lodging industry trends june 14, 2018 · pipeline (000s rooms): top 26 markets have 46% of i/c...

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Lodging Industry TrendsJune 14, 2018

Chris Klauda, CHIASenior Research Director, STR

cklauda@str.com

© 2018 STR. All Rights Reserved.

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Agenda

• What is STR?

• US Hotel Review

• Top Markets

• Segmentation

• Pipeline

• Forecasts

The Center of the Hotel Industry Benchmarking Universe:

Hendersonville, TN

© 2017 STR. All Rights Reserved.

Hendersonville plus 19 other locations

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What is ?

STR is a leading source for premium global data benchmarking, analytics and marketplace insights.

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STR Benchmark Building Blocks

Supply(rooms available)

Demand(rooms sold)

Revenue(rooms revenue)

Occupancy ADR

RevPAR

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STR Benchmark Building Blocks

Supply = 100 rooms available

Demand = 80 rooms sold

Revenue = $8,000 rooms revenue

Occupancy 80% ADR $100

RevPAR $80

© 2018 STR. All Rights Reserved.

Total U.S. Review

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US Hotel Performance

Supply(1.88B rooms available)

Demand(1.24B rooms sold)

Revenue($159B rooms revenue)

OCC 66.1% ADR $128

RevPAR $84

April 2018 12MMA, Total US Results

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US Performance: RevPAR Growth Continues

+1.9%+2.9%

+1.0%

+2.2%+3.2%

+5.2%

1.88BSupply

1.24BDemand

66.1%Occupancy

$128ADR

$84RevPAR

April, 2018 12MMA, Total US Results

$159BRevenue

© 2018 STR. All Rights Reserved. 12

1.9

-4.7

-7.1

7.7

2.9

-8

-4

0

4

8

1990 2000 2010

Supply % Change

Demand % Change

Has the Hotel Industry Skipped a Downturn?

Total U.S., Supply & Demand % Change, 12 MMA 1/1990 – 4/2018

Gulf War

9/11

Housing / Banking Crisis

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Demand/Supply=Occupancy

-3.4

-6.7

-9.7

1.0

-10

-5

0

5

1990 2000 2010

Occ % Change

Total U.S., ADR & OCC % Change, 12 MMA 1/1990 – 04/2018

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Pricing Increases (a little), But So Does Inflation

-3.4

-6.7

-9.7

1.0

6.8 7.5

2.2

-10

-5

0

5

1990 2000 2010

Occ % Change

ADR % Change

Total U.S., ADR & OCC % Change, 12 MMA 1/1990 – 04/2018

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Real ADR Growth (ADR% minus CPI%) Hovers Around 0%

-12

-10

-8

-6

-4

-2

0

2

4

6

8

1990 2000 2010

Total U.S., Real ADR % Change (ADR minus CPI), by quarter, Q1/1990 – Q4/2017

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8+ Consecutive Years of RevPAR Growth

-25

-20

-15

-10

-5

0

5

10

15

1990 2000 2010

Total U.S., RevPAR % Change, 1/1990 – 04/2018

56 Months 98 Months111 Months

Gulf War

9/11Housing /

Banking Crisis

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This Expansion Cycle Fueled by High Demand, Low Supply

Cycle Period:Dec. 1991 –Mar. 2001

Mar. 2010 -present

Length (months) 111 98

Avg. Monthly Supply Growth 2.4 1.0

Avg. Monthly Demand Growth 2.6 3.4

Avg. Monthly ADR Growth 4.2 3.4

Avg. Monthly RevPAR Growth 4.4 5.9

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Class Review

LuxuryUpper Upscale

Upscale Upper Midscale

Midscale Economy

Four Seasons & Ritz-Carlton

Marriott & Hilton

DoubleTree, Courtyard & Wyndham

Hampton, Fairfield & Holiday Inn Express

Best Western, Candlewood Suites & Ramada

Days Inn, Red Roof Inn, Super 8, Econo Lodge

Full Chain Class Listing: http://str.com/resources/documents

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Evidence of Induced Demand in Upscale and Upper Midscale

2.5 2.0

4.5

3.8

0.3

(0.3)

