THE ROAD AHEADhistorichotels.net/media/1289/cbre-11-7-19-presentation.pdf · 2019. 11. 20. · CBRE...

CBRE HOTELS

The World’s Leading Hotel Experts.

NOVEMBER 7, 2019

THE ROAD AHEAD ….

Time to Focus

ROBERT MANDELBAUM

CBRE HOTELS RESEARCH

2CBRE HOTELS HISTORIC HOTELS OF AMERICA | NOVEMBER 7, 2019

A TIME TO FOCUS – WHY?

Percent of Hotels in Trends® Sample Posting an Increase from Prior Year

Note: * 11th edition of USALI in 2015, (10th edition of USALI from 2007 to 2014) Source: 2019 Trends® in the Hotel Industry

70.2%

47.9%

4.5%

67.4%

80.8%77.1% 79.3%

86.2%80.6%

66.4%59.1%

59.2%61.6%

44.4%

8.6%

58.9%

72.3% 70.4% 70.4%

78.2%

70.0%

59.3%52.3% 54.3%

0%

20%

40%

60%

80%

100%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Total Operating Revenue (Total Revenue)* Profit* (GOP 2015 - 2018, NOI before 2015)

WHY MARK WOODWORTH IS NOT PRESENTING TODAY


2019 TRENDS® IN THE HOTEL INDUSTRY

-30%

-20%

-10%

0%

10%

20%

30%

40%

'75 '76 '77 '78 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

Non-Recession

Change in GOP*

Note: * Before Management Fees and Non-Operating Income and Expenses Source: Trends® in the Hotel Industry

Average GOP* growth during non-recession

periods8.8%


AGENDA

• The Economy

• Supply

• Forecasts– Top Line

– Bottom Line

• Historic Hotels– Top Line

– Bottom Line

THE ECONOMY


HOTEL HORIZONS® FORECASTING MODEL

Prepared for:– 60 major cities– 6 national chain-scales– 6 location types

Five Year Forecasts Of:– Supply– Demand– Occupancy– ADR– RevPAR


HOTEL HORIZONS® FORECASTING MODEL

• STRoHistorical rooms occupied, room available, rooms revenueoPipeline of future hotel construction

• CBRE Econometric AdvisorsoEconomic forecasts


-2.7%

2.0%

-1.9%

-8.2%

-5.4%

-0.5%

1.3%

3.9%

1.7%

3.9%

2.7%2.5%

-1.5%

2.9%

0.8%

4.6%

2.7%

1.9%

0.5%0.1%

2.8%

0.8%

3.1%

4.0%

-0.9%

4.6%5.2%

2.0%

3.3%

3.3%

1.0%0.4%

1.5%2.3%

1.9%

1.8%

1.8%

3.1%2.8%

2.3%

2.2%

4.2%

3.4%

2.2%

3.1%2.1%

2.0%

1.3%

0.5%

0.3%

1.0%1.6%

-10.00

-8.00

-6.00

-4.00

-2.00

0.00

2.00

4.00

6.00

8.00

10.00

I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

(GOVERNMENT) Government consumption expenditures and gross investment

TRADE (Net exports of goods and services)

BUSINESS (Gross private domestic investment)

CONSUMERS (Personal consumption expenditures)

Lodging Demand

CBRE HOTELS’ LODGING INSIGHTS


ECONOMIC OUTLOOK – EVIDENCE FOR A SLOWDOWN

Against: Against:

10CBRE HOTELS HISTORIC HOTELS OF AMERICA | NOVEMBER 7, 20191 0

ECONOMIC OUTLOOKC B R E H O U S E V I E W – Q 2 2 0 1 9 ( A v e r a g e A n n u a l C h a n g e )

2017 2018 2019F 2020F 2021F 2022F 2023F

GDP Growth 2.2% 2.9% 2.3% 1.5% 1.5% 2.3% 2.6%

Employment 1.6% 1.7% 1.5% 0.4% -0.2% 0.2% 1.0%

Income 2.2% 1.9% 2.1% 1.6% 1.6% 2.3% 2.8%

CPI Inflation 2.1% 2.4% 1.7% 1.8% 1.6% 1.7% 2.0%

Source: CBRE Research, Q2 2019.

