Industry Trends May 2019 Jessica Haywood Director, Research & - - PowerPoint PPT Presentation

Industry Trends

May 2019

Jessica Haywood Director, Research & Development jhaywood@str.com

Agenda

• US hotel industry performance
• The competitive landscape
• Comparing hotel and vacation rental data
• Looking forward

3

Who We Are

Ø 35 years in business Ø Privately-held company Ø All data is collected directly from source Ø Confidentiality is the core of STR’s business

STR is the leading provider of premium, global data benchmarking, analytics and marketplace insights

Arne Sorenson CEO, Marriott International

“STR has provided incredible value in its strategic partnership with the industry and provided insights that allow us to improve responses to market conditions.”

*Marriott, a $37bn+ company, is the largest hotel operator worldwide with >1,000,000 rooms in its portfolio

• f STR customers

Select snapshot

Two important things happened in 1985: 1. Robert Crandall, CEO of American Airlines, implemented the first yield management platform. 2. Randy & Carolyn Smith started Smith Travel Research.

The evolution of hotel revenue management

The world’s largest hotel performance sample

STR business model

Beautifully simple: Collect 3 numbers, compute 3 numbers

Supply Demand Revenue

Rooms Available Rooms Sold Rooms Revenue

Occupancy

% Rooms Occupied = Rooms sold/ Rooms Available

ADR

Average Daily Rate = Rooms revenue/ Rooms Sold Revenue Per Available Room = Rooms revenue/ Rooms available

RevPAR

Supply Demand Revenue

Occupancy

Why we’re here

9

US Hotel Industry Performance

12 months ending March 2019: US hotels still breaking records

Highest Ever?

% Change Room Supply þ 2.0% Room Demand þ 2.4% Occupancy þ 66.2% 0.3% ADR þ $130 2.1% RevPAR þ $86 2.5% Room Revenue þ 4.5%

Total US Results, 12 MMA March 2019

Demand growth trajectory slows. Supply growth still at 2%.

• 0.7
• 4.7
• 7.1

7.8

• 8
• 4

4 8

1990 2000 2010

Supply % Change Demand % Change

Total U.S., Supply & Demand % Change, 12 MMA 1/1990 – 03/2019

Occupancy growth still positive nine years into the cycle (…but barely)

• 3.4
• 6.7
• 9.7

0.3 6.8 7.5 2.1

• 10
• 5

5

1990 2000 2010

Occ % Change ADR % Change

Total U.S., ADR & OCC % Change, 12 MMA 1/1990 – 03/2019

RevPAR growth: Positive in 108 out of 109 last months (= Nine Years!)

• 25
• 15
• 5

5 15

1990 2000 2010

Total U.S., RevPAR % Change, 1/1990 – 03/2019

56 Months 108 Months 111 Months

4 of 6 classes now with higher supply than demand growth

3.0 2.6 3.8 3.8 1.0

• 0.6

2.8 1.5 3.0 3.8 1.4 1.6 Luxury Upper Upscale Upscale Upper Midscale Midscale Economy Supply % Change Demand % Change

Supply / Demand % Change, by Class, YTD March 2019

Compression nights decreasing

978 1,343 1,771 2,014 2,813 3,168 2,776 2,603 2,626

2010 2011 2012 2013 2014 2015 2016 2017 2018

# of compression nights for all 165 US markets combined

However, compression night pricing premiums increasing

Compression night rate premium over non-compression nights for all 165 US markets combined; compression >=95%

79.8% 77.4% 77.8% 76.2% 70.1% 66.9% 67.0% 67.8% 75.8%

2010 2011 2012 2013 2014 2015 2016 2017 2018

Top 10 markets by sellout nights

186 104 104 82 75 73 59 54 53 49 N e w Y

• r

k , N Y F l

• r

i d a K e y s S a n F r a n c i s c

• /

S a n M a t e

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C A S a n J

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e / S a n t a C r u z , C A B

• s

t

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, M A O a k l a n d , C A S a n D i e g

• ,

C A O r l a n d

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F L O a h u I s l a n d , H I D e n v e r , C O Top 10 markets with most compression nights in 2018. Compression >=90%

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Hotel Types

Individually and wholly-owned condominium unit typically located in leisure-heavy resort areas. Inventory is included in a rental pool operated and serviced by a management company.

