03-05-07 Special Called Joint Meeting of the La Porte Development Corporation Board of Directors and the La Porte City Council Minutes

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EXECUTIVE SUMMARY CONCLUSIONS 1.2 A concise summary of the conclusions of this report follows: · Houston is posting healthy growth, driven by the strong energy sector. The continued diversification of the metro area's industrial structure and the above average population growth will ensure healthy overall growth over the forecast horizon. Based on economic growth rates in Houston, a positive economic environment for the hospitality industry is estimated over the foreseeable future. · The magnitude of the Port of Houston and petrochemical industry coupled with the recent increase in business and leisure activity in the La Porte market area appears to support the need for an upscale, full-service hotel. · The proposed Sylvan Beach Hotel will be well-located on scenic Galveston Bay proximate to both business and leisure demand generators. We consider the subject site to be well-suited for hotel development. · The recommended facilities program for the proposed Sylvan Beach Hotel is appropriate for the market in type, size and quality. The amount of meeting space will provide a competitive advantage for the subject property in attracting group meetings demand. · There are currently no full-service hotels located in the primary market area. Therefore, there is no directly competitive hotel market that can be used as a competitive set for the proposed Sylvan Beach Hotel. In order to determine the recommended facilities and to estimate the performance of the subject hotel, we have evaluated three different sets of hotels: existing area hotels, comparable hotels and competitive hotels located outside the market area, · The primary hotel market area is comprised of limited-service, select-service and extended-stay hotels located in La Porte, Pasadena and Deer Park. The existing hotels have experienced occupancies in the upper 60's and low 70's, except for 2003 and 2004 during the national recession. This reflects the strong corporate demand in the primary market area. The large increase in occupied rooms in 2005 shows the resurgence of the petrochemical industry in response to the strong Texas economy. · Comparable hotels are defined as hotels that are located in similar markets. For the proposed hotel, a comparable hotel would be a full-service hotel located on or near a bay, lake or beach but also proximate to corporate demand. Occupancies have remained around 60% at the corn parable properties, which is indicative of the seasonality of demand in a strongly leisure oriented market. In 2006, rates ranged from $110 to $160 at the comparable properties with an average of $129. This is a good indication of the potential rates that would be obtainable at the subject property.