2014 Texas Trends Hotel Industry Report Austin Hotel

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2014 Texas Trends® Hotel Industry Report Austin Hotel & Lodging Association October 1, 2014

2014 Texas Trends® Hotel Industry Report Austin Hotel & Lodging Association October 1, 2014

Presentation Outline I. The Economy II. Lodging Forecasts – U. S. III. Lodging Forecasts

Presentation Outline I. The Economy II. Lodging Forecasts – U. S. III. Lodging Forecasts - Texas IV. Austin Submarkets V. Hotel Market Cycle

United States: Economic Outlook Employment Personal Income GDP CPI (Inflation) 2013 1. 7% 1.

United States: Economic Outlook Employment Personal Income GDP CPI (Inflation) 2013 1. 7% 1. 9% 1. 5% 2014 1. 8% 2. 4% 1. 7% 1. 9% 2015 2. 3% 4. 3% 3. 7% 2. 2% 2016 2. 4% 4. 7% 3. 3% 2. 5% 2017 1. 6% 3. 5% 2. 9% 2018 0. 6% 2. 2% 2. 8% Source: Moody’s Analytics, July 2014

Austin: Economic Outlook Employment Personal Income GMP CPI (Inflation) 2013 4. 6% 2. 9%

Austin: Economic Outlook Employment Personal Income GMP CPI (Inflation) 2013 4. 6% 2. 9% 5. 5% 1. 6% 2014 3. 5% 4. 0% 5. 2% 2015 4. 2% 6. 8% 5. 4% 2016 4. 1% 6. 4% 4. 9% 2. 7% 2017 3. 6% 5. 1% 4. 2% 3. 0% 2018 2. 6% 4. 0% 3. 5% 2. 9% Source: Moody’s Analytics, July 2014

Unemployment Comparison* June 2013 June 2014 United States 7. 5% 6. 3% Texas 6.

Unemployment Comparison* June 2013 June 2014 United States 7. 5% 6. 3% Texas 6. 9% 5. 5% Austin 5. 7% 4. 4% Dallas/Fort Worth 6. 7% 5. 4% Houston 6. 7% 5. 4% San Antonio 6. 6% 5. 1% * Not seasonally adjusted Source: Texas Work Force Commission

What Could Derail the Economy? • Unpredictable World Event • Price of Oil &

What Could Derail the Economy? • Unpredictable World Event • Price of Oil & Gas • International Crises

Presentation Outline I. The Economy II. Lodging Forecast – U. S. III. Lodging Forecast

Presentation Outline I. The Economy II. Lodging Forecast – U. S. III. Lodging Forecast - Texas IV. Austin Submarkets V. Hotel Market Cycle

Hotel Horizons® • Econometric Forecasting Model − Smith Travel Research – historical lodging data,

Hotel Horizons® • Econometric Forecasting Model − Smith Travel Research – historical lodging data, pipeline data − Moody’s Economy. com – economic forecasts • Five-Year Forecasts of Supply, Demand, Occupancy, ADR, Rev. PAR − 55 Major U. S. Markets • Updated Quarterly

United States: 2 nd Quarter 2014 = Below/Above Long Run Average Long Term Average

United States: 2 nd Quarter 2014 = Below/Above Long Run Average Long Term Average 2010 2011 2012 2013 2014 F 2015 F 2016 F 2017 F 2018 F Supply 1. 9% 1. 7% 0. 5% 0. 4% 0. 7% 0. 9% 1. 3% 1. 7% 2. 1% 2. 4% Demand 1. 9% 7. 2% 4. 7% 2. 8% 2. 2% 4. 5% 2. 2% 1. 6% 1. 1% 0. 4% 61. 9% 57. 5% 59. 9% 61. 3% 62. 2% 64. 4% 65. 0% 64. 9% 64. 3% 63. 0% ADR 3. 0% 0. 0% 3. 8% 4. 2% 3. 9% 4. 5% 5. 7% 5. 9% 5. 4% 4. 1% Rev. PAR 3. 0% 5. 4% 8. 1% 6. 6% 5. 4% 8. 2% 6. 7% 5. 8% 4. 3% 2. 1% Occupancy Source: PKF Hospitality Research – Hotel Horizons® Report, Smith Travel Research

2015 US Hotel Industry Achievements • Six consecutive years of increasing occupancy, the longest

2015 US Hotel Industry Achievements • Six consecutive years of increasing occupancy, the longest since 1988. • An occupancy level of 65%, the highest level of occupancy ever recorded by STR, Inc. • 14 of the 55 markets in the Hotel Horizons® universe will achieve their highest occupancy levels in the past 25 years. • 49 of 55 markets are above their long run average occupancy level.

