Hotels & Hospitality Group

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1 Hotels & Hospitality Group January 2018 North America Hotel Investor Sentiment Survey

2 North America Hotel Investor Sentiment Survey Renewed freshness and energy in hotel investment community Despite entering the ninth consecutive year of RevPAR growth in the U.S., the hotel investment community expressed renewed vigor in JLL s annual Hotel Investor Sentiment Survey. In fact, investor sentiment notched a notable increase in late 2017 and early 2018, marking a more optimistic environment than we have seen in a number of quarters. Sentiment is underpinned by solid ongoing RevPAR trends, robust macro economy and boost to corporate confidence driven by tax reform, among other factors. Following some pressure on asset values, cap rates marked further tightening in our most recent survey. Strong asset valuations are affirmed by liquid transactions market where average per room valuations hold firm or even continue to tick up. Hotel transaction volumes across the Americas are expected to total $28 billion in 2018, in line with volumes seen in Private equity firms have a significant amount of capital ripe for deployment into hotel real estate. Public REITs will remain key buyers in the U.S. lodging market given the health of their company valuations. Institutional investors share of acquisitions has doubled in the past few years. They will continue to grow as a buyer group as they strive for income diversification, underpinned by their increasing familiarity and level of comfort with hotel real estate. In addition, high-net-worth and family office investors, both domestic and off-shore, are becoming more prevalent. We re seeing more transactions being driven by generalist investors as opposed to investors who focus solely on hotels. Achieving 10 percentage point growth in market share since 2014, generalist investors will continue to increase their footprint. JLL s Hotel Investor Sentiment Survey is the only survey of its kind and has been referenced by the hotel investment community since its inception in Responses for JLL s most recent survey were collected during December This survey represents a compilation of 5,000+ data points from hotel investors on future hotel operating performance expectations, yield requirements and future cap rate trends.

3 3 Hotel Investor Sentiment Survey 2018 Hotel investor sentiment recently marks uptick following lull in late Despite mature cycle, investor optimism increases, underpinned by solid ongoing national RevPAR trends, robust macro economy and boost to corporate confidence driven by tax reform, among other factors 80% North American Markets: Investors' Hotel Operating Performance Sentiment 60% Net Balance of Responses with Regard to Hotel Performance Decrease / No Chnage / Increase 40% 20% 0% -20% -40% Despite entering 9th consecutive year of RevPAR growth, hotel investment community expresses renewed vigor -60% -80% Dec- 00 Dec- 01 Dec- 02 Oct-03 Oct-04 Oct-05 Nov- 06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 Dec- 17 Short Term (Six Months) Medium Term (Two Years) Note: the curve represents an index of sentiment and can be understood akin to the Consumer Confidence Index Source: JLL

4 4 Hotel Investor Sentiment Survey 2018 Investors exhibit more confident outlook than in late New York and Chicago are among markets with a weaker outlook while Washington, D.C., Boston and California markets are expected to fare best Investors' Hotel Operating Performance Expectations: North American Markets Caribbean New York Chicago Miami Houston Phoenix Dallas Seattle Atlanta Toronto San Diego Hawaii Vancouver Boston San Francisco Washington D.C. Los Angeles -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% Source: JLL Net Balance of Responses with Regard to Hotel Performance Decrease / No Change / Increase Short Term (Six Months) Medium Term (Two Years) 76% Proportion of North American markets for which investors express more confident short-term outlook today vs. one year ago

5 5 Hotel Investor Sentiment Survey 2018 Following some pressure on asset values, cap rates mark further tightening in most recent survey, indicative of solid hotel investor sentiment. Strong asset valuations are affirmed in liquid transactions market where average price per room valuations hold firm or even continue to tick up 12% North America: Investors' Average Surveyed Cap Rates 9% North America Surveyed Cap Rates 10% 8% 8% 7% 6% 4% 2% 7 percentage points decrease in share of investors who expect cap rates to rise over the next six months 6% 5% 4% 3% 0% 2% Source: JLL 1% 0%

6 Contacts Lauro Ferroni Global Head of Research Hotels & Hospitality Group Geraldine Guichardo Americas Head of Research Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.