrastructure (including easy access to air, ground, and rail transport), Columbus has matured into an important distribution hub. It is categorized as an “inland port,” by virtue of its agreements with a number of ocean ports, including those of Los Angeles, New York and New Jersey, Virginia, and Copenhagen. Columbus offers more than 150 million square feet of warehousing and distribution space. At the center of this hub is Rickenbacker International Airport, a state-of-the-art cargo airport situated on 5,000 acres. It features two parallel 12,000-foot runways, 24-hour customs service, full ground support, inter-modal ramps for rail service, and more than 10.5 million square feet of warehouse space. Cargo carriers using Rickenbacker include United Parcel Service, FedEx, Polar, Evergreen, and LEP Profit International.

Major companies that use Columbus as a distribution hub include Kraft Foods (which opened a 675,000-square-foot distribution center in 1997), The Limited (whose companies include Victoria’s Secret, Abercrombie & Fitch, Galyan’s, The Limited, Bath & Body Works, and Lerner New York), Spiegel, Eddie Bauer, The Gap, Goodyear Tire and Rubber, and JC Penney Catalog.

Rickenbacker International Airport facilities continue to expand. Construction of a consolidated Navy and Marine Corps Air Reserve Center commenced at the airport in August 2001. The $10 million center, scheduled for completion in early 2003, will consolidate the Naval Air Reserve Center at Rickenbacker. In addition, Exel, one of the world's largest supply chain management companies, opened its new, all-inclusive facility at Rickenbacker International Airport in August 2001. HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Area Economic Analysis 3 -7

Electronic Commerce

Columbus has emerged as an important center for electronic commerce, with the United States Department of Defense one of the key players in the region. The department’s Finance and Accounting Center processes approximately $35 billion in payroll through Columbus. Sterling Commerce is another important local player; it provides electronic commerce services to 99 of the top 100 banks in the nation.

Government

As the state capital, Columbus contains a large government sector. State agencies headquartered in the region include elected officials, the legislative and judicial bodies (such as the Ohio General Assembly and the state Supreme Court), and departmental offices such as the Department of Natural Resources, the Department of Public Safety, and the State Medical Board. Federal agencies are represented by the United States Postal Service, as well as key military installations, including the Defense Supply Center. Greater Columbus is also home to Ohio’s largest state-supported university, the Ohio State University, with a total enrollment of approximately 55,000. The university employs more than 15,700 faculty and staff, while the nationally recognized Ohio State University Hospitals employ more than 4,100.

Manufacturing

Among the region’s largest manufacturing companies, Worthington Industries processes steel for a variety of industrial uses, and also makes custom plastics, precision metals, aftermarket auto body parts, and subway car undercarriages. Honda of America is the largest private employer in the Columbus area, with approximately 13,000 employees. Opened in 1982, the Marysville Auto Plant is Honda’s main operation in the region.

Research & Development

Batelle and The Ohio State University spearhead research and development in the Columbus area. Founded in the late 1920s, Battelle is the world's largest private research organization. It is internationally recognized for its part in the development of the compact disc as well as the xerography process for copy machines and biodegradable plastics. Battelle also partners with more than 800 federal, state, and local government agencies through the HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Area Economic Analysis 3 -8

U.S. and abroad to develop solutions to issues of national security, energy, environmental quality, health and human services, and transportation.

Adjacent to Battelle's headquarters is the 1,700-acre main campus of The Ohio State University (OSU). With students in 177 undergraduate and 220 master's and doctoral programs, OSU is the state's flagship teaching and research university. In the 1998-99 academic year, OSU received more than $267 million in research funding.

Chemical Abstracts Service (CAS) is another internationally recognized research organization located in the region. Founded in 1907, CAS registers chemical substances and publishes abstracts on research articles and patents. Another highly specialized research group based in Columbus is the Edison Welding Institute (EWI). EWI develops welding technologies and serves as a resource for the electronics, automotive, power generation, and aerospace industries.

Services & Retail Trade

The services and retail trade sectors combine to account for approximately half of the Columbus economy. The insurance, banking, and health care sectors are particularly prominent. Columbus is home to more than 300 financial institutions; is headquarters for four major insurance companies; and employs more than 57,000 in health care services. The Nationwide Insurance Enterprise was founded in Columbus in 1925 and has grown into a Fortune 500 company with assets in excess of $90 billion. It is one of the nation’s leading insurance companies. Health care giant Cardinal Health is another Fortune 500 company based in Columbus. Founded 1971 as a food wholesaler, Cardinal is now a pharmaceutical distribution company that buys drugs in bulk and sells them to pharmacies, hospitals, and HMOs. The company was added to the Standard & Poor’s 500 Index in 1997. The Limited, a Fortune 500 company that was founded in 1963, leads the region’s retail sector.

High Technology

In the spring issue of the Greater Columbus Blue Chip Economic Forecast, it was concluded that information technology (IT) is a powerful force in the Greater Columbus economy, notwithstanding the recent downturn in nation’s high technology sector. Specifically, Columbus was found to be home to approximately 25% of the Ohio’s total IT employment, and HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Area Economic Analysis 3 -9

continued growth is anticipated over the next ten years. Columbus’s key advantages in this field include the area’s established role in research and development. Local institutions and employers such as The Ohio State University, CompuServe, Battelle, and Sterling Commerce have created a local tradition of innovation. In addition, the region’s infrastructure, skilled workforce, access to capital, and quality life provide additional advantages.

A significant concern in this sector is the future of Lucent Technologies. Of the 5,200 IT manufacturing jobs in the Columbus area, Lucent Technologies provided all but 100. However, Lucent announced a 50% reduction in its Columbus staff in January 2001. Other concerns pertain to the recent shift from “wired” to “wireless” telecommunications. Since its peak in 1997, telecommunications employment in the region has continually declined, owing to the consolidation, acquisitions, and layoffs of companies such as Qwest Communications, SBC Communications, and Ameritech.

Regional start-up firms active in high technology pursuits (as well as the life sciences sector) are commonly funded by venture capital. According to a report released recently by the Columbus Venture Network, an affiliate of the Greater Columbus Chamber of Commerce, Greater Columbus secured $60.5 million in venture capital for the first half of 2001. The region secured $464 million in total venture capital for 2000, representing a 333 percent increase over 1999 figures. Thirteen new Greater Columbus companies were financed by venture capital in 2000; ten of the thirteen were start-up operations. In 2000, venture capital invested in Greater Columbus accounted for nearly 70 percent of total venture capital invested in Ohio. By comparison, in 1996, venture capital invested in Greater Columbus represented only 4.5 percent of total venture capital invested in Ohio.

Life Sciences

The life sciences sector has become an important sector in the Greater Columbus economy. Greater Columbus employs 78,000 life science workers and operates numerous world-renowned research institutions. The life sciences sector is comprised of many different industries, including biotechnology research, scientific and engineering research, industrial research, agricultural research, and product and metallurgical testing. One of the strongest specialized life sciences industries in Greater Columbus is bio- informatics, a multi-disciplinary field focused on management of research data. Bio-informatics provides ways to organize vast quantities of data collected from drug trials and disease research, thereby reducing duplicate HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Area Economic Analysis 3 -10

research. Two local companies, LabBook Inc. and LeadScope Inc., are implementing tools that dramatically reduce drug development time and money.

While cutting-edge research has moved to the forefront of the life science sector, traditional health care industries have struggled with workforce shortages and employment shifts. Increased wages and changes in Medicare and HMO regulations have shifted employment from hospitals to outpatient health care. While hospital employment in Greater Columbus declined 9.5 percent between 1993 and 1999, employment increased 20.4 percent in medical offices and clinics and 26.3 percent in nursing and personal care facilities during the same time period. Columbus is also a center for osteopathic medicine, employing 3.5 times the number of osteopathic physicians typical of an economy its size.

Columbus is home to a branch office of the Edison Biotechnology Center (EBTC), which works to create companies based on institutional research and helps existing businesses in the life sciences sector to grow. Recent developments incubated by the EBTC include:

• Cleveland-based Biomec’s decision late in 2000 to create a Columbus office to work on the commercialization of promising biomedical products; • construction of a new $9 million research and development facility by The Science and Technology Campus; • IMEDD’s relocation to Columbus from California in 2000 in order to develop drug-delivery products that employ micro-engineering technology; and • the expansion of the Business Technology Center, which will include modern biomedical laboratories.

Total City & County The Ohio Job & Family Services Department also tracks total employment for Employment the City of Columbus. Table 3-3 identifies total employment in within the city between 1994 and 2000, as well as year-to-date through July 2001. HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Area Economic Analysis 3 -11

Table 3-3 Total Employment – City of Columbus

City of Percent Year Columbus Change

1994 352,600 --- 1995 359,600 2.0 % 1996 362,000 0.7 1997 370,700 2.4 1998 371,400 0.2 1999 379,000 2.0 2000 386,100 1.9

As of 7/00 394,000 --- As of 7/01 406,600 3.2 %

Avg. Ann. % Change, 1994-00: 1.5 %

Source: Ohio Job & Family Services Department

The city’s total employment increased at an average annual rate of 1.5% between 1994 and 1995, with a strong gain of 3.2% noted through July 2001. Whereas growth in the nation’s economy slowed through the first half of the current year, the city’s rate of employment growth accelerated.

Providing additional context for understanding the nature of the regional economy, Table 3-4 presents a list of the major employers in the Columbus area. HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Area Economic Analysis 3 -12

Table 3-4 Major Columbus Area Employers

Number of Firm Product Employees

State of Ohio Government 27,775 Ohio State University Education 17,597 Honda of America Manufacturing, Inc. Manufacturing 13,200 Bank One Corporation Finance 10,900 Columbus Public Schools Education 9,451 Nationwide Insurance Enterprise Finance 9,311 City of Columbus Government 8,256 The Limited, Inc. Retail 7,200 Big Bear Stores Grocer 6,500 Riverside Methodist Hospitals Health Care 6,049 Franklin County Government 6,003 US Postal Service Postal delivery 5,013 Schottenstein/Value City Stores Corporation Retail 5,000 Mount Carmel Health System Health Care 4,279 Kroger Company Grocer 4,075 Consolidated Stores Corporation Retail 4,040 Wendy's Fast Food 3,700 Huntington Bank Banking 3,630 AEP Energy Utility 3,462 Batelle Research and Developmen 3,237 Ameritech Ohio Telecommunications 3,100

Source: Greater Columbus Chamber of Commerce

Several of the major employers noted above were referred to, or otherwise described, in the preceding text. Overall, the array of major employers alludes to the region’s highly diversified economic base, a trait that tends to insulate the region from the adverse effects of recession. Also of note: although Bank One relocated its corporate headquarters from Columbus to Chicago in the course of the past two years, it retains an important presence in Columbus.

Unemployment Table 3-5 presents historical average unemployment rates for the City of Statistics Columbus, Franklin County, the State of Ohio, and the United States. Average annual unemployment rates are presented for each year between 1994 and 2000, while the unemployment rate as of July of 2000 and 2001 is also set forth. HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Area Economic Analysis 3 -13

Table 3-5 Unemployment Statistics

City of Franklin State of United Year Columbus County Ohio States

1994 4.3 % 3.7 % 5.5 % 6.1 % 1995 3.5 3.0 4.8 5.6 1996 3.4 2.9 4.9 5.4 1997 3.2 2.7 4.6 5.0 1998 3.0 2.5 4.3 4.5 1999 2.9 2.5 4.3 4.2 2000 2.8 2.4 4.1 4.0

July, 2000 2.8 % 2.4 % 4.2 % 4.0 % July, 2001 3.2 2.7 4.4 4.5

Source: Ohio Job & Family Services Department

Unemployment rates receded consistently between 1994 and 2000 for all the surveyed populations. As of 2000, the city’s unemployment rate equated to 2.8%, compared to 2.4% in Franklin County. The state and national unemployment rates were higher, at 4.1% and 4.0%, respectively.

As of July 2001, each population noted a gain in the rate of unemployment. The current trends may be generally attributed the national economic slowdown.

Office Market As of the end of the second quarter of 2001, the Downtown Columbus office market’s vacancy rate had risen to 20.0%, according to CB Richard Ellis. Downtown vacancy rates have been on the rise in recent years due to a combination of increases in supply and slowing demand growth. Although absorption increased significantly through 2000, the rate of gain was substantially outpaced by the increase in supply. In 2000, 328,100 square feet of new and rehabilitated office space entered the market.

Table 3-6 summarizes current statistics for the Columbus office markets (including downtown and the suburbs), including year-to-date absorption figures. HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Area Economic Analysis 3 -14

Table 3-6 Columbus Area Office Space Statistics

Vacancy Under Avg. Asking Year Inventory Rate Net Absorption Construction Rent Downtown 9,532,310 20.0 % (43,080) 736,062$ 19.22 Suburbs 15,811,556 15.6 (40,618) 692,756 18.09

Source: CB Richard Ellis

In the current year, the decline in demand is chiefly attributable to the relocation of Bank One’s headquarters from Columbus to Chicago, as well as the movement of many of the State of Ohio’s offices out of downtown. In addition, the development of more attractive and more modern product throughout the Columbus suburbs has drawn a significant amount of occupancy out of downtown. Downtown office buildings in the vicinity of Capitol Square are hindered by a lack of parking, as well as a sparse array of surrounding amenities.

In response to decreased absorption and increased vacancy, building owners lowered rent levels and are offering significant incentives. Nevertheless, vacancy rates are expected to continue to increase; over 700,000 square feet of new product is currently under construction downtown, with delivery anticipated before year-end 2001. The new construction is concentrated on the north end of downtown, in the vicinity of the Arena District. New construction is also concentrated on the southwestern periphery of downtown, at Miranova, a mixed-use development at the intersection of Interstate 70 and the Scioto River. Because development is continuing in the downtown district, it is important to note that potential continues to be perceived by commercial real estate investors in various sections of downtown, and tenants continue to be attracted to the subject market area. The office market situation is similar to that affecting the downtown lodging market, where hotels located in the vibrant northern sector are performing well, while vacancy rates are high to the south. Again, it is the core buildings in the immediate vicinity of Capital Square that are considered to be most at risk. As the proposed headquarters hotel would also be expected to rely upon a significant share of commercial demand, the health of the office market in the northern sector is a strong indication. HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Area Economic Analysis 3 -15

Outside of downtown, the suburban office market has also experienced a dramatic increase in its vacancy rate, again attributable to aggressive increases in inventory, although downtown still absorbed more square footage. As of 1998, the suburbs posted a vacancy rate of 6.6%, according to CB Richard Ellis. As of the second quarter of 2001, the vacancy rate stands at 15.6%. For the third consecutive year, over 1 million square feet of new inventory was added to the suburban market in 2000.

The largest suburbs in the Columbus area include Dublin (±4.0 million square feet), Worthington (±3.9 million square feet), and Polaris (±1.6 million square feet). Polaris has emerged in recent years as a particularly important node of development. In redefining its Columbus presence, Bank One vacated approximately 400,000 square feet of older suburban space and consolidated its office space occupancy in a new facility at Polaris. Another sub-market that has emerged in recent years is Easton, a master-planned Class A community located to the northeast of downtown. The markets of Dublin, Polaris, and Easton have experienced the majority of the suburbs new construction and absorption activity.

Convention Activity The GCCC was constructed in 1993 as an expansion of the Ohio Center, which was built in 1980. The GCCC is owned by the FCCFA, and is operated by SMG, of Philadelphia, which operates 27 convention centers, 19 arenas, 10 theaters, and 7 stadiums worldwide. With the February 2001 completion of an $85 million capital improvement project, the GCCC was expanded from 1.4 million to 1.7 million square feet. It now includes nearly 330,000 square feet of prime exhibit hall space, 63 meeting rooms, two ballrooms, and supporting reception and back-of-the-house space. In addition, the south facility includes 70,000 square feet of meeting room space and a 90,000- square-foot multi-purpose hall (Batelle Hall). Other facilities include a mix of retail outlets, a food court, a destination restaurant, and ±1,600 garage and surface parking spaces. The GCCC is connected to two hotels: the Hyatt Regency and the Crowne Plaza.

Statistics relating to historical and projected convention activity are reviewed as part of the “Convention Center Demand Analysis” section of this narrative.

Airport Traffic Airport passenger counts are important indicators of lodging demand. Depending on the type of service provided by a particular airfield, a sizable percentage of arriving passengers require hotel accommodations. Trends showing changes in passenger counts also reflect local business activity and the overall economic health of the area. HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Area Economic Analysis 3 -16

Port Columbus International Airport is located roughly ten miles east of downtown Columbus. Twenty-three carriers, including American, Air Ontario, America West, Continental, Midwest Express, Northwest, Southwest, TWA, US Airways, United, and Delta Airlines, serve this regional air facility. The airport schedules 350 arrivals and departures daily, serving 33 destinations on a non-stop basis. Table 3-7 shows the non-stop destinations.

Table 3-7 Non-Stop Destinations – Port Columbus International Airport

Atlanta, GA Miami, FL Baltimore, MD Milwaukee, WI Boston, MA Minneapolis, MN Charlotte, NC Nashville, TN Chicago, IL (Midway) New York, NY (La Guardia) Chicago, IL (O'Hare) New York, NY (Newark) Cincinnati, OH Orlando, FL Cleveland, OH Philadelphia, PA Dallas/Ft. Worth, TX Phoenix, AZ Denver, CO Pittsburgh, PA Detroit, MI Raleigh-Durham, NC Fort Myers, FL St. Louis, MO Hartford, CT Tampa/St. Petersburg, FL Houston, TX Toronto, ONT Indianapolis, IN Washington, DC (Dulles) Las Vegas, NV Washington, DC (National) Los Angeles, CA

Source: Port Columbus International Airport

A number of capital improvements have been completed at the Port Columbus International Airport in recent years. A $25-million expansion in 1995 included the construction of four new gates, as well as additional space for concessions, baggage claim areas, security, and airline operations. A 20,000-square-foot customs area, designed to facilitate international service, opened in 1994. Construction of the airport's north runway was completed at the end of 1997 at an estimated cost of $20 million. A six-story, 2,800-space public parking garage was completed in 2000; this structure includes 1,200 spaces for rental car operations. Other projects currently underway are identified as follows: HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Area Economic Analysis 3 -17

• Concourse C is currently being expanded with the addition of five new gates, with completion slated for 2002. • A new taxiway bridge over Sawyer Road will be completed in 2002. • Concourse A is being redesigned to make room for the addition of two new gates, with completion anticipated in 2001. • A new 224-foot air traffic control tower is currently under construction and completion is slated for 2003. As a result of strong economic conditions and facility expansions, Port Columbus International Airport has experienced continued growth in passenger counts. Because air passenger traffic often exhibits a high degree of correlation with lodging demand, the recent expansion of Port Columbus International Airport and the growth in activity at this facility are particularly significant. Table 3-8 shows the changes in passenger activity at Port Columbus International Airport since 1990.

Table 3-8 Airport Statistics

Total Percent Year Passengers Change

1990 3,660,000 --- 1991 3,430,000 (6.3) % 1992 4,580,000 33.5 1993 4,930,000 7.6 1994 5,430,000 10.1 1995 5,630,000 3.7 1996 6,270,000 11.4 1997 6,510,000 3.8 1998 6,420,000 (1.4) 1999 6,540,000 1.9 2000 6,870,000 5.0

Avg. Ann. % Change, 1990-00 6.5 %

Source: Port Columbus International Airport

As shown, passenger counts increased at an average annual compounded rate of 6.5% between 1990 and 2000. HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Area Economic Analysis 3 -18

Airfares to Columbus tend to be affordable when compared to other destinations in the region, such as Pittsburgh, Cincinnati, and Cleveland. Each of these cities function as one airline’s major hub; as a result, 60% to 80% of the flights are controlled by one airline. It is this fact that gives Columbus an advantage over all other airports in the region. At Port Columbus, the largest percentage of flights controlled by one airline is about 24%. (America West currently holds this lead, with Delta and US Airways close behind). Along with the presence of Southwest Airlines (the nation’s leading discount airline), this diversity of airlines creates a more competitive airfare market.

While large enough to attract the major airlines, Columbus Airport retains the scale and feel of a mid-size airport, creating a more pleasant and efficient experience for its users. There are three concourses with a total of 32 gates. None of the gates are more than a four or five minute walk from the nearest baggage claim area or ticket counter.

Tourist Attractions Columbus offers a wide variety of historical, educational, and recreational attractions that draw visitors to the area.

• The Columbus Museum of Art, which features an outdoor sculpture garden, and the Cultural Arts Center (a renovated state arsenal) offer collections ranging from the works of the Old Masters to those of contemporary artists and local craftsmen. • Downtown Columbus is also the site of two elegantly restored theaters (the Ohio and the Palace), and the new Capitol Theater, located in the Riffe Center. The Columbus Symphony Orchestra, BalletMet, Opera/Columbus, Players Theater Columbus, and various Broadway troupes give performances at the Riffe Center. In addition, outdoor concerts and similar events are summertime favorites at the Riverfront Amphitheater, a stage that floats on the Scioto River near downtown Columbus. • Another new element of downtown Columbus is the $125-million, 320,000-square-foot Center of Science and Industry, located on the riverfront, on the western fringe of downtown. This facility features eight interactive “learning worlds” plus a seven-story Extreme Screen and a 21st Century planetarium. • Just to the south of downtown is the neighborhood known as German Village. This restored 50-block district, which features narrow brick HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Area Economic Analysis 3 -19

streets lined with quaint brick homes and attractive gardens, was first settled by German immigrants in the early 1800s, and is now the largest privately funded restoration in the United States. The area's numerous shops, restaurants, parks, bakeries, and outdoor beer gardens make German Village a popular destination for tourists and residents. The Brewery District, just west of the German Village, consists of 27 acres of renovated brewery buildings. This area houses some of Columbus' finest restaurants, unique retail shops, a winery, and a microbrewery. • The Park of Roses, the world's largest municipal rose garden, displays more than 450 varieties of roses. • The Franklin Park Conservatory, which is listed on the National Register of Historic Places, features hundreds of species of tropical and greenhouse plants and succulents; this facility attracts more than 125,000 visitors annually. Flower shows are held several times each year, and guided tours are available on weekends. • With more than 145 acres of magnificent flower gardens, picnic areas, and natural habitats, the Columbus Zoo and Aquarium attracts more than 1,000,000 visitors annually. The zoo is noted worldwide for its successful breeding of endangered animals, including gorillas, cheetahs, snow leopards, polar bears, and eagles. It is the home of Colo, the first gorilla to survive birth in captivity, and it is the only zoo in the nation where visitors can view four generations of gorillas. The Columbus Zoo also has the world's largest reptile collection. It is located approximately fifteen miles northwest of downtown Columbus. • Columbus has three major outdoor sports venues, in the form of the Ohio Stadium on the campus of Ohio State University, the Columbus Crew Stadium (which is home to Major League Soccer’s Columbus Crew), both of which were recently constructed, and Cooper Stadium (a 15,000-seat Triple-A baseball stadium). In addition, Columbus hosts a major Pro Golfer’s Association (PGA) tournament. The Memorial Tournament is held each year at Muirfield Village Golf Course. • Along with the shopping alternatives located throughout downtown Columbus’s various neighborhoods, the city also offers the Easton Town Center, which opened in June 1999. This facility features indoor/outdoor attractions and includes over 200 stores and restaurants. Ground was recently broken on the Easton Fashion District, a high-end expansion of the existing shopping facilities. It is located approximately seven miles northeast of downtown Columbus. HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Area Economic Analysis 3 -20

• A new retail development known as Polaris Fashion Place is scheduled to open as of October 2001. It is located approximately ten miles north of downtown Columbus and will feature more than 2.0 million square feet of space. Polaris’s anchor tenants will include Sachs Fifth Avenue, Lord & Taylor, Macy’s, and the Great Indoors. Columbus also hosts a number of annual events and festivals, as shown in Table 3-9. These events attract a mix of local and out-of-town visitation, and generate a portion of the local hotels’ leisure demand.

