2015 Texas Trends Hotel Industry Report

Hotel & Lodging Association of Greater Houston

September 24, 2015

The Houston Story

Starting with Record High Occupancies/Rates with

Minimum New Supply

Oil Price Drop Reducing Occupancies/Rates

New Supply Reducing Occupancies/Rates

Positive Factors Providing Some Relief

Temporary DownturnStill Above Long-Term Average

Stabilize in 2017

Redemption in 2018 and 2019

Presentation Outline

I.

The Economy

II. Lodging Forecasts U.S.

III. Lodging Forecasts - Texas
IV. Houston Submarkets

Factors Affecting Economic Forecasts

Collapse in Energy & Other Commody Prices

Chinese Economic Slowdown

Value of U.S. Dollar

U.S. Monetary Policy Normalization

Iran Nuclear Deal

United States: Economic Outlook

Employment

Personal
Income

GDP

CPI
(Inflation)

2014

1.9%

2.6%

2.4%

1.6%

2015

2.2%

4.2%

2.4%

0.4%

2016

2.2%

3.8%

3.0%

2.7%

2017

2.2%

4.1%

2.9%

2.8%

2018

1.6%

3.4%

2.7%

2.8%

2019

0.9%

2.0%

2.2%

2.6%

Source: Moodys Analytics, July 2015

Houston: Economic Outlook

Employment

Personal
Income

GMP

CPI
(Inflation)

2014

3.5%

4.8%

5.4%

2.8%

2015

1.9%

4.3%

2.4%

0.0%

2016

1.6%

2.6%

2.3%

3.0%

2017

3.1%

4.7%

3.4%

3.0%

2018

2.6%

5.3%

3.8%

2.9%

2019

1.8%

3.6%

3.2%

2.6%

Source: Moodys Analytics, July 2015

Unemployment Comparison*

June 2014

June 2015

United States

6.3%

5.5%

Texas

5.5%

4.4%

Austin

4.4%

3.3%

Dallas/Fort Worth

5.4%

4.0%

Houston

5.4%

4.5%

San Antonio

5.1%

3.8%

* Not seasonally adjusted

Source: Texas Work Force Commission

Influence of Texas Oil Factor

Recovery of the Oil & Gas Industry

Oil Prices Remain Low Through 2016

Oil Markets Begin Rebalance in Mid-2016

Drilling Returns in Early 2017

Industry Rebounds in 2018 & 2019

Presentation Outline

I.

The Economy

II. Lodging Forecast U.S.

III. Lodging Forecast - Texas
IV. Houston Submarkets

Hotel Horizons

Econometric Forecasting Model

Smith Travel Research historical lodging data,
pipeline data
Moodys Economy.com economic forecasts

Five-Year Forecasts of Supply, Demand,

Occupancy, ADR, RevPAR
59 Major U.S. Markets

Updated Quarterly

United States: 2nd Quarter 2015

= Below/Above Long Run

Average
Long
Term
Average

2011

2012

2013

2014

2015F

2016F

2017F

2018F

2019F

Supply

1.9%

0.4%

0.4%

0.6%

0.8%

1.1%

1.8%

2.3%

2.5%

2.7%

Demand

2.0%

4.7%

2.7%

2.0%

4.3%

3.3%

2.2%

1.6%

1.4%

0.8%

62.0%

60.0%

61.4%

62.2%

64.4%

65.8%

66.1%

65.6%

64.9%

63.7%

ADR

3.0%

3.8%

4.2%

3.8%

4.5%

5.0%

5.9%

6.3%

5.3%

3.4%

RevPAR

3.2%

8.1%

6.6%

5.2%

8.2%

7.2%

6.3%

5.5%

4.1%

1.5%

Occupancy

Source: PKF Hospitality Research Hotel Horizons Report (2nd Quarter 2015), Smith Travel Research

