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O c T O B E R 2 011 // E xpO R E al E diTiO n fOR h O spiTa liT y & REa l EsTaTE Exp E RT s SPECIAL time to invest

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Exhibitors of hospitalityInside's EXPO REAL 2011 network: cBRE hotels a1.210 arabella hospitality Group/schoerghuber Group a1.214 RMds hotel development B1.120 GBi aG B1.421 Union investment B2.142 WTsh / investment Management hotelprojects B2.330 / c2.233 Motel One c2.010 Treugast solutions Group c2.023 pKf hotelexperts Munich c2.232 hotour hotel consulting c2.233 accor hospitality c2.233 intercontinental hotels Group c2.233 christie+co. c2.233 lindner hotels / lindner Real Estate c2.233 Grand city hotels c2.233 hotelknowhow - hotel development service c2.233 hospitalityinside - World of hospitality information c2.233 fORUM hOspiTaliTy indUsTRiE dialOGUE

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October 2011 hospitalityINSIDE Special EXPO REAL 201 1 Dear hospitalityInsiders and guests of EXPO REAL 2011, Our first SPECIAL issued at last year's EXPO REAL was very well received and as a result, you are holding the second issue in your hands today. Thanks to the support of well-known companies from the fields of real estate/investment and hospitality, it was possible to produce this multi-layered snap-shot of exciting industry topics as both a printed issue and eMagazine at the trade fair. Thank you very much! EXPO REAL 2011 gives the industry a fresh impetus: up to now, public perception has been shaped by the "Hospitality Industry Dialogue" (HID). The first joint hospitality stand, the "World of Hospitality", will increase the trade fair's attractiveness from the exhibitors' point of view in the future! The joint stand was initiated and organised by hospitalityInside. Being an information network, we not only aim at providing weekly management information via our international online magazine, but we have been striving to create entirely real meeting points, particularly at international trade fairs, right from the start. We truly enjoy getting new things moving with the industry. Many of our EXPO REAL partners have collaborated with us in previous years, and others have joined us for the first time. Accordingly, Accor, Christie+Co, Grand City, hotelknowhow, Hotour, IHG, Lindner, and WTSH took part in the first joint stand. Kempinski, bbg-Consulting, Choice, CBRE Hotels, GBI, RMDS Development and the Solution Group are our partners in this year's evening event. We would like to thank all our partners for their commitment. The industry needs more unity when it comes to outward appearances, and it needs companies that think out of the box appreciating the value of professional collaboration. This is why we are so happy that our network has been growing for several years now making all these activities possible. With a growing number of activities, potential for synergies is increasing as well: from the hotel conference, which I'm organizing for the fourth time, to the relaxed get together of the network to which hospitalityInside and EXPO REAL are inviting select guests for the third time this year, and on to this second EXPO REAL SPECIAL and the first joint stand of the industry. Hotels simply remain a special and sexy type of real estate! In this special edition with 100 pages in both German and English you will find further articles about EXPO REAL, recent reports and excerpts from the hospitalityInside.com online magazine - a cross section on hotel markets, concepts, agreements and trends. If you want to know more or read more, please contact me via eMail at maria@hospitalityInside.com. If you are interested in our activities at EXPO REAL 2012, please contact Michael Willems, Managing Director of hospitalityInside, right at the "World of Hospitality" booth or via eMail at Michael@hospitalityInside.com. This special is also uploaded as a bilingual eMagazine on our website so that you can access it at any time. I wish everybody a successful EXPO REAL 2011! Maria Puetz-Willems Editor-in-Chief hospitalityInside.com

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hospitalityINSIDE Special EXPO REAL 201 1 October 2011 CONTENT Editorial The new world of hospitality Project head Claudia Boymanns about the hospitality industry at EXPO REAL 10th Hospitality Industry Dialogue Topics: Asia, CEOs/Owners, Financing, Green City Index, Midscale & more Premiere of the "World of Hospitality"! 8 partners empower the first hospitality joint stand at EXPO REAL 2011 Slow Dating after work BRICKS & BRAINS 2011 3 6 From selective distinction 31 Motel One develops further - with locations and in concept New freedom Schoerghuber/Arabella and Starwood re-arrange their partnership In a squeeze 1st "Freitagshappen": Where are social media & mobile commerce leading us? Green is good Sustainability: Funds demanding, operators researching The foreigners are coming Germany and Switzerland are considered safe havens among investors Lindner Hotels starts new brand Test Lab for the lifestyle community The biggest challenge: banks and partners What's on the mind of developers Trade fair locations overestimated Hotour analysis: Hotels profit less from trade fairs than assumed Banks keep still longer Medium-sized hotels: General problems, but no insolvency wave Case studies included New PKF book on hotel evaluation Competition at the Baltic coast New resorts in Schleswig-Holstein - Mecklenburg should watch out 33 It's still tough 14 Consultants and hoteliers on the current financial situation Transparency the top issue 16 What currently drives the markets and investors in Europe What is a lease contract worth? JLL Hotels on pros and cons of the lease after the recent operator kerfuffle Cosying up with the owners CEO Panel at Berlin IHIF with Accor, Hyatt, Carlson and Starwood The unlikely hospitality couple ITB-CEO Panel: Kempinski & Grand City, Wittwer & Windfuhr compared Willingness is growing FOCUS Franchising: Experts on trends, contracts, guarantees and banks The tough spa calculation 2nd workshop "Investment in Spas" in the Kempinski Airport Munich IMPRINT Publisher: hospitalityInside GmbH, Paul-Lincke-Strasse 20, 86199 Augsburg, Gemany, www.hospitalityInside.com // Editorial office: Maria PuetzWillems, Editor-in-chief, hospitalityInside.com // Articles: The articles published in this Special are written on the occasion of EXPO REAL 2011 or are extracts of articles published in the online magazine www.hospitalityInside.com // Authors: Maria Puetz-Willems, Susanne Stauss, Beatrix Boutonnet // Title: fotolia.de // Photos were kindly provided by the hotels and persons mentioned // Other photos by Maria Puetz-Willems // Advertisements: This Special is kindly supported by Arabella Hospitality Group, Consilium Hotellerie, hcb hospitality competence berlin, hotelknowhow - Hotel Development Service, Hotour Hotel Consulting, Living Hotels, Motel One, PKF hotelexperts Munich, tophotel Consultants, Seetel, Union Investment, WTSH - Business Development and Technology Transfer Corporation of Schleswig-Holstein // Layout: Cornelia Anders, www.blueorangeblue.de // Print: Druckerei Steinmeier, www.steinmeier.net // Copyright: hospitalityInside GmbH. This content is protected by law. Publishing this content or parts of it in print or online media requires the written permission of hospitalityInside GmbH. In case of violation we will charge current market fees. Beyond, we reserve the right to take legal action and claim damages.

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October 2011 hospitalityINSIDE Special EXPO REAL 201 1 quick access to reliable information has always been the decisive element in the success of any person or business. Today, new media produce a constant flood of data, yet reliable sources are hard to come by. More and more, users invest in research time while doubting the quality of information available. Hence, hospitalityInside was born in 2005 on the vision of a information network between expert journalists and hotel executives. Clear rules, transparent price structures and information headings differentiate information fields, currently subdivided into the editorial "magazine", into "Solutions" for specific information by the industry's service providers and suppliers, and in "Network" for conferences, events and all future social media activities. o hospitalityInside.com is a purely editorial independent magazine with focus on the international hotel industry. o Online distribution ensures rapid and reliable delivery of important news to all corners of the globe (inter alia, by way of "Breaking News"). o The target group comprises of managers in the hotel industry and associated industries. o The magazine is published every Friday (48 times per year). o It completely appears in two languages (German/English). o The online magazine is entirely free of advertisements. The aim of the magazine is to bring transparency into the hotel market. The geographical focus of reporting is currently on Europe and the Middle East, though does include international hotels, hotel groups and associated markets and players. The editorial team provide their own research based contributions with in-depth articles, background reports and further interest links. Who does What Where When Why and How? hospitalityInside will tell you - and more. YOUR CONTACTS: Messe München GmbH Exhibition Director EXPO REAL Claudia Boymanns Trade Fair Centre 81823 Munich Germany phone +49-89-94 92 04 30 fax +49-89-94 99 72 04 30 eMail claudia.boymanns@ messe-muenchen.de www.messe-muenchen.de www.exporeal.net hospitalityInside.com Maria Puetz-Willems Editor-in-Chief Paul-Lincke-Strasse 20 86199 Augsburg Germany phone +49-821-885 880 10 fax +49-821-885 880 01 eMail maria@hospitalityInside.com www.hospitalityInside.com XPO REAL, the 14th International Trade Fair for Commercial Property and Investment, is being held at the New Munich Trade Fair Centre from 4 to 6 October 2011. It is a key networking event for interdisciplinary and international projects, investment and finance. It caters to the full spectrum of the property sector, offering an international networking platform for markets spanning from Europe, Russia and the Middle East to the United States. The fair's extensive programme of conference events, featuring some 500 speakers, gives participants valuable insight into the latest trends and innovations in the property, investment and finance market. A total of 1,645 companies from 35 countries exhibited at the EXPO REAL 2010. The event attracted more than 36,816 participants from 71 countries and took up six exhibition halls, covering 64,000 square metres of space. The statistics for EXPO REAL are audited by an independent accountant on behalf of the Gesellschaft zur Freiwilligen Kontrolle von Messeund Ausstellungszahlen (FKM, Society for Voluntary Control of Fair and Exhibition Statistics) (www.exporeal.net). esse München International (MMI, Munich Trade Fairs International Group) is one of the world's leading trade-fair companies. It organizes around 40 trade fairs for capital and consumer goods, and key high-tech industries. Each year over 30,000 exhibitors from more than 100 countries, and over two million visitors from more than 200 countries take part in the events in Munich. In addition, MMI organizes trade fairs in Asia, Russia, the Middle East and South America. With six subsidiaries abroad - in Europe and in Asia - and 64 foreign representatives serving over 90 countries, MMI has a truly global network. Environmental protection and sustainability are key priorities in all MMI's operations, at home and abroad (www.messe-muenchen.de).

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hospitalityINSIDE Special EXPO REAL 201 1 October 2011 PROjECT HEAD CLAUDIA BOYMANNS ABOUT THE HOSPITALITY INDUSTRY AT EXPO REAL The new world of hospitality Munich (October 4, 2011). The "World of Hospitality" will be even more present at this year's EXPO REAL, as for the first time, the hospitality industry will be presenting a joint stand under this very name becoming part of the "perceptible" exhibitors and real estate partners. The booth complements the annual "Hospitality Industry Dialogue" (HID) hotel conference - one of the best attended accompanying events in conjunction with the international trade fair. In addition, executives of the hospitality industry and the real estate and investment sector have been meeting each other at a closed evening event for the past two years. Trade fair visitors will find further valuable information about the industry at the hotel conference, the joint "World of Hospitality" stand and the network's partner booths as well in the "hospitalityInside SPECIAL EXPO REAL" 2011. Claudia Boymanns, EXPO REAL Project Leader explains the significance of all these activities for Europe's leading commercial real estate trade fair. 14 years of EXPO REAL, 10 years of "Hospitality Industry Dialogue" (HID) hotel conference ... What still makes it appealing for a commercial real estate trade fair to include the hotel industry? Claudia Boymanns: Being a trade fair for commercial real estate and investments, EXPO REAL has focused on the office, trade, logistics and residence sectors, but it also started integrating niche segments like hotel real estate in the HID early on. Hotel properties with their specific characteristics clearly differ from "classic" commercial property, which makes the whole issue attractive. Furthermore, hotels have turned out to be interesting investment objects, e.g. for open and closed funds. Therefore, EXPO REAL offers quite a number of points of contact for the hospitality industry. This year's EXPO REAL will see the first joint hospitality stand. Eight co-exhibitors will present themselves under one roof, the "World of Hospitality". What impact does this have on the trade fair? Thanks to the highly frequented hotel conference, the HID, the hotel industry is already a constant focal point in the conference programme. In this way, the industry was already present, and now the joint hospitality stand will enable the industry to be a real part of the exhibition. Preparations already started at EXPO REAL 2010, which is why it is of great importance to us to present the first joint hospitality stand this year. It is also positive that instead of considering this development a form of competition, some individual exhibitors actively support it. Usually, the hospitality industry appears solely at hotel events or leisure trade fairs, whereas it meets an entirely new target group at EXPO REAL: contacts regarding locations, banks and investors, developers and consultants, architects and planners or real estate managers. What synergies and effects does EXPO REAL expect from this compact industry appearance? Of course, we would like to grow further in the hotel segment extending the joint stand as well as individual involvement over the next few years making it a fixed meeting point at EXPO REAL. In order to increase the degree of connectivity between the hospitality industry and partners from the real estate segment, our exclusive "BRICKS & BRAINS" event will be staged on the first evening of the trade fair. With more than 150 invited guests from the hospitality and real estate sectors, it offers the perfect setting for getting to know each other and cultivating contacts. In addition, there will be a new "hospitalityInside Special EXPO REAL 2011" issue dealing with topics connected to the hotel market. The joint stand - a fixed meeting point

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October 2011 hospitalityINSIDE Special EXPO REAL 201 1 . po Real 2011 the focus of Ex joint stand - in lity The first hospita How do you see your future involvement as a business partner of the hospitality sector? Our goal is to further develop and promote EXPO REAL in collaboration with a competent partner from the sector, supporting it and continuously enlarging the joint hospitality stand. We want to actively accompany this process. This also includes even more targeted advertisement for both the joint booth and the conference. This year, for example, there will be a special campaign for the hospitality sector in the course of our advertising activities targeted at visitors in order to attract even more people's attention to the subject of hotel real estate at EXPO REAL. What do you think about the HID's quality compared to other real estate conferences that concentrate purely on hotel properties? What makes EXPO REAL special is its mixture. The "Hospitality Industry Dialogue" is a special segment that is integrated in a much larger and varied conference programme of a commercial real estate trade fair. Both visitors and exhibitors have the chance to become familiar with the topic, but then also turn to other fields of relevance in the segment. This is not possible at a conference purely oriented towards hotel real estate. Moreover, the trade fair offers a large range of exhibitors round about commercial real estate which presents another perfect opportunity to establish new contacts and link with the real estate sector. EXPO REAL still does without sponsorship of the hotel conference. Other conference organizers earn a lot of money this way. What is your intention behind this? By foregoing a sponsor, we remain independent with respect to both the choice of topics and participators. We avoid possible conflicts of interest and are able to concentrate on topics that are interesting for the segment and also adjust to changing cir- cumstances regarding our programme. Critical and controversial questioning is a sign of quality of the EXPO REAL conference programme, which we want to maintain in future. Thank you very much for the interview. The interview was conducted by Maria Puetz-Willems. //

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hospitalityINSIDE Special EXPO REAL 201 1 October 2011 TOPICS: ASIA, CEOS/OWNERS, FINANCING, GREEN CITY INDEX, MIDSCALE & MORE 10th Hospitality Industry Dialogue Munich (October 4, 2011). The financial and economic crisis is not over yet; it has changed agreements, financing strategies and the relation from owners/investors to operators. More Asian chains are entering the European market and are increasing the competition there. The cutthroat competition is becoming fiercer and more brands are emerging: the new mid-scale brands are now competing with luxury and budget. But a new case study reveals that medium-sized hotels are able to hold their own. "Green City Index" and "Reputation Management" might still be far-off subjects for many investors, but their effects on hotel investments are already visible for insiders. The 10th "Hospitality Industry Dialogue" at EXPO REAL contains new explosive and surprising subjects. On Tuesday, October 4, 2011 in the "Special Real Estate Forum", Hall C2, 10.30 am to 5.30 pm. 10.30-11.20 h Asian Chains: How does business pay off in Europe? Moderation: Mary Gostelow, Editor-inChief, Gostelow Report. Panel: Christoph Mares, Director Operations EMEA, Mandarin Oriental Hotels & Resorts; Martin Bowen, Asc. VP Development Continental Europe, InterContinental Hotels Group; Olivia Kaussen, Head of Hotels Germany and CEE, CB Richard Ellis Hotels 12.30-13.00 h Success story Almdorf Seinerzeit: With simplicity to the heavens of ROI. From midscale business to mini brand. Speech by Rupert Simoner, Partner Almdorf Seinerzeit and Regional Vice President Kempinski Hotels 15.00-15.50 h 13.00-14.00 Break 14.00-14.50 h 11.30-12.20 h CEOs & Owners: Friends or enemies? Moderation: Maria Puetz-Willems. Panel: Peter Verhoeven, CEO, Accor Hospitality Germany; Samih Sawiris, Owner & CEO, Orascom Development; Frank Marrenbach, Managing Director, Brenner's Park-Hotel & Spa/Oetker Collecton; Ascan Kókai, Director Hotel Fund Management, Invesco Real Estate Financing, Refinancing, Sell - Hotel Real Estate on the move. Moderation: Christoph Haerle, Managing Director, Jones Lang LaSalle Hotels. Panel: Marty Kandrac, Managing Director, The Blackstone Group Int. Partners; Thomas Wagner, Executive Director Credit Risk Management, Erste Abwicklungsanstalt; Sym Keun Lee, Senior Vice President Asset Management & Business Development Europe, Ascott International Green City Index - How will legal pressure and urban green policies impact the hotel industry? Moderation: Prof. Dr. Christian Buer, Head of Tourism Management/Hotel Management, Heilbronn University. Panel: Thomas Brodocz, Vice President Siemens One International Projects; Gregor Grassl, Project Manager, Drees & Sommer; Michael-W. Hartmann, Senior Vice President Head Market Development Board Hospitality, Siemens AG; Michaela Reitterer, Owner & Managing Director, Boutique Hotel Stadthalle Vienna; 16.00-16.50 h Hostels, Budget & Midscale - Hotels with a higher ROI? Moderation: Beatrix Boutonnet, Editor, fondstelegramm. Panel: Sascha Gechter, Managing Director, Meininger Hotels & Hostels; Philipp Westermann, Co-CEO, Motel One; Gebhard Rainer, Managing Director EMEA, Hyatt International; Ulrike Schueler, Managing Director PKF hotelexperts Munich 17.00-17.30 h Hotel Real Estate and Reputation Management: How Social Media influence the value of a property. Speech by Bruno Wolf, Managing Director, HHC - Bruno Wolf - Consulting

