U.S. Lodging Industry Updt Wht Could Dril th Rovry? prsnttion to: Th Lodging Confrn 2013 Phonix, Arizon R. Mrk Woodworth PKF Hospitlity Rsrh, LLC Sptmbr 18, 2013 mrk.woodworth@pkf.om
Agnd Wht Could Dril th Rovry? Our Currnt Forsts: Ntionl Lol Mrkts Chin Sls Lotions For Copy: WWW.PKFC.COM\Prsnttions 2
Qustion: How Do You Fl vs. Sptmbr 2012? 3
Hs th U.S. Lodging Industry Rovrd? Smith Trvl Rsrh: Lodging Dmnd Ws t n All Tim Rord in 2012 4
Wht Could Dril th Rovry? 1. Th Eonomy 5
GDP Componnt Forst (75% probbility) 10 Contributions to prntg hng in gross domsti produt 8 Forst 6 4 2 0-2 -4-6 3.9% 2.0% 3.7% -5.4% -0.4%1.3% 3.9% 2.8% 2.8% -1.3%3.2% 1.4% 4.9% 1.2% 2.8% 0.1% 1.1%1.7% 2.3% 2.8% 3.4% 4.0% 4.1%4.3% -2.0%-8.3% 1.6% I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV -2.7% 2008 2009 2010 2011 2012 2013 2014 (GOVERNMENT) Govrnmnt onsumption xpnditurs nd gross invstmnt TRADE (Nt xports of goods nd srvis) BUSINESS (Gross privt domsti invstmnt) -8-10 July 2013 Ths mttr th most. CONSUMERS (Prsonl onsumption xpnditurs) Dmnd Chng Sour: BEA, Moody s Anlytis, PKF-HR, STR 6
Lding Eonomi Inditors % hng in lst 6 months August 2013 20% 15% Lding Eonomi Inditors (% hng in th lst 6 months) U.S. Hotl Dmnd 10% 5% 0% -5% -10% -15% -20% -25% 6 to 8 month lg Diminishing P of Dmnd Growth -30% Sour: Th Confrn Bord, PKF-HR, STR 7
Wht Could Dril th Rovry? 1. Th Eonomy Not Likly Any Tim Soon 2. Ovr Building 8
Mixd-Signls in th Piplin? Phs 2013 2012 % Chng In Constrution 76,581 59,803 28.1% Finl Plnning 125,874 121,788 3.4% Plnning 124,838 114,742 8.8% Ativ Piplin 327,293 296,333 10.5% Pr-Plnning 71,576 87,529-18.2% Totl 398,869 383,862 3.9% Totl U.S. Piplin, Numbr of Rooms by Phs, Jun 2013 nd 2012 Sour: Smith Trvl Rsrh 9
Evidn of Flt Pris 200 180 Q1 2005 Q2 2013 High-Prid Hotls 160 140 120 100 80 60 40 20 2010 Q4 Qurtrly Msurs 0 Sour: Cntr for Rl Estt nd Finn, Shool of Hotl Administrtion, Cornll Univrsity 10
Limitd Nw Supply is Big Prt of th Story 11
Nw Supply Outlook Vris Aross Mrkts 12
Wht Could Dril th Rovry? 1. Th Eonomy Not Likly Any Tim Soon 2. Ovr Building Not Likly Any Tim Soon 3. Unprditbl Dmnd Shok 13
Two Big Dmnd Shoks in Rnt Mmory 15% U.S. Hotl Dmnd 10% 5% 0% -5% -10% -15% -20% Sour: PKF-HR, STR 14
Wht Could Dril th Rovry? 1. Th Eonomy Not Likly Any Tim Soon 2. Ovr Building Not Likly Any Tim Soon 3. Unprditbl Dmnd Shok Mny Rsons Why W Do Not Wnt This to Hppn 4. Oil/Enrgy Pri Inrss 15
Whr Ar Oil Pris Going? Finnil Criss Bgins Arb Spring Strts 16
Cpity Inrss xptd to Out-P Dmnd Growth Downwrd Prssur on Pris Ahd? 17
Wht Could Dril th Rovry? 1. Th Eonomy Not Likly Any Tim Soon 2. Ovr Building Not Likly Any Tim Soon 3. Unprditbl Dmnd Shok Mny Rsons Why W Do Not Wnt This to Hppn 4. Oil/Enrgy Pri Inrss Too Muh Explortion Tody for Pris to gt Out-of-Bounds 5. Asst Pri Bubbl 18
Cs Shillr Ntionl Hom Pri Indx Anothr Bubbl on th Horizon?? 2012 19
Qustion: Whr Ar Th Summr Hdwinds? Summr 2011: S&P Downgrds U.S. Dbt Unmploymnt = 9.2 Prnt Summr 2012: Novmbr Eltion Outoms Fisl Cliff ws Looming 20
