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US Hotel Industry Overview
Memphis Update February 12, 2016
Jeff Higley, VP/Editorial Director, STR/Hotel News Now
@jeffhigley1 jeff@str.com
2
HELLO! www.hotelnewsnow.com
Click on “Data Presentations” (free registration/login required)
3
1. Size matters: More mergers to come, say industry leaders.
2. Here we go again: Don’t underestimate supply growth.
3. Airbnb’s reach: NYC data dive says effect is minimal. Will that change if downturn accelerates?
4. Surprise: Deal pace will slow. Is distressed inventory far behind?
5. Shift of sentiment at ALIS: Dark clouds on the horizon?
5 Things I think I know
4
What Wall Street Expects:
2016 What STR Expects:
5
2015-16 Lodging stocks take a beating … and then some
• Baird/STR Hotel Stock Index drops 20% during 2015 • Index drops another 12.1% in January 2016 • Closed Thursday, Feb. 11 at 2732—down from 3900
one year earlier • Is this an indicator of what’s yet to come?
HotelStockIndex.com
OCC 65.6% ▴1.7% RECORD
Metric No. Status Remarks
ROOM REV $142B ▴7.4% RECORD
OCC ROOMS 1.2B ▴2.9% RECORD
AVAIL ROOMS 1.8B ▴1.1% RECORD
ADR $120 ▴4.4% RECORD
REVPAR $79 ▴6.3% RECORD
U.S. Hotels YE 2015
SOURCE: STR
7
Total US RevPAR: NYC and Houston Dragged
Total US : +6.3% NYC: -1.7% Houston: -3.3% Total US excluding NYC & Houston: +6.9%
*RevPAR % Change December 2015 YTD
8
Supply Growth Now Back Over 1%. Demand Growth Slows.
-0.8
-4.7
-7.1
7.7
-8
-4
0
4
8
1990 2000 2010
Supply % Change
Demand % Change
Total U.S., Supply & Demand % Change, 12 MMA 1/1990 – 12/2015
9
ADR Growth Steady. Occ Growth Decelerating Rapidly.
-3.4
-6.7
-9.7
6.8 7.5
4.4
-10
-5
0
5
1990 2000 2010
Occ % Change
ADR % Change
Total U.S., ADR & OCC % Change, 12 MMA 1/1990 – 12/2015
10
RevPAR Growth: It’s Going To Be OK (but Not Great)
-25
-20
-15
-10
-5
0
5
10
15
1990 2000 2010
Total U.S., RevPAR % Change, 1/1990 – 12/2015
56 Months 70 Mo. 80 Months 31 Mo
$30
$50
$70
$90
$110
$130
2007 2009 2011 2013 2015
Bill
ion
s
Total U.S. – Rooms Revenue 12 MMA, January 2005 – December 2015
Room Revenue > $142bn
• Luxury – Fairmont, Four Seasons, Ritz Carlton, JW Marriott
• Upper Upscale – Sheraton, Embassy Suites, Hyatt, Marriott
• Upscale – Radisson, Hilton Garden Inn, Residence Inn, Springhill Suites, Homewood Suites, Courtyard, Best Western Premier
• Upper Midscale – Fairfield Inn/Suites, Holiday Inn, Clarion, Hampton Inn/Suites, Best Western Plus, Country Inn & Suites
• Midscale – Best Western, Candlewood Suites, Quality Inn/Suites, La Quinta, Sleep Inn, Red Lion
• Economy – Americas Best Value Inn, Country Hearth Inn, Jameson Inn, Extended Stay America, Motel 6, Red Roof, Days Inn, Microtel
• Complete list: www.HotelNewsNow.com/chainscales
STR Chain Scales: Sample of brands
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Scales: Demand Growth Healthy. Upscale Supply Increases
0.7
1.3
4.1
1.3
0.1 0.2
1.2
2.0
4.8
3.3
2.1
1.6
Luxury Upper Upscale Upscale Upper Midscale Midscale Economy
Supply % Change
Demand % Change
*Supply / Demand % Change, by Scale, December 2015 YTD
RevPAR Composition: ADR Driven
0.5 0.7 0.7
1.9 2.1 1.4
4.2 4.0
4.9
4.3 4.2 5.0
4.7 4.8
5.6
6.3 6.3 6.5
Luxury Upper Upscale Upscale Upper Midscale Midscale Economy
ADR % Change Occupancy % Change RevPAR % Change
RevPAR % Change by Contribution of OCC / ADR % Change, by Scale Full Year 2015
15
Scales: Upper End Hotels Are Very Busy
75.3 74.2 74.3
67.6
59.5 58.3
75.0 73.6 73.8
66.4
58.3 57.5
Luxury Upper Upscale Upscale Upper Midscale Midscale Economy
2015 2014
*OCC %, by Scale, December YTD 2015 & 2014
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RevPAR December 2015 YTD: Winner: CA. Loser: Oil Markets.
