Guam Future Hotel Supply Requirements

Presented By: Damien Little, Horwath HTL

Outline

• Current Strengths/Weaknesses of Guam

• Seasonal Tourism Performance

• Tourism Growth Projections

• Future Hotel Supply Requirements

CURRENT STRENGTHS & WEAKNESSES

Weaknesses

• Aging Hotel Supply relative to many other Asian

destinations

• Historically dominated by one source market

• Dominance of wholesale agents

• Lack of a strong local cultural appeal to market

• A current lack of hotel rooms during peak

periods

Weaknesses

• Aging Hotel Supply relative to many other Asian

destinations

– Average age of the leading hotels is 27 years

– Most recent leading hotel, Outrigger, is 15 years old

– Declining hotel supply from market peak

Historical Hotel Supply

0

2,000

4,000

6,000

8,000

10,000

12,0001

99

11

99

21

99

31

99

41

99

51

99

61

99

71

99

81

99

92

00

02

00

12

00

22

00

32

00

42

00

52

00

62

00

72

00

82

00

92

01

02

01

12

01

22

01

32

01

4

Growing Market

Declining / Stagnant Market

Weaknesses

• Aging Hotel Supply relative to many other Asian

destinations

– Average age of the leading hotels is 27 years

– Most recent leading hotel, Outrigger, is 15 years old

– A number of hotels have undergone renovations in

recent times with more renovation plans underway.

– Supply that has closed has re-opened

– New hotel construction finally underway

Weaknesses

• Historically dominated by one source market

– Japan has historically accounted for 70% to 80% of

total visitor arrivals

– This market is very quick to react to adverse market

incidents

– Korean arrivals again on the rise increasing diversity

of demand source.

– China represents huge demand potential, while

Russia can add some higher yielding long stay

demand

Japanese Share of Total Arrivals

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Japanese Share 67%

Korean Share 18%

Weaknesses

• Dominance of wholesale agents

– Agents control market through control of seats and

room allocations in market

– Wholesale business can limit rate growth potential of

the market

– The way Guam is packaged has a big influence on

the perception of the destination

– Dominance unlikely to change in short to mid term but

more FIT travelers are emerging

– Marketing of the destination’s image important

Weaknesses

• Lack of a strong local cultural appeal to market

– Colonial history of the islands resulted in much local

culture being lost = lack of authentic cultural

experiences to be had/seen in daily life (food)

– There is a real emphasis to re-build local cultural

traditions and practices in Guam. This will benefit the

tourism experience.

– Tourists also like to experience a western culture

close to home.

Weaknesses

• A current lack of hotel rooms during peak

periods

– With hotel supply below historical peaks and tourist

arrivals back close to historical highs, room supply is

extremely limited in peak periods and is restricting

tourism growth

– New hotel supply is coming

– This presents a development opportunity

Strengths

• Proximity to major demand sources / short travel

time allows for an easy short-break holiday

• Quality of beaches/water/environment

• USA Territory

• A good range of activities

Strengths

• Proximity to major demand sources / short travel

time allows for an easy short-break holiday

– Short flight time reduces travel costs and increases

feasibility for short-break holidays

– A good first time destination and easy for young

families

– May limit perception of destination to being short-stay

Strengths

• Quality of beaches/water/environment

– #1 attraction is the warm weather, good quality

beaches, clean water and clean environment

– A good range of water activities for tourists from

beginners/young children to experienced divers and

thrill-seekers

– Development to date has not spoilt the natural

environment (over-development is fast becoming a

problem in many other Asian destinations)

Strengths

• USA Territory

– US Culture is appealing

– International shopping experience

– Educational exchanges

– Tourism visa challenges

Strengths

• A good range of activities

– In addition to water activities, there are a range of

other activities / entertainment options to keep guests

busy during their stay.

– However, perhaps currently nothing that would extend

the length of stay

SEASONAL TOURISM PERFORMANCE

Monthly Arrivals To Guam (‘12 &’13)

0

20

40

60

80

100

120

140

160

Jan

Feb

Mar

Ap

r

May Jun

Jul

Au

g

Sep

Oct

No

v

Dec Jan

Feb

Mar

Ap

r

May Jun

Jul

Au

g

Sep

Oct

No

v

Dec

00

0s

of

Arr

iva

ls

Seasonality of Arrivals

(0.30)

(0.20)

(0.10)

-

0.10

0.20

0.30

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Seasonality: Guam v Other Destinations

0

5

10

15

20

25

30

Sanya Bali Danang Phuket Guam Okinawa KohSamui

Cebu

Guam Monthly Hotel Occupancy (‘12 & ‘13)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Monthly Occupancy Variance (‘12 & ‘13)

-0.20

-0.15

-0.10

-0.05

0.00

0.05

0.10

0.15

0.20

Jan

Feb

Mar

Ap

r

May Jun

Jul

Au

g

Sep

Oct

No

v

Dec Jan

Feb

Mar

Ap

r

May Jun

Jul

Au

g

Sep

Oct

No

v

Dec

Monthly Occupancy & Growth Implications

• There are a number of months per year when

market-wide occupancy is very high – this is

even more so in the leading 10 to 15 hotels in

the market

• Anecdotal evidence suggests that a lot of

demand is being lost to the market during these

months

• Without new supply, arrivals growth will be

constrained

TOURISM GROWTH PROJECTIONS

Tourism Arrival Projections

• Take into account 2020 Vision

• Historical growth rates and current trends

• Expected increases in air capacity of each major

source market

• Seasonality of tourism arrivals and limits on

hotel room supply

• New hotel openings

• Quality and availability of potential future hotel

developments

Unconstrained Tourism Growth Est.

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

2,500

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

2.02 million

Room Night Demand Assumptions

• Room nights generated per visitor arrival

– Looked at historical ratios

– Reduced slightly over time to be conservative

• Monthly arrival seasonality was largely

maintained moving forward

• Did not allow for any significant change in guest

behaviours

– Conservative approach that ALOS and DOF remain

more or less the same

Room Night Demand Assumptions

• Capped occupancy performance

– Market-wide occupancy capped at 90% on a monthly

basis – beyond this level – demand was kicked out.

– New supply requirements aimed to keep occupancy

around 80% on a an annual basis – this allows for

high occupancy in leading hotels but recognizes the

under-performance of other properties in the market

– Demand growth for following year was based on

capped arrivals and not underlying growth numbers

Estimated Tourism Growth to Guam

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

2,500

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

2.02 million

1.86 million

FUTURE HOTEL SUPPLY

REQUIREMENTS

Future Hotel Supply Requirements

0

2,000

4,000

6,000

8,000

10,000

12,000

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

Actual Under Construction New Supply

Future Hotel Supply Requirements

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Actual Under Construction New Supply

111 523

640 350

750 950 1,150

1,350 1,550

2,190

Guam Market Performance Outlook

0

50

100

150

200

250

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Occ % ADR

$108

$141

$229

THANK YOU!