Table 3-9 Annual Events

Event Date Setting Komen Columbus Race for the Cure Mid May Downtown Asian Festival Late May Franklin Park Columbus Arts Festival Early June Downtown Riverfront Columbus Rose Festival Early June Whetstone Park Festival Latino Mid June Bicentennial Park German Village Haus & Garten Tour Late June Historic German Village Red, White & Boom July 4th Downtown Riverfront Columbus Jazz & Rib Fest Late July Downtown Riverfront Dublin Irish Festival Early August Coffman Park, Dublin Annual Greek Festival Early September Greek Orthodox Cathedral, Downtown Upper Arlington Labor Day Arts Festival Early September Northam Park, Upper Arlington Columbus Family Fun Fest Mid September Downtown Riverfront German Village Oktoberfest Late September Historic Brewery District Civil War Encampment Late September Statehouse at Broad & High Streets Columbus Marathon Early October Downtown (start and finish) Columbus International Festival Early November Veterans Memorial Hall First Night Columbus New Year's Eve Statehouse Square

Source: Greater Columbus Convention & Visitors Bureau

Impact of Terrorist At the time of this report’s production, news of the terrorist attacks of Attack on Hotel September 11th was approximately three months old. At this close range, it is Demand difficult to predict what the impact of the attacks will be on the national and regional economies. Initial reports indicate that the nation’s travel and HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Area Economic Analysis 3 -21

insurance industries have been most adversely affected in the weeks following the event.

In terms of the regional response to the attacks, a few early reports provided a mix of indications. America West Airlines, one of the market share leaders at Port Columbus International Airport, announced it would cut its flight schedule by 20% following the terrorist attacks. Specifically, 14 of its 54 daily departures from Columbus have been cancelled, affecting service to Baltimore, Boston, Chicago, Philadelphia, Newark, and Washington, DC. Airline management also announced that it would cut 2,000 jobs, or 14% of its workforce. America West had been struggling financially prior to the attack, and in the first few weeks following the attacks, it was reported to be on the brink of bankruptcy.

Any development that might alter accessibility to Columbus is a significant concern in this analysis. However, the level of air service is chiefly a function of demand. Demand for air travel to Columbus will return as confidence in the airline industry returns. Presuming a gradual return to normalcy, air access to Columbus will not have been altered over the long term.

Another report was issued concerning Nationwide Life Insurance, which is based in Columbus. Nationwide expected little financial impact on its business as a result of the attacks. Because of risk management practices and reinsurance agreements, Nationwide officials concluded that there is no reason for the tragedy to have a material impact on the company’s financial strength or performance.

The reach of the terrorist attacks is impossible to predict at this point, chiefly because of the number of variables at play, including the potential for additional attacks, as well as the prospect of a protracted war. However, in order to complete this assignment, we are obliged to make certain assumptions as to the future and potential resilience of the national travel industry.

While it is not possible to know how the impact of the terrorist attacks will unfold over time, the opinions expressed here have been developed through a collective discussion among the managing members of HVS International’s eleven domestic and foreign consulting offices. The predictions are based on the assumption that future domestic attacks will not occur on the scale of the New York City attacks. Based on this assumption, HVS International anticipates the following trends and developments. HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Area Economic Analysis 3 -22

• The public’s confidence in the nation’s airline transportation system will be restored gradually over the course of the coming months, and returned to a state of near normalcy by January 2002. • The national economy will recede through the last quarter of 2001, continuing to shrink through the first quarter of 2002. Thereafter, a recovery is expected to commence, owing to a return of consumer confidence and the impact of increased government spending, particularly in the defense sector. • For the remainder of 2001, the national hotel market will experience occupancy rates in the range of 50%, leading to an average annual occupancy rate of approximately 60% for the calendar year 2001. (In a typical year, the national occupancy rate is in the range of 63% - 65%.) • For 2002, the national hotel occupancy rate will be in the low 60% range, with a slight improvement over results for 2001 indicated. At the same time, average rate growth prospects are expected to dim in 2002. • As of 2003, prospects for the national hotel lodging market are expected to begin to recover in earnest, and approach operating levels that would have originally been anticipated prior to the terrorist attacks. Overall, projections from 2003 onward should reflect only slightly lower occupancy rates, with some moderation in average rate also indicated. Overall, hotels are expected to realize significant losses in demand through the remainder of 2001, with 2002 representing a year in which confidence will gradually be recovered. While acknowledging the difficulty of foretelling future events in this suddenly volatile environment, we have applied an outlook we believe would most likely be adopted by a prudent hotel investor.

It should also be noted here that those hotel markets that have been most directly affected by the terrorist attacks are first-tier cities such as New York, Boston, San Francisco, and Miami, representing urban markets that draw a large share of their visitation through the airport. In this regard, Columbus is somewhat insulated against the adverse impact of the terrorist attacks.

Conclusion Franklin County and the broader Columbus area have experienced consistent economic growth in past decades. The Columbus area enjoys the benefits of a truly diverse economic base, and is notable as an important center of research and development, the home of a large and dynamic state university, and an important regional center for commerce, health care, and retail services. Prior to the September 11th terrorist attacks, the Columbus economy HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Area Economic Analysis 3 -23

appeared to be experiencing some signs of economic slow-down, but was generally poised to weather the potential impacts of a national economic recession. After the attacks, all economic projections have been cast into uncertainty. It is our opinion that the national economy will likely recede through the first quarter of 2002, before beginning a recovery in mid 2002. Such projections assume that the future domestic attacks can be contained, and the perceived risks associated with travel will fade in the coming months.

Later sections of this narrative will relate the historical and projected growth trends reviewed herein to specific market segments based on their propensity to reflect changes in lodging demand. This analysis will provide a basis for forecasting changes in room night demand in the subject property's market area. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Downtown Hotel Market Analysis 4-1

4. Downtown Hotel Market Analysis

In the economic principle of supply and demand for normal goods, price varies directly, but not proportionately, with demand and inversely, but not proportionately, with supply. In the lodging industry, the number of guestrooms available represents total supply and demand is measured by the number of guestrooms accommodated; the net effect of supply and demand towards equilibrium results in a prevailing price, or average rate. The purpose of this section is to investigate current supply and demand trends as indicated by the current competitive market.

Demand Analysis For the purpose of demand analysis, the overall market is divided into Using Market individual segments based on the nature of travel. Market segmentation is a Segmentation useful procedure because individual classifications often exhibit unique characteristics in terms of growth potential, seasonality of demand, average length of stay, double occupancy, facility requirements, price sensitivity, and so forth. The following three market segments have been identified as being the primary sources of lodging demand in downtown Columbus.

Segment 1 Meeting & Convention Segment 2 Commercial Segment 3 Leisure

Based on our fieldwork, area analysis, and knowledge of the local lodging market, we project the calendar-year 2001 distribution of accommodated room night demand as Table 4-1 shows. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Downtown Hotel Market Analysis 4-2

Table 4-1 Accommodated Room Night Demand Marketwide Accommodated Percentage of Market Segment Demand Total

Meeting & Convention 311,670 48.1 % Commercial 266,275 41.1 Leisure 69,956 10.8

Total 647,900 100.0 %

As indicated, downtown Columbus hotels were chiefly dependent upon meeting & convention demand in 2001, with this segment accounting for approximately 48% of the market’s total demand. Commercial demand was a close second, with 41% of the market’s demand generated by this variety of visitation. The remainder of the market demand, approximately 11%, was derived from individual leisure travelers. The demand segments are described in greater detail as follows.

Meeting & Convention The meeting & convention market includes meetings, seminars, conventions, Segment trade association shows, and similar gatherings of ten or more people. Peak convention demand typically occurs in the spring and fall. Because of vacations, the summer months represent the slowest period for this market segment; winter demand varies. Although there are numerous classifications within the meeting and group segment, the primary categories considered in this analysis are national, regional, and state associations’ conventions, corporate groups, and SMERFE (social, military, educational, religious, fraternal, and ethnic) groups.

The GCCC is the key generator of convention demand, although some of the market’s larger hotels are also capable of attracting and hosting large-scale meetings. Association demand is generally divided on a geographical basis: the most common categories are national, regional, and state associations. Depending on their nature, these associations may be more or less rate- sensitive than commercial groups. Price sensitivity increases when delegates are not reimbursed by their employers, but must pay to attend. The scheduling pattern of associations also depends on the nature of the group. Professional associations and/or those supported by members' employers often meet on weekdays, while other associations prefer to hold events on weekends. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Downtown Hotel Market Analysis 4-3

Corporate groups are one of the most profitable components of this segment, because they exhibit limited price sensitivity and they often sponsor banquets and other events that generate revenue for the host hotel. In the subject property's market, the same employers that contribute high-volume corporate accounts generate corporate group activity. This demand may take the form of training programs, sales meetings, division conferences, and similar events with a business purpose. Corporate groups generally meet during the workweek, thus generating lodging demand on Monday through Thursday nights. The average length of stay is two to four days, although training groups may stay six nights or more. Double-occupancy rates in this category typically range from 1.0 to 1.5.

The SMERFE market consists of groups that are social, military, educational, religious, fraternal, or ethnic in nature. Examples include family or military reunions, religious groups, youth groups, and religious organizations such as the Knights of Columbus. These groups are extremely budget conscious, and have a strong preference for weekend and summer meeting times, when rates are generally lowest. Typically, groups such as this have a high double- occupancy rate of 2.0 to 2.5, and the length of stay is relatively short (one to three nights). Most hotel operators use this type of demand to bolster occupancy during off-peak times of the month and year, when other demand sources are limited.

Future meeting and group demand is closely related to the activities of the GCCC, and, to a lesser extent, growth in the commercial segment. Because most meetings have either a direct or an indirect business purpose, the economic considerations that have an impact on commercial travel also affect meeting and group demand. The exception is non-commercial (SMERFE) meetings, which are tied to the economic factors that influence leisure travel.

Commercial Segment The commercial segment consists of individual businesspeople visiting various firms in the subject property's market. This demand is strongest Monday through Thursday nights, declines significantly on Friday and Saturday, and increases somewhat on Sunday. In markets where the weekday occupancy often exceeds 90 percent, some unaccommodated commercial demand is likely to be present. The typical length of stay for commercial guests ranges from one to three days, and the rate of double occupancy is a low 1.2 to 1.3 people per room. Commercial demand is relatively constant throughout the year, although some declines are noticeable in late December and during other holiday periods. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Downtown Hotel Market Analysis 4-4

The commercial segment includes numerous smaller classifications; however, the primary categories considered in this analysis are individual business travelers and high-volume corporate accounts. Most individual business travelers are visiting firms in the immediate area or passing through en route to other destinations. Their lodging choices are influenced by brand loyalty (and frequent traveler programs in particular), as well as location and convenience with respect to businesses and amenities. Local companies also generate high-volume corporate accounts; demand in this sub-segment may include employees of the firm or its affiliates, and often consists of training groups. These companies typically designate hotels as “preferred” accommodations; in return, the selected lodging facilities generally offer a significant discount from their published rates. Typically, these rates are negotiated on an annual basis, and the size of the discount is tied to the number of room nights produced.

In the subject lodging market, the key sources of commercial demand currently include Nationwide, American Electric Power, Executive Jet, Huntington Bank, and Columbia Gas. We have also categorized government and airline crew demand in the commercial segment. As the capital of Ohio, Columbus draws a significant share of government demand, although it comes at an established per diem of $70, indicating that this demand source is too low-rated to appeal to the market’s higher-rated hotels. Airline crew demand is also highly discounted, because airlines are able to guarantee a specific level of usage on a daily basis. This type of demand is advantageous because it provides a base level of occupancy over a long period that normally includes weekends and slow seasons. The occupancy benefit is offset by low contract room rates, which have an adverse impact on average rate. Skilled hotel operators use airline patronage to fill rooms during periods of low occupancy, and quickly displace this demand when higher-rated market segments offer better potential.

Leisure Segment The leisure market segment consists of individuals and families who are spending time in the area or passing through en route to other destinations. Their travel purposes may include sightseeing, recreation, visiting friends and relatives, or numerous other non-business activities. Leisure demand is strongest Friday and Saturday nights and all week during holiday periods and the summer months. These peak periods are negatively correlated with commercial visitation, underscoring the stabilizing effect of capturing weekend and summer tourist travel. The typical length of stay ranges from one to four days, depending on the destination and travel purpose, and the rate of double occupancy typically ranges from 1.8 to 2.5 people per room. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Downtown Hotel Market Analysis 4-5

Leisure travelers tend to be the most price-sensitive segment of the lodging market, although hotel operators can achieve strong average rates during peak leisure demand periods. Football weekends at Ohio State University are typically strong demand periods for downtown hotel operators. The Nationwide Arena also generates strong leisure demand for certain hotels on nights when the Columbus Blue Jackets (a new NHL affiliate) play. Other attractions in Columbus include its distinctive neighborhoods such as Short North, German Village, and the Brewery District. Nevertheless, the leisure segment is a minor source of lodging demand, compared to the meeting and commercial segments.

Competitive Review An integral component of the supply and demand relationship that has a direct impact on the availability of lodging demand is the current and anticipated supply of competitive lodging facilities. For purposes of this analysis, we have identified the competitive market as consisting of the 11 hotels located within the boundaries of downtown Columbus. The hotels feature a wide range of quality levels and pricing, and also vary widely in terms of size and the scope of the facilities.

Table 4-2 summarizes the important operating characteristics of the downtown hotels. This information was compiled from personal interviews, inspections, lodging directories, and our in-house library of operating data. The table also sets forth each property's penetration factors; penetration is the ratio between a specific hotel's operating results and the corresponding data for the market. If the penetration factor is greater than 100 percent, the property is performing better than the market as a whole; conversely, if the penetration is less than 100 percent, the hotel is performing at a level below the marketwide average. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Downtown Hotel Market Analysis 4-6

Table 4-2 Competitive Review

Square Footage Est. 2001 Market Segmentation Estimated 2000 Projected 2001

Mtg. No. of Year Meeting Space per Mtg. & Occ. Yield Property Rooms Opened Space RoomConvention Comm'l. Leisure Occ. ADR RevPAR Occ. ADR RevPAR Penetration Penetration

Hyatt Regency 350 N. High St. 631 1981 63,000 100 75 %20%5 %65 %$112 $73 61 % $114 $70 102.2 %112.1% Crowne Plaza 33 E. Nationwide Blvd. 378 1989 8,500 2 2 55 35 10 67 98 66 67 100 67 112.3 108.0 Adam's Mark 50 N. Third St. 415 Dec-96 22,200 5 3 65 30 5 50 102 51 42 100 42 70.4 67.7 Hyatt Capitol Square 75 E. State St. 400 1984 16,500 41 40 50 10 69 125 86 61 120 73 102.2 118.0 Westin Great Southern 310 S. High St. 196 1897 13,000 6 6 35 60 5 65 108 70 50 106 53 83.8 85.4 Doubletree Guest Suites 50 S. Front St. 194 1985 2,500 13 25 60 15 68 105 71 70 106 74 117.3 119.6 Courtyard by Marriott 35 W. Spring St. 149 1986 3,500 23 25 55 20 77 98 75 70 103 72 117.3 116.2 Hampton Inn & Suites 501 N. High St. 179 Oct-00 1,400 8 40 45 15 25 110 28 55 110 61 92.2 97.5 The Lofts 55 Nationwide Blvd. 44 May-98 2,500 57 15 50 35 52 170 88 50 170 85 83.8 137.0 Holiday Inn City Center 175 E. Town St. 240 1968 5,200 22 30 60 10 73 74 54 68 73 50 114.0 80.0 Red Roof Inn 111 E. Nationwide Blvd. 149 Feb-99 1,700 11 30 40 30 70 68 48 65 69 45 108.9 72.3

Totals & Averages 2,975 125,700 4 2 48 % 41 % 11 % 65 % $104 $67 60 % $104 $62 100.0 % 100.0 % HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Downtown Hotel Market Analysis 4-7

Based on our market research, it appears that the 2,975 rooms that make up the downtown Columbus lodging market will finish 2001 with an occupancy rate of approximately 60 percent, at an average rate of $104. In 2000, the previous year, the market contained a total of 2,841 rooms, and posted an occupancy rate of 65 percent, at an average rate of $104. In 2001, demand declined in the subject lodging market due to a number of factors, including 1) the broader economic slowdown underway throughout the nation, 2) the significant decline in room night contributions from two key downtown commercial accounts (Bank One and The Limited), and 3) the immediate and adverse impact of the September 11th terrorist attacks.

Although “walking distance” is not a strictly defined term, it is our opinion that five of the eleven downtown hotels would be perceived by convention center attendees to be within walking distance of the GCCC. Those five hotels (Hyatt Regency, Crowne Plaza, Hampton Inn & Suites, The Lofts, and Red Roof Inn) contain a total of 1,381 rooms. With the planned March 2003 opening of the 184-room Drury Inn, this allocation will increase to 1,565 rooms.

Each of the eleven hotels was inspected and evaluated. Descriptions of our findings are presented as follows.

Hyatt Regency

The Hyatt Regency is attached to the GCCC. Like the proposed subject property, it is a convention headquarters hotel. The 631-room hotel was originally constructed in 1981 and has remained affiliated with Hyatt Regency throughout its operating history. The hotel is managed by Hyatt and owned by Nationwide Insurance, whose corporate headquarters are located across High Street from the hotel. The Hyatt shares meeting and convention space with the GCCC; in promotional materials, the hotel’s meeting space allocation is reported to be 63,000 square feet. This is far and away the largest allocation among the downtown hotels, equating to approximately 100 square feet per guestroom. The next largest allocation is the 22,000 square feet offered at Adam’s Mark.

Hyatt Regency management indicated that the hotel’s operating results for 2000 were depressed due to renovation-related disruptions. Approximately $8.5 million was reinvested in the product in that year, with the efforts focused on the renewal of the guestrooms. Results for 2001 were further depressed due to the various external reasons noted above. Thus, HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Downtown Hotel Market Analysis 4-8

management indicated that results for 1999 are perhaps the best basis for understanding this hotel’s operating potential. In that year, the Hyatt Regency posted an occupancy rate of 69 percent at an average rate of $111.

The Hyatt Regency is in good condition, benefiting from consistent reinvestment in the product. The hotel is a first-class, full-service hotel with a strong array of public facilities. Because of its connection to the GCCC and its strong array of meeting space, the Hyatt Regency may be considered the backbone of the downtown Columbus lodging market.

Crowne Plaza

The Crowne Plaza is located along Nationwide Boulevard, between High and Third Streets, directly across from the GCCC. It is connected to the GCCC via an elevated pedestrian walkway, and is also considered a convention headquarters hotel. The hotel was constructed in 1989 and is in excellent condition, owing to the recent completion of a $5 million renewal project. Nationwide Insurance owns the Crowne Plaza, as well as the Hyatt Regency.

The Crowne Plaza contains a total of 378 rooms, following the completion of a 100-room addition in July 1997. The hotel is also owned and operated in conjunction with The Lofts, a 44-room boutique hotel that was opened directly opposite the Crowne Plaza’s porte-cochere in May 1998.

Despite the adverse external factors affecting Columbus hotels in 2001, the Crowne Plaza is expected to finish the year at an occupancy rate of 67%, equal to 2000 results, and a $2 gain in average rate. That said, hotel management anticipates a sharp decline in occupancy for 2002, currently forecast to be 59 percent. The decline is attributed to an off year in association demand, and is considered to be aberrant, with normalization anticipated in 2003.

The Crowne Plaza is a first-class, full-service hotel, but features a relatively small allotment of meeting space, at only 8,500 square feet. Typically, hotels of this quality, with a connection to a convention center, offer meeting space equal to 30 to 50 square feet per guestroom. The Crowne Plaza’s allocation equates to only 22 square feet per guestroom. Whereas the Hyatt Regency draws 75 percent of its demand from the meeting & convention segment, the Crowne Plaza draws 55 percent of its demand from this segment. The Crowne Plaza is more dependent upon individual commercial travel. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Downtown Hotel Market Analysis 4-9

Adam’s Mark

The Adam’s Mark is located along Third Street, between Gay and Broad Streets. The hotel was operated as a Sheraton affiliate in the 1980s, but was vacated and ceased operations prior to reopening as the Adam’s Mark in December 1996. The hotel was renovated as part of the reopening, but the quality of the materials and furnishings used in the renewal is below the industry standard for a first-class hotel. In addition, it is our understanding that the property has developed a reputation for inconsistent management. The hotel’s projected 2001 operating results (42 percent occupancy at a $100 average rate) reflect the hotel’s weak quality and reputation. The property’s 2001 RevPAR is at the bottom of the market, below that of even the Red Roof Inn, a discount limited-service brand.

