Hotel Investment – The next move June 2014 Hospitality Business Summit 2013 92 2013 OPERATOR SEARCH STUDIES HBU’s FEASIBILITIES STRATEGIES 12 PROCESSES 153 LOI – MOU’s 7 AGREEMENTS $2.1m SAVINGS 7 153 PEOPLE HOTEL ASSET MANAGEMENT 11 HOTELS OVER PROFESSIONALS OVER 100 YEARS COMBINED EXPERIENCE 4000 HOTEL VALUATIONS KEYS $6.3 2013 10.3% AVERAGE BILLIONS EBITDA INCREASE COMBINED ASSET VALUE 38,043 KEYS ADDED VALUE Offices: Dubai, Abu Dhabi, Doha, Riyadh, Jeddah, Cairo 16 YEARS LOCALLY 100’s HOTEL P&Ls 1000s AGREEMENTS GLOBAL BENCHMARKS Colliers International Hotels Range of Services Asset / Facilities Management Highest & Best Use Assessments Financial Feasibility Study Land Lord / Tenant Representations Valuation & Brokerage Project Lifecycle Operator Search and Selection Identification of Market Opportunities Investment Teasers / Information Memoranda Portfolio Assessments Business Plans 3 Dubai Current Supply Current Demand 0 2004 2005 2006 2007 2008 Hotel Supply (No. of Keys) 2009 2010 2011 2012 2013 2009 2010 11.4 29.0 19.0 16.7 2008 7.6 16.7 15.9 2007 9.6 2006 CAGR + 10.0% 2011 2012 CAGR + 17.7% 2013 Hotels 10% Growth for Hotel Guest nights 18% Growth for Hotel Apartment Guest nights 110,000 Keys by 2018 Future Demand 120,000 CAGR +4.2% 100,000 80,000 2005 Serviced Apartments Serviced Apartment Supply (No. of Keys) Future Supply 2004 6.1 0 5.8 31,645 32,617 26,155 29,834 5 4.7 40,981 43,419 62,285 57,343 51,115 53,828 14.0 10 10,190 3.6 10,000 7,278 9,217 15 2.9 30,000 8,395 CAGR +10.1% 2.9 40,000 18,068 13.4 15,618 20 12.3 50,000 21,015 23.3 23,069 19,840 60,000 20,000 25 24,171 70,000 30 12.5 CAGR +14.3% 80,000 35 26.0 90,000 Millions 51% - 5 Star and 4 Star 100,000 29,460 25,443 29,681 29,681 26,636 24,171 60,000 CAGR +5.4% 40,000 62,285 68,584 71,167 2013 2014(f ) 2015(f ) 79,861 80,868 81,068 2016(f ) 2017(f ) 2018(f ) 20,000 0 Hotel Supply (No. of Keys) Source: Colliers International, 2014 Serviced Apartment Supply (No. of Keys) Tourism Infrastructure Destination Dubai – Corporate Leisure Double Digit Growth We expect the trend to continue Mega events Expo 2020 4 Abu Dhabi Current Supply Current Demand 6 6.0 4,709 7 3,428 12,000 5,000 6,238 6,787 2006 2007 2 18,261 2,828 13,929 15,568 1 9,398 7,503 2010 2008 2009 2010 2011 2012 Future Supply 33,000 Keys by 2018 30,000 6,751 6,687 6,051 Future Demand 7,107 6,751 5,225 CAGR +7.3% 15,000 18,261 2013(e) 19% Growth for Hotel Guest nights 12% Growth for Hotel Apartment Guest nights CAGR +6.3% 10,000 2011 2012 Serviced Apartments Hotels 2013 Serviced Apartment Supply (No. of Keys) 35,000 25,000 CAGR + 11.5% 0 0 Hotel Supply (No. of Keys) 1.9 2,288 2,662 3 1.9 10,000 CAGR + 19.4% 3.5 CAGR +16.6% 4.4 4 4,231 1.6 15,000 20,000 5.1 5 4,550 2.3 5,225 20,000 CAGR +12.5% Millions 61% - 5 Star and 4 Star 25,000 20,907 21,809 23,020 2014(f) 2015(f) 2016(f) 25,264 26,007 2017(f) 2018(f) Continued investment Leisure destination – Saadiyat/ Yas MICE and Business positioning 5,000 0 2013 Hotel Supply (No. of Keys) Source: Colliers International, 2014 Serviced Apartment Supply (No. of Keys) Introducing new segments into the market Consolidating the existing demand 5 Market Performance Evolution of Key Performance Indicators: 20011 – 2013 90% Sharjah 80% Dubai Tourism Hub Dubai Jeddah Ras Al Khaimah Occupancy (%) Fujairah 70% Abu Dhabi 60% Abu Dhabi Emerging MICE and Leisure Muscat Al Ain Riyadh Cairo 50% Ras al Khaima Affordable Luxury Al Khobar 40% 30% 70 90 110 130 150 2011 170 190 ADR (USD) 2012 210 230 250 270 Fujeirah The Getaway 2013 Source: STR