Hotel Industry Overview UPDATE: Trends and outlook for Northern California Vail R. Brown Senior Vice President, Global Business Development & Marketing vbrown@str.com @vail_str 2016 STR, Inc. All Rights Reserved. Any reprint, use or republication of all or a part of this presentation without the prior written approval of STR, Inc. or STR Global, Ltd. trading as STR (collectively STR ) is strictly prohibited. Any such reproduction shall specifically credit STR as the source. This presentation is based on data collected by STR. No strategic advice or marketing recommendation is intended or implied.
Agenda U.S. High level trends Northern California markets & submarkets Pipeline Outlook
U.S. Industry Review
September 2016 Jewish Calendar shift lifted results RevPAR +5.6% ADR +3.9% First time that September demand was ~105 Million Rooms Sold Group RevPAR +12.1%
September 2016 YTD: Occupancy Was Never Higher % Change Room Supply 1.5% Room Demand 1.5% Occupancy 67.1% 0% A.D.R. $125 3.2% RevPAR $84 3.2% Room Revenue 4.8% September 2016 YTD, Total US Results
15 10 5 RevPAR Growth: Slowing Down After 6 Yrs. Of Growth 0-5 -10 80 Months 31 Mo 56 Months 79 Mo. -15-20 -25 1990 2000 2010 Total U.S., RevPAR % Change, 1/1990 09/2016
Northern California Markets & Submarkets
San Francisco Oakland San Francisco Sacramento Silicon Valley
Sacramento Market: Demand growth > Supply growth Supply Demand 3.5 1.4 0.7 0.7-0.3-0.4-1.2-1.4 San Francisco Oakland Sacramento Silicon Valley Northern CA Markets Supply / Demand Percent Change Twelve Months Ended September 2016
ADR growth outpacing OCC growth Occupancy ADR 10.3 8.6 6.8 4.7 4.9 0.0-0.9-1.9 San Francisco Oakland Sacramento Silicon Valley Northern CA Markets Occupancy / ADR Percent Change Twelve Months Ended September 2016
Sacramento growing over 2015... 84.4 84.4 2015 2016 79.1 78.4 80.1 78.6 65.5 68.8 San Francisco Oakland Sacramento Silicon Valley Actual OCC by market, Twelve Month Moving Average Sept 2015 vs. Sept 2016
ALL RevPAR growth driven by ADR 12.0 9.3 6.6 4.7 San Francisco Oakland Sacramento Silicon Valley Northern CA Markets RevPAR Percent Change Twelve Months Ended September 2016
Customer Segmentation Transient Segment Rooms reserved at rack rate, corporate negotiated, package, government rate or rooms booked via third party websites. Group Segment Rooms sold simultaneously in blocks of 10 or more.