Qustion: (ontinud) Whr Ar Th Summr Hdwinds? Summr 2013: Hom Pris r Up Crdit Boming Mor Avilbl Intrst Rts Going Up Job Growth to Continu GDP Growth Alrting into 2015 Govrnmnt Shutdown Otobr 1? 21
Our Forst Hotl Horizons Forsting Modl Smith Trvl Rsrh Historil rooms oupid, room vilbl, rooms rvnu Piplin of futur hotl onstrution Moody s Anlytis Eonomi forsts 22
Hotl Horizons Sptmbr 2012 Unitd Stts 2013 2014 Sptmbr 2012 Most Rnt Updt Sptmbr 2012 Most Rnt Updt Oupny 61.9% 62.3% 63.4% 63.5% ADR 5.3% 4.2% 6.6% 5.2% RvPAR 7.3% 5.9% 8.8% 7.2% Strongr thn Exptd Dmnd Growth Sour: PKF Hospitlity Rsrh, LLC Hotl Horizons ADR Rovry Slowr thn Exptd Sptmbr-Novmbr 2012, 2013, Smith Trvl Rsrh 23
In-Bound Intrntionl Visittion t Rord Lvls 90.0 80.0 70.0 Histori nd Projtd Intrntionl Visitors to th U.S. Forst 60.0 Arrivls in Millions 50.0 40.0 30.0 20.0 10.0-2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Sour: Intrntionl Trd Administrtion 24
Good Nws Summry 1. Supply Growth: Blow Avrg through 2016. 2. Dmnd Growth: Abov Avrg through 2015. 3. Oupny: Abov Avrg Lvl through 2016. 4. ADR Growth: 1.5 x s Avrg through 2016. 5. RvPAR Growth: 2.0 x s Avrg through 2015. 25
Ntionl Forst 2013/2014 Vry Limitd Nw Supply Long Trm Avrg 2008 2009 2010 2011 2012 2013F 2014F Supply 2.0% 2.4% 2.8% 1.7% 0.5% 0.5% 0.8% 1.1% Dmnd 2.1% 2.5% 6.2% 7.2% 4.7% 3.0% 2.4% 3.1% Oupny 61.9% 59.8% 54.5% 57.5% 59.9% 61.4% 62.3% 63.5% ADR 2.9% 3.0% 8.7% 0.0% 3.8% 4.2% 4.2% 5.2% RvPAR 2.9% 2.0% 16.7% 5.4% 8.2% 6.8% 5.9% 7.2% Sour: PKF Hospitlity Rsrh, LLC Hotl Horizons Sptmbr-Novmbr 2012, 2013, Smith Trvl Rsrh Pssing Through Long Run Avrg Lvl A
2012 Oupny: Wll-Abov Avrg for Most.. 100.0% Mjor Mrkt Outlook 80.0% 60.0% 40.0% 20.0% 0.0% -20.0% Most Mrkts Ar Abov Thir 10-Yr Histori Avrg Sour: PKF Hospitlity Rsrh, LLC, Smith Trvl Rsrh 27 10-Yr Avrg Oupny Lvl Albuqurqu Anhim Atlnt Austin Bltimor Boston Chrlott Chigo Cininnti Clvlnd Columbus Dlls Dnvr Dtroit Fort Ludrdl Fort Worth Hrtford Houston Indinpolis Jksonvill Knss City Long Islnd Los Angls Mmphis Mimi Minnpolis Nshvill Nw Orlns Nw York Nwrk Ohu Oklnd Orlndo Phildlphi Phonix Pittsburgh Portlnd Rligh-Durhm Rihmond Srmnto Sint Louis Slt Lk City Sn Antonio Sn Digo Sn Frniso Sttl Tmp Tuson Wshington DC Wst Plm Bh City
$350.00 $300.00 $250.00 $200.00 $150.00 $100.00 $50.00 $- $(50.00). But Room Rts Still Hv Wy to Go Mjor Mrkt Outlook 2012 Avrg Dily Rt vs. Prvious Pk (nominl) 28 Historil Pk Avrg Dily Rt (Nominl) Albuqurqu Anhim Atlnt Austin Bltimor Boston Chrlott Chigo Cininnti Clvlnd Columbus Dlls Dnvr Dtroit Fort Ludrdl Fort Worth Hrtford Houston Indinpolis Jksonvill Knss City Long Islnd Los Angls Mmphis Mimi Minnpolis Nshvill Nw Orlns Nw York Nwrk Ohu Oklnd Orlndo Phildlphi Phonix Pittsburgh Portlnd Rligh-Durhm Rihmond Srmnto Sint Louis Slt Lk City Sn Antonio Sn Digo Sn Frniso Sttl Tmp Tuson Wshington DC Wst Plm Bh Sour: PKF Hospitlity Rsrh, LLC, Smith Trvl Rsrh City
RvPAR Outlook Aross Mrkts Vris; All Looks Good Avrg Annul Chng: 2013-2017 6.0% - 8.0% 5.0% - 6.0% 4.0% - 5.0% 3.0% - 4.0% Sour: PKF Hospitlity Rsrh, LLC Hotl Horizons Sptmbr-Novmbr 2013 29
