Download - US HOTEL OUTLOOK

Jamie LaneSr. Director, Economics & Forecasting

US HOTEL OUTLOOK

4/23/2020

RATE OF NEW CASE NUMBERS NOW PEAKINGDaily new cases confirmed, Indexed from historical peak

Source: CBRE Research, European Centre for Disease Prevention, Macrobond, 23 April 2020.Note: Number reporting as a 3-day moving average with each country indexed from its peak.

3/23 4/112/6

0

20

40

60

80

100

120

1/3 1/10 1/17 1/24 1/31 2/7 2/14 2/21 2/28 3/6 3/13 3/20 3/27 4/3 4/10 4/17

Inde

x

Italy United States China

NEW CLAIMS ARE FALLING

Source: BLS, Google Trends, April 23nd 2020.

6,211,406

4,267,395

0

20

40

60

80

100

120

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

2/10/2020 3/10/2020 4/10/2020Se

arch

es

Initi

al cla

ims

Google Search: “File for Unemployment”

0

2

4

6

8

10

12

14

16

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

per c

ent

Unemployment Rate

Initial Unemployment Claims

Source: BLS, CBRE-EA, April 23nd 2020.

U.S. ECONOMIC FORECAST COMPARED

Real GDP growth and headline unemployment rate (%)

Source: CBRE Research, 20 April 2020.

-5.7

-6.0

-5.3

-4.9

-4.9

-4.8

-4.1

-3

5.5

6.1

7.5

5.1

6.1

2.2

7.7

1.7

Goldman Sachs

Bank of America Merrill Lynch

JP Morgan

WSJ Concensus

CBRE

National Association for Business Economics

Oxford Economics

Wells Fargo

Full-Year GDP Growth

2020 2021

5.4

8

10

9.7

6.1

7.4

6.1

8.3

10.5

15.6

20

12.6

15.2

12.0

15.2

15.1

Goldman Sachs

Bank of America Merrill Lynch

JP Morgan

WSJ Concensus

CBRE

National Association for Business Economics

Oxford Economics

Wells Fargo

Unemployment Rate

Q2 2020 Q4 2020Q2 2021

US OCCUPANCY LEVELS ARE STABILIZING

Source: CBRE Hotels Research, STR, April 22, 2020.

61.8

53.0

30.3

22.6 21.6 21.0 23.4

(7,000)

(6,000)

(5,000)

(4,000)

(3,000)

(2,000)

(1,000)

-

1,000

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

BPS (Diff)Occupancy Spread Current Year Prior Year Last Week Avg.

AIR TRAVEL INCREASES?...NO TSA CHECKPOINT TRAFFIC

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3/1 3/8 3/15 3/22 3/29 4/5 4/12 4/19

2020 2019

Source: CBRE Hotels Research, TSA, April 22, 2020.

NEW BOOKINGS HAPPENING?....NO

ALL TRAVEL – SHOWING SIMILAR TRENDS TO HOTEL OCCUPANCIES

DISRUPTION CURVE – HOTEL OCCUPANCY


Baseline Recovery Scenario

0

10

20

30

40

50

60

70

80

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Occupancy Level (%)

Months of Impact

China History China Forecast U.S. History U.S. Baseline

US 3/7

US 3/14China 1/21

China 1/30

China 2/8

China 4/11

US 4/15US 6/15

US 4/11

DISRUPTION CURVE – HOTEL OCCUPANCY


Recovery Scenarios

0

10

20

30

40

50

60

70

80

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Occupancy Level (%)

Months of Impact

China History China Forecast U.S. History U.S. Baseline U.S. Upside U.S. Downside

US 3/7China 1/16

China 2/8

China 4/11

US 4/15US 6/15

US 4/18

DEEP DECLINES IN PERFORMANCE ARE STABILIZING

Source: CBRE Hotels Research, STR, April 22, 2020.Note: 7 Day Moving Avg.

