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RESULTS PRESENTATION 2014
2
2
THE GLOBAL ECONOMY’S RECOVERY FACING DOWNSIDE RISKS
• The global economy slowed to 2.4% in 2013 from 2.5% in 2012
• Indicators show signs of growth driven mainly by the Euro zone and the US
• Growth prospects of all BRIC countries are expected to slow in 2014 and 2015
• Geopolitical tensions cloud global growth outlook
ECONOMIC OVERVIEW
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
2010 2011 2012 2013 2014F 2015F 2016F
GDP Growth*
World Developed Developing* World Bank Forecasts July 2014
3
3
OUTLOOK ON DOMESTIC ECONOMIC CONDITIONS
• GDP slowed to 1.9% in 2013, and is expected to slow further driven by:
› Prolonged industrial action
› Electricity supply constraints
• Inflation likely to increase short term due to depreciating rand and impact of high wage
settlements, increase the likelihood of another rate hike
ECONOMIC OVERVIEW
2.8%
3.9%
2.5%1.9% 1.8%
2.8%3.2%
4.3%5.0%
5.7% 5.8%6.3% 6.0%
5.5%
0.00%
2.00%
4.00%
6.00%
8.00%
2010 2011 2012 2013e 2014e 2015e 2016e
Real GDP CPISource: Nedbank July 2014
4
4
SA REAL ESTATE UPDATE
• 6 new listings and numerous mergers in the pipeline for 2014
• Musical chairs in the major city nodes in the office market
• Office market development overheating in Cape Town and Sandton
• Residential market gaining momentum (Premium, Octodec, Visual International,
Arrowhead)
SA REAL ESTATE MARKET
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GLOBAL HOTEL MARKET
• International tourist arrivals grew by 5% in 2013 (1 087 million)
• International tourist receipts, strongly correlated to arrivals, reached USD 1 159 billion
(+5%)
• China leads top spenders in international tourism ahead of the USA, Germany, Russia
and the UK
• Four out of five worldwide arrivals originating from the same region
• Arrivals to Africa are forecast to grow from 50 million to 134 million by 2030
GLOBAL HOTEL MARKET
› lead by strong growth in Europe &
Asia and the Pacific (+6%)
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AFRICAN & SA HOTEL MARKET
• Consolidation of Hotel Management Companies
› Protea / Marriott
› Tsogo / Sun International
› Three Cities / African Hotel Adventures
• Sun International disposes of shares in African hotel assets but retains management &
gaming operations
• Developer driven hotel pipeline (operators not making any investments)
• Acquisition remains more beneficial than new developments
AFRICAN & SA HOTEL MARKET
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MIDDLE EAST & AFRICA MARKET UPDATE
Occ ADR (FX*) RevPAR (FX) ADR (CC**) RevPAR (CC)
Middle East 2.8 2.4 5.3 2.4 5.3
Northern Africa -7.0 1.1 -6.0 2.0 -5.2
Southern Africa -0.4 -1.9 -2.3 7.2 6.7
JUNE 2014 YTD OCCUPANCY, ADR & REVPAR PERCENTAGE CHANGE IN USD
*FX = Foreign Exchange Rate, **CC = Constant Currency Source: STR Global
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JUNE 2014 YTD OCCUPANCY & ADR PERCENTAGE CHANGE IN LOCAL CURRENCY
MIDDLE EAST & AFRICA MARKET UPDATE
Source: STR Global
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SA HOTEL DEVELOPMENT PIPELINE – SHORT TO MEDIUM TERM
• High-end hotels trading at significant discounts to replacement costs reducing supply risk
• Limited capital available for new hotel development
• Long-lead time needed to develop competitive products, up to 36 months
• Development Pipeline:
› Upscale:
– Old Mutual Stella Road
– Protea Fire & Ice Menlyn
› Midscale:
– City Lodge Waterfall
– City Lodge Johannesburg CBD
– V&A Waterfront Silo site
– Park Inn Newlands
› Economy:
– Road Lodge Pietermaritzburg
– CTICC Expansion
SA HOTEL PIPELINE
• Rebranding Pipeline:
› Four Points by Starwood
– Lagoon Beach Hotel Cape Town
– Cape Town Ritz Hotel
› Radisson Blu
– Le Vendome Cape Town
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GLOBAL RISKS
