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Hotel Market Fundamentals - API Hotel Investment Forum

The document discusses hotel market fundamentals, focusing on demand drivers, market segmentation, ownership structures, management issues, and performance indicators in the hospitality sector. It distinguishes between city hotels and resort hotels based on their demand dynamics and provides insights into the complexities of hotel management, including labor shortages and technology adoption. Additionally, the document highlights key performance metrics such as room occupancy, average room rate, and revenue per available room (RevPAR) to assess market performance.

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Hotel Market Fundamentals Rutger Smits Hotel Investment Forum Australian Property Institute 5 July 2012 © AHS Advisory Hospitality Real Estate & Consulting
The Basics © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
What drives demand? • History – Commercialisation of hospitality – Taverns, inns, hostels (board & lodging) – Leisure travel first emerged in Roman Empire – Seafaring, trade caravans, global business environment – As the world becomes smaller there is more need for hotels • What creates the need for temporary accommodation – Business trip, Meeting, Conference (Corporate) – Holiday, Visiting Friends & Relatives (Leisure) • Need to understand the market – Who is my guest? – Why is he here? – Where does he need/want to be? – What does he need/want/expect? © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
City Hotels vs Resorts • City Hotel: – Required accommodation – A guest must visit and needs a room – Demand is driven by commercial activity in the market – Total demand cannot be increased by adding more supply – Most hotels are chasing the same customer – Market players are fighting for a slice of a finite cake • Resort Hotel: – Desired accommodation – A guest chooses to go and wants a room – Demand is driven by destination appeal – Total demand can be stimulated by destination marketing – Total demand can be increased by adding more supply – Market players are looking to differentiate and grow the pie © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
Guest Segmentation • Purpose of Stay – Business or Leisure • Origin of Guest – Domestic (Local, Intrastate, Interstate) or International • Origin of Booking – Direct, Internet, Wholesale, GDS, etc • Booking Volume – Individual or Group (Wholesale or Group) • Different for each market/destination – City vs Resort • Different for each brand – Corporate standards and definitions • Different for each property – Conference hotel vs. all suite property • There is no standard segmentation, define as needed ! © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
Organisation Chart General Manager Sales & Resident Financial Revenue Human Marketing Manager Engineering Controller Manager Resources Manager (Operations) Food & Rooms Public Technology Beverage Division Security Relations Manager Manager Outlet Front Office Managers Manager Banquets & Housekeeping Catering Kitchen Comms © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
Ownership & Management Structures • Relationships between various parties involved: – Property Owner, Business Owner, Operator, Brand, (Lender) • Structures define the relationships, risk exposure and exit opportunities • Owner / Operator = self operated – Sometimes with a brand franchise and/or marketing agreement • Management Agreement – Business Owner relinquishes day-to-day operations to an Operator, at a fee – In Australia, unlike the US, the operator usually provides the brand • Lease – Operator leases the building, effectively becomes business owner • Variations and hybrid structures © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
