ohio chapter of the appraisal institute 40th annual ... · presentation by david j. sangree, mai,...

Ohio Chapter of the Appraisal Institute40th Annual Economic Seminar

Ohio and National Lodging Industry Overview: Statistics, Appraisal Issues,

and New Supply

Presented by:David J. Sangree, MAI, CPA, ISHC

Presentation by David J. Sangree, MAI, CPA, ISHC

Presentation Outline:

• National Hotel Overview• Cleveland Market Overview• Columbus Market Overview• Cincinnati Market Overview• Dayton Market Overview• National Hotel Pipeline and Forecasts• Appraisal Process for Hotels


Occupancy % Change ADR % Change RevPAR % Change 2012 61.4% 4.2% $106.02 3.8% $65.10 8.1%2013 62.3% 1.5% $109.98 3.7% $68.47 5.2%2014 64.4% 3.4% $114.92 4.5% $74.02 8.1%2015 65.5% 1.7% $120.01 4.4% $78.63 6.2%2016 65.5% 0.0% $123.97 3.3% $81.19 3.3%

Source: STR

Overall U.S. Lodging Performance


Year Occ % change ADR % change REVPAR % change

2012 58.4% 4.8% $82.98 4.8% $48.42 9.8%

2013 58.5% 0.2% $86.98 4.8% $50.89 5.1%

2014 59.8% 2.2% $90.42 4.0% $54.12 6.3%

2015 60.2% 0.7% $94.59 4.6% $56.98 5.3%

2016 59.7% -0.8% $97.40 3.0% $58.16 2.1%

Source: STR

Ohio Performance Summary



2012 61.0% 6.7% $88.79 5.4% $54.18 12.4%

2013 61.8% 1.3% $93.94 5.8% $58.06 7.2%

2014 61.2% -1.0% $98.64 5.0% $60.33 3.9%

2015 62.9% 2.9% $102.45 3.9% $64.49 6.9%

2016 61.2% -2.8% $109.39 6.8% $66.95 3.8%

Source: CBRE Hotels Americas Research, STR, Q2 2017

Cleveland MSA Summary


Date Occ % change ADR % change REVPAR % change

Aug-17 60.9% -3.8% 105.30$ -4.6% 64.15$ -8.2%

Source: STR

Cleveland MSA YTD Summary

• YTD occupancy and ADR decline from fewer major events (no RNC Convention) and large supply increases (600-room Hilton and others)


Hotel Location Number of Rooms Open Date Hotel Location Number of

Rooms Open Date

Avon Place Residence Inn Avon 116 Mar 2016 Home2 Suites by Hilton Middleburg Heights 112 Mar 2017

Kimpton Hotel Downtown Cleveland 123 Mar 2016 aloft Hotel North Olmsted North Olmsted 135 Aug 2017

Drury Plaza Hotel Downtown Cleveland 180 Apr 2016 Hampton Inn & Suites Oakwood Village Oakwood Village 86 Sep 2017

Holiday Inn Cleveland Clinic Cleveland 276 May 2016 Crowne Plaza at Playhouse Square Cleveland (downtown) Unchanged Sep 2017

Hilton Hotel Cleveland Convention Center Downtown Cleveland 600 Jun 2016 Four Points by Sheraton Cleveland-Eastlake Eastlake Unchanged 1Q 2018

Hyatt Place Hotel Legacy Village Lyndhurst 135 Jun 2016 Comfort Suites Brunswick 84 1Q 2018

Springhill Suites by Marriott Independence 121 Jun 2016 Residence Inn by Marriott Middleburg Heights 100 2Q 2018

Holiday Inn Express Westlake 91 Jun 2016 TownePlace Suites by Marriott Solon 101 2Q 2018

Holiday Inn Express & Suites Medina 92 Jun 2016 Innova Residence Inn by Marriott Cleveland 175 4Q 2018

Fairfield Inn & Suites Medina 76 Oct 2016 AC Hotel by Marriott Pinecrest Orange 145 1Q 2019

Hampton Inn North Olmsted Cleveland Airport North Olmsted 118 Nov 2016 Curio Collection by Hilton Cleveland (downtown) 279 1Q 2019

Home2 Suites by Hilton Independence 120 Nov 2016 Tru by Hilton Cleveland Midtown Cleveland 114 1Q 2019

Four Points by Sheraton Cleveland Airport Cleveland Unchanged Dec 2016 Total 3,470