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October 2011 hospitalityINSIDE Special EXPO REAL 201 1 Portraits Panellists CHRISTOPH MARES is Operations Director, Europe, Middle East and Africa of the Mandarin Oriental Hotel Group and manages the group's current and future portfolio across the region. He re-joined Mandarin Oriental from his position of Chief Operating Officer, Emaar Hospitality Group LLC, based in Dubai. Prior to leaving Mandarin Oriental Hotel Group in 2008, he had been General Manager of Mandarin Oriental Hyde Park, London. SAMIH SAWIRIS is Founder and President of Orascom conglomerate in Egypt and Chairman of Orascom Development Holding (ODH), a newly established Swiss-incorporated company. ODH develops, constructs and manages fully integrated touristic towns, e.g. El Gouna, Taba Heights and Andermatt. RUPERT SIMONER started his hotel career with Marco Polo Hotels in 1989, changed to Hilton and moved on to Kempinski Hotels in 1995. Since 2007, he is Regional Vice President Kempinski Hotels. In 2010, the native-born Austrian privately became a partner of Almdorf Seinerzeit in Carinthia, Austria. MARTIN KANDRAC is a Managing Director of The Blackstone Group International Partners, London. Since joining Blackstone in 2001, he has primarily been involved in hotel acquisitions throughout Europe. Before, he worked at Goldman Sachs in the real estate principal investment group in its New York, London, and Hong Kong offices. THOMAS WAGNER was Head of Asset and Portfolio Management of the Union Investment Real Estate AG for more than eight years. Since 2005, he takes care of international investors and family offices in the fields of asset and investment management. Since 2010, he is also in charge of the real estate projects of Erste Abwicklungsanstalt (the "bad bank" of WestLB). THOMAS BRODOCZ is Head of Corporate Development Siemens One, International Projects, Siemens AG, Germany. He supports investors, architects, planners and general contractors as well as the worldwide Siemens organization to master challenging large infrastructure projects including major events. GEBHARD RAINER is Managing Director Hyatt International and in charge of all business and development aspects in Europe, Africa, Middle East. He started his Hyatt career as a Director of Finance, then moved on to IT and hotel operations. BRUNO WOLF is Managing Director of HHC - Bruno Wolf - Consulting since 2011. Before, he was with Marriott International for 16 years, always in charge of distribution and technology. His last position was Director International eCommerce Distribution. hotel Anzeige unternehmensgruppe im bereich hotel. Ihr Schwerpunkt liegt im Asset management für die 22 eigenen sowie gepachteten häuser in Deutschland, österreich, der Schweiz und auf mallorca. Sie bündelt die Kompetenzen von mehr als vier Jahrzehnten in der entwicklung werthaltiger hotelimmobilien und innovativer hotelleriekonzepte. erfahrung, die sich auszahlt. Werte schaffen. Werte steigern. Die Arabella hospitality group ist die Führungsgesellschaft der Schörghuber Creating value. Increasing value. the Arabella hospitality group is the management company for the hotels division of the Schörghuber corporate group. Its primary focus is providing asset management services for the 22 hotels in germany, Austria, Switzerland and mallorca that are owned by the group or leased from third parties. It bundles the experience gained over more than four decades of developing valuable hotel properties and innovative hotel-specific concepts. experience you can profit from. www.sug-munich.com S c h ö r g h u b e r u n t e r n e h m e n S g r u p p e

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hospitalityINSIDE Special EXPO REAL 201 1 October 2011 8 PARTNERS EMPOWER THE FIRST HOSPITALITY jOINT STAND AT EXPO REAL 2011 Premiere of the "World of Hospitality"! Munich (October 4, 2011). At the EXPO REAL 2011 this year, one sector will present itself anew: the hotel industry. Eight renowned and leading companies of the international hotel industry will be present at the 14th Commercial Real Estate Fair held between 4 to 6 October 2011 in Munich at the first joint stand "World of Hospitality", initiated by hospitalityInside. mong the exhibitors at the premier stand in Hall C2/Stand 233 are Accor Hospitality (Paris/Munich), InterContinental Hotels Group (London/ Frankfurt), Grand City Hotels & Resorts (Berlin), Lindner Hotels & Resorts (Duesseldorf), the consultancies Christie+Co (London/Berlin) and Hotour Hotel Consulting (Frankfurt). In addition, the WTSH - Wirtschaftsfoerderungsgesellschaft Schleswig-Holstein (Business Development and Technology Transfer Corporation of Schleswig Holstein) will use the "World of Hospitality" for communication of its hotel projects, despite it already being present with its own stand. Also, the new hotel development service provider hotelknowhow, vienna, will be present for the first time. The industry presence strengthens synergies of the hospitalityInside projects at the EXPO REAL and also gives new weight to the hotel conference "Hospitality Industry Dialogue", for years one of the most popular conferences. "The 'World of Hospitality' raises perception of the hotel industry in the investor and finance world. The sector gains a central presence at the trade fair and another means to strengthen its profile," Michael Willems says, Managing Director of hos- pitalityInside. The Augsburg-based company is the initiator of the joint stand; it operates a network for the international hotel industry through the online trade magazine www.hospitalityInside.com. "We very much welcome that hospitality-affine exhibitors will be placed close to the ,Hospitality Industry Dialogue' in Hall C2," Willems says. "The potential of the industry is enormous. With the hotel companies sharing the joint stand, more than 8,700 hotels are represented worldwide with over 1.16 million rooms; many new hotels and also small brands are in their pipeline." //

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hospitalityINSIDE Special EXPO REAL 201 1 hotelknowhow Accor, market leader in Europe, is present in 90 countries with 4,200 hotels and more than 500,000 rooms. Accor's broad portfolio of hotel brands - Sofitel, Pullman, MGallery, Novotel, Suite Novotel, Mercure, Adagio, ibis, all seasons, Etap Hotel, Formule 1, hotelF1 and Motel 6 - provides an extensive offer from luxury to budget (www.accor.com). IDENTITÉ N° dossier : 2006454E Date : 13/12/06 N° : 00 15 83 18 00 30 22 100 Club Med Validation DA/DC : Validation Client : hotelknowhow - Hotel Development Service, Vienna: The architect Oliver Massabni and his German partner Rudolf Bachhuber founded this joint venture. Massabni's company a2 hotelconcept also operates offices in Munich and Beirut; Rudolf Bachhuber, an experienced general contractor in the hotel industry is headquartered in Bad Birnbach, Germany with his Bachhuber Contract company (www.hotelknowhow.com). Christie + Co, established in London in 1935 is Europe's leading agent and advisor in the hotel property sector. The company also brokers transactions of restaurant, pub, leisure, care and retail businesses and offers informed consultancy and valuation services. Christie + Co employs more than 250 specialists, who combine their understanding of regional and national markets with their vast knowledge of current market trends and local distinctions. Christie + Co operates 25 offices worldwide (www.christiecorporate.com and www.christie.com). HOTOUR Hotel Consulting is a Frankfurtbased consulting firm specialised on the hotel industry. Its goal is to support clients with lasting effect in the most varied of problems and strategically important decisions in all phases, from the project development up to the hotel opening. The foundation for the success of a long-term added value is a creative solution approach and individually tailored consultation services: from Transaction Consulting (for purchasers, sellers and banks) and Project Development Consulting (for project developers, investors and banks) to Asset Management (for banks, owners and investors) and Hotel Appraisals (for banks, investors, project developers and operators). (www.hotour.de) Lindner Hotels & Resorts, Duesseldorf: Innovative hotel concepts, multi-media solutions and a variety of spa, sports and golf opportunities are the features of the 34 4-star Lindner Hotels & Resorts. Still looking for real estates in the field of constructing, managing, lease and franchising in Europe. Focus of the independent consulting subsidiary Lindner Hotels Real Estate GmbH is providing international hospitality & real estate solutions. It includes consulting, conception and realisation of hotel projects, investment consulting and brokerage for external clients and internal objects. The newest subsidiary me and all hotels GmbH combines high-tech and first-class equipment. Core feature is the community lounge with five theme zones. Search criteria for buildings: lively hearts of city centers, appropriate infrastructure for daily needs, real estate buildings up to 6,000 sq.m. GFA (www.lindner.de). Grand City Hotels, Berlin: With over 100 hotels in Germany, the Netherlands, Belgium, Austria Cyprus, Italy and Spain, Grand City Hotels is one of the leading hotel management companies in Europe. Grand City has more than 13,000 hotel rooms at its disposal. The hotels are operated by Grand City and marketed under its own brand "Grand City Hotel" or such renowned brands as Radisson Blu, Best Western, Mercure, and Holiday Inn. The scope of the activities comprises general management, sales & marketing, E-commerce, revenue management, purchasing, controlling" business development including hotel finance and acquisitions. In the latest "Treugast Investment Ranking", Grand City Hotels are listed as "AA" (www.grandcityhotels.com). InterContinental Hotels Group (IHG) is a global company operating seven wellknown hotel brands including InterContinental Hotels & Resorts, Hotel Indigo, Crowne Plaza Hotels & Resorts, Holiday Inn Hotels and Resorts, Holiday Inn Express, Staybridge Suites and Candlewood Suites. IHG is the world's largest hotel group by number of rooms and IHG franchises, leases, manages or owns, through various subsidiaries, a portfolio of over 4,400 hotels and more than 652,000 guest rooms in 100 countries and territories around the world. IHG has more than 1,200 hotels in its development pipeline (www.ihgplc.com). WTSH - Business Development and Technology Transfer Corporation of SchleswigHolstein, Kiel: The main point of contact for hotel operators, investors, local authorities and project developers is the Investment Management for Hotel Projects team at WTSH. Through customised services offered free of charge the company provides qualified support in every project development phase, e.g. in finding the right location, applying for subsidies or looking for project partners. The company offers sound and specific market and local knowledge plus details of interesting development sites; it opens door to the state's ministries and decision-makers; and has a broad-based network of contacts in the hotel industry. The special show, "Schleswig-Holstein - the location for hotels", features concrete local offers and projects (WTSH, Hall B2, Stand 330) (www.wtsh.de).

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hospitalityINSIDE Special EXPO REAL 201 1 October 2011 A hospitalityInside Network Event hosted by Expo Real Munich & BRA NS Slow Dating after work Cultivating existing contacts and making new contacts: BRICKS & BRAINS, the network event of hospitalityInside offers this opportunity at EXPO REAL 2011 for the third time. Always after the hotel conference at the first day of the fair. ere, in a relaxing atmosphere, hotel investors have many opportunities to talk to hoteliers, project developers and industry experts about new concepts, markets and locations. As only top business executives will be present, a three-and-a-half hour extensive exchange of thoughts at a high level is possible. The event is "by invitation only". This means that only invited guests with confirmed registrations will be admitted. Accompanying persons will not be allowed to join the round. Impressions of BRICKS & BRAINS 2010.

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October 2011 hospitalityINSIDE Special EXPO REAL 201 1 BRICKS & BRAINS: Partners of the same philosophy Networking events of this kind can only be realised with reliable partners. For the development of such platforms, the sustainable support is an important element. Four partners at our third edition of this event have accompanied us from the event's beginning. Some of last year's partners are present at the first joint stand. In doing so, the "hospitalityInside Networking Society" has become reality just as hospitalityInside hoped for at the event's launch two years ago: finding good partners, who help to develop projects further and those who venture into new projects. Since 2009, BRICKS & BRAINS has been supported by Kempinski Hotels & Resorts as "Platinum Partner". The development team of Europe's President Gianni van Daalen is present again and can be contacted; for the third time in a row, Kempinski Hotel Vier Jahreszeiten Munich will spoil the guests with its perfect catering service. Moreover, this year's "Gold Partners" will be: the hotel group Choice Hotels Europe, the Solutions Holding with Treugast founder Stephan Gerhard at its head; the architect's office Markus-Diedenhofen from Reutlingen, presenting itself under the roof of the new development corporation RMDS. In 2011, new "Gold Partner" is the project developer GBI AG, Berlin/Erlangen. The board members Reiner Nittka, Ralph-Dieter Klossek and Markus Beugel are pleased to celebrate the 10th anniversary of their business this year. This year, the British consultancy CBRE Hotels is a partner for the first time; among others, the consultancy has an office in Munich under the management of Olivia Kaussen. Last but not least, Duesseldorf-based bbg-CONSULTING headed by the new CEO Tina Froboese will support the event for the first time. Again, the event is organised by MMG Event, the event agency of Messe Muenchen. THANK YOU VERY MUCH to all our partners for their valuable BRICKS & BRAINS support in 2011! 2012 Would you like to become a partner for BRICKS & BRAINS 2012 and benefit from the top contacts at this event? Please, send an eMail to office@hospitalityInside.com. YOU ARE a hotel operator, investor, financing expert or hotel developer and like to be a guest of BRICKS & BRAINS 2011? Please, send your request on time, including your contact data to service@hospitalityInside.com. EXPO REAL 2012 will take place from Monday to Wednesday, 8-10 October 2012. Consequently, BRICKS & BRAINS 2012 will take place on Monday, 8 October 2012. SAVE THE DATE! NETWORKING with hospitalityInside The online magazine will remain the major pillar of hospitalityInside; nevertheless hospitalityInside creates real opportunities for connecting people - by means of events, workshops, exhibitions, conferences, trips, and by partnering with other reputable disseminators of the hospitality industry that also address top management. On www.hospitalityInside.com under "network" you will find all hospitalityInside activities announced and summarized at a later stage. These pages can be accessed by all users. For years, the online platform has been media partner and prepared the content of the "ITB Hospitality Day", the hotel conference at the world's biggest tourism fair in Berlin; hospitalityInside is also media partner of ITB Asia in Singapore. We also collaborate with Cornell University School of Hotel Administration and many other partners. Furthermore, hospitalityInside occasionally offers its own trips and workshops, e.g. a spa workshop for investors in May 2011.

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hospitalityINSIDE Special EXPO REAL 201 1 October 2011 CONSULTANTS AND HOTELIERS ON THE CURRENT FINANCIAL SITUATION It's still tough Munich (july 29, 2011). The financial crisis has ensured that financial terms for hotels have become considerably more onerous. Meanwhile, however, both the economy and the results of most hotels have recovered well. All the same, hotel consultants and hoteliers are quick to remind that it's still tough. Franchise systems and private hoteliers in particular still have a struggle on their hands. Some banks have even dropped properties altogether - and thus put an end to otherwise good concepts. The approach taken by Austrian banks seems more adventurous. The perspective of the hotel consultant and hotelier. n the economically difficult times following the financial crisis, finding finance for hotel real estate is generally more difficult. Christof Winkelmann, Managing Director Special Property Finance at Aareal Bank AG, has a more in depth view: Anything can be financed at any time, it's just a matter of the financial parameters, the business plans and the terms. In the current environment, Aareal Bank sees attractive opportunities in the hotel sector in many of the markets in which it is active. With a financing volume of around 4.2 billion EUR in the hotel sector, Aareal Bank is one of Europe's leading hotel financiers. Group intern also, the asset class "hotels" plays an important role, currently accounting for around 20 per cent of the bank's loan portfolio. Aareal Bank generally employs a strict earnings and riskoriented business policy and places great emphasis on the quality of the properties for which it provides finance. This also applies to its commitments in the hotel sector. And its approach is working well, as Aareal Bank's comparably modest risk costs show. The bank also employs a conscious policy of risk diversification by ensuring the portfolio covers a broad regional base and various types of commercial property. are forced to sell or commit additional equity in order to secure adequate terms for refinance. Project development is currently even more difficult. Here, Kaussen explains, finance is often only found where the end investor is in place or where the developer provides onerous guarantees. In general, Kokai believes German banks are the most active on the hotel finance market and also believes they offer the most attractive terms. This is due to the fact that in Germany mortgage banks are very widespread, he explains. They themselves draw finance from a bank portfolio of seven German, French, Norwegian and Austrian banks. Hoteliers don't sell themselves well enough Martina Fidlschuster, Managing Director of Hotour in Frankfurt, has also seen demand from hotels and the willingness to provide finance increase in the second fiscal quarter of 2011. Foreign hotels and investors have certainly begun to make their bank shopping trips again. But even if the banks are again becoming more open, obtaining finance has become harder since the crisis, Fidlschuster adds. She believes at least 30 per cent equity is realistic for lease contracts, and at least 40 per cent for management contracts. She also points to a further problem: Often hotel-iers don't sell themselves well enough to the banks. Here, she refers in particular ascan Kókai, invesco Real Estate. CBRE Hotels has the opposite view: Everything remains slow Olivia Kaussen, Head of CBRE Hotels is more cautious in her assessment. In her opinion, banks are still being very selective, not only with regards to new business but also in terms of refinance. The market is sluggish, she says, and there are only a few players. Finance cannot be quickly secured, she goes on. Sometimes owners The situation appears better for institutional investors though. Ascan Kokai, Director Hotels Fund Management at Invesco Real Estate in Munich, last year one of the largest investors active in the hotel sector, reports of good experiences with the banks. He attributes this primarily to Invesco's investment focus. The Invesco team, which is comprised of eight hotel experts, primarily looks for 3 to 4-star hotels with stable cash flows and hybrid or lease contracts. The LTV (loan-to-value) ratio is also under 50, Kokai continues, so that banks offer interesting margins in view of these parameters. Creditors of the institutional fund are primarily insurance companies and pension funds. They seek long-term secure earnings and their requirements thus sit well with those of the banks. Martina fidlschuster, hotour hotel consulting.

