ALBERTA ACCOMMODATION OUTLOOK 2018

Transcription

1 ALBERTA ACCOMMODATION OUTLOOK 2018 ALBERTA HOTEL & LODGING ASSOCIATION APRIL 17, 2018

2 PRESENTATION OUTLINE National Western Canada Alberta Calgary & Edmonton Investment Trends Key Takeaways Questions

3 NATIONAL ECONOMIC & TRAVEL OUTLOOKS

4 NATIONAL REAL GDP OUTLOOK 2018/19 $ % $1.90 $1.85 $1.88 $ % $1.80 $ % Real GDP ($ Trillions) $1.75 $1.70 $1.65 $1.60 $1.63 $1.66 $1.70 $1.74 $1.76 $ % 0.0% -1.0% % Change $1.55 $ % $ p 2019p % Change -3.0% Source: Statistics Canada; Conference Board of Canada, Canadian Outlook Fall 2017; Scotiabank Group Global Forecast Update January 2018; CIBC World Markets Monthly FX Outlook, February 2018; RBC Economic and Financial Market Outlook 2017 Source: CBRE Hotels

5 NATIONAL TRAVEL OUTLOOK Overnight Travel 2016E 2017F 2018P 2019P KEEP YOUR TABLE WITHIN THE GUIDES Business travel domestic 1.3% 2.2% 1.4% 1.4% Pleasure travel domestic 2.1% 3.1% 2.2% 2.0% Total domestic travel 1.9% 2.7% 1.8% 1.7% U.S. Travel 9.4% 4.0% 2.8% 2.3% Overseas travel 13.6% 10.4% 6.4% 5.7% Total Overnight Travel 3.7% 3.3% 2.2% 2.0% National accommodation demand growth 1.3%* 4.1%* 2.4% Source: Canadian Tourism Research Institute, Conference Board of Canada, Fall 2017 *Actual results, Source: CBRE Hotels

6 NATIONAL SUPPLY & DEMAND OUTLOOKS 2018

7 NATIONAL SUPPLY & DEMAND OUTLOOK 4.1% National Occupancy 2016 Actual 64% 2.4% 2017 Actual 66% 1.2% 1.1% 1.7% 1.3% 2018 Projection 66% p p Supply Demand Source: CBRE Hotels

8 NATIONAL ADR, REVPAR & BOTTOM LINE OUTLOOK P ADR Growth RevPAR Growth Occupancy 64% 64% 0 pts 66% 2 pts 66% 0 pts 2016 Actual 2.9% ADR 2017 Actual$ % $ % 2017 Actual $ % 8.0% $ % 2018 Forecast 4.0% 2016 Actual 3.0% 2018 Forecast 4.7% RevPAR $91 $94 3.0% $ % $ % Adjusted Net Operating Income/ Available Room ($000 s) 3.9% 15.9% 8.2% $12.3 $14.3 $15.4 Source: CBRE Hotels p

9 WESTERN CANADA OUTLOOKS

10 WESTERN CANADA SUPPLY & DEMAND OUTLOOK Supply & Demand Growth 4.6% Western Canada Occupancy 2016 Actual 60% 2017 Actual 62% 2.0% 1.7% 1.0% 2.4% 2018 Projection 63% p p Supply -1.5% Demand Source: CBRE Hotels

11 CANADIAN NATIONAL AND REGIONAL MARKET OUTLOOKS Region 2014 Actual 2015 Actual 2016 Actual 2017 Actual 2018 Forecast Western Canada Occ 65% 62% 60% 62% 63% ADR $143 $148 $150 $155 $160 RevPAR $93 $92 $90 $96 $100 Central Canada Occ 64% 66% 68% 70% 70% ADR $134 $142 $149 $158 $165 RevPAR $87 $93 $101 $110 $115 Atlantic Canada Occ 58% 59% 61% 63% 63% ADR $123 $127 $129 $135 $140 RevPAR $72 $75 $79 $86 $88 National Occ 64% 64% 64% 66% 66% ADR $138 $144 $148 $155 $161 RevPAR $88 $91 $94 $102 $107 Source: CBRE Hotels

