Title F Feasibility Study Essay Example

Title F Feasibility Study Essay May 12, 2006 8 Penn Center Plaza th 19 Floor Philadelphia, PA 19103 Phone: 215-563-5300 Fax: 215-563-1977 Mr. Dick Shellenberger, Chairman Board of Commissioners Lancaster County 50 North Duke Street Lancaster, Pennsylvania 17608-3480 Dear Mr. Shellenberger: In accordance with your request we have completed our market feasibility study associated with the proposed development of a Hotel/Convention Center to be located in Downtown Lancaster, Pennsylvania. The entire study and conclusions reached are based upon our present knowledge and information with respect to the status and demand characteristics of the subject project’s competitive lodging and meetings markets. As in all studies of this type, the estimated results are based upon competent and efficient management and presume no significant change in the competitive position of the lodging and meetings industries in the immediate area from that as set forth in this report. They are also based on our evaluation of the present economy of the region and do not take into account or make provision for the effect of any sharp rise or decline in economic conditions not presently foreseeable. We will write a custom essay sample on Title F Feasibility Study specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Title F Feasibility Study specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Title F Feasibility Study specifically for you FOR ONLY $16.38 $13.9/page Hire Writer To the extent that wages and other operating expenses may advance over the economic life of the subject project, we expect that prices of rooms and other services will be adjusted, at least to offset such advances. The terms of our engagement are such that we have no obligation to revise this report or the estimated annual operating results to reflect events or conditions which occur subsequent to the date of the completion of our fieldwork. However, we are available to discuss the necessity for the revision in view of changes in the economic or market factors affecting the proposed project. Please do not hesitate to call should you have any comments or questions. Sincerely, PKF Consulting TConsulting was engaged by the Board of Commissioners of Lancaster County (Pennsylvania) to conduct a feasibility study of market demand and operating performance associated with the proposed development of a Hotel/Convention Center to be located in Downtown Lancaster. Assumptions for the proposed development include the following: †¢ The Hotel component of the proposed development will be branded as a fullservice Marriott property and will contain 300 guestrooms, a full-service restaurant, a 9,621 square-foot ballroom, and a 7,541 square-foot fitness facility to include an exercise room, indoor pool, and whirlpool. The Convention Center component of subject project will contain a 47,842 square-foot exhibit hall, 27,551 square feet of prefunction space, a 9,200 squarefoot ballroom, three 764 square-foot boardrooms, and 7,662 square feet of meeting room space. SCOPE OF THE STUDY The scope of our study included the following: †¢ †¢ †¢ †¢ †¢ Site analysis. Analysis of economic trends. Analysis of historical, current, and future supply of and demand for hotel rooms and convention center facilities in the respective competitive markets. Development of estimates of utilization levels that might be obtained at the proposed Ho tel/Convention Center facility. Development of statements of estimated annual operating results for both the Hotel and Convention Center components of the proposed project, as well as for the combined operation. I-1 SECTION II EXECUTIVE SUMMARY Section II: Executive Summary SUMMARY Based upon information collected during the fieldwork phase of our study, and subsequent analyses, following is a summary of our findings and conclusions relating to the proposed Hotel/Convention Center to be located in Downtown Lancaster. †¢ The Hotel component of the proposed development will be branded as a fullservice Marriott property and will contain 300 guestrooms, a full-service estaurant, a 9,621 square-foot ballroom, and a 7,541 square-foot fitness facility to include an exercise room, indoor pool, and whirlpool. The Convention Center component of subject project will contain a 47,842 square-foot exhibit hall, 27,551 square feet of prefunction space, a 9,200 squarefoot ballroom, three 764 square-foot boardrooms, and 7,662 square feet of meeting room space. The proposed project site fronts on historic Penn Square in Downtown Lancaster, and contains the former Watt Shand Department Store Building as its centerpiece. The Hotel component is to be developed within