By Michele Lerner

Jon Bortz has served as president and chief executive officer of LaSalle Hotel Properties (NYSE: LHO) since its formation in 1998. Named chairman in January 2001, Bortz has implemented a conservative financial philosophy of maintaining a high coverage of dividends and balancing the company portfolio with resort, convention and urban upscale hotels designed to attract both leisure and business travelers.

CLOSE UP

AGE: 48 FAMILY: Wife, Ellen; two children (Adam, 18, and Marc, 15) EDUCATION: The Wharton School of the University of Pennsylvania, 1978 HOBBIES: Golf, fantasy football, investing FAVORITE SPORTS TEAMS: Baltimore Orioles, Baltimore Ravens, Penn Quakers Favorite Participant Sports: Golf, Skiing, Ping Pong FAVORITE BOOKS: "Founding Fathers," by M.E. Bradford. Tom Clancy books FAVORITE MOVIES: "Groundhog Day," "Jerry Maguire" FAVORITE PLACES TO TRAVEL: Golf Resorts, Las Vegas RECENT VACATION: Skiing in Beaver Creek, Colo. COMMUNITY ACTIVITIES: MANNA, and the University of Pennsylvania Other Business ACTIVITIES: NAREIT Board of Governors, Federal Realty Investment Trust Board of Trustees, Loudoun County CEO Economic Advisory Council

His strategy has been successful. For the six months ended June 30, 2005, net income applicable to common shareholders increased to $7.3 million from $0.9 million for the prior year period. EBITDA was $45.7 million compared to $33.4 million for the same period in 2004. FFO was $29.1 million compared with $20.4 million for the prior year period. LaSalle owns interests in 22 upscale and luxury full- service hotels, totaling approximately 6,800 guest rooms in 14 markets and 10 states and the District of Columbia.

Bortz recently discussed the company's plans for continuing the strategies that have kept LaSalle in upscale company among hotel REITs.

Portfolio: A recent article in Business Week online mentioned that most hotel REITs' revenue per available room (RevPAR) has increased by 7 percent to 12 percent in recent quarters over the previous year. Do you anticipate LaSalle Hotel Properties' RevPAR to continue this growth rate over the next several quarters?
Bortz: For the industry overall for the first six months of 2005, RevPAR has been just under 8 percent over this time frame last year. We've run at 11.2 percent RevPAR growth over last year, well ahead of the industry average. This is primarily due to the type of hotels we own and to the major repositioning and renovations we do to our properties.

We think the growth will be very strong going forward, with 9 percent to 10 percent growth for the year overall. The fundamentals are extremely strong, with very little supply growth and a rise in demand.

Portfolio: Your company's strategy of focusing on upscale hotel properties in resort, urban and convention areas has paid off in the current market climate. Do you anticipate all three segments to continue to perform well?
Bortz: We believe a healthy supply-and-demand situation will continue in all three types of properties, with some differences between them. We expect that the properties that focus on the business traveler will perform better (the convention and urban hotels) than the resort areas.

During the most recent slowdown in business travel, the resort hotels did well, but now business travel is going through a recovery period. Business travelers are less price sensitive than leisure travelers, who are largely spending their own money, so we have a greater ability to raise prices on hotels which cater to business travelers.

Overall, our investors benefit from our diversification among different types of hotels. The resort properties stayed strong during the last economic cycle when business travel slowed, so we expect to maintain this same strategy.

Portfolio: Any plans to expand this strategy internationally?
Bortz: We don't have any plans for overseas expansion. There are plenty of opportunities for us as a hotel REIT here in the United States, and we don't have to deal with any currency or taxation issues. As a REIT we benefit from legislation that allows us to not pay certain corporate taxes as long as we pay out certain dividends. Those tax benefits may not be available in other countries.