12 WESTERN CANADA ADR, REVPAR & BOTTOM LINE OUTLOOK P ADR Growth RevPAR Growth Occupancy 62% 60% -2 pts 62% 2 pts 63% 1 pt 2016 Actual 1.3% 2017 Actual 3.2% 2018 Forecast 3.3% 2016 Actual (2.1%) ADR $148 $ % $ % $ % 2017 Actual 6.1% 2018 Forecast 4.7% RevPAR $92 $90 (2.1%) $96 6.1% $ % Adjusted Net Operating Income/ Available Room ($000 s) 7.1% 9.8% -7.2% $13.7 $15.0 $ p Source: CBRE Hotels

13 ALBERTA ECONOMIC & TOURISM OUTLOOKS

14 ALBERTA TOURISM INDICATORS 2017 AIRPORT PASSENGER VOLUMES Calgary (YYC) 3.8% Edmonton (YEG) 5.0% FOOD SERVICES & DRINKING PLACES RECEIPTS 2.4% NATIONAL PARKS ATTENDANCE* Banff 3.0% Jasper -1.6% Waterton Lakes 7.3%** HISTORIC SITES & MUSEUM VISITS 3.8% *Excludes Group Tours as per Parks Canada definition ** Waterton Lakes National Park was closed to the public from September 8-20, 2017 due to a wildfire. Source: Alberta Tourism Market Monitor, Alberta Culture and Tourism

15 ALBERTA GDP GROWTH PROJECTIONS 2017 Estimate 2018 Forecast 2019 Forecast ATB Financial 3.9% 2.8% 2.2% Scotiabank Group 3.0% 2.8% 1.9% RBC Economics 4.2% 2.2% 2.0% Conference Board of Canada 6.7% 2.1% 1.6% Source: ATB Financial Alberta Economic Outlook February 2018 Scotiabank Group, Global Economics Forecast Tables, March 6, 2018 RBC Economic and Financial Provincial Outlook Alberta March 2018 Conference Board of Canada, Provincial Outlook Winter (February) 2018

16 F REAL GDP GROWTH BY PROVINCE NL PE NS NB QC ON MB SK National 2018f 2.4% 2019f 1.9% AB BC 2018f 2019f 2018f 2019f 2018f 2019f 2018f 2019f 2018f 2019f 2018f 2019f 2018f 2019f 2018f 2019f 2018f 2019f 2018f 2019f Real GDP 0.5% 1.0% 1.6% 1.2% 1.2% 0.9% 1.0% 0.7% 2.1% 1.6% 2.3% 1.9% 2.2% 1.8% 2.2% 1.9% 2.8% 2.1% 2.6% 2.0% Source: Scotiabank Group, Global Forecast Update, March 6, 2018

17 ALBERTA TRAVEL OUTLOOK Overnight Travel 2017 Estimate 2018 Forecast 2019 Forecast Business Travel Overnight Domestic Pleasure Travel Overnight Domestic 2.6% 1.3% 1.3% 3.9% 2.3% 1.9% U.S. Overnight Travel 4.9% 3.3% 2.8% Overseas Overnight Travel 9.1% 5.9% 5.3% Total Overnight Travel 3.6% 2.3% 2.1% Source: Canadian Tourism Research Institute, Conference Board of Canada, Fall 2017

18 KEY ECONOMIC/TOURISM FACTORS Oil and Gas Capital Investment Oil Sands Conventional Pipeline/Rail Capacity Issues Low Natural Gas Prices Business & Consumer Confidence Inconsistencies Overnight Travel Growth Increases Source: CBRE Hotels

19 WEST TEXAS INTERMEDIATE CRUDE OIL PRICES & HOTEL OCCUPANCY F $120 80% $100 70% 60% USD $ per Barrel $80 $60 $40 $20 50% 40% 30% 20% 10% Hotel Occupancy $0 0% F Crude Oil Prices Alberta Hotel Occupancy Source: U.S. Energy Information Administration & CBRE Hotels Trends in the Hotel Industry

20 HENRY HUB NATURAL GAS PRICES & HOTEL OCCUPANCY F $10 80% USD $ per million Btu $9 $8 $7 $6 $5 $4 $3 $2 $1 70% 60% 50% 40% 30% 20% 10% Hotel Occupancy $0 0% F Natural Gas Prices Alberta Hotel Occupancy Source: U.S. Energy Information Administration & CBRE Hotels Trends in the Hotel Industry

