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Restaurant Industry 2009 and Beyond
Hudson RiehleSenior Vice President
Research and Knowledge Group
Rhode Island Hospitality Association Economic Outlook Breakfast
Providence, RI
October 14, 2009
Agenda
• Overview• Economic Backdrop• Industry Segments• Industry Imperatives
– Jobs and Careers– Food and Healthy Living– Sustainability and Social Responsibility– Profitability and Entrepreneurship
• Regional Outlook• Wrap-Up
DEFINITION:
“Restaurant Industry”All meals/snacks prepared away from home, including all takeout meals and beverages
Restaurant Industry
Commercial Restaurant
Services
Non-Commercial Restaurant
Services
Military Restaurant
Services
Overview:The Industry in 2009
2008 + 2009 =
Most Challenging Period for Restaurant Industry in Decades
39 Years of Restaurant-Industry Sales
Source: National Restaurant Association
Annual Sales:
$560+ billion
Employees:
13 million
Locations:
945,000
Source: National Restaurant Association
1955: 25% Present: 48%
Restaurant Industry’s Share of the Food Dollar
The Industry Mosaic
Economic Backdrop
National Economy Expected to Improve in 2010
4.1%
1.1%
1.8%2.5%
3.6%3.1%
2.7%2.1%
0.4%
-2.6%
2.1%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Projected
U.S. Real Gross Domestic Product – Historical and Projected Growth Rates
Source: Bureau of Economic Analysis; National Restaurant Association
Recovery Expected to Be Slow and ModestU.S. Real Gross Domestic Product – Quarterly Annualized Growth Rates
Source: Bureau of Economic Analysis; National Restaurant Association
1.2%
3.2% 3.6%
2.1%
-0.7%
1.5%
-2.7%
-5.4%-6.4%
-0.7%
3.0%
2.2% 2.0% 2.2% 2.5%3.0%
-8%
-6%
-4%
-2%
0%
2%
4%
07:Q1 07:Q2 07:Q3 07:Q4 08:Q1 08:Q2 08:Q3 08:Q4 09:Q1 09:Q2 09:Q3 09:Q4 10:Q1 10:Q2 10:Q3 10:Q4
Projected
Income Growth Expected to Remain Modest in 2010
Real Disposable Personal Income – Historical and Projected Growth Rates
Source: Bureau of Economic Analysis; National Restaurant Association
5.1%
2.4%
3.3%
2.5%
3.4%
1.3%
4.0%
2.2%
0.5%
0.1%
0.8%
0%
1%
2%
3%
4%
5%
6%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Projected
Home Equity Cashed Out Through Refinancing Each Quarter
Includes refinancing of prime, first-lien conventional mortgages
Source: Freddie Mac
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
Bill
ion
s
00:Q1 01:Q1 02:Q1 03:Q1 04:Q1 05:Q1 06:Q1 07:Q1 08:Q1 09:Q1
0%
2%
4%
6%
8%
10%
12%
14%
Jan-81 Jan-85 Jan-89 Jan-93 Jan-97 Jan-01 Jan-05 Jan-09
Personal Saving Rate Trending Upward Personal Saving as a Percentage of Disposable Personal Income
Source: Bureau of Economic Analysis
Gas Prices Remain Below 2008 Levels Average price per gallon for regular gasoline
Source: U.S. Department of Energy, Energy Information Administration
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09
Pri
ce
pe
r g
allo
n
Tourism Drives Restaurant Sales Median proportion of restaurant sales represented by travelers and visitors
Source: National Restaurant Association
25%25%25%25%
FamilyFamilyDiningDining
CasualCasualDiningDining
40%40%
15%15%
FineFineDiningDining
QuickserviceQuickservice
International Arrivals to the U.S. Down 10% in First Half of 2009 Percent change in number of international arrivals to the U.S.