Although the quality is sub-par, the scope of the Adam’s Mark’s facilities is in line with a first-class, full-service hotel. The property offers 22,000 square feet of meeting space, equal to 53 square feet per guestroom. Whether or not the property is within walking distance of the GCCC is debatable. It is located five blocks to the south, and the distance would perhaps seem less significant if the quality of the neighborhood didn’t deteriorate as one moves from the GCCC toward the hotel.

Hyatt Capitol Square

The Hyatt Capitol Square is located at Capitol Square, along Third Street, between Broad and State Streets. The 400-room hotel opened in 1984 and is owned by Equitable Real Estate (functioning as a wholly-owned affiliate of Lend Lease), and has historically established the standard for quality in the downtown Columbus market. Behind the 44-room boutique property, The Lofts, the Hyatt Capitol Square generates the second-strongest average rate in the downtown market. Nevertheless, the Hyatt Capitol Square has been directly affected by the decline of the Capitol Square neighborhood, and more particularly, by the relocation of room night demand generated by Bank One and The Limited to suburban hotels. Hyatt management anticipates that the hotel will finish 2001 with an occupancy rate of 61 percent, down from the 69 percent rate realized in 2000. At the same time, average rate is expected to finish down by $5, at $120. In 2001, for the first time in the hotel’s history, property management took on an airline crew contract. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Downtown Hotel Market Analysis 4-10

The Hyatt Capitol Square was last renovated in 1996, and is slated for a renewal project in 2003. The hotel is part of a mixed-use development that includes a high-rise office building, and is connected to the City Center Mall. As noted earlier in the narrative, the downturn of the neighborhood surrounding Capitol South has been significant, as reflected by the sagging quality of the mall and the high level of vacancy in what are described as the city’s core office buildings. In addition, the Hyatt Capitol Square cannot be considered to be within walking distance of the GCCC; it is seven blocks to the south.

Westin Great Southern

Among the eleven hotels surveyed here, the Westin Great Southern is the last of the five hotels that may be considered first-class, full-service hotels. (The quality of the Adam’s Mark makes its inclusion in this category debatable, although one could also argue that the Doubletree Guest Suites qualifies, despite its limited public facilities.) The Westin Great Southern is a 196-room hotel located on the southernmost end of downtown Columbus, on High Street, between Main and Mound Streets. The hotel is one of the oldest continuously operating hotels in the nation, having originally been constructed in 1897. Berwin Hotels acquired the hotel in 1996, and began operating the hotel subject to a Westin franchise in 1997. The hotel has a striking external appearance, as well as a majestic lobby, although other elements of the hotel’s interiors allude to functional obsolescence and dated décor.

The Westin has experienced a dramatic downturn in occupancy in 2001, falling from 65 percent in 2000 to a projected year-end level of 50 percent in 2001. As with the Hyatt Capitol Square, the Westin has been affected by the loss of Bank One and The Limited demand, as well as the general downturn in nearby office occupancy. The hotel is further limited by its poor location (a neighboring tenant sells bail bonds), its reputation for inconsistent management, and the inconsistent quality of the improvements. The hotel is over one mile south of the GCCC, and appears to be particularly isolated in the declining southern sector of downtown Columbus.

Doubletree Guest Suites

The Doubletree Guest Suites is somewhat unusual in the subject lodging market. The hotel is located on Front Street, between Broad and State Streets, and is therefore located in the southern sector of downtown Columbus. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Downtown Hotel Market Analysis 4-11

Despite its location in the weaker half of downtown, the property is expected to finish 2001 with the second-strongest RevPAR in the competitive survey, behind The Lofts. The performance is further noteworthy considering that the property is in only fair condition. The hotel originally opened in 1985 and its décor and design is dated, with dark corridors and worn furnishings. The strong performance may be attributed to the hotel’s all-suite design. All of the hotel’s guestrooms contain separate living room and bedroom quarters, greatly enhancing the perceived value of the hotel’s product. Through 2001, the Doubletree is expected to finish with an occupancy rate of 70 percent, up from 68 percent in 2000.

Public facilities at the Doubletree Guest Suites are limited. The hotel offers only 2,500 square feet of meeting space, or 13 square feet per guestroom. In this regard, the hotel is similar to the other limited-service hotels serving Columbus. The hotel is owned and operated by FelCor Lodging Trust.

Courtyard by Marriott

The Courtyard by Marriott is located on Spring Street between Front and High Streets. The 149-room hotel was originally developed in 1986, adapted from an existing structure. As an adaptive reuse, the hotel has a design that is distinct from the typical suburban Courtyard prototype. In addition, the property appears to be in need of renewal.

The Courtyard has historically realized the highest occupancy rates in the downtown Columbus market, owing to the popularity of the Courtyard concept and the loyalty of Marriott clientele. However, in 2001, the hotel is on pace to finish with an occupancy rate of 70 percent, down from 77 percent in 2000. The hotel’s average rate is on pace to finish up $5, nonetheless. The hotel’s 2001 RevPAR of $72 is the third-highest in the market, behind only The Lofts and the Doubletree Guest Suites.

Hampton Inn & Suites

The Hampton Inn & Suites is the only hotel located north of the subject site. It is located on High Street, between Spruce Street and Interstate 670. It is located across High Street from the GCCC. The 179-room hotel opened in October 2000, and is expected to finish its first full operating year with an occupancy rate of approximately 55 percent, at a surprisingly strong average rate of $110. The average rate is noteworthy in that Hampton Inn is widely recognized as a limited-service brand. To date, the hotel’s pricing exceeds that HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Downtown Hotel Market Analysis 4-12

of several of the market’s full-service brands, including the Crowne Plaza, the Adam’s Mark, the Westin, and the Doubletree.

In fact, the Hampton Inn & Suites was constructed at a high grade, and with the exception of its somewhat small room modules and its limited public space, the hotel is one of the market’s top products. The hotel was constructed at a cost of approximately $19 million, or $106,000 per room, and the guestroom décor package is particularly modern and top-quality. The hotel also offers a total of 44 suites, where each of these units features distinct living room and bedroom areas.

Hampton Inn & Suites management identifies the GCCC as its primary source of demand, with the nearby Nationwide Arena another key source of demand. The hotel contains 1,400 square feet of meeting space and offers a complimentary continental breakfast each morning.

The Lofts

The Lofts is a 44-room boutique hotel with a highly distinctive design and décor. The hotel opened in May 1998 and is owned by Nationwide Insurance and operated in conjunction with the adjacent Crowne Plaza Hotel. It was adapted from a historic building that was constructed in 1882. The Lofts is the highest-priced hotel in Columbus, and generates average rates approximately $50 above the next nearest competitor. Each room at the hotel features high- speed Internet access, Italian-made Frette Egyptian cotton linens, and Aveda personal care products. The design features floor-to-ceiling windows, arched doorways, and exposed brick walls, beams, and duct work. The progressive design is influenced by the Ian Schrager collection of Manhattan boutique hotels. The hotel contains 2,500 square feet of meeting space, in the form of the Wine Cellar, and a restaurant known as Fusion.

Holiday Inn City Center

The Holiday Inn City Center is located on Town Street, between Fourth Street and Grant Avenue. The hotel’s location is distant from the GCCC, peripheral to the city’s urban core, and surrounded by marginal neighborhood influences, including a Greyhound Bus Station. The hotel originally opened in 1968 and is in only fair condition, with a low grade of construction and improvements. The hotel is owned and operated by Lodgian, and generates low average rate levels due to its high level of dependence upon airline crew contracts and per diem government demand. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Downtown Hotel Market Analysis 4-13

The hotel’s occupancy rates are viable, but only the Red Roof Inn posts lower average rates. Holiday Inn is a full-service brand, but this property’s public space is fairly limited. The meeting space allotment of 5,200 square feet equates to only 22 square feet per guestroom.

Red Roof Inn

The 149-room Red Roof Inn opened in February 1999 on Nationwide Boulevard, between Fourth and Fifth Streets, in the northeastern quadrant of downtown. The hotel features a high-quality exterior design that is distinct from the prototypical low-rise, roadside Red Roof Inn product. The six-story hotel features an appealing brick façade. The hotel does have Red Roof Inn’s signature red mansard roof; however, the hotel could easily be re-branded with a higher grade flag should the property be sold. It is owned and operated by Accor, the French hotel company that controls the Red Roof Inn and Motel 6 brands.

As for the hotel’s interiors, the public space (including the lobby) also represents an upgrade to the standard Red Roof Inn product. The guestrooms, however, appear to be more in keeping with a discount limited- service product. As a result, the hotel’s average rate levels form the bottom end of the competitive market.

Other Competitors Columbus’s suburban hotel markets have expanded rapidly in recent years. According to information provided by Smith Travel Research, the Greater Columbus lodging market currently contains a total of approximately 19,000 rooms, with approximately 5,000 of those rooms added in the past five years, representing a 33 percent increase. Most of the new development consists of hotels categorized as extended-stay, limited-service, or focused-service brands, with very little full-service hotel development. Among the full-service hotels opened, however, three in particular have had a notable impact on downtown Columbus, according to downtown hotel operators.

• In June 1998, the 303-room Marriott Northwest opened in Dublin, approximately 12 miles northwest of downtown. This hotel is on pace to finish 2001 with an occupancy rate of 65 percent (down from 73 percent in 2000), with an average rate of approximately $125. • The Marriott Northwest’s performance softened in 2001 in part due to the opening of the 284-room Embassy Suites in Dublin, which was completed HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Downtown Hotel Market Analysis 4-14

in December 2000. The Embassy Suites is on pace to finish 2001 with an occupancy rate of approximately 45 percent, and an average rate of $126. • In July 2000, the 313-room Hilton Columbus opened in Easton, approximately seven miles northeast of downtown. The Hilton is on pace to finish 2001 with an occupancy rate of 75 percent, at an average rate of $138. Les Wexner, the owner of The Limited, owns the Hilton; following the Hilton’s opening, most of The Limited’s lodging demand was redirected to the Hilton, moving it out of downtown and away from hotels such as the Hyatt Capital Square and the Westin Great Southern. These three suburban hotels have tended to draw individual commercial and leisure travelers away from downtown, particularly those hotels that are located in the declining southern sector. The suburban hotels have minimal impact on the downtown market’s meeting & convention demand.

Historical Supply Smith Travel Research (STR) is an independent research firm that compiles and Demand Data data on the lodging industry; hotel investors routinely use its published data. STR has compiled historical supply and demand data for the downtown Columbus hotels identified above, with one exception. STR’s confidentiality criteria requires that no brand may account for more than 35 percent of given competitive set’s total room count. Together, the Hyatt Regency and the Hyatt on Capitol Square contain 1,031 rooms. This allocation currently equates to 34.7 percent of the total downtown inventory; however, the ratio only dropped below 35 percent with the opening of the 179-room Hampton Inn & Suites in October 2000. In order to gather data prior to October 2000 we were obliged to drop one of the Hyatt affiliates. Thus, the following competitive survey excludes the 400-room Hyatt Capital Square.

For the remaining ten downtown hotels, Table 4-3 shows marketwide occupancy, average rate, and rooms revenue per available room (RevPAR). RevPAR is calculated by multiplying occupancy by average rate, and provides an indication of how well rooms revenue is being maximized. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Downtown Hotel Market Analysis 4-15

Table 4-3 Historical Supply and Demand Trends (STR)

Year-to-Date Through August Avg. Ann. Compounded 1996 1997 1998 1999 2000 2000 2001 Change: 1996-00 Average Daily Room Count 1,723 2,153 2,233 2,383 2,441 2,396 2,575 Available Room Nights 628,985 785,995 814,875 869,921 891,008 582,228 625,725 Change — 25.0 % 3.7 % 6.8 % 2.4 % — 7.5 % 9.1 % Occupied Room Nights 425,194 523,473 532,928 568,058 572,027 380,195 379,189 Change — 23.1 % 1.8 % 6.6 % 0.7 % — (0.3) % 7.7 % Occupancy 67.6 % 66.6 % 65.4 % 65.3 % 64.2 % 65.3 % 60.6 % Change — (1.5) % (1.8) % (0.2) % (1.7) % — (7.2) % (1.3) % Average Rate $89.80 $95.21 $97.32 $99.53 $100.83 $100.48 $100.79 Change — 6.0% 2.2% 2.3% 1.3% — 0.3% 2.9% RevPAR $60.70 $63.41 $63.65 $64.99 $64.73 $65.61 $61.08 Change — 4.5 % 0.4 % 2.1 % (0.4) % — (6.9) % 1.6 %

Source: Smith Travel Research

HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Downtown Hotel Market Analysis 4-16

It is important to note some limitations of the STR data. Hotels are occasionally added to or removed from the sample, and not every property reports data in a consistent and timely manner; these factors can influence the overall quality of the information by skewing the results. These inconsistencies may also cause the STR data to differ from the results of our competitive survey. Nonetheless, STR data provides the best indication of aggregate growth or decline in existing supply and demand, and thus it has been considered in our analysis.

The preceding data indicates that the downtown lodging market’s supply has increased at an average annual rate of 9.1 percent between 1996 and 2000, with an additional gain of 7.5 percent. In actuality, the rates of supply growth are not this dramatic, as these figures are based on a total market inventory that excludes the Hyatt Capitol Square. Later in this section, the true rates of supply growth are reviewed. In addition, the basis for the supply increase is detailed.

The preceding table also indicates that demand grew at an average annual rate of 7.7 percent between 1996 and 2000, slightly below the rate of supply growth, but a strong rate of increase, nonetheless. Demand growth slowed significantly in 2000, while demand actually receded downtown through August 2001. Following the events of September 11th, the market is expected recede far more significantly than the 0.3 percent rate of decline noted year to date. In addition, the reader should consider that the Hyatt Capitol Square is not accounted for in the preceding table – this hotel’s occupancy is expected to finish 2001 down by eight occupancy points, from 69 percent to 61 percent. Were it included in the survey, the demand decline noted above would have been more severe.

Marketwide occupancy declined steadily between 1996 and 2000, falling from 67.6 percent in 1996 to 64.2 percent in 2000. Through August 2001, the market’s supply increased by 7.5 percent and demand declined; as such, the market was on pace to finish down by approximately five occupancy points through August.

As marketwide occupancy rates have softened, the market’s pricing environment has become more competitive, limiting the rate growth. Between 1996 and 2000, the market’s average rate increased at an average annual rate of 2.9 percent, a very modest rate of gain for a period that was generally marked by robust average rate growth throughout the nation. Comparable markets throughout the market experienced rates of average rate HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Downtown Hotel Market Analysis 4-17

growth two to three times as fast as downtown Columbus, between 1996 and 2000. The slow rate of growth may be attributed to a variety of factors, including the softening demand levels, and the opening of hotels whose average rates tend to be below the marketwide average rate.

Marketwide RevPAR trends reflect the impact of both occupancy and average rate trends. Between 1996 and 2000, RevPAR increased by only 1.6 percent per year. A 0.4 percent RevPAR decline in 2000 was followed by a 6.9 percent decline through August 2001.

Supply Changes Overall, the downtown lodging trends point to a weakening market. Whereas the bases for the weakening demand trends have been reviewed earlier in this narrative (attributed chiefly to the downturn in the economic condition of the downtown’s southern sector, the downturn in the national economy, and secondarily, the impact of the September 11th terrorist attacks), changes in the downtown hotel supply trends are also significant to this analysis. Table 4-4 identifies the changes in the market’s supply over time, and also shows the impact of the new 184-room Drury Inn which is currently under construction on Nationwide Boulevard, on a site adjacent to the GCCC. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Downtown Hotel Market Analysis 4-18

Table 4-4 Changes in Downtown Hotel Market Supply

Year Historical Projected Hotel Open 1996 1997 1998 1999 2000 2001 2002 2003 2004 Historical Westin 1897 196 196 196 196 196 196 196 196 196 Holiday Inn 1968 240 240 240 240 240 240 240 240 240 Hyatt Regency 1981 631 631 631 631 631 631 631 631 631 Hyatt Capitol Square 1984 400 400 400 400 400 400 400 400 400 Doubletree Guest Suites 1985 194 194 194 194 194 194 194 194 194 Courtyard by Marriott 1986 149 149 149 149 149 149 149 149 149 Crowne Plaza* 1989 278 328 378 378 378 378 378 378 378 Adam's Mark Dec-96 35 415 415 415 415 415 415 415 415 The Lofts May-98 - - 29 44 44 44 44 44 44 Red Roof Inn Feb-99 - - - 137 149 149 149 149 149 Hampton Inn & Suites Oct-00 - - - - 45 179 179 179 179 Projected Drury Inn Mar-03 ------153 184 Total 2,123 2,553 2,632 2,784 2,841 2,975 2,975 3,128 3,159 % Change --- 20.3% 3.1% 5.7% 2.1% 4.7% 0.0% 5.2% 1.0% Total % Change, 1996-2001: 40.2% Total % Change, 2001-2004: 6.2% Avg. Ann. % Change, 1996-2001: 7.0% Avg. Ann. % Change, 2001-2004: 2.0%

* Expanded by 100 rooms as of July 1997

Unlike the preceding STR survey, the preceding chart includes the Hyatt Capitol Square. The inventory surveyed includes all eleven of the hotels located downtown, and presents the hotels in the order in which they were opened, beginning with the Westin in 1897. Based on this accounting, the downtown inventory increased at an average annual rate of 7.0 percent between 1996 and 2001, with a total increase of 40.2 percent. With the projected March 2003 opening of the 184-room Drury Inn, the market’s inventory will increase by another 6.2 percent through 2004, reflecting an average annual increase of 2.0 percent between 2001 and 2004.

Of significance in the review of the preceding table is the market orientation of the most recently opened hotels. The Adam’s Mark is the only full-service hotel among the four hotels opened since 1996. The Lofts is a luxury caliber boutique hotel with limited public facilities, while the Hampton Inn & Suites HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Downtown Hotel Market Analysis 4-19

and the Red Roof Inn also have limited public space. Local hotel operators are frustrated by the nature of the new hotels, considering their lack of significant meeting space to be a substantial liability. Whereas a full-service hotel with a quality brand name can be expected to attract a significant amount of new demand into the market (through their incremental marketing efforts, brand loyalty, and the use of their own meeting space), a limited-service hotel is more likely to feed off the market’s existing demand, eroding the demand shares of the full-service hotels. In addition, limited- service hotel brands do little to elevate the image of given market, and therefore are not particularly helpful in the marketing of the GCCC.

The Crowne Plaza also added 100 rooms in 1997, representing another inventory addition that was not accompanied by additional meeting space. Thus, a total of 472 rooms with only 5,600 square feet of meeting space entered the market in the past four years. Considering that the Adam’s Mark is a brand of limited recognition, the nature of the recent spate of supply additions appears to be a factor in the downtown lodging market’s downturn. Furthermore, the new Drury Inn represents another limited- service brand.

No other additions to supply in downtown Columbus were found to be likely, based on our fieldwork. The owner of the Hampton Inn & Suites, David Patel, has considered the development of a Residence Inn on a downtown site, but the project remains speculative at this stage. In addition, the Hyatt Regency reportedly has the capacity and approvals for a 300-room expansion, although no development efforts are currently underway.

Conclusion The downtown Columbus lodging market has traditionally generated occupancy rates in the range of 65 percent, but has experienced a downturn through 2001. It is expected to finish the year with an occupancy rate of 60 percent, well below the rates typically necessary to justify new construction. Marketwide average rate is currently in the range of $100, representing an average generated by a wide range of product and quality types. Average rate has grown slowly historically, reflecting the relatively soft market conditions. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Industry Trends 5- 1

5. Convention / Meeting Industry Trends

The purpose of this section is to describe the convention and meeting industry and analyze trends in the number of events, attendance, and supply of meeting and exposition facilities. The definitions provided herein will aid in understanding the convention center market analysis, and the industry trends will inform the projections of convention center performance.

Types of Meetings and The meetings industry includes several types of events, from large trade and Facility Needs exhibition events to conferences and corporate meetings. Each type of event has unique facility needs. Certain events require large amounts of contiguous space and others require several smaller meeting rooms. A single event may use different types of space, including exhibit halls, banquet rooms, breakout meeting rooms, and theater seating. Event facilities need to offer the proportions of different types of space that are appropriate for their markets. Table 5-1 summarizes the key attributes of various types of meetings, including facility requirements. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Industry Trends 5- 2

Table 5-1 Event Types and Characteristics

Event Type Primary Purpose Major Facility Requirement Typical Facility Used

Social, Military, Educational, Civic & social Meeting and/or banquet space Civic center or auditorium Religious, Fraternal, & Ethnic

Hotels; Conference Centers; Training and information Corporate & Other Meetings Meeting space (minimal) Convention Center Meeting exchange Rooms Hotels; Conference Centers; Meeting space and banquet Conferences Information exchange Convention Center Meeting space Rooms

Meeting space and banquet Hotels; Conference Centers; Conventions Information exchange space Convention Centers

Information exchange Exhibition, breakout meeting Conventions with Exhibits Convention Centers and sales space, and banquet space

Exhibition and breakout meeting Convention Centers; Trademarts; Tradeshows Sales space for some events Fairgrounds

Convention Centers; Trademarts; Consumer Shows Advertising and sales Exhibition Space Fairgrounds

Convention Centers; Trademarts; Combination Shows* Advertising and sales Exhibition Space Fairgrounds

Stage, seating, breakout meeting Convention Centers; Arenas; Assemblies Information exchange rooms Stadiums; Fairgrounds

*A tradeshow with private access is followed by a consumer show with public access.

Source: HVS International

The following is a description of these various types of events:

Social, Military, Educational, Religious, Fraternal, and Ethnic Events — Referred to as “SMERFE” events, these events include weddings, fund-raising events, educational seminars, religious gatherings, parties, and other community events that have a civic, social, or entertainment purpose. These HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Industry Trends 5- 3

events typically require a ballroom or multipurpose space where food and beverage services and, in some cases, entertainment can be provided. SMERFE events are the most common type of events in most civic centers and locally oriented conference facilities. Generally, SMERFE groups are highly price sensitive with respect to hotel room and space rental rates.

Corporate and Other Meetings — Corporate meetings include training seminars, professional and technical conferences, sales meetings, shareholder events, product introductions, and management meetings. Attendance ranges up to 100, with an average of fewer than 50. These meetings are held in hotels with meeting space, conference centers, and sometimes in the meeting room blocks of larger convention centers. Corporate meetings usually require meeting rooms or ballroom space, but not exhibition space. Larger functions are sometimes held at convention centers. Corporate meeting planners and attendees prefer facilities with business amenities and a high-quality, professional appearance.

