Lodging Industry Update
2014 Hospitality Asset
Managers Association
Fall Conference
Scott D. Berman
U.S. Industry Leader, Hospitality & Leisure
September 17, 2014
Agenda
PwC
Recovering
economy
Robust industry
fundamentals
Limited supply
growth
Rising hotel
values and
transaction volume
Positive investor
sentiment
Brand evolution
Rise of sharing
economy
Industry activism
Megatrends
2
U.S. Economic Performance
Opportunities
Risks
• Cyclical dynamics and receding
headwinds (e.g. less fiscal drag,
receding uncertainty, and
employment gains)
• Slowing housing recovery
• Rising household wealth and
consumer spend
• Robust financing environment
• Dow and S&P reach new highs
• Impending interest rate
increases
• Risk of a slowdown in China
• Lingering European economic
risks
• Conflicts in Ukraine and the
Middle East
Sources: Macroeconomic Advisers, PwC
PwC
3
Lodging Supply and Demand Growth in the U.S.
Average Lodging Demand Outpaces Lodging Supply
8.0%
6.0%
4.0%
2.7%
2.0%
1.8%
1.6%
0.0%
1.1%
-2.0%
-4.0%
-6.0%
-8.0%
2002
2003
2004
Demand
2005
2006
2007
2008
Average Demand
2009
2010
2011
Supply
2012
2013
2014
2015
Average Supply
Sources: STR; Bureau of Economic Analysis; Bureau of Labor Statistics; Macroeconomic Advisers, LLC, PwC
PwC
4
Lodging Performance
U.S. Top 25 Markets vs All Other U.S. Markets
Percentage Change in RevPAR
FY14 RevPAR growth is narrowing between the top 25 markets and
all other U.S. markets.
8.0%
7.8%
1.8%
6.6%
6.0%
2.0%
0.5%
2.1%
4.8%
4.6%
2012
7.5%
6.9%
YTD July 2013
2013
Top 25 Markets
YTD July 2014
All Other US Markets
Source: STR
PwC
5
Lodging Performance
“Hottest” Top 25 Markets in FY14
Percentage Change in RevPAR
Atlanta
12.2%
Tampa
12.2%
Seattle
12.4%
San
San Francisco
Denver
Nashville
Nashville
13.6%
16.9%
19.1%
Source: STR
PwC
6
Lodging Performance
Luxury and Upper Upscale Room Rate Leaders
Top 25 Markets
Boston
San Francisco
$190
$205
$244
$221
Miami
Honolulu
$223
$207
$263
$282
$250
New York
$299
YTD July 2013
$272
$314
YTD July 2014 Increase
Source: STR
PwC
7
PwC U.S. Lodging Outlook
2014
Demand
↑ 4.0%
Supply
Occupancy
+
Occupancy
+
↑ 3.1%
ADR
=
ADR
=
↑ 4.4%
RevPAR
↑ 7.6%
↑ 1.0%
2015
Demand
↑ 2.7%
Supply
↑ 1.1%
↑5.7%
RevPAR
↑ 6.9%
↑ 1.6%
Source: PwC Hospitality Directions U.S., August 2014
PwC
8
A Focus on Greater Miami & the Beaches
Miami Lodging Performance
100.0%
$250
90.0%
80.0%
70.0%
$200
77.9%
64.3%
$176.66
60.0%
$150
$137.60
50.0%
$106.23
40.0%
30.0%
$100
$68.31
20.0%
$50
10.0%
0.0%
$2003
2004
2005
2006
2007
2008
2009
Occupancy
2010
ADR
2011
2012
2013
YTD July YTD July
2013
2014
RevPAR
Source: STR
PwC
9
Recent Miami Hotel Transactions
Soho Beach House
St. Regis Bal Harbour
Raleigh Hotel
Casa Moderna
March 2014
January 2014
April 2014
January 2014
Value: $81.5 Million
$/Key: $1.6 Million
Seller: WP Carey (REIT)
Buyer: N/A
Rooms: 50
Source: RCA
PwC
Value: $213 Million
$/Key: $1 Million
Seller: Starwood
Buyer: Al Faisal
Rooms: 207
Source: RCA
Value: $69.3 Million
$/Key: $561 K
Seller: sbe Hotels
Buyer: The Raleigh Group
Rooms: 105
Source: RCA
Value: $37.5 Million
$/Key: $670 K
Seller: Africa Israel IG
Buyer: CGI Merchant Group
Rooms: 56
Source: RCA
10
New Brands Emerging in Greater Miami & the
Beaches
Latin American/Spanish
Asian
Domestic
Sources: Marriott International, Hotel-Online, Lodging Magazine, Miami Herald, Hospitality Net, Travel Weekly
PwC
11
Rise of the Sharing Economy
Founded in 2009
Represented in 37 countries and 70+ cities
Valued at $18.2B
Founded in 2012
Represented in 64 markets in the U.S.
