times are good….……will they get better?€¦ · q3 2013 q4 2013 q1 2014 q2 2014 q3 2014 q4...

Mark Woodworth – Senior Managing DirectorCBRE Hotels’ Americas Research

June 1, 2017

Times Are Good….……Will They Get Better?

2

• The Economy• The Impact of New Supply• Leading and Lagging Markets• Room to Grow?• Our Forecasts• Atlanta and Gwinnett County

THE AGENDA

3

HOW WAS THE ECONOMY IN 2016?

4

NOT NEARLY AS GOOD AS EXPECTED!

Source: CBRE Hotels’ Americas Research; Moody’s Analytics.

16,400.00

16,600.00

16,800.00

17,000.00

17,200.00

17,400.00

17,600.00

17,800.00

0

1

2

3

4

5

Q3 20

13

Q4 20

13

Q1 20

14

Q2 20

14

Q3 20

14

Q4 20

14

Q1 20

15

Q2 20

15

Q3 20

15

Q4 20

15

Q1 20

16

Q2 20

16

Q3 20

16

Billions of Dollars%

Historical Moody's Forecasts of Q4 2016 Nominal GDP

Y-o-Y Growth GDP Forecast

5

HOW WILL THE ECONOMY BE IN 2017?

6

Source: BEA, Moody’s Analytics, CBRE Hotels | Americas Research Hotel Horizons: May 2017, STR, Inc.

The Outlook for the Drivers that are Most Important to Hotels Remains Favorable

THE ECONOMY: GOOD….GETTING BETTER?

These matter the most.

7

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, March 2017

6 to 8 month lagEconomic indicators are

trending up in 2017

8

FOR MOST U.S. STATES, CANADA IS THE LARGEST CLIENT

Credit:Clement GignacSenior Vice‐President and Chief Economist

The Impact of New Supply

10

GOOD…..GETTING BETTER? U.S. GATEWAY CITIESAn Uneven Landscape:

Low Supply:Strong ADR Growth

Source: CBRE Hotels’ Americas Research, STR

U.S. Gateway Cities2011 - 2016

Gateway CityCumulative ADR Change (23.9%)

Cumulative Supply Change (4.6%)

2016 Occupancy (65.5%)

Boston* 40.1% 6.1% 74.2%Chicago* 25.2% 4.0% 69.0%Los Angeles* 60.0% 0.1% 81.3%Miami* 37.2% 12.2% 75.9%New York* 12.9% 25.9% 85.8%Oahu 51.5% -0.3% 84.2%Orlando 42.9% 3.1% 75.6%San Francisco* 68.7% 0.1% 84.3%Washington, D.C.* 14.7% 5.0% 72.1%

* Sensitive to Exchange

Rate Fluctuations

U.S. Averages

Source: CBRE Hotels’ Americas Research, STR, Q1 2017

11


U.S. Gateway Cities2011 - 2016

Gateway CityCumulative ADR Change (23.9%)

Cumulative Supply Change (4.6%)

2016 Occupancy (65.5%)

Boston* 40.1% 6.1% 74.2%Chicago* 25.2% 4.0% 69.0%Los Angeles* 60.0% 0.1% 81.3%Miami* 37.2% 12.2% 75.9%New York* 12.9% 25.9% 85.8%Oahu 51.5% -0.3% 84.2%Orlando 42.9% 3.1% 75.6%San Francisco* 68.7% 0.1% 84.3%Washington, D.C.* 14.7% 5.0% 72.1%

* Sensitive to Exchange

Rate Fluctuations

U.S. Averages

Source: CBRE Hotels’ Americas Research, STR, Q1 2017

An Uneven Landscape:High Supply:Weak ADR Growth

GOOD…..GETTING BETTER? U.S. GATEWAY CITIES

The Years AheadLeading and Lagging Markets

13

MARKET OUTLOOK

Occupancy Levels will Decline in 40 of our 60 Top U.S. Markets this Year, and in 43 Markets in 2018.Average Daily Rate Growth will Exceed 2.0% in 45 Markets this Year and in 51 Markets in 2017.

