Hvs market study final - proposed hotel - flower mound tx - 05 31 11

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Hvs market study final - proposed hotel - flower mound tx - 05 31 11

  1. 1. MARKET STUDY Proposed Select-Service Hotel FLOWER MOUND, TEXAS SUBMITTED TO: PROPOSED PREPARED BY: Ms. Melissa Glasgow HVS Consulting and Valuation Services Flower Mound Economic Development Division of DFW Hospitality Consulting, LLC 2121 Cross Timbers Road 2601 Sagebrush Drive, Suite 101 Flower Mound, Texas, 75028 Flower Mound, Texas 75028 +1 972 874-6045 +1 972 899-5400May-2011
  2. 2. May 2, 2011 Ms. Melissa Glasgow Flower Mound Economic Development 2121 Cross Timbers Road Flower Mound, Texas, 75028 Re: Proposed Select-Service Hotel Flower Mound, Texas HVS Reference: 20110204672601 Sagebrush Drive, Suite 101Flower Mound, Texas 75028 Dear Ms. Glasgow:+1 972 899-5400+1 972 899-1057 FAX Pursuant to your request, we herewith submit our market study pertaining to thewww.hvs.com above-captioned property. We have inspected the real estate and analyzed the hotel market conditions in the Flower Mound, Texas area. We have studied the proposed project, and the results of our fieldwork and analysis are presented inAtlanta this report. We have also reviewed the proposed improvements for this site. OurBoston report was prepared in accordance with the Uniform Standards of ProfessionalBoulder Appraisal Practice (USPAP), as provided by the Appraisal Foundation.ChicagoDallas We hereby certify that we have no undisclosed interest in the property, and ourDenver employment and compensation are not contingent upon our findings. This study isLas Vegas subject to the comments made throughout this report and to all assumptions andMexico City limiting conditions set forth herein.MiamiNassauNew York Sincerely,Newport DFW Hospitality Consulting, LLCSan FranciscoTorontoVancouverWashingtonAthensBuenos AiresDubai Kathleen D. Donahue, Senior Project ManagerHong KongLima kdonahue@hvs.com, +1 972 890-3548LondonMadridMumbaiNew DelhiSao PauloShanghaiSingaporeSpecialists in Hotel Consulting andAppraisal Worldwide
  3. 3. Table of Contents SECTION TITLE PAGE 1. Executive Summary 1 2. Description of the Site and Neighborhood 11 3. Market Area Analysis 22 4. Supply and Demand Analysis 45 5. Description of the Proposed Project 74 6. Projection of Occupancy and Average Rate 79 7. Projection of Income and Expense 88 8. Statement of Assumptions and Limiting Conditions 109 9. Certification 112 Addenda Penetration Explanation i The Nielsen Company Demographic Snapshot ii Qualifications
  4. 4. 1. Executive SummarySubject of the The subject of the market study is a select-service lodging facility; the hotel isMarket Study expected to be affiliated with a nationally-franchised brand. The property is expected to open on January 1, 2013 and is expected to feature 130 rooms, a breakfast dining area, lobby café and lounge, 3,500 square feet of meeting space, a pool, a whirlpool, an exercise room, a guest laundry facility, a business center, a market pantry, and ice machine areas. The hotel will also feature all necessary back-of-the-house space. The proposed subject property is expected to be located within the Lakeside Business District, Flower Mounds commercial district located at the south end of Town. At the time of this study, a specific parcel of land had not been determined for the hotel site. At the request of our client, The Town of Flower Mound, we have analyzed two primary areas, the River Walk at Central Park development and the Lakeside Business District. Following analysis of both areas, our study recommends and assumes the Lakeside Business District is more suited for hotel development. Primary support for this recommendation include: • Proximity to Dallas/Fort Worth International Airport • Proximity to Lake Grapevine Shoreline • Nearby concentration of corporations • Easy access to State Highway 121 and Grapevine Mills outlet mall and surrounding uses While we have recommended the Lakeside Business District for this study, it is important to note that the River Walk at Central Park development area is expanding with medical and residential development and would also be suited for hotel use. Overall, it is our opinion a developer would choose to maximize the corporate focus of the Lakeside Business Distinct and the proximity to airport. As Flower Mound continues to grow and is recognized as a lodging market choice, it is our opinion additional hotel development will be dispersed throughout other areas of the Town. Furthermore, a specific brand was not identified by our client as the subject of our study. After a review of the market supply, we have recommended a first-class, select-service hotel facility. Given the similarly in scope of facilities and amenitiesMay-2011 Executive Summary Proposed Select-Service Hotel – Flower Mound, Texas 1
  5. 5. in nationally affiliated select-service brands, it is our opinion that the identification of one particular brand is not pertinent to our study. The subject site’s location is in or near the Lakeside Business District in Flower Mound, Texas.Pertinent Dates The effective date of the report is May 2, 2011.Ownership, Franchise, At the time of this study, the developer or specific site had yet to be determined.and Management The purpose of this report is to allow the Town of Flower Mound to review theAssumptions potential performance of a lodging property in the Town and assist in the attraction of developers. The Town will have no interest in the development of the property other than potential incentives. Given the preliminary stage of the potential development project, we have devised certain assumptions illustrated in this report pertaining to the location of the subject site, as well as to the scope of the potential proposed hotel facility. We assume that the proposed subject hotel will be managed by a professional management company that is experienced in the operation of first-class, branded, select-service hotels. Our findings and this study are based on the potential development and future operation of a first-class, select-service hotel facility. Brands within this tier include hotels such as Hyatt Place (Hyatt), Cambria Suites (Choice Hotels), and Courtyard by Marriott (Marriott International), among others. We note the potential brand would be subject to location and impact analysis of the franchisor if the brand is already represented in the greater market. The management team had not been selected as of the date of this study; therefore, details pertaining to management terms had yet to be determined. We have assumed a market-appropriate total management fee of 3.0% of total revenues in our study. We recommend that the proposed subject property be developed and operate as a first-class, select-service hotel. A specific franchise affiliation has yet to be selected. First-class, select-service products generally encompass similar facility programs including limited food and beverage operations, meeting space, and ancillary facilities. Based on expected terms, a nationally-franchised hotel is reflected in our forecasts with a royalty fee of 5% of rooms revenue, and a marketing assessment of 3% of rooms revenue. Reservations fees will also be due, and are included in the rooms expense line item of our forecast.Summary of Hotel The north-central Dallas/Fort Worth Metroplex area encompasses theMarket Trends communities of Grapevine, Flower Mound, and Lewisville, among others, offering recreational opportunities, hotels, restaurants, and retail centers. The collective market area is ideally located adjacent to the northern entrance of the Dallas/Fort Worth International Airport. Occupancy in this area increased from 2003 through 2005 as a result of an increase in corporate travel to the area. Furthermore, theMay-2011 Executive Summary Proposed Select-Service Hotel – Flower Mound, Texas 2
