nyu tisch center economic recovery briefing for the us hospitality indnyu tisch center economic...

NEW YORK UNIVERSITYSchool of Continuing andSchool of Continuing and

Professional Studies

P t R b t Ti h C t fPreston Robert Tisch Center forHospitality, Tourism, and Sports Management

Th U S E i RThe U.S. Economic Recovery: Chain Scale Segments,

Top 25 Markets,Demand Segments and Profits

The Fourth in a Series ofNYU Tisch Center Economic Briefings

February 2010©NYU 2010

St M L b t M ASteven M. Lambert, M.A.Director of Administration and Industry Relations

NYU Tisch CenterNYU Tisch Center

©NYU 2010

Bjorn Hanson, Ph.D.j ,Clinical Associate Professor

NYU Tisch Center

©NYU 2010

AgendaAgenda

1. U.S. Recessions2. U.S. Lodging Industry: Cycles and Performance3. Analysis of U.S. Lodging Recoveriesy g g4. U.S. Lodging RevPAR Trends: Implications for this

Recovery5. Two RevPAR Recovery Analyses6. RevPAR Forecasts

l h7. Structural Changes8. Conclusions

©NYU 2010

Section 1 ‐ U.S. Recessions

©NYU 2010

U.S. RecessionsD t D tiDates Duration

Aug. 1929 to March 1933 43 months

May 1937 to June 1938 13 monthsMay 1937 to June 1938 13 months

Feb. 1945 to Oct. 1945 8 months

Nov. 1948 to Oct. 1949 11 months

J l 1953 t M 1954 10 thJuly 1953 to May 1954 10 months

Aug. 1957 to April 1958 8 months

April 1960 to Feb. 1961 10 months

Dec. 1969 to Nov. 1970 11 months

Nov. 1973 to March 1975 16 months

Jan 1980 to July 1980 6 monthsJan. 1980 to July 1980 6 months

July 1981 to Nov. 1982 16 months

July 1990 to March 1991 8 months

March 2001 to Nov. 2001

December 2007 to Feb. 2010

8 months

26 months*Source: National Bureau of Economic Research*To date

©NYU 2010

For further information on “The U.S. Economy, the Stock Market and its Effect on the Lodging Industry”,Stock Market and its Effect on the Lodging Industry , please refer to the Tisch Center NYU February Podcast at:

http://www.scps.nyu.edu/tischpodcast

©NYU 2010

Section 2 ‐ The U.S. Lodging Industry: C l d P f R l iCycles and Performance Relative to

Recessions

©NYU 2010

Long-Term U.S. Occupancyg p yOccupancy Percentage

90%

95%1946

92.5%Long-Term Trend63.34% (81 Years)

1987 to 2007 Trend62.7% (20 Years)

75%

80%

85%

65%

70%

75%

199564.8%

197972.2%

2008 60.3%

55%

60% 199161.9%

197153.4%

193350.6%

2002 59.0%

200955.2%

50%28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94 97 '00 '03 '06 '09

Sources: PricewaterhouseCoopers LLP (1928 to 1986 and 2008), Smith Travel Research (1987 to 2009).Sources: PricewaterhouseCoopers LLP (1928 to 1986 and 2008), Smith Travel Research (1987 to 2009) ©NYU 2010

Timeline of Recessions & Historic Events

1962 Cuban Missile C i i

2002 U.S. invasionCrisis

1963JFK

1973 Oil Embargo

U.S. invasionof Iraq

1982Falklands War 1991

Persian Gulf War

1953Korean War Ends

Assassinated 2003SARS1950 1960 1990 20001970 2010

Persian Gulf War

1980

2001 September 11th Attacks

1987Black

Monday

2008H1N11979

Iranian Oil

19676 Day War in Middle East

1963

1991 USSR

Collapse

1995 Oklahoma City Bombing

1958First domesticjet airline

Oil

Crisis2008

2008Lehman

Brothers Chapter 11

1963LBJ Expands War in Vietnam 1991

Yugoslav Wars

Collapse

©NYU 2010

Bear Stearns

Collapse

U.S. Lodging Demand and Recessions

2700

2400

2700

1800

2100

1500

1800

1200

900

Source: National Bureau of Economic Research & Smith Travel Research ©NYU 2010

U.S. Recessions and Lodging Cyclesg g yU.S. Recessions Months Lodging Cycles Months

