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Hotel InduSTRy Overview

Chris Klauda, CHIA

Director, Destination Research

cklauda@str.com

ESTO Webinar November 12, 2015

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1. Visit www.HotelNewsNow.com 2. Create Free Login 3. Click on “Data Presentations”

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The recognized leader in hotel benchmarking Founded in 1985 Sample 72% of total U.S. room supply; 50% of total global room supply. Provide monthly, weekly, and daily STAR reports to over 46,000 hotels,

representing 6.1 million rooms worldwide Provide reports to DMOs, CVBs and any organization working in the lodging

industry Impartial, timely, confidential

About STR

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1. Industry Record Breaking Continues

2. Group and Transient Pricing Power

• What do Meeting Planners Think?

3. Highest & Lowest Growth Markets

4. Pipeline Growth

5. Where Are We Headed?

5 Things to Know …..

U.S. Pulse – Going Gangbusters 1

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OCC 65.4% ▴2.5% RECORD

Metric No. Status Remarks

ROOM REV $141B ▴8.2% RECORD

OCC ROOMS* 1.2B ▴3.4% RECORD

AVAIL ROOMS 1.8B ▴1.0% RECORD

ADR $119 ▴4.6% RECORD

REVPAR $78 ▴7.2% RECORD

U.S. Hotels TTM Sept 2015

SOURCE: STR * Demand

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Demand Growth Rates Slow. Supply Growth Now Back At 1%.

1.0

-0.8

-4.7

-7.1

7.7

3.4

-8

-4

0

4

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1990 2000 2010

Supply % Change

Demand % Change

Total U.S., Supply & Demand % Change, 12 MMA 1/1990 – 09/2015

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ADR Growth Healthy. Occ Growth Easing.

-3.4

-6.7

-9.7

2.5

6.8 7.5

4.6

-10

-5

0

5

1990 2000 2010

Occ % Change

ADR % Change

Total U.S., ADR & OCC % Change, 12 MMA 1/1990 – 09/2015

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ADR Growth Healthy. Demand Easing.

-0.6

-4.7

-7.1

3.4

6.8 7.5

4.6

-10

-5

0

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1990 2000 2010

Demand % Change

ADR % Change

Total U.S., ADR & OCC % Change, 12 MMA 1/1990 – 09/2015

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TTM September 2015 $141 billion

U.S. hotel room revenue

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52% of U.S. rooms revenue in 2015 came from 8 states 33% from California, Florida and New York

U.S. Hotels TTM Sept 2015

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Where are we in the lodging cycle?

The Back 9

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TTM September 2015 $78

U.S. hotel RevPAR

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Expect More Of The Same: Positive (but slowing) Growth

-20

-15

-10

-5

0

5

10

1990 2000 2010

-16.8%

-2.6%

-10.1%

9.3% 8.5%

Total U.S., RevPAR % Change, 12 MMA 1/1990 – 9/2015

65 Months 61 Months 112 Months

7.2%

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Group and Transient Pricing Power

Group Transient Contract

Segmentation

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Chain Scales - examples

Luxury Upper Upscale

Upscale Upper Midscale Midscale Economy

Four Seasons Hilton Courtyard Comfort Suites Best Western Days Inn

Loews Hyatt DoubleTree Hampton Inn La Quinta EconoLodge

Ritz Carlton Marriott Hilton Garden Inn Holiday Inn Ramada Motel 6

W Hotel Westin Radisson Holiday Inn Express Sleep Inn Super 8

Demand Segmentation: Continued Group Rebound

2.3

2.7 2.7

1.7

Luxury Upper Upscale

Transient % Change Group % Change

*Segmentation Occupancy % Change, by Class, September 2015 TTM

ADR Segmentation: Transient and Group Increases Growth Pace

4.4 4.5

3.9 3.6

Luxury Upper Upscale

Transient % Change Group % Change

*Segmentation ADR % Change, by Class, September 2015 TTM

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Transient ADR Growth Follows High Occupancies

2.6%

4.4%

0%

1%

2%

3%

4%

5%

6%

Feb 12 Feb 13 Feb 14 Feb-15

Demand % Change

ADR % Change

*Transient Demand and ADR % Change, 12 MMA, 1/2012 – 09/2015

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Group Demand Growth Slows As Hotels Are Full

1.9%

3.8%

-2%

-1%

1%

2%

3%

4%

5%

6%

2012 2013 2014 2015

Demand % Change

ADR % Change

*Group Demand and ADR % Change, 12 MMA, 1/2012 – 09/2015

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September 2015

4.2 million

more transient rooms sold than in the prior 12 months

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September 2015

1.6 million

more group rooms sold than in the prior 12 months

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MEETING SIZE

Meetings of 1000+ attendees make up the largest major meeting segment and are on the rise.