Transient Customer Segmentation: Positive RevPAR growth Transient ADR % Change Transient OCC % Change 16.2% RevPAR 5.0 8.3% RevPAR 4.0% RevPAR 1.1 9.0 10.7 2.8% RevPAR 2.9-0.6 2.3 0.5 San Francisco Oakland Sacramento Silicon Valley Transient Customer: RevPAR % Change by Contribution of OCC / ADR % Change, September 2016 YTD
Group Customer Segmentation: All Driven by ADR Group ADR % Change Group OCC % Change 5.1% RevPAR 15.1% RevPAR 9.7% RevPAR 9.9-0.2 14.7-2.6% RevPAR 6.0 7.8 6.8-8.3-8.1 San Francisco Oakland Sacramento Silicon Valley Group Customer: RevPAR % Change by Contribution of OCC / ADR % Change, September 2016 YTD
San Francisco unique relationship $281.02 $295.52 Transient ADR Group ADR $257.94 $255.34 $194.57 $176.63 $181.66 $159.25 San Francisco Oakland Sacramento Silicon Valley Customer Segmentation: Actual ADR by market, September YTD Transient vs. Group
San Francisco Submarkets
San Francisco Area OCC: -0.1% ADR: 6.3% RevPAR: 6.2% Nob Hill/Wharf OCC: 0.8% ADR: 4.9% RevPAR: 5.7% Market/CBD OCC: 2.1% ADR: 2.8% RevPAR: 5.0% San Francisco Submarkets September 2016 YTD Airport OCC: -2.2% ADR: 5.1% RevPAR: 2.8% San Mateo/Redwood City OCC: -2.9% ADR: 7.7% RevPAR: 4.6%
San Francisco Area Transient OCC: 0.2% Group OCC: -4.7% Nob Hill/Wharf Transient OCC: 4.8% Group OCC: 2.6% Market/CBD Transient OCC: 3.5% Group OCC: -1.6% Airport Transient OCC: -1.0% Group OCC: -2.4% San Mateo/Redwood City Transient OCC: -4.2% Group OCC: 3.8% San Francisco Submarkets September 2016 YTD
San Francisco Area Transient ADR: 4.0% Group ADR: 10.3% Nob Hill/Wharf Transient ADR: 1.6% Group ADR: 10.6% Market/CBD Transient ADR: -0.2% Group ADR: 9.9% Airport Transient ADR: 1.5% Group ADR: 6.8% San Mateo/Redwood City Transient ADR: -3.8% Group ADR: 9.6% San Francisco Submarkets September 2016 YTD
Group ADR > Transient ADR within 3 submarkets Transient ADR Group ADR $325.95 $306.81 $302.91 $303.27 $290.03 $283.00 $325.82 $281.46 $213.82 $203.77 San Francisco Area Nob Hill/Wharf Market/CBD Airport San Mateo/Redwood City Customer Segmentation: Actual ADR by submarket, September YTD Transient vs. Group
Pipeline
Select Service Construction Is The Name Of The Game 61.2 55.7 66% 22.5 22.9 6.0 6.9 3.1 Luxury Upper Upscale Upscale Upper Midscale Midscale Economy Unaffiliated U.S. Pipeline, Rooms Under Construction, 000s Rooms, by Scale, September 2016
Construction In Top 26 Markets: 23 With 2%+ Of Supply Market Rooms U/C % Of Existing Orlando, FL 1,129 1% Norfolk/Virginia Beach, VA 456 1% Oahu Island, HI 410 1% St Louis, MO-IL 864 2% Atlanta, GA 2,210 2% Las Vegas, NV 3,859 2% Washington, DC-MD-VA 3,137 3% Detroit, MI 1,270 3% San Diego, CA 1,866 3% San Francisco/San Mateo, CA 1,580 3% Phoenix, AZ 2,019 3% Minneapolis/St Paul, MN-WI 1,401 3% Chicago, IL 4,175 4% Anaheim/Santa Ana, CA 2,127 4% Boston, MA 2,292 4% Tampa/St Petersburg, FL 1,966 4% New Orleans, LA 1,786 5% Philadelphia, PA-NJ 2,659 6% Los Angeles/Long Beach, CA 5,921 6% Miami/Hialeah, FL 3,377 6% Houston, TX 5,305 6% Dallas, TX 5,567 7% Nashville, TN 3,549 9% Denver, CO 4,470 10% Seattle, WA 4,955 12% New York, NY 16,462 15% *US Pipeline, Top 26 Markets, U/C Rooms as % of Existing Supply, September 2016