Dec. 1969 to Nov. 1970 11 Feb. 1969 to Feb. 1971 12

Nov 1973 to March 1975 16 Aug 1974 to May 1975 9Nov. 1973 to March 1975 16 Aug. 1974 to May 1975 9

Jan. 1980 to July 1980 6 Oct. 1979… -

July 1981 to Nov. 1982 16 … to May 1982 19

July 1990 to March 1991 8 Feb 1990 to March 1991 13July 1990 to March 1991 8 Feb. 1990 to March 1991 13

March 2001 to Nov. 2001 8 Sept. 2000 to Sept. 2003 36

Dec 2007 to Feb. 2010 26

Source: Smith Travel Research and National Bureau of Economic Research ©NYU 2010

S i 3 U S L d i R iSection 3 ‐ U.S. Lodging Recoveries

©NYU 2010

Definitions of Recovery

1. Return to a prior trend line

2. Favorable trend following a trough

3. Return to a prior performance level

©NYU 2010

3. Return to a prior performance level

Years from priorYears from

Y f i Y f f

Years from priorpeak to recovery

Years from trough to recovery

Years from prior peak to recovery

Years from from trough to recovery

recoveryy

2/5 years

©NYU 2010

Total U.S. Lodging Industry

©NYU 2010

Total U.S. Occupancy2007 R i1991 R i

125

2007 Recession

2001 Recession

1991 Recession

1980 Recession1973 Recession

1969 Recession

115

cent

age

105

cupa

ncy P

erc

95

Inde

xed

Occ

854 3 2 1 1 2 3 4 5

Trough

4 3 2 1 1 2 3 4 5

Source: Smith Travel Research and PricewaterouseCoopers

Years Prior to Trough Years Past Trough

©NYU 2010

Total U.S. Nominal ADR2001 R i1991 R i

140

1980 Recession 2007 Recession

2001 Recession

1973 Recession

1991 Recession

120

130

140

Rate

$

110

120

erag

e Dail

y R

90

100

Inde

xed A

ve

70

80

4 3 2 1 1 2 3 4 5

Trough

4 3 2 1 1 2 3 4 5Years Prior to Trough Years Post Trough

Source: Smith Travel Research and PricewaterouseCoopers ©NYU 2010

Total U.S. Real ADR2001 R i1991 R i


2001 Recession

1973 Recession

1991 Recession

140

120130

Rate

$

100110

erag

e Dail

y R

8090

Inde

xed A

ve

Trough6070

4 3 2 1 1 2 3 4 5

Trough

Years Prior to Trough Years Post Trough


4 3 2 1 1 2 3 4 5

Total U.S. Nominal RevPAR2001 R i1991 R i


2001 Recession

1973 Recession

1991 Recession

140

120

130

140

100

110

120

evPA

R $

80

90

Inde

xed

R

Trough60

70

4 3 2 1 1 2 3 4 5

Trough


Source: Smith Travel Research and PricewaterouseCoopers

4 3 2 1 1 2 3 4 5

©NYU 2010

Total U.S. Real RevPAR2001 R i1991 R i


2001 Recession

1973 Recession

1991 Recession

evPA

R $

Inde

xed

R

TroughTrough



Total U.S. Demand2001 R i1991 R i


2001 Recession

1973 Recession

1991 Recession

TroughTrough



Total U.S. Supply2001 R i1991 R i


2001 Recession

1973 Recession

1991 Recession

TroughTrough



Total U.S. Supply ChangeTotal U.S. Supply Change

12

8

10

6

8

rcen

t

2

4

Per

0

2

-21968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008


U S L d i Ch i S l SU.S. Lodging Chain Scale Segments

©NYU 2010

Graphs Provided For: Graphs Of:Graphs Provided For: Total U.S.

