Lester Lie                                                                                    February 25, 2010
lester.lie...
Lester Lie                                                                                February 25, 2010
lester.lie@alu...
Lester Lie                                                                                           February 25, 2010
les...
Lester Lie                                                                                                                ...
Lester Lie                                                                                           February 25, 2010
les...
Lester Lie                                                                                    February 25, 2010
lester.lie...
Lester Lie                                                                                   February 25, 2010
lester.lie@...
Lester Lie                                                                               February 25, 2010
lester.lie@alum...
Lester Lie                                                                              February 25, 2010
lester.lie@alumn...
Lester Lie                                                                                  February 25, 2010
lester.lie@a...
Lester Lie                                                                                       February 25, 2010
lester....
Lester Lie                                                                                          February 25, 2010
lest...
Lester Lie                                                                                                                ...
Lester Lie                                                                              February 25, 2010
lester.lie@alumn...
Lester Lie                                                                            February 25, 2010
lester.lie@alumni....
Lester Lie                                                                                February 25, 2010
lester.lie@alu...
Lester Lie                                                                                                              Fe...
Lester Lie                                                                                                                ...
Lester Lie                                                                                                                ...
Lester Lie                                                                                                                ...
Lester Lie                                                                                                           Febru...
Lester Lie                                                                                                    February 25,...
Hyatt Hotels Final   2 25 10 K
Hyatt Hotels Final   2 25 10 K
Hyatt Hotels Final   2 25 10 K
Hyatt Hotels Final   2 25 10 K
Hyatt Hotels Final   2 25 10 K
Hyatt Hotels Final   2 25 10 K
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Hyatt Hotels Final 2 25 10 K

  1. 1. Lester Lie February 25, 2010 lester.lie@alumni.stern.nyu Lodging Hyatt Hotels Corporation (NYSE: H) Recommendation: BUY Current stock price (2/25/10): $32.50 Target: $56.00 52-week range: $25.75 - $32.75 Shares Outstanding: 173.88 MM Market Cap. (2/25/10): $5.65 B EV: $5.2 B Float: 32% Avg. Vol. (3 mo.): 324,000 Calculated Beta: 1.64 EBIT Margin: 1.4%; EBITDA Margin: 9.5% Cash per share: $7.63 Current Ratio: 4.02 Debt/Assets: 12% EBIT/Interest Expense: 0.9 INVESTMENT THESIS Hyatt Hotels is undervalued relative to its replacement cost and earnings power value. Comparing the Company’s hotel portfolio with hotel sales transactions from 2008 to 2010, I determined the replacement value of the portfolio was $5.3 billion. Combining the hotel portfolio replacement value with an estimation of the Company’s brand value, the total replacement cost of the firm was estimated at $8.5 billion. Furthermore, the Earnings Power Value (EPV), the value of the franchise was estimated at $1.3 billion. Combining the replacement cost estimate with EPV, Hyatt Hotels was estimated at $9.9 billion or $56.66 per share. Hyatt Hotels is poised to grow both domestically and internationally. Hyatt Hotels is dwarfed by its competitors in terms of the total number of hotels owned and franchised, the percentage of total hotels franchised, and the number of international hotels it owns and franchises. The Company’s debt to total assets is 12% while the average of its closest competitors’ debt to total assets is 37%. Similarly, Hyatt’s cash ratio is 2.68 while its closest competitors’ cash ratio is 0.15. This liquidity and low leverage enables the Company to actively acquire hotels and hotel portfolios as well as form partnerships with third-party developers in new markets. RISKS • Challenges in determining value of international portfolio and brand equity • Unclear how Hyatt Hotels will grow the hotel portfolio in terms of company-owned and franchise mix • Higher operating leverage than its peers because it owns 53% of its hotels while Starwood and other hotel companies own 35% and 17%, respectively • Family conflict could continue to distract the operation of the business
  2. 2. Lester Lie February 25, 2010 lester.lie@alumni.stern.nyu Lodging Company Description Hyatt Hotels Corporation (“Hyatt Hotels” or “the Company”) is a global hospitality company that manages, franchises, owns, and develops Hyatt- branded hotels, resorts, residential, and vacation ownership properties around the world. Under the Park Hyatt, Grand Hyatt, Hyatt Regency, Hyatt, Hyatt Summerfield Suites, Hyatt Place, and Andaz brands, the Company’s worldwide portfolio consists of 424 Hyatt-branded properties (122,317 rooms and units). For the years ending December 31, 2009 and 2008, Hyatt derived approximately 80% of its revenues from operations in the US. Hyatt Hotels employs 45,000 people; third-party owners and hotel franchisees employ an additional 80,000 people. Hyatt Hotels is headquartered in Chicago and was founded in 1957. INVESTMENT THESIS Hyatt Hotels is Undervalued Compared With Replacement Cost and Earnings Power Value. Reproduction Cost Analysis Property & Equipment Hyatt Hotels has 37,486 rooms that are owned by the Company. Approximately 84% or 31,362 rooms are located in the US. Hyatt Hotels’s most recent balance sheet understates the value of its Property & Equipment. The reported amount is recorded at historic cost rather than at current market value. For each of the properties Hyatt Hotels has an ownership interest, I reviewed sales transactions on LoopNet.com largely between 2008 and 2010 and estimated the value of the Hyatt property. Based on a review of hundreds of sales transactions, I estimated the value of the domestic hotel portfolio. I tried to use as many transactions from 2008 to 2010 as possible. Properties sold prior to 2008 were discounted based on estimates of property value declines for that region. Cities in the Midwest, Texas, and the Great Plains states do not have significant discounts while those in coastal cities have larger discounts. For ownership interests under 50%, I applied an additional 15% discount to the value of the property. The value of the domestic hospitality portfolio is $3.7 billion. (See Appendix F) Hyatt Hotels’s international portfolio of company-owned hotels represents 16% of its total company owned rooms. For the years ending December 31, 2009 and 2008, Hyatt Hotels derived approximately 80% of its revenues from operations in the US. These hotels are in many major global cities including London and Paris as well as Bishkek, Kyrgyzstan and Baku, Azerbaijan. Since data for international hospitality transactions is much harder to locate, I valued the hotels based on a multiple of the price per room at the Grand Hyatt New York. First, I determined the standard room rate on April 30, 2010 for all the hotels in the portfolio; then I converted the room rate from local currency to US dollars. Comparing the dollar room rate with that of the Grand Hyatt New York, I applied this “room rate multiple” to the price per room at the Grand Hyatt New York to
