CBRE HOTELS The World’s Leading Hotel Experts.
July 27, 2017
Dallas Midyear Lodging Update
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• Where we left off in Dallas
• Where are we now?
• Where are we going?
• The Economy
• New Supply
• Our Forecasts
• Room to Grow?
• Unmentionables
THE AGENDA
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Slice it – Dice it
Where we left off . . .
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Dallas Annual Hotel Market Performance
Service Year of Date OCC Δ OCC ADR Δ ADR RevPAR Δ RevPAR Δ Supply Δ Demand Δ Revenue
2014 66.4% $59.85 $39.73
2015 69.6% 4.9% $64.31 7.5% $44.77 12.7% 0.1% 5.0% 12.9%
2016 71.4% 2.6% $68.67 6.8% $49.04 9.5% 1.2% 3.8% 10.9%
2014 69.5% $132.17 $91.86
2015 71.5% 2.9% $138.65 4.9% $99.17 8.0% 2.3% 5.3% 10.5%
2016 71.3% -0.3% $143.43 3.5% $102.30 3.2% 3.3% 3.0% 6.6%
2014 67.8% $93.63 $63.48
2015 70.5% 4.0% $99.09 5.8% $69.85 10.0% 1.1% 5.2% 11.3%
2016 71.4% 1.2% $103.50 4.5% $73.87 5.8% 2.2% 3.4% 8.0%
Lower-Priced
Upper-Priced
All Hotels
Where we left off in Dallas . . .
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Submarket Comparison– Year-End 2016
Submarket Percent Pt. Change $ Amount % Change
CBD / Market Center 67.8% -0.8 $151 5.1%
Addison / LBJ 73.9% 1.9 $95 3.8%
Farmers Branch / Stemmons 74.1% 3.0 $82 4.7%
West Plano / Frisco 72.7% 0.6 $115 0.6%
East Plano / Richardson 70.6% 2.3 $87 7.6%
Denton/Lewisville/McKinney 72.3% 1.3 $82 7.3%
Irving North 76.3% 0.4 $109 2.7%
Irving South / Grand Prairie 68.9% -2.3 $95 5.7%
Southeast 69.8% 5.4 $67 5.2%
Average / Change 71.4% 1.2 $103 4.5%
Source: STR, Inc.
ALL HOTELS
Dallas Hotel Submarket Analysis
Year-End 2016 Compared to Year-End 2015
Occupancy ADR
So, Times Are Good …Will They Get Better?
Where are we now?
9
Dallas 2017 YTD Hotel Market Performance (Jan-June 2017 vs. Jan-June 2016)
Service Year of Date OCC Δ OCC ADR Δ ADR RevPAR Δ RevPAR Δ Supply Δ Demand Δ Revenue
Lower-Priced
2016
73.3% $68.38 $50.12
2017
70.8% -3.4% $70.91 3.7% $50.22 0.2% 2.7% -0.8% 2.9%
Upper-Priced
2016
74.8% $145.93 $109.14
2017
72.2% -3.5% $147.39 1.0% $106.36 -2.5% 3.4% -0.3% 0.7%
All Hotels
2016
74.0% $104.91 $77.62
2017
71.4% -3.4% $107.04 2.0% $76.48 -1.5% 3.0% -0.6% 1.5%
Dallas 2017 YTD Hotel Market Performance
11 11
Regional Comparison ALL HOTELS
Dallas Regional Performance
Mid-Year 2017 Compared to Mid-Year 2016
Submarket Percent Pt. Change $ Amount % Change $ Amount % Change
Downtonw/Uptown/Market Center 70.1% 72.3 $173 -0.2% $124 -2.2%
North Dallas 73.8% 76.9 $98 1.0% $75 -3.1%
NW Dallas & Stemmons Corr. 71.9% 69.1 $81 3.3% $57 2.8%
Irving & Grand Prairie 71.9% 72.2 $102 4.2% $74 -0.3%
Addison/Carrollton/Farmers Branch 73.3% 78.1 $91 0.6% $70 -4.8%
Plano/Richardson/Frisco/Allen 71.5% 76.3 $110 0.3% $82 -4.8%
Denton/Lewisville/McKinney 71.3% 69.4 $84 5.0% $58 1.9%
Garland & Rockwall 71.6% 75.7 $69 2.5% $52 -4.1%
Grapevine 77.5% 77.2 $175 0.3% $134 0.3%
Source: STR, Inc., VisitDallas Hotel Performance Report
RevPAROccupancy ADR
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Chain Scale Performance
ALL HOTELS
Dallas Regional Performance
Mid-Year 2017 Compared to Mid-Year 2016
Chain Scale Percent Pt. Change $ Amount % Change $ Amount % Change
1,000+ Rooms 68.9% -1.5 $168 0.8% $116 -1.3%
Luxury/Upper Upscale, w/o 1,000 Rooms 71.3% -1.3 $163 1.8% $116 0.1%
Upscale 73.7% -5.1 $120 0.8% $88 -5.8%
Upper Midscale 72.4% -3.4 $98 -0.4% $71 -4.9%
Midscale 70.1% -3.5 $79 2.1% $55 -2.6%
Economy 71.5% -2.7 $50 3.3% $36 -0.5%
Source: STR, Inc., VisitDallas Hotel Performance Report
RevPAROccupancy ADR
Where are we going?