10. 0% 8. 0% -2. 0% -4. 0% Austin Pittsburgh New York West Palm

10. 0% 8. 0% -2. 0% -4. 0% Austin Pittsburgh New York West Palm Beach Miami Raleigh-Durham Houston Cincinnati Nashville Boston Columbus Louisville San Jose-Santa Cruz Salt Lake City Charleston Chicago New Orleans Cleveland Denver Savannah Baltimore Washington DC Anaheim Fort Lauderdale Seattle Dallas San Diego Indianapolis Orlando Richmond Portland Memphis Jacksonville Charlotte Los Angeles San Antonio Saint Louis Atlanta Albuquerque Minneapolis Hartford Philadelphia Phoenix Detroit Tampa Kansas City Newark Fort Worth San Francisco Oahu Norfolk-VA Beach Tucson Sacramento Oakland Long Island Net Supply Change 2009 vs. 2015 United States 48, 000 New Rooms in 2014 65, 000 New Rooms in 2015 130, 800 New Rooms in 2009 6. 0% 4. 0% 2. 0% 0. 0% 2015 2009 Source: PKF-HR Hotel Horizons® September-November 2014 Edition, STR, Inc. .

Presentation Outline I. The Economy II. Lodging Forecast – U. S. III. Lodging Forecast

Presentation Outline I. The Economy II. Lodging Forecast – U. S. III. Lodging Forecast – Texas IV. Austin Submarkets V. Hotel Market Cycle

Texas Summary Occupancy 54. 6% $91. 79 56. 5% $89. 72 60. 4% $92.

Texas Summary Occupancy 54. 6% $91. 79 56. 5% $89. 72 60. 4% $92. 06 66. 0% 63. 4% $99. 63 $94. 38 ADR Rev. PAR $50. 09 267, 248 2015 F $50. 70 261, 111 2014 F $55. 60 257, 555 2013 $65. 76 $59. 81 254, 933 251, 917 2012 Supply 2011 68. 5% 68. 0% $110. 00 $105. 00 $75. 50 $71. 36 247, 971 2010 237, 491 2009

Dallas: 2 nd Quarter 2014 = Below/Above Long Run Average Long Term Average 2010

Dallas: 2 nd Quarter 2014 = Below/Above Long Run Average Long Term Average 2010 2011 2012 2013 2014 F 2015 F 2016 F 2017 F 2018 F Supply 2. 5% 2. 7% 0. 8% 1. 4% 0. 3% 0. 6% 1. 7% 1. 9% 2. 8% 3. 4% Demand 3. 4% 9. 5% 9. 1% 4. 8% 5. 7% 5. 4% 3. 3% 3. 2% 2. 9% 2. 5% 60. 7% 54. 5% 59. 0% 61. 0% 64. 2% 67. 3% 68. 3% 69. 2% 68. 6% ADR 2. 1% -2. 6% 3. 4% 1. 1% 5. 0% 6. 5% 5. 4% 4. 0% 3. 2% Rev. PAR 3. 1% 3. 9% 11. 9% 4. 4% 10. 7% 10. 0% 8. 2% 6. 8% 4. 1% 2. 3% Occupancy Source: PKF Hospitality Research – Hotel Horizons® Report, Smith Travel Research

