Midwest Lodging Investors Summit U.S. Hotel Industry Overview
Jeff Higley VP/Editorial Director
STR/HotelNewsNow.com
www.hotelnewsnow.com Click on “Hotel Data Presentations”
(free registration required)
3
Supply / Demand Drive Results. Pricing Power Is Back (?)
% Change
• Room Supply* 727 mm 0.3%
• Room Demand* 430 mm 3.5%
• Occupancy 59% 3.2%
• ADR $104 4.2%
• RevPAR $62 7.5%
• Room Revenue* $45 bn 7.9%
YTD May 2012, Total US Results * All Time High
4
YTD May 2012:
Highest Demand - EVER
(430 Million Rooms Sold)
5
-8
-4
0
4
8
1990 2000 2010
Supply Demand
Demand Growth Expected To Revert To Mean. Supply Not An Issue
-6.9%
-0.9%
- 4.7%
*Total US, Supply & Demand % Change, 12 MMA 1990 – 5/2012
8.0%
4.0%
6
-10
-5
0
5
1990 2000 2010
Demand ADR
ADR Rebound Trajectory Flattens Out (Too?) Early
-6.9%
-4.7%
-0.9%
-4.6%
-0.2%
-8.7%
4.0%
*Total US, ADR & Demand % Change, 12 MMA 1990 – 5/2012
7
2000 2002 2004 2006 2008 2010 2012F
Nominal ADR
2000 / 2007 Grown by CPI
2000 ADR Grown By CPI
* Total US, ADR $ and Inflation Adjusted ADR $, 2000 – 2013F 2000 – 2010 CPI from bls.gov, 2011 – 2013 CPI from Blue Chip Economic Indicators
$85
$101
$104
$85
$107 $109
$107
$117
2013F
Inflation Adjusted ADRs Well Out Of Reach
2007 ADR Grown By CPI
8
3.1
2.6
3.9
2.9
4.1
3.7
4.0
3.5
4.2 4.0
4.4
3.5
4.2 4.1 3.9
3.7 3.6
Jan-11 Jul-11 Jan-12
* Total US, ADR $ % Change, by Month, 1/11 – 5/12
ADRs Are Growing (But Comps Get More Difficult)
9
Chicago & Regional Markets
10
Chicago - Key Performance Statistics May YTD 2012
% Change
• Hotels 716
• Rooms 108k -0.4%
• Rooms Sold 10 million 6.0%
• Occupancy 60.5% 6.4%
• ADR $113.74 5.7%
• RevPAR $68.77 12.5%
• Room Revenue $1.1 billion 12.1%
11
30
40
50
60
70
80
J F M A M J J A S O N D
20 Yr Avg 2012
Chicago Occupancy Seasonality 20 Year Average vs. 2012 May YTD
2008 Smith Travel Research, Inc.
76.3 % - 20 Year June Average
64.6% - 20 year average annual occupancy
12
-15
-10
-5
0
5
10
15
2000 2002 2004 2006 2008 2010 2012
Supply % Change
Demand % Change
Demand Returning to Sustainable Levels – Supply Flat
4.2%
-9.3%
Total Chicago Market Twelve Month Moving Average 2000 thru May 2012
13
-20
-15
-10
-5
0
5
10
15
2000 2002 2004 2006 2008 2010 2012
Occ % Chg
ADR % Chg
Total Chicago Market Occupancy/ADR Percent Change Twelve Month Moving Average – 2000 to May 2012
-7.2%
4.7%
4.6%
-13.4%
-12.4%
-15.0%
14
5.9
5.3
11.5
8.0
6.4
15.0
0
5
10
15
20
Occ ADR RevPAR
Weekday Weekend
Chicago Weekday / Weekend Percent Change May YTD 2012
Weekends = Friday / Saturday
15
$90
$100
$110
$120
$130
$140
2000 2002 2004 2006 2008 2010 2012
60 Months
44 Months
Chicago ADR, 12 MMA, Jan ’00 – May 2012
Chicago ADR Recovery - 2 Years Away?