  6. 6. Gaylord Texan opened in the spring of 2004 and began to generate a significant amount of overflow demand for the Grapevine hotel market during its ramp-up period. Demand experienced a correction from October 2008 through October 2009, concurrent with the corporate-travel restrictions that were put into place during this time. Furthermore, overflow demand from the Gaylord minimized during this period, as group travel to that facility slowed. Demand levels have now exceeded the historic high as most travel restrictions have been lifted, the Gaylord is experiencing strong results, and the Dallas/Fort Worth area is seen as a value- driven, business-focused and appropriate destination for travel in the current economic climate. The following table provides a long-term perspective on the supply and demand trends for a selected set of hotels, as provided by Smith Travel Research.FIGURE 1-1 HISTORICAL SUPPLY AND DEMAND TRENDS (STR) Average Daily Available Room Occupied Room Average Year Room Count Nights Change Nights Change Occupancy Rate Change RevPAR Change 2002 511 186,515 — 100,555 — 53.9 % $87.44 — $47.14 — 2003 511 186,515 0.0 % 111,330 10.7 % 59.7 81.11 (7.2) % 48.42 2.7 % 2004 511 186,515 0.0 123,564 11.0 66.2 85.11 4.9 56.39 16.5 2005 663 241,979 29.7 162,443 31.5 67.1 95.61 12.3 64.18 13.8 2006 718 262,070 8.3 185,610 14.3 70.8 106.23 11.1 75.24 17.2 2007 787 287,315 9.6 195,733 5.5 68.1 115.77 9.0 78.87 4.8 2008 883 322,295 12.2 205,414 4.9 63.7 118.60 2.4 75.59 (4.2) 2009 883 322,295 0.0 187,582 (8.7) 58.2 104.30 (12.1) 60.70 (19.7) Year-to-Date Through June 2009 1,781 322,295 — 187,582 — 58.2 % $104.30 — $60.70 — 2010 1,905 344,765 7.0 % 221,852 18.3 % 64.3 95.08 (8.8) % 61.18 0.8 % Average Annual Compounded Change: 2002-2009 8.1 % 9.3 % 2.6 % 3.7 % Number Year Year Hotels Included in Sample of Rooms Affiliated Opened Fairfield Inn & Suites DFW Airport N Grapevine 80 Aug-04 Jul 1998 Hyatt Place Dallas Grapevine 125 Feb-08 Jan 2000 Hampton Inn Suites DFW Airport North Grapevine 94 Dec-00 Dec 2000 Courtyard Dallas Lewisville 122 Mar-01 Mar 2001 Holiday Inn Express & Suites Dallas Lewisville 90 Jun-06 Oct 2001 Comfort Suites Dallas Fort Worth Airport N 96 Jan-05 Jan 2005 Springhill Suites DFW Airport North Grapevine 111 Jul-05 Jul 2005 Hilton Garden Inn Dallas Lewisville 165 Aug-07 Aug 2007 Hampton Inn Suites Dallas Lewisville Vista Ridge Mall 105 Jun-10 Jun 2010 Total 988 Source: Smith Travel ResearchMay-2011 Executive Summary Proposed Select-Service Hotel – Flower Mound, Texas 3
  7. 7. The following tables reflect our estimates of operating data for hotels on an individual basis. These trends are presented in greater detail in the Supply and Demand Analysis chapter of this report.May-2011 Executive Summary Proposed Select-Service Hotel – Flower Mound, Texas 4
  8. 8. FIGURE 1-2 PRIMARY COMPETITORS – OPERATING PERFORMANCE Est. Segmentation Estimated 2008 Estimated 2009 Estimated 2010 Weighted Weighted Weighted nd l ercia Annual Annual Annual ing a p Grou re Number Room Average Room Average Room Average RevPAR Occupancy Yield Comm M eet Leisu Property of Rooms Count Occ. Rate RevPAR Count Occ. Rate RevPAR Count Occ. Rate RevPAR Change Penetration Penetration Hyatt Place Grapevine 125 65 % 15 % 20 % 125 60 % $121.00 $72.60 125 62 % $105.00 $65.10 125 80 % $86.00 $68.80 5.7 % 119.9 % 106.4 % Hampton Inn & Suites Dallas DFW Airport North Grapevine 94 65 15 20 94 67 154.00 103.18 94 60 127.00 76.20 94 76 114.00 86.64 13.7 113.9 134.0 SpringHill Suites Grapevine DFW Airport North 111 80 5 15 111 67 133.00 89.11 111 54 117.00 63.18 111 64 107.00 68.48 8.4 95.9 105.9 Fairfield Inn & Suites Grapevine DFW Airport North 80 70 5 25 80 67 133.00 89.11 80 54 117.00 63.18 80 64 107.00 68.48 8.4 95.9 105.9 Comfort Suites Grapevine 96 70 5 25 96 62 112.00 69.44 96 50 95.00 47.50 96 67 82.00 54.94 15.7 100.4 85.0 Sub-Totals/Averages 506 70 % 10 % 21 % 506 64.3 % $130.46 $83.91 506 56.3 % $112.01 $63.10 506 70.8 % $98.04 $69.36 9.9 % 106.0 % 107.3 % Secondary Competitors 482 57 % 11 % 32 % 238 62.8 % $102.54 $64.37 238 60.7 % $95.15 $57.77 282 59.5 % $94.33 $56.15 (2.8) % 89.2 % 86.9 % Totals/Averages 988 65 % 10 % 24 % 744 63.8 % $121.66 $77.65 744 57.7 % $106.33 $61.39 788 66.7 % $96.85 $64.64 5.3 % 100.0 % 100.0 %FIGURE 1-3 SECONDARY COMPETITORS – OPERATING PERFORMANCE Est. Segmentation Estimated 2008 Estimated 2009 Estimated 2010 nd Weighted Weighted Weighted l ercia Total Annual Annual Annual ing a p Gr ou re Number Competitive Room Average Room Average Room Average Comm Me e t Leisu Property of Rooms Level Count Occ. Rate RevPAR Count Occ. Rate RevPAR Count Occ. Rate RevPAR Courtyard Dallas Lewisville 122 65 % 5 % 30 % 70 % 85 63 % $99.00 $62.37 85 62 % $90.00 $55.80 85 60 % $90.00 $54.00 Hilton Garden Inn Dallas Lewisville 165 50 20 30 60 99 63 115.00 72.45 99 60 108.00 64.80 99 67 105.00 70.35 Holiday Inn Express Dallas Lewisville 90 55 5 40 60 54 62 85.00 52.70 54 60 80.00 48.00 54 60 85.00 51.00 Hampton Inn Suites Dallas Lewisville Vista Ridge Mall 105 60 5 35 70 0 0 0.00 0.00 0 0 0.00 0.00 43 41 84.00 34.44 Totals/Averages 482 57 % 11 % 32 % 65 % 238 62.8 % $102.54 $64.37 238 60.7 % $95.15 $57.77 282 59.5 % $94.33 $56.15May-2011 Executive Summary Proposed Select-Service Hotel – Flower Mound, Texas 5
