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Australia Hotel Market Outlook Q1 2011
- 1. Tourism, Hospitality & Leisure Hotel Market Outlook 2010 in review; 2011 and beyond Rutger Smits National Leader – Tourism, Hospitality & Leisure Hotel Market Outlook - Q1 2011 10 February 2011 1
- 2. Tourism, Hospitality & Leisure Economic Update Hotel Market Outlook - Q1 2011 10 February 2011 2
- 3. Tourism, Hospitality & Leisure The global economy • The US economy remains weak • The Eurozone sees recovery in the developed countries • The UK is in a much stronger position • China has become very competitive (cheap) due to the weak US$ • India is getting close to 9% GDP growth • The Asian countries are beginning to slow down from a rapid recovery • New Zealand benefits from trade with Australia and China • Australia has been a star performer Business Outlook Dec. Quarter 2010 Hotel Market Outlook - Q1 2011 10 February 2011 3
- 4. Tourism, Hospitality & Leisure Global accommodation performance indicators STR Global: % Change Year-end 2010 vs year-end 2009 25.0 Based on comparison in US$ 20.0 15.0 10.0 5.0 - -5.0 Asia Pacif ic Americas Europe Middle East/Af rica Occ% ADR RevPAR Hotel Market Outlook - Q1 2011 10 February 2011 4
- 5. Tourism, Hospitality & Leisure Global accommodation performance indicators STR Global: % Change Year-end 2010 vs year-end 2009 25.0 Based on comparison in US$ 20.0 15.0 10.0 5.0 - -5.0 Australia & North America Western Europe Middle East Oceania Occ% ADR RevPAR Hotel Market Outlook - Q1 2011 10 February 2011 5
- 6. Tourism, Hospitality & Leisure Global accommodation performance indicators STR Global: Room Occ% and ADR Year-end 2010 75.0 USD 200 70.0 USD 175 65.0 USD 150 60.0 USD 125 55.0 USD 100 50.0 USD 75 Australia & North America Western Middle East Oceania Europe Occ% ADR Hotel Market Outlook - Q1 2011 10 February 2011 6
- 7. Tourism, Hospitality & Leisure Global trends in the accommodation sector • As performance improves, so will: • Industry confidence • Property values • Availability of debt • Transaction volumes • Development pipeline • Emerging markets: • BRIC (Brazil, Russia, India, China) • “Silver Market” or “Grey Nomads” • Middle class looking for value for money • Experience seekers • Focus on: • Technology • Social media • Environmental sustainability Hotel Market Outlook - Q1 2011 10 February 2011 7
- 8. Tourism, Hospitality & Leisure The Australian economy • We are the Lucky Country: providing in abundance what a large number of rapidly industrialising economies need most: mineral resources • Businesses are spending big, but this also pushes interest rates up and holds the A$ at parity • The recent floodings and cyclone Yasi are likely to add to labour and material shortages, driving up construction cost but potentially also adding to overall economic growth • Retail and recreation will remain under pressure, as the A$ remains strong Business Outlook Dec. Quarter 2010 Hotel Market Outlook - Q1 2011 10 February 2011 8
- 9. Tourism, Hospitality & Leisure Economic impact on the accommodation industry • International departures are now more numerous than arrivals • Japanese and Korean markets have lost interest in Australia whilst “mainstay markets” such as the US and UK are under pressure • “Replacement markets” such as China are growing but are still lacking individual spending power • Assuming the A$ will weaken by 2012, leisure tourism should see the beginnings of a recovery • A downturn in foreign students will see the number of foreign workers in the tourism sector declining • Summary: a booming trade in the corporate segment, whilst the leisure segment and in particular resort destinations remain under pressure Hotel Market Outlook - Q1 2011 10 February 2011 9