-$10.56
-$23.42
16
Chicago Quarterly RevPAR Percent Change: 2010 – 1Q 2012
-6.4
11.9 13.0 13.0
12.0
10.1
6.6 8.3
14.5
10.4
-10
-5
0
5
10
15
20
1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 2Q 11 3Q 11 4Q 11 1Q 12 Apr-May
17
38.3
16.9
13.7
12.8
11.4
3.5 4.0
UPPER UPSCALE
UPSCALE
INDEPENDENT
LUXURY
UPPER MIDSCALE
MIDSCALE
ECONOMY
Chicago Chain Scales - Revenue Share (%) Twelve Months Ending May 2012
Annual Chicago revenue room = $2.9 billion
18
5.5
3.3 2.9
6.9
3.8
1.1
6.5
3.1
5.6
4.8
0.9
3.8
0
5
10
Luxury Upper Upscale
Upscale Upper Mid Midscale Economy
Occupancy ADR
Chicago Chain Scales Occupancy/ADR Percent Change First Quarter 2012
19
Key Regional Markets: Occupancy May YTD 2012
% Change
• Chicago 60.5% 6.4%
• Cincinnati 52.8% 2.3%
• Cleveland 54.9% 6.8%
• Columbus 59.2% 4.6%
• Detroit 57.5% 3.0%
• Indianapolis 58.4% 8.8%
• Kansas City 53.9% 2.1%
• Memphis 61.0% 6.9%
• Milwaukee 54.0% 1.8%
• Minneapolis 58.2% -0.2%
• Nashville 64.8% 10.6%
• St. Louis 57.2% 4.6%
20
Key Regional Markets: ADR May YTD 2012
% Change
• Chicago $113.74 5.7%
• Cincinnati $83.93 2.0%
• Cleveland $87.29 3.8%
• Columbus $84.95 5.0%
• Detroit $79.25 2.9%
• Indianapolis $98.01 15.5%
• Kansas City $83.94 5.2%
• Memphis $78.22 3.6%
• Milwaukee $88.42 4.4%
• Minneapolis $94.70 3.8%
• Nashville $95.38 3.9%
• St. Louis $84.79 5.1%
21
Key Regional Markets: RevPAR May YTD 2012
% Change
• Chicago $68.66 12.5%
• Cincinnati $44.33 3.3%
• Cleveland $47.90 10.8%
• Columbus $50.27 9.8%
• Detroit $45.53 6.0%
• Indianapolis $57.22 25.6%
• Kansas City $45.28 7.4%
• Memphis $47.68 10.8%
• Milwaukee $47.76 6.4%
• Minneapolis $55.14 3.6%
• Nashville $61.76 14.9%
• St. Louis $48.51 9.9%
22
Chicago Sub Markets
23
24
-2.5
0.4
-1.8 -2.4
0.2 0.3
1.5
0.0 -0.3
7.0
2.0
3.9
10.0
7.1 6.1
10.1
-5
0
5
10
15
North Northwest OHare Dupage County
South Downtown Lake County
Southwest
Supply Demand
Chicago Sub Markets Supply/Demand Percent Change May YTD 2012
25
2.2
6.6
3.8
6.5
9.8
6.8
4.5
10.2
6.3
2.8
4.7
5.7
2.3
6.6 5.8
2.0
0
5
10
15
North Northwest OHare Dupage County
South Downtown Lake County
Southwest
Occupancy ADR
Chicago Sub Markets Occupancy/ADR Percent Change May YTD 2012
26
53.4
55.4
56.8
57.1
58.7
59.0
63.2
65.9
40 50 60 70
Northwest
Southwest
Lake County
DuPage County
South
North
OHare
Downtown
Chicago Sub Markets Occupancy Percent May YTD 2012
27
$74.33
$75.48
$75.57
$85.36
$86.89
$91.04
$100.71
$160.75
$50 $75 $100 $125 $150 $175
South
Northwest
Southwest
Lake County
DuPage County
North
Ohare
Chicago Downtown
Chicago Sub Markets ADR May YTD 2012
28
Chicago Projections
29
Chicago Pipeline Outlook – Construction and Final Planning May 2012
Phase May 2012
In Construction 1,438
Final Planning 1,755
Active Pipeline 3,193
• Current Stock: 107,647 Rooms • Earliest new supply is scheduled for June 2013 (Hyatt McCormick 460-room tower) • Flat supply for next 12 months
30
-0.2
3.7 4.0 4.7
8.8
-0.2
3.4 3.6
4.9
8.6
1.2
2.8
1.5
4.1
5.7
-5
0
5
10
Supply Demand Occ ADR RevPAR
2011 2012 F 2013 F
