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U.S. HOTEL TRANSACTION MARKET SHOWS SIGNS OF LIFE IN SHORT TO MEDIUM TERM (JONES LANG LASALLE HOTELS)

FocusOn The Return of Hotel Transactions Published by Jones Lang LaSalle Hotels

Chicago, The hotel transaction market is at last showing signs of life after almost nine months of inactivity, according to research from Jones Lang LaSalle Hotels. However, the first six months of 2002 have been sluggish, as the market warms to improved demand characteristics and a growing economy.

"The industry is coming to realize that the market has hit bottom, which bodes well for both the operating and investment markets," said Melinda McKay, Senior Vice President of Jones Lang LaSalle Hotels, who authored the report. "The transaction market is expected to rebound toward the end of 2002 and continue to gather momentum into 2003."

Why this bullish stance? As the economy and hotel market recovers, investors' confidence in the medium to long term resiliency of the market will build. The absence of new supply will act as a stimulant, and trailing 12-month numbers will start to look more and more attractive. Pent-up demand will be liberated following almost a year of relative uncertainty and inactivity.

It is anticipated that transaction volume will reach almost six billion dollars in 2003, which would represent a peak in activity over the last five years. Average price per room is predicted to lift by around 25% over 2002 levels if, as envisioned, larger hotels are transacted.

Perception Is Not Reality When It Comes To Hotel Cap Rates

Hotel cap rates soared following September 11, albeit on a knee-jerk reaction. During Q4-01, hotel cap rates experienced a 70-basis point shift, significantly more than the 10-basis point shift for all property types. This increase placed hotel cap rates at one of their highest levels in a decade. Jones Lang LaSalle Hotels' transaction analysis indicated that hotels traded at an average cap rate of 11.5% in 2001, although the range was between sub-six percent up to 14 percent.

"Based on our research and investor surveys, we expect cap rates in 2003 will be representative of historical numbers given the sentiment that the market has reached bottom and investors will be pricing upside moving forward," said Arthur Adler, Managing Director and CEO-Americas, of Jones Lang LaSalle Hotels.

As we travel through 2002, the capital markets continue to exhibit marked changes since the fall of 2001. The capital markets are responding to an improving economic climate, low interest rate environment and cautious recovery in the hotel sector as detailed below:

As we progress into 2003, investors will become more confident in underwriting the U.S. hotel sector and, given the pent-up investor demand, this will help create an environment ripe for a record volume of transactions. "Yet, until hotel performance gathers momentum and investors have more transactions to benchmark against, pricing transactions will continue to be a challenge and as such valuation ranges will remain wide," concluded Adler.

Jones Lang LaSalle Hotels, the world's leading hotel investment services group, provides clients with value-added investment opportunities and advice. In 2001, its success story includes the sale of 7,972 hotel rooms to the value of US$1.3 billion in 39 cities and advisory expertise on 100,550 rooms to the value of US$26.3 billion across 255 cities. Jones Lang LaSalle Hotels' services include transactions, mergers and acquisitions, financial advice and capital raising, valuation and appraisal, asset management, strategic planning, operator assessment and selection and industry research. Jones Lang LaSalle [NYSE: JLL] is the world's leading real estate services and investment management firm, operating across more than 100 key markets on five continents. www.joneslanglasallehotels.com

In July, newly-appointed PATA Vice President-Development, Mr. Peter Semone will embark on a "listening tour" of the Pacific to outline PATA’s vision for the region and listen to the full range of member feedback. Mr. Semone said: "PATA remains absolutely dedicated to boosting tourism in the Pacific on behalf of its members. We are determined to put the ‘P’ firmly back into ‘PATA’." Dates and itinerary for the fact-finding mission will be announced soon. For further information e-mail Mr. Semone at pas@pata.th.com. Or contact the Sydney-based Pacific Division Interim Representative, Mr. Ian Kennedy at iken@pata.org.au.