  3. 3. Lester Lie February 25, 2010 lester.lie@alumni.stern.nyu Lodging determine the price per room of a given hotel and then the value of the entire hotel. According to this analysis, the value of the international portfolio is $1.6 billion. (See Table 1) Hyatt Hotels Corporaton Reproduction Cost Analysis Reproduction ($ in millions) 2009 Adjustment Cost Assets: Cash and cash equivalents $ 1,327 100% $ 1,327 Restricted cash 11 100% 11 Receivables, net of allowances 226 80% 181 Inventories(1) 133 85% 113 Prepaids and other assets 184 100% 184 Prepaid income taxes 85 100% 85 Deferred tax assets 23 100% 23 Total Current Assets $ 1,989 $ 1,924 Investments(2) 223 65% 145 Property and equipment, net 3,605 5,569 US hotels $ 3,786 International $ 1,783 Notes receivable, net of allowances 385 60% 231 Goodwill 113 0% - Intangibles, net (3) 284 0% 2,184 Deferred tax assets 74 100% 74 Other assets(4) 482 100% 482 Total assets $ 7,155 $ 10,608 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Current maturities of long-term debt $ 12 100% $ 12 Accounts payable 196 100% 196 Accrued expenses 183 100% 183 Accrued income taxes 5 100% 5 Accrued compensation and benefits 99 100% 99 Liabilities of discontinued operations - 100% - Total Current Liabilities $ 495 $ 495 Long-term debt 840 100% 840 Other long-term liabilities 780 100% 780 Total liabilities $ 2,115 $ 2,115 Stockholders' equity $ 5,040 $ 8,493 Total Liabilities & Stockholders' Equity $ 7,155 $ 10,608 (1) Unsold vacation ownership intervals; food and beverage inventories (2) Unconsolidated hospitality ventures (3) Ignore reported Intangibles; assume it takes 5 years to build the Hyatt brand from scratch (3) Marketable securities held for Gold Passport Fund, deferred compensation plans
  4. 4. Lester Lie February 25, 2010 lester.lie@alumni.stern.nyu Lodging Table 1 International Portfolio Value Analysis Room Rate Exchange Room Rate Multiple of Type City Country Rooms Ownership (LC) 4/30/10 Rate (2/25/10) (USD) 4/30/10 NY Rate Price/Room Value of Hotel Andaz London England 267 100% 299 1.5317 458 1.5317 $ 583,625 $ 155,800,000 Park Hyatt Paris France 167 100% 560 1.3489 755 2.5264 962,625 160,800,000 Park Hyatt Toronto Ontario 346 100% 330 0.9447 312 1.0427 397,298 137,500,000 Hyatt Regency Kyoto Japan 189 20% 49,600 0.0112 554 1.8545 706,619 26,720,000 Grand Hyatt Mumbai India 547 50% 11,000 0.0216 237 0.7940 302,539 82,750,000 Park Hyatt Zurich Switzerland 142 100% 480 0.9218 442 1.4798 563,867 80,100,000 Park Hyatt Milan Italy 167 30% 480 1.3489 647 2.1655 825,107 41,340,000 Hyatt Regency Palm Beach Aruba 357 100% 304 1.0167 387,403 138,300,000 Grand Hyatt Sao Paolo Brazil 466 50% 900 0.5466 492 1.6453 626,904 146,050,000 Hyatt Regency Vancouver Canada 644 100% 394 0.9447 372 1.2449 474,350 305,500,000 Hyatt Regency Seoul S. Korea 601 100% 220000 0.0009 189 0.6326 241,031 144,900,000 Hyatt Bali Indonesia 386 10% 140 0.4682 178,409 6,890,000 Grand Hyatt Bali Indonesia 648 10% 190 0.6355 242,127 15,690,000 Park Hyatt Mendoza Argentina 186 50% 735 0.2546 187 0.6259 238,484 22,200,000 Park Hyatt Baku Azerbaijan 159 100% 270 0.8000 216 0.7224 275,260 43,800,000 Hyatt Regency Baku Azerbaijan 182 100% 270 0.8000 216 0.7224 275,260 50,100,000 Hyatt Regency Bishkek Kyrgyz 178 87% 295 0.9866 375,934 58,203,000 Park Hyatt Jeddah Saudi Arabia 142 8% 1100 0.2667 293 0.9810 373,789 4,248,000 Total: 5,774 Total Asset Value of Hotel: $ 1,620,891,000 Source: Company reports Goodwill & Intangibles Given the uncertain nature surrounding the value of the Company’s intangibles, I assigned a value of zero to both Goodwill and Intangibles. Nonetheless, I attempted to value the cost a new entrant would need to spend to become a competitor and build the brand. Considering the introduction of the W Hotels in 1998, I estimated that it would take at least 8 years to build a competitor with the same reputation for quality and service as Hyatt Hotels in the US and abroad. Taking the 3 year average of Selling, General, & Administrative or $273 million (Table 2), I estimated this intangible value by multiplying it by 8 years. The Intangible Asset Value was estimated at $2.2 billion. In addition to taking discounts on Hyatt Hotels’s receivables, inventories, investments, and notes receivable worth $297 million, I determined that the replacement value of the Company was $10.6 billion. Deducting Total Liabilities of $2.1 billon, the equity value of the Company’s assets was $8.5 billion. (Reproduction Cost Analysis above) Earnings Power Value In order to determine what Bruce Greenwald describes as “the franchise value from current competitive advantage,” I determined the Earnings Power Value by first determining the EBIT – after tax adjusted (EBIT- ATA) then using weighted average cost of capital to obtain the value.
  5. 5. Lester Lie February 25, 2010 lester.lie@alumni.stern.nyu Lodging Table 2 EBIT - after tax adjusted 3 Year ($ in millions) 2007 2008 2009 Average EBIT $ 385.0 $ 364.0 $ 48.0 Tax rate 35% 35% 35% EBIT after tax $ 250.3 $ 236.6 $ 31.2 D&A 214.0 249.0 270.0 CapEx (377.0) (258.0) (216.0) EBIT after tax adjusted (EBIT-ATA) $ 87.3 $ 227.6 $ 85.2 $ 133.4 EBIT-ATA as a % of Total Revenues 2.3% 5.9% 2.6% 3.6% Applying a weighted average cost of capital of 10.2% and adding the Replacement Value determined above, I obtained a Total Value range of $9.4 - $9.9 billion or $53.84 - $56.66 per share. (Table 3) Table 3 Earnings Power Value & Total Value Analysis Avg. EBIT-ATA 3 Year Avg. ($ in millions) Current (1) as % Rev. (2) EBIT-ATA (3) EBIT after tax adjusted $ 85.20 $ 120.21 $ 133.4 WACC 9.8% EPV $ 868 $ 1,224 $ 1,358 Asset Value 8,493 8,493 8,493 Total Value $ 9,361 $ 9,718 $ 9,852 Shares Outstanding 173.88 Price per share $ 53.84 $ 55.89 $ 56.66 (1) Used the EBIT-ATA for the fiscal year ending 2009 (2) Determined by multiplying 3 year average of EBIT-ATA margin with 2009 revenues (3) Determined by using the 3 year average of EBIT - ATA Hyatt Hotels is poised to grow both domestically and internationally Hyatt Hotels global footprint is much smaller than competitors Compared to its closest competitors, Hyatt Hotels is dwarfed both in terms of the number of hotels and rooms in its hotel portfolio. As of December 31, 2009, Hyatt Hotels had 424 hotels and 122,317 rooms in its entire hotel portfolio (Table 4). Its average competitor had four times as many rooms and ten times as many hotels. This can be explained by the fact that Hyatt Hotels has concentrated on the full-service segment of the market. Eighty- two percent of its hotels are full-service and 53% of its revenues are derived from company-owned properties. In terms of business strategy, Starwood Hotel & Resorts is the Company’s closest competitor. Both companies have nearly 300 rooms per hotel which reflects the typical size of a full-
  6. 6. Lester Lie February 25, 2010 lester.lie@alumni.stern.nyu Lodging service hotel. For instance, the Hyatt Regency Scottsdale has 492 rooms while the Grand Hyatt New York has 1,311 rooms. Starwood Hotels & Resorts has more than twice the number of hotels and 34% of its revenues are derived from company-owned properties. If Hyatt Hotels were to mimic the footprint and level of franchisees in its portfolio, then the Company could more than double in terms of hotel portfolio size alone. Currently, 25% of the Company’s hotels are located outside the US and are flagged largely as either Grand Hyatt, Park Hyatt, or Hyatt Regency hotels. This suggests there is significant opportunity to continue growing the full- service brands to international cities and/or develop limited service brands such as Hyatt Place in secondary markets. Hyatt Hotels announced on April 18, 2010 that it was planning to open 15 new hotels in India under the Park Hyatt, Grand Hyatt, Hyatt Regency, and Hyatt brands. If Hyatt Hotels pursued a strategy similar to Marriott International and InterContinental Hotels Group with portfolios more evenly spread across the luxury, full-service, and limited service segments, then Hyatt could quadruple in size. Given Hyatt Hotels’s focus on the upper-end of each segment it operates in, I believe this scenario is unlikely. Table 4 Mkt Cap Total Total Avg. Rooms Rev. Owned Company ($MM) Hotels Rooms per Hotel as % Total Rev. Marriott International $ 9,745 3,457 603,009 174 9% Starwood Hotels & Resorts 7,078 992 298,500 301 34% InterContinental Hotels 4,069 4,438 646,679 146 36% Wyndham Worldwide 4,043 7,114 597,674 84 5% Choice Hotels International 1,960 6,021 487,410 81 1% Mean $ 5,379 4,404 526,654 157 17% Median 4,069 4,438 597,674 146 9% Hyatt Hotels Corporation $ 5,651 424 122,317 288 53% Source: Company reports Liquidity and Low Debt Enables Hyatt Hotels to Act Quickly In November 2009, Hyatt Hotels completed an initial public offering. This provided the company with a substantial cash position. Currently, Hyatt Hotels has a cash ratio of 2.68 while the mean for its peers is 0.15 (Table 5). Though the Company’s interest coverage was 0.9, Hyatt Hotels’s cash position of $1.3 billion enables the Company to comfortably pay any shortfall on its interest expense which was $56 million in 2009. Hyatt Hotels also had a debt to total assets ratio of 12% while most its peers had three times as much leverage. This difference suggests that the Company can still comfortably add debt to its capital structure. Combining the high cash ratio and the low debt level, Hyatt Hotels is in a good financial position to make acquisitions using a combination of cash and debt without weakening its financial position.
