u.s. outlook for 2020 - hospitality netpast demand shocks - impact on market hotel adr % difference...
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U.S. Outlook for 2020
Coronavirus and the Risk to Hotels
PAST DEMAND SHOCKS - IMPACT ON MARKET HOTEL DEMAND% Difference from month prior to event
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Months After Event
Toronto - SARS New York - 9/11 New York - GFC SFO - TECH Bust
Source: CBRE Hotels Research, STR
PAST DEMAND SHOCKS - IMPACT ON MARKET HOTEL ADR% Difference from month prior to event
60.0%
65.0%
70.0%
75.0%
80.0%
85.0%
90.0%
95.0%
100.0%
105.0%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25Months After Event
Toronto - SARS New York - 9/11 New York - GFC SFO - TECH Bust
Scenario 1:2-4 month Disruption
Scenario 2:Prolonged Recession
Source: CBRE Hotels Research, STR
-
20
40
60
80
100
120
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Months from Shock
Demand Index ADR Index RevPAR Index
Demand Impacted 6-10 Months
ADR/RevPAR Impacted 12-16 Months
CORONAVIRUS U.S. HOTEL IMPACT – DOWNSIDE SCENARIO 3/11/2020
Source: CBRE Hotels Research, March 2020.
DISRUPTION CURVE – HOTEL OCCUPANCY
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
1 2 3 4 5 6 7 8 9 10
Months Since Impact
U.S. 3/7Italy 2/22China 1/18
U.S. 3/14?Italy 2/29China 1/25
Italy 3/7China 2/1
China 2/8China 3/7
Source: CBRE Hotels Research, STR, March 7, 2020.
Potential Recovery Scenario
STR REPORTS HOTELS IN CHINA RECOVERED QUICKLY, POINTING TO POTENTIAL FOR FAST RECOVERY
Down from -0.6% Down from 1.4% Down from 0.7%
PUBLISHED FORECASTS - NO GROWTH FOR 2020 Before COVID-19 Transmission outside of China
Source: CBRE Hotels Research, STR, February 2020.
UPDATED DOWNSIDE FORECAST – PRELIMINARY 3/12/2020
Year Occ Occ^ ADR ADR^ RevPAR RevPAR^ Supply Supply^ Demand Demand^
2016 65.4% $ 124.06 $ 81.14 5,021,012 3,283,828
2017 65.9% 0.7% $ 126.81 2.2% $ 83.52 2.9% 5,106,199 1.7% 3,363,052 2.4%
2018 66.1% 0.4% $ 129.96 2.5% $ 85.94 2.9% 5,206,614 2.0% 3,442,727 2.4%
2019 66.1% 0.0% $ 131.20 1.0% $ 86.73 0.9% 5,311,653 2.0% 3,511,367 2.0%
2020 59.3% -10.2% $ 117.58 -10.4% $ 69.78 -19.5% 5,418,543 2.0% 3,215,740 -8.4%
2021 61.4% 3.5% $ 124.93 6.2% $ 76.75 10.0% 5,501,826 1.5% 3,380,068 5.1%
2022 64.2% 4.6% $ 134.83 7.9% $ 86.61 12.8% 5,520,763 0.3% 3,546,212 4.9%
Source: CBRE Hotels Research, STR, March 2020.RevPAR Recovery by 2022
UPDATED SEVERE-DOWNSIDE FORECAST – PRELIMINARY 3/12/2020
Year Occ Occ^ ADR ADR^ RevPAR RevPAR^ Supply Supply^ Demand Demand^
2016 65.4% $ 124.06 $ 81.14 5,021,012 3,283,828
2017 65.9% 0.7% $ 126.81 2.2% $ 83.52 2.9% 5,106,199 1.7% 3,363,052 2.4%
2018 66.1% 0.4% $ 129.96 2.5% $ 85.94 2.9% 5,206,614 2.0% 3,442,727 2.4%
2019 66.1% 0.0% $ 131.20 1.0% $ 86.73 0.9% 5,311,653 2.0% 3,511,367 2.0%
2020 55.7% -15.7% $ 113.80 -13.3% $ 63.44 -26.9% 5,418,543 2.0% 3,020,817 -14.0%
2021 57.7% 3.4% $ 107.34 -5.7% $ 61.90 -2.4% 5,501,428 1.5% 3,172,378 5.0%
2022 60.8% 5.4% $ 105.03 -2.2% $ 63.83 3.1% 5,504,418 0.1% 3,345,368 5.5%
Source: CBRE Hotels Research, STR, March 2020.
