Preliminary Discussion Document

PRELIMINARY DISCUSSION DOCUMENT Ramada Hotel Del Rio, Texas

1. Market Area Review

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Del Rio is part of the Texas-Mexico border region known as the Rio Grande Valley that stretches 1,254 miles from El Paso in the west to Brownsville on the Gulf Coast. The Del Rio-Ciudad Acuna Metropolitan Area is one of six bi-national metropolitan areas along the United States-Mexico border. The metropolitan area is made up of one county: Val Verde in Texas and the municipalities of Del Rio, Lake Amistad, Amistad Village, Box Canyon, Comstock, Juno, Lake Views, Pandale and Laughlin Air Force Base.

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The population of the county is estimated at 52,477 for the 2008 census. Del Rio represents almost 70% of the county’s population with an estimated 37,099 for the 2008 census. The county’s population grew by 8.8% during the period of 2000 to 2008 and is estimated to grow by 5% over the next five year period.

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Ciudad Acuna, Mexico is the border city to Del Rio. Ciudad Acuna has a population of 209,000 with the municipality population reaching to 217,000, putting it as Coahuila’s largest city. For decades this northern Mexican region has boasted numerous industries including mining, agriculture, cattle-raising, import-export and tourism. Acuna’s industrial base has the highest concentration of maquillas per capita between Tijuana and Matamoras. In comparing Del Rio-Ciudad Acuna to the other five bi national areas, it has the advantage of short border crossings, limited violence and a large, low-cost labor pool.

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Eagle Pass – Piedras Negras, 50 miles south of Del Rio, has experienced growth over recent years. This area will soon be the location for the largest brewery in the world bringing over 5,000 new jobs. Many are speculating the new Corona brewery will have major economic effects to the local area, similar to that experienced with Toyota's relocation to San Antonio. In addition, Kickapoo Casino located in Eagle Pass attracts many visitors to the region. Over the past decade the border region has benefited from an expansion of the Texas economy, increased trade with a fast-growing Mexican economy and the maquilladora boom across the border. The region’s economy has followed the ups and downs of the Mexican and U.S. economic cycles and has been impacted by the national recession, financial challenges in the auto industry, border violence and tighter passport requirements. Dell Rio is on U.S. Highway 90, running east-west, and U.S. 277, running north-south. It is 150 miles from San Antonio to the east and 154 miles from San Angelo to the north. It is served by the main line of the Union Pacific Railroad and Amtrak. The Del Rio General Aviation Airport is serviced by six freight carriers and one commercial airline. Continental has two arriving and two departing flights daily with a current capacity rate of 55%. There are two International Bridges in Del Rio.

Ramada Del Rio Page 2 The Federal Government represents the largest employment sector in Del Rio. Laughlin Air Force Base, Border Patrol, U.S. Customs and U.S. Park Services are the largest government employers. San Felipe Del Rio CISD is another significant employer in the area followed by Val Verde Medical Center and the City of Del Rio.

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The 1994 NAFTA enabled companies to locate their manufacturing plants in a foreign country and distribute their goods back into the U.S. duty free. The location of Del Rio just three miles from the Ciudad Acuna, Mexico crossing made this area attractive for corporate relocations under the new international agreement. There are approximately 50 Maquilladoras with operations in Ciudad Acuna, Mexico. The automotive industry dominates the manufacturing and maquilladoras base in the area. Del Rio Economic Development has a strong partnership with their counterparts in Ciudad Acuna and are partnering together to expand into other vertical industries. Largest Maquiladoras Facilities in Del Rio – Ciudad Acuna Number of Employees 10,000 3,200 2,000 2,000 1,600 1,500 1,500 1,300 1,100 1,000 1,000 900 700 700 500

Corporate US Office Location Brentwood, TN Greenwood, MS Del Rio, TX Aurora Ontario, Canada Auburn Hills, MI Del Rio, TX El Grove, IL Tipp City, OH Auburn Hills, MI Irving, TX Winston, Salem, NC Elyria, OH Del Rey Beach, FL Windsor, Ontario San Antonio, TX

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Name Alcoa Fujikura Irvin Automotive Products Jaropamex Magna Seating Systems Takata Brenna Mex Sigmatron International A.O. Smith Electrical Products Prologics Kimberly Clark Carolina Coupon Bendix Sunbeam/Oster W.E.T. Automotive Systems San Antonio Shoes (SAS)

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Del Rio has several natural attractions that provide a draw for visitors from outside the area. Although there is an opportunity to capitalize and expand the tourism industry in Del Rio, Lake Amistad is already a major attraction with an estimated 1.8 million visitors in 2008. They estimate that 70% of the lake visitation is from outside the area and an estimated 16% utilize local lodging facilities. The Lake has had increasing exposure through ESPN and over 150 other fishing tournaments, resulting in a 5.6% CAGR (compound annual growth rate) in visitors during the 2004 to 2008 period. In the first nine months of 2009, attendance was up to 2.5 million. Lake Amistad has gained recognition as one of the best bass fishing lakes in the U.S. Through promotion, expanded concessioners and supporting attractions, Lake Amistad is positioned for future growth and a major tourist attraction. In addition to the lake, other major attractions in the area include: 

Seminole Canyon State Park – The area attracts both tourists and archeologists and is well known for its art rock.

