Guam Future Hotel Supply Requirements Presented By: Damien Little, Horwath HTL
Outline Current Strengths/Weaknesses of Guam Seasonal Tourism Performance Tourism Growth Projections Future Hotel Supply Requirements
CURRENT STRENGTHS & WEAKNESSES
Weaknesses Aging Hotel Supply relative to many other Asian destinations Historically dominated by one source market Dominance of wholesale agents Lack of a strong local cultural appeal to market A current lack of hotel rooms during peak periods
Weaknesses Aging Hotel Supply relative to many other Asian destinations Average age of the leading hotels is 27 years Most recent leading hotel, Outrigger, is 15 years old Declining hotel supply from market peak
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Historical Hotel Supply 12,000 10,000 8,000 Growing Market Declining / Stagnant Market 6,000 4,000 2,000 0
Weaknesses Aging Hotel Supply relative to many other Asian destinations Average age of the leading hotels is 27 years Most recent leading hotel, Outrigger, is 15 years old A number of hotels have undergone renovations in recent times with more renovation plans underway. Supply that has closed has re-opened New hotel construction finally underway
Weaknesses Historically dominated by one source market Japan has historically accounted for 70% to 80% of total visitor arrivals This market is very quick to react to adverse market incidents Korean arrivals again on the rise increasing diversity of demand source. China represents huge demand potential, while Russia can add some higher yielding long stay demand
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Japanese Share of Total Arrivals 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Japanese Share 67% Korean Share 18%
Weaknesses Dominance of wholesale agents Agents control market through control of seats and room allocations in market Wholesale business can limit rate growth potential of the market The way Guam is packaged has a big influence on the perception of the destination Dominance unlikely to change in short to mid term but more FIT travelers are emerging Marketing of the destination s image important
Weaknesses Lack of a strong local cultural appeal to market Colonial history of the islands resulted in much local culture being lost = lack of authentic cultural experiences to be had/seen in daily life (food) There is a real emphasis to re-build local cultural traditions and practices in Guam. This will benefit the tourism experience. Tourists also like to experience a western culture close to home.
Weaknesses A current lack of hotel rooms during peak periods With hotel supply below historical peaks and tourist arrivals back close to historical highs, room supply is extremely limited in peak periods and is restricting tourism growth New hotel supply is coming This presents a development opportunity
Strengths Proximity to major demand sources / short travel time allows for an easy short-break holiday Quality of beaches/water/environment USA Territory A good range of activities
Strengths Proximity to major demand sources / short travel time allows for an easy short-break holiday Short flight time reduces travel costs and increases feasibility for short-break holidays A good first time destination and easy for young families May limit perception of destination to being short-stay
Strengths Quality of beaches/water/environment #1 attraction is the warm weather, good quality beaches, clean water and clean environment A good range of water activities for tourists from beginners/young children to experienced divers and thrill-seekers Development to date has not spoilt the natural environment (over-development is fast becoming a problem in many other Asian destinations)
Strengths USA Territory US Culture is appealing International shopping experience Educational exchanges Tourism visa challenges
Strengths A good range of activities In addition to water activities, there are a range of other activities / entertainment options to keep guests busy during their stay. However, perhaps currently nothing that would extend the length of stay
SEASONAL TOURISM PERFORMANCE
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 000s of Arrivals Monthly Arrivals To Guam ( 12 & 13) 160 140 120 100 80 60 40 20 0
Seasonality of Arrivals 0.30 0.20 0.10 - (0.10) (0.20) (0.30) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Seasonality: Guam v Other Destinations 30 25 20 15 10 5 0 Sanya Bali Danang Phuket Guam Okinawa Koh Samui Cebu
Guam Monthly Hotel Occupancy ( 12 & 13) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Monthly Occupancy Variance ( 12 & 13) 0.20 0.15 0.10 0.05 0.00-0.05-0.10-0.15-0.20
Monthly Occupancy & Growth Implications There are a number of months per year when market-wide occupancy is very high this is even more so in the leading 10 to 15 hotels in the market Anecdotal evidence suggests that a lot of demand is being lost to the market during these months Without new supply, arrivals growth will be constrained
TOURISM GROWTH PROJECTIONS
Tourism Arrival Projections Take into account 2020 Vision Historical growth rates and current trends Expected increases in air capacity of each major source market Seasonality of tourism arrivals and limits on hotel room supply New hotel openings Quality and availability of potential future hotel developments
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Unconstrained Tourism Growth Est. 2,500 2,250 2,000 1,750 1,500 1,250 1,000 750 500 250 0 2.02 million
Room Night Demand Assumptions Room nights generated per visitor arrival Looked at historical ratios Reduced slightly over time to be conservative Monthly arrival seasonality was largely maintained moving forward Did not allow for any significant change in guest behaviours Conservative approach that ALOS and DOF remain more or less the same
Room Night Demand Assumptions Capped occupancy performance Market-wide occupancy capped at 90% on a monthly basis beyond this level demand was kicked out. New supply requirements aimed to keep occupancy around 80% on a an annual basis this allows for high occupancy in leading hotels but recognizes the under-performance of other properties in the market Demand growth for following year was based on capped arrivals and not underlying growth numbers
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Estimated Tourism Growth to Guam 2,500 2,250 2,000 1,750 1,500 1,250 1,000 750 500 250 0 2.02 million 1.86 million
FUTURE HOTEL SUPPLY REQUIREMENTS
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Future Hotel Supply Requirements 12,000 10,000 8,000 6,000 4,000 2,000 0 Actual Under Construction New Supply
Future Hotel Supply Requirements 11,000 10,000 9,000 111 523 640 350 750 950 1,150 1,350 1,550 2,190 8,000 7,000 6,000 5,000 4,000 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Actual Under Construction New Supply
Guam Market Performance Outlook 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% $108 $141 $229 250 200 150 100 50 0 Occ % ADR
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