OCCUPANCY- 4QTR. MOVING AVG. – BY SCENARIO
50.0%
52.0%
54.0%
56.0%
58.0%
60.0%
62.0%
64.0%
66.0%
68.0%19
88
19
88
19
89
19
90
19
91
19
91
19
92
19
93
19
94
19
94
19
95
19
96
19
97
19
97
19
98
19
99
20
00
20
00
20
01
20
02
20
03
20
03
20
04
20
05
20
06
20
06
20
07
20
08
20
09
20
09
20
10
20
11
20
12
20
12
20
13
20
14
20
15
20
15
20
16
20
17
20
18
20
18
20
19
20
20
20
21
20
21
20
22
20
23
20
24
Baseline - Current Forecasts Downside - COVID-19 Severe Downside- COVID-19
Source: CBRE Hotels Research, STR, March 2020.
REVPAR – 4 QTR. MOVING AVG. – BY SCENARIO
$0.50
$20.50
$40.50
$60.50
$80.50
$100.50
$120.50
Baseline - Current Forecasts Downside - COVID-19 Severe Downside- COVID-19
Source: CBRE Hotels Research, STR, March 2020.
WEEKLY US HOTEL PERFORMANCE
(16)
(14)
(12)
(10)
(8)
(6)
(4)
(2)
0
2
4
6YoY Change (%) Occ^ ADR^ RevPAR^Major Travel
Restrictions Start
Source: CBRE Hotels Research, STR, March 2020.
IMPACT WORSE IN URBAN AND AIRPORT LOCATIONS
Source: CBRE Hotels Research, STR, March 2020.
(25)
(20)
(15)
(10)
(5)
0
5
10
15YoY Change (%) US Airport Urban
MUCH LESS IMPACT IN INTERSTATE & SMALL METROS…. SO FAR
Source: CBRE Hotels Research, STR, March 2020.
(16)
(14)
(12)
(10)
(8)
(6)
(4)
(2)
0
2
4YoY Change (%) US Interstate Small Metro/Town
HIGHER THE ADR, LARGER THE Y-O-Y PERCENT DECLINE
(20)
(15)
(10)
(5)
0
5
10
YoY Change (%) Luxury & Upper Upscale Upscale & Upper Midscale Midscale & Economy
Source: CBRE Hotels Research, STR, March 2020.
DEMAND REVPAR IMPACT OF 9/11, BY MARKET – UPPER PRICED HOTELS
Source: CBRE Hotels Research, STR, March 2020.
-45.0%
-40.0%
-35.0%
-30.0%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
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Average: -20%
OPERATING METRICS DURING 2001NON TOP & TOP 25 MARKETS 2001 RECESSION CHANGE IN DOLLARS PER AVAILABLE ROOM
(25.0)%
(20.0)%
(15.0)%
(10.0)%
(5.0)%
0%
2000 to 2001 Change in Dollars per Available Room
Top 25 Non Top 25
Note: * Before deduction for Management Fees and Non-Operating Income and Expenses Source: 2019 Trends® in the Hotel Industry.
TOTAL AMOUNT OF INTERNATIONAL ARRIVALS INTO THE U.S.