  9. 9. Summary of Forecast Based on our analysis presented in the Projection of Occupancy and Average RateOccupancy and chapter, we have chosen to use a stabilized occupancy level of 70% and a base-Average Rate year rate position of $100.00 for the proposed subject property. The following table reflects a summary of our market-wide and proposed subject property occupancy and average rate projections.FIGURE 1-4 MARKET AND SUBJECT PROPERTY AVERAGE RATE FORECAST Area-wide Market (Calendar Year) Subject Property (Calendar Year) Average Rate Average Average Rate Average Average Rate Year Occupancy Growth Rate Occupancy Growth Rate Penetration Base Year 66.7 % — $96.85 — — $100.00 103.2 % 2011 69.0 -1.0 % 95.89 — -1.0 % 99.00 103.2 2012 71.4 2.5 98.28 — 2.5 101.48 103.2 2013 67.8 5.0 103.20 60.0 % 5.0 106.55 103.2 2014 69.3 6.0 109.39 65.0 6.0 112.94 103.2 2015 70.2 4.0 113.76 68.0 4.0 117.46 103.2 2016 70.9 3.0 117.18 70.0 3.0 120.98 103.2 The following table summarizes the proposed subject property’s forecast, reflecting fiscalization and opening-year rate discounts as applicable. FIGURE 1-5 FORECAST OF AVERAGE RATE Average Rate Average Rate Year Occupancy Before Discount Discount After Discount 2013 60 % $106.55 3.0 % $103.35 2014 65 112.94 1.5 111.25 2015 68 117.46 0.0 117.46 2016 70 120.98 0.0 120.98Summary of Forecast Our positioning of each revenue and expense level is supported by comparableIncome and Expense operations or trends specific to this market. Our forecast of income and expense isStatement presented in the following table.May-2011 Executive Summary Proposed Select-Service Hotel – Flower Mound, Texas 6
  10. 10. FIGURE 1-6 DETAILED FORECAST OF INCOME AND EXPENSE 2013 (Calendar Year) 2014 2015 Stabilized 2017 Number of Rooms: 130 130 130 130 130 Occupancy: 60% 65% 68% 70% 70% Average Rate: $103.35 $111.25 $117.46 $120.98 $124.61 RevPAR: $62.01 $72.31 $79.87 $84.69 $87.23 Days Open: 365 365 365 365 365 Occupied Rooms: 28,470 %Gross PAR POR 30,843 %Gross PAR POR 32,266 %Gross PAR POR 33,215 %Gross PAR POR 33,215 %Gross PAR POR REVENUE Rooms $2,942 93.5 % $22,631 $103.34 $3,431 93.9 % $26,392 $111.24 $3,790 94.1 % $29,154 $117.46 $4,018 94.1 % $30,908 $120.97 $4,139 94.1 % $31,838 $124.61 Food 125 4.0 962 4.39 138 3.8 1,060 4.47 147 3.7 1,134 4.57 156 3.6 1,197 4.68 160 3.6 1,233 4.82 Beverage 31 1.0 241 1.10 34 0.9 265 1.12 37 0.9 283 1.14 39 0.9 299 1.17 40 0.9 308 1.21 Other Income 47 1.5 358 1.63 51 1.4 396 1.67 55 1.4 425 1.71 58 1.4 449 1.76 60 1.4 462 1.81 Total Revenues 3,145 100.0 24,191 110.46 3,655 100.0 28,113 118.49 4,029 100.0 30,995 124.88 4,271 100.0 32,852 128.58 4,399 100.0 33,842 132.45 DEPARTMENTAL EXPENSES * Rooms 766 26.0 5,894 26.92 813 23.7 6,255 26.37 852 22.5 6,557 26.42 888 22.1 6,831 26.74 915 22.1 7,036 27.54 Food & Beverage 150 95.8 1,152 5.26 159 92.2 1,221 5.15 166 90.2 1,278 5.15 173 89.0 1,331 5.21 178 89.0 1,371 5.37 Other Expenses 18 38.6 138 0.63 19 36.7 145 0.61 20 35.6 151 0.61 20 35.0 157 0.61 21 35.0 162 0.63 Total 934 29.7 7,184 32.81 991 27.1 7,621 32.12 1,038 25.8 7,986 32.18 1,082 25.3 8,320 32.56 1,114 25.3 8,569 33.54 DEPARTMENTAL INCOME 2,211 70.3 17,007 77.66 2,664 72.9 20,491 86.37 2,991 74.2 23,009 92.70 3,189 74.7 24,533 96.02 3,285 74.7 25,272 98.91 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 345 11.0 2,650 12.10 364 10.0 2,804 11.82 382 9.5 2,935 11.82 396 9.3 3,044 11.92 408 9.3 3,136 12.27 Marketing 119 3.8 917 4.19 126 3.5 970 4.09 132 3.3 1,016 4.09 137 3.2 1,054 4.12 141 3.2 1,085 4.25 Franchise Fee 235 7.5 1,810 8.27 274 7.5 2,111 8.90 303 7.5 2,332 9.40 321 7.5 2,473 9.68 331 7.5 2,547 9.97 Prop. Operations & Maint. 113 3.6 872 3.98 133 3.7 1,026 4.33 149 3.7 1,147 4.62 158 3.7 1,213 4.75 166 3.8 1,274 4.99 Utilities 159 5.1 1,223 5.58 168 4.6 1,294 5.45 176 4.4 1,355 5.46 183 4.3 1,405 5.50 188 4.3 1,447 5.66 Total 972 31.0 7,473 34.12 1,067 29.3 8,206 34.59 1,142 28.4 8,785 35.40 1,195 28.0 9,189 35.97 1,234 28.1 9,490 37.14 HOUSE PROFIT 1,239 39.3 9,534 43.53 1,597 43.6 12,286 51.78 1,849 45.8 14,224 57.31 1,995 46.7 15,343 60.05 2,052 46.6 15,782 61.77 Management Fee 94 3.0 726 3.31 110 3.0 843 3.55 121 3.0 930 3.75 128 3.0 986 3.86 132 3.0 1,015 3.97 INCOME BEFORE FIXED CHARGES 1,145 36.3 8,808 40.22 1,488 40.6 11,442 48.23 1,728 42.8 13,294 53.56 1,866 43.7 14,358 56.19 1,920 43.6 14,767 57.80 FIXED EXPENSES Property Taxes 180 5.7 1,384 6.32 183 5.0 1,405 5.92 186 4.6 1,433 5.77 192 4.5 1,476 5.78 198 4.5 1,520 5.95 Insurance 42 1.3 321 1.47 43 1.2 331 1.40 44 1.1 341 1.37 46 1.1 351 1.37 47 1.1 362 1.42 Reserve for Replacement 63 2.0 484 2.21 110 3.0 843 3.55 161 4.0 1,240 5.00 171 4.0 1,314 5.14 176 4.0 1,354 5.30 Total 285 9.0 2,189 10.00 335 9.2 2,579 10.87 392 9.7 3,014 12.14 408 9.6 3,141 12.29 421 9.6 3,236 12.66 NET INCOME $860 27.3 % $6,619 $30.22 $1,152 31.4 % $8,863 $37.36 $1,336 33.1 % $10,280 $41.42 $1,458 34.1 % $11,216 $43.90 $1,499 34.0 % $11,531 $45.13 *Departmental expenses are expressed as a percentage of departmental revenues.May-2011 Executive Summary Proposed Select-Service Hotel – Flower Mound, Texas 7
  11. 11. FIGURE 1-7 TEN-YEAR FORECAST OF INCOME AND EXPENSE 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Number of Rooms: 130 130 130 130 130 130 130 130 130 130 Occupied Rooms: 28,470 30,843 32,266 33,215 33,215 33,215 33,215 33,215 33,215 33,215 Occupancy: 60% 65% 68% 70% 70% 70% 70% 70% 70% 70% Average Rate: $103.35 % of $111.25 % of $117.46 % of $120.98 % of $124.61 % of $128.35 % of $132.20 % of $136.17 % of $140.25 % of $144.46 % of RevPAR: $62.01 Gross $72.31 Gross $79.87 Gross $84.69 Gross $87.23 Gross $89.85 Gross $92.54 Gross $95.32 Gross $98.18 Gross $101.12 Gross REVENUE Rooms $2,942 93.5 % $3,431 93.9 % $3,790 94.1 % $4,018 94.1 % $4,139 94.1 % $4,263 94.1 % $4,391 94.1 % $4,523 94.1 % $4,658 94.1 % $4,798 94.1 % Food 125 4.0 138 3.8 147 3.7 156 3.6 160 3.6 165 3.6 170 3.6 175 3.6 180 3.6 186 3.6 Beverage 31 1.0 34 0.9 37 0.9 39 0.9 40 0.9 41 0.9 43 0.9 44 0.9 45 0.9 46 0.9 Other Income 47 1.5 51 1.4 55 1.4 58 1.4 60 1.4 62 1.4 64 1.4 66 1.4 68 1.4 70 1.4 Total 3,145 100.0 3,655 100.0 4,029 100.0 4,271 100.0 4,399 100.0 4,531 100.0 4,667 100.0 4,808 100.0 4,951 100.0 5,100 100.0 DEPARTMENTAL EXPENSES* Rooms 766 26.0 813 23.7 852 22.5 888 22.1 915 22.1 942 22.1 970 22.1 1,000 22.1 1,030 22.1 1,060 22.1 Food & Beverage 150 95.8 159 92.2 166 90.2 173 89.0 178 89.0 184 89.0 189 89.0 195 89.0 201 89.0 207 89.0 Other Expenses 18 38.6 19 36.7 20 35.6 20 35.0 21 35.0 22 35.0 22 35.0 23 35.0 24 35.0 24 35.0 Total 934 29.7 991 27.1 1,038 25.8 1,082 25.3 1,114 25.3 1,147 25.3 1,182 25.3 1,217 25.3 1,254 25.3 1,291 25.3 DEPARTMENTAL INCOME 2,211 70.3 2,664 72.9 2,991 74.2 3,189 74.7 3,285 74.7 3,384 74.7 3,485 74.7 3,590 74.7 3,697 74.7 3,808 74.7 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 345 11.0 364 10.0 382 9.5 396 9.3 408 9.3 420 9.3 432 9.3 445 9.3 459 9.3 473 9.3 Marketing 119 3.8 126 3.5 132 3.3 137 3.2 141 3.2 145 3.2 150 3.2 154 3.2 159 3.2 164 3.2 Franchise Fee 235 7.5 274 7.5 303 7.5 321 7.5 331 7.5 341 7.5 351 7.5 362 7.5 373 7.5 384 7.5 Prop. Operations & Maint. 113 3.6 133 3.7 149 3.7 158 3.7 166 3.8 174 3.8 183 3.9 188 3.9 194 3.9 200 3.9 Utilities 159 5.1 168 4.6 176 4.4 183 4.3 188 4.3 194 4.3 200 4.3 206 4.3 212 4.3 218 4.3 Total 972 31.0 1,067 29.3 1,142 28.4 1,195 28.0 1,234 28.1 1,274 28.1 1,316 28.2 1,355 28.2 1,396 28.2 1,438 28.2 HOUSE PROFIT 1,239 39.3 1,597 43.6 1,849 45.8 1,995 46.7 2,052 46.6 2,110 46.6 2,170 46.5 2,235 46.5 2,301 46.5 2,371 46.5 Management Fee 94 3.0 110 3.0 121 3.0 128 3.0 132 3.0 136 3.0 140 3.0 144 3.0 149 3.0 153 3.0 INCOME BEFORE FIXED CHARGES 1,145 36.3 1,488 40.6 1,728 42.8 1,866 43.7 1,920 43.6 1,974 43.6 2,030 43.5 2,091 43.5 2,153 43.5 2,218 43.5 FIXED EXPENSES Property Taxes 180 5.7 183 5.0 186 4.6 192 4.5 198 4.5 204 4.5 210 4.5 216 4.5 222 4.5 229 4.5 Insurance 42 1.3 43 1.2 44 1.1 46 1.1 47 1.1 48 1.1 50 1.1 51 1.1 53 1.1 55 1.1 Reserve for Replacement 63 2.0 110 3.0 161 4.0 171 4.0 176 4.0 181 4.0 187 4.0 192 4.0 198 4.0 204 4.0 Total 285 9.0 335 9.2 392 9.7 408 9.6 421 9.6 433 9.6 446 9.6 460 9.6 473 9.6 488 9.6 NET INCOME $860 27.3 % $1,152 31.4 % $1,336 33.1 % $1,458 34.1 % $1,499 34.0 % $1,541 34.0 % $1,583 33.9 % $1,631 33.9 % $1,680 33.9 % $1,730 33.9 % 1 1 1 1 1 1 1 1 1 1 *Departmental expenses are expressed as a percentage of departmental revenues.May-2011 Executive Summary Proposed Select-Service Hotel – Flower Mound, Texas 8