  7. 7. Lester Lie February 25, 2010 lester.lie@alumni.stern.nyu Lodging Table 5: Liquidity and Solvency Ratios EBIT/ Current Cash Hotels Int. Exp. Debt/Assets D/E Rato Ratio Marriott International NM 37% 24% 1.30 0.05 Starwood Hotels & Resorts 0.11 34% 29% 0.74 0.04 InterContinental Hotels NM 39% 22% 0.40 0.04 Wyndham Worldwide 5.21 38% 71% 0.92 0.08 Choice Hotels International 33.55 82% 12% 0.97 0.51 Mean 13.0 46% 32% 0.87 0.15 Median 5.2 38% 24% 0.92 0.05 Hyatt Hotels Corporation 0.9 12% 12% 4.02 2.68 Source: Company reports RISKS • Challenges in determining value of international portfolio and brand equity • Unclear how Hyatt Hotels will grow the hotel portfolio in terms of company-owned and franchise mix • Higher operating leverage than its peers because it owns 53% of its hotels while Starwood and other hotel companies own 35% and 17%, respectively • Family conflict could continue to distract the operation of the business BUSINESS BACKGROUND Hyatt Hotels Corporation is a global hospitality company that manages, franchises, owns, and develops Hyatt-branded hotels, resorts, residential, and vacation ownership properties around the world. Under the Park Hyatt, Grand Hyatt, Hyatt Regency, Hyatt, and Andaz brands, the Company’s worldwide portfolio consists of 424 Hyatt-branded properties (122,317 rooms and units). For the years ending December 31, 2009 and 2008, Hyatt derived approximately 80% of its revenues from operations in the US. As of December 31, 2009, Hyatt’s hotel portfolio breakdown is as follows: • 162 managed properties (63,062 rooms) – Hyatt Hotels operates under management agreements with third-party property owners • 109 franchised properties (16,607 rooms) – owned by third parties that have franchise agreements with Hyatt Hotels and are operated by third parties • 96 owned properties (including 4 consolidated hospitality ventures) (25,765 rooms) and 6 leased properties (2,851 rooms), all of which Hyatt Hotels manage • 26 managed properties owned or leased by unconsolidated hospitality ventures (11,746 rooms)
  8. 8. Lester Lie February 25, 2010 lester.lie@alumni.stern.nyu Lodging • 15 vacation ownership properties (962 units) managed by Hyatt Hotels • 10 residential properties (1,324 units) – all managed by Hyatt Hotels and some are owned by Hyatt On November 10, 2009, the company was listed on the New York Stock Exchange. Nearly 80% of the Company is controlled by the Pritzker family in the form of Class B shares which have 10 times the voting power of Class A shares. Thus, while Class B shares represent 60.3% of outstanding shares, they also represent 80% of the total voting power. Long-standing disagreements within the Pritzker family prompted the initial public offering to provide liquidity to various members. History In 1957, Jay Pritzker purchased the Hyatt House motel near the Los Angeles International Airport. Along with his brother, Donald Pritzker, the two built the company to include several modest hotels along the West Coast and Chicago. The Company went public in 1962. In 1967, Hyatt opened Hyatt Regency Atlanta which featured a 21-story atrium lobby. A year later, the Company formed Hyatt International Corporation and opened the Hyatt Regency Hong Kong in 1969. Eventually, Hyatt International Corporation became a separate public company. Throughout the 1970s, the Hyatt portfolio of hotels grew. In 1980, the Company introduced the Grand Hyatt and Park Hyatt brands. By 1982, the Pritzker family interests took both companies private. Family Issues Hyatt Hotels previously was closely held by Pritzker family. Financial tensions among four generations of Pritzkers are rumored to have prompted the initial public offering. Rumors emerged that certain family members believed they were not adequately compensated for their trust fund interests. In 2002, 18 year old Liesel Pritzker filed a $6 billion suit against Robert Pritzker and her 11 older cousins charging that they had misappropriated funds from trusts for her and her brother. The suit was settled in 2005 with the Pritzker fortune distributed among her 11 older cousins. Tensions also appear to have arisen from misgivings regarding how the family’s other business interests were operated. The initial public offering provided a liquidity event for the various Pritzker interests. Brands Park Hyatt (Full-service/Luxury): These hotels offer a high level of personalized service to their individual business and leisure travelers. Situated in many of the world’s finest cities, the 26 Park Hyatt hotels offer restaurants from award-winning chefs, may have spa facilities, and are decorated by paintings and sculptures from contemporary artists such as Gerhard Richter and Ed Paschke. The Company describes their competitors as the Four Seasons, Ritz-Carlton, Peninsula, St. Regis, and Mandarin Oriental hotels. As of December 31, 2009, they represented 4% of the Company’s total rooms with 1,122 rooms in North America and
  9. 9. Lester Lie February 25, 2010 lester.lie@alumni.stern.nyu Lodging 3,779 rooms internationally. Below is a list of the Park Hyatt hotels across the globe (bold-faced cities are 100% fully owned by Hyatt Hotels):
  10. 10. Lester Lie February 25, 2010 lester.lie@alumni.stern.nyu Lodging Chicago Shanghai Beaver Creek Seoul Baku, Azerbaijan Buenos Aires Melbourne Milan Paris Istanbul Saigon Washington DC Zurich Dubai Moscow Goa Toronto Canberra Jeddah, Saudi Arabia Mendoza Hamburg Tokyo Sydney Beijing Source: Company reports Andaz (Full-service/Upper upscale): Boutique hotels that have approximately 250 rooms. Currently, there are five hotels (Liverpool Street in London, Wall Street and Midtown locations in New York, Downtown San Diego, West Hollywood in Los Angeles) and they make up approximately 1% of the Company’s total rooms. These hotels cater to individual business and leisure travelers as well as offer venues for small meetings. The Company describes their competitors as the W Hotels, Mondrian, The Standard. Currently, there are 34 W Hotels in the US and 18 international locations. Grand Hyatt (Full-service/Upper upscale): These hotels cater to global business and leisure travelers in major cities