the historic Watt Shand Department Store Building and in a new tower to be constructed over the existing building at its southeast corner, while the Convention Center component is to be constructed on a vacant parcel to the south of the Watt Shand Department Store Building. Specifically, the total project site is located to the north of East Vine Street, to the south of East King Street, to the east of South Queen Street, and to the west of Duke Street. †¢ †¢ FINDINGS †¢ †¢ Economic indicators for the subject market area project a positive outlook for economic growth in the region. Feedback from trade/consumer show organizers indicated that the demographic profile of the subject market area, specifically the population and household income levels, would support mid-level shows such as those revolving around antiques and art. Generally speaking, the local market area would not support high-level (large attendance) shows such as auto or boat shows. Our research revealed that, depending on the source of the information, national trends in the convention center industry can be deemed either positive or negative. It is more relevant to analyze more localized areas when determining trends, particularly since reported national trends tend to overlook secondary or tertiary convention destinations such as Lancaster. However, one trend that appears to be generally consistent is that overall supply growth in the meetings industry has been outpacing overall demand growth in recent years, creating a more fiercely competitive environment. For example, functions that previously would have been held at secondary or †¢ II-1 Section II: Executive Summary tertiary convention destinations are now being accommodated at primary destinations, as the larger facilities in major markets have the ability to host numerous smaller events concurrently. However, there is a renewed interest on the part of many convention groups to consider second-tier cities in their evaluation of destinations, primarily for pricing reasons. Although it is reasonable to expect that third-tier cities will benefit from this trend, the options open to groups at this level are extensive. Similarly, Pennsylvania associations which operate on a rotational basis for site selection now have a venue available in several geographic and city locations, reducing the visit frequency for each location. †¢ †¢ †¢ While the overall Lancaster County hotel market is stable and viable, the market is highly seasonal, price sensitive and tourist-oriented. The growth of commercial demand along the Route 30 bypass is being absorbed by new hotel property additions. The downtown commercial hotel market has shrunk considerably in recent years. This has contributed to the decline of the Hotel Brunswick. Although the Marriott brand is extremely strong in this segment, the availability of Marriott products along Route 30 will limit this advantage. The responses to our surveys resulted in a relatively low projected level of usage as compared to other surveys of this type. This indicates that a substantial marketing effort will be required to both counter negative perceptions and to then create competitive advantages versus other regional convention destinations. For example, the downtown historic attractions could be packaged to provide a reason for conventions and tour and travel groups to both come to downtown and to stay overnight. The price sensitivity of the primary markets available to the project will require the hotel to make rate concessions to generate activity. Our occupancy/utilization projections have taken this into account as to what we believe the best balance point of price and volume would be. Franklin Marshall’s new Lancaster Arts Hotel is expected to accommodate most routine demand generated by the College. Peak-period demand will still be available to the proposed Downtown Hotel. Although not evaluated by us in a professional sense, the parking and access issues related to the site are expected to be problematic and a competitive disadvantage for the complex. Air access to Lancaster and even Harrisburg is such, i. e. frequency, price and type of aircraft, that convention and conference demand will likely emanate †¢ †¢ †¢ †¢ †¢ II-2 Section II: Executive Summary almost exclusively from Pennsylvania association and corporate groups who can drive to the site. †¢ Our research indicates the following competitive positioning for this project: Strengths Positive, wholesome image of Lancaster County Extensive tourism base for exposure Strong hotel brand and management Historic attractions in Downtown Large public sector incentive agreements limiting risk Tourist attractions in Lancaster County Central