us lodging industry overview randy smith smith travel research
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US LODGING INDUSTRY OVERVIEW
Randy Smith
SMITH TRAVEL RESEARCH
90000000
100000000
110000000
120000000
130000000
140000000
150000000
1989 1991 1993 1995 1997 1999 2001 2003 2005
Actual Seas Adj
Total U.S.Monthly Room Supply – Actual and Seasonally AdjustedJanuary 1989 to March 2006
CAGR – 2.07%
CAGR 3.5%
CAGR 0.8%
4.4 Million Rooms
3.1 Million Rooms
50000000
60000000
70000000
80000000
90000000
1989 1991 1993 1995 1997 1999 2001 2003 2005
Seas Adj
Total U.S.Monthly Room Demand – Seasonally AdjustedJanuary 1989 to March 2006
Peak CAGR – 2.7%
CAGR – 2.07%
6.1%
-10
-5
0
5
10
2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 J F M
Total United StatesRoom Demand Percent ChangeJan 2002 – March 2006
35 Consecutive Months of Demand Growth
-6
-4
-2
0
2
4
6
1989 1991 1993 1995 1997 1999 2001 2003 2005
Supply % Change
Demand % Change
Total United StatesRoom Supply/Demand Percent ChangeTwelve Month Moving Average – 1989 to March 2006
3.3%
0.3%
58
60
62
64
66
1989 1991 1993 1995 1997 1999 2001 2003 2005
Total United StatesOccupancy PercentTwelve Month Moving Average – 1989 to March 2006
61.9 %December 1991
Sep 95 & May 96
64.9%
63.3% Feb 2001
58.5%
Aug 02 & May 03
Feb 0663.5%
-8
-6
-4
-2
0
2
4
6
8
1989 1991 1993 1995 1997 1999 2001 2003 2005
Occ % Chg
ADR % Chg
Total United StatesOccupancy/ADR Percent ChangeTwelve Month Moving Average – 1989 to March 2006
DivergenceDivergence?
3.0%
5.9%
-6
-4
-2
0
2
4
6
8
1989 1991 1993 1995 1997 1999 2001 2003 2005
Demand % Chg
ADR % Chg
Total United StatesRoom Demand / ADR Percent ChangeTwelve Month Moving Average – 1989 to March 2006
3.3%
5.9%
50
60
70
80
90
100
1989 1991 1993 1995 1997 1999 2001 2003 2005
Total United StatesAverage Daily RateTwelve Month Moving Average – 1989 to March 2006
$54.94Jan 1989
$86.33
June2001
$92.27Mar 06
Peak CAGR – 4.4%
Long Term CAGR – 3.1%
-15
-10
-5
0
5
10
15
1989 1991 1993 1995 1997 1999 2001 2003 2005
RevPAR % Chg
Total United StatesRevPAR Percent ChangeTwelve Month Moving Average – 1989 to March 2006
-2.6%Oct 91
6.5%
Feb 97
6.5% Feb 01
-10.6%Jun 02
9.1%
3000
4000
5000
6000
7000
8000
9000
1989 1991 1993 1995 1997 1999 2001 2003 2005
Total U.S.Monthly Seasonally Adjusted Room RevenuesJanuary 1989 to February 2006
Peak CAGR – 7.1%
Long-Term CAGR – 5.2%
0.3
2.9
4.33.7 3.2
7.7
0.5
5.9
3.3
9.0
0
5
10
Supply Demand Occupancy ADR RevPAR
2005 2006
Total United StatesKey Performance Indicators Percent ChangeTwelve Months Ending March 2006
0.4
6.5
4.3
3.1 2.8
7.2
0.3
3.13.5
9.7
0
5
10
15
Supply Demand Occupancy ADR RevPAR
2005 2006
Total United StatesKey Performance Indicators Percent ChangeMarch YTD
1.10.2
1.1
-2.9
2.0
-0.6
4.6
2.63.5
0.6
6.1
2.7
-5
0
5
10
Luxury UpperUpscale
Upscale Mid w F&B Mid wo F&B Economy
SupplyDemand
Chain ScalesSupply/Demand Percent ChangeMarch 2006 YTD
7.57.1
8.7 8.7