and resort destinations. Grand Hyatt hotels may contain technology centers, spa and fitness centers, and business meeting facilities. As of December 31, 2009, these hotels represented 18% of the Company’s total hotel rooms and units. The Company describes their competitors in this category as Mandarin Oriental, Shangri-La, InterContinental, and Fairmont Hotels. Hyatt Regency and Hyatt (Full-service/Upper upscale): Hyatt Regency hotels cater to conventions, business travelers, and resort vacationers. Hotel sizes can vary from as few as 200 rooms to over 2,000 rooms. These hotels are often located in urban, suburban, airport, convention, and resort destinations. “Hyatt” branded properties typically have between 150 and 300 rooms and are located in secondary markets. Hyatt Regency and Hyatt hotels represent the Company’s core business. As of December 31, 2009, they represented 58% of Hyatt Hotels Corporation’s total rooms. The Company regards Marriott, Sheraton, Hilton, Renaissance, and Westin hotels as their main competition. Hyatt Place (Select Service/Upscale): Located in urban, airport, and suburban areas, Hyatt Place hotels are a new concept in the Hyatt portfolio that target business travelers. They represent 15% of the rooms in the Hyatt portfolio. Each of these facilities feature The Gallery, a coffee and wine bar and a guest kitchen that operates 24/7. The kitchen offers freshly prepared appetizers, soups, salads, sandwiches and breakfast, lunch and dinner entrees including waffles, grilled chicken quesadillas, buffalo chicken wraps, and 8” pizzas. Breakfast is complimentary. These hotels typically have between 125 and 200 rooms and are located. Courtyard by Marriott and Hilton Garden Inn are considered competitors. Hyatt Summerfield Suites (Select Service/Extended Stay): These 125 to 200 room, all-suite properties aim to provide individual and business travelers a
  11. 11. Lester Lie February 25, 2010 lester.lie@alumni.stern.nyu Lodging condominium-type experience. Each suite is configured as either a one or two bedroom and offers a fully equipped kitchen, 32” flat panel HDTVs, and free access to high speed Internet access. Properties may include a pool, barbeque grill, fitness center and business center. Monday through Thursday there is a complimentary Evening Social that provides residents a chance to mingle with other guests and hotel associates. Hyatt Summerfield Suites represent 3% of the Hyatt Hotels portfolio. Table 6: Major Shareholders Holder % Outstanding Goldman Sachs Group 28.86% FMR LLC 11.60% Lord Abbett & Company 9.05% BAMCO Inc. 8.20% AXA 6.70% Pershing Square C.M. 6.31% Oppenheimer Funds Inc. 5.66% Source: Yahoo! Finance INDUSTRY BACKGROUND Hyatt Hotels participates in a very competitive landscape that is segmented by class and the level of service. In addition to independent hotel and motel operators, several large corporations and real estate investment trusts operate hospitality companies including: Table 7 Mkt Cap Total Total LTM 2009 Avg. Rooms Company ($MM) Hotels Rooms Rev. ($MM) Rev Growth per Hotel Marriott International $ 9,745 3,457 603,009 $ 10,908 -15% 174 Starwood Hotels & Resorts 7,078 992 298,500 4,712 -18% 301 InterContinental Hotels 4,069 4,438 646,679 1,538 -19% 146 Wyndham Worldwide 4,043 7,114 597,674 3,750 -12% 84 Choice Hotels International 1,960 6,021 487,410 564 -12% 81 Mean $ 5,379 4,404 526,654 $ 4,294 -15% 157 Median 4,069 4,438 597,674 3,750 -15% 146 Hyatt Hotels Corporation $ 5,651 424 122,317 $ 3,332 -13% 288 Source: Company reports
  12. 12. Lester Lie February 25, 2010 lester.lie@alumni.stern.nyu Lodging Table 8: US Market Size and Chain Scale Avg. Hotel Chain Scale Brand Examples Rooms % of Total Room Size Luxury Four Seasons, Ritz Carlton 107,372 2.2% 304 Upper Upscale Marriott, Hilton, sheraton 600,711 12.4% 367 Upscale Hilton Garden Inn, Courtyard Cambria Suites 507,481 10.5% 146 Midscale w/F&B Quality, Clarion, Holiday Inn, Best Western, Ramada 510,066 10.6% 112 Sub-Total Full Service 1,725,630 35.7% 173 Midscale w/o F&B Comfort, La Quinta, Baymont Inn, Hampton Inn 824,018 17.1% 87 Economy Econo Lodge, Days Inn, Super 8, Red Roof Inn 765,527 15.8% 76 Sub-Total Limited Service 1,589,545 32.9% 81 Independents 1,515,573 31.4% 67 Total All Hotels 4,830,748 100.0% 93 Source: Smith Travel Research (December 2009) Revenue Hospitality companies generate revenues from a combination of the income generated by the hotels they own, income earned from managing properties owned by third parties, and franchise income from properties owned and managed by third-parties. Owned and leased hotels permit the owner to enjoy all the benefits of increased profitability and all the downside risk of declining profitability. They are an unlevered bet on the hospitality industry. In these hotels, the owner is responsible for the costs and capital expenditures associated with operating them. The cost structure of a typical hotel is more fixed than variable, so as demand and room rates increase over time, the pace of increase in operating profits typically is higher than the pace of increase of revenues. Management and franchise agreements allow hospitality companies to generate higher overall returns on invested capital because the capital investment under a typical management or franchise agreement is not significant. Third-party owners usually provide the capital necessary to build and maintain the hotels. They also pay a base amount calculated from the revenues of the hotel and an incentive fee that is a percentage of hotel profits – usually no more than 20% of profits. The actual percentage is determined by the terms of the management agreement. Thus, the franchisor does not share in all the benefits of increases in property profits during periods of higher demand and room rates. Third-party owners also pay an initial application fee and ongoing royalty fees based on a percentage of the gross room revenues. State of Industry In 2009, the hospitality industry suffered significant year over year declines in occupancy (480 bps) and the average daily room rate (8.8%) which both contributed to a 16.7% decline in revenue per available room (RevPAR).