PATA members are invited to join the PATA stand at MADI Travel Market November 5-7, 2002, in Prague, Czech Republic. MADI is a major show for operators interested in the Central and Eastern European outbound sector. PATA members can join the stand at a special price of US$495 compared to US$900 full price. The 2001 MADI event attracted 554 exhibitors from 40 countries and approximately 4,600 buyers worldwide. Participants will also receive 75 percent AD from CSA Czech Airlines and discounted hotel accommodation. The deadline for application is September 13, 2002. For further information contact Mr. Ales Krejci, Chairman, PATA Czechia/Slovakia Chapter. Fax: (420-2) 2254-1221. E-mail: pata.czech@madi.cz. Web site: http://www.madi.cz/madi-fair.html.

The PATA Sustainable Tourism Conference & Mart, October 23-26 in Banten, Western Java, Indonesia will feature a key-note address by world-famous environmentalist, Professor David Bellamy. There will be case studies on Antarctica, Indonesia, Western Australia, Fiji, the Wetland Centre (UK), Munich airport, and off-site workshop sessions to Indonesian villages. National Geographic Traveler and Conservation International will host a special session on "Geotourism". The event has introduced a one-and-a-half day mart component. Register before June 30, 2002 to receive a 10 percent MasterCard early bird discount. For further information visit www.pata.org or e-mail pstc@pata.th.com.

PATA’s Strategic Information Centre will publish Pacific Asia Tourism Forecasts 2002-2004 at the end of July. Written by professors Lindsay W. Turner and Stephen F. Witt, the 280-page study will predict tourism arrivals in 36 PATA-region countries as well as analyse market trends, seasonal change, and for some countries, tourism receipts and accommodation requirements. The book is available to PATA members for US$350 and to PATA chapters and non-members for US$499. To order, contact Ms. Patcharin Hongprapat. Tel: (66-2) 658-2000 ext. 121. Fax: (66-2) 658-2010. E-mail: publications@pata.th.com.

PATA’s Strategic Information Centre will release the PATA region’s 2001 Annual Statistical Report and first quarter 2002 Quarterly Statistical Report in August 2002. The reports include visitor arrivals by country of origin, outbound travel data for selected PATA-member countries, percentage change over the same period previous year and an update of aggregate arrivals and departure data for many member countries spanning five years. The price for one set is US$400 (from US$450) for PATA members and US$600 (from US$625) for PATA chapters and non-members. To order, contact Ms. Patcharin Hongprapat. Tel: (66-2) 658-2000 ext. 121. Fax: (66-2) 658-2010. E-mail: publications@pata.th.com.

* Outbound resident traffic from Korea (ROK) grew +20.9 percent during Q1 2002. China (PRC), with a +58.1 percent gain, became Korea (ROK)’s favourite destination ahead of Japan. Thailand (+35.9 percent), the Philippines (+36.3 percent) and Vietnam (+62.8 percent) all did well too.

* GDP in Japan rose at an annual rate of 5.7 percent in Q1 2002, although prices fell 0.9 percent in the year to May 2002.

* Production in the industrial sector in China (PRC) rose 12.9 percent in the year to May 2002. Malaysia recorded 3.8 percent growth in the year to April and India 2.9 percent.

* JetBlue Airways, a domestic carrier of the U.S. will offer an in-flight yoga programme to take the pain out of air travel. Each seat-back pocket will be equipped with a yoga instruction card showing four relaxing positions passengers can assume without leaving their seats. To de-stress passengers pre-flight, JetBlue will place eight punch bags at its terminal at New York's John F. Kennedy International Airport.

EUROPEAN INVESTORS FLY IN THE FACE OF ANALYST SCEPTICISM TO SUPPORT SALE AND LEASEBACK IN HOTEL SECTOR

Jones Lang LaSalle Hotels releases latest Hotel Topics, “Hotel Sale-Leaseback Transactions”

London — "Investors across Europe are increasingly recognising the potential benefits of investing in the hotel industry through sale and leaseback structures" says Mark Wynne-Smith, Executive Vice President, Jones Lang LaSalle Hotels when launching their latest Hotel Topics, entitled "Sale and Leaseback Transactions". Hotel Topics predicts that a shortage of available equity public finance will make this largely European trend spread quickly to the Americas and Asia Pacific, flying in the face of analysts' continual down-beat view of this form of financing.