Conferences — Conferences are events held by associations, professional groups, and other membership organizations. These events do not usually require exhibit space, but are otherwise similar to conventions. They require meeting space for general sessions, food service areas, and breakout meeting rooms. Hotels and conference centers host the majority of conferences.

Conventions — Associations, professional groups, and other membership organizations hold conventions, with attendance ranging from 300 to 30,000 attendees, the average of which is approximately 800-900. The larger of these meetings typically take place in convention centers with exhibit halls of 100,000 square feet or more. Smaller events are held in hotels and conference centers. Conventions usually consist of a number of concurrent meetings, with a few general sessions. Facility needs include assembly space for general sessions, banquet facilities, and numerous breakout-meeting rooms. Approximately two-thirds of conventions use exhibit space for displays and booths.

Conventions generate a greater amount of new spending in the area economy because a large percentage of attendees originate from outside the local area, typically stay several nights in the host city, and spend money on accommodations, food, retail goods, transportation, and entertainment. Spouses, family, or companions accompany about 40 percent of attendees. In order to properly accommodate conventions, an exhibit space of around 75,000 to 100,000 square feet is necessary. Without a dedicated exhibit space of HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Industry Trends 5- 4

this size, a market is limited to events that occur in individual hotel properties or conference centers.

Tradeshows — Tradeshows provide a means for wholesalers and retailers to transact business with industry buyers. Trade associations, independent show organizers, and other companies sponsor and produce trade shows. Similar to conventions, tradeshows require exhibit halls and are generally restricted to convention centers, as opposed to hotel or conference center event spaces.

Like conventions, tradeshows offer a forum for exchanging industry ideas. Tradeshows are more product and sales-oriented than conventions. They are exhibit-intensive, and exhibitors prefer column-free, single-story, open-space facilities. Exhibitors construct temporary custom booths for product display. Tradeshows typically attract a large number of attendees that originate from outside the host city, but their length of stay is shorter and their average spending lower than convention attendees. Many tradeshows are increasing the amount of meetings and other breakout sessions they conduct in order to augment the educational component of their events, attract more attendees, and keep them in the host city for longer periods of time.

Consumer Shows — Consumer shows are public, ticketed events featuring exhibitions of merchandise for sale or display. Consumer shows provide a means of product distribution and advertising. Some, such as auto and boat shows, have recreational and entertainment components as well. Consumer shows range in size from small local, specialized shows with a few hundred attendees to large shows with many thousands of attendees. The larger consumer shows may occur in convention centers, shopping malls, fairgrounds, and other public-assembly facilities with large exhibition areas.

Most attendees are local residents, although a few large consumer shows have a regional or national draw. Exhibitors often come from out of town and may follow a series of events occurring in different venues. Site selection considerations for consumer shows include the size and income of the local population, availability of facilities, and the number of competitive shows in the market. Many consumer shows are beginning to incorporate educational seminars, and the availability of meeting space is becoming increasingly important for these events.

Assemblies — Assembly events usually fall under the category of SMERFE events. They attract anywhere from 200 to 50,000 people or more and many HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Industry Trends 5- 5

require arena or stadium seating. These events do not usually require large amounts of exhibit and meeting-room space.

Overall Facility and Convention centers typically provide several types of space that are used in Event Characteristics different combinations depending on the type of event.

• Exhibition space — typically the largest single area in a convention center, with high ceilings and clear spans that limit the number of support columns in the room. Large contiguous areas are divisible with movable, soundproof walls so that the halls can be used in various configurations. Most exhibition halls have a low level of finish and their concrete floors are designed to support heavy loads. Neutral in their design, exhibit halls are more like empty stages that are appropriately decorated for each event. Loading docks with high doors allow easy loading access and trucks may be allowed to drive on the floor. Utilities for exhibition booths are provided from boxes in the floor or dropped from the ceilings. Utilities typically include electricity, telecommunications hookups, water, and sometimes, compressed air and natural gas.

• Ballroom space — primarily designed for food and entertainment functions. Ballrooms typically have the highest level of finish in the convention center with permanent carpet and various lighting fixtures. Like exhibit halls, ballrooms also offer high ceilings, clear spans, and divisible space with soundproof movable walls. Often used as assembly space or for entertainment events, ballrooms are usually equipped for staging presentations. Sound attenuation and sophisticated sound systems are also important features of a ballroom. Close proximity to kitchen facilities is vital for the efficient delivery of food service.

• Meeting or breakout rooms — intended for small groups and range from 500 to 10,000 square feet. They are often divisible into smaller units to provide maximum flexibility. Meeting rooms are characteristically carpeted and have a high level of finish. Most meeting spaces have flat floors and no fixed seating so that they can be configured for an assortment of meeting styles. Meeting rooms offer variable lighting setups, sound attenuation, and in newer facilities, access to advanced telecommunications technology. Some meeting rooms are designed exclusively for presentations and may have fixed tiered theater style seating and video projection HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Industry Trends 5- 6

capabilities. Boardrooms are elegant meeting rooms with the permanent installation of a conference table.

• Breakout space — synonym for meeting and ballroom space. HVS International’s analysis of US convention centers shows that the average ratio of breakout space to exhibition space is 42 percent.

• Assembly halls and theaters — space frequently located within convention centers that generally has a large number of fixed seats and stages. Convention centers may also be connected to arena facilities which are occasionally used as assembly spaces for events with a large number of attendees.

• Multi-purpose space — area that can be used as an exhibit hall or a banquet space. Similar to exhibit halls, multi-purpose rooms offer the amenities necessary for hosting exhibitions, but the level of finish is more like that of a ballroom. A multi-purpose space may also combine arena and exhibit hall functions.

• Pre-function space — locations just outside of or adjacent to the event space. Pre-function areas support the circulation of pedestrian traffic through the facility, serve as registration areas, and are essential to the control of access to event spaces.

• Back-of-house space — storage, loading docks, administrative offices, service corridors, kitchens, mechanical spaces and other areas that are vital to the operation of the facility but not visible to the public.

Size of Convention Tradeshow Week’s Major Exhibit Hall Directory 2000 reports the distribution of Center Events 270 convention centers with 25,000 square feet or more of exhibition space, as Figure 5-1 shows. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Industry Trends 5- 7

Figure 5-1 Distribution of Convention Centers by Square Feet of Exhibit Space

25,000-49,999 500,000+ 15% 6%

100,000- 499,000 50,000-99,000 46% 33%

Source: Tradeshow Week

Almost 80 percent of the facilities have between 50,000 and 499,000 square feet of exhibit space.

Figure 5-2 shows the distribution of convention events by type of sponsoring organization.

Figure 5-2 Distribution of Convention Events by Type of Sponsoring Organization

Exposition / Tradeshow Medical Other 5% 9% 6% Governmental 11% SMERFE* 24%

Professional & Trade 45%

* Social, military, religious, fraternal, and ethnic Source: IACVB Spending Survey

HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Industry Trends 5- 8

Trade and professional events account for the largest share of events. The other category includes club and corporate events.

Tradeshow Week annually publishes Tradeshow Week Databook, containing information on convention, tradeshows, and consumer shows that require exhibit space. Figure 5-3 shows the distribution of events by the amount of exhibit space they require.

Figure 5-3 Distribution of Events by Amount of Required Exhibit Space

70% 62% 60%

50%

40%

30% 20% 20%

10% 6% 4% 3% 2% 2% 1% 0% 0 to 99,999 100,000 to 200,000 to 300,000 to 400,000 to 500,000 to 600,000 to 700,000 + 199,999 299,999 399,999 499,999 599,999 699,999 Source: Tradeshow Week

Among the events Tradeshow Week tracks, 82 percent use less than 200,000 square feet of exhibit space. However, this data partially reflects the distribution of facilities by size, and may not represent how much exhibit space existing events would use if larger facilities were available.

The International Association of Convention & Visitors Bureaus maintains a database of convention and tradeshow events that it makes available to member organizations. The Greater Columbus Convention and Visitors Bureau (GCCVB) obtained information from this database on the number of rotating conventions and tradeshows that are appropriate for the size of the GCCC and the area’s hotel room supply. The search criteria specified events that rotate to different locations and require room blocks of 3,000 or less rooms. Among such events, there are 2,096 that require between 50,000 and 190,000 square feet of exhibit space, which represents the prime candidates for the GCCC’s current specifications. Increasing the upper size limit to 300,000 square feet would add another 393 events, an increase of 19 percent. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Industry Trends 5- 9

Event Planner Location Figure 5-4 shows the criteria that convention and association event planners Criteria consider to be the most important in selecting a destination for their events.

Figure 5-4 Share of Event Planners Citing Factors as “Very Important”, National vs. Regional

Meeting Facilities 64% Meeting Facilities 70% Quality of Service 60% Quality of Service 67% Overall Affordability 44% Overall Affordability 58% Hotel Rooms 42% Membership Appeal 44% Facility Type 42% Hotel Rooms 42% Rotation Policy 37% Rotation Policy 40% Membership Appeal 37% Driving Accessibility 39% Climate 20% Facility Type 36% ADA Facilities 14% Climate 18% National/International Dining/Entertainment 11% ADA Facilities 18% Regional/State/Local Driving Accessibility 8% Dining/Entertainment 18%

0% 20% 40% 60% 80% 0% 20% 40% 60% 80%

Source: ASAE's Association Meeting Trends Source: ASAE's Association Meeting Trends

The survey asked respondents whether various site selection criteria were very important. Both convention and association event planners cited most frequently the availability of hotels and the affordability of the market as being very important.

Tradeshow Trends Table 5-2 shows the historical growth of exhibition events, attendees, exhibiting companies, and net square feet (NSF) used by exhibitors. Tradeshow Week data focuses on larger consumer shows, trade shows, and conventions with exhibitions that typically occur in convention and exhibition centers. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Industry Trends 5- 10

Table 5-2 Historical Annual Exhibition Growth – Percent Change

Exhibiting Year Exhibition Events1 Attendees NSF Used2 Companies 1990 13.7% 25.0% 10.0% 22.2% 1991 4.0% -5.3% 9.4% 3.0% 1992 4.6% 8.5% 0.0% 10.6% 1993 2.6% -5.2% 0.0% 5.7% 1994 3.5% 16.4% 8.3% 3.4% 1995 1.5% 36.5% 0.0% 12.0% 1996 0.5% -12.9% -3.8% 0.0% 1997 -1.5% 8.9% 0.8% -0.7% 1998 -1.0% 0.0% 11.1% -1.6% 1999 4.9% -7.3% 7.9% 7.4% 2000 6.2% 9.8% 0.7% 7.0% Average: 1990 - 2000 3.5% 6.8% 4.0% 6.3% 1 Exhibition events with more than 30,000 square feet of exhibit space. 2 NSF is the net square feet of exhibit space actually rented by exhibitors.

Source: Tradeshow Week

Over the past decade, average growth in demand for the events in the Tradeshow Week database has outpaced the average growth in supply. This growth reflects the expansion in the overall economy, but it also reflects an increasing utilization of exhibitions as a means of marketing and sales. Various independent surveys of major businesses rank exhibitions as the second or third most common way companies spend their advertising and marketing dollars.

The cost effectiveness of tradeshows is the primary driver of their growth. According to a national survey conducted by Data & Strategies Group, Inc., closing a sale with an exhibition lead costs an average of $625 and takes 1.3 follow-up calls compared to an average of $1,117 and 3.7 phone calls for direct sales methods. Tradeshows bring together willing and qualified buyers with sellers. According to a Tradeshow Week survey, 75 percent of all buyers at tradeshows make at least one purchase while attending the exhibition.

Trends in Exhibition Table 5-3 shows the annual growth in available exhibition space in the United Space Supply States and Canada. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Industry Trends 5- 11

Table 5-3 Total Exhibition Space in the United States and Canada Square Feet Percent Year (millions) Change 1996 62.0 -- 1997 63.0 1.6% 1998 63.0 0.0% 1999 63.4 0.6% 2000 65.5 3.3% 2001 68.5 4.6% 2002 71.9 4.9% 2003 76.9 7.0% By 2006 84.4 9.7%

Source: Tradeshow Week Major Exhibit Hall Directory

From 1996 through 2003, the compound annual growth rate of available exhibition space is expected to be 5.4 percent. In the next few years, the amount of exhibition space is likely to increase at well above three percent per year, which is the result of planning efforts that have occurred over the past five years.

Convention Center Within the next five years, planned expansions and new facilities would add Expansion Activity nearly 15 million square feet of additional exhibition space to the inventory. However, as Table 5-4 shows, roughly 5.1 million square feet of these additions can be attributed to five facilities in first-tier markets that are undertaking large expansions or new construction.

Table 5-4 Planned Expansions and New Construction in First-Tier Convention Markets Square Feet of Facility New Exhibit Space

World Expo Center (Orlando) 2,000,000 Orange County Convention Center 1,000,000 Las Vegas Convention Center 930,000 McCormick Place (Chicago) 610,000 Boston Exhibition Center 600,000 Georgia World Congress Center 450,000 Total 5,590,000

Source: Tradeshow Week Major Exhibit Hall Directory HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Industry Trends 5- 12

Columbus does not often compete directly with first-tier facilities, which cater primarily to the large national events that are too big to be accommodated in anything but the largest facilities. Rather, Columbus will generally compete among other mid-sized, or second tier, markets for mid-sized national events, and state and regional business.

A number of facilities in markets similar in size to Columbus currently have plans to expand. The 2000 Tradeshow Week Major Exhibit Hall Directory reports certain planned expansions and is not exhaustive of all peer facilities considering expansion. Recent and ongoing expansions account for 1.1 million square feet of additional exhibit space (with 2.0 million square feet already existing, an increase of 36.5 percent) and 331,881 square feet of additional meeting space (with 483,749 square feet already existing, an increase of 40.7 percent). HVS International sees the current growth in the supply of exhibition and meeting space outpacing the demand for such space.

Use of Technology in Overall, the meetings and conventions industry uses a moderate amount of Convention Centers technology during events, typically computers with Internet access and audiovisual presentation equipment. The industry as a whole lags behind other leading industries in terms of incorporating new technologies. The majority of conventions and conferences still require only basic technological amenities like a laptop or video projectors, items that all convention centers possess. Multi-media, whiteboards and videoconferencing are the three most commonly used technologies, as shown in Figure 5-5. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Industry Trends 5- 13

Figure 5-5 Technology Used to Deliver Meeting Content Keypad Simultaneous Response Translation 5% Whiteboards 4% Internet Training 18% 7%

Decision-making Software 7% Multimedia 18% Virtual Trade Show 11% Video Conferencing CD-ROM 17% 13% Source: Successful Meetings, 2000

Implications of a In the article titled “The Ground Has Shifted” in the October 1, 2000, issue of Continuing Global Meeting News, Equation Research posted the results of a survey of 722 Conflict on the meeting buyers one week after the September 11th terrorist attacks on New Meetings/Conventions York City and Washington D.C. This atrocity had an instant impact on the Industry meetings industry and the willingness of people to travel to events. The survey revealed two existing trends that may persist: more electronic conferencing via satellite broadcasting and the web, and an increase in regional meetings.

The attacks’ immediate effects on the convention and meeting industry played out differently in various types of markets. In larger national markets that attract attendees from throughout the country and the world, the weeks immediately following the attacks brought dramatic reductions in event activity and attendance at events that were held. The interruption in air service forced the postponement of some national and international events. Hotel occupancies, particularly in properties that have a significant amount of group business, were extremely low.

In second-tier markets that are oriented more towards state groups, the effects were not as pronounced. Attendees to many state events were able to arrange alternative transportation plans, as evidenced by the increase in car rentals, train and bus ridership during this period.

The Meeting News survey asked event professionals whether the terrorist attacks had influenced them to cancel meetings. Figure 5-6 shows the share of responses among four answers the survey provides. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Industry Trends 5- 14

Figure 5-6 Influence of Attacks on Events

One meeting One meeting cancelled / no cancelled / more expects future expected cancellations cancellations 18% 36%

No cancelled No cancelled meetings / meetings / no expects future expected cancellations cancellations 7% 39%

Source: Meeting News

Among these event professionals, 54 percent indicated that they had cancelled at least one of their events as a result of the terrorist attacks. However, almost 75 percent of the event planners indicated that they did not expect any future event cancellations. When asked whether their organization will be scheduling fewer meetings as a result of the attacks, 29 percent indicated that they expected a decrease in events. In addition, 54 percent of the responding meeting professionals indicated that they expected attendance at their meetings to decrease as a result of the attacks.

The survey went on to ask respondents who had cancelled events the reasons for these cancellations. Figure 5-7 shows the most frequently mentioned reasons for meeting cancellations. Respondents cited more than one reason when applicable. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Industry Trends 5- 15

Figure 5-7 Reasons for Meeting Cancellations 50% 46% 45% 40% 40% 35% 30% 25% 20% 20% 15% 13% 13% 7% 10% 5%

0% Organization's Attendees Logistical Organization's Attendees Change in Concern for Reluctant to Issues* Concern for Reluctant to Business Plans Safety Meet or Travel Safety * Meet or Travel* * Event was scheduled in New York or Washington D.C. Source: Meeting News

Concerns over travel safety were the most prevalent factor in the cancellation of events in the days following the attacks. If the event was planned to take place in New York City or Washington, D.C., 13 percent of the total number of responses from event professionals who cancelled events cited the sponsoring organization’s concern for attendee safety. Another 13 percent cited attendee reluctance to travel as a reason for cancellations. However, such safety concerns were not limited to events scheduled for New York and Washington D.C. Of the responses from those who cancelled events occurring in other locations, 46 percent cited the organization’s concern for attendee safety and 40 percent cited attendee reluctance to travel, indicating that the events of September 11 was the direct cause of a large majority of event cancellations.

An independently produced survey of the meeting industry by the association Meeting Professionals International cited in the discussion produced statistics similar to Meeting News:

24 percent made no meeting cancellations

49 percent expected to cancel some scheduled programs (of these, 19 percent cited safety issues and 41 percent mentioned financial issues as reasons for cancellation) HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Industry Trends 5- 16

39 percent predicted up to 20 percent decrease in future meetings (Q4 2001 and Q1 2002)

24 percent expect no decreases

One of the primary accelerating trends mentioned in the Meeting News survey is the potential increase in alternatives to convention and meeting events, such as video conferencing and other related technologies. Figure 5-8 shows meeting professionals’ views concerning whether organizations will increase their use of electronic meeting methods such as video conferencing and web conferencing.

Figure 5-8 Organizations’ Future Use of Electronic Meeting Methods 45% 42% 40%

35%

30%

25% 21% 21% 20% 16% 15%

10%

5%

0% Increase significantly Increase somewhat Increase marginally Stay about the same Source: Meeting News

A majority of respondents, 58 percent, indicated that as a result of the terrorist attacks they believed that their organization would increase the use of electronic meeting methods. The survey interprets the consensus from interviews with selected meeting professionals to be that the terrorist attacks will only accelerate existing technological trends, as opposed to causing fundamental changes in the industry or these trends.

The use of video and audio conferencing boosted dramatically after the September 11th attacks, with various sources estimating an increase between 10 to 50 percent. Historically, a similar spike in video conferencing usage occurred during the Persian Gulf War in 1991 that did not have a permanent effect on the attendance at meetings and conventions. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Industry Trends 5- 17

Meeting and convention industry specialists have speculated upon another post-attack phenomenon – an increase in regional meetings. The desire for safer and more easily accessible drive-in locations for events may encourage planners to use smaller markets. Like video conferencing, this effect is likely to be temporary.

Emerging Industry Over the past few decades, the meeting and convention industry has evolved Trends dramatically from a budding industry to a more mature one that has become an important driver of the national economy. Currently, industry expenditure estimates are over $40 billion per year. As an established industry, the rapid growth of the last four decades is not likely to persist. However, continued evolution and growth can be expected on a controlled scale. HVS International has identified the following emerging industry trends.

• Supply and Demand Equilibrium — Since the majority of convention facilities involve public funding, the expected relationship between supply and demand found in the private sector does not necessarily hold true for the convention industry. Public entities are motivated to develop convention facilities because they seek to stimulate local economic activity by attracting new visitors to the community. These public entities are not constrained by the need to achieve a return on investment in the facility. Rather, convention centers are considered “lost leaders” for overall expenditures in the local economy. The consequence of this disengagement between the rationale for an increase in supply and the given available demand is likely to lead to an overbuilt situation, as currently planned new construction and expansions are completed. However, public entities are constrained by limitations on tax resources to support these developments. If convention centers do not produce the expected economic impacts, the justification for increasing public support of convention center development will become less politically viable. These political constraints are likely, in the long run, to keep the supply of space commensurate with demand.

• Quality of Supply — As the industry has matured and competition among cities has become more intense, meeting planner expectations for quality have increased. For example, the availability of a headquarters hotel property has become an essential piece of a convention center package. Cities without headquarters properties, frequently lose business to cities with a good “hotel package.” HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Industry Trends 5- 18

Similarly, advanced communications technologies in convention centers are now routinely expected. Furthermore, surveys of meeting planners show that expectations for quality of services has become one of the most important site selection criteria. In an oversupplied market, quality expectations are likely to increase in importance.

• Emergence of “Convention Cities” – Several cities have emerged as primary convention destinations, such as Las Vegas, Orlando, New Orleans, and Chicago, among others. These cities have undergone rapid growth in the supply of hotels and convention centers that are quickly absorbed with new business. They have in common a broad tourist appeal and offer an appealing experience for the convention attendee. Their ability to attract a large number of attendees is a prime consideration in site selection. Cities with such strong appeal are likely to continue to be the most successful convention destinations.

• Propensity to Travel — Declining cost of travel (in real terms) and the increase in the propensity to travel has been a primary driver of long- term growth in the meetings and convention industry. Recent events that temporarily reduced the ability and desire to travel clearly demonstrated the importance of travel propensity to the industry. However, in the long-run, expansions in the transportation system and continued innovations that reduce costs and increase the ease of travel are likely to support the growth of the meeting and convention industry.

• Improved Communications Technology — Over the past decade, industry experts have engaged in a great deal of speculation that improvements in telecommunications technology will supplant the need for face-to-face meeting. To date, there is no evidence that video conferencing or the Internet has become a viable substitute for in- person communication. Society still prefers person-to-person interaction to exchange ideas and information, and to build relationships. To the extent that improvements in communications technology have contributed to overall economic growth, they have more likely fostered the growth of the meetings and convention industries.