- 10. Tourism, Hospitality & Leisure International arrivals and departures 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 -1,000,000 -2,000,000 Residents Departing Tourists Arriving Net Tourist Exchange Hotel Market Outlook - Q1 2011 10 February 2011 10
- 11. Tourism, Hospitality & Leisure Economic impact of recent natural disasters • Most of the flooding occurred inland: coastal infrastructure remains intact, except in selected areas in Tropical North Queensland (TNQ) affected by the cyclone Yasi • A perception of general devastation is holding back demand and is resulting in cancellations • The significant rebuilding will be a boost to economic activity and stronger infrastructure in the longer term • Possible impact on domestic spend on leisure and recreational activity, exacerbated by the increasing cost of household supplies, insurance premiums, budget cuts and additional taxes and levies • Further pressure to the already struggling leisure market, especially in TNQ Hotel Market Outlook - Q1 2011 10 February 2011 11
- 12. Tourism, Hospitality & Leisure What influences demand in Australia? • Corporate demand • Strength of the economy • Propensity of corporate world to travel (MICE) • Relatively unaffected by health scares etc • Heavily affected by Global Financial Crisis • Leisure demand • Disposable income • Sentiment • Heavily affected by interest rates, inflation, employment • International demand (corporate and leisure) • All of the above • Exchange rates • Airfares Hotel Market Outlook - Q1 2011 10 February 2011 12
- 13. Tourism, Hospitality & Leisure Econometric forecasting model • Correlate economic outlook ( ) and demand for accommodation (ABS) • Create a mathematical formula for a Demand Index • Fine-tune the Demand Index with data from STR Global • Match future demand forecast to the Demand Index • Match demand forecast to supply projections to calculate room occupancy • Correlate room occupancy to the change in achieved average room rate and project future rate changes Hotel Market Outlook - Q1 2011 10 February 2011 13
- 14. Tourism, Hospitality & Leisure Access Economics indicators • Final Demand: the sum of consumption and investment spending by the public and private sectors = economic activity • Retail Spend: disposable household income = leisure spend • Employment: corporate activity = domestic corporate segment. • International Arrivals: reflecting the impact of foreign exchange rates. • Supply: new hotel rooms entering the market. Hotel Market Outlook - Q1 2011 10 February 2011 14
- 15. Tourism, Hospitality & Leisure Demand Index I = α∆D+ β∆R + γ∆E + δ∆A + ε∆FX + ζ∆S V I = Demand Index α∆D = weighted change in economic Demand β∆R = weighted change in Retail spend γ∆E = weighted change in Employment δ∆A = weighted change in international Arrivals ε∆FX = weighted Trade Weighted Foreign Exchange Index (TWI) ζ∆S = weighted change in the supply of hotels rooms V = volatility index The components of the index are different for each market Hotel Market Outlook - Q1 2011 10 February 2011 15
- 16. Tourism, Hospitality & Leisure Australia Hotel Market Outlook - Q1 2011 10 February 2011 16
- 17. Tourism, Hospitality & Leisure Australian Economic Indicators – Act 1993 – F’cast 2013 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 ∆ Econ. Demand ∆ Employment ∆ Retail Spend ∆ Int'l Arrivals ∆ Supply Hotel Market Outlook - Q1 2011 10 February 2011 17
