Tourism Forecast for Inland Empire

7/29/2019 Tourism Forecast for Inland Empire

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Recovery Full Speed Aheada presentation to:

U.S. + Inland Empire Lodging Industry Update

Brandon FeighnerPKF Consulting USA

September 18, 2013

Inland Empire Tourism Council

DiscoverIE Tourism Summit


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Agenda

The Recovery & What Could Derail It?Our Current Forecasts.

Regional Trends & Opportunities Inthe IEs Five Regions.

2


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3

Has the U.S. Lodging Industry

Recovered?

Smith Travel Research:

Lodging Demand Was at an

All Time Record in 2012


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What Could Derail the Recovery?

4

1. The Economy


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GDP Component Forecast

5

These matter

the most.

-2.7%

2.0%

-2.0%-8.3%

-5.4% -0.4%1.3%3.9%

1.6%

3.9%

2.8%2.8% -1.3%3.2% 1.4%4.9%

3.7%

1.2%2.8% 0.1%1.1%1.7% 2.3%2.8%3.4%4.0% 4.1%4.3%

-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

2008 2009 2010 2011 2012 2013 2014

Contributions to percentage change in gross domestic product

(GOVERNMENT) Government consumption expendituresand gross investment

TRADE (Net exports of goods and services)

BUSINESS (Gross private domestic investment)

CONSUMERS (Personal consumption expenditures)

Demand Change

Forecast

Source: BEA, Moodys Analytics, PKF-HR, STR

July 2013


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1. The Economy Not Likely Any Time Soon2. Over Building


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Limited New Supply is a Big

Part of the Story

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1. The Economy Not Likely Any Time Soon2. Over Building Not Likely Any Time Soon

3. Unpredictable Demand Shock


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Two Big Demand Shocks

in Recent Memory

-20%

-15%

-10%

-5%

0%

5%

10%

15%

U.S. Hotel Demand

Source: PKF-HR, STR 9


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1. The Economy Not Likely Any Time Soon2. Over Building Not Likely Any Time Soon

3. Unpredictable Demand Shock

Many Reasons Why WeDo Not Want This to Happen


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Where Are The Summer Headwinds?

Summer 2013:

Home Prices are Up

Credit Becoming More Available Interest Rates Going Up

J ob Growth to Continue

GDP Growth Accelerating into 2015

A Final Thought

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Hotel HorizonsAugust 2013

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2012 2013August

2012

STR

Actual

August

2012Most Recent

Update

Occupancy 60.7% 61.4% 61.9% 62.3%ADR 4.7% 4.2% 5.3% 4.2%

RevPAR 6.7% 6.8% 7.3% 5.9%

Stronger than Expected

Demand Growth

United States

ADR Recovery Slower than

Expected

Source: PKF Hospitality Research, LLC Hotel Horizons September-November 2012, 2013, Smith Travel Research


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Historic and Projected International

Visitors to the U.S.

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Arrivalsin

Millions

Forecast

Source: International Trade Administration

In-Bound International Visitation at RecordLevels


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Good News Summary

1. Supply Growth: Below Average through 2016.2. Demand Growth: Above Average through 2015.3. Occupancy: Above Average Level through 2016.4. ADR Growth: 2 xs Average through 2015.5. RevPAR Growth: 2.5 xs Average through 2015.

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2013 RevPAR Forecast

By Chain-Scale

Chain-Scale 2012 2013F 2014F

Luxury (Ritz-Carlton, Four Seasons) 7.8% 7.4% 7.5%

Upper-Upscale (Marriott, Hilton) 6.6% 6.2% 6.2%

Upscale (Courtyard, Hyatt Place) 6.7% 5.8% 6.8%

Upper-Midscale (Hampton, H.I.) 6.6% 4.4% 5.5%

Midscale (Best Western, LaQuinta) 6.0% 4.4% 5.6%Economy (Days Inn, Red Roof) 5.7% 4.9% 7.6%

All Hotels 6.8% 5.9% 7.2%

Source: PKF Hospitality Research, September-November 2013 Hotel Horizons report.


