MARKET ANALYSIS FOR NMMC HOTEL AND CONFERENCE

Table 1.1.Regional IndicatorsPrince WilliamCoStafford 025,116717,061104,74036,12125,015165,876Live and Work50,43514,0884,065Commute in35,36012,97615,698Commute out99,90634,2685,586Net ommuting2000Source: Data compiled by Virginia Employment CommissionMarine Corps Base QuanticoThe base is located about 35 miles south of Washington DC. Multiple agencies are housed on the base,including: US Marine Corps- Marine Corps Intelligence Activity- Headquarters and Service Battalion- Marine Officer Candidate School- Training and Education Command- Combat Development Command FBI- Training Academy- Forensic Laboratory Drug Enforcement Administration- Training Academy7 P a g eMarket Analysis for Hotel and Conference Center, National Museum of the Marine Corps

In September 2011, the Military Defense Investigative Agencies will have relocated to MCBQ with 2,767employees. Component agencies include:-Defense Security ServiceDefense Intelligence AgencyNaval Criminal Investigative AgencyArmy Criminal Investigation CommandAir Force Office of Special Investigations8 P a g eMarket Analysis for Hotel and Conference Center, National Museum of the Marine Corps

SECTION 2: DEMAND FOR HOTEL ROOMSThe area around the Marine Corps Museum is currently a different hotel market than in the WashingtonMetropolitan area in general, which itself has many hotel submarkets. A key differentiator is that theGSA specifies much higher allowable per diem rates in the Washington market than in the PrinceWilliam and Stafford market. The hotels present in the Prince William and Stafford/Fredericksburgmarket are also of a different character and appeal to a different audience than hotels found in locationscloser to downtown Washington.Due to travel distances, traffic, and differences in generators of demand for hotel rooms, hotels locatedin the vicinity of the Marine Corps Museum attract more leisure travelers than business travelers. Untilrecently, leisure demand has been based on the needs of through travelers on I-95, shoppers attractedto Potomac Mills mall, and visitors to local historic attractions; business demand has been based moreon the needs of government-related business (direct Marine Corps or MCBQ related business) than oncorporate or association demand.The trade area for a hotel at the Marine Corps Museum can be broken down into two parts: Primary Trade Area, which includes the area south of the Occoquan River in Prince William Countyand the northern portion of Stafford County, focused on the I-95 corridor Secondary Trade Area, including the Washington region and through traffic from other states.Exhibit 3: Primary Trade Area9 P a g eMarket Analysis for Hotel and Conference Center, National Museum of the Marine Corps

Market Segments Comprising Demand for Hotel RoomsDemand for hotel rooms was analyzed by major market segment, as the characteristics and needs ofeach segment are different. Included in this analysis are: Government-related Corporate Association Education Leisure PersonalThe following analysis considers demand for hotel rooms not associated with meetings.Government-RelatedThis substantial market segment draws from the activities currently housed on MCBQ as well as theongoing expansion due to BRAC and future expansions. Each agency on the base generates demand onits own. The current demand cannot be accommodated within existing facilities nearby, and overflowsto hotels in Fredericksburg, or in the case of conferences, to larger hotels in Arlington, Washington, DC,Fairfax, and other parts of the Washington area (Appendix Table 9)The FBI Training Academy is located on 385 acres on base and has been opened since 1972. It is asecured facility that provides a variety of training, including a 20-week new agent training coursegraduating 800 agents a year. Its current campus includes a classroom building, dining hall, library,three dormitory buildings, a gym and track, administrative offices, and 8 outdoor ranges. The FBIAcademy has outgrown its facilities and has identified a need for 650 new beds, 12 classrooms, and a700-seat conference center; these new facilities, when built, are purported to save the agency 15.2million that is currently spent housing trainees off-campus. If the new facility is not built, therecontinues to be a demand for hotel rooms for trainees. If it is built, it is likely there would still bedemand for off-site hotel rooms for visiting instructors or high-level government officials visiting thesite.The Drug Enforcement Administration operates a Training Academy at Quantico which conducts suchactivities as Basic Agent training, Firearms training, Intelligence training, and executive and professionaldevelopment programs.The Marine Corps University conducts conferences, classes, and ceremonies on Base, many at the GrayResearch Center. In 2010, the MCU held 790 conferences and 259 classes. Multiple commands use thefacility. These conferences and classes could be expected to generate demand at off-site hotels.The Military Defense Investigative Agencies (MDIA) is relocating to MCBQ by September 15, 2011. Thenew facility provides 58 conference rooms and 10 classrooms on a 100 acre secure compound. Thebuildings are ATFP compliant and LEED Silver. A fitness center and cafeteria are available. It is likelythat their conference and meeting space needs will be met internally for the first few years, but therecould be hotel business related to visiting instructors and related users.Contractors on government business will need hotel rooms in the vicinity of the base.10 P a g eMarket Analysis for Hotel and Conference Center, National Museum of the Marine Corps