Home2 Suites by Hilton Beachwood 91 Feb 2017 Source: Hotel & Leisure Advisors

Cleveland MSA Hotel Supply Changes & Conversions Cleveland MSA Hotel Supply Changes & Conversions



2012 56.6% 1.1% $86.27 1.8% $48.85 2.9%

2013 58.5% 3.4% $89.59 3.8% $52.44 7.4%

2014 60.6% 3.6% $95.01 6.1% $57.60 9.8%

2015 63.2% 4.3% $98.58 3.8% $62.32 8.2%

2016 64.3% 1.7% $101.32 2.8% $65.13 4.5%


Cincinnati MSA Summary



Aug-17 66.2% 0.7% 105.56$ 3.1% 69.93$ 3.8%

Source: STR

Cincinnati MSA YTD Summary

• 2017 achieving modest occupancy growth and above inflationary ADR growth


Hotel Location Number of Rooms Open Date

AC Hotels by Marriott Cincinnati at Liberty Center Liberty Township 130 Feb 2016

Hampton Inn & Suites by Hilton Cincinnati Kenwood Cincinnati, OH 118 Feb 2016

Hampton Inn by Hilton Cincinnati Blue Ash Blue Ash, OH 118 Jun 2016

Hampton Inn & Suites by Hilton Cincinnati Mason Mason, OH 112 Jun 2016

Home2 Suites by Hilton Cincinnati Liberty Township Center Liberty Township 91 Aug 2016

Hotel Covington Covington, KY 114 Aug 2016

Fairfield Inn & Suites Cincinnati Uptown University Area Cincinnati, OH 115 Sep 2016

The Blu Hotel, An Ascend Collection Hotel Blue Ash, OH Unchanged Oct 2016

Holiday Inn & Suites Cincinnati Cincinnati, OH 117 Dec 2016

Hampton Inn & Suites by Hilton Newport/Cincinnati Newport, KY 122 Dec 2016

Aloft Newport on the Levee Newport, KY 144 Jan 2017

Best Western Plus Cincinnati Riverfront Downtown Covington, KY 20 Jun 2017

Hyatt Place Sharonville Convention Center Sharonville, OH 119 Jun 2017

SpringHill Suites Cincinnati Blue Ash Blue Ash, OH 100 Jul 2017

Residence Inn Rookwood Exchange Cincinnati, OH 118 Sep 2017

Home2 Suites by Hilton Florence Florence, KY 109 Sep 2017

AC Hotels by Marriott The Banks Cincinnati, OH 171 Oct 2017

Holiday Inn Express & Suites Wilder Wilder, KY 93 Q1 2018

The Summit, A Dolce Hotel Madisonville, OH 239 Q1 2018

Homewood Suites by Hilton Oakley Station Cincinnati, OH 108 Q1 2018

The Lytle Park Hotel, Autograph Collection by Marriott Cincinnati, OH 106 Q2 2018

The Cincinnatian Hotel, Curio Collection by Hilton Cincinnati, OH Unchanged Q2 2018

Sonesta ES Blue Ash Blue Ash, OH Unchanged Q2 2018

Total 2,364

Source: Hotel & Leisure Advisors

Cincinnati MSA Hotel Supply Changes & Conversions



2012 62.0% 3.8% $85.74 5.5% $53.14 9.5%

2013 62.1% 0.3% $89.81 4.7% $55.80 5.0%

2014 63.0% 1.4% $94.07 4.8% $59.28 6.2%

2015 64.8% 2.9% $99.26 5.5% $64.38 8.5%

2016 65.9% 1.7% $101.93 2.7% $67.18 4.4%


Columbus MSA Summary



Aug-17 67.0% 0.1% 103.55$ 2.0% 69.40$ 2.1%

Source: STR

Columbus MSA YTD Summary

• 2017 will finish with stable occupancy and ADR will be consistent with inflationary growth