Source: U.S. Department of Commerce; *Year-to-Date growth through June 2009
6%
-12%
-8%
-4%
11%
8%
6%
11%
4%
-10%
-15%
-10%
-5%
0%
5%
10%
15%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009:YTD
Job Losses Likely to Continue into 2010
Total U.S. Employment – Historical and Projected Growth Rates
Source: Bureau of Labor Statistics; National Restaurant Association
2.2%
0.0%
-1.1%
-0.3%
1.1%
1.7% 1.8%
1.1%
-0.4%
-3.7%
-1.0%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Projected
Consumer Confidence Edging Back Up from Record Lows U.S. Consumer Confidence Index
Source: The Conference Board
0
25
50
75
100
125
150
Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09
2.4%
2.9%
2.5%
2.1%
3.0% 3.1% 3.1%
3.6%
4.4%
3.6%
0%
1%
2%
3%
4%
5%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Menu Prices Expected to Post Moderate Growth in 2009Menu Prices – Historical and Projected Growth Rates
Source: Bureau of Labor Statistics; National Restaurant Association
Projected
Economy Remains the Top Challenge Facing Operators Top Challenges Facing Restaurant Operators: Sep. 2007, Sep. 2008, Sep. 2009
Source: National Restaurant Association, Restaurant Industry Tracking Survey
SEPTEMBER 2009
The Economy 34%
Sales Volume 29
Labor Costs 6
Government 6
Recruiting Employees 5
Food Costs 3
SEPTEMBER 2007
Recruiting Employees 34%
Sales Volume 16
Food Costs 11
The Economy 9
Competition 7
Labor Costs 3
SEPTEMBER 2008
The Economy 31%
Food Costs 22
Sales Volume 15
Recruiting Employees 8
Gas/Energy Prices 6
Labor Costs 1
Total Monthly Sales Just Slightly Above 2008 Levels Seasonally-adjusted Monthly Sales at Eating and Drinking Places (in billions)
Source: U.S. Census Bureau
$24
$26
$28
$30
$32
$34
$36
$38
$40
Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec
Mo
nth
ly S
ales
(in
bill
ion
s)
2008
2007
2006
2004
2002
2001
2003
2005
2009
Restaurant Performance Index Below 100 for 22nd Consecutive Month
Source: National Restaurant Association
96
97
98
99
100
101
102
103
104
Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09
Values Above 100 = Expansion, Values Below 100 = Contraction
Expectations Index Rising as Operators Grow More Optimistic
Source: National Restaurant Association
95
96
97
98
99
100
101
102
103
104
105
Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09
Current Situation Index Expectations Index
Values Above 100 = Expansion, Values Below 100 = Contraction
Restaurant Operators Continue to Plan for Capital Expenditures
Proportion of operators that made a capital expenditure for equipment, expansion or remodeling in last 3 months and plan to in the next 6 months
Source: National Restaurant Association
40% 41% 38%46%
35%40%
60% 59%
39%46%
0%
10%
20%
30%
40%
50%
60%
70%
Family Dining Casual Dining Fine Dining Quickservice Quick-Casual
Made Capital Expenditure in Last 3 Months Plan to Make Capital Expenditure in Next 6 Months
Industry Segments
Fullservice Restaurant Sales
2008 2009
$181 billion$183 billion
-2.5%Real
Decrease
Source: National Restaurant Association
Pent-Up Demand for Restaurants
Percent of adults NOT eating on-premises at restaurants as often as they would like
Percentage
2007 2008 Point Change
All Adults 31% 33% +2
Household Income:
$50,000 - $74,999 23% 29% +6
$75,000 or more 17% 24% +7
Source: National Restaurant Association
Percent of adults NOT eating on-premises at restaurants as often as they would like
Source: National Restaurant Association
Pent-Up Demand for Restaurants Continues to Grow
October
2007
September
2009
Percentage Point Change
All Adults 31% 36% +5
Household Income:
$50,000 - $74,999 23% 34% +11
$75,000 or more 17% 26% +9
Limited-Service Restaurant Sales
2008 2009
$157 billion
$164 billion
0.4%Real
Increase
Source: National Restaurant Association
Managed Services Sales
Source: National Restaurant Association
2008 2009
$38.3 billion
$40.1 billion
1.2%Real
Increase
Jobs and Careers
Over two out of five American adults have worked in the restaurant industry.
Source: National Restaurant Association
Source: Bureau of Labor Statistics; National Restaurant Association projections * Projected
1999
10.9 million
2009* 2019*
13.0 million
14.8 million
Total Restaurant-Industry Employment
Restaurants Down 119,500 Jobs from Pre-Recession Peak (-1.2%) Net Change in Eating and Drinking Place Employment (seasonally-adjusted)
Source: Bureau of Labor Statistics
-16,300
-27,300
-25,300
-6,900-10,300
-4,500
2,900
21,500
4,100
-5,700-6,800
-10,500
-35,000
-30,000
-25,000
-20,000
-15,000
-10,000
-5,000
0
5,000
10,000
15,000
20,000
25,000
Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09
National Economy Down 7.2 Million Jobs (5.2% of Workforce) Net Change in Total U.S. Employment (seasonally-adjusted)
Source: Bureau of Labor Statistics
-380,000
-597,000
-681,000-741,000
-681,000-652,000
-519,000
-303,000
-463,000
-304,000
-201,000
-263,000
-800,000
-600,000
-400,000
-200,000
0
Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09
Food and Healthy Living
1 Locally grown produce
2 Bite size desserts
3 Organic produce
4 Nutritionally-balanced children’s dishes
5 New/fabricated cuts of meat (e.g. Denver steak, pork flat iron, bone-in Tuscan veal chop)
Source: National Restaurant Association; American Culinary Federation, 2008
Hot/Trendy Food OfferingsFullservice Restaurants
1 Healthy options in kids meals
2 Organic items
3 Locally-sourced items
4 Spicy items
5 Wraps/pitas/tortillas
Source: National Restaurant Association, Quickservice Restaurant Survey 2008
Hot/Trendy Food OfferingsQuickservice Restaurants
1 Micro-distilled/artisan liquor
2 Culinary cocktails (e.g. savory, customized to specific dishes)
3 Organic wine
4 Craft beer/microbrews
5 Specialty beer (e.g. seasonal, fruit)
Source: National Restaurant Association; American Culinary Federation, 2008
Hot/Trendy Alcoholic Beverage OfferingsFullservice Restaurants
1 Specialty iced tea (e.g. Thai-style, Southern/sweet, flavored)
2 Organic coffee
3 Flavored/enhanced water
4 Green tea
5 Espresso/specialty coffee
Source: National Restaurant Association; American Culinary Federation, 2008
Hot/Trendy Non-Alcoholic Beverage OfferingsFullservice Restaurants
1 Energy drinks
2 Flavored/enhanced water
3 Espresso/specialty coffees
4 Sports drinks
5 Iced tea
Source: National Restaurant Association, Quickservice Restaurant Survey 2008
Hot/Trendy Non-Alcoholic Beverage OfferingsQuickservice Restaurants
Three out of four adults (76 percent) said they are trying to eat healthier now at restaurants than they did two years ago.