location within Pennsylvania Weaknesses Constricted site resulting in parking and traffic issues Downtown location perceived as less desirable Poor air access Limited markets available to the hotel other than self/PDCCVB-generated meetings and shows Demographics not adequate for larger consumer/trade shows Markets available are price sensitive No other acceptable downtown hotel supply available for larger groups, unless Hotel Brunswick is extensively renovated Lancaster’s perceived image is not what many conventioneers are looking for. For the Hotel component of the project, we are of the opinion that there are two separate competitive markets: the overall hotel market in Lancaster County (Hotel Competitive Market 1), a nd the group oriented properties in the subject market (Hotel Competitive Market 2). The properties in the latter group include the following: Best Western Eden Resort Inn Suites, Hotel Brunswick, Lancaster Host Resort and Conference Center, and Willow Valley Resort and Conference Center. †¢ The following table illustrates annual performance characteristics for the properties in Hotel Competitive Market 1 from 2003 through 2005. As the data indicates, total occupied rooms have increased at an annual rate of 4. percent during this period, exceeding annual supply growth of 0. 9 percent. Despite the relatively low aggregate market occupancies (ranging from 53. 1 percent in 2003 to 56. 5 percent in 2005), the growth in occupied rooms is a positive indicator as it demonstrates that demand within the local lodging market is increasing. Combined with annual growth in average daily rate (ADR) of 2. 8 percent, the occupancy increases resulted in revenue per II-3 Section II: Executive S ummary available room (RevPAR) growth of 6. 1 percent annually. Although these properties are certainly not alike, they collectively cater to a wide variety of types of groups. Estimated Performance Hotel Competitive Market 1 Available Occupied Occupancy ADR RevPAR Rooms Rooms 2003 2,331,255 1,237,896 53. 1% $57. 49 $30. 53 2004 2,331,255 1,256,546 53. 9% $58. 84 $31. 71 2005 2,374,325 1,341,494 56. 5% $60. 78 $34. 34 CAGR(1) 0. 9% 4. 1% 2. 8% 6. 1% Note: (1) Compound annual growth rate for years 2003-2005 Source: PKF Consulting, Smith Travel Research, Individual Properties Year †¢ The following table illustrates annual performance characteristics for the properties in Hotel Competitive Market 2 from 2003 through 2005. As the data indicates, total occupied rooms have increased at an annual rate of 2. 8 percent during this period. While this annual growth rate is lower than that exhibited by the broader competitive market (Hotel Competitive Market 1), both occupancy and average daily rate levels exhibited by the properties in Hotel Competitive Market 2 were notably higher than those of the broader hotel set. Combined with annual growth in average daily rate (ADR) of 3. 2 percent, the occupancy increases resulted in revenue per available room (RevPAR) growth of 5. 9 percent annually. Estimated Performance Hotel Competitive Market 2 Available Occupied Occupancy ADR RevPAR Rooms Rooms 2003 415,735 237,800 57. 2% $93. 63 $53. 56 2004 415,735 250,688 60. 3% $96. 24 $58. 03 2005 415,735 251,104 60. 4% $99. 44 $60. 06 CAGR(1) 0. 0% 2. 8% 3. 1% 5. 9% Note: (1) Compound annual growth rate for years 2003-2005 Source: PKF Consulting, Smith Travel Research, Individual Properties Year †¢ Our research revealed that there are four future additions to supply in the subject market area, all of which are anticipated to compete with the proposed Hotel in the Competitive Category 1 group. These include: the 63-unit Lancaster Arts Hotel currently under construction a few blocks from the campus of Franklin Marshall College on the corner of North Mulberry Street and Harrisburg Pike that is scheduled to open late Summer 2006; a 60-unit Comfort Inn; a 150-unit Homewood Suites; and a 150-unit Residence Inn. The locations of the latter three additions to supply are scattered along US-30. II-4 Section II: Executive Summary †¢ The following table presents our projections of market demand by market segment through 2014 for Hotel Competitive Market 1. Of note is that we have assumed that the proposed Hotel opens January 1, 2009. Projected Competitive Set Demand by Market Segment Hotel Competitive Market 1 Government, Commercial Tour and Total Group Military, Other Individual Travel 2005 134,100 872,000 268,300 67,100 1,341,500 2006 134,800 924,300 273,700 67,100 1,399,900 2007 135,500 961,300 279,100 67,100 1,443,000 2008 136,200 1,009,300 287,500 67,100 1,500,100 2009 137,500 1,049,700 301,900 67,100 1,556,200 2010 138,200 1,081,200 314,000 67,100 1,600,500 2011 138,200 1,102,800 320,200 67,100 1,628,300 2012 138,200 1,102,800 320,200 67,100 1,628,300 2013 138,200 1,102,800 320,200 67,100 1,628,300 2014 138,200 1,102,800 320,200 67,100 1,628,300 CAGR(1) 0. 