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PREPARED FOR GREATER TORONTO HOTEL ASSOCIATION Economic Impact Study and Comparative Cities Research December 2015 and September 2016 Reports

ED16.1

2 CBRE HOTELS | GTHA | CITY OF TORONTO

• CBRE Hotels is a specialized hospitality and tourism advisory group within CBRE.

• Provides owners, operators, financial institutions, developers and investors in the hotel sector with a single global source for lodging and hospitality brokerage, valuation, consulting, research and capital markets services.

• Comprised of 375 dedicated hospitality professionals located in 60 offices worldwide.

• CBRE Hotels Canadian practice is comprised of 23 professionals with offices in Toronto, Montreal, Calgary and Vancouver.

• CBRE Hotels maintains the only proprietary databases on the accommodation industry in Canada.

ABOUT CBRE HOTELS – INDUSTRY EXPERTS


GTHA ECONOMIC IMPACT STUDY, December 2015 • Economic Impact Study – to provide overview of the GTA lodging sector and quantify its

economic contribution to the Greater Toronto Area’s GDP, labour force and taxes

• Analysis focused on the “big picture” level of the Greater Toronto Area, with further details for the City of Toronto and Downtown Toronto

GTHA COMPARATIVE CITY HOTEL OPERATONS RESEARCH, September 2016 • Analysis of how Downtown Toronto’s hotel market performance compares with 15 other

downtown hotel markets in 2015, in terms of cost of doing business and industry profitability

• Analysis of Toronto’s Airbnb industry

• CBRE HOTELS MARKET OUTLOOKS • CBRE NATIONAL MARKET AND FINANCIAL DATABASES

TODAY’S DISCUSSION

DEFINING THE GREATER TORONTO HOTEL MARKET


HOTEL INVENTORY IN THE GREATER TORONTO AREA

GTHA Membership 212 hotels offering

38,830 rooms (2014)

Total GTA Supply 44,180 rooms (2015)


HOTEL INVENTORY IN THE CITY OF TORONTO

108 hotels offering 25,280 rooms (2015)


SIZE OF GTA HOTEL INVENTORY

Market Properties Rooms %

Downtown Toronto 61 16,741 38%

Rest of Toronto 47 8,540 19%

City of Toronto 108 25,281 57%

Total GTA 44,176 100%

Greater Toronto Accommodation Supply by Submarket

Source: CBRE Hotels


LARGEST HOTEL MARKET IN CANADA

05,000

10,00015,00020,00025,00030,00035,00040,00045,00050,000

Top 10 Hotel Markets in Canada

Rooms

Source: CBRE Hotels

HISTORIC HOTEL SECTOR PERFORMANCE 2000-2015


Total GTA Hotel Rooms

HISTORIC GROWTH IN SUPPLY

25,5

73

24,8

84

25,2

81

36,603

43,337 44,176

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

GTA City of TorontoSource: CBRE Hotels

City of Toronto


Total GTA Supply and Demand

GREATER TORONTO MARKET PERFORMANCE

13.4

16.1

9.4

11.4

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Room Nights in Millions

Supply

Demand

Source: CBRE Hotels


Total City of Toronto Supply and Demand

CITY OF TORONTO MARKET PERFORMANCE

9.3 9.3

6.6 6.7

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Room Nights in Millions

Supply

Demand

Source: CBRE Hotels

GTA HOTEL MARKET SEGMENTATION - 2014


HOTEL MARKET SEGMENTATION - 2014

34%

37%

17%

12%

GTA Hotel Market Segmentation

Corporate

Leisure

Meeting/Conference

Government/Other

Source: CBRE Hotels

COMPETITIVE DESTINATION PERFORMANCE ANALYSIS


Comparable US and Canadian Destinations’ Top Line Performance - 2015

TORONTO VERSUS 15 COMPETITIVE DESTINATIONS

Source: CBRE Hotels


Comparable US and Canadian Destinations’ Total Revenue Performance - 2015


Toronto @ $80,780 per room

San Francisco @ $154,215 per room

Source: CBRE Hotels


Comparable US and Canadian Destinations’ Total Operating Expense Performance - 2015


$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

San

Fran

cisc

o, C

A

Bost

on, M

A

Was

hing

ton,

DC

New

Yor

k, N

Y

Los

Ange

les,

CA

Mia

mi,

FL

Chi

cago

, IL

Phila

delp

hia,

PA

Den

ver,

CO

Aust

in, T

X

Vanc

ouve

r, BC

Nas

hvill

e, T

N

Toro

nto,

ON

Atla

nta,

GA

Mon

treal

, QC

Hou

ston

, TX

Per A

vaila

ble

Room

Total Expense BreakdownPer Available Room - $CDN

2015

Insurance

Property and Other Taxes

Utilities

POM

Sales and Marketing

Info. & Tele. Systems

A&G

Other Op. Dept.