21 ALBERTA SUPPLY & DEMAND OUTLOOKS 2018

22 ALBERTA TOP LINE 2017 PERFORMANCE Edmonton Red Deer Calgary 57% Occ $130 ADR $74 RevPAR 49% Occ $124 ADR $61 RevPAR Lethbridge Alberta Resorts Other Alberta North* 67% Occ $273 ADR $182 RevPAR 42% Occ $106 ADR $45 RevPAR Other Alberta South** Note: *Properties in Communities located On or North of Highway 16 **Properties in Communities located South of Highway 16 59% Occ $143 ADR $85 RevPAR 51% Occ $110 ADR $57 RevPAR 43% Occ $115 ADR $50 RevPAR

23 ALBERTA HISTORIC TOP LINE RESULTS COMPARISON (YTD FEBRUARY) 2016 Jan-Feb 2017 Jan-Feb 2018 Jan-Feb Overall Alberta (excl.resorts) Occ ADR RevPAR 45% $131 $59 45% $127 $57 47% $126 $59 Red Deer Occ 36% 36% 36% ADR $111 $105 $108 RevPAR $40 $38 $40 Lethbridge Occ 42% 40% 42% ADR $109 $109 $111 RevPAR $46 $43 $47 Alberta Resorts Occ ADR 48% $189 48% $199 49% $210 RevPAR $91 $96 $103 Other Alberta Occ ADR 36% $127 40% $119 44% $121 RevPAR $46 $48 $54 Source: CBRE Hotels

24 ACCOMMODATION SUPPLY 2,000 new rooms in 2018 Majority in Calgary/ Edmonton Modular Construction Developers still looking Project Financing? Source: CBRE Hotels

25 ALBERTA SUPPLY & DEMAND OUTLOOK Room Nights 18,000,000 16,000,000 2% 2% 1% 14,000,000 12,000,000 5% 5% 3% 10,000,000 8,000,000 6,000,000 4,000,000 2,000, % 4% 3% -12% 8% 2% -2,000, P P Calgary/Edmonton Combined Other Alberta Supply Dem Demand Supply/Available Room Nights Source: CBRE Hotels 25 CBRE HOTELS 2017/2018 OUTLOOK

26 OTHER ALBERTA MARKET DUAL IMPACTS OF ECONOMIC DOWNTURN AND NEW SUPPLY (2014 TO 2018) Other AB Market Supply vs. Demand Growth Other AB Market Occupancy 10% 5% 0% -5% -10% -15% Supply Growth 6% 7% 5% Demand Growth 70% 65% 60% 55% 50% 67% 56% 48% 51% 52% -20% -25% -30% -25% -19% -17% 45% 40% F Market Occupancy Supply in Other Alberta (outside Calgary and Edmonton) increasing by 7% for Demand dropping 17% over the same period ( ) The impact on market occupancy is a 15 point decline, from 67% in 2014 to 52% for 2018 for the Other Alberta market.

27 PROVINCIAL FORECAST

28 ALBERTA TOP LINE 2018 FORECAST $160 ADR RevPAR Occupancy 80% $140 66% 68% 68% 70% $120 $132 $138 $143 $141 59% 52% 54% 54% 60% $100 $80 $60 $87 $94 $97 $83 $131 $68 $130 $70 $131 $71 50% 40% 30% $40 20% $20 10% $ P 0% Source: CBRE Hotels

29 ALBERTA FINANCIAL FORECAST $24 Adjusted Net Operating Income Per Available Room ($000 s) $22 $20 $18 $16 $14 $12 $10 $8 $16.7 $18.7 $9.1 $9.6 $20.3 $10.8 $15.7 $11.8 $15.4 $14.3 $12.3 $10.2 $10.2 $10.3 $ P AB NATIONAL NOTE: Adjusted Net Operating Income is defined as income after property taxes, insurance, management fees, franchise fees, and capital reserves; but before rent, interest, income taxes, depreciation and amortization. Source: CBRE Hotels

30 HISTORIC EXPENSE RATIOS ALBERTA FULL SERVICE YEAR 2016 Departmental Expenses $ Per Available Room % of Dept Revenue Rooms $8, % Food & Beverage $11, % Other Operated Departments* $1, % Total Departmental Expenses $20, % Undistributed Expenses $ Per Available Room % of Total Revenue Administration & General $3, % Information & Telecommunications Systems $ % Sales & Marketing $2, % Property Op. & Maintenance $2, % Utilities $1, % Property and Other Taxes $1, % Insurance $ % Total Undistributed Expenses $13, % Source: CBRE Hotels