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Shumla School – A nonprofit archeological research and education center.

Ramada Del Rio Page 3 San Felipe Springs – A beautiful creek and spring that runs through several parks and offers the blue hotel swimming area. There is some discussion about revitalizing downtown through retail and restaurant development along San Felipe Springs.

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Hunting – Ranches around Del Rio and in Mexico offer excellent domestic and exotic hunting and bring in visitors year-round.

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Historical Sites – Val Verde Winery, Whitehead Memorial Museum, Laughlin Heritage Foundation Museum, Alamo Village and Judge Roy Bean Visitor Center

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Easy access to Mexico – Neighboring Acuna has been a favorite for Americans to visit the cultural and nightlife offered just south of the border. The city has an active nightlife and music flair that attracted both college students and weekend tourism. With the increased publicity of border violence combined with new passport regulations, this demand has tapered off over the last several years.

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Winter Texans – South Texas attracts senior citizens from the Midwest that migrate to warmer climates for the winter months. Many stay in motor homes and campsites but do provide increased revenue streams to the area for four to six months.

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Mexican Nationals – Refers to the demand created by Mexican tourists crossing the border to shop, vacation or seek medical care. This is currently not a large segment in Del Rio due to limited retail and dining, but has large growth potential with increased shopping, dining and entertainment development in Del Rio.

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Medical Tourism – Dentists, specialty physicians, clinics and pharmacies in Mexico offer quality services at reduced prices and attract tourists across the border.

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2. Subject Hotel Review

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Facility Review

The following table presents an overview of the Ramada Inn facilities.

Ramada Del Rio Page 4 Hotel Outlet

Exterior Building

Lobby

 Two-story exterior corridor  Sprawling campus style with original courtyard and two new interior corridor buildings.  Interior courtyard and pool are well landscaped, but the two new wings are surrounded by surface parking lots.  Drive up porte-cochere

 Lobby redesigned in 2007  Open, two-story lobby with three sitting areas  Automated welcome signage promoting hotel outlets  183 rooms in five buildings  A variety of room types  Upgraded in-room amenities including coffee makers, refrigerators and 37” flat screen televisions with premium channels  Courtyard outdoor pool  Indoor pool  Three hot tubs  Two workout rooms  Three business centers equipped with computers and printers  Lobby grab & go kiosk  Eight rooms totaling over 6,000 square feet of meeting space  3,000-square foot ballroom divisible by three

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Rooms

 Wyndham – Ramada Brand

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Amenities

Meeting Space

Restaurant

Lounge

Analysis  Excellent access and visibility  Restaurants in walking distance  Just three miles from International Bridge  Ramada consumer perception not in line with hotel quality or full-service hotel amenities  Frequent guest program for brand not affiliated with airlines  New supply has strong brands  Dated 70’s motel appearance  Well maintained  Well landscaped  Campus versus resort appearance

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Brand

Description  Located on Highway 90 on main thoroughfare in Del Rio.  Located on approximately five acres

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Site

 Full-service restaurant located off lobby  Renovated in 2007  White Horse Lounge offering patio and lounge seating  Separate entrance from hotel

 Good first impression for the hotel

 Case goods and soft goods in excellent condition  Bathrooms are in good condition but have opportunity for modernizations  Competitive advantage with hotel amenities relative to competition

 Offers best meeting space in Del Rio  Meetings rooms have upgraded equipment and lighting  Restaurant volume inconsistent  Food quality fluctuates  Renovated and repositioned in 2007  Strong happy hour and weekend demand

Ramada Del Rio Page 5 Hotel Operating Performance

Ramada Inn - Historical Market Performance Percent Occupied Percent Change Rooms Change

Occupancy Percentage

Market Average Penetration Daily Rate

Percent Change

REVPAR

Yield

2004

56,575

N/A

46,109

N/A

81.5%

114%

2005 2006

66,795 66,795

18.1% 0.0%

49,295 53,236

6.9% 8.0%

73.8% 79.7%

104% 107%

$60.06

N/A

$48.95

141%

64.98 64.98

8.2% 0.0%

47.96 51.79

133% 126%

2007

66,795

0.0%

51,165

-3.9%

76.6%

2008 CAAG

66,795 4.2%

0.0%

50,363 2.2%

-1.6%

75.4%

107%

68.55

5.5%

52.51

124%

115%

73.34 5.1%

7.0%

55.30 3.1%

127%

08' YTD Aug 09' YTD Aug

44,530 44,530

N/A 0.0%

34,644 27,163

N/A -21.6%

77.8% 61.0%

114% 109%

$73.76 73.23

N/A -0.7%

$57.39 44.67

118% 118%

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Year

Annual Supply

Source: PKF Consulting

The subject hotel has averaged 77.4% occupancy over the past five years.

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The hotel’s ADR averaged a 5.1% (CAAG) over the five year period of 2004 to 2008.