New Hotel Additions 2015 - 2017

New York MSA 22,000 to 25,000

Houston MSA 8,000 to 10,000

Austin MSA 6,000 to 8,000

U.S. Hotel Markets - Supply

Greatest and Least Change in Supply
Forecast Change 2015 to 2016
Pittsburgh

8.4%

Austin

8.4%
7.9%

Houston

7.4%

New York

6.2%

Cleveland

1.8%

National Average

0.9%

Norfolk-VA

0.7%

Sacramento
Hartford

0.3%

Oakland

0.3%
0.1%

Tucson

0%

5%

Source: PKF Hospitality Research, a CBRE Company, October 2015 Hotel Horizons reports

10%

U.S. Hotel Markets - Demand

Greatest and Least Change in Demand
Forecast Change 2015 to 2016
Cleveland

6.4%

Pittsburgh

6.3%

New York

5.6%

Austin

5.3%

Savannah

4.7%

National

2.2%

Sacramento

1.0%

San Diego

1.0%

Hartford

0.7%

New Orleans

0.7%

San Francisco

0.5%
0%

4%

Source: PKF Hospitality Research, a CBRE Company, October 2015 Hotel Horizons reports

8%

U.S. Hotel Markets - Occupancy

Greatest and Least Change in Occupancy
Forecast Change 2015 to 2016
Tucson

2.5%

Richmond

2.2%

Columbia

1.9%

Norfolk-VA Beach

1.7%

Oakland

1.5%

National Average

0.4%

Albany/New York

-1.7%

Pittsburgh

-2.0%

Miami

-2.8%

Austin

-2.8%

Houston
-8%

-5.6%
-4%

0%

Source: PKF Hospitality Research, a CBRE Company, October 2015 Hotel Horizons reports

4%

Presentation Outline

I.

The Economy

II. Lodging Forecast U.S.

III. Lodging Forecast Texas
IV. Houston Submarkets

Texas Summary

Occupancy

56.7%

$89.47

60.6%

$91.75

63.6%

$94.11

ADR
RevPAR

$50.69

$55.63

$59.81

66.2%

$99.25

$65.65

250,312

254,399

257,474

259,228

2010

2011

2012

2013
Supply

68.6%

$103.67

$71.13

261,475

2014

69.0%

67.5%

$107.00

$110.00

$73.99

$74.41

268,234

281,918

2015F

2016F

Austin: 2nd Quarter 2015

= Below/Above Long Run

Average
Long
Term
Average

2011

2012

2013

2014

2015F

2016F

2017F

2018F

2019F

Supply

3.2%

2.4

0.7%

2.8%

2.2%

7.6%

8.4%

5.9%

3.6%

2.4%

Demand

4.3%

6.9%

3.2%

7.4%

3.6%

6.7%

5.3%

4.5%

2.9%

2.5%

66.5%

66.7%

68.3%

71.4%

72.4%

71.8%

69.8%

68.8%

68.4%

68.4%

ADR

4.1%

5.9%

7.7%

5.4%

6.6%

5.9%

4.6%

3.5%

2.2%

2.3%

RevPAR

5.4%

10.5%

10.4%

10.2%

8.0%

5.1%

1.7%

2.1%

1.5%

2.3%

Occupancy

Source: PKF Hospitality Research Hotel Horizons Report (2nd Quarter 2015), Smith Travel Research

Austin: Upper-Priced

= Below/Above Long Run

Average
Long
Term
Average

2011

2012

2013

2014

2015F

2016F

2017F

2018F

2019F

Supply

4.1%

2.8%

0.2%

2.0%

2.5%

12.7%

11.8%

9.4%

4.3%

2.0%

Demand

5.4%

6.8%

2.6%

5.1%

3.5%

9.5%

7.4%

6.5%

3.2%

3.1%

70.4%

72.6%

74.3%

76.5%

77.3%

75.1%

72.1%

70.2%

69.5%

70.2%

ADR

4.3%

6.4%

8.2%

6.2%

6.3%

5.6%

4.3%

3.0%

2.1%

2.1%

RevPAR

5.7%

10.5%

10.8%

9.3%

7.3%

2.6%

0.3%

0.3%

1.0%

3.3%

Occupancy

Source: PKF Hospitality Research Hotel Horizons Report (2nd Quarter 2015), Smith Travel Research

