Wyndham Midtown 45 Financial Analysis

Wyndham
Midtown 45
205 E 45th St, New York, NY 10017
Josh Bagley, Zachary Cahn, Gregory Davis,
Nick Kavourias, Joel Robinson
IPRE 348: Spring 2014

Wyndham Midtown 45 ii
Wyndham Midtown 45
205 E 45th St, New York, NY 10017
Executive Summary
This analysis of the Wyndham Midtown 45 Hotel, formerly known the Alex Hotel, will
examine the hotel’s current standing and provide insight on the highest and best use of
the asset. The Wyndham Midtown 45 Hotel, located at 205 East 45th Street, is a
cornerstone of the midtown hotel market, yet is currently struggling to maintain an
identity. The hotel, which is defined by 33 floors and 203 spacious rooms, was recently
purchased by the Wyndham Vacation
Ownership in February of 2013 for $115
million. Wyndham will begin
converting rooms to timeshares in the
near future. Still operating in the
meantime as a four star hotel, the
Wyndham is a great place to stay for a
variety of different guests, and is
located near key attractions like the
United Nations building. Although the
hotel has recently underperformed
financially (81% occupancy with an ADR of $275 trailing 12 months ending October),
we ultimately believe that the ownership of this asset should not convert the Wyndham
into a timeshare property. Thus we will evaluate this asset as a hotel, but integrate the
transition into our analysis of this asset as a whole.

Wyndham Midtown 45 iii
Table of Contents
Executive Summary.....................................................................................................................ii
Hotel History & Structure........................................................................................................... 1
Hotel Location .............................................................................................................................. 2
Property Description ................................................................................................................... 6
Physical Structure .................................................................................................................... 6
David Rockwell ........................................................................................................................ 7
Amenities .................................................................................................................................. 9
Wyndham Worldwide .............................................................................................................. 12
Wyndham Worldwide Corporation.................................................................................... 12
Overview..........................................................................................................................................................12
Business Strategy.............................................................................................................................................14
Product Markets and Trends.........................................................................................................................15
Financial Resources.........................................................................................................................................16
Wyndham Worldwide and the Timeshare Industry ........................................................ 18
Manhattan Hospitality Industry.............................................................................................. 21
New York City Timeshares .................................................................................................. 21
The New York City Hotel Market ....................................................................................... 22
Macroeconomic Factors......................................................................................................... 29
Identified Hotel Guests ............................................................................................................. 30
Competitive Set Properties:...................................................................................................... 31
Fitzpatrick Grand Central Hotel.......................................................................................... 32
The Roger Smith Hotel.......................................................................................................... 33
Residence Inn New York Manhattan Midtown East ........................................................ 34

Wyndham Midtown 45 iv
Affinia 50 ................................................................................................................................. 35
The Benjamin .......................................................................................................................... 36
Financial Analysis...................................................................................................................... 37
Financial Analysis Roadmap................................................................................................ 37
Section 1: RNAADR Analysis.......................................................................................................................38
Section 2: FIXVAR Analysis...........................................................................................................................38
Section 3: Equity Analysis..............................................................................................................................38
Most Likely Scenario Valuation of Wyndham Property...................................................... 39
Section 1: RNAADR Analysis .............................................................................................. 40
Competitive Set ...............................................................................................................................................40
Occupancy........................................................................................................................................................42
Secondary Competitors ..................................................................................................................................44
Supply and Demand.......................................................................................................................................46
Future Occupancy Rate Growth ...................................................................................................................50
Average Daily Rate .........................................................................................................................................50
FIXVAR Analysis- Most Likely Case .................................................................................. 52
Revenues ..........................................................................................................................................................53
Expenses ...........................................................................................................................................................55
Equity Valuation- Most likely Case..................................................................................... 56
Worst-Case Scenario Valuation of Wyndham Property....................................................... 61
FIXVAR WORST-CASE ........................................................................................................ 64
Equity Analysis Worst-Case..........................................................................................................................70
Best-Case Scenario Valuation of Wyndham Property.......................................................... 73
FIXVAR BEST-CASE ............................................................................................................. 76
Equity Analysis ...............................................................................................................................................78
Conclusion .................................................................................................................................. 82
Appendix....................................................................................Error! Bookmark not defined.

Wyndham Midtown 45 1
Hotel History & Structure
The Alexico Group, led by Simon Elias and Izak Senbahar, previously owned the
property before their fallout at the height of the financial crisis. Alexico also owned the
Flatotel Hotel at at 135 West 52nd Street. The two hotels combined for a total of $368
million in liabilities in 2009, and thus the Alexico group defaulted on its loans. The joint
venture of The Rockpoint, The Atlas, & The Procaccianti group purchased the debt on
the two hotels, held by Anglo Irish Bank, at a discount in 2010 for an undisclosed sum,
then sued to foreclose on the Alexico group. The Alexico group delayed the foreclosure
on the two properties until 2012, when Elias and Senbahar eventually filed for
bankruptcy protection.
After much speculation of a sale, in February of 2013 the hotel was finally purchased by
Wyndham Vacation Ownership for $115 million from the joint venture. Wyndham will
be purchasing the property in pieces over the next three years, says the company. The
203-room hotel was renamed as the Wyndham Midtown 45, and will be converted to a
time-share. It will be operated and managed by Wyndham Hotel Group, according to
Jeff Wagoner, president of Wyndham Hotel Group Management.

Hotel Location
The four-star Wyndham Midtown 45 hotel is located at 205 East 45th Street, right along
3rd Avenue in the Turtle Bay neighborhood. It is a convenient walk from Grand
Central Terminal, five different subway lines, and beautiful Bryant Park. A short
distance away, guests can enjoy high-end shopping along Fifth Avenue, or in the
winter, ice skate in the iconic Rockefeller Plaza. The Wyndham Midtown 45 is
surrounded by great places to eat, including the historic Palm Restaurant, Sparks
Steakhouse, or one of Manhattan’s most famous Japanese restaurants, Sushi
Yasuda. Late night, the property is a safe walking distance from some of the city’s most
popular bars and clubs, such as The Perfect Pint and Whiskey Blue.

The hotel's location places it in a very convenient area for transit. Located next to 3rd
Avenue, the hotel offers easy access to the Queens-Midtown Tunnel and the
Queensboro Bridge. Both of these transit arteries offer quick access to the two Queens
Airports (LaGuardia and John F. Kennedy) as well as an easy route to get out to Long
Island. The proximity to FDR allows for guests to quickly move North or South along
Manhattan. Using this highway is much faster than taking the streets to get around
New York. A quick walk away from Grand Central Terminal allows guests easy access
to Metro-North train service to the New York and Connecticut suburbs as well as some
of the smaller cities located in the region. Subway access makes getting to Penn Station
an easy trip, placing all of New Jersey (including Newark Airport) and Long Island
within reach of a quick train ride.
The Turtle Bay neighborhood houses a number of large companies. Many airlines have
offices in this neighborhood including Avianca, Ethiopian Airlines, and Delta Airlines.
Fujitsu also maintains a large office in this neighborhood. Just a few blocks away you
will find the Chrysler Building and the MetLife building which both house a number of
other large multi-national companies. These large companies combined with the busy
retail corridors of Park Avenue and Lexington Avenue, and the bustling transportation
hub of Grand Central Terminal place this hotel right in the middle of a powerhouse of
economic activity.

For international delegates, the Wyndham Midtown 45 is an excellent choice as the
United Nations is just a short walk away. The area also features a variety of diplomatic
missions to the United States, which include:
 Consulate-General of the Bahamas
 Consulate-General of Germany
 Consulate-General of Israel in New York
 Consulate-General of Jamaica
 Consulate-General of Luxembourg
 Consulate-General of Nicaragua
 Consulate-General of Saudi Arabia
 Consulate-General of Singapore
 Consulate-General of Ukraine
 Consulate-General of the United Kingdom

Every other country that maintains a presence in the United Nations also has some form
of diplomatic mission, and almost all are located in the Turtle Bay neighborhood with
the hotel. This hotel has one of the shortest walking distances to the United Nations.
Because of the United Nation's travel-centric nature, with diplomats frequently coming
and going for events, it is only natural that they and their staff would want to stay at a
hotel which is close by. This gives the hotel a very unique advantage that few others
have; that of frequent travelers to the area for business.
The Turtle Bay Association is one of the main unifying forces within this bustling
neighborhood. It was founded in 1957 to ensure that the neighborhood kept its high
quality of life. After a large amount of slaughterhouses were demolished in 1948 to
make way for the United Nations and elevated trains were removed from the
neighborhood, a vast expansion occurred which made it a much more modern and
desirable place to live. The Association is responsible for the increase in landscaping
throughout the neighborhood as well as scattered park-space. Despite all of the activity
that occurs within this neighborhood it still maintains a serene atmosphere with tree-
lined streets, a luxury in Manhattan.

Property Description
Physical Structure
Upon entering the lobby of this steel structured, brick and glass curtain walled building,
one notices the tall ceilings and sleek, modern glass walls that are lit with soft, colorful
lighting. A toasty inset gas fireplace warms the leather seating along the perimeter,
around to the entrance of the modern-rustic style hotel bar. From the ceiling hang
dimly lit chandeliers, glowing inside large, rusted iron cages.
There is quaint ambience upon entering into the hotel. While many hotel owners would
balk at the possibility of having a small lobby, but the Wyndham embraces this. This
lobby gives the hotel a more intimate feeling. When a guest first arrives at the hotel they
are not given the feeling that they are just another guest in a large sea of people, a
feeling many hotels of this size and larger across the city give off. Instead, they are left
with an impression that the hotel is much smaller and more exclusive.

The 203 guest rooms in the Wyndham Midtown 45 are larger than typical Manhattan
hotel rooms and have an apartment-like feel. Each room is equipped with advanced
technology capabilities, leather furnishings, and plush pillow-top bedding. Cream,
beige, and chocolate accents lend an earthy vibe along with the custom blond wood
furniture and accents. All features of wood and leather furniture were designed by
architect David Rockwell and have been emulated by many around the city.
David Rockwell
David Rockwell is an American born architect and interior designer, drawing
inspiration from his strong passion for theater, high-end crafts, and technology. He
developed his skills and studied architecture at Syracuse University and the
Architectural Association in London. In 1984, David Rockwell founded the Rockwell
Group, a multi-disciplinary design and architecture firm, which is now composed of
over 150 employees and has offices in the United States, Spain, and China. Combining
David Rockwell’s personal inspirations with elements of local style, the Rockwell
Group develops personalized narratives for each new project, including hotels,
hospitals, Broadway sets, and museum exhibits.