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The hotel has captured more than its fair share of demand and ADR resulting in a yield index of 127% in 2008. Although the hotel outperforms the market, their yield index has declined since 2004.

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Demand in the first eight months of 2009 is down 21.6%, resulting from decreased market demand related to the national recession and increased rate competition. The hotel has maintained rate integrity, but the loss in market share is partly attributed to rate inflexibility.

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Management Summary

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General Management – The hotel has maintained the same management company since it was acquired by Max and Mac in 1979. The management group has a depth of experience in the market and the hotel. Management has a positive reputation in the market and is an active leader in the community. Each key department head seems passionate about their job and loyal to the company. Department heads are crosstrained in various positions to support the overall operation of the hotel. The hotel is operated well with positive guest comments regarding overall service. The two areas for improvement that occur on franchise property inspections and comment cards revolve around cleanliness and food and beverage consistency. 

Staffing - Due to the market and available workforce turnover is high and training is an ongoing process. Increased benefits, training and recognition/rewards programs should be considered to reduce turnover and improve service quality.

Ramada Del Rio Page 6 Food and Beverage – The restaurant and lounge provide a positive amenity to the hotel guest and achieve a good capture rate on breakfast and lounge services. The restaurant offers daily buffets and full menu services. The bar is currently operated during evening hours and has a strong happy hour and weekend business. Guest comment cards and local community feedback indicate food quality fluctuates. The inconsistent service and product quality has hampered banquet and restaurant sales.

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Sales - Management appears to understand their customer base and demand sources. They are actively involved in the community, aware of market opportunities and forge strong relationships with the CVB and City to promote tourism. Based on past historic performance, a formalized, proactive sales strategy was not necessary to perform well in the market. With the changing economy, a more formalized and targeted sales approach will assist the hotel to outperform the market.

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Revenue Management – Revenue management has several key components including forecasting, pricing, CRS and GDS inventory management and proper tracking and monitoring. The hotel has maintained rate integrity even during a down market and has some sound revenue management principals. A more formalized yield management program could have positive returns to RevPar.

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Profitability – Management has efficiently operated the hotel and maximized profitability. Payroll and expenses are carefully monitored to ensure proper margins in each department.

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2. Competitive Supply

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Del Rio has a total of fourteen hotels representing 985 available rooms. We selected five of the national branded hotels to define the competitive lodging market in Del Rio. The table below summarizes the local area supply. Primary Competitive Hotels

Property

La Quinta Motel 6 Days Inn Comfort Inn Hampton Inn AVERAGE

Year Built 1966 1979 1979 1997 2006 1985

Number of Rooms 101 122 95 59 65 88

Total SF Meeting Space 1,500 0 500 800 0 550

Source: PKF Consulting

3. Historical Market Performance The following table shows the historical performance for the local competitive set hotels for the period 2004 through 2008 and August year-to-date 2009.

Ramada Del Rio Page 7

Year 2004 2005 2006 2007 2008 CAAG 08' YTD Aug 09' YTD Aug

Historical Market Performance of the Competitive Supply Annual Percent Occupied Percent Market Average Percent Percent Supply Change Rooms Change Occupancy Daily Rate Change REVPAR Change 194,180 N/A 138,322 N/A 71.2% $48.72 N/A $34.70 N/A 204,400 5.3% 144,653 4.6% 70.8% 50.98 4.6% 36.08 4.0% 220,095 7.7% 163,336 12.9% 74.2% 55.29 8.4% 41.03 13.7% 228,125 3.6% 163,676 0.2% 71.7% 59.17 7.0% 42.45 3.5% 228,125 0.0% 149,392 -8.7% 65.5% 66.32 12.1% 43.43 2.3% 4.1% 1.9% 8.0% 5.8% 152,205 N/A 103,987 N/A 68.3% $71.31 N/A $48.72 N/A 152,205 0.0% 85,089 -18.2% 55.9% 67.62 -5.2% 37.80 -22.4%

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Source: PKF Consulting, Smith Travel Research

Market occupancy averaged 70.7% during the five year historic period.

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During the 2004 to 2008 period, supply increased 4.1% (CAAG). During the year the Hampton Inn opened, demand increased an average of 13% indicating latent market demand.

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In 2008, demand began to decline in the fourth quarter due to the economic recession and the decreased manufacturing in the auto industry. A more rapid decline in demand was experienced in the first eight months of 2009 related to the continued economic recession and continued pressure on manufacturing reductions at the Maquilladoras.

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Strong average daily rate (ADR) growth exists in the market with a CAAG over the five year period of 8.0%. Year-to-date 2009, ADR has declined by 5.2% as hotels compete for their fairshare of declining demand. ADR declines in this market are much better than other parts of Texas and the U.S which have declined an average of 10.5% this year.

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4. Additions to Supply

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The historic occupancy levels exhibited in 2004 to 2008 indicate pent-up demand and justify additional supply additions. Prior to the current downturn, mid-week demand was very strong and some latent demand was evident in the area. Unfortunately, the new supply addition will deliver during declining demand levels and some of the lowest occupancies in the areas five year history. The new supply addition is listed below. 