• Global hotel industry recovery
• Terror impact on African markets
• Global disease outbreak
• African ‘bubble’ to burst
RISKS FACING SA HOTEL MARKET
DOMESTIC RISKS
• Airline capacity issues
• Lack of funding into hotel industry
• No suitable development land
• Credit downgrade
• Visa requirements
• Impact of employment equity act
• Labour unrest – strikes
• Lack of hotel industry representative body
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SOUTH AFRICAN TOURISM MARKET
• International tourist arrivals expected to breach 10 million in 2014
SA TOURISM MARKET
2.1%-3.8%
6.4%4.6% 4.0%
5.0%4.3%
5.7%
3.8%
15.1%
3.3%
10.2%
4.7% 4.0%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
2008 2009 2010 2011 2012 2013 2014e
International Tourist Arrivals (growth %)
Global South Africa
Sources: Stats SA & UNWTO,
HPF estimate
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12
INTERNATIONAL TOURISM RECEIPTS (CURRENT USD MILLION)
SA TOURISM MARKET
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Africa Cup
of Nations
2006
Africa Cup
of Nations
2012
Cricket World
Cup 2003
President’s Cup
Soccer
World Cup
2010
Sources: World Bank; Stanlib
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MARCH 2013 – FEBRUARY 2014: SOURCE MARKET OVERSEAS ARRIVALS
SA TOURISM MARKET
-
50 000
100 000
150 000
200 000
250 000
300 000
350 000
400 000
450 000
500 000
2013 2014 Sources: Stats SA
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MARCH 2013 – FEBRUARY 2014: SOURCE MARKET OVERSEAS ARRIVALS
SA TOURISM MARKET
-
1 000 000
2 000 000
3 000 000
4 000 000
5 000 000
6 000 000
7 000 000
8 000 000
2013 2014 Sources: Stats SA
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NOMINAL GDP AND REVPAR GROWTH RATES
NOMINAL GDP & REVPAR GROWTH
-20%
-10%
0%
10%
20%
30%
40%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Q1
2014Q2
% C
ha
ng
e
GDP Growth RevPAR
FIFA
World
Cup 2010
Global
Recession
WSSD &
ZAR
depreciation
16
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STRATEGIC ACHIEVEMENTS – 2014 HIGHLIGHTS
• Combined distribution growth of 14.2% on YE June 2013
• Occupancy of 61.4% (+2.2%) and ADR of R1 162 (+14%) resulting in RevPAR
growth of 16.5% outperforming STR Global
• R500 million secured notes issued to settle Absa’s onerous facility
• Radisson Blu Gautrain Hotel significantly outperformed it’s market set
THE YEAR IN REVIEW
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YEAR END 30 JUNE 2014
THE YEAR IN REVIEW
YE2013 YE2014
Gross Rental Income
R 356
million19.6%
R 426
million
Portfolio Value
R 4,57
billion5.7%
R4,83
billion
Weighted Average Cost of Debt
8.56% 6.8% 9.14%
Total Debt
R 1,57
billion12.7% R1,77 billion
YE2013 YE2014
Net Asset Value per Linked Unit
1 095cents
4.1%1 140 cents
Distributable Debenture Interest
R200 million 20.0% R 240 million
Gearing (% of asset value)
34.4% 6.7%% 36.7%
Interest Cover Ratio
2.47x 6.9% 2.64x
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YEAR END 30 JUNE 2014
THE YEAR IN REVIEW
-33%-87%
129%83%
0%
-100%
-50%
0%
50%
100%
150%Y-on-Y Growth
5%
-7%
19%
5% 5%
-20%
-10%
0%
10%
20%Y-on-Y Growth
58.90c7.91c
18.08c
33.45c
33.45c
-
50
100
150
200
2011 2012 2013 2014 2015e
B Linked Unit Distribution
122.11c 113.08c134.63c 141.35c 148.43c
-
50
100
150
200
2011 2012 2013 2014 2015e
A Linked Unit Distribution
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20
TRADING FIGURES OUTPERFORM THE OVERALL MARKET (JULY 2013 – JUNE 2014)
THE YEAR IN REVIEW
60.1% 61.4% 61.4% 62.3%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
HPF'13 STR'13 HPF'14 STR'14
Occupancy HPF* vs STR
R 1 020
R 914
R 1 162
R 1 001
R 0
R 200
R 400
R 600
R 800
R 1 000
R 1 200
R 1 400
HPF'13 STR'13 HPF'14 STR'14
ADR HPF* vs STR
* HPF YE June 2014 data for traditional F&V and Variable hotels. Including F&V conference hotels, occupancy for
YE June 2014 was at 59.7% with an ADR of R1 135.