F&B

Rooms

Note: Sales and Marketing expenses inclusive of Franchise Fees

Toronto $60,500 per available room

Source: CBRE Hotels


Comparable US and Canadian Destinations’ Profitability - 2015


$46,

210

$18,

450

$12,

860

$454

$194 $175

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

Nas

hvill

e, T

N

Bost

on, M

A

San

Fran

cisc

o, C

A

Aus

tin, T

X

Mia

mi,

FL

Den

ver,

CO

New

Yor

k, N

Y

Was

hing

ton,

DC

Chi

cago

, IL

Hou

ston

, TX

Phila

delp

hia,

PA

Los

Ang

eles

, CA

Vanc

ouve

r, B

C

Atla

nta,

GA

Toro

nto,

ON

Mon

treal

, QC

Per A

vaila

ble

Room

NOI and ADR - $CDN 2015

NOI

ADR

Note: Sales and Marketing expenses inclusive of Franchise FeesSource: CBRE Hotels’ national Monthly Trends database (Canadian City ADRs) and STR Inc. data (U.S. City ADRs - converted to $CDN)

Source: CBRE Hotels

CAPITAL INVESTMENTS AND RE-INVESTMENTS IN HOTELS


Capital Investment in New Built Hotels by Market in $Millions (2000-2015 YTD)

CAPITAL INVESTMENTS IN NEW HOTEL DEVELOPMENT

$209 M

$351 M $340 M

$0

$50

$100

$150

$200

$250

$300

$350

$40020

00

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Downtown Toronto City of Toronto (excl. Downtown) GTHA Market (outside City of Toronto)

Source: CBRE Hotels


HOTEL CAPITAL EXPENDITURE EXPECTATIONS

63%

29%

8%

Hotel Capital Expenditure Expectations - 2016

Substantive Renovation

Typical FF&E Expenditure

Minimal FF&E Expenditure

Source: CBRE Hotels


• Since 2000, 13,100 rooms have built in GTA, at an average construction cost of

$204,300 per room and total capital investment of $2.7 Billion.

2015 data shows significant growth in capital replacement levels across GTA with Re-investment/renovation levels ranging from $15,100 per room for the average GTA hotel to $19,500 per room at the typical Downtown Toronto hotel.

GTA CAPITAL INVESTMENT SUMMARY

ECONOMIC IMPACTS


GTA ECONOMIC IMPACT OF HOTEL OPERATIONS

GTA Rest of Province TOTAL IN $MILLIONS 2014 2014 2014

Total Revenue $2,065Gross Domestic Product (GDP) Direct $1,387 $23 $1,411 57% Indirect $329 $83 $411 17% Induced $426 $217 $643 26%Total $2,143 $323 $2,465 100%Labour Income Direct $911 $15 $926 58% Indirect $217 $57 $273 17% Induced $260 $146 $406 25%Total $1,388 $218 $1,606 100%Employment (Jobs) (actual#) Direct 18,800 230 19,030 63% Indirect 3,300 950 4,250 14% Induced 4,300 2,650 6,950 23%Total 26,400 3,830 30,230 100%Direct Taxes Federal $364 $4 $368 41% Provincial $346 $3 $349 39% Municipal $173 $1 $174 20%Total $883 $9 $891 100%Total Taxes Federal $541 $62 $602 45% Provincial $466 $48 $514 39% Municipal $202 $13 $214 16%Total $1,208 $122 $1,330 100%Sources: CBRE Hotels and Ontario Ministry of Tourism's TREIM Model

Hotel Operation Impacts

Economic Impacts of Greater Toronto Hotels Operations - 2014GTHA Accommodation Sector

%

VISITOR MARKET TO TORONTO – RTO 5


TOTAL VISITOR SPENDING - 2014

$3,520,993,000

$1,778,639,000

$1,527,628,000

$482,390,000

$966,061,000

TOTAL VISITOR SPENDING – 2014

Transportation

F&B

Accommodation

Recreation &EntertainmentRetail/Other

Source: Ontario MTCS, Statistics Canada

18 cents of every visitor dollar spent on commercial accommodation

There were 28 Million visitors to RTO 5 in 2014 which contributed $8.3 Billion in spending. 10.7 M visits were generated by overnight travellers (38%). Of the overnight visitors to RTO 5, approximately 47% stayed in commercial accommodation properties (5.0 M visits)