The 80-room Holiday Inn Express scheduled to open June 2010.

5. Market Supply and Demand Projections The following table summarizes our projections of supply and demand for the competitive set lodging market (local area demand).

Ramada Del Rio Page 8 Ramada Hotel Del Rio Competitive Market Estimated Future Growth in Lodging Supply and Demand 2008 - 2015 2008 2009 2010 2011 2012

Cumulative Rooms Supply Total Annual Rooms Supply Growth Over the Prior Year

625 --------228,125 0.0%

625 --------228,125 0.0%

TOTAL DEMONSTRATED DEMAND

Leisure Demonstrated Induced/(Unsatisfied)

Total Growth Over Prior Year

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Group Demonstrated Induced/(Unsatisfied)

Total Growth Over Prior Year

Contract Demonstrated Induced/(Unsatisfied)

Total Growth Over Prior Year

Gov't Demonstrated Induced/(Unsatisfied) Total Growth Over Prior Year

Market Occupancy Source: PKF Consulting

40

665 --------242,725 6.4%

705 --------257,325 6.0%

705 --------257,325 0.0%

705 --------257,325 0.0%

705 --------257,325 0.0%

705 --------257,325 0.0%

2010 30% 35% 4% 7% 24% --------100% ---------

2011 31% 34% 4% 7% 24% --------100% ---------

2012 31% 34% 4% 7% 23% --------100% ---------

2013 32% 34% 4% 7% 23% --------100% ---------

2014 32% 34% 4% 7% 23% --------100% ---------

2015 32% 34% 4% 7% 23% --------100% ---------

-25.0% -10.0% -5.0% -20.0% -10.0%

15.0% 5.0% 5.0% 15.0% 5.0%

10.0% 5.0% 5.0% 5.0% 5.0%

8.0% 5.0% 4.0% 3.0% 4.0%

4.0% 4.0% 3.0% 3.0% 3.0%

4.0% 4.0% 3.0% 3.0% 3.0%

4.0% 4.0% 3.0% 3.0% 3.0%

47,373 0 --------47,400 N/A ---------

35,529 0 --------35,500 -25.1% ---------

40,859 0 --------40,900 15.2% ---------

44,945 0 --------44,900 9.8% ---------

48,540 0 --------48,500 8.0% ---------

50,482 0 --------50,500 4.1% ---------

52,501 0 --------52,500 4.0% ---------

54,601 0 --------54,600 4.0% ---------

50,182 0 --------50,200 N/A ---------

45,163 0 --------45,200 -10.0% ---------

47,422 0 --------47,400 4.9% ---------

49,793 0 --------49,800 5.1% ---------

52,282 0 --------52,300 5.0% ---------

54,374 0 --------54,400 4.0% ---------

56,549 0 --------56,500 3.9% ---------

58,811 0 --------58,800 4.1% ---------

5,865 0 --------5,900 N/A ---------

5,572 0 --------5,600 -5.1% ---------

5,851 0 --------5,900 5.4% ---------

6,143 0 --------6,100 3.4% ---------

6,389 0 --------6,400 4.9% ---------

6,581 0 --------6,600 3.1% ---------

6,778 0 --------6,800 3.0% ---------

6,981 0 --------7,000 2.9% ---------

10,945 0 --------10,900 N/A ---------

8,756 0 --------8,800 -19.3% ---------

10,069 0 --------10,100 14.8% ---------

10,573 0 --------10,600 5.0% ---------

10,890 0 --------10,900 2.8% ---------

11,216 0 --------11,200 2.8% ---------

11,553 0 --------11,600 3.6% ---------

11,899 0 --------11,900 2.6% ---------

35,027 0 --------35,000 N/A ---------

31,525 0 --------31,500 -10.0% ---------

33,101 0 --------33,100 5.1% ---------

34,756 0 --------34,800 5.1% ---------

36,146 0 --------36,100 3.7% ---------

37,230 0 --------37,200 3.0% ---------

38,347 0 --------38,300 3.0% ---------

39,498 0 --------39,500 3.1% ---------

149,400 N/A

126,600 -15.3%

137,400 8.5%

146,200 6.4%

154,200 5.5%

159,900 3.7%

165,700 3.6%

171,800 3.7%

65%

55%

57%

57%

60%

62%

64%

67%

2008 47,373 50,182 5,865 10,945 35,027 --------149,392 ---------

32% 34% 4% 7% 23% --------100% ---------

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Total Growth Over Prior Year

Total Market Demand Growth Over Prior Year

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DEMONSTRATED DEMAND IN BASE YR IBT Leisure Group Contract Gov't

PROJECTED DEMAND IBT Demonstrated Induced/(Unsatisfied)

2015

625

Additions/(Deletions) to Supply Ramada Hotel Del Rio Primary Competition Holiday Inn Express

GROWTH RATES IBT Leisure Group Contract Gov't

2014

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ROOMS SUPPLY

2013

Ramada Del Rio Page 9 We expect IBT demand to decline in 2009 by 25% due to the slow down in production and employment in the Maquilldoras. Some indicators are showing production levels are beginning to rebound. Moody’s Economy.com has indicated South Texas and the border market as one of the first six markets in the country to show a recovery from the recession.