-90

-80

-70

-60

-50

-40

-30

-20

-10

0

10Y-o-Y Percent Change

Occ^ ADR^ RevPAR^

IMPACT WORSE IN URBAN AND RESORT LOCATIONS, NO REAL GAINS


(100)

(80)

(60)

(40)

(20)

0

20RevPAR Y-o-Y Percent Change US Resort Urban

LESS IMPACT IN INTERSTATE & SMALL METROS…. SOME GAINS


(90)

(80)

(70)

(60)

(50)

(40)

(30)

(20)

(10)

0

10RevPAR Y-o-Y Percent Change US Interstate Small Metro/Town

HIGHER THE ADR, LARGER THE Y-O-Y PERCENT DECLINE


(100)

(80)

(60)

(40)

(20)

0

20

RevPAR Y-o-Y Percent Change Luxury & Upper Upscale Upscale & Upper Midscale Midscale & Economy

HIGHER THE ADR, LOWER THE OCCUPANCY


-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0Occupancy Level Luxury Upper Upscale Upscale Upper Midscale Midscale Economy

ADR DECLINES BOTTOMING OUT, SHIFTS IN DEMAND IMPACTING NATIONAL AVERAGES

(60.0)

(50.0)

(40.0)

(30.0)

(20.0)

(10.0)

0

10.0Y-o-Y Change in ADR All Luxury Upper Upscale Upscale Upper Midscale Midscale Economy


URBAN & RESORT SHOWING LOWEST OCCUPANCY LEVELS


-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0 Urban Suburban Airport Interstate Resort Small Metro/Town

NEW YORK OCCUPANCIES CLIMBING..BENEFIT FROM MEDICAL WORKERS OR CLOSING HOTELS?

0

10

20

30

40

50

60

70

80

90

100

OccupancyLos Angeles/Long Beach, CA New York, NY Oahu Island, HI


UPDATED BASELINE FORECAST – PRELIMINARY 4/6/2020


Year Occ ΔOcc ADR ΔADR RevPAR ΔRevPAR2016 65.4% 0.1% $124.06 3.0% $81.14 3.1%

2017 65.9% 0.7% $126.81 2.2% $83.52 2.9%

2018 66.1% 0.4% $129.96 2.5% $85.94 2.9%

2019 66.1% 0.0% $131.20 1.0% $86.73 0.9%

2020 42.6% -35.6% $109.98 -16.2% $46.85 -46.0%

2021 59.9% 40.5% $123.64 12.4% $74.02 58.0%

2022 63.8% 6.5% $131.68 6.5% $83.95 13.4%

2023 64.8% 1.7% $134.45 2.1% $87.17 3.8%

-70.0%

-60.0%

-50.0%

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

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2020 REVPAR Y-O-Y % CHANGE

Source: CBRE Hotels Research, STR, April 6th, 2020.

IMPACT ON PROFITS: MULTIPLE REVPAR CHANGE SCENARIOS

Note: * Profit Before Management Fees and Non-Operating Income and Expenses** Earnings Before Interest, Taxes, Depreciation and Amortization.

Source: CBRE, Trends® in the Hotel Industry

-5%-15%

-24%-34%

-44%

-9%

-22%

-35%

-47%

-62%

-6%-16%

-24%-33%

-44%

-11%

-25%

-37%-35%

-79%-0.9-0.8-0.7-0.6-0.5-0.4-0.3-0.2-0.1

0

RevPAR Decline:0% to 9.9%




RevPAR Decline:Greater Than 40%

Y-o-Y Change 2001 RevPAR 2001 GOP* 2009 RevPAR 2009 GOP*

-20.0% 0.0% 20.0% 40.0% 60.0% 80.0%

EBITDA

Non-Operating Income and Expenses

Income Before Non-Operating

Management Fees

Gross Operating Profit

Undistributed Expenses

Departmental Profit

Departmental Expenses

Upper-Priced Mid-Priced Lower-Priced

Percent of Total Operating Revenue by Chain-Scale Groups

Note: Upper-Price (Luxury, Upper-Upscale), Mid-Priced (Upscale, Upper-Midscale), Lower-Priced (Midscale, Economy)Source: CBRE, Trends® in the Hotel Industry, Sample of hotels reporting occupancy proximate to 2020 forecast for respective chain-scale, April 12, 2020

U.S. HOTEL PERFORMANCE BY CHAIN-SCALE GROUPS BASED ON PROJECTED 2020 ANNUAL OCCUPANCY LEVEL

LONGER-TERM ECONOMIC OUTLOOK

• The lagged effect of monetary policy and a sharp increase in government debt – Is it inflationary?

• Don’t underestimate the impact of pent-up demand

• The capex deficit – creates the need for investment surge

• Upside from Q4 onwards with big catch-up in 2021

• Capital values broadly resilient over 24-36 months

• Curves are bending as predicted

• Over $2 Trillion in stimulus, and more fiscal and monetary stimulus on its way

• 70% of recent jobless claims are temporary

• Corporate America gearing up for re-start

• Oil prices falling (hurts oil markets) – but good for growth in most markets as it provides an effective tax cut for consumers

• Politicians pressured to re-open too quickly

• Emerging markets stress

• Oil price slump hits investment

ECONOMIC RISKS

THANK YOU!PLEASE DON’T HESITATE TO CONTACT ME.