"The pressure for operators to deliver maximum value to shareholders in an environment of increasingly limited capital resources is fuelling this trend. In order to satisfy the need for growth, operators are almost forced in to sale and leaseback agreements for lack of suitable alternatives", continues Mr Wynne-Smith. But these agreements can actually work well for both parties. They provide an innovative method of off-balance sheet financing that presents a win-win situation for both the investor and the operator: the investor has a realisable form of security for his investment while the operator has a tranche of newly acquired development capital. It was a sale and leaseback deal through the Royal Bank of Scotland that enabled Nomura to acquire the Méridien portfolio in 2001 with its new capital injection.

Arthur de Haast, Managing Director Europe, Jones Lang Lasalle Hotels adds, "Despite Europe seeing a total investment of just under €3.5 billion in sale and leaseback agreements in the last two years, analysts continue to take a one-sided view of this type of structure. They focus on the negative impact on the balance sheet that occurs when assets become long-term liabilities. But while the pressure for expansion exists and available public equity is scarce, operators will continue to participate in sale and leaseback contracts rather than run the risk of satisfying neither party".

Traditionally sale and leaseback structures have been used as a method of financing hotel acquisitions mainly in Germany, France and the UK although now open and closed ended funds, pension funds, high net worth individuals and property companies are starting to be interested in sale and leaseback transactions. Jones Lang LaSalle Hotels' most recent research suggests that this trend will continue throughout Europe with many firms such as Hilton and Six Continents trying to find a balance between their franchised, owned, leased and managed assets.

Jones Lang LaSalle Hotels, the world's leading hotel investment services group, provides clients with value-added investment opportunities and advice. Its recent two-year success story includes the sale of 13,994 hotel rooms to the value of US$1.4 billion in 48 cities and advisory expertise for 173,021 rooms to the value of US$32.6 billion across 343 cities. Jones Lang LaSalle Hotels' services include transactions, mergers and acquisitions, financial advice and capital raising, valuation and appraisal, asset management, strategic planning, operator assessment and selection and industry research. Jones Lang LaSalle [NYSE: JLL] is the world's leading real estate services and investment management firm, operating across more than 100 key markets on five continents. www.joneslanglasallehotels.com

Jones Lang LaSalle Hotels (NY)
http://www.joneslanglasallehotels.com/
153 East 53rd Street
USA - New York, NY 10022
Phone: +1 212 812 5700
Fax: +1 212 421 5640

Herald Tribune - Businesses are still cutting back on employee travel, and hotel profits remain weak. Yet some investors say those are signs to buy hotel stocks.

Michael Rietbrock at Salomon Smith Barney Inc. in New York said he expected a "powerful" rally in the first half of next year, precisely because the past year has been so awful. The slump has helped by limiting construction of new hotels and pushing the chains into serious cost-cutting, he said.

That view is not universal. Bjorn Hanson of PricewaterhouseCoopers said share prices, which have recovered from their September lows, already reflect that good news and are too high. "If business travel doesn't recover by year-end, people will become impatient" and prices could plummet, he said.

But analysts who expect that business will rebound soon are recommending shares of some of the big chains, such as Marriott International Inc., Starwood Hotels Resorts Worldwide Inc.and Hilton Hotels Corp."The debate is: Do you feel the economic recovery is strong?" said Bernard Winograd of Prudential Investment Management.

J. Cogan of Banc of America Securities in San Francisco prefers hotel companies that own properties over those, such as Marriott, that manage hotels or franchise their brands. Owners, he contends, will benefit faster when travel resumes. He favors Starwood, which generates almost three-fourths of its income through ownership of Sheraton, Westin, W and St. Regis hotels.

Joyce Minor of Lehman Brothers favors Marriott. While not an owner, Marriott gains "incentive fees" if hotel profits rise, and it says it expects a 6 percent increase in Marriott-brand hotels both this year and next.