14

BUYERS MARKETS – UPPER-PRICED HOTELS*

* Luxury, Upper-Upscale and Upscale Hotels per STR

Market

Annual Increase in

ADR

Norfolk-VA Beach 1.8%Austin 1.8%San Francisco 1.7%Philadelphia 1.6%West Palm Beach 1.6%Omaha 1.3%Pittsburgh 1.1%Miami 0.9%New York 0.6%Albany -0.2%National Average 3.0%

*

**

* Top 10 Market

Opportunities for Better Pricing!

2.5%

2016-2018

Source: CBRE Hotels’ Americas Research, Hotel Horizons®

15

SELLERS MARKETS - UPPER-PRICED HOTELS*

* Luxury, Upper-Upscale and Upscale Hotels per STR

Market

Annual Increase in

ADR

Sacramento 4.8%Washington DC 4.8%Oakland 4.7%Atlanta 4.5%Tucson 4.3%Jacksonville 4.1%Indianapolis 3.9%Savannah 3.9%Minneapolis 3.8%Detroit 3.7%National Average 3.0%

*

*

* Top 10 Market

Hotels should have the upper

hand.

2.5%

2016-2018

Source: CBRE Hotels’ Americas Research, Hotel Horizons®

Room to Grow?

17

ROOM TO GROW?Comparing Weekday vs. Weekend Performance

Weekend Demand Share Has Been Increasing

Year Weekday Weekend2000 68.9% 31.1%2005 68.8% 31.2%2010 68.7% 31.3%2016 68.6% 31.4%

Demand Distribution

Source: STR

18

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?

19

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?

A Closer Look at Markets

219Source: CBRE Hotels, CBRE Hotels’ Americas Research, Hotel Horizons®

LOCAL MARKET POSITION IN THE CURRENT CYCLE VARIES

HUNTER HOTEL CONFERENCE

2210

REVPAR EXPECTATIONS VS. LONG RUN AVERAGE

(2)

(1)

0

1

2

3

4

5

6

7

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% Change

Forecast Average Annual Change in RevPAR 2017-2021 by Market

LRA Forecast U.S. LRASources: CBRE Hotels' Americas Research, STR Q4 2016.

HUNTER HOTEL CONFERENCE

Our Forecasts

24

TIMES ARE GOOD...WILL THEY GET BETTER?U.S. National Forecast


Long RunAverage 2014 2015 2016 2017F 2018F

Supply 1.8% 0.7% 1.0% 1.6% 2.0% 2.1%

Demand 2.0% 4.1% 2.7% 1.7% 2.1% 1.8%

Occupancy 62.2% 64.3% 65.4% 65.4% 65.5% 65.3%

ADR 3.1% 4.6% 4.5% 3.1% 2.9% 2.9%

RevPAR 3.3% 8.2% 6.2% 3.2% 3.0% 2.6%

Forecast calls for a continual decline in RevPAR growth mainly due to slowing employment gains and new supply diluting ADR.

25

U.S. LODGING INDUSTRY

50%

55%

60%

65%

70%19

97

19

98

19

99

20

00

20

01

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

17F

20

18F

20

19F

Annual Occupancy Levels

Source: STR, CBRE Hotels’ Hotel Horizons® - June 2017

Record Occupancy Level!

Long Run Average = 62.0%

Forecast

26

-10%

-5%

0%

5%

10%

19

97

19

98

19

99

20

00

20

01

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

17F

20

18F

20

19F

Annual Change in Average Daily Rate

U.S. LODGING INDUSTRY

Source: STR, CBRE Hotels’ Hotel Horizons® - June 2017

Long Run Average = 3.0%

Forecast

Atlanta and Gwinnett County

28

Softer This Year; Stronger NextECONOMIC ASSUMPTIONS BEHIND OUR FORECASTS

Year CPI^ GMP (GDP)^ Income^ Employment^2015 0.1% 3.1% 5.2% 3.1%2016 1.2% 4.5% 3.3% 3.4%