  13. 13. Lester Lie February 25, 2010 lester.lie@alumni.stern.nyu Lodging Table 9: Hospitality RevPAR and Profits 1997 – 2009 $70 $30 $65 $25 $60 $B $55 $20 $50 $15 $45 $40 $10 1997 2000 2003 2006 2009 RevPAR Profits ($B) 68% $110 64% $100 Avg. Daily Rate Occupancy 60% $90 56% $80 52% $70 48% $60 1997 2000 2003 2006 2009 Occupancy ADR Source: Smith Travel Research (December 2009) Comparable Companies Analysis Profitability Hyatt had a negative net margin in 2009, an EBIT Margin of 1.4% and an EBITDA margin of 9.5%. The mean net margin for other hotel companies was 10.2%, 8.4%, and 12.7%, respectively; the mean net margin for hotel REITs was 0.2%, 0.2%, and 15.6%. Valuation Hyatt was trading at 2.15 times 2009 revenues, 1.42 times reported book value, and EV/EBITDA was 21.1. The mean P/S, P/BV, and EV/EBITDA for other hotel companies were 2.42, 13.37, and 43.5, respectively. For Hospitality REITs, the mean P/S was 2.49, the mean P/BV was 1.43, and the median EV/EBITDA was 20 times. Table 10: Valuation Multiples
  14. 14. Lester Lie February 25, 2010 lester.lie@alumni.stern.nyu Lodging Mkt Cap EV/ Company ($MM) EV P/S P/BV EBITDA Marriott International $ 9,745 $ 12,896 0.9 9.1 390.8 Starwood Hotels & Resorts 7,078 9,946 1.5 3.8 29.7 InterContinental Hotels 4,069 7,410 1.1 1.5 9.6 Wyndham Worldwide 4,043 2,169 3.5 NM 13.9 Choice Hotels International 1,960 5,151 2.6 27.3 52.0 Mean $ 5,379 $ 7,515 1.9 Median 4,069 7,410 1.5 Hyatt Hotels Corporation $ 5,651 $ 5,176 1.7 1.1 16.3 Source: Company reports
  15. 15. Lester Lie February 25, 2010 lester.lie@alumni.stern.nyu Lodging Table 11: Profitability Ratios RevPAR RevPAR EBIT EBITDA Net Hotels 2009 2008 Margin Margin Margin ROA ROE Marriott International $ 97 $ 120 -0.1% 1.6% NM NM NM Starwood Hotels & Resorts 129 172 0.6% 7.1% 1.5% 0.8% 0.7% InterContinental Hotels NA NA -0.7% 6.4% 13.8% 7.4% 4.3% Wyndham Worldwide 54 64 15.8% 20.6% 7.8% 3.1% 5.9% Choice Hotels International 35 41 26.2% 27.7% 17.4% 28.9% 4.2% Mean $ 78.65 $ 99.31 8.4% 12.7% 10.2% 10.1% 3.8% Median 75.29 92.18 0.6% 7.1% 10.8% 5.2% 4.2% Hyatt Hotels Corporation $ 100.87 $ 123.89 1.4% 9.5% NM NM NM Source: Company reports
  16. 16. Lester Lie February 25, 2010 lester.lie@alumni.stern.nyu Lodging Appendix A Competitors Marriott International Inc. (603,009 rooms, LTM Revenues: $11.0 billion) • Luxury Brands: The Ritz-Carlton, Bulgari Hotels & Resorts • Full-Service Brands: Marriott Hotels & Resorts, JW Marriott, Renaissance Hotels • Limited Service Brands: Courtyard By Marriott, Fairfield Inn & Suites by Marriott, Springhill Suites by Marriott, Residence Inn by Marriott, TownePlace Suites by Martiott, Marriott ExecuStay Starwood Hotels & Resorts Worldwide Inc. (298,500 rooms, LTM Revenues: $4.7 billion) • Luxury Brands: St. Regis, Luxury Collection • Full-Service Brands: W Hotels, Sheraton, Le Meridien, Aloft • Limited Service: Four Points Wyndham Worldwide Corporation (593,300 rooms, LTM Revenues: $3.8 billion) • Full-service: Wyndham Hotels and Resorts, Wingate by Wyndham, Ramada Inn, Baymont Inn & Suites, Howard Johnson (International) • Limited Service: Days Inn, Super 8, Microtel Inns & Suites, Howard Johnson (North America), Travelodge, Knights Inn, Hawthorne Suites InterContinental Hotels Group plc (646,679 rooms, LTM Revenues: $1.5 billion) • Full-Service Brands: InterContinental, Crowne Plaza, Holiday Inn, Hotel Indigo • Limited Service Brands: Holiday Inn Express, Staybridge Suites, Candelwood Suites Choice Hotels International Inc. (487,410 rooms, LTM Revenues: $564 million) • Full-Service Brands: Ascend Collection, Clarion • Limited Service Brands: Cambria Suites, Comfort Inn, Comfort Suites, Sleep Inn, Quality Inn, MainStay Suites, Suburban Extended Stay Hotel, Econo Lodge, Rodeway Inn Source: Company reports
  17. 17. Lester Lie February 25, 2010 lester.lie@alumni.stern.nyu Lodging Appendix B: Hyatt Hotels- Historical and Projected Income Statement ($ in millions, except per share data) 2007 2008 2009 2010 2011 2012 2013 Revenues Owned and leased hotels $ 2,039 $ 2,139 $ 1,782 $ 1,900 $ 2,025 $ 2,157 $ 2,255 Management and franchise fees 315 290 223 238 253 270 282 Other fees 103 83 49 52 56 59 62 Other revenues from managed properties 1,281 1,325 1,278 1,362 1,452 1,547 1,617 Total Revenues $ 3,738 $ 3,837 $ 3,332 $ 3,552 $ 3,786 $ 4,034 $ 4,216 Cost of Owned and Leased Hotels 1,524 1,583 1,462 1,491 1,551 1,612 1,643 Gross profit $ 2,214 $ 2,254 $ 1,870 $ 2,061 $ 2,235 $ 2,422 $ 2,573 Gross profit margin (%) 59.2% 58.7% 56.1% 58.0% 59.0% 60.0% 61.0% Operating Expenses: Depreciation and amortization $ 214 $ 249 $ 270 $ 241 $ 256 $ 273 $ 286 Other direct costs 42 26 13 26 28 29 31 SG&A 292 290 261 275 293 312 326 Other costs from managed properties 1,281 1,325 1,278 1,362 1,452 1,547 1,617 Total Operating Expenses $ 1,829 $ 1,890 $ 1,822 $ 1,904 $ 2,029 $ 2,162 $ 2,259 Operating income (EBIT) $ 385 $ 364 $ 48 $ 158 $ 206 $ 260 $ 314 Operating margin (%) 10.3% 9.5% 1.4% 4.4% 5.4% 6.4% 7.4% Net (losses) gains and interest income from mktble sec. 15 (36) 29 - - - - Equity earnings from unconsol. hospitality ventures 11 14 (13) - - - - Interest expense (43) (75) (56) (43) (43) (43) (43) Gains on sales of real estate 22 - - - - - - Asset impairments (61) (86) (15) - - - - Other income, net 145 23 (48) - - - - Pretax income $ 474 $ 204 $ (55) $ 115 $ 163 $ 216 $ 270 Income taxes (208) (90) 10 (40) (57) (76) (95) 43.9% 44.1% 18.2% 35.0% 35.0% 35.0% 35.0% Income from continuing operations $ 266 $ 114 $ (45) $ 74 $ 106 $ 141 $ 176 Discontinued operations Income from disc. operations, net of tax 3 1 (1) - - - - Gain (loss) on sale of disc. operations, net of tax 2 55 - - - - - Cumulative effect of