austin hotel market update › evite2019 › sept › cbre.pdfq2 2019 compared to q2 2018 submarket...

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Austin Hotel Market UpdateAustin, Texas

TABLE OF CONTENTS

AUSTIN HOTEL MARKET UPDATE | SLIDE | 2

1HISTORICAL RESULTS

2THE ECONOMY

3BUSINESS CYCLES

4AUSTIN PIPELINE

5GEOGRAPHIC SUBMARKETS

6AUSTIN SUMMARY

7 8GEOGRAPHIC SUBMARKETS

CLOSING THOUGHTS

CBRE HOTELSThe World’s Leading Hotel Experts.

THE ROAD AHEAD ….

Time to Focus

STATE OF THE U.S. LODGING INDUSTRY

Jeff Binford – Managing Director | Advisory LeaderCBRE Hotels South Central Division

September 20, 2019

WHY ???

ECONOMIC FACTORS


-30%

-20%

-10%

0%

10%

20%

30%

40%

'75 '76 '77 '78 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

Non-Recession

Change in GOP*

Note: * Before Management Fees and Non-Operating Income and Expenses Source: Trends® in the Hotel Industry

Average GOP* growth during non-recession

periods8.8%

ECONOMIC FACTORS


HISTORICAL RESULTS


YEAR END 2018 SUBMARKET COMPARISONAll Hotels – Austin Submarket Analysis

Year End 2018 Compared to Year End 2017

Submarket Percent Pt. Change $ Amount % Change $ Amount % Change

CBD 74.8% -2.4% $224 1.5% $167 -0.9%

US-290 / I-35 Area 70.3% -1.3% $92 0.7% $65 -0.5%

Round Rock / Georgetown 67.1% -1.2% $93 -0.8% $62 -2.0%

South Austin / Airport 72.9% 0.1% $125 -4.8% $91 -4.8%

Northwest / Arboretum 73.0% -2.5% $126 0.5% $92 -2.0%

San Marcos / Surrounding Area 53.8% -4.6% $86 -4.4% $46 -8.8%

Average / Change 70.3% -2.0% $141 1.2% $99 -0.9%Source: STR, Inc.

Occupancy ADR RevPAR

HISTORICAL RESULTS


SECOND QUARTER 2019 SUBMARKET COMPARISONAll Hotels – Austin Submarket Analysis

Q2 2019 Compared to Q2 2018

Submarket Percent Pt. Change $ Amount % Change $ Amount % Change

CBD 81.1% 4.9% $241 2.5% $195 7.5%

US-290 / I-35 Area 75.0% 2.9% $96 -0.4% $72 2.5%

Round Rock / Georgetown 71.2% 2.6% $96 -0.3% $69 2.2%

South Austin / Airport 75.9% 1.3% $131 1.1% $99 2.4%

Northwest / Arboretum 74.5% -3.1% $130 -0.5% $97 -3.6%

San Marcos / Surrounding Area 59.1% 6.5% $86 -1.1% $51 5.4%

Average / Change 76.7% 2.0% $145 2.1% $112 4.1%Source: STR, Inc.

Occupancy ADR RevPAR

ECONOMIC FACTORS


Employment Personal Income GDP CPI (Inflation)

2019 1.5% 2.1% 2.3% 1.7%

2020 0.4% 1.6% 1.5% 1.8%

2021 -0.2% 1.6% 1.5% 1.6%

2022 0.2% 2.3% 2.3% 1.7%

2023 1.0% 2.8% 2.6% 2.0%Source: CBRE EA, Moody’s Analytics, Q2 2019

UNITED STATES: ECONOMIC OUTLOOK

ECONOMIC FACTORS



2019 1.9% 4.5% 2.3% 1.7%

2020 2.1% 3.6% 1.5% 1.8%

2021 1.7% 3.3% 1.5% 1.6%

2022 1.4% 4.2% 2.3% 1.7%

2023 2.1% 4.8% 2.6% 2.0%

AUSTIN: ECONOMIC OUTLOOK

Source: CBRE EA, Moody’s Analytics, Q2 2019

ECONOMIC FACTORS


ECONOMIC OUTLOOK COMPARISON

Source: CBRE EA, Moody’s Analytics, Q2 2019


2019 1.5% 1.9% 2.1% 4.5% 2.3% 2.3% 1.7% 1.7%

2020 0.4% 2.1% 1.6% 3.6% 1.5% 1.5% 1.8% 1.8%

2021 -0.2% 1.7% 1.6% 3.3% 1.5% 1.5% 1.6% 1.6%

2022 0.2% 1.4% 2.3% 4.2% 2.3% 2.3% 1.7% 1.7%

2023 1.0% 2.1% 2.8% 4.8% 2.6% 2.6% 2.0% 2.0%

ECONOMIC FACTORS


ECONOMIC FACTORS


Why Austin?

