The Darwin of Data: STR Presentation - MemberClicks · The Darwin of Data: STR Presentation Ali Hoyt Senior Director, Consulting & Analytics STR

The Darwin of Data: STR Presentation

Ali Hoyt

Senior Director, Consulting & Analytics

STR

Economic Concern Around the World

Global Risk

• Protectionism

• Weakening key economies

• Volatile financial markets

• Brexit

Global growth is slowing (especially manufacturing)

• Eurozone in slow motion

• Germany contracting

• Brazil in recession

• Mexico stalled

• China and India slowing

…and the U.S. economy is being pulled into the fray.

British economy sunk in the 2nd quarterGrowth flatlining in ItalyGermany contractingMexico showing weak growth after a quarter of declinesBrazil slipping into recession

5 of the World’s Largest Economies at Risk of Recession

https://www.cnn.com/2019/08/14/economy/recession-risk-economies/index.html

U.S. economic fundamentals a mixed bag

The good The bad

Healthy labor and credit trends

Low inflation

Corporate earnings still strong

Housing starts declining

Manufacturing deteriorating

Service-sector growth weakest level in three years

Inverted yield curve

Takeaways from Tourism Economics

The global economy is slowing

The US economy is foundationally strong but is slowing due to weak trade, financial market tightening, and waning business confidence

We remain on a “recession watch” but are not convinced this is inevitable over the next 12 months

Leading travel indicators are still positive in the short term and consumer is still driving demand growth

Global Hotel Performance

© 2019 STR. All Rights Reserved.

| The world’s largest hotel performance sample


United States


12 MMA July 2019: Persistent Weak ADR Change

Highest Ever?

% Change

Room Supply 2.0%

Room Demand 2.1%

Occupancy 66.2% 0.1%

ADR $131 1.5%

RevPAR $87 1.6%

Room Revenue 3.6%Total US Results, 12 MMA July 2019


RevPAR Growth: Longest RevPAR Upcycle(with two small interruptions)

-25

-15

-5

5

15

1990 2000 2010

Total U.S., RevPAR % Change, 1/1990 – 07/2019

56 Months111 Months(out of 113)

111 Months(out of 112)


Total US Pipeline; Rooms In Construction, in ‘000s; 01/2006 – 07/2019

0

50

100

150

200

250

2006 2008 2010 2012 2014 2016 2018

Low: July ‘1150K

July ’19206K

High:Dec ‘07

211K

5K

I/C Pipeline Closing In On Prior PeakTh

ou

san

ds


Outlook

Metric2019

Forecast2020

Forecast

Supply 1.9% 1.9%

Demand 2.1% 1.6%

Occupancy 0.2% -0.3%

ADR 1.4% 1.4%

RevPAR 1.6% 1.1%

Total US Forecast


Europe continues to experience positive growthEurope – Main KPIs, Constant Currency, EUR, July 2019 YTD

71.1%Occupancy+0.4%

112.22ADR+2.1%

79.81RevPAR+2.5%


2018: Strong year for EuropeRussia World Cup + Market Recovery (Brussels/Paris/Istanbul)

Long-term travel drivers are strongMore people want to travel more of the time

... now 9 years of RevPAR growthDespite European Financial Crises, Home sharing & terrorist attacks


+20% Growth

0 – 10% Growth

4th Lisbon +65%

5th Edinburgh +42%

6th Copenhagen +36%

7th London +30%

8th Berlin +29%

9th Amsterdam +26% 20th Zurich -11%

Dublin

+74%

Istanbul

+70%

Budapest

+78%

Declines

10 - 20% Growth

With stellar growth across Eastern European,Irish and Iberian cities

RevPAR growth 2018 vs 2008

Local Currency

10th Barcelona +18%

11th Warsaw +17%

12th Madrid +16%

13th Bucharest +15%

14th Helsinki +12%

15th Athens +9%

16th Rome +7%

17th Brussels +6%

18th Moscow +5%

19th Paris +1%


0%

5%

10%

2012 2013 2014 2015 2016 2017 2018 2019 YTD

Supply % change Demand % change RevPAR % change

Strong supply across Europe for the beginning of 2019Europe – Supply, Demand, RevPAR % Change, Constant Currency, EUR


