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Jamie Lane Sr. Director, Economics & Forecasting US HOTEL OUTLOOK 4/23/2020

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PowerPoint PresentationUS HOTEL OUTLOOK
4/23/2020
RATE OF NEW CASE NUMBERS NOW PEAKING Daily 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
In de
6,211,406
4,267,395
0
20
40
60
80
100
120
0
2
4
6
8
10
12
14
16
U.S. ECONOMIC FORECAST COMPARED
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
JP Morgan
WSJ Concensus
Oxford Economics
Wells Fargo
JP Morgan
WSJ Concensus
Oxford Economics
Wells Fargo
Unemployment Rate
Source: CBRE Hotels Research, STR, April 22, 2020.
61.8
53.0
30.3
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
2020 2019
NEW BOOKINGS HAPPENING?....NO
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 (%)
US 3/7
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 3/7 China 1/16
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
IMPACT WORSE IN URBAN AND RESORT LOCATIONS, NO REAL GAINS
Source: CBRE Hotels Research, STR, April 22, 2020. Note: 7 Day Moving Avg.
(100)
(80)
(60)
(40)
(20)
0
20 RevPAR Y-o-Y Percent Change US Resort Urban
LESS IMPACT IN INTERSTATE & SMALL METROS…. SOME GAINS
Source: CBRE Hotels Research, STR, April 22, 2020. Note: 7 Day Moving Avg.
(90)
(80)
(70)
(60)
(50)
(40)
(30)
(20)
(10)
0
HIGHER THE ADR, LARGER THE Y-O-Y PERCENT DECLINE
Source: CBRE Hotels Research, STR, April 22, 2020. Note: 7 Day Moving Avg.
(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
-
80.0 Occupancy 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
10.0 Y-o-Y Change in ADR All Luxury Upper Upscale Upscale Upper Midscale Midscale Economy
Source: CBRE Hotels Research, STR, April 22, 2020. Note: 7 Day Moving Avg.
URBAN & RESORT SHOWING LOWEST OCCUPANCY LEVELS
-
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
Occupancy Los Angeles/Long Beach, CA New York, NY Oahu Island, HI
Source: CBRE Hotels Research, STR, April 22, 2020. Note: 7 Day Moving Avg.
UPDATED BASELINE FORECAST – PRELIMINARY 4/6/2020
Source: CBRE Hotels Research, STR, April 6, 2020.
Year Occ ΔOcc ADR ΔADR RevPAR ΔRevPAR 2016 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%
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%
-79% -0.9 -0.8 -0.7 -0.6 -0.5 -0.4 -0.3 -0.2 -0.1
0
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
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
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 are subject 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 market circumstances. 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 views herein 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 CBRE or 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 the presenter 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 Lane Sr. Director, Economics & Forecasting CBRE Hotels Research [email protected]
HOW WE CAN HELP CBRE HOTELS ADVISORY
We understand the impact the current pandemic crisis is taking on your day-to-day operations and business models. As you evaluate the implications on your assets, CBRE Hotels stands ready to assist with the most up-to-date information, data, and customized services. The US CBRE Hotels Advisory team covers all territories and is backed by the #1 US Hotel Research group in the nation, enabling us to be the best equipped professionals 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 data that can be applied to your specific property or portfolio. Given the scale and experience of our professional team, together with the unparalleled strength 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 Services Restricted Appraisal Report:
Desktop Income Approach, Guidance on Current Transaction,
and Asset Stress Test
Detailed Property Diagnostics, Interviews with Management Team, and a
Strategic Business Plan for COVID-19 Situation
Advisory Services Underwriting Due Diligence Package:
Red Flag Report, Supply & Demand Analysis, Financial Diagnostic with
Sensitivity Analysis included
Our Select Service Offering:
Jeff Lugosi, CRE, MAI, FRICS, ISHC West Managing Director CBRE Hotels Advisory +1 213 613 3375 [email protected]
Mark VanStekelenburg, ISHC Northeast & Midwest Managing Director, CBRE Hotels Advisory +1 212 984 7125 [email protected] re.com
Henry Staley, MAI, CPA, ISHC, CRE South Managing Director CBRE Hotels Advisory +1 904 633 2615 [email protected]
• Asset Management • Financial Benchmarking • Operational Reviews • Occupancy
Forecasting • Litigation Support • Debt Advisory • Operator/Brand
Selection
• Market Demand & Financial Feasibility Analysis (Both New & Existing)
• Appraisals: + Real Estate Appraisals + Business Valuations
• Stress Tests • Impairment Testing • Liquidity Assessment
CBRE HOTELS ADVISORY ADDITIONAL SUITE OF SERVICES
Tommy Crozier, MAI, CRE, CCIM National Hotel Practice Leader, CBRE Hotels Advisory +1 704 331 1283 [email protected]
Jeff Binford South Central Managing Director, CBRE Hotels Advisory +1 214 979 6166 [email protected]
Fernando Garcia-Chacon South Florida Managing Director, CBRE Hotels Advisory +1 305 381 6457 [email protected] bre.com
Tim Dick, PhD, MAI, CRE Asset Management Sr Director, CBRE Hotels Advisory +1 404 504 7937 [email protected]
David Larone, ISHC Sr Managing Director, CBRE Hotels +1 647 943 3742 [email protected]
Contacts Per Division
Slide Number 1
Rate of new Case numbers now peakingDaily new cases confirmed, Indexed from historical peak
New claims are falling
U.S. Economic forecast compared
Air Travel Increases?...No TSA Checkpoint Traffic
New Bookings Happening?....No
Disruption Curve – Hotel Occupancy
Disruption Curve – Hotel Occupancy
Impact Worse in Urban and Resort Locations, No Real Gains
Less Impact In Interstate & Small Metros…. Some Gains
Higher THE ADR, Larger the Y-o-Y Percent Decline
Higher THE ADR, Lower the Occupancy
ADR Declines Bottoming Out, shifts in Demand impacting National Averages
Urban & Resort showing Lowest Occupancy Levels
New York Occupancies Climbing..benefit from Medical Workers or Closing hotels?
Updated Baseline Forecast – Preliminary 4/6/2020
Slide Number 37
Impact on Profits: Multiple revpar change SCENARIOS
U.S. Hotel performance by chain-scale groups based on projected 2020 annual occupancy level
Longer-term Economic outlook
Slide Number 45