Chicago Key Performance Indicators Percent Change Full Year 2011 Actual & 2012 / 2013 Forecast
31
Chicago Occupancy Percent Full Year Actual 2007 – 2011 / 2012 & 2013 Forecast
67.5
63.1
56.2
61.7
64.2
66.5 67.5
55
60
65
70
75
2007 2008 2009 2010 2011 20012F 2013F
32
$129.75 $132.20
$113.50 $112.82
$118.11
$123.80
$128.89
$75
$100
$125
$150
2007 2008 2009 2010 2011 2012F 2013F
Chicago
Average Daily Rate Full Year Actual 2007 – 2011 / 2012 & 2013 Forecast
33
U.S. Markets
34
Top 25 26 - 50 51 - 75 76 - 94
Top 94 Metro Markets By Size
Orlando, FL
Chicago, IL
Washington, DC-MD-VA
New York, NY
Los Angeles-Long Beach, CA
Atlanta, GA
Dallas, TX
Houston, TX
Phoenix, AZ
San Diego, CA
Anaheim-Santa Ana, CA
San Francisco/San Mateo, CA
Boston, MA
Miami-Hialeah, FL
Tampa-St Petersburg, FL
Philadelphia, PA-NJ
Detroit, MI
Seattle, WA
Denver, CO
St Louis, MO-IL
Norfolk-Virginia Beach, VA
Minneapolis-St Paul, MN-WI
New Orleans, LA
Nashville, TN
Oahu Island, HI
San Antonio, TX
Riverside-San Bernardino, CA
Baltimore, MD
Kansas City, MO-KS
Charlotte, NC-SC
Indianapolis, IN
Fort Worth-Arlington, TX
Knoxville, TN
Fort Lauderdale, FL
Austin, TX
San Jose-Santa Cruz, CA
Myrtle Beach, SC
Cincinnati, OH-KY-IN
Jacksonville, FL
Raleigh-Durham-Chapel Hill, NC
Portland, OR
Columbus, OH
Sacramento, CA
Oakland, CA
Pittsburgh, PA
Oklahoma City, OK
Memphis, TN-AR-MS
Richmond-Petersburg, VA
Cleveland, OH
Salt Lake City-Ogden, UT
Louisville, KY-IN
Greensboro-Winston Salem, NC
Newark, NJ
Charleston, SC
Albuquerque, NM
Birmingham, AL
Tucson, AZ
Milwaukee, WI
West Palm Beach-Boca Raton, FL
Greenville-Spartanburg, SC
Savannah, GA
Tulsa, OK
Maui Island, HI
Long Island
Daytona Beach, FL
Harrisburg, PA
Hawaii-Kauai Islands
Omaha, NE
Hartford, CT
Buffalo, NY
Scranton--Wilkes-Barre, PA
Mobile, AL
Little Rock, AR
Fort Myers, FL
Albany/Schenectady, NY
Columbia, SC
Dayton-Springfield, OH
Grand Rapids, MI
Lexington, KY
Des Moines, IA
Colorado Springs, CO
Jackson, MS
Rochester, NY
Macon/Warner Robbins, GA
Bergen-Passaic, NJ
Chattanooga, TN-GA
Allentown-Reading, PA
Florida Keys
Augusta, GA-SC
Madison, WI
Melbourne-Titusville, FL
Sarasota-Bradenton, FL
Syracuse, NY
35
-10
-5
0
5
10
2002 2007 2012
Top 25 26-50 51-75 76-94
Demand Performance Distinctly Different This Time
*Metro markets by size, in 25 market increments, Demand % Change, 12 MMA 1990 – 5/2012
36
-12
-8
-4
0
4
8
12
2002 2007 2012
Top 25 26-50 51-75 76-94
ADR Swings in Top 25 Markets Most Erratic
*Metro markets by size, in 25 market increments, ADR % Change, 12 MMA 1990 – 5/2012
37
Top 25 Markets Occupancy Percent Change May 2012 YTD
-2
0
2
4
6
8
10
12
38
Top 25 Markets ADR Percent Change May 2012 YTD
-2
0
2
4
6
8
10
12
39
Top 25 Markets RevPAR Percent Change May 2012 YTD
-2 0 2 4 6 8
10 12 14 16 18
40
Chain Scale Review
41
STR Chain Scales Selected chains from each segment www.HotelNewsNow.com/chainscales.pdf
• Luxury – W Hotel, Four Seasons, Ritz Carlton
• Upper Upscale – Sheraton, Hilton, Marriott, Hyatt Regency