  12. 12. As illustrated, the hotel is expected to stabilize at a profitable level. Please refer to the Forecast of Income and Expense chapter of our report for a detailed explanation of the methodology used in deriving this forecast.Scope of Work The methodology used to develop this study is based on the market research and valuation techniques set forth in the textbooks authored by Hospitality Valuation Services for the American Institute of Real Estate Appraisers and the Appraisal Institute, entitled The Valuation of Hotels and Motels,1 Hotels, Motels and Restaurants: Valuations and Market Studies,2 The Computerized Income Approach to Hotel/Motel Market Studies and Valuations,3 Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations,4 and Hotels and Motels – Valuations and Market Studies.5 1. All information was collected and analyzed by the staff of DFW Hospitality Consulting, LLC. Information was also supplied by the client. 2. The general location of the subject site has been evaluated from the viewpoint of its access, visibility, and other relevant factors. 3. The subject propertys proposed improvements represent a recommended construction, design, and layout efficiency. 4. The surrounding economic environment, on both an area and neighborhood level, has been reviewed to identify specific hostelry-related economic and demographic trends that may have an impact on future demand for hotels. 5. Dividing the market for hotel accommodations into individual segments defines specific market characteristics for the types of travelers expected to utilize the areas hotels. The factors investigated include purpose of visit, average length of stay, facilities and amenities required, seasonality, daily demand fluctuations, and price sensitivity. 1 Stephen Rushmore, The Valuation of Hotels and Motels. (Chicago: American Institute of Real Estate Appraisers, 1978). 2 Stephen Rushmore, Hotels, Motels and Restaurants: Valuations and Market Studies. (Chicago: American Institute of Real Estate Appraisers, 1983). 3 Stephen Rushmore, The Computerized Income Approach to Hotel/Motel Market Studies and Valuations. (Chicago: American Institute of Real Estate Appraisers, 1990). 4 Stephen Rushmore, Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations (Chicago: Appraisal Institute, 1992). 5 Stephen Rushmore and Erich Baum, Hotels and Motels – Valuations and Market Studies. (Chicago: Appraisal Institute, 2001).May-2011 Executive Summary Proposed Select-Service Hotel – Flower Mound, Texas 9
  13. 13. 6. An analysis of existing and proposed competition provides an indication of the current accommodated demand, along with market penetration and the degree of competitiveness. Unless noted otherwise, we have inspected the competitive lodging facilities summarized in this report. 7. Documentation for an occupancy and average rate projection is derived utilizing the build-up approach based on an analysis of lodging activity. 8. A detailed projection of income and expense made in accordance with the Uniform System of Accounts for the Lodging Industry sets forth the anticipated economic benefits of the subject property.May-2011 Executive Summary Proposed Select-Service Hotel – Flower Mound, Texas 10
  14. 14. 2. Description of the Site and Neighborhood The suitability of the land for the operation of a lodging facility is an important consideration affecting the economic viability of a property and its ultimate marketability. Factors such as size, topography, access, visibility, and the availability of utilities have a direct impact on the desirability of a particular site. While the specific site of the proposed subject property had not been selected at the time of this study, the subject site is expected to be located in or near Flower Mounds Lakeside Business District, in the southern portion of Town. This site is in the Town of Flower Mound, Texas.AREAS OF STUDY FOR At the request of our client, we have analyzed two areas of study for the potentialSITE SELECTION development of the proposed hotel. The River Walk at Central Park is located in the northeast quadrant of the intersection formed by FM 2499 and Cross Timbers Road. The Lakeside Business District is located in the general vicinity of Lakeside Parkway and FM 2499. A summary of each area’s characteristics are presented on the following pages.May-2011 Description of the Site and Neighborhood Proposed Select-Service Hotel – Flower Mound, Texas 11
  15. 15. MAP OF AREAS OF STUDY FOR SITE RECOMMENDATIONRiver Walk at Central The River Walk at Central Park was planned as Flower Mound’s 21st centuryPark downtown, integrating commercial and residential uses within a 158-acre development. However, the turbulence of the economic climate in 2008 and 2009 affected development plans and pace. In 2010, about 149 acres of the 158-acre property were listed in foreclosure. However, The Texas Health Presbyterian Hospital opened in 2010, and ground has been broken on the three-phase River Walk Medical Park and River Walk at Central Park Apartments. The following illustration shows the concept phasing plan for the mixed-use development. A major retail grocer is rumored for development in the southwest portion of the development.May-2011 Description of the Site and Neighborhood Proposed Select-Service Hotel – Flower Mound, Texas 12
  16. 16. RIVER WALK AT CENTRAL PARK – CONCEPT PLAN PHASINGMay-2011 Description of the Site and Neighborhood Proposed Select-Service Hotel – Flower Mound, Texas 13