Europe – RevPAR % Change, Local Currency, July 2019 YTD

Vienna

Madrid

LondonBrussels

Dublin

Edinburgh

Paris

Lisbon

HelsinkiSt. Petersburg

Moscow

Zurich

Barcelona

Amsterdam

IstanbulBelgradeBucharest

Kiev

Budapest

BerlinWarsaw

Prague

1

-1

-12

14

-1

-2

7

0 16

-2

17

6

-34

42

0

1

-2

5

Copenhagen

Mitigated Europe

45

12Rome

Athens1

Tel Aviv 22

Tbilisi-5

Nursultan 6

-6

1

<0

0-3

4-6

6<


ADR decline driving RevPAR dropMiddle East – Main KPIs, Constant Currency, USD, July 2019 YTD

65.5%Occupancy+1.8%

143.84ADR-7.8%

94.27RevPAR-6.1%


-15%

-10%

-5%

0%

5%

10%

15%

2012 2013 2014 2015 2016 2017 2018 2019 YTD

Supply % change Demand % change RevPAR % change

Continuous negative RevPAR % ChangeMiddle East – Supply, Demand, RevPAR % Change, Constant Currency, USD


Hotel Supply Growth - Dubai

2019-2021

Rooms increase:

+46.7%

Properties increase:

31.8%

2010-2012

Rooms increase:

+27.4%


+14.7%

2013-2015

Rooms increase:

+15.0%


+10.9%

2016-2018

Rooms increase:

+21.5%


+14.1%


Africa - a hot market!Africa – Main KPIs, Constant Currency, USD, July 2019 YTD

59.3%Occupancy+2.1%

109.53ADR+2.5%

64.98RevPAR+4.7%


Northern Africa vs Southern AfricaJanuary 2007 – June 2019, 12 Month Moving Average, Occ & ADR

$20

$30

$40

$50

$60

$70

$80

$90

$100

40% 50% 60% 70% 80%

Northern Africa

$50

$60

$70

$80

$90

$100

$110

$120

$130

50% 55% 60% 65% 70% 75%

Southern Africa

Jan-07Jan-07

Jun-19 Jun-19


Occupancy and ADR drops bring RevPAR downAsia Pacific – Main KPIs, Constant Currency, USD, July 2019 YTD

68.8%Occupancy-1.2%

99.53ADR-1.2%

68.45RevPAR-2.4%


Chinese outbound tourism primarily to APAC

0

10

20

30

40

50

60

70

80

90

100

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Mill

ion

s APAC Other

Oxford Economics data retrieved: August 2019


In local currency: A mixed bag, Oceania dropping behindAsia Pacific – RevPAR % Change, Local Currency, July 2019 YTD

Delhi 7

Perth -4

Adelaide

Brisbane1

Sydney

Melbourne Auckland-8

Tokyo3

Mumbai 5

9-3

Bangkok -1

Phuket -12

Singapore

Beijing1

Kuala Lumpur-8

Hanoi

Manila5

Hong Kong -4Taipei

Shanghai Osaka-9

Seoul3

BaliJakarta

-5-2

-2

-4

0

9

-5

3

<0

0-3

4-6

6<


RevPAR drop led by decrease in ADRSouth America – Main KPIs, Constant Currency, USD, July 2019 YTD

57.6%Occupancy+2.6%

91.50ADR-45.6%

52.72RevPAR-44.1%


Brazil GDP recovery and demand levels up in 2017 & 2018GDP vs Demand % Change, 2015-2018