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Long

TermAverage 2008 2009 2010 2011 2012 2013F 2014F

Supply 2.0% 2.4% 2.8% 1.7% 0.5% 0.5% 0.8% 1.1%

Demand 2.1%2.5%

6.2% 7.2% 4.7% 3.0% 2.4% 3.1%

Occupancy 61.9% 59.8% 54.5% 57.5% 59.9% 61.4% 62.3% 63.5%

ADR 2.9% 3.0%8.7% 0.0% 3.8% 4.2% 4.2% 5.2%

RevPAR 2.9% 2.0% 16.7% 5.4% 8.2% 6.8% 5.9% 7.2%

National Forecast 2013/2014

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Passing Through Long

Run Average Level

Very Limited New

Supply

Source: PKF Hospitality Research, LLC Hotel Horizons September-November 2012, 2013,Smith Travel Research


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Occupancy Level Back to AverageRoom Rate Growth Stalls

17Source: Smith Travel Research

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

45.0%

50.0%

55.0%

60.0%

65.0%

1988

1988

1989

1989

1990

1990

1991

1991

1992

1992

1993

1993

1994

1994

1995

1995

1996

1996

1997

1997

1998

1998

1999

1999

2000

2000

2001

2001

2002

2002

2003

2003

2004

2004

2005

2005

2006

2006

2007

2007

2008

2008

2009

2009

2010

2010

2011

2011

2012

2012

Occupancy (4Q MovingAverage)

Average Daily Rate Change

Current Occupancy

Level

Current ADR

Change Rate


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Why Have Room Rates Been

Slow to Recover?

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While Total Lodging Demand is at Record

Levels, the Group Meeting Customer Has Yet to

Fully Return.

Why?


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Uncertainty! It Remains Elevated

Source: Scott R. Baker, Nicholas Bloom, and Steven J . Davis

Since 2008, economic policy

uncertainty has averaged about

twice the level of the previous 23years.

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Inland Empire v. National

Lodging Market (2006-12)

$0

$10

$20

$30

$40

$50

$60

$70

2006 2007 2008 2009 2010 2011 2012

United States

Inland Empire

RevPAR


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Southern California Hotels

Historical Annual Performance

Area YE 2012 2013 Est. YoY Change

Orange County 73.0% 74.4% 1.9%

Los Angeles County 75.4% 76.2% 1.1%

Inland Empire 58.3% 60.5% 3.8%

San Diego County 70.6% 70.9% 0.5%

Area YE 2012 2013 Est. YoY Change

Orange County $120.30 $127.78 6.2%

Los Angeles County $130.26 $137.02 5.2%

Inland Empire $91.79 $94.08 2.5%

San Diego County $131.76 $133.55 1.4%

Source: PKF Consulting HR Hotel Horizons, and PKF Consulting Los Angeles Trends in the Hotel Industry


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Southern California Hotels

Forecasted Performance

Area 2013 Est. 2014 Forecast YoY Change

Orange County 74.4% 75.0% 0.7%Los Angeles County 76.2% 76.8% 0.8%

Inland Empire 60.5% 62.9% 4.0%

San Diego County 70.9% 71.2% 0.4%

Area 2013 Est. 2014 Forecast YoY Change

Orange County $127.78 $135.79 6.3%

Los Angeles County $137.02 $146.24 6.7%

Inland Empire $94.08 $97.38 3.5%

San Diego County $133.55 $138.06 3.4%

Source: PKF Consulting HR Hotel Horizons, and PKF Consulting Los Angeles Trends in the Hotel Industry


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Inland Empire Outlook

Opportunities

Things will only get betterDeclining vacancy in Industrial/Office50,000+ jobs created 2012-13

New Riverside CC and Ontario CCManagement

Challenges

Older hotel productAir access/Local airport controlMarketing a large and diverse local


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Summary

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3. Industry growth, while limited regionallyshould accelerate in the IE in coming years.

2. The fundamentals are solid nationally andimproving regionally.

1. No threats from the factors that historicallyhave brought an end to the good times.

4. Above average room rate increases should beachieved as demand strengthens or peaksacross the region.


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Thank You

www.pkfc.com

[email protected]

VicePresident

PKFConsultingUSA,LosAngeles

(213)861 3312

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Tourism Forecast for Inland Empire

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