5.7
3.53.5
2.4
3.6
2.3
4.0
6.5
0
5
10
Luxury UpperUpscale
Upscale Mid w F&B Mid wo F&B Economy
OccupancyADR
Chain ScalesOccupancy/ADR Percent ChangeMarch 2006 YTD
1000000
1500000
2000000
2500000
3000000
1989 1991 1993 1995 1997 1999 2001 2003 2005
Actual Seas Adj
Luxury ChainsMonthly Room Supply – Actual and Seasonally AdjustedJanuary 1989 to February 2006
CAGR – 3.8 %
43,000 Rooms
74,000 Rooms
800000
1000000
1200000
1400000
1600000
1800000
1989 1991 1993 1995 1997 1999 2001 2003 2005
Seas Adj Linear (Seas Adj)
Luxury ChainsMonthly Room Demand – Seasonally AdjustedJanuary 1989 to February 2006
CAGR – 4.1%
-15
-10
-5
0
5
10
15
1989 1991 1993 1995 1997 1999 2001 2003 2005
Occ % Chg
ADR % Chg
Luxury ChainsOccupancy/ADR Percent ChangeTwelve Month Moving Average – 1989 to February 2006
3.7%
7.2%
15000000
17000000
19000000
21000000
1989 1991 1993 1995 1997 1999 2001 2003 2005
Actual Seas Adj
Midscale With F&B ChainsRoom Supply – Actual and Seasonally AdjustedJanuary 1989 to February 2006
CAGR – -0.8%
641,000 Rooms
547,000 Rooms
8000000
10000000
12000000
14000000
1989 1991 1993 1995 1997 1999 2001 2003 2005
Seas Adj
Midscale With F&B ChainsRoom Demand – Seasonally AdjustedJanuary 1989 to February 2006
CAGR – -1.1%
14000000
16000000
18000000
20000000
22000000
24000000
1989 1991 1993 1995 1997 1999 2001 2003 2005
Actual Seas Adj
Economy ChainsRoom Supply – Actual and Seasonally AdjustedJanuary 1989 to February 2006
CAGR – 3.0%
459,000 Rooms
731,000 Rooms
8000000
10000000
12000000
14000000
1989 1991 1993 1995 1997 1999 2001 2003 2005
Seas Adj
Economy ChainsRoom Demand – Seasonally AdjustedJanuary 1989 to February 2006
CAGR – 2.4%
-5.5
-1.8
-1.2
-1.2
-1.1
-0.7
-0.3
-0.3
0.0
0.3
0.3
0.4
0.5
0.8
0.9
1.3
1.6
-6 -4 -2 0 2
Honolulu
Orlando
Miami
San Francisco
New York
Philadelphia
Los Angeles
Phoenix
Top 25 Markets
Atlanta
Total US
Boston
All Other Markets
Chicago
Dallas
San Diego
Washington
Key 15 MarketsRoom Supply Percent ChangeTwelve Months Ending March 2006
Total U.S.Summary of Condotel Pipeline – March 2006
Source: STR Condotel Pipeline, part of the STR / TWR / Dodge Construction Pipeline
• 232 Projects with a total of 98,237 reported* rooms
Rooms are broken out as follows ( % of total):
• Hotel Rooms: 33,270 33.9%
• Condo Hotel Rooms: 49,068 49.9%
Total Affecting Nightly Room Supply: 82,338 83.8%
• Non-rental Residences: 14,436 14.7%
• Timeshare Rooms: 1,463 1.5%
* Some projects have not yet reported room counts
Total United StatesDevelopment Pipeline – Rooms March 2006 Hotels vs. Hotel Rooms in Condotels
Source: STR / TWR / Dodge Construction Pipeline
For Reference: STR Supply Increase Forecast 2006: 54k rooms (1.2%)
Phase Hotel RoomsHotel Rooms in Condo
Hotels %
In Construction 111,456 10,267 9.2%
Final Planning 17,741 1,533 8.6%
Planning 208,377 14,020 6.7%
Active Pipeline 337,574 25,820 7.6%
Pre-Planning 63,219 7,450 11.8%
Total 400,793 33,270 8.3%