Luxury

Graphs Of:Occupancy

Nominal Average Daily Ratey

Upper Upscale

Upscale

g y

Real Average Daily Rate

Nominal RevPAR

Midscale with Food and Beverage

Midscale without Food and Beverage

Real RevPAR

Supply

Economy

Top 25 Markets

Supply Percentage Change

Demand

©NYU 2010

Luxury Occupancy2001 Recession 1991 Recession2007 Recession

2006: 4

1997:74.1%

71.5% 4/8 years

cent

age

1.5/4.5 years

cupa

ncy P

erc

1988: 67.1%

Inde

xed

Occ

Trough

Years Prior to Trough Years Post TroughSource: Smith Travel Research ©NYU 2010

Luxury Nominal ADR1991 Recession2001 Recession2007 Recession

Rate

$

1 5

2007: $290.41

erag

e Dail

y R

1.5/4.5 years

1990: $128 68

2000:$236.04 .25/1.25 yearsIn

dexe

d Ave

Trough

$128.68


Luxury Real ADR2007 Recession 2001 Recession 1991 Recession

2007 Rate

$

2007: $290.41

1.5/4.5yearserag

e Dail

y R

2000: $228.06

1.5/4.5years

Inde

xed A

ve

Trough


Source: Smith Travel Research ©NYU 2010

Luxury Nominal RevPAR2007 Recession 2001 Recession 1991 Recession

2007: $207.4000 $ 0 0

2000:

3/5 years

evPA

R $

1990: $84.21

2000: $172.26

.5/1.5 yearsInde

xed

R

Trough

$84.21



Luxury Real RevPARy2001 Recession 1991 Recession2007 Recession

2/5 yearsevPA

R $

1990:

y

2000: $166.43

.25/1.25 years

Inde

xed

R

Trough$79.67

.25/1.25 years



Luxury Demandy1991 Recession2007 Recession 2001 Recession

Millions

135

1452007: 23.879

115

125

85

95

105 1994: 13.931 2000:

16.864

.25/1.25 years

1/1.5 years

75

85

4 3 2 1 1 2 3 4 5 6

Trough



Luxury Supply1991 Recession2007 Recession 2001 RecessionMillions

140

150

120

130 2008: 35.059 million

90

100

110

1994:

.25/1.25 years

80

90

4 3 2 1 1 2 3 4 5 6 7

Trough19.851 million



Luxury Supply ChangeLuxury Supply Change

14

1012

rcen

t

68

Per

24

-20

1988

1991

1994

1997

2000

2003

2006

2009


-4

1 1 1 1 2 2 2 2

Upper Upscale Occupancy2001 Recession 1991 Recession2007 Recession

107

109

111

2000:

2007: 71.2% 5/7 years

ntag

e

103

105

107

1991

72.2%

1.5/3.5 years

panc

y Per

ce

99

1011991:66.2%

ndex

ed O

ccu

95

97

4 3 2 1 1 2 3 4 5 6 7

In

4 3 2 1 1 2 3 4 5 6 7Years Prior to Trough Years Post Trough


Upper Upscale Nominal ADR1991 Recession2007 Recession 2001 Recession

Rate

$

2008: $109.852000:

$138.43 2/4.75 years

erag

e Dail

y R

1990: .5/1.5 yearsInde

xed A

ve

Trough$92.29



Upper Upscale Real ADR2001 Recession 1991 Recession2007 Recession

130

Rate

$

110

1202008: $153.92

2000: $133 75 1.75/

erag

e Dail

y R

100

110 $133.75

1990:

4.75 years

Inde

xed A

ve

904 3 2 1 1 2 3 4 5 6 7

1990: $87.32 Trough



Upper Upscale Nominal RevPAR

140

1991 Recession2001 Recession2007 Recession

130

140

2007:

120$112.492000:

$100.002/5.25 years

evPA

R $

100

110

1990: 1.25/2.25 years

Inde

xed

R

90

100

4 3 2 1 1 2 3 4 5 6 7

Trough$62.56

y



Upper Upscale Real RevPAR1991 Recession2001 Recession2007 Recession

2007:00$109.262000:

$96.622/5 years

evPA

R $

1990 .5/1.50 years

Inde

xed

R

Trough1990: $59.18

y



Upper Upscale Demand1991 Recession2001 Recession2007 Recession

2007:

Millions

125

135141.229

115

125

2000: 125.958

95

105125.958

1990: .25/1.25 years

2.75/3.75 years

85

95

4 3 2 1 1 2 3 4 5 6 7

Trough99.255



Upper Upscale Supply1991 Recession2001 Recession1991 RecessionMillions

2008: 205.811

1992: 152 027 1 5/3 5 152.027 1.5/3.5 years

2002: 183 883

Trough

183.883


Upper Upscale Supply Change

6

4

5

2

3

rcen

t

1

2

Per

-1

01989 1993 1997 2001 2005 2009

-2©NYU 2010Source: Smith Travel Research

Upscale Occupancy

115

1991 Recession2007 Recession 2001 Recession

2005:

110

11570.3%

1998 enta

ge

100

105 1998: 70.8%

1994 1/2 yearsupan

cy P

erce

90

951994:73.1%

1/2 years

ndex

ed O

ccu

85

90

4 3 2 1 1 2 3 4 5 6 7

Trough

I



Upscale Nominal ADR1991 Recession2007 Recession 2001 Recession

Rate

$

2000: $98.52

2008: $119.62 1.5/4.5 years

erag

e Dail

y R

$98.52


xed A

ve

1990: $68.59

Trough

y



Upscale Real ADR

130

2001 Recession 2007 Recession2007 Recession

120

130

Rate

$

110 2000: $95 19

2008: $115.01 1.5/4.5 years

erag

e Dail

y R

100

$95.19

1990: Inde

xed A

ve

904 3 2 1 1 2 3 4 5 6 7

Trough

1990: $64.89



Upscale Nominal RevPAR2001 Recession 1991 Recession2007 Recession

2007: $81.75

1 5/4 5

2000:

1.5/4.5 years

evPA

R $

1990: $45 39

2000: $69.30

.25/1.25 yearsInde

xed

R

$45.39

Trough



Upscale Real RevPAR1991 Recession2001 Recession2007 Recession

125

135

2007:

115

125 $79.422000: $66.95

1.5/4.5 years

evPA

R $

95

105

1990:

Inde

xed

R

85

95

4 3 2 1 1 2 3 4 5 6 7

Trough$42.94



Upscale Demand1991 Recession2001 Recession2007 Recession

Millions

135145 2008:

108.627

105115125

2000:

8595

105 82.052

1990: 37.018

6575

4 3 2 1 1 2 3 4 5 6 7

Trough



Upscale Supply2001 Recession 1991 Recession2007 Recession

Millions

140150

2008:

110120130

2008: 162.660

2004:

90100110 2004:

142.292

1991: 59 173

7080

4 3 2 1 1 2 3 4 5 6 7

Trough

59.173


Source: Smith Travel Research©NYU 2010

Upscale Supply ChangeUpscale Supply Changerc

ent

Per

©NYU 2010Source: Smith Travel Research

Midscale with F&B Occupancy

2006:59.5%


110

113

2000: 60.3%

59.5%

3/6 yearsenta

ge

104

107 1989: 62.6% 4/6 years

y

upan

cy P

erce

98

101

104

ndex

ed O

ccu

95

98

4 3 2 1 1 2 3 4 5 6 7

Trough

I



Midscale with F&B Nominal ADR

125


115

120

125

Rate

$

105

110

115

2008: $88.332000: 1erag

e Dail

y R

100

105 $88.332000:$73.86

1991:

1/4 years

Inde

xed A

ve

90

95

4 3 2 1 1 2 3 4 5 6 7

Trough$53.25



Midscale with F&B Real ADR

125


115

120

125

Rate

$

105

110

115

2008: 2000: erag

e Dail

y R

100

105 $84.922000: $71.36

1/4 years1991: In

dexe

d Ave

90

95

4 3 2 1 1 2 3 4 5 6 7

Trough

1991: $50.19



Midscale with F&B Nominal RevPAR

130


120

125

130

2007:$

110

115

3/4.5 years

2000: $44.55

$50.57

evPA

R $

100

1051.5/2.5 years1990:

$32 83

Inde

xed

R

90

95

4 3 2 1 1 2 3 4 5 6 7

Trough

$32.83



Midscale with F&B Real RevPAR

130


120

125

130

2007:

110

1152007: $49.132000:

$43.04 1.5/4.5 years

evPA

R $

100

105


xed

R

90

95

4 3 2 1 1 2 3 4 5 6 7

Trough$31.06



Midscale with F&B Demand

Millions 1991 Recession2001 Recession2007 Recession

170

150

160170

2005: 119.116

130

140150

1998:

110120

1989: 147.845 1.25/2.25 years

1998: 144.008

90100

4 3 2 1 1 2 3 4 5 6 7

8 5

Trough

1.25/2.25 years


4 3 2 1 1 2 3 4 5 6 7

Midscale with F&B Supply

1991 Recession2001 Recession2007 RecessionMillions

140

1502008: 201.743c

2000: ©NYU 2010120

130

20002000:228.800

©NYU 2010

100

1101/2.5 years

2000:228.800

1994:

Trough80

90

4 3 2 1 1 2 3 4 6 7

243.433


Source: Smith Travel Research

4 3 2 1 1 2 3 4 6 7

©NYU 2010

Midscale with F&B Supply ChangeMidscale with F&B Supply Changerc

ent

Per


Midscale Without F&B Occupancy

115 2006: 66.10%


110

115

1 5/5 5 cent

age

105199766.0%

1.5/5.5 years

cupa

ncy P

erc

95

1001989: 65.9%

.25/2.25 years

Inde

xed

Occ

904 3 2 1 1 2 3 4 5 6 7

Trough



Midscale Without F&B Nominal ADR


125

135

Rate

$

1152007:$er

age D

aily R

95

105 $90.19

19902001: 1.5/2.5 yearsIn

dexe

d Ave

85

95

4 3 2 1 1 2 3 4 5 6 7

Trough

1990:$43.81

$67.51



Midscale Without F&B Real ADR1991 Recession2001 Recession2007 Recession

125

135

Rate

$

115

125

2008 erag

e Dail

y R

95

1052008: $120.80

.25/1.25 years1990: In

dexe

d Ave

85

95

4 3 2 1 1 2 3 4 5 6 7

Trough

1990: $44.03



Midscale Without F&B Nominal RevPAR


125

135

115

1252007: $57.02

evPA

R $

95

1052000:$41 91

1.5/3.5 years

Inde

xed

R

85

95

4 3 2 1 1 2 3 4 5 6 7

Trough

$41.911993:$39.21



Midscale Without F&B Real RevPAR1991 Recession2007 Recession 2001 Recession

2007:$55.40

evPA

R $

.25/4.25 years

1998 2000: $40 77

Inde

xed

R

Trough1998:

$38.60$40.77



Midscale Without F&B Demand

Millions 2007 Recession 2001 Recession 1991 Recession

170

190

2008

130

150 2008: 170.462

1999

70

90

110 1999: 116.139

1992:

50

70

4 3 2 1 1 2 3 4 5 6 7

Trough49.473



Midscale Without F&B Supply

Millions 2007 Recession 2001 Recession 1991 Recession

2008: 273.913273.913

1990:

Trough

1990: 59.108



Midscale without F&B Supply Changepp y grc

ent

Per


Economy Occupancy

115 2005

2007 Recession 2001 Recession 1991 Recession

110

115

2000:58.5%

2005: 57.4%

3/6 years 2/5 yearscent

age

105 1989: 64.7%

y y

cupa

ncy P

erc

95

100

Inde

xed

Occ

904 3 2 1 1 2 3 4 5 6

Trough

4 3 2 1 1 2 3 4 5 6Years Prior to Trough Years Post Trough


Economy Nominal ADR

120


115

ate $

105

1102008: $54.37erag

e Dail

y R

100

105 $54.37

2002:$46.81

1990

.75/2.75 years

5/4 5 yearsInde

xed A

ve

954 3 2 1 1 2 3 4 5 6 7

Trough1990: $37.59

.5/4.5 years



Economy Real ADR


Rate

$

2008erag

e Dail

y R

2008:$52.28

1991: $35.56 5In

dexe

d Ave

2002: $46.07 Trough

.5/1.5 years



Economy Nominal RevPAR1991 Recession2007 Recession 2001 Recession

2007: $30.62

2000: $27.54 2/3.5 years

evPA

R $

1989: $23.81

2.25/5.25 years

Inde

xed

R

Trough


Economy Real RevPAR1991 Recession2001 Recession2007 Recession

2007: $29 74$29.74

2000: $26.60 1.5/4.5

yearsevPA

R $

1989:$22 65

years

1.75/4.75 years

Inde

xed

R

$22.65

Trough


Economy Demand

150 2007 153 392

1991 Recession2007 Recession 2001 RecessionMillions

130

140

150 2007: 153.392

110

1202000: 153.481 4/6 years

90

1001990:115.785

70

80

4 3 2 1 1 2 3 4 5 6 7

Trough



Economy Supply1991 Recession2001 Recession2007 Recession

Millions

120

1302008: 274.449

100

110

120

2002: 271.002

80

90

100 1/1.5 years1990: 183.024

70

80

4 3 2 1 1 2 3 4 5 6 7

Trough


Economy Supply ChangeEconomy Supply Changerc

ent

Per


Top 25 Markets

©NYU 2010

Top 25 Markets Occupancy

113


2007:

110

113 2007: 68.02%

2000: %

2/5 years

cent

age

104

107 68.74%

1990: 2/4.25 years

cupa

ncy P

erc

98

101

1990: 66.28%

Inde

xed

Occ

95

98

4 3 2 1 1 2 3 4 5 6 7

Trough



U.S. Top 25 Markets Nominal ADR

135


125

135

Rate

$

115 2007: $123.362000:

$99.451.5/4.5 yearser

age D

aily R

95

105

1990:

years

Inde

xed A

ve

854 3 2 1 1 2 3 4 5 6 7

Trough

1990: $68.02

4 3 2 1 1 2 3 4 5 6 7



©NYU 2010

U.S. Top 25 Markets Real ADR

140


130

140

Rate

$

120

1 25/4 252000 2007: erag

e Dail

y R

100

1101.25/4.25years

2000: $96.09

$118.61

Inde

xed A

ve

904 3 2 1 1 2 3 4 5 6 7

Trough1990:

$64.35



U.S. Top 25 Markets Nominal RevPAR

140

2007 Recession 2001 Recession 1991 Recession

130

140

2007

1202000: $70.99

2007: $84.86 1.5/4.5 years

evPA

R $

100

110 1991: $45.82

.75/1.75 yearsInde

xed

R

904 3 2 1 1 2 3 4 5 6 7

Trough



©NYU 2010

U.S. Top 25 Markets Real RevPAR

140


130

140

1202007: $81.822000:

$68.591.75/4.75 years

evPA

R $

100

110

.5/1.50 years

Inde

xed

R

904 3 2 1 1 2 3 4 5 6 7

Trough1990:

$43.35

y

4 3 2 1 1 2 3 4 5 6 7Years Post TroughYears Prior to Trough


U.S. Top 25 Markets Demand

190

2007 Recession 2001 Recession 1991 RecessionMillions

2000:

170

190

1990: 32.405

2000: 43.821

130

15032.405

90

110

2007:

70

90

4 3 2 1 1 2 3 4 5 6 7

Trough29.113



U.S. Top 25 Markets Supply2001 Recession 1991 Recession2007 Recession

Millions

105

110

100

105

2000: 38 982

1991:32.5101

95

100 38.982

90 Trough

2007: 40.756



Top 25 Markets Supply ChangeTop 25 Markets Supply Change


U S Top 25 Markets Cycles and RecoveriesU.S. Top 25 Markets Cycles and Recoveries Relative to Total U.S. Lodging

©NYU 2010

Top 25 Markets and Total U.S. Occupancy

115

Top 25 2001 Total U.S. 2007 Total U.S. 2001 Total U.S. 1991 Top 25 2007 Top 25 1991

110

115

cent

age

105

cupa

ncy P

erc

100

Inde

xed

Occ

954 3 2 1 1 2 3 4 5 6 7

Trough



Top 25 Markets and Total U.S. Nominal RevPARS S STotal U.S. 2007 Total U.S. 2001 Total U.S. 1991

Top 25 1991 Top 25 2001Top 25 2007

evPA

R $

Inde

xed

R

Trough



Top 25 Markets and Total U.S. Nominal ADRTotal U.S. 1991

Total U.S. 2007

Total U.S. 2001

Top 25 1991

Top 25 2001

Top 25 2001

130

Rate

$

120

erag

e Dail

y R

100

110

Inde

xed A

ve

904 3 2 1 1 2 3 4 5 6 7

Trough



Top 25 Markets and Total U.S. DemandTotal U.S. 1991Total U.S. 2001Total U.S. 2007

Top 25 2001Top 25 2007 Top 25 1991Millions

170

190

130

150

90

110

130

Trough70

90

4 3 2 1 1 2 3 4 5 6 7

Trough



4 3 2 1 1 2 3 4 5 6 7

©NYU 2010

Top 25 Markets and Total U.S. SupplyTotal U.S. 1991Total U.S. 2001Total U.S. 2007

Top 25 2001Top 25 2007 Top 25 1991Millions

TroughTrough


Total U.S. and Top 25 Market Supply ChangeTotal U.S. and Top 25 Market Supply Change

6Top 25 Markets Total U.S.