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
Monthly Arrivals
Source: CBRE Hotels Research, NTTO, 2020 Q1
Increase of 81% from 2001
INTERNATIONAL HOTEL STAYS / HOTEL DEMAND
8.20%
0% 10% 20% 30% 40% 50% 60% 70%
MiamiNew York
OahuSan Francisco
OrlandoLos Angeles
BostonFort LauderdaleWashington DC
San DiegoSeattle
PhiladelphiaChicago
TampaSan Jose-Santa Cruz
New OrleansHoustonAnaheim
AtlantaDallas
National
Sources: U.S. Department of Commerce International Trade Administration; STR, and City Visitor Reports.
8% of U.S. Hotel demand is generated from international visitations
MARKETS WITH A HIGH PERCENT OF REVENUES GENERATED DURING MARCH/APRILAverage March/April revenue as compared to the rest of the year
Source: CBRE Hotels Research, STR, March 2020.-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
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Mia
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Translation:Phoenix hotels earn 65% more revenue in March/April than they do the rest of the year
ADDITIONAL EFFECTS TO BE CONSIDERED: LOWER OIL PRICES DUE TO ANTICIPATED LOWER CHINESE DEMAND COULD AFFECT TRAVEL TO OIL MARKETS
40
45
50
55
60
65
70
Mar 01,2019
Apr 01,2019
May 01,2019
Jun 01,2019
Jul 01,2019
Aug 01,2019
Sep 01,2019
Oct 01,2019
Nov 01,2019
Dec 01,2019
Jan 01,2020
Feb 01,2020
Dollars per Barrel
Cushing Spot Price, Crude Oil, Previous Year
Source: eia.gov Q1 2020.
20
30
40
50
60
70
80
90
100
110
120
Jan 04,2010
Jan 04,2011
Jan 04,2012
Jan 04,2013
Jan 04,2014
Jan 04,2015
Jan 04,2016
Jan 04,2017
Jan 04,2018
Jan 04,2019
Jan 04,2020
Dollars per Barrel
Cushing Spot Price, Crude Oil, Previous Decade
Source: eia.gov Q1 2020.
HOUSTON ALREADY BUFFETED BY OIL PRICES, HURRICANE DISRUPTIONContinued slide in prices could exacerbate future weakness
0
20
40
60
80
100
120
-15%
-10%
-5%
0%
5%
10%
15%
2011 2012 2013 2014 2015 2016
Oil Price ($)Occupancy Change
Houston Occupancy and Oil Price Change During 2014 Oil Price Crash
Occupancy Change Oil Price
Sources: CBRE Hotels, STR Q1 2020.
0
20
40
60
80
100
120
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
2011 2012 2013 2014 2015 2016
Oil Price ($)Occupancy
Change
Houston ADR and Oil Price Change During 2014 Oil Price Crash
ADR Change Oil Price
Sources: CBRE Hotels, STR Q1 2020.
ANNUAL CHANGE IN REVENUES, EXPENSES AND PROFITS*
Note: * Before deduction for Management Fees and Non-Operating Income and Expenses Source: 2019 Trends® in the Hotel Industry.
2001 CHANGE IN OPERATING PERFORMANCEMULTIPLE REVPAR CHANGE SCENARIOS - 2000 - 2001
-5%
-15%
-24%
-34%
-44%
-9%
-22%
-35%
-47%
-62%
-80%
-60%
-40%
-20%
0%
RevPAR Decline:0% to 9.9%
RevPAR Decline:10% to 19.9%
RevPAR Decline:20% to 29.9%
RevPAR Decline:30% to 39.9%
RevPAR Decline:Greater Than 40%
RevPAR Total RevPAR Operating Expenses* GOP* EBITDA**Note: * Profit Before Management Fees and Non-Operating Income and Expenses
** Earnings Before Interest, Taxes, Depreciation and Amortization.Source: CBRE, Trends® in the Hotel Industry
2009 CHANGE IN OPERATING PERFORMANCEMULTIPLE REVPAR CHANGE SCENARIOS 2008 - 2009
-6%-16%
-24%-33%
-44%
-11%
-25%-37% -35%
-79%
-120%
-100%
-80%
-60%
-40%
-20%
0%
RevPAR Decline:0% to 9.9%
RevPAR Decline:10% to 19.9%
RevPAR Decline:20% to 29.9%
RevPAR Decline:30% to 39.9%
RevPAR Decline:Greater Than 40%
RevPAR Total RevPAR Operating Expenses* GOP* EBITDA**Note: * Profit Before Management Fees and Non-Operating Income and Expenses
** Earnings Before Interest, Taxes, Depreciation and Amortization.Source: CBRE, Trends® in the Hotel Industry
SUMMARY THOUGHTS
• THE HOTEL MARKET’S RECOVERY FROM PAST MAJOR SHOCKS, SUCH AS 9/11 NATIONALLY, SARS OUTBREAKIN TORONTO, ZIKA OUTBREAK IN MIAMI, TYPICALLY TOOK 14 TO 24 MONTHS.
