The Global Economy The Global Economy

through a Hospitality Lens

General Manager’s Conference 2015

Arthur de HaastChairman JLL Hotels& Hospitality Group

January 2015

Agenda

• Global Economy Overview

• Global Hospitality Overview

• Global Capital Markets

• Focus on the UK

• Outlook 2015

1

Global Economy Overview

Headlines in January

International tourism on

track to end 2014 with record

levelsUNWTO,31 December 2014“International tourism is set to hit a new record by the end of 2014 with over 1.1 billion international tourists travelling the world in one single year.During the first ten months of 2014, the number of international tourists grew by 5% according to the latest

International tourism on

track to end 2014 with record

levelsUNWTO,31 December 2014“International tourism is set to hit a new record by the end of 2014 with over 1.1 billion international tourists travelling the world in one single year.During the first ten months of 2014, the number of international tourists grew by 5% according to the latest

Asia to face 'significant economic challenges' in 2015Deutsche Welle,31 December 2014

Asia to face 'significant economic challenges' in 2015Deutsche Welle,31 December 2014

3

international tourists grew by 5% according to the latest UNWTO World Tourism Barometer, rising above expectations.”

international tourists grew by 5% according to the latest UNWTO World Tourism Barometer, rising above expectations.”

Oil Prices Tumble to Fresh LowsWall Street Journal,6 January 2015“Oil’s selloff accelerated on Monday, with U.S. prices falling briefly below $50 a barrel for the first time since April 2009.”

Oil Prices Tumble to Fresh LowsWall Street Journal,6 January 2015“Oil’s selloff accelerated on Monday, with U.S. prices falling briefly below $50 a barrel for the first time since April 2009.”

31 December 201431 December 2014

Deflation is a rising

threat for marketsJohn Plender, Financial Times,6 January 2015

Deflation is a rising

threat for marketsJohn Plender, Financial Times,6 January 2015

00 Month, 2014 4

Global Hospitality Overview

Strong Growth Forecast for International Tourist Arrivals

1000

1200

1400

1600

1800

2000

International Tourist Arrivals (Millions)

Middle East

Africa9401,087

1,360

1,810

Source: UNWTO

0

200

400

600

800

1000

2000 2010 2013 2020(F) 2030(F)

International Tourist Arrivals (Millions)

Asia Pacific

Americas

Europe

6

674

940

Pipeline at Record Levels

413,419

70,882

151,680

545,630

10%

15%

20%

25%

Total % supply increase

Global Hotel Development Pipeline – December 2014

Source: STR

141,55829,252

-5%

0%

5%

-10% 0% 10% 20% 30% 40% 50% 60%

Total % supply increase

% change active pipeline Dec-14 vs. Dec-13

US Central & South America Europe MEA AP Carribean & Mexico

7

Global Capital Markets

Real Estate is a Growing Part of Global Capital Markets

52

41

12

150

200

250

US$ Trillion

Global Commercial Capital Markets 2014

29%19%

5%

US$US$

64

52

0

50

100

Debt Equities Corporate Bonds Government Bonds Real Estate

US$ Trillion

9

Source: JLL, McKinsey

24%23%

US$

221Trillion

US$

221Trillion

Asia Pacific to See the Growth – Longer TermCommercial Real Estate Markets by Value, 2011-2031

25,000

30,000

35,000

40,000

45,000

50,000

$ US bn

10

-

5,000

10,000

15,000

20,000

25,000

Europe North America Asia Pacific South America Middle East/Africa

2011 2021 2031Source: Pramerica Real Estate Research

The Shape of Global Savings is Changing

39%

31%

Domestic savings by country in 2022

10 biggest countriesby domestic savings

in 2022 (in $US bn)

China $14,422

U.S. $4,434

India $2,792

% oftotalin

% oftotalin

12%7%4%

4%3%

11

India $2,792

Japan $1,590

Russia $1,499

Germany $1,172

Other, including:BrazilFranceIndonesiaU.K.

$1,048 $961 $811 $806 Source: IHS Global Insight, Growth in Domestic Savings

in

2022in

2022

Offices Still Dominate Investment ActivityDirect Commercial Real Estate Investment by Sector

Global Sector Share

12

OfficesOffices RetailRetail IndustrialIndustrial HotelsHotels OtherOther

Source: JLL

48%48% 24%24% 14%14% 9%9% 5%5%

Transaction Volumes Steadily Growing Quarter-on-QuarterDirect Commercial Real Estate Investment, 2007-2014

120

140

160

180

200

220

US$ bn Americas EMEA Asia Pacific Rolling Four Quarters Average

13

0

20

40

60

80

100

120

Q1 07Q2 07Q3 07Q4 07Q1 08Q2 08Q3 08Q4 08Q1 09Q2 09Q3 09Q4 09Q1 10Q2 10Q3 10Q4 10Q1 11Q2 11Q3 11Q4 11Q1 12Q2 12Q3 12Q4 12Q1 13Q2 13Q3 13Q4 13Q1 14Q2 14Q3 14Q4 14

Source: JLL

US Remains the Dominant MarketWorld’s Largest markets for Transactional Activity 2014

Japan

France

AustraliaCanada

ChinaSweden

Norway

200

250

300

US$ bn

4%

3%3% 3%

2%

14

Source: JLL

USA

UK

Germany

Japan

-

50

100

150

47%

17%

8%

8%

5%

Direct Commercial Estate Transactions Exceeding $1 trillion by 2020

$464bn

$588bn

$700bn

$1 trillion+

15

Source: JLL

+36%

2010

$321bn+6%

2011

$436bn

27%

2012 20132014

2020 forecast

18%

Global Hotel Real Estate Investment, 2005-2015F

40

50

60

70

80

90

100

Volume ($B)