5% 4. 0% 3. 0% 0. 0% 3. 3% Note: (1) Compound annual growth rate for years 2005 through 2011 (at which time demand is projected to stabilize) Source: PKF Consulting Year †¢ For the Convention Center component of the project, we are of the opinion that there are two separate competitive markets: regional convention center facilities (Convention Center Competitive Market 1), and hotels with significant meeting space in Southeastern Pennsylvania (Convention Center Competitive Market 2). Following is a description of each of these groups. †¢ Convention Center Competitive Market 1 includes the Pennsylvania Expo Center at Lehigh Valley – Allentown, Blair County Convention Center – Altoona, Bayfront Convention Center – Erie, Hershey Lodge Convention Center – Hershey, and Valley Forge Convention Center – King of Prussia. The above facilities indicated the average performance characteristics detailed in the following table. Average Performance Characteristics Convention Center Competitive Market 1 Trade/Consumer Shows Number of Annual Events 30 Average Attendance per Event 2,800 Total Annual Attendance 84,000 Annual Room Nights Generated 12,600 Source: PKF Consulting, Individual Facilities Category Conventions/ Conferences 25 600 15,000 12,000 Other Events 90 250 22,500 13,500 Total 145 N/A 121,500 38,100 II-5 Section II: Executive Summary †¢ For Convention Center Competitive Market 2, we inventoried facilities and collected data on more than 50 properties, ultimately limiting the analysis to those properties with more than 5,000 square feet of meeting space. We excluded properties in Center City Philadelphia, as downtown Lancaster is not competing with Center City Philadelphia for group functions, and we did not include resort-oriented properties. The hotels in this set were concentrated in Allentown, Cherry Hill, Harrisburg, King of Prussia, Reading, and York. †¢ The above facilities indicated the average performance characteristics detailed in the following table. Average Performance Characteristics Convention Center Competitive Market 2 Trade/Consumer Shows Number of Annual Events 15 Average Attendance per Event 700 Total Annual Attendance 10,500 Annual Room Nights Generated 1,050 Source: PKF Consulting, Individual Facilities Category Conventions/ Conferences 20 300 6,000 5,400 Other Events 250 50 12,500 2,500 Total 285 N/A 29,000 8,950 †¢ PKF conducted survey research of potential demand from both association and corporate meeting planners. Following are summaries of the results of these surveys. †¢ A mail survey was sent to 500 associations in the regional market area – located throughout the mid-Atlantic region. We received completed mail surveys from or conducted phone surveys with 45 association representatives, indicating a response rate of approximately 9. 0 percent. †¢ 19 of the 45 respondents indicated a willingness to utilize the proposed facility in Downtown Lancaster. †¢ The following table summarizes projected annual usage data based on the results of the survey. II-6 Section II: Executive Summary Projected Annual Usage Data Associations Category Number of Annual Events Average Attendance per Event Total Annual Attendance Annual Room Nights Generated Average Length of Events (Days) Average Convention Center Revenue per Attendee per Event (Excluding Hotel) Source: PKF Consulting Total 18. 5 206 3,811 2,054 3 $50. 00 †¢ As the previous table indicates, the responding associations indicated a total of slightly more than 2,000 room-nights of demand for 18. 5 events. We are of the opinion that this number could conservatively be tripled in quantity, to account for nonrespondents, invigorated marketing efforts and potential operator (Interstate)-induced referrals. This would result in more than 6,000 occupied room-nights attributable to associations, or approximately 6. 