5

3

4

1

2

0

1

1988 1991 1994 1997 2000 2003 2006-1 1988 1991 1994 1997 2000 2003 2006


Chain Scale Segment Recovery

Occupancy Nominal ADR Real ADR Nominal RevPAR Real RevPARFirst to Recover 1991 Recession

LuxuryMidscale w/o F&B

LuxuryEconomy

LuxuryUpscale

LuxuryUpper Upscale

Last to Recover 1991 Recession Occupancy Nominal ADR Real ADR Nominal RevPAR Real RevPARMidscale w/F&BUpscale

Midscale w/F&BUpper Upscale

Midscale w/F&BEconomy

First to Recover 2001 Recession Occupancy Nominal ADR Real ADR Nominal RevPAR Real RevPARMidscale w/o F&B Midscale w/F&B Midscale w/o F&B Upscale Midscale w/o F&BMidscale w/o F&B Midscale w/F&B

EconomyMidscale w/o F&BMidscale w/F&B

UpscaleUpper Upscale

Midscale w/o F&B

Last to Recover 2001 Recession Occupancy Nominal ADR Real ADR Nominal RevPAR Real RevPAROccupancy Nominal ADR Real ADR Nominal RevPAR Real RevPAR

Upper Upscale Midscale w/o F&B Upper Upscale Luxury EconomyUpper Upscale

©NYU 2010

Top 25 Market & Total US Recovery

Occupancy Nominal ADR Nominal RevPARFirst to Recover 1991 Recession

Top 25 Markets Total US Top 25 Markets

First to Recover 2001 Recession Occupancy Nominal ADR Nominal RevPARTop 25 Markets Total US Top 25 MarketsTop 25 Markets Total US Top 25 Markets

©NYU 2010

Demand Segments – Cycle and Recoveries Order of decline in demand

• Business/Commercial

• Group/Convention

• SMERF

• Leisure

Percentage decline of demand• Group/Convention

• Business/Commercial/

• SMERF

• Leisure

Duration to Recovery (first to last)Duration to Recovery (first to last)• Leisure

• SMERF

B i / i l• Business/commercial

• Group/ Convention

©NYU 2010

Perverse MathPerverse Math

Average Daily Rate $200Average Daily Rate $200

50 percent decline $10050 percent decline $100

$50 percent increase $150

©NYU 2010

1. Long term RevPAR +3.1 percent

2. U.S. RevPAR peaked 2007 $63.75

3. Assumed RevPAR trough 2010 $53.40

If RevPAR were to increase by 3.1 percent, If RevPAR were to increase by 3.1 percent, recovery to 2007 levels would be 2017 (worst case)case)

4. U.S. RevPAR recovery has averaged 7.57 percent for 4 years post trough (since 1968)percent for 4 years post trough (since 1968)

If RevPAR were to increase by 7.57 percent for four years 3 1 percent thereafter recovery tofour years, 3.1 percent thereafter, recovery to 2007 levels would be 2013 (best case)

©NYU 2010

2009 – 2010 U.S. Lodging RevPAR Forecasts g g

S 2010 2011Source 2010 2011

Smith Travel Research (3.2) 4.2( )

PKF Research (1.3) 5.9

PricewaterhouseCoopers (1.5)

Source: Individual organizations*Forecasts as of February 13, 2010

©NYU 2010

Demand Elasticity and Correlation to Real GDP

1987 value = 100

170

180

1987 value = 100

US Real GDP

150

160US Real GDP

120

130

140

Lodging Demand(Room Nights Sold)

100

110

120

87 88 89 90 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07 '08

(Room Nights Sold)

87 88 89 90 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07 '08

Sources: Lodging demand – PricewaterhouseCoopers LLP based on Smith Travel Research data; Real GDP- U.S. Bureau of Economic Analysis; Air travel demand - Air Transport Association.