Market RevPAR %
Change Market RevPAR %
Change
Macon/Warner Robbins, GA
18.6 Ohio Area
(1.9)
San Jose/Santa Cruz, CA
17.3 Houston, TX
(3.3)
Oakland, CA
15.7 Texas North
(4.1)
Chattanooga, TN-GA
15.5 West Virginia
(4.5)
California North Central
14.9 New Mexico South
(5.4)
Fort Myers, FL
14.7 Augusta, GA-SC
(6.7)
Knoxville, TN
14.5 Oklahoma Area
(10.0)
Portland, OR
14.2 Texas South
(11.4)
Tampa/St Petersburg, FL
13.8 Texas West
(19.2)
Greenville/Spartanburg, SC
13.7 North Dakota
(20.9)
*December 2015 YTD RevPAR: Best / Worst Performing Markets
High Occ = Higher ADR (Except in NYC)
Market Occ % ADR % Change
Nashville, TN 73.5 8.7
Phoenix, AZ 65.9 8.0
Seattle, WA 76.2 7.8
Tampa/St Petersburg, FL 71.8 7.7
Los Angeles/Long Beach, CA 79.7 7.5
Washington, DC-MD-VA 70.7 3.0
Oahu Island, HI 85.3 3.0
New Orleans, LA 69.7 2.3
Houston, TX 68.5 1.6
New York, NY 84.7 -1.6
Top 25: Top 5 / Bottom 5 Performing ADR % Markets Full Year 2015
Markets 26-50: Markets Around San Francisco Lead
Market Occ % ADR % Change
San Jose/Santa Cruz, CA 77.6 14.6
Oakland, CA 79.6 12.0
Portland, OR 74.9 9.9
Knoxville, TN 59.0 8.5
Richmond/Petersburg, VA 61.9 7.7
Cleveland, OH 63.1 3.7
San Antonio, TX 64.9 3.1
Pittsburgh, PA 65.1 2.3
Oklahoma City, OK 62.3 2.1
Baltimore, MD 67.1 1.4
Markets 26-50: Top 5 / Bottom 5 Performing ADR % Markets Full Year 2015
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12.4
6.0 5.8 3.8 2.2
-1.7
80.8 81.2 83.7 84.4 84.7 84.7
2010 2011 2012 2013 2014 2015
RevPAR % Change Occupancy
NYC YTD RevPAR & Occupancy: Full House But No RevPAR Growth
* NYC RevPAR % Change & Absolut Occupancy, December YTD, by year
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Houston: Oil Price Predicts Houston Room Demand
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
$35
$45
$55
$65
$75
$85
$95
$105
2014 2015
Crude Oil Futures Price / Barrel (LHS)
Demand % Change (RHS)
*Monthly Oil price Future / Barrel vs. Houston, TX Room Demand % Change 1/2014 – 12/2015 http://www.investing.com/commodities/crude-oil
Group Demand Growth Slows Rapidly
-2%
-1%
1%
2%
3%
4%
5%
6%
7%
2012 2013 2014 2015
Demand % Change
ADR % Change
1.9%
3.8%
Group Demand and ADR % Change 12 MMA, January 2012 – December 2015 NOTE: Data is for upper tier hotels only (Luxury & Upper Upscale classes)
5.3%
-1.5%
3.6%
Balanced ADR Growth for Transient & Group
1.3
3.7
5.1
0.7
3.8
4.5
Occupancy ADR RevPAR
Transient Group
24.1% $44.21
Segmentation % Change Full Year 2015 NOTE: Data is for upper tier hotels only (luxury & upper upscale classes)