BUSINESS CYCLES



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-20%

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10%

20%

30%

40%

50%

60%

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Markets in Expansion Markets in ContractionMarkets in Recovery

REAL REVPAR CHANGE FROM PRE-RECESSION PEAK

Not All Markets Have Fully Recovered From the Last Recession

As of Q4 2018 As of Q4 2020Source: STR, CBRE Hotels’ Americas Research, Hotel Horizons® June-August 2019

BUSINESS CYCLES


Source: Economicsdiscussion.net

AUSTIN PIPELINE


AUSTIN PIPELINE – BY THE NUMBERSProperties Factor Rooms

PROJECT PHASE129 TOTAL Austin Pipeline 15,502

7 Abandoned 710 3 Deferred 195

48 Planning 5,281 36 Final Planning 4,095 35 Start 5,221

PRICE TIER78 Lower Priced 7,56951 Upper Priced 7,933

TIMELINE6 No Dates 540

20 Open by YE 2019 2,179 46 Open by YE 2020 6,213 57 Open 2021 and Beyond 6,570

AUSTIN PIPELINE


All Hotels – Austin Submarket Analysis PIPELINE

AUSTIN PIPELINE – BY THE NUMBERS

ALL HOTELSAustin Hotel Submarket Analysis

PIPELINESubmarket Hotels Rooms

CBD 17 2,919

US-290/I-35 15 1,526

Round Rock / Georgetown 15 1,429

South Austin/ Airport 24 2,655

Northwest / Arboretum 23 2,494

San Marcos / Surrounding 12 1,905

Total 106 16,418 Source: STR, Inc.

GEOGRAPHIC SUBMARKETS


AUSTIN GEOGRAPHIC SUBMARKETS



Central Business District



CENTRAL BUSINESS DISTRICT

69.5%

72.8%

71.4% 71.2%

70.3%

71.0%70.6%

68.0%

69.0%

70.0%

71.0%

72.0%

73.0%

74.0%

2014 2015 2016 2017 2018 2019 2020

Occupancy

2014 2015 2016 2017 2018 2019 2020ΔSupply -0.2% 1.8% 2.4% -2.1% 6.2% 8.6%ΔDemand 4.4% -0.2% 2.2% -3.3% 7.2% 8.1%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Supply and Demand Change

$203.69

$214.85$217.94

$220.22

$223.62$226.12

$231.13

$200.00

$205.00

$210.00

$215.00

$220.00

$225.00

$230.00

$235.00

2014 2015 2016 2017 2018 2019 2020

ADR

$161.53

$167.13$168.54 $168.91

$167.33

$170.72

$173.62

$155.00

$157.00

$159.00

$161.00

$163.00

$165.00

$167.00

$169.00

$171.00

$173.00

$175.00

2014 2015 2016 2017 2018 2019 2020

RevPAR



US-290 / I-35



US-290 / I-35

69.5%

72.8%

71.4% 71.2%

70.3%

71.0%70.6%

68.0%

69.0%

70.0%

71.0%

72.0%

73.0%

74.0%

2014 2015 2016 2017 2018 2019 2020

Occupancy

2014 2015 2016 2017 2018 2019 2020ΔSupply -0.2% 1.8% 2.4% -2.1% 6.2% 8.6%ΔDemand 4.4% -0.2% 2.2% -3.3% 7.2% 8.1%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%


$83.53

$88.93

$91.16 $91.13$91.81

$92.83

$94.89

$80.00

$85.00

$90.00

$95.00

$100.00

2014 2015 2016 2017 2018 2019 2020

ADR

$58.09

$64.74 $65.08 $64.91 $64.56$65.87

$66.99

$55.00

$57.00

$59.00

$61.00

$63.00

$65.00

$67.00

$69.00

2014 2015 2016 2017 2018 2019 2020

RevPAR



Round Rock / Georgetown



ROUND ROCK / GEORGETOWN

67.8%

69.0%68.9%

67.9%

67.1%

67.8%

67.4%

66.0%

66.5%

67.0%

67.5%

68.0%

68.5%

69.0%

69.5%

2014 2015 2016 2017 2018 2019 2020

Occupancy

2014 2015 2016 2017 2018 2019 2020ΔSupply 4.4% 6.8% 7.8% 2.5% 6.2% 8.6%ΔDemand 6.3% 6.5% 6.4% 1.3% 7.1% 8.1%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%