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The Del Rio – Ciudad Acuna industrial market is expected to expand over the next decade. Both cities are working in tandem to sell the benefits of their location to corporations for relocation. Transportation enhancements including Ports to Plains, the new Loop 277 and a pending railroad spur with access to Acuna will strengthen the market. The advantages of access and bridge crossing convenience, quality and low cost workforce in Coahuila and enhanced border security will contribute to economic growth in the market over the longterm.

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The leisure market is anticipated to constrict by 10% in 2009 as a result of the current economic climate and tighter passport requirements enacted in 2009. However, we expect steady growth in this market through the remainder of the projection period. The City of Del Rio is actively pursuing opportunities to promote and invest in the tourism/retail segment. We anticipate tourism to be a growing economic force in the area.

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The government market is expected to see a 10% decrease this year related to the withdrawal of special assignments by the National Guard. Border Patrol and U.S. Customs will be necessary in the short and long-term and the government sector is expected to remain strong in the region and in Del Rio. Laughlin Air Force Base is one of the largest training facilities in the U.S. and has no plans of downsizing or closures in the near-term. Expansion and development in and around Del Rio will support limited land encroachments surrounding Laughlin Air Force Base to ensure they remain a vibrant and growing part of the community.

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A 2.2% CAGR in demand is projected over the 2008 to 2014 period.

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Market occupancies are anticipated to drop to a low of 55% in 2009 as a result of the slow-down in manufacturing and the national recession. Occupancy over the seven year projection period is expected to average 60.3%.

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6. Subject Property Performance We have estimated the future performance of the subject hotel under three differing scenarios. The following table presents the estimated market penetrations and corresponding occupancies for each situation. Scenario I – Projects hotel performance based on retaining the Ramada brand with no major capital improvements. This projection also assumes no proactive changes to staffing, operation or strategy deployment.

Ramada Del Rio Page 10 Scenario II – Projects hotel performance based on retaining the Ramada brand and completing exterior enhancements to update the hotel to a resort positioning. Under this analysis, we have assumed the implementation of a proactive sales department and a more systematic yield management system.

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Scenario III – Projects performance based on upgrading to a full-service franchise affiliation with either Choice-Clarion or Wyndham. This scenario assumes both the exterior renovations/repositioning and any interior renovations required by the brands. Both of the recommended brands will position the hotel in a higher price tier than Ramada, effecting not only demand but ADR. Under this analysis, we have also assumed the implementation of a proactive sales department and a more systematic yield management system.

Ramada Del Rio Page 11

Ramada Hotel Del Rio - Scenario I Market Penetration and Projected Occupancy

Fair Share of Supply

ESTIMATED TOTAL MARKET DEMAND IBT Leisure Group Contract Gov't TOTAL

2010

2011

2012

2013

66,795 228,125 ==== 29.3% ====

66,795 228,125 ==== 29.3% ====

66,795 242,725 ==== 27.5% ====

66,795 257,325 ==== 26.0% ====

66,795 257,325 ==== 26.0% ====

66,795 257,325 ==== 26.0% ====

47,400 50,200 5,900 10,900 35,000 ------149,400 ------149,400

35,500 45,200 5,600 8,800 31,500 ------126,600 ------126,600

40,900 47,400 5,900 10,100 33,100 ------137,400 ------137,400

44,900 49,800 6,100 10,600 34,800 ------146,200 ------146,200

48,500 52,300 6,400 10,900 36,100 ------154,200 ------154,200

50,500 54,400 6,600 11,200 37,200 ------159,900 ------159,900

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FAIR SHARE OF DEMAND IBT Leisure Group Contract Gov't

2009

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TOTAL ROOM NIGHTS AVAILABLE Ramada Hotel Del Rio Competitive Market