Portfolio: You have mentioned your various properties are attracting leisure or business travelers. Is there a difference in the services and amenities a property should provide to attract a certain type of customer?
Bortz: Our hotel customers are about one-third leisure travelers and two-thirds business travelers, so we have to be cognizant of the needs of both types of travelers. The things they are looking for are different, with business travelers wanting business centers and leisure travelers looking for leisure amenities.

Most of our urban properties satisfy both types of customers and a lot of our resort properties offer meeting facilities. The trick is finding the balance from the perspective of both types of customers so the leisure customer doesn't feel as if they have landed at a corporate headquarter and the business customer doesn't feel like they are at a family camp.

Portfolio: Recently your company launched an expansion of Lansdowne Resort in Loudoun County, Va., purchased The Hilton Alexandria Old Town, the Hilton San Diego Gaslamp Quarter Hotel, The Grafton on Sunset in Hollywood, the Indianapolis Marriott and the Onyx Hotel in Boston. Do you anticipate further acquisitions and expansion projects in 2005 and 2006?
Bortz: We continue to look for opportunities in our own portfolio for properties to upgrade, such as converting the Meridian Hotel in Dallas to a Westin. We recently bought the Chaminade resort in Santa Cruz, Calif., to which we'll be adding an amenity base to attract more leisure customers, and then following that with an overall renovation to boost the number of business travelers.

Frequently when we do a major renovation or expansion we change the brand name of a property, because when we upgrade the quality of the hotel we are attempting to attract guests who are willing to pay more. Changing the brand name can make a difference in which customers we attract to the hotel.

Going forward we will also continue to look for new acquisition and investment opportunities.

Portfolio: Your properties are always managed and operated by hotel operating companies and carry a brand name other than LaSalle. Are there any plans to change that strategy?
Bortz: We have no plans to change the strategy: there's no brand envy here and no ego issue either. We are happy to keep our name visible to our investors and the hotel brand names visible to the customers. We work with 11 different operators so we get to know the best practices of each of those operators and spread them to all our hotels.

Also, we are viewed as a capital partner rather than as a competitor by our operators, so they alert us to properties they think might become available for sale that they might want to manage. They also let us know if the owner of a hotel they are managing might be interested in selling. We find out about opportunities which may not be marketed to everyone, which helps us grow our company.

Portfolio: With the recent London terrorist attacks and the U.S. still on alert, is the hotel industry concerned about another potential slump in business similar to the post- September 11 slowdown? What did that slowdown teach your company about handling unpredictable market cycles?
Bortz: We try to run our company on a conservative financial basis so we can absorb any potential negative factors. We have low debt leverage so that we can absorb shocks as well as normal business cycles. After September 11 we were able to continue our investments and our renovations, and we were the first company to reinstate our dividends. We have very high coverage of our dividends so that we can absorb a significant reduction in our cash flow and still pay our dividends.

Portfolio: Rising energy costs are having an impact on most businesses these days. How does LaSalle compensate for these rising costs?
Bortz: Energy costs account for only about 3 percent of our costs throughout our portfolio, so it's not a huge concern for us. But still, like any cost category, we are looking to keep our costs in line to allow us to grow our operating margins. We work with consultants to determine how to work more efficiently plus we've made some capital investments to make our properties more energy efficient.

For instance, we spent roughly $750,000 on co-generator equipment at Chaminade, which created about $250,000 a year in electricity savings. It won't take long for that investment to be paid off completely. We have digital temperature controls in all our rooms, too, which help control costs.

Portfolio: You've recently been appointed a member of Federal Realty Investment Trust's (NYSE: FRT) board of trustees. What benefit do you gain sitting on a shopping center REIT's board, and will this have any impact on LaSalle Hotel Properties?
Bortz: The board at LaSalle feels it will benefit our company because I will learn things from some of the best-run companies in the country that I might be able to bring back and apply to LaSalle. It will also be great for me to sit on the other side of the table since I may learn things that will help me work with our own board. It'll provide a 360-degree viewpoint that I otherwise wouldn't have.