Total United StatesHotel Rooms vs. Condotel Rooms vs. All RoomsMarch 2006
PhaseHotel Rooms in
PipelineCondo Rooms in
PipelineTotal Potential Hotel Pipeline
In Construction
111,456
15,626 127,082
Final Planning
17,741
4,409 22,150
Planning
208,377
17,904 226,281
In Pre-Planning
63,219
11,129 74,348
Total Development
400,793
49,068 449,861
Total United StatesAll Rooms vs. Condotel RoomsMarch 2006
PhaseTotal Potential
PipelineTotal Condotel
PipelineRatio:
Condo vs Total
In Construction
127,082
28,691 23%
Final Planning
22,150
8,040 36%
Planning
226,281
41,643 18%
In Pre-Planning
74,348
19,863 27%
Total Development
449,861
98,237 22%
59.2
61.363.1
52.7
56.0
59.4
63.4
66.9 67.6
40
45
50
55
60
65
70
2003 2004 2005
Total US
CondoHotels
Destination Resorts
Annual Occupancy 2003 - 2005Total US vs. Condo Hotels vs. Destination Resorts
%
$82.86 $86.24$90.83
$168.44
$179.26
$194.18
$148.77 $151.85$158.68
40
60
80
100
120
140
160
180
200
220
2003 2004 2005
Total US
CondoHotels
Destination Resorts
Annual ADR 2003 - 2005Total US vs. Condo Hotels vs. Destination Resorts
$
0.1
4.1
5.3
2.1
6.3
8.7
-1.1
1.9
4.5
-2
0
2
4
6
8
10
2003 2004 2005
Total USCondoHotelsDestination Resorts
Annual ADR Percent Change 2002 - 2005Total US vs. Condo Hotels vs. Destination Resorts
%
Total United StatesActive Development Pipeline - RoomsChange From Last Year
Source: STR / TWR / Dodge Construction Pipeline
Phase March 2006 Mach 2005 Difference % Change
In Construction 111,456 99,526 11,930 12.0%
Final Planning 17,741 14,928 2,813 18.8%
Planning 208,377 173,048 35,329 20.4%
Active Pipeline 337,574 287,502 50,072 17.4%
Pre-Planning 63,219 83,178 (19,959) -24.0%
Total 400,793 370,680 30,113 -7%
Total United StatesRooms Opened – In Thousands2000 – 2006P
132
113
87.3
56.7
69
60.6
75
20
40
60
80
100
120
140
2000 2001 2002 2003 2004 2005 2006P
Source: STR / TWR / Dodge Construction Pipeline
Slight Increase in Supply Still is No Threat
1.6
3.1
0.4
1.21.10.6
4.2 3.3
0.3
1.4
-6
-3
0
3
6
2002 2003 2004 2005 2006P
Supply % Chg
Demand % Chg
Total United StatesSupply/Demand Percent Change2002 – 2006P
3.62.9
0.3
1.9
-1.2
-5
0
5
2002 2003 2004 2005 2006P
Total United StatesOccupancy Percent Change2002 – 2006P
59 59.2
63.1
61.3
64.3
55
60
65
70
2002 2003 2004 2005 2006P
Total United StatesOccupancy Percent2002 – 2006P
4.1
5.3
-1.5
6.0
0.1
-2.0
0.0
2.0
4.0
6.0
8.0
2002 2003 2004 2005 2006P
Total United StatesADR Percent Change2002 – 2006P
8.48.07.8
0.4
-2.7
-10.0
-5.0
0.0
5.0
10.0
2002 2003 2004 2005 2006P
Total United StatesRevPAR Percent Change2002 – 2006P
Lodging Industry Issues
Source: STR
Construction Costs
Interest Rates
Steel, Concrete, Lumber - Availability
Land (Competition for Sites)
Hurricanes
IMPACT – Cap on Supply Growth
Lodging Industry Issues
Source: STR
Rising Operating Costs
Energy - Natural Gas, Electricity
Insurance – Health Care, Property, Liability
Labor - Visa caps, union contracts, aging work force
