State of the lodging industry. Hotels & Hospitality Group

Transcription

1 State of the lodging industry Hotels & Hospitality Group U.S. Capital Markets Presentation October 2015

2 Table of contents Hotel fundamentals and historical perspective 2 Hotel values 18 Influences for the future 26 1

3 Hotel fundamentals and historical perspective 2

4 U.S. historic lodging performance Occupancy increased 1.8% in YTD 2015; ADR is up 4.8%, RevPAR is up 6.7% $140 80% ADR and RevPAR (U.S. Dollars) $120 $100 $80 $60 $40 70% 60% 50% 40% Occupancy $20 30% $ ADR $85 $84 $83 $83 $86 $91 $98 $104 $107 $98 $98 $102 $106 $110 $115 $115 $120 RevPAR $54 $50 $49 $49 $53 $58 $62 $66 $64 $54 $56 $61 $65 $69 $74 $76 $81 Occupancy 63% 60% 59% 59% 61% 63% 63% 63% 60% 55% 58% 60% 61% 62% 64% 66% 67% RevPAR % change % -2.7% 0.6% 7.9% 8.5% 7.8% 5.8% -1.8% -16.6% 5.1% 8.1% 6.8% 5.2% 8.3% % YTD Aug 2014 YTD Aug % Source: Smith Travel Research 3

5 Top Markets for RevPAR growth in YTD August Seattle 10.9% Total U.S. RevPAR 6.7% growth San Francisco/San Mateo 9.2% 10 6 Denver 10.0 Chicago 10.5% 5 8 Boston 9.4% 1 Phoenix 16.0% Nashville 11.7% 3 Atlanta 9.4% 8 Source: Smith Travel Research Tampa-St. Petersburg 12.8% 7 2 Orlando 9.9% 4

6 U.S. hotel performance outlook for 2015 No evidence of slowdown in industry fundamentals; prognosticators expecting RevPAR to grow 6-8% through 2015, driven by ADR gains Date of Forecast ADR Occupancy RevPAR ADR Occupancy RevPAR PwC Aug % 1.8% 6.9% 5.8% 0.1% 5.9% PKF-HR Jun % 2.0% 7.2% 6.4% 0.4% 6.8% STR Aug % 1.7% 6.8% 5.2% 0.8% 6.0% Average 5.1% 1.8% 7.0% 5.8% 0.4% 6.2% 5

7 U.S. hotel transaction volume Transaction volume in 2014 marks 21% increase $50 $ % 400% $40 300% Volume ($B) $35 $30 $25 $20 $15 $10 $ % 100% 0% -100% -200% -300% -400% Single-Asset % Change $ Public-Private/Real Estate M&A All Other Portfolios Single Assets Single-Asset % Change -19% -39% -10% 1% -43% 71% 100% 72% 50% -15% -66% -61% 200% 95% -8% 23% 32% 50% 44% 17% Total Number of Transactions YTD Sep 2014 YTD Sep F -500% Source: JLL; transactions $5 million and above; excludes casino transactions f 6

8 U.S. room night demand vs. real GDP Lodging demand is highly correlated to changes in U.S. GDP Other drivers of GDP that are highly correlated with hotel demand include: Wage & Salary Disbursements (Non-Farm): 0.96 Per Capita Income: 0.96 Total consumption: 0.93 Government consumption: Annual % change E Demand % change Y-O-Y GDP % change Source: Smith Travel Research, Oxford Economics, JLL 7

9 Off-shore investment into U.S. hotels Asian and Middle Eastern investors invested nearly $3 billion in U.S. hotels in 2014, or 10% of transaction volume d T Billions $5.0 $4.5 $4.0 $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $- Off-shore investment into U.S. hotels since 2011 $1.2 $1.2 $2.4 $2.9 Note: YTD July 2015 volume includes the $1.95B sale of the Waldorf Astoria New York to Chinese buyer Anbang Insurance Group $ YTD July 2014 $4.7 YTD July 2015 Top hotel markets for foreign investment since 2011 Market Volume (millions) Source of capital New York $ 5,900 Asia, Middle East Hawaii $ 1,900 Asia Los Angeles $ 960 Asia Miami $ 610 Middle East, Latin America Chicago $ 400 Asia, Middle East, Europe Atlanta $ 310 Asia, Middle East Anaheim $ 270 Asia, Middle East San Francisco $ 150 Asia Orlando $ 110 Asia Raleigh $ 110 Middle East Source: JLL Source: JLL 8

