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Economic Outlook ® Four Seasons and the Hospitality Industry

Economic Outlook ® Four Seasons and the Hospitality Industry. Team Synergos. Presents. March 3, 2006. Agenda. Introductions Hospitality Industry Analysis Firm Analysis Forecasts, Projections & Recommendations Economic Environment Macro Summary. Hospitality Industry Analysis.

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Economic Outlook ® Four Seasons and the Hospitality Industry

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  1. Economic Outlook®Four Seasons and the Hospitality Industry Team Synergos Presents March 3, 2006

  2. Agenda • Introductions • Hospitality Industry Analysis • Firm Analysis • Forecasts, Projections & Recommendations • Economic Environment • Macro Summary

  3. Hospitality Industry Analysis

  4. U.S. hotel industry consists of about 48,000 companies with combined annual revenue of $90 billion. 4

  5. The Hospitality Industry Hospitality Industry (includes lodging operations, food/beverage service, and travel/tourism) 5 Basic Types of Hotels commercial, resort, residential, extended-stay, and casino Luxury LodgingSegment

  6. Market Structure Types of Rooms Room Rates Hotel Property Locations Source: U.S. Department of Commerce, International Trade Administration, Office of Travel & Tourism Industries Hotel Base: 48,000

  7. Distribution of Lodging Customer Base Leisure travel has increased and business travel has decreased as a percent of travel Source: AHLA, 2004

  8. Lodging Industry Spending (as % of Real GDP) Impact of World Events (such as 9/11, SARs), Tech Bubble Burst, Travel Anxiety, Tightening of Security, Visa Restrictions Source from: Bureau of Economics, 2005

  9. Expense Structure of the Lodging Industry Lodging Expense Composition Labor comprises 45% of the lodging industry annual expense. Source from: PKF Hospitality Research

  10. Industry Expense Challenges

  11. 11

  12. Market Profile – Demographics & Tastes 12 Source: Cornell University

  13. Major Players in Luxury Segment • Four Seasons Le Merdien • Ritz-Carlton The Peninsula • Fairmont Loews • Starwood St. Regis Top players comprise 17% of total hotel market share Source from: Urban Land Institute Survey, 2004

  14. Luxury segment enjoys higher profit margins While profits margins have shrunk from 01 to 03, there was a rebound in 2004. GOP Margins 14 Source from: Four Seasons Investor Relations

  15. Welcome to Four Seasons Mingalaba Willkommen Ukwemukela Beinv'nu Maliu mai Willkommen Akwaba

  16. Four Seasons Mission and Overall Goal TEAM SYNERGOS FOUR SEASONS Source from: Four Seasons 16

  17. Four Seasons Mission and Overall Goal TEAM SYNERGOS FOUR SEASONS Highest Employee Satisfaction Low Turnover Source from: Four Seasons 17

  18. Four Seasons Mission and Overall Goal TEAM SYNERGOS FOUR SEASONS Value of the Brand Global Presence Operations Expertise Source from: Four Seasons 18

  19. Four Seasons Mission and Overall Goal TEAM SYNERGOS FOUR SEASONS Industry Leading Margins Smart Investments Source from: Four Seasons 19

  20. Four Seasons Mission and Overall Goal TEAM SYNERGOS FOUR SEASONS Selection of Property Sites Preferred Partner Source from: Four Seasons 20

  21. Four Seasons Mission and Overall Goal TEAM SYNERGOS FOUR SEASONS Significant Growth Leverage Expertise Source from: Four Seasons 21

  22. Four Seasons Mission and Overall Goal TEAM SYNERGOS FOUR SEASONS The Golden Rule Source from: Four Seasons 22

  23. Business Model: Management vs. Ownership TEAM SYNERGOS FOUR SEASONS Management allows lower capital expenses. 23 Source from: UBS Investment Research, 2006

  24. Firm Analysis - Corporate Expenses TEAM SYNERGOS FOUR SEASONS Increase in corporate expenses to support new hotel growth and expansion - mainly staffing. Four Seasons Corporate Expense ($US) 24 Source from: Cornell University – Four Seasons Analysis

  25. Brand Strength and Strategies • Four Seasons Hotels and Resorts ranks highest in overall guest satisfaction • Company Values • Employees focus on customer service • The Golden Rule • Strategic Partnership with Investors • Marketing Strategy • Outperformed all competitors – highest RevPAR

  26. ForecastingProjections Recommendations 26

  27. Forecasting

  28. GDP Forecast TEAM SYNERGOS FOUR SEASONS Less business income for the business traveler and slowing demand among business travelers for luxury hotels Slowing GDP 28 Source from: Economic Forecast of the Nation; Dr. Rajeev Rhawan

  29. Hotel Industry Supply US. Hotel Supply Forecast Remains higher than industry due to inelasticity of price Supply slows in alignment with GDP Growth trends align with rest of segment. Source of segment data: PriceWaterhouse Coopers (December 2005)

  30. Hotel Industry Demand TEAM SYNERGOS FOUR SEASONS Source of segment data: PriceWaterhouse Coopers (December 2005) 30

  31. Demand Forecast of Hotel Industry TEAM SYNERGOS FOUR SEASONS Source of segment data: PriceWaterhouse Coopers (December 2005)Source of Four Seasons: 2003 and 2004 Four Seasons Annual Reports 31

  32. Expansion Opportunities TEAM SYNERGOS FOUR SEASONS Recommended Expansion *Source: Four Seasons Investor Relations 32

  33. Macro Summary 33

  34. Factors Influencing Macro Economic Impacts Terrorism OIL Prices Source: PKF Hospitality Research

  35. Employment Growth Rate TEAM SYNERGOS FOUR SEASONS Employment in hospitality follows trend of the overall employment growth rate but remains above rate Source of segment data: PriceWaterhouse Coopers (December 2005) 35

  36. US Dollar to World Currency If dollar weakens, business travel could decrease affecting international demand 36

  37. US Dollar to World Currency 37

  38. Thank You! Questions? Wish You Were Here?

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