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Hospitality Sales and Marketing Association
February 21, 2013
Lodging Market Overview
United States
United States Occupancy Performance
63.7%
59.8% 58.9% 59.2%
61.3%
63.1% 63.3% 63.1%
60.3%
55.1%
57.5%
59.9% 60.4%
50%
55%
60%
65%
70%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Occupancy
Source: Smith Travel Research
United States ADR Performance
$84.66 $83.62 $82.54 $82.67 $86.19
$91.04
$97.82
$104.32 $107.40
$98.07 $98.06 $101.70
$106.15
Inflated $114.00
$50
$60
$70
$80
$90
$100
$110
$120
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Average Daily Rate
Note: 2000 ADR inflated to 2012 equals $114.00. Source: Smith Travel Research
United States RevPAR Performance
$54.80
$50.49 $48.89 $49.11
$52.93
$57.39
$61.69
$65.61 $64.49
$53.71
$56.43
$61.06
$65.17
Inflated $73.70
$40
$45
$50
$55
$60
$65
$70
$75
$80
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
RevPAR
Note: 2000 RevPAR inflated to 2012 equals $73.70. Source: Smith Travel Research
United States Top 10 RevPAR Markets - 2012
$61.17
$87.27
$90.10
$93.70
$97.02
$97.53
$113.50
$122.98
$136.99
$153.68
$208.09
$0 $50 $100 $150 $200 $250
Phoenix
Anaheim
New Orleans
San Diego
Washington D.C.
Los Angeles
Boston
Miami
San Francisco
Oahu
New York
Note: Phoenix ranked 19th in RevPAR among the United States lodging markets. Source: Smith Travel Research
United States Top 10 RevPAR % Change Markets - 2012
1.6%
8.9%
9.6%
9.8%
10.2%
10.9%
12.3%
12.4%
13.9%
16.5%
16.7%
0% 5% 10% 15% 20%
Phoenix
Anaheim
San Diego
Nashville
Chicago
Los Angeles
Tampa/St. Pete
San Francisco
Houston
Oahu
New Orleans
Note: Phoenix ranked 24th in RevPAR growth among the United States lodging markets (down from 17th in 2011). Source: Smith Travel Research
United States % Change in Key Performance Indicators
3.2%
-5.8
%
-8.7
%
-8.8
%
-16.
7%
2.0%
7.8%
5.7%
-0.2
%
5.4%
0.6%
5.0
%
4.4%
3.7%
8.2%
0.4%
3.0%
2.6%
4.1%
6.8%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
Supply Demand Occupancy ADR RevPAR
2009 2010 2011 2012
Source: Smith Travel Research
United States % Change in Key Performance Indicators
1.3
%
3.4
%
2.1
%
3.9
%
6.1
%
1.5
%
4.0
%
2.5
%
3.5
%
6.1
%
0.5
%
3.2
%
2.7
%
3.9
%
6.7
%
-0.2
%
2.8
%
3.1
%
4.3
%
7.5
%
-0.6
%
1.5%
2.1
%
5.0
%
7.2
%
-10%
0%
10%
20%
30%
Supply Demand Occupancy ADR RevPAR
2012
Source: Smith Travel Research
5.4%
17.3
%
11.3
%
10.7
% 2
3.1%
4.7%
18.0
%
12.3
%
8.2
%
21.4
%
0.9
%
14.
5%
13.6
%
8.9%
23.8
%
-0.2
%
12.5
%
14.1
%
7.2%
22.2
%
-0.6
%
10.8
%
12.9
%
8.3%
22.
4%
-10%
0%
10%
20%
30%
Supply Demand Occupancy ADR RevPAR
Recovery January 2010 to Present
Luxury Upscale Mid-Price Economy Budget
United States 2013 Forecast Summary
Supply 0.9% 0.8% 0.8%
Demand 1.2% 1.7% 1.7%
Occupancy 0.3% 0.9% 0.9%
ADR 4.6% 5.2% 4.4%
RevPAR 4.9% 6.1% 5.4%
Source: Smith Travel Research (as of November 11, 2012)
Lodging Market Overview
Metropolitan Phoenix
Metropolitan Phoenix Total Available Rooms
52,200 52,490 52,853 54,103 53,590 53,288 53,395 53,844
56,247
59,261 60,572 61,054 61,603
45,000
50,000
55,000
60,000
65,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Available Rooms
Supply growth continued to moderate in 2012 providing further opportunity for occupancy growth.