Keith Mills at UBS Warburg is not bullish for the near term, but he has one recommendation: Extended Stay America Inc., which he calls "the Southwest Airlines in the hotel industry," by which he means a low-cost leader. (NYT)

New Zealand tourism earnings up Tourism New Zealand's IVS figures estimate that international visitors to New Zealand spent 13 percent more money in New Zealand in the last year. This equates to an extra NZ$635 million spent in New Zealand in the year ending March 2002. Visitor numbers during this period increased by 5.8 percent to 1,954,831. Expenditure per visit has also increased to NZ$3,256 on average per visit in the year ended March 2002, up 9 percent on last year. The most dramatic increase in the March 2002 year came from Korean visitors, who increased their spending per visit by 21 percent, and overall by an unprecedented 107 percent - up to NZ$223 million in total. Visitor arrivals from this market increased by 32 percent during this period - up to 93,278. (Source: www.tourisminfo.govt.nz, 23/5/02)

New australia.com site to reach 6 million by 2003 The Australian Tourist Commission (ATC) has unveiled its new $3 million redeveloped travel website, www.australia.com, which is set to attract 6 million visitors next year. Last year, the site provided information to more than five million users and over the next two years it is expected to deliver a record 80 million pages to potential travellers around the globe. Australia.com is now the primary resource for all ATC consumer and trade marketing programs. It provides information on all aspects of the country from suggested holiday itineraries and travel deals through to daily weather updates. The redevelopment of australia.com has taken over 12 months to complete and involved extensive consumer research to determine how potential travellers access their information. (Source: ATC Online, 31/05/02)

Samoan arrivals increase slightly in March Visitor arrivals in Samoa for the month of March 2002 was up by 0.9 per cent to 6,207 compared to the same period last year. Overall the top three source markets for the month were American Samoa 2165, New Zealand 1460 and Australia 744. The top three markets by purpose of travel for March were: Holiday - NZ 402, Am. Samoa 399 & USA 284; VFR - Am. Samoa 1246, NZ 639 & Australia 254; Business - Am. Samoa 206, NZ 204 & Australia 133; Sports - Am. Samoa 37, USA 9 & NZ 6; Others - Am. Samoa 277, NZ 209 & USA 94. Total arrivals for the year to date (January to March) saw a 2 per cent drop in total numbers to 19,482. Overall the top three markets for the period were Am. Samoa 6845, NZ 5182 & Australia 2131. (Source: Samoa Visitors Bureau, 05/06/02)

Polynesian Airlines may get cash infusion The Samoan government's 2002/2003 budget includes more than US$2 million injection for Polynesian Airlines. Minister of Finance Misa Telefoni Retzlaff is quoted as saying this is an "infrastructure development" for Polynesian, which faced difficulties created by the September 11 terrorist attacks in the USA. Polynesian's Boeing 737-800 services provide links with two of Samoa's major tourism markets, Australia and New Zealand. The airline also operates international services to Honolulu, Tonga, French Polynesia, and American Samoa, as well as domestic flights. "This will also ensure that the adequate capacity required by tourist industry, exporters and the general public is available," Misa said. (Source: PINA Nius Online, 12/6/02)

Caribbean Hotel Association - The media has a pivotal role to play in creating a better awareness and understanding of the importance of tourism to the people of the Caribbean.

This is the view of the President of the Caribbean Hotel Association (CHA) Ralph Taylor. He believes that the players in regional tourism need to embrace the media in a more meaningful way.

Speaking on the eve of the Caribbean Hotel Industry Conference (CHIC) 2002, to be held June 16-19, 2002 in Puerto Rico, Taylor says, the Caribbean Media Exchange on Sustainable Tourism (CMEX) initiative piloted by Air Jamaica, Counterpart International, CHA, CAST (CHA's environmental arm), Caribbean Broadcasting Union, and Life Needs the Caribbean, is a step in the right direction. The program brings together media professionals and tourism experts to exchange ideas on sustainable tourism issues.

The 2nd CMEX conference was held in Nassau, Bahamas last month and attracted more than 80 delegates for discussions on the need for the media to scrutinize the economics of the tourism industry on which the Caribbean economies depend so much, among other topics.

