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CBRE HOTEL MARKET SURVEY
Insights from the coalface across Australia
APRIL 2020
APRIL 2020
Introduction
Recent challenging events and the impacts of COVID-19 have brought significant pressure on the hotel sector as a whole. To help identify the business impact of COVID-19, CBRE Hotels in Australia has surveyed a number of key market participants ranging from investors, operators and developers in order to gauge current market sentiment across the industry.
The results of the survey provide key insight into how hoteliers are responding to the current crisis, as well as some of the likely longer-term implications arising from the crisis.
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Who took the survey?
17%
20%
26%
37%
0% 10% 20% 30% 40%
Developer
Operator
Owner operator
Investor
APRIL 2020
Short-term response
Preserve cashflow
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APRIL 2020
Respondents believe that operators should focus on reducing operating costs or seek other income sources as a primary response to the current crisis…
5 Question: What are the primary actions operators should take in response to the current crisis?
1%
3%
5%
5%
14%
17%
22%
33%
0% 5% 10% 15% 20% 25% 30% 35%
Close
Reduce room rates
Reduce or increase marketing
Offer short term management fee waivers
Maintain ADR integrity
Close rooms/floors
Seek other income sources (e.g. outsource floors for hospital use)
Focus on reducing costs (e.g. enforce staff taking leave, limit part-timers etc)
APRIL 2020
…as companies look implement key short-term measures to ensure cashflow and business continuity…
Hoteliers have undertaken numerous measures (see previous page) to help mitigate the short-term impacts of the crisis. In conjunction, respondents have identified two critical short-term planning measures to manage the crisis:
• Preserving cashflow - holding off any major investment plans (capex, refurbishment) is necessary in the interim as a means to preserve cash flow. This is more so the short-term focus rather than the overall P&L position.
• Maintaining business continuity – having a good continuity plan in place will ensure hotels are well placed to take advantage of the market recovery after the crisis is contained.
6Question: What impact has the crisis had on your company’s short-term plans?
APRIL 2020
…with 75 per cent of respondents placing new development plans on hold, but only as an interim measure for the most part
7 Question: Has the crisis led to your company putting new development plans on hold?
69%
6%
25%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Yes, but only as an interim measure Yes, indefinitely No not at all
APRIL 2020
Market sentiment
Lasting long-term sector implications
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APRIL 2020
Over half of respondents believe the current crisis will last between 6 to 12 months…
9 Question: How long do you expect this crisis to continue?
32%
53%
15%
3 to 6 months 6 to 12 months More than 12 months
APRIL 2020
…with over half the respondents expecting the market to take greater than 6 months to recover
10 Question: How quickly do you expect the market to rebound after the crisis is contained?
4%
42%54%
Less than 3 months 3 to 6 months Greater than 6 months
APRIL 2020
Investor appetite has softened with 28 per cent saying they are now more likely to invest less relative to December last year. That said, 72 per cent plan to invest the same or more.
11 Question: How has your medium-term investment outlook for the hotel real estate sector changed since December last year?
51%
21%
28%
0%
10%
20%
30%
40%
50%
60%
Invest the same Invest more Invest less
APRIL 2020
Over 85 per cent of respondents expect investors to re-rate the hotel sector over the medium term although most see this only as a slight re-rating
12 Question: Do you think the crisis will result in investors re-rating the hotel real estate sector over the medium-term?
63%
25%
12%
0%
10%
20%
30%
40%
50%
60%
70%
Yes, but only slightly Yes, materially No, not at all
APRIL 2020
87 per cent of respondents anticipate that banks will hold off on acting on assets under pressure and adopt a ‘wait and see’ approach in the interim
13 Question: How do you anticipate your financier to respond to the current crisis?
87%
13%
0%0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Adopt a "wait and see" approach Strong and immediate focus on loancovenants
Force sale of assets
APRIL 2020
46 per cent of respondents see buying opportunities on the horizon, while 38 per cent believe that the crisis will trigger substantial financial stress with medium/longer-term implications
14 Question: What is the most likely outcome of the crisis?
46%
38%
16%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Likely to see numerous buyingopportunities for less geared investors
Substantial financial stress within theindustry that has medium/longer term
implications
The industry will remain resilient withminimal medium/longer term
implications
APRIL 2020
Trading impacts
RevPAR and capital values declining
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APRIL 2020
Over 70 per cent of respondents expect the crisis to result in a negative RevPAR impact by 30 per cent or more in 2020 across the major cities*…
16*The survey asked for the separate RevPAR impact for Sydney, Melbourne, Brisbane and PerthQuestion: What will be the RevPAR impact for major cities in 2020?
6%
23%
71%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Negative by 10% to 20%
Negative by 20% to 30%
Negative by more than 30%
APRIL 2020
…With over half of respondents expecting a decline of 10 per cent or more in capital city hotel values over the next six months
17 Question: Thinking about capital city hotel values, where do you see values trending over the next 6 months?
8%
13%
25%
21%
33%
0%
5%
10%
15%
20%
25%
30%
35%
No material change Declines in the order of0% to 5%
Declines in the order of5% to 10%
Declines in the order of10% to 15%
Declines of more than15%
Contact us
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Troy CraigRegional Director, Valuation & Advisory
+61 439 398 769
Robert McIntoshExecutive Director, Valuation & Advisory
+61 449 587 023
Wayne BunzNational Director, Capital Markets
+61 419 698 640
Chinmay ChitaleResearch Manager, Hotels
+61 430 583 128
