Austin Hotel & Lodging Austin Hotel & Lodging AssociationAssociation
2011 Texas Trends2011 Texas Trends®®Hotel Industry ReportHotel Industry Report
““Journey Through UncertaintyJourney Through Uncertainty””November 9, 2011November 9, 2011
2009 – When Will Things Get Better?2010 – Emerging From Crisis 2011 – Journey Through Uncertainty
Are We Having Fun Yet?
Presentation OutlinePresentation Outline
I. The Economy
II. Lodging Forecast
III. Austin Submarkets
IV. Journey Through Uncertainty
I. The Economy
II. Lodging Forecast
III. Austin Submarkets
IV. Journey Through Uncertainty
U.S. TOTAL EMPLOYMENT LEVELSU.S. TOTAL EMPLOYMENT LEVELS…………are starting to gainare starting to gain
8 Million Jobs Lost 8 Million Jobs Lost –– 6Years From 6Years From PeakPeak--toto--PeakPeak
Source: Moody’s Analytics
We’re here
Unemployment Comparison Unemployment Comparison –– September 2011September 2011
Not Seasonally Adjusted
Source: Texas Workforce Commission
United States 9.1% 8.8%
Texas 8.5%
--
Dallas -- 8.4%
--
--
--
8.4%
Austin 7.4%
Fort Worth 8.2%
Houston 8.6%
San Antonio 7.9%
Seasonally Adjusted
Uncertainties That Affect Recovery Uncertainties That Affect Recovery
•• U.S. Debt Crisis U.S. Debt Crisis –– S&PS&P’’s Ratings Rating
•• Global Financial Crisis Global Financial Crisis
•• Japan Japan –– Long Term ImpactLong Term Impact
•• Middle East & Libya Middle East & Libya
•• Price of Oil & GasPrice of Oil & Gas
•• U.S. CongressU.S. Congress
•• 2012 Election2012 Election
United States: January vs. April 2011United States: January vs. April 2011
EmploymentPersonal Income GDP
CPI (Inflation)
Year January April January April January April January April
2011 1.7% 1.1% 4.0% 3.7% 3.9% 3.3% 1.5% 2.1%
2012 2.4% 2.3% 3.8% 4.7% 4.0% 4.3% 2.5% 2.0%
2013 2.4% 2.6% 4.6% 5.0% 3.7% 3.9% 3.2% 2.9%
2014 2.6% 2.7% 3.1% 3.0% 3.1% 3.1% 2.7% 2.7%
2015 1.4% 1.7% 2.6% 2.6% 2.3% 2.3% 2.4% 2.3%
Source: Moody’s Analytics
United States: April vs. July 2011United States: April vs. July 2011
EmploymentPersonal Income GDP CPI (Inflation)
Year April July April July April July April July
2011 1.1% 1.1% 3.7% 2.1% 3.3% 2.5% 2.1% 3.0%
2012 2.3% 1.7% 4.7% 4.0% 4.3% 3.8% 2.0% 1.9%
2013 2.6% 2.5% 5.0% 5.0% 3.9% 4.1% 2.9% 2.5%
2014 2.7% 3.0% 3.0% 4.0% 3.1% 3.5% 2.7% 2.7%
2015 1.7% 2.0% 2.6% 3.0% 2.3% 2.5% 2.3% 2.4%
Source: Moody’s Analytics
United States: July vs. October 2011United States: July vs. October 2011
EmploymentPersonal Income GDP
CPI (Inflation)
Year July October July October July October July October
2011 1.1% 1.0% 2.1% 2.7% 2.5% 1.8% 3.0% 3.0%
2012 1.7% 0.7% 4.0% 4.9% 3.8% 2.7% 1.9% 1.8%
2013 2.5% 1.7% 5.0% 4.0% 4.1% 3.5% 2.5% 2.4%
2014 3.0% 3.1% 4.0% 3.4% 3.5% 3.8% 2.7% 3.0%
2015 2.0% 2.8% 3.0% 3.1% 2.5% 3.5% 2.4% 2.4%
Source: Moody’s Analytics