Hampton Inn & Suites New Albany Columbus New Albany 114 Feb 2016

Staybridge Suites University Area OSU Columbus 90 Sep 2016

Courtyard Columbus OSU Columbus 135 Oct 2016

Hampton Inn & Suites Columbus Scioto Downs Lockbourne 118 Mar 2017

Autograph Collection Hotel LeVeque Columbus 149 Mar 2017

Courtyard Columbus Grove City Grove City 104 Aug 2017

Residence Inn Columbus OSU Columbus 114 Aug 2017

Marriott Columbus OSU Columbus 240 Aug 2017

Staybridge Suites Columbus Polaris Polaris 119 Sep 2017

Home2 Suites by Hilton Dublin, OH 129 Sep 2017

AC Hotel by Marriott Columbus Dublin Dublin 150 Sep 2017

Aloft Hotel Westerville Westerville 99 1Q 2018

Home2 Suites by Hilton Columbus Airport East New Albany 90 1Q 2018

Renaissance Hotel & Conference Center Westerville 224 2Q 2018

Home2 Suites by Hilton Columbus Downtown Columbus 107 2Q 2018

BrewDog Hotel Canal Winchester 125 4Q 2018

Canopy by Hilton Downtown Columbus Columbus 168 1Q 2019

Aloft Hotel Columbus 164 1Q 2019

Moxy Hotel Short North Columbus 111 2Q 2019

Total 2,550


Columbus MSA Hotel Supply Changes & Conversions



2012 55.6% 0.2% $71.41 3.8% $39.67 4.0%

2013 54.3% -2.2% $73.79 3.3% $40.08 1.0%

2014 57.3% 5.4% $76.06 3.1% $43.55 8.7%

2015 61.1% 6.6% $77.31 1.7% $47.21 8.4%

2016 63.3% 3.6% $81.39 5.3% $51.48 9.1%


Dayton MSA Summary



Sep-17 64.6% -1.7% 85.75$ 4.8% 55.36$ 3.0%

Source: STR

Dayton MSA YTD Summary

• 2017 will finish with a decline in occupancy and ADR will be above inflationary growth



Mills Park Hotel Yellow Spring 28 Apr 2016

Springhill Suites Dayton Beavercreek Beavercreek 118 Sep 2016

Springhill Suites Dayton North Dayton 91 Dec 2016

Dayton Grand Hotel (closed) Dayton -184 Jan 2017

Staybridge Suites Miamisburg Miamisburg 109 May 2017

Holiday Inn Express Dayton Dayton 95 Q4 2017

Home2 Suites by Hilton Dayton Vandalia Dayton 106 Q2 2018

Fairfield Inn & Suites Water Street Dayton 115 Q4 2018

Total 478


Dayton MSA Hotel Supply Changes & Conversions

Updated October 18, 2017


Occ ADR RevPAR Occ ADR RevPAR Occ ADR RevPAR

United States 65.5% 120.01 78.63 65.5% $123.97 $81.19 67.4% $127.14 $85.70

Ohio 60.2% 94.59 56.98 59.7% $97.40 $58.16 62.2% $97.99 $61.00

Cleveland 62.9% 102.45 64.49 61.2% $109.39 $66.95 60.9% $105.30 $64.15

Cincinnati 63.2% 98.58 62.32 64.3% $101.32 $65.13 66.2% $105.56 $69.93

Columbus 64.8% 99.26 64.38 65.9% $101.93 $67.18 67.0% $103.55 $69.40

Dayton 61.1% 77.31 47.21 63.3% $81.39 $51.48 64.6% $85.75 $55.36

Source: STR

YTD 2017

Comparison of Ohio Cities to State and National Performance

2015 2016


• Ohio performance lags behind the nation for occupancy and ADR

• Cincinnati and Columbus offer the strongest of Ohio’s four markets in terms of ADR and Occupancy

• Cleveland has experienced the most supply growth in recent years, which accounts for its lower performance figures

• Cincinnati, Columbus, and Dayton have all seen steady supply growth over the past three years

• All Ohio markets expect continued supply additions, which will impact overall performance metrics heading into 2018 and beyond


• H&LA is tracking proposed new hotel development in each major Ohio market:

• Cincinnati: 20 projects

• Cleveland MSA: 18 projects

• Columbus: 25 projects

• Dayton: 7 projects

• Numerous proposals for hotels in all markets will affect demand and overall occupancy levels


Year No. of Rooms Growth Rate2014 63,468 -2015 82,094 29.3%2016 99,872 21.7%

2017 (Forecast) 114,906 15.1%2018 (Forecast) 133,880 16.5%2019 (Forecast) 137,393 2.6%