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HPF’S OCCUPANCY CYCLE ON THE UP*
THE YEAR IN REVIEW
66.3% 66.0% 68.3%
55.6%
53.4%51.4%
57.5% 60.1%61.4%
64.8%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015e
Peak
Occupancy
* HPF YE June 2014 data for traditional F&V and Variable hotels excluding conference hotels.
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WESTIN PERFORMANCE COMPARED TO COMPSET (JULY – JUNE)
THE YEAR IN REVIEW
119.8
103.2
123.6118.1
99.9
117.9
103.2 105.5108.9
0
20
40
60
80
100
120
140
Occupancy Index (MPI) ADR Index (AGI) RevPAR Index (RGI)
FY 2012 FY 2013 FY 2014
Par vs.
Competitor
Set
Comp Set: The Mount Nelson Hotel, Southern Sun Cape Town Waterfront Hotel, Sun International Table Bay Hotel,
Radisson Blu Hotel Waterfront, Legacy The Commodore, Southern Sun the Cullinan, Hilton Cape Town City Centre
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RADISSON BLU WATERFRONT PERFORMANCE COMPARED TO COMPSET (JULY – JUNE)
THE YEAR IN REVIEW
107.7
113.2121.9
105.4
116.3122.5
114.2 112.8
128.9
0
20
40
60
80
100
120
140
Occupancy Index (MPI) ADR Index (AGI) RevPAR Index (RGI)
FY 2012 FY 2013 FY 2014
Par vs.
Competitor
Set
Comp Set: The Mount Nelson Hotel, Cape Grace Hotel, Sun International Table Bay Hotel, The Westin Cape Town ,
Legacy The Commodore, Victoria & Alfred Hotel, Cape Royale Luxury Hotel & Resort
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HOLIDAY INN SANDTON PERFORMANCE COMPARED TO COMPSET (JULY – JUNE)
THE YEAR IN REVIEW
118.4 116.2
137.6
112.9
111.4
125.8
108.3 106.8
115.7
0
20
40
60
80
100
120
140
Occupancy Index (MPI) ADR Index (AGI) RevPAR Index (RGI)
FY 2012 FY 2013 FY 2014
Par vs.
Competitor
Set
Comp Set: Sun International The Maslow Hotel, Garden Court Sandton, Protea Hotel Balalaika Sandton, Courtyard
Hotel Sandton, Southern Sun Katherine Street Sandton, Protea Hotel Wanderers, Park Inn Sandton
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CROWNE PLAZA ROSEBANK PERFORMANCE COMPARED TO COMPSET (JULY – JUNE)
THE YEAR IN REVIEW
114.4
97.9
112.0
98.1 96.7 94.898.9 97.4 96.3
0
20
40
60
80
100
120
140
Occupancy Index (MPI) ADR Index (AGI) RevPAR Index (RGI)
FY 2012 FY 2013 FY 2014
Par vs.
Competitor
Set
Comp Set: Legacy Sunnyside Park, Courtyard Hotel Rosebank, Courtyard Hotel Sandton, Protea Hotel Wanderers,
Southern Sun Hyde Park, Protea Hotel Fire & Ice Melrose Arch, Holiday Inn Johannesburg Rosebank
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26
85.2
110.5
94.1
91.0
99.4 90.5
87.5
94.9
83.0
0
20
40
60
80
100
120
140
Occupancy Index (MPI) ADR Index (AGI) RevPAR Index (RGI)
FY 2012 FY 2013 FY 2014
MOUNT GRACE PERFORMANCE COMPARED TO COMPSET (JULY – JUNE)
THE YEAR IN REVIEW
Par vs.
Competitor
Set
Comp Set: 54 On Bath, Kwa Maritane Bush Lodge, Legacy Bakubung Bush Lodge, African Pride Irene Country
Lodge, African Pride Melrose Arch Hotel
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27
106.2
89.1
94.699.2
90.1
89.4101.8
91.2
92.9
0
20
40
60
80
100
120
140
Occupancy Index (MPI) ADR Index (AGI) RevPAR Index (RGI)
FY 2012 FY 2013 FY 2014
PH VICTORIA JUNCTION PERFORMANCE COMPARED TO COMPSET (JULY – JUNE)
THE YEAR IN REVIEW
Par vs.
