Hotel Market Performance and Expansion Opportunities Aiden Murphy, Crowe Horwath. 8 th November 2016 Audit Tax Advisory Audit Tax Advisory

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1 Hotel Market Performance and Expansion Opportunities Aiden Murphy, Crowe Horwath 8 th November 2016 Audit Tax Advisory Audit Tax Advisory 1

2 Introduction Ireland Hotel Supply Current hotel performance 2016 Annual Hotel Industry Survey Dublin hotel market Regional hotel market Hotel market by classification Findings of the Crowe Horwath Brexit survey Conclusions and Expansion Opportunities 2

3 Ireland Supply 3

Overview of Hotel Supply 2016 Total # Hotels 817 # Rooms 57,346 Avg Size 70 Dublin D1/2/4/8 Naas Rd Airport Other Total # Hotels 87 6 14 44 151 # Rooms 10,061 1,159 2,115 5,499 18,834 Avg Size 116

4 Overview of Hotel Supply 2016 Total # Hotels 817 # Rooms 57,346 Avg Size 70 Dublin D1/2/4/8 Naas Rd Airport Other Total # Hotels # Rooms 10,061 1,159 2,115 5,499 18,834 Avg Size Western Seaboard # Hotels 253 # Rooms 13,544 Avg Size 54 D1/2/4/8 Naas Rd Airport Other South West # Hotels 181 # Rooms 11,982 Avg Size 66 Midlands & East # Hotels 232 #Rooms 12,986 Avg Size 55 Source: Fáilte Ireland 4

5 Overview of Hotel Supply and 2 Star # Hotels 146 #Rooms 2,871 Avg Size 20 4 Star (First Class) # Hotels 289 #Rooms 28,071 Avg Size 97 88% of rooms in Ireland are 3 & 4 Star 3 Star (Mid Price) # Hotels 346 #Rooms 22,293 Avg Size 64 Luxury (5 Star) # Hotels 36 #Rooms 4,111 Avg Size 114 5

6 Ireland s Hotel Supply 45k 40k 35k 30k 25k 20k 15k 10k 5k Rooms by Region 2001 to 2015 Trends in Hotel Supply - Regions excl Dublin # Rooms % Diff Midlands and East +5k +62% South West +2k +20% Western Seaboard +3k +28% Total +10k +34% Bedrooms Occupancy 68% 66% 64% 62% 60% 58% 56% 54% 52% 50% 6

7 Dublin s Room Supply 21k Trends in Room Supply - Dublin 85% 19k 17k 15k 13k 11k 9k 7k From 2001 to 2015 room supply increased by 58% (+7k rooms) 80% 75% 70% 65% 60% 55% 5k Bedrooms Occupancy 50% 7

8 Hotel Performance 8

Regional Hotel Performance Excluding Dublin Per Room 2005 2010 Sales 54,266 41,507 RevPAR 55 39 Per

9 Regional Hotel Performance Excluding Dublin Per Room Sales 54,266 41,507 RevPAR Per Room (F) Sales 58,777 +5% RevPAR Profit 8,111 3,241 Profit 9,019 +9% SALES 8% growth 9

10 Regional Hotel Performance excluding Dublin 70,000 60,000 50,000 40,000 30,000 20,000 10,000 15% 15% Total Sales Regions excl Dublin PBT regions excl Dublin 10

11 Snapshot of Hotel Performance - Regional (excl Dublin) Regional Hotel Market year Variance Occupancy 65% 56% 66% -1% Average Room Rate (ARR) RevPAR Revenue per room Rooms 20k 14k 20k - Food 18k 15k 23k + 5k Beverage 11k 9k 12k + 1k Other 5k 4k 4k - 1k Total Revenue 54k 42k 59k + 5k Total Payroll % 39% 43% 38% -1% Net Profit per Room 8k 3k 9k + 1k Net Profit % 15% 8% 15% - Source : Crowe Horwath Annual Hotel Industry Survey 11

Dublin Hotel Performance Per Room 2005 2010 Sales 64,271 40,191 RevPAR 87 53 Per Room 2015

12 Dublin Hotel Performance Per Room Sales 64,271 40,191 RevPAR Per Room (F) Sales 59,123 +7% RevPAR Profit 13,707 6,226 Profit 16, % 23% Profit growth 12

13 Dublin Hotel Performance 70,000 60,000 50,000 40,000 30,000 20,000 21% 29% 10, Total Sales Dublin PBT Dublin 13

14 Snapshot of Hotel Performance - Dublin Dublin Hotel Market year Variance Occupancy 77% 67% 81% +4% Average Room Rate (ARR) RevPAR Revenue per room Rooms 33k 19k 33k - Food 15k 10k 14k - 1k Beverage 11k 6k 9k - 2k Other 5k 4k 4k - 1k Total Revenue 64k 40k 59k - 4k Total Payroll % 38% 40% 33% -5% Net Profit per room 14k 6k 17k + 3k Net Profit % 21% 15% 29% +8% Source : Crowe Horwath Annual Hotel Industry Survey 14

15 Luxury (5 Star) Hotel Performance Per Room Sales 88,884 60,446 RevPAR Per Room (F) Sales 100,954 +6% RevPAR Profit 13,168 3,208 Profit 20, % PROFIT 58% growth 15