Outlook
Notable Calendar Shifts Impacting Lodging Performance Data in 2016: Super Bowl: Easter: Jewish Holidays: From Phoenix to San Francisco From April to March From September to October July and December will have two more Weekend days (Net +) May will have two fewer Weekend days (Net -) Leap Day February 29 th (No Impact To Results) See: http://www.str.com/media/default/documents/str_leap_year_methodology.pdf
Total United States Key Performance Indicator Outlook (% Change vs. Prior Year) 2016-2017 Outlook 2016 Forecast 2017 Forecast Supply 1.6% 2.0% Demand 1.6% 1.6% Occupancy 0.0% -0.3% ADR 3.2% 3.1% RevPAR 3.2% 2.8%
2016 Year End RevPAR Forecast Top 25 US Markets, Aug 2016 Forecast (Markets sorted alphabetically) -10% to -5% -5% to 0% 0% to 5% 5% to 10% Houston, TX Miami-Hialeah, FL Anaheim-Santa Ana, CA Dallas, TX New Orleans, LA Atlanta, GA Los Angeles-Long Beach, CA New York, NY Boston, MA Nashville, TN Chicago, IL Norfolk-Virginia Beach, VA Denver, CO San Francisco/San Mateo, CA Detroit, MI Minneapolis-St. Paul, MN-WI Oahu Island, HI Orlando, FL Philadelphia, PA-NJ Phoenix, AZ San Diego, CA Seattle, WA St. Louis, MO-IL Washington, D.C. Tampa, FL
2017 Year End RevPAR Forecast Top 25 US Markets, Aug 2016 Forecast (Markets sorted alphabetically) -5% to 0% 0% to 5% 5% to 10% Houston, TX Atlanta, GA Anaheim-Santa Ana, CA Boston, MA Detroit, MI Chicago, IL Washington, D.C. Dallas, TX Denver, CO Los Angeles-Long Beach, CA Miami-Hialeah, FL Minneapolis-St. Paul, MN-WI Nashville, TN New Orleans, LA New York, NY Norfolk-Virginia Beach, VA Oahu Island, HI Orlando, FL Philadelphia, PA-NJ Phoenix, AZ San Diego, CA San Francisco/San Mateo, CA Seattle, WA St. Louis, MO-IL Tampa, FL
Outlook as of March 2016 *using 4 th quarter 2015 data
As of March 2016 San Francisco Market Outlook 2015 Actual 2016 Forecast 2017 Forecast Occupancy 84.4 0.4% 85.2 0.9% 84.6-0.7% ADR $222.90 7.1% $234.62 5.3% $245.08 4.5% RevPAR $188.05 7.5% $199.79 6.2% $207.23 3.7% Key Performance Indicator Outlook (% Change vs. Prior Year) Actual 2015 Forecast YE 2016-2017
As of March 2016 Oakland Market Outlook 2015 Actual 2016 Forecast 2017 Forecast Occupancy 79.5 3.3% 80.5 1.2% 80.3-0.3% ADR $130.96 12% $141.57 8.1% $148.93 5.2% RevPAR $104.17 15.7% $113.96 9.4% $119.53 4.9% Key Performance Indicator Outlook (% Change vs. Prior Year) Actual 2015 Forecast YE 2016-2017
As of March 2016 Sacramento Market Outlook 2015 Actual 2016 Forecast 2017 Forecast Occupancy 66.7 6.8% 69.5 4.2% 70.1 0.9% ADR $103.10 5.3% $108.36 5.1% $113.23 4.5% RevPAR $68.78 12.4% $75.32 9.5% $79.42 5.4% Key Performance Indicator Outlook (% Change vs. Prior Year) Actual 2015 Forecast YE 2016-2017
As of March 2016 Silicon Valley Sub-Market Outlook 2015 Actual 2016 Forecast 2017 Forecast Occupancy 81 1.9% 81.7 0.9% 81.4-0.4% ADR $174.83 16.6% $196.34 12.3% $210.86 7.4% RevPAR $141.63 18.8% $160.48 13.3% $171.67 7.0% Key Performance Indicator Outlook (% Change vs. Prior Year) Actual 2015 Forecast YE 2016-2017
As of March 2016 San Fran CBD Sub-Market Outlook 2015 Actual 2016 Forecast 2017 Forecast Occupancy 84.9 0.4% 85.6 0.9% 85.2-0.5% ADR $250.21 5.4% $265.22 6.0% $278.21 4.9% RevPAR $212.34 5.9% $227.11 7.0% $237.04 4.4% Key Performance Indicator Outlook (% Change vs. Prior Year) Actual 2015 Forecast YE 2016-2017