Source: National Restaurant Association
Nearly three out of ten adults (27 percent) said they have gone online to search for nutrition information about restaurant food.
Source: National Restaurant Association
Sustainability and Social Responsibility
Going GreenPercent of operators, by type of operation, who plan to devote more oftheir resources to green initiatives in 2009
Source: National Restaurant Association, 2008
Family dining Casual dining Fine dining Quickservice
43% 45% 50% 27%
Forty-four percent of adults said they are likely to make a restaurant choice based on a restaurant’s practices in the areas of energy and water conservation.
Source: National Restaurant Association
Conservation InitiativesPercent of restaurant operators who took the following actions in 2008
Family Casual Fine Quick
Dining Dining Dining Service
Purchase Energy-Saving Lighting Fixtures 64% 52% 63% 41%
Purchase Energy-Saving Kitchen Equipment 44 40 36 36
Purchase Energy-Efficient Refrigeration, Air 40 40 41 30
Conditioning or Heating Systems
Install Water-Saving Equipment and/or Fixtures 34 28 37 26
Source: National Restaurant Association
Fifty-two percent of adults said they are likely to make a restaurant choice based on how much a restaurant supports charitable activities and the local community.
Source: National Restaurant Association
Profitability and Entrepreneurship
The Restaurant Industry Dollar
Source: Deloitte; National Restaurant Association
Fullservice Limited Service
Wages and benefits 33% 30%
Food and beverages 33% 29%
Occupancy costs 6% 9%
Other 24% 23%
Income before taxes 4% 9%
TOTAL 100% 100%
Same-Store Sales and Customer Traffic Remain Soft
Proportion of Restaurant Operators Reporting Higher/Lower Same-Store Sales
Source: National Restaurant Association
26%
60%
29%
60%
26%
60%
23%
66%
31%
55%
29%
56%
24%
63%
26%
59%
26%
60%
22%
61%
26%
58%
17%
68%
0%
25%
50%
75%
Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09
Higher Same-Store Sales Lower Same-Store Sales
A New GenerationProportion of fullservice customers who said they would utilize the option of a touch-screen TV monitor at the table, which gave the options to view the menu, place the order, pay the bill, browse the Internet, watch TV and play video games, if it was offered by a fullservice restaurant
65%
56%53%
38%
21%
13%
0%
10%
20%
30%
40%
50%
60%
70%
18 - 24 25 - 34 35 - 44 45 - 54 55 - 64 65 & over
Age Group
Source: National Restaurant Association
A New GenerationProportion of fullservice customers who said they would utilize the option of receiving cell phone text message notifications of daily specials, if it was offered by a fullservice restaurant
Source: National Restaurant Association
24%
19% 19%
14%
6% 6%
0%
5%
10%
15%
20%
25%
18 - 24 25 - 34 35 - 44 45 - 54 55 - 64 65 & over
Age Group
A New PerspectiveSeventy-five percent of adults would patronize fullservice restaurants more if they were offered discounts for dining on less busy days of the week.
