2017 Hospitality Investment Forecast

U.S.
HOSPITALITY INVESTMENT FORECAST
IN-DEPTH LOCAL NATIONAL INDUSTRY-FOCUSED

MARKET ANALYSIS PERSPECTIVE EXPERT RESEARCH
Table of Contents
National Perspective
Executive Summary 3
National Economy 4
National Hotel Overview 5
Capital Markets 6
Hospitality Investment Outlook 7
National Construction Map 8-9
Market Overviews
California 10
Carolinas 11
Central Midwest 12
Florida 13
Georgia 14
Gulf Region 15
Mid Atlantic 16
Mid South 17
New York 18
North Central 19
Northeast 20
Northwest 21
Southwest 22
Texas 23
Upper Midwest 24
Washington Region 25
Client Services
Office Locations 26-27
Contacts, Sources and Definitions 28
Research Services 28
Written and edited by Art Gering, Senior Hospitality Analyst, with assistance from investment brokerage professionals nationwide. The Capital Markets section was
co-authored by William E. Hughes, Senior Vice President, Marcus & Millichap Capital Corporation.
2
Executive Summary
Hospitality Demand and Performance

Economic trends point to another year of growth in 2017, generating higher room revenue and more occupied rooms.
Current plans to increase infrastructure and defense spending could initiate a higher rate of economic growth. However,
the White Houses relationship with Congress and the legislation enabling such initiatives, and potential changes in tax
policy, may be slow to evolve.
Growth rates in primary hospitality performance indicators will moderate. Downside risks include an unanticipated dis-
ruption in travel related to events outside the industry.
Projects slated for delivery this year mark the peak of this cycle but nonetheless remain well below the high points of
recent cycles. Select-service brands dominate the construction pipeline in 2017.
Airbnb remains a competitive factor, and additional municipalities will follow the lead of large markets New York City and
San Francisco to impose regulations on short-term rentals.
Investment Activity and Capital Markets

Hotel lenders are tightening leverage and loan proceeds as growth in primary revenue metrics eases. Liquidity in the debt
market remains healthy, but higher interest rates are raising borrowing costs.
The Federal Reserve increased its short-term lending benchmark in March. The central bank will likely be more active in
raising the Fed Funds rate during 2017.
A considerable number of new hotels are coming online, encouraging hotel investors to assess the impact of new supply
and revise price expectations. Investors and sellers price targets will realign accordingly.
A reduction in the unemployment rate and the implementation of higher minimum wages in many areas are presenting
challenges in managing labor costs. Wage pressures will intensify in the hotel industry during 2017 as the economy
remains near full employment.
Hospitality 2017 Outlook

1.9% increase Supply:
in available rooms Developers will bring online roughly 140,000 rooms in 2017, an increase from the approximate-
ly 100,000 rooms that were delivered in 2016. Completions translate to a 1.9 percent increase
in available rooms, matching the long-term trend.
30 basis point Occupancy:
decrease in occupancy Room demand will increase 1.4 percent during 2017, moderating from last years gain. Annual
occupancy slips to 65.2 percent, the first yearly decline this cycle.
2.8% ADR:
increase in ADR Competition from new hotels and home-sharing services reduces ADR growth from last years
3.1 percent gain. Select-service hotels will come under the greatest pressure.
2.4% RevPAR:
increase in RevPAR With occupancy forecast to decline, ADR becomes the sole driver of a modest gain in RevPAR
this year and extends a trend of moderating growth.
3
National Economy
Economic Growth Prospects Positive,

Economy Adding Jobs
But New Policies Still Evolving
6
The economic cycle is well into its eighth year of expansion. Current
Annual Job Growth (millions)
trends point to another year of respectable economic growth that will enable the
3 national hotel sector to record higher revenues in 2017. Though many believe
that the longevity of an economic cycle alone predicts a slowdown, few signs of
0 a pending downturn are evident. Hiring remains sound; between 2 million and
3 million jobs were added each year since 2011, including millions of positions
-3 in sectors associated with business travel. Workers who have held jobs since
early in the cycle have also accumulated paid vacation benefits that will translate
-6
into additional spending on leisure trips. With a low unemployment rate, the
07 08 09 10 11 12 13 14 15 16 17*
corporate world may face some near-term challenges finding workers to staff
unfilled positions and maintaining profit growth, but gauges of service sector and
Labor Market Slack Tightening manufacturing activity remain in expansionary territory. Potential headwinds for
Unemployment Rate Underemployment Rate
manufacturing, though, include a strong U.S. dollar that may curtail exports and
the possible implementation of protectionist trade and tax policies.
20%
The promise of a faster pace of economic growth looms large in the

Monthly Rate
15%
economic outlook. The Trump administrations expressed intent to increase
10% infrastructure and defense spending could potentially stimulate a higher rate
of economic growth, but the legislation enabling such initiatives may be slow
5% to evolve. Congress and the executive branch may sit on the same side of the
political aisle, but their relationship could take time to work out as differences in
0%
07 08 09 10 11 12 13 14 15 16 17** policy priorities are resolved. While a more robust economic expansion would
assuredly benefit the hotel sector, the Trump agenda as currently understood
carries potential downside risks. These include a rise in long-term interest rates
Economic Growth Drives Room Demand that would accompany an increase in federal spending for infrastructure, and
GDP Room Demand greater inflationary pressure. In addition, a potentially tougher stance on immi-
10% gration could crimp hiring and force employers to temper expansion plans at
the same time that labor market slack is tightening. Demographic shifts are also
a factor affecting long-term economic growth potential, with millions of baby
Y-O-Y Change
5%
boomers entering retirement and being replaced with less experienced workers.
0%
-5%
-10%
2017 National Economic Outlook
07 08 09 10 11 12 13 14 15 16 17*
Job growth remains steady in tight labor market. The economy added
approximately 2.2 million jobs in 2016, but with unemployment below 5 per-
cent, the tight labor market will restrain hiring to the low-2 million range this
Indexes in Expansion Area
year. Accommodations staffing is growing modestly, primarily as a result of
Manufacturing Services Expansion Threshold
the opening of new hotels.
70
Wages, wealth effect provide fuel for spending. As a tight labor market
60
drives up wages, consumer spending should accelerate, sustaining the eco-
Activity Index
nomic expansion. An increase in consumer spending should generate GDP

50
growth in the 2.5 percent range in 2017. Greater business investment arising
40 from a resumption of activity in oil-and-gas regions could also make a greater
contribution to GDP.
30
07 08 09 10 11 12 13 14 15 16 17** Downside risks linger. Rising interest rates and a strong U.S. dollar can
signal positive economic growth. Yet, they can also negatively impact the ex-
pansion by cutting exports due to the higher cost of American products and
deferring investment due to higher financing costs. Overall economic health in
* Forecast
** Through February 2017 looks solid, but potential downside risks exist.
4
National Hotel Overview
More Full Rooms, Higher Revenue Measures

Foreseen for U.S. Hotels in 2017 U.S. Annual Occupancy Trend
Room Nights Annual Occupancy Rate
A year of change is in the wind. A growing U.S. economy, buoyed by addi-
tional gains in employment and consumer spending, offers the U.S. hotel sector 1,400
Occupied Rooms (millions)

80%
a meaningful push for moderate growth in 2017. Emerging trends shape this
Occupancy Rate
1,125 70%
years outlook, however. The combination of the highest rate of supply growth
this cycle and the leveling off in room demand increases will reduce the annual 850 60%
occupancy rate this year for the first time since 2009. Reflecting the influence
of abundant new hotel openings and competition from home-sharing services 575 50%
including Airbnb, ADR and RevPAR growth rates will also moderate considerably.
300 40%
The streak of consecutive year-over-year gains in RevPAR stood at a record 82
07 08 09 10 11 12 13 14 15 16 17*
months through the end of 2016 but could come to an end in 2017. In addition,
the superior performance of markets outside of the top 25 was a storyline that
developed as 2016 progressed. These other markets account for a dispro- Revenue Measures Rising
portionately small share of rooms under construction and could record higher Annual RevPAR Annual ADR
growth than the top 25 markets and the entire nation during 2017, attracting
$100 $140
greater interest from investors.
$75 $125
Operators strive to maintain RevPAR growth. ADR will account for all of the
RevPAR
ADR
gain to be realized in RevPAR in 2017, a marked shift from prior years when occu- $50 $110
pancy growth also contributed significantly. Greater transparency on room rates,
$25 $95
competition from shadow lodging stock and new hotels are among the factors
that have pressured ADR growth thus far in the cycle. Last year marked the most $80
$0
significant new supply since the sectors upturn started in 2010, and it appears 07 08 09 10 11 12 13 14 15 16 17*
likely that elevated completions will persist into 2018 and place additional stress
on RevPAR drivers. The debt market, though, could potentially moderate the
impact of new supply. Slowing rates of RevPAR growth, in particular, will tem- Select-Service Rooms Underway**
per property performance expectations in loan underwriting and perhaps require
larger equity contributions from developers. Select-service hotels are the sector New York
most likely to be hit by tighter underwriting standards. Supply growth induced a Dallas
decline last year in occupancy in select-service hotels, a favorite of investors and
Houston
developers, a trend that will continue and intensify in 2017.
Los Angeles
Seattle
2017 National Hotel Sector Outlook 0 3 6 9 12
Property performance moderates. The annual U.S. occupancy rate will Rooms Underway (000s)
decline 30 basis points in 2017 to 65.2 percent. Projected room demand
growth of 1.4 percent will raise occupied rooms to the highest level on record
but represents a moderation from the 1.8 percent gain last year. Competition Construction Still Below Last Peak
from new lodging supply and home-sharing services will restrain ADR growth
Value of Work Completed (bil.)
to 2.8 percent and yield a 2.4 percent rise in RevPAR. $40
Supply growth reaches cycle peak. The scheduled delivery of approxi- $30
mately 140,000 rooms this year marks the high point during the current cycle
and supports a 1.9 percent increase in available rooms. Few rooms are under $20
construction in the luxury and economy categories, but the upper midscale
$10
and upscale tiers are filled with new projects. Dallas, Houston and New York
City face the largest supply additions in these tiers. $0
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16**
Leveling the playing field with home-sharing services. Throughout 2016,
numerous municipalities and Airbnb struck working agreements that purport
to ensure that Airbnb remits its share of occupancy taxes and operates under
other regulations governing the operation of lodging properties. It remains to * Forecast
be seen whether an eventual slowdown in travel and room demand will mate- ** Through December
rially affect the number of properties listed for rent on Airbnb.
5
Capital Markets
Liquidity Persists in Debt Marketplace,