  17. 17. In our review of the area, we identified advantages and disadvantages for future hotel development in or near the River Walk at Central Park development. The primary advantage of this location would be the proximity to Texas Health Presbyterian Hospital, River Walk Medical Park, and other medical facilities. The site’s central location in the heart of Flower Mound is ideal for users visiting friends or relatives, local meetings and functions, and social events such as weddings. The completion of FM 2499 Section 4 (a four-lane, 4.7-mile stretch of road that includes two bridges over the far western portions of Lake Lewisville between FM 407 in Highland Village and FM 2181 in Corinth) connects the Highland Village/Flower Mound communities and the Corinth area, and the nearby cities and towns of Denton, Lake Dallas, Hickory Creek and Shady Shores. As such, the River Walk at Central Park area would be easily accessible to many communities. The proximity of a heavy retail concentration near FM 299 and FM 407 is a positive attribute of this location as well. Accessibility from the airport and major interstates and highways was also reviewed. This location is roughly seven miles north of State Highway 121 and Dallas/Fort Worth International Airport. Interstate 35E is approximately four miles to the east, while Interstate 35W is located roughly ten miles to the west. While the general location of River Walk at Central Park would be conducive to hospital demand and leisure travelers associated with local social functions and area attractions, the location is considered somewhat distanced from the area’s regional access routes. The location seven miles north of the airport could be considered a disadvantage in regard to demand related to the airport. This type of demand is a significant source for hotels in the North Dallas/Fort Worth International Airport area given their proximity to the facility and ease of accessibility.Lakeside Business Eight business centers comprise the 1,500-acre Lakeside Business District. ThisDistrict commercial district is located within three miles of the Dallas/Fort Worth International Airport and experienced an investment by the Town of Flower Mound of $25 million in public improvements that include new road construction and water and sewer extensions.May-2011 Description of the Site and Neighborhood Proposed Select-Service Hotel – Flower Mound, Texas 14
  18. 18. LAKESIDE BUSINESS DISTRICT Similar to our analysis of the River Walk at Central Park area, we identified advantages and disadvantages for future hotel development in or near the Lakeside Business District. The primary advantage of this location would be the proximity to area corporations within the Lakeside Business District and the Dallas/Fort Worth International Airport. The site’s location in the southern portion of Flower Mound also allows for easy access to State Highway 121, which connects to several of the Metroplex’s major roadways. The presence of the Grapevine Mills outlet mall and additional retail and dining uses within two miles is considered another advantage of this location. The lack of a wide range of retail and dining choices within the immediate vicinity of the Lakeside Business District has been considered a disadvantage, but the inclusion of a café and lounge in the hotel’s planned concept helps mitigate this attribute.May-2011 Description of the Site and Neighborhood Proposed Select-Service Hotel – Flower Mound, Texas 15
  19. 19. A hotel within the Lakeside Business District area would have a corporate focus stemming from nearby corporations and the airport. The stability of airport- related demand would be a positive attribute of development in this area.Conclusion of Site Area Following a review of the two areas, we have identified the Lakeside BusinessRecommendation District area as the area more suited for hotel development at the time of this study due to the anticipated corporate/commercial focus associated with this location versus a medical and leisure orientation of the River Walk at Central Park location.Physical Characteristics A specific subject site has not been determined for the project. While site size can vary with varying types of construction configuration, we would expect the hotel site to span roughly two acres. Primary vehicular access to the proposed subject property is expected to be provided by FM 2499 or a cross street of this roadway. The topography and shape of the selected site is unknown at this time due to identification of location by a general area only.Site Utility Upon completion of construction, the subject site will not contain any significant portion of undeveloped land that could be sold, entitled, and developed for alternate use. The site is expected to be fully developed with site or building improvements, which will contribute to the overall profitability of the hotel.Access and Visibility It is important to analyze the site in regard to ease of access with respect to regional and local transportation routes and demand generators. The subject site is readily accessible to a variety of local, county, state, and interstate highways.May-2011 Description of the Site and Neighborhood Proposed Select-Service Hotel – Flower Mound, Texas 16
  20. 20. MAP OF REGIONAL ACCESS ROUTES Primary regional access routes serving the Dallas/Fort Worth Metroplex include Interstates 20, 30, 35, and 45, as well as U.S. Highways 67, 75, and 287. Interstate 20 traverses the southern sector of the metro area and extends to such cities as Abilene and Midland to the west and Shreveport, Louisiana to the east. Interstate 30 commences in west Fort Worth and, after serving as a major east/west route through the metro area, extends in a northeasterly direction to Greenville and Texarkana. Interstate 35, which divides into eastern and western sections when passing through the respective Dallas and Fort Worth metro areas, provides access to Oklahoma City to the north and Austin and San Antonio to the south. Interstate 45 commences near Downtown Dallas and extends in a southeasterly direction, providing access to the Houston metropolitan area. The subject market is served by a variety of additional local highways, which are illustrated on the map. The area enjoys a well-developed network of local roadways, highways, and interstates. State Highways 114 and 121 and Interstates 635, 35W, and 35E facilitate travel between Flower Mound and the principal concentrations ofMay-2011 Description of the Site and Neighborhood Proposed Select-Service Hotel – Flower Mound, Texas 17