2017F 2.1% 3.0% 2.1% 2.7%2018F 2.2% 3.7% 3.2% 1.5%

Atlanta

Source: CBRE Econometric Advisors, Moody's Analytics

29

ECONOMIC ASSUMPTIONS BEHIND OUR FORECASTS

Year CPI^ GMP (GDP)^ Income^ Employment^2015 0.1% 3.1% 5.2% 3.1%2016 1.2% 4.5% 3.3% 3.4%

2017F 2.1% 3.0% 2.1% 2.7%2018F 2.2% 3.7% 3.2% 1.5%

Atlanta


Year CPI^ GDP^ Income^ Employment^Corporate

Profits^2015 0.1% 2.6% 4.3% 2.1% -3.0%2016 1.2% 1.6% 2.3% 1.8% -0.1%

2017F 2.1% 2.0% 2.7% 1.4% 4.6%2018F 2.2% 2.5% 2.5% 0.8% 3.7%

United States


Softer This Year; Stronger Next

30

1300

1500

1700

1900

2100

2300

2500

2700

2900

19

85Q

119

85Q

419

86Q

319

87Q

219

88Q

119

88Q

419

89Q

319

90Q

219

91Q

119

91Q

419

92Q

319

93Q

219

94Q

119

94Q

419

95Q

319

96Q

219

97Q

119

97Q

419

98Q

319

99Q

220

00Q

120

00Q

420

01Q

320

02Q

220

03Q

120

03Q

420

04Q

320

05Q

220

06Q

120

06Q

420

07Q

320

08Q

220

09Q

120

09Q

420

10Q

320

11Q

220

12Q

120

12Q

420

13Q

320

14Q

220

15Q

120

15Q

420

16Q

320

17Q

220

18Q

120

18Q

420

19Q

320

20Q

2

Q1 2010 2262

Q4 2016 2704

Forecast

ATLANTA EMPLOYMENT

Source: Moody’s Analytics

Q1 2001 2320

Q2 2007 2455Previous Peak

31

2

3

4

5

6

7

8

9

10

11

19

90Q

1

19

90Q

4

19

91Q

3

19

92Q

2

19

93Q

1

19

93Q

4

19

94Q

3

19

95Q

2

19

96Q

1

19

96Q

4

19

97Q

3

19

98Q

2

19

99Q

1

19

99Q

4

20

00Q

3

20

01Q

2

20

02Q

1

20

02Q

4

20

03Q

3

20

04Q

2

20

05Q

1

20

05Q

4

20

06Q

3

20

07Q

2

20

08Q

1

20

08Q

4

20

09Q

3

20

10Q

2

20

11Q

1

20

11Q

4

20

12Q

3

20

13Q

2

20

14Q

1

20

14Q

4

20

15Q

3

20

16Q

2

20

17Q

1

20

17Q

4

20

18Q

3

20

19Q

2

20

20Q

1

20

20Q

4

Q4 2000 2.88

Q2 2005 5.27

Q1 2007 4.36

Q4 2009 10.44

Q4 2014 7.02

Q3 2016 5.07

ATLANTA UNEMPLOYMENT RATE


Previous Low

32

70000

120000

170000

220000

270000

19

85Q

119

85Q

419

86Q

319

87Q

219

88Q

119

88Q

419

89Q

319

90Q

219

91Q

119

91Q

419

92Q

319

93Q

219

94Q

119

94Q

419

95Q

319

96Q

219

97Q

119

97Q

419

98Q

319

99Q

220

00Q

120

00Q

420

01Q

320

02Q

220

03Q

120

03Q

420

04Q

320

05Q

220

06Q

120

06Q

420

07Q

320

08Q

220

09Q

120

09Q

420

10Q

320

11Q

220

12Q

120

12Q

420

13Q

320

14Q

220

15Q

120

15Q

420

16Q

320

17Q

220

18Q

120

18Q

420

19Q

320

20Q

2

Q4 2016 $247,136

ATLANTA REAL PERSONAL INCOME


Q3 2002 $181,260

Q2 2007 $215,420 Q1 2010

$199,606

Previous Peak

33

JUNE 2016

2016 2017June2016

ActualPer STR

June2016

June 2017 Update

Occupancy 70.1% 69.9% 70.1% 70.1%

ADR 6.2% 5.9% 5.7% 4.1%

RevPAR 6.5% 6.0% 5.7% 4.4%

Pretty Much as Expected

Atlanta

Inflation Stayed Low Source: CBRE Hotels | Americas Research –June-August 2016 + 2017, Hotel Horizons® Report, STR