But Borrowers Costs Rising
U.S. Hotel Lender Composition
100% New outlook takes hold as cycle matures. Hotel lenders are tightening
leverage and loan proceeds as growth in primary revenue metrics eases, raising
75% new considerations for property owners and borrowers in 2017. The new, more
National Bank
International Bank conservative lending stance occurs amid a period of continuing liquidity in the
Rate
50% Regional/Local Bank debt market and accompanies rising interest rates that are increasing borrowing
CMBS
Insurance costs. A substantial increase in the 10-year U.S. Treasury following the 2016
25% Financial election led to a repricing of assets and delays in closing transactions. The gap
Private/Other
between buyers and sellers expectations is likely to extend into this year, and
0% higher long-term rates will also drive greater urgency among owners needing
12 13 14 15 16*
to refinance maturing loans. Expectations of additional action by the Federal
Reserve this year will also lead to higher rates on short-term loans, a common
Common Lending Benchmarks financing option for properties in transition. Interest rates on bridge loans have
increased and lenders have also decreased leverage, introducing new consider-
Prime Rate 30-Day Libor
ations for borrowers that are likely to arise often this year.
12%
9% CMBS will press to reclaim share of market. Banks dominated hotel lending
in 2016 at the expense of CMBS, which was beset by numerous obstacles early
in the year. A modest resurgence in the second half following the issuance of the
Rate
6%
first CMBS offerings written under new risk-retention rules last summer offers
3%
the promise of a reboot in securitized lending. The offerings were well received
and create a potential blueprint for near-term deals. Potential changes to the
0%
07 08 09 10 11 12 13 14 15 16 Dodd-Frank regulations, however, may have a measurable impact on CMBS un-
derwriting and issuance. A large volume of CMBS maturities will also take place
this year, corresponding with the year of peak issuance prior to the recession.
Annual CMBS Issuance Some borrowers may not be able to refinance through CMBS, but high liquidity
and competition among lenders will potentially provide new alternative financing
$240 solutions, including subordinated or mezzanine debt. A potential downside risk
in hotel capital markets, though, remains a sudden disruption in travel volume.
$180
Billions
$120
2017 Capital Markets Outlook
$60
Monetary policy actions to accelerate. The 10-year U.S. Treasury rate
$0
jumped following the election but has since settled in the mid-2 percent range.
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 Moderate economic expansion and muted inflation throughout the current cy-
cle allowed the Federal Reserve to put off hiking its short-term lending bench-
mark, but its increase in March reinforces a positive outlook for economic
Growth Rates Tapering growth. The central bank will likely be more assertive in its rate increases in
Occupancy Rate RevPAR 2017.
20%
Leverage levels stable for now. Banks and CMBS typically underwrite
10% deals at leverage from 60 percent to 65 percent and terms of five, seven and
Y-O-Y Change
10 years. Moderating rates of growth in occupancy and RevPAR, though, re-

0% quire more conservative underwriting and a renewed focus on top brands and
markets that have multiple and diverse room demand drivers. Construction
-10%
lending may also be approaching a crossroads in 2017, as higher borrowing
-20% costs and lower leverage prevent some projects from penciling out and new
06 07 08 09 10 11 12 13 14 15 16 property performance results accumulate.
SBA loans offer higher leverage. First-time buyers, including some who
are crossing over from other commercial property sectors, remain attracted
to hotels. For these investors, small balance loans up to $5 million backed by
the Small Business Administration will remain a viable financing source during
2017. SBA-backed loans are typically indexed to the prime rate and can run
for a term up to 25 years and maximum leverage of 80 percent.
6
Hospitality Investment Outlook
Shift in Cycles Momentum, Higher Interest Rates

Among Factors Influencing Hotel Investment
Limited-Service Cap Rates
Maturing hotel cycle and interest rate trends shaping investment plans. Cap Rate 10-Year Treasury
Property performance improvements and liquid debt markets sustained elevated 12%
investor interest in 2016, though transaction volume slowed as several factors
9%
influencing investment strategies took shape as the year progressed. A consid-
Average Rate
410 bps
660 bps
erable number of new hotels opened last year and will also come online in 2017,
670 bps
680 bps
6%
encouraging investors to assess the impact of new properties on performance
expectations. RevPAR growth also decelerated, leaving investors to determine 3%
how additional asset value can be created. While devising new pricing models
in response to the sectors slowing momentum, owners and potential buyers 0%
05 06 07 08 09 10 11 12 13 14 15 16*
also face rising interest rates. An increase in the yield on the 10-year U.S. Trea-
sury to the mid-2 percent range and expectations of potential changes to the
tax code inspired many investors to step back and reassess their strategies. Full-Service Cap Rates
Accordingly, the hotel investment market may start 2017 slowly as owners and
Cap Rate 10-Year Treasury
investors assimilate recent and potential changes into underwriting assumptions
12%
and strategies.
9%
Average Rate
Limited-service remains in focus in 2017. Property owners with flexible price
570 bps
340 bps
expectations can likely leverage keen investor interest to complete transactions, 6%
580 bps
620 bps
though uncertainty over government policies could slow deal volume in early
2017. Limited-service properties, comprising flagged economy and midscale 3%
inns, received healthy bids from investors and owner-operators in 2016, and
0%
comprised nearly half of all branded hotel deals during the year. Debt capital 05 06 07 08 09 10 11 12 13 14 15 16*
remains accessible to the buyer pool active in this segment. A potential relax-
ation in banking regulations could liberate additional debt from local and regional
banks in 2017, supporting additional limited-service deals. Moving up the chain- Significant RevPAR Growth
scale ladder, select-service assets mark the intersection of private, REIT and 2011 2016*
institutional capital, and pitched bidding drove up prices over the past two years. Upscale
Select-service hotel deal volume receded last year, partly as a result of aggres-
sive pricing. Higher interest rates and a sizable construction pipeline will likely Upper Midscale
maintain a bid-ask spread into 2017, further slowing transactions. Also, the mar-
ket for branded upper-upscale and luxury properties will likely remain subdued Midscale
as publicly traded REITs still face valuation hurdles.
Economy
2017 Investment Outlook $0 $20 $40

Annual RevPAR
$60 $80 $100 $120
Potential new tax regime. Comprehensive tax reform could hold implica-
tions for hotel investment, and some investors have stepped back from deals
to gain further clarity on a new policy. Proposed changes include a reduction Wages Climbing
in capital gains taxes, lower corporate tax rates, a reduction in the number of $560
personal tax brackets and the elimination of the carried interest loophole that
Average Weekly Wage
mostly affects developers and some investor syndicates. Action on tax reform, $520
though, may not occur until 2018.

$480
Independents day. Independent hotels retain vast appeal with investors and
accounted for roughly one-third of all hotels traded last year, a proportion on $440
par with historical trends. Greater access to debt supported additional trans-
actions in the $1 million to $10 million tranche, the realm of small private cap- $400
ital and owner-operators. Potential value-add opportunities through branding, 07 08 09 10 11 12 13 14 15 16*
capital infusions or different management strategies remain in 2017.

Hotel wages increasing. A reduction in the unemployment rate and the im-
plementation of minimum wage increases in several areas are imposing chal- * Through December
lenges on hotel owners labor costs. Wage pressures could be further exac-
erbated by potential changes in immigration policy that would make it more
difficult for hotel operators to staff essential services.
7
2017 National Construction Map
2017-18 Completions Mark Cycle Peak
Under Construction
Percent of Stock WA MT
< 1%
1% - 2.9% OR ID
WY
3% - 4.9%
5% - 10%
NV
UT CO
CA
AZ
NM
Top States
Rooms Percent
STATE
Underway* of Stock
New York 20,295 8.8%
Washington 6,359 6.9%
Texas 25,618 5.7%
Oklahoma 3,906 5.6%
District of Columbia 1,578 5.2%
Colorado 5,618 5.1% Annual Supply Growth
6% Supply Growth Long-term Trend
Idaho 1,077 4.8%
North Carolina 6,682 4.4% 4%
Y-O-Y Change
Pennsylvania 5,970 4.2%

2%
Tennessee 5,308 4.2%
All Other States 99,975 2.7% 0%
-2%
88 92 96 00 04 08 12 16
* Through December 2016
Sources: AHLA; STR Inc.
8
2017 National Construction Map
ND
MN
ME
SD WI
VT
NH
MI NY
MA
NE IA CT RI
OH PA
IL IN NJ
MD
KS MO DC DE
WV
KY VA
TN NC
OK
AR
SC
MS
AL
GA
TX LA
FL Construction Highlights
Roughly 45 percent of
rooms underway are in the
largest 25 metros.
Top metros: New York City,
Dallas, Los Angeles, Seattle.
About 140,000 rooms will
open in 2017.
Rooms Underway
Hampton Inn Extended-stay formats ac-
Fairfield Inn
count for 30,000 rooms.
Home2 Suites Construction pipeline tapers

Holiday Inn Express after 2017.
Residence Inn
Courtyard
0 4 8 12 16
Rooms Underway (000s)
9
California
Supply Wave Finally Hits California,

Posing New Considerations for Investors
Annual Occupancy
Market U.S. Key performance measures moderating. An influx of new rooms comes to
80% the Golden State in 2017, marking the most significant phase of supply growth
this cycle. Although annual occupancy will flatten this year and ADR and RevPAR
Occupancy Rate
75%
rates of increase will also moderate in response to the new supply, the states
70% long-term outlook remains sound barring an unanticipated shock to travel. The
addition of thousands of upper midscale and upscale rooms could ultimately
65% induce new demand from travelers previously locked out by a lack of moderate-
ly priced accommodations, especially in major metros. The emergence of new
60%
room demand would partly counter a trend of slowing economic growth state-
13 14 15 16 17*
wide. A dwindling labor supply and the high cost of housing impose a potential
obstacle to the state achieving a higher rate of near-term economic growth.
Supply and Demand Potentially more stringent immigration policies may also deprive employers from
acquiring the workers they require to fulfill expansion goals.
Available Rooms Room Demand
4% Slowing RevPAR growth will affect pricing. Investors resisted higher asking
Year-over-Year Change
prices to drive a decrease in deal flow over the past 12 months, while sales of
3%
smaller properties contributed to a decline in dollar volume. Acquisition debt
2% remains accessible and equity is available, but completing deals during 2017 will
depend partly on sellers willingness to meet investors changing expectations.
1% In addition to higher interest rates that affect borrowing costs, investors continue
to underwrite for slower near-term RevPAR growth as the current cycle matures.
0%
13 14 15 16 17* Statewide, RevPAR growth has waned from more than 10 percent in 2014 to
6.6 percent last year, and little capacity remains to appreciably raise occupan-
cy. Investors also continue to seek modestly priced properties offering potential
Full-Year Revenue Measures upsides, rather than full-price performing assets where NOIs have risen on the
ADR RevPAR overall strengthening trend in the market. Potential upside plays include rebrand-
$180 $140 ing or developing new sources of room demand.
$150 $120 2017 Market Forecast

