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HomeMy WebLinkAbout4.3b HVS Study - Tables - DRAFT - Proposed Hotel 10 28 22 HVS STUDY RESULTS Proposed Cottage Grove Hotel US-10/US-61 CORRIDOR COTTAGE GROVE, MINNESOTA October-2022 October-2022 HVS Study Results Proposed Cottage Grove Hotel – Cottage Grove, Minnesota 1 HVS Study Results Project: Proposed Cottage Grove Hotel Location: US-10/US-61 Corridor, Cottage Grove, Minnesota Date of Inspection: September 12, 2022 Date of Report: October 28, 2022 HVS Associate Name: Tanya J. Pierson, MAI Scope of Work Overview: During the months of September and October 2022, HVS completed numerous interviews in the market with demand generators including area businesses, sports associations, and event facilities. In addition, we spoke with economic development departments in surrounding municipalities, as well as numerous competitive lodging facilities. Based on our demand generator interviews and pattern of business development, it is our recommendation that the US-10/US-61 corridor be the primary area of focus for development, with favorable visibility, easy access, and close proximity to area businesses and retail establishments in Cottage Grove. While moderate corporate demand exists in the immediate area, there is also significant demand from sports and social group travelers in Cottage Grove. Based on information obtained during these conversations as well as industry data from STR and our in-house database, the following tables reflect our projections for a proposed hotel in Cottage Grove, Minnesota with the assumed opening date of June 1, 2024. Our projections assume a midscale or upper midscale limited-service chain-affiliated hotel. Given trends in hotel development, a smaller, dual- branded property could be an attractive alternative, as some demand generators stated longer lengths of stay. Examples of these include Fairfield/TownePlace Suites by Marriott, Tru/Home2 Suites by Hilton, Avid/Candlewood Suites by IHG. October-2022 HVS Study Results Proposed Cottage Grove Hotel – Cottage Grove, Minnesota 2 FIGURE 1-1 RECOMMENDED FACILITY – BASED ON DEMAND GENERATOR SURVEYS Guestroom Configuration Queen/Queen 50% King 50% Total 80 to 100 Food & Beverage Facilities Complimentary Breakfast Area Indoor Meeting & Banquet Facilities Meeting Room 50 Amenities & Services Indoor Swimming Pool Lobby Workstation Indoor Whirlpool Market Pantry Fitness Room Guest Laundry Area Capacity Number of Units Given the recovery of the market, projected development growth in Cottage Grove and the surrounding areas, our projections assume an opening of May 1, 2025 to allow sufficient time for planning and construction. For the purpose of our projections, we have assumed 90 rooms. October-2022 HVS Study Results Proposed Cottage Grove Hotel – Cottage Grove, Minnesota 3 FIGURE 1-2 HISTORICAL SUPPLY AND DEMAND TRENDS Year Average Daily Room Count Available Room Nights Change Occupied Room Nights Change Occupancy Average Rate Change RevPAR Change 2009 507 185,055 — 95,505 — 51.6 %$96.36 — $49.73 — 2010 507 185,055 0.0 %116,297 21.8 %62.8 96.51 0.2 %60.65 22.0 % 2011 507 185,055 0.0 124,310 6.9 67.2 101.15 4.8 67.95 12.0 2012 507 185,055 0.0 124,112 (0.2)67.1 106.10 4.9 71.16 4.7 2013 506 184,721 (0.2)129,720 4.5 70.2 112.46 6.0 78.98 11.0 2014 505 184,506 (0.1)131,739 1.6 71.4 118.09 5.0 84.32 6.8 2015 505 184,325 (0.1)136,575 3.7 74.1 120.29 1.9 89.13 5.7 2016 562 205,065 11.3 148,497 8.7 72.4 125.62 4.4 90.97 2.1 2017 746 272,185 32.7 196,385 32.2 72.2 121.18 (3.5)87.43 (3.9) 2018 949 346,385 27.3 237,588 21.0 68.6 123.02 1.5 84.38 (3.5) 2019 949 346,385 0.0 230,585 (2.9)66.6 113.89 (7.4)75.82 (10.1) 2020 949 346,385 0.0 126,181 (45.3)36.4 92.74 (18.6)33.78 (55.4) 2021 949 346,385 0.0 190,974 51.3 55.1 101.33 9.3 55.87 65.4 Year-to-Date Through August 2019 949 230,607 — 159,344 — 69.1 %$114.48 — $79.10 — 2020 949 230,607 0.0 %85,816 (46.1)%37.2 94.38 (17.6)%35.12 (55.6)% 2021 918 223,047 (3.3)126,768 47.7 56.8 98.67 4.5 56.08 59.7 2022 949 230,607 3.4 157,954 24.6 68.5 112.05 13.6 76.75 36.9 Average Annual Compounded Change: 2009 – 2019 6.5 %9.2 %1.7 %4.3 % 2009 – 2020 5.9 2.6 (0.3)(3.5) Competitive Hotels Included in Sample Class Status Hampton by Hilton Inn Minneapolis/St Paul-Woodbury Upper Midscale Class Secondary 63 May 2021 Jan 1996 Holiday Inn Express & Suites St Paul Woodbury Upper Midscale Class Secondary 100 Aug 1997 Aug 1997 Country Inn & Suites Cottage Grove Upper Midscale Class Primary 76 Jul 2002 Jul 2002 Hilton Garden Inn St Paul Oakdale Upscale Class Secondary 116 Feb 2005 Feb 2005 Sheraton Hotel St Paul Woodbury Upper Upscale Class Secondary 150 Jul 2008 Jul 2008 Residence Inn St Paul Woodbury Upscale Class Secondary 116 Sep 2016 Sep 2016 La Quinta Inns & Suites St Paul - Woodbury Upper Midscale Class Secondary 108 Nov 2016 Nov 2016 Courtyard St Paul Woodbury Upscale Class Secondary 120 Jan 2018 Jan 2018 Hampton by Hilton Inn & Suites St Paul Oakdale/Woodbury Upper Midscale Class Secondary 100 Nov 2017 Nov 2017 Total 949 Year Opened Year Affiliated Source: STR Number of Rooms October-2022 HVS Study Results Proposed Cottage Grove Hotel – Cottage Grove, Minnesota 4 FIGURE 1-3 SEASONALITY 2015 2016 2017 2018 2019 2020 2021 2022 High Season - June, July, August, September, October Occupancy 83.4 %81.4 %84.4 %81.0 %78.7 %42.1 %66.6 %— Average Rate $125.31 $130.89 $125.57 $123.42 $118.58 $91.05 $110.39 — RevPAR 104.52 106.51 105.95 99.99 93.27 38.36 73.56 — Shoulder Season - February, March, April, May Occupancy 72.3 %74.6 %72.2 %66.4 %63.6 %30.6 %50.4 %62.9 % Average Rate $117.96 $124.24 $119.53 $128.90 $110.92 $94.37 $88.91 $104.32 RevPAR 85.23 92.65 86.25 85.55 70.53 28.88 44.85 65.63 Low Season - January, November, December Occupancy 61.0 %57.7 %53.5 %50.8 %50.4 %34.5 %42.1 %— Average Rate $112.46 $116.99 $113.30 $111.93 $106.60 $94.29 $96.90 — RevPAR 68.61 67.46 60.63 56.89 53.70 32.58 40.82 — Source: STR October-2022 HVS Study Results Proposed Cottage Grove Hotel – Cottage Grove, Minnesota 5 FIGURE 1-4 AVERAGE DAILY OCCUPANCY PATTERNS BY MONTH - TTM Month Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Month Sep - 21 51.0 %57.2 %59.9 %60.0 %61.4 %81.5 %87.3 %65.1 % Oct - 21 41.3 55.7 59.2 58.8 58.2 74.6 80.7 61.6 Nov - 21 34.5 46.6 49.8 50.5 49.1 53.5 55.8 48.5 Dec - 21 36.6 45.5 47.2 46.1 42.2 53.3 55.2 46.6 Jan - 22 34.1 42.4 46.5 44.2 41.0 48.3 55.1 44.4 Feb - 22 36.6 49.2 52.9 49.2 45.2 54.8 66.5 50.6 Mar - 22 42.9 53.9 60.2 59.0 56.2 64.8 67.6 57.9 Apr - 22 47.8 63.5 70.6 67.4 62.8 68.5 74.6 65.5 May - 22 59.6 71.3 80.6 81.8 73.4 85.4 88.5 76.6 Jun - 22 66.5 81.8 87.0 84.0 82.4 93.0 94.4 84.1 Jul - 22 71.0 77.7 86.6 87.8 87.0 88.1 91.0 84.1 Aug - 22 66.1 81.5 87.7 85.3 82.6 89.1 91.1 83.5 Average 49.2 %60.5 %66.0 %64.7 %61.7 %71.2 %75.6 %64.1 % Source: STR FIGURE 1-5 AVERAGE DAILY ADR PATTERNS BY MONTH - TTM Month Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Month Sep - 21 $108.27 $105.83 $108.25 $109.05 $108.00 $116.46 $121.84 $111.85 Oct - 21 102.35 105.45 107.08 106.49 105.57 113.93 116.24 109.39 Nov - 21 99.76 101.95 102.76 104.91 103.74 104.42 106.07 103.53 Dec - 21 94.66 98.71 98.79 99.21 99.13 99.82 99.87 98.84 Jan - 22 93.85 96.68 100.00 97.35 94.96 96.36 100.57 97.39 Feb - 22 93.43 97.32 98.24 98.74 94.69 98.75 103.05 98.21 Mar - 22 95.54 100.44 101.08 100.82 98.08 107.28 110.61 102.29 Apr - 22 94.28 99.01 104.47 104.70 99.01 106.51 109.40 103.40 May - 22 103.67 