Condotel

62.3%

Occupancy +0.5%

$214.20

ADR +3.1%

$133.47

RevPAR +3.6%

Total US– 12 months ending March 2019, year-over-year % chg

A self-contained accommodation establishment focused

• n providing for all of a leisure traveler’s needs on
• premises. Resorts are typically located in recreation areas

(beaches, mountains) and focus on leisure travelers.

Resort

70.5%

Occupancy

• 0.4%

$214.70

ADR +2.3%

$151.40

RevPAR +1.8%

Total US – 12 months ending March 2019, year-over-year % chg

Collection of hotels that allows owners and operators to affiliate with a major chain while retaining their unique name, design and orientation. Many include a focus on

• local. These properties cater to business and leisure

travelers and are concentrated in urban, suburban and resort areas.

Soft Brand

65.7%

Occupancy +0.6%

$193.95

ADR +6.4%

$127.35

RevPAR +7.1%

Total US – 12 months ending March 2019, year-over-year % chg

Hotel that appeals to guests because of its unique and local amenity and room configurations. Over half of these properties are in urban areas and cater to business and

• leisure. Boutique hotels often provide authentic cultural,

historic experiences and interesting guest services.

Boutique

73.5%

Occupancy +0.3%

$222.53

ADR +1.1%

$163.55

RevPAR +1.4%

Total US – 12 months ending March 2019, year-over-year % chg

A hotel with a major focus on conference or convention

• facilities. These properties typically have a large number
• f rooms and large meeting space. Convention hotels are

typically located in urban areas and focus on business guests.

Convention

71.9%

Occupancy +0.2%

$185.87

ADR +2.4%

$133.61

RevPAR +2.6%

Total US – 12 months ending March 2019, year-over-year % chg

Focuses on attracting guests for extended periods, often quoting weekly rates and providing home-like amenities including a kitchen. Extended stay hotels share many features with serviced apartments but are generally

• perated by hotel chains. These properties are aimed at

business travelers on extended assignment and others that are relocating.

Extended Stay

74.6%

Occupancy

• 0.2%

$105.05

ADR +2.0%

$78.35

RevPAR +1.9%

Total US – 12 months ending March 2019, year-over-year % chg

Extended Stay supply growing at fastest rate

1.4% 3.3% 0.3% 0.8% 5.9% 0.4% 4.1%

US average Boutique Condotel Convention Extended Stay Resort Soft Brand Total US – average annual growth by hotel type, 2014-2018

Boutique and Extended Stay see highest occupancy rates

66.2 73.5 62.3 71.9 74.6 70.5 65.7

50.0 55.0 60.0 65.0 70.0 75.0 80.0 85.0

US average Boutique Condotel Convention Extended Stay Resort Soft Brand Total US, 12 months ending March 2019, year over year % chg

Soft Brands lead in ADR growth

130.19 222.50 214.20 185.90 105.00 214.70 193.90

2.1% 1.1% 3.1% 2.4% 2.0% 2.3% 6.4%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%

50.0 70.0 90.0 110.0 130.0 150.0 170.0 190.0 210.0 230.0 250.0

US average Boutique Condotel Convention Extended Stay Resort Soft Brand ADR % Change Total US, 12 months ending March 2019, year over year % chg

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Comparing Hotels & Vacation Rentals

VRs achieve higher rates than hotels, with exception of Maui

558 359 320 214 206 170 260 128 421 131 146 105 Colorado Ski/Mountains Tahoe Maui Florida Panhandle Orlando/Central Florida Myrtle Beach All VRs Hotels March 2019 ADR Source: RedAwning, STR

Even smaller VRs achieve higher rates than hotels

331 220 253 144 64 260 128 421 131 146 105 Colorado Ski/Mountains Tahoe Maui Florida Panhandle Orlando/Central Florida Myrtle Beach Small VRs (Studio + 1 BR) Hotels March 2019 ADR Source: RedAwning, STR