Competitor
Set
Comp Set: Southern Sun Cape Town Waterfront Hotel, Legacy The Commodore, Legacy The Portswood, Cape
Royale Luxury Hotel & Resort, Relais Harbour Bridge Hotel & Stes, Hilton Cape Town City Centre, Park Inn by
Radisson Cape Town Foreshore
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28
89.3
105.5
94.2
90.7
113.3102.8
122.3
109.5
133.8
0
20
40
60
80
100
120
140
Occupancy Index (MPI) ADR Index (AGI) RevPAR Index (RGI)
FY 2012 FY 2013 FY 2014
RADISSON BLU GAUTRAIN PERFORMANCE COMPARED TO COMPSET (JULY – JUNE)
THE YEAR IN REVIEW
Par vs.
Competitor
Set
Comp Set: Hilton Sandton, Southern Sun Sandton Sun Deluxe Johannesburg, Holiday Inn Sandton Rivonia
Road, Legacy The Da Vinci
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CONSOLIDATED INCOME STATEMENT
THE YEAR IN REVIEW
2010 2011 2012 2013 2014 2015e
Rooms Revenue 66% 61% 63% 64% 65% 60%
F&B Revenue 27% 27% 29% 29% 28% 35%
Other Revenue 8% 12% 8% 7% 7% 5%
Total Revenue 100% 100% 100% 100% 100% 100%
Rooms 79% 76% 77% 77% 78% 78%
F&B 26% 26% 33% 33% 33% 41%
Other 63% 72% 45% 38% 36% 33%
Departmental Profit 63% 62% 61% 62% 62% 62%
Total Other
Expenses
26% 28% 27% 27% 27% 25%
MCP 37% 34% 34% 35% 36% 37%
Fixed Expenses 4% 6% 5% 5% 4% 4%
Mgmt & Incentive
Fee
5% 5% 5% 5% 5% 6%
EBITDA 29% 24% 24% 25% 27% 27%
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Q3 AND Q4 ARE THE STRONGEST PERFORMING MONTHS IN TERMS OF EBITDA
THE YEAR IN REVIEW
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
'12 '13 '14 '15e
Q1 (Jul – Sept)
'12 '13 '14 15e
Q2 (Oct – Dec)
'12 '13 '14 15e
Q3 (Jan – Mar)
'12 '13 '14 15e
Q4 (Apr – Jun)
EB
ITD
A R’m
illion
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LEASE EXPIRY PROFILE (CY) – WEIGHTED AVERAGE EXPIRY 8.5 YEARS
THE YEAR IN REVIEW
14 16 18 20 22 24 26 28 30 32 34 36 38
Inn on the Square
Premier Hotel King David
Champagne Sports Resort
Protea Hotel - The Winkler
Protea Hotel - The Richards
The Bayshore Inn
Protea Hotel Imperial
Protea Hotel Hazyview
Protea Hotel Hluhluwe & Safaris
Holiday Inn Sandton - Rivonia Road
Kopanong Hotel & Conference Centre
Crowne Plaza Johannesburg - The Rosebank
Protea Hotel Edward
Protea Hotel Marine
Protea Hotel Richards Bay
Courtyard Arcadia
Courtyard Eastgate
Courtyard Rosebank
Courtyard Sandton
Arabella Hotel and Spa
Birchwood Executive Hotel & OR Tambo…
Mount Grace Country House & Spa
Protea Hotel Victoria Junction
Radisson Blu Gautrain
Radisson Blu Waterfront
Westin Cape Town
Initial Period Option Period(s)
32
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DEBT MATURITY PROFILE AS AT 30 JUNE 2014 (R’MILLION)
STRATEGIC PLAN
-
100
200
300
400
500
600
700
Nedbank Secured Note Unsecured Note
33
33
RADISSON BLU CAPE TOWN
• Refurbishment of public and reception areas including the conference rooms and
business centre
• Construction of a 12 - seater boardroom
• Capex spend: R8,6 million
• Estimated completion: mid-September 2014
PROPERTY PORTFOLIO
34
34
WESTIN CAPE TOWN
• Construction of outside swimming pool to enhance leisure offering
• Capex spend: R7 million
• Estimated completion: mid-September 2014
PROPERTY PORTFOLIO
35
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BIRCHWOOD HOTEL & CONFERENCE CENTRE
• Soft refurbishment of 167 rooms
• Capex spend: R13,2 million
• Estimated completion: end November 2014
PROPERTY PORTFOLIO
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36
MOUNT GRACE COUNTRY HOUSE & SPA
• Development of a Mountain Bike and a Kids Club
• Replacement of all thatched roofing across the resort
• Resurface of access road to Mount Grace
• Capex spend: R12,7 million
• To be completed in mid-December 2014
PROPERTY PORTFOLIO
Kids Club
Mountain Bike Club
37
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RADISSON BLU GAUTRAIN HOTEL
• Refurbishment of the reception level including:
› Increasing restaurant capacity
› Relocation of Bar One
› Upgrade of lounge area
• Capex spend: R3,7 million
• Estimated completion: September 2014
PROPERTY PORTFOLIO
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PROPERTIES HELD FOR SALE
• 7 non-core properties at total of R312 million (excl. break fees)
› Bayshore Inn
› PH Hazyview
› PH Hluhluwe
› PH Imperial
› Kopanong Hotel & Conference Centre