• Upscale – Best Western Premier, Courtyard, Hilton Garden Inn, Crowne Plaza
• Upper Midscale – Best Western Plus, Lexington, Hampton Inn, Holiday Inn, Fairfield Inn, Comfort Inn
• Midscale – Best Western, La Quinta Inns & Suites, Quality Inn, Wingate
• Economy – Americas Best Value Inn, Red Roof Inns, Days Inn, Super 8, Econolodge
42
Scales: Strong Demand Growth, Supply Not An Issue
-0.9
0.2
1.5 1.8
0.6
-0.2
2.8 3.1
4.3
5.8
3.9
1.7
Luxury Upper Upscale Upscale Upper Midscale Midscale Economy
Supply
Demand
*Supply / Demand % Change, by Scale, YTD May‘12 Upper Mid / Midscale: Same Store Basis to Account for Best Western Reclassification
43
Good Beginning to 2012
3.7
2.9 2.8
3.9
3.3
2.0
4.9
4.0 4.3
3.8
3.2
4.3
Luxury Upper Upscale Upscale Upper Midscale Midscale Economy
Occupancy
ADR
*OCC / ADR % Change, by Scale, YTD May ‘12 Upper Mid / Midscale: Same Store Basis to Account for Best Western Reclassification
44
Upper End Sells 7 out of 10 Rooms Every Night
72.5
70.5 69.6
65.6
59.0
57.0
72.1
70.1 70.3
62.2
54.3 53.9
Luxury Upper Upscale Upscale Upper Midscale*
Midscale* Economy
2007 12 Months end 5/12
*Absolute OCC %, by Scale, YE 2007 & 12 Months ending 5/12 Upper Mid / Midscale: Same Store Basis to Account for Best Western Reclassification
45
ADR Growth Is Strong – But Not Strong Enough (...yet)
$293
$159
$121
$94
$75
$54
$266
$150
$114 $95
$73
$51
Luxury Upper Upscale Upscale Upper Midscale*
Midscale* Economy
2007
12 Months end 5/12
*Absolute ADR $, by Scale, YE 2007 & 12 Months ending 5/12 Upper Mid / Midscale: Same Store Basis to Account for Best Western Reclassification
46
Segmentation Review
47
Transient Demand Breaks Records, But....
10
12.5
15
17.5
20
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2007 2011 2012
*Transient Demand in Millions of Rooms; 2007, 2011, 2012 Data is for upper tier hotels only (LUX & UU chains, & Upper Tier independents)
Mill
ion
s
48
… Transient ADR Still Lags 2007 Results
$140
$150
$160
$170
$180
$190
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2007 2011 2012
*Transient ADR $, 2007, 2011, 2012 Data is for upper tier hotels only (LUX & UU chains, & Upper Tier independents)
49
5.3
4.6
6.4
5.4
5.9
5.1 5.0
3.7
4.7 4.3
4.6
3.7 3.8 3.4
4.0
5.5
4.2
Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12
*Transient ADR % by Month, 1/11 – 5/12 Data is for upper tier hotels only (LUX & UU chains, & Upper Tier independents)
We Expect Transient ADR Growth To Continue
50
Group Demand Has Not Changed Over Time, But…
4
6
8
10
12
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Millio
ns
2007 2011 2012
*Group Demand in Millions of Rooms, 2007, 2011, 2012 Data is for upper tier hotels only (LUX & UU chains, & Upper Tier independents)
51
… Group ADRs Still Depressed (& Could Dampen Future Absolute ADRs)
$130
$140
$150
$160
$170
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2008 2011 2012
*Group ADR $, 2008, 2011, 2012 Data is for upper tier hotels only (LUX & UU chains, & Upper Tier independents)
52
2.6 2.4 2.4