While there is significant demand for hotel rooms directly related to government business, this type ofbusiness has some constraints associated with it. A key issue is the Government Per Diem rate andMeals & Incidental Expenses reimbursement specified for Prince William County. Also of concern is thetendency of government business to be strong only on Monday, Tuesday, and Wednesday nights,meaning that a hotel needs to balance its book of business with other types of users to ensure it can filllate week and weekend nights. Finally, government-related business tends to not book in advance,posing a challenge to the hotel’s management in filling space.Corporate DemandBusiness travelers tend to pay higher rates than government or leisure travelers, and demand moreamenities, better-appointed accommodations, and more services than other categories. They are alsomore likely to eat breakfast or dinner at the hotel restaurant than other types of overnight guests.Corporate travelers who may have an interest in staying at a hotel near the Marine Corps Base includeemployees of companies marketing to agencies and commands on the base. There are several annualopportunities, for example in conjunction with the Marine Corps Expo (an annual event coming up nextin September 2011), as well as one-time only marketing trips by individual companies. The singlepurpose trip demand is reduced somewhat by the extensive presence in the Washington area ofcontractors firms that have local offices in the metropolitan area; they may be sending locally-basedemployees on marketing missions rather than flying people in from around the country. In addition,some employees flying in from outside the region will likely choose to stay overnight at a hotel closer toDulles or Reagan National Airports, or close to another destination in the Washington area such as thePentagon or Capitol Hill. Nevertheless, a portion of the demand for a new hotel at the Marine CorpsMuseum would arise from corporate travelers with business on the base.Another portion of corporate hotel demand comes from businesses located in Prince William andStafford Counties, whose suppliers from other parts of the country need to visit with them. PrinceWilliam and Stafford Counties’ employer base is still small, and the companies located there tend to begovernment contractors or small firms. Appendix Table 3 provides a sample listing of employers withover 100 employees in Prince William and Stafford Counties.AssociationsAssociations generate an enormous amount of business in the Washington metropolitan region.Hundreds of trade and professional associations are based in the Washington area, and many holdseveral meetings in the area, although their large Annual Meeting may be held in a different city eachyear. Outside of their meetings that require an overnight stay, associations sponsor numerous smallermeetings, including Board meetings, seminars, and one-day conferences that may require a few of theattendees to spend one night at a hotel.The Marine Corps Museum’s location far from the concentration of association offices or downtownWashington lobbying sites weighs against a role in providing hotel rooms to association executives orboard members. There is some possibility of associations with a connection to the military to wantovernight rooms.EducationalSpecialized training and continuing education course generated demand for hotel rooms particularlytied to meeting space, and will be covered in the section on meetings.11 P a g eMarket Analysis for Hotel and Conference Center, National Museum of the Marine Corps