  21. 21. business activity and population in the region. From State Highway 121, motorists take the FM 2499 Exit and proceed north on this thoroughfare for approximately three miles before reaching the Lakeside Business District area. The proposed subject property is expected to be located near a major interchange of FM 2499 and have adequate signage at the street; thus, the proposed hotel should benefit from very good visibility from within its local neighborhood. Overall, the subject site is expected to benefit from very good accessibility, and the proposed hotel is anticipated to enjoy very good visibility attributes.Airport Access The proposed subject property will be well served by the Dallas/Fort Worth International Airport, which is located approximately three miles to the south of Flower Mound. From the airport, motorists will follow signs to State Highway 121 and travel north on this thoroughfare to FM 2499. Motorists will then proceed northbound on FM 2499, continuing to the subject site. As noted previously, the location of the subject property has only been indentified within a general area, the Lakeside Business District. The proposed subject property will also be served by Dallas Love Field, which is located approximately 15 miles to the southeast of Flower Mound.Neighborhood The neighborhood surrounding a lodging facility often has an impact on a hotels status, image, class, style of operation, and sometimes its ability to attract and properly serve a particular market segment. This section of the report investigates the subject neighborhood and evaluates any pertinent location factors that could affect its future occupancy, average rate, and overall profitability. The subject neighborhood is generally defined by Flower Mound Road to the north, Grapevine Lake to the west, Sandy Lake Road to the south, and Valley Parkway to the east. In general, this neighborhood is in the stable stage of its life cycle, with pockets of growth having occurred in the residential, special-use, and retail sectors in the past two years. Within the proximity of the proposed site area, land use is primarily commercial in nature. Anchored by the Lakeside Business District, businesses in the area include Stryker Communications, Best Buy Distribution, Ivie & Associates, and ThermoTek. There are few restaurants within immediate proximity of the Lakeside Business District. However, there is a Starbucks, Sonic, and Jack in the Box near FM 2499 and Sandy Lake Road. Additionally, The Pines of Flower shopping center, located at Flower Mound Road and Gerault Road, offers various dining choices such as Agave Azul, Lazy Dogz Grill, Straw Hat Pizza, and Subway. Newer developments in this neighborhood include the Flower Mound Community Activity Center, Verde Walk Apartments, and small strip retail centers. To the south of the neighborhood, a major change in the area is the construction of the DFW Connector, which began in February of 2010 and is intended to increase mobility along State Highways 114May-2011 Description of the Site and Neighborhood Proposed Select-Service Hotel – Flower Mound, Texas 18
  22. 22. and 121. When complete in 2014, this 14.4-mile, $1.02-billion project will have rebuilt the corridor through Southlake, Grapevine, and the north side of the Dallas/Fort Worth International Airport. In general, we would characterize the neighborhood as 40% office/retail use, 25% residential use, 25% vacant, and 10% other. The proposed subject propertys opening should be a positive influence on the area; the hotel will be in character with and will complement surrounding land uses.MAP OF NEIGHBORHOOD Overall, the supportive nature of the development in the immediate area is considered appropriate for and conducive to the operation of a hotel.Utilities The subject site is expected to be served by all necessary utilities. We assume that these will be acquired from the most cost-effective providers within the local market.May-2011 Description of the Site and Neighborhood Proposed Select-Service Hotel – Flower Mound, Texas 19
  23. 23. Soil and As the specific site has not been identified, geological and soil reports were notSubsoil Conditions available to us or made available for our review during the preparation of this report. We assume that no extraordinary conditions will be apparent prior to construction.Nuisances We assume that there will be no site-specific nuisances or hazards or toxic groundand Hazards contaminants. An independent analysis of these factors should be completed prior to construction.Flood Zone A specific subject site has not been determined; therefore, the flood zone cannot be determined. The Federal Emergency Management Agency map numbers for the area are illustrated below. A flood certification should be obtained when a specific site is identified.FEDERAL EMERGENCY MANAGEMENT AGENCY MAP PANELSMay-2011 Description of the Site and Neighborhood Proposed Select-Service Hotel – Flower Mound, Texas 20
  24. 24. Zoning We assume the zoning designation of the site will allow for most commercial uses, including small office complexes, retail centers, service industries, and hotels and motels. We assume that all necessary permits and approvals will be secured (including an appropriate liquor license if applicable) and that the subject property will be constructed in accordance with local zoning ordinances, building codes, and all other applicable regulations. The zoning designations for the Lakeside Business District, as published by the Town of Flower Mound Planning Department, are illustrated below.LAKESIDE BUSINESS DISTRICT ZONING MAP A zoning analysis should be completed before any physical changes are made to the site.Easements and We have assumed that there will be no easements attached to the property thatEncroachments would significantly affect the utility of the site or marketability of this project.Conclusion We have not analyzed the issues of size, topography, access, visibility, and the availability of utilities for a specific site. The subject site is expected to be located in the general location of the Lakeside Business District and within easy access of FM 2499, a major north/south roadway in Flower Mound. In general, the site should be well suited for future hotel use, with acceptable access, visibility, and topography for an effective operation.May-2011 Description of the Site and Neighborhood Proposed Select-Service Hotel – Flower Mound, Texas 21
  25. 25. 3. Market Area Analysis The economic vitality of the market area and neighborhood surrounding the subject site is an important consideration in forecasting lodging demand and future income potential. Economic and demographic trends that reflect the amount of visitation provide a basis from which to project lodging demand. The purpose of the market area analysis is to review available economic and demographic data to determine whether the local market will undergo economic growth, stabilize, or decline. In addition to predicting the direction of the economy, the rate of change must be quantified. These trends are then correlated based on their propensity to reflect variations in lodging demand, with the objective of forecasting the amount of growth or decline in visitation by individual market segment, e.g. commercial, meeting and group, and leisure.Market Area Definition The market area for a lodging facility is the geographical region where the sources of demand and the competitive supply are located. The subject property is located in the Town of Flower Mound, the county of Denton, and the state of Texas. We note that a small portion of the Town is located in Tarrant County. As part of the greater Dallas/Fort Worth Metropolitan area, Flower Mound derived its name from a prominent 12.5-acre mound, "The Mound," that was once covered with bluestem grasses and a variety of indigenous flowers. Flower Mound is located primarily within Denton County, with a small portion occupying and bordering Tarrant County to the south. Encompassing 46 square miles, the Town is situated 26 miles northwest of Dallas, 25 miles northeast of Fort Worth, and three miles north of the Dallas/Fort Worth International Airport. Denton County offers two major universities, Texas Womens University and University of North Texas, as well as campuses of North Texas College in Corinth and Flower Mound. Today, the Town is home to more than 1,000 businesses and continues to experience economic and neighborhood growth.May-2011 Market Area Analysis Proposed Select-Service Hotel – Flower Mound, Texas 22