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October 2011 hospitalityINSIDE Special EXPO REAL 201 1 Dear Readers, In this SPECIAL, we focus on the hotel industry at EXPO REAL 2011 and on the hot topics of the industry. Current topics of the fair are part of this magazine. Also, you will find younger articles and excerpts from the online trade magazine www.hospitalityInside.com. to the preparation of figures. Banks have a longterm mentality, and plans must be conceived accordingly. Hoteliers need to learn that. Often franchise systems and private hoteliers have the hardest struggle on their hands. Banks remain particularly cautious with finance here, Georg Schlegel reports, Senior Development Director at Starwood Hotels & Resorts. In Schlegel's experience, if banks commit to providing finance, then it's in the budget/select service sector and then only for a moderate investment sum and high collateral. Many banks are primarily concerned with reducing their commitments through the course of refinancing and are withdrawing finance wherever possible. This can mean, Schlegel continues, that the banks distance themselves from possibly good transactions whilst retaining bad ones on their books. Even large financiers aren't spared this fate. this trend to high pressure to make investment in Austria with Russian investors choosing to hold high deposits there. Austrian banks then invest the money throughout Eastern and South-Eastern Europe, includ-ing Turkey. Germany also interests them. Private equity groups from Israel, Russia and the Middle East also like to do their shopping in Germany. A similarly high pressure to invest is felt by Austrian institutional investors. However, they find only few properties which accord with their investment focus as the market has currently already been swept bare, Schlegel says. Franchisors of select service hotels are generally not creditworthy enough for them, or otherwise their overall investment is not attractive enough with the banks preferring investments of upwards of 20 million EUR. Antje Zumsande, Managing Director of the Leonberg-based hotel consultancy Consilium, sees similar trends. Finance is often available but on terms which are so uninteresting that no deal is concluded in the end. Finance is primarily available to groups with strong credit rating, for smaller hoteliers the situation has become even more dire as they are simply not "bankable". Her fear is that the upshot of this development is that hoteliers who are first and foremost hosts will slowly die out and be replaced by the colder profitorientated investor. "That won't do our industry any good", Zumsande warns. // Beatrix Boutonnet Austrian banks more open to ideas It all seems different for Austrian banks. According to hotel insiders, interest and risk appetite is increasing here. They attribute apartmentcamp_Anzeige_Produktion_Layout 1 02.09.11 11:21 Seite 1 Anzeige antje Zumsande, consilium hotellerie. MITREDEN STATT ZUHÖREN! Seien Sie dabei, analysieren Sie mit Profis den attraktiven Immobilienmarkt a k kt k kt "Serviced Apartments". 120 Mio. Überr rv r rt nachtungen pro Jahr und zweistellige Wachstumsraten belegen das Potena at zial. Beim apartmentcamp 2011 von The Living Hotels - dem Spezialisten für Serviced Apartments - bestimmen r rv r rt Sie die Gespräche und Fachbeiträge. APARTMENT 2011 BERLIN Anmeldung unter: www.living-hotels.de/apartmentcamp 17. bis 11 18.11.20 hr egebü Teilnahm 89,00 EUR

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hospitalityINSIDE Special EXPO REAL 201 1 October 2011 WHAT CURRENTLY DRIVES THE MARKETS AND INVESTORS IN EUROPE Transparency the top issue Munich (February 11, 2011). The global upswing is gaining in breadth. The time-delayed emerging recovery in many property markets is also fueling liquidity in the investment markets. As a result, commercial real estate as well as hotels are slowly recapturing their place as a popular form of investment for foreign and institutional investors. However, without transparency, this will go no further. The investors themselves are not only picking through the high-yield locations, but are also progressively giving more time for the scrutiny of the business transactions. A current appraisal of the (hotel) real estate movement in Europe. Top brands and top locations always attract investors - the ME by sol Meliá in Barcelona. he world moves fast. For many, too fast. During these last days, not only North Africa and Arabia have felt this; also beyond the big pond, Barack Obama has had to fight hard. In the meantime, the majority of the US federal states are being governed by republicans once again. With this, the risk of a political blockade has risen considerably. In parallel to this, the chances for his complicated, proposed reforms in finance, infrastructure and climate politics are sinking. It looks different in Asia. China and India are the new heavyweights. At the World Economic Forum in Davos, it became quickly clear that China has risen from the crisis as the big winner. And thus, the G7 structure is increasingly being replaced by the G20. The cards were shuffled again. And for the property markets as well. European markets clearly drift apart Much has changed since the crisis Thus, the current European property markets are progressively drifting apart. Germany is presenting itself as the virtual model student - not only in the matter of economy, but also in real estate. The strong economic backbone is an additional help. Investors appreciate this more and more - all Arabian and Asian sovereign wealth funds are in the forefront as well as anglo-saxon private equity investments. Their share rose from 13% in 2009 to 37% in 2010, according to a current survey by the real estate service provider, DTZ. Eastern Europe with cities like Warsaw and Budapest are also offering attractive yields again while crisis-shaken countries like Portugal, Greece and Spain, in particular, still

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October 2011 hospitalityINSIDE Special EXPO REAL 201 1 must wrestle with big problems. Also, Ireland must first close its disastrous residential and commercial bubble for a start. On the investor's side, as already reported in previous articles, it is still core real estate in prime locations ranging across all types of utilisation that is sought after. Of course, this forces the prices up. Additionally, the low interest rate policy in many countries is raising pressure on the property markets since investors are once more looking for their capital globally for lucrative investments and above all, higher yields. This is more and more difficult with existing properties and with the properties becoming increasingly more scarce in top locations. Hence, investors will soon be made to fall back to B-positions at the locations and on real estate with appreciation potential (Value Add). However, opportunity investments such as project developments will break down due to financing problems, according to Dr. Thomas Beyerle, Director of CRS and Research with the Bonner IVG AG. Even if, according to the statements of Jones Lang Lasalle CEO, Colin Dyer, the credit-granting sector has improved because banks, for their part, have become successful with refinancing their loans once again. In the comeback of the commercial real estate investment market, he sees many positives for the global economic development. The issue of "security orientation" is still not on the table. IVG Research Director, Dr. Oliver Voss, also explains that in the meantime, investors are once more interested in the longer term. German locations, London city, Stockholm and Warsaw lie well in the front on the popularity scale. By contrast, fear is circling once more around the London West End that the market could turn and risks will rise again. Due diligences are extended - transparency is a must Family offices and institutional investors such as insurance companies and pension funds want to raise their real estate ratios in spite of "Solvency II" (a new legal directive for insurance companies' equity deposits) but demand a clearly higher transparency. "During the global financial crisis, the activities in most markets concentrated on survival," sums up Dyer. Now, however, the investors want to see clear exit strategies before they put their money into commercial real estate. Experts are hearing from everywhere that the length of the examination processes, the so-called Due Diligence, lasts even longer. In the meantime, investors are precisely considering what they buy so they can then gain a lucrative turnover from it in five to ten years. Along with this, the old credo, "location, location, location", is still a leader. For this reason, many cities are working hard to structure their markets more transparently in order to achieve such a competitive advantage. Deals in the middle range between 20 and 50 million Euros are particularly in focus. With the type of utilisation, investors are placing an increasing focus on living quarters and shopping centres as Anzeige O u r e x p e r t i s e ??? p r o f i t a b l e h o t e l s Beratung für Hoteliers: Repositionierung, Studien zur Leistungskraft von Markengebern, Portfolioanalyse, Betriebsschließung von Hoteldepartements inkl. Übergabe an Nachnutzer, Begleitung und Koordination der Voreröffnungsphase. Beratung für Eigentümer und Projektentwickler: Hotelmarkt- und Standortstudien, Hotelverträge, Begleitung kommunaler Durchführungsverträge und Bebauungspläne, Strategieplanung, Plausibilitätsberechnung, Due Dilligence Hotelarchitektur. Stuttgarter Str. 122 in 71229 Leonberg Tel.: 07152 - 33 66 71 oder Mobil: 0173 - 70 64 523 www.consilium-hotellerie.de

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hospitalityINSIDE Special EXPO REAL 201 1 October 2011 well as niche products such as hotels or retirement homes and nursing facilities. Open funds scene splits Also, open real estate funds are increasingly shaping the market. But with it comes a division into two parts. While the frozen funds that cannot currently take back shares are wringing their hands trying to sell their properties, the stable funds like Dekra, UnionInvest and the Commerz Real are hard on the path of the buying side. For 2011, Timo Tschammler, CEO of DTZ Germany, other market drivers aside from open funds were to be found: These are, on the one hand, good signs for the leasing markets. However, even more considerably, he holds to the fact that, up to now and in view of the rising prices, the colin dyer, Jones lang lasalle. reserved owners explain their growing readiness for sales of all types of utilisation. Also, the banks have now entered as potential sellers since they had to take a fair amount of real estate onto their books as a result of the crisis and are now increasingly trying to resell it. The savoy london, a star in the international luxury hotel industry. still, investors follow the credo of "location, location, location". Banks will sell more actively again Market experts also see better times in the hotel sector. In the EMEA region (Europe, Middle East, Africa) Jones Lang LaSalle Hotels expects a transaction volume of approximately 8.3 billion Euros in 2011 according to an increase of 18 percent in comparison to the year before. With this, countries like the United Kingdom and Ireland will gain the highest share and if nothing else, be influenced by distress sales which up to now, were hardly to be seen neither in the office space nor in the hotel markets. "In 2011, however, hotels that are not able to refinance their current Loan-to-Value terms will increasingly come onto the market. Therefore, the banks and financial backers who are anxious to settle their balances will be the most active sellers." Confidently says Christoph Haerle, Managing Director with Jones Lang LaSalle Hotels. He goes on further: "Many of the hotels up for sale will change owners on the basis of location or renovation needs, not on the values financed in 2006 or 2007. This will only slowly raise the remainder of the hotel purchase prices. Therefrom, the investor's demand for trophy hotel real estate will be unaffected in key markets. These hotels will be sold on basis of the strong investor's interest in higher sale prices." Though much has changed in this regard, quite a lot still remains the same. // Beatrix Boutonnet Timo Tschammler, dTZ.

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Anzeige October 2011 hospitalityINSIDE Special EXPO REAL 201 1 Hotel investments offer stable returns With assets under management currently totalling around 19 billion euros across seven funds, Union Investment is one of Europe's leading real estate investment managers, focusing on open-ended real estate funds for private and institutional investors. Thanks to their stable returns and sustainable rental income, hotels figure prominently in Union Investment's investment strategy, with the focus on budget and medium price hotels plus high-end hotels in Europe's major business centres. Fresh, innovative hotel concepts are also of interest, e.g. in new CBD locations. Hotel Steigenberger, Hamburg Union Investment was again one of the most active investors in the European real estate market in 2010. The company invested a total of 1.6 billion euros and added 24 properties to its portfolio, with new acquisitions including the Motel One in Hamburg's Neustadt area. The purchase of the Crowne Plaza Amsterdam South was finalised this year, and plans for further investment in locations with an international gateway function are in hand. Union Investment takes care to ensure that its hotel investments incorporate key sustainability factors. The company has made significant progress towards its goal of creating a sustainable property portfolio, investing some 600 million euros in certified green buildings in the past two years. Its holdings now include 18 properties and projects with national or international awards for sustainable building and a current market value of 2.3 billion euros. Union Investment is the first German real estate fund provider to have properties certified for sustainable construction across all usage classes. Scandic Hamburg EMPORIO, held by the UniImmo: Deutschland fund, was one of the first hotels to be awarded pre-certification by the German Sustainable Building Council (DGNB). Hotel Arcotel Courtyard by Marriott Hilton Holiday Inn Express Ibis InterCityHotel InterContinental Le Méridien Marriott Motel One Mövenpick Novotel Park Plaza Pullman Radisson Blu City Vienna Munich Munich Dresden Hamburg Berlin Hamburg Berlin Stuttgart Hamburg Hamburg Frankfurt Munich Berlin Berlin Berlin Brussels Krakau London Stansted Manchester Marseille Hamburg Berlin Hamburg Union Investment has been investing in hotels for over 40 years, thereby gaining a strategic position in this important market segment. The company's hotel expertise is brought together in a dedicated, eight-person asset management unit that handles the entire hotel investment process, from operator selection to ongoing management. This longstanding involvement in the hotel segment has resulted in an outstanding portfolio of 25 hotels across Europe with a current market value of some 1.4 billion euros. With regard to operational management, Union Investment relies on the experience and financial strength of leading players. The 19 hotel brands in the Union Investment portfolio include InterContinental, Hilton, Marriott, Mövenpick, Radisson Blu, Scandic and Steigenberger. Hotel Mövenpick, Frankfurt Scandic (off 2012) Sofitel Steigenberger Contact: Union Investment Real Estate GmbH Asset Management Hotel Andreas Löcher Caffamachereihe 8 20355 Hamburg, Germany Tel.: + 49 40 34919 - 4711 E-Mail: andreas.loecher@union-investment.de Internet: www.union-investment.com/realestate

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hospitalityINSIDE Special EXPO REAL 201 1 October 2011 jLL HOTELS ON PROS AND CONS OF THE LEASE AFTER THE RECENT OPERATOR KERFUFFLE What is a lease contract worth? Munich (june 10, 2011). Continuity and normality this is not: After the surprising and rapid termination of management contracts, at the end of March InterContinental's hotel sign was taken down and the Dorint flag was hoisted at three German hotels. Two months later - after various operators had weighed up their chances - InterConti had returned to the hotels in Berlin and Duesseldorf. Yet despite the ultimate clarity as to operator, rumours and mysteries still remain. The entire toing and froing was the result of the "good old" German lease contract - though a management contract was also in play. Now, not only jones Lang LaSalle Hotels (jLL Hotels) is asking: What is a lease contract (still) worth? Christoph Haerle, Managing Director, and Ursula Kriegl, Executive Vice President Germany, from jLL Hotels venture their answers. rom an operator's perspective, a lease contract can sometimes be very valuable and sometimes much less valuable," Ursula Kriegl begins the statement from JLL Hotels. "It's also possible that the lease contract turns out to be the ultimate financial disaster - temporarily or permanently." The expert opinions in detail: "Similar to investors, hotel companies work out the value of their commitments using the discounted cash flow method. Put simply, this means earnings after all operating costs and lease fees are adjusted by applying a risk-based discount rate and summed over the full term of the contract. The discount rate is determined largely in accordance with the company valuation. This is the financial value. Further factors such as, for example, staff, repairs and replacements (what, how and when) must also be taken into account. Less pleasing from an operator perspective is that a lease contract - when negotiated properly - is also linked to a guarantee. A guarantee from a bank isn't exactly cheap lease or management? What is the perfect solution? Ursula Kriegl.

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October 2011 hospitalityINSIDE Special EXPO REAL 201 1 dorint and ihG: a severe dispute was finished in 2011. Seldomly does news focus on those cases where an operator makes an absolute killing, despite all commitments under the lease - assuming of course adequate prior market assessment and low pressure to expand. In particular in the case of a fixed lease agreement with moderate indexation, the operator's income can increase massively through the second half of the contract term and take on dimensions which make a mockery of any fair distribution of benefit between the owner and operator. Location pressure fires the lease's recovery and a corporate guarantee weighs on the balance sheet. Maximum financial exposure must also be kept in mind in the valuation. So what does the commitment cost in the worst case scenario - apart from the grief? There are then also the soft factors such as brand presence and image. The latter is likely to have played a significant role in the case of Berlin. After all, leaving InterConti's hotel guide without an entry for the German capital, especially when this is also a well-known international conference destination, would have been very painful indeed. In this case, exceptions to the rule can be made and a lease contract be signed despite the otherwise consistent policy of only accepting management deals. What have we learned from the recent waves of rebrandings affecting Germany's renowned hotels? Above all, we must accept that sandwich constellations with three parties (owner, lessee and manager = fund, Dorint and IHG in the case at hand) and with their many and varied interests are more complicated than initially thought. We witnessed a case yet again where the lease was anything but an allround problem-free solution, but yet it still appears in the top echelons of the hotel industry. Renowned hotel companies are obviously prepared to stick their head out when it comes to securing important locations. Various factors therefore come into play when valuing these lease agreements, which overall are positive for the hotel company. The other party will also have had to make concessions though as a large global brand also has its price." As hospitalityInside.com learned from wellinformed circles, the Neue Dorint received a total of 11 million EUR for premature termination of the lease which allowed IHG the opportunity to conclude a contract directly with the owners (two funds). In order to secure the deal though, IHG was prepared to enter into lease agreements for hotels in Berlin and Duesseldorf. // christoph haerle. Pros and cons of lease and management Everything is more relaxed with the management contract. The sales-related basic fee is always there. How far incentive fees are attached to the attainment of certain targets is a matter for the individual parties. If a management contract were valued, the basic fee would be subject to a significant- ly lower risk-based discount rate than would apply to the incentive fee or to income under a lease contract. But concluding that the management contract is worth more to the operator than the lease would be premature. Assuming an equal balance of power at the point of negotiation, the operator may rightly demand higher earnings in the case of a lease agreement and thus the sums to be discounted are higher here. In Germany, the press seem to focus on those scenarios where the operator suffers under the lease. This of course encourages hotel companies to move increasingly towards the management contract. Anzeige

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hospitalityINSIDE Special EXPO REAL 201 1 October 2011 CEO PANEL AT BERLIN IHIF WITH ACCOR, HYATT, CARLSON AND STARWOOD Cosying up with the owners Berlin (March 18, 2011). After the crisis, the large international hotel groups are also continuing to target franchise and management contracts. Nevertheless, dealings with real estate owners have changed. Today, the operators must prove more than ever that they are not only pursuing their own interests. Strong brands are an additional resource. Impressions of the CEO-Panel at the 14. International Hotel Investment Forum (IHIF) 2011 in Berlin. These cEOs talking at the ihif Berlin share different opinions about the importance of real estate for operators: (from left) denis hennequin/accor, Mark hoplamazian/ hyatt, hubert Joly/carlson and frits van paasschen/starwood hotels. ancelled and delayed building projects have not exactly made the expansion of large hotel chains during past years any easier. "20 percent of our new contracts were the conversions of already existing hotels. At the moment, not so many hotels are not being built", says Frits van Paasschen, President & CEO of Starwood Hotels Worldwide, describing the situation for his company. For a hotel group like Starwood, who owns only as much as 5% of their hotels, the relationship with the owner is therefore of tremendous importance, to say the least. "The success of a hotel belongs to a good operator and a good real estate investor", explained van Paasschen. A hotel compa- ny will be always put to the question of whether it wants to pursue a fee business or create value for the owner. The fact that Starwood can look back at long-standing, often extended partnerships with owners proves that a benefit from the partnerships has also been derived. Accor: Innovations for the owners "Our greatest asset is our brands", underlines Denis Hennequin, the new Chairman and CEO of the Accor once more. Therefore, Accor will continue to follow the correct asset strategy. Sale-and-Lease-Back as well as Sale-and-Management-Back, but also the conversion of leases into variable versions and management or franchise contracts are important components of the Accor strategy until 2015. But aside from this, Accor wants to also bring advantages to the owners, particularly through innovative strategies. Therein, the real estate owners are clearly masterful and require a very different training for their job than an operator. Hubert Joly, President & Director of Carlson Hospitality, the main shareholder of Rezidor also holds this view. "Real estate management is very important. Real estate managers have other abilities, it is simply another business", he explained in Berlin. Indeed, the owners would also need to make a marketable product available to the operators. "80 percent of our owners have just signed a property improvement plan", he said.