IMPACT – Higher operating costs
Lodging Industry Issues
Source: STR
Amenity Creep
“Bed Wars”
HDTV, Flat Screens, Plasma, In-Room Entertainment
Internet Access (Land Based, Wi-Fi)
Office Away from the Office
Custom/Branded Amenities
Changing Ownership/Flag
IMPACT – Higher operating/capital expense
Lodging Industry Issues
Source: STR
Demand Leakage – Particularly in Specific Markets
Condo Hotels
Cruise Ships
Timeshare
Friends and Relatives
Associated with Experience Travel – Dude Ranches, Fishing Camps
IMPACT – Slower Revenue Growth
Lodging Industry Issues
Source: STR
Transportation Problems
Airlines – Consolidation, Losses, Inconvenience, Crowds
Fuel Costs – High Gasoline Costs
Infrastructure – Highway Construction, Traffic Jams
IMPACT – Inhibit demand
Lodging Industry Issues
Source: STR
Global Issues
Terrorism
Bird Flu (other outbreaks)
Natural Disasters
Currency Fluctuations
Domestic Unrest
Wars
IMPACT - Varies
Lodging Industry Issues
Source: STR
Supply/Demand/Pricing
Supply Growth Remains Benign – Condo Hotels
Solid Demand Growth – Degrees of Good, Some Not So Good
Changing Demand – Experience Travel, Baby Boomers
Occupancy Growth Slows – Varies Widely by Market
Aggressive Pricing – Could Double CPI, Control Internet
Higher Industry Profits – More Difficult for each Property
IMPACT – Higher Revenues
Market props rooms RevPAR %
Chg Market props rooms RevPAR %
Chg
Louisiana South 275 24445 48.6% Seattle, WA 333 37357 13.4%
Jackson, MS 103 8890 38.0% Maui Island, HI 107 15361 13.2%
Houston, TX 582 60598 28.1% Fort Lauderdale, FL 294 28640 13.1%
Mississippi 416 35061 24.0% Phoenix, AZ 389 53745 13.0%
Louisiana North 183 16671 22.9% Memphis, TN-AR-MS 214 20423 12.5%
Oahu Island, HI 96 29807 21.7% Denver, CO 274 37663 12.5%
Mobile, AL 94 8320 21.5% Salt Lake City-Ogden, UT 160 19400 12.4%
Austin, TX 223 25361 20.3% Little Rock, AR 119 10583 12.4%
Augusta, GA-SC 104 8043 19.6% Birmingham, AL 143 14774 12.0%
California North Central 263 16303 18.4% Arizona Area 455 28873 11.8%
Fort Worth-Arlington, TX 243 24798 18.2% San Diego, CA 447 53309 11.7%
Anaheim-Santa Ana, CA 426 52308 17.0% Utah Area 366 21833 11.7%
Texas East 851 55476 16.9% Los Angeles-Long Beach, CA 978 95751 11.6%
Miami-Hialeah, FL 354 45784 16.5% New Orleans, LA 174 27799 11.3%
Charlotte, NC-SC 276 30101 16.4%
Tulsa, OK 127 12224 16.1% Albany/Schenectady, NY 128 10825 0.9%
New York, NY 382 79646 15.7% Savannah, GA 126 11723 0.8%
Atlanta, GA 745 91979 14.7% Hartford, CT 116 11824 0.8%
San Antonio, TX 304 33350 14.4% Nevada (Exc Las Vegas) 291 35407 0.6%
San Jose-Santa Cruz, CA 312 29490 14.3% Alaska 221 16061 0.0%
Greenville-Spartanburg, SC 160 14545 14.3% Maine 365 21007 -0.7%
Dallas, TX 558 70556 14.2% Vermont 293 16850 -2.0%
Wyoming 344 20081 14.0% Georgia South 475 32729 -2.2%
Tucson, AZ 136 15216 13.5% Rhode Island 111 9166 -2.9%
Portland, OR 252 24294 13.4% Scranton--Wilkes-Barre, PA 151 12142 -7.2%