David Rockwell has earned numerous honors and awards, including the National
Design Award by the Smithsonian’s Cooper-Hewitt National Design Museum for
outstanding achievement in Interior Design. He was also awarded the Presidential
Design Award for the renovations to the Grand Central Terminal, and three Tony
Award nominations for Best Scenic Design. The Rockwell Group was recognized by
Fast Company Magazine as “one of the most innovative design practices” in their
World’s 50 Most Innovative Companies issue.
Grand Central Terminal

Amenities
The property also features a variety of comprehensive amenities designed to cater to all
guests possible needs. The hotel is host to the Atrium restaurant, a contemporary
American style restaurant. This allows for a mix of both a traditional dining experience
as well as in-room dining via room service. The restaurant also features as a bar, but
this is not the typical hotel bar. Instead of just being a bar which caters to the hotel
guests, this hotel has a bar which is very popular in the Midtown nightlife scene. It is a
frequent occurrence for non-guests, such as those who live or work in the neighborhood
to come here for a drink. This affords guests access to a quality New York City nightlife
experience, without ever even having to put on a jacket.
Having an impressive fitness center is a current industry edge, and the Wyndham
Midtown 45 is embracing this; the hotel features a 24-hour fitness center filled with
state-of-the-art equipment. While the gym was already considered modern by hotel
standards, Wyndham decide to completely renovate it so much so that it could rival a
guest's gym back home. . Additional services the hotel room service, a 24-hour valet
parking service, a multilingual staff, free daily newspapers, free Wi-Fi, and even
express dry-cleaning services. Combined with a fully equipped business center, this
hotel provides the ideal balance for both leisure and business travelers.

The hotel is - the ideal location for hosting special events. It has a private dining room
and suites for smaller events. The hotel’s integrated restaurant allows for it to cater any
size event, from a small business meeting to a large wedding. Its Midtown Manhattan
address makes it an easy property to get to for any type of event.
There are five different room options to choose from: deluxe queen and king sized
traditional rooms, studio, one bedroom, and two bedroom suites. Both deluxe queen
and king sized rooms are over 350 square feet and offer city views. Studio suites are 400
square feet and feature a full kitchen and spectacular city views.
All of the rooms are decorated in the same style with soft earth tones juxtaposed with
sharp Scandinavian design. These are not your typical standard hotel rooms. Their

bold design sets them apart from many other hotels in the city. It adds a cosmopolitan
atmosphere to any New York City trip, whether it is for business or for pleasure.
The 103 studio, one bedroom and two bedroom suites offer multiple closets,
Poggenpohl kitchens with Gaggenau cook tops and Sub Zero fridges. Additionally,
there are Sharp flat-screen LCD TVs in every bedroom, living area, and even the
bathrooms. Inside the limestone bathrooms there is immersive, glass enclosed, rain
showers.
The one bedroom suites are 600 square feet including a master bedroom with an ensuite
bathroom and a walk-in closet, a separate living room, a full kitchen and city views. The
two bedroom suites offer all the same amenities as single bedroom suites, but are 760
square feet. These suites offer better views than many New York City residents get.

Wyndham Worldwide
Wyndham Worldwide Corporation
Overview
Wyndham Worldwide Corporation (NYSE: WYN) is a holding company
founded in 2006 to act as a management group for the Wyndham Hotels Group and the

semi-independent RCI (formerly Resort Condominiums International). They are
headquartered in Parsippany-Troy Hills, NJ and their current CEO is Stephen Holmes.
The Wyndham Hotel Group is the group of hotel and resort chains owned, operated, or
flagged by the company. The Wyndham Hotels brand, the company’s main brand, was
founded in 1981 in Dallas, TX. The entire group consists of 7,400 hotels under 15 brands
in 66 countries. Wyndham Hotel Group currently employs 4,000 worldwide employees.
The Wyndham group has only partial market coverage, with flags (brands) spanning
from budget/economy hotels to upper upscale hotels. The group does not currently
have a luxury flag. The brands biggest competitors in order of total room count are the
InterContinental Hotels Group (NYSE: IHG), Hilton Hotels (NYSE: HLT), and Marriott
International (NASDAQ: MAR). While all three of these competitors have more rooms
in total, Wyndham flags more hotels than any of them. Unlike Wyndham, all of these
brands do operate at least one luxury flag.
Overall the Wyndham group portfolio has grown from 2012 to 2013 by 2.3%.
This growth is a good indicator of the brand’s strong position; and it is only marginally
behind the growth of its top 3 competitors. They grew by 2.7%, 3.4%, and 2.7%
respectively. For the two competitors ranked below it in terms of size, Choice Hotels
and Accor, they shrank by 1.1% and 15.3% respectively. Wyndham should be well
positioned in the market for the 2014.1
The Wyndham Hotel Management division is an offshoot of the main hotel
operations. By leveraging Wyndham’s managerial experience, this division can
effectively manage many upscale hotels, even ones not under any Wyndham flag. A
large portion of the growth of the Wyndham hotel group is due to it acquiring
additional hotels and brands. For hotels it flags, revenue is generated through a mix of a
portion of revenue and flat fee. For hotels it operates it is the same structure, with a flat
fee and a portion of revenue. For the few hotels it owns and the timeshares it sells,
revenue is simply generated from the net income.
1
World Ranking 2013 of Hotel Groups and Brands
http://www.hospitalitynet.org/news/4060119.html

RCI is a timeshare-trading network founded in 1974. It currently has 3.8 million
members worldwide. The network does not own or develop any timeshares, however
Wyndham does own and develop timeshares. Because of the way that the network is
set up, this does not result in a conflict of interest. This also means that there is little
Wyndham can do to use RCI to boost its own timeshare brand, nor can it suppress
competitors. There are currently 6,300 affiliated resorts in over 100 countries. RCI’s
revenues are fee based from transactions customers conduct through its system and
membership dues. Its main competitors are Interval International, Dial and Exchange,
and Trading Places International. It is the largest of all of its competitors.
Business Strategy
Wyndham’s driving corporate strategy is to cover as many locations with as
many diversified hotels as the market can sustain. This is clearly evident too. Wyndham
operates almost as many hotels as both Hilton Hotels and Marriott International
combined the number 2 and 3 largest hotels. Wyndham is able to sustain this large
amount of growth through its own supported new construction and flag deals for
existing hotels to convert over to the Wyndham brand. It also uses its industry leading
rewards program to keep travelers within the Wyndham family2
. Wyndham frequently
cites this rewards program as one of the main drivers of sustained visits by guests in its
investor conference calls. This strategy is also its biggest risk factor; it nearly caused the
firm to go bankrupt in 1999 and forced it to undergo a major restructuring in 2004.
Because of the competitive nature of the hospitality industry, there is also a risk that a
different company’s actions could severely impact the brand and cause them to not
reach revenue goals needed to sustain this growth.
Some growth possibilities and drivers that Wyndham is considering are to better
position the Wyndham flagship and Wingate brands as value-added alternatives to
competing brands. They are also looking to better diversify their existing portfolio to
maximize market potential. This will take the form of either hotels changing flags or
new hotels being added to the Wyndham group. This is one of the main ways to
optimize its economy and midscale portfolio and minimize competition among
2
Wyndham All-Brand Conference http://www.hospitalitynet.org/news/4048414.html

different flags. One of its continued growth drivers is to grow its international core
brands: Wyndham, Ramada, Days Inn, Super 8, and Howard Johnson3
. This has been a
successful expansion over past decade and something that the group plans to continue
to push for.
Product Markets and Trends
From 2008 to 2013 there has been a steady amount of new hotel construction and
openings that have happened. Between March 2008 and April 2013, a total of 89 new
hotels were built in Manhattan alone. These hotels cumulatively added 15,799 rooms to
the market. This accounts for a total market growth of 23.7%. Of those new hotels
constructed, around 75% of the supply that entered the market entered in the period
from March 2008 to December 2010. This is part of a general market prediction that after
a recession the market tends to jump up, and new hotel owners were trying to capitalize
upon that. It is likely that Wyndham will use this period to build out its current brands.
The hotel group’s historical strategy has been to acquire brands and properties during
3
Wyndham Investor Presentation, http://www.corporate-
ir.net/media_files/nys/wyn/s_rudnitsky_v2.pdf

economic downturns, and to build new properties with hotel owners as the economy
improves. This trend is expected to continue and Wyndham has not indicated any
deviation from this strategy.
This current recession is proving to be much slower to exit than others in recent
history. During the recession of the early 1990’s the trough, the lowest economic point,
was reached in 27 months and the recession was considered over within 4 years. In the
2001 recession, the trough was reached sooner in 20 months, but it took about 4 years
and 9 months for it to be considered over. The 2008 recession has been the most difficult
for the country. Though the trough was reached in a comparatively quick 16 months the
recession is predicted to until July 2014, a total of 5 years and 10 months.
This slow recovery has prevented the big average daily rate (ADR, one of the
standard measures for hotel profitability) increase that is usually seen after a recession.
In April of 1992, the ADR change rate was at -5.2% which was its lowest. The peak
following this was in October of 1998 with an ADR increase of 11.8%. While that is a
gap of 6 years, it should be noted that the rate had been close to the October 1998 point
since 1996. From the 2001 recession the market hit its lowest point in July of 2002 with
its lowest point of a 17.2% decrease. The rebound in July of 2006 was roughly as large
with an increase of 17.5% in average daily rates. With the 2008 recession these numbers
have yet to be seen. The average daily rate dropped 22.7% in January of 2010, but it has
only so far risen to a high of 10.1% in March of 2011. Given that the general trend calls
for the largest increases around the 4-year mark, it is not untenable that the high point
has not yet been reached. 4
Financial Resources5
The risk level of Wyndham Worldwide is considered average when compared
with the rest of its industry. While its Beta of 1.32 is higher than many other firms
within the hospitality index, it is only marginally higher. The company recently was
4
Manhattan Lodging Market: Why ADR Growth Is Lagging Behind the U.S. Average. March
2013 Issue. Pinnacle Advisory Group
5
Yahoo Finance

