The View from Where You Sit - Hunter Hotel Conference PowerPo… · The View From Where You Sit...
Transcript of The View from Where You Sit - Hunter Hotel Conference PowerPo… · The View From Where You Sit...
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
A View From The Cheap Seats
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
A View From The Cheap Seats
These markets will see an average supply growth rate of 5% during 2015 & 2016 (vs. the national average of 1.6%).
Many markets in the middle of the country depend on the oil industry for economic growth.
Reasons for below average growth:
U.S. Will BenefitOil Patch Will be Hurt
Energy employment as a percent of total
A View From The Cheap Seats
These markets will see an average supply growth rate of 5% during 2015 & 2016 (vs. the national average of 1.6%).
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.
Reasons for below average growth:
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
A View From The Cheap Seats
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
Increasing Threat from Airbnb?
New York City
New York City
Source: Insideairbnb.com
Increasing Threat from Airbnb?
76% of NYC Listings are less than $200
Price Levels
# of UnitsNew York City
Source: Insideairbnb.com
Increasing Threat from Airbnb?
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