45.5% $212.72 $183.76 $96.76
6 Years of Group RevPAR Growth
1.2
6.8 6.2 6.3 4.3
-0.3
-23.6
4.7 5.5 3.9
2.0
6.7
-28
-23
-18
-13
-8
-3
2
7
12
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
ADR % Change
Occupancy % Change
RevPAR % Change
Group RevPAR % Change by Contribution of Occ / ADR % Change 2003 – 2015 Annual NOTE: Data is for upper tier hotels only (luxury & upper upscale classes)
4.5
13.5
9.5 9.2 8.5 8.1 8.1
7.4 6.5 6.4 6.2 5.9
5.2 4.7 4.4 4.3 3.7 3.5
2.9
1.3 1.3 0.9
-0.1 -0.3
-5.5 -5.5
Group RevPAR Declines in 4 of Top 25 Markets
Group RevPAR % Change, Top 25 Markets Full Year 2015
MEETING PLANNING TRENDS
SOME THINGS TO KNOW
MEETING SIZE
MEETING REQUIREMENTS
CONVENTION CENTERS
INFORMATION SOURCES
ADVERTISING
MEETING SIZE
Meetings of 1000+ attendees make up the largest major meeting segment.
0%
10%
20%
30%
40%
50%
60%
Less than 300 300-999 1000+
Overall CMP planners Non-CMP planners
OVERALL ATTENDANCE AT LARGEST MEETING PLANNED IN LAST YEAR
MEETING REQUIREMENTS
Meeting planners are more demanding than ever when selecting a meeting site.
CONSIDERATIONS RATED “VERY IMPORTANT” IN SITE SELECTION
50% 60% 70% 80% 90% 100%
Clean/attractive city
Attractive conference hotels
# of hotel rooms available
Convenient airline service
Easy for delegates to get to
Food and lodging costs
Travel costs to destination
Good value for the money
2015
2013
COSTS
CONVENIENCE
CLEAN/ ATTRACTIVE
CONVENTION CENTER
Cost, logistics and service considerations are very important to meeting planners when selecting a convention center.
“VERY IMPORTANT” CONVENTION CENTER CONSIDERATIONS
• Reasonable facility rental rates
• Adequate breakout rooms
• Adequate seating for largest session
• Competent management
• Wireless internet
• Helpful staff
• Proximity to hotels
INFORMATION SOURCES Sources that are personal or directly connected to a meeting planner are found to be the most trustworthy and highly valued.
“VERY IMPORTANT” INFORMATION SOURCES
83% 76%
58% 57% 56% 45%
Past experience Attendee feedback Hotel website Colleaguerecommendations
Hotel rating/userreview sites
Destinationwebsite
Hotel Pipeline
In Construction – Vertical construction on the physical building has begun. (This does not include construction on any sub-grade structures.) Final Planning – construction will begin within the next 12 months. Planning – construction will begin in more than 13 months. Unconfirmed - Potential projects that remain unconfirmed at this time.