30%

38%

32% 28%

35% 37%

Less than 300 300-999 1000+

2013 2015

OVERALL ATTENDANCE AT LARGEST MEETING PLANNED IN LAST YEAR

*DMAP 2015, a national survey of meeting planners www.str.com/products/destinationmap

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What Are Meeting Planners Saying?

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Sources that are personal or directly connected to meeting planner are the most trustworthy and valued.

83% 76%

58% 57% 56% 45%

Past experience Attendeefeedback

Hotel website Colleaguerecommendations

Hotel rating/userreview sites

Destinationwebsite

“VERY IMPORTANT” INFORMATION SOURCES

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CONSIDERATIONS RATED “VERY IMPORTANT” IN SITE SELECTION

COSTS

CONVENIENCE

CLEAN/ ATTRACTIVE

Meeting planners are demanding when selecting a meeting site

50% 60% 70% 80% 90% 100%

Clean/attractive city

Attractive conference hotels

# of hotel rooms available

Convenient airline service

Easy for delegates to get to

Food and lodging costs

Travel costs to destination

Good value for the money

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CONSIDERATIONS RATED “VERY IMPORTANT” IN SITE SELECTION

50% 60% 70% 80% 90% 100%

Clean/attractive city

Attractive conference hotels

# of hotel rooms available

Convenient airline service

Easy for delegates to get to

Food and lodging costs

Travel costs to destination

Good value for the money

2015

2013

COSTS

CONVENIENCE

CLEAN/ ATTRACTIVE

Meeting planners are demanding when selecting a meeting site

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3 U.S. Market Performance

162 markets

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RevPAR September 2015 YTD: Low Oil Price = Lower RevPAR

Market RevPAR %

Change Market RevPAR %

Change

Macon/Warner Robbins, GA 19.0 New York, NY (1.6)

San Jose/Santa Cruz, CA 18.9 West Virginia (1.8)

Oakland, CA 16.6 Texas North (1.9)

Portland, OR 15.1 New Mexico South (2.1)

Phoenix, AZ 14.9 Houston, TX (2.4)

Chattanooga, TN-GA 14.7 Augusta, GA-SC (7.1)

Fort Myers, FL 14.5 Texas South (7.3)

Greenville/Spartanburg, SC 14.3 Oklahoma Area (9.4)

Melbourne/Titusville, FL 14.1 Texas West (14.9)

California North Central 13.7 North Dakota (16.2)

*September 2015 YTD RevPAR: Best / Worst Performing Markets

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ADR September 2015 YTD: West Coast Very Strong, NYC Still Weak

Market ADR % Change Market

ADR % Change

San Jose/Santa Cruz, CA 15.2 Jackson, MS 1.0

Oakland, CA 12.2 Texas North 1.0

Portland, OR 10.9 New Mexico South 0.8

Sarasota/Bradenton, FL 10.1 Bergen/Passaic, NJ 0.1

Phoenix, AZ 9.6 McAllen/Brownsville, TX

(0.1)

Nashville, TN 9.2 Oklahoma Area

(0.9)

Melbourne/Titusville, FL 9.0 New York, NY

(1.4)

Seattle, WA 9.0 North Dakota

(3.1)

Savannah, GA 8.7 Texas South

(4.3)

Wyoming 8.5 Texas West

(5.8)

* September 2015 YTD ADR : Best / Worst Performing Markets

3 U.S. Market Performance

50 markets

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September 2015 YTD: Houston and NYC Perform Poorly

Market OCC % ADR % Change

Phoenix, AZ 66.5 14.9

Tampa/St Petersburg, FL 73.4 13.1

Nashville, TN 74.6 11.8

Seattle, WA 79.0 10.1

Orlando, FL 77.7 9.7

New Orleans, LA 70.4 4.8

Minneapolis/St Paul, MN-WI 70.3 3.9

Oahu Island, HI 85.2 2.6

New York, NY 84.3 -1.6

Houston, TX 70.0 -2.4

* September 2015 YTD ADR % Change in Top 25: 5 Best / 5 Worst Performing ADR % Markets

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Markets 26-50: Markets Around SF Lead

Market OCC % ADR % Change San Jose/Santa Cruz, CA 79.8 15.2

Oakland, CA 81.1 12.2

Portland, OR 76.9 10.9

Richmond/Petersburg, VA 63.6 7.5

Austin, TX 75.5 7.4

Fort Worth/Arlington, TX 68.2 3.3

San Antonio, TX 67.1 3.3

Pittsburgh, PA 66.9 2.6

Oklahoma City, OK 63.9 2.2

Baltimore, MD 68.6 1.1

*September 2015 YTD ADR % Change, Markets 26-50: 5 Best / 5 Worst Performing ADR % Markets