34

2014 2015 2016 2017F 2018FLong-Term

Average

Occupancy 68.1% 69.8% 69.9% 70.1% 70.2% 62.9%

% Change 7.9% 2.6% 0.1% 0.3% 0.1% -

ADR $91.89 $97.82 $103.57 $107.78 $112.48 -

% Change 4.7% 6.5% 5.9% 4.1% 4.4% 2.4%

RevPAR $62.53 $68.33 $72.40 $75.56 $78.91 -

% Change 13.0% 9.3% 6.0% 4.4% 4.4% 2.9%

ADR Growth to Remain StrongATLANTA MSA - ALL HOTELS

Source: CBRE Hotels Americas’ Research–June-August 2017 Hotel Horizons® Report, STR, Inc.

35

SELECT BRANDS – UPPER AND LOWER TIERS

Upper-Priced Lower-PricedCourtyard by Marriott

Hilton Garden InnHyattLoews

Marriott HotelsRitz-Carlton

Westin

Days InnFairfield InnHampton Inn

Holiday Inn ExpressInTown Suites

TownPlace Suites

Source: STR, Inc.

A CBRE Company

35

36

2014 2015 2016 2017F 2018FLong-Term

Average

Occupancy 72.3% 74.1% 74.0% 74.2% 74.5% 66.3%

% Change +5.5% +2.5% -0.1% 0.2% 0.4% --

ADR $129.26 $136.61 $143.95 $149.21 $155.36 --

% Change +4.6% +5.7% +5.4% +3.7% +4.1% +2.3%

RevPAR $93.47 $101.21 $106.59 $110.66 $115.67 --

% Change +10.4% +8.3% +5.3% +3.8% +4.5% +3.1%

OCCUPANCY GROWTH GIVES WAY TO ADR INCREASES

36

A CBRE Company

ATLANTA MSA - ALL UPPER-PRICED HOTELS


37

2014 2015 2016 2017F 2018FLong-Term

Average

Occupancy 64.9% 66.7% 66.8% 67.0% 66.9% 60.1%

% Change 9.8% 2.8% 0.2% 0.4% -0.2% --

ADR $60.73 $65.39 69.87 73.23 76.61 --

% Change +6.0% +7.7% +6.8% 4.8% 4.6% +1.9%

RevPAR $39.40 $43.59 $46.66 $49.10 $51.27 --

% Change +16.4% +10.7% +7.0% +5.2% +4.4% +2.4%

OCCUPANCY LEVEL BEGINS TO PLATEAU A CBRE Company

ATLANTA MSA - ALL LOWER-PRICED HOTELS


3838

A CBRE Company

95,532

39

Q1 2017 Submarket Performance vs Q1 2016 (All Hotels)

WHERE IS THE GROWTH?

Source: CBRE Hotels Americas’ Research–June – August 2017 Hotel Horizons® Report, STR

SubmarketQ1 2017

Occupancy Level

Y-O-Y Occupancy Change

Y-O-Y ADR Change

Y-O-Y RevPAR Change

Downtown 72.7% -0.2% 4.5% 4.3%Midtown 76.4% 1.9% 3.0% 4.9%Buckhead 76.2% 0.9% 2.5% 3.5%Central Perimeter 73.6% 2.0% 2.0% 4.0%Cumberland / Central Cobb 69.3% 2.7% 6.0% 8.9%Airport 77.0% 1.1% 3.1% 4.2%Emory / Decatur 65.6% -2.6% 5.0% 2.3%Georgia 400 North 70.7% 3.1% 2.4% 5.6%Gwinnett Place 68.7% -0.8% -0.1% -0.9%I-20 East 62.7% -3.6% 3.5% -0.2%I-75 South 67.3% 0.7% 3.1% 3.8%I-85 Northeast 68.7% -1.0% 2.3% 1.3%I-85 South 64.5% -2.4% 4.2% 1.6%Northlake / Stone Mountain 64.9% -1.6% 3.2% 1.5%Peachtree Corners 66.1% -1.2% 3.9% 2.7%Six Flags 58.2% 0.3% 5.5% 5.8%Town Center North 62.2% 1.4% 5.7% 7.1%

