The View from Where You Sit - Hunter Hotel Conference PowerPo… · The View From Where You Sit Colors represent 2015 year over year change in RevPAR Source: PKF ... Increasing Threat

Persistence at the Peak

The View from Where You Sit

March 25, 2015

Presented By:

Mark Woodworth, Senior Managing DirectorPKF Hospitality Research, a CBRE Company

Real RevPAR ChangeWhat We Learn From Past Cycles

0.5%0.4%

‐1.4%

‐6.7%

0.6%1.8%

4.7%4.5%

5.3%4.9%3.3%

1.2%

3.4%

‐12.7%

‐6.1%

‐4.1%

5.9%5.3%

3.0%

‐4.6%

3.9%3.8%4.1%

4.4%6.6% 6.7%

3.8%

1.3%0.2%

‐0.1%

‐20.0%

‐15.0%

‐10.0%

‐5.0%

0.0%

5.0%

10.0%

RealADR^

Occ

Supply^

Party like it is 1995!

Lower Supply Growth Leads to Higher RevPAR Increases this Time Around

Source: PKF Hospitality Research– Hotel Horizons® March‐May 2014, 2015, STR, Inc.

ECONOMETRIC ADVISORS

Our Forecasts

‐2.7%

2.0%

‐1.9%

‐8.2%

‐5.4%

‐0.5%

1.3%

3.9%1.7%

3.9%

2.7% 2.5%

‐1.5%

2.9%

0.8%

4.6%

2.3%

1.6%2.5%

0.1%

2.7%

1.8%

4.5% 3.5%

‐2.1%

4.6% 5.0%

2.3%3.1%

3.6% 3.8%3.9%

‐10

‐8

‐6

‐4

‐2

0

2

4

6

8

10

I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV

2008 2009 2010 2011 2012 2013 2014 2015

(GOVERNMENT) Government consumption expenditures and grossinvestmentTRADE (Net exports of goods and services)

BUSINESS (Gross private domestic investment)

CONSUMERS (Personal consumption expenditures)

Lodging Demand

These matter the most.

GDP Component Forecast

Source: BEA, Moody’s Analytics, PKF‐ HR Hotel Horizons: March – May 2015, STR, Inc.

The Drivers Most Important toHotels Remain Favorable

What Did We Say a Year Ago?

2014 2015March2014

STR Actual

April2014

Most RecentUpdate

Occupancy 1.7% 3.6% 1.3% 1.9%

ADR 4.9% 4.5% 5.7% 5.3%

RevPAR 6.6% 8.3% 7.0% 7.3%

Source: PKF Hospitality Research– Hotel Horizons® March‐May 2014, 2015, STR, Inc.

Stronger Demand Essentially the Same

National Forecast

Long Run Average 2012 2013 2014 2015F 2016F

Supply 1.9% 0.5% 0.7% 0.9% 1.2% 1.7%

Demand 2.1% 3.0% 2.2% 4.5% 3.1% 1.9%

Occupancy 61.9% 61.4% 62.2% 64.4% 65.8%

ADR 2.9% 4.2% 3.9% 4.6% 5.3% 6.3%

RevPAR 2.9% 6.8% 5.4% 8.3% 7.3% 6.5%

ExpensePAR 2.7% 3.2% 3.7% 4.7% (p) 3.7% 3.7%

RevPAR driven by ADR Growth

Source: PKF Hospitality Research ‐ Hotel Horizons® March‐May, 2015, STR, Inc.

65.6%

RevPAR Forecast by Chain Scale

Chain-Scale 2013 2014 2015F

Luxury* 7.6% 6.5% 7.2%

Upper-Upscale* 5.8% 7.5% 8.0%

Upscale* 5.5% 8.4% 8.8%

Upper-Midscale 4.2% 8.2% 7.2%

Midscale 4.1% 8.3% 7.0%

Economy 4.7% 8.7% 6.7%

All Hotels 5.4% 8.3% 7.3%

Note‐ * ‐ Record Occupancy Level in 2014

Source: PKF Hospitality Research, March – May 2015 Hotel Horizons®, STR, Inc.

The View From Where You Sit

Colors represent 2015 year over year change in RevPAR

Source: PKF Hospitality Research, March – May 2015 Hotel Horizons®

12 36 11

A View From The Good SeatsTop Markets for RevPAR Growth 2014‐2016

A View From The Good Seats

These markets will see an average supply growth rate of 2% during 2015 & 2016; only slightly higher than the national average.

Employment growth of 2.5% compared to 2.0% for the Nation.

Most cities have an existing or expanding concentration of technology employment.

Many markets are benefiting from reduced gas prices.

Reasons for above average growth

A View From The Good Seats

Top Markets for RevPAR Growth 2014‐2019

A Longer Term Perspective

Downward Trend in Oil Prices

0

20

40

60

80

100

120

140

160

1998 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: US. Energy Information Administration as of 3/24/2015

West Texas Intermediate (WTI) 1998 – 2015, $ per barrel

58% Decline since June, 2014

Non‐Oil South, Mountain StatesWould Gain

Gasoline expenditure share of disposable income, % 2012

A View From The Cheap Seats

Bottom Markets for RevPAR Growth 2014‐2016


These markets will see an average supply growth rate of 5% during 2015 & 2016 (vs. the national average of 1.6%).

