Austin Hotel & Lodging Association -

Austin Hotel & Lodging Austin Hotel & Lodging AssociationAssociation

2011 Texas Trends2011 Texas Trends®®Hotel Industry ReportHotel Industry Report

““Journey Through UncertaintyJourney Through Uncertainty””November 9, 2011November 9, 2011

2009 – When Will Things Get Better?2010 – Emerging From Crisis 2011 – Journey Through Uncertainty

Are We Having Fun Yet?

Presentation OutlinePresentation Outline

I. The Economy

II. Lodging Forecast

III. Austin Submarkets

IV. Journey Through Uncertainty

I. The Economy

U.S. TOTAL EMPLOYMENT LEVELSU.S. TOTAL EMPLOYMENT LEVELS…………are starting to gainare starting to gain

8 Million Jobs Lost 8 Million Jobs Lost –– 6Years From 6Years From PeakPeak--toto--PeakPeak

Source: Moody’s Analytics

We’re here

Unemployment Comparison Unemployment Comparison –– September 2011September 2011

Not Seasonally Adjusted

Source: Texas Workforce Commission

United States 9.1% 8.8%

Texas 8.5%

Dallas -- 8.4%

Austin 7.4%

Fort Worth 8.2%

Houston 8.6%

San Antonio 7.9%

Seasonally Adjusted

Uncertainties That Affect Recovery Uncertainties That Affect Recovery

•• U.S. Debt Crisis U.S. Debt Crisis –– S&PS&P’’s Ratings Rating

•• Global Financial Crisis Global Financial Crisis

•• Japan Japan –– Long Term ImpactLong Term Impact

•• Middle East & Libya Middle East & Libya

•• Price of Oil & GasPrice of Oil & Gas

•• U.S. CongressU.S. Congress

•• 2012 Election2012 Election

United States: January vs. April 2011United States: January vs. April 2011

EmploymentPersonal Income GDP

CPI (Inflation)

Year January April January April January April January April

2011 1.7% 1.1% 4.0% 3.7% 3.9% 3.3% 1.5% 2.1%

2012 2.4% 2.3% 3.8% 4.7% 4.0% 4.3% 2.5% 2.0%

2013 2.4% 2.6% 4.6% 5.0% 3.7% 3.9% 3.2% 2.9%

2014 2.6% 2.7% 3.1% 3.0% 3.1% 3.1% 2.7% 2.7%

2015 1.4% 1.7% 2.6% 2.6% 2.3% 2.3% 2.4% 2.3%

United States: April vs. July 2011United States: April vs. July 2011

EmploymentPersonal Income GDP CPI (Inflation)

Year April July April July April July April July

2011 1.1% 1.1% 3.7% 2.1% 3.3% 2.5% 2.1% 3.0%

2012 2.3% 1.7% 4.7% 4.0% 4.3% 3.8% 2.0% 1.9%

2013 2.6% 2.5% 5.0% 5.0% 3.9% 4.1% 2.9% 2.5%

2014 2.7% 3.0% 3.0% 4.0% 3.1% 3.5% 2.7% 2.7%

2015 1.7% 2.0% 2.6% 3.0% 2.3% 2.5% 2.3% 2.4%

United States: July vs. October 2011United States: July vs. October 2011

EmploymentPersonal Income GDP

CPI (Inflation)

Year July October July October July October July October

2011 1.1% 1.0% 2.1% 2.7% 2.5% 1.8% 3.0% 3.0%

2012 1.7% 0.7% 4.0% 4.9% 3.8% 2.7% 1.9% 1.8%

2013 2.5% 1.7% 5.0% 4.0% 4.1% 3.5% 2.5% 2.4%

2014 3.0% 3.1% 4.0% 3.4% 3.5% 3.8% 2.7% 3.0%

2015 2.0% 2.8% 3.0% 3.1% 2.5% 3.5% 2.4% 2.4%

Austin: April vs. JulyAustin: April vs. July

EmploymentPersonal Income GMP

CPI (Inflation)

Year April July April July April July April July

2011 1.5% 2.0% 3.9% 2.9% 6.2% 5.9% 2.3% 3.4%

2012 3.0% 3.0% 4.1% 4.1% 6.8% 6.9% 2.5% 2.4%

2013 4.0% 4.0% 4.2% 3.8% 6.3% 6.4% 3.4% 3.0%

2014 4.8% 4.9% 5.1% 4.0% 5.4% 5.5% 2.8% 2.9%

2015 3.9% 4.0% 5.3% 4.2% 4.9% 4.8% 2.5% 2.5%

Austin: July vs. October 2011Austin: July vs. October 2011

EmploymentPersonal Income GMP

CPI (Inflation)