Source: National Restaurant Association
Regional Outlook
U.S. Jobless Rate Stood at 9.8% in September
Seasonally-adjusted Unemployment Rates in August 2009
Source: Bureau of Labor Statistics
< 7%
7 to 8.9%
9 to 10.9%
11% +
Dramatic Consumer Confidence Variations By Region
Present Situation: September 2009
Source: The Conference Board
REGION INDEX
West South Central 75.2
West North Central 40.0
East South Central 32.3
South Atlantic 22.8
Middle Atlantic 21.5
New England 19.0
Mountain 18.0
Pacific 12.3
Growth in Key Indicators
Source: National Restaurant Association
2010 Rhode Island
Population +0.1%
Real Disposable Personal Income (DPI) +0.1%
Construction Employment +0.2%
Wrap Up
Unfulfilled Demand for Restaurant Services Remains High
Source: National Restaurant Association
Over one-third of adults are NOT dining on-premises or using take-out as often as they would like
Americans Love RestaurantsPercent of adults who said they enjoy going to:
Restaurants 90%
Grocery Stores 55%
Source: National Restaurant Association
Wrap-Up Modest real GDP growth resumes
Patchy and prolonged recovery
Job market remains weak
With soft economic backdrop, value emphasis continues
However, 2010 environment will be better than prior two years
Menu — healthy kids’ meals, local produce, mini- desserts, artisan spirits
Workforce — higher productivity through greater focus on technology
Growing role of green initiatives
Pent-up demand for restaurants + nudging / incenting consumer = positive future despite challenges
Restaurant Industry 2009 and Beyond
Hudson RiehleSenior Vice President
Research and Knowledge Group
Rhode Island Hospitality Association Economic Outlook Breakfast
Providence, RI
October 14, 2009
rhode island
hospitalityEconomic Outlook Breakfast
October 14, 2009
Rachel J. Roginsky, [email protected]
164 Canal Street Boston, MA 02114 ~ 617/722-9916www.pinnacle-advisory.com
The State of the Hospitality Industry in
Rhode Island
NATIONAL LODGING MARKET
U.S. Occupancy Percent 2000 – 2010P
Source: Smith Travel Research
63.3
59.7 5959.2 61.3
63.1 63.3 63.160.4
55.4 55.1
40
46
52
58
64
70
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009P 2010P
$85.37$84.07 $82.82 $82.96
$86.41
$91.16
$98.00
$104.08
$106.72
$96.43$93.16
$70
$75
$80
$85
$90
$95
$100
$105
$110
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009P 2010P
Source: Smith Travel Research
U.S. Average Daily Rate 2000 – 2010P
U.S. RevPAR Percent Change 2000 – 2010P
6.1
-6.9
-2.6
0.5
7.9 8.5 7.85.7
-1.8
-17.1
-4
-12.0
-7.0
-2.0
3.0
8.0
13.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009P 2010P
Source: Smith Travel Research
20 yr. Ave. 2.9%
86.41 91.16 104.08 106.72 96.43 93.1684.0785.30 98.0082.9682.82
$87.73$89.11
$91.15
$93.57
$96.74
$99.86
$105.90$107.81$106.65
$85.30
$102.71
80
90
100
110
Nominal ADRYr 2000, Grown by CPI
Source: Smith Travel Research
Total U.S. Room Rates Actual vs. Inflation Adjusted 2000 – 2010P
If year 2000 ADR had increased by CPI each year…
2009 2010Segment RevPar Chg RevPar Chg
Luxury -25.0 / -28.0 -7.0 / -10.0
Upper Upscale -18.0 / -21.0 -1.0 / -4.0
Upscale -16.0 / -19.0 -5.0 / -8.0
Midscale with F&B -12.5 / -15.5 -3.0 / -6.0
Midscale without F&B -10.5 / -13.5 +1.0 / -2.0
Economy -13.0 / -16.0 Flat / -3.0
STR Chain Scale Forecast
Source: Smith Travel Research
1990/1991
2001/2002
Current(Q2-09)
Estimate 2008/10
Demand 3 5 6 9
Occupancy 7 6 7 11
ADR 0 5 3 9
RevPAR 5 5 4 9
Room Revenue 2 5 4 7
Total US Industry Consecutive Quarterly Declines – Key Indicators
Source: Smith Travel Research
Takeaways:• Decline is global• Supply growth still an issue• Demand declines may be near bottom• ADR weakness continues • “Less Worse” 2H 2009• Moderate improvement 2010• Meaningful growth anticipated 2011
Source: Smith Travel Research
NEW ENGLAND LODGING MARKET
57.2%
61.6%
58.1%
56.7%
58.8%
52.0%
54.0%
56.0%
58.0%
60.0%
62.0%
64.0%
66.0%
57.8%
New England Occupancy - 2008
Source: Smith Travel Research/Pinnacle Advisory Group
$106.36
$126.41 $140.77
$109.79$102.65 $94.93
$30.00
$50.00
$70.00
$90.00
$110.00
$130.00
$150.00
New England Average Daily Rate - 2008
Source: Smith Travel Research/Pinnacle Advisory Group
New England RevPAR - 2008
Source: Smith Travel Research/Pinnacle Advisory Group
RHODE ISLAND LODGING MARKET
40
50
60
70
80
1999200020012002200320042005200620072008
73.1%72.2%
66.9%67.3%
66.2%
68.2%
64.2%62.2%
60.8% 57.1%
Rhode Island Occupancy 1999-2008
Source: Smith Travel Research
40
60
80
100
120
140
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