3.3

2.3

5.3 4.9

1.4

0.6

Luxury Upper Upscale Upscale Upper Midscale Midscale Economy

Supply % Change

Demand % Change

*Supply / Demand % Change, by Class, April 2018 12MMA

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ADR Growth Drives RevPAR Growth (But Occupancy Growth Still Contributes A Little)

0.8 0.3

0.8 1.1 1.2

0.9

1.8

1.4

1.61.6

2.4 3.0

Luxury Upper Upscale Upscale Upper Midscale Midscale Economy

ADR % Change

Occ % Change

*RevPAR % Change by Contribution of OCC / ADR % Change, by Class, April 2018 12MMA

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Upscale and Upper Midscale Hotels Still Pretty Full Despite New Supply

71.272.8 72.5

68.0

60.858.8

70.772.6 72.0

67.3

60.158.3

Luxury Upper Upscale Upscale Upper Midscale Midscale Economy

2018 2017

*OCC %, by Class, April 2018 & 2017 12 MMA

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All Key Performance Indicators (KPIs) Are UP

From Luxury to Economy

Expansion Fueled by High Demand, Low Supply

No Black Swans In Sight

Let The Good Times Roll

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Markets

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Top and Bottom: Ranked by ADR % Change

Market Occ % ADR (% chg) Influenced ByNashville, TN 73.7 6.3 Bachelorette Parties +

Miami/Hialeah, FL 77.7 5.9 Leisure DemandOrlando, FL 79.5 5.2 Leisure / Group Demand

Atlanta, GA 70.2 4.1 Strong GroupDetroit, MI 66.1 4.0 Recovery

* April 2018 12MMM ADR % Change and absolute OCC in Top 25: 5 Best / 5 Worst Performing ADR % Markets

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Market OCC % ADR (% chg) Influenced BySan Francisco/San Mateo, CA 82.5 0.7 Moscone Center Closed Apr – Oct 2017

Chicago, IL 69.0 (0.3) Stronger TransientNew York, NY 87.2 (0.5) Supply

Washington, DC-MD-VA 71.8 (0.7) Inauguration / Women’s March CompPhiladelphia, PA-NJ 70.0 (1.6)

Top and Bottom: Ranked by ADR % Change

* April 2018 12MMM ADR % Change and absolute OCC in Top 25: 5 Best / 5 Worst Performing ADR % Markets

© 2018 STR. All Rights Reserved. 26

Market OCC % ADR (% chg) Influenced BySan Francisco/San Mateo, CA 82.5 0.7 Moscone Center Closed Apr – Oct 2017

Chicago, IL 69.0 (0.3)New York, NY 87.2 (0.5)

Washington, DC-MD-VA 71.8 (0.7) Inauguration / Women’s March CompPhiladelphia, PA-NJ 70.0 (1.6)

Market Occ % ADR (% chg) Influenced ByNashville, TN 73.7 6.3 Bachelorette Parties +

Miami/Hialeah, FL 77.7 5.9 Leisure DemandOrlando, FL 79.5 5.2 Leisure / Group Demand

Atlanta, GA 70.2 4.1Detroit, MI 66.1 4.0

Top and Bottom: Ranked by ADR % Change

* April 2018 12MMM ADR % Change and absolute OCC in Top 25: 5 Best / 5 Worst Performing ADR % Markets

TOP 25 MARKETS 74.0 1.8 Higher OccupancyTOTAL US 66.1 2.2 Greater Pricing Power

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Segmentation

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SEGMENTATION

TRANSIENT GROUP

SOURCE: STR

UPPER UPSCALE & LUXURY CLASS

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Transient Performance: Soft April, But Demand Still Impressive

3.2%

1.5%

0%

1%

2%

3%

4%

Jan-16 Jan-17 Jan-18

Demand % Change

ADR % Change

*Transient Demand and ADR % Change Luxury/Upper Upscale, 12 MMA, 1/2016 – 04/2018

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Group Performance: A Spike in April, Thanks to Easter Shift

0.4%

1.9%

-2%

-1%

0%

1%

2%

3%

4%

Jan-16 Jan-17 Jan-18

Demand % Change

ADR % Change

Easter Shift

*Group Demand and ADR % Change Luxury/Upper Upscale, 12 MMA, 1/2016 – 04/2018

Easter Shift

Jewish Holiday Shift

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Spring/Fall Holiday Shift Impacts Monthly Group Demand