Hotel Management Issues • Labour & Skills Shortage – attracting and retaining qualified workers • Technology – the need to take advantage of modern, integrated systems • Perishability – a room left unsold can never be replaced • Changing demographics and impact on travel trends – globalisation, retirement of baby boomers and increased business travel • Evolution of distribution channels – booking rooms inventory via internet – price transparency • The perfect storm in the current market – patchwork economy, FX rates, interest rates, resource shortages, economic worries, disposable income, construction cost, debt © AHS Advisory 5 July 2012 Hospitality Real Estate & Consulting API Hotel investment Forum
Performance Analysis © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
Performance Indicators • Room Occupancy – Ratio of occupied rooms to total rooms – Daily, weekly, monthly, seasonally, annually – 100 rooms occupied in 125-room hotel  80% occupancy • Average Room Rate (ARR) / Average Daily Rate (ADR) – Room revenue per occupied room – Total room revenue / total occupied rooms – $15,000 room revenue over 100 occupied rooms  $150 ADR • RevPAR = Revenue per Available Room – Room revenue per available room – Total room revenue / total available rooms – $15,000 room revenue over 125 available rooms  $120 RevPAR – Combines occupancy and average rate – RevPAR = Occ% x ADR (80% x $150 = $120) = Revenue/RN available © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
Market Performance Analysis • Room Occupancy is highly volatile and varies over time: – Demand: weekly variances: weekday / weekend – Demand: seasonal variances, holidays, long weekends etc. – Additions to supply • What is a reasonable room occupancy? – Key cities: 75%-80%  these days sub 80% becomes “low” – Regional destinations: 60%-65% • Room rates change based on sentiment: – Availability of rooms (price elasticity) – Seasonal rates, special events (Olympics) – Change in business (mix, timing, patterns) • What is a reasonable room rate? – Significant variations, compare to other properties • Room occupancy is much more volatile than room rate © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
50% 55% 60% 65% 70% 75% 80% 85% 90% 95% Mar-93 Sep-93 Mar-94 Sep-94 Mar-95 Sep-95 Mar-96 API Hotel investment Forum Sep-96 Sydney Mar-97 Sep-97 Mar-98 Sep-98 Mar-99 Sep-99 Mar-00 Sep-00 Mar-01 Melbourne Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 © AHS Advisory Sep-05 Brisbane Mar-06 Sep-06 Mar-07 Hospitality Real Estate & Consulting Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Room Occupancy Trends Mar-10 Adelaide Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Perth Mar-14 Sep-14 5 July 2012 50% 55% 60% 65% 70% 75% 80% 85% 90% 95%
Room Occupancy Trends 95% 95% 90% 90% 85% 85% 80% 80% 75% 75% 70% 70% 65% 65% 60% 60% 55% 55% 50% 50% Mar-93 Mar-96 Mar-99 Mar-02 Mar-05 Mar-08 Mar-11 Mar-14 Sep-94 Sep-97 Sep-00 Sep-03 Sep-06 Sep-09 Sep-12 Australia Gold Coast TNQ Canberra Darwin © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
100 125 150 175 200 225 250 275 300 50 75 Mar-93 Sep-93 Mar-94 Sep-94 Mar-95 Sep-95 Mar-96 Sep-96 API Hotel investment Forum Sydney Mar-97 Sep-97 Mar-98 Sep-98 Mar-99 Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Melbourne Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 © AHS Advisory Sep-05 Mar-06 Brisbane Sep-06 Mar-07 Hospitality Real Estate & Consulting Sep-07 Average Rate Trends Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Adelaide Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Perth Sep-14 5 July 2012 50 75 100 125 150 175 200 225 250 275 300