RevPAR
$120
ADR
$100 Supply Approximately 19,000 rooms are under construction

up 1.3% statewide. The total includes 6,100 predominantly full-
$90 $80
and select-service rooms in Los Angeles, plus 2,500
$60 $60
keys in Orange County.
13 14 15 16 17*
Occupancy Annual occupancy will likely match its peak of the cur-
no change rent cycle this year, staying at 75.4 percent. Los Angeles
Flagged Hotel Sales will come under the greatest pressure to improve on last
years performance.
Average Price Per Room (000s)
$140
ADR The ADR increase slows from last years 5.4 percent
$115
up 3.9% pace as new supply reduces the number of high occu-
$90
pancy nights essential for driving outsize rate growth.
$65 RevPAR RevPAR also increases 3.9 percent this year, solely be-
up 3.9% hind the higher ADR. The Inland Empire could outper-
$40 form due to improving leisure travel.
12 13 14 15 16
Investment New flagged properties coming online will pressure older

inns to perform capital improvements in order to remain
* Forecast competitive, presenting potential buying opportunities
Sources: CoStar Group, Inc.; STR Inc.; for well-capitalized investors.
Real Capital Analytics
10
Carolinas
Carolina Hotels Shined Brightly in 2016,

But New Properties Will Slow Momentum
Annual Occupancy
The economies in the Carolinas are growing and will support a small gain Market U.S.
in regional occupancy this year. Aided by growth in key segments associated 70%
with inbound business travel and popular leisure destinations, including up-and-
Occupancy Rate
coming Greenville, hotels in South Carolina seem positioned to outperform their 65%
counterparts in North Carolina. The latter states HB2 law, or the so-called bath-
60%
room bill, has prompted cancellations of large events in North Carolina. Over the
long term, HB2 could potentially prevent hotel operations from reaching their full 55%
revenue-generating potential by discouraging travel to the state. In the near term,
the laws specific effects on hotel operations could include a decline in sellout or 50%
13 14 15 16 17*
high-occupancy nights that would dramatically lift property-level occupancy and
RevPAR. The legislation went into effect as hotel development in the state accel-
erated. This years pipeline is even larger than one year ago, and Charlotte alone Supply and Demand
will see roughly 3,700 rooms come online, nearly matching the 3,900 rooms
under construction in all of South Carolina.
8%
Hotels generate interest from local and regional players seeking to ex-
6%
pand or shuffle portfolios. A national pool of investors desiring geographic
diversification is also active. Transaction velocity rose slightly last year, but a 4%
decline in REIT purchases contributed to fewer select-service deals. A potential
absence of REITs again this year could remove a major impetus for higher pric- 2%
ing and force property owners to temper price expectations. Reflecting national
0%
trends, sales of economy and midscale hotels jumped notably last year, placing 13 14 15 16 17*
upward pressure on asset pricing. Investors are active in this segment, but more
significant interest in transacting may lie with owner-operators taking advantage
of liquid debt and equity markets to sell longtime holdings. The regions diverse Full-Year Revenue Measures
set of demand drivers is most evident in this segment, as transactions occurred ADR RevPAR
in major metros as well as airport, highway and college locations. $120 $80
2017 Market Forecast $105 $70
RevPAR
$90
ADR
Supply More than 10,600 rooms are under construction in the $60
up 2.0% region, primarily in North Carolina. An additional 3,600

$75 $50
rooms are planned.
$60 $40
Occupancy Diverse demand drivers support a minor increase in the 13 14 15 16 17*
up 30 basis annual occupancy rate this year to 64.9 percent, coun-
points tering the U.S. forecast of a slight decline.
Flagged Hotel Sales
ADR Competition from new supply and the potential of few-
up 2.9% er high-occupancy nights from hosting major events will $100
moderate the increase in the regional ADR during 2017.

$80
Last year, the ADR rose 3.7 percent behind a gain of 4.0
percent in South Carolina. $60
RevPAR With a slight contribution from occupancy and additional $40

up 3.3% growth in the daily rate, RevPAR advances at more than
the national rate of growth this year to $68.59. A gain of $20
12 13 14 15 16
7.2 percent was posted in 2016.
Investment Moderating RevPAR growth and an expanding con-

struction pipeline will encourage additional owners to list * Forecast
assets in 2017. Properties priced to reflect prospects for Sources: CoStar Group, Inc.; STR Inc.;
slower near-term growth will garner attention. Real Capital Analytics
11
Central Midwest
RevPAR Growth Easing in Region;

Owners Consider Testing the Market
Annual Occupancy
Market U.S. Missouri driving regional growth, while Oklahoma positioned for poten-
70% tial turnaround. Operating conditions will vary in the Central Midwest region
consisting of Kansas, Missouri and Oklahoma during 2017. Weak economic
Occupancy Rate
65% growth is hindering demand drivers in Kansas, where annual occupancy fell for
a second consecutive year in 2016. Missouri, however, remains the regions stal-
60%
wart hotel market. Statewide performance measures will continue to improve in
55% 2017, albeit at a more incremental pace than recorded last year. Growth rates
are also tapering from lofty levels in St. Louis, where a strengthening office mar-
50% ket will continue to provide momentum for business travel. In suburban St. Louis,
13 14 15 16 17*
Chesterfield and Clayton post low office vacancy rates and several proposed
office buildings could provide an additional source of hotel room demand if proj-
Supply and Demand ects advance to completion. In Oklahoma, office markets in Oklahoma City and
Tulsa are also performing well and provide a solid foundation for higher occupan-
cy, ADR and RevPAR in the state this year.
4%
Borrowing costs to affect bidding. Higher interest rates could disrupt deal
3%
flow in the region in early 2017, as buyers and sellers expectations realign. As-
2% set pricing was concentrated within a tighter range last year than in the preced-
ing period, perhaps signaling a greater unwillingness among investors to reach
1% for deals as the runway for attaining near-term performance objectives shortens.
Missouri remains a center of attention for investors as evidenced in a rise in
0%
13 14 15 16 17* transactions over the past year. RevPAR has climbed nearly 30 percent state-
wide since 2012 and the probability of moderating gains may prompt additional
listings in 2017. A drop in sales in Oklahoma occurred last year, but positive
Full-Year Revenue Measures comparisons to depressed year-earlier periods could allow owners to rebuild
ADR RevPAR occupancy and RevPAR rather quickly this year as energy sector performance
$120 $60 improves and fuels additional business travel.

RevPAR
$90
ADR
$50 Supply Led by a relatively large volume of rooms under con-

up 1.7% struction in Kansas and Oklahoma, available rooms
$75 $45
accelerate from last years 1.1 percent expansion. Only
$60 $40
876 rooms are underway in St. Louis, the regions largest
13 14 15 16 17* hotel market.
Occupancy Room demand increases from last years tepid increase

Flagged Hotel Sales down 40 basis of 0.3 percent but is not enough to avert a supply-in-
points duced decrease in annual occupancy to 58.0 percent.
$70
$55
ADR ADR will rise this year, virtually matching the increase of
$40
up 2.3% 2.4 percent in 2016 behind a recovery in Oklahoma from
last years 1.3 percent decline.
$25
RevPAR RevPAR of $52.93 for the full year in the Central Midwest
$10 up 1.7% marks a slight gain and a further deceleration in the rate
12 13 14 15 16
of increases recorded over the past four years.
Investment Investors targeting select-service properties may focus

* Forecast on recently built properties that have not yet reached full
Sources: CoStar Group, Inc.; STR Inc.; operating potential and are unlikely to require near-term
Real Capital Analytics capital expenditures. Suburban areas of major metros
are prime targets.
12
Florida
Supply Growth Weighs on Occupancy

As Demand Drivers Remain Sound
Annual Occupancy
Scattered sunshine in the near-term outlook. Statewide supply growth will Market U.S.
contribute to a decline in annual occupancy in Florida and a further moderation 80%

in the increases in ADR and RevPAR. Last years performance was attributable to
Occupancy Rate
a mix of slowing economic growth, Zika and a hurricane, plus other high-profile 75%
events that suppressed travel to the state. Random events could arise again,
70%
but property owners will have opportunities to leverage a growing economy to
strengthen property performance. Payrolls are still growing steadily, particular- 65%
ly in Orlando and Tampa, sustaining inbound business travel. Relocations to
Florida have also consistently increased to pre-recession levels. The relocation 60%
13 14 15 16 17*
of households promotes the use of hotels as transitional residences until per-
manent housing is available and generates inbound leisure travel from visiting
friends and relatives. Against the bright prospects offered by these and other Supply and Demand
demand drivers, the significant number of new, primarily select-service rooms
and home-sharing services including Airbnb imposes hurdles.
8%
Mix of sales by chain scale shifts. Investors also expanded into markets
6%
outside of the states three largest. Many longtime owner-operators of flagged
limited-service inns sold, taking advantage of keen investor interest and fluid 4%
debt markets. Additional opportunities to transact will arise in 2017, though a
potential acceleration in long-term interest rates could require price adjustments. 2%
Deals in the select-service tier declined last year, but investors are shifting from
0%
higher-priced major markets to secondary locations with sound demand drivers. 13 14 15 16 17*
Investors seeking higher yields will likely search further for upper midscale and
upscale brands in Gulf Coast or college town locations. Independent assets also
represent a sizable share of sales in the state, especially in coastal areas where Full-Year Revenue Measures
land prices are high. Historically significant unflagged hotels or independents on ADR RevPAR
sites suitable for higher-value alternative uses will command interest in 2017. $150 $100
RevPAR
$130
ADR
Supply A portion of the 13,400 rooms under construction state- $80
up 2.2% wide will come online in 2017 and raise the rate of supply
$120 $70
expansion above the national pace of growth. The total
includes more than 6,100 rooms in markets other than $110 $60
Miami-Dade, Orlando and Tampa. 13 14 15 16 17*
Occupancy Room demand growth of 1.5 percent marks an increase

down 50 basis from last years subdued 1.0 percent rate, but full-year Flagged Hotel Sales
points occupancy decreases to 71.1 percent.
$90
ADR The increase in ADR in Florida also exceeds last years

$75
up 2.9% tempered gain of 2.4 percent. Tampa paced the state
last year with a 5.6 percent increase. $60
RevPAR After recording a double-digit rise in 2014, the statewide $45

up 2.2% increase in RevPAR moderates further this year solely
behind the gain in the ADR. $30
12 13 14 15 16
Investment Properties in South Florida could outperform in 2017

after outside factors affected performance last year. A
significant construction pipeline is a potential concern * Forecast
for attaining target returns, but expanded air and cruise Sources: CoStar Group, Inc.; STR Inc.;
service will also generate new room demand. Real Capital Analytics
13
Georgia
Georgia RevPAR Gain Exceeds U.S. Pace,

Sustaining Active Transaction Market
Annual Occupancy
Market U.S. More rooms on the way. Following the most notable increase in room sup-
70% ply in six years during 2016, additional select-service rooms will come online in
Atlanta and the entire state of Georgia this year. The delivery of new stock will
Occupancy Rate
65% likely result in the first annual decrease in statewide occupancy since 2010 and
moderate RevPAR growth from the lofty levels of the past three years. While the
60%
states economy continues to expand this year, additional growth in business
55% and leisure travel will generate only a minor increase in occupied rooms from last
years record level. In addition, the strong U.S. dollar could curtail international
50% visitor volume. Some positive trends, however, could provide a lift to hotel perfor-
13 14 15 16 17*
mance. Relocations to the state and Atlanta in particular are healthy, offering ho-
tel owners a new source of room demand as new residents arrange transitions
Supply and Demand to permanent housing. The Atlanta office sector is also growing. Companies
including Anthem, Mercedes-Benz and Honeywell are expanding in the metro, a
positive development for inbound business travel.
8%
Window open for deals. Rooms under construction in the state are higher than
6%
one year ago, but nominal growth in the number of rooms nearest to ground-
4% breaking and in preliminary planning signals that supply pressures could abate
after 2017. In the months ahead, however, operators will continue to balance
2% daily rate and occupancy to maintain RevPAR growth while also undertaking
property improvements to keep up with newer inns. Accordingly, operators that
0%
13 14 15 16 17* have resisted testing the transaction market may finally opt to list assets while
debt markets are fluid and buyer interest remains pitched. Much of the dealmak-
ing will occur in branded economy and midscale hotels, which accounted for
Full-Year Revenue Measures more than 60 percent of all flagged hotel sales last year. Select-service assets
ADR RevPAR around the entire state also remain primary targets, but potential concerns re-
$110 $70 garding new supply may temper bid prices, especially for older assets.