Sources: Lodging demand – PricewaterhouseCoopers LLP based on Smith Travel Research data; Real GDP- U.S. Bureau of Economic Analysis; Air travel demand - Air Transport Association. ©NYU 2010

Long‐Term Occupancy Levels and Profits

$30 68%

Income Before Income Taxes, Billions of Dollars Occupancy Percentage

$20

$25

62%

64%

66%

$10

$15

58%

60%

$0

$5

52%

54%

56%

($10)

($5)

1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 200848%

50%Aggregate Profits Occupancy

1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Sources: Smith Travel ResearchNote: STR change in method in 2002Sources: Smith Travel Research, 2009 NYU Tisch Center Estimate ©NYU 2010

U.S. Lodging Industry Net Income as a R ti t RRatio to Revenue

20

25

15

20

10

0

5

087 89 91 93 95 97 99 01 03 05 07 09

Sources: Smith Travel Research, 2009 NYU Tisch Center Estimate ©NYU 2010

1. Lodging Industry forecasts are more challenging now than ever before – record revisions

2. “Comparable” recessions and long term trends indicate thi “ ” ill b l d l b t ththis “recovery” will be longer and less robust than average

3 The U S Lodging Industry spends more time in declines3. The U.S. Lodging Industry spends more time in declines than in recoveries

4. During declines, occupancy usually precedes average g p y y p gdaily rate

During recoveries, occupancy usually precedes average daily rate

5. Industry RevPAR is unlikely to recover to 2007 levels until 2013 or later2013 or later

©NYU 2010

6. Luxury and Upper Upscale demand has declined during all recessions, Economy during all but one recession

Upscale and Midscale without Food and Beverage demand declined only during the current recessiondemand declined only during the current recession

Midscale with Food and Beverage has experienced a long term trend of demand declineterm trend of demand decline

7. The Top 25 Markets are much more volatile than the U.S. with earlier and greater declines, but frequently with

l dearlier and stronger recoveries8. Luxury may experience a favorable percentage increase,

but is likely to be among the last to recoverbut is likely to be among the last to recover9. Upscale and Midscale without Food and Beverage will

likely emerge as stronger performers based on b l t f l labsolute performance levels

©NYU 2010

10. Leisure demand will remain favorable but is based on di ti i ll f Ldiscounting especially for Luxury

11. Group/convention demand is likely to recover afterbusiness/commercial/

12. It is probable that there will be a structural resetting oflodging demand – less demand relative to GDP

13 It i b bl th t th i d t ill ith13. It is probable that the industry will emerge with structural resetting of profitability – higher profit levels relative to occupancy and RevPARp y

©NYU 2010

NYU Tisch Center ProgramsNYU Tisch Center Programs

Undergraduate Degrees:Undergraduate Degrees: ‐ B.S. in Hotel and Tourism Management‐ B.S. in Sports Management

Graduate Degrees and Graduate Certificates:‐ M.S. Hospitality Industry Studies‐ M.S. Sports Business‐ M.S. Tourism and Travel Management

Continuing Education and Professional Certificates:Food and Beverage Operations‐ Food and Beverage Operations

‐ Hotel Operations‐ Meeting, Conference, and Event Management

For additional information: www.scps.nyu.edu/tischcenter©NYU 2010

32nd Annual NYU International Hospitality Industry

Investment ConferenceJune 6 - 8, 2010June 6 8, 2010

Hosted by the New York University Preston Robert Tisch Centerfor Hospitality Tourism and Sports Managementfor Hospitality, Tourism, and Sports Management

Location: The New York Marriott Marquis, New York Cityocat o e e o a ott a qu s, e o C ty

For additional information: www.nyu.edu/hospitalityconference

©NYU 2010

NEW YORK UNIVERSITYSchool of Continuing andSchool of Continuing and

Professional Studies

P t R b t Ti h C t fPreston Robert Tisch Center forHospitality, Tourism, and Sports Management

Th U S E i RThe U.S. Economic Recovery: Chain Scale Segments,

Top 25 Markets,Demand Segments and Profits

The Fourth in a Series ofNYU Tisch Center Economic Briefings

February 2010©NYU 2010