31 HISTORIC EXPENSE RATIOS ALBERTA LIMITED SERVICE YEAR 2016 Departmental Expenses $ Per Available Room % of Dept Revenue Rooms $5, % Other Operated Departments* $ % Total Departmental Expenses $5, % Undistributed Expenses $ Per Available Room % of Total Revenue Administration & General $2, % Information & Telecommunications Systems $ % Sales & Marketing $1, % Property Op. & Maintenance $1, % Utilities $1, % Property and Other Taxes $1, % Insurance $90 0.4% Total Undistributed Expenses $7, % Source: CBRE Hotels

32 FINANCIAL CONCERNS Departmental expenses up in 2016 and 2017 Labour shortages in many markets Legislative changes in benefit requirements affect labour costs Energy price increases (fuel, hydro) Assessments time to appeal? Hotel brands increasing costs for program participation Higher vacancy rates of other rental spaces Source: CBRE Hotels

33 CALGARY & EDMONTON MARKET OUTLOOKS

34 CALGARY ECONOMIC OUTLOOK Forecast 2017F GDP Growth (%) (3.2) (3.7) Growth (%) Employment Employment (% Change) (% Change) (1.5) Unemployment Rate (%) Unemployment Rate (%) Housing Starts (annual, 000 s of Housing units) Starts (annual, 000 s of units) Source: Conference Board of Canada Metropolitan Outlook Winter 2018

35 CALGARY PERFORMANCE INDICATORS KEY POINTS FOR 2018 Supply growth slightly ahead of demand growth in 2018 ADR declines to continue, impacting RevPAR and Bottom Line Downtown hotels suffering ADR drop, lower F&B demand and revenue GDP growth projected for Calgary concerns about spending in certain sectors International travel has positive impact on spending in Calgary Air passenger volumes continue to increase Source: CBRE Hotels

36 CALGARY TOP LINE 2017 PERFORMANCE BY SUB-MARKET Airport / NE Downtown / Beltline Northwest / Motel Village South / Macleod Trail 64% Occ $113 ADR $73 RevPAR 62% Occ $189 ADR $117 RevPAR 59% Occ $119 ADR $70 RevPAR 53% Occ $127 ADR $68 RevPAR

37 CALGARY ACCOMMODATION MARKET PERFORMANCE $180 $170 $160 $150 $140 $130 $120 $110 $100 $90 $80 $70 $60 73% 71% 70% $156 $162 $167 $158 $110 $118 $117 ADR RevPAR Occupancy 64% 59% 59% 59% $102 $145 $143 $145 $85 $85 $ P 80% 70% 60% 50% 40% 30% 20% 10% 0% Source: CBRE Hotels

38 CALGARY DUAL IMPACTS OF ECONOMIC DOWNTURN AND NEW SUPPLY (2014 TO 2018) Calgary Accommodation Market Supply vs. Demand Growth 75% Calgary Market Occupancy 25% 20% 15% 10% Supply Growth 20% 15% 9% Demand Growth 70% 65% 60% 70% 64% 59% 59% 59% 5% 0% 1% 55% -5% -10% -9% -3% % F Market Occupancy Supply in Calgary increasing by 20% from 2014 to 2018 Over the same 2014 to 2018 period, demand to improve by only net 1% As a result, market occupancy dropping from 70% in 2014 to forecast 59% in 2018 (11 points)

39 EDMONTON ECONOMIC OUTLOOK Forecast Forecast 2017F GDP Growth (%) (3.2) (3.4) GDP Growth (%) (3.2) (3.6) Growth (%) Employment (% Change) Employment (% Change) (% Change) Unemployment Rate (%) Unemployment Rate (%) Housing Starts (annual, 000 s of Housing units) Starts (annual, 000 s of units) Source: Conference Board of Canada Metropolitan Outlook Winter 2018

40 EDMONTON PERFORMANCE INDICATORS KEY POINTS FOR 2018 Supply and demand to grow at roughly same pace in 2018 Operators must be diligent on ADR YTD Feb 2018 is down Major infrastructure projection in Alberta s Industrial Heartland to have positive impact on Edmonton economy Key events including Cities and Climate Change Conference, Smart Airports and Regions Conference, Grey Cup Royal Alberta Museum to open Source: CBRE Hotels