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October 2011 hospitalityINSIDE Special EXPO REAL 201 1 Country Inn as Indian Home In principle, Carlson would not be averse to investing in real estate. "We invest strategically. In the USA, we are absolutely willing to spend money on flagship assets", according to Joly. In India, Carlson took over the majority of the hotel operating company, RHW in 2010 of which the companies had worked together for many years. There, we also want to intensively engage ourselves with the expansion of the Country Inns & Suites brand. The moderator of the CEO Panel and Director CBRE Hotels, Simon Johnson, poin- nal markets. His companies also have a long past as a real estate owner. Hoplamazian is still convinced of the fact that individual brands can only be set up in new markets through ownership. In 2004, Hyatt also bought the introduction of another hotel category through a real estate deal. The group acquired the AmeriSuites from a Blackstone subsidiary and it surged into the newly formed "Limited-Service" brand, Hyatt Place. "Ownership is the heart of what we do", explained Hoplamazian in Berlin. Indeed, the key to the future not only lies in growth gish economy. "There are still no jobs for the workers who stay overnight in the budget sector", according to the Frenchman. However, Motel 6 has very great name recognition and the best customer satisfaction review in its category. Unfortunately, this drives too many older properties to unattractive conditions. "We must change the contracts for Motel 6, this is quite clearly a franchise brand", explained Hennequin. "This brand will function well as a franchise system." The fact that allseasons and Mercure are also set as less standardised products was also reckoned at the time. frits van paasschen. Mark hoplamazian. denis hennequin. ted to their hesitant expansion in the USA. Joly: "We have at least 500 Country Inns & Suites in the USA. We will start pulling up this brand in 2011. After all, it is not a problem to have a brand that is successful in only one country." Country Inns is a brand of the Midwest, very much US-defined with an open chimney as a symbol. Now this concept will transfer to India, by recreating how it feels at an "Indian Home". "We looked for new models for the brand in different countries. In the future, we want to concentrate on our four brands and adapt them to other countries", explained the manager. through ownership, but also in the entering of partnerships with owners. With Hyatt's own real estate management group, representation is very engaged in the interests of the owners. Confession of weak brands? Not only Joly of Carlson, but also his CEO colleagues with Accor, Hyatt and Starwood had to provide the moderator, Johnson with information regarding weakly active brands. He asked van Paasschen why Starwood sticks to Le Méridien where headway is not being made in the USA with the brand. His answer: The growth of the RevPAR index of the brand is very high, so it also gives Starwood great hope. Hennequin, in response to the weakness of the Motel 6 brand in the USA, explained this development as through the still slug- However, the "Big Mac" of Accor, according to the former McDonald's manager, is definitively Ibis. This brand simply functions everywhere in the world. Hoplamazian also reacted calmly to the request by the presenter to explain the differences between Grand Hyatt and Hyatt Regency. Grand Hyatt has more restaurants, the hotels are larger and oriented more toward Asia, he reeled down and sufficiently met the moment. // Susanne Stauss Hyatt: No future without ownership Mark S. Hoplamazian, President & CEO Hyatt Hotels Corporation is also engaged in the adaptation of his brands to internatio- Anzeige

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hospitalityINSIDE Special EXPO REAL 201 1 October 2011 ITB-CEO PANEL: KEMPINSKI & GRAND CITY, WITTWER & WINDFUHR COMPARED The unlikely hospitality couple Berlin (March 18, 2011). The speakers on the CEO panel at the 6th "ITB Hospitality Day" last week couldn't have been more different. Whilst Reto Wittwer, President and CEO of Kempinski Hotels & Resorts presented his skills as luxury hotel manager with clear emotion, Christian Windfuhr of Grand City explained the strategy of his company - with the core aim of increasing real estate values - with utmost objectivity. Both managers embody the very different approaches of their companies, which in turn reflect the two major models employed today by the hotel sector across the globe. Brand values or real estate investments: Wittwer and Windfuhr gave away some interesting details. empinski owner, the Thai Crowne Property Bureau, is no hotel expert, Reto Wittwer was keen to make clear at the very start of the discussion. The company is a state investment fund, independent of the Thai Royal Family, whose main objective is to increase the wealth of the country. For this reason "the investment in Kempinski 16 years ago was more a coincidence", Wittwer stated coquettishly. Kempinski is the only foreign investment held by the fund. As Wittwer took over the company as CEO in 1995, "it was broke". "In the first two years, I was fully occupied with saving the company from bankruptcy," Wittwer went on. Kempinski is today, de facto, a pure management company. The Group retains ownership of only one property, the Vier Jahreszeiten in Munich. There are still two lease contracts, one for the Adlon Berlin and one for the Hotel Les Bains St. Moritz. On being questioned by host Maria PuetzWillems, Editor-in-Chief of hospitalityInside. com, Wittwer put the group's current value at 600 million EUR. The target is to double this to 1.2 billion EUR by the year 2015. In case of stress, termination of contract looms In terms of Kempinski's income, management fees form the lion's share. And the CEO has a clear statement here: "If the fee can't be paid, we have to terminate." But the chemistry between manager and owner must also be right. Over the last two years, he has given up 23 hotels, sometimes also due to "differences with the owner". According to Wittwer, Kempinski generates 1 million EUR net as fees from 100 hotels; EBITDA per year stands at 35%. "That is, I think, very acceptable for our business," Wittwer went on. The fees move in the region of 300,000 EUR to five million EUR. He resisted vehemently any accusation that Kempinski didn't want to assume any risk in restricting itself to management contracts. "We employ people and create value. What do bankers do? They charge their fees and do nothing. And lawyers charge their fees whether they win the case or not," Wittwer said defensively. Grand City: Increasing real estate value Grand City Hotels pursues quite a different strategy to Kempinski. The hotel group belongs today to the three investors Yakir Gabay, Teddy Saguy and the Weizman family. The declared focus of the company, according to CEO Christian Windfuhr, is clearly on return on investment in respect of the property. "Our strategy is to buy, renovate, refinance and/or retain by way of sale-and-leaseback," he said in Berlin. Up to now, the company has not sold a hotel. Grand City operates hotels both under its own brand as well as under the individual brands of its various franchise partners including Accor, Rezidor, IHG and Best Western. "This variety of brands is part heritage, part strategy," Windfuhr explained. "There are locations which aren't suitable for any brand." Should an international hotel brand not result in the desired success for a particular hotel, it will continue to be Two managers, two concepts: does the brand or real estate increase the company's value? Moderator Maria puetz-Willems talking to Reto Wittwer, Kempinski hotels & Resorts (left) and christian Windfuhr, Grand city hotels & Resorts during the iTB cEO panel.

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October 2011 hospitalityINSIDE Special EXPO REAL 201 1 operated without. "With respect to franchise contracts, we expect to increase our net profit. If that doesn't work, the franchise is quickly removed." Grand City's investors do not hire external management companies (like Kempinski, for instance), but retain the operating company for their hotels within their own company and employ managers to this end. Though he does wish that the Germans would be more willing to spend on luxury. "When Germans travel abroad, they have money. When they travel within Germany, their arms seem to lose some of their length and no longer stretch into their pockets," he says. Windfuhr sees things differently: "We have no desire to expand into the luxury segment, because it's difficult to maintain luxury. In German cities, luxury doesn't work," he says. Wittwer, who aims to run his company by German rules, though is focussing expansion outside Germany, is sticking with his exclusive luxury strategy. Reto Wittwer. According to Windfuhr, this is a "means to an end" in order to increase hotel value. Certainly, success can be seen. For 2011, Grand City plans revenues of 250 million EUR and GOP of 90 million EUR (adjusted for franchise fees). Grand City finances its hotels from GOP. The Treugast AA-rating as investment partner also brings the group an increasing number of inquiries from other investors looking to have their hotels operated by the Group. "We also conclude management contracts with third parties. We are perhaps even better managers than the large brands," Windfuhr casually explained. "We think in terms of profit." months though, until the sale of the Starwood Capital property to the new Saudi Arabian owner is completed. In the luxury segment, one must have a very long-term strategy, he stressed yet again. Wittwer cited the success of the luxury brand Hermes in the field of ties and laundry. "The Hermes tie is 38 percent more expensive than a tie by Armani or Versace. We want the Hermes effect for Kempinski!" The name Kempinski on the roof "puts 30% on the room rate", he says by way of analogy. Windfuhr, meanwhile, is not dreaming of this effect. "We also operate Ibis Hotels, they perhaps don't generate quite as much individually, but the ratios are very respectable, especially if you have more of them," he went on. Interesting note: Grand City would also be prepared to enter into a strategic alliance, a joint venture or conclude a master franchising deal with or for one of its brands. Kempinski: The staff challenge christian Windfuhr. Since luxury must be limited and the customer should always have the feeling that he is a member of an exclusive club, the "Nuo" brand will also be introduced in Asia alongside Kempinski. In the Middle East and North Africa, Kempinski operates the regional brand "Shaza Hotels". The "Hermes effect" for Kempinski That his luxury and brand value strategy is working is illustrated by Wittwer with reference, inter alia, to the increased interest from wealthy investors in contracts with Kempinski. Prospective buyers of the Crillon in Paris have also approached him. "They called us," Wittwer reported in Berlin. Negotiations could go on another two to three Luxury versus pragmatism Grand City and Kempinski are both proud of their German roots. "We remain, as ever, German. The only Thai restaurant that we have is in our new hotel in Bangkok and is run by Danish staff," Wittwer laughs. Kempinski Hotels plans to double the size of its portfolio by 2015 to 121 hotels: 53 in Europe, 34 in the Middle East and Africa, 23 in China and eleven in South East Asia. In 2011, 12 new openings are planned:. In addition, Kempinski has signed about 20 new projects. The group has also introduced a differentiated brand strategy with "NUO" and "Shaza" for the Chinese and Arabian market. Grand City Hotels plans to grow to 120 hotels with 15,000 rooms by 2012. Currently, 93 hotels with about 11,800 rooms are in operation. The hotels are operated by Grand City under the own "Grand City Hotel" brand or under well-known brands like Radisson Blu, Best Western, Mercure and Holiday Inn. Recently, the group also entered the resort segment. A large challenge facing his company, Wittwer explains, is attracting and training exceptional staff. "Our business depends to 50% on the talent of our staff and to 50% on the owner," he explains. "If our staff aren't right, the machine doesn't work." It is the task of the General Manager to select the right candidates. Personnel managers look too closely at CVs, though in this industry is more a matter of personality, and this can't be seen from a CV. For a number of years, Kempinski has organised large "Career Day" events. At Grand City, the search for staff is obviously less exciting. "We buy hotels with staff," Windfuhr explained. Grand City has, however, established an Academy for Sales and Revenue Management where those interested can complete a two-year trainee programme. Windfuhr and Wittwer have seen many a tourism crisis come and go in their time. Only rarely are they foreseeable. Asked about the recent turmoil in North Africa, Wittwer had the following to say: "I'm not a politician, but no-one foresaw the last economic crisis at the World Economic Forum in Davos, and no-one foresaw the political developments in North Africa. Today, no-one can foresee how it will end, whether hotels will be destroyed or not. We should rather focus our attention on our own business." // Susanne Stauss

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hospitalityINSIDE Special EXPO REAL 201 1 October 2011 FOCUS FRANCHISING: EXPERTS ON TRENDS, CONTRACTS, GUARANTEES AND BANKS Willingness is growing Augsburg (November 19, 2010). At the beginning of November, Accor appointed a franchise expert as CEO. Europe's largest hotel chain sends a clear signal with the move - and takes franchising symbolically out of the fast food sector and into the feudal hospitality industry. "Franchising is not difficult, just complex," Markus Lehnert says, an experienced developer for Marriott Hotels. Strategic development of this area of business in Continental Europe remains a challenge nonetheless. Up to now, the Americans and the British have dominated the field - and have applied their market rules. These work - at least in German-speaking Europe - only to a limited extent. Only facts matter, if, for example, the bookings from mega brands only make up between 30 and 50 percent of revenues. Views on the reasons for the current surge in franchising as well as on contracts, guarantees and relationships with the banks. An extract. he following experts participated in the survey: Martin Bowen, Asc Vice President Development Germany, InterContinental Hotels Group, Frankfurt; Usama Dessoky, Executive Chairman, Foremost Hotel Group, London; Thomas Edelkamp, Director Franchise Accor Hotellerie Germany, Munich; Manfred Friedrich, Managing Director, Success Group, Stuttgart; Margit Hug, Managing Director Central European Operations, Choice Hotels Franchise GmbH, Munich; Markus Lehnert, Vice President Intern. Development, Intern. Hotel Licensing Company S.à r.l. (A subsidiary of Marriott International), Zurich; Uwe Niemann, Dept. Director/Real Estate Banking Inland, Deutsche Hypothekenbank, Hanover; Erwin Rieck, CEO, QMH Limited, London; HansDieter Schiller, Managing Director, Focus Hospitality GmbH, Gruenwald/Munich; Georg Schlegel, Senior Development Director, Starwood Hotels & Resorts, Brussels; Ulrich Widmer, Vice President Development Central & Eastern Europe, Hilton Worldwide, Frankfurt; Christian Windfuhr, CEO, Grand City Holland BV, Amsterdam; Antje Zumsande, Managing Director, Consilium Hotellerie GmbH, Leonberg/Stuttgart. a well-known brand on the roof. But that can be a mistake. Margit Hug: In the past, Choice Hotels was both operator as well as franchisor. Today, as pure franchisor, we are of course pushing the subject forward. Ulrich Widmer: Mainly medium-sized companies/franchisees which want to change something. And the banks looking for brands! Manfred Friedrich: All of them! Usama Dessoky: Mainly by the brand proprietors (franchisors) and the operators (franchisees)! Hans-Dieter Schiller: The big hotel brands/ chains! Uwe Niemann: The brands! Antje Zumsande: Mostly the brand providers! Why are there in Europe still no larger or suitable franchisees? Markus Lehnert: I would break the franchisees down into three categories: Firstly, rich individuals from the real estate sector; secondly larger companies (like our strategic partner, the Swiss SV Group), and thirdly those with lots of franchise experience and little capital. The core question for me is: Which companies can develop further and with what volumes in the franchise What is the main driver of franchise? Operators, investors, franchisors? Martin Bowen: The franchisor of course! Thomas Edelkamp: All parties! Georg Schlegel: All of them! Christian Windfuhr: The franchisor mainly, but also the banks as they are reassured by accor's 100th allseasons - in Berlin. / photo: M. Kompe

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October 2011 hospitalityINSIDE Special EXPO REAL 201 1 holiday inn Express hamburg city centre. business? We are currently working with five "strategic partners" in Germany, Austria and Switzerland as well as with two each in Scandinavia and France. The SV Group is our largest franchisee with five hotels. In Continental Europe, the preference tends still to be to establish hotel operating companies and own brands than to move into franchising. Martin Bowen: There are larger franchisees, but not enough of them! The smaller ones often lack the structure for this business. Smaller franchisees also often fail to meet criteria applied by banks and thus growth is limited. Thomas Edelkamp: Franchisees are indeed not represented in large numbers. We therefore look for a balance between individual operators and smaller groups which together form a good franchise community. In Germany, we currently collaborate with 5 fire/safety standards) impair these companies from gaining (existing) hotels as investments before branding can be very high. It can also occur that the relatively inflexible franchise fees prevent a conclusion of contract. Brands tend to allow themselves to be measured and remunerated less in terms of their own performance (system delivery) than they, in turn, want to participate in total accommodation business. The rationale for this is generally that the customer makes the reservation with the respective brand hotel because it has a brand... Though this is unfortunately only partly true. Margit Hug: The desired franchise partners often introduce their own brands to German-speaking Europe. This runs contrary our wish to have more medium-sized and large franchisees. Manfred Friedrich: We have acted as franchisee for 15 years and have never thought about developing our own brand. This would involve a disproportionate financial burden and would fix expansion on one hotel concept. As franchisee, we have full flexibility and full access to a variety of brands. We can therefore make decisions in accordance with the location requirements posed by macro and micro-markets. We are very happy with our Multiple Agreement IHG and the long-term cooperation with Hilton, Accor and Best Western. Usama Dessoky: The international hotel operators in Europe until recently preferred to expand by either directly owning or leasing/managing investor's hotels. An example of a Franchisee is an owner operator who wishes to benefit from the economy of scale offered by an international brand owner. Some of the franchisee's core business is real estate development/investment, part of which is operating hotels under a franchise agreement. Hans-Dieter Schiller: Many in Continental Europe still have the ambition today to establish their own brand. In the USA, this approach is seen more rarely. I understand that for niche products, but not for "mainstream" hotels. Antje Zumsande: Larger franchisees certainly exist, for new developments, however, "suitable" partners are often lacking. Some large franchisees accept only existing businesses and generally shy away from the risk of a project development. Others favour undeveloped land as they themselves want to plan and/or build. Many developers on the other hand do not wish to have their business taken away by hotel operators active in the construction sector. That means, over certain phases, there aren't enough creditworthy franchisees which concentrate on hotels as their core business. Thomas Edelkamp. franchise groups. Of the 70 or so Accor franchise partners, around half are operated by one of these groups. Georg Schlegel: There are larger franchisees, and they are also found in Central Europe. Ten years ago, individual hoteliers were still sought, today partners are preferred who can make several hotels. A constellation is to be preferred here whereby the franchisee has a strong investment partner in the background. Today, growth is a matter of creating "packets" of around 10 to 15 hotels which are then later sold. Ulrich Widmer: This has to do with the history. In Continental Europe, many entrepreneurs fear losing control of their companies. Though things are changing slowly. Christian Windfuhr: Grand City has "branded" around 50 of its 85 hotels. All renowned companies are active in the market and attempt to obtain franchise contracts/ cooperation agreements. With respect to some brands, standards (especially the US Where franchise contracts are being negotiated, which criteria are the most important? Markus Lehnert: Where an operator or owner is selecting a suitable brand, the follow-

