UK hotels forecast 2013 update

Transcription

1 UK hotels forecast 2013 update 17 May 2013 Conference Centres of Excellence Liz Hall

2 Agenda 1 Economic outlook 2 Travel outlook 3 UK hotel landscape 4 Hotel forecast 5 Key messages 2

3 1 Economic outlook Slide 3

4 % change per annum in working age population ( ) M-om-m change in non-farm employment (in 000s) Consumers assessing the current economic environment as 'bad' (%) Real GDP growth (%) Index of lending to private sector (Jan 2007: 100) Three speed economy: EM in the fast lane - US in the middle In the aftermath of the financial crisis we are witnessing the rise of a three speed global economy Emerging markets: Banks there were largely unscathed from the financial crisis and continue to lend Proportion of CEOs concerned/very concerned about the inability to finance growth Long-term ( ) p Emerging market and developing economies US EZ and Japan Brazil UK 27% 52% Source: IMF Source: Brazilian Central Bank, Bank of England and CEO Survey These economies will receive an added boost to growth because of healthy demographics US: Could be turning round a corner as jobs are being created and consumers feel more confident % 2.0% 1.0% 0.0% -1.0% -2.0% Source: World in Jobs created (LHS) Consumers ranking the economic situation as bad (RHS) -200 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec Source: US BLS, Conference Board Slide 4

5 US Sectoral debt (% of GDP) Nikkei 225 indexed performance (01/11/2012: 100) Europe and Japan in the slow lane...but despite some private balance sheet restructuring public sector debt poses a threat to the US economy Japan: Recently announced reforms centring on radical monetary expansion were well received by the markets 110% 100% 90% 80% 70% recession Shinzo Abe elected (PM) Haruhiko Kuroda installed (CB governor) 2% inflation target announced 60% 50% 40% 30% Monetary expansion plan announced Household Debt Business sector debt Government debt Source: FRED...but more needs to be done to address concerns about the sustainability of its public debt Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 Source Thomson Datastream...and Japan needs to address its underlying structural inefficiencies including regulation in product markets Source: Thomson Datastream Japan Switzerland Finland Iceland Denmark Spain Canada Netherlands Ireland US UK Indicator of product market regulation (No regulation: 0, Full regulated: 2.5) The OECD Indicators of Product Market Regulation (PMR) are a set of indicators that measure the degree to which policies promote or inhibit competition in areas of the product market where competition is viable Slide 5

6 Economic outlook is brightest in EM UK Canada Germany 0.4 Russia 3.8 Portugal -2.0 Greece US France Japan Mexico Spain -1.4 Italy -1.2 China Global (MER) 2.5% Global (PPP) 3.2% Eurozone -0.4% India Key 6.0 x.x =2013 projected GDP growth Brazil 3.0 South Africa Australia Slide 6

7 UK outlook: still cloudy but improving UK overall Key Estimated average GDP growth in 2013 Employment rate (Dec 2012 Feb 2013 vs a year earlier) Increase No change* Decrease Northern Ireland Latest employment rate (16-64) North West Scotland 0.4% 69.5% 0.6% 71.7% North East 0.2% 67.1% 0.8% 71.4% Yorkshire & Humberside East 0.7% 70.2% 0.1% 66.4% 0.8% 74.8% Wales South West 0.4% 68.9% 0.7% 74.5% West Midlands 0.7% 70.9% East Midlands South east 0.7% 71.0% 1.4% 74.8% London 1.3% 70.0% Eurozone still stormy -0.4% 63.9% Source: ONS, Eurostat, analysis Note: Eurozone employment rate is from 2012 Q4. *This means no statistically significant change > 0.3%

8 Economic backdrop means a new lower growth environment for travel and hotels A strange and uncertain world Tailwinds supporting past growth no longer available for developed economies No return to very strong consumer driven growth Often a 2 speed economy in countries and a two speed hotel sector regions and key cities But some cities benefit from a global role 13

9 2 Travel outlook

10 Asian residents are by far the most confident about this year Source: SLH/ research among SLH Club Members December

11 And European residents are the least confident 20% expect to be worse off compared to 9% of Asians Source: SLH/ research among SLH Club Members December