16 First Class (4 Star) Hotel Performance Per Room Sales 61,156 44,541 RevPAR Per Room (F) Sales 62,897 +5% RevPAR Profit 10,315 4,711 Profit 12, % PROFIT 24% growth 16

17 Mid Price (3 Star) Hotel Performance Per Room Sales 45,510 32,460 RevPAR Per Room (F) Sales 47,537 +5% RevPAR Profit 10,493 5,149 Profit 9,157 +8% 13% Profit decline 17

18 Luxury Hotel Performance 120, ,000 Luxury Hotels at Peak Sales and Profit levels 80,000 60,000 40,000 20,000 15% 21% Total Sales Luxury PBT Luxury 18

19 First Class Hotel Performance 80,000 70,000 60,000 First Class Hotels at Peak Sales and Profit levels 50,000 40,000 30,000 20,000 10,000 17% 20% Sales First Class PBT First Class 19

20 Mid Price Hotel Performance 80,000 70,000 60,000 Mid Price Hotels not back to peak levels 50,000 40,000 30,000 20,000 23% 19% 10, Total Sales Mid Price PBT Mid Price 20

21 International Tourism Demand and Brexit 21

22 International Tourism Demand 12.0m 10.0m 8.0m 6.0m % Global US Terror Economic Attacks Crisis 2016 (Jan-Sept) +12% 4.0m 2.0m 0.0m GB Other Europe US/Canada ROW Source: CSO 22

Brexit UK Visitors to Ireland as % of Total Visitors 1985 1995 2005 2015 UK Other Europe US/Canada ROW Source: CSO UK

23 Brexit UK Visitors to Ireland as % of Total Visitors UK Other Europe US/Canada ROW Source: CSO UK 63% of International Tourists UK 41% of International Tourists Source : Crowe Horwath Annual Hotel Industry Survey 23

24 Brexit Source of Business by Region 30.0% 25.0% 20.0% 24% 21% 20% 17% 23% 15.0% 10.0% 5.0% 0.0% All Dublin M&E South West Western Seaboard GB NI Source : Crowe Horwath Annual Hotel Industry Survey 24

25 Brexit Source of Business by Classification of Hotel 30.0% 25.0% 21% 21% 20.5% 23% 20.0% 16% 15.0% 10.0% 5.0% 0.0% All Luxury First Class Mid Price Economy GB NI Source : Crowe Horwath Annual Hotel Industry Survey 25

26 Brexit Survey - Findings Profile of Respondents Border 15% Dublin 31% Survey issued September 2016, 3 months after Brexit result Replies from 80 hotels Regional 54% Has the Brexit vote had a direct impact on your business in the last 3 months? 82% of respondents in the Border region felt that Brexit had directly impacted their business in the last 3 months. No 57% Yes 43% Respondents who answered Yes felt that any impact to date was minimal. 26

Hotelier Sentiment for next 12-15 Months Sentiment for Demand Levels Increase / Remain the Same 64% Decrease 36% 100% 80% 60% 40% 20% 0% Demand By Region 58% 79% 25% 75% 42% 21% Dublin Regional

27 Hotelier Sentiment for next Months Sentiment for Demand Levels Increase / Remain the Same 64% Decrease 36% 100% 80% 60% 40% 20% 0% Demand By Region 58% 79% 25% 75% 42% 21% Dublin Regional Border Sentiment for Average Room Rate Increase / Remain the Stay 87% Decrease 13% 100% 80% 60% 40% 20% 0% Average Room Rate By Region 96% 88% 67% Dublin Regional Border Decrease Increase / Remain the Same 27

28 Investment and Constraints 28

29 Investment and Constraints on the Sector What happens if there s no additional supply introduced? 29

30 Investment Feasibility Dublin City Centre 3 Star Hotels YTD Sept 2015 YTD Sept 2016 YOY Growth Occupancy 87% 86% -1% Average Room Rate RevPAR Star Hotels YTD Sept 2015 YTD Sept 2016 YOY Growth Occupancy 85% 86% +1% Average Room Rate RevPAR Source: STR Global New builds and Extensions 30

31 Investment Feasibility Dublin Surrounding 3 Star Hotels YTD Sept 2015 YTD Sept 2016 YOY Growth Occupancy 72% 73% +1% Average Room Rate RevPAR Star Hotels YTD Sept 2015 YTD Sept 2016 YOY Growth Occupancy 83% 86% +3% Average Room Rate RevPAR Site Costs? Feasibility? Source: STR Global New Builds & Extensions 31

32 Conclusion and Opportunities for the Irish Hotel Sector Demand has returned to a level which allows: Opportunity to yield room rate Need for additional room supply Potential for new hotels in the Dublin market Existing hoteliers will have the opportunity to expand Repositioning of hotels (e.g. upgrade in hotel classifications) Re-investment in the hotel product through capex programmes, lifting revenue Reduced potential for distressed sales and retrades. Barriers to entry remain planning, funding and stabilisation of new builds. 32

33 Thank You. Aiden Murphy Partner Restructuring, Advisory & Insolvency Bastow Charleton Member Crowe Horwath International Marine House Clanwilliam Court Dublin 2 Ireland 33

Cushman & Wakefield Irish Hotel Market Briefing November 2017

Cushman & Wakefield Irish Hotel Market Briefing November 2017 Aiden Murphy Partner Impact Of New Supply On The Dublin Hotel Market Jonathan Hubbard Head of Hospitality EMEA EMEA Hotels Overview Stefan