104.34 106.38 106.14 105.48 120.25 124.33 110.26 Jun - 22 110.22 115.66 119.86 115.99 116.16 132.66 136.27 121.40 Jul - 22 112.78 118.26 119.68 121.22 118.86 130.36 132.45 122.70 Aug - 22 110.51 116.58 119.54 119.47 117.23 134.61 138.48 122.59 Average $103.37 $106.51 $108.80 $108.84 $106.94 $116.03 $118.80 $110.47 Source: STR October-2022 HVS Study Results Proposed Cottage Grove Hotel – Cottage Grove, Minnesota 6 FIGURE 1-6 MARKET RECOVERY BY MONTH Month January 49.0 %$120.99 51.9 %$111.74 49.9 %$102.08 31.4 %$84.14 44.4 %$97.39 February 59.4 172.26 52.4 105.73 56.8 100.13 39.3 81.80 50.6 98.21 March 59.5 115.13 61.7 105.53 30.7 97.74 46.7 85.34 57.9 102.29 April 70.3 118.16 70.0 120.06 14.4 84.07 53.4 90.38 65.5 103.40 May 75.7 118.62 69.3 110.35 22.6 83.06 61.3 94.53 76.6 110.26 June 85.4 125.07 83.3 118.16 35.5 89.59 68.4 106.04 84.1 121.40 July 77.6 118.95 80.0 118.50 43.5 91.49 69.6 111.68 84.1 122.70 August 82.0 125.23 83.0 119.26 45.5 92.34 68.4 112.84 83.5 122.59 September 79.3 123.45 79.0 118.01 44.6 89.69 65.1 111.85 — — October 80.9 124.17 68.1 119.00 41.4 91.79 61.6 109.39 — — November 56.6 113.08 51.7 105.75 27.7 88.87 48.5 103.53 — — December 47.0 101.16 47.5 101.91 25.8 84.86 46.6 98.84 — — Annual Averages 68.6 %$123.02 66.6 %$113.89 36.4 %$92.74 55.1 %$101.33 — — Year-to-Date 69.1 %$125.66 69.1 %$114.48 37.2 %$94.38 55.0 %$98.67 68.5 %$112.05 2022 January -3.6 pts 4.3 2.9 pts -7.6 -1.9 pts -8.6 -18.5 pts -17.6 13.0 pts 15.7 % February -5.2 46.4 -7.0 -38.6 4.3 -5.3 -17.4 -18.3 11.3 20.1 March -9.1 -3.2 2.2 -8.3 -31.0 -7.4 16.0 -12.7 11.1 19.9 April -4.0 0.5 -0.3 1.6 -55.6 -30.0 39.0 7.5 12.0 14.4 May -4.6 -3.6 -6.4 -7.0 -46.7 -24.7 38.7 13.8 15.3 16.6 June -2.3 -3.1 -2.1 -5.5 -47.8 -24.2 33.0 18.4 15.7 14.5 July -4.5 -4.1 2.4 -0.4 -36.5 -22.8 26.1 22.1 14.5 9.9 August -5.1 -1.3 1.0 -4.8 -37.6 -22.6 22.9 22.2 15.1 8.6 September -3.3 0.9 -0.3 -4.4 -34.4 -24.0 20.6 24.7 — — October -1.6 -0.8 -12.8 -4.2 -26.7 -22.9 20.2 19.2 — — November -1.4 -3.2 -4.9 -6.5 -24.0 -16.0 20.8 16.5 — — December -2.8 -5.3 0.5 0.7 -21.8 -16.7 20.9 16.5 — — Annual Change -3.6 pts 1.5 -2.0 pts -7.4 -30.1 pts -18.6 18.7 pts 9.3 — — Year-to-Date -5.7 2.7 0.0 -8.9 -31.9 -17.6 17.8 4.5 13.5 pts 13.6 % OccupancyOccupancyADR OccupancyOccupancyADR 2020 2021 2022 ADR Occupancy ADR Occupancy ADR Occupancy ADR 2018 2019 Change from Prior Year 2018 2019 2020 2021 ADR Occupancy ADR Occupancy ADR Occupancy ADR Source: STR October-2022 HVS Study Results Proposed Cottage Grove Hotel – Cottage Grove, Minnesota 7 FIGURE 1-7 PRIMARY COMPETITORS – OPERATING PERFORMANCE Est. Segmentation Estimated 2019 Estimated 2021 Property Occ.RevPAR RevPAR Occupancy Penetration Yield Penetration Country Inn & Suites By Carlson Cottage Grove 76 40 %10 %50 %76 60 - 65 %$95 - $100 $55 - $60 76 65 - 70 %$95 - $100 $60 - $65 110 - 120 %110 - 120 % Wakota Inn & Suites 31 10 0 90 31 45 - 50 75 - 80 35 - 40 31 45 - 50 70 - 75 35 - 40 85 - 90 60 - 65 Sub-Totals/Averages 107 33 %8 %60 %107 59.2 %$90.11 $53.37 107 61.4 %$91.39 $56 111 %101.7 % Secondary Competitors 873 63 %18 %19 %655 66.9 %$115.55 $77.31 655 54.1 %$101.67 $55 98 %99.7 % Totals/Averages 980 59 %17 %24 %762 65.8 %$112.33 $73.95 762 55.1 %$100.06 $55 100 %100.0 % * Specific occupancy and average rate data were utilized in our analysis, but are presented in ranges in the above table for the purposes of confidentiality. Average RateCommercialGroupLeisureWeighted Annual Room Count Number of Rooms Average Rate Occ. Weighted Annual Room Count October-2022 HVS Study Results Proposed Cottage Grove Hotel – Cottage Grove, Minnesota 8 FIGURE 1-8 SECONDARY COMPETITORS – OPERATING PERFORMANCE Est. Segmentation Estimated 2019 Estimated 2021 Property Number of Rooms