Making the Grade: Top 25 Markets Brad Garner – SVP

August, 2015

Methodology of Grades

• Data from June 2009, 2011, 2013, and 2015 – 12MMA

• Calculated the relative position (rank) of supply, demand, ADR

• Applied weighted factors to each of the metrics (in each year)

• Averaged all the metrics to come up with the index

• Averaged the index for all four years

• Gave 1-3 points based on average index

• Gave 1-3 points based on RevPAR forecast for 2015 & 2016

• Totaled points to come up with grades

Top 25 markets – “A” Grade

Dallas

Denver

Los Angeles

Nashville

Orlando

San Francisco

Seattle

Tampa

Most Likely to be Famous: Nashville • Highest ADR and RevPAR growth

at 10.5% and 14.9%

• Highest group RevPAR growth at 14.3%

• Its Own TV Show (Get on Board)

*forecast is preliminary *all metrics reported are as of June 15 12MMA

Most Athletic: Phoenix

• Super Bowl XLIX & Phx. Open 2/2015

• January RevPAR up 43%

• February RevPAR up 18%

• 2nd largest RevPAR growth as of June 12MMA

• Highest forecast RevPAR growth for 2015 at 12.8%

*forecast is preliminary

Most Likely to enter Rehab: Houston

• Occ down 3.8% YTD

• RevPAR down 1.7% YTD

• 2nd lowest RevPAR forecast for 2015 at 2.5%

*forecast is preliminary

Pipeline Accelerates

4

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4. In Construction – Vertical construction on the physical building has begun. (This does not include construction on any sub-grade structures.) 3. Final Planning – construction will begin within the next 12 months. 2. Planning – construction will begin in more than 13 months. 1. Unconfirmed (formerly Pre-Planning) - Potential projects that remain unconfirmed at this time.

STR Pipeline Phases U

nd

er

Co

ntr

act

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US Pipeline: Construction Today Will Impact 2016 / 2017

Phase 2015 2014 % Change

In Construction 132 110 20%

Final Planning 175 120 46%

Planning 134 164 -18%

Under Contract 441 395 12%

*Total US Pipeline, by Phase, ‘000s Rooms, September 2015 and 2014

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Limited Service Construction Has Been Strong For 2 Years

5.9

11.9

46.2 42.9

5.0 1.8

18.6

Luxury UpperUpscale

Upscale UpperMidscale

Midscale Economy Unaffiliated

*US Pipeline, Rooms In Construction , ‘000s Rooms, by Scale, September 2015

67%

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Pipeline (’000s rooms): Top 26 Markets Have ~50% Of U/C Rooms

64.5 67.7 71.1

103.9

58.8

75.3

Top 26 Markets Rest of the US

In Construction

Final Planning

Planning

*US Pipeline, Rooms (‘000s), Top 26 Markets vs. All Other Markets, September 2015

(132)

(175)

(134)

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Construction In Top 26 Markets: 11 Markets w/4%+ Of Supply

*US Pipeline, Top 26 Markets, U/C Rooms as % of Existing Supply, September 2015

Market Rooms U/C % Of Existing

1 New York, NY 13,107 11%

2 Houston, TX 6,639 9%

3 Miami/Hialeah, FL 3,314 7%

4 Denver, CO 2,404 6%

5 Nashville, TN 1,703 4%

6 Dallas, TX 3,427 4%

7 Anaheim/Santa Ana, CA 2,291 4%

8 Los Angeles/Long Beach, CA 4,052 4%

9 Boston, MA 2,144 4%

10 Philadelphia, PA-NJ 1,846 4%

11 Minneapolis/St Paul, MN-WI 1,548 4%

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Construction In Top 26 Markets: Eight With 2%+ Of Supply

*US Pipeline, Top 26 Markets, U/C Rooms as % of Existing Supply, September 2015

Market Rooms U/C % Of Existing

12 Washington, DC-MD-VA 3,588 3%

13 Seattle, WA 1,334 3%

14 San Diego, CA 1,785 3%

15 Detroit, MI 1,126 3%

16 Phoenix, AZ 1,577 3%

17 Chicago, IL 2,753 2%

18 Las Vegas, NV 3,905 2%

19 Tampa/St Petersburg, FL 1,012 2%

20 New Orleans, LA 792 2%

21 Atlanta, GA 1,398 1%

22 Orlando, FL 1,645 1%

23 Norfolk/Virginia Beach, VA 394 1%

24 St Louis, MO-IL 332 1%

25 San Francisco/San Mateo, CA 430 1%

26 Oahu Island, HI 0%

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Where Are We Headed? 5

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Total United States Key Performance Indicator Outlook (% Change vs. Prior Year) 2015 - 2016