40


WHERE IS THE GROWTH? – OCCUPANCY (ATL: +0.3%)


SubmarketQ1 2017

Occupancy Level


Y-O-Y ADR Change

Y-O-Y RevPAR Change


41


WHERE IS THE GROWTH? – ADR (ATL: +5.1%)


SubmarketQ1 2017

Occupancy Level


Y-O-Y ADR Change

Y-O-Y RevPAR Change


42


WHERE IS THE GROWTH? – REVPAR (ATL: +5.4%)


SubmarketQ1 2017

Occupancy Level


Y-O-Y ADR Change

Y-O-Y RevPAR Change


43

8

3

56 6

5

910

3

8

0

8

4

10

7

9

0

2

4

6

8

10

12

ALL PROJECTS IN THE PLANNING PIPELINEJUNE 2017

Source: STR

A CBRE Company

44

ATLANTA PROJECTS UNDER CONSTRUCTION –JUNE 2017

City Sectors # Projects # Rooms

Airport 4 654

Buckhead 1 186

Central Perimeter 1 127

Cumberland 3 523

Downtown 1 170

Georgia 400 North 2 445

Gwinnett Place North 1 67

I-75 South 2 167

Six Flags 4 304

I-85 South 2 165

Town Center North 3 285

24 3,093Source: STR

3.2% of Existing Supply

A CBRE Company

45

2014 2015 2016 2017F 2018FLong-Term

Average

Occupancy 68.0% 68.9% 69.5% 67.5% 67.8% 63.3%

% Change +2.4% +1.4% 0.8% -2.9% 0.4% --

ADR $107.15 $114.05 $117.91 $119.37 $122.73 --

% Change +5.0% +6.4% +3.4% +1.2% +2.8% +1.4%

RevPAR $72.87 $78.63 $81.93 $80.56 $83.15 --

% Change +7.5% +7.9% +4.2% -1.7% +3.2% +1.8%

OCCUPANCY GROWTH GIVES WAY TO ADR INCREASES

45

A CBRE Company

GWINNET PLACE NORTH - ALL UPPER-PRICED HOTELS


46

2014 2015 2016 2017F 2018FLong-Term

Average

Occupancy 69.5% 72.9% 73.7% 73.1% 72.9% 61.9%

% Change 8.4% 4.8% 1.1% -0.8% -0.2% --

ADR $64.09 $67.71 $72.09 $73.96 76.61 --

% Change +4.8% +5.6% +6.5% 2.6% 3.6% +2.5%

RevPAR $44.57 $49.36 $53.11 $54.05 $55.88 --

% Change +13.6% +10.7% +7.6% +1.8% +3.4% +3.3%

OCCUPANCY LEVEL BEGINS TO PLATEAU A CBRE Company

GWINNET PLACE NORTH - ALL LOWER-PRICED HOTELS


47

SUMMARY THOUGHTS TIMES ARE GOOD…..WILL THEY GET BETTER?

1.The fundamentals remain attractive across the vast majority of markets.2. Industry growth will persist comfortably through 2018 and likely beyond. 3.High occupancy levels should provide leverage to achieve attractive ADR

increases for the next two-three years; scale of new supply in some markets represents a strong headwind.

4. Increasing hotel construction will continue; the threat of over building is the exception and not the rule.

5.Above long run average occupancy levels will lead to revenue growth, but increasing labor costs will become more of an issue. Profit growth will remain good, but not great, for most. Upside potential during the week.

6.Atlanta will out perform the nation this year and next. Gwinnett lags in 2017, leads in 2018.

June 1, 2017

Times Are Good….……Will They Get Better?

[email protected]

YES!

times are good….……will they get better?€¦ · q3 2013 q4 2013 q1 2014 q2 2014 q3 2014 q4...

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