Average Rate Trends 300 300 275 275 250 250 225 225 200 200 175 175 150 150 125 125 100 100 75 75 50 50 Mar-93 Mar-96 Mar-99 Mar-02 Mar-05 Mar-08 Mar-11 Mar-14 Sep-94 Sep-97 Sep-00 Sep-03 Sep-06 Sep-09 Sep-12 Australia Gold Coast TNQ Canberra Darwin © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
100 125 150 175 200 225 250 275 25 50 75 0 Mar-93 Sep-93 Mar-94 Sep-94 Mar-95 Sep-95 Sydney Mar-96 Sep-96 API Hotel investment Forum Mar-97 Sep-97 Mar-98 Sep-98 Mar-99 Sep-99 Mar-00 Sep-00 Melbourne Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 RevPAR Trends Mar-05 Brisbane © AHS Advisory Sep-05 Mar-06 Sep-06 Mar-07 Hospitality Real Estate & Consulting Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Adelaide Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Perth Mar-14 Sep-14 5 July 2012 - 25 50 75 100 125 150 175 200 225 250 275
100 125 150 175 200 225 250 275 25 50 75 0 Mar-93 Sep-93 Mar-94 Sep-94 Mar-95 Sep-95 Mar-96 Australia Sep-96 API Hotel investment Forum Mar-97 Sep-97 Mar-98 Sep-98 Mar-99 Sep-99 Mar-00 Sep-00 Mar-01 Gold Coast Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 RevPAR Trends Mar-05 © AHS Advisory Sep-05 Canberra Mar-06 Sep-06 Mar-07 Hospitality Real Estate & Consulting Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Darwin Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 TNQ Mar-14 5 July 2012 Sep-14 0 25 50 75 100 125 150 175 200 225 250 275
66% 68% 70% 72% 74% 76% 78% 80% 82% 84% 86% 88% Mar-93 Sep-93 Mar-94 Sep-94 Mar-95 Sep-95 Mar-96 API Hotel investment Forum Sep-96 Mar-97 Sep-97 Mar-98 Sep-98 ∆ Occ Rooms (RHS) Mar-99 Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 ∆ Supply (RHS) © AHS Advisory Sep-05 Mar-06 Sep-06 Mar-07 Hospitality Real Estate & Consulting Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Room Occupancy (LHS) Sydney City – Room Occupancy Sep-13 Mar-14 Sep-14 5 July 2012 0.0% 3.0% 6.0% 9.0% -9.0% -6.0% -3.0% 12.0% 15.0% 18.0% 21.0% 24.0%
66% 68% 70% 72% 74% 76% 78% 80% 82% 84% 86% 88% Mar-93 Sep-93 Mar-94 Sep-94 Mar-95 Sep-95 Mar-96 API Hotel investment Forum Sep-96 Mar-97 Sep-97 Mar-98 Sep-98 Mar-99 Room Occupancy (LHS) Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 © AHS Advisory Sep-05 Mar-06 Sep-06 Mar-07 Hospitality Real Estate & Consulting Sep-07 ∆ Average Room Rate (RHS) Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 CPI (RHS) Sep-13 Mar-14 Sep-14 5 July 2012 0% 3% 6% 9% -9% -6% -3% 12% 15% 18% -15% -12% Sydney City – Occ% and ∆ Room Rate
66% 68% 70% 72% 74% 76% 78% 80% 84% 86% 88% 82% Mar-93 Sep-93 Mar-94 Sep-94 Mar-95 Sep-95 Mar-96 API Hotel investment Forum Sep-96 Mar-97 Sep-97 Mar-98 Sep-98 Mar-99 Room Occupancy (LHS) Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 © AHS Advisory Sep-05 Mar-06 Sep-06 Panic Points Mar-07 Hospitality Real Estate & Consulting Sep-07 ∆ Average Room Rate (RHS) Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 CPI (RHS) Sep-13 Mar-14 Sep-14 5 July 2012 0% 3% 6% 9% -9% -6% -3% 12% 15% 18% -15% -12% Sydney City – Occ% and ∆ Room Rate
66% 68% 70% 72% 74% 76% 78% 80% 82% 84% 86% 88% Mar-93 Sep-93 Mar-94 Sep-94 Mar-95 Sep-95 Mar-96 API Hotel investment Forum Sep-96 Mar-97 Sep-97 Mar-98 Sep-98 Mar-99 Room Occupancy (LHS) Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 © AHS Advisory Sep-05 Mar-06 Sep-06 Mar-07 Hospitality Real Estate & Consulting Sep-07 ∆ Average Room Rate (RHS) Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 CPI (RHS) Sep-13 Mar-14 Sep-14 5 July 2012 0% 3% 6% 9% -9% -6% -3% 12% 15% 18% -15% -12% Sydney City – Occ% and ∆ Room Rate
