Hotel Industry Overview Lodging Conference Ali Hoyt Senior Director, Consulting and Analytics ahoyt@str.com 2018 STR, Inc. All Rights Reserved. Any reprint, use or republication of all or a part of this presentation without the prior written approval of STR, Inc. or STR Global, Ltd. trading as STR (collectively STR ) is strictly prohibited. Any such reproduction shall specifically credit STR as the source. This presentation is based on data collected by STR. No strategic advice or marketing recommendation is intended or implied.
Agenda Total U.S. Review Segmentation Pipeline Forecast
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Total U.S. Review
Another Strong Year in the Making Actual % Change Room Supply 2.0% p Room Demand 2.9% p Occupancy 67.6% 0.8% p ADR $130 2.6% p RevPAR $88 3.5% p Total US Results, Aug YTD 2018
Quarterly RevPAR % Change: Q2 RevPAR Growth Actually Accelerated! 7.8 2015 2016 2017 2018 6.4 5.8 4.8 2.6 3.5 3.5 3.5 2.7 4.0 3.4 3.2 4.2 1.9 Q1 Q2 Q3 Q4 Total US, RevPAR % Change, by Quarter, Q1 2015 Q2 2018
Demand Growth Continues and Supply Growth Slow and Steady 8 Supply % Change Demand % Change 3.1% 4 0-4 2.0% -8 1990 2000 2010 Total U.S., Supply & Demand % Change, 12 MMA 1/1990 8/2018
ADR Growth Steady and Occupancy Growth Leads to New Occupancy Records Occ % Change ADR % Change 2.4% 5 0-5 1.1% -10 1990 2000 2010 Total U.S., ADR & OCC % Change, 12 MMA 1/1990 8/2018
102 Consecutive Months of RevPAR Growth 15 10 5 0-5 -10 111 Months 56 Months 102 Months -15-20 -25 1990 2000 2010 Total U.S., RevPAR % Change, 1/1990 8/2018
Strong Luxury Demand Growth, New Upscale and Upper Midscale Supply Supply % Change Demand % Change 4.6 5.0 4.6 3.5 3.8 2.3 2.2 2.5 0.4 1.2 0.7-0.3 Luxury Upper Upscale Upscale Upper Midscale Midscale Economy Supply / Demand % Change, by Class, Aug YTD 2018
Higher Occupancy Growth Spurs Higher ADR Growth Occ % Change ADR % Change 2.8 3.1 2.6 2.0 2.1 1.8 1.2 0.3 0.5 0.7 0.8 1.0 Luxury Upper Upscale Upscale Upper Midscale Midscale Economy RevPAR % Change by Contribution of OCC / ADR % Change, by Class, Aug YTD 2018
Strong Demand Drives Stellar Occupancy Results 2018 2017 72.9 72.1 74.3 74.1 73.9 73.6 69.3 68.9 62.3 61.8 60.2 59.6 Luxury Upper Upscale Upscale Upper Midscale Midscale Economy OCC %, by Class, Aug YTD 2018 & 2017
Leisure Demand Seems To Allow For Pricing Power Market OCC % ADR % Change Influenced By Miami/Hialeah, FL 79.5 8.4 Leisure and Group Demand Minneapolis/St Paul, MN-WI 69.5 7.6 Super Bowl Orlando, FL 80.3 5.9 Leisure Demand San Francisco/San Mateo, CA 83.2 5.1 Group Demand Atlanta, GA 71.6 4.4 Denver, CO 75.5 1.0 Houston, TX 65.4 0.6 St Louis, MO-IL 66.3 0.5 Boston, MA 75.0 (0.2) Washington, DC-MD-VA 73.6 (2.2) Inauguration / Women s March Comp ADR % Change and absolute OCC in Top 25: 5 Best / 5 Worst Performing ADR % Markets, Aug YTD 2018
We are monitoring the Number of Submarkets with Negative RevPAR % 97% 57% 70% 54% 47% 63% 32% 23% 25%25% 29%33% 23% 14%15% 8% 8% 8% 14% 18% 9% 11%16% 4% 12% 22%28%27% 25% 1991 1996 2001 2006 2011 2016 YTD 17 YTD 18 Submarkets with Negative RevPAR % Change out of all 639 Submarkets, by year 1990 2017, and YTD June 2017/18
Segmentation
Transient Segment Rooms reserved at rack rate, corporate negotiated, package, government rate or rooms booked via third party websites. Group Segment Rooms sold simultaneously in blocks of 10 or more.
