cbre hotels & pkf hospitality research · 2020-06-30 · hotel sector update & forecast ....

HOTEL SECTOR UPDATE & FORECAST

CBRE HOTELS & PKF HOSPITALITY RESEARCH MAY 2015

2

A Year Ago

Our Opinion THE HOTEL MARKET CYCLE

Rapid Development

Occupancy Declines, ADR Follows

Development at Minimum

Levels

Lodging Decline, Leads Other Sectors

Occupancy Recovers

ADR and Margins Recover

Development Picks Up

Development Slows

Lodging Recovers, Lags Other Sectors (Not this

Time!)

Long Run Occupancy

Accelerated Development ?

Equilibrium ADR

U.S. is Here

2014

2015

2016/7

3

Party Like it is 1995!

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^

Lower Supply Growth Leads to Higher RevPAR Increases this Time Around

REAL REVPAR CHANGE – WHAT WE LEARN FROM PAST CYCLES

Forecast

QUESTION:

Things to Worry About

What Should We be Worried About?

5

WHAT SHOULD WE BE WORRIED ABOUT?

5

This Guy?

6

WHAT COULD DERAIL THE GOOD TIMES?

4. Oil/Energy Price Increases

5. Over Building

1. The Economy

2. Asset Price Bubble

3. Unpredictable Demand Shock

Okay, moving to good

Stable?

?

Decreasing Risk

Mostly no, some yes.

7

Low Inflation* (-) ADR Low 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

IMPACT ON OUR BASELINE FORECAST

OUR FORECASTS OUR VIEW:

The Very Good Will

Get Even Better

9

2014-2016 NATIONAL FORECAST – ALL U.S. HOTELS

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% 65.6% 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%

RevPAR driven by ADR Growth

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

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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

11

Upper-Priced Chains Approaching Peak Growth this Year 2015 CHAIN SCALE FORECASTS

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

Economy Midscale Upper Midscale Upscale Upper Upscale Luxury

Occupancy Change ADR Change

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

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(100,000)

(50,000)

-

50,000

100,000

150,000

200,000 Independents Economy Midscale Upper Midscale Upscale Upper Upscale Luxury

Components of the Net Annual Change in Available Supply U.S. SUPPLY CHANGE

Source: PKF Hospitality Research, STR, Inc.

Upper Upscale: 11.7% Upscale: 15.6%

Upper Upscale: 11.4% Upscale: 19.4%

Upper Upscale: 12.6% Upscale: 32.9%

Upper Upscale: 17.3% Upscale: 49.9%

Upper Upscale: 11.7% Upscale: 30.4% 27.3% 30.8% 45.5% 67.2%

42.1%

TRACKING THE BUSINESS CYLCES OF U.S. HOTELS

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A Look at Past Cycles – 1991 Recession REAL ADR PERFORMANCE – U.S.

1997 Q1

1990 Q2

54.0%

56.0%

58.0%

60.0%

62.0%

64.0%

66.0%

$95.00 $100.00 $105.00 $110.00 $115.00 $120.00 $125.00 $130.00

Occupancy

Level

Real Average Daily Rate Level (2014 $’s)

Duration: 6 Years – 3 Quarters

The Path and Duration of Occupancy and Real ADR Recovery

Source: PKF Hospitality Research, STR, Inc.

15

A Look at Past Cycles – 2001 Recession REAL ADR PERFORMANCE – U.S.

Occupancy

Level

Real Average Daily Rate Level (2014 $’s)

Duration: 6 Years – 0 Quarters

The Path and Duration of Occupancy and Real ADR Recovery

54.0%

56.0%

58.0%

60.0%

62.0%

64.0%

66.0%

$95.00 $100.00 $105.00 $110.00 $115.00 $120.00 $125.00 $130.00

Start: Q1 2001

End: Q1 2007

Source: PKF Hospitality Research, STR, Inc.

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Current Cycle REAL ADR PERFORMANCE – U.S.

54.0%

56.0%

58.0%

60.0%

62.0%

64.0%

66.0%

$95.00 $100.00 $105.00 $110.00 $115.00 $120.00 $125.00 $130.00

Occupancy

Level

Real Average Daily Rate Level (2014 $’s)

The Path and Duration of Occupancy and Real ADR Recovery

Present

Start - 2008 Q1

Source: PKF Hospitality Research, STR, Inc.

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Current Cycle – cont’d REAL ADR PERFORMANCE – U.S.