Dallas: 2nd Quarter 2015

= Below/Above Long Run

Average
Long
Term
Average

2011

2012

2013

2014

2015F

2016F

2017F

2018F

2019F

Supply

2.4%

0.8%

1.4%

0.3%

0.2%

1.6%

4.3%

5.0%

4.1%

3.7%

Demand

3.5%

9.1%

4.7%

5.5%

5.8%

5.1%

3.6%

3.3%

3.1%

2.5%

61.0%

59.1%

61.1%

64.3%

67.8%

70.2%

69.7%

68.6%

67.9%

67.1%

ADR

2.2%

3.4%

1.1%

5.0%

3.4%

5.4%

5.5%

4.3%

3.7%

2.9%

RevPAR

3.4%

11.9%

4.5%

10.5%

9.1%

9.0%

4.7%

2.6%

2.7%

1.7%

Occupancy

Source: PKF Hospitality Research Hotel Horizons Report (2nd Quarter 2015), Smith Travel Research

Fort Worth: 2nd Quarter 2015

= Below/Above Long Run

Average
Long
Term
Average

2011

2012

2013

2014

2015F

2016F

2017F

2018F

2019F

Supply

3.0%

1.3%

1.1%

0.4%

1.6%

0.5%

1.8%

3.6%

3.5%

3.6%

Demand

3.6%

7.1%

2.8%

4.0%

4.5%

4.1%

3.1%

3.3%

2.6%

2.2%

61.0%

59.4%

60.4%

62.6%

64.4%

66.7%

67.6%

67.3%

66.8%

65.8%

ADR

3.2%

1.1%

-1.3%

1.2%

3.3%

3.6%

4.1%

3.4%

3.4%

3.0%

RevPAR

3.9%

6.9%

0.4%

4.8%

6.4%

7.3%

5.4%

3.1%

2.5%

1.5%

Occupancy

Source: PKF Hospitality Research Hotel Horizons Report (2nd Quarter 2015), Smith Travel Research

San Antonio: 2nd Quarter 2015

= Below/Above Long Run

Average
Long
Term
Average

2011

2012

2013

2014

2015F

2016F

2017F

2018F

2019F

Supply

3.2%

2.5%

1.4%

0.3%

0.5%

0.2%

2.5%

3.0%

3.1%

3.1%

Demand

3.6%

7.2%

5.3%

-0.5%

3.4%
.

2.5%

2.1%

2.3%

2.7%

2.0%

65.0%

61.2%

63.5%

63.0%

64.8%

66.3%

66.0%

65.5%

65.2%

64.6%

ADR

3.0%

0.1%

1.4%

4.6%

2.4%

3.1%

3.1%

2.7%

2.5%

1.7%

RevPAR

3.5%

4.7%

5.3%

3.8%

5.4%

5.5%

2.7%

1.9%

2.1%

0.7%

Occupancy

Source: PKF Hospitality Research Hotel Horizons Report (2nd Quarter 2015), Smith Travel Research

The Houston
market is really
complicated.

I had to upgrade my
crystal ball to come up
with the forecast.

Houston Local Demand Factors

New Hotel Supply
- 8,000 to 10,000 rooms

Oil Price Decline

- Exploration Rigs Bottom Out

Petrochemical Plant Expansion

- East Houston / Bay Area
- Driven By Low Oil Prices
- 100 Projects Worth $80 Billion

- Service Company Layoffs

TMC Research & Development

- Energy Corridor, Westchase,

Northwest, Galleria, CBD Hit Hardest

2016 NCAA Final Four

- Corporate Travel Down

2017 Super Bowl

- Corporate Group Cancellations

Convention Activity

Exxon Move to New Campus

- Marriott Marquis

Reduced Compression

Southwest International-Hobby

Housing Market Deceleration

2018/2019 Oil/Gas Rebound

Houston: 2nd Quarter 2015

= Below/Above Long Run

Average
Long
Term
Average

2011

2012

2013

2014

2015F

2016F

2017F

2018F

2019F

Supply

2.5%

1.9%

0.9%

0.6%

1.3%

2.8%

7.9%

4.9%

3.2%

2.1%

Demand

4.0%

10.9%

10.3%

6.3%

5.1%

-1.8%

1.8%

2.9%

6.5%

4.8%

62.2%

60.0%

65.6%

69.3%

71.9%

68.7%

64.9%

63.6%

65.6%

67.4%

ADR

3.1%

2.5%

3.9%

7.8%

5.9%

1.0%

-2.1%

1.4%

3.1%

4.2%

RevPAR

4.8%

11.6%

13.6%

13.9%

9.9%

-3.5%

-7.6%

-0.5%

6.4%

6.9%

Occupancy

Source: PKF Hospitality Research Hotel Horizons Report (2nd Quarter 2015), Smith Travel Research