TOO MUCH NEW SUPPLY?


NEW ROOMS ADDED

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,00019

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

Source: STR, CBRE Hotels Research, Q2 2019.

12 MMA of New Hotel Room Added in the U.S.

Well Below

Previous Peaks

Do We Have a Problem?


0

5,000

10,000

15,000

20,000

25,000

Avg. New Rooms Added Avg. New Rooms Added w/ Airbnb

Well Below Previous Peaks

Do We Have a Problem?

NEW ROOMS ADDED

12 MMA of New Hotel Rooms & Airbnb Units Added in the U.S.

Source: STR, CBRE Hotels Research, Airdna, Q2 2019.

Well Above Previous

Peaks


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2014 2015 2017 2018

Top 10 MSAs Other MSAs Non MSA

1. New York2. Los Angeles3. San Francisco4. Miami5. Washington6. Chicago7. San Diego8. Austin9. Boston10. Seattle

CHANGING SHARE OF THOSE SAME CITES

SHARE OF AIRBNB’S US SUPPLY MAJOR MARKETS SHRINKS SUBSTANTIALLY

2014 TOP AIRBNB MSA’S

Source: CBRE Hotels Research, Airdna, Google Trends, STR, Q1 2019.


Notes: Previous historical peak occupancy 66.2% (2018 Q2), Current occupancy 66.1% (2018 Q3)

Sources: CBRE Hotels Research, STR Q2 2019

NEW SUPPLY (TRADITIONAL/NON-TRADITIONAL) IS HURTING RATE

GROWTH

Gap

54

56

58

60

62

64

66

68

(20)

(15)

(10)

(5)

0

5

10

1989

1989

1990

1991

1992

1992

1993

1994

1995

1995

1996

1997

1998

1998

1999

2000

2001

2001

2002

2003

2004

2004

2005

2006

2007

2007

2008

2009

2010

2010

2011

2012

2013

2013

2014

2015

2016

2016

2017

2018

Occupancy (%)% Change in ADR/Occ/RevPAR

Contribution from ∆RADR Contribution from ∆Occupancy ∆RRevPAR Occ (4-Qtr Moving Average)

Area of Interest

OUR FORECASTS


2022F

1.8%

2.4%

65.6%

1.3%

1.9%

HOTELS PEAKED IN MID-2018 – SLOWDOWN WILL BE A MILD ONE

2022F

1.7%

2.5%

65.1%

0.6%

1.4%

Long Run Average 2017 2018 2019F 2020F 2021F

Supply 1.8% 1.7% 2.0% 2.0% 2.1% 1.8%

Demand 2.0% 2.4% 2.4% 1.8% 1.3% 1.4%

Occupancy 62.5% 65.9% 66.2% 66.0% 65.5% 65.2%

ADR 3.0% 2.2% 2.5% 1.1% 2.0% 1.3%

RevPAR 3.2% 2.9% 2.9% 0.9% 1.2% 0.9%

Source: STR, CBRE Hotels Research, Hotel Horizons® September - November 2019

A Blip!