Occ.Average Rate RevPAR Occ.Average Rate RevPAR Sheraton Saint Paul Woodbury 150 55 %30 %15 %75 %113 65 - 70 %$115 - $120 $75 - $80 113 50 - 55 %$95 - $100 $50 - $55 Courtyard by Marriott Saint Paul Woodbury 120 65 20 15 75 90 60 - 65 120 - 125 75 - 80 90 55 - 60 110 - 115 60 - 65 Residence Inn by Marriott Saint Paul Woodbury 116 75 10 15 75 87 75 - 80 130 - 140 100 - 105 87 75 - 80 120 - 125 95 - 100 Hampton by Hilton Minneapolis Saint Paul Woodbury 63 70 10 20 75 47 65 - 70 110 - 115 75 - 80 47 25 - 30 95 - 100 25 - 30 Hilton Garden Inn Saint Paul Oakdale 116 60 30 10 75 87 65 - 70 115 - 120 75 - 80 87 30 - 35 95 - 100 30 - 35 Hampton by Hilton Saint Paul Oakdale Woodbury 100 60 10 30 75 75 60 - 65 105 - 110 65 - 70 75 50 - 55 95 - 100 50 - 55 La Quinta Inn & Suites Saint Paul Woodbury 108 60 10 30 75 81 65 - 70 95 - 100 65 - 70 81 55 - 60 85 - 90 50 - 55 Holiday Inn Express & Suites Saint Paul Woodbury 100 65 15 20 75 75 60 - 65 105 - 110 65 - 70 75 55 - 60 90 - 95 50 - 55 Totals/Averages 873 63 %18 %19 %75 %655 66.9 %$115.55 $77.31 655 54.1 %$101.67 $55.00 * Specific occupancy and average rate data was utilized in our analysis, but is presented in ranges in the above table for the purposes of confidentiality.LeisureCommercialGroupTotal Competitive Level Weighted Annual Room Count Weighted Annual Room Count October-2022 HVS Study Results Proposed Cottage Grove Hotel – Cottage Grove, Minnesota 9 FIGURE 1-9 ACCOMMODATED-ROOM-NIGHT DEMAND – 2019 AND 2021 2019 Marketwide Market Segment Commercial 108,875 59 %76,626 50 % Group 30,382 17 30,651 20 Leisure 43,771 24 45,976 30 Total 183,028 100 %153,253 100 % 2021 Marketwide Accommodated Demand Percentage of Total Accommodated Demand Percentage of Total October-2022 HVS Study Results Proposed Cottage Grove Hotel – Cottage Grove, Minnesota 10 FIGURE 1-10 FORECAST OF MARKET OCCUPANCY 108,875 76,626 95,783 100,572 103,589 108,769 112,032 112,032 112,032 Growth Rate (29.6)%25.0 %5.0 %3.0 %5.0 %3.0 %0.0 %0.0 % 30,382 30,651 35,248 37,715 41,487 44,391 46,611 46,611 46,611 1,404 1,614 1,727 1,900 2,033 2,135 2,135 2,135 30,382 32,054 36,862 39,443 43,387 46,424 48,745 48,745 48,745 5.5 %15.0 %7.0 %10.0 %7.0 %5.0 %0.0 %0.0 % 43,771 45,976 50,573 53,102 54,695 56,883 58,021 58,021 58,021 1,404 1,544 1,621 1,670 1,737 1,771 1,771 1,771 43,771 47,379 52,117 54,723 56,365 58,619 59,792 59,792 59,792 8.2 %10.0 %5.0 %3.0 %4.0 %2.0 %0.0 %0.0 % Base Demand 183,028 153,253 181,604 191,389 199,771 210,043 216,663 216,663 216,663 Unaccommodated Demand 2,807 3,158 3,348 3,570 3,769 3,906 3,906 3,906 Total Demand 183,028 156,060 184,762 194,738 203,341 213,812 220,569 220,569 220,569 less: Residual Demand 2,807 3,158 2,470 2,646 755 542 542 542 Total Accommodated Demand 183,028 153,253 181,604 192,268 200,695 213,057 220,027 220,027 220,027 Overall Demand Growth —46.4 %18.5 %5.9 %4.4 %6.2 %3.3 %0.0 %0.0 % Market Mix 59.5 %50.0 %51.8 %51.6 %50.9 %50.9 %50.8 %50.8 %50.8 % 16.6 20.0 20.0 20.3 21.3 21.7 22.1 22.1 22.1 23.9 30.0 28.2 28.1 27.7 27.4 27.1 27.1 27.1 762 762 762 762 762 762 762 762 762 Proposed Subject Property 1 60 90 90 90 Confluence Hotel 2 39 58 58 58 58 58 Available Room Nights per Year 278,039 278,039 278,039 292,188 299,118 321,168 331,968 331,968 331,968 Nights per Year 365 365 365 365 365 365 365 365 365 Total Supply 762 762 762 801 820 880 910 910 910 Rooms Supply Growth 0.0 %0.0 %0.0 %5.1 %2.4 %7.4 %3.4 %0.0 %0.0 % Marketwide Occupancy 65.8 %55.1 %65.3 %65.8 %67.1 %66.3 %66.3 %66.3 %66.3 % 1 Opening in May 2025 of the 100% competitive, 90-room Proposed Subject Property 2 Opening in May 2023 of the 75% competitive, 77-room Confluence Hotel Commercial 2021 2022 2023 2024 2025 20262019 Unaccommodated Demand 2027 2028 Total Demand