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hospitalityINSIDE Special EXPO REAL 201 1 October 2011 ing five aspects are important for me: reservation system ("system delivery"), the quality of the customer retention system, the experience of the franchisor as franchisor and operator, the brand presence and the balance sheet. Martin Bowen: Strictly, there's no "franchise contract" but a "franchise licence". With the licence, one buys the know-how and reservation system. That means the brand must bring the franchisee real added value. But partners must agree beyond these criteria and have mutual trust for one another! Ulrich Widmer: Infrastructure and awareness of the brand. I believe the former is the more important criterion - franchisees primarily seek security through quality control and general issues, they require less support with the reservation system. Thomas Edelkamp: Brand, distribution, performance - all these are necessary criteria. In the end, the relationship of trust is paramount as long-term liabilities are assumed. The franchisee today wants a term similar in length to the standard tenancy. Georg Schlegel: The terms, termination clauses, sale of real estate. In case of lease: Brand maintenance, interim management for the owner in case the leaseholder drops out = franchisees. Criteria applied by American chains e.g. on fire safety or legal liabilities impair many contracts, though I see things beginning to move here. The large chains must concede on certain issues to be able to grow. Margit Hug: From the perspective of the potential franchisee, the following points are the most important: Fee structure or profitability of the partnership; term; "loss" of entrepreneurial independence; costs of integration (buzz word fire/safety standards). Increasingly, experience, brand knowledge as well as creditworthiness play a role. Christian Windfuhr: For us, primarily franchise fees and system delivery. For investors, certainly the know-how of the franchisor. In the end though, additional business generated through the brand will be the yardstick. For existing hotels in particular, an important criterion is also the investment necessary in order to obtain the brand. Erwin Rieck: Most important is the strength of the brand, that is, its market presence, and of course the fees. Manfred Friedrich: Franchising is ideal for us and our expansion in B locations. A cer- Also, Starwood's brand aloft will be established as a franchise product in Europe. tain risk remains with respect to contract form nonetheless for franchisors: If the project fails, then it's not us sustaining the loss of image, but the brand on the roof. The location assessment together with the franchisor must also be good. You just have to know the possible system delivery for your location. Otherwise, terms can be negotiated in a multiple deal. Antje Zumsande: For the brand provider, the reliability and financial situation of the future partner is important. What criteria must be satisfied for banks to provide finance for franchise contracts? Martin Bowen: The creditworthiness of franchisees is the main problem - at least in the first three years. I think franchisors and franchisees must approach the banks together and work out what is feasible. Everyone must come round the table - although that's not usual in Germany yet. This is still causing financial pain. Thomas Edelkamp: Above all, local/regional banks are open to franchise contracts. They are no longer interested in isolated 100-room hotels, but in a brand. Georg Schlegel: Either the owner-operator commits the corresponding equity or the franchisee = the lessee must be in a position to furnish the guarantees demanded by the bank from the investor. Fundamentally, banks have understood franchising, though are demanding equity. And a good brand on the roof. Ulrich Widmer: Banks' willingness to finance hotels is currently not very high. And if at all, then only in connection with a big brand. Fundamentally, also with respect to the dialogue with the bank, the following "rule of thumb" applies: The bigger the hotel and higher the category, the more suitable it is for a management contract and thus also for institutional investors. The smaller the hotel and lower the category, the more suitable a candidate it is for franchise and for the individual entrepreneur. A medium-sized company is not in a position to Martin Bowen. Usama Dessoky: For the franchisee: The strength of the reservation system; favourable exit clause; level of support offered by brand owner; reduced fees in the first two years. For the franchisor: Location; hotel management experience; financial strength of the franchisee. Ulrich Widmer: For banks, profitability is of utmost importance. Hans-Dieter Schiller: Fixed fees and reservation fees should be known, then the calculation is easier. But also the contract term should be considered: We now conclude contracts over five year terms with Focus Hospitality. Contracts over ten years and more are more critical - not every location has the potential for a franchise business.

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October 2011 hospitalityINSIDE Special EXPO REAL 201 1 provide a guarantee for a 400-room Hilton - that's also to be considered. Usama Dessoky: The banks like to see the franchisor supporting the franchisee in case of financial difficulties, as well as possibly stepping in with an alternative franchisee, in case of failure by current operator. 100,000 inhabitants with 900,000 overnight stays are not considered adequate due to their dependence on tourism. Numerous banks come to this astounding conclusion. If this rationale were applied to other industries, Hapag Lloyd, for instance, would only have access to debt capital for new aeroplanes and ships if not tourists but only business travellers and goods were transported. Further criteria include: Value of the contract, reputation of the investor, creditworthiness of the lease company and extent of rent guarantee. Margit hug. Which banks provide finance for franchise contracts? What's the state of the banking sector's understanding of this subject? Uwe Niemann: For the Deutsche Hypothekenbank, groups upwards of ten hotels come into question; we require the balance sheet and operating results for the last three years; external consultants must ensure the plausibility of results and bring in figures for the new project. We generally provide finance of up to 10 to 12 times the planned GOP, this means an equity ratio of 30 to 40% for long-term finance arrangements. Antje Zumsande: The location must generally have a certain number of inhabitants. Around 75% of banks make their decision according to such criteria, which indeed makes no sense: Locations with 250,000 inhabitants and 500,000 overnight stays are deemed eligible, whilst locations with Markus Lehnert: Some bankers meanwhile understand franchising well; with respect to hotel projects, they now push for a big brand. Often, they view the brand as of greater value than the expertise of the operator. Discussions often occur within the scope of the "owners agreements" (Editor's note: We will look at this subject separately.) Martin Bowen: A certain understanding is there, though franchisors must and should still explain a lot. Building societies and certain real estate finance institutions are taking a serious look at the subject. Thomas Edelkamp: Our task is to provide better information to the banks and to cooperate with them. Banks know about franchising, but their knowledge isn't deep enough to fully grasp the effects of franchising. Georg Schlegel: The understanding of most banks has grown. But no bank will say that it doesn't finance franchise contracts. Christian Windfuhr: Understanding is greater than generally accepted. Usama Dessoky: We found that banks are more willing to lend in the case of an operator with an international franchise agreement in place. Margit Hug: Our contract was certified by the LfA (Foerderbank Bayern) as "contract eligible for subsidy" - though loans can't be made through the LfA until approval is gained from the principal bank (building society). That means: If the principal bank consultant has little understanding of the industry and the franchise system, subsequent support systems can't be exploited. Even advisory institutions like the IHK have knowledge gaps. Uwe Niemann: As a bank, you're bound by the creditworthiness of the franchisee. The name on the hotel roof plays a lesser role. In case of lease, our checks are already very strict - in case of franchising our demands are even greater. Credit discussions are entered into primarily with investors who already have a franchisee and brand name. Often, investors ask for help in assessing the planned partner. Sometimes, investors and operators come together to the meeting. Antje Zumsande: Many building societies and credit unions (Volksbanken) as well as private banks and some state bank subsidiaries. The subject of franchising is certainly known, even if not always in relation to the hotel industry. // Statements collected by Maria Puetz-Willems. Anzeige PKF hotelexperts Munich is a member of the international PKF public accounting and consulting organisation with more than 440 offices in 125 countries. Services are primarily focused on the hospitality industry and include among others: ? ? ? ? ? ? Feasibility Studies Valuations Asset Management Operator Search Property transactions Restructuring services P KF has s up p l ie d s p ec ia l is t consulting services and benchPantone Reflex Blue marking analysesC since 1935. Our knowledge of the international hotel market furnishes the basis for the qu a l it y a nd r e l i ab i l it y of o ur services. 100c / 73m / 0y / 2k For further information please contact: PKF hotelexperts GmbH, Maximilianstrasse 27, 80539 Munich T.: +49 (0)89 290 32-200, F.: +49 (0)89 290 32-222, E-Mail: info@pkfhotelexperts.com, Web: www.pkfhotelexperts.com 57r / 71g / 146b

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hospitalityINSIDE Special EXPO REAL 201 1 October 2011 The pool at the Kempinski Airport Hotel Munich, the host hotel for the second spa workshop. 2ND WORKSHOP "INVESTMENT IN SPAS" IN THE KEMPINSKI AIRPORT MUNICH The tough spa calculation Munich (August 5, 2011). The next workshop "Investment in Spas" will take place in Munich on November 3, in the Kempinski Airport Hotel. The venue is an ideal meeting place for prospective visitors from Germany, Austria and Switzerland looking for facts and figures on spa calculation and the spa market. The workshop is aimed at managing directors of hotel chains, hotel operations managers, spa managers, consultants and representatives from supplier industries. high-calibre participants registered for the premier of this very profitorientated spa workshop in the Hotel Nassauer Hof in Wiesbaden in the middle of May. Since the response was so great, organisers, Rizzato Spa Consulting from Tettnang in the Black Forest and hospitalityInside.com from Augsburg have set a new date for November 3. Dagmar Rizzato, Managing Director of the internationally renowned Rizzato Spa Consulting will set out the reality and development of the spa market alongside trends and facts. Her particular focus will be on profitability. The national and international alignment of the spa industry sets the framework for conceptual opportunities and challenges that lie ahead - also to be discussed. The market, day spas and hard calculations One segment of the spa market is Day Spas. "An area with high potential", as Marianne Schnaitmann, Managing Director of Schnaitmann Beauty GmbH, knows. Nevertheless, the parameters for the success of a Day Spa are quite different from those of a Hotel Spa. Increasingly, mixed concepts are appearing in this segment. The speaker will look at these challenges. Susanne Kraus Winkler, Managing Partner of Loisium Hotel- und Resortentwicklungsund Management GmbH in Austria will then move on to provide a comprehensive overview of the figures. She will work through spa calculations and explain how floor space and usage concept dictate costs. Practical examples for Urban Spas, Resort Spas and Thermal Spas show just how important room planning and design are to profitability. With this, participants will have enough material for an intensive discussion. The workshop is sponsored by Hansgrohe and its Axor brand. The one-day workshop in the Kempinski Airport Hotel Munich begins at 10 a.m. and ends at around 6 p.m. The workshop will be held in German. Price per person is 490 EUR (plus VAT) including lunch and coffee break, including conference fee and seminar materials. Registration deadline is Wednesday, October 5, 2011. // For further information, please address to: Dagmar Rizzato, Managing Director, Rizzato Spa Consulting, phone +49(0)7542-94 69 90, eMail: rizzato@ spa-consulting.com, or Maria PuetzWillems, Editor-in-Chief, hospitalityInside. com, phone +49(0)821-885 880 10, eMail: maria@hospitalityInside.com. dagmar Rizzato. susanne Kraus Winkler.

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October 2011 hospitalityINSIDE Special EXPO REAL 201 1 MOTEL ONE DEVELOPS FURTHER - WITH LOCATIONS AND IN CONCEPT From selective distinction Munich (june 10, 2011). Salzburg, Munich, Berlin, Munich... In recent times, Motel One Hotels have opened in an almost weekly rhythm. The rhythm will not be maintained in this number of cycles, but Co-CEO Philip Westermann still sees plenty of room for Motel One. The international expansion is incumbent upon the former investment manager with Morgan Stanley. Now, the first projects beyond the German-speaking realm are definite: In Great Britain, Belgium and Poland. Meanwhile, in the home market of Germany - for which the group still grants "first priority" - Motel One, points out what small changes can be made to increase the value of the 2-Star products. This is of particular benefit to the larger properties. Two days ago, the group opened their largest hotel up to now: The Motel One Berlin Central Station counting 505 rooms. Observations and a conversation with Philipp Westermann. he Motel One directly across from the Berlin Central Station is not to be overlooked. It is the eighth hotel of the group in Berlin and perhaps it also draws an increased attention to itself through the critical observers of architecture: The new buildings in the city and in the vicinity of the designer railway station have been increasingly criticised because of their lacking charm. In the meantime, Senate Building Director Regula Luescher has prescribed that properties may be built in "city-scape moulding locations" at the Central Station in the future only after the realisation of an architectural competition. The Motel One, also in ownership of the group already was the result of an architectural competition. The hotel has something in common with the young sister Motel One Deutsches Museum in Munich: the window front. The windows of two floors each are placed in one vertical line which makes the building opti- cally "slender". The twelve floors have pleasingly melded themselves to the ambience of the residential houses in the neighbourhood. The Munich property is owned by the real estate group of the traditional Munich fashion company Hirmer. In the meantime, the group is present in the Bavarian capital with seven properties - and one sees that there also may still be a place for the eighth property, e.g., in Schwabing, near the university (see following interview). The 469-room large hotel in walking distance to the German Museum and the Gasteig (and in a row with a Novotel and Holiday Inn Express) illustrates the advancement of the Motel One brand. And it once again poses the question among insiders of whether the self-elected concept of the "Low Budget Design" hotel really still applies to Motel One or could it, in the meantime, have a counter-productive effect. But, even Managing Director, Philippe Weyland is modest: "This already fits." The new lounge - with its 4m-sofa and thick lounging rounds. A lounge with leather armchairs as a selective highlight Motel One does not change its corporate design, but rather the details. So is the case with the Motel One German Museum as the lounge first catches the eye: Aside from the legendary turquoise-coloured Arne Jacobsen Egg Chairs in front of the TV fireplace, there is a novelty at this hotel: A small, comfortable library with books and miniature models of the German Museum as well as a lounge with a bright leather sofa drawn four metres long and in contrast to the several additional, deep, thick lounging rounds. The 4m-sofa is a custom-manufacture from Italy. In addition here, the Munich light designer, Ingo Mauer has designed the lighting concepts. Motel One spends money on only a few points - but with great effect. Anzeige Hotel Consulting New angles www.hotour.de

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hospitalityINSIDE Special EXPO REAL 201 1 October 2011 hopefully have signed and sealed in four months and hopefully a hotel in Krakow, Poland in six months. The first step beyond the German-speaking realm has already been taken - in Edinburgh, Great Britain. How does the calculation of Motel One present itself in this market? In Edinburgh, we will invest 23 million for a 208 room hotel in an existing building that is to be renovated. Motel One has bought the property there and will finance the construction gradually (keyword: "forward funding") and a local developer provides it. We will go into the Edinburgh market with room prices from 69 Pounds Sterling (currently approx. 77 Euros). What has tempted you in Edinburgh? The city has 11 million overnight stays and an occupancy of more than 75% in similar conditions as with Munich. Moreover, the location of the Motel One is simply the best: Directly at the Central Station and on the corner of the Royal Mile, the main attraction for tourists. Additionally, the airport shuttle bus turns in front our hotel. The fact that we will alter an older building there is new to us - a Motel One will even have a tower room for the first time! Here, we are counting on our local developer, Chris Stewart, who has already built many hotels, Travelodge and Apex Hotels, among others. markets in this competition-laden market. We can estimate rooms there with prices from 89 Pounds Sterling (currently around 100 Euros). London is a very yield-driven market and other budget chains market themselves through the lowest prices plus surcharges for every service. Rather than Motel One which pursues a policy of stable, dependable, calculable room prices that look higher at first sight than that of competitors. Will you change in London? No, I think not. In the beginning, we will establish ourselves there on our good networking with the German-speaking market which alone will already provide us with a fine occupancy in London. Of the100 million overnight stays in London, five million were generated through Germans alone. As such, the Motel One name and product will become more known in Great Britain when we are represented there with several properties. How large is your development team now? We currently have ten staff members. Another developer who is very experienced in Spain and Turkey will change over to us in the summer. Is the financing in the foreign markets a challenge for Motel One? In England, there is enough capital in the market, whereas in Central Europe and East Europe, the financing is often a challenge. Indeed, we also have existing capital partners who would like to tackle other projects with us. Where is there still room for Motel One in your home market of Germany? Germany remains our first priority! There is still a lot of room for Motel One, in cities and presumably also in secondary cities. We will remain in motion. How will you bring the new staff in the foreign-language UK market to a closer familiarity with the German mentality and the Motel One philosophy? Of course, we will also train the new staff in Germany before the hotel opening. But we are also open to additionally learning from others at the same time. Many thanks for the conversation! // "Individual pieces of furniture should be the highlights," Motel One Interior Designer Svenja Hansen says. "Expensive highlights," adds Uschi Schelle-Mueller, Marketing Director and jointly responsible for the design development. Even still: The lounge (photo) deepens the impression of distinction on a multiple measured in costs. There are also mini-changes in the legendary Motel One bar stools: From now on, they have a 10-cm high mini-backrest. Whether it decisively increases the seat comfort remains to be seen, but it increases the distinction once again. The same holds true for the arc lamps used in all Motel One by Achille Castiglioni: On the one hand, they break the lines in this large (breakfast) foyer and on the other hand, they are a soothing eye-catcher. With this "fine-tuning", Motel One also continues with its concept of the brand highlights with the rooms where a Loewe flat screen television with an iPod and MP3 connection, Artemide lights, washstand armatures by Dornbracht and a rain dance shower by hansgrohe have been integrated in the meantime. Details such as the lounge inspired by the German Museum should be also be realised in future - where always possible. Motel One still sees a lot of room for its budget brand, also beyond Germany. Additionally, Co-CEO, Philipp Westermann, in a conversation with Maria Puetz-Willems: Now Mr. Westermann, Germany is already covered with a fine Motel One network and in Austria, the next openings are lined up - where do you calculate as the next, further contracts? Philipp Westermann: We will not go forward country-wise but will target all European cities with a high overnight volume. We have already some contracts on which we can report shortly that, however, are still dilatorily conditioned at present: Among others are a hotel in Brussels that we can philipp Westermann. London is also your goal. How far has the hotel search progressed there? Only in London, only two developers are on the search for us and we are currently looking at several properties - either for buying or to rent. I expect from this that we will have also signed up there by the end of the year. Of course, the prices orientate themselves around the micro-