U.S. NATIONAL FORECAST – ALL HOTELS


-30%-20%-10%

0%10%20%30%40%50%60%70%

San J

ose

-Santa

Cru

zN

ash

ville

Oakla

nd

San F

ranci

sco

Los

Angele

sO

ahu

Denve

rBost

on

Anaheim

Cin

cinnati

Sacr

am

ento

Charl

otte

Seattle

Tam

pa

Dayt

on

Detr

oit

Orl

ando

Jack

sonvi

lle

Fort

Lauderd

ale

Colu

mbia

Atlanta

Rale

igh-D

urh

am

Cle

vela

nd

Sain

t Lo

uis

Min

neapolis

San D

iego

Fort

Wort

hSalt L

ake C

ity

Ric

hm

ond

Long Isl

and

Hart

ford

Mem

phis

Milw

aukee

West

Palm

Beach

New

ark

New

Orl

eans

Alb

uquerq

ue

Chic

ago

Alb

any

Norf

olk

-VA

Beach

Pitts

burg

hPhiladelp

hia

San A

nto

nio

Phoenix

Wash

ingto

n D

CO

maha

Tucs

on

Houst

on

New

York

Port

land

Louis

ville

India

napolis

Aust

inC

harl

est

on

Mia

mi

Dallas

Colu

mbus

Sava

nnah

Kansa

s C

ity

Baltim

ore

Markets in Expansion Markets in ContractionMarkets in Recovery

REAL REVPAR CHANGE FROM PRE-RECESSION PEAK

Not All Markets Have Fully Recovered From the Last Recession

As of Q4 2018

Source: STR, CBRE Hotels Research, Hotel Horizons® September-November 2019


MARKET OUTLOOK

Occupancy Levels will Decline in 30 of our

60 Top U.S. Markets this Year, but in 48

Markets in 2020.

Average Daily Rate Growth will Exceed 2.0% in 40 Markets this Year and in 31 Markets in 2020.


PERCENT CHANGE IN REAL REVPAR FROM PRESENT TO 2024

Most Markets to See Positive RevPAR Change in Real Terms

-5%

0%

5%

10%

15%

San

Fran

cisco

Pitts

burg

hDa

yton

Sacra

men

toNo

rfolk

-VA

Beac

hPh

oeni

xAn

aheim

Albu

quer

que

Tam

paLo

s Ang

eles

Hous

ton

Omah

aRa

leigh

-Dur

ham

Newa

rkAl

bany

Wes

t Pal

m B

each

Austi

nTu

cson

Hartf

ord

Nash

ville

Salt

Lake

City

Loui

svill

eSa

n Di

ego

Denv

erW

ashi

ngto

n DC

Sain

t Lou

isLo

ng Is

land

Colu

mbu

sKa

nsas

City

New

Orlea

nsFo

rt La

uder

dale

Atla

nta

Cinc

inna

tiCh

icago

Milw

auke

eBa

ltim

ore

Mem

phis

San

Jose

-San

ta C

ruz

Phila

delp

hia

Jack

sonv

ille

Indi

anap

olis

Fort

Wor

thBo

ston

New

York

Clev

eland

Seat

tleOa

kland

Orla

ndo

Mia

mi

Portl

and

Char

lotte

Char

lesto

nRi

chm

ond

Detro

itM

inne

apol

isSa

vann

ahSa

n An

toni

oCo

lum

bia

Dalla

s

Sources: CBRE Hotels Research, STR, Q3 2019.


CBRE HOTELS’ LODGING INSIGHTSU.S. LODGING INDUSTRY: CHAIN-SCALE FORECAST – REVPAR CHANGE

-1%

0%

1%

2%

3%

4%

5%

2017 2018 2019F 2020F 2021F 2022F

All Hotels Luxury Upper-Upscale Upscale Upper-Midsacle Midscale Economy

Source: STR, CBRE Hotels Research, Hotel Horizons® September - November 2019


0.9%

1.2%

0.8%

1.5%

1.9%

1.3%

0%

1%

2%

3%

2019F 2020F 2021F

September 2019 Hotel Horizons® RevPAR Forecast

Maximum Expense Growth to Achieve Nominal GOP* Growth

2019 TRENDS® IN THE HOTEL INDUSTRYMaximum Expense Growth Needed to Achieve an Increase in GOP*

Note: * Before deduction for Management Fees and Non-Operating Income and ExpensesSource: 2019 Trends® in the Hotel Industry, September 2019 Hotel Horizons® Forecast


3%

4%

5%

6%

7%

8%

9%

10%

0%

2%

4%

6%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

BLS - Change in Average Hourly Compensation for Hospitality Employees (Left Axis)

U.S. Unemployment Level (Right Axis)

