cbre hotels & pkf hospitality research · 2020-06-30 · hotel sector update & forecast ....
TRANSCRIPT
HOTEL SECTOR UPDATE & FORECAST
CBRE HOTELS & PKF HOSPITALITY RESEARCH MAY 2015
2
A Year Ago
Our Opinion THE HOTEL MARKET CYCLE
Rapid Development
Occupancy Declines, ADR Follows
Development at Minimum
Levels
Lodging Decline, Leads Other Sectors
Occupancy Recovers
ADR and Margins Recover
Development Picks Up
Development Slows
Lodging Recovers, Lags Other Sectors (Not this
Time!)
Long Run Occupancy
Accelerated Development ?
Equilibrium ADR
U.S. is Here
2014
2015
2016/7
3
Party Like it is 1995!
0.5% 0.4%
-1.4%
-6.7%
0.6% 1.8%
4.7% 4.5%
5.3% 4.9%
3.3%
1.2%
3.4%
-12.7%
-6.1%
-4.1%
5.9% 5.3%
3.0%
-4.6%
3.9%
3.8% 4.1% 4.4% 6.6% 6.7%
3.8%
1.3%
0.2%
-0.1%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
RealADR^
Occ
Supply^
Lower Supply Growth Leads to Higher RevPAR Increases this Time Around
REAL REVPAR CHANGE – WHAT WE LEARN FROM PAST CYCLES
Forecast
QUESTION:
Things to Worry About
What Should We be Worried About?
5
WHAT SHOULD WE BE WORRIED ABOUT?
5
This Guy?
6
WHAT COULD DERAIL THE GOOD TIMES?
4. Oil/Energy Price Increases
5. Over Building
1. The Economy
2. Asset Price Bubble
3. Unpredictable Demand Shock
Okay, moving to good
Stable?
?
Decreasing Risk
Mostly no, some yes.
7
Low Inflation* (-) ADR Low Oil
Higher Income &GDP (+) Demand
(+) ADR
No Change in ADR
Higher Occupancy
Slightly Higher RevPAR
Source: PKF Hospitality Research
* - PKF-HR econometric research shows a 1:1 relationship between change in inflation and ADR during expansionary periods, holding the effect of occupancy constant
IMPACT ON OUR BASELINE FORECAST
OUR FORECASTS OUR VIEW:
The Very Good Will
Get Even Better
9
2014-2016 NATIONAL FORECAST – ALL U.S. HOTELS
Long Run
Average 2012 2013 2014 2015F 2016F
Supply 1.9% 0.5% 0.7% 0.9% 1.2% 1.7%
Demand 2.1% 3.0% 2.2% 4.5% 3.1% 1.9%
Occupancy
61.9% 61.4% 62.2% 64.4% 65.6% 65.8%
ADR 2.9% 4.2% 3.9% 4.6% 5.3% 6.3%
RevPAR 2.9% 6.8% 5.4% 8.3% 7.3% 6.5%
RevPAR driven by ADR Growth
Source: PKF Hospitality Research - Hotel Horizons® March-May, 2015, STR, Inc.
10
THE VIEW FROM WHERE YOU SIT Colors represent 2015 year over year change in RevPAR
Source: PKF Hospitality Research, March – May 2015 Hotel Horizons®
12 36 11
11
Upper-Priced Chains Approaching Peak Growth this Year 2015 CHAIN SCALE FORECASTS
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Economy Midscale Upper Midscale Upscale Upper Upscale Luxury
Occupancy Change ADR Change
Source: PKF Hospitality Research, March – May 2015 Hotel Horizons®, STR, Inc.
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(100,000)
(50,000)
-
50,000
100,000
150,000
200,000 Independents Economy Midscale Upper Midscale Upscale Upper Upscale Luxury
Components of the Net Annual Change in Available Supply U.S. SUPPLY CHANGE
Source: PKF Hospitality Research, STR, Inc.
Upper Upscale: 11.7% Upscale: 15.6%
Upper Upscale: 11.4% Upscale: 19.4%
Upper Upscale: 12.6% Upscale: 32.9%
Upper Upscale: 17.3% Upscale: 49.9%
Upper Upscale: 11.7% Upscale: 30.4% 27.3% 30.8% 45.5% 67.2%
42.1%
TRACKING THE BUSINESS CYLCES OF U.S. HOTELS
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A Look at Past Cycles – 1991 Recession REAL ADR PERFORMANCE – U.S.
1997 Q1
1990 Q2
54.0%
56.0%
58.0%
60.0%
62.0%
64.0%
66.0%
$95.00 $100.00 $105.00 $110.00 $115.00 $120.00 $125.00 $130.00
Occupancy
Level
Real Average Daily Rate Level (2014 $’s)
Duration: 6 Years – 3 Quarters
The Path and Duration of Occupancy and Real ADR Recovery
Source: PKF Hospitality Research, STR, Inc.
15
A Look at Past Cycles – 2001 Recession REAL ADR PERFORMANCE – U.S.
Occupancy
Level
Real Average Daily Rate Level (2014 $’s)
Duration: 6 Years – 0 Quarters
The Path and Duration of Occupancy and Real ADR Recovery
54.0%
56.0%
58.0%
60.0%
62.0%
64.0%
66.0%
$95.00 $100.00 $105.00 $110.00 $115.00 $120.00 $125.00 $130.00
Start: Q1 2001
End: Q1 2007
Source: PKF Hospitality Research, STR, Inc.
