CBRE HOTELS… · CBRE HOTELS The World’s Leading Hotel Experts. ... Year-End 2016 Compared to Year-End 2015 ... Will They Get Better? Where are we now? 9 Dallas 2017 YTD Hotel

CBRE HOTELS The World’s Leading Hotel Experts.

July 27, 2017

Dallas Midyear Lodging Update

2

• 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

3

Slice it – Dice it

Where we left off . . .

5

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 . . .

6

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

12

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?

17

17

18 18

THE OUTLOOK FOR THE DRIVERS MOST IMPORTANT TO HOTELS

REMAINS FAVORABLE

19 19

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

21

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%

22

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 !!!

23

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

25

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

26

Supply Change 2017 - Forecast

(2.0)%

(1.0)%

0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

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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

27

28

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

30

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



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



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?

41

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

43

Airbnb

Source Airbnb

44

Special events lead to surge in Airbnb supply

- 2,000 4,000 6,000 8,000

10,000 12,000

10/1

/20

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17

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

48

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.


July 27, 2017


[email protected]

214-979-6166

YES!

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Owners and Operators

Documents

CBRE HOTELS… · CBRE HOTELS The World’s Leading Hotel Experts. ... Year-End 2016 Compared to Year-End 2015 ... Will They Get Better? Where are we now? 9 Dallas 2017 YTD Hotel