0.3
3.7
2.0 2.0 1.7
3.0 2.7
3.7
-0.5
2.8 2.6
2.2
4.2
2.3
Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12
*Group ADR % by Month, 1/11 – 4/12 Data is for upper tier hotels only (LUX & UU chains, & Upper Tier independents)
Group ADR Expectation Still Depressed
53
Pipeline
54
Rooms Pipeline Still Not An Issue in 2012
Phase May 2012 May 2011 Dec 2007
In Construction 60 50 211
“Planned Pipeline” 230 261 204
Active Pipeline 290 311 415
*Total US Pipeline, in ‘000s of rooms, by Phase by Year Planned Pipeline includes projects in Final Planning and Planning phases Source: STR / McGraw-Hill Construction Dodge
55
Upscale / Upper Midscale Sees Activity
1.6
7.7
17.4 19.5
3.0 1.0
12.0
Luxury Upper Upscale Upscale Upper Midscale Midscale Economy Unaffiliated
*Rooms In Construction by Scale (‘000s), 5/12 Source: STR / McGraw-Hill Construction Dodge
56
Rooms (‘000s) With Open Dates Reported
Date 1 Year
Out 2 Years
Out 3 Years
Out 4+ Years
Out Dec-09 124 130 5 140 Dec-10 75 94 4 142 Dec-11 70 91 34 111
Developers Are Looking Three Years Out
Source: STR / McGraw-Hill Construction Dodge
57
Distribution Channels
Demand Share by Channel for Total US
9.3
15.7 13.7
8.1
53.3
10.1
16.2
12.9
8.4
52.3
10.9
17.0
13.7
9.3
49.1
0
10
20
30
40
50
60
OTA Brand.com CRS/Voice GDS Prop Direct/Other
2009 2010 2011
YTD June 2009, 2010 and 2011 (Percent of Total Room Nights)
Revenue Share by Channel for Total US
6.9
17.3 17.7
10.4
47.7
7.1
18.3 16.9
10.9
46.7
8.0
19.4 17.3
11.9
43.4
0
10
20
30
40
50
OTA Brand.com CRS/Voice GDS Prop Direct/Other
2009 2010 2011
YTD June 2009, 2010 and 2011 (Percent of Total Room Revenue)
ADR by Channel for Total US
109
128 127
89
78
97
55
99
110
127 126
87
70
90
54
97
115
128
89
75
97
56
101
50
60
70
80
90
100
110
120
130
Brand.com CRS/Voice GDS Prop Direct/Other
OTA - Merchant
OTA - Retail OTA- Opaque STAR Total
2009 2010 2011
YTD June 2009, 2010, and 2011 (in Dollars)
Channel Demand Share by Scale for US
8
18
25
14
36
8
22 24
14
32
7
22
15 15
40
7
21
10 11
52
11 15
7 5
62
11 10
3 1
76
0
10
20
30
40
50
60
70
80
90
OTA Brand.com CRS/Voice GDS Prop Direct/Other
Luxury Upper Upscale
Upscale Upper Midscale
Midscale Economy
June YTD 2011 (Percent of Total Room Nights)
Similar to Annual 2010 numbers, with some exceptions Voice & GDS high at top, OTA & Direct at bottom, Brand in up/mid
Looking ahead
63
U.S. Hotel Industry Forecast 2012 / 2013 Key Performance Indicator % Change 2012
Forecast 2013
Forecast
Supply 0.5% 1.1%
Demand 2.0% 1.8%
Occupancy 1.5% 0.7%
ADR 4.0% 4.6%
RevPAR 5.5% 5.4%
64
2012 Chain-Scale Forecast Key Performance Indicator % Change
Chain Scale
Occupancy (% chg)
ADR (% chg)
RevPAR (%chg)
Luxury +2.6% +5.1% +7.9%
Upper Upscale +1.5% +4.2% +5.7%
Upscale +2.3% +4.6% +7.1%
Upper Midscale +1.4% +4.0% +5.5%
Midscale +2.8% +1.4% +4.3%
Economy +1.4% +3.1% +4.5%
Independent +0.5% +3.5% +4.0%
Total United States 1.5% 4.0% 5.5%
*Key Performance Indicator Forecast, by Scale, 2012
65
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