Un
de
r C
on
trac
t STR Pipeline Phases
Un
de
r C
on
trac
t
2015 Supply Increase: Now 2 Million More Rooms Available Per Month
1.1 1.1
1.4 1.5
1.4 1.6
1.7 1.6
1.8
1.9 2.0
2.2
January February March April May June July August September October November December
U.S. Supply Change (millions of room nights) 2015 by Month
Top 26 Markets Have ~50% Of U/C Rooms
69.4 71.3 72.5
107.9
67.0
81.0
Top 26 Markets Rest of the US
In Construction
Final Planning
Planning
U.S. Pipeline, Rooms (‘000s), Top 26 Markets vs. All Other Markets December 2015
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US Pipeline: Construction Today Will Impact 2016 / 2017
Phase 2015 2014 % Change
In Construction 141 120 17%
Final Planning 180 122 47%
Planning 147 170 -13%
Under Contract 469 413 14%
*Total US Pipeline, by Phase, ‘000s Rooms, December 2015 and 2014
35
Limited Service Construction Has Been Strong For 2 Years
7.4 11.5
49.2 48.0
5.3 1.5
17.7
Luxury UpperUpscale
Upscale UpperMidscale
Midscale Economy Unaffiliated
*US Pipeline, Rooms Under Construction , ‘000s Rooms, by Scale, December 2015
69%
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Construction In Top 26 Markets: 20 With 2%+ Of Supply
*US Pipeline, Top 26 Markets, U/C Rooms as % of Existing Supply, December 2015
Market Rooms U/C % Of Existing
Oahu Island, HI 175 0.6%
Norfolk/Virginia Beach, VA 300 0.8%
St Louis, MO-IL 407 1.1%
Atlanta, GA 1,255 1.3%
San Francisco/San Mateo, CA 751 1.5%
New Orleans, LA 618 1.6%
Orlando, FL 2,600 2.1%
Detroit, MI 954 2.3%
Las Vegas, NV 3,905 2.3%
Phoenix, AZ 1,536 2.5%
Chicago, IL 2,964 2.7%
Tampa/St Petersburg, FL 1,233 2.8%
Washington, DC-MD-VA 3,339 3.1%
San Diego, CA 1,951 3.2%
Denver, CO 1,794 4.1%
Anaheim/Santa Ana, CA 2,328 4.2%
Los Angeles/Long Beach, CA 4,240 4.3%
Minneapolis/St Paul, MN-WI 1,949 5.0%
Boston, MA 2,627 5.0%
Philadelphia, PA-NJ 2,343 5.1%
Nashville, TN 1,982 5.1%
Dallas, TX 4,177 5.2%
Seattle, WA 2,232 5.3%
Houston, TX 5,710 7.1%
Miami/Hialeah, FL 3,920 7.6%
New York, NY 14,090 12.0%
Forecast: Where Are We Headed?
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Notable Calendar Shifts Impacting Lodging Performance Data in 2016:
Super Bowl: From Phoenix to San Francisco
Easter: From April to March
Jewish Holidays: From September to October
April and December will have two more Weekend days (Net +)
May will have two fewer Weekend days (Net -)
Leap Day February 29th (No Impact To Results) See: http://www.str.com/Media/Default/Documents/STR_leap_year_methodology.pdf
39
Total United States Key Performance Indicator Outlook (% Change vs. Prior Year) 2016 - 2017
Outlook
2016 Forecast
2017 Forecast
Supply 1.7% 1.9%
Demand 2.3% 2.1%
Occupancy 0.6% 0.2%
ADR 4.4% 4.3%
RevPAR 5.0% 4.5%
40
Total United States Chain Scale Key Performance Indicator Outlook 2016F by Chain Scale
2016 Year End Outlook
Chain Scale Occupancy
(% chg) ADR
(% chg) RevPAR (% chg)
Luxury 0.4% 4.5% 4.9%
Upper Upscale 0.5% 4.6% 5.2%
Upscale -0.2% 4.5% 4.3%
Upper Midscale 0.4% 4.1% 4.5%
Midscale 0.5% 3.5% 4.0%
Economy 0.9% 3.7% 4.6%
Independent 0.6% 4.4% 5.1%
Total United States 0.6% 4.4% 5.0%
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Total United States Chain Scale Key Performance Indicator Outlook 2017F by Chain Scale
2017 Year End Outlook
Chain Scale Occupancy
(% chg) ADR
(% chg) RevPAR (% chg)
Luxury 0.1% 4.7% 4.8%
Upper Upscale 0.1% 4.6% 4.7%
Upscale -0.6% 3.8% 3.2%
Upper Midscale -0.1% 3.7% 3.6%
Midscale 0.6% 4.1% 4.7%
Economy 0.4% 3.4% 3.9%
Independent 0.3% 4.4% 4.7%
Total United States 0.2% 4.3% 4.5%
42
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