0 occupancy points based on an annual available room inventory of 109,500 (300 guestrooms X 365 days annually). The primary reason for our projected increase is there were associations who indicated varying potential levels of usage of the subject Convention Center that either did not respond or indicated varying levels of room-nights required without quantifying that amount. Furthermore, our survey queried a finite number of associations, while through future marketing efforts, the Pennsylvania Dutch Country CVB could reach out to a broader population of associations. When asked to rate the level of importance of various factors in selecting a meeting venue, critical factors included air traffic accessibility, free (or low cost) parking, and availability of restaurant/nightlife options. As with many convention center facilities in downtown locations, availability and cost of parking is a significant factor with event coordinators and their constituents, and Downtown Lancaster must be proactive in addressing this issue so that it does not become a competitive disadvantage when marketing the proposed facility to potential demand sources. †¢ †¢ A mail survey was sent to 308 corporate meeting planners in the regional market area – primarily concentrated in Pennsylvania and New Jersey. We received completed mail surveys from or conducted phone surveys with 35 corporate meeting planners, indicating a response rate of approximately 11. 4 percent. II-7 Section II: Executive Summary †¢ 10 of the 35 respondents indicated a willingness to utilize the proposed facility in Downtown Lancaster. †¢ The following table summarizes projected annual usage data based on the results of the survey. Projected Annual Usage Data Corporate Meeting Planners Category Number of Annual Events Average Attendance per Event Total Annual Attendance Annual Room-Nights Generated Average Length of Events (Days) Average Convention Center Revenue per Attendee per Event (Excluding Hotel) Source: PKF Consulting Total 18 289 5,195 2,365 2. 5 $60. 00 †¢ As the previous table indicates, the responding corporate planners indicated a total of more than 2,300 room-nights of demand for 18 events. We are of the opinion that this number could conservatively be tripled in quantity. This would result in more than 6,900 occupied room-nights attributable to corporate meeting planners, or approximately 6. 0 occupancy points based on an annual available room inventory of 109,500 (300 guestrooms X 365 days annually). The primary reason for our projected increase is there were corporate meeting planners who indicated varying levels of potential usage of the subject Convention Center that either did not respond or indicated varying levels of room nights required without quantifying that amount. When asked to rate the level of importance of various factors in selecting a meeting venue, critical factors included location in a major market, air traffic accessibility, and availability of restaurant/nightlife options. †¢ †¢ We estimate that the subject 300-unit Hotel should be able to achieve a stabilized occupancy level of 53. 0 percent. Overall market penetration (percentage of fair share) in the stabilized year (the fourth year of operation) is estimated to be 89 percent. Approximately 5 percent of total demand for the subject hotel is estimated to originate from the commercial individual segment, 27 percent from the tour and travel segment, 65 percent from the group segment, and 3 percent from the government, military, and other segment. We further project that the subject Hotel should be able to achieve an average daily room rate of $105. 0 (in 2006-value dollars) in a representative year of operation. A representative year of operation is a year in which the subj ect property is II-8 Section II: Executive Summary projected to have reached a stabilized level of performance. Our projections of occupancy and average daily rate assume that the subject Hotel will have to discount rates heavily, particularly during non-peak demand periods, in order to achieve the projected level of demand. As such, the annual average daily rate level may be well above or below the average rate level at any point in time during the course of the year. †¢ The following table presents our utilization projections for the subject Convention Center. Projected Performance Characteristics Proposed Convention Center Category Number of Annual Events Average Attendance per Event Total Annual Attendance Annual Room Nights Generated Average Revenue per Attendee per Event (Excluding Travel) $7. 50 Total Revenue per Event $15,000 Total Revenue $375,000 Source: PKF Consulting, Individual Facilities Trade/Consumer Shows 25 2,000 50,000 5,000 Conventions/ Conferences 40 250 10,000 6,000 $50. 00 $12,500 $500,000 Other Events 80 50 4,000 2,000 $55. 00 $2,750 $220,000 Total 145 N/A 64,000 13,000 N/A N/A $1,095,000 II-9 Section II: Executive Summary †¢ The following statement provides the estimated results for a representative operating year for the proposed Hotel. As stated previously, our stabilized year projection assumes an annual occupancy rate of 53. 0 percent at an average daily rate of $105. 