Colorado Ski/Mountains

Source: RedAwning, STR 200,000 400,000 600,000 800,000 1,000,000 200 400

J a n

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Demand ADR

Hotels

100 200 300 400 500 600 700 800 200 400 600

J a n

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Demand ADR

Vacation Rentals

Colorado Ski/Mountains

Source: RedAwning, STR 200,000 400,000 600,000 800,000 1,000,000 200 400

J a n

• 1

8 M a r

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8 M a y

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Demand ADR

Hotels

100 200 300 400 500 600 700 800 200 400 600

J a n

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8 M a r

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8 S e p

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Demand ADR

Vacation Rentals

3% 14% 1% 3% 3% 1%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

Boutique Condotel Convention Extended Stay Resort Soft Brand

Colorado Ski/Mountains: Condotels most prevalent

March 2019 Source: RedAwning, STR

Tahoe

Source: RedAwning, STR 100,000 200,000 300,000 400,000 500,000 600,000 200

J a n

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8 M a r

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8 S e p

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Demand ADR

Hotels

0.0 100.0 200.0 300.0 400.0 500.0 600.0 700.0 200 400 600

J a n

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8 M a r

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8 M a y

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Demand ADR

Vacation Rentals

1.2% 1.2% 0.2% 2.0% 0.5% 1.2%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%

Boutique Condotel Convention Extended Stay Resort Soft Brand

Tahoe: no dominant hotel type

March 2019 Source: RedAwning, STR

Orlando, FL

Source: RedAwning, STR 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 200

J a n

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8 M a r

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8 M a y

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8 J u l

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8 S e p

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8 J a n

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Demand ADR

Hotels

0.0 50.0 100.0 150.0 200.0 250.0 300.0 200 400

J a n

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8 M a r

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8 M a y

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8 J u l

• 1

8 S e p

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8 N

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9 M a r

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Demand ADR

Vacation Rentals

Orlando, FL

Source: RedAwning, STR 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 200

J a n

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8 M a r

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8 M a y

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8 J u l

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8 S e p

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8 N

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Demand ADR

Hotels

0.0 50.0 100.0 150.0 200.0 250.0 300.0 200 400

J a n

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8 M a r

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8 M a y

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8 J u l

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8 S e p

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Demand ADR

Vacation Rentals

1.7% 4.2% 7.1% 14.1% 7.6% 1.5%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0%

Boutique Condotel Convention Extended Stay Resort Soft Brand

Orlando, FL: Extended Stay is dominant

March 2019 Source: RedAwning, STR

Florida Panhandle

Source: RedAwning, STR 200,000 400,000 600,000 800,000 1,000,000 1,200,000 200

J a n

• 1

8 M a r

• 1

8 M a y

• 1

8 J u l

• 1

8 S e p

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8 N

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8 J a n

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9 M a r

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Demand ADR

Hotels

0.0 200.0 400.0 600.0 800.0 1000.0 1200.0 200 400

J a n

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8 M a r

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8 M a y

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8 J u l

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8 S e p

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8 N

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Demand ADR

Vacation Rentals

1.6% 1.9% 1.9% 5.1% 2.2% 1.3%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%

Boutique Condotel Convention Extended Stay Resort Soft Brand

Florida Panhandle: slightly more Extended Stay than other hotel types

March 2019 Source: RedAwning, STR

Myrtle Beach, SC

Source: RedAwning, STR 200,000 400,000 600,000 800,000 1,000,000 1,200,000 200 400

J a n

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8 M a y

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8 J u l

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8 S e p

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Demand ADR

Hotels

0.0 200.0 400.0 600.0 800.0 1000.0 200 400

J a n

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8 M a y

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8 J u l

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8 S e p

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Demand ADR

Vacation Rentals

Myrtle Beach, SC

Source: RedAwning, STR 200,000 400,000 600,000 800,000 1,000,000 1,200,000 200 400

J a n

• 1

8 M a r

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8 M a y

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8 J u l

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8 S e p

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8 N

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8 J a n

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Demand ADR

Hotels

0.0 200.0 400.0 600.0 800.0 1000.0 200 400

J a n

• 1

8 M a r

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8 M a y

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8 J u l

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8 S e p

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8 N

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8 J a n

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Demand ADR

Vacation Rentals

2.0% 17.9% 2.6% 4.6% 4.2% 2.3%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0%

