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Mark VanStekelenburg, Andy Hartley and Vanessa Gonzalez CBRE HOTELS ADVISORY June 2, 2020 NATIONAL MARKET UPDATE: COMING OUT OF THE TRENCHES
CBRE HOTELS ADVISORY | CHOICE HOTELS OWNERS COUNCIL 1
Mark VanStekelenburg, Andy Hartley and Vanessa Gonzalez
C B R E H O T E L S A D V I S O R Y
J u n e 2 , 2 0 2 0
NATIONAL MARKET UPDATE: COMING OUT
OF THE TRENCHES
CBRE HOTELS ADVISORY | CHOICE HOTELS OWNERS COUNCIL 2
TABLE OF CONTENTS
1. NATIONAL OUTLOOK
2. HOTEL FORECAST
3. GREEN SHOOTS
4. Q & A
3
NATIONAL OUTLOOK
I talySouth Korea China
SpainGermany
UK
France
Japan
New York State
USA excl. NY (right axis)
0
5,000
10,000
15,000
20,000
25,000
30,000
0
2,000
4,000
6,000
8,000
10,000
12,000
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
Num
ber
of C
ases
WE ARE GENERALLY PAST THE PEAK IN NEW INFECTIONSDaily new cases in 7-day moving averages
Source: CBRE Research, European Centre for Disease Prevention, COVID Tracking Project, Macrobond, 28 May 2020.Note: Number reported as a 7-day moving average.
USA, UK slow off the mark to control the virus
Days Since Daily Increase Exceeds 100
-
20
40
60
80
100
(38)
(36)
(34)
(32)
(30)
(28)
(26)
(24)
(22)
(20)
(18)
(16)
(14)
(12)
(10) (8
) (6
) (4
) (2
) - 2 4 6 8 1
0 1
2 1
4 1
6 1
8 2
0 2
2 2
4 2
6 2
8 3
0 3
2 3
4 3
6 3
8 4
0 4
2 4
4 4
6 4
8 5
0 5
2 5
4 5
6 5
8 6
0 6
2 6
4 6
6 6
8 7
0 7
2 7
4 7
6 7
8 8
0 8
2 8
4 8
6 8
8 9
0 9
2 9
4 9
6 9
8 1
00 1
02 1
04 1
06 1
08
Days to/from Peak
Europe United Kingdom China Italy Germany United States Spain
June 15th
Source: CBRE Research, European Centre for Disease Prevention, Macrobond, 1 June 2020.Note: Number reporting as a 7-day moving average with each country indexed and aligned from its peak.
REDUCTION IN RATE OF NEW CASE NUMBERS MOVING TO REOPENINGDaily new cases confirmed, Indexed and aligned from historical peak
Re-opening to Travel 8-12 Weeks after Peak
June 3rdJuly
DISRUPTION CURVE – HOTEL OCCUPANCY
Source: CBRE, STR, Morgan Stanley, May 28 2020.Note: China data beginning week ending 16th Jan, France and Germany from w/e 15th Feb, UK and Europe from w/e 22nd Feb, US from w/e 29th Feb, which all correspond to the weekly occupancy highs this year
US OCCUPANCY LEVELS ARE SLOWLY RISING
61.8
53.0
30.3
22.6 21.6 21.0 23.4
26.0 28.6 30.1 32.4
35.4
(7,000)
(6,000)
(5,000)
(4,000)
(3,000)
(2,000)
(1,000)
-
1,000
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
BPS (Diff)Occupancy Spread Current Year Prior Year Last Week Avg.
Source: CBRE Hotels Research, STR, May 28th, 2020.
CBRE HOTELS ADVISORY | CHOICE HOTELS OWNERS COUNCIL 8
TURNING TO HOTEL FORECAST
US HOTEL REVPARCurrent Forecast Scenarios Compared to Past Recessions
-
20.0
40.0
60.0
80.0
100.0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Quarters to Recover
1990 2001 2008 2020 Baseline 2020 Downside
Source: STR, CBRE Hotels Research, May 14th, 2020.Note: RevPAR Indexed to Pre-recession levels
CBRE HOTELS – BASELINE FORECAST
Year Occ ΔOcc ADR ΔADR RevPAR ΔRevPAR ΔSupply ΔDemand
2018 66.1% 0.4% $129.91 2.4% $85.90 2.9% 2.0% 2.4%
2019 66.1% -0.1% $131.11 0.9% $86.64 0.9% 2.0% 2.0%
2020 41.0% -38.0% $101.67 -22.5% $41.67 -51.9% 1.5% -37.0%
2021 55.9% 36.3% $110.69 8.9% $61.83 48.4% -1.1% 34.8%
2022 65.0% 16.4% $122.93 11.1% $79.95 29.3% 0.0% 16.4%
2023 66.6% 2.4% $130.47 6.1% $86.92 8.7% 0.5% 3.0%
2024 66.5% -0.2% $135.63 4.0% $90.18 3.7% 0.9% 0.7%
Source: CBRE Hotels Research, STR, May 14, 2020.
CBRE HOTELS ADVISORY | CHOICE HOTELS OWNERS COUNCIL 11
HUNTING FOR GREEN SHOOTS
TRAVEL DATA – GREEN SHOOTS?ARRIVALIST: US DAILY TRAVEL INDEX
ADARA: US HOTEL BOOKING VOLUME
SOURCE:ADARA, 5/28/2020SOURCE: ARRIVALIST, 5/28/2020
TSA CHECKPOINTS – WEEK OVER WEEK CHANGE IN NUMBER & PERCENT OF TRAVELERS, 7 DAY MOVING AVERAGE
-877,189
-100.0%
-80.0%
-60.0%
-40.0%
-20.0%
0.0%
20.0%
-1,000,000
-800,000
-600,000
-400,000
-200,000
0
200,000
Weekly Change in Number of Travelers W-o-W Change in Travelers
Decreasing atDecreasing Rate
Increasing!