41 EDMONTON TOP LINE 2017 PERFORMANCE BY SUB-MARKET Downtown South /Ellerslie/Airport West 54% Occ $124 ADR $67 RevPAR 63% Occ $154 ADR $98 RevPAR 56% Occ $114 ADR $64 RevPAR

42 EDMONTON ACCOMMODATION MARKET PERFORMANCE $150 ADR RevPAR Occupancy 80% $140 $130 $120 $110 $100 $90 $80 $70 $60 70% 69% 67% $122 $127 $134 $136 $81 $89 $93 63% 59% $86 $130 $77 $130 $133 57% 57% $74 $ P 70% 60% 50% 40% 30% 20% 10% 0% Source: CBRE Hotels

43 EDMONTON DUAL IMPACTS OF ECONOMIC DOWNTURN AND NEW SUPPLY (2014 TO 2018) Edmonton Accommodation Market Supply vs. Demand Growth 75% Edmonton Market Occupancy 20% 15% 10% 5% Supply Growth 7% 13% 16% Demand Growth 70% 65% 60% 69% 63% 59% 57% 57% 0% 55% -5% -10% -8% -7% -4% 50% F Market Occupancy Edmonton supply will grow by 16% over the period Room Demand will decline by net 4% over the period The impact on market occupancy over the 4-year period is a projected 12 point decline, from 69% in 2014 to 57% in 2017 and 2018

44 MAJOR MARKET OUTLOOKS REVPAR PROJECTION RevPAR Ranking Vancouver $161 10% 8% 6% 4% -2% 0% 2% -4% -6% Vancouver Toronto > 4% RevPar Growth Niagara Falls Montreal Winnipeg Quebec City Regina Edmonton Halifax Ottawa Calgary Saskatoon St. John's 0%-3% RevPar Growth RevPAR Decline Toronto $138 Montreal $136 Ottawa $130 Quebec City $117 Niagara Falls $114 Halifax $109 Winnipeg $92 St. John s $87 Calgary $86 Edmonton $76 * Major Markets refer to Greater Metro Areas Source: CBRE Hotels Saskatoon $75 Regina $70

45 INVESTMENT TRENDS

46 ALBERTA TRANSACTION OVERVIEW Canada Total Transactions Volume ($Millions) $1,090 $410 $730 $1,200 $1,090 $2,110 $1,400 $2,300 $4,100 $3,400 Alberta * 2017** Total Transactions Volume ($Millions) % Volume of Total $344 $77 $111 $167 $335 $501 $293 $265 $110 $190 32% 19% 15% 14% 31% 24% 21% 12% 6% 8% * Year 2016 Totals EXCLUDE assets that were within Entity Level transactions for which individual property acquisition prices were not disclosed. Specifically, the acquisition of the InnVest REIT portfolio and the acquisition of Coast Hotels & Resorts. ** Year 2017 Excludes M&A transactions Source: CBRE

47 Q CAP RATE SURVEY Downtown Full Service Suburban Limited Service Q HOTEL CAP RATES National Calgary Edmonton 7.28% 7.00%-8.75% 7.25%-8.75% 8.36% 8.00%-9.25% 8.50%-9.50% Focused Service 8.05% 7.50%-9.25% 8.00%-9.50% Source: CBRE Hotels

48 KEY TAKEAWAYS

49 ALBERTA TOP & BOTTOM LINE OUTLOOK OCC ADR REVPAR P 59% 54% 54% 52% $141 $131 $130 $131 $83 $68 $70 $71 0.9% -34.8% -0.2% $10.3 $10.2 $10.2 Adjusted Net Operating Income/ Available Room ($000 s) P

50 KEY TAKEAWAYS Top line performance results in many areas of the Province improved in 2017 and will continue to so in 2018 Weakness to continue in oil sands related markets due to lack of capital spending We need to grow ADR!!! Alberta Resorts market will continue to grow ADR Room construction continues despite economic conditions Bottom lines only slightly improved in 2018 Growth on the horizon in many markets. Adjustments required to thrive under New Normal operating conditions

51 THANK YOU!! Brokerage Bill Stone Greg Kwong Deborah Borotsik Scott Duff Michael Beckley Sylvia Occhiuzzi Karina Saks Ashley Kerr Valuation & Advisory Services David Larone Brian Stanford Fran Hohol Erin O Brien David Ferguson Rebecca Godfrey Kirstin Hallett Nicole Nguyen Carol Lopes