The U.S. Lodging Industry - 2009: Been There; Done That; Doing It - PowerPoint PPT Presentation

The U.S. Lodging Industry - 2009: Been There; Done That; Doing It Again Presented to: CB Richard Ellis Hotels Hospitality Industry Outlook: Economic Recovery or Prolonged Retraction Washington DC March 10, 2009 Daniel H. Lesser Senior Managing Director – Industry Leader Hospitality & Gaming Group CB Richard Ellis, Inc. One Penn Plaza, Suite 1835 New York, NY 10119 USA Phone: 212.207.6064 Fax: 212.207.6069 Email: daniel.lesser@cbre.com

Agenda � Economic Review � U.S. Lodging Industry Operating Metrics � U.S. Lodging Industry Investment Metrics � Closing Comments CB Richard Ellis | Page 2

Business-Driven Economy Succumbs Contribution to Headline GDP Growth (%) 5 4 3 2 1 0 -1 -2 -3 -4 -5 2005 2006 2007 2008q1 2008q2 2008q3 2008q4 Consumer Driven GDP Business Driven GDP Government Driven GDP Source: BEA and CBRE Torto Wheaton Research CB Richard Ellis | Page 3

A Recession This Deep Cannot Resolve Itself Quickly Net Jobs Created per Quarter x 1000 1,500 1,000 500 0 -500 2008q1 -1,000 1990q3 -1,500 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 1990s Today Sources: CBRE/Torto Wheaton Research, Bureau of Labor Statistics. CB Richard Ellis | Page 4

TWR Forecasts US Job Loses Worse than in Previous Cycles 6 Forecast Percent Change in Employment 4 2 0 -.94% -1.39% -847 Th -1.5 Mil -2 -2.73% -2.05% -3.7% -3.08% -2.1 Mil -2.7Mil -5.1 Mil -2.7 Mil -4 -6.7% -1.1 Mil - -6 1974.3 1976.1 1977.3 1979.1 1980.3 1982.1 1983.3 1985.1 1986.3 1988.1 1989.3 1991.1 1992.3 1994.1 1995.3 1997.1 1998.3 2000.1 2001.3 2003.1 2004.3 2006.1 2007.3 2009.1 2010.3 2012.1 Total Nonfarm Employment Office Employment Office employment disproportionately hit 2008 Total Employment down 1.5% 2008 Office Employment down 2.2% CBRE Torto Wheaton Research Spring 2009 CB Richard Ellis | Page 5

Layoffs and Dwindling Confidence Have Led to Sharply Lower Consumer Spending… Personal Consumption Expenditures (Year-Over-Year Change, %) 15 10 5 0 -5 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 Source: CBRE/TWR, BEA. CB Richard Ellis | Page 6

… And Higher Savings Rates Personal Savings Rate (3 Month Mvg Avg, %) 4 3 2 1 0 -1 -2 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: CBRE/TWR, BEA. CB Richard Ellis | Page 7

Lending Has Shut Down Very Quickly Net Borrowing and Lending as % of GDP 40 35 30 25 20 15 10 5 1975.1 1976.4 1978.3 1980.2 1982.1 1983.4 1985.3 1987.2 1989.1 1990.4 1992.3 1994.2 1996.1 1997.4 1999.3 2001.2 2003.1 2004.4 2006.3 2008.2 Net Borrowing as % of GDP Source: Federal Reserve. CB Richard Ellis | Page 8

There is a Lot of Cash on the Sidelines Money Market Mutual Funds as % of GDP 25 20 15 10 5 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: CBRE/TWR, Federal Reserve Bank CB Richard Ellis | Page 9

National U.S. Recessions Dates Duration Aug. 1929 to March 1933 (Depression) 43 months May 1937 to June 1938 13 months Feb. 1945 to Oct. 1945 8 months Nov. 1948 to Oct. 1949 11 months July 1953 to May 1954 10 months Aug. 1957 to April 1958 8 months April 1960 to Feb. 1961 10 months Dec. 1969 to Nov. 1970 11 months Nov. 1973 to March 1975 16 months Jan. 1980 to July 1980 6 months July 1981 to Nov. 1982 16 months July 1990 to March 1991 8 months March 2001 to Nov. 2001 8 months Source: Smith Travel Research and National Bureau of Economic Research CB Richard Ellis | Page 10

National U.S. Recessions Source: National Bureau of Economic Research CB Richard Ellis | Page 11

U.S. Recessions and Stock Market Magnitude of Months of Months Until Year Decline Decline Full Recovery 1929 to 1933 151 83% 34 (Depression) 1937 50% 13 58 1946 22% 6 35 1962 22% 6 10 1970 29% 19 9 1974 43% 21 21 1987 30% 3 18 2002 45% 25 40 2008 47% 13* ?? * To date. Source: Center For Research In Security Prices (University of Chicago) CB Richard Ellis | Page 12

U.S. Lodging Industry Operating Metrics CB Richard Ellis | Page 13

Total United States Room Supply/Demand Percent Change Twelve Month Moving Average – 1989 to December 2008 6 4 2 0 -2 Supply % Change -4 Demand % Change -6 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 Source: 2009 Smith Travel Research, Inc. CB Richard Ellis | Page 14

Total United States Room Demand/Occ/ADR Percent Change Twelve Month Moving Average – 1989 to December 2008 10 8 6 4 2 2.4% 0 -2 -1.6% ADR % Chg -4 Demand % Change Occ % Chg -4.2% -6 -8 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 Source: 2009 Smith Travel Research, Inc. CB Richard Ellis | Page 15