2008

13,900 14,700 1,700 3,200 10,200 ------43,700 -------

10,400 13,200 1,600 2,600 9,200 ------37,000 -------

11,300 13,000 1,600 2,800 9,100 ------37,800 -------

11,700 12,900 1,600 2,800 9,000 ------38,000 -------

12,600 13,600 1,700 2,800 9,400 ------40,100 -------

13,100 14,100 1,700 2,900 9,700 ------41,500 -------

119% 120% 147% 142% 89% -------

115% 105% 140% 130% 98% -------

115% 105% 140% 125% 95% -------

114% 105% 140% 125% 95% -------

112% 103% 140% 125% 95% -------

112% 103% 140% 125% 95% -------

16,600 17,600 2,500 4,533 9,065 ------50,298 ====

12,000 13,900 2,300 3,300 9,000 ------40,500 ====

12,900 13,700 2,300 3,500 8,700 ------41,100 ====

13,300 13,600 2,200 3,400 8,600 ------41,100 ====

14,100 14,000 2,300 3,500 8,900 ------42,800 ====

14,700 14,500 2,400 3,600 9,200 ------44,400 ====

MARKET SHARE CAPTURED

33.7%

32.0%

29.9%

28.1%

27.8%

27.8%

OVERALL MARKET PENETRATION

115% ------75% -------

109% ------61% -------

109% ------62% -------

108% ------62% -------

107% ------64% -------

107% ------66% -------

33% 35% 5% 9% 18% ------100% ====

30% 34% 6% 8% 22% ------100% ====

31% 33% 6% 9% 21% ------100% ====

32% 33% 5% 8% 21% ------100% ====

33% 33% 5% 8% 21% ------100% ====

33% 33% 5% 8% 21% ------100% ====

TOTAL

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SUBJECT PENETRATION IBT Leisure Group Contract Gov't

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ROOM NIGHTS CAPTURED IBT Leisure Group Contract Gov't

TOTAL CAPTURED DEMAND

SUBJECT OCCUPANCY

MARKET MIX IBT Leisure Group Contract Gov't TOTAL Source: PKF Consulting

Ramada Del Rio Page 12

Ramada Hotel Del Rio - Scenario II Market Penetration and Projected Occupancy

Fair Share of Supply

ESTIMATED TOTAL MARKET DEMAND IBT Leisure Group Contract Gov't TOTAL

2010

2011

2012

2013

66,795 228,125 ==== 29.3% ====

66,795 228,125 ==== 29.3% ====

66,795 242,725 ==== 27.5% ====

66,795 257,325 ==== 26.0% ====

66,795 257,325 ==== 26.0% ====

66,795 257,325 ==== 26.0% ====

47,400 50,200 5,900 10,900 35,000 ------149,400 ------149,400

35,500 45,200 5,600 8,800 31,500 ------126,600 ------126,600

40,900 47,400 5,900 10,100 33,100 ------137,400 ------137,400

44,900 49,800 6,100 10,600 34,800 ------146,200 ------146,200

48,500 52,300 6,400 10,900 36,100 ------154,200 ------154,200

50,500 54,400 6,600 11,200 37,200 ------159,900 ------159,900

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FAIR SHARE OF DEMAND IBT Leisure Group Contract Gov't

2009

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TOTAL ROOM NIGHTS AVAILABLE Ramada Hotel Del Rio Competitive Market