Group Base Demand Total Demand Growth Rate Leisure Base Demand Unaccommodated Demand Total Demand Growth Rate Leisure Existing Hotel Supply Proposed Hotels Totals Commercial Group October-2022 HVS Study Results Proposed Cottage Grove Hotel – Cottage Grove, Minnesota 11 FIGURE 1-11 FORECAST OF SUBJECT PROPERTY'S OCCUPANCY Market Segment Commercial Demand 108,769 111,766 111,766 111,766 Market Share 7.2 %11.2 %11.2 %11.2 % Capture 7,840 12,572 12,572 12,572 Penetration 105 %114 %114 %114 % Group Demand 46,017 48,620 48,620 48,620 Market Share 4.9 %8.0 %8.6 %8.6 % Capture 2,243 3,901 4,169 4,169 Penetration 71 %81 %87 %87 % Leisure Demand 58,272 59,642 59,642 59,642 Market Share 7.2 %10.4 %10.4 %10.4 % Capture 4,200 6,186 6,186 6,186 Penetration 105 %105 %105 %105 % Total Room Nights Captured 14,283 22,659 22,927 22,927 Available Room Nights 22,050 32,850 32,850 32,850 Subject Occupancy 65 %69 %70 %70 % Market-wide Available Room Nights 321,168 331,968 331,968 331,968 Fair Share 7 %10 %10 %10 % Market-wide Occupied Room Nights 213,057 220,027 220,027 220,027 Market Share 7 %10 %10 %10 % Market-wide Occupancy 66 %66 %66 %66 % Total Penetration 98 %104 %105 %105 % 2025 2026 2027 2028 October-2022 HVS Study Results Proposed Cottage Grove Hotel – Cottage Grove, Minnesota 12 FIGURE 1-12 ADR FORECAST – MARKET AND SUBJECT PROPERTY Calendar Year 2019 2021 2022 2023 2024 2025 2026 2027 2028 2029 Market ADR $112.33 $100.06 $110.07 $115.57 $119.04 $122.61 $126.28 $130.07 $133.98 $137.99 Projected Market ADR Growth Rate — 10.0%5.0%3.0%3.0%3.0%3.0%3.0%3.0% Proposed Subject Property ADR (As-If Stabilized)$105.00 $115.50 $121.28 $124.91 $128.66 $132.52 $136.50 $140.59 $144.81 ADR Growth Rate 10.0%5.0%3.0%3.0%3.0%3.0%3.0%3.0% Proposed Subject Stabilized ADR Penetration 105%105%105%105%105%105%105%105%105% Fiscal Year 2025/26 2026/27 2027/28 2028/29 2029/30 Proposed Subject Property Average Rate $129.93 $133.83 $137.84 $141.98 $146.24 Opening Discount 5.0%0.0%0.0%0.0%0.0% Average Rate After Discount $123.43 $133.83 $137.84 $141.98 $146.24 Real Average Rate Growth — 8.4%3.0%3.0%3.0% Market ADR $123.82 $127.53 $131.36 $135.30 $139.36 Proposed Subject ADR Penetration (After Discount)100%105%105%105%105% ADR Expressed in Base-Year Dollars Deflated @ Inflation Rate $104.50 $110.00 $110.00 $110.00 $110.00 Historical Occupancy and average rate forecast, assuming an opening date of June 1, 2024. FIGURE 1-13 FISCAL FORECAST OF OCCUPANCY AND AVERAGE RATE Year 2025/26 66 %$129.93 5.0 %$123.43 2026/27 69 133.83 0.0 133.83 2027/28 70 137.84 0.0 137.84 Occupancy Average Rate Before Discount Discount Average Rate After Discount October-2022 HVS Study Results Proposed Cottage Grove Hotel – Cottage Grove, Minnesota 13 FIGURE 1-14 DETAILED FORECAST OF INCOME AND EXPENSE (,000) 2025/26 Begins May 2026/27 Stabilized 2028/29 2029/30 Number of Rooms:90 90 90 90 90 Occupancy:66%69%70%70%70% Average Rate:$123.43 $133.83 $137.84 $141.98 $146.24 RevPAR:$81.47 $92.34 $96.49 $99.38 $102.37 Days Open:365 365 365 365 365 Occupied Rooms:21,681 %Gross PAR POR 22,667 %Gross PAR POR 22,995 %Gross PAR POR 22,995 %Gross PAR POR 22,995 %Gross PAR POR OPERATING REVENUE Rooms $2,676 98.2 %$29,733 $123.43 $3,033 98.3 %$33,700 $133.81 $3,170 98.3 %$35,222 $137.86 $3,265 98.3 %$36,278 $141.99 $3,363 98.3 %$37,367 $146.25 Other Operated Departments 38 1.4 423 1.75 42 1.4 464 1.84 43 1.3 480 1.88 45 1.3 495 1.94 46 1.3 509 1.99 Miscellaneous Income 11 0.4 119 0.49 11 0.4 124 0.49 12 0.4 128 0.50 12 0.4 132 0.52 12 0.4 136 0.53 Total Operating Revenues 2,725 100.0 30,275 125.67 3,086 100.0 34,288 136.14 3,225 100.0 35,831 140.24 3,321 100.0 36,904 144.44 3,421 100.0 38,012 148.77 DEPARTMENTAL EXPENSES * Rooms 715 26.7 7,947 