Fort Worth: 2 nd Quarter 2014 = Below/Above Long Run Average Long Term Average

Fort Worth: 2 nd Quarter 2014 = Below/Above Long Run Average Long Term Average 2010 2011 2012 2013 2014 F 2015 F 2016 F 2017 F 2018 F Supply 3. 1% 3. 7% 1. 3% 1. 2% 0. 5% 1. 5% 0. 3% 2. 1% 3. 8% 4. 4% Demand 3. 5% 7. 7% 7. 1% 3. 0% 3. 9% 3. 7% 3. 3% 2. 7% 2. 8% 2. 7% 60. 9% 56. 1% 59. 3% 60. 3% 62. 3% 63. 7% 65. 5% 66. 0% 65. 3% 64. 3% ADR 3. 2% -0. 9% 1. 1% -1. 4% 1. 5% 4. 3% 4. 4% 3. 8% 3. 3% Rev. PAR 3. 8% 2. 8% 6. 9% 0. 3% 4. 9% 6. 6% 7. 5% 4. 5% 2. 8% 1. 6% Occupancy Source: PKF Hospitality Research – Hotel Horizons® Report, Smith Travel Research

Houston: 2 nd Quarter 2014 = Below/Above Long Run Average Long Term Average 2010

Houston: 2 nd Quarter 2014 = Below/Above Long Run Average Long Term Average 2010 2011 2012 2013 2014 F 2015 F 2016 F 2017 F 2018 F Supply 2. 5% 6. 1% 1. 8% 0. 9% 0. 6% 1. 5% 3. 0% 2. 8% 2. 5% 1. 8% Demand 3. 9% 5. 4% 10. 6% 10. 4% 6. 2% 4. 1% 2. 2% 2. 0% 1. 5% 1. 1% 61. 8% 55. 0% 59. 7% 65. 4% 69. 1% 70. 8% 70. 3% 69. 8% 69. 1% 68. 6% ADR 3. 0% -4. 0% 2. 6% 3. 7% 7. 8% 7. 0% 4. 1% 1. 4% 1. 6% 1. 9% Rev. PAR 4. 6% -4. 6% 11. 5% 13. 6% 13. 8% 9. 7% 3. 3% 0. 7% 0. 6% 1. 1% Occupancy Source: PKF Hospitality Research – Hotel Horizons® Report, Smith Travel Research

San Antonio: 2 nd Quarter 2014 = Below/Above Long Run Average Long Term Average

San Antonio: 2 nd Quarter 2014 = Below/Above Long Run Average Long Term Average 2010 2011 2012 2013 2014 F 2015 F 2016 F 2017 F 2018 F Supply 3. 4% 8. 5% 2. 5% 1. 6% 0. 5% 1. 4% 1. 1% 1. 2% 2. 4% 3. 3% Demand 3. 6% 12. 4% 7. 1% 5. 5% -0. 1%. 2. 9% 2. 8% 2. 5% 3. 0% 65. 0% 58. 2% 60. 8% 63. 2% 62. 8% 63. 8% 64. 8% 65. 9% 65. 7% ADR 3. 0% 0. 3% 0. 1% 1. 3% 4. 8% 1. 9% 3. 4% 3. 0% Rev. PAR 3. 4% 4. 0% 4. 6% 5. 2% 4. 2% 3. 5% 5. 6% 5. 0% 3. 2% 2. 7% Occupancy Source: PKF Hospitality Research – Hotel Horizons® Report, Smith Travel Research

Austin – Supply / Demand Analysis 2009 - Supply Up / Demand Down -

Austin – Supply / Demand Analysis 2009 - Supply Up / Demand Down - Huge Occupancy & Rate Loss • Current - Supply Down / Demand Up - Occ Above Average / Turnaway Up - Artificially High Rates • 2015 to 2017 - Supply Up / Demand Up/Slowing - Turnaway & Compression Down - Occupancies Normalize - Rates Normalize •

Austin – Local Demand Factors • Continued IT Expansion - Apple – 3, 600

Austin – Local Demand Factors • Continued IT Expansion - Apple – 3, 600 jobs - Flextronics – 900 jobs - Spansion – $200 million upgrade - Ambiq Micro, Illuminix, Dropbox, Websense, Roku, Marvell Semiconductor • Festivals / Events - SXSW - Austin City Limits - Many Others • Convention Activity - JW Marriott (2015) - Increased Bookings • Residential Housing Boom • Hotel Additions – Labor • UT Expansions • Reduced Compression • Sports Activity • Legislature (2015 & 2017) • Circuit of the Americas • Per Diem Rate Up $6 to $126

