U.S. Hotel Industry Performance What Lies Ahead Vail R. Brown, CHMS Vice President, Global Business Development & Marketing vail_str May 5, 2015 vbrown@str.com
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MAY: RevPAR Growth 10% Highest May of any on record ever! JULY: Most Rooms Sold Ever! 113 Million JUNE: Occupancy 71.7% Highest June occupancy this century! AUGUST: Room Revenue $90.8 bn Highest August YTD!
All KPIs Have Hit All Time Highs!! % Change Room Supply* 0.9% Room Demand* 4.6% Occupancy* 64.9% 3.6% A.D.R.* $116 4.7% RevPAR* $75 8.5% Room Revenue* 9.5% Total U.S.: March 2015 12 Month Moving Average * All Time High Absolute Values
Today s Agenda Supply Progress Occupancy Acceleration Customer Mix Revenue Growth Forecast
Supply Progress
4 Supply Growth Slowly Creeps Up 3 2 20 Year CAGR: 1.7% 1 0.9% 0-1 2005 2007 2009 2011 2013 2015 Total U.S. Room Supply Percent Change 12 Month Moving Average 2005 to March 2015
80 60 64.9 53.0 23K + rooms closed in 2014 Number of Rooms Closed (in thousands) 40 20 35.4 28.2 31.2 27.7 26.4 17.8 19.8 23.6 6.3 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Mar-15 Total U.S. Closed Hotels Annual 2004 through March 2015
Buy vs. Build $800 Acquisition Cost Development Cost $600 In Thousand $400 $200 $0 Luxury Upper Upscale Upscale Upper Total U.S.: Acquisition Price vs. Development Cost Midscale Source: 2014 Hotel Development Index Midscale Economy
Limited Service Construction Has Been Strong For 2 Years 46.9 37.2 14.0 67% 17.1 4.9 5.1 0.8 Luxury Upper Upscale Upscale Upper Midscale Midscale Economy Unaffiliated Total U.S. Pipeline: Rooms Under Construction, 000s Rooms, by Scale, March 2015
These Markets Will Feel New Supply Impact in 2015/16 Market Rooms U/C % Of Existing Boston, MA 1,809 4% Anaheim/Santa Ana, CA 1,934 4% San Diego, CA 2,276 4% Denver, CO 1,719 4% Seattle, WA 2,427 6% Houston, TX 6,173 8% Miami/Hialeah, FL 4,026 8% U.S. Pipeline: Under Construction Rooms as % of Existing Supply March 2015
New York, NY Market 13,368 Rooms Under Construction 12% of the Market s Existing Supply Under Construction Rooms as % of Existing Supply, March 2015
Occupancy Acceleration
March 2015: Highest March Occupancy Ever!
10 5 Demand Growth Accelerates Again Feb 11 7.7% 20 Year CAGR: 1.6% Mar 15 4.6% 0-5 Aug 09-7.1% -10 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total U.S.: Demand Percent Change 12 Month Moving Average 2007 to March 2015
66 64 Occupancy Matches Prior Record. 64.9 64.9 62 60 58 56 54.7 54 1990 1994 1998 2002 2006 2010 2014 Total U.S., Occupancy 12 Month Moving Average 1/1990 03/2015
Scales: Absolute OCC Very High On Upper End 73.8 73.5 71.3 70.9 70.4 69.8 2015 2014 62.0 59.9 54.2 54.0 52.2 52.1 Luxury Upper Upscale Upscale Upper Midscale Midscale Economy U.S. Chain Scales Occupancy % YTD March 2015 vs. 2014
Markets With Demand Growth > 5% Top U.S. Markets Demand Growth %, March 2015 YTD
Customer Mix
GROUP 3.1% Total U.S.: Customer Segmentation Demand Growth 1Q TRANSIENT 2.7%
Transient ADR Growth Follows The High Occupancies 6% 5% 4% 3% 2% Demand % Change 1% ADR % Change 0% 2012 2013 Total U.S. Transient: Demand and ADR % Change 12 Month Moving Average 2012 03/2015 2014 2015
Group Demand Back. Good Implications For All Hotels 6% 5% 4% 3% 2% *2014 Easter Comp Demand % Change 1% ADR % Change -1% -2% 2012 2013 Total U.S. Group: Demand and ADR % Change 12 Month Moving Average, 1/2012 03/2015 2014 2015
Revenue Growth
Back To Strong Transient & Group rates Transient $211 Group $202 $193 $183 $181 $175 $170 $165 $160 2010 $188 $175 $165 2011 U.S. Customer Segmentation ADR $ 1st Quarter March 2010-2015 2012 2013 2014 2015
Total U.S. Department Revenue Growth % Change 2014 vs. 2013 Source: 2015 STR Host Almanac
Room Revenue > $135bn $130 Billions $110 $90 $70 $50 $30 2007 2009 2011 Total U.S.: Rooms Revenue 12 Month Moving Average: January 2005 March 2015 2013 2015
Real ADR.Adjusted for inflation $125 $115 $105 $95 1987 1990 1993 1996 1999 Total U.S. Real ADR (Adjusted for Inflation) 1987-2014 Annual (Current Dollars) 2002 2005 2008 2011 2014 Source: U.S. Department of Labor: Bureau of Labor Statistics
Q1 2015 Group ADR Change Varied Widely Market San Francisco/San Mateo, CA Phoenix, AZ Miami/Hialeah, FL Boston, MA Anaheim/Santa Ana, CA ADR $ 271 252 302 189 198 ADR % Change 14.1 13.5 8.9 7.1 6.9 Oahu Island, HI Norfolk/Virginia Beach, VA Washington, DC-MD-VA New Orleans, LA New York, NY 260 104 200 198 283 1.3 0.0-0.5-5.1-7.9 2014 Group ADR and % Change Sorted by 5 Highest / Lowest ADR % Change in Top25 Markets
U.S. Forecast
Expect More Of The Same: Positive Growth! 15 10 5 0 80 Months 31 Mo 61 Mo. 56 Months -5-10 -15-20 -25 1990 2000 Total U.S.: RevPAR % Change, 1/1990 03/2015 2010
Total United States Key Performance Indicator Outlook (% Change vs. Prior Year) 2015-2016 Outlook 2015 Forecast 2016 Forecast Supply 1.3% 1.4% Demand 2.4% 2.2% Occupancy 1.2% 0.8% ADR 5.2% 5.0% RevPAR 6.4% 5.9%
Total United States Chain Scale Key Performance Indicator Outlook 2015F by Chain Scale 2015 Year End Outlook Occupancy (% chg) ADR (% chg) RevPAR (% chg) Luxury 0.6% 5.5% 6.1% Upper Upscale 1.1% 5.1% 6.3% Upscale 1.0% 5.4% 6.5% Upper Midscale 1.6% 4.8% 6.5% Midscale 1.3% 3.8% 5.2% Economy 1.4% 4.7% 6.2% Independent 0.6% 5.1% 5.7% Total United States 1.2% 5.2% 6.4% Chain Scale
To Wrap It Up.. Supply Progress A hot topic for a few Occupancy Acceleration Growing steady Customer Mix Both segments are strong Revenue Growth So far so good Forecast Walking On Sunshine
Questions: vbrown@str.com Slides: www.hotelnewsnow.com Thank you!