  26. 26. FLOWER MOUND The proposed subject property’s market area can be defined by its Combined Statistical Area (CSA): Dallas-Fort Worth, TX. The CSA represents adjacent metropolitan and micropolitan statistical areas that have a moderate degree of employment interchange. Micropolitan statistical areas represent urban areas in the United States based around a core city or town with a population of 10,000 to 49,999; the MSA requires the presence of a core city of at least 50,000 people and a total population of at least 100,000 (75,000 in New England).The following exhibit illustrates the market area.May-2011 Market Area Analysis Proposed Select-Service Hotel – Flower Mound, Texas 23
  27. 27. MAP OF MARKET AREAEconomic and A primary source of economic and demographic statistics used in this analysis isDemographic Review the Complete Economic and Demographic Data Source published by Woods & Poole Economics, Inc. – a well-regarded forecasting service based in Washington, D.C. Using a database containing more than 900 variables for each county in the nation, Woods & Poole employs a sophisticated regional model to forecast economic and demographic trends. Historical statistics are based on census data and information published by the Bureau of Economic Analysis. Projections are formulated by Woods & Poole, and all dollar amounts have been adjusted for inflation, thus reflecting real change. These data are summarized in the following table.May-2011 Market Area Analysis Proposed Select-Service Hotel – Flower Mound, Texas 24
  28. 28. FIGURE 3-1 ECONOMIC AND DEMOGRAPHIC DATA SUMMARY Average Annual Compounded Change 1990 2000 2010 2015 1990-00 2000-10 2010-15 Resident Population (Thousands) Denton County 276.4 439.0 679.5 783.9 4.7 % 4.5 % 2.9 % Dallas-Fort Worth-Arlington, TX MSA 4,014.3 5,196.2 6,561.1 7,134.1 2.6 2.4 1.7 State of Texas 17,056.8 20,946.0 25,205.7 27,346.7 2.1 1.9 1.6 United States 249,622.8 282,172.0 310,009.2 325,343.4 1.2 0.9 1.0 Per-Capita Personal Income* Denton County $25,920 $37,070 $32,235 $34,613 3.6 (1.4) 1.4 Dallas-Fort Worth-Arlington, TX MSA 28,578 38,041 35,280 37,667 2.9 (0.8) 1.3 State of Texas 23,924 31,750 32,559 34,611 2.9 0.3 1.2 United States 26,826 33,770 35,336 37,559 2.3 0.5 1.2 W&P Wealth Index Denton County 106.0 118.6 98.8 99.4 1.1 (1.8) 0.1 Dallas-Fort Worth-Arlington, TX MSA 110.3 115.0 102.2 102.5 0.4 (1.2) 0.1 State of Texas 92.0 95.1 92.4 92.4 0.3 (0.3) (0.0) United States 100.0 100.0 100.0 100.0 0.0 0.0 0.0 Food and Beverage Sales (Millions)* Denton County $211 $449 $775 $900 7.9 5.6 3.0 Dallas-Fort Worth-Arlington, TX MSA 5,073 7,496 10,231 11,152 4.0 3.2 1.7 State of Texas 17,379 25,694 33,765 36,899 4.0 2.8 1.8 United States 257,805 341,525 409,983 434,221 2.9 1.8 1.2 Total Retail Sales (Millions)* Denton County $2,435 $5,062 $7,346 $8,956 7.6 3.8 4.0 Dallas-Fort Worth-Arlington, TX MSA 49,759 74,167 87,895 101,091 4.1 1.7 2.8 State of Texas 179,748 269,662 313,269 360,785 4.1 1.5 2.9 United States 2,620,710 3,613,909 3,880,980 4,325,045 3.3 0.7 2.2 * Inflation Adjusted Source: Woods & Poole Economics, Inc.May-2011 Market Area Analysis Proposed Select-Service Hotel – Flower Mound, Texas 25
  29. 29. The U.S. population has grown at an average annual compounded rate of 0.9% from 2000 through 2010. The county’s population has grown at a quicker pace than the nation’s population; the average annual growth rate of 4.5% between 2000 and 2010 reflects a rapidly expanding area. Following this population trend, per-capita personal income decreased slowly, at -1.4% on average annually for the county between 2000 and 2010. Local wealth indexes have remained stable in recent years, registering a relatively near average 98.8 level for the county in 2010. Food and beverage sales totaled $775 million in the county in 2010, versus $449 million in 2000. This reflects a 5.6% average annual change, which compares to the average annual change of 3.0%, which is forecast through 2015. Retail sales totaled $7,346.4 million in the county in 2010, versus $5,061.9 million in 2000. This represents an average annual change of 3.8%. A modestly slower 4.0% average annual change is expected in county retail sales through 2015.Workforce The characteristics of an areas workforce provide an indication of the type andCharacteristics amount of transient visitation likely to be generated by local businesses. Sectors such as finance, insurance, and real estate (FIRE); wholesale trade; and services produce a considerable number of visitors who are not particularly rate sensitive. The government sector often generates transient room nights, but per-diem reimbursement allowances often limit the accommodations selection to budget and mid-priced lodging facilities. Contributions from manufacturing, construction, transportation, communications, and public utilities (TCPU) employers can also be important, depending on the company type. The following table sets forth the county workforce distribution by business sector in 1990, 2000, and 2010, as well as a forecast for 2015.May-2011 Market Area Analysis Proposed Select-Service Hotel – Flower Mound, Texas 26
  30. 30. FIGURE 3-2 HISTORICAL AND PROJECTED EMPLOYMENT (000S) Average Annual Compounded Change Percent Percent Percent Percent Industry 1990 of Total 2000 of Total 2010 of Total 2015 of Total 1990-2000 2000-2010 2010-2015 Farm 2.0 2.1 % 2.8 1.7 % 2.8 1.2 % 2.8 1.0 % 3.2 % 0.1 % 0.2 % Forestry, Fishing, Related Activities And Other 0.2 0.2 0.5 0.3 0.5 0.2 0.6 0.2 8.9 1.7 1.5 Mining 0.6 0.6 0.7 0.4 2.2 0.9 2.4 0.9 1.4 12.2 1.5 Utilities 0.4 0.4 0.7 0.4 0.7 0.3 0.8 0.3 6.1 0.6 0.9 Construction 5.1 5.1 12.9 7.9 13.0 5.4 14.3 5.3 9.8 0.0 2.0 Manufacturing 12.4 12.6 14.8 9.0 12.1 5.1 12.5 4.6 1.8 (2.0) 0.6 Total Trade 17.2 17.4 30.6 18.7 38.4 16.1 42.4 15.7 5.9 2.3 2.0 Wholesale Trade 3.3 3.3 7.2 4.4 9.5 4.0 11.3 4.2 8.0 2.9 3.6 Retail Trade 13.9 14.1 23.5 14.3 28.9 12.1 31.1 11.5 5.4 2.1 1.4 Transportation And Warehousing 1.2 1.2 3.1 1.9 5.6 2.3 6.6 2.5 10.5 5.9 3.5 Information 2.5 2.5 4.3 2.6 4.3 1.8 4.7 1.7 5.5 0.2 1.4 Finance And Insurance 3.1 3.1 6.0 3.7 11.3 4.7 13.8 5.1 6.8 6.6 4.1 Real Estate And Rental And Lease 3.0 3.1 5.6 3.4 10.3 4.3 11.1 4.1 6.2 6.4 1.6 Total Services 32.9 33.3 56.1 34.3 102.6 42.9 120.5 44.7 5.5 6.2 3.3 Professional And Technical