change in accounting principle - - - - - - - Net income $ 271 $ 170 $ (46) $ 74 $ 106 $ 141 $ 176 Net (income) attributable to noncontrolling interests (1) (2) 3 - - - - Net income attributable to Hyatt Hotels Corp $ 270 $ 168 $ (43) $ 74 $ 106 $ 141 $ 176 Net Margin (%) 7.2% 4.4% NM 2.1% 2.8% 3.5% 4.2% Depreciation & Amortization 214 249 270 241 256 273 286 EBITDA $ 599 $ 613 $ 318 $ 398 $ 462 $ 533 $ 599 EBITDA Margin (%) 16.0% 16.0% 9.5% 11.2% 12.2% 13.2% 14.2% Income Statement Assumptions and Drivers: Revenues ADR $ 173 $ 178 $ 154 $ 162 $ 170 $ 178 $ 184 y-o-y change (%) 2.9% -13.5% 5.0% 5.0% 5.0% 3.0% Occupancy 67.70% 69.60% 65.50% 66.50% 67.50% 68.50% 69.50% RevPAR $ 117 $ 124 $ 101 $ 108 $ 115 $ 122 $ 128 y-o-y change (%) 5.8% -18.6% 6.6% 6.6% 6.6% 4.5% Owned & Lease Hotels as % of Revenues 40.8% 41.3% 43.9% 42.0% 41.0% 40.0% 39.0% Operating Expenses as a % of Revenues Depreciation & amortization 5.7% 6.5% 8.1% 6.8% 6.8% 6.8% 6.8% Other direct costs 1.1% 0.7% 0.4% 0.7% 0.7% 0.7% 0.7% SG&A 7.8% 7.6% 7.8% 7.7% 7.7% 7.7% 7.7% Capex/D&A 1.76 1.04 0.80 1.00 1.00 1.00 1.00 Tax Rate 35% 35% 35% 35% 35% 35% 35%
  18. 18. Lester Lie February 25, 2010 lester.lie@alumni.stern.nyu Lodging Appendix C: Hyatt Hotels- Historical and Projected Balance Sheet ($ in millions, except per share data) 2007 2008 2009 2010 2011 2012 2013 Assets: Current Assets: Cash and cash equivalents 416 428 1,327 1,366 1,607 1,513 1,667 Restricted cash 13 37 11 - - - - Receivables, net of allowances 318 281 226 253 278 305 328 Inventories 150 170 133 139 148 157 164 Prepaids and other assets 101 141 292 313 314 315 308 Assets of discontinued operations 67 - - - - - - Total Current Assets $ 1,065 $ 1,057 $ 1,989 $ 2,070 $ 2,347 $ 2,290 $ 2,467 Property and equipment, net 3,518 3,495 3,605 3,605 3,605 3,605 3,605 Other LT Assets 1,665 1,567 1,561 1,566 1,663 1,813 1,868 Total assets $ 6,248 $ 6,119 $ 7,155 $ 7,241 $ 7,615 $ 7,708 $ 7,940 Liabilities: Current Liabilities: Current maturities of long-term debt 26 38 12 12 132 3 3 Accounts payable 303 318 196 245 306 318 324 Accrued expenses 360 297 287 308 328 349 365 Liabilities of discontinued operations 8 - - - - - - Total Current Liabilities 697 653 495 565 766 670 692 Long-term debt 1,288 1,209 840 828 846 843 840 Other long-term liabilities 794 665 780 734 782 833 871 Total liabilities $ 2,779 $ 2,527 $ 2,115 $ 2,127 $ 2,394 $ 2,347 $ 2,403 Stockholders' equity: Paid in Capital 3,326 2,243 3,733 3,733 3,733 3,733 3,733 Retained Earnings/Accumulated Deficit 143 1,349 1,307 1,381 1,488 1,628 1,804 Stockholders' equity $ 3,469 $ 3,592 $ 5,040 $ 5,114 $ 5,221 $ 5,361 $ 5,537 Total liabilities and stockholders' equity $ 6,248 $ 6,119 $ 7,155 $ 7,241 $ 7,615 $ 7,708 $ 7,940 Balance check - - - - - - - a. Asset Drivers Accounts Receivables (DSOs) 7.8 6.7 6.2 6.5 6.7 6.9 7.1 Inventory (DSIs) 9.0 9.8 8.3 8.5 8.7 8.9 9.1 Prepaids and Other as a % of Revenues 2.7% 3.7% 8.8% 8.8% 8.3% 7.8% 7.3% Other LT assets as a % of Revenues 45% 41% 47% 44% 44% 45% 44% b. Liability Drivers Accounts Payable (DPOs) 18.1 18.3 12.2 15.0 18.0 18.0 18.0 Accrued Expenses as a % of Revenue 9.6% 7.7% 8.6% 8.66% 8.66% 8.66% 8.66% Other LT Liabilities as % of Revenue 21.2% 17.3% 23.4% 20.66% 20.66% 20.66% 20.66% c. Schedule of Property and Equipment Net Property and Equipment, beginning 3,495 3,605 3,605 3,605 3,605 + Capex 216 241 256 273 286 + extra ordinary Capex 164 - Depreciation (270) (241) (256) (273) (286) - Sale of PP&E, net - Net Property and Equipment, ending 3,605 3,605 3,605 3,605 3,605 - d. Changes in Noncash Working Capital Noncash Working Capital (48) (24) 167 140 (26) 107 107 Change in Noncash Working Capital 24 191 (27) (166) 132 1 e. Long-Term Debt Long-Term Debt, beginning 1,209 840 828 846 843 Repayment of Long-Term Debt (12) (12) (132) (3) (3) Additional repayment of LT Debt (855) - - - - Issuance of new Long-Term Debt 498 - 150 - - Long-Term Debt, ending 840 828 846 843 840 Cost of debt 5.14% 5.14% 5.14% 5.14%
  19. 19. Lester Lie February 25, 2010 lester.lie@alumni.stern.nyu Lodging Appendix D: Hyatt Hotels- Historical and Projected Statement of Cash Flows 2007 2008 2009 2010 2011 2012 2013 Cash Flows from Operating Activities Net income $ 271 $ 170 $ (46) $ 74 $ 106 $ 141 $ 176 Gain on sale of discontinued operations (2) (55) - - - - - (Income) loss from discontinued operations (3) (1) 1 - - - - Income (loss) from continuing operations $ 266 $ 114 $ (45) $ 74 $ 106 $ 141 $ 176 Adjustments to reconcile net income to net cash provided by operating activities Depreciation & Amortization 214 249 270 241 256 273 286 Deferred income taxes (100) 6 73 - - - - Asset impairments - 86 15 - - - - Provisions for hotel loans 61 - 9 - - - - Equity (earnings) losses from unconsolidated hospitality ventures1 (5) 28 - - - - Income from cost method investments (87) (64) (22) - - - - Gain on sale of real estate (22) - - - - - - Foreign currency (gains) losses (17) 23 (5) - - - - Net realized losses from marketable securities - 14 - - - - - Net unrealized (gains) losses from other marketable securities (12) 23 (10) - - - - Other 11 20 47 - - - - Increase (decrease) in cash attributable to changes in assets and liabilities Receivables, net (19) 4 57 (27) (25) (27) (23) Inventories 14 (21) (10) (6) (9) (9) (7) Prepaid income taxes - (15) (67) (21) (2) (0) 7 Accounts payable (19) (10) (19) 49 61 12 6 Accrued compensation and benefits 71 (137) (45) 21 20 21 16 Net cash provided by operating activities of continuing operations $ 362 $ 287 $ 276 $ 331 $ 408 $ 411 $ 460 Cash Flows from Investing Activities Contributions to investments and purchases of marketable securities (32) (87) (132) Distributions from investments 116 209 