Implications for Continued growth in the meetings industry depends largely upon continued Columbus growth of the national and local economies. The recent economic downturn has brought difficult times for most industries, and the meeting industry is no HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Industry Trends 5- 19

exception. However, planning efforts must focus on the long term, recognizing the realities of economic cycles. Long-term growth in the overall economy is likely to result in long-term growth of the conventions industry. Long-term economic recovery will probably be associated with an increase in the number and size of exhibitions and the attendance at those events.

While the ongoing terrorist threat is perceived as a new one to the United States, many other nations have faced similar threats over extended periods. As new security measures are implemented that restore confidence in travel, the impact of terrorist threats on the meetings industry is likely to diminish over time.

Columbus has been highly successful in developing a strong base of state association business. Other cities in the State are struggling to overcome the competitive advantages Columbus offers in terms of its central location and proximity to state association offices, which often locate in capital cities.

Columbus’ dependence upon state association business provides it with a partial buffer against economic cycles and continued concerns with air travel. State association events and their attendees are less likely to be affected adversely by economic downturns than more corporate or trade oriented events. Many attendees to state association events drive rather than fly. However, this dependence also limits future growth in the volume of events and attendees, particularly in the types of events that can generate the largest economic impact for a community.

The key question regarding the future potential of convention demand in Columbus is its ability to make inroads into the national event market. A continuing building boom in exhibit space, against a backdrop of stagnant growth in events and attendees, has made the competition between cities for such high-impact national events increasingly intense. In the following analysis, HVS International will assess Columbus’ amenities and capacities relative to peer markets, event planners’ perceptions of it as a national convention/meeting destination, and other factors that influence its national event potential. This analysis will help HVS International determine the level of event demand, and corresponding lodging demand, the GCCC can reasonably achieve with and without a headquarters hotel. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-1

6. Convention Center Demand Analysis

HVS International conducted the following tasks to assess the demand potential of the GCCC:

Analyzed Columbus as a convention, tradeshow, and meeting destination relative to a set of peer markets and convention facilities,

Analyzed past, current, and future event bookings, event leads, and lost business reports, and

Surveyed State association and national event planners concerning their perceptions of Columbus and the frequency in which they intend to hold events in Columbus, with and without a new headquarters hotel and an additional expansion of the GCCC’s exhibit space.

The preceding tasks and the event industry trends analysis in Section 5 provide HVS International with a basis for projecting events and attendance at the GCCC.

Facility Description The GCCC, built in 1993, was originally an expansion of the Ohio Center. It recently underwent an $81 million expansion and renovation that increased the facility’s total size from 1.4 to 1.7 million square feet. The expansion and renovation added:

120,000 square feet of exhibit space, A 15,000 square foot ballroom, 11 new meeting rooms, 1,100 space parking garage, Additional parking, and 100,000 square feet of renovated retail space. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-2

The expansion was designed to elevate Columbus’ status as a convention/meeting destination and was completed in January 2001.

Table 6-1 shows a summary of the facility’s function spaces.

Table 6-1 GCCC Function Spaces Number of Area Square Feet Rooms Exhibition Halls 1 4 329,236 Ballrooms 1 39,729 Meeting Rooms 61 58,483 Total Function Area 67 427,448 1 Does not include Battelle Hall

Source: GCCC

The ratio of meeting and ballroom space to exhibit space is important because conventions and certain tradeshows require the simultaneous use of exhibit, ballroom and meeting space. The GCCC’s ratio of ballroom and meeting space to exhibit space is 23 percent, somewhat low compared to new facilities that typically have such ratios closer to 40 percent. The connected Hyatt Regency also offers 63,000 square feet of meeting and ballroom space that is often used in conjunction with convention center space. However, if Battelle is excluded in the total of exhibit hall space, the GCCC’s ratio of total breakout space to exhibit space is 30 percent. If a new headquarters hotel is built it would provide additional meeting and ballroom space that, subject to availability, could augment the GCCC’s breakout spaces.

Peer Markets and HVS International selected 14 national peer markets to assess as part of a Facilities Analysis comparable demand analysis, basing the selection of peer markets on similarities in market size, event facilities, and the role they currently play in the event market. Columbus does not compete directly with the country’s larger markets for premiere events. Columbus primarily hosts local, state, and regional events. However, Columbus is likely to compete with these peer markets and similar markets for events that rotate to second-tier cities.

Population and Income Although there is no direct correlation between population and the demand for events, population data reveals trends in the overall economic climate of an area and its ability to support both local consumer events and provide and maintain sufficient visitor-related infrastructure and attractions. High HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-3

population or income density and/or growth rates can indicate significant capacity to support local public events and a likelihood that the area will add to its existing urban attractions. Strong population growth also suggests an increasing commercial and fiscal base to support convention facilities. Population changes often reflect underlying trends in business activity and the attractiveness of an area as a place to live and as a place to visit.

Table 6-2 shows 2000 and 1990 population, per capita income, non-farm personal income, and non-farm employment figures for the peer markets.

Table 6-2 Population and Income of Peer Markets Non-Farm MSA MSA Compund Non-Farm Personal Per Capita Employment Market Population Population Annual Income ($millions) Income 1998 (thousands) 2000 1990 Growth 1998 1998 St. Louis 2,603,607 2,492,525 0.4% $29,089 $74.4 1,584 Baltimore 2,552,994 2,382,172 0.7% $29,548 $73.2 1,476 Pittsburgh 2,358,695 2,394,811 -0.2% $28,149 $66.0 1,327 Cleveland 2,250,871 2,202,069 0.2% $29,239 $64.9 1,371 Denver 2,109,282 1,622,980 2.7% $34,092 $66.0 1,398 Kansas City 1,776,062 1,582,875 1.2% $28,473 $49.4 1,147 Cincinnati 1,646,395 1,526,092 0.8% $28,507 $46.1 1,038 Indianapolis 1,607,486 1,380,491 1.5% $29,022 $44.0 1,022 Columbus 1,540,157 1,345,450 1.4% $28,454 $41.8 1,019 Milwaukee 1,500,741 1,432,149 0.5% $30,582 $44.6 988 Charlotte 1,499,293 1,162,093 2.6% $28,784 $39.6 936 Salt Lake City 1,333,914 1,072,227 2.2% $24,698 $31.2 853 Austin 1,249,763 846,227 4.0% $29,087 $32.1 761 Memphis 1,135,614 1,007,306 1.2% $27,511 $30.0 698 Louisville 1,025,598 948,829 0.8% $27,749 $27.7 660 Comp Average 1,760,737 1,575,203 1.3% $28,895 $49.2 1,090 Columbus % of Average 87% 85% 103% 98% 85% 93% Source: Bureau of Economic Analysis

The Columbus MSA has the 9th largest population out of the peer markets, with 1,540,157 residents. Columbus’s annual growth percentage was 1.4, which is slightly above the 1.3 percent average of the peer markets.

Similar to population, income and employment statistics provide insight into the general health of the area’s economy and its ability to generate locally HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-4

based event demand and supply, and sustain visitor infrastructure and attractions.

Per capita personal income reflects the relative spending capacity of local residents, and provides another benchmark for assessing the region’s ability to develop and maintain both public and private services and attractions that help make an area an attractive place to live and visit. The Columbus MSA has the 11th highest per capita income among the peer markets, at $28,454. However, the Columbus MSA’s per capita income is nearly identical to the average of the peer markets. Total non-farm personal income is $41.8 million, or 85 percent of the peer market average. The non-farm employees in the Columbus MSA amount to 1,018,700, just below the peer market average.

Exhibit Space Analysis

Table 6-3 and Table 6-4 show summaries of the amount of exhibit and breakout space in the primary convention facilities in each of the selected peer markets and information on the hotel supply accessible to each facility. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-5

Table 6-3 Attributes of the Prime Convention Facility in Peer Markets and their Supporting Hotel Supply

Prime Exhibition Number of Proximate Hotel-Room Facility / City Headquarters Hotel Name Space (SF) Rooms Supply (Walking Distance)

Hyatt Regency Greater Columbus 329,236 yes Columbus, Crowne 1,011 3,163 Convention Center Plaza

Austin Convention Center 246,642 planned Hilton (2004) 800 3,664

Hyatt Regency Baltimore Convention Center 295,000 yes Baltimore, Sheraton 823 6,179 Inner Harbor Hotel

Charlotte Convention Center 280,000 planned Westin (October 2002) 700 4,118

Millenium Hotel Cincinnati Convention Center 161,900 yes Cincinnati / Sheraton 886 3,310 Four Points Downtown

Sheraton Cleveland Cleveland Convention Center 317,480 yes 470 4,427 City Center

Colorado Convention Center Hyatt Convention 292,000 planned 1,100 6,728 (Denver, CO) Center (2004)

Crowne Plaza, Hyatt Indiana Convention Center & 315,366 yes Regency, Marriott, 1,964 4,713 RCA Dome (Indianapolis, IN) Westin

1 New facility to open 2002 2 Includes Meeting and Ballroom square footage

Sources: Major Exhibit Hall Directory 2000 and respective facilities

HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-6

Table 6-4 Attributes of the Prime Convention Facility in Peer Markets and their Supporting Hotel Supply (continued)

Proximate Hotel- Square Feet of Ratio of Prime Exhibition Number of Headquarters Number of Room Supply Facility / City Breakout Space Breakout to Name Space (SF) Breakout Rooms Hotel Rooms (Walking 2 Exhibition Space Distance)

Kansas City Kansas City Convention Marriot 388,800 37 133,018 34% yes 1,371 2,000 Center Downtown, DoubleTree

Kentucky International Convention Center 191,000 52 97,722 51% yes Hyatt Regency 388 na (Louisville, KY)

Marriott Memphis Cook Convention 125,000 22 40,289 32% planned Downtown (as of 603 2,424 Center Jan. 2003)

Hilton Milwaukee Midwest Express Center 188,695 33 76,870 41% yes Center, Hyatt 1,215 2,537 (Milwaukee, WI) Regency

David L. Lawrence Convention Center 250,000 53 124,000 50% yes Westin 618 3,254 (Pittsburgh, PA) 1

Salt Palace Convention 367,100 53 96,980 26% yes Wyndham Hotel 381 6,523 Center (Salt Lake City, UT)

Renaissance America's Center/Cervantes Hotel & Suites Convention Center (St. 340,000 96 168,186 49% planned 1,081 6,015 (as of spring Louis, MO) 2003)

Peer Average 268,499 48 102,068 39% 886 4,299 1 New facility to open in March 2003 2 Includes Meeting and Ballroom square footage

Sources: Major Exhibit Hall Directory 2000 and respective facilities HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-7

The GCCC has more prime exhibit space than most of its peer second-tier markets, excluding the Kansas City Convention Center, the Salt Palace Convention Center in Salt Lake City, and the Cervantes Convention Center in St. Louis. The peer facilities, excluding the GCCC, have an average of average 48 breakout rooms providing an average of 102,068 square feet of space.

All of these markets have or will have a headquarters hotel and/or one or more hotels located adjacent to, or across the street from, their primary convention center. The supply of hotel rooms in the area surrounding the convention centers varies greatly among these peer markets, ranging from 2,424 rooms to 6,728 rooms. This supply of convention center rooms is generally defined as rooms within reasonable walking distance from a convention center, but may also include rooms as far as 1.5 miles away if a city routinely uses such properties as part of their primary room blocks. Despite having more exhibit space than most of its peers, Columbus’ primary hotel supply that serves convention demand is among the smallest of the peer markets. The 631 headquarters hotel rooms in Columbus are only 71 percent of the peer market average of 886 rooms.

Figure 6-1 displays the existing amount of prime and non-prime exhibit space in the peer markets’ primary convention centers. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-8

Figure 6-1 Existing Prime and Non-Prime Exhibit Space

St. Louis

Kansas City

Columbus

Indianapolis

Salt Lake City

Pittsburgh

Cleveland

Baltimore

Denver

Charlotte Prime SF

Austin Non-Prime SF

Louisville

Milwaukee

Cincinnati

Memphis

Sources: Tradeshow Week, Facilities & Destinations Annual Directory 0 100,000 200,000 300,000 400,000 500,000

The GCCC has 426,000 square feet of exhibit space, including the arena floor space, making it the third largest facility among the peer markets in total exhibit space, and fourth in prime exhibit space. Currently, St. Louis’ Cervantes Convention Center and the Kansas City Convention Center contain the most exhibit space out of the peer markets.

Figure 6-2 shows the existing amount of prime exhibit space and the amount of exhibit space currently under construction or any planned expansions among the peer facilities. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-9

Figure 6-2 Existing Square Footage and Planned Expansion Expanded Square Footage

Denver

Kansas City

Salt Lake City

St. Louis

Columbus Cleveland Indianapolis Milwaukee

Baltimore

Charlotte Existing Prime Exhibit SF Pittsburgh Planned Expansion Prime Exhibit SF Austin Louisville

Cincinnati Memphis

0 100,000Source: 200,000 Tradeshow 300,000 Week 400,000 500,000 600,000

There are four facilities with concrete plans to expand. Upon completion of each, Columbus will be the fifth largest facility. Denver’s Colorado Convention Center is doubling its current size to a total of nearly 600,000 square feet of prime exhibit space, which will make it the largest facility out of the peer markets. Both Cincinnati and Cleveland are developing plans to increase their amount of exhibit space, but no size estimates are certain thus far. The City of Cleveland is considering the construction of an entirely new facility.

Table 6-5 shows the existing and future per capita exhibit hall space of the peer markets. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-10

Table 6-5 Existing and Future Per Capita Exhibit Hall Square Footage Existing Per Existing Prime Exhibit Future Prime Exhibit Future Per Capita 2000 MSA Capita (in City Hall Space in Main Hall Space in Main (in hundreds) Population hundreds) Exhibit Convention Center Convention Center Exhibit Hall SF Hall SF Salt Lake City 1,333,914 367,100 27.5 367,100 27.5 Kansas City 1,776,062 388,800 21.9 388,800 21.9 Columbus 1,540,157 329,236 21.4 329,236 21.4 Indianapolis 1,607,486 315,366 19.6 315,366 19.6 Charlotte 1,499,293 280,000 18.7 280,000 18.7 Louisville 1,025,598 191,000 18.6 191,000 18.6 Cleveland 2,250,871 317,480 14.1 317,480 14.1 Denver 2,109,282 292,000 13.8 584,000 27.7 St. Louis 2,603,607 340,000 13.1 340,000 13.1 Milwaukee 1,500,741 188,695 12.6 313,695 20.9 Baltimore 2,552,994 295,000 11.6 295,000 11.6 Memphis 1,135,614 125,000 11.0 125,000 11.0 Austin 1,249,763 125,972 10.1 246,642 19.7 Cincinnati 1,646,395 161,900 9.8 161,900 9.8 Pittsburgh 2,358,695 131,000 5.6 250,000 10.6 Comp Average 1,760,737 251,380 14.9 298,285 17.5 Columbus % of Average 87% 131% 144% 110% 122% Sources: Tradeshow Week and Census Bureau

Columbus’s existing per capita exhibit hall square footage is 21.4 square feet per 100 people, third out of its peers behind Kansas City and Salt Lake City. The average is 14.4 square feet, far below that of Columbus. Upon completion of any expansions in the peer markets, Columbus will have the fourth highest ratio of prime exhibit space per person. The ratios within expanding markets such as Denver, Milwaukee, Austin, and Pittsburgh will increase drastically, giving Denver the highest per capita square footage of 27.7 and adding to competition among peer facilities.

Availability of Sleeping Figure 6-3 shows the availability of metro area and downtown hotel rooms in Rooms the Columbus and its peer markets. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-11

Figure 6-3 Number of Hotel Rooms in Columbus and its Peer Markets

St. Louis

Charlotte

Kansas City

Cincinnati

Denver

Indianapolis

Austin

Columbus

Cleveland

Memphis

Salt Lake City Downtown Hotel Rooms Louisville Other Metrowide Hotels Pittsburgh

Milwaukee

Baltimore

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000

Sources: Respective CVB's & HVS

Columbus has 13 hotels from which it can assemble a primary room block for the GCCC. The Columbus hotel supply is relatively small compared to its peers. Columbus has the lowest number of downtown hotel rooms 3,163, except for Memphis. Columbus’ number of downtown hotel rooms accounts for 63 percent of the peer market average. In addition, despite having more exhibit space, Columbus has fewer downtown hotel rooms than both Cincinnati and Cleveland, its nearest competitors. Table 6-6 shows the ratio of square feet of prime exhibit space to the number of downtown hotel rooms in the peer markets. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-12

Table 6-6 Ratio of Square Feet of Prime Exhibit Space to Number of Downtown Hotel Rooms

SF of Exhibit Number of SF of Prime Space per City Downtown Exhibit Space Downtown Hotel Rooms Room

Kansas City 388,800 3,668 106 Columbus 329,236 3,163 104 Pittsburgh 250,000 3,350 75 Cleveland 317,480 4,500 71 Austin 246,642 3,523 70 Charlotte 280,000 4,118 68 Memphis 125,000 2,019 62 Indianapolis 315,366 5,289 60 Milwaukee 188,695 3,673 51 St. Louis 340,000 6,200 55 Louisville 191,000 3,680 52 Denver 292,000 6,100 48 Baltimore 295,000 6,179 48 Salt Lake City 367,100 7,829 47 Cincinnati 161,900 5,095 32 Comp Average 268,499 4,659 60 Columbus % of Average 122.6% 67.9% 172.8% Sources: Respective CVB's and HVS

Columbus has the second highest ratio of square feet of exhibit space per downtown hotel rooms among the peer markets. This high ratio of exhibit space to room supply suggests that additional downtown rooms may be necessary to enable a significant increase in the demand potential for out-of- town events in Columbus and maximize the positive benefits of the recent exhibit hall expansion.

Affordability The 2000 Corporate Travel Index, as compiled by Business Travel News, is an indicator of the relative costs of business travel to Columbus and its peers. This index does not attempt to measure total daily expenditures by travelers, but reveals the relative average costs of primary types of travel expenses. The index includes three components:

Hotel room rental, Food and beverages (for breakfast, lunch, and dinner), and HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-13

Car rental.

Figure 6-4 shows the average travel per diems for each peer market.

Figure 6-4 Average Travel Per Diems in Peer Markets

Cincinnati $261

Cleveland $257

Columbus $254

Charlotte $254

Memphis $247

Austin $246

Denver $240

St. Louis $236

Milwaukee $234

Indianapolis $230

Baltimore $230

Pittsburgh $225

Kansas City $224

Louisville $219

Salt Lake City $214

$0 $50 $100 $150 $200 $250 $300 Source: Business Travel News, 2000 Corporate Travel Index

Columbus ranks 3rd out of the 14 peer markets that appear in the 2000 Corporate Travel Index. Columbus ranks 26th out of the 100 top cities in the US. Columbus’s per diem of $253.80 is 107.1 percent of the $237.02 average of the peer cities. Columbus is relatively expensive compared to its peer markets. However, it is more affordable than its two intrastate peers, Cincinnati and Cleveland.

CVB Budgets The budget of the convention and visitors bureau serving a particular market is one measure of the marketing resources available for promoting a convention facility. Figure 6-5 shows the annual CVB budgets for Columbus and its peer markets. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-14

Figure 6-5 Annual CVB Budgets of the Peer Markets ($ in millions)

St. Louis $12.5 Cleveland $9.3 Pittsburgh $8.7 Salt Lake City $8.6 $8.5 Indianapolis Baltimore $7.7 Denver $7.1 Milwaukee $6.9 Austin $6.7 Charlotte $6.4 Kansas City $6.3 Cincinnati $6.2 Louisville $6.2 Columbus $5.7 Memphis $4.7

$0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0

Source: Respective CVB's

The annual CVB budget does not indicate the amount of money a particular CVB spends on marketing their convention facilities. The budget figures presented here include spending on destination marketing, tourism, and other typical CVB activities. Additionally, convention facilities may also spend money on marketing and promotion, which is not reflected in this data. However, the CVB budget figures indicate the relative amount of resources that are available to each bureau for marketing a city as a destination and its primary event facilities.

Table 6-7 shows the ratio of annual CVB budgets to the number of metro area hotel rooms in Columbus and its peers. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-15

Table 6-7 Ratio of CVB Budgets Per Metro Area Hotel Rooms

Number of CVB Dollars City Annual CVB Budget Metro Area per Hotel Hotel Rooms Room

Pittsburgh $8,661,568 13,000 $666 Milwaukee $6,900,000 12,231 $564 Salt Lake City $8,627,521 17,458 $494 Cleveland $9,342,000 19,069 $490 Baltimore $7,700,000 16,000 $481 Louisville $6,200,000 15,129 $410 St. Louis $12,450,000 31,000 $402 Indianapolis $8,500,000 21,248 $400 Austin $6,702,954 20,095 $334 Denver $7,100,000 22,500 $316 Columbus $5,700,000 19,086 $299 Cincinnati $6,200,000 23,012 $269 Kansas City $6,300,000 24,211 $260 Memphis $4,700,000 19,043 $247 Charlotte $6,400,000 28,842 $222 Comp Average $7,556,003 20,203 $397 Columbus % of Average 75.4% 94.5% 75.3% Sources: Respective CVB's and HVS

The GCCVB’s annual budget per hotel room is $298.65, approximately 75.3 percent of the average of its peer markets. As in Columbus, many CVB budgets are dependent on revenue generated from room taxes. For this reason, the smaller than average size of the Columbus hotel market and the comparable average room rate place the GCCVB at a competitive disadvantage with respect to marketing resources from room tax revenue. Below average marketing resources are more likely to affect performance in the national meetings market, which often requires more extensive marketing efforts than local and state markets.

Air Service The accessibility and affordability of a destination via air travel is an important consideration for planners of national and certain regional events because it affects a destination’s ability to attract attendees. Table 6-8 displays the number of total passengers and commercial flights in 2000. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-16

Table 6-8 Air Service in Peer Markets in 2000 Commercial Market Total Passengers Flights/Year Denver 38,748,781 509,092 St. Louis 30,546,698 481,025 Charlotte 23,073,894 452,009 Cincinnati 22,537,525 486,671 Salt Lake City 19,900,810 366,933 Pittsburgh 19,813,174 448,785 Baltimore 19,602,856 321,627 Cleveland 13,288,353 331,899 Kansas City 11,910,654 219,508 Memphis 11,769,213 388,412 Indianapolis 7,774,908 261,816 Austin 7,307,282 245,737 Columbus 6,872,310 238,011 Milwaukee 6,072,646 221,855 Louisville 3,954,243 181,548 Comparable Average 16,878,646 351,208 Columbus % of Average 41% 68% Sources: Airports Council International

The level of air service Columbus offers ranks 13th in total passengers and 12th in flights. This set of peer markets includes some major hub airports such as Denver, St. Louis, Charlotte, and Cincinnati. A second set of markets includes those that do not function as major national hubs, but still have substantial levels of air service. Columbus ranks at the low end of this second set of markets that do not function as major hubs.