Houston: Upper-Priced

= Below/Above Long Run

Average
Long
Term
Average

2011

2012

2013

2014

2015F

2016F

2017F

2018F

2019F

Supply

2.3%

3.3%

1.5%

1.1%

1.7%

3.8%

11.3%

6.2%

3.6%

2.3%

Demand

3.6%

11.3%

8.2%

4.0%

3.3%

-1.4%

3.1%

4.1%

7.4%

5.8%

64.9%

65.7%

70.0%

72.0%

73.1%

69.4%

64.3%

63.0%

65.4%

67.6%

ADR

3.5%

3.0%

4.3%

8.9%

5.4%

-0.5%

-2.8%

1.1%

2.9%

3.8%

RevPAR

5.0%

10.9%

11.2%

12.0%

7.1%

-5.6%

-9.9%

-1.0%

6.7%

7.3%

Occupancy

Source: PKF Hospitality Research Hotel Horizons Report (2nd Quarter 2015), Smith Travel Research

Houston: Lower-Priced

= Below/Above Long Run

Average
Long
Term
Average

2011

2012

2013

2014

2015F

2016F

2017F

2018F

2019F

Supply

2.7%

0.9%

0.5%

0.3%

1.0%

2.1%

5.5%

3.9%

2.9%

2.0%

Demand

4.3%

10.6%

12.0%

8.1%

6.5%

-2.0%

0.9%

2.0%

5.7%

4.0%

60.4%

56.1%

62.5%

67.4%

71.0%

68.2%

65.3%

64.1%

65.9%

67.2%

ADR

2.7%

1.3%

5.0%

8.1%

8.2%

2.9%

-1.9%

1.0%

2.9%

4.2%

RevPAR

4.7%

11.0%

17.0%

16.5%

14.1%

-1.1%

-6.2%

-0.8%

5.7%

6.2%

Occupancy

Source: PKF Hospitality Research Hotel Horizons Report (2nd Quarter 2015), Smith Travel Research

Presentation Outline

I.

