Sick Patient or Post-Mortem? Diagnosing the Canadian Hotel Investment Industry What Will It Take To Survive? Moderator: Lyle Hall, HLT Advisory Inc. Panel:

Sick Patient or Post-Mortem? Diagnosing the Canadian Hotel Investment Industry

What Will It Take To Survive?

Sick Patient or Post-Mortem? Diagnosing the Canadian Hotel Investment Industry

What Will It Take To Survive?

Moderator:

Lyle Hall, HLT Advisory Inc.

Panel:

David Larone, Director, PKF Consulting Inc

Betsy MacDonald, Managing Director, HVS

Abid J. Gilani, SVP Treasury, Marriott International

Chuck Henry, President, Hotel Capital Advisers, Inc.

Craig Wright, Senior VP & Chief Economist, RBC Capital Markets - Real Estate Group

Moderator:

Lyle Hall, HLT Advisory Inc.

Panel:

David Larone, Director, PKF Consulting Inc

Betsy MacDonald, Managing Director, HVS

Abid J. Gilani, SVP Treasury, Marriott International

Chuck Henry, President, Hotel Capital Advisers, Inc.

Craig Wright, Senior VP & Chief Economist, RBC Capital Markets - Real Estate Group

Craig WrightCraig WrightSVP & Chief EconomistSVP & Chief Economist

3-month TED Spread*3-month TED Spread*

00

5050

100100

150150

200200

250250

300300

350350

400400

20022002 20032003 20042004 20052005 20062006 20072007 20082008 20092009

Source: Federal Reserve Board Source: Federal Reserve Board

Basis pointsBasis points

*3-month LIBOR rate - 3-month T-bill *3-month LIBOR rate - 3-month T-bill

World GDP GrowthWorld GDP Growth

-1-1

11

33

55

77

99

7373 7575 7777 7979 8181 8383 8585 8787 8989 9191 9393 9595 9797 9999 0101 0303 0505 0707 0909

% change, year-over-year% change, year-over-year

ForecastForecast

Source: International Monetary Fund, RBC Economics ResearchSource: International Monetary Fund, RBC Economics Research

Canadian and U.S. Real GDPCanadian and U.S. Real GDP

-8-8

-6-6

-4-4

-2-2

00

22

44

66

88

1010

0000 0101 0202 0303 0404 0505 0606 0707 0808 0909 1010

Quarter-over-quarter annualized % changeQuarter-over-quarter annualized % change

CanadaCanada U.SU.S

Source: Statistics Canada, Bureau of Economic Analysis, RBC Economics ResearchSource: Statistics Canada, Bureau of Economic Analysis, RBC Economics Research

ForecastForecast

Annual Growth Rates

'07 '08 '09F ’10F

Canada

2.7 0.5 -1.4 2.6

U.S. 2.0 1.1 -2.4 2.2

Unemployment rateUnemployment rate

3

5

7

9

11

13

15

8282 8484 8686 8888 9090 9292 9494 9696 9898 0000 0202 0404 0606 0808 1010

Canada U.S.

%%

Source: Bank of Canada, Bureau of Labor Statistics, RBC Economics Research

U.S. long-term average: 6.0U.S. long-term average: 6.0

Canada long-term average: 8.7Canada long-term average: 8.7

ForecastForecast

Federal Government Budgetary BalanceFederal Government Budgetary Balance

Billions of dollars

-30.0

-8.7

3.05.8

14.3

19.9

8.0 6.69.1

1.5

13.2 13.8

9.6

-1.1

-33.7-29.8

-13.0

-7.3

0.7

95-9695-96 97-9897-98 99-0099-00 01-0201-02 03-0403-04 05-0605-06 07-0807-08 09-1009-10 11-1211-12 13-1413-14

0.00.0

10.010.0

20.020.0

30.0

30.0

-10.0-10.0

-20.0-20.0

-30.0-30.0

-40.0-40.0

Source: Department of Finance, , RBC Economics Research

Federal budget projection

Canadian and U.S. Central Bank Policy Target RatesCanadian and U.S. Central Bank Policy Target Rates

0

1

2

3

4

5

6

7

00 01 02 03 04 05 06 07 08 09 10

%

0

1

2

3

4

5

6

7%

BoC overnight rateBoC overnight rate

Fed funds rateFed funds rate

Source: Bank of Canada, Federal Reserve Board, RBC Economics ResearchSource: Bank of Canada, Federal Reserve Board, RBC Economics Research

Forecast

Real GDP GrowthReal GDP Growth

-3-3 -2-2 -1-1 00 11 22 33 44

ALTA.ALTA.

ONT.ONT.

B.C.B.C.

CANADACANADA

NFLD.NFLD.

P.E.I.P.E.I.

N.B.N.B.

QUE.QUE.

N.S.N.S.

MAN.MAN.

SASK.SASK.

20092009

20102010

% change, ranked by 2009 growth% change, ranked by 2009 growth

Source: RBC Economics ResearchSource: RBC Economics Research

Recession: Then and Now(% Change, Peak to Trough)Recession: Then and Now(% Change, Peak to Trough)

1980's1980's 1990's1990's TodayToday

U.S. GDPU.S. GDP -2.7-2.7 -1.3-1.3 -1.8-1.8

Canadian GDPCanadian GDP -4.9-4.9 -1.5-1.5 -0.8-0.8

Housing StartsHousing Starts -19.2-19.2 -18.2-18.2 -35.7-35.7

EmploymentEmployment -5.0-5.0 -3.5-3.5 -1.7-1.7

Unemployment rate Unemployment rate (diff.)(diff.) 5.7ppts5.7ppts 4.6ppts4.6ppts 1.4ppts1.4ppts

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