RevPAR
$90
ADR
$50 Supply After gaining nearly 2,500 rooms statewide last year net
up 1.9% of stock removals, an additional 5,200 rooms were un-
$80 $40
der construction as 2017 began. The pipeline includes
$70 $30
1,900 select-service rooms underway in Atlanta.
13 14 15 16 17*
Occupancy Projected room demand growth of 1.6 percent rep-
down 20 basis resents a dip from the 2.1 percent gain one year ago.
Flagged Hotel Sales points Combined with higher completions, annual occupancy
in the state declines to 64.6 percent in 2017.
$90
ADR Supply growth likely reduces the number of high-occu-

$75
up 4.0% pancy days that drive more robust growth in room rates
$60
and reduces the increase in ADR from last years 5.1
percent gain.
$45
RevPAR The increase in the ADR drives all of this years projected
$30 up 3.7% increase in statewide RevPAR to $65.79. The rate of in-
12 13 14 15 16
crease, however, exceeds the national pace.
Investment Savannah, an up-and-coming leisure destination, will

* Forecast continue to attract investors looking for geographic di-
Sources: CoStar Group, Inc.; STR Inc.; versification in secondary metros. Business demand
Real Capital Analytics drivers in the market are also expanding.
14
Gulf Region
New Hotels Arriving in Gulf Region,

Slowing ADR, RevPAR Growth
Annual Occupancy
Construction impacts hotel sector. After touching a cycle high in annual Market U.S.
occupancy last year, the rate will recede in 2017 as developers accelerate ho- 70%
tel openings. Beyond this year, however, construction in the region consisting
Occupancy Rate
of Alabama, Arkansas, Louisiana and Mississippi should moderate. Projects 65%
in earlier phases of planning, totaling about 8,800 rooms, may have difficulty
60%
penciling out in a rising interest rate environment. Against the backdrop of near-
term supply growth, demand drivers remain relatively sound. Alabama and Ar- 55%
kansas continue to benefit from rates of economic growth sufficient to maintain
spending on leisure and business travel. Conditions in Louisianas natural-re- 50%
13 14 15 16 17*
sources-dependent economy, though, are suppressing growth in the state.
New Orleans, in particular, continues to feel the effects of lower leisure travel
from within the state and the nearby energy regions of Texas. Houston, a major Supply and Demand
feeder market for leisure travel in New Orleans, seems to be slowly emerging
from the energy sector downturn, and a healthier level of leisure travel should
resume as an upswing takes hold. 8%
6%
Alabama hotels drawing investor interest. Sales of midscale and inde-
pendent hotels rose last year but not sufficiently to offset declines in the upper 4%
echelons of the chain scale ladder. Transactions rose in Alabama, with mid-
scale inns at highway locations commanding attention. Additional deals were 2%
executed in Birmingham, an emerging leisure destination. Opportunities to
0%
turn around underperforming properties remains a common play in the mar- 13 14 15 16 17*
ket. Deals fell in Arkansas despite opportunities in interstate highway hotels.
The pace of RevPAR growth in the state has not significantly eroded, and
a relatively sparse construction pipeline could support additional occupancy Full-Year Revenue Measures
growth. Declining RevPAR complicated efforts to sell in New Orleans and in- ADR RevPAR
vestors seeking discounted prices could slow deal volume in early 2017. $100 $60
RevPAR
$90
ADR
Supply The number of rooms under construction in the Gulf Re- $50
up 2.1% gion increases from 5,900 one year ago to 8,300 at the
$85 $45
beginning of 2017. Alabama and Louisiana account for
most of the construction in the region. $80 $40
13 14 15 16 17*
Occupancy A 1.6 percent increase in room demand marks a slow-
down 30 basis down from last years increase and is exceeded by sup-
points ply growth, yielding a decline in the annual occupancy Flagged Hotel Sales
rate to 59.0 percent.
$80
ADR The regional ADR rises nominally in 2017; a potential re-

$65
up 0.8% surgence of travel to New Orleans could support a great-
er rate of growth. $50
RevPAR The combination of rising ADR and a decline in the oc- $35
up 0.3% cupancy rate underpin a slender increase in RevPAR to
$55.48 in 2017. RevPAR advanced 2.2 percent in 2016. $20
12 13 14 15 16
Investment Some potential opportunities remain largely overlooked.

Baton Rouge, for example, typifies the type of market
common in the region. Government travel and a major * Forecast
university in Baton Rouge offer reliable sources of recur- Sources: CoStar Group, Inc.; STR Inc.;
ring room demand. Real Capital Analytics
15
Mid Atlantic
At Late Stage of Cycle, Hotel Stock Grows

And Investors Contemplate Strategies
Annual Occupancy
Market U.S. New hotels coming online. A projected decline in annual occupancy in Del-
70% aware, New Jersey and Pennsylvania, the states making up the Mid Atlantic,
is entirely rooted in a surge in completions. Prospects for an outperformance
Occupancy Rate
65% of current expectations remain, however. Natural gas drilling in the Marcellus
Shale hit bottom in the third quarter last year and has since improved. A modest
60%
improvement in room demand related to the energy sector will likely be less of
55% a drag on hotel performance in Pittsburgh in 2017. Roughly 1,000 rooms were
brought online in Pittsburgh last year, and the market will continue to absorb
50% stock this year before reaching an equilibrium sometime in 2018. A relatively
13 14 15 16 17*
strong office property sector and burgeoning healthcare and tech industries pro-
vide potentially potent demand drivers in the metro. In the regions other large
Supply and Demand market, Philadelphia, last years significant gains in occupancy and RevPAR were
influenced by visitation for the Democratic National Convention. Operations this
year may pale in comparison, but the metro will likely resume its typical pattern
6% of steady but subdued growth.
4%
Transaction volume in the region declined last year. Fewer trades of se-
2% lect-service assets were recorded, and new stock is likely to temper investors
appetites in 2017. The decline in select-service deals was most conspicuous
0% in Pittsburgh, where investors shifted their focus to assets with minimal energy
sector exposure that potentially provide unrealized upsides. Sales in Philadel-
-2%
13 14 15 16 17* phia, meanwhile, were muted. Greater investor caution will encourage discount-
ing the effects of last years convention on property operations and focusing
instead on recurring sources of guest bookings. Investment in New Jersey hotels
Full-Year Revenue Measures countered the regional trend. An increase in deals occurred last year, mostly in
ADR RevPAR independent hotels in shore counties. Hotels in central New Jersey also draw
$140 $80 interest due to their business and government room demand drivers.

RevPAR
$120
ADR
$70 Supply Approximately 9,300 rooms are under construction, an

up 2.3% increase from one year ago. Projects in the final stage
$110 $65
before groundbreaking total 9,700 rooms and also mark
$100 $60
an expansion from one year earlier.
13 14 15 16 17*
Occupancy Growth in occupied rooms moderates to 1.2 percent
down 70 basis in 2017 from last years 1.8 percent bump. Annual oc-
Flagged Hotel Sales points cupancy is set to dip to 60.8 percent, reflecting a sup-
ply-to-demand imbalance in Pennsylvania.
$90
ADR This years projected rate of ADR growth eases from

$75
up 1.8% the 2.4 percent bump registered in 2016. New supply
$60
weighs on pricing power in Pittsburgh.
$45 RevPAR The slender gain in RevPAR this year is less than the pro-
up 0.7 % jected national increase. Minimal supply growth provides
$30 an opportunity for a solid increase in Delaware, adding to
12 13 14 15 16
last years 5.3 percent statewide gain.
Investment Commercial development in Pittsburgh will continue to

* Forecast reshape the lodging landscape. Approximately 1.3 mil-
Sources: CoStar Group, Inc.; STR Inc.; lion square feet of office space is proposed in the sub-
Real Capital Analytics urbs, offering a potential source of new business-related
room demand or development opportunities.
16
Mid South
Nashville Market Prime Driver