Global, Colliers International, 2014 Average occupancy in Dubai reached 81% in 2013 with an ADR of USD 247; Abu Dhabi, on the other hand, experienced a rate compression with an ADR of USD 132 in 2013 while the occupancy recovered to reach 6 69%, we expect further recovery as the market consolidates Opportunity: Mid market hotels Mid Market Hotels Gap Cost Efficiency Market Gap Supply Gap/ Rate Gap Wider audience/ Target Market Projected Occupancy of 80% to 85% by 2018 Lower Investment/ Incentives Incentives by authorities (Land) Budget hotel investment range: USD 90,000 to USD 110,000 Upscale hotel investment range: USD 160,000 to USD 180,000 Efficient Optimum utilization of BUA Short construction/ fit out period Efficient operations: GOP in the range of 40% to 55% We expect the mid market hotel segment to experience considerable growth in the next 3 to 5 years 7 Opportunity: Serviced Apartments Serviced Apartments: Operating Model Standard (All) Residential Serviced Apartments Rooms sold on daily basis Annual contracts Annual or quarterly payments Rooms sold on annual basis Lower operating costs Extensive streetlevel retail Limited staff to unit ratio Hotel Full kitchen Rooms sold on monthly basis Payment post-stay Monthly payments Kitchenette Limited food and beverage options Mini bar Cleaning 2 to 3 times per week Restaurants 0.51 Staff per unit High staff to unit ratio Higher operating costs Full range of hotel services 0.78 Staff per unit Leisure facilities Deluxe (Branded) Limited services No cleaning Deluxe (All) Daily cleaning Features unique to Residential apartments Possible common features between Residential apartments and Serviced Apartments Features unique to Hotel apartments 0.60 Staff per unit Possible common features between Hotels and Serviced Apartments Features unique to Hotels With average occupancies over 85% in many parts of the city, many serviced apartments in Dubai are confident that they will be able to fill with transient demand paying strong rates and see long stay guests as an erosion of potential revenue streams Deluxe (Unbranded) 0.84 Staff per unit 8 Opportunity: Branded Residences The Concept The Premium PHYSICAL ATTRIBUTES SERVICES & AMENITIES IMAGE & ASSOCIATION Prime Residential Product Premium Branded Hotel •New construction building •Unique features (e.g. Rooftop pool) •Very good accessibility •Luxury brand •Iconic building design •Star Architect •Famous building name •High floor •Prime global city •Prime neighborhood HIGH PREMIUM 30-40% AND HIGHER •High-end finishing •Branded quality white goods and electronics •Easy accessibility •Hotel amenities •Health club •Spa •Valet parking •Boutique/lower tier brand •Unique building design •Recognized architect •Desirable views •Renowned location/neighborhood MEDIUM PREMIUM 15-30% Branded Residences •Conversion building •Communal facilities (e.g. garden) Source: Colliers International, 2014 •Five-star hotel services •High-end restaurants •Extensive luxury leisure facilities •Luxury spa •Private parking •24 h security •Limited leisure facilities •Professional architect •Good location/neighborhood •Low floor LOW PREMIUM 15% AND LOWER Strength of hotel brand ensuring high occupancy and stability in returns; In a rising residential market, benefits capital value appreciation; In a rising hotel market income growth from increases in Average Room Rates; Minimum hassle – maintained and managed by hotel operator; Low security and damage risk; Ability to use the residence for personal use on a set number of days 9 each year (0-14 days)