2008

13,900 14,700 1,700 3,200 10,200 ------43,700 -------

10,400 13,200 1,600 2,600 9,200 ------37,000 -------

11,300 13,000 1,600 2,800 9,100 ------37,800 -------

11,700 12,900 1,600 2,800 9,000 ------38,000 -------

12,600 13,600 1,700 2,800 9,400 ------40,100 -------

13,100 14,100 1,700 2,900 9,700 ------41,500 -------

119% 120% 147% 142% 89% -------

115% 105% 140% 130% 98% -------

115% 110% 140% 130% 108% -------

115% 115% 145% 130% 108% -------

116% 116% 145% 130% 108% -------

116% 116% 150% 130% 108% -------

16,600 17,600 2,500 4,533 9,065 ------50,298 ====

12,000 13,900 2,300 3,300 9,000 ------40,500 ====

12,900 14,300 2,300 3,600 9,800 ------42,900 ====

13,400 14,900 2,300 3,600 9,800 ------44,000 ====

14,600 15,700 2,400 3,700 10,100 ------46,500 ====

15,300 16,400 2,600 3,800 10,400 ------48,500 ====

MARKET SHARE CAPTURED

33.7%

32.0%

31.2%

30.1%

30.2%

30.3%

OVERALL MARKET PENETRATION

115% ------75% -------

109% ------61% -------

113% ------64% -------

116% ------66% -------

116% ------70% -------

117% ------73% -------

33% 35% 5% 9% 18% ------100% ====

30% 34% 6% 8% 22% ------100% ====

30% 33% 5% 8% 23% ------100% ====

30% 34% 5% 8% 22% ------100% ====

31% 34% 5% 8% 22% ------100% ====

32% 34% 5% 8% 21% ------100% ====

TOTAL

R

SUBJECT PENETRATION IBT Leisure Group Contract Gov't

D

ROOM NIGHTS CAPTURED IBT Leisure Group Contract Gov't

TOTAL CAPTURED DEMAND

SUBJECT OCCUPANCY

MARKET MIX IBT Leisure Group Contract Gov't TOTAL Source: PKF Consulting

Ramada Del Rio Page 13

Ramada Hotel Del rio Scenario III Market Penetration and Projected Occupancy

Fair Share of Supply

ESTIMATED TOTAL MARKET DEMAND IBT Leisure Group Contract Gov't TOTAL

2010

2011

2012

2013

66,795 228,125 ==== 29.3% ====

66,795 228,125 ==== 29.3% ====

66,795 242,725 ==== 27.5% ====

66,795 257,325 ==== 26.0% ====

66,795 257,325 ==== 26.0% ====

66,795 257,325 ==== 26.0% ====

47,400 50,200 5,900 10,900 35,000 ------149,400 ------149,400

35,500 45,200 5,600 8,800 31,500 ------126,600 ------126,600

40,900 47,400 5,900 10,100 33,100 ------137,400 ------137,400

44,900 49,800 6,100 10,600 34,800 ------146,200 ------146,200

48,500 52,300 6,400 10,900 36,100 ------154,200 ------154,200

50,500 54,400 6,600 11,200 37,200 ------159,900 ------159,900

AF

FAIR SHARE OF DEMAND IBT Leisure Group Contract Gov't

2009

T

TOTAL ROOM NIGHTS AVAILABLE Ramada Hotel Del Rio Competitive Market

2008

13,900 14,700 1,700 3,200 10,200 ------43,700 -------

10,400 13,200 1,600 2,600 9,200 ------37,000 -------

11,300 13,000 1,600 2,800 9,100 ------37,800 -------

11,700 12,900 1,600 2,800 9,000 ------38,000 -------

12,600 13,600 1,700 2,800 9,400 ------40,100 -------

13,100 14,100 1,700 2,900 9,700 ------41,500 -------

119% 120% 147% 142% 89% -------

115% 105% 140% 130% 98% -------

120% 110% 140% 130% 98% -------

124% 120% 170% 130% 98% -------

126% 120% 170% 130% 98% -------

128% 120% 170% 130% 98% -------

16,600 17,600 2,500 4,533 9,065 ------50,298 ====

12,000 13,900 2,300 3,300 9,000 ------40,500 ====

13,500 14,300 2,300 3,600 8,900 ------42,600 ====

14,500 15,500 2,700 3,600 8,900 ------45,200 ====

15,900 16,300 2,800 3,700 9,200 ------47,900 ====

16,800 16,900 2,900 3,800 9,500 ------49,900 ====

MARKET SHARE CAPTURED

33.7%

32.0%

31.0%

30.9%

31.1%

31.2%

OVERALL MARKET PENETRATION

115% ------75% -------

109% ------61% -------

113% ------64% -------

119% ------68% -------

120% ------72% -------

120% ------75% -------

33% 35% 5% 9% 18% ------100% ====

30% 34% 6% 8% 22% ------100% ====

32% 34% 5% 8% 21% ------100% ====

32% 34% 6% 8% 20% ------100% ====

33% 34% 6% 8% 19% ------100% ====

34% 34% 6% 8% 19% ------100% ====

TOTAL

R

SUBJECT PENETRATION IBT Leisure Group Contract Gov't

D

ROOM NIGHTS CAPTURED IBT Leisure Group Contract Gov't

TOTAL CAPTURED DEMAND

SUBJECT OCCUPANCY

MARKET MIX IBT Leisure Group Contract Gov't TOTAL Source: PKF Consulting

Ramada Del Rio Page 14 7. Strategy and Positioning Recommendations for the Subject Hotel Brand

T

We recommend a PIP report and cost analysis be completed to upgrade to a Wyndham or Clarion (Choice). Both brands are recognized by travelers as full-service hotels and viewed as a more upscale product relative to Ramada. The hotels full-service positioning is one of the largest competitive advantages and should be promoted. The product quality of the subject hotel is equal to that of the Hampton, but the exterior corridor and brand positioning is restricting ADR. The Hampton Inn achieves a rate premium of approximately $35 above the Ramada, indicating rate elasticity in the market.

AF

The IBT traveler is the largest segment of lodging demand in Del Rio. These travelers are loyal to their travel partners and airline point accumulation is very important. Choice Hotels has a preferred program that incorporates all of the major airlines. Both Wyndham and Choice provide the GDS visibility and connectivity that is extremely important to capture market share in the IBT and leisure segments. Renovation Recommendations

R

The overall condition of the rooms is good. They have been updated and wellmaintained and will most likely require limited renovations. The case goods, soft goods and amenities are in good condition with the exception of some upgrades to the 1995 building addition. The original guest rooms may require some type of enclosed closet to meet brand standards. The guest bathrooms require updating with framed mirrors, granite vanities and some shower/tile upgrades.

D

The biggest challenge for the hotel is the two-story exterior corridor shell. We recommend exterior renovations to soften the exterior corridors with stucco and raw iron facades. We also recommend connecting the buildings into a courtyard resort setting. Surface parking should be eliminated between the buildings and replaced with well landscaped courtyards. These courtyards not only provide a leisure, resort atmosphere, but become outdoor venues to market banquet functions. Food and Beverage

The bar and restaurant were renovated and re-opened in 2007. The lounge has achieved success and attracts a steady local clientele. The exterior patio with a separate entrance has been an advantage. The restaurant struggles to gain local market share and has not yet identified its position in the market. Fluctuations in volume, staffing and food quality has resulted in inconsistencies and it does not appear to be viewed as a local restaurant of choice. Management may consider creating a more open, contemporary environment by combining the restaurant and lounge into one outlet similar to a Chili’s or Friday’s. Opening the restaurant to the pool patio would also update the concept and make it more attractive to locals.