Austin: April vs. JulyAustin: April vs. July
EmploymentPersonal Income GMP
CPI (Inflation)
Year April July April July April July April July
2011 1.5% 2.0% 3.9% 2.9% 6.2% 5.9% 2.3% 3.4%
2012 3.0% 3.0% 4.1% 4.1% 6.8% 6.9% 2.5% 2.4%
2013 4.0% 4.0% 4.2% 3.8% 6.3% 6.4% 3.4% 3.0%
2014 4.8% 4.9% 5.1% 4.0% 5.4% 5.5% 2.8% 2.9%
2015 3.9% 4.0% 5.3% 4.2% 4.9% 4.8% 2.5% 2.5%
Source: Moody’s Analytics
Austin: July vs. October 2011Austin: July vs. October 2011
EmploymentPersonal Income GMP
CPI (Inflation)
Year July October July October July October July October
2011 2.0% 1.9% 2.9% 3.3% 5.9% 4.6% 3.4% 3.4%
2012 3.0% 2.0% 4.1% 3.0% 6.9% 6.1% 2.4% 2.3%
2013 4.0% 3.0% 3.8% 2.4% 6.4% 6.3% 3.0% 2.9%
2014 4.9% 4.9% 4.0% 3.6% 5.5% 5.9% 2.9% 3.2%
2015 4.0% 4.7% 4.2% 4.9% 4.8% 5.5% 2.5% 2.6%
Source: Moody’s Analytics
Factors Affecting 3Factors Affecting 3rdrd Qtr Projections Qtr Projections
• Based on YTD September STR Historical Data and October Moody’s Forecast
• 3rd Qtr STR Data – Better Than Expected • Impact of Uncertainties on Travel and Lodging Demand From Other Markets
• Increase/Decrease in Local Economic Factors • GMP – Factors That Affect Lodging
- Personal Consumption (Personal Income)- Gross Private Domestic Investment (Business Profits)
• Local Drivers - Oil and Gas - Technology - Corporate Growth
Conclusions Conclusions
• 3rd Qtr Projections Should be Similar to 2nd Qtr
• No Significant Change
• May See Slight Increase
Presentation OutlinePresentation Outline
I. The Economy
II. Lodging Forecast
III. Austin Submarkets
IV. Journey Through Uncertainty
I. The Economy
II. Lodging Forecast
III. Austin Submarkets
IV. Journey Through Uncertainty
Hotel HorizonsHotel Horizons®®
• Econometric Forecasting ModelSmith Travel Research – historical lodging data, pipeline dataMoody’s Economy.com – economic forecasts
• Five-Year Forecasts of Supply, Demand, Occupancy, ADR, RevPAR
50 Major U.S. Markets• Updated Quarterly
United StatesUnited States22ndnd Quarter 2011Quarter 2011
= Below/Above Long Run Average
Long Term
Average 2008 2009 2010 2011F 2012F 2013F 2014F 2015F
Supply 2.1% 2.4% 2.9% 1.8% 0.6% 0.7% 1.1% 1.7% 2.0%
Demand 1.8% -2.5% -6.1% 7.5% 4.5% 3.1% 3.8% 3.4% 1.3%
Occupancy 62.0% 59.8% 54.5% 57.6% 59.8% 61.2% 62.8% 63.9% 63.4%
ADR 2.8% 2.9% -8.6% -0.1% 3.2% 4.8% 5.3% 5.2% 4.0%
RevPAR 2.5% -2.0% -16.6% 5.5% 7.2% 7.3% 8.1% 7.0% 3.2%
Source: PKF Hospitality Research – 2nd Quarter 2011 Hotel Horizons® Report, Smith Travel Research
Recovery Timelines Mixed Across Markets:Year when ADR levels Surpass Previous Peak (4Q Moving Average)
20112012201320142015 & Beyond Source: PKF Hospitality Research
Texas SummaryTexas Summary
DallasDallas22ndnd Quarter 2011Quarter 2011
= Below/Above Long Run Average
Long Term