The Economy
15
Bad?
How Was the Economy in 2016?
Where are we now?
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17
18 18
THE OUTLOOK FOR THE DRIVERS MOST IMPORTANT TO HOTELS
REMAINS FAVORABLE
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Percent Change In the Last 6 Months
Leading Economic Indicators
-30.0%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0% Leading Economic Indicators (% change in the last 6 months)U.S. Hotel Demand
Source: The Conference Board, CBRE Hotels’ Americas Research, STR, April 2017
6 to 8 month lag Economic
indicators are
trending up in
2017
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Dallas: Economic Outlook
Source: CBRE Econometric Advisors & Moody’s Analytics, January 2017
Employment
Personal Income
GMP
CPI (Inflation)
2016 3.9% 1.8% 2.3% 1.2%
2017 3.7% 3.5% 3.2% 2.1%
2018 2.2% 4.4% 4.6% 2.2%
2019 0.7% 4.4% 3.4% 1.1%
2020 0.9% 3.9% 2.8% 1.5%
2021 2.6% 4.4% 3.5% 2.0%
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Texas Nonagricultural Wage and Salary Employment Seasonally Adjusted
INDUSTRY TITLE June 2017* May-17 Jun-16
May '17 to June '17 June '16 to June '17
Absolute Change Percent Change Absolute Change Percent Change
Total Nonagricultural 12,306,300 12,266,100 11,987,000 40,200 0.3 319,300 2.7
Total Private 10,347,000 10,312,900 10,063,200 34,100 0.3 283,800 2.8
Goods Producing 1,825,800 1,816,100 1,761,600 9,700 0.5 64,200 3.6
Mining and Logging 240,500 236,100 218,000 4,400 1.9 22,500 10.3
Construction 712,900 712,200 698,500 700 0.1 14,400 2.1
Manufacturing 872,400 867,800 845,100 4,600 0.5 27,300 3.2
Service Providing 10,480,500 10,450,000 10,225,400 30,500 0.3 255,100 2.5
Trade, Transportation, and Utilities 2,438,400 2,437,800 2,415,700 600 0 22,700 0.9
Information 194,700 193,100 202,200 1,600 0.8 -7,500 -3.7
Financial Activities 754,800 752,900 730,500 1,900 0.3 24,300 3.3
Professional and Business Services 1,670,600 1,674,500 1,619,400 -3,900 -0.2 51,200 3.2
Education and Health Services 1,691,500 1,678,400 1,625,800 13,100 0.8 65,700 4
Leisure and Hospitality 1,322,800 1,322,200 1,286,500 600 0 36,300 2.8
Other Services 448,400 437,900 421,500 10,500 2.4 26,900 6.4
Government 1,959,300 1,953,200 1,923,800 6,100 0.3 35,500 1.8
Source: Texas Workforce Commission
Texas Economy Adds 40,200 Jobs in June !!!
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Dallas – Economic Factors
Strengths:
Stable demand for professional services due to
many corporate headquarters.
Well-positioned distribution center for
Southwest as international trade grows.
Favorable migration trends, age structure.
Weaknesses:
Exposure to volatile high tech, which is
sensitive to the business cycle.
Diminished housing affordability as metro
division matures.
Upside:
Strong income and job gains accelerate
housing recovery more than expected.
Lower oil prices boost transportation
businesses more than projected.
