H2-Hotel

Development

Situation Overview
by Market Segments

1
Index
Situation Overview by Market Segments
• 1. HRI’s Segmentation Performance
• 2. Contract Segment Mix
• 3. Average Daily Rate + Incremental Spend by Market Segment
• 4. Market Segment Opportunity Summary
• 5. Facility Requirements by Market Segment
• 6. Hyatt Regency Incheon Assumptions

Future Vision with Addition of H2

• 8. Future Vision
• 9. Rooms Configuration
• 10. F & B Configuration
• 11. HRI New Business Model

Appendix
• 12. HRI Function Rooms Utilization 2006 January ~ 2010 February
• 13. Lost Business – Main Reasons 2006 January ~ 2010 February
• 14. Total Catering Lost Business - 2006 January ~ 2010 February
• 15. Total MICE Lost Business 2006 January ~ 2010 February
• 16. Catering Lost Business – Due to Space Constrains 2006 January ~ 2010 February
• 17. MICE Lost Business – due to space constrains 2006 January ~ 2010 February
• 18. Target Marketing Rooms
• 19. Total Passenger Growth by Region
• 20. Target Marketing F & B
• 21. KAL & Hanjin Production
• 22. IFEZ Large Function Space Competitor’s Stats
• 23. Large Function Space Projections
• 24. Domestic MICE Group Demand Trend (by actual number)
• 25. Domestic MICE Group Demand Trend (by portion)
• 26. YoungJong Island Distribution of Potential Large Convention Space Competition and Campus Concept Market Demand
• 27. Songdo-Distribution of Potential Large Convention Space Competition and Campus + Residence Concept Market Demand
• 28. Cheongra-Distribution of Potential Large Convention Space Competition and Campus Concept Market Demand
2
1. HRI’s Segmentation Performance

* Total No. of Room Nights by Market Segment

200,000
Total
180,000

160,000
Contract
140,000
72%
68%
120,000

100,000

80,000

60,000
FIT
20% 20%
40,000

12% 8%
20,000
Group
0
2004 2005 2006 2007 2008 2009 2010 YTD

FIT Group Contract Total

3
2. Contract Segment Mix

Main Contracted Accounts

120,000

100,000

80,000 Polar / Atlas

Room Nights

Northwest
60,000 Cathay Pacific
Hanjin
KAL
40,000

20,000

-
2004 2005 2006 2007 2008 2009

4
3. Average Daily Rate + Incremental Spend by Market Segment

400,000

350,000

300,000

250,000
Won

200,000

150,000

100,000

50,000

0
Airline Casino Business Leisure Group Business FIT Leisure FIT
Group

Contract Group FIT

ADR Rev. per Night
5
4. Market Segment Opportunity Summary

After reviewing the statistics we believe that there will be a strong demand
in the next 3 – 10 years in the following segments:

Market Segment Potential Growth Yield Incremental Spend

Contract:
Casino High High High
Hanjin Layover High Low Low
KAL High Low Low
Group:
MICE 50-300pax High Med Med - High
MICE 300+ Medium Low-Med Med
Wedding 300+ Medium Med - High Med
FIT:
Fit Leisure High Med – High Med - High
FIT Business High High N/A

6
5. Facility Requirements by Market Segment

Fit Leisure: Seasonal Leisure options (Spa/Swimming Pool / Ice

Rink), Shopping/Duty Free/Retail, F&B alternatives,
Transportation, Residential, Kids facilities

FIT Business: Leisure options (Spa), Shopping/Duty Free /Retail,

Transportation, Executive Recreational options

Casino: Shopping/Duty Free/Retail, F&B alternatives (with

private room facilities), More smoking areas, Additional
guest rooms, Additional floor space for the casino,
Entertainment options.

Hanjin Layover: Leisure options (Spa), Shopping/Duty Free/Retail,

F & B alternatives ( low – medium spend), Group
Check in, Tour options

7
5. Facility Requirements by Market Segment continued

Airline : Shopping/Duty Free/Retail (Low Price), Networking Area dedicated

to Airline Personnel (e.g. Table Tennis, Tennis, Pool Table), Storage
space

MICE: Leisure options (Spa), F&B alternatives, Transportation,

Additional guest rooms, Medium Size Meeting rooms ( Regency
Size ), High Tech A.V./Quality, Corporate Team Building Alternatives,
Destination Venue

Weddings: 1 Stop Shopping, Show Room with photo Dress etc. Bridal room,
Garden Photo facilities, Kids facilities, Transportation

8
6. Hyatt Regency Incheon Assumptions

• There will no doubt be new emerging markets, but we should continue to focus on those that are continually
building and how we can yield them better.