awarded a place on the Dow Jones Sustainable Growth Index, which is a key indicator
of a very stable company.
Analyst predictions for Wyndham estimate 4.2% growth this quarter, compared
to an industry 70.10%. The current year it is expected to grow at 12.30% while the
industry will grow at 41.60%. Next year’s growth predictions are 12.10% next year and
the industry at 32.6%. Over the next five years growth is predicted at 12.29% with
industry growth 21.66%. While it might seem that Wyndham is significantly behind
industry growth, this is only because many other competitors are undergoing
significant brand growth that Wyndham does not have to do because of its size and
global presence. This is also why it is important to compare Wyndham to only its 3
main competitors and not the entire industry. As a large and well-established brand,
many of the competitors that are causing the huge industry growth rates still cannot
compete at the level of Wyndham. Based off of past performance and conservative
future estimates, Wyndham should be able to easily meet these objectives.
WYN IHG HLT MAR
Stock Price
(As of
2/28/14)
72.94 32.76 22.42 54.31
52 wk Range 52.84-75.25 32.55-32.78 22.08-22.58 38.17-54.32
1y Target Est 79.08 33.86 24.60 55.37
Trailing P/E 22.7 23.51 45.84 27.12
Forward P/E 15.12 19.73 28.37 19.10
PEG (5 Year) 1.32 2.71 1.74 1.68
Beta 1.32 1.36 N/A6
1.24
Revenue 5.01B 1.9B 9.43B 2.49B
Net Income 432M 372M 450M 626M
Total Debt 4.85B 1.28B 13.02B 3.15B
6
Not Available, HLT was first listed 12/12/13

Wyndham Worldwide and the Timeshare Industry
Wyndam 45 Midtown is owned by Wyndham Worldwide, the parent company of
hotels, resorts, and timeshare properties worldwide. Wyndham Worldwide timeshare
business is managed by Wyndham Vacation Ownership, the world’s largest vacation
ownership corporation, measured by the owners of vacation interests, individual
ownership units, and the number of vacation ownership resorts. Wyndham Vacation
Ownership has acquired or developed over 185 vacation ownership resorts,
representing 23,000 individual ownership units and almost 1 million owners of vacation
ownership interests. While headquartered in Orlando, Florida, Wyndham Vacation
Ownership’s properties are spread throughout the United States, Mexico, Canada, The
Caribbean, and the South Pacific.
In 1991, Wyndham Vacation Ownership launched a point-based ownership system
which revolutionized the timeshare industry. The system allows interest owners
flexible options to choose the location, duration, timing, and accommodation options
for their vacation interests, and helped Wyndham Vacation Ownership to become the
largest vacation ownership company in the world.
In the early and mid2000’s, the timeshare industry grew steadily, until sales dropped
8% to almost $10 billion in 2008. The following year, timeshare sales fell to just over $6
billion. The 36% decrease in sales in 2009 was mainly attributed to the mid-priced
timeshare resorts unable to secure consumer financing.

Following the crash of the housing market, timeshare sales began to grow once again,
and Wyndham Worldwide was prepared. With growth as the primary goal, Wyndham
sought to increase their consumer base, and ultimately their bottom line. However,
Wyndham realized that their current method of converting condos to timeshares was
incredibly expensive and risky, with property and acquisition costs requiring the
company to put up equity ranging from 20% to as high as 40% of costs. Chris Woronka,
a lodging industry analyst at Deutsche Bank, claims that “Wall Street is telling
[Wyndham] not to touch timeshare real estate”, leaving Wyndham Worldwide with
very little long-term financing options.
-As a result, Wyndham Vacation Ownership has most recently developed an innovative
business model, the Wyndham Asset Affiliation Model. The new model utilizes
Wyndham Vacation Ownership’s top-notch marketing and sales expertise to add
additional, premiere vacation location options for interest owners by affiliating with
world-class condominium resorts. Wyndham Vacation Ownership markets, develops,
and sells its vacation ownership interests, as well as provides owners with consumer

financing, through its four primary brands, WorldMark by Wyndham, CLUB
WYNDHAM, Shell Vacations Club, and Wyndham Vacation Resorts Asia Pacific.
Wyndham Vacation Ownership’s Wyndham Asset Affiliation Model allows the
company to convert condominiums into timeshare units, while they are still owned by
the real estate developers and lenders in control of the resort. Wyndham has leveraged
their knowledge of the timeshare industry to become a broker between timeshare
buyers and developers who have limited access to the market.
Wyndham’s strategy proved to be successful, as the company is maximizing its use of
cash to increase profits and customer base. Tom Conforti, Wyndham Worldwide’s
Chief Financial Officer, claims that sales commissions though the Wyndham Asset
Affiliation Model are expected to average around 60%, or almost 10 times what a
traditional real estate agent would earn selling a house. Along with Wyndham
Vacation Ownership’s new strategy, the company expects about 65% of its overall profit
to stem from customer financing activities offered through one of Wyndham’s four
brands.
While Wyndham Worldwide was one of the first timeshare resort companies to pioneer
the “fee-for-service” model, they are not the only player in the market. In an analysis of

four top companies utilizing the “fee-for-service” model, together they generated net
revenues of about $35 million in 2009. One year later, “fee-for-service” sales
skyrocketed to almost $140 million for the industry, a 350% increase. This is an
excellent sign that Wyndham has properly utilized their knowledge of the timeshare
industry, as well as maximizing the value of their cash on hand to grow their business
further.
Manhattan Hospitality Industry
New York City Timeshares
The Manhattan Timeshare market is very thin in comparison to the hotel industry. It
features two properties that dominate the market; the 300-unit Manhattan Club on West
56th Street and the 161-unit Hilton Grand Vacations Club on West 57th Street. The
Manhattan Club has conveniently accommodated guests in the heart of Midtown for
the last twenty years. In addition to the Hilton Grand Vacations Club, Hilton also owns
72 units on the top two floors of 1335 Sixth Avenue. In 2002, the company converted the
top two floors of 1335 Sixth from hotel rooms into timeshares. Those timeshares sold
out, and after its success, Hilton introduced the 57th Street ground-up timeshare in 2009
(TheRealDeal).

The New York City Hotel Market
New York City remains to be one of the most expensive hotel markets in the United
States. As of March 2013, according to HVS, the total room supply in Manhattan was
approximately 29.5 million, generating total rooms revenue of $7.2 billion. Although
total room supply in Manhattan accounted for 1.6% of the total supply in the United
States, the market generates approximately 6.1% of total rooms revenue for the country.
As of March 2013, the 348 hotels encompassing the entire New York City hotel market
achieved an overall occupancy of 86.7 % at an average rate of approximately $280.00,
compared to an occupancy level of 61.6 % at an average rate of $107.00 for the nation.

The graph below illustrates the fluctuation in NYC hotel performance from January
1987 to March 2013. The thick yellow, vertical lines represent the three recessions that
have occurred during that time period, whilst the red and blue lines represent percent
changes in hotel demand and supply (12-month moving averages), respectively. It is
clear that in the periods shortly after each recession, demand for Manhattan lodging
decreased significantly. After the most recent recession in 2008, which was the worst
economic downturn since the Great Depression, New York City hotels experienced a
decrease in demand of -4.3%, which was a significantly smaller decline compared to the
previous two recessions. Furthermore, in 2010, NYC hotels experienced the largest post-
recession percent increase in demand since the early ‘90’s. Despite a significant increase
in supply, demand increased by 11.6% in August 2010, compared to 11%, 7.7%, and -
6.1% in 2004, 1995, and 1991, respectively.

One can make the claim that historically, the NYC Hotel market has been
undersupplied. Over the last 25 years, average annual demand growth, at 2.1%, has
outpaced corresponding growth in supply of 1.7%. This has translated well into high
room rates and occupancies for New York City compared to national averages.
However, there are concerns that new hotel supply entering the market over the next
few years will drown demand. One of the main reasons why Manhattan is expected to
see a drastic increase in hotel supply is because of record tourism numbers. According
to The Real Deal, “the city saw approximately 54.3 million tourists in 2013, shattering
2012’s record of 52 million, and a 54 percent increase over 2002, the year after the
September 11 terrorist attacks.” The numbers are only supposed to increase in 2014 with
the hosting of Super Bowl XLVIII in New Jersey, which boosted hotel occupancies in
both New Jersey and New York.
According to HVS Hospitality Services’ Market Overview, the New York metro area
average RevPAR will reach its highest levels in history by mid-year 2014,
demonstrating a complete recovery from the challenges of the most recent recession. As
large groups of travelers continue to emerge from Asia, South America, and Eastern
Europe, potential for vast gains in the number of visitors to New York appear possible
for the indefinite future.
At the beginning of 2014, the city’s hotel inventory stood at an all-time high of about
99,000 rooms. From 2014 through 2016, an additional 84 hotels are expected to open,
with most of them being in Manhattan 10 in Queens, nine in Brooklyn, three in Staten
Island and one in the Bronx.
They include the 330-room Bossert Hotel conversion in Brooklyn Heights; the
renovation of the old Knickerbocker Hotel near Times Square into a 300-room full-
service inn; a new 243-room Residence Inn by Marriott across from the new World
Trade Center; and the Baccarat Hotel & Residences across from the Museum of Modern
Art, which will have 114 rooms and 26 suites. Of the 28 Manhattan hotels projected to
open this year, nine are in Midtown or Midtown South such as the 135-room Cambria

Suites Chelsea, being built on West 28th Street. Another nine are below 14th Street,
including the 162-room Hotel Ludlow on the Lower East Side. Average room rates are
expected to increase the most in 2014 on the East Side and Uptown, by about $15 a night
from 2013. Rates in Times Square, Midtown, and Midtown South are expected to grow
slightly less, by about $5-$10.
Although this increase in supply has the potential to dampen room rates, economists at
STR disagree. According to their research, at the end of 2013, average RevPAR for NYC
hotels was $243. In 2014, it’s expected to reach a post-recession high of $264.91.