PERSON NIGHTS IN ROOFED ACCOMMODATION- 2013 & 2014

25,386,100

11,151,300

4,102,800

25,984,800

12,175,800

5,659,800

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

Private Homes CommercialAccommodation

Other

TOTAL PERSON NIGHTS SPENT in RTO 5 by TYPE OF ACCOMMODATION– 2013 & 2014

Up 38%

Up 9%

Source: Ontario MTCS, Statistics Canada

Definition: 2 people staying in 1 room overnight = 2 person nights or 1 occupied room night

Of the 44 Million Persons Nights to Toronto, those staying in commercial accommodations represent only 28% of the overnight visitor market

IMPACT OF TORONTO’S AIRBNB INDUSTRY


DOWNTOWN TORONTO’S AIRBNB INDUSTRY

• Dtwn Toronto Airbnb industry generated $58 M in revenue in past 12 months ending June 2016

• Dtwn Toronto’s total Airbnb ACTIVE UNITS listings represent over 40% of the size current hotel inventory in the City of Toronto

• Supply of 10,272 hotel comparable Airbnb property LISTINGS in Downtown Toronto (Aug 2016)

Sources: AirDNA and CBRE Hotels

Apartment, Loft or Condo Entire House Bungalow or Townhouse / B&B

• In the past year, Dtwn Toronto’s Airbnb supply has grown by 80%. 2016 Dtwn Toronto revenues are equivalent to the $60 M generated by the total GTA airbnb sector in 2015

COMPETITIVE DESTINATION ROOM AND PROPERTY TAX RATES


Total Lodging Rate Ranking - 2014

COMPETITIVE DESTINATION CONSUMER TAX RATES

11.09%

15.66%

18.48%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

20.00%C

hica

go

Orla

ndo

San

Die

go

Mia

mi

Nas

hvill

e

Min

neap

olis

Bost

on

Was

hing

ton

New

Yor

k

Den

ver

Dal

las

Los

Ang

eles

Toro

nto

Atla

nta

Otta

wa

San

Fran

cisc

o

Seat

tle

Nia

gara

Fal

ls

Hou

ston

Win

nipe

g

Vanc

ouve

r

Mon

trea

l

Source: HVS Lodging Tax Report

AVERAGE 15.07%


Property Tax per Room – 2014 ($CDN)

COMPETITIVE DESTINATION PROPERTY TAX BURDENS

$1,602

$3,530

$9,700

$1,500

$2,500

$3,500

$4,500

$5,500

$6,500

$7,500

$8,500

$9,500

$10,500A

tlant

a

Orla

ndo

Seat

tle

Dal

las

Nas

hvill

e

Hou

ston

Vanc

ouve

r

Den

ver

Otta

wa

Los

Ang

eles

Mia

mi

Min

neap

olis

San

Fran

cisc

o

Was

hing

ton

Mon

trea

l

San

Die

go

Toro

nto

Chi

cago

Nia

gara

Fal

ls

Bost

on

New

Yor

k

Source: CBRE Hotels

HOTEL CONTRIBUTIONS TO TORONTO’S DESTINATION MARKETING


Estimate of Historic Tourism Toronto Budget – Breakdown by Funding Type in $Millions

HISTORIC GTA DESTINATION MARKETING

$0

$5

$10

$15

$20

$25

$30

$35

$4020

00

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

F

City of Toronto Funding DMFsGTHA/DMP Funding Other Tourism Toronto SourcesProvincial Funding

Source: Tourism Toronto Annual Reports, CBRE Hotels

$35.8 M 2017 Budget

POTENTIAL ROOM TAX IMPLICATIONS


IMPLICATIONS OF POTENTIAL ROOM TAX SCENARIOS

• ABILITY TO MAINTAIN DESTINATION COMPETITIVENESS • As a leisure tourism destination

• As a M&C destination

• As an economic development investment destination

• IMPACT OF REGIONAL COMPETITIVENESS • 19,000 rooms surrounding City of Toronto

• 10,000 Airbnb rooms generating $58 M

• ABILITY TO GROW REVENUES AND INCREASE INDUSTRY PROFITABILITY • At $18,450 per available room, Toronto ranked 2nd lowest against 15 other

competitive cities in terms of NOI in 2015

• Lower revenues and higher operating expenses – especially utilities and property taxes

• ABILITY TO INFLUENCE FURTHER DEVELOPMENT AND RE-INVESTMENT

• Since 2010, 6 new hotels built in the City with 1,560 rooms and 12 have closed with 1,470 rooms

• ABILITY TO MAINTAIN SUSTAINABILE DESTINATION FUNDING • Tourism Toronto’s requirement for $35 M in funding

QUESTIONS

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