Source: Smith Travel Research, Warnick + Company
Supply Summary
Since the market peak in 2007, 53 hotels have opened in Metropolitan Phoenix • Of the 53 new hotels, 10 are full-service
Renaissance Glendale Hotel & Spa (2007) Sheraton Phoenix Downtown Hotel (2008) The W Scottsdale (2008) InterContinental Montelucia Resort & Spa (2008) Hilton Chandler (2009) Wild Horse Pass Hotel & Casino (2009) Talking Stick Resort (2010) Westin Phoenix Downtown (2010) The Saguaro (re-opened 2010) Hotel Palomar (2012)
• The remaining openings are comprised of various select-service hotels located throughout the Valley
U. S. Top 25 Markets Room Supply % Change – YTD Nov 2012
0.9%
-2%
-1%
0%
1%
2%
3%
4%
5%
Source: Smith Travel Research
Metropolitan Phoenix Occupied Rooms Per Day
32,447
30,776 30,585
32,197
34,192
35,713 36,461
35,171
32,598
31,075
33,813
35,575 35,717
25,000
27,500
30,000
32,500
35,000
37,500
40,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Occupied Rooms
Growth in demand continued in 2012 albeit at a far more moderate pace compared to 2011 (0.6% versus 5.2%).
Source: Smith Travel Research, Warnick + Company
U. S. Top 25 Markets Room Demand % Change – YTD Nov 2012
0.6
%
-2%
0%
2%
4%
6%
8%
10%
12% Room Demand Percent Change
Source: Smith Travel Research
Metropolitan Phoenix % Change in Supply and Demand
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Supply 5.0% 0.6% 0.7% 2.4% -1.0% -0.8% 0.2% 0.2% 4.4% 6.2% 2.9% 0.8% 0.9%
Demand 5.9% -5.1% -0.6% 5.3% 6.2% 4.4% 1.8% -1.7% -7.3% -6.3% 10.3% 5.2% 0.6%
-10%
-5%
0%
5%
10%
15%
Percent Change in Supply and Demand
While modest, supply growth outpaced demand.
Source: Smith Travel Research, Warnick + Company
Metropolitan Phoenix Occupancy
62.1%
58.5% 57.7%
59.4%
63.7%
67.1% 68.2%
66.9%
59.4%
52.1%
55.8%
57.9% 57.7%
50%
55%
60%
65%
70%
75%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Occupancy
Occupancy declined in 2012 (reversing a three year growth trend) and remains at post 9/11 levels and well below market peak of 2006.
Source: Smith Travel Research, Warnick + Company
U. S. Top 25 Markets: Occupancy Year-to-Date November 2012
58.7
%
55%
60%
65%
70%
75%
80%
85%
90%
Occupancy
Source: Smith Travel Research
U. S. Top 25 Markets: Occupancy % Change Year-to-Date November 2012
-0.3
%
-2%
0%
2%
4%
6%
8%
10%
12% Occupancy % Change
Source: Smith Travel Research
Metropolitan Phoenix Average Daily Rate
$98.49 $96.89 $92.22 $92.66
$95.74
$102.83
$113.27
$120.80 $124.93
$106.41 $100.62
$103.96 $105.97
$50
$75
$100
$125
$150
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Average Daily Rate
For the second year in a row, the market achieved growth in ADR. Since bottoming out in 2010, rate growth has been minimal (5.2 percent). Building rate remains the #1 challenge for the market (factoring inflation, 2000 ADR equals $132.45 today).