32.99 750 24.7 8,329 33.07 777 24.5 8,629 33.77 800 24.5 8,887 34.78 824 24.5 9,154 35.83 Other Operated Departments 20 52.5 222 0.92 21 50.2 233 0.92 22 50.0 240 0.94 22 50.0 247 0.97 23 50.0 255 1.00 Total Expenses 735 27.0 8,169 33.91 771 25.0 8,562 34.00 798 24.8 8,869 34.71 822 24.8 9,135 35.75 847 24.8 9,409 36.83 DEPARTMENTAL INCOME 1,989 73.0 22,105 91.76 2,315 75.0 25,726 102.15 2,427 75.2 26,962 105.53 2,499 75.2 27,770 108.69 2,574 75.2 28,603 111.95 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 259 9.5 2,876 11.94 273 8.8 3,031 12.03 282 8.7 3,133 12.26 290 8.7 3,227 12.63 299 8.7 3,323 13.01 Info & Telecom Systems 41 1.5 460 1.91 44 1.4 485 1.93 45 1.4 501 1.96 46 1.4 516 2.02 48 1.4 532 2.08 Marketing 142 5.2 1,582 6.57 136 4.4 1,515 6.02 141 4.4 1,566 6.13 145 4.4 1,613 6.31 150 4.4 1,662 6.50 Franchise Fee 227 8.3 2,527 10.49 258 8.4 2,865 11.37 269 8.4 2,994 11.72 278 8.4 3,084 12.07 286 8.4 3,176 12.43 Prop. Operations & Maint.128 4.7 1,421 5.90 142 4.6 1,576 6.26 147 4.5 1,629 6.38 151 4.5 1,678 6.57 156 4.5 1,728 6.76 Utilities 129 4.8 1,438 5.97 136 4.4 1,515 6.02 141 4.4 1,566 6.13 145 4.4 1,613 6.31 150 4.4 1,662 6.50 Total Expenses 927 34.0 10,305 42.78 989 32.0 10,986 43.62 1,025 31.8 11,390 44.58 1,056 31.8 11,731 45.91 1,087 31.8 12,083 47.29 GROSS OPERATING PROFIT 1,062 39.0 11,800 48.98 1,327 43.0 14,739 58.52 1,402 43.4 15,572 60.95 1,443 43.4 16,039 62.77 1,487 43.4 16,520 64.66 Management Fee 82 3.0 908 3.77 93 3.0 1,029 4.08 97 3.0 1,075 4.21 100 3.0 1,107 4.33 103 3.0 1,140 4.46 INCOME BEFORE NON-OPR. INC. & EXP.980 36.0 10,892 45.21 1,234 40.0 13,711 54.44 1,305 40.4 14,497 56.74 1,344 40.4 14,931 58.44 1,384 40.4 15,380 60.19 NON-OPERATING INCOME & EXPENSE Property Taxes 121 4.4 1,344 5.58 249 8.1 2,769 10.99 257 8.0 2,852 11.16 264 8.0 2,937 11.50 272 8.0 3,025 11.84 Insurance 43 1.6 472 1.96 44 1.4 487 1.93 45 1.4 501 1.96 46 1.4 516 2.02 48 1.4 532 2.08 Total Expenses 163 6.0 1,816 7.54 293 9.5 3,255 12.93 302 9.4 3,353 13.12 311 9.4 3,453 13.52 320 9.4 3,557 13.92 EBITDA 817 30.0 9,076 37.67 941 30.5 10,456 41.52 1,003 31.0 11,145 43.62 1,033 31.0 11,478 44.92 1,064 31.0 11,823 46.27 Reserve for Replacement 54 2.0 605 2.51 93 3.0 1,029 4.08 129 4.0 1,433 5.61 133 4.0 1,476 5.78 137 4.0 1,520 5.95 EBITDA LESS RESERVE $762 28.0 %$8,470 $35.16 $848 27.5 %$9,427 $37.43 $874 27.0 %$9,711 $38.01 $900 27.0 %$10,002 $39.15 $927 27.0 %$10,302 $40.32 *Departmental expenses are expressed as a percentage of departmental revenues. October-2022 HVS Study Results Proposed Cottage Grove Hotel – Cottage Grove, Minnesota 14 FIGURE 1-15 TEN-YEAR FORECAST OF INCOME AND EXPENSE (,000) 2025/26 2026/27 2027/28 2028/29 2029/30 2030/31 2031/32 2032/33 2033/34 2034/35 Number of Rooms:90 90 90 90 90 90 90 90 90 90 Occupied Rooms:21,681 22,667 22,995 22,995 22,995 22,995 22,995 22,995 22,995 22,995 Occupancy:66%69%70%70%70%70%70%70%70%70% Average Rate:$123.43 % of $133.83 % of $137.84 % of $141.98 % of $146.24 % of $150.62 % of $155.14 % of $159.80 % of $164.59 % of $169.53 RevPAR:$81.47 Gross $92.34 Gross $96.49 Gross $99.38 Gross $102.37 Gross $105.44 Gross $108.60 Gross $111.86 Gross $115.21 Gross $118.67 OPERATING REVENUE Rooms $2,676 98.2 %$3,033 98.3 %$3,170 98.3 %$3,265 98.3 %$3,363 98.3 %$3,464 98.3 %$3,568 98.3 %$3,675 98.3 %$3,785 98.3 %$3,898 Other Operated Departments 38 1.4 42 1.4 43 1.3 45 1.3 46 1.3 47 1.3 49 1.3 50 1.3 52 1.3 53 Miscellaneous Income 11 0.4 11 0.4 12 0.4 12 0.4 12 0.4 13 0.4 13 0.4 13 0.4 14 0.4 14 Total Operating Revenues 2,725 100.0 3,086 100.0 3,225 100.0 3,321 100.0 3,421 100.0 3,524 100.0 3,630 100.0 3,738 100.0 3,850 100.0 3,965 DEPARTMENTAL EXPENSES * Rooms 715 26.7 750 24.7 777 24.5 800 24.5 824 24.5 849 24.5 