This presentation has been prepared in good faith based on CBRE’s current views of the commercial real-estate market. Although CBRE believes its views reflect market conditions on the date of this presentation, they aresubject to significant uncertainties and contingencies, many of which are beyond CBRE’s control. In addition, many of CBRE’s views are opinion and/or projections based on CBRE’s subjective analyses of current marketcircumstances. Other firms may have different opinions, projections and analyses, and actual market conditions in the future may cause CBRE’s current views to later be incorrect. CBRE has no obligation to update its viewsherein if its opinions, projections, analyses or market circumstances later change.Nothing in this presentation should be construed as an indicator of the future performance of CBRE’s securities or of the performance of any other company’s securities. You should not purchase or sell securities – of CBREor any other company – based on the views herein. CBRE disclaims all liability for securities purchased or sold based on information herein, and by viewing this presentation, you waive all claims against CBRE and thepresenter as well as against CBRE’s affiliates, officers, directors, employees, agents, advisers and representatives arising out of the accuracy, completeness, adequacy or your use of the information herein.© Copyright 2020 CBRE

Jamie LaneSr. Director, Economics & Forecasting CBRE Hotels [email protected]

HOW WE CAN HELPCBRE HOTELS ADVISORY

We understand the impact the current pandemic crisis is taking on your day-to-day operations and business models. As you evaluate theimplications on your assets, CBRE Hotels stands ready to assist with the most up-to-date information, data, and customized services. The US CBREHotels Advisory team covers all territories and is backed by the #1 US Hotel Research group in the nation, enabling us to be the best equippedprofessionals for this situation.

We have identified the following services that can be offered in expedited fashion. They are largely desktop based but incorporate real-time datathat can be applied to your specific property or portfolio. Given the scale and experience of our professional team, together with the unparalleledstrength of the world’s leading hospitality group, CBRE Hotels Advisory is prepared to offer these services on a weekly, bi-weekly, monthly or one-time basis. We are prepared to immediately help you navigate through the current environment with confidence.

Valuation ServicesRestricted Appraisal Report:

Desktop Income Approach,Guidance on Current Transaction,

and Asset Stress Test

Asset ManagementDesktop Operational Analysis:

Detailed Property Diagnostics, Interviews with Management Team, and a

Strategic Business Plan for COVID-19 Situation

Advisory ServicesUnderwriting Due Diligence Package:

Red Flag Report, Supply & Demand Analysis, Financial Diagnostic with

Sensitivity Analysis included

Our Select Service Offering:

Jeff Lugosi, CRE, MAI, FRICS, ISHCWest Managing Director CBRE Hotels Advisory+1 213 613 [email protected]

Mark VanStekelenburg, ISHC Northeast & Midwest Managing Director, CBRE Hotels Advisory+1 212 984 [email protected]

Henry Staley, MAI, CPA, ISHC, CRESouth Managing Director CBRE Hotels Advisory+1 904 633 [email protected]

• Asset Management• Financial Benchmarking• Operational Reviews• Occupancy

Forecasting • Litigation Support• Debt Advisory• Operator/Brand

Selection

• Branding, Re-Branding & Marketing

• Development Advisory• Management Company

Selection• Acquisition Due Diligence:

+ Buy Side + Sell Side + Technical

• Market Demand & Financial Feasibility Analysis (Both New & Existing)

• Appraisals:+ Real Estate Appraisals+ Business Valuations

• Stress Tests • Impairment Testing• Liquidity Assessment

CBRE HOTELS ADVISORYADDITIONAL SUITE OF SERVICES

Tommy Crozier, MAI, CRE, CCIMNational Hotel Practice Leader, CBRE Hotels Advisory+1 704 331 [email protected]

Jeff BinfordSouth Central Managing Director,CBRE Hotels Advisory+1 214 979 [email protected]

Fernando Garcia-ChaconSouth Florida Managing Director, CBRE Hotels Advisory+1 305 381 [email protected]

Tim Dick, PhD, MAI, CRE Asset Management Sr Director, CBRE Hotels Advisory+1 404 504 [email protected]

David Larone, ISHCSr Managing Director, CBRE Hotels+1 647 943 [email protected]

Contacts Per Division

CANADA LEADERSHIP

mailto:[email protected]








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