› PH The Richards
› PH The Winkler
PROPERTY PORTFOLIO
PH The Winkler
39
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SA HOSPITALITY OUTLOOK
• SA hotel development pipeline growth subdued
• Weaker Rand lead to South African leisure traveller to remain local
• International travel to benefit from weaker Rand
• Significant pressure on tourism growth through changes in visa requirements (for both
leisure and business travellers)
• Non-traditional international source markets continue above average growth
• RevPAR growth to continue driven by strong rate growth
• Renewed interest in Africa by international hotel operators
MARKET OUTLOOK
40
40
• Focus on optimization of hotel revenues
• Driving value of existing portfolio
• Minimizing rental reversion at Birchwood
• Acquisition of additional units at Radisson Blu Waterfront
THE YEAR AHEAD
• New development and acquisition opportunities
in major centres
• Expansion opportunities at existing properties in
Durban and Sandton
• Review of capital structure
41
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DISTRIBUTION OUTLOOK
• Combined distribution forecast to increase by 4.0% to 181.87c
• A-linked unit forecast to increase by 5% to 148.42c
• B-linked unit forecast to remain the same at 33.45c
• Distribution outlook impacted by R14 million net income reversion at Birchwood
• Excluding Birchwood’s anticipated rental reversion, distribution outlook would be:
› Combined distribution increase of 10.1% to 192.50c
› B-linked unit distribution increase of 31.8% to 44.08c
• Champagne rental reversion of approximately 20% expected in FY2016
THE YEAR AHEAD
42
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DISTRIBUTION TIMEFRAME
November
S M T W T F S
1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30
September
S M T W T F S
1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30
Last day to trade cum interest 5 September
Linked units trade ex-interest 8 September
Record date 12 September
Payment date 15 September
Annual general meeting 5 November
RESULTS PRESENTATION 2014
44
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The announcements and information in this presentation do not constitute an offer to sell or issue or
the solicitation of an offer to buy or acquire securities of hospitality property fund (pty) ltd ('hospitality')
or any of its affiliates in any jurisdiction or an inducement to enter into investment activity. This
presentation may include "forward-looking statements". These statements may contain the words
"anticipate", "believe", "intend", "estimate", "expect" and words of similar meaning. All statements other
than statements of historical facts included in these announcements, including, without limitation, those
regarding hospitality's financial position, business strategy, plans and objectives of management for
future operations (including development plans and objectives relating to hospitality's products and
services) are forward-looking statements. These forward-looking statements involve known and
unknown risks, uncertainties and other important factors that could cause the actual results,
performance or achievements of hospitality to be materially different from future results, performance
or achievements expressed or implied by such forward-looking statements. These forward-looking
statements are based on numerous assumptions regarding hospitality's present and future business
strategies and the environment in which hospitality will operate in the future. These forward-looking
statements speak only as at the date of these announcements. Neither hospitality nor any affiliate, nor
any of their respective officers, directors, partners, or employees claim any obligation or undertaking to
disseminate any updates or revisions to any forward-looking statements contained in these
announcements to reflect any change in hospitality's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is based. Any information contained
in these announcements on the price at which hospitality's securities have been bought or sold in the
past, or on the yield on such securities, should not be relied upon as a guide to future performance.
DISCLAIMER
