Economic Outlook Breakfast September 8, 2016 The State of the Hospitality Industry in Rhode Island Rachel J. Roginsky, ISHC

[email protected] 164 Canal Street Boston, MA 02114 ~ 617/722-9916 www.pinnacle-advisory.com

NATIONAL LODGING MARKET

Historic Market Performance $125.00

70.0%

15 Year History Average Occ: 61.2% Occ Range: 54.7% to 65.6% ADR CAGR: 2.3%

65.0%

Since Recession (‘09) Occ increased from 55% to 66% ADR CAGR: 4.1%

$100.00

60.0%

$75.00

55.0%

$50.00

50.0%

$25.00

45.0%

$0.00

Source: STR

Occupancy

ADR

RevPAR

©Pinnacle Advisory Group

RevPAR % Change 20.0%

10.0%

8.0%

8.3%

8.1%

7.9% 5.6%

5.5%

6.8%

8.0% 5.3%

6.3%

4.4%

0.0% -1.5%

-10.0%

-1.8%

-1.5%

-6.6%

-17.0%

-20.0%

Source: STR

©Pinnacle Advisory Group

2015 Performance by Class 2015 Supply vs. Demand by Class 5.0%

4.4%

2015 RevPAR % by Class

4.3%

Economy

7.0%

4.0% 3.0%

3.0% 2.5%

Midscale 2.4% 2.3%

2.3%

Upper Midscale

2.0%

6.3%

1.4%

1.3% 1.0%

6.5%

0.8%

Upscale

6.1%

0.2% 0.0% -1.0%

Upper Upscale

5.0%

-0.4% Luxury

Upper Upscale

Upscale Demand

Upper Midscale Supply

Midscale

Economy

Luxury 0.0%

5.2% 2.0%

4.0%

6.0%

8.0%

Source: STR

©Pinnacle Advisory Group

Top 25 Markets, RevPAR % Change 2015 15.0% 12.8%

10.0% 5.8% 6.0% 6.1% 5.3% 5.4% 5.5%

5.0%

3.4%

6.6% 6.9%

7.9% 7.9% 7.4% 7.5%

9.1% 9.3% 9.4% 8.6% 8.8% 8.8%

10.0%

11.1%

4.1%

0.0% -1.7% -5.0%

-3.3%

Source: STR

©Pinnacle Advisory Group

YTD Performance Through July 2016

Occupancy

July 2015

July 2016

% Change

66.5%

66.4%

-0.1%

ADR

$120.13

$123.93

3.1%

RevPAR

$79.71

$82.23

3.0%

YTD RevPAR growth is the lowest since the recovery started in 2010.

Source: STR

©Pinnacle Advisory Group

New Supply – June 2016 U.S. Pipeline by Chain Scale

JUNE 2016 PIPELINE (Under Contract): 522,300 rooms in 4,241 projects

200,000 175,000

175,000 149,000

150,000 125,000

100,100

100,000

22.6% increase in rooms under contract compared to June 2015

75,000 45,700

50,000 25,000

12,800

0

35,400 4,300

32% of rooms under contract are under construction (166,400)

Upper Midscale and Upscale make up 66% of rooms under construction In Construction

Final Planning & Planning stages

Source: STR

©Pinnacle Advisory Group

Hot Topics Consolidation

Sharing Economy Brexit, Strength of USD and Other Global Concerns Direct Bookings vs. OTAs ©Pinnacle Advisory Group

Key Takeaways • Keep in mind in that 2015 was by far the highest Occ and ADR ever recorded. • Hotel revenue growth will slow in 2016, and continue through 2017. This growth will be driven entirely by ADR growth. • Occupancy is expected to remain flat in 2017 due to supply growth catching up to demand growth for the first time since the recession in 2009. • Among the chain scales, upper upscale is expected to see the strongest RevPAR growth year-overyear, followed by luxury. Midscale could see the weakest growth. • Major gateway cities and top 20 markets will face is growing supply from the sharing economy, particularly through Airbnb.