Forst Oupny Lvls By Chin-Sl 80% 70% 60% 50% 40% 30% 20% 10% 0% 74.4% 71.8% 71.6% 73.3% 70.7% 70.9% 71.0% 69.3% 69.5% 63.8% 55.7% 54.9% 62.8% 54.9% 54.3% 61.3% 53.2% 53.4% This is whr mtings go. 2011 2012 2013F Sour: PKF Hospitlity Rsrh, LLC Hotl Horizons Sptmbr-Novmbr 2012, 2013P, Smith Trvl Rsrh 30
Oupny Sprd Uppr-Prid vs Lowr-Prid 80% Forst 70% 60% Th Gp Gts Widr 50% 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Uppr-Prid Lowr-Prid Oupny Diffrntil 16% 14% Forst 12% 10% 8% 6% 4% 2% 0% 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Oupny Diffrntil Linr (Oupny Diffrntil) Sour: PKF Hospitlity Rsrh, LLC Sptmbr-Novmbr 2013 Hotl Horizons Rport, Smith Trvl Rsrh C
Lotions 32
In Whih Lotion(s) hs Oupny Fully Rovrd? Intrstt Smll Mtro / Town Urbn Suburbn Rsort Airport Sour: STR 33
Th Winnr: Urbn O u p n y L v l 72.0% 70.0% 68.0% 66.0% 64.0% 62.0% 60.0% 58.0% 56.0% Currnt Oupny Lvl Lvl of Currnt ADR Growth Rt Oupny (4Q Moving Avrg) Avrg Dily Rt Chng Urbn Lotions 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% A v r g D i l y R t C h n g Sour: STR, PKF Hospitlity Rsrh, LLC, Sptmbr-Novmbr 2013 Hotl Horizons % 34
Urbn: Evn Bttr Tims to Com O u p n y L v l 74.0% 72.0% 70.0% 68.0% 66.0% 64.0% 62.0% 60.0% 58.0% 56.0% 54.0% Currnt Oupny Lvl Lvl of Currnt ADR Growth Rt Oupny (4Q Moving Avrg) Avrg Dily Rt Chng Urbn Lotions Forst 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% A v r g D i l y R t C h n g Sour: STR, PKF Hospitlity Rsrh, LLC, Sptmbr-Novmbr 2013 Hotl Horizons % 35
Lotion Dispritis-Suburbn O u p n y L v l 70.0% 65.0% 60.0% 55.0% 50.0% Currnt Oupny Lvl Lvl of Currnt ADR Growth Rt Suburbn Oupny (4Q Moving Avrg) Avrg Dily Rt Chng 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% -10.0% -12.0% A v r g D i l y R t C h n g Sour: STR, PKF Hospitlity Rsrh, LLC, Sptmbr-Novmbr 2013 Hotl Horizons % 36
Suburbn: 20-Yr Oupny Rovry O u p n y L v l 70.0% 65.0% 60.0% 55.0% 50.0% Currnt Oupny Lvl Lvl of Currnt ADR Growth Rt Suburbn Oupny (4Q Moving Avrg) Avrg Dily Rt Chng Forst 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% -10.0% -12.0% A v r g D i l y R t C h n g Sour: STR, PKF Hospitlity Rsrh, LLC, Sptmbr-Novmbr 2013 Hotl Horizons % 37
Lotion Dispritis- Rsort O u p n y L v l 70.0% 65.0% 60.0% 55.0% 50.0% Currnt Oupny Lvl Lvl of Currnt ADR Growth Rt Oupny (4Q Moving Avrg) Avrg Dily Rt Chng Rsort 1988 1988 1989 1990 1991 1991 1992 1993 1994 1994 1995 1996 1997 1997 1998 1999 2000 2000 2001 2002 2003 2003 2004 2005 2006 2006 2007 2008 2009 2009 2010 2011 2012 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% A v r g D i l y R t C h n g Sour: STR, PKF Hospitlity Rsrh, LLC, Sptmbr-Novmbr 2013 Hotl Horizons % 38
Rsort: Vry Strong RvPAR Outlook O u p n y L v l 70.0% 65.0% 60.0% 55.0% 50.0% Currnt Oupny Lvl Lvl of Currnt ADR Growth Rt Oupny (4Q Moving Avrg) Avrg Dily Rt Chng Rsort Forst 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% A v r g D i l y R t C h n g Sour: STR, PKF Hospitlity Rsrh, LLC, Sptmbr-Novmbr 2013 Hotl Horizons % 39