Source: Lodging Econometrics

Hotel Openings 2014-2018


STR CBRE PwC STR CBRE PwC

Supply 2.0% 1.9% 1.9% 2.1% 2.0% 1.9%Demand 2.0% 2.2% 2.1% 1.9% 2.0% 1.6%Occupancy 0.0% 0.3% 0.1% -0.2% -0.1% 0.0%ADR 2.3% 2.5% 2.1% 2.5% 2.3% 2.1%RevPAR 2.3% 2.8% 2.3% 2.3% N/A 2.0%Source: STR/CBRE/PWC

20182017

Industry Forecasts


Hotel and Leisure Property Appraisals have Unique Challenges

• Going concerns

• Very management intensive

• Hotels and waterparks have new customers every single day as compared to apartments and office buildings which have annual leases

• Waterparks are riskier than hotels as they are entertainment-based leisure real estate and are seasonal


Economics and Demographics

When gathering economic and demographic data, the appraiser should look within a market of the subject property and gather the following data:

• Population trends

• Household growth

• Household economics

• Area economics

• Area transportation

• Major employers

• New Developments


• A thorough market analysis of the local hospitality and resort market is an essential component of a hotel appraisal

• The value conclusion will depend heavily upon the data gathered for this section

• Market research encompasses a large range of data

• Requires interviews with various competitors, brokers, CVB, and other knowledgeable people in the market


Smith Travel Research Trend report profiles the daily, monthly, and annual occupancy, average daily rate, and RevPAR of a market area. The information is used to answer the following questions:

• Existing competitors: How many competitors exist in the market? To what degree are they competitive? How have they performed in past years in terms of occupancy, ADR and RevPAR?

• Recent hotel openings: How many hotels have opened in the past few years in the market?

• Potential hotel openings: How many hotel projects are in the works? What types of hotels will they be? How many rooms? What is their projected impact?

• Market segmentation and market penetration: What is the market segmentation and penetration of each competitor in the market?

• Projections: Synthesize the data gathered in the previous steps and project the performance potential for the subject property. Based on the current market situation, is the subject likely to perform well in terms of occupancy and ADR? What are its potential penetration rates and market segmentation?


Information specific to the subject property is collected in the following areas.

• Financial data: When appraising an existing property one needs to interview the management and obtain historical financial statements from them. For a proposed property, the interview will be with the developer, and the appraiser will need to obtain the financial forecast and the development budget.

• Performance data: If the property is existing, historical market segmentation reports, usage figures, and other performance statistics are needed.

• Physical plant information: For an existing property one will look at the building plans. For a proposed property, the appraiser will obtain the architectural plans.

• Governmental impacts: The subject’s ad valorem taxes, zoning information, sales history, governmental restrictions, environmental regulations and other factors which may affect the subject property should be collected.


• The discounted cash flow (DCF) analysis is most appropriate for hospitality properties

• The appraiser should analyze and estimate various revenue and expense departments in determining the projected net operating income and value for the property

• Direct capitalization approach appropriate for stabilized property only

• Capitalization and discount rates are higher for hotels than apartments and other commercial real estate (even higher for waterparks)

• Franchise fee, management fee, reserve for replacement should be deducted for a hotel analysis

• Many data sources – STR, CBRE, PwC, etc.


• Because of this heavy reliance on market data, this approach is more difficult for properties with limited sales in the immediate area, but there is a lot of hotel sales data available regionally. Limited sales data available for many leisure properties such as waterparks.

• When using the sales comparison approach, the appraiser should fully analyze sales of comparable quality.

• Information should be obtained on sale price, historical performance, occupancy and ADR or per capita spending, financial performance, renovation costinformation, amenity offerings of the property, and special circumstances concerning the sale.

• Once the sales data have been fully analyzed, the appraiser will probably find a wide range of values.

• Use an adjustment grid to account for differences in location, size of the property, time and circumstances of the sale, etc.


• The cost to replace the improvements is estimated. Once replacement costs are determined, a deduction is made for any depreciation. The result is then combined with the estimated value of the underlying land. This approach is most appropriate when appraising a proposed development where development budgets and land cost are available.

• It is typically not appropriate for an older hotel due to the difficulty in estimating depreciation.


All three approaches to value are reconciled to a final value conclusion:

• The income approach is generally given greatest consideration, while the sales comparison approach and the cost approach support the value conclusion


Breakdown of the Going Concern

• Personal Property

• Real Estate

• Business Value

David J. Sangree, MAI, CPA, ISHC

Hotel & Leisure Advisors, LLCPhone: 216-810-5800

[email protected]


ohio chapter of the appraisal institute 40th annual ... · presentation by david j. sangree, mai,...

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