The overall level of air service places Columbus at a competitive disadvantage to the peer markets for national events, as the number of commercial flights served by the airports in these markets is greater than in Columbus. However, Columbus does benefit from having a significant amount of low- cost air service, the majority provided by Southwest Airlines.

Peer Hotel Market Table 6-9 shows the number of hotel rooms in the metro and downtown areas Occupancy and ADR of each peer market, including occupancy percentages and average daily room rates (ADR), when available. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-17

Table 6-9 Occupancy and ADR of Peer Hotel Markets Number of Downtown Downtown Number of Metro City Downtown Metro ADR Occupancy % ADR Metro Rooms Occupancy % Rooms Salt Lake City 7,829 66.2% $80.37 17,458 66.6% $73.15 St. Louis 6,200 61.9% $105.94 31,000 63.0% $73.10 Baltimore 1 6,179 71.0% $150.33 16,000 na na Denver 6,100 68.5% $124.45 22,500 65.1% $87.44 Indianapolis 5,289 62.0% $94.25 21,248 59.2% $76.52 Cincinnati 5,095 49.2% $82.87 23,012 52.0% $70.75 Cleveland 4,500 na na 19,069 62.3% $83.85 Charlotte 4,118 56.6% $104.43 28,842 55.3% $66.84 Louisville 2 3,680 56.5% $98.28 15,129 na na Kansas City 3,668 61.7% $89.99 24,211 62.7% $73.19 Austin 3 3,523 73.2% $129.44 20,095 71.0% $79.10 Pittsburgh 4 3,350 na na 13,000 66.8% $100.57 Milwaukee 3,673 63.9% $104.73 12,231 61.5% $79.53 Columbus 3,163 65.3% $104.57 19,086 65.3% $69.82 Memphis 2,019 67.1% $72.92 19,043 60.6% $65.76 Comp Average 4,659 63.1% $103.17 20,203 62.2% $77.48 Columbus % of Average 68% 103% 101% 94% 105% 90% 1 Downtown Occupancy and ADR figures from 2000 2 Data from year 2000 3 Occupany figures are average of 1999-2001, ADR figures from year 1999 4 Metro Occupancy and ADR figures from 2000

Source: Respective CVB's and HVS

The convention and visitor bureaus in Cleveland and Pittsburgh did not provide downtown ADR and occupancy information. Columbus’s downtown hotel market’s occupancy and ADR is comparable to its peer markets. The low number of downtown hotel rooms and the slightly above average occupancy and ADR indicate that downtown rooms are at more of a premium in Columbus than in some of its peers, such as Cincinnati and Charlotte, which both have larger supplies and lower occupancy. Among the cities for which downtown hotel occupancy rates and ADR’s are available, Columbus ranks 6th in each category.

Events and Attendance Table 6-10 and Table 6-11 display events and attendance for the primary at Peer Facilities convention facilities for which such data is available. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-18

Table 6-10 Events and Attendance at Peer Facilities Colorado Indiana Austin Baltimore Charlotte Cincinnati Cleveland Kansas City Convention Convention Event Type Convention Convention Convention Convention Convention Convention Center Center & RCA Center 1 Center Center 2 Center 1 Center Center 4 (Denver) 2 Dome 3 Prime Exhibit Hall Space 246,642 295,000 280,000 161,900 317,480 292,000 315,366 388,800 Number of Exhibit Hall Events Conventions/Tradeshows 42 55 34 42 na 45 83 48 Consumer Shows 18 39 17 53 na 29 18 11 Meetings 129 74 150 89 na 112 140 72 Banquets 32 14 na 8 na na na 84 Assemblies na na 8 na na na na na Sports / Entertainmentnananananana16 28 Other Events 9 2 na 18 na na na 26 Total Events 230 184 209 210 na 186 257 269

Attendance Conventions/Tradeshows 116,335 234,394 305,316 na na 190,063 472,486 na Consumer Shows 196,308 252,219 106,296 na na 395,319 151,450 na Meetings 35,588 59,356 67,276 na na 152,660 87,564 na Banquets 18,345 17,455 na na na na na na Assemblies na na 20,185 na na na na na Sports / Entertainmentnananananana72,187 na Other Events 2,667 11,950 na na na na na na Total Attendance 369,243 575,374 499,073 510,609 738,042 783,687 1,200,000

Average Attendance Conventions/Tradeshows 2,770 4,262 8,980 na na 4,224 5,693 na Consumer Shows 10,906 6,467 6,253 na na 13,632 8,414 na Meetings 276 802 449 na na 1,363 625 na Banquets 573 1,247 na na na na na na Assemblies na na 2,523 na na na na na Sports / Entertainmentnananananana4,512 na Other Events 296 5,975 na na na na na na 1 Annual average fiscal years 1998-2000 2 Data for Meetings include Banquets 3 Data from 2000 4 Data from 1999 5 Average excludes zero values and those for which data is not available na=not available Sources: Respective Convention Centers & HVS HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-19

Table 6-11 Events and Attendance at Peer Facilities (continued) Kentucky David L. Memphis Salt Palace Cervantes Greater International Midwest Express Lawrence Cook Convention Convention Columbus Event Type Convention Center Convention Average 5 Convention Center (Salt Center (St. Convention Center (Milwaukee) 3 Center Center 4 Lake City) Louis) Center (Louisville) 3 (Pittsburgh) Prime Exhibit Hall Space 191,000 125,000 188,695 250,000 367,100 340,000 287,149 329,236 Number of Exhibit Hall Events Conventions/Tradeshows 40 31 50 20 173 na 50 92 Consumer Shows 21 19 23 21 110 na 26 15 Meetings 5 65 81 155 125 na 109 148 Banquets na 57 91 24 10 na 35 34 Assemblies na 22 na na na na 8 3 Sports / Entertainment 6 1 na na 1 na 22 12 Other Events 28 72 4 na 59 na 14 na Total Events 100 267 249 220 478 na 221 304

Attendance Conventions/Tradeshows na 186,970 216,113 96,100 524,550 na 263,719 345,377 Consumer Shows na 110,685 292,726 258,361 403,187 na 220,318 188,400 Meetings na 15,846 27,682 46,447 45,322 na 80,489 81,290 Banquets na 37,659 52,378 16,191 7,910 na 17,900 21,853 Assemblies na 10,900 na na na na 20,185 1,800 Sports / Entertainment na 3,305 na na 1,017 na 72,187 69,500 Other Events na 21,447 33,512 na 57,053 na 7,309 na Total Attendance 296,177 386,812 622,411 417,099 1,039,039 na 668,004 708,220

Average Attendance Conventions/Tradeshows na 6,031 4,322 4,805 3,032 na 5,349 3,754 Consumer Shows na 5,826 12,727 12,303 3,665 na 8,989 12,560 Meetings na 244 342 300 363 na 404 549 Banquets na 661 576 675 791 na 618 643 Assemblies na 495 na na na na 495 600 Sports / Entertainment na 3,305 na na 1,017 na 3,908 5,792 Other Events na 298 8,378 na 967 na 4,338 na 1 Annual average fiscal years 1998-2000 2 Data for Meetings include Banquets 3 Data from 2000 4 Data from 1999 5 Average excludes zero values and those for which data is not available na=not available Sources: Respective Convention Centers & HVS HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-20

There is no standard method of classifying events by type in use among all convention center facilities, which complicates comparisons of demand among different convention centers. However, this demand data provides a sense of the overall level of activity occurring in these convention centers.

In conclusion, Columbus performs well above the average of its peers, particularly with respect to conventions and tradeshows. Essentially, Columbus is strong with respect to high impact events. The lower number of consumer shows reflects both a high level of demand for conventions and tradeshows and the booking policy for the GCCC, which gives preference to events that attract out-of-town attendees and generate room nights.

Analysis of GCCC The GCCC provided information on past and future booked events including Events & Attendance attendance figures, estimated room nights, and other event information. HVS International classified the events by type according to a standard classification system used to analyze convention demand. Table 6-12 shows a summary of events and attendance by type of event in 2001.

Table 6-12 Events and Attendance for GCCC Booked Events in 2001 Number of Average Percent of Total Event Type Total Attendance Events Attendance Attendance Conventions 57 2,393 136,418 22.3% Tradeshows 35 3,907 136,759 22.3% Consumer Shows 15 11,727 175,900 28.7% Meetings 148 495 73,190 12.0% Banquets 34 643 21,853 3.6% Sports / Entertainment 12 5,542 66,500 10.9% Assembly 3 600 1,800 0.3% Total 304 2,015 612,420 100.0%

Sources: Greater Columbus Convention Center & HVS

Conventions are the second most frequent type of event at the GCCC in 2001 and they contribute 22 percent of total attendance. Tradeshows, which have a higher average attendance than conventions, contribute roughly the same amount of attendees from only 35 events. Assembly events, which contribute a small percentage of total attendance, consist primarily of religious gatherings.

Table 6-13 shows a summary of the number of average and total event days and the number of move-in and move-out days by category for 2001. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-21

Table 6-13 Event Length in Days by Type of Event 2001 Average Total Move- Average Total Show Percent of Move- Percent of Event Type In/Move-Out Show Days Days Total In/Move-Out Total Days Days Conventions 3.0 170 30.1% 1.1 64 30.8% Tradeshows 2.6 90 16.0% 2.3 80 38.5% Consumer Shows 2.1 31 5.5% 1.5 23 11.1% Meetings 1.5 219 38.8% 0.1 21 10.1% Banquets 1.1 37 6.6% 0.3 9 4.3% Sports / Entertainment 1.2 14 2.5% 0.9 11 5.3% Assembly 1.0 3 0.5% 0.0 0 0.0% Total 1.9 564 100.0% 0.7 208 100.0% Sources: Greater Columbus Convention Center and HVS

This impact analysis uses the information on show days and move-in/move- out days to help guide the assumptions for average event length for the impact estimates.

Historical Demand The GCCC provided HVS International with data on historical events and attendance. Table 6-14 displays historical events and attendance at the GCCC.

Table 6-14 Historical Events & Attendance at Conventions & Tradeshows Number of Average Year Total Attendance Events Attendance 1993 73 217,803 2,984 1994 90 345,921 3,844 1995 94 354,015 3,766 1996 78 269,815 3,459 Sources: GCCC & HVS

The FCCCA provided HVS International with historical events and attendance data for 1997-2000, which includes a more detailed summary by type of event, as shown in Table 6-15. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-22

Table 6-15 Historical Events & Attendance at Conventions & Tradeshows Event Type 1997* 1998 1999 2000 Events Conventions 70 32 18 43 Tradeshows na 54 63 36 Banquets 22 36 40 36 Meetings/Seminars 449 286 208 207 Concerts na 8 3 - Family Shows na 1 - - Consumer Shows 9 5 7 8 Sporting Events 58 46 15 11 Other - 4 8 9 Total Events 608 472 362 350 Average Attendance Conventions 4,581 5,641 3,679 3,850 Tradeshows na 2,677 4,625 6,579 Banquets 793 805 1,151 910 Meetings/Seminars 440 245 689 651 Concerts na 2,550 1,154 na Family Shows na 58,953 na na Consumer Shows 18,683 60,578 47,683 48,445 Sporting Events 3,622 3,066 7,053 8,303 Other na 2,675 1,471 1,833 Total Attendance Conventions 320,671 180,504 66,230 165,552 Tradeshows na 144,578 291,359 236,857 Banquets 17,445 28,979 46,037 32,750 Meetings/Seminars 197,644 70,004 143,348 134,800 Concerts na 20,397 3,462 - Family Shows na 58,953 - - Consumer Shows 168,150 302,891 333,782 387,560 Sporting Events 210,096 141,055 105,791 91,330 Other - 10,700 11,770 16,500 Total Attendance 914,006 958,061 1,001,779 1,065,349 * Conventions include tradeshows; Sporting Events include concerts and family shows Sources: FCCCA and HVS

Future Bookings The GCCC provided HVS International with a list of future booked events. Figure 6-6 shows the number of tentative and definite events through 2005. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-23

Figure 6-6 Future Convention and Tradeshow Bookings at the GCCC

60 2 Tentative 50 8 Definite 40 15 30 55

20 39 14 26 15 10 9 6 0 2001 2002 2003 2004 2005 Sources: GCCC and HVS

The future bookings display a typical pattern with the ratio of definite to tentative events and total events declining in out years. The planning horizon for the types of conventions and tradeshows that utilize a large convention center like the GCCC is usually between five and ten years. Smaller events typically have planning horizons of fewer than five years.

Figure 6-7 shows the number of tentative and definite future events by type at the GCCC between 2001 and 2005. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-24

Figure 6-7 GCCC Future Events by Type 2001-2005

160

140 Conventions

120 Tradeshows Consumer Shows 100 Meetings

80 Banquets

Other 60

40

20

0

2001 2002Sources: GCCC 2003 and HVS 2004 2005

Table 6-16 shows a summary of the number of currently booked events and their estimated attendance by type of event for each year between 2001 and 2005. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-25

Table 6-16 GCCC Summary of Currently Booked Events by Type 2001-2005 Type of Event 2001 2002 2003 2004 2005 Number of Events Conventions 5747412321 Tradeshows 35 28 24 21 12 Consumer Shows1512764 Meetings 148 68 12 5 3 Banquets 3432522 Sports / Entertainment 12 13 11 7 6 Assembly 32000 Total 304 202 100 64 48 Average Attendance1 Conventions 3,261 3,207 2,988 3,253 2,825 Tradeshows 4,836 3,126 3,545 5,518 6,300 Consumer Shows 14,492 8,922 16,840 20,000 8,333 Meetings 553 715 772 2,267 4,267 Banquets 683 980 2,131 3,500 3,000 Sports / Entertainment 5,792 4,759 4,100 6,000 7,500 Assembly 600950000 Total Attendance Conventions 176,118 141,100 122,500 61,800 45,200 Tradeshows 169,259 87,520 78,000 93,800 56,700 Consumer Shows 188,400 80,300 84,200 80,000 25,000 Meetings 81,290 42,897 6,950 6,800 12,800 Banquets 21,853 27,450 8,525 7,000 6,000 Sports / Entertainment 69,500 52,350 41,000 30,000 15,000 Assembly 1,8001,900000 Total 708,220 433,517 341,175 279,400 160,700 1 Average excludes events that do not have estimated attendance figures

Source: Greater Columbus Convention Center & HVS

The volume of events that are currently booked declines over time, particularly after 2003, as many events have not yet booked dates for 2004 and 2005.

Event Leads The GCCVB maintains a list of event leads that they are currently pursuing. The list contains information on event dates, attendance, and room nights. Figure 6-8 shows the number of event leads between 2002 and 2006 by type of event. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-26

Figure 6-8 Number of Event Leads by Type 2002-2006

50

45 Conventions

40 Meetings Tradeshows 35 Sports / Entertainment 30 Assembly 25

20

15

10

5

0 2002 2003 2004 2005 2006 Sources: Greater Columbus Convention & Visitors Bureau and HVS

The number of convention leads is greater in 2003 than in 2002, in part because many of these leads have either evolved into bookings or decided upon other locations by now. However, the number of events in 2003 could surpass the number in 2002, given current bookings and event leads in these years. The number of event leads declines in each year subsequent to 2003, as the planning horizon for convention center events becomes increasingly distant from current sales efforts.

Table 6-17 shows the number of event leads by type of event and estimated attendance. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-27

Table 6-17 Number of Event Leads and Estimated Attendance by Type 2002-2006 Type of Event 2002 2003 2004 2005 2006 Number of Events Conventions 3645353315 Tradeshows 1712653 Consumer Shows10000 Meetings 255200 Banquets 00000 Video Conference00000 Sports / Entertainment 14 14 11 3 0 Assembly 105233 Total 103 81 56 44 21 Average Attendance 1 Conventions 1,031 1,611 2,217 2,682 6,800 Tradeshows 3,282 4,904 10,424 13,169 4,333 Consumer Shows 25,000 ------Meetings 198 563 500 -- -- Banquets ------Video Conference ------Sports / Entertainment 0 61,786 27,606 23,333 -- Assembly 0 3,820 3,400 15,000 9,500 Total Attendance Conventions 32,990 69,275 68,725 85,825 95,200 Tradeshows 55,800 53,943 62,543 65,843 13,000 Consumer Shows25,0000000 Meetings 4,955 2,815 1,000 0 0 Banquets 00000 Video Conference00000 Sports / Entertainment 0 865,000 276,060 70,000 0 Assembly 0 19,100 6,800 45,000 19,000 Total 118,745 1,010,133 415,128 266,668 127,200

1 Average excludes events that do note have estimated attendance figures Sources: GCCVB & HVS

Analysis of the estimated attendance among the event leads the GCCVB is pursuing reveals over 1 million attendees in 2003.

Lost Business Analysis The GCCVB maintains lists of potential events that were tentatively scheduled or those that previously considered using the GCCC, but were lost HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-28

to other convention venues or are eluding Columbus for some other reason. The GCCVB tracks information on these events including:

Estimated attendance, Total room nights, and The reason cited for selecting another location. The 934 events included in the GCCVB’s lost business report, which were to have occurred between the dates of January 1, 1998 and March 18, 2001, amounted to a total of 4,517 event days. The average length of each event was five days, ranging in length from one day to two weeks. The attendance for these events totaled 1,755,607. Table 6-18 shows the total and average attributes of the lost events.

Table 6-18 GCCVB Total and Average Event Days, Attendance, and Room Nights 1998-2001 Attribute Total Average Event Days 4,274 5 Attendance 1,755,607 1,946 Room Nights 1,684,908 1,975 Source: GCCVB

Figure 6-9 shows a distribution of the number of rooms associated with these lost events. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-29

Figure 6-9 Distribution of Lost Business Report Events by Number of Room Nights

250

205 200

156 150 126

97 100 92

60

50 21 22 21 16 15

0 1 to 249 250 to 500 to 1,000 to 2,000 to 3,000 to 4,000 to 5,000 to 6,000 to 7,000 to 8,000 to 499 999 1,999 2,999 3,999 4,999 5,999 6,999 7,999 9,000 Sources: Greater Columbus Convention & Visitor Bureau and HVS

The GCCVB has room night data for 854 of the 934 events. The average number of room nights among these 854 events is 1,975, which represents 1,684,908 total room nights. Over 70 percent of the events have less than 2,000 room nights.

HVS International grouped the reasons attributed to the loss of events into 11 categories. More than half of the events on the lost business reports did not cite a specific reason for electing to go elsewhere. However, many of the decision makers for the lost events cited specific reasons why they did not bring their event to Columbus. Figure 6-10 shows the most frequently mentioned reasons for why event planners elected against holding their events in Columbus. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-30

Figure 6-10 Reasons Cited for Not Bringing Events to the Columbus Convention Center

Date Conflict 128

Cancelled 92

Hotel Supply 61

Low Attendance / Registration 60

Cost 38

Hotel Cost 22

City Image / Attractiveness 21

Lack of Event Space 8

Other 6

Climate 6

City too Large 1

0 20 40 60 80 100 120 140 Number of Responses Sources: Greater Columbus Convention & Visitor Bureau and HVS

The most frequent reasons given for lost business are date conflicts, followed by cancellations. Of the 443 associations that cited a reason for not holding an event in Columbus, 14 percent were attributed to problems with the existing hotel supply. An additional five percent indicated hotel costs as a reason, reflecting dissatisfaction with the current hotel supply. The development of an accompanying headquarters hotel could alleviate some of these concerns among event planners. Fourteen percent decided to hold their events elsewhere due to low attendance at previous events. Only eight respondents cited an inadequate amount of space within the GCCC as a reason for not holding an event in Columbus.

Event Planner Surveys HVS International conducted two sets of internet based event planner surveys. The first set included State associations and the second focused on national groups.

State Associations HVS International conducted a web-based survey of 69 State association event planners that are located in Ohio and identified survey recipients from a list of members of the American Society of Association Executives. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-31

Approximately 30 percent of the event planners responded to the survey. HVS International does not intend this survey to serve as a statistically valid measure for the future demand for the facility, but rather as a tool to measure the general interest level in the GCCC and determine how event planners view Columbus as a potential location for their events.

Figure 6-11 shows the most common types of events that the survey respondents plan or manage.

Figure 6-11 Most Common Event Types Planned or Managed by State Association Survey Respondents

20 19 18 17

16

14 13

12 10 10

8

6 5

4

2 1

0 Meetings Conventions Training Trade Shows Banquets Consumer Seminars Shows Source: HVS Survey

The respondents indicated that they were involved in a variety of events, with meetings and conventions mentioned most frequently.

The survey addressed whether the event planners expect the attendance at their events to increase, decrease, or remain the same over the next five years. Figure 6-12 shows the result of the question regarding trends in attendance. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-32

Figure 6-12 Expected Trend in Event Attendance at State Association Events Over the Next Five Years

Decrease 11%

Increase 57% Stay the Same 32% Source: HVS Survey

Close to 90 percent of the responding association event planners anticipate that attendance at their events will increase or remain the same over the next five years.

HVS International asked event planners to rate their level of knowledge of Columbus as a convention/meetings destination. Figure 6-13 shows the level of knowledge among the responding event planners.

Figure 6-13 State Association Event Planner Knowledge of Columbus as a Convention / Meetings Destination

Not Knowledgable 5%

Somewhat Knowledgable Very 43% Knowledgable 52%

Source: HVS Survey

Among the respondents, over half consider themselves to be very knowledgeable regarding Columbus’ characteristics as a convention/meetings destination. This high level of familiarity comes as no surprise, given Columbus’ great success in attracting State association events. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-33

Another question asked event planners to indicate whether they viewed Columbus as a national, regional, or state convention / meeting destination. The perception among event planners of the role that Columbus plays in the market for events has implications for its demand potential. Figure 6-14 shows the views of event planners concerning Columbus’ place in the overall market for events.