Researchers at STR are making the claim that RevPAR and ADR will increase in 2014,
despite the drastic increase in hotel supply expected to incept in NYC’s near future.
However, one can see how this is feasible due to the large amount of commercial office
space expected to also come to market. Tens of millions of square feet of office space are
due over the next few years, including the Hudson Yards project and the World Trade
Center. According to the Real Deal, economists believe that this drastic increase in office
square footage can be supported by the increase in hotel supply. As business travelers
attend meetings at these new office locations, hotels included in this new supply will be
able to support this increase in offices, business travelers, and demand. According to
the graph below of forecasted supply and demand, which was created by HVS, the new
supply of hotels created in 2014 is projected to outpace demand. However, in 2015,
demand is supposed to grow past supply, possibly a result of the new office space
coming to market.

The data below was taken from STR’s Forecast Report for New York City hotels as a
whole, and was created in August 2013. STR has avoided disclosing the individual
property information. The current average hotel occupancy in NYC for 2013 YTD is
82.5%. Average ADR and RevPAR for 2013 YTD were $241, and $199, respectively. Each
of these figures represents positive growth from 2012.
Occupancy
(%)
ADR
($)
RevPAR
($)
2013 Q2 86.8% 267.0 231.91
2013 YTD 82.5% 240.5 198.54
2013 Q2 (% change year ago) 0.4% 3.7% 4.1%
2013 YTD (% change year ago) 3.3% 4.1% 7.5%
Regional Forecasts

Annual
Performance
Occupancy ADR RevPAR
Year % USD USD
Actual 2009 77.0 216.3 166.5
2010 80.8 231.7 187.2
2011 81.2 244.6 198.5
2012 83.6 251.4 210.3
Forecast 2013 84.4 264.0 222.8
2014 82.1 272.1 223.4
2015 79.6 270.9 215.5
2016 79.0 276.3 218.4
2017 80.3 289.4 232.5
(Annual percentage change unless specified)
2011 2012 2013 2014 2015 2016
New York
City GDP 0.8 1.2 2.7 3.7 3.4 3.7
City Employment 1.3 1.7 1.8 1.7 2.1 1.8
City Unemployment rate (%) 8.6 8.8 9.5 9.0 7.9 6.8
Household disposable income 0.3 0.9 -1.0 3.4 3.4 3.3

Every year over the last 5 years, New York City hotels have experienced a growth in
occupancy, ADR, and RevPAR. However, STR has forecasted a decrease in occupancy
through 2016, to only increase by 0.3% in 2016. This could be a result of the drastic
increase in supply that expected in the New York City hotel market over the next few
years. Despite this decline in occupancy, ADR is expected to increase through 2016,
which is consistent with STR’s claim that ADR is expected to increase in 2014 to pre-
recession highs of $300+. RevPAR is expected to fluctuate over the next several years.
Macroeconomic Factors
Based on the chart below, in terms of macroeconomic factors, the future is bright for the
New York City economy. Based on annual percentage changes, City GDP, Employment,
and Household disposable income are forecasted to increase through 2016. These are
positive outlooks on the future NYC economy, which should translate into higher
occupancies and rates for NYC hotels. The unemployment rate, which is closely tied to
real estate demand across the country, is expected to decrease significantly through
2016, which will allow hotel owners to charge higher rates on rooms to earn more
revenue and create more value for investors.
Since the recession in 2008 and the bailouts of many U.S. financial services firms, the
Fed has taken control of interest rates with the intent of encouraging consumer
spending and keeping financing costs low. Janet Yellen, the new Federal Reserve chair,
has made it clear that as long as the national unemployment rate is above 6.5% and the
outlook on inflation does not exceed 2.5%, interest rates will not change. Each month
since 2010, the Fed has been purchasing upwards of $80 billion of bonds each month to
keep interest rates historically low, otherwise known as “quantitative easing”. Recently,
however, the Fed has lowered this threshold to $65 billion of bonds per month (WSJ)
As of the February 2014, the national unemployment rate was 6.7%. According to
Bloomberg, the median forecast for unemployment, by a group of economists surveyed,
was a decline to 6.2% in the fourth quarter. Consumer prices rose 1.2% in January from

a year earlier, a common metric used to measure annual inflation. After reviewing these
statistics, there is possibility that by year-end 2014, the Fed could potentially decide to
continue to “taper” or even end their bond-buying program, which will increase
interest rates. This increase in interest rates will have a few implications on the market,
the obvious one being an increase in borrowing costs. This could potentially have an
adverse effect on development, making it harder to finance projects. An increase in
interest rates will increase the cost of carrying credit for your customers, which could
raise the issue of bad debt for hotel accountants
Identified Hotel Guests
The Wyndham houses many guests, but relies mostly on transient stays. With large
rooms and access to full kitchens, the hotel is very attractive for larger parties looking to
stay in midtown for a long-term stay. Because the Wyndham is one of the more
affordable hotels in midtown, customers are often ones just looking for the best price.
The property often markets on third party travel sites that attract such users.
The hotel also benefits from the
large number of corporate
headquarters in midtown. Along
with a number of different national
embassies from the United
Nations, large group customers
include Cantor Fitzgerald, Six
Flags, Viacom, and Univision
Communications. The Wyndham
cites this as one of the main reasons
they would like to convert to
timeshares. The supply of large
group customers, who often have
guests coming in and out of the

city, would benefit from this set up.
Competitive Set Properties:

Fitzpatrick Grand Central Hotel
141 E 44th St
New York, NY 10017
Rooms: 144
Suites: 11
Amenities:
 Complementary access to a nearby NY Sports Club
 24-hour Valet Parking services
 Same day laundry and dry cleaning service
 The Wheeltapper- Onsite restaurant and bar equipped with a year-round outdoor
patio
 The Wheeltapper patio serves as an event space for parties, special events, and
receptions.
Deluxe Queen- $199/night
Deluxe Two Doubles- $249/night
King Junior Suite- $269/night
Garden Room West (Sleeps 2)- $299/night

The Roger Smith Hotel
501 Lexington Avenue
New York, NY 10017
Rooms: 130
Amenities:
 Free WiFi
 Four distinct event spaces dedicated to hosting meetings and conferences.
 Lily’s Bar & Lounge- mezzanine level restaurant and bar, with private back room
available
 Henry’s Rooftop Bar- open May to October
Classic Queen- $139/night
2 Double Beds - $139/night
Junior Suite Queen (with Sofabed)- $169/night
Junior Suite 2 Doubles (with Sofabed)- $169/night
One Bedroom Suite (1 King)- $239/night
*All suites include kitchenettes

Residence Inn New York Manhattan Midtown East
148 East 48th Street
New York, NY 10017
17 floors- 211 suites
4 meeting rooms, 1,320 sq ft of total meeting space
Amenities:
 Free WiFi & Buffett Breakfast
 Full kitchens in every room
 24-hour Business Center with access to computers and printers and quick-print
stations
Studio (1 King)- $179/night
Studio (2 Queens)- $179/night
Studio with balcony (1 King)- $199/night
1 Bedroom Suite (2 Queens) Sofabed- $279/night
1 Bedroom Executive Suite, (1 King) Sofabed, Corner room- $329/night

Affinia 50
New York, NY 10022
Recently completed renovation:
251 redesigned rooms including 100 with kitchens and 19 with terraces
New restaurant in lobby: The Cupboard
Amenities:
 Room Service 11:00 a.m.–11:00 p.m.
 Grocery shopping
 Business Center
 Continental Club Breakfast, served Monday - Friday in the Club Room
 Valet Parking
1 Guest Bedroom- $169/night
Guest room Deluxe (1 King)- $179/night
Guest room (2 Queens)- $219/night
Studio suite w/ kitchenette (2 Queens)- $249/night

The Benjamin
New York, NY 10022
Guestrooms: 209 (all include kitchens, dining areas)
17 rooms with terraces
30-40 suites
Amenities:
 24-hour room service by Iron Chef Geoffrey Zakarian's restaurant, The National
 24-hour fitness center on the 3rd floor
 High-speed Wi-Fi access - Complimentary
Rates:
Queen Guest room- $229/night
King Studio - $249/night
One Bedroom Suite- $349/night
Terrace Suite- $409/night
Two Bedroom Terrace Suite- $869/night

Financial Analysis
Financial Analysis Roadmap
The HVS valuation suite has been integral to our ability to value this property at its
highest and best use. To better understand how we valued this hotel, we will first walk
the reader through the three main valuation software files: first, the RNAADR Analysis,
which allows us to forecast occupancy rates and average daily rates for the hotel over
the next ten-years based on current market dynamics and future supply and demand
growth. Then we focus on the main output from this analysis, yearly average daily rate,
for the next ten-years. With our meticulously derived ADR, we can now begin
calculating the room and other revenues/costs associated with the building in our
FIXVAR analysis. Based on the revenues and expenses found in our ten-year analysis,
we can finally solve for the net income of this property. With the net income (cash
flows) carefully derived from the FIXVAR analysis, we can finally solve for the equity
valuation for the property. The EQUITY analysis portion of this financial analysis suite
will consider key inputs such as terminal cap rate, expected equity yield, and inflation,
to solve for three equity values based on a 20 year amortized loan purchase of the
building. We will first bring the user through these three reports to discover the most
likely equity valuation scenario for this property. Once we derive this value, we will be
able to change key inputs in our files to solve for the best-case and worst-case scenarios.
With these values, we hope to provide the reader with an unbiased, yet detailed
valuation for the Wyndham Midtown 45.

Section 1: RNAADR Analysis
Purpose: Solve for the hotel’s expected occupancy rates and ADRs over the next ten-
years based upon information provided about the hotel’s primary and secondary
competitors, as well as, expected additions to supply.
Section 2: FIXVAR Analysis
Purpose: With our room revenue for the next ten-years solved for, the FIXVAR analysis
allows us to add alternative expected revenues and costs: for example, food and
beverage, property taxes, etc. With al revenues and expenses accounted for, we can
finally solve for the ten-year net income expected for this property.
Section 3: Equity Analysis
Purpose: Finally, with the expected cash flows from the property accounted for, we can
begin solving for the value of the hotel. We will use three approaches: a loan-to-value
valuation, debt-coverage ratio valuation, and debt-yield valuation.