Transient Performance: ADR Growth Seems to Accelerate 4% Demand % Change ADR % Change 3% 2% 1% 0% Jan-16 Jul-16 Jan-17 Jul-17 18-Jan Jul-18 Transient Demand and ADR % Change, Luxury and Upper Upscale Classes, 12 MMA, 1/2016 8/2018
Group Performance: Demand Growth Is Finally Positive Demand % Change ADR % Change 4% 3% 2% 1% 0% -1% -2% Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Group Demand and ADR % Change, Luxury and Upper Upscale Classes, 12 MMA, 1/2016 8/2018
Demand (millions) Demand Growth is Transient Driven 200 180 Group Transient 39.0% 160 140 120 100 80 60 40 2.3% 20-2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total Number of Rooms Sold, Group and Transient, by year 2002 2017
Monthly Segmentation ADR % Change: 2018 Is A Different Story From 2017 5.0 4.0 Transient ADR % Change Group ADR % Change 3.0 2.0 1.0 0.0-1.0-2.0 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 ADR % Change, Transient & Group, by Month, 8/2017 8/2018
Pipeline
Lack of In Construction Rooms Growth Aids Healthy Industry Results Phase 2018 2017 % Change In Construction 188 189-0.8% Final Planning 215 217-0.7% Planning 204 174 17.1% Under Contract 607 580 4.6% Total US Pipeline, by Phase, 000s Rooms, August 2018 and 2017
Under Construction Pipeline is Leveling Off Below Prior Peak 250 200 150 100 High: Dec 07 211K 20,000 rooms below peak Aug 18 188K 50 Low: May 11 50K 0 2006 2008 2010 2012 2014 2016 2018 Total US Pipeline; Rooms In Construction, in 000s; 1/2006 8/2018
Limited Service Construction Is The Name Of The Game 58.6 60.8 72% of Rooms In Construction 23.6 14.6 20.8 7.2 2.2 Luxury Upper Upscale Upscale Upper Midscale Midscale Economy Unaffiliated US Pipeline, Rooms In Construction, 000s Rooms, by Scale, August 2018
A few words on rate growth
Real ADR Growth (ADR% minus CPI%) Now Hovers Around 0% 5.0% 0.0% -5.0% -10.0% 2002 2004 2006 2008 2010 2012 2014 2016 2018 CPI Data: Consumer Price Index for All Urban Consumers: All Items, Index 1982-1984=100, Monthly, Seasonally Adjusted Source: FRED Graph Observations; ADR Data, Source: STR, Running 12 Months Ending July 2018
ADR Growth Weak Compared to the 90 s 1996 2018 Rate Growth 7.3% 2.4% Inflation Rate 2.9% 2.3% CPI Data: Consumer Price Index for All Urban Consumers: All Items, Index 1982-1984=100, Monthly, Seasonally Adjusted Source: FRED Graph Observations; ADR Data, Source: STR, Running 12 Months Ending July 2018
RevPAR Increases, August 20, 2017 Idaho Falls, ID 501% Casper, WY 766% Columbia, MO 454% Hopkinsville, KY 1,644% Lincoln, NE 321% Nashville, TN 165% Total RevPAR Increase of all Hotels in Path: 244% Source: STR
2018 / 2019 Forecast
Total U.S. Forecast Outlook 2018 Forecast 2019 Forecast Supply 2.0% 1.9% Demand 2.6% 2.1% Occupancy 0.6% 0.2% ADR 2.6% 2.4% RevPAR 3.2% 2.6%
Summary Industry remains at record-setting levels, but growth is slow Demand is exceeding expectations in 2018 RevPAR growth will be driven by ADR growth Construction pipeline slowing below prior peak Can t forecast a black-swan event
Thank You! Ali Hoyt Senior Director, Consulting & Analytics ahoyt@str.com @ahoyt_str www.linkedin.com/in/alisonhoyt 2018 STR, Inc. All Rights Reserved. Any reprint, use or republication of all or a part of this presentation without the prior written approval of STR, Inc. or STR Global, Ltd. trading as STR (collectively STR ) is strictly prohibited. Any such reproduction shall specifically credit STR as the source. This presentation is based on data collected by STR. No strategic advice or marketing recommendation is intended or implied.