2,000,000

4,000,000

6,000,000

8,000,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Group Demand Current Year Group Demand Last Year

Occ

up

ied

Ro

om

Nig

hts

*Total Number of Rooms Sold, Group and Transient, by month May 2016 - April 2018

TY = 2018 TY = 2017

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Segmentation ADR Showing A Pulse

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

Jan-16 Jan-17 Jan-18

Transient ADR % Change

Group ADR % Change

*ADR % Change Luxury/Upper Upscale, Transient & Group, 1/2016 – 04/2018

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Current Group ADR Exceeds Last Year Every Month

$150

$160

$170

$180

$190

$200

$210

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Group ADR Current Year Group ADR Last Year

AD

R

*ADR, Group, by month May 2016 - April 2018

TY = 2018 TY = 2017

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Planners: Calendars Matter; Better Negotiating Position

Hotels/CVBs: Challenge to Balance Group and Transient

Customers: Flexibility Offers Opportunity

Group and Transient Shift

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Top 40 Markets Segmentation

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© 2018 STR. All Rights Reserved. 37

Top 20 Markets Group ADR

$0 $50 $100 $150 $200 $250 $300 $350 $400

JAX

PHL

Nashville

CHI

NOLA

Fort Lauderdale

PHX

SEA

Anaheim

Austin

DC

San Diego

LA

BOS

Miami

Oahu

SFO

NYC

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Next 20 Group Markets ADR

$0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200

STL

SLC

MPS

Pittsburgh

Louisville

Montreal

Baltimore

Sacramento

ATL

Indy

DAL

Tampa

Toronto

HOU

Vancouver

Charlotte

DEN

Portland

ORL

San Antonio

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ADR and Demand Above US Average

ADR and Demand Below US Average

Demand Above

ADR Below

Demand Below

ADR Above

Group: ADR% change (vertical axis); Demand % change (horizontal axis)

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Expensive vs. Less Expensive Markets

Growing vs. Slowing Demand

Growing vs. Slowing ADR

Supply Impacts

High vs. Low Season

And Then There is Pipeline

Group Market Selection

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Pipeline

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US Pipeline: First Decline in I/C since the Recovery (Now for 4 Months Running)

Phase 2018 2017 % Change

In Construction 186 190 -2.2%

Final Planning 220 210 4.9%

Planning 191 181 5.3%

Under Contract 597 581 2.7%

*Total US Pipeline, by Phase, ‘000s Rooms, April 2018 and 2017

© 2018 STR. All Rights Reserved. 43*Total US Pipeline; Rooms In Construction, in ‘000s; 1/2006 – 4/2018

0

50

100

150

200

250

2006 2008 2010 2012 2014 2016 2018

Low: May ‘1150K

April. ’18186K

High:Dec ‘07

211K

25K

I/C Pipeline Is Leveling Off Below Prior PeakTh

ou

san

ds

© 2018 STR. All Rights Reserved. 44

Limited Service Construction Is The Name Of The Game

8.7

21.7

58.661.8

11.9

1.2

21.5

Luxury Upper Upscale Upscale Upper Midscale Midscale Economy Unaffiliated*US Pipeline, Rooms In Construction , ‘000s Rooms, by Scale, March 2018

72%

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Large Markets Grow Rapidly

Market Rooms In Construction % Of Existing

Nashville, TN 5,202 12%

New York, NY 12,741 11%

Denver, CO 4,597 10%

Seattle, WA 3,690 8%

Dallas, TX 6,508 8%

*US Pipeline, Rooms I/C and as % of Existing Supply, Largest % In Top 26 Markets, April 2018

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Pipeline (’000s rooms): Top 26 Markets Have 46% Of I/C Rooms

85.6

100.087.5

132.3

68.2

122.6

Top 26 Markets Rest of the US

In Construction

Final Planning

Planning

*US Pipeline, Rooms (‘000s), Top 26 Markets vs. All Other Markets, April 2018

© 2018 STR. All Rights Reserved. 47

New Hotels w/50,000+ SF of Meeting Space

9

8

5

2

0

2 2

3

2 2

6

5

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018* 2019*

Total U.S. Count of New Hotels with 50,000+ square feet of meeting space by year, 2008- April 2018 and projected for the remainder of 2018 and 2019