The CHA head says that already the CMEX initiative is paying dividends reflected by an increase in the number and quality of tourism articles appearing in the media. He says through this initiative, the organizations of the CMEX Team hope to influence the influencers of public opinion and attitudes in the region.

Ultimately says Taylor, our end objective is to foster positive attitudes to tourism as a career option for the region’s brightest and its best, as well as to engender among Caribbean people, the desire to exceed the expectation visitors.

A persistent theme of the recent CMEX conference was the importance of considering the carious stakeholders in tourism, not just the customers, but the staff and the local community who all have to benefit from the experience in order to maintain a sustainable industry.

CHA President-elect Simon Suárez, is of the view that the Caribbean media should not only play an instrumental role in educating the masses of the region about tourism trends and visitor needs, but should also expose people in the various communities to the opportunities for forging greater economic linkages with the industry that would pay greater employment dividends.

Suárez commended the recent initiative of a group of concerned journalists attending the annual Caribbean Hotel Association's Marketplace who decided it was time the Caribbean media came together and used its profession to help get tourism in the region back on its feet. As a result, the Caribbean Media Organization for Sustainable Tourism (CMOST) was born with the mission of supporting the sustainability of tourism in the Caribbean through the exchange of information, and facilitating the development and training of regional journalists in tourism and tourism related areas. Suárez says CHA is honored to have served as a catalyst for the creation of CMOST.

About the Caribbean Hotel Association
Founded in 1962, CHA is dedicated to excellence in hospitality, leadership in marketing, and sustainable growth in tourism, to the benefit of its membership and that of the wider Caribbean community. The members of CHA represent the entire spectrum of hospitality industry’s private sector, from over 1,100 member hotels in 34 national hotel associations, to allied members including airline executives, tour operators, travel agents, trade and consumer press, hotel and restaurant suppliers, and others. CHA is headquartered is in San Juan, Puerto Rico, and maintains an office in Miami, Florida.

STARWOOD EXPANDS FOUR POINTS BY SHERATON BRAND IN ASIA-PACIFIC WITH ADDITION OF FOUR POINTS BY SHERATON SEOUL, SOUTH KOREA

Olympia Hotel in Seoul converts to Four Points by Sheraton Seoul and will launch multi million dollar refurbishment

Starwood Hotels & Resorts Worldwide, Inc.(NYSE: HOT) is pleased to announce an agreement with Olympia Seoul HotelCompany Ltd. to convert their Olympia Hotel to Four Points by SheratonSeoul. This will be Starwood's first Four Points by Sheraton hotel in South Korea.

Located in PyungChang-Dong in the northeast of Seoul, Four Points by Sheraton Seoul will embark on a multi-million dollar refurbishment starting in the third quarter of 2002, with completion scheduled in the third quarter of 2003. The refurbishment will include extensive remodeling work in the guest rooms, meeting rooms and other dining and recreational facilities

"We are very excited with our developments in South Korea where we have had a strong presence with the Westin hotels in Seoul and Busan and the Sheraton hotel in Walker Hill, Seoul for a number of years. Starwood had earlier announced its expansion in South Korea with the addition of W Seoul - Walker Hill that is developing nicely and will open at the end of 2003," said Miguel Ko, President, Asia-Pacific, Starwood Hotels & Resorts Worldwide, Inc. "We are delighted to be able to introduce another brand in our portfolio, the Four Points by Sheraton, to Korea," added Ko.

"We are very pleased with the expansion of the Four Points by Sheraton brand into South Korea. This is our sixth Four Points by Sheraton hotel in Asia Pacific, following three hotels in Australia, one in Taiwan and one in China that is under development," remarked Tom Monahan, Senior Vice President of Finance, Development and Acquisition of Starwood Hotels & Resorts, Asia Pacific. "Four Points by Sheraton addresses a defined market segment, that of travelers who choose quality hotels, either for business or leisure, that can deliver full services at mid-scale and affordable prices. We believe the addition of Four Points by Sheraton will introduce a higher level of products and service delivery in the international mid-scale hotel market in Seoul."