$101.37
$114.25$116.14
$114.12
$111.37
$112.46
$116.99
$122.92$128.78
$126.52
Rhode Island Average Daily Room Rate 1999-2008
Source: Smith Travel Research
Rhode Island RevPAR 1999-2008
Source: Smith Travel Research
2008 2009
Occupancy 58.7% 54.9%
ADR $128.32 $114.50
RevPAR $75.31 $62.84 Down 16.5%
Rhode Island Year-to-Date August Comparison
Source: Smith Travel Research
CITY OF PROVIDENCE LODGING MARKET
Providence Occupancy 2000-2008
Source: Smith Travel Research
40.0%
45.0%
50.0%
55.0%
60.0%
65.0%
70.0%
75.0%
80.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008
76.5%
69.7% 72.5%70.9%
72.9%
67.2%
63.6% 63.1%60.7%
$130
$135
$140
$145
$150
$155
$134.39
$137.40
$132.56 $134.59
$137.88
$143.06
$151.64
$154.35
$145.86
2000 2001 2002 2003 2004 2005 2006 2007 2008
Providence Average Daily Room Rate 2000-2008
Source: Smith Travel Research
$77
$82
$87
$92
$97
$102
2000 2001 2002 2003 2004 2005 2006 2007 2008
$102.82
$95.74 $96.06
$95.19
$100.41
$96.19 $96.48$97.35
$88.50
Providence RevPAR 2000-2008
Source: Smith Travel Research
2008 2009
Occupancy 60.8% 56.8%
ADR $145.53 $133.12
RevPAR $88.52 $75.59 Down -14.6%
US Down -18.3%
DC Down -7.4%
Phil Down -16.6%
Boston Down -18.7%
NY Down -32.4%
Providence YTD August
Providence - Future
•Convention•Office Market
•Other Demand Factors•New Supply•Projections
Comparison of Events by Type – FY2007 – FY2008
Source: Rhode Island Convention Center Authority
# of Events FY 2007
Attendance FY 2007
Associated RoomNights
FY 2007
# of Events FY 2008
Attendance FY 2008
Associated RoomNights
FY 2008
Public Shows 36 223,400 3,686 47 204,250 4,048Tradeshows 21 30,300 19,510 22 41,450 15,127Conventions 12 15,100 16,972 12 9,450 10,894Meetings 169 47,310 5,832 184 59,796 12,015Banquets 89 42,450 0 84 24,953 2548
TOTALS 327 358,560 46,000 349 339,899 44,632
Fiscal Year July 1-July 30
Comparison of Events by Type – FY2009-FY2010
Source: Rhode Island Convention Center Authority
Note 2010 includes August and September actuals & estimates for October-June
# of Events
FY 2009Attendance
FY2009
Associated Room Nights
FY2009
# of Events FY2010
Attendance FY2010
Associated Room Nights FY2010
Public Trade Shows 52 215,150 7,340 41 196,900 7,124
Tradeshows 12 17,450 9,588 18 21,750 20,809
Conventions 21 25,535 37,901 18 25,325 22,743
Meetings 171 41,651 6,747 70 32,755 5,888
Banquets 63 19,270 0 45 18,940 1459
Totals 319 319,056 61,576 192 295,670 58,023
Providence – Downtown Office Market
Source: CB Richard Ellis
Total SF Vacancy Absorption
12/31/99 6,035,318 12.4% 4,465
12/31/00 5,908,818 11.5% 129,073
12/31/01 5,704,318 13.8% (18,275)
12/31/02 5,736,118 12.8% 53,006
12/31/03 5,399,118 9.3% 125,287
11/30/04 5,737,542 8.5% 124,475
12/31/05 5,437,427 10.1% (117,000)
12/31/06 6,664,927 11.2% 184,000
12/31/07 6,049,233 14.8% 116,541
12/31/08 6,025,453 15.2% 13,371
Providence Other Factors
•I-195 Relocation•Economic Outlook
•Civic Center
Providence – New Supply
• No New Supply
Providence – Projections
• 2009 – 55% @ $131: REVPAR - $72.05
• 2010 – 56% @ $128: REVPAR - $71.68
WARWICK LODGING MARKET
40%
50%
60%
70%
80%
2000 2001 2002 2003 2004 2005 2006 2007 2008
79.8%
72.7%72.4% 71.1%74.2%
70.1%
69.1%65.7%
61.5%
Warwick Occupancy 2000-2008
Source: Smith Travel Research
$70
$80
$90
$100
$110
2000 2001 2002 2003 2004 2005 2006 2007 2008
$102.05
$106.44
$100.92
$96.39$93.27
$95.81$97.31$98.76
$94.36
Warwick Average Daily Room Rate 2000-2008
Source: Smith Travel Research
$40
$50
$60
$70
$80
$90
2000 2001 2002 2003 2004 2005 2006 2007 2008
$81.46$77.40
$73.10$68.49$69.22 $67.19 $67.20
$64.90
$58.07
Warwick RevPAR 2000-2008
Source: Smith Travel Research
2008 2009
Occupancy 63.9% 58.4%
ADR $95.58 $83.18
RevPAR $61.11 $48.56 Down -20.5%
Warwick YTD August
Source: Smith Travel Research
Warwick – Future
Issues•Airport Factors – YTD Passengers Down 6.5%• Intermodal Underway•No New Supply•Continued Economic Slowdown
Projections•2009: 58% @ $83: REVPAR - $48.14•2010: 60% @ $80: REVPAR - $48.00
NEWPORT LODGING MARKET
52%
54%
56%
58%
60%
62%
64%
66%
68%
2000 2001 2002 2003 2004 2005 2006 2007 2008
66.1%
58.8%
62.9%
61.0%63.2%
61.0%
58.7%59.9%
56.8%Occupancy
Newport Occupancy 2000-2008
Source: Smith Travel Research
$100
$120
$140
$160
$180
$200
$155.40$154.23
$154.23$152.06
$157.20
$164.04$176.56
$189.90
2000 2001 2002 2003 2004 2005 2006 2007 20082000 2001 2002 2003 2004 2005 2006 2007 20082000 2001 2002 2003 2004 2005 2006 2007 20082000 2001 2002 2003 2004 2005 2006 2007 2008
$190.15
Newport Average Daily Rate 2000-2008
Source: Smith Travel Research