Downside:
Rising relative costs of living and doing
business limit growth.
High-tech manufacturing weakens further
because of global competition.
Source: Moody’s Analytics
New Supply
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Top Markets
Supply Change Q1 2016-Q1 2017
(2.0)%
(1.0)%
0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
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22 markets where the average supply growth over the past year
was greater than 2%.
Source: CBRE Hotels’ Americas Research Q1 2017
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Supply Change 2017 - Forecast
(2.0)%
(1.0)%
0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
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39 markets where the average supply growth
is forecast to be greater than 2%.
Source: CBRE Hotels’ Americas Research Q1 2017
Top Markets
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Properties Factor Rooms
STATUS
170 TOTAL Dallas Pipeline 22,875
5 Abandoned 405
1 Deferred 130
2 Unconfirmed 405
47 Planning 6,619
58 Final Planning 7,616
57 Start 7,700
TYPE
102 Lower 11,185
68 Upper 11,690
When
6 No Dates 1,048
130 Open by 2018 13,821
45 Open in 2019 6,397
8 Open 2020 and Beyond 1,206 28
Dallas Pipeline – By the numbers
Our Forecasts Leading and Lagging Markets
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Hotel Horizons® Econometric Forecasting Model
• STR, Inc. – historical lodging data, pipeline data
• CBRE Econometric Advisors / Moody’s Analytics – economic
forecasts
• Five-Year Forecasts of Supply, Demand, Occupancy, ADR, RevPar
• 60 Major U.S. Markets
• Updated Quarterly
U.S. hotels started 2017
on a strong note, posting
a
30-year high for Q1
occupancy.
U.S. hotels started 2017
on a strong note, posting
a
30-year high for Q1
occupancy. But not in Dallas
CBRE Hotels forecasts for
2017 an eighth
consecutive year of
occupancy growth.
CBRE Hotels forecasts for
2017 an eighth
consecutive year of
occupancy growth. But not in Dallas
35
MARKET OUTLOOK
Occupancy Levels will Decline in 51 of our
60 Top U.S. Markets this Year, but in only 45
Markets in 2018.
Average Daily Rate Growth will Exceed 2.0% in 52 Markets this Year and Next.
36
MARKET OUTLOOK
Occupancy Levels will Decline in 51 of our
60 Top U.S. Markets this Year, but in only 45
Markets in 2018. (Dallas is in both)
Average Daily Rate Growth will Exceed 2.0% in 52 Markets this Year and Next.
37
MARKET OUTLOOK
Occupancy Levels will Decline in 51 of our
60 Top U.S. Markets this Year, but in only 45
Markets in 2018. (Dallas is in both)
Average Daily Rate Growth will Exceed 2.0% in 52
Markets this Year and Next. (INCLUDING Dallas!!!)
38
Dallas: Mid-Year 2017
Source: CBRE Hospitality Research – Hotel Horizons® Report (4th Quarter 2016), STR, Inc.
Long Term
Average 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F
Supply 2.4% 0.3% 0.2% 1.1% 2.2% 5.0% 7.0% 3.9% 2.9% 2.5%
Demand 3.5% 5.5% 5.7% 5.2% 3.5% 3.1% 5.4% 2.9% 3.1% 2.7%
Occupancy 61.7% 64.3% 67.8% 70.5% 71.4% 70.1% 69.0% 68.3% 68.5% 68.6%
ADR 2.4% 5.0% 3.5% 5.8% 4.4% 3.4% 2.8% 2.7% 2.7% 2.9%
RevPAR 3.7% 10.5% 9.1% 10.1% 4.7% 1.4% 1.2% 1.8% 3.0% 3.1%
Room to Grow?
40
Comparing Weekday vs. Weekend Performance
Year Weekday % ^ Weekend % ^ Total % ^
2000 60.5% 68.3% 62.8%
2005 60.2% -0.6% 68.3% 0.0% 62.5% -0.4%
2010 54.8% -8.9% 62.5% -8.5% 57.0% -8.8%
2016 62.3% 13.8% 71.3% 14.0% 64.9% 13.9%
2000-16 Change 1.4% 1.8% 1.6%
Occupancy Level
Source: STR
Weekend Occupancy Level is 9.0 points Higher than
the Weekday Level
ROOM TO GROW?
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Comparing Weekday vs. Weekend Performance
ADR is Now Higher on the Weekend !!!
