The Lodging Industry The Ritz-Carlton Naples, Florida.
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Transcript of The Lodging Industry The Ritz-Carlton Naples, Florida.
The Lodging Industry
The Ritz-CarltonNaples, Florida
Industry Scope
35,000 Hotels in U.S.
3.7 million Rooms in U.S.
Annual Revenues of $95 Billion Profit of $19 Billion
Hotel Industry ProfitsNet Profit or Loss
-10
-5
0
5
10
15
20
78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98
$Billion
Changing Sentiment in theCapital Markets
General anxiety over trouble abroad and their impact on the US economy.
Concerns about overbuilding.General feeling that easy money has been
made in the sector.Growth and momentum investors have sold
their positions and have not been replaced by value investors.
Capital market response has led to equilibrium.
1992 - 1998 Lodging Equity Offerings
$122
$871$1,367
$2,783
$7,172
$4,520
$1,649
$0
$1,500
$3,000
$4,500
$6,000
1992 1993 1994 1995 1996 1997 1998
Source: NationsBanc Montgomery Securities
Key Players
Management Company e.g. Marriott, Sheraton, Hyatt
Franchisor e.g. Holiday Inn, Best Western, Sheraton
Owner - numerous possibilities REIT Hotel Co. Private Owner or Ownership Group Joint Ventures
Average Management & Franchise Fees
% of Total Rev. Per Room % of Total Rev. Per RoomLimited Service 4.8% 725$ 3.3% 481$ Suite 4.4% 1,530$ 3.9% 1,264$ Resort 3.6% 2,336$ 1.9% 1,224$ Convention 3.3% 1,753$ 1.2% 575$ Full-Service 3.1% 1,177$ 3.0% 995$
MANAGEMENT FEES FRANCHISE FEES
Public C-Corporations
Market Cap ($ Millions) P/E Ratio
Marriott Int’l 8,500 23.8
Starwood 5,800 5.1
Hilton 3,800 12.9
Promus 2,900 19.3
Four Seasons 1,400 28.2
Public REITs
($ Millions) P/E Ratio
Host Marriott 2,600 14.5
Felcor 1,600 11.9
Patriot American 1,000 NA
Meristar 971 13.8
Innkeeper USA 351 11.3
REIT Structures
Normal REIT
Paired Share
Stapled or Paper Clip REIT
Private Hotel CompaniesHyatt
Destination Hotels & Resorts
KSL Resorts
Kimpton Group
Joie de Vivre Hospitality
Structure Example #1Hyatt Regency Kauai
Owner Mgmt Co.
Hotel
Hyatt Hotels
Hyatt RegencyKauai
Structure Example #2San Francisco Marriott
Owner
Mgmt Co.
Hotel
Marriott International
Host Marriott REIT
San Francisco Marriott
Structure Example #3Best Western Victorian Inn, Monterey
Best Western
Mom & Pop
Best Western Victorian Inn
Owner/Operator
Hotel
Franchisor
Structure Example #4Los Angeles Marriott
Owner
Mgmt Co.
Hotel
MeriStar Hotel & Resorts
Meristar Hospitality Corp (REIT)
Marriott Int’l.Franchisor
Los Angeles Marriott
Structure Example #5Ritz-Carlton, Philadelphia
Owner
Mgmt Co.
Hotel
Ritz-Carlton/Marriott Int’l.
Starwood Hotels
The Ritz-Carlton Philadelphia
Renaissance Hotels Ritz-Carlton
LIMITED SERVICE
No Food & Beverage Midscale Economy Budget
Suites/Extended Stay
Food & Beverage Deluxe Luxury Upscale Midscale
Resorts Convention Suites/Extended
Stay
FULL SERVICE
Deluxe
Four SeasonsRegentRitz-CarltonThe St. Regis
Luxury Collection
The Regent Beverly Wilshire
Ritz-Carlton
Full ServiceLuxury
HiltonHotel SofitelHyattMeridien Inter-ContinentalNikkoOmniMarriott HotelsWestinRenaissanceSheratonWyndham Omni Mandalay
Las Colinas, Texas
Full ServiceUpscale
DoubletreeCrowne PlazaHotel NovotelRadissonEmbassy SuitesRed Lion
Double TreeSan Diego -Mission Valley
Full ServiceMidscale with F&B
Best WesternCourtyardSheraton Four
PointsHoliday InnHoliday Inn SelectHoward JohnsonRamada Howard Johnson’s,
Vermont
Full ServiceResort
Lots of recreational activities.