Decreasing atIncreasing Rate
SOURCE: TSA, CBRE HOTELS RESEARCH, 5/28/2020
LONG-LASTING EFFECTS OF COVID-19 ON HOTEL INDUSTRYFixed and variable components of operations, outsourced services, technology to drive demand
Pre-COVID Costs Short-Term Costs Potential Post-COVID CostsFixed Variable Fixed Variable Fixed (%) Variable
Rooms Rooms RoomsManagement and
Housekeeping Supervisor, Minimum FTE’s
Outsourced Labor/Part-time, Distribution Fees
Management or Housekeeping Supervisor Most Line-Level Housekeeping Supervisor Outsourced Labor
F&B F&B F&B
Management Salary Food Costs, Part-time Labor
Closed or Pre-packaged/To-go Most of Line Item Manager, Kitchen and
Restaurant FTEs Outsourced Labor
Minimum FTE - Kitchen and Floor Banquet Outsource Kitchen FTE and Single
ManagerF&B Re-concept/Grab &
Go/Counter-service
A&G A&G A&GGeneral Manager, AGM, Support, Controller/DOF
Office Supplies, Support Staff
General Manager, Controller/DOF
AGM, Support, Support Staff
General Manager, Support Staff, Controller/DOF
AGM, Support, Support Staff
Sales & Marketing Sales & Marketing Sales & MarketingDirector or Sales,
Managers, Revenue Manager, Staff
Royalty Fees Single Manager or DOS DOS, Managers, Revenue Manager DOS Sales Team, Staff
Sales Team Revenue ManagerProperty Operation & M Property Operation & M Property Operation & M
FTEs Part-time Staff 1 FTE (Security) FTEs, Part-time FTEs Outsource
Utilities Utilities Utilities
Common Areas Guestrooms/Meeting Rooms Common Areas (Open)
Guestrooms/Meeting Rooms, Common Areas
(Closed)Common Areas
Guestrooms/Meeting Rooms, Common Areas
(Closed)
15
Q & A
CBRE HOTELS ADVISORY | CHOICE HOTELS OWNERS COUNCIL 16
Mark VanStekelenburg, ISHC Northeast & Midwest Division Practice Leader, Managing Director New York City+1 212 984 7125mark.v [email protected]
Daniel C. Hanrahan, II, MAI, CREAmericas Marketing Leader,Senior DirectorNew York City+1 213 613 [email protected]
Andrew HartleyDirectorNew York City+1 917 690 [email protected]
Michele Salvati, MAISenior Consultant New York City+1 917 952 8263michele.salv [email protected]
Edward Eschmann, MAIDirectorNew York City+1 917 886 [email protected]
Jenna FinkelsteinDirectorNew York City +1 908 328 [email protected]
Vanessa GonzalezConsultantNew York City+1 832 248 7282v [email protected]
Gabriel BassilConsultant New York City+1 917 885 [email protected]
Kannan SankaranSenior Director Washington, D.C.+1 703 508 [email protected]
Brian DamronSenior ConsultantWashington, D.C.+1 703 789 [email protected]
CBRE HOTELS ADVISORYNortheast Division
1. FEASILBILTY & VALUATIONS
• Market Demand & Financial Feasibility Analysis(Both New & Existing)
• Appraisals
+ Real Estate Appraisals+ Business Valuations
• Stress Tests
• Impairment Testing
• Liquidity Assessment
2. POSITIONING
• Operator/Brand Selection
• Operational Reviews
3. ADDITIONAL ADVISORY SERVICES
• Branding, Re-Branding & Marketing
• Food & Beverage
• Li tigation Support
• Occupancy Forecasting
4. DELIVERY
• Development Advisory
• Management Company Selection
5. INVESTMENT & TRANSACTION
• Acquisition Due Di ligence+ Buy Side + Sell S ide + Technical
• Debt Advisory
6. ASSET MANAGEMENT & MONITORING
• Asset Management
• Financial Benchmarking
• Workouts
• Receiverships
Suite of Services
Casey Burns, MAI, MRICSVice President McLean+1 703 734 [email protected]
Adam Duffy, MAIDirector Philadelphia+1 215 561 [email protected]
CBRE © 2020 All Rights Reserved. This presentation has been prepared in good faith based on CBRE’s current views of the commercial real-estate market. Although CBRE believes its views reflect market conditions on the date of this presentation, they are subject to significant uncertainties andcontingencies, many of which are beyond CBRE’s control. In addition, many of CBRE’s views are opinion and/or projections based on CBRE’s subjective analyses of current market circumstances. Other firms may have different opinions, projections and analyses, and actual market conditions in the futuremay cause CBRE’s current views to later be incorrect. CBRE has no obligation to update its views herein if its opinions, projections, analyses or market circumstances laterchange. Nothing in this presentation should be construed as an indicator of the future performance of CBRE’s securities or of theperformance of any other company’s securities. You should not purchase orsell securities – of CBRE or any other company – based on the views herein. CBRE disclaims all liability for securities purchased or sold based on information herein, and by viewing this presentation, you waive all claims againstCBRE and the presenter as well as against CBRE’s affiliates, officers, directors, employees, agents, advisers and representatives arising out of the accuracy, completeness, adequacy or your use of the information herein. CBRE and the CBRE logo are service marks of CBRE, Inc. All other marksdisplayed on this document are the property of their respective owners.
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