Outlook as of October 2016 *using 3 rd Quarter 2016 data
As of October 2016 San Francisco Market Outlook 2015 Actual 2016 Forecast 2017 Forecast Occupancy 84.3 0.3% 85 0.8% 85.1 0.2% ADR $222.92 7.1% $235.72 5.7% $243.24 3.2% RevPAR $187.99 7.5% $200.29 6.5% $207.06 3.4% Key Performance Indicator Outlook (% Change vs. Prior Year) Actual 2015 Forecast YE 2016 2017 As of August 2016 forecast report
As of October 2016 Oakland Market Outlook 2015 Actual 2016 Forecast 2017 Forecast Occupancy 79.4 3.1% 78.0-1.8% 77.1-1.2% ADR $130.96 12.1% $144.18 10.1% $153.84 6.7% RevPAR $104.00 15.6% $112.44 8.1% $118.54 5.4% Key Performance Indicator Outlook (% Change vs. Prior Year) Actual 2015 Forecast YE 2016-2017
As of October 2016 Sacramento Market Outlook 2015 Actual 2016 Forecast 2017 Forecast Occupancy 66.7 6.8% 69.2 3.8% 69.7 0.7% ADR $103.89 5.5% $110.95 6.8% $115.61 4.2% RevPAR $69.25 12.7% $76.77 10.9% $80.55 4.9% Key Performance Indicator Outlook (% Change vs. Prior Year) Actual 2015 Forecast YE 2016 2017 As of August 2016 forecast report
As of October 2016 Silicon Valley Sub-Market Outlook 2015 Actual 2016 Forecast 2017 Forecast Occupancy 80.0 1.5% 78.2-2.2% 81.4-0.4% ADR $177.54 16.7% $190.86 7.5% $200.21 4.9% RevPAR $142.03 18.4% $149.32 5.1% $155.85 4.4% Key Performance Indicator Outlook (% Change vs. Prior Year) Actual 2015 Forecast YE 2016 2017 As of August 2016 forecast report
As of October 2016 San Fran CBD Sub-Market Outlook 2015 Actual 2016 Forecast 2017 Forecast Occupancy 84.9 0.5% 86.1 1.4% 85.7-0.5% ADR $250.40 5.4% $260.92 4.2% $270.31 3.6% RevPAR $212.60 6.0% $224.63 5.7% $231.56 3.1% Key Performance Indicator Outlook (% Change vs. Prior Year) Actual 2015 Forecast YE 2016 2017 As of August 2016 forecast report
To wrap it up. Total U.S. Slowing down KPI growth however still positive growth Northern CA Markets & Submarkets All RevPAR growth coming from ADR Group ADR > Transient ADR 3 out of 5 submarkets. Overall 2016 and 2017 outlook is good above U.S. RevPAR forecast
San Francisco Outlook So, for certain the expansion of Moscone is complicated and there is no question group demand will be affected. However what is unknown is how much unaccommodated demand is sitting on top of the market right now. If there are high levels of unaccommodated demand, much of that will fill the gaps created by the loss of group demand, effectively changing the market mix of the area for the short-term. It s our contention that at the current high levels of accommodated demand (85% OCC), there is plentiful unaccommodated demand to mitigate the impact caused by the expansion. While we see occupancy declining a bit, those high levels should still allow for pricing power (albeit at softer rates than the past several years), resulting in positive RevPAR. However, overall CBD RevPAR growth is still expected to be substantially lower than in 2015 and 2016, which is in-line with the Tourism Economics forecast for the greater market. Carter Wilson Vice President of Consulting & Analytics, STR
Questions? Thank you! vbrown@str.com