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October 2011 hospitalityINSIDE Special EXPO REAL 201 1 SCHOERGHUBER/ARABELLA AND STARWOOD RE-ARRANGE THEIR PARTNERSHIP New freedom Munich (May 27, 2011). In future, there will be only two parties in this partnership: the owner - Bayerische Hausbau within the Schoerghuber Group - and the manager Starwood Hotels & Resorts. The former intermediary operator Arabella Starwood Hotels (ASH) will be dissolved on july 1, 2011. The joint venture agreement with Starwood, once initiated by Stefan Schoerghuber in 1998 with a 51:49 ratio, no longer exists. 23 of a total of 39 hotels from the current Arabella Starwood portfolio will be transferred directly to the management of Starwood. Starwood will have its own offices in the Schoerghuber house. The remaining staff members will be taken over/ transferred. So far, 25 employees have already left or will leave the business. Before the press, both parties signed the new agreement on Tuesday. n future, agreements between the two partners will be arranged directly - via Arabella Hospitality Group (AHG), which is a 100-percent subsidiary of Schoerghuber. When Schoerghuber invests in a hotel in future, the subsidiary Bayerische Hausbau will then lease the hotel to the AHG. The AHG will then give the object to the management of Starwood Hotels. "There is no exclusive agreement with Starwood," says Dr. Klaus N. Naeve, Chairman of the Executive Board of Schoerghuber Unternehmensgruppe. At the press conference, he said that he wants to build additional hotels and operate them together with Starwood. Apparently, there are already fixed plans, which Dr. Naeve did not want to talk about in detail (yet). "The hotel division has always been one of the core business fields for our group and will remain important," he stressed to hospitalityInside.com "After all, it generates about 25% of our rental income." For Starwood Hotels & Resorts, this new agreement seems to be a liberation: Now they are able to expand in the former "joint venture country" of Germany, as well as in Switzerland, Spain and South Africa as much as they like. So far, the expansion in these countries had to be arranged with Arabella - which rather interfered with Starwood's plans rather than promoted them. In future, Starwood will manage 23 hotels "Since the start of the joint venture in 1998, Arabella and Starwood have been merging and will continue to merge further," summarises Roeland Vos, President Starwood Hotels & Resorts EMEA. In order to continue common new projects, they will conclude agreements until 2037. This year was already mentioned in 2006 in the course of the last extension of the joint venture with Stefan Schoerghuber. It was then that the joint venture agreements were scheduled to end. At the moment, 39 hotels belong to the management company ASH. 23 of these hotels are owned and leased hotels, three are franchise hotels under the Starwood flag, and 13 hotels only participate in the sales and marketing network of Starwood. From this "Schoerghuber portfolio", Starwood will now take over the management of the 23 owned and leased hotels (see box for more details). For 23 hotels, new agreement conditions had to be negotiated, there had to be talks with the other owners, and the structures had to be re-arranged in Munich. The difference for the individual hotels is that they will now report directly to Starwood Hotels (to Thomas Willms in Vienna, Vice President & Regional Director Central/Eastern Europe for Starwood) and no longer to Schoerghuber or AHG, where Reinhold Weise manages the business Anzeige Hotel Consulting New handles www.hotour.de

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hospitalityINSIDE Special EXPO REAL 201 1 October 2011 signed: Roeland Vos (left), president EMEa of starwood hotels & Resorts, and dr. Klaus naeve, chairman of the schoerghuber Unternehmensgruppe signed the new contract in front of the media. now. He is the owner's representative and Asset Manager Hotels of Schoerghuber Unternehmensgruppe. Together, Willms and Weise are Managing Directors of ASH; starting July 1, they will be contact and negotiation partners with management and owner interests on opposite sides. "All of us have to get used to our new roles," says Weise. Agreement concerning conditions Concerning conditions, Roeland Vos and Reinhold Weise were very relaxed: "In future, the management fees will go to Starwood and no longer to the joint venture company, as it used to be," says Vos, "the conditions correspond to the conditions of a portfolio deal". Weise: "It was a fair deal with normal market conditions.". Both sides regard the new rule as an "agreement adjustment", the third one after the foundation of the joint venture in 1998, and with Stefan Schoerghuber in 2006. As good relations are still very important, Starwood Hotels will be moving into offices at the headquarters of Arabella in Englschalkinger Street in Munich. The departments of sales & marketing, purchasing, accounting, and reservation will remain there. Concerning the question why these departments are not being integrated in the European Starwood headquarters in Brussels, Thomas Willms answers: "We regard this - besides Vienna - as a kind of 'area office', the staff members will not be solely responsible for Schoerghuber projects." The offices of the Schoerghuber hotel division with Reinhold Weise and about ten employees will be located close to the Starwood offices - because of the proximity. All in all, the remaining employees of the headquarters were transferred - either to the Schoerghuber Group and its subsidiaries or in Starwood hotels or divisions. The ASH once had about 90 employees; 25 of them have already left or will leave the business in the next few weeks. Hans-Peter Hermann, Corporate Director Development, will leave for an investment company. Former CEO Wolfgang Neumann, as reported by us, has already assumed the position as COO at Rezidor. Few changes for staff members The staff members, who will work in the Starwood office in Munich, obtain AHG contracts; however, they will directly report to Starwood. Only very few business executives with central positions will obtain direct Starwood contracts, e.g. regional directors for sales and marketing or PR. As a management company, Starwood provides the General Managers; however, changes are not planned, assures Thomas Willms. The single subject concerning staff is the re-arrangement of the areas right now. In a few weeks, he will be able to tell more about this subject. Dr. Naeve explained the fact that the negotiations lasted five months longer than announced by last fall with the following: "We totally underestimated what it means to agree on management agreements," he said. For two months, in January and February, they were unable to find common appointment dates to continue the negotiations. On the Starwood side, Vos confesses, mainly the American lawyers needed a lot more time. The proceedings fill 84 files. In the end, the question remains: What has been changed and what has been improved? "Everything has been structured more systematically," answered the Chairman of the Executive Board, Dr. Klaus Naeve. Concerning the subject of IFRS, he sees the resulting disadvantages for the Unternehmensgruppe being significantly reduced by this re-structuring. However, hotels remain attractive. Concentrating on the role as investor does "not mean the end of the hotel activities" for Schoerghuber. Reinhold Weise said: "What has changed is that several double structures have been dissolved", and concerning AHG, the lesser, he adds: "We still bear the risk." It was a first new step for Schoerghuber as well, and only in two to three years could be seen whether this decision was the right one. Starwood Hotels & Resort is now content to be able to expand without limitations. "On our expansion list in Germany is still Berlin, Duesseldorf and Cologne. By all means, we want to establish a W in Berlin or Hamburg; in Cologne we could participate with our brands aloft or Four Points. Concerning the common projects with Schoerghuber in Germany, the Westin Elbphilharmonie Hamburg is the next project. Schoerghuber Chairman Klaus Naeve gives him support: "We are lessees there, everything is already fixed, we will hold on to the project, even if the technical realisation is difficult." The opening date is still undecided (2013 or 2014). On July 1, 2011, the era of Arabella Hotels in Munich will finally be over. It all began with the erection of the "Arabella House" and the group's first Arabella hotel, in 1969. // Maria Puetz-Willems

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October 2011 hospitalityINSIDE Special EXPO REAL 201 1 1ST "FREITAGSHAPPEN": WHERE ARE SOCIAL MEDIA & MOBILE COMMERCE LEADING US? In a squeeze Wiesbaden (july 8, 2011). It was intended to be a small, nice circle and informal exchange of thoughts beyond any form of competition. The 1st "Freitagshappen", which could be best translated as "Friday's titbit", achieved this goal. hospitalityInside and the Hotel Nassauer Hof in Wiesbaden organised a talk last Friday, which will take place once or twice a year in the future aiming at bringing together important leaders in the industry. External experts with a critical attitude towards hotels and technology inspired the theme called "Where are social media and mobile commerce leading us?". And there were some rather flabbergasted reactions about unexpected connections. n the future, hotels will no longer determine the dialogue with their guests and customers, but the latter will decide by themselves, which hotels will be allowed to talk to them. "Users no longer believe us", said Bruno Wolf, Managing Director of HHC - Bruno Wolf - Consulting, summarising today's influence of social media. For 16 years, he was responsible for all sales and technology issues at Marriott, lastly as Director International eCommerce Distribution. Michael Hartmann presented some contrasts hinting at how helpless hoteliers could get in the future: "In terms of technology, the industry will be facing outright industrialisation. But this contradicts its core intention of providing individual guest service." Hartmann, who was a hotelier himself and started his career at Kempinski, has been working for Siemens AG for 15 years and is responsible for market development in hospitality today, added: "Today, hotel groups define themselves via their brands, but GDS and online reservation platforms feel their pulse." The squeeze between IT and customers Is the host in a squeeze between IT and customers? It looks like it, if we are to believe what the leaders of major and small hotel groups taking part in the panel say: a "global player" admitted that social media were deliberately ignored at first, as it was considered a brief hype. Due to the complexity of the whole issue, another chain quarrelled for ages about which department was actually responsible for social media ... Open talk in a small circle, just as the "Freitagshappen" was intended to be. But the hospitality industry seems unaware that the tourism sector is the biggest employer in the world, apart from agriculture, and this is why there is hardly another industry that is comparably so deeply involved in social issues at a higher level. It is one of the first industries to experience the pressure that can be exerted by customers, but on the other side, it will be facing the pressure of its own involvement in ownership claims and legal stipulations on a community and national level. What sounded far away is up close all of a sudden: with company customers starting to collect "green loyalty points" and handing them on to their friends, closing the ranks of environmental trends, hotels and social media has been achieved. Stay offline and online These developments definitely offer some opportunities to let your own company shine in a bright light,"accompany" guests during all stages of their trip (before, during and after), guide them through their business travel via iPhone apps and offer them individual service when they need it. Interesting note on the side: companies should remain available equally easily both "offline" and "online". Anzeige Hotel Consulting New directions www.hotour.de

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hospitalityINSIDE Special EXPO REAL 201 1 October 2011 Thinking in and supporting networks However, the guests at the 1st "Freitagshappen" admitted that the industry is a hindrance to itself sometimes. Its inhomogenity prevents it from speaking with one voice - in contrast to the airlines. Instead, it is too occupied with the small details of everyday work. Thinking in terms of networks and outside the box is rare. Consequently, the industry is rather driven than driving things itself. It still thinks too much of its core business and guests, and almost forgets about what the current technology wave and online fever will do with them. The relaxed exchange of thoughts continued when Karl Nueser and his team of the "ENTE" offered culinary titbits to follow the "spiritual" ones. The Nassauer Hof showed how fruitful direct contact can be in a well-prepared environment, even in the age of social media. With the "Freitagshappen", hospitalityInside wishes to address ongoing developments, raise certain issues, give some food for thought, open up horizons, find new ideas and support networking ... // map SUSTAINABILITY: FUNDS DEMANDING, OPERATORS RESEARCHING Green is good Munich (October 15, 2010). Sustainability of building design and social responsible business concepts were in the focal point of many events at this year's real estate trade fair Expo Real in Munich, and at the hotel conference "Hospitality Industry Dialogue". For 80 minutes, two hotel groups, one project representative, one architect and one representative of DGNB (German Sustainable Building Council) discussed the question, whether investors were willing to invest in sustainable hotels or not. For a long time, hotel chains have been doing research about their standards and are even advising their investors now; the certifiers are contributing to the awareness and the architects have to make greater efforts to understand. One new aspect is that the guests have to be included in sustainability concepts. ourism is unstoppable; the opening of the Asian markets will launch as many tourists into the world as never before. "Estimations assume that about 1.6 billion people will be travelling around the world in the year 2020; this is nearly twice as much as today," said presenter Maria Puetz-Willems, hospitalityInside.com, and opened the discussion about "Investments in sustainable hotels: Does CSR pay off?" It is obvious that environmental protection and the conservation of nature are becoming more important. Travellers use energy, produce waste and contribute considerably to the CO2 emissions. For years, the awareness has been growing, mainly among travellers from western countries. "The interest in environmental protection has increased thanks to the marketing actions of the Americans, even if they are still lagging behind in their development, explained Alexander Rieck, architect at the Fraunhofer IAO, Stuttgart, and self-employed architect. The most sensible people concerning environmental matters were Western Europeans, from the Mediterranean to Scandinavia. Rieck is sure: in countries like Germany, every project has to be planned sustainably. After all, the urbanisation rate is at 70 to 80% in industrialised countries. But for new markets like China, ecological thinking and acting is urgently necessary. "In China, the urbanisation rate is about 30 to 40% right now. Soon, they will need city space for 400 billion people and more," he explained. Operators demand green buildings The 1st "freitagshappen": Executives from Travel charme hotels & Resorts, hilton Worldwide, hR Management & consulting, programmingpool, intercontinental hotels Group, arabella hospitality Group, and arcona hotels & Resorts talked off the record. In the last few years, the tourism industry has already developed several holistic concepts, which take the most important aspects of CO2 emission, species protection, recycling and protection of the drinking water into consideration. Martin Bowen, Asc. Vice President Development Continental Europe at InterContinental Hotels Group (IHG), explains the reason for this: "In the cost structure of hotel chains, the factors of energy, waste and materials play a very important role. Even small changes concerning environmental protection have large effects." In the meantime, all chains have ordered their members to follow strict rules concerning material, energy and waste reduction. In addition, they follow national or international standards for building certifications. The American label for "green" buildings, LEED (Leadership in Energy and Environmental Design), is currently the best known in the world. It divides the environmental friendliness of buildings into "certified", "silver", "gold" or "platinum". The German

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October 2011 hospitalityINSIDE Special EXPO REAL 201 1 equivalent of LEED is the DGNB and awards "gold" as the highest certificate - which is a disadvantage in practice compared to LEED: "As platinum is more than gold, many people just take LEED." Moreover, he criticises that the Germans jumped on the certification bandwagon too late. Certifications under discussion The model of DGNB has an international point system and is developed even further than the LEED, according to Johannes Kreissig, member of the executive board of German Sustainable Building Council (DGNB). Following the ideas of the developers, the DGNB certificate is now to conquer Europe after Germany, and then markets like Brazil and China later on. "The DGNB certification should also lead to better financing," explained Kreissig. The criteria catalogue turns towards city hotels and resort hotels. IHG has been working together with LEED for many years. IHG operators can find IHG's requirements for environmental protection in the intranet. There, hotel owners also find out what they would have to do in order to obtain a LEED certification. However, some of the certification criteria contained odd criteria. "I wonder why a hotel obtains more points if it has more bicycle stands? None of our guests arrives with a bicycle," says Martin Bowen, representative of a business hotel chain, and shakes his head in bewilderment about certain certification approaches in the market. into practice. In addition, Accor is strongly committed to socially responsible projects, for example, actions against child labour and child prostitution. The entire package seems to work, according to hotel operators. At IHG and Accor, funds are the main "driving forces" behind the subject of sustainability. This is because only sound hotels, which are fit for the future, can be resold. Moreover, the pressure on the hotel operators is increasing from another source: large business clients, such as Siemens or Telekom, are only accommodating their guests in chain hotels with a "green" philosophy. Therefore, the chains have started to advise their investors concerning sustainability and CSR. In the meantime, Accor is also investing time and money into research about renewable energies, reports Caroline Andrieux, Sustainable Project Manager of Accor in Paris. "Basically, we have included sustainability criteria in our own standards for building and operating for a long time now," she said emphasising again. in particular, funds drive the sustainability issue: Talk session at the Expo Real with (from left) Martin Bowen, caroline andrieux, moderator Maria puetz-Willems, silke Trost, alexander Rieck and Johannes Kreissig. US dollars per square foot and their occupancy was 3.8% higher than in non-certified buildings. Guests pedalling for kilowatt However, in one point, the talk round totally agreed: hotel customers are not willing to pay more for sustainability. Instead, they have to be included in sustainability measures. "In the Arabian countries, environmental aspects are more difficult to communicate," explained Rieck. "There, a bathroom is 30 square metres and water uses up the most resources in these countries." The newest challenge in this industry is to include guests in reasonable environmental actions without reprimanding them. The Crowne Plaza in Copenhagen, which is exemplary concerning energy consumption, has initiated a very witty action: -"Guests, who pedal one kilowatt hour for the hotel, obtain a free dinner," explains Bowen. Old cost models are no longer valid It is obvious that buildings, which are built according to ecological factors, have many cost advantages for the operators. And these are increasing. Rieck: "The prices for resources are constantly rising." Therefore, older calculation systems, which claimed sustainable constructing was too expensive, are no longer valid. In the meantime, owners of sustainable buildings also have advantages. Maria Puetz-Willems presented solid facts concerning this point: "Already in 2006, the Green Building Council of Australia announced that green buildings collected rents five to ten percent higher than normal," she said. In 2008 in the US, a survey conducted among more than 1,300 owners of LEEDcertified real estate revealed that they generated a higher rent of additionally 11.24 Many open questions for initiators It is difficult to obtain clarity and a market overview in this entire discussion, as Silke Trost revealed. The Investment Manager for hotel projects of Wirtschaftsfoerderung Schleswig-Holstein described that it is an initiator of a 60-million-euro large hotel and resort complex including biotopes in Heiligenhafen/Schleswig-Holstein and now has to decide to make this project sustainable or not. Although the statements in the panel encouraged her, there were still many open questions at the time the master plan had just been finished, e.g. what the concept for the target group had to look like, if the market was large enough for such a concept, and whether a like-minded investor/ operator will be found. // Susanne Stauss Funds and companies as driving forces Since the eighties, Accor has been concerned with environmental protection and similar to IHG provides its hotel operators and owners with tools in the intranet, where the energy usage and waste production in ratios per room can be prepared. Check lists and other guidelines demand from hotel operators that they choose five "must" measures and 15 other "priorities" and put them