Year July October July October July October July October

2011 2.0% 1.9% 2.9% 3.3% 5.9% 4.6% 3.4% 3.4%

2012 3.0% 2.0% 4.1% 3.0% 6.9% 6.1% 2.4% 2.3%

2013 4.0% 3.0% 3.8% 2.4% 6.4% 6.3% 3.0% 2.9%

2014 4.9% 4.9% 4.0% 3.6% 5.5% 5.9% 2.9% 3.2%

2015 4.0% 4.7% 4.2% 4.9% 4.8% 5.5% 2.5% 2.6%

Factors Affecting 3Factors Affecting 3rdrd Qtr Projections Qtr Projections

• Based on YTD September STR Historical Data and October Moody’s Forecast

• 3rd Qtr STR Data – Better Than Expected • Impact of Uncertainties on Travel and Lodging Demand From Other Markets

• Increase/Decrease in Local Economic Factors • GMP – Factors That Affect Lodging

- Personal Consumption (Personal Income)- Gross Private Domestic Investment (Business Profits)

• Local Drivers - Oil and Gas - Technology - Corporate Growth

Conclusions Conclusions

• 3rd Qtr Projections Should be Similar to 2nd Qtr

• No Significant Change

• May See Slight Increase

I. The Economy

Hotel HorizonsHotel Horizons®®

• Econometric Forecasting ModelSmith Travel Research – historical lodging data, pipeline dataMoody’s Economy.com – economic forecasts

• Five-Year Forecasts of Supply, Demand, Occupancy, ADR, RevPAR

50 Major U.S. Markets• Updated Quarterly

United StatesUnited States22ndnd Quarter 2011Quarter 2011

= Below/Above Long Run Average

Long Term

Average 2008 2009 2010 2011F 2012F 2013F 2014F 2015F

Supply 2.1% 2.4% 2.9% 1.8% 0.6% 0.7% 1.1% 1.7% 2.0%

Demand 1.8% -2.5% -6.1% 7.5% 4.5% 3.1% 3.8% 3.4% 1.3%

Occupancy 62.0% 59.8% 54.5% 57.6% 59.8% 61.2% 62.8% 63.9% 63.4%

ADR 2.8% 2.9% -8.6% -0.1% 3.2% 4.8% 5.3% 5.2% 4.0%

RevPAR 2.5% -2.0% -16.6% 5.5% 7.2% 7.3% 8.1% 7.0% 3.2%

Source: PKF Hospitality Research – 2nd Quarter 2011 Hotel Horizons® Report, Smith Travel Research

Recovery Timelines Mixed Across Markets:Year when ADR levels Surpass Previous Peak (4Q Moving Average)