00 (in current value dollars). II-10 Section II: Executive Summary †¢ The following statement provides the estimated results for a representative operating year for the proposed Convention Center. As stated previously, our stabilized year projection assumes 145 annual events. II-11 Section II: Executive Summary †¢ The following statement provides the estimated results for a representative operating year for the consolidated operations of the proposed Hotel and Convention Center. II-12 Section II: Executive Summary CONCLUSIONS †¢ The Lancaster County economy is growing, diversified and should continue on this path for the foreseeable future. The vast majority of this growth is outside the downtown area. †¢ The projected annual operating deficit of the combined entities is $1,281,000 (2006 value dollars) in a representative year. Although losses are expected with most facilities of this type and these deficits are offset to some extent by attendee spending within the community, there is great controversy as to the degree to which this offset occurs. In the case of Lancaster, much of the spending would occur outside of the City, where the bulk of the shopping, hotels and restaurants are located. Since travel would be required to accomplish this, the spending by attendees and delegates would likely be less than in a normal urban situation. Our surveys indicate that a relatively limited amount of demand will be readily attracted to this facility without extensive marketing efforts and concessions on price. To the extent this is not successful, and depending on how these marketing efforts are funded, the downside economic risk is substantial. Based on our demand research for the Convention Center, it appears that the probable number of attendees per event will be lower than that exhibited by the facilities in Convention Center Competitive Market 1 and will be closer to the exhibited attendance by the facilities in Convention Center Competitive Market 2. While the average number of attendees per event is projected to be lower, we anticipate that the proposed Convention Center will be able to capture the average number of annual events that the facilities in Convention Center Competitive Market 1 demonstrated. The hotel component of this project will face two basic challenges in filling the â€Å"dark† days when no events are being held at the Convention Center: (1) the lack of a strong downtown commercial demand base; and (2) its lack of appeal to the area’s dominant leisure market due to its downtown location and comparatively high room rate structure. The lack of parking, even with the proposed garage, and traffic-flow logistics, appear to be significant and should be expected to affect overall marketability for larger events. Although we are not thoroughly familiar with the background of this project, and we have not performed an economic impact analysis, our findings lead us to conclude that the potential economic benefits are not likely to be sufficient to justify the risks involved, including the potential need to raise the hotel tax to fund operating deficits after several years should the reserves become depleted. We therefore recommend that, prior to proceeding further with this project, the parties involved consider exploring a downsizing of the project or an alternate use for the site. †¢ †¢ †¢ †¢ †¢ II-13 SECTION III SITE REVIEW Section III: Site Review OVERVIEW OF THE AREA The City of Lancaster is located in Lancaster County, Pennsylvania, and is included in the Lancaster, Pennsylvania Metropolitan Statistical Area (MSA). Lancaster is located approximately 30 miles south of the Commonwealth of Pennsylvania’s capital city (Harrisburg), 60 miles west of Philadelphia (PA) and 55 miles north of Baltimore (MD). SITE LOCATION The proposed project site fronts on historic Penn Square in Downtown Lancaster, and contains the former Watt Shand Department Store Building as its centerpiece. The Hotel component is to be developed within the historic Watt Shand Department Store Building and in a new tower to be constructed over the existing building at its southeast corner, while the Convention Center component is to be constructed on a vacant parcel to the south of the Watt Shand Department Store Building. Specifically, the total project site is located to the north of East Vine Street, to the south of East King Street, to the east of South Queen Street, and to the west of Duke Street. The site is in the heart of downtown Lancaster within walking distance of several historic attractions. The number of restaurants and entertainment venues is quite limited, but could be expected to grow should the project be developed. The map on the following page provides an illustration of the site in relation to the immediate area. III-1 Section III: Site Review III-2 Section III: Site Review ACCESS Major roadways and highways that connect Lancaster County to other points throughout