10 U.S. lodging market supply Industry is in a multi-year run where annual supply growth is noticeably below the long-term average 6,000,000 6% 5,000,000 5% Absolute U.S. room stock 4,000,000 3,000,000 2,000,000 4% 3% 2% Annual rooms available % change 1,000,000 1% 0 0% F 2016F Absolute room supply Supply annual % increase Long-term average supply increase Source: Smith Travel Research, JLL 9

11 U.S. market RevPAR annual percent change RevPAR CAGR in current cycle is broadly in line with that of previous recovery periods 10% 5% Annual % change 0% -5% -10% -15% -20% Source: Smith Travel Research, JLL 10

12 U.S. market RevPAR and supply percent change RevPAR performs best during periods of low annual supply increases 10% Annual % change 5% 0% -5% -10% : RevPAR CAGR: 5.1% Supply CAGR: 1.9% : RevPAR CAGR: 7.5% Supply CAGR: 0.6% : RevPAR CAGR: 7.1% Supply CAGR: 0.6% r r -15% -20% Source: Smith Travel Research, JLL RevPAR Supply 11

13 U.S. market RevPAR 12-month moving average Positive RevPAR growth began in October 2010 $90 15% $80 10% 12-month moving average RevPAR $70 $60 $50 $40 $30 $20 Inflection points 5% 0% -5% -10% % change $10 $0 Jan % -20% Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Source: Smith Travel Research, JLL Data through August month moving average % change 12-month moving average RevPAR 12

14 U.S. market occupancy 12-month moving average Positive occupancy growth began in September % 66 4% 64 2% Occupancy 12-mo. moving avg Inflection points 0% -2% -4% -6% 52-8% 50-10% 48-12% Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 % change % change 12-month moving average Occupancy Nov-2009 Source: Smith Travel Research, JLL Data through August

15 U.S. market RevPAR decline comparison (three cycles) Latest downturn was the longest and deepest in recent history 2% First T-12 positive growth month 0% -2% Oct % -6% -8% -10% -12% -14% -16% -18% T=0 T=1 T=2 T=3 T=4 T=5 T=6 T=7 T=8 T=9 T=10 T=11 T=12 T=13 T=14 T=15 T=16 T=17 T=18 T=19 T=20 T=21 T=22 T=23 % change in 12-mo. moving avg. Ea rl y 19 90s down turn (Apr to Jun- 1992) Po st 9/1 1d ownturn ( Oct- 01 toju n-0 3 Fi nanci al crisi sdo wnturn ( Nov-0 8to Sep- 10) Note: T=0 refers to first month of decline in moving 12-month average RevPAR; last month plotted represents first month of positive growth Source: Smith Travel Research 14

16 RevPAR performance since previous peak 2014 RevPAR in 85% of the top-25 markets exceeded the previous peak Percent Above/Below Previous RevPAR Peak 60% 50% 40% 30% 20% 10% 0% -10% -20% Markets that have reached their previous RevPAR peak Markets that have not yet reached their previous RevPAR peak Source: Smith Travel Research, JLL 15

17 Occupancy vs. ADR percent change in 52-week moving average Occupancy and ADR growth both holding steady 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% -12% Aug-03 Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Aug-14 Feb-15 Aug-15 ADR 52-week moving average Occupancy 52-week moving average change Source: Smith Travel Research Data through 09/12/

18 Group demand outlook improved notably in H Group demand growth turned positive in July 2014; in November 2014 group demand growth outpaced transient demand growth for the first time since % 5% 12-month moving average % change 0% -5% -10% -15% -20% Dec 03 Mar 04 Jun 04 Sep 04 Dec 04 Mar 05 Jun 05 Sep 05 Dec 05 Mar 06 Jun 06 Sep 06 Dec 06 Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Source: Smith Travel Research, JLL Group demand Transient demand 17

19 Hotel values 18

20 Influences on hotel values Capital: Cost and availability of capital (Basic metric is the cap rates are 100 to 200 basis points above the cost of debt capital) Trends: Direction of market trends up or down Transactions: Velocity (competition) 19