Austin: 2 nd Quarter 2014 = Below/Above Long Run Average Long Term Average 2010

Austin: 2 nd Quarter 2014 = Below/Above Long Run Average Long Term Average 2010 2011 2012 2013 2014 F 2015 F 2016 F 2017 F 2018 F Supply 3. 3% 4. 8% 2. 4% 0. 7% 2. 8% 2. 4% 6. 0% 3. 1% 2. 4% Demand 4. 3% 10. 3% 6. 8% 3. 1% 7. 7% 3. 4% 5. 3% 2. 0% 1. 5% 1. 0% 66. 2% 63. 7% 66. 5% 68. 0% 71. 3% 72. 0% 71. 5% 70. 8% 70. 3% 69. 4% ADR 4. 0% -2. 6% 5. 9% 7. 9% 5. 5% 6. 9% 4. 7% 1. 6% 2. 0% Rev. PAR 5. 3% 2. 6% 10. 5% 10. 4% 10. 5% 7. 9% 4. 1% 0. 7% 0. 9% 0. 6% Occupancy Source: PKF Hospitality Research – Hotel Horizons® Report, Smith Travel Research

Austin: Upper-Priced = Below/Above Long Run Average Long Term Average 2010 2011 2012 2013

Austin: Upper-Priced = Below/Above Long Run Average Long Term Average 2010 2011 2012 2013 2014 F 2015 F 2016 F 2017 F 2018 F Supply 4. 2% 4. 5% 2. 9% 0. 2% 2. 1% 2. 6% 11. 8% 4. 2% 2. 3% 2. 1% Demand 5. 5% 10. 5% 7. 0% 2. 6% 5. 2% 3. 3% 8. 0% 2. 0% 1. 0% 70. 1% 69. 9% 72. 7% 74. 4% 76. 7% 77. 2% 74. 5% 73. 0% 72. 8% 72. 0% ADR 4. 2% -1. 1% 6. 3% 8. 3% 6. 5% 7. 0% 3. 3% 1. 0% 2. 0% Rev. PAR 5. 6% 4. 5% 10. 6% 10. 8% 9. 7% 7. 7% -0. 3% -1. 1% 0. 7% 0. 9% Occupancy Source: PKF Hospitality Research – Hotel Horizons® Report, Smith Travel Research

Austin: Lower-Priced = Below/Above Long Run Average Long Term Average 2010 2011 2012 2013

Austin: Lower-Priced = Below/Above Long Run Average Long Term Average 2010 2011 2012 2013 2014 F 2015 F 2016 F 2017 F 2018 F Supply 2. 7% 5. 0% 2. 0% 1. 1% 3. 3% 2. 3% 1. 6% 2. 2% 1. 9% 2. 7% Demand 3. 6% 10. 1% 6. 6% 3. 5% 9. 8% 3. 6% 3. 0% 2. 0% 1. 0% 63. 8% 59. 1% 61. 8% 63. 3% 67. 3% 68. 1% 69. 0% 68. 3% 67. 2% ADR 3. 3% -5. 2% 5. 1% 7. 6% 5. 9% 6. 7% 4. 9% 3. 0% 2. 0% Rev. PAR 4. 5% -0. 5% 9. 9% 10. 2% 12. 7% 8. 1% 6. 3% 2. 8% 1. 1% 0. 4% Occupancy Source: PKF Hospitality Research – Hotel Horizons® Report, Smith Travel Research

Presentation Outline I. The Economy II. Lodging Forecast – U. S. III. Lodging Forecast

Presentation Outline I. The Economy II. Lodging Forecast – U. S. III. Lodging Forecast - Texas IV. Austin Submarkets V. Hotel Market Cycle

Austin Summary Occupancy 60. 5% 63. 7% 66. 4% 68. 0% 72. 0% 71.