the local region include State Route 283 (SR-283), US Route 30 (US-30), US Route 222 (US-222) Interstate 76 (I-76), and Interstate 83 (I-83). SR-283 connects the County to Harrisburg and Western Pennsylvania; US-30 to York to the west and Philadelphia to the east; US-222 to Allentown and Northeastern Pennsylvania; and I-76 and I-81 are respectively the major east-west and north-south interstate highways in the subject market area. With regard to the specific location of the roposed project, the constricted nature of the site could potentially result in parking and traffic issues. Although not evaluated by us in a professional sense, the parking and access issues related to the site are expected to be problematic and a competitive di sadvantage for the complex. Air access to Lancaster and even Harrisburg is such, i. e. frequency, price and type of aircraft, that convention and conference demand will likely emanate almost exclusively from Pennsylvania association and corporate groups who can drive to the site. Rail service to Lancaster is via Amtrak’s Philadelphia to Harrisburg service with connections to major east coast cities. Train service may prove to be the preferred option for knowledgeable attendees who are uncomfortable with the parking options associated with larger events. III-3 SECTION IV AREA REVIEW Section IV: Area Review ECONOMIC AND DEMOGRAPHIC INDICATORS Historical trends provide a positive outlook for the economic environment in the subject market area. A review of market area economic and demographic trends offers an indication of the relative health of the subject market area. Population The current population of the Lancaster County Metropolitan Statistical Area (MSA) is estimated to be approximately 488,700. This represents a 0. 6 percent compound annual increase since 2000, as compared to a growth rate of 0. 8 percent experienced in the United States during the same time period. The growing population base in the subject market area is a positive indicator for the subject development, as there is potential for additional room night and meeting demand generated from the resident population. The following table summarizes population figures for the Lancaster, PA MSA and the United States. Population Lancaster, PA MSA United States Lancaster, PA MSA Persons Households Persons per Persons (000) (000) Household (000) 2000 474. 2 172. 9 2. 7 283,876. 4 2005(1) 488. 7 180. 7 2. 7 295,140. 1 2010(2) 508. 2 188. 9 2. 7 311,573. 0 CAGR(3) 0. 6% 1. 8% 0. 8% Notes: (1) Estimated (2) Projected Notes: (3) Compound annual growth rate for years 2000-2005 Source: Sales Marketing Management, Survey of Buying Power Year United States Households Persons per (000) Household 106,206. 0 2. 7 110,420. 1 2. 7 116,568. 1 2. 7 0. 8% Effective Buying Income Effective buying income (EBI) is defined as personal income less personal taxes, nontax payments such as fines, fees, penalties and personal contributions to social insurance. Residents of the Lancaster, PA MSA are in general more affluent than the national average. The Lancaster, PA MSA median household effective buying income is estimated to be $41,374, approximately 5. 2 percent above the United States average of $39,324 in 2005. The following table summarizes income figures for the Lancaster MSA and the United States. IV-1 Section IV: Area Review Effective Buying Income Lancaster, PA MSA United States Lancaster, PA MSA United States Median Median Year Household Effective Household Effective Buying Income Buying Income 2000 $45,431 $39,129 2005 (1) $41,374 $39,324 CAGR(2) 3. 9% 3. 8% Notes: (1) Estimated (2) Compound annual growth rate for years 2000-2005 Source: Sales Marketing Management, Survey of Buying Power Retail Sales and Eating and Drinking Place Sales From 2000 through 2005, retail sales in the Lancaster, PA MSA grew at an annual rate of 2. 7 percent, primarily due to the plethora of outlet shopping facilities located in the area. The increase in retail sales is a positive indication that the economy in the MSA is growing. Increased spending on retail items indicates that disposable income levels are increasing and that individuals have more disposable income for leisure pursuits. In addition to retail sales, a review of eating and drinking sales offers an indication of the economic health of the selected market areas. Eating and drinking place sales are considered to be a good reflection of the amount of discretionary income available to the population within a market area, and consequently, a true indication of economic well-being. During the 2000 through 2005 period, eating and drinking place sales in the Lancaster, PA MSA increased at a compound annual growth rate of 4