Leisure TravelA substantial portion of the existing business at hotels in Prince William County and Stafford County isgenerated by leisure travelers. These include the following segments: People on group tours, usually characterized by arrival on a tour bus, and a low room rate;Family or high school outings staying overnight; these also tend to seek lower-pricedaccommodations;People driving along I-95 on the way to a more distant destination and spontaneously choosing ahotel when they are ready to stop for the night; these tend to choose brand name highway hotelswith 50 to 80 room rates or lower;Travelers on a holiday with a specific theme such as discovering Civil War or Colonial History, ormuseum-goers, or people interested in Military themes – this segment is interested in morecomfortable overnight accommodations, may enjoy a white-tablecloth restaurant for dinner, andmay be willing to pay more for their room than the typical highway traveler; Washington areaattractions that bring tourists to the area are identified in Appendix table 11.Attendees at special events in the vicinity; these may consider staying at a hotel at the Marine CorpsMuseum, particularly if the special event they are attending is at the Museum or nearby. Thissegment may be willing to pay more for a room than those seeking a standard highway hotel ormotel;People gathering for a sporting event such as the Marine Corps Half Marathon. This year the RoadRunners Club of America is having its 53rd annual convention at the Courtyard Marriott inFredericksburg, with 225 attendees expected.Social travelers are those who are part of a wedding, graduation, class reunion, special ceremony.They are also a potential market for a hotel at the Marine Corps Museum, particularly when theceremony or reunion is being held on MCBQ or at the Museum.Leisure travelers thus run the gamut from those spontaneously seeking an inexpensive overnightaccommodation to those who are clearly interested in a high quality overnight stay.Table 2.1Stand-alone Hotel Room Demand by Market SegmentSegmentTypical Lengthof StayDays of theWeekSeasonsPrice SensitivityProspectGovernment2-3 daysM-T-Wyear-roundhigh (govt per diem)Corporate2-3 daysS-M-T-W-Thyear-roundlowHighLow tomediumAssociation1-2 daysM-T-W-ThF W SplowlowEducation1-2 daysM-T-W-ThF W Spmediumlowgroup travel1 nightanySp Suhighlowfamily/school1 nightM T W ThSp SuhighlowDrive-by1 nightanyallhighMuseum visitor1 nightanySp SumediummediumMedium tohighSpecial event attendees1-2 nightsTh F SanymediumhighCeremony attendees1-2 nightsTh F SFall, Sp, SumediumhighLeisure12 P a g eMarket Analysis for Hotel and Conference Center, National Museum of the Marine Corps

Room Night Potential of These SegmentsTotal demand is dependent on season, length of stay, otter attractions in the area that cause people topick a specific location, and price sensitivity. Net demand is made up of accommodated room-nightdemand plus usable latent demand. As shown in the next section, occupancy is middling in hotels alongthe I-95 corridor, indicating that the available rooms do not match the needs of the government,business, and leisure traveler.At the occupancy rates achieved State-wide in 2009 and 2010 (average of 55%), a 140-room hotel wouldhave to fill 28,105 room-nights each year, while a 240-room hotel would need to fill 48,180 room-nights.At the 67.2% occupancy rate achieved in Fairfax County in 2010 these numbers would increase to34,339 in a 140-room hotel and 58,867 in a 240-room hotel.The best prospects to stay at the proposed hotel are overnight guests on government business, mostlikely staying 3 to 5 nights, and in some cases potentially 21 nights; and museum visitors, and event andceremony attendees staying 1 to 2 nights. These overnight guests will be supplemented by guestsderiving from conference and meeting attendees.To serve these overnight guests, the facility should provide a full-service restaurant, room service, and abreakfast restaurant; workout/fitness facilities; walking/jogging trails; laundry and cleaning service; andeasy access to parking.13 P a g eMarket Analysis for Hotel and Conference Center, National Museum of the Marine Corps

