Hotels & Hospitality Prospects for 2015 Matthew Costin, Managing Director Hotels & Hospitality, BDRC Continental Tuesday 20 th January The Strand Palace Hotel, London
Looking ahead Ownership & transactions Demand growth Emerging guest segments The sharing economy New brands 25
Transactions a slowing of activity? Broad consensus about the end of distress for UK hotels Three weeks into 2015 Topland acquisition of Feathers Hotels Looking ahead Private equity owners looking to cash in? Starwood Capital acquisition of The Town House Collection New owners to divest weaker properties 26
Looking ahead Ownership & transactions Demand: Where is growth going to come from? 27
International leisure is the key long-term source of hotel demand growth Millions of adult hotel room nights contributed by major Western European source markets 315 323 298 323 - International Leisure 279 264 267 - Domestic Leisure 230 - Domestic Business 114 - International Business Source: BDRC Hotel Guest Surveys 2010 2011 2012 2013 2014 28
International leisure key European source markets Total size of outbound leisure market (nights) % total demand accounted for by outbound leisure Actual growth since start of decade 45% 114 million 39% +34 million nights 79 million 36% 37% +10million nights 42 million 19% 25% +20million nights 2010 2014 29
A weak Euro is unhelpful to UK hotels but is likely to have only a modest impact on UK s appeal as a short-break destination Demand from US and China visitors will help fill hotel rooms UK France s top short break destination UK the top leisure destination outside North America UK Germany s No.3 Short Break Destination UK not yet in the top 10 destinations 30
Meetings & events higher volumes and rate recovery? Meetings contributes 36% domestic British business bed nights Q4 2014 - Estimated Y-O-Y Change in UK Event Volume 7.5 % At 20 million, event-driven UK hotel room nights exceeded pre-recession levels in 2014 19 12.9 16.7 15.6 16.5 19.7 Residential 1.2 % Non-Residential Quoted DDR +1.8% YOY 2007 2010 2011 2012 2013 2014 Quoted DDR - 10% vs 2011 after adjusting for inflation 31
Meetings & events higher volumes and rate recovery? Some reasons for Optimism 1. Under new ownership, there is a strong prospect of disposal of venues most prone to discounting 2. Impact of rapidly growing office rents particularly in the capital. Positive impact on external meetings space demand 3. Agencies are bullish! In our most recent survey, 54% said that they expect to place more events in the year ahead 32
Looking ahead Ownership & transactions Demand growth Emerging guest segments 33
By the end of 2015, nearly 1 in 4 British hotel guests will be Generation Y Emerging differentiators 24/7 food offering High bandwidth / speed Wi-fi Entertainment Fine dining Fitness and leisure Inviting public spaces 34
Just one example of the implications for hotel selection decisions.. When selecting a hotel for leisure, how important is each of the following? - % Rating 8+ / 10 Review Sites Hotel brands 42 36 37 39 43 35 47 32 European leisure Travellers Babyboomers Gen X Gen Y 35
Looking ahead Ownership & transactions Demand growth Emerging guest segments The sharing economy 36
The Sharing Economy just how disruptive will it be? How soon will it become the World s biggest hospitality brand? 2014 valuations Prompted Brand Awareness British Business Guests Airbnb $10 bn Hilton Holiday Inn 89 87 Hyatt $9.4 bn Premier Inn 84 Wyndham $8.4 bn Travelodge Ibis 70 81 Airbnb 11 Indigo 9 37
Airbnb has a stronger profile among GenY and high value guest segments 11 Brand Awareness 18 20 Of those aware but not currently using Airbnb All Gen Y Elite tier loyalty programme 63% would consider using for business Usage 20 3 4 All Gen Y Elite tier loyalty programme 70% would consider using for leisure Source: BDRC British Hotel Guest Survey 2014 38
Moving into 2015 Gaining Legitimacy? 39
Looking ahead Ownership & transactions Demand growth Emerging guest segments The sharing economy New brands 40
A proliferation of new brands aiming to offer something unique (expect more of the same)! Individuality Designed specifically for Chinese guests Designed with the female business guest in mind Designed specifically for wellness-minded guests A passion for making it personal Fastest, free, unlimited WI-FI in the world Connected, comfortable and Central A commune hotel offering space efficient crash-pads 41
To sum up.. 1 TRANSACTION ACTIVITY: and end to distress perhaps, but still plenty happening 2 DEMAND: positive indications for growth with international leisure and meetings events both key contributors 3 4 5 THE MARKET: the impact of Gen Y and changing consumer preferences and behaviour THE SHARING ECONOMY: a genuine threat to hotels for some stay occasions particularly as it gains legitimacy BRANDS: hotel companies responding to the threat with strongly differentiated offers with a bias towards Gen Y 42
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