Source: Smith Travel Research, Warnick + Company
U. S. Top 25 Markets Average Daily Rate – YTD Nov 2012
$107
.02
$75
$100
$125
$150
$175
$200
$225
$250
$275
Average Daily Rate
Source: Smith Travel Research
U. S. Top 25 Markets Average Daily Rate % Change – YTD Nov 2012
2.0%
-2%
0%
2%
4%
6%
8%
10%
12% ADR Percent Change
Metropolitan Phoenix Revenue Per Available Room
$61.10 $56.70
$53.26 $55.03 $60.97
$68.98
$77.22 $80.76
$74.15
$55.42 $56.17 $60.22 $61.17
$0
$20
$40
$60
$80
$100
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Revenue Per Available Room
A combination of modest increases in occupancy and ADR has resulted in RevPAR growth over the past three years; that said, RevPAR remains well below the 2007 peak and 2000 level when factoring inflation (2000 RevPAR equals $82.17 today).
Note: RevPAR decline in 2009 was second only to New York as the worst decline by U.S. Top 25 Markets-Impact of the economic decline, AIG , new supply (local, regional), with further impact in 2010 by SB1070 and tourism budget cuts. Source: Smith Travel Research, Warnick + Company
U. S. Top 25 Markets Revenue Per Available Room – YTD Nov 2012
$62.
84
$40
$60
$80
$100
$120
$140
$160
$180
$200
$220 RevPAR
U. S. Top 25 Markets RevPAR % Change – YTD Nov 2012
1.7%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Metropolitan Phoenix % Change in Key Performance Indicators
6.2%
-6.3
%
-11.
8%
-15.
4%
-25.
3%
2.9%
10.3
%
7.2%
-5.1
%
1.7%
0.8%
5.2%
4.4%
3.3%
7.8%
0.9%
0.6%
-0.4
%
1.9%
1.6%
-30%
-20%
-10%
0%
10%
20%
Supply Demand Occupancy ADR RevPAR
2009 2010 2011 2012
Source: Smith Travel Research, Warnick + Company
Metro Phoenix vs. United States % Change in Performance 2011 vs. 2012
Metropolitan Phoenix United States
2011 2012 % Change 2011 2012 % Change
Occupancy 57.9% 57.7% -0.4% 59.6% 61.4% +2.5%
ADR $103.95 $105.97 +1.9% $101.85 $106.10 +4.2%
RevPAR $60.22 $61.17 +1.6% $61.02 $65.17 +6.8%
Supply – – +0.9% – – +0.5%
Demand – – +0.6% – – +3.0%
Source: Smith Travel Research, Warnick + Company
Resort Market Overview
Metropolitan Phoenix
Metropolitan Phoenix Resort Market Total Available Rooms
10,693 10,844 11,240
13,088 12,888 12,211 12,317 12,317 12,355 12,610
13,084 13,184 13,176
0
3,000
6,000
9,000
12,000
15,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Available Rooms
Source: Smith Travel Research, Warnick + Company
Metropolitan Phoenix Resort Market Occupancy
66.7%
61.2% 60.4%
62.1%
67.2%
70.6% 69.9%
68.2%
64.2%
58.1%
61.3%
63.5% 63.9%
50%
55%
60%
65%
70%
75%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Occupancy
Source: Smith Travel Research, Warnick + Company
Metropolitan Phoenix Resort Market Occupancy by Segment
70.3%
61.7%
74.7%
63.0%
68.0% 67.6%
64.7%
67.5%
54.2%
60.2% 61.4%
50%
55%
60%
65%
70%
75%
80%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Occupancy by Segment
Luxury Non-Luxury
Source: Smith Travel Research
Metropolitan Phoenix Resort Market Average Daily Rate
$182.95 $179.62
$166.50 $158.51
$163.88
$177.00
$190.74
$199.23 $204.12
$167.56 $160.24
$166.96 $168.26
$100
$125
$150
$175
$200
$225
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Average Daily Rate
Moderate rate growth was achieved in 2012 (note: 2000 ADR = $240 today).