©Pinnacle Advisory Group

NEW ENGLAND LODGING MARKET

New England Occupancy 2015 80% 75% 70.3%

70%

67.6%

65% 61.5%

61.3%

60%

60.5% 56.7%

55% 50% 45% 40%

Connecticut

Source: Smith Travel Research

Rhode Island

Massachusetts

Vermont

New Hampshire

Maine

New England Average Daily Rate - 2015 $200.00 $180.00

$174.26

$160.00 $140.00

$138.58

$135.05

$123.93 $120.00

$112.77

$119.51

$100.00 $80.00 $60.00

Connecticut

Rhode Island

Source: Smith Travel Research/Pinnacle Advisory Group

Massachusetts

Vermont

New Hampshire

Maine

New England RevPAR – 2015

$67.80

Maine New Hampshire Vermont

$69.41

$74.95

$91.40

Rhode Island Massachusetts

$84.98 $122.65

Source: Smith Travel Research/Pinnacle Advisory Group

Connecticut

RHODE ISLAND LODGING MARKET

Rhode Island Occupancy 2005-2015 75% 70% 65%

67.6% 64.2% 62.2%

60.8%

60%

60.3%

60.9%

61.2%

2010

2011

2012

62.4%

63.5%

57.1% 54.1%

55% 50% 45% 40%

2005

2006

Source: Smith Travel Research

2007

2008

2009

2013

2014

2015

Rhode Island Average Daily Room Rate 2005-2015 $140.00

$135.05

$135.00 $130.00

$128.78

$125.00

$127.91

$126.52

$122.92

$122.21

$120.00 $115.00

$119.20

$116.99

$115.01 $111.59

$110.00

$111.58

$105.00 $100.00

2005

2006

Source: Smith Travel Research

2007

2008

2009

2010

2011

2012

2013

2014

2015

Rhode Island RevPAR 2005-2015 $100.00 $91.40 $90.00 $80.00

$75.00

$76.00

$81.17

$78.00 $72.00

$70.00

$67.26

$70.07

$73.40

$76.28

$60.00

$60.00 $50.00 $40.00 $30.00

2005

2006

Source: Smith Travel Research

2007

2008

2009

2010

2011

2012

2013

2014

2015

Rhode Island Year-to-Date July 2016

Occupancy ADR RevPAR Source: STR

July 2015

July 2016

66.6%

66.1%

$131.56

$138.27

$87.64

$91.45

Up 4.4%

CITY OF PROVIDENCE LODGING MARKET

Providence Occupancy 2005-2015 75%

70.7% 70%

69.4%

2013

2014

68.0%

67.2% 65%

69.5%

63.6%

63.8%

63.1%

64.9%

60.7% 60%

56.5% 55%

50%

2005 Source: STR

2006

2007

2008

2009

2010

2011

2012

2015

Providence Average Daily Room Rate 2005-2015 $170.00 $160.00

$157.86

154.35 $151.64

$150.00 $140.00

$145.94

$145.86

$143.06

$138.85 $130.92

$130.00

$127.11

$139.58

$129.94

$120.00 $110.00 $100.00 Source: STR

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Providence RevPAR 2005-2015 $120.00

$111.56 $110.00

$101.30 $100.00

$96.19

$96.48

$97.35 $94.37

$97.00

$88.50

$90.00

$84.29 $80.66

$80.00

$73.96 $70.00

$60.00

2005 Source: STR

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Providence YTD July 2016 Occupancy ADR RevPAR

2015 70.3% $156.78 $110.25

2016 70.% $164.36 $115.00 YTD July Washington DC Philadelphia Boston New York

Source: STR

Up 4.3%

Up 2.7% Up 6.0% Down 0.8% Down 2.9%

Providence - Future Convention Office Market Other Demand Factors New Supply Projections

Providence Convention Tap Report August 2016 • Q4 2016 Definite Rooms Are 20% Behind The Pace Target (3,075 Room Nights) • 2017 Definite Rooms are 6% Ahead of the Pace Target (4,512 Room Nights) • 2017 Soft months are: • January, February, March, May. October, and December; • May is particularly soft (down 66%); • 2017 Particularly strong months are: • August (up 95%); • September (up 53%); and • November (up 63%); Source: The Tap Report

Providence – Downtown Office Market (class A, B, C) VACANCY 11/30/04

8.4%

12/31/10

18.9%

12/31/05

10.1%

12/31/11

15.9%

12/31/06

11.2%

12/31/12

16.0%

12/31/07

14.8%

12/31/13

16.2%

12/31/08

15.2%

12/31/14

15.6%

12/31/09

17.2%

12/31/15

16.9%

Source: CBRE

Providence Other Factors

Economic Outlook: Modest Growth Anticipated New Lodging Supply: No New Supply in 2016/2017