Lotion Dispritis-Airport O u p n y L v l 75.0% 70.0% 65.0% 60.0% 55.0% Currnt Oupny Lvl Lvl of Currnt ADR Growth Rt Oupny (4Q Moving Avrg) Avrg Dily Rt Chng Airport 1988 1988 1989 1990 1991 1991 1992 1993 1994 1994 1995 1996 1997 1997 1998 1999 2000 2000 2001 2002 2003 2003 2004 2005 2006 2006 2007 2008 2009 2009 2010 2011 2012 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% A v r g D i l y R t C h n g Sour: STR, PKF Hospitlity Rsrh, LLC, Sptmbr-Novmbr 2013 Hotl Horizons % 40
Airport: Rord Oupny Lvls Ahd O u p n y L v l 75.0% Airport 70.0% 65.0% 60.0% 55.0% Currnt Oupny Lvl Lvl of Currnt ADR Growth Rt Oupny (4Q Moving Avrg) Avrg Dily Rt Chng Forst 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% A v r g D i l y R t C h n g Sour: STR, PKF Hospitlity Rsrh, LLC, Sptmbr-Novmbr 2013 Hotl Horizons % 41
Lotion Intrstt O u p n y 65.0% 60.0% 55.0% Intrstt 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% A v r g D i l y L v l 50.0% 45.0% Currnt Oupny Lvl Oupny (4Q Moving Avrg) Avrg Dily Rt Chng Lvl of Currnt ADR Growth Rt 1988 1988 1989 1990 1991 1991 1992 1993 1994 1994 1995 1996 1997 1997 1998 1999 2000 2000 2001 2002 2003 2003 2004 2005 2006 2006 2007 2008 2009 2009 2010 2011 2012 1.0% 0.0% -1.0% -2.0% -3.0% R t C h n g Sour: STR, PKF Hospitlity Rsrh, LLC, Sptmbr-Novmbr 2013 Hotl Horizons % 42
Intrstt: No Rturn to Pks Anytim Soon O u p n y 65.0% 60.0% 55.0% Intrstt Forst 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% A v r g D i l y L v l 50.0% 45.0% Currnt Oupny Lvl Oupny (4Q Moving Avrg) Lvl of Currnt Avrg Dily Rt Chng ADR Growth Rt 1.0% 0.0% -1.0% -2.0% -3.0% R t C h n g Sour: STR, PKF Hospitlity Rsrh, LLC, Sptmbr-Novmbr 2013 Hotl Horizons % 43
Lotion Dispritis-Smll Town O u p n y L v l 65.0% 60.0% 55.0% 50.0% 45.0% Smll Mtro/Town Oupny (4Q Moving Avrg) dr^ Currnt Oupny Lvl Lvl of Currnt ADR Growth Rt 1988 1988 1989 1990 1991 1991 1992 1993 1994 1994 1995 1996 1997 1997 1998 1999 2000 2000 2001 2002 2003 2003 2004 2005 2006 2006 2007 2008 2009 2009 2010 2011 2012 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% A v r g D i l y R t C h n g Sour: STR, PKF Hospitlity Rsrh, LLC, Sptmbr-Novmbr 2013 Hotl Horizons % 44
Smll Town: Modst Expttions O u p n y L v l 65.0% Smll Mtro/Town 60.0% 55.0% 50.0% 45.0% Oupny (4Q Moving Avrg) dr^ Currnt Oupny Lvl Lvl of Currnt ADR Growth Rt Forst 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% A v r g D i l y R t C h n g Sour: STR, PKF Hospitlity Rsrh, LLC, Sptmbr-Novmbr 2013 Hotl Horizons % 45
2007 Hotl Rl Estt Emotions 2017? 2008 1 st Hlf 2011-13 2004 2013-14? 2008 2nd Hlf 2009-2010 2011 46
Summry 1. Unrtinty ontinus to b drg n importnt impdimnt to th rovry of th group sgmnt nd priing ovrll. 2. Industry growth, whil still positiv, will slow rltiv to wht w hv bom usd to. 2014 should b nxt rlly good yr. 47
Summry 3. Positiv momntum will prsist s industry fundmntls solidify nd grtr lvls of dbt nd quity find thir wy into th mrkt. Th hotl risk prmium ontrts s rsult. 4. It is grt tim to b in th hotl businss! 48
Thnk You www.pkf.om For Copy: WWW.PKFC.COM\Prsnttions 49