Average 2008 2009 2010 2011F 2012F 2013F 2014F 2015F
Supply 3.7% 3.7% 3.5% 2.8% 1.0% 1.6% 1.8% 3.0% 3.8%
Demand 3.8% 0.7% -9.4% 10.0% 8.8% 2.8% 4.1% 5.8% 4.1%
Occupancy 61.9% 58.3% 51.1% 54.6% 58.8% 59.5% 60.9% 62.5% 62.7%
ADR 2.0% 1.8% -9.8% -2.7% 3.5% 1.6% 5.4% 5.5% 4.5%
RevPAR 2.3% -1.1% -21.1% 4.1% 11.4% 2.9% 7.8% 8.3% 4.8%
Source: PKF Hospitality Research – 2nd Quarter 2011 Hotel Horizons® Report, Smith Travel Research
Fort Worth Fort Worth 22ndnd Quarter 2011Quarter 2011
= Below/Above Long Run Average
Long Term
Average 2008 2009 2010 2011F 2012F 2013F 2014F 2015F
Supply 4.8% 9.1% 10.0% 3.9% 1.9% 0.8% 0.5% 1.3% 2.0%
Demand 5.0% 3.4% -7.0% 7.8% 6.5% 2.7% 4.3% 4.0% 2.7%
Occupancy 63.4% 64.0% 54.1% 56.1% 58.6% 59.8% 62.0% 63.6% 64.1%
ADR 3.7% 4.8% -1.2% -1.0% 1.5% 2.1% 5.2% 4.2% 3.2%
RevPAR 4.0% -0.6% -16.4% 2.7% 6.0% 4.1% 9.1% 7.0% 3.9%
Source: PKF Hospitality Research – 2nd Quarter 2011 Hotel Horizons® Report, Smith Travel Research
HoustonHouston22ndnd Quarter 2011Quarter 2011
= Below/Above Long Run Average
Long Term
Average 2008 2009 2010 2011F 2012F 2013F 2014F 2015F
Supply 3.6% 2.8% 6.1% 6.4% 3.1% 0.8% 0.8% 1.5% 2.6%
Demand 4.1% 5.0% -12.1% 6.0% 8.3% 2.3% 3.7% 3.7% 4.1%
Occupancy 62.8% 67.2% 55.6% 55.4% 58.1% 59.0% 60.7% 62.0% 63.0%
ADR 3.0% 9.3% -8.3% -4.0% 4.3% 4.8% 5.1% 4.4% 3.4%
RevPAR 3.6% 11.5% -24.1% -4.4% 9.5% 6.3% 8.1% 6.7% 4.9%
Source: PKF Hospitality Research – 2nd Quarter 2011 Hotel Horizons® Report, Smith Travel Research
San Antonio San Antonio 2nd Quarter 20112nd Quarter 2011
= Below/Above Long Run Average
Long Term
Average 2008 2009 2010 2011F 2012F 2013F 2014F 2015F
Supply 4.2% 6.8% 6.9% 8.7% 2.7% 0.9% 0.7% 2.0% 3.3%
Demand 4.2% 3.9% -6.3% 12.7% 5.9% 3.4% 3.5% 3.7% 3.1%
Occupancy 65.4% 64.2% 56.2% 58.3% 60.1% 61.6% 63.3% 64.4% 64.2%
ADR 3.0% 4.3% -10.1% 0.2% -0.7% 2.0% 4.0% 4.0% 3.4%
RevPAR 3.2% 1.6% -21.3% 3.9% 2.4% 4.6% 6.9% 5.7% 3.2%
Source: PKF Hospitality Research – 2nd Quarter 2011 Hotel Horizons® Report, Smith Travel Research
AustinAustin22ndnd Quarter 2011Quarter 2011
= Below/Above Long Run Average
Long Term
Average 2008 2009 2010 2011F 2012F 2013F 2014F 2015F
Supply 4.1% 2.0% 5.0% 5.0% 2.9% 0.5% 1.4% 2.9% 3.9%
Demand 4.8% -1.3% -5.0% 10.6% 7.3% 3.7% 2.8% 3.4% 3.6%
Occupancy 66.3% 66.9% 60.5% 63.8% 66.5% 68.5% 69.5% 69.8% 69.6%
ADR 3.6% 5.4% -7.7% -2.7% 5.5% 3.9% 6.4% 5.4% 3.8%
RevPAR 4.5% 2.0% -16.4% 2.5% 9.9% 7.2% 7.8% 5.9% 3.5%
Source: PKF Hospitality Research – 2nd Quarter 2011 Hotel Horizons® Report, Smith Travel Research
Austin: UpperAustin: Upper--PricedPriced22ndnd Quarter 2011Quarter 2011
= Below/Above Long Run Average
Long Term
Average 2008 2009 2010 2011F 2012F 2013F 2014F 2015F
Supply 4.5% 2.5% 6.7% 4.5% 3.1% 0.3% 2.1% 4.2% 5.3%