Of Mid South Region Hotel Performance
Annual Occupancy
No movement forecast in full-year occupancy. The growth rates in occupied Market U.S.
rooms and room supply converge, leaving the full-year occupancy rate in the Mid 70%
South states of Kentucky and Tennessee unchanged in 2017. Growing business
Occupancy Rate
travel and abundant leisure destinations throughout the region have sustained av- 65%
erage annual room demand increases of 4.1 percent in the past five years. While
60%
rising wages and inexpensive gas combine to drive leisure travel volume in the
coming year, the business demand channel is leveling off. Metro economies in 55%
Louisville, Memphis and Nashville are expanding more slowly, providing a less po-
tent stimulus for increasing inbound business travel. Hotel performance in the two 50%
13 14 15 16 17*
largest markets will noticeably taper during the year. In Memphis, new supply will
be absorbed and support a minor increase in occupancy, but RevPAR growth will
ease to the mid-3 percent range for the year. In Nashville, which has a pipeline of Supply and Demand
more than 3,300 rooms underway, a smaller gain in occupancy will also reduce
RevPAR expansion from last years robust 8 percent gain.
8%
Limited-service sales climb. Private investors and owner-operators dominat-
6%
ed investment in midscale and economy hotels over the past 12 months. While
the pool of investors in this segment remains motivated, older upper-midscale 4%
inns being replaced by newly built properties could be down-branded and pose
new competitive risks to existing assets. In the select-service tier, deal volume 2%
dipped over the past year and investors will modify pricing parameters in the
0%
coming months as RevPAR growth wanes. Properly priced select-service assets 13 14 15 16 17*
offering potential upsides through property improvement plans or new manage-
ment strategies, though, could gain momentum. In addition to near-term asset
performance expectations, investors will also focus on other factors that affect Full-Year Revenue Measures
property operations. Nashvilles short-term rental ordinance regulating Airbnb, ADR RevPAR
for example, was ruled unconstitutional last year. $120 $70
RevPAR
$100
ADR
Supply Nearly 6,700 rooms are under construction and slated $50
up 1.8% for completion in the Mid South this year and beyond,
$90 $40
underpinning an acceleration in supply growth in 2017.
$80 $30
13 14 15 16 17*
Occupancy Room demand and available rooms increase at identical
No change rates of growth this year, leaving full-year occupancy un-
changed at the cycle high of 63.3 percent. Flagged Hotel Sales
$90
$75
ADR The increase in the regions ADR moderates in 2017 fol-
up 3.3% lowing gains of 7.1 percent and 5.2 percent in 2016 and $60
2015, respectively.
$45
RevPAR Flat annual occupancy means that RevPAR also increas-
up 3.3% es 3.3 percent this year. Tennessee, and Nashville spe- $30
12 13 14 15 16
cifically, will outpace regional performance.
Investment The moderating rate of RevPAR growth will motivate

property owners to recalibrate price expectations to im- * Forecast
prove prospects for completing transactions. Property Sources: CoStar Group, Inc.; STR Inc.;
owners will need to push daily rates to continue driving Real Capital Analytics
RevPAR growth.
17
New York
Thousands of New Rooms on the Way,

Steering New York Performance Outlook
Annual Occupancy
Market U.S. Trends in New York City remain dominant factor affecting statewide ho-
80% tel performance measures. Key lodging demand indicators in the city were
strong last year, helping to raise citywide occupancy to nearly 86 percent and
Occupancy Rate
75% occupancy in Manhattan to approximately 87 percent. Business travel volume

promises to grow in 2017 in conjunction with a strong local economy, though
70%
foreign visitation could fall slightly due to the strong dollar and changing percep-
65% tions of the U.S related to attempted travel bans. On balance, the demand profile
for 2017 appears solid, leaving supply growth as the driving force behind occu-
60% pancy, ADR and RevPAR trends in the city. Hundreds of rooms were added to
13 14 15 16 17*
the citys stock over the past few years, and these accommodations have helped
to generate new demand from travelers on tight budgets. The number of hotel
Supply and Demand rooms under construction has remained constant at about 15,600 rooms over
the past year. Greater lender restraint, project cancellations and re-purposing
planned hotels for other uses point to fewer completions next year.
8%
Market liquidity persists. In the city, the greatest downward pressure on

6%
RevPAR related to supply growth will ease in late 2017 as deliveries taper. ADR
4%
growth, meanwhile, will resume as new supply is absorbed and stabilized. In
addition to new supply, ADR is also affected by guest loyalty reward redemptions
2% and competition from Airbnb. A recently enacted law, though, authorizes steep
fines for home-sharing services. RevPAR pressures in the city are pushing many
0%
13 14 15 16 17* investors with mandated return targets to withdraw from the market, clearing a
path for other investors to step into the highly competitive marketplace. Transac-
tions in the city were essentially flat last year, though pricing remained elevated.
Full-Year Revenue Measures Most of the deals continue to occur in Manhattan, but a stock buildup and emer-
ADR RevPAR gence of new demand drivers has elevated the appeal of the outer boroughs and
$220 $160 encouraged searches for development sites.

RevPAR
$200
ADR
$140 Supply More than 20,000 rooms are under construction in the
up 3.9% state. New York Citys underway pipeline totals in excess
$190 $130
of 15,000 rooms.
$180 $120
13 14 15 16 17* Occupancy Annual statewide occupancy dips to 72.7 percent as
down 60 basis supply growth outpaces a respectable gain in room de-
points mand. In New York City, occupancy will increase nomi-
Flagged Hotel Sales nally to the low-86 percent range as recent additions to
supply are absorbed.
$240
ADR The projected statewide decline reflects continuing soft-

$220
down 1.0% ening in New York City, where the ADR receded 2.5 per-
$200
cent last year and underpinned a decrease in the mar-
kets RevPAR.
$180
RevPAR Following a slight decrease last year, statewide RevPAR
$160 down 1.8% will fall again in 2017, reflecting trends in New York City.
12 13 14 15 16
A thinning of the construction pipeline, though, might in-
duce a nominal gain next year.
* Forecast Investment Outside of the city, longtime owners of flagged economy

Sources: CoStar Group, Inc.; STR Inc.; and midscale inns will continue to find a willing group of
Real Capital Analytics buyers, but higher interest rates will moderate bid prices.
18
North Central
Occupancy Rise on Tap in Region;

Assimilation of New Stock Continues in Ohio
Annual Occupancy
Hotels in the North Central region consisting of Indiana, Michigan and Market U.S.
Ohio will enjoy sound health in 2017. A projected increase in annual occupancy 70%
in 2017 will extend a climb that began with a reading of 48.7 percent in 2009. The
Occupancy Rate
intervening years have provided hotel owners with opportunities to consistently 65%
improve property performance and amass greater equity in their hotels. Indiana
60%
and Michigan continue to generate employment gains that are supporting higher
volumes of business and leisure travel within those states and the entire region. 55%
Summer tourism in Michigan, meanwhile, is also on an upswing supported by
rising incomes in the state. Recent supply growth in Ohio continues to pressure 50%
13 14 15 16 17*
occupancy. Nearly 3,800 new rooms were added in the state last year, principally
in Cleveland. The Republican National Convention drove a 6.7 percent gain in ADR
in the market that was the single force behind RevPAR growth. Without major Supply and Demand
events in Cleveland this year, ADR and RevPAR increases will moderate.
Healthy liquidity remains in the regions investment market. Sales of econ- 4%
omy and midscale hotels increased in the region last year, while new construction
3%
tempered sales of upper midscale and upscale inns. Opportunities for owners
who have completed brand-to-brand and independent-to-brand conversions 2%
will persist amid steady equity flows and an intensified search by investors for ho-
tels offering untapped upsides. Within the regions major metros, a respectably 1%
strong economy is generating new room demand in Indianapolis. Recent sales
0%
of limited-service hotels here included performing assets and others requiring 13 14 15 16 17*
either capital infusions or new flags, illustrating a range of risk appetites. In Ohio,
diverse demand drivers also lead investors to Columbus, while supply growth in
Cleveland may encourage longer due-diligence. In the states Utica Shale region, Full-Year Revenue Measures
a recent increase in rig counts signals a resumption of drilling that could generate ADR RevPAR
additional hotel stays by work crews and renew investor interest in the area. $110 $70
RevPAR
$90
ADR
Supply Developers control a pipeline of more than 9,200 rooms $50
up 1.8% under construction, a minor increase from one year ago.

$80 $40
The number of rooms underway in Ohio declined by
more than 1,300 during that span. $70 $30
13 14 15 16 17*
Occupancy Respectably healthy state economies support travel to
up 10 basis and within the region, generating a slender increase in
points the annual occupancy rate to 60.5 percent. Room nights Flagged Hotel Sales
will grow 1.9 percent this year, down from a gain of 2.2
percent in 2016. $60
$50
ADR The regional ADR advances at a pace slower than 2016,
up 2.8% when a 3.7 percent gain was registered. Nationally, the $40
ADR is also on pace to rise 2.8 percent this year.
$30
RevPAR The uptick in occupancy and modest pricing pow- $20

12 13 14 15 16
up 2.9% er expressed in the increase in ADR support a gain in
RevPAR. A gain of 4.2 percent was recorded last year.
Investment Higher interest rates could cause a reconsideration of * Forecast

target returns and contribute to a slowdown in deals this Sources: CoStar Group, Inc.; STR Inc.;
year until buyers and sellers expectations realign. Real Capital Analytics
19
Northeast
Northeast Occupancy Dips as Region

Adjusts to Trends in Boston
Annual Occupancy
Market U.S. Region receding from peak performance level. Annual occupancy will de-
70% cline for the second consecutive year at hotels in the Northeast, a region consist-
ing of Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and
Occupancy Rate
67% Vermont. New supply represents the primary driver of the decrease, as demand
drivers remain fairly sound. Job growth has been steady, promoting business
64%
travel between the states. Leisure destinations also remain a draw for region-
61% al residents and visitors from nearby states. Boston typifies the challenges the
regional hotel sector faces in 2017. The combination of growing employment,
58% numerous colleges, professional sports and cultural institutions creates a formi-
13 14 15 16 17*
dable set of room demand drivers. However, more than 2,800 rooms are under-
way in 2017, posing a challenge to occupancy growth. The ADR in the market
Supply and Demand also rose only 2.3 percent last year, but the combination of new competition and
guest loyalty rewards redemptions will suppress rate growth again this year.
4% Flagged assets gaining attention. The region continues to see a respectable

level of transactions. Established demand drivers in each state provide oppor-

3%
tunities for investors to sustain and potentially build upon property performance,
2%
and the limited representation of brands offers another possible means to en-
hance property income through flagging. Trades of branded properties increased
1% last year, reflecting keen investor interest in select-service assets, a trend that
will persist in 2017. Specifically, recently completed inns with the most modern
0%
13 14 15 16 17* design prototypes and longest franchise agreements will garner significant at-
tention. Independent hotels, however, claim a larger share of the regions trans-
action market than in other parts of the country. Unaffiliated hotels represent
Full-Year Revenue Measures the mainstays of the region. Assets with longstanding demand drivers, in sound
ADR RevPAR physical condition and priced to account for moderating near-term growth will
$160 $100 continue to elicit intense interest when listed for sale.

