charles scudmore

TRI HOSPITALITY CONSULTING

INTERNATIONAL EXPERTS IN HOTELS

From A+ to Fail in Development, Funding,

Design and Construction

Charles Scudamore Director

TRI Hospitality Consulting



The Running Order

• Current State of Play

• Recent London Hotel Openings

• Projects due to open 2010-2011

• Future Market Prospects

• Development Options

• The Hotel Development Process



Where are we now?

RECOVERY• Improving

fundamentals and returns

• GDP Growth• Increased

international travel

• Increased demand for commercial lettings

• Domestic consumer spend recovery

GROWTH• Demand

outpaces supply• Increasing

access to capital• Rapid supply

growth• Hotel earnings

grow but values stabilise

PEAK• Overbuilding

occurs• Supply starts to

exceed demand• Hotel earnings

decelerate and stabilise

DECLINE• GDP decline• Reduction in

consumer spend• Visitor levels

decrease• Corporate spend

reduced• Returns decline• Funding reduces• Supply growth

slows• Profit margins

contract

RECESSIONARY PERIOD



London – Current PerformanceFive-Star London Hotels(12 months to March)

2009 2010

Average Room Occupancy

74.6% 79.1%

Average Room Rate £212.09 £199.20

Room RevPAR £158.14 £157.57

Total RevPAR £255.02 £247.64

GOP 43.2% 44.5%

Full-Service London Hotels(12 months to March)

2009 2010

Average Room Occupancy

79.8% 81.2%


Room RevPAR £93.25 £90.85

Total RevPAR £134.41 £128.71

GOP 45.9% 47.0%

12.2%

37.0%

6.2%

25.9%

5.2%

13.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

(% o

f ro

om

nig

hts

)

Rack Corporate Conference Leisure Tours/Groups Other

13.8%

30.8%

5.7%

23.9%

12.9% 13.1%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

(% o

f ro

om

nig

hts

)

Rack Corporate Conference Leisure Tours/Groups Other



London – Sector Rates

£243

£219

£165£177

£180

£171

£137

£127

£117

£112

£73

£85

0.00 50.00 100.00 150.00 200.00 250.00Room Rates (£)

London Five-star

London Full Service

Rack Business/Corporate Residential Conference Tourist/Leisure Group Tours Other



London New Hotel Room Supply

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

89 90 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 10f 11f 12f 13f

Tota

l Room

s



Composition of 2009/10 Supply

214

406

1,744

1,344

133

1,134

0 200 400 600 800 1000 1200 1400 1600 1800

Number of Rooms

Boutique

Aparthotel

5 Star+

4 Star

3 Star

Budget



London Hotel Projects - 2010

• London Heliport location (Battersea)

• 70 bedrooms (4 suites)• Subterranean spa Verta• Extensive conference facilities• Design, lifestyle-led hotel• Due to open in Summer 2010




• Fairmont-owned• 268 bedrooms (58 suites)• Room rates starting at £350pn• £200million refurbishment?• Eco-friendly, energy saving

systems• Re-opening delayed four times




• McAleer & Rushe development• 192 bedrooms (9 suites)• Due to open in September 2010• Mixed-use project (200,000sq ft)• Landmark location in London



Composition of 2010-2013f Supply

139

406

4,572

4,482

442

3,375

0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000

Number of Rooms

Boutique

Aparthotel

5 Star+

4 Star

3 Star

Budget




• Mixed-use development (1m sq ft)

• Hotel - 175,000 sq ft (34th-50th floors)

• 195 bedrooms• Initial fixed-price contract of

£350m• Expected to open in Summer

2012



London Hotel Projects – 2013?

• City location (Bishopsgate)• Purpose-built 190 bedroom hotel • 43-floors: conference, leisure and

120 branded residences• 2nd stage of £500 million Heron

Tower development• 4th Four Seasons Hotel in the UK



Supply by London Borough

0 500 1000 1500 2000 2500

N umber of Bedrooms

Barking & Dagenham

Kensington & Chelsea

Croydon

Bromley

Greenwich

Harrow

Islington

Ealing

Wandsworth

Hammersmith and Fulham

Kingston

Camden

Newham

Tower Hamlets

Lambeth

City

Southwark

Hounslow

Hillingdon

Westminster

Brent

Haringey

Hackney

Lewisham

Spelthorne

Wandsworth



London - Future Prospects

London Hotels Forecast(2010 year-end and 2011)

2010YE 2011

Average Room Occupancy 81.8% 82.5%


Room RevPAR £91.27 £94.40

Total Revenue per Available Room (TrevPAR)

£130.57 £136.82

Gross Operating Profit per Available Room (GOPPAR)

£60.71 £64.99

Gross Operating Profit Conversion (as a % of total revenue) 46.5% 47.5%



When to develop?

RECOVERY

• Improving fundamentals and returns

• Hotel earnings and values grow, with stocks appreciating

• New Build• Conversion• Refurbishment

GROWTH

• Demand outpaces supply

• Increasing access to capital

• Rapid supply growth

• Hotel earnings grow but values stabilise

• New Build• Conversion

PEAK

• Overbuilding occurs

• Supply starts to outpace demand

• Hotel earnings decelerate and stabilise

DECLINE

• Returns decline• Funding reduces• Supply growth

slows• Profit margins

contract

• Acquisition• Refurbishment



Development Options

Advantages Disadvantages

Acquisition

• Established business • Relative ease of funding• Easier to forecast future earnings

• Acquisition premium• Unknown redevelopment costs

New Build

• Reflect market needs• Latest technology/innovation• New brand requirements• Range of potential hotel operators

• Capital requirement• Availability of land• Cost of financing• Timescale of development

Refurbishment

• Reflect market needs • Different grades of refurbishment• Relatively quick vs. other options

• Disruption to existing business• Limited re-branding opportunities

Conversion

• Access to primary locations• Range of potential hotel operators• Timely

• Building/planning restrictions• Hidden costs – remedial/repair work



The Development Process

(1) Concept – initial plans and concept drawings. What’s the vision?

(2) Feasibility – concept needs to be market tested and costed. Requirement of funding.

(3) Construction – architect, quantity surveyor and builder.

(4) Operations – compliant with brand standards, operational planning and suitable service levels.

(5) Asset Management – unit operations, maintenance and repair, maximising performance and profitability.

Asset Management

Asset Management

Operating Operating Design &Construction

Design &Construction

FeasibilityFeasibility

ConceptConcept

HOTELHOTEL

Source: Developing Hospitality Properties and Facilities, J Ransley and H Ingram, 2nd ed



Feasibility Study - Objectives

1. Provide a brief to the architect2. Present to bankers/equity investor3. Support an application for planning

permission4. Attract potential operators5. Provide marketing information6. Identify the market opportunity



Feasibility Study - Methodology

1. Site Appraisal(Visibility, Access, Size, Proximity to demand generators)

2. Market Research(Competitive hotels performance, characteristics of demand)

3. Information Review(consensus of opinion, analysis of data)

4. Financial Analysis(Revenues, costs, profit and ROI)

5. Reporting(what’s the conclusion and why?)



www.trihospitality.comww.HotStats.com

[email protected]

charles scudmore

Business

london hotel projects

london new hotel room

demand hotel earnings

bedroom hotel

seasons hotel

hotel development process

sq ft hotel

room revpar