Demand 5.5% 1.4% -0.3% 10.5% 7.7% 2.5% 1.7% 3.1% 3.4%
Occupancy 69.5% 70.8% 66.2% 69.9% 73.1% 74.6% 74.3% 73.6% 72.2%
ADR 3.8% 3.5% -9.3% -1.1% 6.0% 5.0% 7.3% 5.3% 3.2%
RevPAR 5.0% 2.2% -15.2% 4.5% 10.8% 7.3% 6.9% 4.2% 1.3%
Source: PKF Hospitality Research – 2nd Quarter 2011 Hotel Horizons® Report, Smith Travel Research
Austin: LowerAustin: Lower--PricedPriced22ndnd Quarter 2011Quarter 2011
= Below/Above Long Run Average
Long Term
Average 2008 2009 2010 2011F 2012F 2013F 2014F 2015F
Supply 3.8% 1.6% 3.7% 5.3% 2.8% 0.7% 1.0% 1.9% 2.8%
Demand 4.2% -3.3% -8.8% 10.6% 7.0% 4.7% 3.8% 3.7% 3.8%
Occupancy 64.1% 64.0% 56.3% 59.2% 61.5% 64.0% 65.8% 67.0% 67.6%
ADR 2.9% 6.4% -8.6% -5.3% 4.1% 3.1% 5.8% 5.8% 5.2%
RevPAR 3.6% 1.2% -19.6% -0.5% 8.2% 7.2% 8.8% 7.6% 6.2%
Source: PKF Hospitality Research – 2nd Quarter 2011 Hotel Horizons® Report, Smith Travel Research
Presentation OutlinePresentation Outline
I. The Economy
II. Lodging Forecast
III. Austin Submarkets
IV. Journey Through Uncertainty
I. The Economy
II. Lodging Forecast
III. Austin Submarkets
IV. Journey Through Uncertainty
Austin Austin –– Local FactorsLocal Factors
•• Formula One Race TrackFormula One Race Track
•• High Tech Expansions/GrowthHigh Tech Expansions/Growth
•• SXSW / ACL / Other EventsSXSW / ACL / Other Events
•• Convention ActivityConvention Activity
•• Government Budget CutsGovernment Budget Cuts
•• Overall Return to Prerecession LevelsOverall Return to Prerecession Levels
•• Potential Convention Center Potential Convention Center Hotel(sHotel(s))
Austin SummaryAustin Summary
Austin CBDAustin CBD
North AustinNorth Austin
Round Rock / GeorgetownRound Rock / Georgetown
Northwest AustinNorthwest Austin
South Austin / San MarcosSouth Austin / San Marcos
Presentation OutlinePresentation Outline
I. The Economy
II. Lodging Forecast
III. Austin Submarkets
IV. Journey Through Uncertainty
I. The Economy
II. Lodging Forecast
III. Austin Submarkets
IV. Journey Through Uncertainty
Lessons Learned Lessons Learned
•Certain to Be Uncertainties
•Need for Multiple Budgets
•Slow Down Through 2012 Elections
•Occupancy Flat / Rate Up in 2012
•Recovery Delayed to 2013 and 2014
The Hotel Market CycleThe Hotel Market Cycle
Rapid Development
Occupancy Declines, ADR Follows
Lodging Decline, Leads Other
Sectors
Occupancy Recovers
ADR and Margins Recover
Development Picks Up
Development Slows
Development at Minimum Levels
Long RunOccupancy
Rapid Development
Equilibrium ADR
U.S. is Here
2012-2013
2014-2015
A Year Ago
The Long, Hard Climb Up Growth HillThe Long, Hard Climb Up Growth Hill
Lodging Recovers, Lags Other Sectors (Not this
Time!)
For a Copy of This PresentationPlease Visit
www.pkfc.com/presentations or
Contact: Randy McCaslinEmail: [email protected]
713.621.5252 Ext. 21