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Current Cycle REAL ADR PERFORMANCE – U.S.
54.0%
56.0%
58.0%
60.0%
62.0%
64.0%
66.0%
$95.00 $100.00 $105.00 $110.00 $115.00 $120.00 $125.00 $130.00
Occupancy
Level
Real Average Daily Rate Level (2014 $’s)
The Path and Duration of Occupancy and Real ADR Recovery
Present
Start - 2008 Q1
Source: PKF Hospitality Research, STR, Inc.
17
Current Cycle – cont’d REAL ADR PERFORMANCE – U.S.
54.0%
56.0%
58.0%
60.0%
62.0%
64.0%
66.0%
$95.00 $100.00 $105.00 $110.00 $115.00 $120.00 $125.00 $130.00
Occupancy
Level
Real Average Daily Rate Level (2014 $’s)
The Path and Duration of Occupancy and Real ADR Recovery
2014 Q4
Start - 2008 Q1
Current Cycle – March 2015 Forecast
End - 2016 Q2
Forecast Duration: 8.5 Years
Forecast
Source: PKF Hospitality Research, STR, Inc.
18
Current Cycle – cont’d REAL ADR PERFORMANCE – U.S.
54.0%
56.0%
58.0%
60.0%
62.0%
64.0%
66.0%
$95.00 $100.00 $105.00 $110.00 $115.00 $120.00 $125.00 $130.00
Occupancy
Level
Real Average Daily Rate Level (2014 $’s)
The Path and Duration of Occupancy and Real ADR Recovery
2014 Q4
Start - 2008 Q1
Current Cycle – March 2015 Forecast
End - 2016 Q2
Forecast
Source: PKF Hospitality Research, STR, Inc.
CycleCycle Start
Cycle Peak
At Real ADR
Recovery Delta1990 64.4% 64.8% 64.3% -0.1%2001 63.1% 63.5% 62.9% -0.2%2008 62.3% 65.8% 65.4% 3.1%
Occupancy Level
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PROFIT TRENDS
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Percent of Hotels** Posting an Increase in Total Revenue or Profits From Prior Year MORE HOTELS ENJOYING GROWTH IN PROFITS*
Source: PKF Hospitality Research, a CBRE Company, Trends® in the Hotel Industry reports.
(*) - Before deductions for capital reserves, rent, interest, income taxes, depreciation, and amortization.
(**) - Trends® in the Hotel Industry sample.
70.2%
47.9%
4.5%
67.4%
80.8% 77.1% 79.3%
86.2%
61.6%
44.4%
8.6%
58.9%
72.3% 70.4% 70.4% 78.2%
0%
20%
40%
60%
80%
100%
2007 2008 2009 2010 2011 2012 2013 2014 Revenue Profits**
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REVPAR COMPONENTS AND NOI* CHANGE
Source: PKF Hospitality Research, a CBRE Company, 2015 Trends® in the Hotel Industry report.
(*) - Before deductions for capital reserve, rent, interest, income taxes, depreciation, and amortization
-40%
-30%
-20%
-10%
0%
10%
20%
Occupancy A.D.R. Change in NOI*
22
$17,
042
$16,
394
$10,
591
$11,
629
$13,
105
$14,
442
$15,
894
$17,
849
$20,
243
$22,
705
$0
$5,000
$10,000
$15,000
$20,000
$25,000
Dolla
rs P
er A
vaila
ble
Room
2010 – 2016F CAGR: 11.8%
Note: * Before deductions for capital reserve, rent, interest, income taxes, depreciation, and amortization.
Source: PKF Hospitality Research, a CBRE Company, Trends® in the Hotel Industry, March 2014 Hotel Horizons® forecast
U.S. HOTEL PERFORMANCE Nominal Dollar Operating Profits* Six Years of Double Digit Growth
23
U.S. HOTEL PERFORMANCE Constant 2014 Dollar Operating Profits* Real Recovery Not Until 2015
$19,
023
$18,
376
$11,
577
$12,
538
$13,
729
$14,
841
$16,
125
$17,
849
$20,
133
$22,
056
$0
$5,000
$10,000
$15,000
$20,000
$25,000
Dol
lars
Per
Ava
ilabl
e R
oom
Note: * Before deductions for capital reserve, rent, interest, income taxes, depreciation, and amortization.
Source: PKF Hospitality Research, a CBRE Company, Trends® in the Hotel Industry, March 2014 Hotel Horizons® forecast
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1. No threats from the factors that historically have brought an end to the good times.
2. The fundamentals are solid across the vast majority of markets.
3. Elevated industry growth will persist comfortably through 2016 and likely beyond.
4. High occupancy levels will provide the leverage needed to achieve large real ADR increases for the next two-three years.
5. Competition for building materials and labor will continue to present challenges for developers in most markets. Below average hotel construction will be the result for the next three years.
6. Above long run average occupancy levels will lead to strong profit growth comfortably through 2016, enough to off-set increasing labor costs.
7. It is a great time to be in the hotel business!
The Very Good ……Will Get Even Better SUMMARY THOUGHTS