21 Capital trends U.S. hotel CMBS issuance 2014 U.S. hotel CMBS issuance remains high, marking a slight increase over 2013 issuance. CMBS debt is typically 40% of overall debt issuances $40,000 $35,000 $30,000 $25,000 $Millions $20,000 $15,000 $10,000 $5,000 $ YTD Q YTD Q Source: Commercial Mortgage Alert 20

22 Capital trends lodging stock issuance Stock issuance peaked in 1996 and 2006, with another surge in 2009 and 2010; with the exception of the recent recession, stock issuance tends to peak every ten years $8,000 $7,000 $6,000 $5,000 The Hilton IPO of $2.7B in common equity accounts for 40% of the total lodging stock issued in 2013 $Millions $4,000 $3,000 $2,000 $1,000 $ YTD Q2 Source: MLV & Co YTD Q

23 Capital trends flow of capital into hotel real estate Capital sources for hotel real estate have broadened in recent decades DEBT EQUITY 1980s 1990s 2000s 2010s Insurance companies Savings & loans banks Community banks Banks CMBS Sellers Mortgage REITs Investment Banks - Debt funds Foreign investors Japan Europe / Middle East Asia / Middle East Hotel companies Insurance companies Pension funds Syndications Opportunity funds Owner/Operators REITs Investment banks TIC/DPP Crossover investors 22

24 Capital trends major buyer groups Private equity and REITs account for 2/3 of hotel acquisitions since 2011 $5.0 $4.5 $4.0 Three-month moving average (Billions) $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Public REITs Private equity Other Source: JLL 23

25 Active investment groups REITs and Private equity investors account for 62% of buyer volume in H O O O O O O O Source: JLL; Deals $5MM+ 24