$60
$70
$80
$90
$100
$110
$120
2000 2001 2002 2003 2004 2005 2006 2007 2008
$102.74
$90.75$97.08
$92.83
$99.38$100.69
$103.56
$113.67
$108.00
Newport RevPAR 2000-2008
Source: Smith Travel Research
2008 2009
Occupancy 57.9% 54.7%
ADR $195.07 $94.40
RevPAR $112.95 $94.40 Down -16.4%
Newport YTD August
Source: Smith Travel Research
Newport – Future
Issues:•No New Supply
•Downturn In Economy Is Impacting Leisure Market
•Discover New England in Newport – April 2010
Projections:2009 – 56% @ $171: REVPAR - $95.76
2010 – 58% @ $168: REVPAR - $97.44
Rachel J. Roginsky, ISHC164 Canal Street Boston, MA 02114 ~ 617/722-9916
www.pinnacle-advisory.com
PINNACLE ADVISORY GROUP
Rhode Island and US Tourism:
There Is Light At The End Of The Tunnel
Copyright © 2009 IHS Global Insight, Inc. 113
• Quick Introduction to IHS Global Insight
• What is Tourism Satellite Accounting?
• 2008 Rhode Island Tourism Results
• What Do Visitors Mean to RI?
• Outlook for Travel
Agenda
Copyright © 2009 IHS Global Insight, Inc. 114
About IHS Global Insight:
Premier economic analysis, forecasting, & consulting organization
Formed in 2001 by combining WEFA and DRI
Provides the most comprehensive coverage of countries, regions and industries available from any single source
Brings a common analytical framework and a consistent set of assumptions to diverse capabilities and products
Significant Travel & Tourism practice, with major public and private clients
We are now part of IHS, an $800B publicly traded information company
• Provides a broad range of consulting capabilities covering:
• Strong reputation and experience within the travel & tourism sector
• Provides a broad range of consulting capabilities covering:
• Strong reputation and experience within the travel & tourism sector
Market Analysis Business Planning Investment Strategy Risk Assessment Infrastructure Analysis Policy Evaluation Economic Development Economic Impact
Copyright © 2009 IHS Global Insight, Inc. 115
Travel and Tourism Practice
• Visitation & Spending ForecastsVisitation & Spending Forecasts –by category and by country, region, state, or U.S. city. Market size, growth, and share.
• Market Feasibility & Investment FacilitationMarket Feasibility & Investment Facilitation market analysis & research, demand/supply review, policy evaluation, development cost analysis.
• Destination Impact & Concession SupportDestination Impact & Concession Support economic impact of the construction and operations of individual facilities –resort, convention center, entertainment venue, event…
• Tourism Economic Impact & Tourism Satellite AccountingTourism Economic Impact & Tourism Satellite Accounting conforming to the UN/WTO standards. What does travel & tourism contribute in jobs, wages, spending, and taxes to a national or local economy?
• Tourism Policy AnalysisTourism Policy Analysis travel & tourism policy evaluation and rationalization.
Copyright © 2009 IHS Global Insight, Inc. 116
Tourism Satellite Accounting
• The Tourism Satellite Account is the international (UN/WTO, OECD) standard for measuring the contribution of tourism to an economy
• Measuring the industry “tourism” is difficult: Tourism is not measured in standard economic accounting terms. Most industries are accounted via the supply-side:
firms are categorized into NAICS codes and asked about jobs, revenues, costs.
But tourism is a demand-side activity: the focus is on what the traveler buys before and during a trip( hotel, food, transportation, retail…).
As a result, tourism touches many industries
• Why a TSA? -the 4”Cs”: Credibility, Comprehensiveness, Comparability, Consistency
116
Copyright © 2009 IHS Global Insight, Inc. 117
Tourism Economic Impact: Definitions
• Visitor:Visitor: GT 50 miles, non-commuting; All overnight trips• Resident Tourism: Resident Tourism: Outbound purchases made in advance of a trip only. Resident
usage of RI tourism assets are not included.
• Tourism Expenditures:Tourism Expenditures: A TSA concept, includes all spending by all constituents on travel made in the state (RI), including tourism related investments
• Visitor Spending: Visitor Spending: Spending in the jurisdiction by visitors (see above) (on accommodations, food & beverage, shopping, transportation, entertainment,…
• Economic Impact: “GDP” definition…spending less value of supply chain purchases made outside RI. The amount retained in the RI economy.
• Import Leakages:Import Leakages: The value of supply chain purchases made outside of RI.