The Economy

II. Lodging Forecast U.S.

III. Lodging Forecast - Texas
IV. Houston Submarkets

Houston Summary
Occupancy

65.6%

69.3%

ADR
RevPAR

$48.47

72,461

2010

69.0%

60.0%

55.1%

$87.97

71.9%

$90.15

$54.13

73,807

2011

$93.64

$61.41

74,461

2012

$100.97

$69.92

74,926

2013
Supply

$106.96

$108.00

$76.89

$74.26

75,897

78,228

2014

2015F

65.0%

$105.50

$68.60

84,130

2016F

Houston CBD
Occupancy

61.2%

67.6%

63.3%

70.6%

ADR

$170.25

RevPAR

$144.10

$147.58

5,085
2010

$93.42

5,430

2011

$174.05

69.0%

$178.50

64.0%
$175.00

$155.30
$120.20

$88.19

73.3%

$127.58

$123.17
$112.00

$104.98

5,416

2012

5,399

2013
Supply

5,571

2014

6,060

2015F

6,642

2016F

Galleria / Greenway Plaza

68.4%

73.0%

77.0%

77.4%

76.7%

74.0%

69.5%

Occupancy
ADR

$148.53

RevPAR

$118.77

$81.24
8,116

2010

$126.31
$92.21

7,963

2011

$157.40

$150.00

$147.00

$133.02
$114.96

$120.73

$102.43

$111.00

$102.17

8,403
7,835

2012

7,798

2013
Supply

7,800

2014

7,801

2015F

2016F

Texas Medical Center / Reliant Park

62.5%
58.4%

65.8%

69.2%

RevPAR

$100.03

$104.94

$113.86

$78.79
$56.32

5,518

2010

68.5%

66.5%

$121.74

$122.00

$119.00

$85.10

$83.61

5,549

5,494

Occupancy
ADR

$96.43

69.9%

$62.52

5,525

2011

$79.14

$69.05

5,529

2012

5,550

2013
Supply

2014

2015F

5,640

2016F

Bush Intercontinental Airport

66.6%

60.5%

70.3%

73.5%

71.0%

67.0%

53.5%
Occupancy
ADR
RevPAR

$68.07

$36.42
12,096

2010

$67.74

$40.98

11,754

2011

$70.84
$47.18

11,973

2012

$75.24
$52.89

11,964

2013
Supply

$81.56
$59.95

12,004

2014

$85.00
$60.35

12,427

2015F

$83.00

$55.61

12,778

2016F

Bay Area / Hobby Airport

68.1%

Occupancy

49.7%

$70.47

53.0%

$69.81

58.1%

$71.54

62.4%

$75.35

ADR
RevPAR

$35.02

6,314

2010

$37.00

6,464

2011

$41.56

6,573

2012

$47.02

6,670

2013
Supply

67.5%

$80.54

$82.00

$54.85

$55.35

6,645

6,669

2014

2015F

64.0%

$79.50

$50.88

7,145

2016F

Southwest Houston / Sugar Land

Occupancy

64.1%

72.2%

ADR
RevPAR

$70.79

$72.72

$78.11
$56.40

$36.26

6,216

2010

70.5%

$84.89

$86.50

$61.55

$60.98

6,581

6,582

68.0%

55.7%

52.7%

$68.80

72.5%

$39.43
6,600

2011

$84.50

$57.46

$46.61

6,476

2012

6,459

2013
Supply

2014

2015F

6,676

2016F

Katy Freeway / Westchase

68.1%

63.2%

72.6%

73.1%

68.0%

55.8%

62.5%

Occupancy
ADR
RevPAR

$85.60

$47.76

9,786

2010

$89.67

$95.61

$104.76
$76.06

$56.67

10,069

2011

$112.96
$82.57

$65.11

10,386

2012

10,547

2013
Supply

10,508

2014

$109.50

$74.46

11,110

2015F

$106.00

$66.25

12,139

2016F

Northwest Houston
66.9%

61.9%

69.5%

70.5%
64.0%

54.4%

60.0%

Occupancy
ADR
RevPAR

$72.52

$39.45

6,590

2010

$73.86

$45.72

6,560

2011

$78.74

$52.68

6,670

2012

$86.43

$60.07

6,899

2013
Supply

$93.73

$66.08

7,147

2014

$95.50

$61.12

7,574

2015F

$92.00

$55.20

8,181

2016F

East Houston / Baytown

71.6%
Occupancy

45.4%

$58.89

58.2%

61.2%

$58.48

$60.28

$63.58

2010

$66.83

$47.85

RevPAR

6,938

67.0%

$71.00

$69.00

48.5%

ADR

$26.74

67.5%

$28.36

7,290

2011

$35.08

7,384

2012

$47.96

$46.23

7,561

7,628

$38.91

7,382

2013
Supply

7,448

2014

2015F

2016F

Galveston

52.5%

56.6%

57.7%

60.1%

59.5%

58.5%

47.0%
Occupancy

$98.30

$103.69

$110.05

$113.09

$120.00

$118.00

$69.59

$71.40

$69.03

6,651

6,658

6,808

$115.79

ADR
RevPAR

$46.20
6,171

2010

$54.44

6,407

2011

$62.29

6,402

2012

$65.25

6,549

2013
Supply

2014

2015F

2016F

North / The Woodlands

Occupancy

51.0%

55.9%

59.9%

63.8%

ADR
RevPAR

$99.34

$50.66

5,802

2010

$101.73

$56.87

6,152

2011

$105.62

$63.27

6,219

2012

$110.67

$70.61

6,258

2013
Supply

66.9%

66.0%

$118.35

$123.00

$79.18

$81.18

6,644

2014

6,950

2015F

61.5%

$120.00

$73.80

8,898

2016F

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