RevPAR
$140
ADR
$80 Supply More than 2,500 rooms were added to stock net of re-
up 2.0% movals last year, and approximately 4,700 rooms are un-
$130 $70
derway in 2017. Projects in final planning also increased
$60
over the past 12 months.
$120
13 14 15 16 17*
Occupancy An increase in occupied rooms of 1.2 percent marks a
down 50 basis modest uptick from one year ago but is insufficient to
Flagged Hotel Sales points absorb supply growth. Full-year occupancy will decline
to 63.8 percent.
$90
ADR Competition from new supply hinders rate growth in
$80
up 2.0% Boston and underpins a subdued increase across the
$70
entire region. During 2016, the regional ADR advanced
3.0 percent.
$60
RevPAR Annual RevPAR of $98.04 marks a minor increase from
$50 up 1.2% 2016. Maine and New Hampshire could outperform the
12 13 14 15 16
region due to the minimal impact on occupancy of their
light construction pipelines.
* Forecast Investment The availability of SBA financing in 2017 will support pur-
Sources: CoStar Group, Inc.; STR Inc.; chases of independent inns in small markets by first-time
Real Capital Analytics owners. Longtime owners will find opportunities to sell.
20
Northwest
Regions Easing RevPAR Growth

Shaping Investors Performance Outlook
Annual Occupancy
Seattle, Portland driving region, with assistance from Idaho. Elevated Market U.S.
completions in Washington, plus varying operations in Idaho, Montana, Oregon 70%

and Wyoming, will reduce occupancy in the Northwest and trim the increase
Occupancy Rate
in ADR and RevPAR from the higher levels achieved two years ago. Demand 67%
drivers remain fairly healthy in the region. A decline in room demand related to re-
64%
duced travel by natural resource businesses in Montana and Wyoming continues
to outweigh steady leisure demand in those states. Led by Seattle, growing tech 61%
employment is propelling the Washington economy, encouraging developers to
bring new hotels online to capture growing travel and room demand. Roughly 58%
13 14 15 16 17*
5,200 rooms are under construction in Seattle, representing more than half of
the regions total, and nearly 2,500 rooms are in affordably priced chain scales.
In Portland, the business demand segment continues to grow behind expanding Supply and Demand
office-using establishments. After rising to 75.7 percent last year, annual occu-
pancy in the market should advance again behind business demand and a larger
contribution from leisure visits. 8%
6%
Opportunities to transact remain in place. Statewide RevPARs have grown,
providing hotel owners the opportunity to monetize recent growth through trans- 4%
actions. Since 2011, RevPAR in Oregon has advanced more than 50 percent,
and gains in excess of 40 percent were posted in Idaho and Washington. While 2%
several recent sales provide some transparency on values in each of those states,
0%
prospective investors and lenders are likely to proceed with greater circumspec- 13 14 15 16 17*
tion this year as the rate of performance improvement eases. Accordingly, some
tempering of sellers price expectations may ensue. Properties in Seattle garner
the highest prices in the region, and investors will continue to search for busi- Full-Year Revenue Measures
ness-oriented select-service inns in dense employment hubs including Bellevue ADR RevPAR
and the South Lake Union area. $130 $90
RevPAR
$110
ADR
Supply The projected growth rate in available rooms this year $70
up 2.5% is the highest of the current cycle and exceeds the U.S.
$100 $60
forecast. Idaho and Washington have the largest pipeline
of rooms underway as a percentage of inventory. $50
$90
13 14 15 16 17*
Occupancy Room demand moderates to a 1.4 percent gain this
down 70 basis year, trailing supply growth and contributing to a drop in
points full-year occupancy to 65.1 percent. Flagged Hotel Sales
ADR Competition from new supply slows the rate of ADR in- $120
up 2.2% crease this year. Seattle, where a 3.4 percent gain was
$105
posted in 2016, will record an increase in the mid-2 per-
cent range. $90
RevPAR Led by growth in Oregon in excess of the regional in- $75

up 1.1% crease, annual RevPAR rises to $122.18 this year. A gain
of 3.9 percent occurred in 2016. $60
12 13 14 15 16
Investment Idahos favorable economic, demographic and visita-

tion trends continue to support a strong hotel market
and raise its stature among investors. Development and * Forecast
re-branding opportunities will remain a draw this year, Sources: CoStar Group, Inc.; STR Inc.;
though new supply will temper RevPAR expectations. Real Capital Analytics
21
Southwest
Arizona, Nevada Driving Regional Growth;

Utah Commands Greater Investor Attention
Annual Occupancy
Market U.S. Outlook mostly positive in 2017. The Southwest region, encompassing Ar-
70% izona, Colorado, Nevada, New Mexico and Utah, will post higher hotel occu-
pancy and growth in RevPAR greater than the projected national increase in
Occupancy Rate
67% 2017. Economic momentum in Phoenix will lead Arizona performance measures
higher, offsetting any potential impact from the delivery of 2,800 new rooms. In
64%
contrast, New Mexico faces a slightly different outlook in 2017 following a year
61% of declining occupancy and RevPAR. Hotel stays on government per diems may
restrict room revenue but a potential increase in Permian Basin drilling could lift
58% occupancy. Nevada could further establish itself as the regions best-performing
13 14 15 16 17*
market. In addition to its traditional demand drivers, the inaugural season of an
NHL franchise in Las Vegas in 2017 and the planned relocation of the NFLs
Raiders will enrich an already diverse collection of visitor attractions. In Utah,
Supply and Demand
performance on the Wasatch Front should improve behind greater inbound busi-
ness travel stemming from a robust local economy.
8%
Considerable equity and flowing debt markets sustaining investment
6%
climate. Upper midscale hotels commanded attention in the past year, espe-
4%
cially assets in Arizona and Colorado. Some well-located assets regionwide
fetched prices exceeding $100,000 per room during the period but, as state-
2% wide RevPAR growth tapers this year, investors will increasingly resist aggressive
bidding. The RevPAR gain in Arizona of 5.7 percent last year was approximately
0%
13 14 15 16 17*
one-half of the preceding years result, and additional slowing will occur in 2017
as occupancy gains subside. Declining RevPAR growth in Denver will also factor
prominently in bidding, as will new supply totaling 4,600 rooms, mostly in up-
Full-Year Revenue Measures per-upscale and upscale brands. Attention may increasingly turn to Las Vegas.
ADR RevPAR The markets constantly shifting visitor profile may favor independent-to-brand
$130 $90
conversions as a means to unlock greater performance and value potential.

RevPAR
$110
ADR
$70 Supply Nearly 6,500 additional rooms are under construction

up 1.4% than one year ago. Colorado recorded an expansion in
$100 $60
the pipeline of rooms underway due to anticipated open-
$50
ings in Denver.
$90
13 14 15 16 17*
Occupancy Economic growth remains sufficient to generate a 1.7
up 20 basis percent increase in room nights this year and raise annu-
Flagged Hotel Sales points al occupancy to 66.5 percent. Colorado and New Mex-
ico will likely post declines that will be offset by gains in
$80 the other states.
$70
ADR Competition from new hotels softens pricing power, re-
$60
up 2.7% sulting in a decrease in the rate of ADR growth from 4.9
percent last year.
$50
RevPAR Regional growth will recede from the 6.3 percent bump
$40 up 3.0% registered in 2016. In Denver, the increase will slow to
12 13 14 15 16 the low-2 percent range.
Investment Production is ramping up at a Tesla battery plant in

* Forecast northern Nevada that will eventually employ 6,500 work-
Sources: CoStar Group, Inc.; STR Inc.; ers and generate hotel stays in Reno and Carson City
Real Capital Analytics from out-of-area vendors and subcontractors.
22
Texas
Supply Growth Slows Operating Momentum;

Texas Pipeline Largest in the U.S.
Annual Occupancy
Projected drop in annual occupancy entirely the result of new hotels. Market U.S.
After 13,000 rooms came online last year, this years supply wave will mask a 70%
favorable turn in performance momentum that could generate somewhat better
Occupancy Rate
occupancy, ADR and RevPAR results than anticipated. Positive factors include 67%
the state legislative session in Austin that will provide hotel owners there an op-
64%
portunity to increase occupied rooms from last years record level. Activity has
also resumed in the Permian Basin, where drilling rigs are being placed back in 61%
service as energy companies increase spending. Returning work crews, though,
may be smaller than expected due to efficiencies gained during the downturn in 58%
13 14 15 16 17*
oil prices. Overall, energy firms in the state are increasing budgets, a develop-
ment supportive of additional energy sector travel. More broadly, Texas remains
a job-creation machine and gauges of service sector activity reveal confident
Supply and Demand
expectations of further growth in 2017. Several new office projects in Dallas, for
example, will create new sources of room demand.
8%
Investors becoming more tactical. Roughly 26,000 rooms are planned in
6%
the state, predominantly in areas other than Dallas and Houston. Due diligence
periods are likely to extend this year as investors devote more time to fully un- 4%
derstanding impending new supply, especially in Dallas, where supply growth
will exceed demand at some point. In addition, the proliferation of new hotels 2%
across the state potentially limits rebranding options for investors, a commonly
0%
employed tactic. Within specific metros, Austin and Dallas will continue to elicit 13 14 15 16 17*
investor interest for their multiple demand drivers. Property owners in Houston,
where transactions fell last year, will have new opportunities to rebuild property
performance as the economy gains momentum. Assets in several areas, includ- Full-Year Revenue Measures
ing the Medical Center, remain a constant draw. In San Antonio, many longtime ADR RevPAR
owners of limited-service properties will seek exits through transactions. $110 $70
RevPAR
$100
ADR
Supply Dallas, with 7,100 rooms under construction, and Hous- $50
up 3.4% ton, with 4,700 rooms underway, account for a sizable

$95 $40
portion of the 26,000 rooms under construction state-
wide this year, an increase from one year ago. $30
$90
13 14 15 16 17*
Occupancy A modest economic upswing in Houston contributes to
down 150 basis a 1.0 percent rise in occupied rooms in 2017, besting
points last years 0.3 percent rise. Supply growth, however, will Flagged Hotel Sales
push down annual occupancy to 61.5 percent.
$110
$95
ADR Hosting the Super Bowl in Houston contributes to a
up 1.0% slight increase in the statewide ADR in 2017 after a virtu- $80
ally flat performance last year.
$65
RevPAR Dallas stands the best chance of bucking the statewide
down 0.6% trend but will nonetheless post a slower rate of growth $50
than last years 5.7 percent jump. San Antonio also posts 12 13 14 15 16
a slender gain.
Investment The Wolfgang Shale is a new discovery of oil and gas * Forecast
reserves in the Permian Basin. Efforts to develop the field Sources: CoStar Group, Inc.; STR Inc.;
could lead to the deployment of new work crews that will Real Capital Analytics
require temporary accommodations.
23
Upper Midwest
Occupancy Drop Expected;

RevPAR Moderates in Upper Midwest Region
Annual Occupancy
Market U.S. Occupancy under pressure. Room demand will grow behind expanding state
70% economies and interstate travel, but the delivery of thousands of new rooms will
reduce annual occupancy for a second consecutive year in the Upper Midwest
Occupancy Rate
67% region. A wide array of performance outcomes are likely this year as Illinois,
Iowa, Minnesota, Nebraska, the Dakotas and Wisconsin are at different points
64%
in their economic cycles. The challenges for hotels in the energy region of North
61% Dakota are chronicled in a performance downturn over the past two years, but
the Minnesota economy is highly functioning, generating new room demand.
58% Behind employment gains, commercial property sectors in the largest metros
13 14 15 16 17*
are doing well. Office vacancy in the Twin Cities, for example, sits near a cycle
low. Statewide RevPAR in Illinois declined last year, though Chicago posted a
Supply and Demand nominal gain. Pressure on RevPAR in the metro will persist this year, as more
than 3,000 rooms are slated to come online. A projected increase in convention
attendance will help absorb the new supply.
8%
Transaction cycle at a new juncture. RevPAR growth is slowing, prompting

6%
owners and investors to increasingly engage new strategies intended to either
4% preserve existing asset performance or realize new upside opportunities. Fore-
most, owners and investors will seek to push ADR more assertively to maintain
2% or enhance RevPAR or, as an alternative, unlock an assets untapped potential by
capturing a greater share of a specific market. Transactions, though, may prove
0%
13 14 15 16 17* somewhat challenging to complete in early 2017 as higher borrowing costs and
tapering performance improvements create potential disparities in price expec-
tations. An abundance of deals in the past few years provides a starting point to
Full-Year Revenue Measures find middle ground. In the large markets, Minneapolis-St. Paul has long been a
ADR RevPAR buy-and-hold market, but high deal volume signals a period of elevated liquidity
$130 $80 that will encourage additional owners to test the market in 2017.