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hospitalityINSIDE Special EXPO REAL 201 1 October 2011 Holiday Inn Munich-Gasteig, at present part of a portfolio for sale. GERMANY AND SWITZERLAND ARE CONSIDERED SAFE HAVENS AMONG INVESTORS The foreigners are coming Augsburg (October 4, 2011). The foreigners are coming - and they are most welcome. Foreign investors increasingly regard both Germany and Switzerland as safe havens for hotel investments. Currently, Germany is the country with the most hotel property on the market, and a large number of deals are going on in the background. A great number of foreign investors do not require any German bank for funding purposes. Moreover, their interest in hotels focuses on more than just the budget segment. A recent survey among consultancies about the desires and behaviour of investors. s in 2010, two thirds of hotel investments in Germany are based on foreign money this year," says Olivia Kaussen, responsible for CBRE Hotels Germany and CEE headquartered in Munich, defining the big frame. "Investors are again interested in all categories, from 3 to 5 stars - the run on budget is over," she says. "Yes, the interest of foreign investors has risen noticeably in the last while," confirms Martina Fidlschuster, Managing Director Hotour Hotel Consulting, Frankfurt. Hotour mainly records investors from the Middle East, who are aiming to diversify their wealth in times of political instability at home. "In doing so, they specifically choose Germany and Switzerland as a secure haven," she adds. Tina Froboese, Managing Director bbg Consulting in Duesseldorf (and successor of Karl H. Kreuzig) agrees: "Abroad, the German-speaking hotel market is not only considered underrated, but mainly stable. This shows particularly in the increased demand of foreign investors." Against the backdrop of ongoing discussions about the "Euro safety net" for ailing EU members, the term "risk diversification" acquires a new dimension for investors, as Antje Zumsande, Managing Director of Consilium Hotellerie in Leonberg/Stuttgart, found out: "Many investors, particularly from Turkey and Russia, trust the German government and consider their assets safely invested in Germany. The Americans also

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October 2011 hospitalityINSIDE Special EXPO REAL 201 1 know about the risk of the Dollar rate and the American economy and trust in Germany's economic power and the Euro, despite the recent Euro crisis. However, there is a general notion that incalculable risks are always in existence all over the world. Against this backdrop, Germany still offers good chances at a comparably low risk." Big deals in Germany A few years ago, Germany was regarded scornfully as Cinderella, while today, it is a shining sleeping beauty again: Germany is obviously the pet of foreign investors. "It is Thomas Roeckelein. clearly evident that foreign interest is on the rise," emphasises Markus Beike, Managing Director Christie+Co, Berlin, "both with individual transactions as well as on a portfolio level," he specifies. Accordingly, a Libanese investor bought a hotel portfolio from Morgan Stanley Real Estate comprising seven InterContinental Hotels including the InterConti Frankfurt. According to insiders, there are hotel portfolios worth more than one billion Euros on the European market - mainly in Germany. Deutsche Bank and CBRE Hotels are settling the sale of an 18-hotel portfolio belonging to the Canadian Sitq fund generating 600 million Euros - about twice its purchase price. The hotels are operated by IHG brands (InterContinental Hotels). Eleven of the 18 hotels are located in Germany - e.g. the Holiday Inn in Munich next to Gasteig - the remaining ones are located in Austria, Spain and the Netherlands. And another example: the British Whitehall and Westmont Hospitality investment funds are currently in the process of withdrawal from continental Europe offering a portfolio of 20 German Queens Moat Houses worth more than 300 million Euros via Christie+Co. The hotels operate under Best Western, Holiday Inn and Queens brands and have a total of 3,649 rooms. But also smaller portfolios with sonorous names are for sale: one of them includes the hotels of the deceased investor Dieter Bock (Octavian Hotel Holding), whose widow allegedly wants about 380 million Euros for the five luxury hotels. According to information by hospitalityInside, the Kempinski Hotel in Frankfurt/Gravenbruch has been sold in the meantime, while the three Kempinski Hotels Atlantic Hamburg, Bristol Berlin and Taschenbergpalais Dresden are to be sold in a triple pack. Markus Beike. Investor types as colourful as the wish list In Germany, there are investors from many markets: from the Middle East, the USA and Canada, from Great Britain, Russia, Turkey, Israel, sometimes from Scandinavia and Benelux, according to the consultancies. And they are obviously interested in everything that is usable. Thomas Roeckelein, Managing Director of tophotel Consultants in Sinzheim talks about some Chinese who succeeded in finding 30 to 100-room hotels in the 2- and 4-star segment. In one case, they did not invest in a hotel that needed refurbishment, in another case they decided in favour of a renovation. "Concerning Asian investors, the motivation for such investments often remains unclear," he explained. The Russians are quite different in this respect: they do not buy any non-performing loans, but look for profitable objects suitable for self-operation. GUS investors prefer 3 to 4-star hotels, luxury and budget are a no-no. Motivation of such investors, estimates Roeckelein, is often inexperience regarding the hotel sector. Facing the "Putin system" in Russia, many of them aim at securing themselves a permanent visa via their own companies in Germany. Antje Zumsande summarises the desires of professional hotel investors. They are looking for operator-free business hotels of 100 rooms or more in major cities capable of bearing a brand or portfolio hotels with Anzeige

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hospitalityINSIDE Special EXPO REAL 201 1 October 2011 fixed-lease agreements. "The bigger and financially stronger the leasing company, the smaller the city may be," specifies Zumsande. Apart from that, hotel investors are on the lookout for nameable health resorts as well as packages consisting of at least ten hotels. country where the investment will be made, but also often at their branch abroad - mainly in London - but hardly in the country investors come from." Tina Froboese of bbg Consulting sees another issue concerning financing: "Expectations of international investors in German Security is sexy Martina Fidlschuster can only agree with that while bringing another aspect into play: "Investors are almost exclusively interested in hotels located in famous cities and belonging to the upper-market segment, whereas yield is mostly less important than the intrinsic value." Stephan Gerhard, CEO of Treugast Solutions in Munich nods and gets right to the point: "Security is sexy!" For about one and a half years, there has been a new kind of modesty regarding yield expectations. Meanwhile, according to the consultants, those who buy property in Germany do not automatically require financing. Investors with an unclear motive or who do not want to reveal their motive sometimes pay the millions in cash. Potential investors from the Benelux countries, Scandinavia, and Canada, who preferably acquire for semi-institutional types of investment, rarely require financing in Germany or Austria. banks are often very high. But on site, they are disillusioned too often: due to strong reservations of the German credit economy regarding hotel financing, the partly very restrictive criteria are not always understandable in an international context. Quite often, German banks have bet on the wrong horse and are handing back the ball to their customers now." There will only be a solution if both sides discuss the procedures and possible options early on and in detail. Accordingly, it seems that things are not total sunshine and lollipops in Germany's hotel investment sector. // Maria Puetz-Willems Olivia Kaussen. Taschenbergpalais dresden, sold soon? Tina froboese. In contrast, other private investors, e.g. from Turkey or Russia, prefer to finance their projects in Germany or Austria. However: "Foreign capital of 70 percent is usually only provided to hotels if the owner has mortgageable assets or a lease agreement with a proper value," specifies Antje Zumsande. "Financing and growth in value of this particular type of investor is thus often only achieved through financially strong operators." Martina Fidlschuster summarises: "Financing is either looked for at the banks in the 4 POINTS IN FAVOUR OF GERMANY AS A HOTEL INVESTMENT COUNTRY Markus Beike, Managing Director of Christie+Co Germany, summarises Germany's attractiveness as a hotel investment country in four aspects: 1. There are several interesting individual hotels and hotel portfolios for sale again. 2. Productivity has been continuously developing positively since 2010. 3. Banks are ready to provide foreign capital for hotel transactions, albeit on a lower level compared to the period before the crisis. 4. The fourth largest economy in the world offers a calculable environment for real estate investments.

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October 2011 hospitalityINSIDE Special EXPO REAL 201 1 TEST LAB FOR THE LIFESTYLE COMMUNITY Lindner Hotels starts new brand Duesseldorf (August 26, 2011). Lindner Hotels & Resorts will come onto the market with a new, high-quality hotel brand and with this, will begin a new concept that is directed toward a Live Community. ot only better. Different.", so says the marketing slogan of the 34 Lindner Hotels and Resorts. The new properties of the new hotel brand, "me and all", will again, be quite different. The developers of the Lindner Group are currently still working on it and the new brand should be introduced at its first location by the end of 2012. The new concept does not intend to have a reception, lobby or restaurant; the present and classic hotel design is completely questioned by the "me and all" hotels. Instead, there will be a lounge that opens to the city and simultaneously makes a lot possible - e.g., work and chill. The usual a la carte dining will likewise be replaced by modern food and coffee shop concepts with self-service. franchise concepts from it. Lindner will purposely settle the new brand in a "high-quality facility in 4-star areas" in order to stand out in contrast to the budget hotels with design claims. The name "me and all" should be a tip to the fact that the single traveller can connect here with others from the community. Kroekel and Klein as partners The newly founded, me and all GmbH is a 51 percent subsidiary of Lindner Hotels AG. Both Andreas Kroekel, Chairman of Operations, Sales & Marketing with Lindner Hotels AG and the B-K-Hospitality Service GmbH from Bernhard Klein will equally split the remaining shares. They will also place the management together with Otto Lindner, Chief Executive Officer for Lindner Hotels AG. Klein is no stranger in the industry: He founded Innside Premium Hotels in 1995, sold the group in 2007 to Sol Meliá and then left the company in 2009. Lindner Hotels & Resorts will introduce its new brand in detail for the first time at leading commercial real estate trade show in Europe, Expo Real in Munich from October 4-6, 2011. Lindner is a co-exhibitor at the 1st hospitality joint stand "World of Hospitality" in Hall C2, stand 233. // kn Lobby as a community club According to Lindner, the target groups are business and city travellers with a high affinity for the newest communication technology that can be found not only in the rooms, but first and foremost, in the lounge. It will become the "Test Lab for John Q. Public" thanks to directed, strategic partnerships with famous brand suppliers from the communication and entertainment industry. The guests will be able to try out their most recent developments live. Talks with suitable brand suppliers are currently running, says the Lindner Headquarters in Duesseldorf. The most topical events of the respective city will be shown live on screens or the newest communication tools will also be presented. Or the hotel, itself, will turn into a community club: And so, aside from the business and city traveller, the "Urban Locals" will also be a target group. Lindner believes that because all Social Media has become integrated into their everyday life and is constantly further developing, this could then develop yet another target group for the Live Community Lounge and Hotel. Existing properties in 1-A desired So, the new brand wants to open its first location in the end of 2012. Concrete talks are in motion. The first steps are basically only geared toward existing properties in the 1A locations of German cities that allow for a conversion to at least 100 rooms. Lindner also wants to operate "me and all" itself and construct no andreas Kroekel. Bernhard Klein.

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hospitalityINSIDE Special EXPO REAL 201 1 October 2011 WHAT'S ON THE MIND OF DEVELOPERS The biggest challenge: banks and partners Augsburg (October 4, 2011). What's on the mind of developers at the moment? The unanimous answer: restrictive banks. In addition, they are on the lookout for reliable partners and focused concepts. On the occasion of Expo Real 2011, hospitalityInside asked nameable developers what they think. GBI AG, Reiner Nittka, Board Member tel). I personally think that business is going in a more face-to-face direction, as trust in the people acting gains increasingly in importance." hcb hospitality competence, Olaf Steinhage, Managing Director 42 from a tourist point of view, attracting both business travellers and weekend guests. These also include resort hotels focused on target groups and located at top-class destinations as well as locations providing tourist infrastructure that is not linked to any product, more and more often in connection with real estate sales to strengthen the equity capital base. "Safe havens" are in high demand - both in Germany and Switzerland. One of our business partners recently said: "Gold seems to be followed by Swiss real estate." "Since the financial and economic crisis, especially banks have become even more conservative regarding their willingness to provide funding, i.e. they take a very close look at their partners and check both their references and track record in their respective area of expertise. Not every experienced office developer is thus able to hope for hotel funding. Creditworthiness of hotel operators is checked even more intensely and banks demand collateralization and lease assumption on the part of the parent company. Banks/investors generally deem important that the chain is closed, i.e. the property is bound, the planning law is secured, the lease agreement is concluded, and the buyer is identified. And there should at least be a letter of intent. Still, A cities and exceptional locations in B cities hold top ranks - without compromise! Diversification is in high demand. Mixed-use developments are clearly in the lead, insofar as the aforementioned conditions are truly met. Ideally, various buyers with good credit ratings are even at hand for the respective use (such as with our current GBI project in Frankfurt's Europavier- Union Investment, Dr. Bernd Schade, Head of Real Estate Project Management "Today, it has become much more important for the individual partners of a hotel development to realize projects with a positive image and doing so in collaboration with reliable partners and solid frame conditions. Both banks and investors are (desperately) looking for economically reasonable and sustainable projects - they are again willing to finance and/or make purchases. Today, I consider "tested and tried" projects realisable, i.e. projects following the demographic development and adapting to the dynamically changing phases-of-life models. And these products should be created at very good, sustainably reliable locations in collaboration with robust but also new and innovative partners. We are talking about hotels that are optimized in terms of concept and economic real estate criteria (e.g. 25hours Hotels) and located at places that are interesting "Today, the banks act much more restrictively concerning financing new projects compared to the pre-crisis era. Speculative project developments and developments of more than 100 million Euros are normally only financed in exceptional cases. Particularly small developers with low equity capital usually face enormous challenges when it comes to financing. Thanks to "forward funding" structures,

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October 2011 hospitalityINSIDE Special EXPO REAL 201 1 The GBi project citadines Michel hamburg will have 128 apartments and is scheduled to open in late 2013. / Visualisation: Wandel hoefer lorch & hirsch Union Investment has the possibility to take over funding, which makes us a welcome partner." (Editor's note: Forward funding involves the final investor providing required construction capital in advance.) RMDS Hotel Development, Cornelia Markus-Diedenhofen, Partner "In the past few years, it has become even harder, to get financial means for realizing projects. Private investors and communities urgently require funding for minor investments (under 20 million Euros). Financial service providers should develop new solutions, e.g. via "package purchases", which involves bundling up small units. During the run-up to funding, preparatory work of competent partners has never been in higher de- mand, particularly concerning reliable costs, appointments and quality. Investors demonstrate high cost-awareness due to the low margins. Across the industry, decision makers are glad if they are presented with a consistent planning and realisation concept that considers the utilization phase with respect to energy efficiency. Certifications for the hotel industry are gaining in importance, as they have a positive effect on both the rating of banks and communication with consumers. And that is just the strength of our young and interdisciplinary company: RMDS provides consulting services along a hotel's entire life cycle with respect to architecture, interior design and planning of building services." // map Anzeige VISIT US! EXPO REAL HALL C2, BOOTH 010 GREAT DESIGN FOR LITTLE MONEY! www.motel-one.com 09411MO_AZ_EXPO_185x128_RZ.indd 1 28.07.2011 10:50:24 Uhr More information and contact details:

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hospitalityINSIDE Special EXPO REAL 201 1 October 2011 HOTOUR ANALYSIS: HOTELS PROFIT LESS FROM TRADE FAIRS THAN ASSUMED Trade fair locations overestimated Frankfurt (September 9, 2011). The golden times, when hoteliers were able to rent out little cubbyholes at any price, are nearly over. Real estate developers still regard this segment as important, but hoteliers detect decreasing numbers of overnight stays compared to the total business. Even in the light of the Asian upswing, Germany still remains the most important trade fair location in the world. Therefore it is no surprise that the trade fair business plays an important role for the accommodation industry in Germany. But how important is this role really? As the "trade fair autumn" is about to return, Falk Laudi, consultant at Hotour Hotel Consulting in Frankfurt, analysed Germany's top trade fair locations and their significance for the hotel industry for hospitalityInside.com. oteliers in trade fair cities benefit from large specialised fairs twice: their hotels are mostly booked out and they are normally able to obtain high trade fair prices. Therefore, locations with a significant percentage of trade fair business are highly popular among project developers and investors in hotel properties. In the real estate industry, the impression is created that the trade fair business is gran- ted a higher-than-average importance concerning overnight stays. Is this evaluation appropriate? What role does the trade fair business really play in the accommodation industry? Moreover, it is questionable whether the trade fair business is a growing segment in Germany's top trade fair locations. After all, the total of overnight stays has increased significantly at the largest trade fair locations in the last decade. Accor- Top 10 trade fairs from the point of view of the hotel industry 20.8 m. overnights 20.000 15.000 10.000 11.1 m. overnights ding to many hotel managers, the trade fair proportion appears to be decreasing compared to the total business. Regarding trade fair statistics, structural changes are becoming more clear: the number of events is increasing continually. The number of exhibitors is also increasing, at the same time, businesses are keeping an eye on their costs, which makes the average duration of the visitors' stay decrease. Because of the large number of trade fairs, individual events are losing their importance. In addition, some events last significantly shorter compared to a few years ago. According to statistics, the number of visitor days is also declining. Germany's top 8 trade fair locations in an individual analysis In order to assess the contribution trade fairs make to the accommodation industry in top trade fair locations, a more precise analysis of the individual trade fairs and their structures is necessary. It has to be taken into account that trade fairs have to fulfil certain parameters, in order to be "relevant to hotels". Not public trade fairs, such as the "Boot" in Duesseldorf, but specialised fairs such as the "bauma" in Munich - ideally with a high percentage of international guests - are of special importance for the accommodation market. Another indicator for a "hotel-relevant" trade fair is the percentage of superregional visitors. In the ranking of the top 10 trade fairs from the hotel industry's point of view, Frankfurt is at the top. The city hosts four of the largest trade fairs with more than 100,000 10% 4% Overnights 2010 Ø Visitor days generated by trade fairs at trade fair location Identified ratio of the trade fair business in relation of total overnights at each trade fair location sources: fKM Gesellschaft zur freiwilligen Kontrolle von Messe- und ausstellungszahlen 2010, hotour research * Buchmesse, iaa and iaa nutzfahrzeuge: international percentage of professional visitors. in addition, there are international private visitors