Ramada Del Rio Page 15 Staffing

T

The management staff is well trained and experienced. Several key positions have multiple areas of responsibilities and job sharing. Revenue enhancement opportunities exist in room sales, revenue management and increased catering volume. We recommend a full-time sales person to proactively manage top corporate accounts and make sales presentations to their respective travel managers and in-house travel agencies. Additionally, this position will be able to actively promote the leisure segment, soliciting the demand in the submarkets related to fishing, hunting, medical tourism and Mexican Nationals. Tommy Zapata, Assistant Manager, can refocus from sales to a more active approach on yield management, transient sales (OTA) and tracking mechanisms.

AF

Catering has an opportunity for growth as the reputation and service levels improve in food and beverage. We would recommend a banquet manager to oversee service levels and lead the training of all banquet wait staff. Based on your current banquet gratuity charges there is an opportunity to raise it by 1% to help fund this position. This position would allow more resources for Sherry Pile to focus on housekeeping and restaurant operations. Sales & Marketing Strategies IBT 

Develop key account relationships with the corporate travel managers and inhouse agencies related to each of the U.S. companies with maquliadoras in Acuna. Network with each of the major plant managers and identify vendors and suppliers that visit the area.



Network with the hospital and area clinics to identify pharmaceutical reps that sell products in the area. This may result in meetings related demand as well.



Review Hotelligence Report monthly and develop a hit list of agencies that are booking room nights in the area, but not at your hotel. (For example, in September, there were ten agencies or accounts that you are not receiving business from, resulting in over 200 potential monthly room nights – Nexion.)

D

R



Leisure  Fishing – Actively solicit bass clubs in West Texas and South Texas to promote the lake and group fishing events. 

Obtain data on each fishing tournament and investigate advertising, direct mail or club presentations to promote the area and your hotel.

Ramada Del Rio Page 16 Network with area ranches in Del Rio and Mexico and develop a hunting package/promotion. Market via advertising, direct mail and flyers to gun shops, gun clubs, hunt clubs and sporting good stores (Cabella’s, Great Outdoors, Bass Pro).



Package and network with new vendors at Lake Amistad to market to families in West Texas. May consider weekend mall shows and look at on-line promotions.



Work with Acuna Tourism Director and obtain names of major dentists, plastic surgeons and clinics to promote and package medical tourism.



Network with Acuna and CVB to promote shorter bridge crossings versus El Paso, thereby increasing Mexican Nationals demand to Del Rio.



Develop Winter Texan packages for low demand days (Sunday’s – 54% running 12-months) and market to Winter Texans in McAllen and Brownsville. Package with attractions and casino.

AF

T



Catering and Restaurant Marketing  Use sales/catering software to actively manage all active and prospective accounts. Each account should be properly profiled and actively traced with either a service or sales call contact date. Use prospecting sources to actively solicit catering demand – list of clubs and organizations within the county, engagement announcements, high schools, government agencies and local businesses.



Establish booking goals and monitor sales activity and production in catering sales.



Market restaurant locally with discounts and specials to area churches, winter Texans and neighborhoods.



Continue to build restaurant and lounge database and promote specials via email blasts and social media.

D

R



Revenue Management 

Use Hotelligence report to monitor hotel GDS activity in the major airline systems versus your competitive set (September was only 35% market share).



Bi-annual reviews of your CRS and GDS listings. Your current Ramada listing needs to be updated (one screen shows you are not by a lake, one indicates you do not offer non-smoking rooms, recreation section needs updating, some attractions listed too far away, need to list key businesses and location, update sales pitch).

Ramada Del Rio Page 17 More formalized approach to forecasting. Forecasts should be updated weekly for 30-60-90 day time frame. Pricing, discounts, stay restrictions should be reviewed weekly and inventory managed in each of the systems.



Identify marketing opportunities to promote OTA business and increase on-line exposure. The brand can provide resources and knowledge to help you develop a plan or a third party agency can be contracted.



Competitive rate monitoring service (Rubicon) and review weekly in strategy meeting.



Tracking and correctly coding reservations is critical to a successful marketing and revenue management plan. Train and monitor reservation coding with front desk staff.



Train all front desk staff on reservation sales, walk-in conversion, transient and group lead forms.

AF

T



8. Performance Summary

Year 2009 2010 2011 2012 2013

D

Year 2009 2010 2011 2012 2013

(1)

Scenario II Estimated Performance Occupancy ADR(1) 61% $71 64% $73 66% $78 70% $83 73% $89

RevPar(1) $43 $47 $55 $58 $65

Rounded: Stated year dollars Source: PKF Consulting

Year 2009 2010 2011 2012 2013 (1)

RevPar(1) $43 $44 $45 $48 $51

Rounded: Stated year dollars Source: PKF Consulting

R

(1)

Scenario I Estimated Performance Occupancy ADR(1) 61% $71 62% $71 62% $73 64% $75 66% $77

Scenario III Estimated Performance Occupancy ADR(1) 61% $71 64% $74 68% $85 72% $90 75% $96

Rounded: Stated year dollars Source: PKF Consulting

RevPar(1) $43 $47 $58 $65 $72