$87.61

$91.09

$92.08

$93.51$92.72

$93.76

$95.83

$86.00

$88.00

$90.00

$92.00

$94.00

$96.00

$98.00

2014 2015 2016 2017 2018 2019 2020

ADR

$59.40

$62.89$63.41 $63.53

$62.26

$63.52

$64.60

$56.00

$57.00

$58.00

$59.00

$60.00

$61.00

$62.00

$63.00

$64.00

$65.00

2014 2015 2016 2017 2018 2019 2020

RevPAR



South / Airport



SOUTH / AIRPORT

73.0%

74.4%

72.6%72.8% 72.9%

73.5%

73.2%

72.0%

72.5%

73.0%

73.5%

74.0%

74.5%

75.0%

2014 2015 2016 2017 2018 2019 2020

Occupancy

2014 2015 2016 2017 2018 2019 2020ΔSupply 3.6% 2.7% 6.9% 2.9% 6.2% 8.6%ΔDemand 5.5% 0.3% 7.2% 3.0% 7.1% 8.1%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%


$128.24

$134.90 $135.27

$131.12

$124.79$126.19

$128.98

$120.00

$125.00

$130.00

$135.00

$140.00

2014 2015 2016 2017 2018 2019 2020

ADR

$93.63

$100.33

$98.21

$95.48

$90.93

$92.77

$94.35

$88.00

$90.00

$92.00

$94.00

$96.00

$98.00

$100.00

$102.00

2014 2015 2016 2017 2018 2019 2020

RevPAR



Northwest / Arboretum



NORTHWEST / ARBORETUM

75.1%

77.3%

74.0%

74.9%

73.0%

73.7%73.3%

72.0%

73.0%

74.0%

75.0%

76.0%

77.0%

78.0%

2014 2015 2016 2017 2018 2019 2020

Occupancy

2014 2015 2016 2017 2018 2019 2020ΔSupply 4.0% 7.8% 7.7% 2.7% 6.2% 8.6%ΔDemand 7.0% 3.2% 9.0% 0.2% 7.1% 8.1%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%


$112.56

$117.41

$123.35$125.50 $126.08

$127.49$130.31

$100.00

$105.00

$110.00

$115.00

$120.00

$125.00

$130.00

$135.00

2014 2015 2016 2017 2018 2019 2020

ADR

$84.54

$90.73 $91.32

$94.01

$92.09

$93.95

$95.55

$80.00

$82.00

$84.00

$86.00

$88.00

$90.00

$92.00

$94.00

$96.00

$98.00

2014 2015 2016 2017 2018 2019 2020

RevPAR



San Marcos / Surrounding



SAN MARCOS / SURROUNDING

61.9% 61.8%

58.1%

56.4%

53.8% 54.3% 54.0%

48.0%

50.0%

52.0%

54.0%

56.0%

58.0%

60.0%

62.0%

64.0%

2014 2015 2016 2017 2018 2019 2020

Occupancy

2014 2015 2016 2017 2018 2019 2020ΔSupply 1.9% 9.9% 9.1% 14.8% 6.2% 8.6%ΔDemand 1.8% 3.2% 5.9% 9.5% 7.2% 8.1%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%


$88.94

$87.39

$91.15

$89.66

$85.73

$86.69

$88.61

$83.00

$84.00

$85.00

$86.00

$87.00

$88.00

$89.00

$90.00

$91.00

$92.00

2014 2015 2016 2017 2018 2019 2020

ADR

$55.05$54.04

$52.95

$50.58

$46.15$47.08

$47.88

$45.00

$47.00

$49.00

$51.00

$53.00

$55.00

$57.00

2014 2015 2016 2017 2018 2019 2020

RevPAR



LODGING FORECASTS



https://pip.cbrehotels.com/home

AUSTIN SUMMARY


72.4%

73.7%

72.1%71.7%

70.3%

70.9%70.6%

70.3%

71.0%

71.6%

69%

70%

71%

72%

73%

74%

75%

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Occupancy

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023ΔSupply 5.9% 6.4% 6.0% 5.7% 6.2% 8.6% 4.0% 1.8% 2.2%ΔDemand 7.8% 4.1% 5.5% 3.6% 7.2% 8.1% 3.6% 2.8% 3.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%