• Based on the historical data where we have seen FIT business decline and Group business plateau. We see a
opportunity for potential growth in the market segments of “FIT”, “Group” and “Contract” especially as we emerge
from a global economic recession.

• The potential for high yield growth will come from two market segments 1. Group , and 2. FIT , and this is likely
to be sustained if the planned visionary develops for the greater Songdo and Yong Jeong -do areas develop
as planned.

• The following recommendations are based on the statistics and information that has been made available to us
from the various government agencies. Although there is no guarantee as to the timeframe, a cautious approach
should be made when considering the timeframe of the development of these projects and potentially the
financial commitment in lieu of the recent global recession.

• The opportunity to position the hotel at this early stage of development and concept , means that we must
understand the environment around us and the developments that are planned for the future before any detailed
commitment is confirmed.

• We must also assume that surrounding developments may be delayed as we have already seen since the
opening of Hyatt Regency Incheon in 2003.

• In order to be attractive to both the Incheon market and greater Seoul Market we must be able to offer a superior
product that is attractive to the MICE, FIT, and Leisure market year round. 9
7. Hyatt Regency Incheon Assumptions continued

• Most importantly , we need to be self sufficient in all aspects of our facilities in order to attract the target markets
which compare us to city locations.

• The facilities are already world class , but with the potential developments and long term vision for the island , we
should proactively look at other markets that can support the hotel to be a market leader in the next 10-20
years.

• After a detailed review of the environment developing around us and the renewed access to the island, we
suggested the following options that could be considered for further development.

10
 H2-Hotel
Development

Hyatt Regency Incheon

Future Vision with Addition of H2

11
8. Future Vision

• Hyatt Regency Incheon is the leading deluxe 5 star hotel in the airport area and Incheon.
With authentic hospitality, we serve International and Korean travelers the most dynamic
pragmatic lifestyle experience.

• We want to be the market leader and compete with no one else. Concepts will cater to the
international and local market but will be original in the thought process, pragmatic and
catering for the local market. Our designed concepts will focus on the best utilization of
our space to generate the best return on investment for the areas.

• It is generally thought that demand for a 1000 pax Ballroom will only be when then the
Songdo and Yong Jeong do areas have reached the full maturity of their development
stages which is likely to be in 10 – 15 years. In the immediate future 5 – 10 years, the
demand would be for medium to large size function rooms.

12
8. Future Vision

• It is understood that the new H2 project will need to target new markets and future
potential business opportunities in order to expand the current business in the area.

• In conclusion to the review of the future developments in the area, we see the area to
potentially become self sufficient and a sought after leisure destination. We should
anticipate that there is potentially a bigger picture in the long term, but not to over
invest for little return on investment in the short term ( 5 – 10 years).

• If the design scope permits , venues should be specifically designed and segregated ,
taking into consideration noise and pre-function area space allocation.

13
9. Rooms Configuration

Sqm Total Sqm

• (215) King Rooms 36 7,740
• (105) Twin Rooms 36 3,780
• (5) Disabled Rooms 36 180
• (66) Regency Club King Rooms 36 2,376
• (34) Regency Club Twin Rooms 36 1,224
• (20) 1bedroom Service Apartments 72 1,440
• (15) 2 bedroom Service Apartments 90 1,350
• (25) Suites 72 1,800
• (13) Executive Suites 108 1,404
• (1) Presidential Suites 144 144
• (1) Chairman Suites 180 180
• Club Lounge, Boardroom, & Pantry 288 288
• Guest Floor Service Areas (estimate of 25) 15 375
• 500 Total Guest Rooms & Suites 22,281
10. F & B Configuration

Option 1 – F & B – ADD

• 1 - Restaurant – 200 seats

• 1 - Ballroom – 800sqm ( divisible into 3 sections )
• 8 - Smaller function rooms
• 1 Lounge

• Target the small/medium sized MICE ie. 500 persons and less as the number of these types of event are greater in
volume and trends show event sizes are generally getting smaller.

• Taking this option would also be conducive to the wedding business which also is seeing a trend of size reduction
and too catering only.

