Hotel Market Performance and Expansion Opportunities Aiden Murphy, Crowe Horwath 8 th November 2016 Audit Tax Advisory Audit Tax Advisory 1
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
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 116 193 151 125 125 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
Overview of Hotel Supply 2016 1 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
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% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Bedrooms Occupancy 68% 66% 64% 62% 60% 58% 56% 54% 52% 50% 6
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 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Bedrooms Occupancy 50% 7
Hotel Performance 8
Regional Hotel Performance Excluding Dublin Per Room 2005 2010 Sales 54,266 41,507 RevPAR 55 39 Per Room 2015 2016 (F) Sales 58,777 +5% RevPAR 55 57 Profit 8,111 3,241 Profit 9,019 +9% SALES 8% growth 9
Regional Hotel Performance excluding Dublin 70,000 60,000 50,000 40,000 30,000 20,000 10,000 15% 15% 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total Sales Regions excl Dublin PBT regions excl Dublin 10
Snapshot of Hotel Performance - Regional (excl Dublin) Regional Hotel Market 2005 2010 2015 10 year Variance Occupancy 65% 56% 66% -1% Average Room Rate (ARR) 85 70 83-2 RevPAR 55 39 55 - 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 2016 (F) Sales 59,123 +7% RevPAR 90 98 Profit 13,707 6,226 Profit 16,913 +14% 23% Profit growth 12
Dublin Hotel Performance 70,000 60,000 50,000 40,000 30,000 20,000 21% 29% 10,000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total Sales Dublin PBT Dublin 13
Snapshot of Hotel Performance - Dublin Dublin Hotel Market 2005 2010 2015 10 year Variance Occupancy 77% 67% 81% +4% Average Room Rate (ARR) 120 79 112-8 RevPAR 87 53 90-2 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
Luxury (5 Star) Hotel Performance Per Room 2005 2010 Sales 88,884 60,446 RevPAR 100 71 Per Room 2015 2016 (F) Sales 100,954 +6% RevPAR 130 143 Profit 13,168 3,208 Profit 20,860 +16% PROFIT 58% growth 15
First Class (4 Star) Hotel Performance Per Room 2005 2010 Sales 61,156 44,541 RevPAR 62 42 Per Room 2015 2016 (F) Sales 62,897 +5% RevPAR 66 71 Profit 10,315 4,711 Profit 12,805 +11% PROFIT 24% growth 16
Mid Price (3 Star) Hotel Performance Per Room 2005 2010 Sales 45,510 32,460 RevPAR 56 36 Per Room 2015 2016 (F) Sales 47,537 +5% RevPAR 48 52 Profit 10,493 5,149 Profit 9,157 +8% 13% Profit decline 17
Luxury Hotel Performance 120,000 100,000 Luxury Hotels at Peak Sales and Profit levels 80,000 60,000 40,000 20,000 15% 21% 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total Sales Luxury PBT Luxury 18
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% 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sales First Class PBT First Class 19
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% 10,000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total Sales Mid Price PBT Mid Price 20
International Tourism Demand and Brexit 21
International Tourism Demand 12.0m 10.0m 8.0m 6.0m 2015 +13.6% 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 63% of International Tourists UK 41% of International Tourists Source : Crowe Horwath Annual Hotel Industry Survey 23
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
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
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 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
Investment and Constraints 28
Investment and Constraints on the Sector What happens if there s no additional supply introduced? 29
Investment Feasibility Dublin City Centre 3 Star Hotels YTD Sept 2015 YTD Sept 2016 YOY Growth Occupancy 87% 86% -1% Average Room Rate 91 112 + 21 RevPAR 79 96 + 17 4 Star Hotels YTD Sept 2015 YTD Sept 2016 YOY Growth Occupancy 85% 86% +1% Average Room Rate 125 150 + 25 RevPAR 106 129 + 23 Source: STR Global New builds and Extensions 30
Investment Feasibility Dublin Surrounding 3 Star Hotels YTD Sept 2015 YTD Sept 2016 YOY Growth Occupancy 72% 73% +1% Average Room Rate 75 88 + 13 RevPAR 54 64 + 10 4 Star Hotels YTD Sept 2015 YTD Sept 2016 YOY Growth Occupancy 83% 86% +3% Average Room Rate 89 104 + 15 RevPAR 74 90 + 16 Site Costs? Feasibility? Source: STR Global New Builds & Extensions 31
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
Thank You. Aiden Murphy Partner Restructuring, Advisory & Insolvency aiden.murphy@crowehorwath.ie Bastow Charleton Member Crowe Horwath International Marine House Clanwilliam Court Dublin 2 Ireland www.crowehorwath.ie 33