12 UK consumers: is the glass half full or empty? research shows confidence improvement but sentiment cautious Thinking about your disposable income (e.g. money remaining after household bills, credit cards, etc.), in the next 12 months do you expect that your household will be...? Source: Consumer Survey 14

13 Poorer relations Britons slip down global disposable income league table Source : OECD in FT 15 May 2013 Slide 13

14 But, a main holiday remains the top spending priority Deleveraging is also high on the agenda Top priority Deleveraging 12% in 2012 Source: global consumer research

15 UK priorities for consumers are the main holiday, grocery and deleveraging Excluding essential spending categories, which of the following categories are your top three spending priorities in 2013? Main holiday 20% 12% 9% Grocery 19% 16% 10% Savings 14% 10% 10% Mortgage 11% 6% 4% Improving home 9% 8% 10% Credit card/ loan repayment 7% 7% 5% Big ticket items 3% 3% 4% Other leisure travel 3% 7% 7% Clothing 3% 6% 9% Children expenditure 2% 2% 2% Entertainment 2% 2% 5% Going out 2% 5% 5% Treat 1% 2% 3% Communication 1% 2% 4% Technology 1% 3% 4% Sports and wellness 1% 1% 2% Food on the go 1% 1% 2% Eating out 1% 3% 4% Health and beauty 2% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Top Spending Priority Second Spending Priority Third Spending Priority % respondents Source: Consumer Research Jan 2013 (n=2,000) 15

16 Leisure activities such as eating out, food on the go and going out are the key areas for spending tightening in 2013 Which of the following categories would you be most likely to cut back on in 2013? Eating out Going out Food on the go Clothing Main holiday Savings Big ticket items Treat Grocery Technology Other leisure travel Entertainment Improving home Sports and wellness Health and beauty Communication Baby expenditure 2% 2% 2% 1% 1% 12% 11% 11% 9% 9% 7% 6% 6% 5% 5% 5% 4% 4% 4% 2% 3% 1% 4% 6% 5% 6% 6% 3% 5% 3% 4% 6% 7% % of respondents 0% 5% 10% 15% 20% 25% 30% 35% 9% 6% 4% 5% 6% 6% 5% 5% 12% 10% 11% 4% 8% 8% 9% 10% 9% Most likely to Cut back on 2nd Most likely to Cut back on 3rd Most likely to Cut back on 8% Source: Consumer Research Jan 2013 (n=2,000) Recent trends in the R&C industry and outlook for

17 Business trips: more polarised than leisure Thinking about your BUSINESS travel plans, which, if any, are you likely to do over the next 12 months? Source: global consumer research

18 Value remains king for both leisure and business travel Source: Embassy Suites Survey 18

19 And procurement departments still rule Source: Embassy Suites Survey 19

20 Travel remains below past peaks Is slower growth the shape of things to come? Overseas visitors to UK - rolling 12 month total March m Feb m Aug 96 25m Jan 86 14m Olympics: how much of a future boost? Source: IPS, ONS April

21 Domestic tourism is feeling the squeeze Challenges for enterstayment, nearcations and staycations Business + 2% (trips and spend) Holidays -1% (trips) + 6% (spend) Positive signs: -short and urban trips -serviced accommodation Source: GB Tourism Survey April

22 Further pressure as spending cuts squeeze demand Public sector faces more cuts - perhaps till Total discretionary consolidation ( bn) Source: HM Treasury (Budget Red Book, June 2010) Slide 22

23 Pick-up in meetings and conference market? Difficult but picking up: location and geography Smarter operators: nimble, revenue management ADR flat and under pressure from proactive buyers Short termism : lead times, event length Client wish lists get longer, technology important Issues: accessibility, value, a reason to meet, ROI Under-used meeting space: Workspace on Demand Differentiation: dedicated and specialised, 5* hotels

24 3 UK hotel landscape

25 Almost 600,000 rooms around the UK 2013 hotels forecast Source: Am:Pm Database October 2012 November

26 UK hotel landscape by segment Structural change towards budget hotels and 4 star Source: Am:Pm Database October 2012 Slide 26