Trend towards mixing business (conferences) with pleasure.
Ritz-Carlton Kapalua
Full ServiceConference Center
Typically located near convention centers.
Large meeting and banquet areas.
High volume.
San Antonio Marriott Rivercenter
Full ServiceCasino
Cost: $1.6 Billion3005 Rooms @ $185
ADR.$300 Million Art
Collection.15 Restaurants.Estimated EBITDA of
$309 million on $950 million in revenue. Bellagio, Las Vegas
Mirage Resorts
Limited ServiceMid Scale without F&B
Comfort InnHampton InnHilton Garden InnHoliday Inn
ExpressLa Quinta
Comfort Inn, West Virginia
Limited ServiceEconomy
Days InnFairfield InnBudgetelRed Roof InnTravelodge
Red Roof Inn, Ohio
Limited ServiceBudget
Motel 6Budget Host InnBudget InnEcono LodgeGreat WesternSuper 8Knights Inn Motel 6 Prototype
Extended StayUpper Tier
Hawthorn SuitesHomewood SuitesResidence InnCandlewood Suites
Comfort Inn, West Virginia
Hotel CensusFull Service Properties Rooms
Deluxe 173 48,644Luxury 802 351,957Upscale 925 229,131Midscale with F&B 5,305 698,509
Subtotal Full-Service 7,205 1,328,241
Limited ServiceMidscale without F&B 3,656 339,195Economy 3,992 346,323Budget 4,736 346,891
Subtotal Limited-Service 12,384 1,032,409
Upper Tier Extended-Stay 435 51,060Lower Tier Extended-Stay 655 72,327
Subtotal Extended-Stay 1,090 123,387
Total All Branded Hotels 20,679 2,484,037Independents 14,496 1,196,040
Total U.S. Hotels 35,175 3,680,077As of 9/98
Hotel Lingo Average Daily Rate (ADR) = Total Room Revenue / # of Rooms x 365
Occupancy % = Total Room Nights / # of Rooms x 365
Revenue Per Available Room (RevPAR) =ADR x Occupancy %
EBITDA =Earnings before Interest, Taxes, Depreciation and
Amortization
Top Markets # of Rooms
1998 Rank Rooms Hotels 1997 Rank1 Las Vegas, NV 112,000 265 12 Orlando, FL 95,100 350 23 Los Angeles-Long Beach, CA 80,800 653 34 Atlanta, GA 77,100 561 45 Chicago, IL 73,400 418 56 Washington, DC-Metro Area 71,800 387 67 New York, NY 68,300 248 78 Dallas, TX 54,900 361 89 Houston, TX 47,700 318 1210 San Diego, CA 46,800 393 911 Phoenix, AZ 45,700 310 1412 Anaheim-Santa Ana, CA 45,400 360 1013 San Francisco-San Mateo, CA 43,100 307 1114 Miami-Hialeah, FL 41,500 255 1315 Tampa-St. Petersburg, FL 36,900 312 16
Statistics of Top 15 MSA’s
1 New York, NY 82% New York, NY $175 New York, NY $1432 San Francisco, CA 81% San Francisco, CA $130 San Francisco, CA $1053 Orlando, FL 77% Boston, MA $127 Boston, MA $964 Boston, MA 76% Chicago, IL $109 Chicago, IL $805 San Diego, CA 75% Washington, D.C. $106 Washington, D.C. $786 Washington, D.C. 73% Miami-Hialeah, FL $101 San Diego, CA $757 Chicago, IL 73% Phoenix, AZ $100 Miami-Hialeah, FL $728 Los Angeles, CA 71% San Diego, CA $99 Phoenix, AZ $669 Miami-Hialeah, FL 71% Los Angeles, CA $89 Orlando, FL $66
10 Dallas, TX 68% Orlando, FL $85 Los Angeles, CA $6311 Atlanta, GA 67% Dallas, TX $82 Dallas, TX $5612 Phoenix, AZ 66% Atlanta, GA $79 Atlanta, GA $5313 Tampa-St. Pete, FL 66% Tampa-St. Pete, FL $79 Tampa-St. Pete, FL $5214 Houston, TX 66% Houston, TX $74 Houston, TX $4915 Norfolk, VA 62% Norfolk, VA $68 Norfolk, VA $42
Occupancy RevPARADR
Hotel Organization Chart
Front Office M anager Reservations M anager Housekeeping Sw itchboard Supervisor
Room s Division Director