874 24.5 900 24.5 927 24.5 955 Other Operated Departments 20 52.5 21 50.2 22 50.0 22 50.0 23 50.0 24 50.0 24 50.0 25 50.0 26 50.0 27 Total Expenses 735 27.0 771 25.0 798 24.8 822 24.8 847 24.8 872 24.8 898 24.8 925 24.8 953 24.8 982 DEPARTMENTAL INCOME 1,989 73.0 2,315 75.0 2,427 75.2 2,499 75.2 2,574 75.2 2,652 75.2 2,731 75.2 2,813 75.2 2,897 75.2 2,984 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 259 9.5 273 8.8 282 8.7 290 8.7 299 8.7 308 8.7 317 8.7 327 8.7 337 8.7 347 Info & Telecom Systems 41 1.5 44 1.4 45 1.4 46 1.4 48 1.4 49 1.4 51 1.4 52 1.4 54 1.4 55 Marketing 142 5.2 136 4.4 141 4.4 145 4.4 150 4.4 154 4.4 159 4.4 163 4.4 168 4.4 173 Franchise Fee 227 8.3 258 8.4 269 8.4 278 8.4 286 8.4 294 8.4 303 8.4 312 8.4 322 8.4 331 Prop. Operations & Maint.128 4.7 142 4.6 147 4.5 151 4.5 156 4.5 160 4.5 165 4.5 170 4.5 175 4.5 180 Utilities 129 4.8 136 4.4 141 4.4 145 4.4 150 4.4 154 4.4 159 4.4 163 4.4 168 4.4 173 Total Expenses 927 34.0 989 32.0 1,025 31.8 1,056 31.8 1,087 31.8 1,120 31.8 1,154 31.8 1,188 31.8 1,224 31.8 1,261 GROSS OPERATING PROFIT 1,062 39.0 1,327 43.0 1,402 43.4 1,443 43.4 1,487 43.4 1,532 43.4 1,578 43.4 1,625 43.4 1,673 43.4 1,723 Management Fee 82 3.0 93 3.0 97 3.0 100 3.0 103 3.0 106 3.0 109 3.0 112 3.0 116 3.0 119 INCOME BEFORE NON-OPR. INC. & EXP.980 36.0 1,234 40.0 1,305 40.4 1,344 40.4 1,384 40.4 1,426 40.4 1,469 40.4 1,513 40.4 1,558 40.4 1,604 NON-OPERATING INCOME & EXPENSE Property Taxes 121 4.4 249 8.1 257 8.0 264 8.0 272 8.0 280 8.0 289 8.0 298 8.0 306 8.0 316 Insurance 43 1.6 44 1.4 45 1.4 46 1.4 48 1.4 49 1.4 51 1.4 52 1.4 54 1.4 55 Total Expenses 163 6.0 293 9.5 302 9.4 311 9.4 320 9.4 330 9.4 340 9.4 350 9.4 360 9.4 371 EBITDA 817 30.0 941 30.5 1,003 31.0 1,033 31.0 1,064 31.0 1,096 31.0 1,129 31.0 1,163 31.0 1,198 31.0 1,233 Reserve for Replacement 54 2.0 93 3.0 129 4.0 133 4.0 137 4.0 141 4.0 145 4.0 150 4.0 154 4.0 159 EBITDA LESS RESERVE $762 28.0 %$848 27.5 %$874 27.0 %$900 27.0 %$927 27.0 %$955 27.0 %$984 27.0 %$1,013 27.0 %$1,044 27.0 %$1,074 0 0 0 0 0 0 0 0 0 0 October-2022 HVS Study Results Proposed Cottage Grove Hotel – Cottage Grove, Minnesota 15 Our positioning of each revenue and expense level is supported by comparable operations or trends specific to this market. FIGURE 1-16 COMPARABLE OPERATING STATEMENTS: RATIO TO SALES Comp 1 Comp 2 Comp 3 Comp 4 Comp 5 Subject Number of Rooms: 60 to 80 80 to 110 80 to 110 70 to 100 80 to 110 90 Days Open: 365 365 365 365 365 365 Occupancy: 67%72%70%69%72%70% Average Rate: $112 $112 $106 $108 $113 $110 RevPAR:$75 $81 $74 $74 $81 $77 REVENUE Rooms 98.0 %98.6 %95.6 %98.8 %97.3 %98.3 % Other Operated Departments 1.6 1.4 1.3 0.7 2.3 1.3 Miscellaneous Income 0.4 0.0 3.0 0.4 0.3 0.4 Total 100.0 100.0 100.0 100.0 100.0 100.0 DEPARTMENTAL EXPENSES* Rooms 25.1 22.1 23.8 29.5 25.1 24.5 Other Operated Departments 21.9 40.3 52.6 58.3 23.5 50.0 Total 25.0 22.3 23.5 29.5 25.0 24.8 DEPARTMENTAL INCOME 75.0 77.7 76.5 70.5 75.0 75.2 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 8.2 7.3 10.2 5.6 9.3 8.7 Info. and Telecom. Systems 0.8 1.3 2.5 1.0 2.0 1.4 Marketing 5.4 6.0 7.4 1.3 2.5 4.4 Franchise Fee 10.3 8.9 4.9 8.4 9.2 8.4 Property Operations & Maintenance 3.3 3.4 5.1 7.2 6.7 4.5 Utilities 3.5 4.1 4.1 4.4 3.1 4.4 Total 31.4 31.1 34.2 28.0 32.8 31.8 GROSS OPERATING PROFIT 43.6 46.6 42.3 42.5 42.2 43.5 Management Fee 4.5 4.0 3.0 0.0 5.0 3.0 INCOME BEFORE NON-OPER. INC. & EXP.39.1 42.6 39.3 42.5 37.3 40.5 * Departmental expense ratios are expressed as a percentage of departmental revenues Def. Stab $ October-2022 HVS Study Results Proposed Cottage Grove Hotel – Cottage Grove, Minnesota 16 FIGURE 1-17 COMPARABLE OPERATING STATEMENTS: AMOUNTS PER AVAILABLE ROOM Comp 1 Comp 2 