66% 68% 70% 72% 74% 76% 78% 80% 82% 84% 86% 88% Mar-93 Sep-93 Mar-94 Sep-94 Mar-95 Sep-95 Mar-96 API Hotel investment Forum Sep-96 Mar-97 Sep-97 Mar-98 Sep-98 Mar-99 Room Occupancy (LHS) Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 © AHS Advisory Sep-05 Mar-06 Sep-06 Mar-07 Hospitality Real Estate & Consulting Average Room Rate (RHS) Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 RevPAR (RHS) Mar-14 Sep-14 5 July 2012 Sydney City – Occ% and Room Rate $60 $80 $100 $120 $140 $160 $180 $200 $220 $240 $260 $280
66% 68% 70% 72% 74% 76% 78% 80% 82% 84% 86% 88% Mar-93 Sep-93 Mar-94 Sep-94 Mar-95 Sep-95 Mar-96 API Hotel investment Forum Sep-96 Mar-97 Sep-97 Mar-98 Sep-98 Mar-99 Room Occupancy (LHS) Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 © AHS Advisory Sep-05 Mar-06 Sep-06 Mar-07 Hospitality Real Estate & Consulting Average Room Rate (RHS) Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 RevPAR (RHS) Mar-14 Sep-14 5 July 2012 Sydney City – Occ% and Adj Room Rate $60 $80 $100 $120 $140 $160 $180 $200 $220 $240 $260 $280
Comparative Performance Analysis • The performance of a hotel relative to the market and/or its competitors – Know your competitors – Know their product – Check on a regular basis • Who are my competitors? – Location – Standard / AAA Rating – Services and facilities – Branding – Guest segmentation – Guest perception • Use fair share analysis – Ratio analysis of Occupancy, Rate and RevPAR © AHS Advisory 5 July 2012 Hospitality Real Estate & Consulting API Hotel investment Forum
Market Penetration Index (MPI) • Measure of room occupancy performance • Actual share versus fair share • Adjust for competitive positioning Hotel Rooms Fair Share Occ% Occ Rms Act Share MPI A B C D E F A / A total A* C D / D total E/ B 1 50 12.2% 65.0% 33 11.8% 0.97 2 60 14.6% 67.5% 41 14.8% 1.01 3 80 19.5% 70.0% 56 20.4% 1.05 4 100 24.4% 67.5% 68 24.6% 1.01 5 120 29.3% 65.0% 78 28.4% 0.97 Total 410 100.0% 67.0% 275 100.0% 1.00 © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
Average Rate Index (ARI) • Measure of room rate performance • Average property rate versus average market rate • Adjust for competitive positioning Hotel Rooms Occ% Room Rate Revenue ARI A B C D E A* B* C C / C total 1 50 65.0% 80.00 2,600 0.95 2 60 67.5% 85.00 3,443 1.01 3 80 70.0% 90.00 5,040 1.07 4 100 67.5% 85.00 5,738 1.01 5 120 65.0% 80.00 6,240 0.95 Total 410 67.0% 84.01 23,060 1.00 © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
Revenue Generation Index (RGI) • Actual RevPAR versus average market RevPAR • Measure of RevPAR performance • Ultimate measure of competitive performance Hotel Rooms Occ% Room Rate RevPAR RGI A B C D = MPI * ARI B* C D / D Total 1 50 65.0% 80.00 52.00 0.92 2 60 67.5% 85.00 57.38 1.02 3 80 70.0% 90.00 63.00 1.12 4 100 67.5% 85.00 57.38 1.02 5 120 65.0% 80.00 52.00 0.92 Total 410 67.0% 84.01 56.24 1.00 © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
Property Performance Analysis - Summary • MPI = Market Penetration Index – Fair share / Market share – Property occupancy / Market occupancy – Measure for occupancy performance • ARI = Average Rate Index – Property average rate / Market average rate – Measure for rate performance • RGI = Revenue Generation Index – Property yield / Market yield – Measure of competitive performance • Absolute indices are important, but the real value is in the ongoing monitoring of change © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
Rutger Smits Level 6, City Mutual Building rutger@ahsadvisory.com 66 Hunter Street 0414 860 207 Sydney NSW 2000 +61 2 8212 5601 www.AHSadvisory.com © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting

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Hotel Market Fundamentals - API Hotel Investment Forum

  • 1.
    Hotel Market Fundamentals Rutger Smits Hotel Investment Forum Australian Property Institute 5 July 2012 © AHS Advisory Hospitality Real Estate & Consulting
  • 2.