Austin Summary Occupancy 60. 5% 63. 7% 66. 4% 68. 0% 72. 0% 71. 3% ADR Rev. PAR $101. 99 $61. 72 33, 468 2015 F $99. 38 $63. 31 31, 462 2014 F $105. 24 $69. 93 30, 773 2013 $113. 54 $77. 23 29, 602 $119. 58 2012 Supply 2011 $134. 00 $128. 00 $94. 72 $92. 07 $85. 24 29, 392 71. 5% 28, 714 2010 27, 412 2009

Austin CBD 74. 5% 77. 0% 77. 8% 78. 4% 77. 0% 74. 0%

Austin CBD 74. 5% 77. 0% 77. 8% 78. 4% 77. 0% 74. 0% 69. 2% Occupancy $205. 00 ADR $188. 53 $173. 57 Rev. PAR $147. 54 $102. 10 8, 490 2015 F $200. 00 $146. 18 $108. 90 6, 726 2014 F $158. 56 $147. 81 $157. 85 $148. 00 $135. 04 $122. 09 6, 667 2013 6, 319 6, 266 2012 Supply 2011 6, 038 2010 6, 021 2009

North Austin Occupancy 53. 8% 57. 2% 59. 4% 62. 6% 69. 0% 67.

North Austin Occupancy 53. 8% 57. 2% 59. 4% 62. 6% 69. 0% 67. 6% ADR Rev. PAR $72. 39 $38. 95 7, 089 2015 F $68. 95 $39. 44 7, 019 2014 F $73. 77 $43. 82 6, 821 2013 $77. 21 $48. 33 6, 823 6, 806 2012 Supply 2011 $88. 00 $85. 00 $79. 63 $53. 83 68. 0% $59. 84 $58. 65 6, 812 2010 6, 531 2009

Round Rock / Georgetown Occupancy 57. 7% 58. 8% 64. 7% 57. 9% 58.

Round Rock / Georgetown Occupancy 57. 7% 58. 8% 64. 7% 57. 9% 58. 4% ADR Rev. PAR $77. 85 $44. 92 3, 504 2015 F $75. 75 $78. 32 $44. 54 $45. 35 3, 504 2014 F 2013 70. 0% 68. 5% $83. 04 $48. 50 3, 419 $83. 98 $54. 34 3, 301 2012 Supply 2011 $95. 00 $90. 00 $66. 50 $61. 65 3, 026 2010 2, 931 2009

Northwest Austin Occupancy 65. 7% 68. 5% 72. 0% 73. 6% 77. 6% Rev.

Northwest Austin Occupancy 65. 7% 68. 5% 72. 0% 73. 6% 77. 6% Rev. PAR $87. 11 $58. 43 5, 520 $59. 67 5, 520 $120. 00 $115. 00 ADR $88. 94 77. 0% 76. 0% $90. 04 $97. 53 $103. 45 $80. 28 $64. 83 5, 152 $92. 40 $87. 40 $71. 78 4, 930 4, 921 4, 791 4, 180 2015 F 2014 F 2013 2012 Supply 2011 2010 2009

South Austin / San Marcos Occupancy 57. 7% 64. 3% 65. 6% Rev. PAR

South Austin / San Marcos Occupancy 57. 7% 64. 3% 65. 6% Rev. PAR $97. 37 $57. 68 8, 865 2015 F 69. 0% $120. 00 $122. 00 $83. 40 $84. 18 60. 1% ADR $99. 96 69. 5% 67. 6% $58. 52 8, 693 2014 F $100. 50 $64. 62 8, 629 2013 $109. 62 $71. 91 8, 111 $114. 28 $77. 25 8, 098 2012 Supply 2011 8, 047 2010 7, 749 2009

Presentation Outline I. The Economy II. Lodging Forecast – U. S. III. Lodging Forecast

Presentation Outline I. The Economy II. Lodging Forecast – U. S. III. Lodging Forecast – Texas IV. Austin Submarkets V. Hotel Market Cycle

Hotel Market Cycle In the Sweet Spot Rapid Development Lodging Decline, Leads Other Sectors

Hotel Market Cycle In the Sweet Spot Rapid Development Lodging Decline, Leads Other Sectors Accelerated Development ? Development Picks Up 2016/2017 We are Here Long Run Occupancy 2015 2014 Equilibrium ADR Occupancy Declines, ADR Follows ADR and Margins Recover A Year Ago Development Slows Occupancy Recovers Development at Minimum Lodging Recovers, Lags Levels Other Sectors (Not this Time!)

For a Copy of This Presentation Please Visit www. pkfc. com/presentations or Contact: Randy

For a Copy of This Presentation Please Visit www. pkfc. com/presentations or Contact: Randy Mc. Caslin Email: Randy. Mc. Caslin@pkfc. com 713. 621. 5252 Ext. 21