54.0%

56.0%

58.0%

60.0%

62.0%

64.0%

66.0%

$95.00 $100.00 $105.00 $110.00 $115.00 $120.00 $125.00 $130.00

Occupancy

Level

Real Average Daily Rate Level (2014 $’s)

The Path and Duration of Occupancy and Real ADR Recovery

2014 Q4

Start - 2008 Q1

Current Cycle – March 2015 Forecast

End - 2016 Q2

Forecast Duration: 8.5 Years

Forecast

Source: PKF Hospitality Research, STR, Inc.

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Current Cycle – cont’d REAL ADR PERFORMANCE – U.S.

54.0%

56.0%

58.0%

60.0%

62.0%

64.0%

66.0%

$95.00 $100.00 $105.00 $110.00 $115.00 $120.00 $125.00 $130.00

Occupancy

Level

Real Average Daily Rate Level (2014 $’s)

The Path and Duration of Occupancy and Real ADR Recovery

2014 Q4

Start - 2008 Q1

Current Cycle – March 2015 Forecast

End - 2016 Q2

Forecast

Source: PKF Hospitality Research, STR, Inc.

CycleCycle Start

Cycle Peak

At Real ADR

Recovery Delta1990 64.4% 64.8% 64.3% -0.1%2001 63.1% 63.5% 62.9% -0.2%2008 62.3% 65.8% 65.4% 3.1%

Occupancy Level

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PROFIT TRENDS

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Percent of Hotels** Posting an Increase in Total Revenue or Profits From Prior Year MORE HOTELS ENJOYING GROWTH IN PROFITS*

Source: PKF Hospitality Research, a CBRE Company, Trends® in the Hotel Industry reports.

(*) - Before deductions for capital reserves, rent, interest, income taxes, depreciation, and amortization.

(**) - Trends® in the Hotel Industry sample.

70.2%

47.9%

4.5%

67.4%

80.8% 77.1% 79.3%

86.2%

61.6%

44.4%

8.6%

58.9%

72.3% 70.4% 70.4% 78.2%

0%

20%

40%

60%

80%

100%

2007 2008 2009 2010 2011 2012 2013 2014 Revenue Profits**

21

REVPAR COMPONENTS AND NOI* CHANGE

Source: PKF Hospitality Research, a CBRE Company, 2015 Trends® in the Hotel Industry report.

(*) - Before deductions for capital reserve, rent, interest, income taxes, depreciation, and amortization

-40%

-30%

-20%

-10%

0%

10%

20%

Occupancy A.D.R. Change in NOI*

22

$17,

042

$16,

394

$10,

591

$11,

629

$13,

105

$14,

442

$15,

894

$17,

849

$20,

243

$22,

705

$0

$5,000

$10,000

$15,000

$20,000

$25,000

Dolla

rs P

er A

vaila

ble

Room

2010 – 2016F CAGR: 11.8%

Note: * Before deductions for capital reserve, rent, interest, income taxes, depreciation, and amortization.

Source: PKF Hospitality Research, a CBRE Company, Trends® in the Hotel Industry, March 2014 Hotel Horizons® forecast

U.S. HOTEL PERFORMANCE Nominal Dollar Operating Profits* Six Years of Double Digit Growth

23

U.S. HOTEL PERFORMANCE Constant 2014 Dollar Operating Profits* Real Recovery Not Until 2015

$19,

023

$18,

376

$11,

577

$12,

538

$13,

729

$14,

841

$16,

125

$17,

849

$20,

133

$22,

056

$0

$5,000

$10,000

$15,000

$20,000

$25,000

Dol

lars

Per

Ava

ilabl

e R

oom

Note: * Before deductions for capital reserve, rent, interest, income taxes, depreciation, and amortization.

Source: PKF Hospitality Research, a CBRE Company, Trends® in the Hotel Industry, March 2014 Hotel Horizons® forecast

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

2. The fundamentals are solid across the vast majority of markets.

3. Elevated industry growth will persist comfortably through 2016 and likely beyond.

4. High occupancy levels will provide the leverage needed to achieve large real ADR increases for the next two-three years.

5. Competition for building materials and labor will continue to present challenges for developers in most markets. Below average hotel construction will be the result for the next three years.

6. Above long run average occupancy levels will lead to strong profit growth comfortably through 2016, enough to off-set increasing labor costs.

7. It is a great time to be in the hotel business!

The Very Good ……Will Get Even Better SUMMARY THOUGHTS

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THANKS FOR YOUR TIME

CBRE HOTELS & PKF HOSPITALITY

RESEARCH

mark.woodworth@pkfc.com MARK WOODWORTH