Most Likely Scenario Valuation of
Wyndham Property
(In the most likely scenario, we will be solving for the valuation of the hotel using input variables
such as occupancy rate, ADR, cap rate, etc. that we believe should realistically occur. Following
this valuation, we will also perform a best and worst-case scenario analysis.)

Section 1: RNAADR Analysis
The goal of this section is to solve for the ten-year future Average Daily Room Rates of
this hotel using historical information provided by Smith Travel Research and past
income statements provided by the hotel. We will also be looking forward to estimates
concerning the supply and demand dynamics of the Midtown Manhattan Hotel Market.
Starting with the hotel’s 2013 performance, we will be able to value this hotel as of
January 1, 2014.
Competitive Set
In order to find the value of this hotel property, we must first examine the
addressable competition, supply, and demand trends in order to solve for the
Wyndham Midtown’s ADR, projected ADR growth rate, occupancy rate, and projected
occupancy rate growth. There are six properties that the Wyndham Midtown 45
identifies as being their closest competitors. These hotels, The Fitzpatrick Grand Central
Hotel, The Rodger Smith Hotel, The Residence Inn New York Manhattan Midtown
East, The Affinia 50 Hotel, and The Benjamin Hotel are of close geographical proximity,
host guests of similar economic means, and are of comparable size (~200 rooms).
(Google Maps- Midtown East)

Based on the Smith Travel Research reports provided by our property, we first
examined the competitive set average for our group to the 12-month moving average
ADR for the Wyndham provided by our property manager. Based on the proximity of
these two numbers, we were able to confirm our belief that these properties were
certainly comparable properties and realistic competitors.
(STR – 2014)
(RNAADR- Midtown East)
Name of Establishment Class Rooms
Fitzpatrick Grand Central Hotel Upscale Class 155
Wyndham Midtown 45 Upper Upscale Class 203
The Roger Smith Hotel Upscale Class 130
Residence Inn New York Manhattan Midtown
East Upscale Class 211
Affinia 50 Luxury Class 209
The Benjamin Upper Upscale Class 209
# Rooms
Date Opened
During Base
Year
Historical
ARC
Occupancy
%
Wyndham
Midtown 203 1/1/2014 203 81%
Competitive Set 914 1/1/2014 914 81.4%

This competitive set, including the Wyndham hosts 1117 rooms, a total of 407,705 room
nights per annum not contributing for losses/damages. Please see hotels listed below by
class rating and room size.
Occupancy
The Wyndham Midtown 45, which boasts 203 spacious guestrooms, has done a good
job keeping up with market occupancy rates in Midtown. The 12 month-moving
average occupancy for the Wyndham Midtown is 81%. As you can see in the image
below, the hotel was on par with its counterparts for 2013, only lagging by 0.4%. Over
the last seven years, the competitive set has seen an average yearly occupancy of 82.6%.
Due to lagging numbers in 2009 and 2010, we believe that this average occupancy is low
and should stabilize in the 83 to 87 percent range. The properties most like the
Wyndham include The Rodger Smith Hotel, The Residence Inn NY Midtown, and The
Benjamin Hotel. These three hotels will serve as our primary competitors in this
analysis. Our secondary competitors will be the Affinia 50 and the Fitzpatrick Hotel.
Occupancy in this market, as you can see in the chart on the next page has a strong
lower bound of 80% that the market will likely never break. However, as we can see
when the occupancy rates start to rise in this market, we see additions to supply from
new competition, which sharply brings down occupancy rates in to 80 to 82% range.
This will be critical as we address the market dynamics of Midtown Manhattan over the
next ten-years.

(STR- Midtown
East)
There are three particularly important market segments in Midtown. These include
corporate, which is the largest, leisure, which is the second largest, and group, which
makes up the third, but smallest market segment. Although this information is private
and nearly impossible to get from competition, we estimate based off our property’s
own performance that the corporate segment makes up 60% of sales, travel/leisure
contributing 30% of sales, and group making up the final 10% of sales. Although we do
not break down these segments in our RNAADR analysis, we have reason to believe
that pricing in this market is consistent throughout the three groups. As we examine
the timeshare conversion of this property, this market segmentation will be much more
important. However, because we are valuing this property as a hotel, it is imperative
that we maintain a consistent and objective look at these respective properties.
With the occupancy rates we determined above, the Midtown hotel market
should have sold 331,575 guest-rooms in 2013. Please see breakdown below.
Occupancy (%)
Total Year
83.5 2007
83.0 2008
78.6 2009
80.7 2010
85.0 2011
87.3 2012
81.4 2013
82.6 Avg

All Rooms Total
Wyndham
Midtown 60,017 60,017
Competitive Set 271,559 271,559
Total 331,575 331,575
(HVS RNAADR- Most Likely)
Secondary Competitors
The Wyndham Midtown has two competitors that we would consider being
secondary competitors based on location, ADR, and class. These two hotels, the
Affinia 50 and the Fitzpatrick are slightly nicer, boutique hotels, which cater to
slightly wealthier patrons. These hotels’ performance will be weighted less once
we begin determining the ADR output for this particular competitive set.
#
Rooms
Date
Opened
During
Base Year
Historical
ARC
Comp.
%
Eff.
HARC
Occupancy
%
Affina 50 209 1/1/2014 209 100% 209 81%
Fitzpatrick
Hotel 155 1/1/2014 155 100% 155 81%
These hotels, which boast similar occupancy rates of 81.4%, hosted 108,148 guests in
2013, based on a 365 day year and no loss in room nights from damage or repairs. These

hotels are still strong competition in the market, but we will focus on the other hotels to
better analyze key market dynamics, which will directly affect the Wyndham Midtown
45’s financial performance.
All Rooms Total
Affina 50 62,096 62,096
Fitzpatrick
Hotel 46,052 46,052
Total 108,148 108,148

Supply and Demand
With our occupancy rates determined, we can now examine the supply and
demand dynamics playing in this market. Based on our selected competitive set, the
Wyndham Midtown makes up 13.6% of market share compared to like sized,
geographically located, and priced properties. Please see the breakdown of market
share on the page below:
(HVS RNAADR- Most Likely)
The supply and demand in East Midtown has been greatly affected over the last
five years due to the economic recession. As seen below, little to no supply has been
Room Nights Captured by Market
Segment
All
Rooms
Total
Room
Nights
Market
Share
Fair
Share
Overall
Comp
Index
Wyndham
Midtown
60,017 60,017 13.6% 13.7% 99.6%
Competitive Set 271,559 271,559 61.8% 61.7% 100.1%
Primary Market
Total:
331,575 331,575
Affina 50 62,096 62,096
Fitzpatrick Hotel 46,052 46,052
Secondary
Market Total:
108,148 108,148 24.6% 24.6% 100.1%
Total 439,724 439,724

added to this market. Drops in demand brought tough times for East Midtown
Manhattan hotel operators, but sharp bounce backs in 2012 and 2013 have given many
hotel owners a reason to be optimistic.
Demand (Room Nights)
Total Year YEAR
335,215 2007
333,053 2008
315,723 2009
286,352 2010
282,229 2011
289,241 2012
322,371 2013
309,169 Average
(STR- Midtown East)
In order to determine forward looking demand growth, we will use the Smith Travel
Research files to examine both the last seven years and the next 4 to try to determine a
stabilized forward looking rate. Due to the sporadic demand growth rates caused by the
economic recession, we will rely more heavily on STR’s forward-looking rates. Solving
for an average of old growth rates is no longer an option for this property. Here we
solved for a weighted average growth rate, placing a greater weight on the forecasted
rates. Based on these numbers, we expect demand to grow by 2.9% in the East Midtown
Manhattan market.

Demand
Year % Change
2009 -0.7%
2010 10.5%
2011 5.7%
2012 5.7%
2013 4.4%
2014 4.3%
2015 1.5%
2016 1.8%
2017 1.6%
(STR- Midtown East)
2007 2008 2009 2010 2011 2012
Room
Demand 335,215 333,053 315,723 286,352 282,229 289,241
Room Supply 401,500 401,500 401,500 354,950 332,150 331,385
Market
Occupancy 83.49% 82.95% 78.64% 80.67% 84.97% 87.28%

5
Years
4
Years
3
Years
2
Years 1 Year
Compound Growth In
Demand -2.91% -3.46% -2.88% 0.50% 2.48%
Compound Growth In
Supply -3.77% -4.68% -6.20% -3.38% -0.23%
With our key inputs fully examined, we
can now create educated estimates
regarding the demand and supply growth
in the Midtown Manhattan hotel market.
Based on the erratic economic decline and
growth we have seen over the last five or
six years, it is tough to simply average the
demand and supply numbers together and
create a forward looking figure. Thus we
put more emphasis on the 2011 and 2012
numbers to create figures for this market.
Justifying our demand growth numbers
on the 2 to 3% growth rates we have seen
in 2011 and 2012, we believe that 2.9%
demand growth is a reasonable estimate,
especially with the economy continuing to
improve.
Supply growth is making a steady comeback, which is likely to make many
players in this market nervous. However, before we decide on a consistent supply
growth rate, we must first consider new hotels coming to this market. The hotel coming
to this market next, which will make the largest impact on Midtown is the NY YIMBY.
With a forward-looking, stabilized demand rate, we must now examine the new supply
Supply Room Nights
Total Year YEAR
401,500 2007
401,500 2008
401,500 2009
354,950 2010
332,150 2011
331,385 2012
395,842 2013
374,118 Average

coming to the market. One hotel in particular, the YIMBY Midtown will be adding 93
rooms a night to the market on 1/1/15. The 93-room luxury boutique hotel with spa,
rooftop bar and lounge will be a force to reckon with. The new hotel will likely be
pricier than the hotels in our competitive set; however, new supply will certainly affect
this market. Based on our Smith Travel Research reports, we expect an assumed
compound supply growth rate of 2% in this market. There are many obstacles to joining
this market. With lots of empty rooms, many developers are looking in other areas.
Although this 2% rate seems a bit pessimistic, we are fairly confident East Midtown
hotels have limited new supply risk at this time. Based on these additions to supply, we
can now analyze the market occupancy rates expected for the next ten-years. With these
numbers, we can now evaluate the expected occupancy rates for the Wyndham
Midtown, the primary competitors, and the secondary competitors.
Future Occupancy Rate Growth
After strong performance in the previous two years, we expect market
occupancy rates to grow in 2014. However, beginning in 2015, we expect occupancy
rates for this market to take a small hit due to the increased supply from the NY YIMBY.
Once the market stabilizes, we expect the market to come back steadily to the 81% to
86% range in the 2020s. As we previously discussed, the renovations to the Wyndham
Hotel will likely increase demand in the next few years. Hotels closer to the Aloft will
be hurt, so when the hotel goes into operation in 2015 and 2016, we expect to see
Wyndham’s rising occupancy rate slip a bit back down to the 80%-81% range. Based on
our limited future supply growth rate, we expect that Wyndham Midtown will steadily
remain in this range. Towards the end of the ten-year holding period, however, we
expect this property to start to underperform due to outdated amenities and rooms.
Please see Appendix A for our occupancy analysis for the Wyndham and Appendix B
for the occupancy analysis of the competitive set.
Average Daily Rate
The Wyndham Midtown performed on par with the market in 2013 with a $275 ADR.
Only outperforming the Wyndham by 1%, the competitive set saw an average ADR of
~$278.