- 18. -20.0% -15.0% -10.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% -5.0% 0.0% 5.0% Mar-93 Sep-93 Mar-94 Sep-94 Mar-95 Sep-95 Mar-96 ∆ Econ. Demand Sep-96 Hotel Market Outlook - Q1 2011 Mar-97 Sep-97 Mar-98 Tourism, Hospitality & Leisure Sep-98 Mar-99 Sep-99 ∆ Employment Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 ∆ Retail Spend Sep-03 Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 Sep-06 ∆ Int'l Arrivals Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 ∆ Supply Mar-10 Australia: Accommodation Demand Trend Sep-10 10 February 2011 Mar-11 Sep-11 Mar-12 Sep-12 ∆ Occ Rooms Mar-13 Sep-13 18
- 19. Tourism, Hospitality & Leisure Australia: Econometric Accommodation Demand Index 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 ∆ Econ. Demand ∆ Employment ∆ Retail Spend ∆ Int'l Arrivals ∆ Supply ∆ Occ Rooms ∆ INDEX Hotel Market Outlook - Q1 2011 10 February 2011 19
- 20. 50.0% 52.0% 54.0% 56.0% 58.0% 60.0% 62.0% 64.0% 66.0% 68.0% 70.0% Mar-93 Sep-93 Mar-94 Sep-94 Mar-95 Sep-95 Mar-96 Sep-96 Hotel Market Outlook - Q1 2011 Mar-97 Sep-97 Mar-98 Tourism, Hospitality & Leisure Sep-98 Mar-99 Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Room Occ% Mar-05 Sep-05 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 10 February 2011 Australia: Accommodation Occupancy Trend Mar-12 Sep-12 Mar-13 Sep-13 20
- 21. 50.0% 52.0% 54.0% 56.0% 58.0% 60.0% 62.0% 64.0% 66.0% 68.0% 70.0% Mar-93 Sep-93 Mar-94 Sep-94 Mar-95 Sep-95 Mar-96 Sep-96 Hotel Market Outlook - Q1 2011 Mar-97 Sep-97 Mar-98 Tourism, Hospitality & Leisure Sep-98 Mar-99 Sep-99 Mar-00 Room Occ% Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 ∆ Room Rate Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Australia: Occupancy Trend vs. Rate Change 10 February 2011 Mar-12 Sep-12 Mar-13 Sep-13 0.0% 2.5% 5.0% 7.5% -7.5% -5.0% -2.5% 10.0% 12.5% -12.5% -10.0% 21
- 22. Tourism, Hospitality & Leisure Australia: Occupancy, Rate and RevPAR Trends 70.0% $200 Stats Occ% ADR RevPAR 68.0% Q3 2008 64.5 137 88 $180 Q4 2009 62.0 136 84 66.0% YE 2009 62.0 136 84 $160 YE 2010 63.9 139 89 64.0% $140 YE 2011 65.6 148 97 62.0% $120 60.0% $100 58.0% $80 56.0% $60 54.0% $40 52.0% $20 50.0% $0 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Room Occ% Room Rate Trend RevPAR Trend Hotel Market Outlook - Q1 2011 10 February 2011 22
- 23. Tourism, Hospitality & Leisure Australia: Occupancy, Inflated Rate and RevPAR Trends 70.0% $200 68.0% $180 66.0% $160 64.0% $140 62.0% $120 60.0% $100 58.0% $80 56.0% $60 54.0% $40 52.0% $20 50.0% $0 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Room Occ% Infl Room Rate $ Infl RevPAR $ Hotel Market Outlook - Q1 2011 10 February 2011 24
- 24. Tourism, Hospitality & Leisure Sydney, NSW Hotel Market Outlook - Q1 2011 10 February 2011 25
- 25. Tourism, Hospitality & Leisure Sydney: Econometric Accommodation Demand Index 35.0% Project Rooms Grade Timing 30.0% Star City 172 5 star Q4 ‘11 Meriton Haym 270 4 star Q4 ’11 25.0% QT State Th. 200 4½ star Q4 ’12 Novotel DH 96 4 star 2013 20.0% Barangaroo 250 5 star 2014 15.0% South DH 500+ mix 2015 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 ∆ Econ. Demand ∆ Employment ∆ Retail Spend ∆ Int'l Arrivals ∆ Supply ∆ Occ Rooms ∆ INDEX Hotel Market Outlook - Q1 2011 10 February 2011 26
- 26. Tourism, Hospitality & Leisure Sydney: Occupancy, Rate and RevPAR Trends 88.0% $300 Stats Occ% ADR RevPAR 86.0% Q2 2008 82.0 185 151 $275 Q3 2009 78.8 171 135 84.0% YE 2009 80.3 169 136 $250 YE 2010 85.6 176 151 82.0% $225 YE 2011 87.0 196 171 80.0% $200 78.0% $175 76.0% $150 74.0% $125 72.0% $100 70.0% $75 68.0% $50 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Room Occ% Room Rate Trend RevPAR Trend Hotel Market Outlook - Q1 2011 10 February 2011 27
- 27. Tourism, Hospitality & Leisure Melbourne, VIC Hotel Market Outlook - Q1 2011 10 February 2011 28