Valued at $700 M
Sources: Uber, New York Times, Miami Herald, NBC News, Local 10 (ABC)
PwC
12
Activism in the Industry
Key Issues
Short-Term Online Rentals
Online Travel Agencies
Sources: Airbnb, FlipKey, HomeAway, American Hotel & Lodging Association, TravelClick, Forbes
PwC
13
Activism in the Industry
Key Issues
Labor
Living Wage Battles
• Recent Approvals:
- Seattle: $15.00 by 2017, passed in June 2014
- San Diego: $11.50 by 2017, passed in August 2014
• Proposed Increases:
- Los Angeles: $15.37 by 2017
- Chicago: $13.00 by 2018
NLRB – Joint Employer Decision
What are the implications for the hotel industry?
Sources: American Hotel & Lodging Association, CNN Money, Businessweek, Chicago Tribune
PwC
14
Activism in the Industry
Additional Issues
American Hotel & Lodging Association 2014 Policy Agenda
• Improving employer access to a seasonal workforce
• Altering the Affordable Care Act
• Ensuring new federal tax proposals are pro-business
• Supporting growth in foreign visitors through programs such as
Jobs Originating through Launching Travel
• Stifling patent assertion entities and their related lawsuits
• Extending the Terrorism Risk Insurance program
Source: American Hotel & Lodging Association
PwC
15
PwC Megatrends
“A pattern or movement which has a major impact on
business or society as a whole.” PwC groups them into five
megatrends:
1. Demographic Shifts
2. Shift in Economic Power
3. Accelerating Urbanization
4. Climate Change and Resource Scarcity
5. Technological Breakthroughs
Source: PwC
PwC
16
PwC Megatrends
1. Demographic Shifts
Sources: UN Population Division, World Population Prospects, 2 FT, Oxfam, ‘The World’s Women,’ UN, PwC Talent Mobility 2020 and Beyond
PwC
17
PwC Megatrends
2. Shift in Economic Power
Sources: OECD, UNESCO, Chinese National Bureau of Statistics, NASSCOM, UNCTAD, The Economist, IMF, World Economic Outlook, PwC
PwC
18
PwC Megatrends
3. Accelerating Urbanization
Sources: New York Times, Brookings Institution, The Future Build, UN Habitat, United Nations, UN Department of Economic
and Social Affairs, PwC
PwC
19
PwC Megatrends
4. Climate Change and Resource Scarcity
Sources: National Intelligence Council, M. Pidwirny, BP Statistical Review of World Energy, Intergovernmental Panel on Climate Change,
IEA, Carbon Tracker, Hellar and Keoleian, PwC
PwC
20
PwC Megatrends
5. Technological Breakthroughs
Sources: Experian, Cisco Internet Business Solutions Group, Forbes, C. Frey and M. Osborne, Nike, IDC, MIT Technology Review, Facebook,
UN Population Division, World Population Prospects, PwC
PwC
21
PwC Megatrends
Something for All of Us to Think About –
Implications on the Hospitality Industry
• Increasingly dynamic and segregated customers
• Rising operating costs
• Emergence of new, technology-driven competition, opportunities,
and resources
Source: PwC
PwC
22
“Where are we now and where are we headed?”
PwC
Recovering
economy
Robust industry
fundamentals
Limited supply
growth
Rising hotel
values and
transaction volume
Positive investor
sentiment
Brand evolution
Rise of sharing
economy
Industry activism
Megatrends
23
PwC demonstrates its capabilities with sectorspecific thought leadership
• Hospitality Directions – U.S.
• Hospitality Directions – Europe
• Manhattan Lodging Index
• Five Megatrends and Possible
Implications
• Experience Radar 2012 - Consumer
Insight for the US Hospitality
Industry
• Convention and Congress Center
Annual Report
• Global Gaming Outlook
• Global Sports Market Outlook
• South African Hospitality Outlook
• Emerging Trends in Real Estate®
• PwC Real Estate Investor Survey
PwC
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pwc.com
scott.berman@us.pwc.com
@berman_scott
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PwC
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