Providence – Projections Projections

2016: 69% @ $165: RevPAR-$113.85 2017: 70% @ $170: RevPAR- $119.00

WARWICK LODGING MARKET

Warwick Occupancy 2005-2015 80% 75% 70%

72.9% 70.1%

69.1%

67.3%

65.7%

65%

67.3%

66.9%

68.8%

64.0% 61.5%

60%

58.0%

55% 50% 45%

2005

2006

Source: Smith Travel Research

2007

2008

2009

2010

2011

2012

2013

2014

2015

Warwick Average Daily Room Rate 2005-2015 $105.00 $100.00 $95.00

$95.81

$97.31

$98.76 $95.84

$94.36 $90.47

$90.00 $86.93 $85.00 $83.28

$81.86 $80.00

$84.92

$80.02

$75.00 $70.00

2005

2006

Source: Smith Travel Research

2007

2008

2009

2010

2011

2012

2013

2014

2015

Warwick RevPAR 2005-2015 $75.00

$70.00

$69.83 $67.19

$67.20 $64.90

$65.00

$62.24

$60.00

$58.47

$58.07 $55.71 $53.87

$55.00

$50.00

$54.36

$47.50

$45.00

$40.00

2005

2006

Source: Smith Travel Research

2007

2008

2009

2010

2011

2012

2013

2014

2015

Warwick YTD July 2016

2015

2016

Occupancy

71.8%

71.6%

ADR

$94.54

$98.80

RevPAR

Source: Smith Travel Research

$67.86

$70.71

Up 4.5% Up 4.2%

Warwick – Future Unemployment: Improvement

Industrial Market: 7.2% Vacancy

Airport Factors: YTD Passengers – up 4% YTD

New Lodging Supply: None

Economy: Continues to Improve

Office Market: 11.9% Vacancy – Lowest Rate Since 2006 Other: Stronger Providence Market Provides Compression

Projections

2016: 72% @ $99.50: RevPAR-$71.64 2017: 73% @ $103: RevPAR- $75.19

NEWPORT LODGING MARKET

Newport Occupancy 2005-2015 64.8% 64%

62%

61.0%

60.4%

59.9%

60% 58.7%

57.7%

58%

59.3%

59.1%

2012

2013

58.3%

56.8% 56% 53.8%

54%

52%

50%

2005

2006

Source: Smith Travel Research

2007

2008

2009

2010

2011

2014

2015

Newport Average Daily Rate 2005-2015 $220.00 $212.08 $205.08

$200.00 $189.90

$180.00

$160.00

$192.39

$190.15 $182.74

$176.56

$174.65

$164.04

$164.27

$169.30

$140.00

$120.00

$100.00

2005

2006

Source: Smith Travel Research

2007

2008

2009

2010

2011

2012

2013

2014

2015

Newport RevPAR 2005-2015 $150.00 $137.40

$140.00 $130.00

$123.81

$120.00

$108.44

$108.00

$110.00 $100.00

$113.67

$113.67

$100.60

$103.56 $97.65

$101.77

$88.11

$90.00 $80.00 $70.00

2005

2006

Source: Smith Travel Research

2007

2008

2009

2010

2011

2012

2013

2014

2015

Newport YTD July 2016

2015

2016

Occupancy

63%

62.3%

ADR

$204.44

$202.36

RevPAR

Source: Smith Travel Research

$128.78

$126.03

Down 1.0% Down 2.1%

Newport – Future International Visitors: 21% increase (International Passengers) as of May YTD 2016 at Logan. Group/Meetings Market: Continue to See a Rebound

Marketing and Programming from Private Sector $223.4 M Bridge Work – 10 yr. Plan Newport Bridge, Mt Hope Bridge and Jamestown Bridge – Starts 2017

Gas Prices: Positive for Driving Traffic

New Supply

New Supply Supply New

New Supply

200 Room Navy Gateway Inn and Suites Open Spring 2017

East Island Reserve in Middletown – Luxury Cabins and Studios to Open Later in 2016

146 Room Cambria Middletown to Open November 2016

No New Supply in Newport

Projections

2016: 63% @ $213.00: RevPAR-$134.19 2017: 62% @ $217.00: RevPAR- $134.54

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