Year Weekday % ^ Weekend % ^ Total % ^
2000 82.41$ 79.74$ 81.57$
2005 87.73$ 6.5% 87.92$ 10.3% 87.79$ 7.6%
2010 94.02$ 7.2% 93.18$ 6.0% 93.75$ 6.8%
2016 118.54$ 26.1% 120.87$ 29.7% 119.28$ 27.2%
2000-16 Change 2.3% 2.6% 2.4%
Average Daily Rate
Source: STR
ROOM TO GROW?
Unmentionables
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Airbnb
Source Airbnb
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Special events lead to surge in Airbnb supply
- 2,000 4,000 6,000 8,000
10,000 12,000
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Active Airbnb Listings
Austin Washington DC
Inauguration &
Women's March
SXSW SXSW
SXSW
Source: Airdna, CBRE Hotels’ Americas Research, Q2 2017.
Note: SXSW = South by Southwest Festival
45
Morgan Stanley Survey & STR Report
Profile of Airbnb Demand
Source: STR, Airbnb, Q1, 2017
46
Business Travel on Airbnb?
11% of all Airbnb Guests
are business travelers
30% of Airbnb Guests in
Urban Markets are
business travelers
47
Dallas Airbnb Supply and Demand
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6
2014 2015 2016 2017
SUPPLY DEMAND
SUPPLY 311 316 309 348 318 354 359 382 421 469 509 553 639 651 773 810 817 994 1,159 1,135 1,163 1,237 1,271 1,475 1,643 1,555 1,609 1,544 1,326 1,563 1,600 1,733 1,774
DEMAND 144 139 138 156 139 155 162 177 238 263 254 244 305 311 350 384 430 500 591 594 649 647 629 748 815 753 762 744 693 820 870 928 985
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SUBMARKET AIRBNB ADR HOTEL ADR
ADR PREMIUM
/(DISC) AIRBNB OCC HOTEL OCC
OCC PREMIUM
/(DISC)
AIRBNB AVG. DAILY
SUPPLY
HOTEL AVG. DAILY
SUPPLY
AIRBNB SUPPLY
%
Addison / LBJ Freeway $101.93 $95.52 6.72% 53.5% 71.9% -25.1% 111 11,402 1.0%
CBD / Market Center $127.92 $151.00 -15.28% 54.5% 67.7% -23.6% 628 17,397 3.6%
Denton / Lewisville / McKinney $110.78 $83.49 32.69% 46.5% 71.5% -34.8% 226 9,025 2.5%
East Plano / Richardson $85.22 $86.75 -1.76% 53.6% 68.7% -25.0% 88 5,551 1.6%
Farmers Branch / Stemmons Fwy $109.72 $82.92 32.31% 51.2% 71.3% -28.4% 62 5,223 1.2%
Irving North Area $82.04 $111.07 -26.14% 53.5% 74.3% -25.0% 44 8,560 0.5%
Irving South / Grand Prairie $83.54 $98.03 -14.78% 52.4% 68.4% -26.6% 81 7,542 1.1%
South / East $129.02 $71.87 79.52% 45.3% 68.5% -36.6% 222 10,831 2.1%
West Plano / Frisco $108.39 $115.43 -6.10% 46.5% 71.3% -35.0% 67 6,109 1.1%
Total $115.92 $104.58 10.85% 51.2% 70.1% -28.3% 1,528 81,640 1.9%
Submarket Airbnb & Hotel Statistics by Submarket
Summary
50
SUMMARY THOUGHTS 1. Fundamentals remain attractive for vast majority of markets, including Dallas.
2. Growing levels of disposable income will continue to drive increases in travel, both
domestically and abroad. Hotels will continue to benefit as a result.
3. Industry growth will persist and pick back up in 2020.
4. High occupancy levels should provide leverage to continue ADR increases for the
next two-three years; new supply in some cases represent a strong headwind.
5. Hotel construction will continue; the threat of over building is the exception and not
the rule.
6. Above long run average occupancy levels lead to revenue growth, but labor costs
will continue to be an issue. Profit growth will remain good, but not great, for
most. Upside potential during mid-week.
7. Airbnb not a huge factor, but may inhibit ADR, especially for large events.
So, Times Are Good …Will They Get Better?
July 27, 2017
So, Times Are Good …Will They Get Better?
214-979-6166
YES!
For informed, proactive
Owners and Operators