• OUR DOWNSIDE SCENARIO INDICATES IT WILL TAKE SIX TO EIGHT MONTHS FOR US HOTEL DEMAND TORECOVER, AND 12 TO 14 MONTHS FOR ADR AND REVPAR TO RECOVER.
• THE IMPACT IN RECENT WEEKS HAS BEEN NEGATIVE FOR NEARLY ALL HOTEL OPERATORS. BUT IT HAS BEENMORE ACUTE FOR URBAN AND AIRPORT LOCATIONS, AND LESS SO FOR SMALL METROS AND INTERSTATEHOTELS. THE HIGHER THE HOTEL SEGMENT’S ADR, THE LARGER THE YEAR-OVER-YEAR DECLINE.
• THE IMPACT SO FAR HAS BEEN GREATEST, IN GENERAL, FOR WEST COAST MARKETS AND NEW YORK CITY.MEANWHILE, IT HAS BEEN LESSER FOR EAST COAST MARKETS SUCH AS BOSTON, WASHINGTON DC, MIAMIAND (IN THE MIDWEST) CHICAGO.
• CAUSE FOR HOPE FOR FAST RECOVERY: CHINESE HOTELS HAD NEARLY FULLY RECOVERED FROM THE MARCH2003 SARS OUTBREAK BY JULY OF THAT YEAR WHEN SARS WAS CONTAINED.
• MARKETS LIKELY TO SEE THE MOST SEVERE IMMEDIATE IMPACT ARE THOSE THAT GAIN A HIGH PERCENTAGEOF THEIR REVENUE FROM MARCH AND APRIL: PHOENIX, WEST PALM BEACH, TAMPA, NEW ORLEANS, MIAMI,
FORT LAUDERDALE, TUCSON.
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HOW WE CAN HELPCBRE HOTELS ADVISORY
We understand the impact the current pandemic crisis is taking on your day-to-day operations and business models. As you evaluate the implications on your assets, CBRE Hotels stands ready to assist with the most up-to-date information, data, and customized services. The US CBRE Hotels Advisory team covers all territories and is backed by the #1 US Hotel Research group in the nation, enabling us to be the best equipped professionals for this situation.
We have identified the following services that can be offered in expedited fashion. They are largely desktop based but incorporate real-time data that can be applied to your specific property or portfolio. Given the scale and experience of our professional team, together with the unparalleled strength of the world’s leading hospitality group, CBRE Hotels Advisory is prepared to offer these services on a weekly, bi-weekly, monthly or one-time basis. Act NOW by contacting our National Director below. CBRE Hotels Advisory is prepared to immediately help you navigate through the current environment with confidence.
Our Select Service Offering:
Jeff BinfordSouth Central Managing Director,CBRE Hotels Advisory+1 214 979 [email protected]
Fernando Garcia-ChaconSouth Florida Managing Director, CBRE Hotels Advisory+1 305 381 [email protected]
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Henry FondeAsset Management Sr Director, CBRE Hotels Advisory+1 904 633 [email protected]
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Jeff Lugosi, CRE, MAI, FRICS, ISHCWest Managing Director CBRE Hotels Advisory+1 213 613 [email protected]
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