Boutique Condotel Convention Extended Stay Resort Soft Brand

Myrtle Beach, SC: Condotels dominate the market

March 2019 Source: RedAwning, STR

Maui, HI

Source: RedAwning, STR 240,000 250,000 260,000 270,000 280,000 290,000 300,000 310,000 320,000 330,000 200 400 600

J a n

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8 M a r

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8 M a y

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8 J u l

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8 S e p

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8 N

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8 J a n

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Demand ADR

Hotels

0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 200 400

J a n

• 1

8 M a r

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8 M a y

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8 J u l

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8 S e p

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8 N

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Demand ADR

Vacation Rentals

Maui, HI

Source: RedAwning, STR 240,000 250,000 260,000 270,000 280,000 290,000 300,000 310,000 320,000 330,000 200 400 600

J a n

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8 M a r

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Demand ADR

Hotels

0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 200 400

J a n

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8 M a r

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8 M a y

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Demand ADR

Vacation Rentals

2.6% 53.8% 7.7% 1.3% 19.2% 1.3%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

Boutique Condotel Convention Extended Stay Resort Soft Brand

Maui, HI: Condotels make up over 50% of supply in market

March 2019 Source: RedAwning, STR

Orlando leads with most compression nights in 2017, 2018

54 22 7 7 6 54 30 11 7 4 Orlando, FL Myrtle Beach Florida Panhandle Tahoe Colorado Ski Maui Island, HI

2017 2018

Compression >90%

Myrtle Beach market compression premium >50%

179.4 129.2 156.3 147.5 183.8 116.77 94.19 120.93 123.79 177.98

53.7% 37.1% 29.3% 19.1% 3.2% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 75.0 95.0 115.0 135.0 155.0 175.0 195.0 215.0 235.0

Myrtle Beach Florida Panhandle Tahoe Orlando, FL Colorado Ski

Compression Rate Non-Compression Rate Rate Premium

Compression >90%

49

Looking Forward

U/C hotel pipeline is still below prior peak (but slowly creeping up)

Total US Pipeline; Rooms In Construction, in ‘000s; 01/2006 – 03/2019

50 100 150 200 250 2006 2008 2010 2012 2014 2016 2018

Low: May ‘11 50K March ’19 201K High: Dec ‘07 211K Thousands

Limited service hotel construction is the name of the game

12.9 23.7 60.5 66.2 13.0 3.7 20.7

Luxury Upper Upscale Upscale Upper MidscaleMidscale Economy Unaffiliated

US Pipeline, Rooms In Construction , ‘000s Rooms, by Scale, March 2019

72%

Incoming Supply Market Summary

Market Rooms In Construction % Of Existing Colorado Ski/Mountains 1,085 2.9% Florida Panhandle 1,788 4.7% Maui, HI 0.0% Myrtle Beach, SC 289 0.8% Orlando, FL 6,573 5.2% Tahoe, CA 536 2.6%

US Pipeline, Rooms U/C and as % of Existing Supply, March 2019

Total United States hotel outlook (% change vs. prior year)

Outlook

Metric 2019 Forecast 2020 Forecast

Supply

1.9% 1.9%

Demand

1.9% 1.7%

Occupancy

0.0%

• 0.2%

ADR

2.3% 2.2%

RevPAR

2.3% 1.9%

Source: STR, Tourism Economics

What should worry us? ~900,000 Open Positions in Accommodations /Food Service…

200 400 600 800 1,000

1/1/2012 1/1/2014 1/1/2016 1/1/2018

Total U.S., Accommodation and food services, Job openings, seasonally adjusted, https://www.bls.gov/data/#employment

(‘000s)

.. and the fight for talent drives up hourly wages

$14.86 $15.42

$12 $13 $14 $15 $16

Jan-12 Jan-14 Jan-16 Jan-18

+3.8%

Total U.S., Leisure and hospitality, Accommodation, Average hourly earnings of production and nonsupervisory employees, not seasonally adjusted https://www.bls.gov/data CEU7072100008

Takeaways

• Pay attention to wage growth.
• The hotel industry expected to keep growing, just at a

slower pace.

• Practicing revenue management is key to achieving the

highest potential for your properties.

• Analyzing hotel data can give you a better understanding
• f overall lodging dynamics.

57

Thank You!

Jessica Haywood Director, Research & Development, STR jhaywood@str.com