24 Proceeds from sale of investments and marketable securities - 8 - Proceeds from notes receivable 19 19 14 Issuance of notes receivable (23) (281) (7) Acquisitions, net of cash acquired (240) (28) (109) (5) (97) (150) (55) Capital expenditures (377) (258) (216) (241) (256) (273) (286) Contract acquisition costs (5) (8) (10) Proceeds from sales of real estate 98 - - Decrease in restricted cash-investing 48 3 9 11 0 0 0 Net cash used in investing activities $ (396) $ (423) $ (427) $ (234) $ (354) $ (424) $ (340) Cash Flows from Financing Activities Proceeds from issuance of long-term debt 601 - 498 - 150 - - Proceeds from revolver 785 175 675 - - - - Payments on revolver (785) (145) (705) - - - - Proceeds from (repurchase of) senior subordinated notes - - (600) - - - - Repayments of long-term debt (337) (13) (257) (12) (12) (132) (3) Other debt payments (13) (11) (24) (46) 48 51 38 Decrease (increase) in restricted cash - financing - (17) 19 - - - - Distributions to noncontrolling interests (1) (2) (1) - - - - Purchase of noncontrolling interests - (7) - - - - - Costs related to issuance of debt, stock and amendment of revolver(23) - (18) - - - - Settlement of interest rate swap agreements - - (13) - - - - Issuance of convertible preferred stock 500 - - - - - - Issuance of common stock, net of related costs of $4 MM - - 1,355 - - - - Issuance of Class A common stock in IPO, net of underwriter fees - $7MM and other issuance costs of $8 MM of - 127 - - - - Purchase of treasury stock (1,101) - - - - - - Net cash provided by (used in) financing activities of continuing(374) $ $ operations (20) $ 1,056 $ (58) $ 186 $ (81) $ 35 Cash provided by discontinued operations Net cash provided by operating activities in discontinued operations 24 4 - - - - - Net cash provided by investing activities of discontinued operations 7 139 - - - - - Net cash provided by discontinued operations $ 31 $ 143 $ - $ - $ - $ - $ - Effect of exchange rate changes on cash $ (14) $ 25 $ (6) $ - $ - $ - $ - Net increase (decrease) in cash and cash equivalents $ (391) $ 12 $ 899 $ 39 $ 241 $ (94) $ 154 Cash - beginning of the year 807 416 428 1,327 1,366 1,607 1,513 Cash - ending of the year $ 416 $ 428 $ 1,327 $ 1,366 $ 1,607 $ 1,513 $ 1,667
  20. 20. Lester Lie February 25, 2010 lester.lie@alumni.stern.nyu Lodging Appendix E: Hyatt Hotels Corporation - EBITDA Exit Multiple Method Discounted Cash Flow Analysis - EBITDA Multiple Method Value Date February 25, 2010 Current Shares Outstanding 173.9 2009 2010 2011 2012 2013 Total Revenues $ 3,332 $ 3,552 $ 3,786 $ 4,034 $ 4,216 growth (%) -13.2% 6.6% 6.6% 6.6% 4.5% EBITDA 318 398 462 533 599 margin(%) 9.5% 11.2% 12.2% 13.2% 14.2% Less: Taxes 10 (40) (57) (76) (95) Tax-effected EBITDA 308 438 520 609 694 Less: Capital Expenditures (216) (241) (256) (273) (286) Less: Changes in Noncash Working Capital 191 (27) (166) 132 1 Free Cash Flow 283.0 170.6 97.6 467.8 409.1 -39.7% -39.7% -42.8% 379.4% -12.5% End Date 365 730 1095 1460 Valuation Date 56 56 56 56 Discount Period 0.85 1.85 2.85 3.85 PV of FCF @ 8% $ 283 $ 160 $ 85 $ 376 $ 304 9% $ 283 $ 159 $ 83 $ 366 $ 294 10% $ 283 $ 157 $ 82 $ 357 $ 284 11% $ 283 $ 156 $ 80 $ 348 $ 274 12% $ 283 $ 155 $ 79 $ 339 $ 265 EBITDA EXIT MULTIPLE METHOD A + B = C Discounted PV of Terminal Value as a Firm Value Cash Flows Multiple of TV EBITDA Discount Rate 2010-2013 12.0x 14.0x 16.0x 18.0x 20.0x 12.0x 14.0x 16.0x 18.0x 20.0x 8.0% $924 $5,347 $6,238 $7,129 $8,021 $8,912 $6,272 $7,163 $8,054 $8,945 $9,836 9.0% $901 $5,161 $6,021 $6,881 $7,741 $8,601 $6,062 $6,922 $7,783 $8,643 $9,503 10.0% $879 $4,983 $5,813 $6,644 $7,474 $8,305 $5,862 $6,692 $7,523 $8,353 $9,184 11.0% $858 $4,812 $5,614 $6,416 $7,218 $8,020 $5,670 $6,472 $7,274 $8,076 $8,878 12.0% $837 $4,649 $5,424 $6,199 $6,974 $7,748 $5,487 $6,261 $7,036 $7,811 $8,586 - D = E F Total Equity Value Implied Share Price Discount Rate Net Debt 12.0x 14.0x 16.0x 18.0x 20.0x 12.0x 14.0x 16.0x 18.0x 20.0x 8.0% -$475 $6,747 $7,638 $8,529 $9,420 $10,311 $ 38.80 $ 43.93 $ 49.05 $ 54.18 $ 59.30 9.0% -$475 $6,537 $7,397 $8,258 $9,118 $9,978 $ 37.60 $ 42.54 $ 47.49 $ 52.44 $ 57.38 10.0% -$475 $6,337 $7,167 $7,998 $8,828 $9,659 $ 36.44 $ 41.22 $ 46.00 $ 50.77 $ 55.55 11.0% -$475 $6,145 $6,947 $7,749 $8,551 $9,353 $ 35.34 $ 39.95 $ 44.57 $ 49.18 $ 53.79 12.0% -$475 $5,962 $6,736 $7,511 $8,286 $9,061 $ 34.29 $ 38.74 $ 43.20 $ 47.65 $ 52.11
  21. 21. Lester Lie February 25, 2010 lester.lie@alumni.stern.nyu Lodging Appendix F: Estimate of US Hotel Portfolio Value Total Asset Value: $ 3,723,000,000 Prem/ Properties City State Disc. Price Rooms Price/Room Ownership 1 Hyatt Place Birmingham AL 100% $ 14,700,000 126 $ 116,583 100% Jun-09 Marriott Courtyard Troy AL 100% $ 8,696,456 90 $ 96,627 Jun-09 Hilton Garden Inn Dothan AL 100% $ 11,600,836 104 $ 111,547 Apr-08 Residence Inn by Marriott Dothan AL 100% $ 9,669,000 84 $ 115,107 Jan-07 Homewood Suites Birmingham AL 90% $ 15,100,000 95 $ 158,947 2 Hyatt Regency Scottsdale AZ 120% $ 72,700,000 492 $ 147,820 100% 3 Hyatt Place Phoenix AZ 100% $ 8,800,000 127 $ 69,308 100% 4 Hyatt Place Scottsdale AZ 100% $ 8,800,000 127 $ 69,308 100% 5 Hyatt Place Gilbert AZ 35% $ 3,100,000 127 $ 24,258 50% Mar-10 Highland at Biltmore Phoenix AZ 100% $ 14,782,000 120 $ 123,183 Dec-09 La Quinta Inn & Suites Phoenix AZ 100% $ 4,480,000 66 $ 67,879 Aug-09 The Views Inn Sedona AZ 100% $ 2,675,000 40 $ 66,875 Jul-09 Prescott Inn & ConferencePrescott Center AZ 100% $ 6,000,000 82 $ 73,171 6 Grand Hyatt San Francisco CA 100% $ 117,900,000 685 $ 172,047 100% 7 Hyatt San Francisco CA 110% $ 56,900,000 313 $ 165,158 100% Mar-10 Four Seasons San Franciscoan Francisco S CA 100% $ 35,000,000 277 $ 126,354 Jan-10 Tuscan