    The Basics © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
  • 3.
    What drives demand? • History – Commercialisation of hospitality – Taverns, inns, hostels (board & lodging) – Leisure travel first emerged in Roman Empire – Seafaring, trade caravans, global business environment – As the world becomes smaller there is more need for hotels • What creates the need for temporary accommodation – Business trip, Meeting, Conference (Corporate) – Holiday, Visiting Friends & Relatives (Leisure) • Need to understand the market – Who is my guest? – Why is he here? – Where does he need/want to be? – What does he need/want/expect? © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
  • 4.
    City Hotels vsResorts • City Hotel: – Required accommodation – A guest must visit and needs a room – Demand is driven by commercial activity in the market – Total demand cannot be increased by adding more supply – Most hotels are chasing the same customer – Market players are fighting for a slice of a finite cake • Resort Hotel: – Desired accommodation – A guest chooses to go and wants a room – Demand is driven by destination appeal – Total demand can be stimulated by destination marketing – Total demand can be increased by adding more supply – Market players are looking to differentiate and grow the pie © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
  • 5.
    Guest Segmentation • Purpose of Stay – Business or Leisure • Origin of Guest – Domestic (Local, Intrastate, Interstate) or International • Origin of Booking – Direct, Internet, Wholesale, GDS, etc • Booking Volume – Individual or Group (Wholesale or Group) • Different for each market/destination – City vs Resort • Different for each brand – Corporate standards and definitions • Different for each property – Conference hotel vs. all suite property • There is no standard segmentation, define as needed ! © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
  • 6.
    Organisation Chart General Manager Sales & Resident Financial Revenue Human Marketing Manager Engineering Controller Manager Resources Manager (Operations) Food & Rooms Public Technology Beverage Division Security Relations Manager Manager Outlet Front Office Managers Manager Banquets & Housekeeping Catering Kitchen Comms © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
  • 7.
    Ownership & ManagementStructures • Relationships between various parties involved: – Property Owner, Business Owner, Operator, Brand, (Lender) • Structures define the relationships, risk exposure and exit opportunities • Owner / Operator = self operated – Sometimes with a brand franchise and/or marketing agreement • Management Agreement – Business Owner relinquishes day-to-day operations to an Operator, at a fee – In Australia, unlike the US, the operator usually provides the brand • Lease – Operator leases the building, effectively becomes business owner • Variations and hybrid structures © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
  • 8.
    Hotel Management Issues • Labour & Skills Shortage – attracting and retaining qualified workers • Technology – the need to take advantage of modern, integrated systems • Perishability – a room left unsold can never be replaced • Changing demographics and impact on travel trends – globalisation, retirement of baby boomers and increased business travel • Evolution of distribution channels – booking rooms inventory via internet – price transparency • The perfect storm in the current market – patchwork economy, FX rates, interest rates, resource shortages, economic worries, disposable income, construction cost, debt © AHS Advisory 5 July 2012 Hospitality Real Estate & Consulting API Hotel investment Forum
  • 9.
    Performance Analysis © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
  • 10.
    Performance Indicators • Room Occupancy – Ratio of occupied rooms to total rooms – Daily, weekly, monthly, seasonally, annually – 100 rooms occupied in 125-room hotel  80% occupancy • Average Room Rate (ARR) / Average Daily Rate (ADR) – Room revenue per occupied room – Total room revenue / total occupied rooms – $15,000 room revenue over 100 occupied rooms  $150 ADR • RevPAR = Revenue per Available Room – Room revenue per available room – Total room revenue / total available rooms – $15,000 room revenue over 125 available rooms  $120 RevPAR – Combines occupancy and average rate – RevPAR = Occ% x ADR (80% x $150 = $120) = Revenue/RN available © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
  • 11.