Comp 3 Comp 4 Comp 5 Subject Number of Rooms: 60 to 80 80 to 110 80 to 110 70 to 100 80 to 110 90 Days Open: 365 365 365 365 365 365 Occupancy: 67%72%70%69%72%70% Average Rate: $112 $112 $106 $108 $113 $110 RevPAR:$75 $81 $74 $74 $81 $77 REVENUE Rooms $27,484 $29,481 $27,031 $27,112 $29,409 $28,106 Other Operated Departments 449 408 378 200 709 383 Miscellaneous Income 99 3 860 120 100 102 Total 28,032 29,893 28,269 27,433 30,218 28,592 DEPARTMENTAL EXPENSES Rooms 6,907 6,512 6,437 7,989 7,378 6,886 Other Operated Departments 98 164 199 116 166 192 Total 7,006 6,676 6,636 8,105 7,545 7,078 DEPARTMENTAL INCOME 21,026 23,217 21,632 19,328 22,673 21,514 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 2,294 2,185 2,897 1,549 2,815 2,500 Info. and Telecom. Systems 211 398 711 285 590 400 Marketing 1,511 1,800 2,100 360 770 1,250 Franchise Fee 2,886 2,657 1,383 2,293 2,768 2,389 Property Operations & Maintenance 914 1,008 1,428 1,985 2,019 1,300 Utilities 991 1,235 1,157 1,204 943 1,250 Total 8,807 9,284 9,676 7,675 9,904 9,089 GROSS OPERATING PROFIT 12,219 13,933 11,956 11,653 12,769 12,425 Management Fee 1,262 1,195 848 0 1,511 858 INCOME BEFORE NON-OPER. INC. & EXP.10,957 12,738 11,108 11,653 11,259 11,567 Def. Stab $ October-2022 HVS Study Results Proposed Cottage Grove Hotel – Cottage Grove, Minnesota 17 FIGURE 1-18 COMPARABLE OPERATING STATEMENTS: AMOUNTS PER OCCUPIED ROOM Comp 1 Comp 2 Comp 3 Comp 4 Comp 5 Subject Number of Rooms: 60 to 80 80 to 110 80 to 110 70 to 100 80 to 110 90 Days Open: 365 365 365 365 365 365 Occupancy: 67%72%70%69%72%70% Average Rate: $112 $112 $106 $108 $113 $110 RevPAR:$75 $81 $74 $74 $81 $77 REVENUE Rooms $111.89 $111.66 $106.19 $108.37 $112.50 $110.01 Other Operated Departments 1.83 1.55 1.49 0.80 2.71 1.50 Miscellaneous Income 0.40 0.01 3.38 0.48 0.38 0.40 Total 114.12 113.22 111.05 109.65 115.60 111.91 DEPARTMENTAL EXPENSES Rooms 28.12 24.66 25.29 31.93 28.23 26.95 Other Operated Departments 0.40 0.62 0.78 0.46 0.64 0.75 Total 28.52 25.29 26.07 32.39 28.86 27.70 DEPARTMENTAL INCOME 85.60 87.93 84.98 77.25 86.74 84.20 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 9.34 8.27 11.38 6.19 10.77 9.78 Info. and Telecom. Systems 0.86 1.51 2.79 1.14 2.26 1.57 Marketing 6.15 6.82 8.25 1.44 2.95 4.89 Franchise Fee 11.75 10.06 5.43 9.16 10.59 9.35 Property Operations & Maintenance 3.72 3.82 5.61 7.93 7.72 5.09 Utilities 4.04 4.68 4.54 4.81 3.61 4.89 Total 35.85 35.16 38.01 30.68 37.89 35.58 GROSS OPERATING PROFIT 49.74 52.77 46.97 46.57 48.85 48.63 Management Fee 5.14 4.53 3.33 0.00 5.78 3.36 INCOME BEFORE NON-OPER. INC. & EXP.44.61 48.25 43.64 46.57 43.07 45.27 Def. Stab $ October-2022 HVS Study Results Proposed Cottage Grove Hotel – Cottage Grove, Minnesota 18 FIGURE 1-19 COMPARABLE OPERATING STATEMENTS: COMPOSITE STATEMENT Number of Rooms: 432 Days Open: 365 Occupancy: 70.1%Amount per Amount per Average Rate: $110.12 Percentage Available Occupied RevPAR:$77.15 of Revenue Room Room REVENUE Rooms $12,166 97.7 %$28,161 $110.12 Other Operating Departments 187 1.5 433 1.69 Miscellaneous Income 105 0.8 243 0.95 Total 12,458 100.0 28,838 112.76 DEPARTMENTAL EXPENSES Rooms 3,038 25.0 7,032 27.50 Other Operating Departments 66 35.0 152 0.59 Total 3,104 24.9 7,184 28.09 DEPARTMENTAL INCOME 9,354 75.1 21,654 84.67 UNDISTRIBUTED OPERATING EXPENSES Administrative & General 1,022 8.2 2,366 9.25 Info. and Telecom. Systems 195 1.6 452 1.77 Marketing 569 4.6 1,317 5.15 Franchise Fee 1,028 8.3 2,381 9.31 Property Operations & Maintenance 642 5.2 1,486 5.81 Utilities 479 3.8 1,109 4.34 Total 3,936 31.6 9,111 35.63 GROSS OPERATING PROFIT 5,418 43.5 12,542 49.04 Management Fee 420 3.4 972 3.80 INCOME BEFORE NON-OPER. INC. & EXP.4,999 40.1 11,571 45.24