Inn At Fisherman'sSan Francisco Wharf CA 100% $ 36,500,000 221 $ 165,158 Jul-09 W San Francisco San Francisco CA 100% $ 87,966,667 404 $ 217,739 8 Hyatt Place Fremont CA 70% $ 14,600,000 151 $ 137,956 100% 9 Hyatt Regency Santa Clara CA 70% $ 84,800,000 501 $ 241,667 100% Dec-07 Homewood Suites San Jose CA 100% $ 21,862,000 140 $ 156,157 Jul-07 Hilton Garden Inn Cupertino CA 100% $ 38,500,000 165 $ 233,333 May-07 Cypress Hotel Cupertino CA 100% $ 56,000,000 224 $ 250,000 Apr-07 Embassy Suites Santa Clara CA 100% $ 34,200,000 257 $ 133,074 Apr-06 Marriott Santa Clara CA 100% $ 94,600,000 759 $ 124,638 10 Hyatt Regency Monterey CA 100% $ 94,500,000 550 $ 171,850 100% Jan-10 Pacific Grove Inn Pacific Grove CA 120% $ 2,850,000 16 $ 178,125 Jul-09 Carmel Valley Ranch Carmel CA 100% $ 20,000,000 144 $ 138,889 May-08 Monterey Surf Inn/Best Value Surf Inn Monterey CA 120% $ 3,300,000 28 $ 117,857 Mar-07 Hotel Pacific Monterey CA 70% $ 29,000,000 105 $ 276,190 11 Hyatt Place Rancho Cordova CA 100% $ 7,500,000 127 $ 58,737 100% Dec-08 Best Western Expo Inn Sacramento CA 100% $ 6,000,000 127 $ 47,244 Sep-08 Holiday Inn Northeast Sacramento CA 100% $ 19,000,000 230 $ 82,609 Jul-08 Host Airport Hotel Sacramento CA 33% $ 15,000,000 89 $ 168,539 Jul-08 Budget Inn Sacramento CA 100% $ 4,750,000 96 $ 49,479 12 Hyatt Regency Long Beach CA 65% $ 49,400,000 528 $ 143,843 100% Nov-07 Best Western Long Beach CA 100% $ 12,675,050 100 $ 126,751 May-07 Residence Inn Long Beach CA 100% $ 45,400,000 216 $ 210,185 Dec-06 Holiday Inn Hotel & Conference Ctr Long Beach CA 100% $ 21,000,000 222 $ 94,595 13 Hyatt Regency Huntington Beach CA 35% $ 21,000,000 517 $ 290,776 40% Mar-08 By the Sea Inn Laguna Beach CA 100% $ 8,100,000 36 $ 225,000 Jan-08 Eiler's Inn Laguna Beach CA 100% $ 3,915,000 14 $ 279,643 Oct-07 Marriott Laguna Cliffs Dana Point CA 70% $ 197,500,000 376 $ 525,266 14 Hyatt Regency Denver CO 100% $ 22,700,000 451 $ 50,298 100% 15 Hyatt Place Lone Tree CO 100% $ 6,400,000 127 $ 50,298 100% 16 Hyatt Place Aurora CO 100% $ 6,300,000 126 $ 50,298 100% 17 Hyatt Place Englewood CO 100% $ 6,300,000 126 $ 50,298 100% 18 Hyatt Summerfield Suites Englewood CO 100% $ 6,800,000 135 $ 50,298 100%
  22. 22. Lester Lie February 25, 2010 lester.lie@alumni.stern.nyu Lodging Prem/ Properties City State Disc. Price Rooms Price/Room Ownership Mar-10 Denver Intl Hotel & SuitesDenver CO 100% $ 4,500,000 87 $ 51,724 Oct-09 Radisson Denver North - Graystone Castle Denver CO 100% $ 4,925,000 133 $ 37,030 Jul-09 Sleep Inn North Denver CO 100% $ 4,200,000 100 $ 42,000 May-08 Holiday Inn Express Englewood CO 100% $ 6,410,000 91 $ 70,440 19 Hyatt Regency Greenwich CT 120% $ 15,200,000 373 $ 34,033 100% 20 Hyatt Place Mystic CT 100% $ 2,700,000 79 $ 34,033 100% Sep-09 Enfield CT 100% $ 6,500,000 174 $ 37,356 Mar-09 East Hartford CT 100% $ 2,800,000 105 $ 26,667 Nov-08 YMCA Hotel Stamford CT 100% $ 4,650,000 132 $ 35,227 Mar-08 Wellesley Inn Danbury CT 100% $ 5,500,000 181 $ 30,387 Mar-07 Holiday Inn Stamford CT 70% $ 22,000,000 380 $ 57,895 21 Park Hyatt Washington DC 100% $ 76,000,000 216 $ 351,917 100% Mar-10 Sofitel Washington DC 100% $ 95,000,000 237 $ 400,844 Jan-10 District Hotel Washington DC 200% $ 7,449,500 58 $ 128,440 Feb-08 Former Wyndham City Center Washington DC 100% $ 141,300,000 355 $ 398,028 22 Hyatt Regency Miami FL 85% $ 70,465,000 612 $ 135,505 100% 23 Hyatt Summerfield Suites Miami FL 75% $ 15,825,000 156 $ 135,505 100% Feb-10 1671 Washington Ave Miami Beach FL $ 6,600,000 47 $ 140,426 Dec-09 Beach Plaza Hotels & Villas Miami Beach FL $ 12,250,000 77 $ 159,091 Nov-09 Habana Libre Hotel Miami Beach FL $ 9,000,000 78 $ 115,385 Aug-09 Doubletree Hotel Miami FL $ 12,750,000 196 $ 65,051 Sep-08 Courtyard by Marriott Miami FL $ 15,000,000 118 $ 127,119 24 Hyatt Key West FL 100% $ 18,800,000 118 $ 159,353 100% Aug-08 The Artist House Guesthouse West Key FL $ 2,130,000 7 $ 304,286 Oct-07 Sheraton Suites Key West FL 65% $ 39,000,000 180 $ 216,667 Oct-07 The Inn at Key West Key West FL 65% $ 34,000,000 105 $ 323,810 May-07 Atlantic Shores Resort Key West FL 65% $ 14,040,000 72 $ 195,000 25 Grand Hyatt Tampa FL 90% $ 34,920,000 445 $ 87,232 100% 26 Hyatt Place Tampa FL 100% $ 2,800,000 126 $ 22,238 100% Apr-10 Embassy Suites Tampa FL $ 77,000,000 360 $ 213,889 Apr-09 Howard Johnson Tampa FL $ 3,080,422 188 $ 16,385 Dec-08 Tampa FL $ 2,500,000 89 $ 28,090 May-08 Tampa FL $ 7,500,000 83 $ 90,361 Apr-08 Sheraton Suites Tampa Airport Tampa FL $ 24,000,000 259 $ 92,664 Oct-07 Doubletree Tampa FL $ 40,000,000 489 $ 81,800 27 Hyatt Regency Bonita Springs FL 120% $ 91,080,000 454 $ 167,136 100% 28 Hyatt Place Estero FL 85% $ 6,800,000 108 $ 74,250 50% Oct-07 Courtyard by Marriott Naples FL 60% $ 17,910,000 98 $ 182,755 Jul-07 Bonita Beach Plantation Resort Springs Bonita FL 60% $ 2,750,000 19 $ 144,737 Dec-06 Mini Resort -1202 Bonita Springs FL 60% $ 5,150,000 49 $ 105,102 Oct-06 Stoneys Courtyard Inn Naples FL 60% $ 6,750,000 76 $ 88,816 Jun-06 Vanderbilt Inn Naples FL 75% $ 71,667,000 147 $ 487,531 Aug-05 Inn at Pelican Bay Naples FL 80% $ 13,300,000 100 $ 133,000 29 Hyatt Place Lakeland FL 100% $ 9,100,000 127 $ 71,833 100% Jun-08 Hampton Inn & Suites Plant City FL $ 8,000,000 117 $ 68,376 Aug-06 Lakeland FL $ 6,850,000 106 $ 64,623 Jun-05 Residence Inn Lakeland FL 65% $ 9,900,000 78 $ 126,923 30 Hyatt Place Orlando FL 100% $ 11,500,000 128 $ 89,481 100% Jan-10 Renaissance Orlando Airport Orlando FL $ 27,842,000 298 $ 93,430 Oct-08 Orlando FL $ 6,975,000 98 $ 71,173 Jan-08 Hawthorne Suites Orlando FL 75% $ 19,900,000 134 $ 148,507 Jan-07 Hawthorne Suites Orlando FL 60% $ 18,300,000 134 $ 136,567

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