Outlook

2015 Forecast

2016 Forecast

Supply 1.2% 1.4%

Demand 2.9% 2.2%

Occupancy 1.7% 0.8%

ADR 5.1% 5.2%

RevPAR 6.8% 6.0%

*As of 8/1/15

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Total United States Chain Scale Key Performance Indicator Outlook 2015F by Chain Scale

2015 Year End Outlook

Chain Scale Occupancy

(% chg) ADR

(% chg) RevPAR (% chg)

Luxury 0.4% 5.4% 5.9%

Upper Upscale 0.9% 5.0% 5.9%

Upscale 0.6% 5.4% 6.1%

Upper Midscale 1.9% 5.0% 7.0%

Midscale 2.0% 4.5% 6.5%

Economy 1.9% 5.3% 7.2%

Independent 2.0% 4.8% 6.9%

Total United States 1.7% 5.1% 6.8%

*As of 8/1/15

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Total United States Chain Scale Key Performance Indicator Outlook 2016F by Chain Scale

2016 Year End Outlook

Chain Scale Occupancy

(% chg) ADR

(% chg) RevPAR (% chg)

Luxury 0.5% 5.3% 5.8%

Upper Upscale 0.7% 5.6% 6.4%

Upscale 0.7% 5.2% 5.9%

Upper Midscale 0.8% 4.6% 5.4%

Midscale 0.9% 4.1% 5.0%

Economy 1.0% 4.4% 5.4%

Independent 0.4% 5.1% 5.5%

Total United States 0.8% 5.2% 6.0%

*As of 8/1/15

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-5% to 0% 0% to 5% 5% to 10% 10% to 15%

New York Houston Anaheim Phoenix Oahu Atlanta Tampa

Philadelphia Boston

Chicago

Dallas Denver Detroit

Los Angeles Miami

Minneapolis Nashville

New Orleans

Norfolk Orlando

San Diego

San Francisco Seattle

St. Louis Washington, DC

2015 Year End RevPAR Forecast (Total U.S. 6.8%) Top 25 US Markets, August 2015 Forecast (Markets sorted alphabetically)

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2016 Year End RevPAR Forecast (Total U.S. 6.0%) Top 25 US Markets, August 2015 Forecast (Markets sorted alphabetically)

-5% to 0% 0% to 5% 5% to 10% 10% to 15%

Atlanta Anaheim Boston Dallas Chicago Denver

Los Angeles Detroit Miami Houston

New Orleans Minneapolis New York Nashville Norfolk Oahu

Orlando Philadelphia

Phoenix San Diego

San Francisco Seattle

St. Louis

Tampa Washington, DC

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In sum…..

(mostly)

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1. Industry Record Breaking Continues And Continues

2. Group and Transient Pricing Power Is All Good

• What do Meeting Planners Think? Tough Bunch

3. Highest & Lowest Growth Markets Some Challenged

4. Pipeline Growth Scattered

5. Where Are We Headed? Up

5 Things to Know …..

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Other Items of Interest

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Certification in Hotel Industry Analytics (CHIA)

STR and AHLEI have partnered to launch the Certification in Hotel Industry Analytics for a variety of industry professionals.

• There are four core content areas:

o Hotel Industry Foundations

o Hotel Math Fundamentals – the metrics used by the hotel industry

o Property Level Benchmarking (STAR Reports)

o Hotel Industry Performance Reports

• One or two-day CHIA workshops are available

• To find out more please contact us at sharecenter@str.com

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Airbnb

• http://spectrum.ieee.org/computing/software/the-secret-of-airbnbs-pricing-algorithm

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Slides: www.HotelNewsNow.com

Questions: cklauda@str.com

Thank you!

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2015 DESTINATIONMAP MARKETS

Anaheim Atlanta Austin Baltimore Boston Charlotte Chicago Dallas Denver Fort Lauderdale

Houston Indianapolis Jacksonville Las Vegas Los Angeles Louisville Miami Minneapolis Montreal Nashville

New Orleans New York Oahu Orlando Philadelphia Phoenix Portland Sacramento Salt Lake City San Antonio

San Diego San Francisco San Jose Scottsdale Seattle St. Louis Tampa Toronto Vancouver Washington, D.C.