16

Source: ***

0

10

20

30

40

Volume ($B)

Americas EMEA Asia Pacific

Focus on the UK

Growth in Overseas Residents’ Visits to the UK is Accelerating

25

30

35

Overseas residents' visits to the UK

(millions)

16%16%

15

20

25

1990 1995 2000 2005 2010 2011 2012 2013 2014 Oct YTD2013 Oct YTD

Overseas residents' visits to the

(millions)

18

Source: ONS

4.0%

5.0%

6.0%

7.0%

Room Supply Growth %

Supply Growth: London vs. Regional UK

London supply spikeCurrent London supply: 127,785 rooms across 1,281 hotels

Current Regional supply: 446,599 across 10,535 hotels

UK Hotel Supply Overview

0.0%

1.0%

2.0%

3.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013f 2014f 2015f

Room Supply Growth %

% Growth Regional UK % Growth London

Regional UK long term average: 1.7%

London long term

average: 2.8%

Regional UK experiencing historic low of supply growth

19

Source: JLL

Growth in UK Hotel Supply AcceleratesRegional UK Room Supply vs. Room Pipeline

Edinburgh

Manchester

Birmingham

GlasgowAberdeenNewcastle800

1,000

1,200

1,400

1,600

1,800

2,000

Room Pipeline

Pipeline: 11,350 (8.4%) ��Current Supply: 135,803 ��Pipeline: 11,350 (8.4%) ��

Current Supply: 135,803 ��LondonLondon

20

*Confirmed developments*Bubble size indicates pipeline as a % of current supplySource: AMPM Hotels

Edinburgh

Liverpool

Leeds

AberdeenNewcastle

CardiffBelfast

York

0

200

400

600

800

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000

Room Supply

2014 – A Strong PerformanceUK market RevPAR overview November YTD 2014 vs November YTD 2013

10.4%

4.6%

13.7%

3.7%

24.3%

6.3%

7.4%

2.9%

Regional UK

Cheltenham

Bristol

Heathrow Airport

Glasgow

Edinburgh

Aberdeen

Greater London

21

Source: STR Global

10.0%

7.2%

7.4%

14.2%

12.6%

10.4%

£0 £20 £40 £60 £80 £100 £120 £140

Birmingham

Gatwick Airport

Newcastle

Cardiff

Leeds

Regional UK

RevPAR £

Strong $

Recorddomestictourism

7/7Londonbombs

2012 Olympic& Paralympic Games

UK TrendsLondon: Volatility driven by external factorsLondon: Good correlation to UK GDP

London supplyshortfalls

Record US visitors

US visitors down

9/11FMD

Above AverageSupply additions

22

Source: PWC, JLL Hotels & Hospitality Group

Single Asset Transaction Activity Stages a Strong RecoveryUK Transaction Volumes 2004 – 2014

4

5

6

7

8

9

Billions (£)

23

Source: JLL Hotels & Hospitality

0

1

2

3

4

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Billions (£)

Portfolio Single Asset

£310m

£19m

Northern Ireland

Scotland

North West

London still Dominates the Investment MarketInvestor Activity: Single Asset Transactions - 2014

24

£1.6bn

£81m

£31m

£307m

£19m

£24m

£39m

£144m Yorkshire & Humberside

West Midlands

Wales

South West

South East

LondonSource: JLL Hotels & Hospitality

Private Equity Drives UK Hotel Investment MarketUK Transactions by Buyer Type – 2014

Bank / Institutional Investor, 8%

Corporate, 2%

Developer / Property Company, 7%

Other, 12%

Real EstateInvestment Trust, 3%

Sovereign Wealth Fund, 1% Unknown, 8%

Bank / Institutional Investor

Corporate

Developer / Property Company

High Net Worth Individual

Hotel / SA Operator

25

Source: JLL Hotels & Hospitality

High Net WorthIndividual, 3%

Hotel / SA Operator, 21%

Investment Fund / Private Equity, 33%

Hotel / SA Operator

Investment Fund / Private Equity

Other

Real Estate Investment Trust

Sovereign Wealth Fund

Unknown

Africa, 1%

Asia, 8%

North America, 19%

Unknown, 2%

Africa

Asia

Domestic

Europe

Two Thirds of Investment from Off-shoreInvestment by Geographic Source – 2014

Domestic, 34%

Europe, 8%

Global, 12%

Middle East, 17%

Europe

Global

Middle East

North America

Unknown

26

Source: JLL Hotels & Hospitality

Outlook 2015

2015 Themes

• Optimism tempered by uncertainty

• Steady demand growth

• Supply pipeline supported by robust capital markets

• Keeping pace with technology

The Road Ahead

• Consolidation

28

JLL City Momentum Index 2015 – Top 20London1San Jose2Beijing3Shenzhen4Shanghai5Ho Chi Minh City6Boston7Wuhan8San Francisco9Chongqing10

EconomyConnectivityCorporate PresenceConstructionProperty Prices

29

Nanjing20

Tianjin19

Chongqing10Sydney11Bangalore12Dubai13Dublin14Nairobi15Melbourne16Singapore17New York18

Real Estate InvestmentBusiness Start-upsTechnology

EducationR&D

Environment

Thank you© Jones Lang LaSalle 2015All materials contained in this presentation are the property of Jones Lang LaSalle. No materials contained in this presentation may be used by the client for any purpose whatsoever without the express written permission of Jones Lang LaSalle.

Arthur de Haast

+44 20 7399 5873

arthur.dehaast@eu.jll.com