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October 2011 hospitalityINSIDE Special EXPO REAL 201 1 racter compared to Frankfurt or Duesseldorf, as far as visitors are concerned. o In Cologne, where the most visitors have been recorded over the past ten years, the trade fair achieves an 18-percent share in total room nights. It records an average 2.2 million visitor days per year staging internationally well-known trade shows like "Photokina", "Didacta" or the "IDS" dental trade fair. o Compared to this, the Hanover trade fair has the biggest influence on the local accommodation business. Hanover is by far Germany's biggest trade fair location. The numerous annual major trade shows like "Cebit", "Hannover Messe", or "Industrial Automotion" together generate an enormous accommodation volume. Not only does the city of Hanover benefit from this, but due to the comparably low number of beds, which amounts to 13,500 (in comparison: Frankfurt records approximately 37,000 beds), all cities in the Hanover area benefit from the trade fair business despite the decreasing overflow through growing capacities. It can be expected that about 22 percent of room nights are generated by the trade fair. o Aside of Hanover, Nuremberg and Essen are both regarded as secondary locations due to their comparably small accommodation markets. Accordingly, the trade fair business is significantly less important achieving 19 percent (Nuremberg) and 20 percent (Essen), respectively. Demand flowing off to the surrounding area has already been taken into account. o In Duesseldorf, the share of room nights reaches only 20 percent, which is rather low. As a result of the international character and the high number of visitors at the many trade shows, local hoteliers succeed in demanding considerably higher rates compared to Essen, for example. o In comparison, it becomes clear that Messe Frankfurt is ahead in terms of international character and expert visitors. 40 percent of the trade fairs' entire visitor days were generated by international guests in 2010, said Messe Frankfurt in its 2010 annual report. More than 80 percent of all visitor days result from expert visitors. The chance that trade fair guests will stay for a night is thus correspondingly high. With a share of 17 percent in accommodation volume, roughly above one million room nights have been recorded by the market in Frankfurt as a result of trade fair business. Of course, these estimates reflect only an average trade fair year. In cyclically-induced extraordinary trade fair years, e.g. Munich in 2013, when all important major non-annual trade fairs take place in the same year, the share of trade fair business will likely be considerably higher. Trade fair business often overrated The result shows that the trade fair business is less important for the accommodation sector and not so perceived by many local experts in some of Germany's top trade fair cities as originally expected. This perception may originate from the fact that demand is very high on 30 to 35 days per year. On these days, not only trade fair visitors but also individual travellers and other business travellers moan about fully occupied hotels. An impression is quickly created that trade fairs have a dominating impact and new hotels need to be erected. However, it is important to consider that more and more congresses and specialist conferences are drawn to the trade shows in order to generate visitors. The resulting accommodation potential was not considered in the course of this survey due to the low amount of available data. Regarding the accommodation markets, the trade fair business is bound to lose in importance facing strongly growing segments like city tourism. This process will be gradual, as the already mentioned increase of capacity in major cities can attract flowing off demand. Trade fairs will maintain their right to exist in future, but they will continue changing in terms of form and organization. Germany will manage to defend its importance as a trade fair location in the medium term, as not only its central location in Europe but also its excellent transport connections are perfectly suited for carrying out such events; in addition, it also provides the necessary expertise. // specialised visitors each. Among them are "Buchmesse", "Automechanika" and "Light and Building" and mainly "IAA", which was able to generate a total of 845,000 visitor days (33% of them were specialised visitors) in the crisis year in 2009. The number of overnight stays in top trade fair locations in 2010 compared to the average number of registered visitor days in the last few years allows the assumption that in smaller markets (e.g. Hanover or Essen) the trade fair business influences the hotel market much more than in the German metropolises with the most overnight stays like Munich and Berlin. Based on conclusive statistics and numerous talks to experts of the respective markets, Hotour carried out its own evaluations concerning overnight stays triggered by the trade fair business. These evaluations lead to the following results: o Despite Messe Muenchen generating about 1.1 million room nights, the share of business of about 10 percent generated by the trade fair is comparably low due to the high total volume of room nights. However, the Munich tourism office estimates this share to be higher according to a recent survey. o The roughly 800,000 room nights generated by Messe Berlin are much less important, as the share amounts to only 4 percent of total demand. Trade fair business in Berlin has less international cha-

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hospitalityINSIDE Special EXPO REAL 201 1 October 2011 MEDIUM-SIZED HOTELS: GENERAL PROBLEMS, BUT NO INSOLVENCY WAVE Banks keep still longer Augsburg (October 4, 2011). In the German hotel sector, the majority of revenue is generated by hotel chains, while the structure of Germany's hotel landscape remains dominated by medium-sized businesses. As times get harder and margins keep declining, the question at Expo Real 2011 is: Will the banks let small and medium-sized companies survive - and if yes, for how long? Hotel consultancies have identified two extreme core trends in this respect - and a great number of challenges. However, most of them do not see any sign of an insolvency wave on the horizon. room for negotiation again. "In real life, however, family dramas are taking place among many indebted small and mediumsized hotels," he adds, "particularly in the country." Who wants to take over a hotel in Lueneburg Heath, in the Harz mountains or the Bavarian Forest? Here, Roeckelein expects that only three out of ten hotels will survive in the long term. Stephan Gerhard of Treugast Solutions in Munich still has hope: "Mainly German Sparkassen and Volksbanks are generally not interested in (even more) hotel property as they would then need operators again. But their checks are becoming more stringent: they demand figures from small and medium-sized hotels on a regular basis." eing a broker and consultancy, Christie+Co Germany is looking at companies with transaction volumes of up to ten million Euro and also gaining insight into their figures. Accordingly, Managing Director Markus Beike does not see any insolvency wave on the horizon: "On behalf of banks, we have corrected some financial disorders of medium-sized hotels in the crisis years of 2008 and 2009. But this group of clients has not become bigger. Quite the contrary: I rather expect that pressure has subsided, as medium-sized hotels have benefitted from the increase in productivity since 2010 which should also have led to some growth in value." In contrast, Tina Froboese, Managing Director of bbg-Consulting in Duesseldorf, expects "a clear increase in the number of insolvencies" resulting from several factors. Many small and medium-sized hotels have a considerable investment backlog, perspective planning and financing are getting harder as a result of the older generation retiring combined with the lack of successors and only a few career changers. According to general expectations, these trends will even intensify over the next few years. Fate of small and medium-sized hotels depends on the banks' fate The increased pressure on borrowers exerted by the banks has a few other reasons: Martina Fidlschuster of Hotour Hotel Consulting: Sparkassen, Volksbanks and Raiffeisenbanks have taken over several hotel financing engagements that were disposed of by the one or the other major bank in the course of Basel II. However, their experience tells them that local banks keep still longer, as they personally know their customers on site and have longterm customer relationships. "The banks generally follow two main strategies," points out Antje Zumsande of Consilium Hotellerie in Leonberg/Stuttgart. "The banks adjust their books at all costs - taking no consideration of individual hoteliers or small groups - or they keep still at all costs, if insolvency is politically inopportune or if a bank's balance sheet was unreasonably burdened." As a result, many small and medium-sized companies depended on the specific situa- Banks keep still longer today But how do banks react when small and medium-sized companies are no longer able to pay down their loans and a financial crisis or rainy summers bring the balance sheet closer to the edge of the abyss?" "The banks are currently keeping still," say the consultants unanimously. "They are definitely keeping more still than up to 2007," explains Thomas Roeckelein of tophotel Consultants in Sinzheim. "They are trying to find internal solutions for the problems of small and medium-sized companies." He considers businesses generating revenues of up to one million euros to be in the hand of banks. As far as hotels generating up to five million Euro are concerned, there was

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October 2011 hospitalityINSIDE Special EXPO REAL 201 1 tion of their bank. And Antje Zumsande sees yet another trend that tends to put small and medium-sized companies at a disadvantage: the banks often incorporate new, cheap and formerly ailing hotels into hotel groups - even if the corresponding hotel group is indebted itself. "They trust in the principle of hope, i.e. that the results of the entire hotel group will change positively through expansion." Her summary sounds bitter: "All in all, this hints at a well-known course of action: the small portfolios are unimportant and are treated consequently, while the important and/or big market participants can expect leniency." NEW PKF BOOK ON HOTEL EVALUATION Case studies included Munich (October 4, 2011). In late October, a new book on hotel evaluation will be issued in the "PKF Schriftenreihe" line. Publisher Matthias Schroeder and the two authors Ulrike Schueler and Ulf Templin are opening some new chapters. PKF just issued an update of the "Budget Report Deutschland". Ways out of the misery Are there any ways out of the misery for small and medium-sized companies? "Yes," says Tina Froboese. "Cooperative financing has still been rather unnoticed. The sector practiced cooperative financing already at the start of the last century and it could be met by the associations." As far as non-performing loans and companies lacking a successor are concerned, Stephan Gerhard pleads for a creative approach, like the one Treugast Solutions is currently discussing with the Sparkassen. Hoteliers could found a new company with external entrepreneurs, who could lease the hotel and exercise a sales option a few years later. Nobody seriously anticipates an insolvency wave among German medium-sized hotels: "The volume of endangered banks seems more threatening to us than an insolvency wave in the hotel sector," says Zumsande. Markus Beike emphasizes: "We don't see any waves of 'fire sales' at the moment. Banks prolong expiring contracts on short notice rather than calling in the loan." And Stephan Gerhard summarises: "At present, one cannot really badmouth the banks, but they need to dispense with their old habits." // Maria PuetzWillems he new book about hotel evaluation by PKF hotelexperts Muenchen is much more extensive and, of course, more up to date than the first issue, which was released in 2005. Under the headline of "Successfully investing in hotels. Evaluation and rating of hotel real estate", the experts explain the classic methods of evaluating the value of hotel real estate and work out content and procedures in evaluating hotel investments. First of all, the book discusses the relevant criteria for success, before showing the process of a structured investment decision and introducing standardized evaluation criteria. The next aspect is evaluation based on national and international evaluation methods. A case study on evaluating a hotel based on national and international standards as well as calculation of yield before and after profit tax and under consideration of various operating agreement models make the book complete. It is expected to appear in late October and has around 170 pages. The price is yet to be determined. New budget report 2011 available The first PKF "Budget Report" 2009 reflected the situation of the sector before the crisis. Now, PKF hotelexperts Munich has updated its findings. The financial crisis put paid to many expansion plans. The new 75-page document now describes the current state of the budget hotel market in Germany and provides charts and figures for its analysis. 25 of the 46 to which questionnaires were sent, returned data to PKF hotelexperts in Munich. This translates to a response quota of 54%. This is further illustration of the strong interest in facts from this segment of the market. The team of hotel experts at PKF assessed the responses from the hotel groups - from the number of existing hotels and planned openings to the floor and room programme for the individual brands right up to prices and services, distribution channels, contracts and investment. The report "Budget Hotels in Germany 2011" (in German language) can be bought as a hard copy by first-time customers for 420 EUR (plus VAT) and can be ordered as a print version from andrea.rach@m.pkf.de. Returning buyers receive a discount. // Anzeige hotelknowhow Hotel Development Service GmbH Neubaugasse 36 A -1070 Wien Tel +43 1 522 02 86 office@hotelknowhow.com www.hotelknowhow.com experts style

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hospitalityINSIDE Special EXPO REAL 201 1 October 2011 NEW RESORTS IN SCHLESWIG-HOLSTEIN - MECKLENBURG SHOULD WATCH OUT Competition at the Baltic coast Augsburg (October 4, 2011). The rainy summer shortly cast a cloud over vacationers' moods on the coasts of Germany, but nonetheless, the seaside resorts in Mecklenburg-West Pomerania and Schleswig-Holstein remain attractive resort destinations in the long run. Meanwhile, a competition between these two federal states seems to be in the offing. In Schleswig-Holstein, numerous new mega resorts have been announced, while Mecklenburg-West Pomerania is struggling with decreasing numbers of visitors despite growing bed capacities. n the island of Usedom, many hotels were built after the reunification, but they are now about 15 years old and definitely require some refurbishment," analyses Rolf Seelige-Steinhoff, Managing Partner of the Seetel Group on Usedom, and summarises: "This leaves us in a situation similar to what many hotels in Schleswig-Holstein experienced about 30 years ago." And this is why he is closely watching what is going on in the "old" federal state. With 15 hotels on the island of Usedom, 25 million Euro revenue in 2010 and 410 employees, Seetel is the largest hotel company and employer in this resort destination. At the same time, the entrepreneur looks to the east: in Poland, guests get the same smooth sandy beach as on Usedom - and new hotels. Outside the EU, big resorts are planned, partially with an emphasis on medical wellness. For hotels in MecklenburgWest Pomerania, this means: Polish hotels will close the "hardware" gap soon, and then the "software", namely service quality, will determine the winner. "Although we address a broad segment with our considerable hotel and apartment portfolio between 3 and 5 stars, we still need to specialize and react to changes in demand on short notice - as in bus tourism, for example." Seetel still believes in this destination. Up to now, it has invested 120 million Euro on Usedom and is planning another three new hotels/residences at an investment volume of roughly 70 million Euro. tourist attraction, recorded a drop in average occupancy between 2009 and 2010 from 41.5 to 38.5 percent (-3%). At the same time, the number of hotels rose from 189 to 191. "We need to extend existing niches - like health and sustainability - and strengthen the price-performance ratio," says Giuliano This segment is currently in high demand among investors, developers, and operators. After all, selling apartments guarantees (a part of) financing and occupancy. Extending range with mega resorts One year ago, Silke Trost presented the plans for the new Heiligenhafen mega resort with a budget of 60 million Euro. It will include a 4-star hotel, a 3-star lifestyle hotel and apartments. In the meantime, the company is negotiating on the lifestyle hotel with a - German - investor and operator. So the projects are in motion. The same is true for Olpenitz on the Bay of Kiel, 50 kilometres south of Flensburg. Within four years, an investment of more than half a billion Euro will create the largest maritime holiday resort in Northern Europe. The diggers are already on the go and the holiday homes are already being sold - however, sales are said to be dragging somewhat. On top of that, the investors are in conflict with each other. Damp is situated about 20 kilometres south of Kappeln. So far, it is the only combination of a holiday resort and (reha) clinics on a beach. There are 2,500 beds for vacationers in 3 and 4-star hotels, 110 holiday flats, and 700 holiday homes, 300 of Rolf seelige-steinhoff. Declining numbers require clear-cut profiles There are many challenges nonetheless: the three famous Kaiserbaeder Ahlbeck, Heringsdorf and Bansin, the island's main Guerra, Delegate of the Supervisory Board of Travel Charme Hotels & Resorts AG, describing necessary measures to keep the coast of Mecklenburg-West Pomerania competitive when it comes to "holiday in Germany". Travel Charme Hotels & Resorts currently operate eight high-quality hotels on the Baltic coast and on the two islands of Usedom and Ruegen. But it lacks a hotel on the coast of Schleswig-Holstein. Despite that, "we also observe the market and are striving to establish new objects at this location," Guerra adds. "Resorts are a 'hot' topic in Schleswig-Holstein," says Silke Trost, Investment Manager Hotel Projects at WTSH - Business Development and Technology Transfer Corporation of Schleswig-Holstein in Kiel, taking up the issue, "particularly concerning the connection between hotels and apartments." Giuliano Guerra.

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October 2011 hospitalityINSIDE Special EXPO REAL 201 1 Heiligenhafen in Schleswig-Holstein, one of several multi-million investments in the region. silke Trost. which will be newly erected in two stages starting in autumn. Furthermore, the resort is about to be newly positioned. The strong apartment character of the new facility is also based on the fact that the company wants to focus on Scandinavian customers in the future. People from Denmark, Sweden, and Finland love holidays (including service) in (high-quality) holiday homes. These examples show that competition is growing in new dimensions in SchleswigHolstein. But Silke Trost names even more new projects, e.g. a hotel with apartments on the island of Foehr, the Matteo Thun project Bloom Hotelresort, and residences on the island of Fehmarn, as well as Schloss Weissenhaus near Kiel with its new concept called "Historisches Naturreservat Village Schloss Weissenhaus" ("Historical Natural Reservation Village Weissenhaus Castle"). And finally, a hotel with a thermal bath connection is being discussed in the city of Schleswig. Cross-border tourist marketing "Until today, Schleswig-Holstein has been rather compartmentalized," resumes the WTSH Manager. "The new mega hotels bearing nameable hotel brands, for example, will increase our operating range. In addition, the new leading businesses encourage existing hotels to make investments." Northern Germany is increasingly targeting foreign guests as well as guests from Southern Germany. The federal state of Schleswig-Holstein is therefore tying itself closer to the city of Hamburg when it comes to tourist marketing, and in Mecklenburg-West Pomerania, people are also happy about TUI offering flights and package tours to Rostock and Usedom from the next winter season. Things are in motion between Flensburg in Schleswig-Holstein and Cap Arkona on the island of Ruegen. Even the bad news in connection with individual holiday resorts like up-country Fleesensee or Hohe Duene in Warnemuende will not change this. Successful companies like Seetel or Travel Charme Hotels, however, have a particular request to banks and developers: they should finally understand that the resort hotel business is a long-term one. // map Anzeige Since April: Upstalsboom Hotelresidenz & Spa Kühlungsborn Services hcb: Consulting Development Project Management We offer a complete skill-set to support you with the realisation of your hotel and resort projects throughout Germany and Europe. Consulting & Development Project & Asset Management www.hospitalitycompetence.com

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