• Also given that within the vicinity we have Song-do - CONVENSIA, KINTEX and potentially MILANO (Local
Convention & exhibition centers) this would compliment these facilities rather than directly compete.

PRO’S
• - Flexibility to handle many small to medium MICE/Events Groups
• - High restaurant utilization expected with MICE for lunch and Hanjin for dinner

CON’S
• - Can not handle lunch and dinner demand with full Hotel and Banquet occupancy
• - Can not accommodate 500+ MICE meals in one venue only
• - Limited room for restaurant growth on week end (Currently reach full capacity)
10. F & B Configuration

Option 2  – F & B – ADD

• 1 – Buffet Restaurant – 200 seats
• 1 – Ballroom – 1,600sqm ( divisible into 4 sections )
• 1 – Meeting Room (Type A) – 300sqm (divisible into 2 sections)
• 2 – Meeting Room (Type B) – 100sqm
• 3 – Meeting Room (Type C) – 75sqm
• 2 – Meeting Room (Type D) – 50sqm
• 1 – Board Room – 45sqm
• 1 Lounge

• A large ballroom potentially long term is what would be required to support large MICE groups of over 500+ persons.
The volume of these types of events using hotel facilities are limited and guest accommodation utilization tends to
be lower.

• Should it be decided to target large MICE groups over 500+ persons. It may be anticipated that the volume of these
types of events using hotel facilities are limited and that the guest room utilization tends to be low.

• However this configuration would allow flexibility for the up to 500pax MICE as meeting + meals can be confined to
one area.

• Utilization of the whole Ballroom would be low and the tendency would be that these events would be weddings or
social event therefore a meal venue would not be required.
10. F & B Configuration

Option 2  – F & B – ADD

PRO’S
• - Open opportunities to compliment Song-do CONVENSIA
• - Increase restaurant variety offerings.
• - Flexibility to handle multiple events at one time e.g. 2 weddings, 2 or more smaller MICE groups

CON’S
• - Challenge to sell the whole Ballroom on a regular basis
11. Hyatt Regency Incheon New Business Model
H1 H1
• 523 Rooms • 523 Rooms
• 500 Pax Ballroom • 500 Pax Ballroom
• 1 x Breakout Rooms 100 pax • 1 x Breakout Rooms 100 pax
• 4 x Breakout Rooms • 4 x Breakout Rooms
• Restaurant 8 – 401 Seats • Restaurant 8 – 401 Seats
• Spa • Spa
• 1 – Restaurant – 200 seats + Bar Facility • 1 – Restaurant – 200 seats + Bar Facility

H2 – Option 1 H2 – Option 2

Rooms Rooms
• 500 Rooms • 500 Rooms

F&B F&B
• 1 – Ballroom – 800sqm ( divisible into 3 sections ) • 2 – Specialty Restaurant – 150 seats 740sqm /660sqm
• 2 – Meeting Room (Type A) – 120sqm • 1 – Ballroom – 1,600sqm ( divisible into 4 sections )
• 3 – Meeting Room (Type B) – 80sqm • 1 – Meeting Room (Type A-divisible into 2 section) – 300sqm
• 2 – Meeting Room (Type C) – 50sqm • 2 – Meeting Room (Type B) – 100sqm
• 1 – Board Room – 45sqm • 3 – Meeting Room (Type C) – 75sqm
• 1 Lounge with R/S pantry + Casino offerings • 2 – Meeting Room (Type D) – 50sqm
• 1 – Board Room – 45sqm
Other Facilities • 1 Lounge with R/S pantry + Casino offerings
• Gymnasium Room
• Business Centre Other Facilities
• Administrative Offices • Gymnasium Room
• In flight Catering Production Kitchen • Business Centre
• Casino • Administrative Offices
• In flight Catering Production Kitchen 18
• Casino
 H2-Hotel
Discussion

19
Index
Situation Overview by Market Segments
• 1. HRI’s Segmentation Performance
• 2. Contract Segment Mix
• 3. Average Daily Rate + Incremental Spend by Market Segment
• 4. Market Segment Opportunity Summary
• 5. Facility Requirements by Market Segment
• 6. Hyatt Regency Incheon Assumptions

Future Vision with Addition of H2

• 8. Future Vision
• 9. Rooms Configuration
• 10. F & B Configuration
• 11. HRI New Business Model