ΔSupply ΔDemand

$126.63

$134.69

$138.98 $139.06$140.68

$142.26$145.41 $145.76

$148.19

$152.72

$120.00

$125.00

$130.00

$135.00

$140.00

$145.00

$150.00

$155.00

$160.00

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

ADR

$91.65

$99.27$100.23 $99.77

$98.91

$100.92

$102.63 $102.48

$105.27

$109.35

$90.00

$92.00

$94.00

$96.00

$98.00

$100.00

$102.00

$104.00

$106.00

$108.00

$110.00

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

RevPAR

AUSTIN SUMMARY


SHARING ECONOMY


SHARING ECONOMY


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,00019

89

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Source: STR, CBRE Hotels’ Americas Research, Q1 2019.

12 MMA of New Hotel Room Added in the U.S.

Well Below Previous Peaks

Do We Have a Problem?

SHARING ECONOMY


0

5,000

10,000

15,000

20,000

25,000

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Avg. New Rooms Added Avg. New Rooms Added w/ Airbnb

Well Below Previous Peaks

Do We Have a Problem?

Source: STR, CBRE Hotels’ Americas Research, Airdna, Q1 2019.

Well Above Previous Peaks

12 MMA of New Hotel Room & Airbnb Units Added in the U.S.

SHARING ECONOMY


Notes: Previous historical peak occupancy 66.2% (2018 Q2), Current occupancy 66.1% (2018 Q3) Sources: CBRE Hotels' Americas Research, STR Q1 2019

Gap

54

56

58

60

62

64

66

68

(20)

(15)

(10)

(5)

0

5

10

1989

1989

1990

1990

1991

1991

1992

1992

1993

1993

1994

1994

1995

1995

1996

1996

1997

1997

1998

1998

1999

1999

2000

2000

2001

2001

2002

2002

2003

2003

2004

2004

2005

2005

2006

2006

2007

2007

2008

2008

2009

2009

2010

2010

2011

2011

2012

2012

2013

2013

2014

2014

2015

2015

2016

2016

2017

2017

2018

2018

Occupancy (%)% Change in ADR/Occ/RevPAR

Contribution from ∆RADR Contribution from ∆Occupancy ∆RRevPAR Occ (4-Qtr Moving Average)

Area of Interest

New Supply (Traditional/Non-Traditional is hurting Rate Growth

SHARING ECONOMY


SHARE OF AIRBNB’S US SUPPLY MAJOR MARKETS SHRINKS SUBSTANTIALLY

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2014 2015 2017 2018

Top 10 MSAs Other MSAs Non MSA

1. New York2. Los Angeles3. San Francisco4. Miami5. Washington6. Chicago7. San Diego8. Austin9. Boston10. Seattle

CHANGING SHARE OF THOSE SAME CITES2014 TOP AIRBNB MSA’S

Source: CBRE Hotels’ Americas Research, Airdna, Google Trends, STR, Q1 2019.

SHARING ECONOMY


CLOSING THOUGHTS


• The U.S. lodging industry has been operating at peak levels for the past three years – 2019 has generally played out as expected, although ADR continues to weaken.

• The fundamentals remain attractive. Hotel construction will continue; the threat of overbuilding (depending on definition) is the exception, not the rule.

• The environment is more volatile – social, political and economic. Elevated uncertainty (among other factors) has impaired pricing power and ADR growth.

• “Blip” or adjustment in 2021 or 2022 – can’t be pushed out much further.

• Austin is in market contraction phase likely until 2022.

• Increasing occupancy requires increasing occupied room nights or decreasing supply increases. STRATEGIC hotel development is critical.

• Austin occupancies are expected to decline to the low-70”s range, still above long run average of 67.2%.

• Average Daily Room Rates are expected to increase at or near inflation, but at a rate less than the long term average of 3.9%.

• RevPAR increases will be difficult, driven by primarily by ADR, not Occupancy. (Drive Rate!)

• Demand is now outpacing new rooms. Room night demand in Austin remains very health.

© Copyright 2019 CBRE Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of the CBRE Global Chief Economist.

2100 McKinney, Suite 700Dallas, Texas 75201 www.cbrehotels.com

JEFF BINFORDManaging Director | Advisory LeaderSouth Central DivisionDallas, Texas+1 214 979 [email protected]

austin hotel market update › evite2019 › sept › cbre.pdfq2 2019 compared to q2 2018 submarket...

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