Services 4.7 4.7 7.8 4.8 16.3 6.8 20.2 7.5 5.3 7.6 4.5 Management Of Companies And Enterprises 0.2 0.2 0.2 0.1 1.2 0.5 1.4 0.5 2.9 18.0 2.9 Administrative And Waste Services 4.8 4.8 10.3 6.3 16.4 6.8 19.1 7.1 8.0 4.7 3.1 Educational Services 1.0 1.0 1.8 1.1 3.6 1.5 4.1 1.5 5.6 7.3 3.0 Health Care And Social Assistance 6.7 6.8 11.2 6.8 22.2 9.3 26.4 9.8 5.3 7.1 3.5 Arts, Entertainment, And Recreation 2.0 2.0 3.5 2.1 6.1 2.6 6.8 2.5 5.6 5.8 2.2 Accommodation And Food Services 6.3 6.4 11.3 6.9 21.4 9.0 24.8 9.2 6.0 6.6 3.0 Other Services, Except Public Administration 7.3 7.4 10.1 6.2 15.5 6.5 17.7 6.6 3.3 4.4 2.7 Total Government 18.2 18.4 25.8 15.7 35.2 14.7 37.0 13.7 3.6 3.2 1.0 Federal Civilian Government 0.7 0.8 1.2 0.7 1.6 0.7 1.8 0.7 5.1 3.0 1.4 Federal Military 1.0 1.0 1.1 0.7 1.5 0.6 1.5 0.6 1.0 2.9 0.2 State And Local Government 16.4 16.6 23.4 14.3 32.1 13.4 33.7 12.5 3.6 3.2 1.0 TOTAL 98.7 100.0 % 163.7 100.0 % 239.1 100.0 % 269.4 100.0 % 5.2 % 3.9 % 2.4 % MSA 2,509.5 — 3,423.8 — 3,956.0 — 4,324.4 — 3.2 % 1.5 % 1.8 % U.S. 138,331.0 — 165,371.0 — 174,062.6 — 186,999.8 — 1.2 0.5 1.4 Source: Woods & Poole Economics, Inc.May-2011 Market Area Analysis Proposed Select-Service Hotel – Flower Mound, Texas 27
  31. 31. Woods & Poole Economics, Inc. reports that during the period from 1990 to 2000, total employment in the county grew at an average annual rate of 5.2%. This trend was above the growth rate recorded by the MSA, and outpaced the national average, reflecting the expanding nature of the local economy during that decade. Most recently, the pace of total employment growth in the county slowed to 3.9% on an annual average from 2000 to 2010. Of the primary employment sectors, Total Services recorded the highest increase in number of employees during the period from 2000 to 2010, increasing by 46,454 people, or 82.8%, and rising from 34.3% to 42.9% of total employment. Of the various service sub-sectors, Health Care And Social Assistance and Accommodation And Food Services were the largest employers. Strong growth was also recorded in the Total Government sector, as well as the Total Trade sector, which expanded by 85.3% and 25.4%, respectively, in the period 2000 to 2010. Forecasts developed by Woods & Poole Economics, Inc. anticipate that total employment in the county will change by 2.4% on average annually through 2015. The trend is above the forecast rate of change for the U.S. as a whole during the same period.Radial Demographic The following table reflects radial demographic trends for our market areaSnapshot measured by three points of distance from a point along FM 2499 in the Lakeside Business District.May-2011 Market Area Analysis Proposed Select-Service Hotel – Flower Mound, Texas 28
  32. 32. FIGURE 3-3 DEMOGRAPHICS BY RADIUS 0.00 - 1.00 0.00 - 3.00 0.00 - 5.00 miles miles miles Population 2015 Projection 3,869 60,846 219,941 2010 Estimate 3,242 51,578 189,735 2000 Census 2,245 36,957 141,975 1990 Census 441 10,659 73,120 Growth 2010-2015 19.34% 17.97% 15.92% Growth 2000-2010 44.41% 39.56% 33.64% Growth 1990-2000 409.07% 246.72% 94.17% Households 2015 Projection 1,258 19,868 77,855 2010 Estimate 1,065 17,003 67,415 2000 Census 757 12,406 50,813 1990 Census 160 3,834 26,941 Growth 2010-2015 18.12% 16.85% 15.49% Growth 2000-2010 40.69% 37.05% 32.67% Growth 1990-2000 373.13% 223.58% 88.61% Income 2010 Est. Average Household Income $155,496 $134,376 $108,078 2010 Est. Median Household Income 131,250 113,861 87,261 2010 Est. Per Capita Income 51,161 44,382 38,475 2010 Est. Civ Employed Pop 16+ by Occupation 1,646 27,647 105,930 Architect/Engineer 32 680 2,293 Arts/Entertain/Sports 46 726 2,148 Building Grounds Maint 17 225 1,616 Business/Financial Ops 147 2,509 8,462 Community/Soc Svcs 4 166 934 Computer/Mathematical 100 1,928 5,973 Construction/Extraction 40 510 3,349 Edu/Training/Library 85 1,645 6,379 Farm/Fish/Forestry 0 1 10 Food Prep/Serving 42 833 4,312 Health Practitioner/Tec 76 1,178 3,551 Healthcare Support 6 185 1,009 Maintenance Repair 46 580 3,348 Legal 21 252 749 Life/Phys/Soc Science 24 244 877 Management 318 5,123 16,252 Office/Admin Support 229 3,394 14,767 Production 31 695 3,463 Protective Svcs 26 402 1,758 Sales/Related 261 4,485 16,456 Personal Care/Svc 42 941 3,873 Transportation/Moving 52 947 4,352 Source: Claritas, Inc.May-2011 Market Area Analysis Proposed Select-Service Hotel – Flower Mound, Texas 29
  33. 33. This source reports a population of 189,735 within a five-mile radius of the subject property, and 67,415 households within this same radius. Average household income within a five-mile radius of the subject property is currently reported at $108,078, while the median is $87,261. Within the addenda of this report, a demographic report for the entire Town of Flower Mound has been included.Roadway Projects The population growth of Flower Mound has spurred increased roadway improvements to improve traffic flow through the Town and facilitates ingress and egress from and to other parts of the Metroplex. Most recently, the completion of Section 4 of FM 2499 in Highland Village included the bridge that connects FM 2499 with FM 2181 in Corinth, traversing a portion of Lewisville Lake. This roadway improvement has improved north/south travel in the area, allowing for between exposure of businesses along FM 2499. The following bullet points highlight major roadway projects within the Town of Flower Mound: • FM 1171 - Phase 1 (under construction) of this Texas Department of Transportation project will consist of the widening of the existing two-lane roadway to a six-lane divided thoroughfare from FM 2499 to Shiloh Road. Future Phase 2 extends the improvements from Shiloh to U.S. Highway 377, and Future Phase 3 extends the improvements from U.S. Highway 377 to Interstate 35W. • Morriss Road/Gerault Road – Under construction, this project consists of the addition of two inside lanes (one northbound and one southbound) to Gerault Road between FM 2499 and FM 3040 and improving the intersections at FM 407, FM 1171, and FM 3040. Additionally, traffic signals will be added to the intersections with Spinks Road, Garden Road, Sagebrush Drive, and Buckeye Drive. This project will also add landscaping to the medians, provide for new sidewalk in locations where there previously was no existing sidewalk, widen most existing sidewalks to six feet, and replace existing wooden fences along the Morriss/Gerault corridor from FM 2499 to FM 407. • FM 2499/Gerault Road Fly-Over Bridge – Near the intersection of FM 2499 and Gerault Road, piers are under construction for a new fly-over bridge.Major Business and Providing additional context for understanding the nature of the regionalIndustry economy, the following table presents a list of the major employers in the subject property’s market.May-2011 Market Area Analysis Proposed Select-Service Hotel – Flower Mound, Texas 30

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