The hotel is located on a 20,400 square meter site that overlooks the scenic Bukhan Mountain. It is only 15 minutes away from the city center and just 60 minutes from the international airport.. The hotel features 268 guest rooms, 8 restaurants and lounges, and 31,000 square feet of meeting space with meeting rooms accommodating from 20 persons to 600 persons. Recreational and entertainment facilities include a karaoke lounge, extensive health club, swimming pool, beauty salon and shopping arcade.

Said the General Manager, Geoff Johnstone, "Four Points by Sheraton ranked number one in the Mid-Price category of Business Travel News' Annual Top U.S. Hotel Chain Survey of 2001. We are very excited with the introduction of this brand to Seoul and will be working hard to showcase this new product to the Korean market."

Four Points by Sheraton is the full-service, mid-scale hotel brand introduced by Starwood Hotels & Resorts Worldwide, Inc. in 1995. The brand, one of the fastest growing in the global hotel industry, is currently represented by144 Four Points by Sheraton hotels in more than 15 countries.

Guests at Four Points by Sheraton hotels and other Starwood properties can take advantage of the Starwood Preferred Guest program, the award-winning frequent guest program that offers you great hotel rewards with no blackout dates.

The Tourism Authority of Thailand (TAT) is targeting 11.13 million international visitors and 63.07 million domestic trips in 2003, an increase of 6% and 2.5%, respectively over 2002.

These targets are included in the country’s Tourism Action Plan (TAP) for 2003 and will be further refined at the TAT’s annual marketing meeting between June 17-21 in the presence of senior executives from TAT head office, as well as all overseas and domestic offices. The final plan will finally be submitted to the Cabinet for approval and budgetary allocation.

The private sector has already been briefed on the targets and had a chance to comment on them at a Focus Group Meeting on June 6, 2002. A total of 145 representatives of both private companies and public sector agencies, including the Budget Bureau, attended that meeting.

The target of 11.13 million visitor arrivals in 2003 is projected to generate an estimated 360,600 million baht in foreign exchange revenue, up 11.50% over the projected earnings for 2002. In turn, 63.07 million domestic trips are projected to generate 323 billion baht in tourism revenue, up by an estimated 4.87% over the projected earnings for 2002.

Chaired by TAT Deputy Governor for Planning and Development Mr. Patpong Abhijatapong, the Focus Group Meeting focussed on ways to streamline and coordinate the product development and marketing plans to ensure the sustainable growth of Thai tourism.

Mr. Patpong commented, “Thailand’s tourism development and promotion plans are becoming more integrated than before, thanks to strong support from the government as well as related private sector and public agencies.

“Cooperation is very crucial especially during the global tourism and economic slowdown. We at TAT will work more closely with the entire industry to ensure sustainable tourism growth and maintain it as a significant economic and job-creation force,” Mr. Patpong added.

Under the plans, Thailand will be positioned as the ‘Tourism Capital of Asia’ within three years starting as of 2003 which is to be billed the ‘Year of Reform’.

Three major strategies for 2003 will include 1) more direct-to-market and effective marketing strategies, 2) development of new potential tourist destinations, and 3) restructuring of the tourism administration agency.

The main tourism promotion and marketing theme for 2003 will be ‘Amazing Thailand -- Experience Variety,’ highlighting a wide variety of Thai tourism products and services, the hospitality of the Thai people and Thai touch of unique cultural, historical and natural heritage.

Many traditional and new potential markets in the Asia-Pacific, Europe and the Middle East are to be targetted. In addition, a number of new tourism products and services have been identified to cater to the needs of specific market segments. These include MICE and business travellers, longstay visitors, youth, senior citizens, sports (golf and diving), religion, family and honeymooners.

On June 24, TAT will hold marketing briefings and a press conference at Royal Orchid Sheraton Hotel chaired by Minister to the Prime Minister’s Office and TAT Chairman Mr. Somsak Thepsutin to explain details of the TAP 2003 to public and private agencies as well as travel industry media.

Newsletter - June 18, 2002