20112012201320142015 & Beyond Source: PKF Hospitality Research

Texas SummaryTexas Summary

DallasDallas22ndnd Quarter 2011Quarter 2011

Long Term

Average 2008 2009 2010 2011F 2012F 2013F 2014F 2015F

Supply 3.7% 3.7% 3.5% 2.8% 1.0% 1.6% 1.8% 3.0% 3.8%

Demand 3.8% 0.7% -9.4% 10.0% 8.8% 2.8% 4.1% 5.8% 4.1%

Occupancy 61.9% 58.3% 51.1% 54.6% 58.8% 59.5% 60.9% 62.5% 62.7%

ADR 2.0% 1.8% -9.8% -2.7% 3.5% 1.6% 5.4% 5.5% 4.5%

RevPAR 2.3% -1.1% -21.1% 4.1% 11.4% 2.9% 7.8% 8.3% 4.8%

Fort Worth Fort Worth 22ndnd Quarter 2011Quarter 2011

Long Term

Average 2008 2009 2010 2011F 2012F 2013F 2014F 2015F

Supply 4.8% 9.1% 10.0% 3.9% 1.9% 0.8% 0.5% 1.3% 2.0%

Demand 5.0% 3.4% -7.0% 7.8% 6.5% 2.7% 4.3% 4.0% 2.7%

Occupancy 63.4% 64.0% 54.1% 56.1% 58.6% 59.8% 62.0% 63.6% 64.1%

ADR 3.7% 4.8% -1.2% -1.0% 1.5% 2.1% 5.2% 4.2% 3.2%

RevPAR 4.0% -0.6% -16.4% 2.7% 6.0% 4.1% 9.1% 7.0% 3.9%

HoustonHouston22ndnd Quarter 2011Quarter 2011

Long Term

Average 2008 2009 2010 2011F 2012F 2013F 2014F 2015F

Supply 3.6% 2.8% 6.1% 6.4% 3.1% 0.8% 0.8% 1.5% 2.6%

Demand 4.1% 5.0% -12.1% 6.0% 8.3% 2.3% 3.7% 3.7% 4.1%

Occupancy 62.8% 67.2% 55.6% 55.4% 58.1% 59.0% 60.7% 62.0% 63.0%

ADR 3.0% 9.3% -8.3% -4.0% 4.3% 4.8% 5.1% 4.4% 3.4%

RevPAR 3.6% 11.5% -24.1% -4.4% 9.5% 6.3% 8.1% 6.7% 4.9%

San Antonio San Antonio 2nd Quarter 20112nd Quarter 2011

Long Term

Average 2008 2009 2010 2011F 2012F 2013F 2014F 2015F

Supply 4.2% 6.8% 6.9% 8.7% 2.7% 0.9% 0.7% 2.0% 3.3%

Demand 4.2% 3.9% -6.3% 12.7% 5.9% 3.4% 3.5% 3.7% 3.1%

Occupancy 65.4% 64.2% 56.2% 58.3% 60.1% 61.6% 63.3% 64.4% 64.2%

ADR 3.0% 4.3% -10.1% 0.2% -0.7% 2.0% 4.0% 4.0% 3.4%

RevPAR 3.2% 1.6% -21.3% 3.9% 2.4% 4.6% 6.9% 5.7% 3.2%

AustinAustin22ndnd Quarter 2011Quarter 2011

Long Term

Average 2008 2009 2010 2011F 2012F 2013F 2014F 2015F

Supply 4.1% 2.0% 5.0% 5.0% 2.9% 0.5% 1.4% 2.9% 3.9%

Demand 4.8% -1.3% -5.0% 10.6% 7.3% 3.7% 2.8% 3.4% 3.6%

Occupancy 66.3% 66.9% 60.5% 63.8% 66.5% 68.5% 69.5% 69.8% 69.6%

ADR 3.6% 5.4% -7.7% -2.7% 5.5% 3.9% 6.4% 5.4% 3.8%

RevPAR 4.5% 2.0% -16.4% 2.5% 9.9% 7.2% 7.8% 5.9% 3.5%

Austin: UpperAustin: Upper--PricedPriced22ndnd Quarter 2011Quarter 2011

Long Term

Average 2008 2009 2010 2011F 2012F 2013F 2014F 2015F

Supply 4.5% 2.5% 6.7% 4.5% 3.1% 0.3% 2.1% 4.2% 5.3%

Demand 5.5% 1.4% -0.3% 10.5% 7.7% 2.5% 1.7% 3.1% 3.4%

Occupancy 69.5% 70.8% 66.2% 69.9% 73.1% 74.6% 74.3% 73.6% 72.2%

ADR 3.8% 3.5% -9.3% -1.1% 6.0% 5.0% 7.3% 5.3% 3.2%

RevPAR 5.0% 2.2% -15.2% 4.5% 10.8% 7.3% 6.9% 4.2% 1.3%

Austin: LowerAustin: Lower--PricedPriced22ndnd Quarter 2011Quarter 2011

Long Term

Average 2008 2009 2010 2011F 2012F 2013F 2014F 2015F

Supply 3.8% 1.6% 3.7% 5.3% 2.8% 0.7% 1.0% 1.9% 2.8%

Demand 4.2% -3.3% -8.8% 10.6% 7.0% 4.7% 3.8% 3.7% 3.8%

Occupancy 64.1% 64.0% 56.3% 59.2% 61.5% 64.0% 65.8% 67.0% 67.6%

ADR 2.9% 6.4% -8.6% -5.3% 4.1% 3.1% 5.8% 5.8% 5.2%

RevPAR 3.6% 1.2% -19.6% -0.5% 8.2% 7.2% 8.8% 7.6% 6.2%

I. The Economy

Austin Austin –– Local FactorsLocal Factors

•• Formula One Race TrackFormula One Race Track

•• High Tech Expansions/GrowthHigh Tech Expansions/Growth

•• SXSW / ACL / Other EventsSXSW / ACL / Other Events

•• Convention ActivityConvention Activity

•• Government Budget CutsGovernment Budget Cuts

•• Overall Return to Prerecession LevelsOverall Return to Prerecession Levels

•• Potential Convention Center Potential Convention Center Hotel(sHotel(s))

Austin SummaryAustin Summary

Austin CBDAustin CBD

North AustinNorth Austin

Round Rock / GeorgetownRound Rock / Georgetown

Northwest AustinNorthwest Austin

South Austin / San MarcosSouth Austin / San Marcos

I. The Economy

Lessons Learned Lessons Learned

•Certain to Be Uncertainties

•Need for Multiple Budgets

•Slow Down Through 2012 Elections

•Occupancy Flat / Rate Up in 2012

•Recovery Delayed to 2013 and 2014

The Hotel Market CycleThe Hotel Market Cycle

Rapid Development

Occupancy Declines, ADR Follows

Lodging Decline, Leads Other

Sectors

Occupancy Recovers

ADR and Margins Recover

Development Picks Up

Development Slows

Development at Minimum Levels

Long RunOccupancy

Rapid Development

Equilibrium ADR

U.S. is Here

2012-2013

2014-2015

A Year Ago

The Long, Hard Climb Up Growth HillThe Long, Hard Climb Up Growth Hill

Lodging Recovers, Lags Other Sectors (Not this

Time!)

For a Copy of This PresentationPlease Visit

www.pkfc.com/presentations or

Contact: Randy McCaslinEmail: Randy.McCaslin@pkfc.com

713.621.5252 Ext. 21

Austin Hotel & Lodging Association -

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