• DirectDirect Spending/Jobs/Wages/Taxes: Spending/Jobs/Wages/Taxes: Industries that “touch” the visitor (e.g. hotels, restaurants, museums,…)
• IndirectIndirect Spending/Jobs/Wages/Taxes: Spending/Jobs/Wages/Taxes: Industries that supply those that touch the visitor
• Induced Induced Spending/Jobs/Wages/Taxes:Spending/Jobs/Wages/Taxes: Workers of industries that touch or supply spend their wages locally
• Core ImpactCore Impact:: Impact results based purely off of visitor expenditures• Total ImpactTotal Impact:: Impact results Include investment, government support, and expenditures
Copyright © 2009 IHS Global Insight, Inc. 118
2008 Rhode Island Tourism Results
Copyright © 2009 IHS Global Insight, Inc. 119
State Overview: 2008 Totals At A Glance
Source: IHS Global Insight
Tourism Concept 2008 2007’07 – ’08 Growth
VisitsVisits 7.34 M7.34 M 7.87 M -6.8%
ExpendituresExpenditures $3.60 B$3.60 B $4.15 B -13.2%
Total Economic ImpactTotal Economic Impact $2.26 B$2.26 B $2.56 B -11.9%
Core Economic Impact (GSP)Core Economic Impact (GSP) $1.74 B$1.74 B $1.81 B -3.8%
Total JobsTotal Jobs 45,53845,538 52,528 -13.3%
WagesWages $1.37 B$1.37 B $1.59 B -13.8%
TaxesTaxes $843 M$843 M $957 M -12.0%
Copyright © 2009 IHS Global Insight, Inc. 120
0.1% 2.4%
9.3%
-13.2%
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
2005 2006 2007 2008
$ M
illi
on
Core Tourism Total Impact TourismExpenditures
10.8%4.6%
3.0%
2.4%3.2%0.5%
-11.9%
-3.8%
Total Tourism (TSA) Expenditures
• RI visitation fell by 6.8% in ‘08 • Spending per visit increased by 1.4% in ‘08
• Visitor spending fell 5.5% ’08• Investment spending fell 67% in ‘08
Tourism expenditures tallied $3.6 billion in 2008
Source: IHS Global Insight
Copyright © 2009 IHS Global Insight, Inc. 121
-6.8%
2.8%-1.7%-13.8%
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
2005 2006 2007 2008
Vis
ito
rs (
Mil
lio
n)
Business Leisure
Total
3.7%0.4%-15.0%
-0.9%-9.3%-9.0%
-4.3%
-17.8%
Visitors to Rhode Island*
Total visitors fell -6.8% in 2008, but length of stay increased nearly 15%.
* Visitors from GT 50 miles or overnight only, provided by DK Shifflet & Associates, Ltd. Business travel results were estimated by IGI.
Copyright © 2009 IHS Global Insight, Inc. 122
Total Impact of Tourism
• In 2008, the total economic impact of travel & tourism (direct and indirect)
was $2.26 billion. This represents 5.4% of RI Gross State Product
• The ratio of the total impact to total expenditures reveals that 63¢ of each
tourism dollar spent in Rhode Island is retained in the state. The
remainder represents import leakages. This share is fairly typical for a
diversified state like Rhode Island and higher than many other states.
• 45,538 jobs – direct and indirect – were created by travel & tourism (TSA)
economic activity. This accounts for 9.4% of total employment in the
state
• Tourism (TSA) generated $843 million in federal, state, and local
government taxes in 2008, making up 13.8% of all RI state gov. revenue.
Copyright © 2009 IHS Global Insight, Inc. 123
Category Distribution of Expenditures
The category changes shown below, with expenditures in Entertainment, Accommodations and Transportation holding steady while travelers are cutting
back heavily on Food and Shopping, is very common in US destinations.
2008 2007‘07 – ‘08 Growth
Entertainment** 779 768 1.5%
Accommodation 716 724 -1.1%
Transportation 804 823 -2.3%
Food 693 777 -10.8%
Shopping 435 534 -18.6%
Total * 3,427 3,626 -5.5%
* Direct and Indirect Tourism Expenditures (w/o construction & investment)
Source: IHS Global Insight** Entertainment category includes all marina and boating activity
Food20%
Shopping13%
Transportation
23%
Entertainment
23%
Accommodation
21%
Copyright © 2009 IHS Global Insight, Inc. 124
Travel & Tourism 37.8 -7.5% 8.0% 37.8
Ranking Core Tourism – EmploymentTravel & tourism is RI’s 4th largest private sector employer.