Source: Smith Travel Research
Metropolitan Phoenix Resort Market Historical Average Daily Rate by Segment
$253.57
$207.93 (-20.0%)
$205.87 (-1.0%)
$216.13 (+5.0%)
$222.90 (+3.1%)
$140.71 $130.76 (-17.3%) $122.44
(-6.3%)
$126.89 (+3.6%)
$125.47 (-1.1%)
$100
$150
$200
$250
$300
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Average Daily Rate by Segment
Luxury Non-Luxury Notes: • The number in parentheses represents percent change from prior year. • 2000 luxury/non-luxury ADR equals $332 and $185 today, respectively. Source: Smith Travel Research, Warnick + Company
Metropolitan Phoenix Revenue Per Available Room
$122.02
$109.92
$100.57 $98.43
$110.12
$124.97
$133.41 $135.83
$130.96
$97.30 $98.18
$106.05 $107.64
$50
$75
$100
$125
$150
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Revenue Per Available Room
Source: Smith Travel Research, Warnick + Company
Metropolitan Phoenix Resort Market Historical RevPAR by Segment
$178.38
$130.93 (-25.4%)
$134.91 (+3.0%)
$146.94 (+8.9%)
$150.66 (+2.5%)
$91.07 $70.87
(-27.3%) $71.14 (+0.4%)
$76.40 (+7.4%)
$77.04 (+0.8%)
$50
$100
$150
$200
$250
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Revenue Per Available Room by Segment
Luxury Non-Luxury
Note: The number in parentheses represents percent change from prior year. Source: Smith Travel Research, Warnick + Company
Regional Lodging Market
Issues
National and Global Influences
The country continues in an economic recovery The lodging sector typically follows the economy, but recovery thus
far is not uniform • Signs financial markets are loosening up • Recovery will be prolonged; this downturn extended deeper into all
sectors and was global • Change in Consumer habits
Ongoing national and global issues • Ongoing Middle East activity (war, threat of terrorism) • Impact on oil prices; air and ground travel patterns • European economy and recession • U.S. budget deficit ($1.3 trillion) • China slowdown • Impact of recent U.S. and foreign elections • U.S. unemployment
Metro Phoenix Supply Outlook
New supply will remain soft in foreseeable future • Supportable market dynamics, travel patterns, financing, area
economic conditions, etc. • Absorption of current supply • Continued low rate and profit potential • Development capital remains scarce for larger upscale and full-
service projects; no new full-service projects are anticipated for the next three years
• Lack of quality development sites • Brand availability
Continued focus on capital expenditures and renovations • Brand-required renovation • Competitive positioning
Metro Phoenix Demand Outlook
Positive Influences • Local, regional, national economic recovery • Strength and appeal of destination • Appropriation to AOT budget ($7.0 million) and return of Prop
302 monies
Threats • Future immigration legislation • Residual impact of SB1070 (lessening over time) • Arizona Office of Tourism and convention and visitor bureau
budgets remain vulnerable to future economic downturns • Enhanced competitive pressure (regional, national) • Continuing border issues • Cutback in government travel
Average Rate Dilemma
ADR remains the main challenge for market • Reaction to an increased competitive environment, consumer
expectations, and market uncertainty
2011/2012 first sign of ADR recovery-albeit modest (well behind most major markets) • Deep discounting since market fall in 2009 • Absorption of significant new supply (since 2007) at discounted
rates • Absorption of business booked at discounted rates - likely see
continued impact in foreseeable future • Social perception of our destination - issue is minimizing • Continued pressure from meeting and travel planners seeking
bargains • Overall rebound will depend on building rate integrity
Average Rate Dilemma
Rate integrity
• Key to market recovery
• Need occupancy compression to achieve notable ADR growth
• Effective revenue management is paramount
• Market unification a must
Will likely take years to get back to peak market levels
After 9/11, Metro Phoenix’s RevPAR recovery ranked in the top five of major U.S. markets
This recovery far more challenging – currently ranked last in estimated time to fully recover
RevPAR Peak-Through-Recovery Timeframe
Source: Smith Travel Research