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

Real GDP % Chg Demand % Chg

Hotel Behavior Under Duress

ADR Pricing Psychology in a Downturn


-20%

-18%

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

-30

-22

-14 -6 2

10 18 26 34 42 50 58 66 74 82 90 9810

611

412

213

013

814

615

416

217

017

818

619

420

221

021

822

623

424

225

025

826

627

428

229

029

830

631

432

233

0

AD

R %

Dec

line

Days After Rogue Dropped 10%

Sample Chicago Comp Set

1 2 3 4


26 days

57 days


-25%

-20%

-15%

-10%

-5%

0%

5%

-30

-21

-12 -3 6

15 24 33 42 51 60 69 78 87 96

105

114

123

132

141

150

159

168

177

186

195

204

213

222

231

240

249

258

267

276

285

294

303

312

321

330

AD

R %

Dec

line

Days After Rogue Dropped 10%

All Chicago Comp Sets

1 2 3 4

Rogue hotels and second movers suffered ~20% Total ADR Drop


27 days

130 days


3rd and 4th Hotels Were Willing to SustainDouble the Occupancy Loss

-7.2% -7.8%-12.1%

-15.0%

-21.1% -21.5%

-17.9%-15.8%

1st 2nd 3rd 4th

Occ % Change At Peak RevPAR Drop ADR % Change at Peak RevPAR Drop

Did any hotels not drop ADR?


Hotels That Didn’t Slash ADR Lost More Demand…

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10

Hotels With ADR Drop >10%

Hotels With ADR Drop <10%

Dem

and

% C

han

ge

Source: STR


…But Experienced Less Extreme RevPAR Declines

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10

Hotels With ADR Drop >10%

Hotels With ADR Drop <10%

Rev

PAR

% C

han

ge

Source: STR

Labor Costs and Profitsin a Downturn


-6.5

-18.2 -17.4

-27.6

-34.2

-9.0

Demand Rooms Revenue Total Revenue GOP EBITDA Total Labor Costs

2009 U.S. Hotel Performance

Demand, Revenue Declines led to AmplifiedProfit Declines in 2009

0.49xRevPAR

1.5xRevPAR


-7.0-9.6 -9.3

-16.8 -16.5

-5.2

Demand Rooms Total Revenue GOP EBITDA Total Labor Costs

2001 U.S. Hotel Performance

Similar Performance in 2001, although declineswere less extreme

0.54xRevPAR

1.75xRevPAR


-50

-40

-30

-20

-10

0

Full-Service Limited-Service Luxury Upper Upscale Upscale Independents Urban Suburban Airport Resort

Rooms Revenue Total Revenue GOP EBITDA Total Labor

Relatively Consistent Performance Across Segments


-6.5

-17.4

-27.6

-34.2

-35 -25 -15 -5 5

Demand

Rooms Revenue

Food

Beverage

Other F&B

Other Depart

Misc Income

Total Revenue

Rooms

F&B

Other Depart

A&G

Marketing

Franchise Fees

Utilities

POM

GOP

Mgmt Fees

Rent

Property Taxes

Insurance

EBITDA

Reserve

Expenses mostly declined in 2009, but not enough to keep up with revenue declines


Demand -6-7%

Rooms Revenues -10-18%

Total Revenues -9-17%

Labor Costs 0.5x RevPAR

GOP 1.5 to 1.75x RevPAR

Projected Downturn Scenario based on Prior Recessions

Recession Reflection Takeaways

• Most hotels are unable to hold rate steady when competitors drop.

• There are no RevPAR race winners – all hotels had significant losses.

• Costs only decline a fraction of revenues.

• Hotel should start planning for a downturn now. Operators need to analyze impact of both ADR and occupancy loss on their properties’ profits. Create stress test to prepare for next downturn.

Questions?

48

Documents

The Darwin of Data: STR Presentation - MemberClicks · The Darwin of Data: STR Presentation Ali Hoyt Senior Director, Consulting & Analytics STR