Rank IndustryReported
Employment(Thousands)
2007-2008
Growth% of State
Tourism-Extracted
Employment (Thousands)
1 Health Care and Social Assistance 76.58 0.7% 16.2% 76.6
2 Retail Trade 49.42 -4.0% 10.5% 47.43 Accommodation and Food Services 42.86 -0.7% 9.1% 25.84 Manufacturing, Durables 31.08 -5.4% 6.6% 31.15 Finance and Insurance 26.91 -4.4% 5.7% 26.96 Administrative and Waste Services 23.88 -4.2% 5.1% 21.37 Educational Services 23.33 0.6% 4.9% 23.38 Other Services 22.80 -1.6% 4.8% 22.89 Professional, Scientific, and Tech. Services 21.57 -0.3% 4.6% 21.6
10 Construction 20.47 -7.8% 4.3% 20.511 Wholesale Trade 16.93 -1.6% 3.6% 16.912 Manufacturing, Nondurables 16.92 -5.5% 3.6% 16.913 Information 10.62 0.3% 2.3% 10.614 Transportation and Warehousing 9.87 -0.9% 2.1% 9.015 Management of Companies and Enterprises 9.18 -2.9% 1.9% 9.2
Other Industries 15.9 -2.6% 3.4% 0.8Government 53.5 -2.0% 11.3% 53.5
Total Nonfarm 471.8 -0.1% 100.0% 434.1
Core Tourism represented
37,758 jobs in 2008.
Source: Bureau of Labor Statistics and IHS Global Insight
Copyright © 2009 IHS Global Insight, Inc. 125
Talking Points: What Do Visitors Mean to RI?
Each RI visitor/traveler generates about $467 in Each RI visitor/traveler generates about $467 in expenditures, $58 of which goes to RI businesses that do expenditures, $58 of which goes to RI businesses that do not directly “touch” that visitornot directly “touch” that visitor
Every 160 visitors creates a new RI jobEvery 160 visitors creates a new RI job Each visitor creates about $115 in tax receipts, $63 of Each visitor creates about $115 in tax receipts, $63 of
which goes to state & local authoritieswhich goes to state & local authorities It takes only 235 visitors to pay for one Rhode Island It takes only 235 visitors to pay for one Rhode Island
public school student for one yearpublic school student for one year
Each visitor adds about $333 to RI Gross State ProductEach visitor adds about $333 to RI Gross State Product If tourism didn’t exist, each household would pay $1,159 If tourism didn’t exist, each household would pay $1,159
more in taxes to maintain the current level of state and more in taxes to maintain the current level of state and local tax receiptslocal tax receipts
Copyright © 2009 IHS Global Insight, Inc. 126
-0.2
-0.1
-0.1
0.0
0.1
2008Q1 2009Q1 2010Q1 2011Q1
Business Trips Leisure Trips
IGI Travel Insights - Domestic Travel Forecast(Percent)
Outlook for Travel: Quarterly Outlook Through 2011
• After 3 consecutive years of falling domestic trips, growth returns in Q1 2010, led by After 3 consecutive years of falling domestic trips, growth returns in Q1 2010, led by leisure travelleisure travel• Business travel will continue to decline through 2010 – economics triggered the Business travel will continue to decline through 2010 – economics triggered the collapse, but changing viewpoints on biz travel will further slow recoverycollapse, but changing viewpoints on biz travel will further slow recovery• International arrivals remain the most positive story. 2010: +3.0% 20: +4.9%International arrivals remain the most positive story. 2010: +3.0% 20: +4.9%• Rebound in leisure travel helpful for RI, as over 80% of RI visitors are leisure, Rebound in leisure travel helpful for RI, as over 80% of RI visitors are leisure, compared to 75% nationallycompared to 75% nationally
Source: IHS Global Insight, D.K. Shifflet & Associates
Copyright © 2009 IHS Global Insight, Inc. 127
2007 2008 2009 2010 2011 2012 2013
Total Person-Trips (mn) 1,999 1,948 1,873 1,883 1,902 1,930 1,942
Business 503 480 439 428 429 433 430
Leisure 1,496 1,468 1,434 1,455 1,473 1,497 1,512
Total Spending (mn$) 770,853$ 742,787$ 670,740$ 679,020$ 705,048$ 741,312$ 775,274$
Business 231,396$ 223,347$ 198,350$ 199,842$ 204,805$ 212,052$ 218,285$
Leisure 539,458$ 519,441$ 472,390$ 479,178$ 500,243$ 529,261$ 556,988$
2007 2008 2009 2010 2011 2012 2013 2008-2013
Total Person-Trips -0.1% -2.6% -3.8% 0.5% 1.0% 1.5% 0.6% -0.1%
Business -1.1% -4.6% -8.4% -2.5% 0.3% 0.8% -0.7% -2.2%
Leisure 0.3% -1.9% -2.3% 1.4% 1.2% 1.7% 1.0% 0.6%
Total Spending 5.9% -3.6% -9.7% 1.2% 3.8% 5.1% 4.6% 0.9%
Business 8.0% -3.5% -11.2% 0.8% 2.5% 3.5% 2.9% -0.5%
Leisure 5.1% -3.7% -9.1% 1.4% 4.4% 5.8% 5.2% 1.4%
Travel Prices 1.7% 1.5% -7.3% -0.4% 0.1% 1.0% 1.4% -1.1%
Outlook for Travel: US Domestic Travel Metrics
Source: IHS Global Insight, D.K. Shifflet & Associates
Thank You!
Shane NortonSenior Consultant, Travel & [email protected]