Appendix
• 12. HRI Function Rooms Utilization 2006 January ~ 2010 February
• 13. Lost Business – Main Reasons 2006 January ~ 2010 February
• 14. Total Catering Lost Business - 2006 January ~ 2010 February
• 15. Total MICE Lost Business 2006 January ~ 2010 February
• 16. Catering Lost Business – Due to Space Constrains 2006 January ~ 2010 February
• 17. MICE Lost Business – due to space constrains 2006 January ~ 2010 February
• 18. Target Marketing Rooms
• 19. Total Passenger Growth by Region
• 20. Target Marketing F & B
• 21. KAL & Hanjin Production
• 22. IFEZ Large Function Space Competitor’s Stats
• 23. Large Function Space Projections
• 24. Domestic MICE Group Demand Trend (by actual number)
• 25. Domestic MICE Group Demand Trend (by portion)
• 26. YoungJong Island Distribution of Potential Large Convention Space Competition and Campus Concept Market Demand
• 27. Songdo-Distribution of Potential Large Convention Space Competition and Campus + Residence Concept Market Demand
• 28. Cheongra-Distribution of Potential Large Convention Space Competition and Campus Concept Market Demand
20
 H2-Hotel
Development

Appendix Materials

21
12. HRI Function Rooms Utilization 2006 January ~ 2010 February

80%

70%

60%

50%

40%

30%

20%

10%

0%
2004 2005 2006 2007 2008 2009

Segregated Ballroom (280~550㎡ ) Ballroom (280~550㎡ ) Regency 22

13. Lost Business – Main Reasons 2006 January ~ 2010 February

16%

3%

41%
5%

8%

☞ 50% of our lost business losses

are somehow related to our function
space competitiveness

18%
9%

Alternate Destination Function Space Issue Customer Budget

Speaker Cancelled Location Competitors
Others
23
14. Total Catering Lost Business - 2006 January ~ 2010 February

The total number of lost catering

Catering Lost Business Unit : Pax
functions since 2006 is 649
More than
1000
500 ~ 1000 5%
• 55% (354) were small scale
8%
functions under 100pax
300 ~ 500
7%
Less than
100 • 25% (162) were small-medium scale
55% functions between 100 and 300pax.

100 ~ 300
25% • 7% (46) were medium scale
functions between 300 and 500pax

No. of Function Average No. of Pax

Less than 100 354 41 • 8% (54) were large scale functions
100 ~ 300 162 202 between 500 and 1000pax
300 ~ 500 46 400
500 ~ 1000 54 690
More than 1000 33 2,401
Total 649 747 • 5% (33) were very large scale
functions with more than 1000pax 24
15. Total MICE Lost Business 2006 January ~ 2010 February

Unit : Pax The total number of lost MICE

MICE Lost Business
Business since 2006 is 554
More than Unit : Pax
MICE
1000 Lost Business
9% than
More
500 ~ 1000 1000 • 42% (239) were small scale
8% 8%
500 ~ 1000 functions under 100pax
8%
Less than
300 ~ 500
Less than
100
9% 100
42% • 32% (176) were small-medium scale
43%
functions between 100 and 300pax.

100 ~ 500
• 9% (49) were medium scale
41%
100 ~ 300 functions between 300 and 500pax
32%

No. of Function Average No. of Pax •8% (42) were large scale functions
Less than 100 239 49
100 ~ 300 176 186
between 500 and 1000pax
300 ~ 500 49 392
500 ~ 1000 42 692
More than 1000 48 2,053 • 9% (48) were very large scale
Total 554 674 25
functions with more than 1000pax
16. Catering Lost Business – Due to Space Constrains 2006 January ~ 2010 February

The total number of catering

Catering Lost Business Unit : Pax functions lost due to space
More than
constrains since 2006 is 35
1000
9%
500 ~ 1000 • 45% (16) were small scale functions
14% Less than
100 under 100pax
45%

300 ~ 500
6% • 26% (9) were small-medium scale
functions between 100 and 300pax.

