lodging industry trends june 14, 2018 · pipeline (000s rooms): top 26 markets have 46% of i/c...
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© 2018 STR. All Rights Reserved.
Lodging Industry TrendsJune 14, 2018
Chris Klauda, CHIASenior Research Director, STR
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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
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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
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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
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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)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
© 2018 STR. All Rights Reserved. 38
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
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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!