SECTION 3: SUPPLY OF COMPETING HOTELSThe competition for a hotel and restaurant facility at the Marine Corps Museum consists of existing andplanned hotels and restaurants in a primary trade area from the Prince William County border withFairfax County and northern Stafford County to the south, and from the Potomac River to Gainesville onthe west, as shown in the Trade Area map above; and of Northern Virginia and the greater Washingtonmetropolitan area.Existing HotelsExisting hotels tend to be in the upper midscale, midscale, and economy categories according to SmithTravel Research’s definitions. They have traditionally served as highway-oriented hotels catering tothrough travelers or to visitors to the area’s historic attractions. Few would be considered businesshotels and almost none as conference hotels. Table 3.1 summarizes the hotels present in eastern PrinceWilliam County, northern Stafford County, and Fredericksburg by their “scale” according to Smith TravelResearch. Appendix Table 5 provides a sample of hotel brands within each scale.Table 3.1Number of Hotels by STR US Chain ScalesPrince William and Stafford Counties and FredericksburgNumber of HotelsScaleEasternPrinceWilliam Co.North Stafford &FredericksburgTotalLuxury000Upper Upscale000Upscale437Upper Midscale5813Midscale55106511202141EconomySource: Field researchPrince William County offers 3,919 rooms county-wide, while Stafford provides an additional 1,261, andFredericksburg city 1,425. Of the total, about 3,000 would be considered to be in the same trade area asthe proposed NMMC hotel and conference center.Within the 41 hotels in Prince William County, 8 are in the Quantico area, totaling 742 rooms; only twohave meeting space. Half of the County’s hotel inventory is along the I-95 corridor, with the remainderaround Manassas and the Manassas battlefield areas. Eleven of the 41 hotels have meeting space. Thehotels tend to be small, with an average of 96 rooms per hotel.Northern Stafford County has 9 hotels with a total of 703 rooms; only one has more than 100 rooms;seven have a small meeting room.14 P a g eMarket Analysis for Hotel and Conference Center, National Museum of the Marine Corps

Southern Stafford includes Fredericksburg suburbs, and has 13 hotels for 1,070 rooms. Six have meetingspace, and two have restaurants. Fredericksburg has 14 hotels with 1,404 rooms; thirteen of them havemeeting space and four have restaurants. Fredericksburg serves several markets, including Quantico,Kings Dominion, historic Fredericksburg, the Fredericksburg Expo Center, and Mary WashingtonUniversity.Table 3.2Summary of Hotel InventoryPrince William, Stafford, FredericksburgNumber ofHotelsNumberof RoomsAverageNo. ofRoomsNo. withMeetingSpaceNo. withRestaurant131,1939261Prince William - Quantico87429322N. Stafford97037870S. L575,11290349LocationPrince William WoodbridgeSource: Field ResearchDetailed hotel inventories can be found in appendix tables 6.a, 6.b, and 6.c.Of the 57 existing hotels in the primary trade area, only nine have on-site restaurants and could beconsidered full-service hotels, although several more have restaurants within walking distance.Photo 1: Comfort Inn DumfriesPhoto 2: Holiday Inn Express FredericksburgPhoto 3: Super 8 StaffordIn addition to these hotels, there is one facility on the Marine Corps Base, the Crossroads Inn on RussellRoad. It has 74 standard rooms, 4 king rooms, 42 efficiencies, and 24 suites. It advertises an overnightrate for standard rooms of 73 for military guests and 81 for FBI/DEA/Government Contractorovernight guests. On Ft. Belvoir, lodging is available for 80 to 105 per night.15 P a g eMarket Analysis for Hotel and Conference Center, National Museum of the Marine Corps

Planned HotelsPrince William CountySeveral hotels have been talked about in the Potomac Mills area but their status is uncertain. Theywould most likely be of the type already abundant in Prince William County, hotels for the leisuretraveler that are highway- or Potomac Mills- oriented.The Harbor Station Mixed-use development has the potential for a full-service riverfront hotel withconference space. Harbor Station is currently on hold due to reverses suffered by its developer, but willlikely take off in the future. Harbor Station is also planned to include a national defense campus, ariverfront town center, and marina. It is located at I-95 and Rt. 234, one exit north of the NMMC.A site plan has been approved for a hotel across Rt. 1 from the Quantico Gateway development.Further west at Innovation Technology Park, two hotels have been announced, one extended stay andthe second a full-service hotel in the planned Innovation Town Center.Stafford

There is a market for a hotel and conference center at the NMMC in Triangle, Virginia. Market support includes the following facilities: 180-220 room mid-range hotel 140-room extended stay hotel 80-100 room boutique upper upscale hotel 15-20,000 square feet of conference and meeting spa