Total United States RevPAR Percent Change Twelve Month Moving Average – 1989 to December 2008 12 10 8 6 4 2 0 -2 -4 -6 RevPAR % Chg -8 -10 -12 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 Source: 2009 Smith Travel Research, Inc. CB Richard Ellis | Page 16

Total United States Key Performance Indicators Percent Change December YTD 10 2007 2008 6.2 5.8 5 2.7 2.4 1.3 0.9 0 -0.4 -1.6 -1.9 -4.2 -5 Supply Demand Occupancy ADR RevPAR Source: 2009 Smith Travel Research, Inc. CB Richard Ellis | Page 17

Total United States Key Performance Indicators Percent Change 2008 – First 8 Months vs. Last 4 Months 10 Jan-Aug Sept-Dec 5 3.9 3.2 2.4 1.2 0 -0.3 -0.8 -2.6 -5 -4.6 -7.5 -8.2 -10 Supply Demand Occupancy ADR RevPAR Source: 2009 Smith Travel Research, Inc. CB Richard Ellis | Page 18

Total United States Demand Percent Change – Day of Week 2008 First 8 Months vs. Last 4 Months 4 2.4 2.1 1.8 2 0 -0.2 -0.8 -2 -1.2 -1.6 -1.9 -4 -3.5 -3.8 -4.1 -6 -5.9 Jan-Aug -8 Sept-Dec -10 -10.0 -12 -12.2 -14 Sun Mon Tue Wed Thu Fri Sat Source: 2009 Smith Travel Research, Inc. CB Richard Ellis | Page 19

Total United States ADR Percent Change – Day of Week 2008 First 8 Months vs. Last 4 Months 5 4.4 4.3 4.1 4.1 3.7 3.3 2.6 0.7 0.3 0.0 0 -0.1 -0.3 -1.3 -1.5 Jan-Aug Sept-Dec -5 Sun Mon Tue Wed Thu Fri Sat Source: 2009 Smith Travel Research, Inc. CB Richard Ellis | Page 20

Total United States Demand Percent Change – Chain Scale 2008 First 8 Months vs. Last 4 Months 5 3.6 1.9 1.6 1.0 0 -0.3 -0.4 -1.6 -2.2 -3.6 -5 -4.6 -4.7 -6.0 -6.2 Jan-Aug Sept-Dec -9.3 -10 Total US Luxury Upper Upscale Mid W Mid W/O Economy Upscale Source: 2009 Smith Travel Research, Inc. CB Richard Ellis | Page 21

Total United States ADR Percent Change – Chain Scale 2008 First 8 Months vs. Last 4 Months 5 4.2 4.0 3.8 2.6 2.3 2.0 1.7 1.7 0.9 0 -0.6 -0.7 -1.3 -1.5 Jan-Aug Sept-Dec -4.1 -5 Total US Luxury Upper Upscale Mid W Mid W/O Economy Upscale Source: 2009 Smith Travel Research, Inc. CB Richard Ellis | Page 22

Increasing Occupancy and ADR Chain Scales – Percent of Properties Year End 2007 – 3rd & 4th Quarters 2008 60 2007 YE Q3 2008 51.7 Q4 2008 48.6 50 42.1 40.5 40 38.4 35.5 30 23.7 22.7 21.7 20.6 19.1 18.6 20 14 12.4 11.9 10 10 7.1 2.8 0 Luxury Upper Upscale Mid With Mid W/O Economy Upscale Source: 2009 Smith Travel Research, Inc. CB Richard Ellis | Page 23

Declining Occupancy and ADR Chain Scales – Percent of Properties Year End 2007 – 3rd & 4th Quarters 2008 75 2007 YE Q3 2008 Q4 2008 60 53.8 50 42.5 34.7 33.1 31.7 28.5 24.9 23.3 25 20.6 17.2 16.4 10.8 8.1 6.2 5.5 4.1 2.2 0 Luxury Upper Upscale Mid With Mid W/O Economy Upscale Source: 2009 Smith Travel Research, Inc. CB Richard Ellis | Page 24

Total U.S. vs. Resort Locations Demand Percent Change Twelve Month Moving Average – 2005 to December 2008 5 Total U.S. Demand 4 Resort Demand 3 2 1 0 -1 -2 -3 -4 -5 2005 2006 2007 2008 Resort Demand Drops Faster / More Steeply Source: 2009 Smith Travel Research, Inc. CB Richard Ellis | Page 25

Total U.S. Lodging Industry Consecutive Quarterly Declines/Key Indicators 1990/1991 2001/2002 Current Room 3 5 4 Demand 7 6 5* Occupancy Average Daily 0 5 1 Rate 5 5 2 RevPAR Room 2 5 1 Revenue * 8 out of the last 10 quarters Source: 2009 Smith Travel Research, Inc. CB Richard Ellis | Page 26

Total United States Active Development Pipeline – Rooms/Change From Last Year December December Phase Difference % Change 2008 2007 In Construction 185,119 211,694 -26,575 -12.6% Final Planning 88,539 83,985 4,554 5.4% Planning 339,234 319,963 19,271 6.0% Active Pipeline 612,892 615,642 -2,750 -0.4% Pre-Planning 139,951 124,472 12,729 12.4% Total 752,843 740,114 12,729 1.7% Source: STR / TWR / Dodge Construction Pipeline CB Richard Ellis | Page 27

Total United States Abandoned Rooms Year-over-year percent change 90% 75% 70% 70% 56% 50% 34% 31% 30% 16% 17% 10% Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Source: STR / TWR / Dodge Construction Pipeline CB Richard Ellis | Page 28