26 Largest U.S. single-asset transactions in 2015 Largest U.S. single-asset hotel transactions in 2015 Property name Location Closing date Price ($M) Rooms Price per key ($) Buyer Seller Waldorf Astoria New York New York City, NY Feb-15 $1, ,413 $1,380,042 Anbang Insurance Group Hilton Worldwide The Manhattan at Times Square Hotel New York City, NY Feb-15 $ $844,800 Al Faisal Holdings Rockpoint Group, LLC The Phoenician, a Luxury Collection Resort Scottsdale, AZ Jun-15 $ $622,100 Host Hotels & Resorts Starwood Hotels & Resorts Montage Laguna Beach* Laguna Beach, CA Jan-15 $ $1,451,600 Strategic Hotels & Resorts Ohana Real Estate Investors Westin San Francisco Market Street San Francisco, CA Jan-15 $ $513,950 LaSalle Hotel Properties Westbrook Partners, LLC Waldorf Astoria Casa Marina Resort* Key West, FL Feb-15 $ $1,119,000 Hilton Worldwide The Blackstone Group Edition New York New York City, NY Apr-15 $ $1,256,000 Abu Dhabi Investment Authority Marriott International, Inc. The Royal Palm* Miami Beach, FL Mar-15 $ $707,400 Chesapeake Lodging Trust KSL Resorts Marriott New York East Side* New York City, NY Apr-15 $ $412,000 Ashkenazy Acquisition Corporation Morgan Stanley Real Estate Advisors Baccarat Hotel & Residences New York City, NY May-15 $ $2,018,000 Sunshine Insurance Group Starwood Capital Group Edition Miami Miami, FL Feb-15 $ $782,300 Abu Dhabi Investment Authority Marriott International, Inc. Ritz-Carlton Key Biscayne (67% Stake) Key Biscayne, FL May-15 $ $1,088,100 WP Carey & Co Gencom Group Mondrian Hotel SoHo New York City, NY Mar-15 $ $779,500 The Sapir Organization Cape Advisors, Inc. Preferred The Grand Del Mar (88% Stake) San Diego, CA Apr-15 $ $924,000 Blum Capital Partners Manchester Financial Group, L.P. Fairmont Orchid Kohala Coast, HI May-15 $ $372,300 Mirae Asset Global Investments Oaktree Capital Management Austin Four Seasons Austin, TX May-15 $ $677,000 Strategic Hotels & Resorts Lodging Capital Partners, LLC SLS Hotel, a Luxury Collection Hotel, Beverly Hills Los Angeles, CA Apr-15 $ $657,000 Sunrider Group SBE Entertainment Group Hotel Carter New York City, NY Jan-15 $ $308,900 The Chetrit Group Unknown La Playa Beach & Golf Resort Naples, FL May-15 $ $981,500 Pebblebrook Hotel Trust Noble House Hotels & Resorts element New York Times Square West New York City, NY Jul-15 $ $398,000 Ascott Residence Trust Lexington Realty Trust Westin Pasadena Pasadena, CA Mar-15 $ $407,100 Watermark Capital Partners, LLC HEI Hotels & Resorts Hilton Clearwater Beach Resort Clearwater, FL Jan-15 $ $322,100 Columbia Sussex Corporation The Blackstone Group Courtyard Manhattan Herald Square Sale New York, NY Apr-15 $ $790,400 Unknown Hidrock Realty Inc. Waldorf Astoria The Reach Resort Key West* Key West, FL Feb-15 $ $846,700 Hilton Worldwide The Blackstone Group Best Western Plus The Tuscan San Francisco, CA Jun-15 $ $552,036 Pebblebrook Hotel Trust Walnut Hill Capital LLC Hilton Garden Inn Central Park South (50% Stake) New York, NY Feb-15 $ $298,700 Morad Ghadamian Starwood Capital Group Hyatt Regency La Jolla at Aventine (53% Stake) San Diego, CA May-15 $ $529,000 Walton Street Capital Strategic Hotels & Resorts Kimpton Cypress Hotel Cupertino Cupertino, CA Jun-15 $ $500,000 Hilton Worldwide Cornerstone Real Estate Advisers, LLC Waldorf Astoria Chicago* Chicago, IL Jun-15 $ $592,000 Wanxiang America Real Estate Group Equity International Management, LLC Ace Hotel Downtown Los Angeles* Los Angeles, CA Apr-15 $ $565,900 Chesapeake Lodging Trust Greenfield Partners Maile Sky Court A Lite Hotel Honolul, HI Jun-15 $ $172,000 Clearview Hotel Capital, LLC Och-Ziff Real Estate Doubletree The Curtis Denver* Denver, CO May-15 $ $288,700 Alliance Bernstein Sage Hospitality The Marker Waterfront Resort Key West Key West, FL Mar-15 $ $1,002,100 LaSalle Hotel Properties Northwood Investors Hyatt Regency Bethesda Near Washington DC Bethesda, MD May-15 $ $244,000 The Meridian Group LNR Partners Inc Sheraton Hotel Key West All Suites Key West, FL Jun-15 $ $511,000 DiamondRock Hospitality Company Rockwood Capital Crowne Plaza Hollywood Beach Resort* Hollywood, FL Jul-15 $ $301,000 SoTHERLY Hotels Inc Carlyle Investment Management The Setai Miami Beach Miami Beach, FL Feb-15 $ $667,000 Nakash Holdings Former Lehman Brothers Holdings, Inc. Residence Inn San Diego Downtown Gaslamp Quarter San Diego, CA Feb-15 $ $375,000 Chatham Lodging Trust J Street Hospitality Ritz-Carlton Fort Lauderdale 2015 (70% Stake) Fort Lauderdale, FL Jun-15 $ $743,000 Watermark Capital Partners, LLC Gencom Group Doubletree New Orleans New Orleans, LA Jan-15 $ $232,300 Walton Street Capital Burrus Investment Group, Inc. Bardessono Hotel & Spa Yountsville, CA Jul-15 $ $1,371,000 Ashford Prime Yountville Investors, LLC JW Marriott Essex House (49% Stake) New York, NY Jul-15 $ $778,000 Strategic Hotels & Resorts KSL Capital Partners, LLC Marriott Oakland City Center Oakland, CA May-15 $ $171,800 Apollo Global Real Estate CIM Group, LP *Seller advised by JLL Note: Price per key of partial stake sales represents full implied value Source: JLL 25