    Market Performance Analysis • Room Occupancy is highly volatile and varies over time: – Demand: weekly variances: weekday / weekend – Demand: seasonal variances, holidays, long weekends etc. – Additions to supply • What is a reasonable room occupancy? – Key cities: 75%-80%  these days sub 80% becomes “low” – Regional destinations: 60%-65% • Room rates change based on sentiment: – Availability of rooms (price elasticity) – Seasonal rates, special events (Olympics) – Change in business (mix, timing, patterns) • What is a reasonable room rate? – Significant variations, compare to other properties • Room occupancy is much more volatile than room rate © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
  • 12.
    50% 55% 60% 65% 70% 75% 80% 85% 90% 95% Mar-93 Sep-93 Mar-94 Sep-94 Mar-95 Sep-95 Mar-96 API Hotel investment Forum Sep-96 Sydney Mar-97 Sep-97 Mar-98 Sep-98 Mar-99 Sep-99 Mar-00 Sep-00 Mar-01 Melbourne Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 © AHS Advisory Sep-05 Brisbane Mar-06 Sep-06 Mar-07 Hospitality Real Estate & Consulting Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Room Occupancy Trends Mar-10 Adelaide Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Perth Mar-14 Sep-14 5 July 2012 50% 55% 60% 65% 70% 75% 80% 85% 90% 95%
  • 13.
    Room Occupancy Trends 95% 95% 90% 90% 85% 85% 80% 80% 75% 75% 70% 70% 65% 65% 60% 60% 55% 55% 50% 50% Mar-93 Mar-96 Mar-99 Mar-02 Mar-05 Mar-08 Mar-11 Mar-14 Sep-94 Sep-97 Sep-00 Sep-03 Sep-06 Sep-09 Sep-12 Australia Gold Coast TNQ Canberra Darwin © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
  • 14.
    100 125 150 175 200 225 250 275 300 50 75 Mar-93 Sep-93 Mar-94 Sep-94 Mar-95 Sep-95 Mar-96 Sep-96 API Hotel investment Forum Sydney Mar-97 Sep-97 Mar-98 Sep-98 Mar-99 Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Melbourne Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 © AHS Advisory Sep-05 Mar-06 Brisbane Sep-06 Mar-07 Hospitality Real Estate & Consulting Sep-07 Average Rate Trends Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Adelaide Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Perth Sep-14 5 July 2012 50 75 100 125 150 175 200 225 250 275 300
  • 15.
    Average Rate Trends 300 300 275 275 250 250 225 225 200 200 175 175 150 150 125 125 100 100 75 75 50 50 Mar-93 Mar-96 Mar-99 Mar-02 Mar-05 Mar-08 Mar-11 Mar-14 Sep-94 Sep-97 Sep-00 Sep-03 Sep-06 Sep-09 Sep-12 Australia Gold Coast TNQ Canberra Darwin © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
  • 16.
    100 125 150 175 200 225 250 275 25 50 75 0 Mar-93 Sep-93 Mar-94 Sep-94 Mar-95 Sep-95 Sydney Mar-96 Sep-96 API Hotel investment Forum Mar-97 Sep-97 Mar-98 Sep-98 Mar-99 Sep-99 Mar-00 Sep-00 Melbourne Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 RevPAR Trends Mar-05 Brisbane © AHS Advisory Sep-05 Mar-06 Sep-06 Mar-07 Hospitality Real Estate & Consulting Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Adelaide Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Perth Mar-14 Sep-14 5 July 2012 - 25 50 75 100 125 150 175 200 225 250 275
  • 17.
    100 125 150 175 200 225 250 275 25 50 75 0 Mar-93 Sep-93 Mar-94 Sep-94 Mar-95 Sep-95 Mar-96 Australia Sep-96 API Hotel investment Forum Mar-97 Sep-97 Mar-98 Sep-98 Mar-99 Sep-99 Mar-00 Sep-00 Mar-01 Gold Coast Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 RevPAR Trends Mar-05 © AHS Advisory Sep-05 Canberra Mar-06 Sep-06 Mar-07 Hospitality Real Estate & Consulting Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Darwin Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 TNQ Mar-14 5 July 2012 Sep-14 0 25 50 75 100 125 150 175 200 225 250 275
  • 18.