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Top 5 Projects In Construction By Meeting Space

Project Name MarketProjected

Opening Date Room CountTotal Meeting

Space Sq Ft

Gaylord Rockies Hotel & Conference Center Denver 12/2018 1500 400,000

Fairmont Austin Austin 09/2017 1048 107,000

Hyatt Regency Seattle Seattle 06/2018 1260 100,000

Omni Louisville Louisville 03/2018 600 70,000

JW Marriott Nashville Nashville 07/2018 533 60,000

1

2

3

45

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Forecast

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Notable Calendar Shifts Impacting Lodging Performance Data in 2018:

Easter: Shift from April to March (also affects Q1/Q2)

Election Day 11/6: Likely low room demand the night before

Halloween: Shift from TUE to WED, likely impacting full week

Notable Market Level Events / Comps:

Super Bowl: From Houston (2017) To Minneapolis (2018)

San Francisco: Moscone Center Reopened, easy comps Q2/Q3

Washington, D.C.: Inauguration & Women’s March (January 2017)

Houston: Hurricane Harvey – October and all of Q4 2017

Florida: Hurricane Irma – October and all of Q4 2017

California: Wildfires in Q4 2017

© 2018 STR. All Rights Reserved. 51

Total United StatesKey Performance Indicator Outlook (% Change vs. Prior Year)2018F – 2019F

Outlook

Metric2017

Actuals2018

Forecast2019

Forecast

Supply 1.87B 2.0% 1.9%

Demand 1.23B 2.4% 2.0%

Occupancy 65.9% 0.4% 0.1%

ADR $127 2.5% 2.3%

RevPAR $85 2.9% 2.4%

© 2018 STR. All Rights Reserved. 52

Total United StatesChain Scale Key Performance Indicator Outlook 2018F by Chain Scale

2018 Year End Outlook

Chain ScaleOccupancy

(% chg)ADR

(% chg)RevPAR(% chg)

Luxury 0.9% 2.9% 3.8%

Upper Upscale 0.2% 2.1% 2.3%

Upscale -0.1% 2.0% 1.8%

Upper Midscale 0.1% 2.0% 2.1%

Midscale 0.4% 2.4% 2.9%

Economy 0.5% 2.7% 3.2%

Independent 0.4% 2.7% 3.1%

Total United States 0.4% 2.5% 2.9%

© 2018 STR. All Rights Reserved. 53

Total United StatesChain Scale Key Performance Indicator Outlook 2019F by Chain Scale

2019 Year End Outlook

Chain ScaleOccupancy

(% chg)ADR

(% chg)RevPAR(% chg)

Luxury -0.1% 2.2% 2.1%

Upper Upscale 0.0% 2.3% 2.3%

Upscale -0.2% 2.1% 1.9%

Upper Midscale -0.1% 2.1% 2.0%

Midscale -0.1% 2.0% 1.9%

Economy 0.1% 2.0% 2.0%

Independent 0.1% 2.1% 2.2%

Total United States 0.1% 2.3% 2.4%

54

Forecast Summary (STR as of May 2018, CBRE and PWC as of February 2018)

2018 as

Supply 2.0% 2.0% 2.0%

Demand 2.4% 1.8% 2.2%

Occupancy 0.4% -0.1% 0.2%

ADR 2.5% 2.6% 2.4%

RevPAR 2.9% 2.5% 2.7%

2019

Supply 1.9% 1.9%

Demand 2.0% 1.9%

Occupancy 0.1% 0.0%

ADR 2.3% 2.0%

RevPAR 2.4% 2.0%

© 2018 STR. All Rights Reserved.

• U.S. hotel economy isn't just "holding on"...it's accelerating

• Supply grows, but is only problematic in certain locales

• Demand remains impressive, bodes well for summer

• Pricing power shows signs of life...let's see if it continues

• Travelers should prepare to pay more at luxury and economy hotels; these classes have shown greatest rate gains this year

• Hotel economy is predicated on broader economy. Will be watching interest rates, inflation, and gas prices.

Final Takeaways

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Thank you!