ADR
Total Year YEAR
306.92 2007
311.87 2008
234.32 2009
259.55 2010
276.82 2011
273.45 2012
278.59 2013
278.21 AVERAGE
(HVS- Midtown East)
As we would have guessed, this competitive set saw large decreases in ADR due to the
financial crisis. In 2007, ADR was $306. We expect this competitive set to hit this level in
the next two or three years, then steadily grow past it in the next five to seven years.
Based on ADR inflation in the East Midtown market, we expect a 3.0% increase over the
next 10 years. Based on the last five years, we have seen large fluctuations in growth
rates. As markets grow and the economy improves, the inflation rate is likely to rise. A
steady 3.0% lets us account for the fluctuating nature in which inflation can grow.
Below is a graph depicting the ADR we expect to received over the next 10 years based
on all of the information we solved for in the RNAADR analysis.

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
$
275.00
$
283.25
$
291.75
$
300.50
$
309.51
$
318.80
$
328.36
$
338.22
$
348.36
$
358.81
$
369.58
Based on the expected ADR and occupancy rates supplied in the previous appendices,
we expect the room revenues provided in chart below, seen in thousands of dollars.
With expected room revenue of $17,216,011 in 2014, we can now begin the FIXVAR
analysis, which will take into consideration all other revenue and cost channels and
provide us with the net incomes or cash flows of the property for the next ten-years.
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
$16,5
05
$17,2
16
$17,3
62
$18,0
10
$18,6
32
$19,2
20
$19,8
19
$20,4
04
$21,0
23
$21,5
76
$22,1
74
$275.
00
$283.
25
$291.
75
$300.
50
$309.
51
$318.
80
$328.
36
$338.
22
$348.
36
$358.
81
$369.
58
FIXVAR Analysis- Most Likely Case
The purpose of our FIXVAR analysis is to solve for the future annual incomes produced
by this property. With this information, we will be able to solve for an equity valuation
of the property. To begin we take the key outputs from our RNAADR report. Because
we are solving the net incomes of the next ten-years, we use a base year of 2014. Both
occupancy rate for 2014 and ADR are seen below.

Base Year: 2014
Number of
Rooms:
203
Days Open
Per Year:
365
Occupancy 82.03%
Average
Rate:
$283.25
(FIXVAR- Midtown East)
Revenues
Based on this information we are able to solve for the total revenue based on 365
operating days and no room-loss. This multifaceted hotel has alternate revenue sources
that must be accounted for. This includes food and beverage, telephone usage, and
rental income. As we discussed before, the room revenue generated by this property in
the most-likely scenario is $17,216,011.
The Atrium Restaurant and Bar could
potentially be a lucrative revenue
source for the hotel as well. The
restaurant and bar, which are
operated in-house are a main focus for
this midtown hotel. Starting to gain
popularity as a spot for midtown
professionals to grab lunch and
drinks, the Atrium has also been a
cool place for young socialites to grab
dinner and “pre-game” a night out on
the town. The hotel projects they can
greatly improve operating efficiency

in the restaurant and provide returns around 35% on their food and beverage costs. The
Atrium restaurant, which is smaller than most would like, is often lacking guests. With
capital improvements to the lobby and Atrium, we expect serious income growth. For
food we expect to drive $652,000 for the year.
Although this seems low for a hotel of this size, unfortunately, the Wyndham
hotel’s dining has been performing poorly in the last few years. Although the hotel now
benefits from a slightly improved food and dining setting, the hotel only had $111,000
in food and dining revenue in 2012. Most of the capital improvements to the Atrium
came in early 2013 as the building was purchased by the Wyndham Group. This is
about $1786 a night. Assuming the average dinner comes out to $100 at the Atrium
restaurant (work groups of 3 are most common guest size), this would be a conservative
rate of 17 reservations a day. The beverage department, which is slightly more
profitable than food offered at
lunch, dinner, and room service
will be heavily dependent on
getting young people in the bar
before they go out to other night
clubs and bars in the area. Based on
the $465,000 number we projected,
the Atrium restaurant will be doing
$1273 a night in beverage revenue.
Our projection for telephone
expenses is taken from the 2012
income statement provided by the Alex hotel. We project the hotel will drive $272,000 in
phone revenue based on a 3% compound growth rate from 2012. Rentals and other
income include weddings and banquets, which we expect to stay consistent with 2012
numbers. Please see Appendix C for our FIXVAR revenue inputs that have been
discussed above. Based on all sources of revenue for 2014, the Wyndham should gross
$18,741,000 in 2014.

Expenses
In order to solve for room expenses, we decided to use the hotel’s 2012 room expense,
which had comparable occupancy rates and then increase this number by a 3% year
over year growth rate. Although the Wyndham’s current management team believes
they can decrease this number with increased operating efficiency, we believe the
number is consistent with industry standards and a good estimate for the most likely
case. As we discussed before food and beverage expects to operate with a 35% margin,
thus expenses for this category are 65% of revenues. Regardless of how the Atrium
performs, we simplified this calculation by keeping expenses at 65% of revenue. In
order to solve for telephone expenses, we simply used the 2012 income statement
expense category and multiplied by a 3% year over year growth rate, which is also how
we calculated “rental and other income” expense for weddings and banquets.
Maintaining the hotel is a huge cost, most of those expenses get wrapped up into the
room expense, however higher level management expenses are attributed to
Administrative and General expense, as well as, our base management fee, which
stands at 2.8%. The hotel plans on doing little marketing in 2014 as they will likely be
doing significant capital improvements, thus a $399,000 marketing budget for 2014 has
been put into place. The hotel is owned and partly operated by the Wyndham Group, so
a franchise fee is nullified. Lastly, property operation and maintenance, which were
provided by the manager of the Wyndham Midtown 5 are expected to close at $507,000
for the year. Lastly energy costs, which have actually fallen in the last two years due to
small energy efficiency retrofit and the user of advanced lighting systems will come to
$439,000 for the year. All expense numbers can be found in Appendix D. Lastly, we
must discuss our fixed expenses. These include management fees, property tax,
insurance, and reserves. The hotel is not operating on a ground lease, so there is no land
rent. However, the base management fee of 2.8%, will cost the hotel $375,000 for the
year. There is no management incentive fee for this property. Property taxes of $1.4
million have been provided to us by our property manager based on the expected
profitability of the property and it’s appraisal used in the 2013 purchase of the property.
Insurance costs of $129,000 for the year have also been provided by the property
manager. A reserve for replacement has been set by upper management at 2.8%. Fixed
Expenses can be found in Appendix E. With all revenues and expenses accounted for,

we are now able to determine our net income for the year of 2014. An expected income
for the Wyndham Midtown 45, operating wholly as a hotel will come to $6,532,000.
Assuming the inflation rates provided by the HVS FIXVAR file, we can now solve for
the 10 year cash flows of this property. Please See Appendix F.
Equity Valuation- Most likely Case
Using all of the information we solved for in the previous models, we can now
solve for the value of the property. Assuming the following value inputs; most of which
being industry standards for Manhattan hotels. These will be key variables as we
explore the best and worst-case scenarios for this property. The terminal cap rate for the
property is likely to be the most important for valuation. This is the cap rate we use to
estimate the resale value of a property at the end of the holding period. The expected
net operating income (NOI) per year is divided by the terminal cap rate (expressed as a
percentage) to get the terminal value. Terminal capitalization rates are based on
forecasts and estimates and changes based on the person doing the calculation.

Valuation Inputs
First Projection Year: 2014
Holding Period: 10
Stabilized Year: 2015
Equity Yield: 0.145
Terminal Cap Rate: 0.0775
Selling Expenses: 0.03
Mortgage Interest
Rate: 0.0625
Mortgage
Amortization: 20
Mortgage Payments
Per Year: 12
(HEVM- Midtown East)
Our valuation inputs for the most likely case are as follows. We will value the hotel
based on a ten-year holding period, in which we will take out a 20-year amortized loan
paid out monthly. The loan interest rate is 6.25%, an industry standard at this time. As
discussed in this report, we expect cash flows to stabilize in 2015. The equity yield for
this property is set to 14.5%. Although a 15 to 16% equity yield may be more
appropriate for other Manhattan hotels, we expect this hotel to slightly underperform
competitors. Thus an equity yield has been set to 14.5%. Probably the most important
variable here, the terminal cap rate, a rate used to estimate the resale value of a property
at the end of the holding period. The expected net operating income (NOI) per year is

divided by the terminal cap rate (expressed as a percentage) to get the terminal value;
we will set to 7.75% for our most likely case. Although there is a chance we can see cap
rates dip further in this market in the future, we believe this slightly conservative
number will give us a better estimation of the hotel’s true holding value. Lastly, selling
expenses, which range in the 3 to 4% range for this market, are pretty standard. Based
on the fact that transactions and communication are only becoming simpler and more
cost-effective, we decided a lower, 3% rate was more realistic.
Next we input the net incomes that we deduced from our FIXVAR file. These are
as follows. Please see below:
YEAR (ooo)
2014: 6,533
2015: 6,422
2016: 6,718
2017: 6,989
2018: 7,222
2019: 7,457
2020: 7,674
2021: 7,908
2022: 8,080
2023: 8,282
2024: 8,532