27 Influences for the future 26

28 U.S. average hotel investment yields Investments yields narrowing, signifying asset value appreciation 25% 23% 21% 19% 17% 15% 13% 11% 9% 7% Average leveraged IRR for new acquisition Average cap rate (initial yield) for new acquisition 5% Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Oct-03 Apr-04 Oct-04 Apr-05 Oct-05 Jun-06 Nov-06 Jun-07 Oct-07 Jun-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 May-13 Nov-13 Apr-14 Nov-14 Source: JLL(from the Hotel Investor Sentiment Survey) Data based on December 2014 survey 27

29 Hotel cap rates and 10-year treasury yields Spread between hotel cap rates and treasuries near the long-term average 12% 11% 10% 9% 1,200 1,100 1, Treasuries and Cap Rates 8% 7% 6% 5% 4% Spread (basis points) 3% 300 2% 200 1% 100 0% 0 H H H H H H H H H H H H H H H H H H H H H H H H H H H H Source: JLL, IHS Global Insight Spread: 10-Year Treasuries and Full Service Hotel Cap Rates Yield on 10-year Treasuries Full Service Hotel Cap Rates 28

30 Impact of interest rate movement on cap rates Interest rate increases present some risk for cap rates going forward, though impact expected to be muted given strong fundamentals 14% 12% From 2004 to 2007 cap rates declined in spite of increases in treasury yields: Cap Rate: -174 bps Treasury Yield: +61 bps Fed Funds Rate: +425 bps 10% 8% 6% 4% 2% 0% Avg. Target Hotel Cap Rate* 10-Year Treasury Yield Federal Funds Target Rate Source: JLL(from the Hotel Investor Sentiment Survey), Federal Reserve Board 29

31 Hotel CMBS loan delinquency rate (as percent of hotel CMBS loans) Current balance of delinquent hotel CMBS loans is $2.9 billion 16% 14% 12% Deliquency rate 10% 8% 6% 4% 2% 0% Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Source: Morningstar, Inc. Data through July

32 Hotel ADR and Consumer Price Index Hotel ADR growth tends to exceed inflation Annual % change 20% 15% 10% 5% Compound annual growth rate ( ) Average Daily Rate: 4.7% Consumer Price Index: 4.2% ADR - CPI correlation coefficient : 77% (high inflation): 89% 0% -5% CPI % change ADR % change -10% Source: Smith Travel Research, IHS Global Insight 31

33 RevPAR and LIBOR With a correlation coefficient of 0.78, RevPAR change is correlated with LIBOR 10% 300 5% 200 Rev PAR % change 0% -5% -10% RevPAR percent change LIBOR bps change -15% LIBOR change in basis points % Source: Smith Travel Research, Oxford Economics 32

34 Population growth by cohort Retirees growing strongly as are Echo Boomers, or Millennials, born in the 1980s and 1990s 400 Total Population (Millions) over 2010: 16M additional retirees over 2010: 32M additional retirees Up to 21 Years Old 21 to 64 Years Old Ages 65 and Above Source: IHS Global Insight 33

35 International visitor arrivals to U.S. International visitation growing significantly, driven by growth in arrivals from Asia and South America 120 From international visitation expected to grow at a 4.4% CAGR 100 Int'l arrivals (Millions) F 2016F 2017F 2018F 2019F 2020F Source: U.S. Department of Commerce, ITA, Office of Travel & Tourism Industries; Secretaria de Tourismo Mexico; Statistics Canada; Deutsche Bank 34

36 Investment prospects solidifying hotels as viable asset class Key trends for the future 8 to 9-year run-up in RevPAR growth Supply pipeline below long-term average Astonishing debt recovery Off-shore investment Up-cycle which began in 2010 should last 8-9 years. Given that the end of the last cycle was caused by demand disruption, not overbuilding, the current cycle should experience stronger RevPAR growth than previous ones. Pace of new room additions is slowly ticking up but will remain below the long-term average. Resorts and large upscale/luxury hotels will see especially constrained pipeline, underpinning performance of existing hotels. Hotel CMBS issuance is back to the third highest annual level tracked, and alternative lenders opportunistic debt and some traditional balance sheet lenders will be one of the key drivers of 2015 growth in hotel deals. We expect off-shore capital from China and the Middle East to increasingly enter the U.S. lodging sector in Due to lower leverage levels of these buyers, this investment represents close to 10% of the equity in the market. 35

37 Thank you COPYRIGHT JONES LANG LASALLE IP, INC. 2015