RevPAR
$110
ADR
$60
Supply Roughly 11,000 rooms are under construction in the re-
up 2.0% gion, including more than 3,000 rooms in Chicago alone.
$100 $50
The pipeline in Minnesota is shrinking, however.
$90 $40
13 14 15 16 17*
Occupancy Full-year occupancy drops for a second consecutive
down 70 basis year, to 60.3 percent. Minnesota appears best posi-
Flagged Hotel Sales points tioned to counter the regional trend, while new stock is
yet to be fully absorbed in North Dakota.
$70
ADR Competition from new supply continues to hinder pricing

$60
up 2.1% power, yielding a slower rate of growth in ADR during
$50 2017 on the heels of last years 2.6 percent gain.
$40 RevPAR Nominal RevPAR growth leaves little cushion to absorb

up 0.9% unexpected shocks to travel volume. Minnesota, South
$30 Dakota and Wisconsin appear best able to absorb a
12 13 14 15 16
sudden downturn.
Investment Legacy owners of flagged limited-service hotels will in-

* Forecast creasingly leverage the heightened level of investor in-
Sources: CoStar Group, Inc.; STR Inc.; terest to make deals and potentially redeploy capital into
Real Capital Analytics more passive, less management-intensive assets.
24
Washington Region
Market Likely to Retain Strength in 2017;

Investors Widen Search for Upside Opportunities
Annual Occupancy
Primary performance metrics positioned to improve. The Washington Re- Market U.S.
gion hotel market, consisting of properties in the District of Columbia, Maryland, 70%
Virginia and West Virginia, offers sufficiently strong room demand drivers to enable
Occupancy Rate
property owners to augment room revenues in 2017. Occupied rooms in Maryland 67%
and Virginia will expand behind growing employment that will generate addition-
64%
al business travel and a steady flow of visitors to tourist destinations during the
warm-weather months. Only West Virginia will counter the regional trend, as the 61%
states economy remains hobbled by weakness in its natural resources-dependent
industries. In the District proper, the construction pipeline sits roughly on par with 58%
13 14 15 16 17*
last years, when completions increased available rooms about 2 percent. Over the
entire metro area, the planned and potential moves of some federal agencies are
likely to augment demand drivers at the new locations or possibly shift the atten- Supply and Demand
tion of developers to sites in underserved areas.
Transaction market moves into new phase. Deals were virtually flat last year, 9%
but dollar volume rose behind sales of additional full-service hotels in the District.
6%
Overall, the waning rate of regional RevPAR growth, from more than 6 percent
in 2014 to about 2 percent last year, demands an intensified effort to identify po- 3%
tential upsides. For investors in limited- and select-service hotels, opportunities
may arise during 2017 in changing guest mixes to include more leisure travel 0%
and balancing exposure to government and business demand subject to travel
-3%
per diems. Per diems have historically suppressed ADR growth in the Wash- 13 14 15 16 17*
ington, D.C., metro. Recent construction of select-service inns may also reveal
downbranding opportunities for older properties. For specific markets and loca-
tions, a majority of deals are executed outside of the Washington, D.C., metro, Full-Year Revenue Measures
in secondary markets and highway locations. Properly priced assets with solid ADR RevPAR
franchise affiliations and branding options will capture attention. $130 $90
RevPAR
$120
ADR
$70
Supply Select-service hotels dominate a pipeline composed of
up 1.3% more than 6,800 rooms and drives a nominal increase in
$115 $60
available rooms from last years 1.2 percent expansion.
Under-construction pipelines in Maryland and Virginia $110 $50
rose by an aggregate 1,200 rooms from one year ago. 13 14 15 16 17*
Occupancy The projected increase this year is minor but will lift the
up 10 basis annual occupancy rate to 64.9 percent. An increase of Flagged Hotel Sales
points 90 basis points was recorded in 2016, led by a gain in
Virginia. A decline was posted in West Virginia. $80
$70
ADR Following a large swell early in the year related to Wash-
up 2.4% ington, D.C., hosting the presidential inauguration, ADR $60
growth will moderate before posting an increase slightly
exceeding last years pace. $50
RevPAR Contributions from occupancy and ADR support an in- $40

12 13 14 15 16
up 2.6% crease in RevPAR in 2017. A gain of 3.6 percent was
recorded last year.
Investment Interest persists in hotels serving any of the Washing- * Forecast

ton metros three major airports for their relatively stable Sources: CoStar Group, Inc.; STR Inc.;
operating histories. Select-service properties remain pri- Real Capital Analytics
mary targets.
25
Office Locations
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151 Meeting Street
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Atlanta, GA 30328
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Austin, TX 78731
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Baltimore, MD 21202 Ryan Nee
(443) 703-5000 Cincinnati Long Beach
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10th Floor 300 Throckmorton Street Suite 2100
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10527 Kentshire Court (513) 878-7700 Fort Worth, TX 76102 (562) 257-1200
Suite B Michael L. Glass (817) 932-6100 Damon Wyler
Baton Rouge, LA 70810 Kyle Palmer
(225) 376-6800 Cleveland Los Angeles
Jody McKibben 5005 Rockside Road Fresno 515 S. Flower Street
Suite 1100 8050 N. Palm Avenue Suite 500
Birmingham Independence, OH 44131 Suite 108 Los Angeles, CA 90071
The Steiner Building (216) 264-2000 Fresno, CA 93711 (213) 943-1800
15 Richard Arrington Jr. Michael L. Glass (559) 476-5600 Enrique Wong
Boulevard North James B. Markel
Suite 300 Columbia Louisville
Birmingham, AL 35203 1320 Main Street Greensboro 9300 Shelbyville Road
(205) 510-9200 Suite 300 324 S. Elm Street Suite 1012
Jody McKibben Columbia, SC 29201 Suite 300 Louisville, KY 40222
(803) 678-4900 Greensboro, NC 27401 (502) 329-5900
Boise Raj Ravi (336) 450-4600 Richard Matricaria
800 W. Main Street Raj Ravi
Suite 1460 Columbus Manhattan
Boise, ID 83702 230 West Street Hampton Roads 260 Madison Avenue,
(208) 401-9321 Suite 100 999 Waterside Drive Fifth Floor
Richard A. Bird Columbus, OH 43215 Suite 2525 New York, NY 10016
(614) 360-9800 Norfolk, VA 23510 (212) 430-5100
Boston Michael L. Glass (757) 777-3737 John Krueger
100 High Street Raj Ravi
Suite 1025 Corpus Christi Memphis
Boston, MA 02110 15217 S. Padre Island Drive Houston 5100 Poplar Avenue
(617) 896-7200 Suite 203 3 Riverway Suite 2505
Tim Thompson Corpus Christi, TX 78418 Suite 800 Memphis, TN 38137
(361) 949-3300 Houston, TX 77056 (901) 620-3600
Brooklyn J. Michael Watson (713) 452-4200 Jody McKibben
16 Court Street David H. Luther
Floor 2A Miami
Brooklyn, NY 11241 Indianapolis 5201 Blue Lagoon Drive
(718) 475-4300 600 E. 96th Street, Suite 500 Suite 100
John Horowitz Indianapolis, IN 46240 Miami, FL 33126
(317) 218-5300 (786) 522-7000
Josh Caruana Kirk A. Felici
26
Office Locations
Milwaukee Ontario Reno Ventura

13890 Bishops Drive One Lakeshore Center 241 Ridge Street 2775 N. Ventura Road
Suite 300 3281 E. Guasti Road Suite 200 Suite 101
Brookfield, WI 53005 Suite 800 Reno, NV 89501 Oxnard, CA 93036
(262) 364-1900 Ontario, CA 91761 (775) 348-5200 (805) 351-7200
Todd Lindblom (909) 456-3400 Ryan DeMar James B. Markel
Cody Cannon
Minneapolis Sacramento Washington, D.C.
1350 Lagoon Avenue Orlando 3741 Douglas Boulevard 7200 Wisconsin Avenue
Suite 840 300 South Orange Avenue Suite 200 Suite 1101
Minneapolis, MN 55408 Suite 700 Roseville, CA 95661 Bethesda, MD 20814
(952) 852-9700 Orlando, FL 32801 (916) 724-1400 (202) 536-3700
Craig Patterson (407) 557-3800 Ryan DeMar Bryn Merrey
Justin West
Mobile Salt Lake City West Los Angeles
Pelican Square Palm Springs 36 South State Street 12100 W. Olympic Boulevard
101 Lottie Lane 777 E. Tahquitz Canyon Way Suite 2650 Suite 350
Suite 3 Suite 200-27 Salt Lake City, UT 84111 Los Angeles, CA 90064
Fairhope, AL 36532 Palm Springs, CA 92262 (801) 736-2600 (310) 909-5500
(251) 929-7300 (909) 456-3400 Gary K. Mangum Tony Solomon
Jody McKibben Cody Cannon
San Antonio Westchester
Nashville Palo Alto 8200 IH-10 W 50 Main Street
6 Cadillac Drive 2626 Hanover Street Suite 603 Suite 925
Suite 100 Palo Alto, CA 94304 San Antonio, TX 78230 White Plains, NY 10606
Brentwood, TN 37027 (650) 391-1700 (210) 343-7800 (914) 220-9730
(615) 997-2900 Steven J. Seligman J. Michael Watson John Krueger
Jody McKibben
Philadelphia San Diego The Woodlands
New Haven 2005 Market Street 4660 La Jolla Village Drive 1450 Lake Robbins Drive
265 Church Street Suite 1510 Suite 900 Suite 300
Suite 210 Philadelphia, PA 19103 San Diego, CA 92122 The Woodlands, TX 77380
New Haven, CT 06510 (215) 531-7000 (858) 373-3100 (832) 442-2800
(203) 672-3300 Brenton Baskin John Vorsheck David H. Luther
J.D. Parker
Phoenix San Francisco Wynnewood
New Jersey 2398 E. Camelback Road 750 Battery Street 308 E. Lancaster Avenue
250 Pehle Avenue Suite 550 Fifth Floor Third Floor
Suite 501 Phoenix, AZ 85016 San Francisco, CA 94111 Wynnewood, PA 19096
Saddle Brook, NJ 07663 (602) 687-6700 (415) 963-3000 (215) 531-7000
(201) 742-6100 Ryan Sarbinoff Jeffrey M. Mishkin Brenton Baskin
Brian Hosey
Pittsburgh Seattle
New Mexico 204 Fifth Avenue Two Union Square Canada
5600 Eubank Boulevard NE Suite 502 601 Union Street
Calgary
Suite 200 Pittsburgh, PA 15222 Suite 2710
602-16 Ave. NW
Albuquerque, NM 87111 (412) 360-7777 Seattle, WA 98101
Suite 211
(505) 445-6333 Brenton Baskin (206) 826-5700
Calgary, AB T2M 0J7
J. Michael Watson Joel Deis
(587) 349-1302
Portland
Rene H. Palsenbarg
Newport Beach 111 S.W. Fifth Avenue St. Louis
19800 MacArthur Boulevard Suite 1550 7800 Forsyth Boulevard
Ottawa
Suite 150 Portland, OR 97204 Suite 710
343 Preston Street
Irvine, CA 92612 (503) 200-2000 St. Louis, MO 63105
Suite 1142
(949) 419-3200 Adam Lewis (314) 889-2500
Ottawa, ON K1S 1N4
Robert Osbrink Richard Matricaria
(343) 291-1018
Raleigh
Mark A. Paterson
Oakland 101 J Morris Commons Lane Tampa
555 12th Street Suite 130 4030 W. Boy Scout Boulevard
Toronto
Suite 1750 Morrisville, NC 27560 Suite 850
20 Queen Street W
Oakland, CA 94607 (919) 674-1100 Tampa, FL 33607
Suite 2300
(510) 379-1200 Raj Ravi (813) 387-4700
Toronto, ON M5H 3R3
Kent R. Williams Ari Ravi
(416) 585-4646
Richmond
Mark A. Paterson
Oklahoma City 4870 Sadler Road Tulsa
101 Park Avenue Suite 300 7633 East 63rd Place
Vancouver
Suite 1300 Glen Allen, VA 23060 Suite 300
400 Burrard Street
Oklahoma City, OK 73102 (804) 205-5008 Tulsa, OK 74133
Suite 1020
(405) 446-8238 Raj Ravi (918) 294-6300
Vancouver, BC V6C 3A6
J. Michael Watson J. Michael Watson
(604) 675-5200
Rene H. Palsenbarg
27
2017 U.S. Hospitality Investment Forecast
National Hospitality Group Media Contact:

Peter Nichols | National Director Gina Relva | Public Relations Manager
(212) 430-5100 | peter.nichols@marcusmillichap.com 2999 Oak Road, Suite 210
Walnut Creek, CA 94597
(925) 953-1716 | gina.relva@marcusmillichap.com
Written and Edited by:
John Chang | First Vice President, Research Services Senior Management Team
Art Gering | Senior Hospitality Analyst
Hessam Nadji | President and Chief Executive Officer
(818) 212-2250 | hessam.nadji@marcusmillichap.com
National Research Team Mitchell R. LaBar | Executive Vice President, Chief Operating Officer
John Chang | First Vice President, Research Services (818) 212-2250 | hessam.nadji@marcusmillichap.com
Jay Lybik | Vice President, Research Services
James Reeves | National Production Manager William E. Hughes | Senior Vice President
Peter Tindall | Director of Research Data & Analytics Marcus & Millichap Capital Corporation
Tamarah Calderon | Research Administrator (949) 419-3200 | william.hughes@marcusmillichap.com
Connor Devereux | Research Analyst
Maria Erofeeva | Graphic Designer Gregory A. LaBerge | First Vice President, Chief Administrative Officer
Rossetti Farrell | Data Analyst (818) 212-2250| gregory.laberge@marcusmillichap.com
Marette Flora | Senior Copy Editor
Art Gering | Senior Analyst Martin E. Louie | Senior Vice President, Chief Financial Officer
Jessica Hill | Market Analyst (818) 212-2250 | marty.louie@marcusmillichap.com
Gregory Leight | Research Associate
Aaron Martens | Research Analyst Adam P. Christofferson
Adrian Mayron | Data Analyst Senior Vice President, Division Manager, Southern California Division
Michael Murphy | Research Associate (818) 212-2700 | adam.christofferson@marcusmillichap.com
Mridul Nanda | Research Analyst
Richard Matricaria | First Vice President, Division Manager, Midwest Division
Nancy Olmsted | Senior Market Analyst
(312) 327-5400 | richard.matricaria@marcusmillichap.com
Spencer Ryan | Data Analyst
Catherine Zelkowski | Research Associate
Bryn Merrey
Senior Vice President, Division Manager, Mid-Atlantic/Southeast Division
(650) 391-1700 | bryn.merrey@marcusmillichap.com
Communications/Graphic Design
Paul Mudrich | Senior Vice President, Chief Legal Officer
Michelle Cocagne | Senior Vice President, Communications
(650) 391-1700 | paul.mudrich@marcusmillichap.com
J.D. Parker | Senior Vice President, Division Manager, Northeast Division

Contact: (212) 430-5100 | j.d.parker@marcusmillichap.com
John Chang | First Vice President, Research Services
Alan L. Pontius | Senior Vice President, National Director, Specialty Divisions
2398 E. Camelback Road, Suite 550
(415) 963-3000 | alan.pontius@marcusmillichap.com
Phoenix, Arizona 85016
(602) 687-6700 | john.chang@marcusmillichap.com
Kent R. Williams | Senior Vice President, Division Manager, Western Division
(858) 373-3100 | kent.williams@marcusmillichap.com
Statistical Summary Note: Hotel chain scale definitions are based on information available as of December 2016. Average prices and cap rates are a function of
the age, type and geographic area of the properties trading and therefore may not be representative of the market as a whole. No representation, warranty or
guarantee, express or implied may be made as to the accuracy or reliability of the information contained herein. This is not intended to be a forecast of future events
and this is not a guaranty regarding a future event. This is not intended to provide specific investment advice and should not be considered as investment advice.
Sources: Marcus & Millichap Research Services, AH&LA, Bureau of Economic Analysis, CoStar Group, Inc., Federal Reserve, Moodys Analytics, PKF Hospitality,
Real Capital Analytics, STR Inc., Trepp, U.S. Bureau of Labor Statistics, U.S. Census Bureau, U.S. Treasury Department.
Marcus & Millichap 2017
28
Research Services
Research Services
Marcus & Millichaps Research Services group utilizes a two-tiered approach of combining local market research with national economic
and real estate analysis to develop premier research services for real estate investors. Marcus & Millichaps research capabilities are
customized by property type to service the unique needs of owners and investors in various property sectors. National, statewide and
multi-state region reports are produced on a regular basis.
Fact-Based Investment Strategies
Hospitality Demand Analysis

Extensive analyses are performed, including studies of demographics, employment, air traffic, tourism, established room demand
drivers and commercial property trends. Customized maps and graphs are produced for state, metro and property-level comparisons.
Comprehensive economic analyses and forecasts are produced based on data provided by respected private, academic and gov-
ernment sources. Indicators such as job formation, growth by industry, major employers and income trends are monitored constantly.
Hospitality Property Analysis

Marcus & Millichap Research Services routinely updates and analyzes occupancy, ADR, RevPAR, sales and construction activity
locally and nationally.
Customized Research and Consulting Services

In addition to hospitality publications and reports, we provide customized market studies, property and portfolio analysis, and devel-
opment feasibility studies. These services are designed to help clients formulate strategies ranging from acquisitions and dispositions
to maximizing returns during the hold period.
29
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2017 Hospitality Investment Forecast

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U.S.

HOSPITALITY INVESTMENT FORECAST

IN-DEPTH LOCAL NATIONAL INDUSTRY-FOCUSED

Hospitality Demand and Performance

Investment Activity and Capital Markets

Hospitality 2017 Outlook

Economic Growth Prospects Positive,

The promise of a faster pace of economic growth looms large in the

nomic expansion. An increase in consumer spending should generate GDP

More Full Rooms, Higher Revenue Measures

Occupied Rooms (millions)

to 2.8 percent and yield a 2.4 percent rise in RevPAR. $40

Liquidity Persists in Debt Marketplace,

10 years. Moderating rates of growth in occupancy and RevPAR, though, re-

Shift in Cycles Momentum, Higher Interest Rates

2017 Investment Outlook $0 $20 $40

though, may not occur until 2018.

capital infusions or different management strategies remain in 2017.

2017-18 Completions Mark Cycle Peak

Pennsylvania 5,970 4.2%

Home2 Suites Construction pipeline tapers

Supply Wave Finally Hits California,

$150 $120 2017 Market Forecast

$100 Supply Approximately 19,000 rooms are under construction

Investment New flagged properties coming online will pressure older

Carolina Hotels Shined Brightly in 2016,

2017 Market Forecast $105 $70

up 2.0% region, primarily in North Carolina. An additional 3,600

up 2.9% er high-occupancy nights from hosting major events will $100

moderate the increase in the regional ADR during 2017.

RevPAR With a slight contribution from occupancy and additional $40

Investment Moderating RevPAR growth and an expanding con-

RevPAR Growth Easing in Region;

$105 $55 2017 Market Forecast

$50 Supply Led by a relatively large volume of rooms under con-

Occupancy Room demand increases from last years tepid increase

Investment Investors targeting select-service properties may focus

Supply Growth Weighs on Occupancy

contribute to a decline in annual occupancy in Florida and a further moderation 80%

2017 Market Forecast $140 $90

Supply A portion of the 13,400 rooms under construction state- $80

Occupancy Room demand growth of 1.5 percent marks an increase

ADR The increase in ADR in Florida also exceeds last years

RevPAR After recording a double-digit rise in 2014, the statewide $45

Investment Properties in South Florida could outperform in 2017

Georgia RevPAR Gain Exceeds U.S. Pace,

$100 $60 2017 Market Forecast

ADR Supply growth likely reduces the number of high-occu-

Investment Savannah, an up-and-coming leisure destination, will

New Hotels Arriving in Gulf Region,

2017 Market Forecast $95 $55

ADR The regional ADR rises nominally in 2017; a potential re-

Investment Some potential opportunities remain largely overlooked.

At Late Stage of Cycle, Hotel Stock Grows

$130 $75 2017 Market Forecast

$70 Supply Approximately 9,300 rooms are under construction, an

ADR This years projected rate of ADR growth eases from

Investment Commercial development in Pittsburgh will continue to

Nashville Market Prime Driver

2017 Market Forecast $110 $60

Investment The moderating rate of RevPAR growth will motivate

Thousands of New Rooms on the Way,

75% occupancy in Manhattan to approximately 87 percent. Business travel volume

Market liquidity persists. In the city, the greatest downward pressure on