100 ~ 300 • 6% (2) were medium scale functions

26% between 300 and 500pax

No. of Function Average No. of Pax

Less than 100 16 35 • 14% (5) were large scale functions
100 ~ 300 9 211 between 500 and 1000pax
300 ~ 500 2 430
500 ~ 1000 5 666
More than 1000 3 1,980
Total 35 664 • 9% (3) were very large scale 26
functions with more than 1000pax
17. MICE Lost Business – due to space constrains 2006 January ~ 2010 February

Unit : Pax
The total number of lost MICE
MICE Lost Business Business due to space constrains
Less than since 2006 is 24
100
More than 17%
1000
29% • 17% (4) were small scale functions
under 100pax

• 33% (8) were small-medium scale

functions between 100 and 300pax.
100 ~ 300
500 ~ 1000 33%
13%

300 ~ 500 • 8% (2) were medium scale functions

8%
between 300 and 500pax

No. of Function Average No. of Pax

Less than 100 4 83 • 13% (3) were large scale functions
100 ~ 300 8 198
300 ~ 500 2 328
between 500 and 1000pax
500 ~ 1000 3 708
More than 1000 7 2,825
Total 24 331 • 29% (7) were very large scale with 27
more than 1000pax
18. Target Marketing Rooms

• 215 King Rooms / 110 Twin Rooms

– Transient travelers from growing segments (regional tourist, Chinese tourist, long-haul layovers)
– Honeymoon market
– Family Leisure in summer & winter school breaks
– Hyatt Intl Limiter Time Offers
– MICE

• 66 Regency Club King Rooms / 34 Regency Club Twin Rooms

– FIT Corporate
– MICE VIPs full charge upgrades
– Casino regular guests
– High OCC upselling

• Suites
– MICE overseas VIPs
– Casino top rollers
– Foreign Governments delegates

• Residential Suites 2 Bed - Residential Suites 1 Bed

– Incheon-Development overseas long-term guests (I.e. Songdo-related)
– Foreign delegates on IIAC projects
28
– Airline/IIAC-development, passenger growth projections management staff
19. Total Passenger Growth by Region

Europe
N. America
Asia

Passenger/ Logistic
Passenger/ Logistic

Passenger/ Logistic
World Wide

Passenger/ Logistic

29
20. Target Marketing F & B

– 1 x 800 ~ 1000 person ballroom with multifunction capabilities

– 4 x 150 person function rooms
– 2 x 150 set restaurants

• MICE
- Small/Medium   or Large Others
- Medical airport related (e.g. Kal training)
- Casino Fit
- Business

• Leisure F&B
- Wedding
- Social events
- Catering/meeting only events
- Restaurant only business

30
21. KAL & Hanjin Production

31
22. IFEZ Large Function Space
Competitor’s Stats
Appendix

32
• NA: Non-Announced yet
23. Large Function Space Projections

33
24. Domestic MICE Group Demand Trend (by actual number)

2006 – 2008 International MICE group demand in Korea

250

200

2006
150
2007
2008
100

50

0
Less than 100 ~ 300 300 ~ 500 500 ~ 1,000 More than
P ax 100 1,000

• MICE group with less than 500 pax accounts for 70%.
• Groups between 100 and 500 pax accounts for 51%. 34
Source: Korean Tourism Organization, 2009
25. Domestic MICE Group Demand Trend (by portion)

2006 – 2008 International MICE group demand in Korea

40%

35%

30%

25% 2006
2007
20%
2008

15%

10%

5%

0%
Less than 100 ~ 300 300 ~ 500 500 ~ 1,000 More than
P ax 100 1,000

• MICE group with less than 500 pax accounts for 70%.
• Groups between 100 and 500 pax accounts for 51%. 35
Source: Korean Tourism Organization, 2009
26. YoungJong Island Distribution of Potential Large Convention Space
Competition and Campus Concept Market Demand

Unbook Leisure complex

(2014)

Youngjong Broadway
(2013)
Sky City (2020)
- Medi-city

Fantasy world (2020)

Logistic complex (2012~2017)
– Fiera Miilano Incheon Complex

Air City

Yongyu & Mui Tour Complex

(2020) – MGM theme park

Fashion Island (2014)

Magnetic Train (2013)

Water Park 36
27. Songdo-Distribution of Potential Large Convention Space
Competition and Campus + Residence Concept Market Demand

Incheon Twin Towers

(151F, 2013)

Jack Nicklous Golf Club International School

NEAT Trade
Tower (2010)
Convensia

Bio, IT center
(2011)

37
28. Cheongra-Distribution of Potential Large Convention Space Competition
and Campus Concept Market Demand

Golf Park (2010)

SNU – KAIST
(2012)

City Tower (2011)

International Buisness
Cluster (2015)

Intl. Hi-tech Park

Robot Land (2013)
GM Daewoo R&D (2011)
Intl. Hi-tech Park
(2011)

38