Source: Bureau of Labor Statistics

2019 TRENDS® IN THE HOTEL INDUSTRYAnnual Change in Hospitality Industry Employee Hourly Compensation versus Unemployment Rate


$2

1,9

43

$2

1,7

00

$1

5,4

90

$1

6,5

71

$1

8,1

95

$1

9,7

77

$2

1,5

38

$2

3,8

42

$2

5,3

44

$2

6,2

82

$2

6,8

60

$2

7,4

78

$2

7,1

83

$2

7,1

77

$2

6,9

45

$0

$8,000

$16,000

$24,000

$32,000

2019 TRENDS® IN THE HOTEL INDUSTRYGross Operating Profit* - Dollars Per Available Room

Note: * Before deduction for Management Fees and Non-Operating Income and Expenses Source: 2019 Trends® in the Hotel Industry, September 2019 Hotel Horizon® Forecast

77.4% from 2009 to 2018CAGR = 6.6%

A Look at Historic Hotels


THE FOLLOWING DATA IS BASED ON A SAMPLE OF A

211 PROPERTIES THAT ARE MEMBERS OF HISTORIC

HOTELS OF AMERICA, AND PROVIDE THEIR DATA TO

STR.

HISTORICAL AND FORECAST DATA

HISTORIC HOTELS PERFORMANCE


-2%

-1%

0%

1%

2%

3%

4%

5%

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F

Historic Hotels of America All U.S. Hotels

Annual Change

CHANGE IN SUPPLYFore

cast

Source: STR, CBRE Hotels Research – September – November 2019 Hotel Horizons®


-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F


Annual Change

CHANGE IN DEMANDFore

cast



50%

55%

60%

65%

70%

75%

80%

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F


ANNUAL OCCUPANCYFore

cast

Annual Occupancy Level



$0

$50

$100

$150

$200

$250

$300

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F


ANNUAL ADRFore

cast

Annual ADR Level



-12%

-8%

-4%

0%

4%

8%

12%

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F


Annual Change

AVERAGE DAILY RATEFore

cast



-20%

-16%

-12%

-8%

-4%

0%

4%

8%

12%19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F


Annual Change

REVPARFore

cast



HISTORIC HOTELS SAMPLE


50%

55%

60%

65%

70%

75%

80%

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F

Historic Hotels of America Upper-Upscale and Luxury

ANNUAL OCCUPANCYFore

cast

Annual Occupancy Level



$0

$50

$100

$150

$200

$250

$300

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F


ANNUAL ADRFore

cast

Annual ADR Level



-15%

-10%

-5%

0%

5%

10%

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F


Annual Change

AVERAGE DAILY RATEFore

cast



-20%

-16%

-12%

-8%

-4%

0%

4%

8%

12%19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F


Annual Change

REVPARFore

cast



2022F 2023F

0.9% 0.9%

0.7% 1.2%

72.1% 72.3%

1.5% 1.8%

1.3% 2.1%

SLOWDOWN NOT AS SLOW

Long Run Average 2017 2018 2019F 2020F 2021F

Supply 0.7% 1.3% 1.4% 0.5% 0.7% 0.8%

Demand 1.0% 2.3% 1.2% 0.3% 0.2% 0.1%

Occupancy 68.0% 73.4% 73.3% 73.1% 72.8% 72.2%

ADR 3.3% 1.6% 2.0% 1.4% 2.5% 1.7%

RevPAR 1.8% 2.5% 1.8% 1.2% 2.0% 1.0%

Source: STR, CBRE Hotels’ Americas Research, Hotel Horizons® September - November 2019

FORECAST – HISTORIC HOTELS- UPTURN DELAYED UNTIL 2023

HISTORIC HOTELSFINANCIAL BENCHMARKING

40 HISTORIC HOTELS OF AMERICA | NOVEMBER 7, 2019CBRE HOTELS

TRENDS® IN THE HOTEL INDUSTRY

• Annual voluntary survey of

thousands of U.S. hotel

financial statements

• First survey conducted in 1937

– Occ: 64.4%

– ADR: $3.04

• Data converted to USALI to

ensure comparability

• 2019 Survey Sample (2017

data)

• 7,500 hotels across the U.S.