Reasons for below average growth:

Where is Supply a Concern?

Increase in competition may lead to weak rate growth.

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0%

Columbus

Cleveland

Charleston

Houston

West Palm Beach

Miami

Omaha

Pittsburgh

Austin

New York

Top 10 Markets for Supply Growth in 2015



Many markets in the middle of the country depend on the oil industry for economic growth.


U.S. Will BenefitOil Patch Will be Hurt

Energy employment as a percent of total



Many markets in the middle of the country depend on the oil industry for economic growth.

The effect of the strong dollar vs. international currencies will hurt international travel demand in Gateway Cities.


Effect of the Strong DollarExchange Rate Index and International Travel Spending

80

85

90

95

100

105

110

115

5,000

7,000

9,000

11,000

13,000

15,000

17,000

19,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

International Travel Spending(Left Axis) FRB Broad Index (Right Axis)$ (Millions) Index

Sources: Federal Reserve Board, International Trade AssociationNote: Quarterly data in real terms, '97 = 100

Effect of the Strong DollarOn Lodging Demand

PKF‐HR’s 2013 Paper by PKF’s Corgel, Lane, & Walls, “How currency exchange rates affect the demand for U.S. hotel rooms”.

Exchange rates strongly influence hotel demand in luxury, upper‐upscale, and upscale segments, with a much weaker relationship among lower‐price hotels.

The exchange rate effect is strongest for upper‐price hotels in gateway cities, i.e. Boston, Chicago, Los Angeles, Miami, New York, San Francisco, Washington DC.

U.S. Hotels become more expensive

Gateway City Q1 2015RevPAR Change

• Year‐to‐Date RevPAR Growth Versus Project 2015 Q1 Growth

Source: STR, Inc., Hotel Horizons® March‐May 2015 Edition

‐10.0%

‐5.0%

0.0%

5.0%

10.0%

15.0%

San Francisco Miami Chicago Boston Los Angeles Washington DC Oahu New York

RevPAR Growth YTD 2015 Q1 RevPAR Forecast


Lagging Markets for RevPAR Growth 2014‐2019

A Longer Term Perspective

Impact on Our Baseline Forecast

Low Inflation*(‐) ADRLow Oil

Higher Income &GDP(+) Demand

(+) ADR

No Change in ADR

Higher Occupancy

Slightly Higher RevPAR

Source: PKF Hospitality Research

* ‐ PKF‐HR econometric research shows a 1:1 relationship between change in inflation and ADR during expansionary periods, holding the effect of occupancy constant

Increasing Threat from Airbnb?

New York City• Roughly 30,000 Airbnb

Listings• Almost double the

number of units from last year

• New data now available on 2 cities that we have started to analyze

Source: Insideairbnb.com


New York City

New York City



76% of NYC Listings are less than $200

Price Levels

# of UnitsNew York City



Airbnb Units as a Percent of Hotel Supply

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

New

York

Austin

Los A

ngeles

Miami

San Francisco

Oakland

Long

Island

Portland

San Jose‐Santa Cruz

Seattle

Boston

Salt Lake City

Oahu

New

Orle

ans

Anaheim

San Diego

Fort Laude

rdale

Denver

Phoe

nix

Washington DC

Tucson

Philade

lphia

Raleigh‐Du

rham

Nashville

Chicago

West P

alm Beach

Orla

ndo

Charleston

Savann

ahNew

ark

Louisville

Baltimore

Pittsburgh

Albu

querqu

eTampa

Minne

apolis

Atlanta

Hartford

Sacram

ento

Cleveland

Charlotte

Richmon

dHo

uston

Indianapolis

Dallas

Fort W

orth

Norfolk‐VA Be

ach

Mem

phis

Kansas City

Columbu

sDe

troit

Jacksonville

San An

tonio

Cincinnati

Saint Lou

is

18 Markets above 5%

Source: PKF Hospitality Research, Airbnb

Data indicates that increases in Airbnb supply negatively impacts

ADR growth.

Happy Thoughts!

In 2015, the Hotel Industry will Achieve:

An occupancy level of 65.6 percent, the highest level of occupancy ever recorded by STR, Inc.

Record occupancy levels in 20 of the 59 markets in the Hotel Horizons®universe (17 made it in 2014).

Above long run average occupancy levels in 54 of 59 markets .

Highest ADR level ever in 55 of these 59 markets.

A profit increase of 13.2%, which will be an all time high dollar PAR.

ECONOMETRIC ADVISORS

Thanks For Your Time3475 Lenox Road, Suite 720Atlanta, GA 30326Tel: +1 404 842 1150www.pkfc.com

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The View from Where You Sit - Hunter Hotel Conference PowerPo… · The View From Where You Sit Colors represent 2015 year over year change in RevPAR Source: PKF ... Increasing Threat