With our most likely set of cash flows determined for the property, we must finally
include inputs for Loan-To-Value ratio, A lending risk assessment ratio that financial
institutions and others lenders examine before approving a mortgage. Typically,
assessments with high LTV ratios are generally seen as higher risk. The Wyndham
Group, a financially stable organization benefits from a long history of strong credit.
Thus a LTV of 60% has been determined for this property.
Debt Coverage
Ratio (DCR): 1.50
Year NOI To Be
Used: 2015
Debt Yield: 14.50%
Year NOI To Be
Used: 2015
The Debt coverage ratio, or DCR, is the ratio of cash available for debt servicing to
interest, principal and lease payments. It is a popular benchmark used in the
measurement of an entity's ability to produce enough cash to cover its debt (including
lease) payments. Again using a stabilized NOI of 2015, we also determine our debt yield
to be equivalent to our equity yield of 14.5%. Based on this information, we can now
value the property through three methods: a loan-to-value output, a debt coverage
output, and a debt yield output. Although all three are important, we place the most
importance on our loan-to-value equity valuation output. This is the most common
equity valuation method of the three. Please see Appendix G for LTV output valuation.
The HVS software using inputs for the LTV valuations file, value this property at
$82,945,000. This includes $49,767,000 as the value of the mortgage component, and

$33,178,000 as the value of the equity component. This gives us an IRR of 10.4% on the
total property valuation. This is a value of $408,587 per room. Although this is slightly
lower than the market average, we again would like to reiterate, that it is our belief in
the most likely scenario that this hotel will underperform over the next ten-years. Based
on this valuation the property, we see a total appreciation of 32.73%, which translates to
an annual appreciation of 2.87%. The stabilized going in cap rate stays consistent with
our going out, terminal cap rate of 7.75%. Using the debt coverage ratio output,
Appendix H, for the most likely case, we come to a similar total property value of
$83,441,000, which represents an IRR of 10.31%. The mortgage component of this
valuation is $51,061,000 and the equity component is $32,380,000. This valuation gives
us a per room valuation of $411,041. Lastly our debt-yield ratio output gives us a
valuation of 81,629,000 for the ten-year holding period in Appendix I. This represents a
10.64% IRR on the property and a per room valuation of $402,111. The mortgage
component of this valuation accounts for $46,331,000 and the equity component is
valued at $35,298,000. This valuation represents an annual appreciation of 3.04% or
34.87% over the life of this property.

Worst-Case Scenario Valuation of
Wyndham Property
(In the worst-case scenario, we will be solving for the valuation of the hotel using input variables
such as occupancy rate, ADR, cap rate, etc. that we believe could realistically occur in a poor
hotel operating market. Following this valuation, we will also perform a best-case scenario
analysis.)

The purpose of the worst-case scenario is to deduce a valuation based on realistic
estimates about what would happen if the hotel underperforms in key categories, such
as ADR and occupancy growth, or if the hotel faces a more challenging market with
increased supply growth, decreased demand, higher cap rates, etc. We will begin by
changing key inputs in the RNAADR analysis, adjust those inputs in our FIXVAR
analysis, take our newly found net incomes for the ten-year holding period, and solve
for a valuation of the property.
The first major change we made was decreasing demand growth for the midtown
market. The 2.9% growth rate we used in our most-likely case was able to support even
occupancy rates over the ten-year period. However, with a decreased demand growth
rate, we will see a fall in occupancy rates for both this hotel and the midtown market.
By changing the stabilized demand growth rate to 2.2% all hotels in this market will
struggle financially. There are a few reasons this could change: for one, increased
supply in other segments could pull guests out of midtown, increased means of
transportation will keep people from staying the night in Manhattan in years to come.
We also estimated that there could be increased additions to supply. The 2% rate we
chose in our most likely case may be slightly optimistic. By changing this number to
2.25% , we will represent what is likely to happen when this market starts hitting
occupancy rates in the 85% range. Competitors will view the market as undersupplied
and come moving in to gain market share. As seen in Appendix J, the occupancy rate
for the Wyndham Midtown is hurt, mostly in the later years. The hotel is going to get a
nice pick-up with capital improvements; however, by the end of the ten-year period, we
expect that the property will be a bit rundown and an underperformer. Notice the
downward trend in occupancy and market share over this period.
Harsh market conditions will greatly reduce the rate at which our ADR grows. In this
worst-case scenario, we have decided a 2.25% ADR growth rate is more appropriate.
Please see ADR inflation graph below:

Enter expected ADR inflation rates for each segment below.
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
All
Rooms
2.25%
2.25% 2.25% 2.25% 2.25% 2.25% 2.25% 2.25% 2.25% 2.25%
None 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Using the inflation rates above, below is the forecast of ADR by segment by year.
Wyndham
Midtown
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
All
Rooms
$
275.00
$
281.19
$
287.51
$
293.98
$
300.60
$
307.36
$
314.28
$
321.35
$
328.58
$
335.97
$
343.53
(HVS RNAADR- Wyndham Midtown)
The decreased ADR growth will greatly decrease the profitability of this hotel. Lower
rates mean lower room revenue, with almost no change to the room expenses. The
graph above depicts the ADR rates we will use to solve for the room revenue over the
ten-year holding period of this hotel in the worst-case scenario analysis. With this
information, in conjunction to our occupancy rates that we solve for earlier, we can now

solve for the room revenue that will be produced by the hotel. As we can see there is
very little change in the first few holding years. However, in later years, the hotel
greatly underperforms and causes financial strain for ownership. Below are the net
incomes of the property displayed in 1000s, only slightly decreased in the first few
years. However seeing significant drops in net income in later years (2019-2023).
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
$16,5
05
$16,9
32
$16,8
38
$17,1
76
$17,4
71
$17,7
16
$17,9
56
$18,1
68
$18,3
98
$18,5
51
$18,7
34
$275.
00
$281.
19
$287.
51
$293.
98
$300.
60
$307.
36
$314.
28
$321.
35
$328.
58
$335.
97
$343.
53
(HVS RNAADR- Wyndham Midtown)
FIXVAR WORST-CASE
We can now begin our FIXVAR analysis of this property under our worst-case scenario.
By pulling information straight from the RNAADR analysis, we can now begin to solve
for the next ten-year cash flows netted by the property.
(HVS FIXVAR- Wyndham Midtown)
Base Year: 2014
Number of
Rooms:
203
Days Open
Per Year:
365
Occupancy 81.27%
Average
Rate:
$281.19

Our room revenue is only slightly knocked down here to $16,932,000 in the base year.
However we decided the best key inputs to show a worst-case scenario would be
underperforming in the food and beverage category, while still maintain the 35%
margin we discussed before. Although we maintained a high beverage revenue value,
we dropped Food Revenue down $200,000 t $452,000. This represents a per night food
revenue of 1,238. Based on the typical $100 meal for three guests in a business setting
this would be 12 to 13 groups a day.

Base Year Inputs
Base Year
Outputs
(At A
Glance)
Revenue
s
Amoun
t in
$(000)
% of
Revenu
e
$ per
Avail
.
Room
$ per
Occ
Room
This column
displays a
real time
view of how
your inputs
affect the
output
figures.
Rooms
$
16,932 $16,932
Food $452 $452
Beverages $465 $465
Telephone $272 $272
Rentals and
Other Income $136 $136
Other
Operated
Departments $0 $0

The decrease in occupancy will also decrease the cost of room expenses. This will be
from decreased washing and drying of sheets, decreased cleaning costs, and less on-
hand staff. Because the occupancy change is small, we predict a $100,000 decrease in the
cost of room expenses for this period. Food and beverage expense will remain at 65% of
revenues, and our telephone cost will remain the same based on the lack of variability
found in this area. We will also keep rentals and other income the same due to the lack
of importance it has on hotel profitability. In our undistributed operating expense
analysis of the hotel, we increased our administrative and general expenses by 100,000
dollars to reach 1.04 Million.
Rooms $6,981
Food & Beverages $596
Telephone $44
Rentals and Other Income $66
Other Operated
Departments $0
This represents the company missing key efficiency goals and hiring more lobby staff.
Based on decreased occupancy and ADR, we expect the firm to increase spending on
marketing, specifically on third party travel sites, such as jetsetter.com and Travelocity.
Increases in marketing we estimated to total $599,000. Because the property
maintenance and energy costs will be about the same, we did not change these values.
The decreases in occupancy rates were minimal and the current values suffice for a
worst-case scenario.

Undistributed Operating Expenses
Administrative
& General $1,040 $1,040
Marketing $599 $599
Franchise Fees $0 $0
Prop. Oper. &
Maintenance $507 $507
Energy Costs $439 $439
Total Undistributed
Operating
Expenses: $2,585
(HVS FIXVAR- Midtown East)

Fixed Expenses
Base Management Fee 2.0% $365
Incentive Management
Fee 0.0% $0
Property Tax $1,462 $1,462
Insurance $129 $129
Reserve for
Replacement 3.0% $548
Land Rent $0 $0
Total Fixed
Expenses: $2,504
Net Income: $5,846
The fixed expenses for the hotel remained the same. A 2.0% base management fee has
already been negotiated, and property tax at this point is fairly predictable. Our
insurance cost for the property has also been predetermined. In this case however, we
did increase our reserve for replacement to 3%. This could come for any number of
reasons, but changes in Wyndham policy would be one reason for this. The 2.8%
number for our most likely case is a bit lean and would give the company some
concern. These numbers bring us to our final net income for the 2014 worst-case
scenario of $5,846,000. This is a decrease of $684,000 from our initial estimate of
$6,533,000 that we used in our most-likely scenario. Please see Appendix K for our
worst-case scenario 10 year projected net incomes. These will flow directly into our
equity analysis of the property.