• Occupancy: 76.0%

• ADR: $179.48

Annual Benchmarking Survey – Origin: 1937


• From CBRE’s Trends® in the Hotel Industry database, we pulled operating

performance data for two sets of properties

• Members of Historic Hotels of America that participate in our survey

(historic sample) – 86 properties

• Comparable hotels (room count, occupancy, ADR) that opened since 1968

(contemporary sample) – 28 properties

• All properties reported operating data each year from 2014 through 2018.

• Both samples consist of independent and chain-affiliated hotels.

METHODOLOGY

FINANCIAL BENCHMARKING


2018 PROFILE OF SAMPLES

HISTORIC* VS CONTEMPORARY** HOTELS


PERCENT OF TOTAL REVENUE


2018 COMPARATIVE PERFORMANCE

Note: * Members of HHA** Comparable properties less than 50 years old*** Income before deduction for income taxes, interest, depreciation, and amortization.

Source: Trends® in the Hotel Industry


TOTAL LABOR COSTS




SELECT EXPENSES - $PAR AND % OF TOTAL REVENUE




COMPOUND ANNUAL CHANGE 2014 - 2018


TOTAL OPERATING REVENUE




OPERATING DEPARTMENT REVENUE




TOTAL OPERATING EXPENSES***




OPERATING EXPENSES




GROSS OPERATING PROFIT***


SUMMARY THOUGHTS

1. Economic “slowdown” in 2020 – NOT a recession.

2. Traditional hotel supply is not a huge issue, except in select markets.

However, increased competition from non-traditional lodging supply has

contributed to suppressed ADR growth.

3. National occupancy levels are forecast to decline, but remain well above

long-run average. RevPAR will slow down from 2019 through 2021. Upturn

in industry performance starts in 2022.

4. With revenue forecast to increase less than 2%, the challenge for operators

is to control expenses in order to achieve profit growth, or limit declines.

5. Historic Hotels enjoyed superior revenue growth from 2014 to 2018, but

suffered from greater expense growth.

6. The slowdown in Historic Hotel market performance will not be as significant

as the slowdown in the performance of the overall U.S. lodging industry.


THANK YOU

Robert Mandelbaum

Director of Research Information Services

+ 1 404 812 5187

[email protected]

CBRE © 2019 All Rights Reserved. All information included in this proposal pertaining to CBRE—including but not limited to itsoperations, employees, technology and clients—are proprietary and confidential, and are supplied with the understanding thatthey will be held in confidence and not disclosed to third parties without the prior written consent of CBRE. This proposal isintended solely as a preliminary expression of general intentions and is to be used for discussion purposes only. The partiesintend that neither shall have any contractual obligations to the other with respect to the matters referred herein unless and until adefinitive agreement has been fully executed and delivered by the parties. The parties agree that this proposal is not intended tocreate any agreement or obligation by either party to negotiate a definitive lease/purchase and sale agreement and imposes noduty whatsoever on either party to continue negotiations, including without limitation any obligation to negotiate in good faith or inany way other than at arm’s length. Prior to delivery of a definitive executed agreement, and without any liability to the other party,either party may (1) propose different terms from those summarized herein, (2) enter into negotiations with other parties and/or (3)unilaterally terminate all negotiations with the other party hereto.

The information contained in this document has been obtained from sources believed reliable. While CBRE, Inc. does not doubtits accuracy, CBRE, Inc. has not verified it and makes no guarantee, warranty or representation about it. It is your responsibility toindependently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for exampleonly and do not represent the current or future performance of the property. The value of this transaction to you depends on taxand other factors which should be evaluated by your tax, financial and legal advisors. You and your advisors should conduct acareful, independent investigation of the property to determine to your satisfaction the suitability of the property for your needs.

pip.cbrehotels.com

mailto:[email protected]

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THE ROAD AHEADhistorichotels.net/media/1289/cbre-11-7-19-presentation.pdf · 2019. 11. 20. · CBRE...

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