Restaurant M anagers Room Service M anager Executive Chef Banquet M anager
Food & Beverage Director
General Manager
Sales M anager Convention Services M anager
Director of M arketing
General Manager
The Income StatementRevenue
Rooms 67.4%Food 19.6%Beverage 5.0%Telecommunications 2.7%Other Departments 3.3%Rentals & Other Income 1.9%
Total Revenues 100%
Costs & ExpensesRooms 17.2%Food 17.1%Beverage 2.3%Telecommunications 1.3%Other Departments 2.5%
Total Costs & Expenses 40.4%
Undistributed Operating ExpensesA&G 8.3%Franchise Fees 1.6%Marketing 5.4%Property Operation and Maintenance 5.0%Utility Costs 4.1%Other Unallocated Operated Departments 0.2%
Total Undistributed Expenses 24.6%
Income Before Fixed Charges 35.0%
Mgmt. Fees, Property Taxes & InsuranceManagement Fees 2.8%Property Taxes 3.2%Insurance 1.0%
Total Mgmt. Fees, Property Taxes & Insurance7.0%
EBITDA 28.0%
Occupancy % 71.1%ADR 91.60$ Average Size (Rooms) 199
Hotel Revenues
Food20%
Telecomm3%Beverage
5%
Other Operated Departments
3%
Rentals & Other Income
2%
Rooms67%
Trends in Revenue
57.0%60.5% 61.6% 63.1% 63.7% 63.5%
67.2% 67.4%
26.1%23.5% 23.4% 21.6% 21.0% 19.7% 19.7% 19.6%
9.8% 8.9% 7.7% 5.9% 5.6% 5.5% 5.2% 5.0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
1977 1982 1987 1992 1993 1994 1995 1996
% o
f T
ota
l Rev
enu
e
Rooms
Food
Beverage
Hotel Expenses
Salaries & Benefits44%
Utility Costs6%
Management Fees, Property Taxes, & Insurance10%
Cost of Sales12%
Operating Expenses28%
Payroll Costs
Rooms 35.0%Food & Beverage 32.5%Telephone 1.4%Other 2.8%A&G 13.1%Marketing 7.2%Property Operations 7.8%Other Departments 0.3%
Total Payroll 100%
Payroll Taxes & Employee Benefits 33.8%Employee Meals 1.1%
Source: PKF Hotel Industry Trends 1998
Profitability
Income Before Fixed Charges EBITDALimited Service 50.6% 42.8%Suite 44.4% 35.5%Convention 36.4% 29.3%Full-Service 31.5% 24.7%Resort 29.4% 23.5%
Fixed Charges: Management Fees, Property Taxes & Insurance
Hotel Occupancy Rate
60%
61%
62%
63%
64%
65%
66%
87 88 89 90 91 92 93 94 95 96 97 98
Occupancy % by Segment
1998 1997Upper Tier Extended-Stay 79.80% 81.80%Luxury 74.20% 75.30%Deluxe 73.90% 74.80%Upscale 69.90% 71.40%Midscale w/out F&B 68.70% 69.60%Lower Tier Extended-Stay 68.50% 70.70%Midscale with F&B 64.40% 65.30%Budget 63.20% 63.00%Economy 60.20% 60.40%
Total U.S. Hotels 66.80% 67.50%
Source: Bear, Stearns & Co. 1999
ADR & RevPAR by Segment
Source: Bear, Stearns & Co. 1999
1998 1997 1998 1997Deluxe $201 $183 $149 $137Luxury $138 $129 $102 $97Upscale $99 $94 $79 $78Upper Tier Extended-Stay $98 $95 $69 $67Midscale with F&B $70 $66 $45 $43Midscale without F&B $64 $60 $44 $42Economy $51 $49 $31 $30Lower Tier Extended-Stay $43 $38 $29 $27Budget $43 $41 $27 $26
Total U.S. Hotels $80.03 $76.35 $53.45 $51.52
Average Daily Rate RevPAR
Cap Rates
7.00%
8.00%
9.00%
10.00%
11.00%
12.00%
1988 1990 1992 1994 1996 1997
Hotel
Offi ce
Industrial
Retail
Source: PKF Consulting
Spread between 10 Year Treasury & Cap Rates
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
1986 1988 1990 1992 1994 1996 1997
Resort
Full Service
L imited Service
Source: PKF Consulting
Hotel ConstructionContracts Awarded - F.W. Dodge
0
20
40
60
80
100
80 82 84 86 88 90 92 94 96 98
Million SF
R o s e n C o n s u lt in g G ro u p
R e a l E s ta te C y c leH o te l