Figure 6-14 State Association Event Planners’ Perception of Columbus’ Scope as a Convention / Meeting Destination

National Regional 5% 65%

State 30%

Source: HVS Survey

Responding event planners characterized Columbus most frequently as a regional, multi-state, convention / meeting destination. State association event planners generally do not have firsthand experience with national events at the GCCC. However, the small share of State association event planners that consider Columbus as a national event destination reveals that they have likely not encountered scheduling conflicts with national events and do not consider them to be a major component of the GCCC’s overall demand.

Respondents rated the overall attractiveness of a set of peer markets, including Columbus, as a destination for their events. Figure 6-15 shows the average rating for each peer market. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-34

Figure 6-15 State Association Event Planner Ratings of the Overall Attractiveness of the Peer Markets as Event Destinations

Columbus

Cleveland

Cincinnati

11.522.533.544.55

very average very unattractive attractive Source: HVS Survey

Event planners rated Columbus as the most attractive destination out of the “three C’s,” as the three largest cities in Ohio are sometimes called. This rating by event planners bodes well for Columbus’ demand potential for conventions, tradeshows, and other events that must effectively draw out-of- town attendees in order to be successful.

The survey asked event planners to rate various attributes of Columbus in comparison to other cities in which they have held, or may hold events. Figure 6-16 shows the survey results regarding Columbus’ attractiveness relative to other event locations on a set of key site selection criteria. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-35

Figure 6-16 State Association Event Planner Ratings of Columbus’ Event Destination Characteristics

Meeting Space

Exhibit Space

Safety

Hotels

Restaurants & Bars

Cleanliness

Air Travel

Attractiveness to Attendees

Tourist / Sightseeing

Recreational Activities

Climate

00.511.522.533.544.55 very poor average excellent

Source: HVS Survey

The responding event planners rated Columbus above average on each of the above characteristics. The availability of meeting and exhibit space in Columbus received the highest marks. The lowest marks were for climate and the characteristics concerning recreational and tourist activities. Attractiveness to attendees is one of the more important qualities analyzed in this survey, as it can be the most critical factor for event planners in scheduling an event at a facility. This characteristic is particularly important for conventions and tradeshows that draw many attendees from out-of-town.

In rating the overall allure of locations for their events, event planners consider a host of factors including both their own perceptions of the desirability of the market and the perceptions of their potential attendees. Event planners rated Columbus’ attractiveness to event attendees as slightly above average. This rating suggests that event planners consider Columbus to be capable of attracting attendees, but also that there is some room for improvement regarding its overall drawing power as a destination.

HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-36

HVS International asked survey recipients how often they would like to hold events in the GCCC under different scenarios:

Current Situation—the current hotel supply and square feet of exhibition space at the GCCC,

New Hotel—with a new 400-600 room headquarters hotel attached to the GCCC, and

New Hotel and Exhibit Space— with a new 400-600 room headquarters hotel attached to the GCCC and an expansion of the exhibit hall to 526,000 square feet of exhibit space.

Figure 6-17 shows the level of interest among responding event planners under the conditions of each scenario.

Figure 6-17 State Association Event Planner Interest in the GCCC

45% No Improvements 40% New HQ Hotel 35% Hotel with Exhibit Hall Expansion

30%

25%

20%

15%

10%

5%

0% Annually Once Every 2- Once Every 6- Less Than Never 5 Years 10 Years Once Every 11+ Years Source: HVS Survey

Event planners indicated a high level of interest in using the GCCC in its current circumstances, with 40 percent indicating that they would like to hold their events there at least once every five years. A total of 45 percent indicated an interest in using the facility at least once every ten years. The addition of a HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-37

headquarters hotel makes the facility slightly more attractive to event planners, as 52.6 percent indicated an interest in holding an event there once every ten years with the addition of a new headquarters hotel. Expansion of the GCCC has no positive affect on the frequency with which event planners intend to use the facility, with 50 percent indicating an interest in using the facility once every ten years.

National Events HVS International conducted a web-based survey of 107 national event planners that the GCCVB has identified as events that could potentially come to Columbus based on their convention facility requirements. These are events that the GCCC could accommodate, but ones that have not come to Columbus in the recent past and may not have even considered Columbus as a possible event site. Approximately 26 percent of the event planners responded to the survey. HVS International does not intend this survey to serve as a statistically valid measure of the future demand for the facility, but rather as a tool to measure the general interest level in the GCCC and determine how event planners view Columbus as a potential location for their events.

Figure 6-18 shows the most common types of events that the survey respondents plan or manage. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-38

Figure 6-18 Most Common Event Types Planned or Managed by National Survey Respondents

25 21

20 19

15 13

10

5 4 5 3

0 Conventions Meetings Trade Shows Training Banquets Consumer Seminars Shows Source: HVS Survey

The respondents indicated that they were involved in a variety of events, with conventions, meetings, and tradeshows mentioned most frequently.

The survey addressed whether the event planners expect the attendance at their events to increase, decrease, or remain the same over the next five years. Figure 6-19 shows the result of the question regarding trends in attendance. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-39

Figure 6-19 Expected Trend in Attendance at National Events Over the Next Five Years

Decrease 0%

Increase 59% Stay the Same 41%

Source: HVS Survey

The responding association event planners anticipate that attendance at their events will either increase or remain the same over the next five years. This result is a positive sign regarding the future demand for event space from national events, particularly in light of the recent terrorist attacks that interrupted air travel.

HVS International asked event planners to rate their level of knowledge of Columbus as a convention/meetings destination. It is possible that some event planners, particularly for national events that have never been held in Columbus, may not have thorough knowledge of what the City offers as an event location. Figure 6-20 shows the level of knowledge among the responding event planners. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-40

Figure 6-20 National Event Planner Knowledge of Columbus as a Convention / Meetings Destination

Very Knowledgeable Not 21% Knowledgeable 24%

Somewhat Knowledgeable 55% Source: HVS Survey

Among the respondents, 36 percent consider themselves to be very knowledgeable regarding Columbus’ characteristics as a convention/meetings destination. Only 7 percent indicated that they were not knowledgeable concerning Columbus. This high level of knowledge reflects significant past event activity in the market and a strong identity among event planners.

Another question asked event planners to indicate whether they viewed Columbus as a national, regional, or state convention / meeting destination. Figure 6-21 shows the views of event planners concerning Columbus’ place in the overall market for events.

Figure 6-21 National Event Planners’ Perception of Columbus’ Scope as a Convention / Meeting Destination

State 7%

National Regional 29% 64%

Source: HVS Survey

Responding event planners characterized Columbus most frequently as a regional or national convention / meeting destination. Unlike the State HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-41

association planners, only 7 percent of these national event planners consider Columbus to be primarily a state market. Given Columbus’s historical focus on the State association market, the level of national recognition (43 percent) is strong. The degree of familiarity that national meeting planners have with Columbus indicates that marketing efforts have had a significant impact.

Respondents rated the overall attractiveness of a set of peer markets, including Columbus, as a destination for their events. Figure 6-22 shows the average rating for each peer market.

Figure 6-22 Ratings of the Overall Attractiveness of the Peer Markets as Event Destinations by National Event Planners

Denver St. Louis Salt Lake City Columbus Baltimore Pittsburgh Indianapolis Austin Charlotte

Milwaukee Kansas City

Louisville Cleveland Cincinnati Memphis

11.522.533.544.55 very average very unattractive attractive

Source: HVS Survey

Event planners rated Columbus as the 4th most attractive destination out of the 15 peer markets. Columbus received higher ratings than such markets as Austin, Baltimore, Charlotte, and Indianapolis. This rating by event planners HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-42

bodes well for Columbus’ demand potential for national conventions, tradeshows, and other events that must effectively draw out-of-town attendees in order to be successful.

The survey asked event planners to rate various attributes of Columbus in comparison to other cities in which they have held, or may hold events. Figure 6-23 shows the survey results regarding Columbus’ attractiveness relative to other event locations on a set of key site selection criteria.

Figure 6-23 National Event Planner Ratings of Columbus’ Event Destination Characteristics

Exhibit Space

Meeting Space

Hotels

Air Travel

Safety

Cleanliness

Restaurants & Bars

Tourist / Sightseeing

Recreational Activities

Climate

Attractiveness to Attendees

00.511.522.533.544.55 very poor average excellent

Source: HVS Survey

The responding event planners rated Columbus above average on each of the characteristics. The availability of exhibit and meeting space in Columbus received the highest marks. The availability of hotel rooms received the next highest rating. The lowest rating was for attractiveness to attendees. Attractiveness to attendees is one of the more important qualities analyzed in this survey, as it can be the most critical factor for event planners in scheduling an event at a facility. This characteristic is particularly important for conventions and tradeshows that draw many attendees from out-of-town. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-43

In rating the overall allure of locations for their events, event planners consider a host of factors including both their own perceptions of the desirability of the market and the perceptions of their potential attendees. Event planners rated Columbus’ attractiveness to event attendees as just above average. The combination of high ratings on specific characteristics of Columbus and a more modest rating for attractiveness to attendees reveals that event planners perceive Columbus to be a good event location, but are concerned about its image among attendees.

HVS International asked survey recipients how often they would like to hold events in the GCCC under the same scenarios described in the preceding State association survey section.

Figure 6-24 shows the level of interest among responding event planners under the conditions of each scenario.

Figure 6-24 National Event Planner Interest in the GCCC

45% No Improvements 40% New HQ Hotel 35% Hotel with Exhibit Hall 30% Expansion 25%

20%

15%

10%

5%

0% Annually Once Every 2- Once Every 6- Less Than Never 5 Years 10 Years Once Every 11+ Years Source: HVS Survey

Event planners indicated a high level of interest in using the GCCC in its current circumstances, with 29 percent indicating that they would like to hold their events there at least once every five years. A total of 64.3 percent HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-44

indicated an interest in using the facility at least once every ten years. Unlike State association events planners for which the addition of a headquarters hotel made no difference in their level of interest, national meeting planners showed a small increase in interest with the interest in holding an event every 2-5 years increasing from 7 percent to 14 percent.

Comments Both surveys invited respondents to provide comments and to discuss the strengths and weaknesses of Columbus as a convention and meeting destination. Table 6-19 shows a list of the specific comments of survey respondents on the strengths and weaknesses of Columbus as a convention / meeting destination, ranked in order of the frequency with which they were mentioned.

Table 6-19 Comments on Columbus’ Strengths and Weaknesses In Order of Frequency Strengths Weaknesses Central Location Recreational Activities Transportation Parking Recreational Activities Hotel Supply Convention Center Air Service Restaurants Cost Cleanliness Building Location Affordable Geographic Location Growing City Image Arena Hotels Cost Safety Source: HVS Survey

Columbus’ central location was easily the most frequently mentioned comment. There is some disagreement among event planners concerning the availability and quality of recreational activities, as it appears near the top of both lists. This disagreement may, in part, be due to a lack of awareness among event planners that have not held an event in Columbus before, or have not done so in several years. Two survey respondents were adamant about the need for additional attached hotel rooms. Positive comments about the hotel situation focused on the availability of a wide range of room rates.

HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-45

Implications of Survey Results More generally, event planners expressed a high level of interest in using the GCCC for their events and were complimentary of Columbus as a convention / meeting destination. State association planners expressed a clear preference for Columbus over its two primary intrastate competitors—Cleveland and Cincinnati. National event planners rated Columbus ahead of several of its peer markets, indicating that Columbus has become one of the most attractive event destinations among second-tier markets. Columbus had achieved great success in attracting State association events, but most of its future growth potential lies in its ability to attract more national events. A small number of large events expressed considerable need for additional connected rooms. Additional one-to-one interviews with planners of events with similar attendance and room block requirements to these large events should provide a clearer picture of the extent of demand for additional connected hotel rooms. The survey results help to reveal two leading factors that currently limit the demand potential for national events:

Attractiveness to attendees, and The number of proximate hotel rooms.

A significant increase in Columbus’ demand potential for national events will require efforts to improve the market’s standing on both of these issues.

Demand Projections The information revealed in the peer market analysis and the surveys indicates that the addition of a new headquarters hotel could increase the demand potential of the GCCC. The preceding analysis produced less evidence that an additional exhibit hall expansion would significantly increase the demand for the GCCC. In addition, the combination of Columbus’ relatively large supply of existing prime exhibit space and its relatively small supply of downtown hotel rooms further suggests that an increase in the room supply proximate to the GCCC is a prerequisite for improving the GCCC’s demand potential. Additional exhibit hall expansion should eventually be necessary, but current conditions do not provide a basis for projections of significant additional convention or tradeshow demand related to an expansion.

HVS International projected GCCC demand and room nights under two different scenarios: HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-46

No-Hotel Scenario—No additional hotel is developed adjacent to the convention center.

Hotel Scenario—A new 500-room headquarters hotel located in proximity to the GCCC is developed and opened in 2005.

HVS International projected demand in the No-Hotel Scenario based on its present level of future bookings as of September 2001 and its estimate of new events that will be booked thereafter. The projections for the Hotel Scenario reflect analysis of lost booking data, event planner surveys, and comparisons of Columbus to its peer markets in terms of its hotel supply and exhibition space.

This analysis assumes that the proposed headquarters hotel would open on January 1, 2005. HVS International developed a single set of demand projections for the years preceding the opening of the new hotel, as displayed in Table 6-20. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-47

Table 6-20 Projected GCCC Demand and Attendance 2001-2004 Event Type 2001 2002 2003 2004 Number of Events Conventions 57556061 Tradeshows 35 34 36 38 Consumer Shows 15141516 Meetings 148 145 150 155 Banquets 34 30 35 37 Other 15131515 Total 304 291 311 322 Average Attendance Conventions 3,246 3,239 3,356 3,442 Tradeshows 4,949 4,691 4,899 5,066 Consumer Shows 14,492 14,000 14,500 15,000 Meetings 553 500 550 575 Banquets 683 650 690 700 Other 4,753 4,000 4,500 4,750 Total Attendance Conventions 184,996 178,150 201,350 209,950 Tradeshows 173,212 159,500 176,350 192,500 Consumer Shows 217,385 196,000 217,500 240,000 Meetings 81,843 72,500 82,500 89,125 Banquets 23,219 19,500 24,150 25,900 Other 71,300 52,000 67,500 71,250 Total 751,955 677,650 769,350 828,725

Sources: GCCC and HVS

The projected demand for 2001 reflects year-to-date bookings at of October 2001. The projection assumes a slight decline in overall demand in 2002 based upon:

The current level of event bookings and leads,

The current economic slowdown, and

Aftereffects of the recent terrorist attacks and the corresponding disruption to travel tendencies.

Beginning in 2005, the addition of a new 500-room attached headquarters hotel would increase the demand potential of the GCCC. The demand for this HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-48

improved event destination should reach a stabilized point by 2007. The term “stabilized demand” does not mean that the demand stops increasing. Rather, an improved convention center complex reaches stabilized demand after sufficient time has passed since the announcement and completion of a project so that its demand potential is no longer restricted by the fact that it is a planned or a new facility.

Table 6-21 shows the projected demand and attendance for the GCCC under the two scenarios for 2005 to 2007.

Table 6-21 Demand Projections for the No-Hotel and Hotel Scenarios 2005-2007 No-Hotel Scenario Hotel Scenario Change Event Type 2005 2006 2007 2005 2006 2007 2005 2006 2007 Number of Events Conventions 6162626364662 2 4 Tradeshows 38 38 38 38 40 41 0 2 3 Consumer Shows 17 17 17 17 17 17 0 0 0 Meetings 157 159 160 157 159 160 0 0 0 Banquets 40 40 40 40 40 40 0 0 0 Other 1515151515150 0 0 Total 328 331 332 330 335 339 2 4 7

Average Attendance Conventions 3,559 3,624 3,664 3,557 3,675 3,794 -2 51 131 Tradeshows 5,143 5,192 5,241 5,192 5,360 5,498 49 168 257 Consumer Shows 15,250 15,450 15,500 15,250 15,450 15,500 0 0 0 Meetings 580 585 590 600 615 625 20 30 35 Banquets 700 700 700 700 700 700 0 0 0 Other 5,000 5,000 5,000 5,000 5,000 5,000 0 0 0 Total Attendance Conventions 217,100 224,690 227,160 224,100 235,190 250,430 7,000 10,500 23,270 Tradeshows 195,450 197,300 199,150 197,300 214,400 225,400 1,850 17,100 26,250 Consumer Shows 259,250 262,650 263,500 259,250 262,650 263,500 0 0 0 Meetings 91,060 93,015 94,400 94,200 97,785 100,000 3,140 4,770 5,600 Banquets 28,000 28,000 28,000 28,000 28,000 28,000 0 0 0 Other 75,000 75,000 75,000 75,000 75,000 75,000 0 0 0 Total 865,860 880,655 887,210 877,850 913,025 942,330 11,990 32,370 55,120

Sources: GCCC and HVS HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-49

HVS International projects that the new headquarters hotel would enable the GCCC to attract three additional conventions and three additional tradeshows by 2007. These induced convention and tradeshow events would generate an additional 55,120 attendees by 2007. Table 6-22 provides a more detailed look at the projection for each scenario in 2007, the stabilized year of demand.

Table 6-22 Projected Stabilized Demand (2007) With and Without a Headquarters Hotel Number of Events Attendance Percent New Percent Event Type No HQ Hotel HQ Hotel New Events No HQ Hotel HQ Hotel Change Attendees Change Conventions 62 66 4 6.5% 227,160 250,430 23,270 10.2% Tradeshows 38 41 3 7.9% 199,150 225,400 26,250 13.2% Consumer Shows 17 17 0 0.0% 263,500 263,500 0 0.0% Meetings 160 160 0 0.0% 94,400 100,000 5,600 5.9% Banquets 40 40 0 0.0% 28,000 28,000 0 0.0% Other 15 15 0 0.0% 75,000 75,000 0 0.0% Total 332 339 7 2.1% 887,210 942,330 55,120 6.2%

Sources: GCCC and HVS

The addition of a headquarters hotel would enable the GCCC to attract seven more tradeshows and conventions, increasing total attendance by 6.2 percent. The new hotel would not significantly increase events and attendance for other event types.

Conventions/Tradeshows The primary benefit of the addition of a new headquarters hotel to the GCCC would be the increase in the number and size of conventions and tradeshows in the market. The recently expanded GCCC and added headquarters hotel will enable Columbus to compete for a new segment of events that were too large for the prior exhibit hall capacity and/or require more nearby hotel rooms than is currently available. As noted in the lost business information, Columbus currently loses certain events due to factors that these improvements can address, such as:

Date conflicts,

Inadequate hotel supply, and

Lack of event space. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-50

Table 6-23 displays the estimated annual number of conventions by geographic scope. The analysis places religious events in a separate category because the characteristics of their attendees in terms of hotel demand are often vastly different from other event types.

Table 6-23 Geographic Scope of Conventions/Tradeshows in the No-Hotel and Hotel Scenarios 2005 to 2007 No-Hotel Scenario Hotel Scenario Change Scope 2005 2006 2007 2005 2006 2007 2005 2006 2007 Conventions National 15 16 16 16 17 18 1 1 2 State & Regional 33 33 33 34 34 35 1 1 2 Local 4 4 4 4 4 4 - - - Religious 9 9 9 9 9 9 - - - Total 61 62 62 63 64 66 2 2 4

Tradeshows National 15 15 15 15 16 17 - 1 2 State & Regional 22 22 22 22 23 23 - 1 1 Local 1 1 1 1 1 1 - - - Religious ------Total 38 38 38 38 40 41 - 2 3

Source: HVS

The State association market is the primary market for conventions and tradeshows in Columbus. A new headquarters hotel would enable the GCCC to host more simultaneous State events without exhausting the supply of connected rooms. The addition of a new 500-room headquarters hotel would also increase the event potential for national conventions and tradeshows. Larger national events require room blocks that exceed the capacity of the existing Hyatt, and the GCCVB reports using as many as eight separate hotels to assemble the required room blocks for larger national events. Even after the addition of the new headquarters hotel, larger events will require room blocks in off-site hotels, but the larger on-site supply would elevate Columbus to a level of on-site rooms that is closer to that of many of its peer markets.

Projected Room Nights HVS International estimated the room nights that the GCCC events would generate under each of the scenarios, and calculated these room night estimates by multiplying the number of attendees by two factors: 1) the percent of attendees requiring lodging and 2) the average length of stay in the market. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-51

The projection assesses attendance by type and scope of event, and the assumptions regarding lodging demand vary accordingly. HVS International bases the estimates regarding the percentage of attendees requiring lodging on the experience of comparable facilities and CVBs in booking national, state, and local events. HVS International tailored these assumptions specifically for Columbus, based on the characteristics of events appropriate for the market and the likelihood that attendees to those events would come from far enough away to require overnight lodging. HVS International used GCCC event data to calculate average event length by type of event and used this information as a basis for the average number of room nights by attendee.

Table 6-24 displays the assumptions regarding the percentage of attendees requiring lodging and average number of room nights per lodging attendee.

Table 6-24 Percent of Attendees Requiring Lodging Average Number of % Requiring Event Type Room Nights per Lodging Lodging Attendee Conventions-national 75% 3.0 Conventions-state 35% 2.0 Tradeshows-national 70% 2.5 Tradeshows-state 30% 2.0 Consumer Shows 3% 2.5 Meetings 20% 1.0 Banquets 4% 1.0 Other 5% 1.0 Source: HVS

The assumptions for consumer shows are designed to account for exhibitors that travel with the event. Very few attendees to local consumer events travel far enough to require lodging when attending such events.

Table 6-25 displays the resulting projection of room nights generated by event type in each scenario from 2005 through 2007. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Convention Center Demand Analysis 6-52

Table 6-25 Projected Room Nights in the No-Hotel and Hotel Scenarios for 2005-2007 No-Hotel Scenario Hotel Scenario Change Event Type 2005 2006 2007 2005 2006 2007 2005 2006 2007

Conventions 231,300 245,700 248,700 244,100 263,700 286,700 12,800 18,000 38,000 Tradeshows 198,600 200,600 202,600 200,600 220,000 235,300 2,000 19,400 32,700 Consumer Shows 19,400 19,700 19,800 19,400 19,700 19,800 - - - Meetings 18,200 18,600 18,900 18,800 19,600 20,000 600 1,000 1,100 Banquets 1,100 1,100 1,100 1,100 1,100 1,100 - - - Other 3,800 3,800 3,800 3,800 3,800 3,800 - - - Total 472,400 489,500 494,900 487,800 527,900 566,700 15,400 38,400 71,800

Source: HVS

The addition of the headquarters hotel would enable the GCCC to generate an estimated 71,800 additional room nights by increasing the number and average attendance of conventions and tradeshows. The new hotel would also enable a slight increase in the average attendance at meetings, due to the additional on-site room capacity.