Equity Analysis Worst-Case
Going into the equity analysis with our new projected cash flows, we can solve
for the equity valuation of this property based on the three valuation methods
we described before. Here are our key inputs for the worst-case scenario.
Holding Period: 10
Equity Yield: 15.00%
Terminal Cap Rate: 8.00%
Selling Expenses: 3.00%
Mortgage Interest Rate: 6.25%
Mortgage Amortization: 20
Mortgage Payments Per
Year:
12
(HVS Equity- Midtown East)
As discussed our starting valuation year is 2014. We will hold the property for 10 years.
Our first change however is an expected equity yield of 15%, and an increase in our
terminal cap rate to 8%. Although we only change our cap rate by 0.25, the property
value is adversely affected by this change. We maintain a 3% selling expense and our
mortgage interest rate remains at 6.25%. These are industry standards. Changing these
would be erroneous. Similarly, we did not change our LTV ratio. We maintained a 60%

ratio because we are confident that this is what they Wyndham Group would get for a
loan from anyone in the market.
Fill out the matrix below with the appropriate values to complete the analysis.
Loan To Value For Valuation Estimate
Loan To Value Ratio: 60.00%
Debt Coverage Ratio
Debt Coverage Ratio
(DCR): 1.50
Year NOI To Be Used: 2016
Debt Yield
Debt Yield: 15.50%
(HVS Equity- Midtown East)
Our worst-case equity valuations can be found in Appendix L (LTV output), Appendix
M (DCR output), and Appendix N (Debt-Yield output). For our worst-case scenario
LTV output, we have a total property value of $71,804,000. The mortgage component of
this valuation is $43,082,000 and the equity position is valued at $28,772,000. This
valuation implies a per room value of $353,713, a 2.86% year over year appreciation,
and a stabilized going in cap rate of 7.9%. The IRR of holding this property in the worst-
case scenario is 10.64%. Secondly, we deduce a valuation of $72,804,000 from our worst-
case scenario DCR output. This valuation consists of a $45,589 mortgage component

valuation and an equity valuation of $37,215,000, implying that the value per room is
$358,639. Lastly, our debt yield ratio analysis deduces a total property valuation of
$70,054,000, with an equity valuation of $31,358 and a mortgage component valuation
of $38,687,000. Total appreciation over the ten-year holding period is equal to 35.93%.
With a per room value of $345,096, it is that purchasing this hotel at current market
prices will be a poor financial decision.

Best-Case Scenario Valuation of
Wyndham Property
(In the most likely scenario, we will be solving for the valuation of the hotel using input
variables such as occupancy rate, ADR, cap rate, etc. that we believe should realistically
occur in a favorable Midtown market. Following this valuation, we will also perform a best
and worst-case scenario analysis.)

In order to solve for the best-case scenario valuation of this property, we took all of the
inputs we thought were critical to change in the worst-case scenario and gave them
conservative, yet optimistic inputs. These inputs represent what would happen in the
company reaches all of their efficiency goals and the hotel market in midtown become
slightly more favorable. Again we will begin by changing key inputs in the RNAADR,
which will give us new ADR and occupancy rate values. These values in turn will go
directly into our FIXVAR analysis, which will give us the net incomes for the property
over the next ten-years. With this information, we will be able to solve for the property
value of the hotel based on three different valuation methods.
The first key input we decided to change is the demand growth rate for the midtown
Manhattan hotel market. By slightly changing demand from 2.9% to 3.2%, we will are
increasing occupancy rates for the whole market, particularly in later years in our ten-
year holding period. However we decided to keep the rate at which the market would
see increases to supply the same at 2%. This outlook would represent that investors
have a hard time entering this market, or that occupancy rates stay just below a point
that investors think there needs to be a new hotel in the market. This can be seen in
Appendix O. With these two key changes, we have new output occupancy for the
property over the ten-year holding period. This can be seen in Appendix P. Here the
occupancy rate climbs to 82.27% in 2014, dips down slightly with the addition of the NY
YIMBY in 2015, then steadily climbs back to 83% in the last four years. Market
occupancy however is able to climb into the 85% to 87% range during this time.
Although we see this hotel only slightly lagging, we find it hard to believe that the hotel
will be able to compete in the later years of the holding period when bedding, lobby,
etc. are outdated.
With occupancy rate solved for, we can now begin to analyze the best-case scenario for
ADR. As we can see below, the property will benefit from a 3.25% year over year
growth rate in ADR.

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
$275.
00
$283.
94
$293.
17
$302.
69
$312.
53
$322.
69
$333.
18
$344.
00
$355.
18
$366.
73
$378.
65
(HVS RNAADR- Midtown East)
This will again increase profitability for the hotel over the next ten-years. With an ADR
growth rate that beats inflation, the hotel’s profitability will increase with time. With
our new ADRs solved for, in conjunction to the new occupancy rates in the best-case
scenario, we can now solve for the room revenue for the property over the next ten-
years. Here we use room revenue for 2014 of $17,308,105: a $391,000 increase from our
most likely case. Please find the expected room revenues for this scenario below,
displayed in thousands. With this information, we can now begin to examine the
implications of stellar performance by the hotel on the ten-year future cash flows.
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
16,50
5
17,30
8
17,54
8
18,30
0
19,03
4
19,73
9
20,46
4
21,18
1
21,94
0
22,63
7
23,39
0
$275.
00
$283.
94
$293.
17
$302.
69
$312.
53
$322.
69
$333.
18
$344.
00
$355.
18
$366.
73
$378.
65
(HVS RNAADR- Midtown East)

FIXVAR BEST-CASE
With the room revenue solved for in the preceding section, we can now begin to
analyze the other revenue/cost sources of the hotel. With this information, we can begin
to analyze the ten-year cash flows of the hotel in a very favorable operating market.
Job Title: FIXVAR
Prepared By: Wyndham
Prepared For: SFT
Job ID:
Base Year: 2014
Number of
Rooms:
203
Days Open Per
Year:
365
Occupancy 82.27%
Average Rate: $283.94
Assuming that the hotel will do particularly well in food and beverage sales, still based
on a 35% profit margin, we expect the following revenue for the property. Again we are
using dollar amounts in total, opposed to as a percent of revenue or per available room
because this is how the information has been presented to us by the property manager.
With the hope of staying as consistent as possible, we decided this is the best way to
display the financial information to the reader of this report. As we discussed, there is

an increase in food and beverage revenue, particularly in the beverage category. This is
due to the potential we see for the Atrium bar. The bar is in an ideal location for after-
work happy hours and dinners, as well as party goers looking for a place to meet up
and grab a few drinks. We expect that the hotel bar and restaurant could be a steady
source of reliable income and a source of free marketing. As we all know word of
mouth can be the most powerful marketing tool. If the hotel executes its plan of
outstanding food and beverage service, we expect the hotel could see outstanding
results. Based on this, we decided an increase to $800,000 in beverage revenue was a fair
estimate for the best-case scenario for the hotel.
Rooms $17,308
Food $452
Beverages $800
Telephone $272
Rentals and Other Income $136
Other Operated Departments $0
Total Revenue: $18,968
Our expense reports, found below, have few changes. However in order to keep the
65% assumption of costs to revenue, we had to change our food and beverage cost to
$814,000.

Administrative & General 1,000
Marketing 299
Franchise Fees 0
Prop. Oper. & Maintenance 507
Energy Costs 439
Total Undistributed Expenses: 2,245
In the best-case scenario, we also find that the hotel has to do little extra marketing and
has one less staff for administrative and general expenses. Seen in Appendix Q.
Lastly, before we are able to solve for our future cash flows, we find the fixed cost
analysis in Appendix R. In this scenario, all previously negotiated costs remain the
same, however, we decided to operate the hotel as leanly as possible and only account
2% of revenue as reserve for replacement. Although risky, we still find the number
reasonable. This brings us to a total net income of $6,847,000 for the year of 2014 in the
best-case scenario. With this information, we can now do an analysis of the ten-year
cash flows seen in Appendix S.
Equity Analysis
Finally coming to the equity valuation software file, we can take a look at the key inputs
we would change in the market was operating in a favorable manner in the midtown
Manhattan hotel market. In this case we lower the equity yield to 13.5% and lower our
cap rate to 7.5%. This represents a hot market that buyers are willing to pay more to get
into. If adding supply to this market becomes more difficult, it is likely that this cap rate
will decrease, as we have displayed below.

Holding Period: 10
Equity Yield: 13.50%
Terminal Cap Rate: 7.50%
Selling Expenses: 3.00%
Mortgage Interest
Rate: 6.25%
Mortgage
Amortization: 20
Mortgage Payments
Per Year: 12
(HVS HEVM- Midtown East)
The revenues we solved for in our FIXVAR analysis can be seen below. These numbers,
slightly inflated from our most likely case represent the hotel operating a little below
the midtown Manhattan market, but above what it would be doing in the most likely
case. Steady growth in ADR and occupancy, combined with a decrease in new supply
are the main indicators of this newfound profitability.

2014: $6,848
2015: $6,783
2016: $7,137
2017: $7,469
2018: $7,764
2019: $8,066
2020: $8,352
2021: $8,661
2022: $8,907
2023: $9,189
2024: $9,467
(HVS HEVM- Midtown East)
Lastly we can see the final variables necessary for completion of the equity analysis.
Again we changed little, simply because changes would be erroneous. However we did
change our debt yield to 13.5%.

Loan To Value Ratio: 0.60
Debt Coverage Ratio
(DCR): 1.50
Debt Yield: 0.135
Appendix U, V, X will serve as the LTV valuation, DCR valuation, and Debt-Yield
valuation.
Through our LTV output, we come to a valuation of the property of $91,105,000, based
on a PV factor of 9.86%. This valuation represents a per room valuation of $450,789. Of
the $91,205,000 in total property valuation, $54,906,000 consists of the mortgage
valuation; thus leaving $36,604,000 in equity valuation. This valuation represents a total
appreciation of 30.04% over the 10 year term. With this valuation and the addition of an
$8,950,000 net income in year 11 and a selling expense of $3580, the net sales price in
year 11 is $115,753,000.
Our DCR output similarly represents a $91,043,000 valuation for the hotel, with
$53,570,000 representing mortgage valuation and an equity valuation of $37,473,000.
This leaves us with a per room valuation of $448,485 and a total appreciation of 31.05%.
This valuation based on a 9.96 PV factor also gives us a selling price of $115,753 in the
11th
year based on a $3,580 selling expense.
Using the debt-yield output, we come to a total property value of $90,592,000, with a
mortgage component valued at $46,917,000 and an equity valuation of $43,675,000. This
represents a per room value of $46,267. Based on this valuation, the owners of this
property will receive a 5.43% year over year appreciation increase, or 69.68%

Wyndham Midtown 45 Financial Analysis

Wyndham Midtown 45 Financial Analysis

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