27 With brand standards galore Confusing consumers Extended stay / all suite Economy / budget Midscale / midmarket Upscale / 4 Upper upscale / 5 Luxury Marriott Carlson Rezidor Hyatt Wyndham IHG Choice Starwood Accor Marriott ExecuStay. (Oakwood), Residence Inns, TownPlace Suites Country Suites Summerfield Suites Hawthorn Suites Baymont Suites Mainstay Suburban Cambria and Comfort Suites Element Suitehotel Moxy (Europe only) Country Inns Days Inn Super 8 Travelodge (US) Knights Inn Microtel Sleep Inn Rodeway Econolodge Comfort Inn Formule 1 Ibis Style Ibis Budget Ibis Courtyard Park Inn by Radisson Ramada Howard Johnson Quality Four Points Aloft Novotel Mercure AC by Marriott Radisson Park Plaza Hyatt Hyatt Place Clarion Sheraton MGallery Marriott Edition Renaissance Hotel Missoni (Rezidor) Radisson Blu Hyatt Regency Grand Hyatt Andaz Wyndham Hotels & Resorts Staybridge Suites Hualuxe (China) Candlewood Suites Holiday Inn Express Holiday Inn Indigo Crowne Plaza InterContinental Even Westin St Regis Le Meridien Pullman W Bulgari J W Marriott Ritz Carlton Regent (operated by Rezidor) Park Hyatt Luxury Collection Sofitel Hilton Homewood and Embassy Suites Hampton by Hilton Garden Inn Doubletree Hilton Waldorf Astoria Conrad = Lifestyle/boutique products Source: PricewaterhouseCoopers, February 2013 Notes: Listed in no particular order. Brands may fit into different scales in different markets. 27

28 Too many rooms at the inn? Increase from new hotel construction ,000 Likely the highest for some time 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 rooms 2, pipeline Source: AM:PMDatabase February

29 A weak start for London hotels in 2013 Q Occupancy falls 1.6% and ADR 4% but May looking brighter Slide 29

30 ...Regional hotels get off to a slightly better start Source STR Global Slide 30

31 4 Forecast

32 London hotel forecast: weaker trading Global city status should ensure London isn t held back for long 2012 out turn % change 2013 forecast % change Supply: rooms above the long term average 6,000 rooms 3,000 rooms Occupancy -1.9% 81% 79% -2.0% ADR 4.1% % RevPAR 2.2% % RevPAR dipped by 5% in 2009 but rebounded by 22% in 2012 Source: Econometric forecast, February 2013 Benchmarking data, STR Global February 2013 Slide 32

33 Regional hotel forecast Strong finish to 2012 but ADR could slip again in out turn % change 2013 forecast % change Supply: rooms below the long term average 2,700 rooms 860 rooms Occupancy -1.5% 70% 70% -0.2% ADR 0.9% % RevPAR -0.5% % RevPAR in 2012 remained 8% below its 2007 level (10% in 2013) Source: Econometric forecast, February 2012 Benchmarking data, STR Global February 2012 Slide 33

34 And...not just about the economy Real GDP % change RevPAR % change Strong $ Record domestic tourism Black Monday Millennium SARS Iraq War London bombs 2012 Olympic and Paralympic Games F Recession Unemployment hits almost 2m London supply shortfalls Record US visitors US visitors down Recession Gulf War Recession fears 9/11 FMD Credit crunch Deep recession. Weak pound cushions London Above average supply additions Source: Econometric forecasts: February 2013 Macroeconomic data: National Statistics Benchmarking data: TRI Hospitality Consulting and STR Global; Supply data and AM:PM database 34

35 5 Key messages

36 So what? Strengths Weaknesses High quality products Holidays a priority Face to face meetings Too many hotels Visa regulations Innovation Overseas markets Olympic success story Differentiation Use technology to boost consumption Hotels Economic backdrop Public sector squeeze Rising costs and inflation Commoditisation Opportunities Threats 39

37 Thank you..any questions? 37