The proposed headquarters hotel would capture a portion of these room nights. This induced demand represents only the portion of the total estimated meeting and group demand in the market that is directly attributable to event activity at the GCCC. Other meeting and group events that occur in hotel meeting spaces and other facilities, including those occurring in the subject property, generate additional room nights that are not included in the preceding table. The following section of this report provides a discussion of the projected capture rates of the subject property and overall projections of occupancy.

The number of room nights the GCCC generates is larger than the recorded group room demand in the downtown hotels. The downtown hotels do not capture all of the room nights generated by events at the GCCC. Some attendees may elect to stay in suburban hotels for reasons such as cost or perceived convenience. In addition, many attendees at GCCC events may book their lodging independently, instead of relying on the room block established for their event or booking their room through the GCCVB. As a result, individual hotels may record such room nights as independent business demand rather than group demand. HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Hotel Occupancy Projections 7-1

7. Hotel Occupancy Projections

In this section, we will apply the findings and projections from the preceding portions of the narrative in order to develop projections of occupancy for the downtown lodging market under two scenarios: 1) No-Hotel Scenario: assuming no new headquarters hotel is constructed, and 2) Hotel Scenario: assuming the construction of a 500-room headquarters hotel. Both scenarios assume that the convention center remains in its current orientation, as no support for an expansion was found in the course of our research. In the second scenario, the occupancy rate of the proposed headquarters hotel will also be projected.

Market Occupancy Lodging demand and occupancy can be projected through a process known Projection: No-Hotel as room night analysis. A room night is a unit of hotel demand that equals Scenario one room that is occupied for one night. After estimating the number of room nights a hotel can be expected to attract during a 12-month period, occupancy can be determined by dividing the number of room nights of demand captured by the number of room nights available (calculated as the room count x 365). The projected annual number of room nights occupied by the competitive hotels in 2001 equates to the market's accommodated room night demand in the base year, as shown in Table 7-1.

Table 7-1 2001 Base Year Demand

Marketwide Accommodated Percentage of Market Segment Demand Total

Meeting & Convention 311,670 48.1 % Commercial 266,275 41.1 Leisure 69,956 10.8

Total 647,900 100.0 % Source: HVS International HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Hotel Occupancy Projections 7-2

In our research, the subject lodging market’s 2001 total demand (among the 11 hotels defined as competition) was estimated to be 647,900 room nights, of which 48.1 percent was derived from the meeting & convention segment. This meeting & convention allocation was based on market segmentation data provided by representatives of the competitive hotels’ management. The total meeting & convention room night allocation of 311,670 is below the room night contribution generated by the GCCC for 2001, as estimated by our research and assumptions: 407,700. We attribute the difference to two factors: 1) not all demand generated by the GCCC is accommodated by the 11 downtown hotels (i.e., some users of the GCCC are using suburban hotels), and 2) some demand generated by the GCCC has been allocated to the commercial and leisure segments. Whereas the difference in the figures is substantial, the growth trends reflected in the projected GCCC usage levels are still considered appropriate and germane to this analysis, as they are reflective of overall trends.

Based on a review of the lodging market trends, projected volume levels at the GCCC, and our review of the economic and demographic data evaluated in the “Area Economic Analysis,” we forecast the following average annual compounded market segment growth rates, as shown in Table 7-2.

Table 7-2 Average Annual Compounded Market Segment Growth Rates

Annual Compounded Growth Rate Market Segment 2002 2003 2004 2005 20062007 2008 2009

Meeting & Convention (7.0) % 12.0 % 7.0 % 5.0 % 3.0 % 3.0 % 3.0 % 3.0 % Commercial 1.0 3.0 4.0 2.0 1.5 1.5 1.5 1.5 Leisure 1.0 2.5 3.0 2.0 1.0 1.0 1.0 1.0

Base Demand Growth (2.8) % 7.1 % 5.3 % 3.5 % 2.2 % 2.2 % 2.2 % 2.2 % Source: HVS International

The preceding growth rates are described and qualified as follows:

• At the GCCC, 2002 is expected to be a comparatively weak year, owing to a cyclical downturn in the use of the GCCC. The preceding growth rates reflect the room night demand projections set forth previously in this narrative. • Market lodging demand declined in the last four months of 2001, owing to the events of September 11th. In that this event was extraordinary, HVS International Expansion of Headquarters Hotel Capacity– Columbus, OH Hotel Occupancy Projections 7-3

lodging demand in the commercial and leisure segments is expected to rebound slightly through 2002, despite the effects of ongoing economic recession anticipated through that year. • No specific assumption is made as to the declining condition of the downtown district’s southern sector, i.e., we have not specifically assumed revitalization. Where this topic is concerned, the growth rates are rather intended to reflect the cyclical pattern of broader economic influences.

In the following table, the base demand growth rates are applied to the segmented base demand levels in order to generate a projection of future demand. The demand forecast is then divided by market supply. For purposes of this scenario, no expansion of market’s inventory is anticipated, beyond the March 2003 opening of the 184-room Drury Inn. Table 7-3 sets forth the basis for the marketwide occupancy forecast, assuming no new headquarters hotel is developed. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Hotel Occupancy Projections 7-4

Table 7-3 Marketwide Occupancy Forecast – No Hotel

2001 2002 2003 2004 2005 2006 2007 2008 2009

DEMAND Meeting & Convention Occupied Room Nights 311,670 289,853 324,636 347,360 364,728 375,670 386,940 398,548 410,505 Percent Change — (7.0) % 12.0 % 7.0 % 5.0 % 3.0 % 3.0 % 3.0 % 3.0 % Commercial Occupied Room Nights 266,275 268,938 277,006 288,086 293,848 298,256 302,729 307,270 311,879 Percent Change — 1.0 % 3.0 % 4.0 % 2.0 % 1.5 % 1.5 % 1.5 % 1.5 % Leisure Occupied Room Nights 69,956 70,655 72,421 74,594 76,086 76,847 77,615 78,391 79,175 Percent Change — 1.0 % 2.5 % 3.0 % 2.0 % 1.0 % 1.0 % 1.0 % 1.0 %

Occupied Room Nights 647,901 629,446 674,063 710,040 734,662 750,772 767,285 784,210 801,559 Percent Change — (2.8) % 7.1 % 5.3 % 3.5 % 2.2 % 2.2 % 2.2 % 2.2 %

SUPPLY Existing Supply 2,975 2,975 2,975 2,975 2,975 2,975 2,975 2,975 2,975 Changes in Supply Drury Hotel ¹ — — 154 184 184 184 184 184 184 Available Rooms per Night 2,975 2,975 3,129 3,159 3,159 3,159 3,159 3,159 3,159 Nights per Year 365 365 365 365 365 365 365 365 365 Total Supply 1,085,875 1,085,875 1,142,179 1,153,035 1,153,035 1,153,035 1,153,035 1,153,035 1,153,035 Rooms Supply Growth — 0.0 % 5.2 % 1.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % Marketwide Occupancy 59.7 % 58.0 % 59.0 % 61.6 % 63.7 % 65.1 % 66.5 % 68.0 % 69.5 %

¹ Reflects the March 1, 2003 opening of the 184-room Drury Inn Source: HVS International HVS International Expansion of Headquarters Hotel- Columbus, OH Hotel Occupancy Projections 7-5

The downtown lodging market’s occupancy rate is expected to finish 2001 at 59.7 percent. With the opening of the new Drury Inn, the market occupancy rate is expected to remain below 60% through 2003, before commencing a gradual recovery in 2004. In 2007, the market is expected to finish at 66.5 percent, reflecting an approximation of the occupancy rate historically realized by the downtown Columbus hotel market between 1996 and 2000.

Market Occupancy The second scenario assumes that a new headquarters hotel is constructed on Projection: Hotel the subject site. For purposes of this scenario, we have made the following Scenario assumptions.

• A 500-room headquarters hotel will open on the subject site on January 1, 2005. • The hotel will contain a minimum of 50 square feet of meeting space, equal to a total of 25,000 square feet. • The hotel will be affiliated with a first-class, full-service hotel brand, most of which are available in the subject lodging market (including Marriott, Hilton, and Sheraton). The new headquarters hotel can be expected to induce a share of demand into the market due to the operator’s incremental marketing efforts, the added appeal of the new brand, and the new hotel’s ability to enhance the marketability of the GCCC as well as Greater Columbus’ profile as a destination. In the previous section of this narrative, the number of incremental room nights generated by the GCCC, strictly associated with and attributable to the opening of the hypothetical headquarters hotel, is projected to stabilize at 71,800. Beyond this GCCC-related demand component, we have added another 20 percent in order to account for demand induced by the hotel’s additional marketing efforts and incremental meeting space. Thus, a total of 86,160 room nights have been added to the room night analysis, as part of the marketwide occupancy forecast. This induced demand component equates to approximately 47 points of occupancy at the new 500-room hotel, which is considered to be logical, in our experience with similar projects. The hotel’s remaining occupancy will be drawn from the market’s existing demand base. The induced room nights will be phased into the lodging market gradually, subject to the following schedule shown in Table 7-4. HVS International Expansion of Headquarters Hotel- Columbus, OH Hotel Occupancy Projections 7-6

Table 7-4 Induced Demand Schedule

Induced Room Nights Meeting & Convention 20052006 2007 2008

Total Induced Demand 86,160 86,160 86,160 86,160 Phase-in Ratio 60 % 90 % 100 % 100 %

Total 51,696 77,544 86,160 86,160 Source: HVS International

The induced demand is phased into the market gradually in recognition of the time it takes to establish a new hotel’s market position.

All other factors held equivalent to the original No-Hotel Scenario marketwide occupancy forecast, Table 7-5 identifies the Hotel Scenario marketwide occupancy forecast. HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Hotel Occupancy Projections 7-7

Table 7-5 Marketwide Occupancy Forecast – As Expanded

2001 2002 2003 2004 2005 2006 2007 2008 2009

DEMAND Meeting & Convention Occupied Room Nights 311,670 289,853 324,636 347,360 364,728 375,670 386,940 398,548 410,505 Percent Change — (7.0) % 12.0 % 7.0 % 5.0 % 3.0 % 3.0 % 3.0 % 3.0 % Induced Demand — — — — 51,696 77,544 86,160 86,160 86,160 Total 311,670 289,853 324,636 347,360 416,424 453,214 473,100 484,708 496,665

Commercial Occupied Room Nights 266,275 268,938 277,006 288,086 293,848 298,256 302,729 307,270 311,879 Percent Change — 1.0 % 3.0 % 4.0 % 2.0 % 1.5 % 1.5 % 1.5 % 1.5 %

Leisure Occupied Room Nights 69,956 70,655 72,421 74,594 76,086 76,847 77,615 78,391 79,175 Percent Change — 1.0 % 2.5 % 3.0 % 2.0 % 1.0 % 1.0 % 1.0 % 1.0 %

Occupied Room Nights 647,901 629,446 674,063 710,040 786,358 828,316 853,445 870,370 887,719 Percent Change — (2.8) % 7.1 % 5.3 % 10.7 % 5.3 % 3.0 % 2.0 % 2.0 %

SUPPLY Existing Supply 2,975 2,975 2,975 2,975 2,975 2,975 2,975 2,975 2,975 Changes in Supply Proposed HQ Hotel ¹ — — — — 500 500 500 500 500 Drury Hotel ² — — 154 184 184 184 184 184 184 Available Rooms per Night 2,975 2,975 3,129 3,159 3,659 3,659 3,659 3,659 3,659 Nights per Year 365 365 365 365 365 365 365 365 365 Total Supply 1,085,875 1,085,875 1,142,179 1,153,035 1,335,535 1,335,535 1,335,535 1,335,535 1,335,535 Rooms Supply Growth — 0.0 % 5.2 % 1.0 % 15.8 % 0.0 % 0.0 % 0.0 % 0.0 %

Marketwide Occupancy 59.7 % 58.1 % 59.0 % 61.5 % 58.8 % 61.9 % 63.7 % 65.0 % 66.2 %

¹ Reflects the January 1, 2005 opening of the 500-room Headquarters Hotel ² Reflects the March 1, 2003 opening of the 184-room Drury Inn Source: HVS International HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Hotel Occupancy Projection 7-8

Assuming a 500-room headquarters hotel opens on the subject site on April 1, 2005, the downtown lodging market’s occupancy rate is expected to finish 2005 at 58.8 percent, down from 61.5 percent in 2004. The new hotel is expected to be absorbed gradually thereafter. In 2009, the market is expected to finish at 66.2 percent, reflecting an approximation of the occupancy rate historically realized by the downtown Columbus hotel market between 1996 and 2000.

Projection of Subject To a certain degree, a given hotel’s management can manipulate occupancy Headquarters Hotel’s attainment. For example, a hotel’s operator may choose to lower rates in an Occupancy effort to maximize occupancy. Our forecasts are intended to reflect the actions of a competent hotel management team, seeking to achieve an optimal mix of occupancy and average rate. Although average rate has not been projected as part of this analysis, our occupancy projections implicitly assume that the hotel will be priced in line with its most direct competitors.

The subject property's forecasted market share and occupancy levels are based upon its anticipated competitive posture within the market. Market share represents that portion of total market demand accommodated and fair share represents the subject hotel's portion of the total supply (calculated as the subject's room count divided by the total supply of the market at large).

If a property with a fair share of 5 percent is capturing 5 percent of the market demand in a given year, then its occupancy will equal the marketwide occupancy, and its penetration factor will equal 100 percent (5 percent ÷ 5 percent = 100 percent). If the same property achieves a market share in excess of its fair share, then its occupancy will be greater than the marketwide occupancy, and its penetration factor will be greater than 100 percent. For example, if a property's fair share is 5 percent and its market share is 7 percent, then its penetration factor is 140 percent (7 percent ÷ 5 percent = 140 percent). Conversely, if the property captures less than its fair share, then its occupancy will be below the marketwide average, and its penetration factor will be less than 100 percent.

Penetration factors can be calculated for each market segment of a property, and for the property as a whole. For example, leisure segment penetration can be determined by dividing the subject property's leisure room nights captured (property's total room nights captured multiplied by property's leisure segment percentage) by the hotel's fair share of total areawide leisure demand (property's fair share percentage multiplied by the market's total leisure room night demand). HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Hotel Occupancy Projection 7-9

HVS International calculated the 2001 segmented penetration factors of the downtown hotels, which are shown in Table 7-6.

Table 7-6 Historical Penetration Factors

Mtg. & Hotel Convention Commercial Leisure Overall Hyatt Regency 172.2 % 45.8 % 47.3 % 102.2 % Crowne Plaza 75.6 150.8 104.0 112.3 Adam's Mark 102.7 47.3 32.6 70.4 Hyatt Capitol Square 91.8 114.4 94.7 102.2 Westin Great Southern 65.9 112.6 38.8 83.8 Doubletree Guest Suites 65.9 157.6 163.0 117.3 Courtyard by Marriott 65.9 144.5 217.3 117.3 Hampton Inn & Suites 82.8 92.9 128.1 92.2 The Lofts 28.2 93.8 271.6 83.8 Holiday Inn City Center 76.8 153.1 105.6 114.0 Red Roof Inn 73.4 97.6 302.7 108.9 Source: HVS International

Based on a review of the historical penetration factors, and consideration of the proposed headquarters hotel’s various attributes, Table 7-7 shows the new hotel's occupancy forecast.

HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Hotel Occupancy Projection 7-10

Table 7-7 Forecast of Headquarters Hotel's Occupancy

Market Segment 2005 2006 2007 2008 2009

Meeting & Convention Demand 416,424 453,214 473,100 484,708 496,665 Market Share 17.1 % 18.2 % 18.7 % 19.0 % 19.0 % Capture 71,311 82,387 88,375 91,911 94,146 Penetration 134.0 % 141.7 % 145.5 % 147.8 % 147.8 %

Commercial Demand 293,848 298,256 302,729 307,270 311,879 Market Share 7.3 % 7.7 % 7.9 % 7.9 % 7.9 % Capture 21,350 23,012 23,808 24,166 24,528 Penetration 48.9 % 52.0 % 53.0 % 53.0 % 53.0 % Leisure Demand 76,086 76,847 77,615 78,391 79,175 Market Share 7.8 % 8.2 % 8.3 % 8.3 % 8.3 % Capture 5,919 6,277 6,440 6,505 6,570 Penetration 56.9 % 59.8 % 60.7 % 60.7 % 60.7 % Total Room Nights Captured 98,579 111,676 118,624 122,581 125,244 Available Room Nights 182,500 182,500 182,500 182,500 182,500

Calendar-Year Occupancy 54.0 % 61.2 % 65.0 % 67.2 % 68.6 % STABILIZED Rounded Subject Occupancy 54.0 % 61.0 % 65.0 % 67.0 % Marketwide Occupancy 58.8 % 61.9 % 63.7 % 65.0 % 66.2 % Total Penetration 91.9 % 98.9 % 102.0 % 103.4 % 103.6 %

Segmentation Meeting & Convention 72.3 % 73.8 % 74.5 % 75.0 % 75.2 % Commercial 21.7 20.6 20.1 19.7 19.6 Leisure 6.0 5.6 5.4 5.3 5.2 Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

Source: HVS International

HVS International Expansion of Headquarters Hotel Capacity- Columbus, OH Hotel Occupancy Projection 7-11

Overall, the subject property is expected to stabilize with an overall market penetration factor of approximately 103 percent, which appears logical given the subject site’s location in downtown Columbus’s vibrant northern sector.

Based on the preceding analysis, we have assumed a stabilized occupancy level of 67 percent for the subject property, reached as of the fourth projection year, 2008. The stabilized occupancy is intended to reflect the anticipated results of the property over its remaining economic life, given any and all changes in the life cycle of the hotel. Thus, the stabilized occupancy excludes from consideration any abnormal relationship between supply and demand, as well as any non-recurring conditions that may result in unusually high or low occupancies. Although the subject property may operate at occupancy levels above this stabilized level, we believe that it is equally possible for new competition and temporary economic downturns to force the occupancy below this selected point of stability. HVS International Statement of Assumptions & Limiting Conditions Section 8-1

8. Statement of Assumptions & Limiting Conditions

1. This report is to be used in whole and not in part. 2. No responsibility is assumed for matters of a legal nature. 3. We have not considered the presence of potentially hazardous materials on the proposed site, such as asbestos, urea formaldehyde foam insulation, PCBs, any form of toxic waste, polychlorinated biphengyls, pesticides, or lead-based paints. The appraisers are not qualified to detect hazardous substances, and we urge the client to retain an expert in this field if desired. 4. We have made no survey of the property, and we assume no responsibility in connection with such matters. Sketches, photographs, maps, and other exhibits are included to assist the reader in visualizing the property. It is assumed that the use of the land and improvements is within the boundaries of the property described, and that there is no encroachment or trespass unless noted. 5. All information, estimates, and opinions obtained from parties not employed by HVS are assumed to be true and correct. We can assume no liability resulting from misinformation. 6. Unless noted, we assume that there are no encroachments, zoning violations, or building violations encumbering the subject property. 7. All mortgages, liens, encumbrances, leases, and servitudes have been disregarded unless specified otherwise. 8. None of this material may be reproduced in any form without our written permission, and the report cannot be disseminated to the public through advertising, public relations, news, sales, or other media. 9. We are not required to give testimony or attendance in court by reason of this analysis without previous arrangements, and only when our standard per diem fees and travel costs are paid prior to the appearance.

HVS International Statement of Assumptions & Limiting Conditions Section 8-2

10. If the reader is making a fiduciary or individual investment decision and has any questions concerning the material presented in this report, it is recommended that the reader contact us. 11. We take no responsibility for any events or circumstances that take place subsequent to the date of our field inspection. 12. The quality of a convention center and arena facility's on-site management and organization that market the facility have a direct effect on a center’s economic viability. The forecasts presented in this analysis assume responsible ownership, competent management and effective marketing and sales. Any departure from this assumption may have a significant impact on the projected operating results. 13. Many of the figures presented in this report were generated using sophisticated computer models that make calculations based on numbers carried out to three or more decimal places. In the interest of simplicity, most numbers have been rounded to the nearest tenth of a percent. Thus, these figures may be subject to small rounding errors. 14. It is agreed that our liability to the client is limited to the amount of the fee paid as liquidated damages. Our responsibility is limited to the client, and use of this report by third parties shall be solely at the risk of the client and/or third parties. The use of this report is also subject to the terms and conditions set forth in our engagement letter with the client. 15. This report was prepared by HVS Convention, Sports & Entertainment Facilities Consulting, a division of HVS International. All opinions, recommendations, and conclusions expressed during the course of this assignment are rendered by the staff of these two organizations, as employees, rather than as individuals. 16. This report is set forth as a market study of the proposed subject property; this is not an appraisal report.

HVS International Certification Section 9-1

9. Certification

We, the undersigned, hereby certify:

1. that the statements of fact presented in this report are true and correct to the best of our knowledge and belief; 2. that the reported analyses, opinions, and conclusions presented in this report are limited only by the assumptions and limiting conditions set forth, and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions; 3. that Thomas Hazinski, Paul Sajovec, and Erich Baum personally inspected the headquarters hotel site and market described in this report; Giancarlo Turano participated in the analysis and reviewed the findings, but did not personally inspect the subject site and market; 4. that we have no current or contemplated interests in the real estate that is the subject of this report; 5. that we have no personal interest or bias with respect to the subject matter of this report or the parties involved; 6. that this report sets forth all of the limiting conditions (imposed by the terms of this assignment) affecting the analyses, opinions, and conclusions presented herein; 7. that the fee paid for the preparation of this report is not contingent upon our conclusions, or the occurrence of a subsequent event directly related to the intended use of this report; 8. that our engagement in this assignment was not contingent upon developing or reporting predetermined results; and 9. that no one other than those listed above and the undersigned prepared the analyses, conclusions, and opinions concerning the real estate that are set forth in this market study.

HVS International Certification Section 9-2

Tom Hazinski Managing Director

Paul Sajovec Senior Vice President

Erich Baum Senior Associate

Giancarlo Turano Associate