    66% 68% 70% 72% 74% 76% 78% 80% 82% 84% 86% 88% Mar-93 Sep-93 Mar-94 Sep-94 Mar-95 Sep-95 Mar-96 API Hotel investment Forum Sep-96 Mar-97 Sep-97 Mar-98 Sep-98 ∆ Occ Rooms (RHS) Mar-99 Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 ∆ Supply (RHS) © AHS Advisory Sep-05 Mar-06 Sep-06 Mar-07 Hospitality Real Estate & Consulting Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Room Occupancy (LHS) Sydney City – Room Occupancy Sep-13 Mar-14 Sep-14 5 July 2012 0.0% 3.0% 6.0% 9.0% -9.0% -6.0% -3.0% 12.0% 15.0% 18.0% 21.0% 24.0%
  • 19.
    66% 68% 70% 72% 74% 76% 78% 80% 82% 84% 86% 88% Mar-93 Sep-93 Mar-94 Sep-94 Mar-95 Sep-95 Mar-96 API Hotel investment Forum Sep-96 Mar-97 Sep-97 Mar-98 Sep-98 Mar-99 Room Occupancy (LHS) Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 © AHS Advisory Sep-05 Mar-06 Sep-06 Mar-07 Hospitality Real Estate & Consulting Sep-07 ∆ Average Room Rate (RHS) Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 CPI (RHS) Sep-13 Mar-14 Sep-14 5 July 2012 0% 3% 6% 9% -9% -6% -3% 12% 15% 18% -15% -12% Sydney City – Occ% and ∆ Room Rate
  • 20.
    66% 68% 70% 72% 74% 76% 78% 80% 84% 86% 88% 82% Mar-93 Sep-93 Mar-94 Sep-94 Mar-95 Sep-95 Mar-96 API Hotel investment Forum Sep-96 Mar-97 Sep-97 Mar-98 Sep-98 Mar-99 Room Occupancy (LHS) Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 © AHS Advisory Sep-05 Mar-06 Sep-06 Panic Points Mar-07 Hospitality Real Estate & Consulting Sep-07 ∆ Average Room Rate (RHS) Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 CPI (RHS) Sep-13 Mar-14 Sep-14 5 July 2012 0% 3% 6% 9% -9% -6% -3% 12% 15% 18% -15% -12% Sydney City – Occ% and ∆ Room Rate
  • 21.
    66% 68% 70% 72% 74% 76% 78% 80% 82% 84% 86% 88% Mar-93 Sep-93 Mar-94 Sep-94 Mar-95 Sep-95 Mar-96 API Hotel investment Forum Sep-96 Mar-97 Sep-97 Mar-98 Sep-98 Mar-99 Room Occupancy (LHS) Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 © AHS Advisory Sep-05 Mar-06 Sep-06 Mar-07 Hospitality Real Estate & Consulting Sep-07 ∆ Average Room Rate (RHS) Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 CPI (RHS) Sep-13 Mar-14 Sep-14 5 July 2012 0% 3% 6% 9% -9% -6% -3% 12% 15% 18% -15% -12% Sydney City – Occ% and ∆ Room Rate
  • 22.
    66% 68% 70% 72% 74% 76% 78% 80% 82% 84% 86% 88% Mar-93 Sep-93 Mar-94 Sep-94 Mar-95 Sep-95 Mar-96 API Hotel investment Forum Sep-96 Mar-97 Sep-97 Mar-98 Sep-98 Mar-99 Room Occupancy (LHS) Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 © AHS Advisory Sep-05 Mar-06 Sep-06 Mar-07 Hospitality Real Estate & Consulting Average Room Rate (RHS) Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 RevPAR (RHS) Mar-14 Sep-14 5 July 2012 Sydney City – Occ% and Room Rate $60 $80 $100 $120 $140 $160 $180 $200 $220 $240 $260 $280
  • 23.
    66% 68% 70% 72% 74% 76% 78% 80% 82% 84% 86% 88% Mar-93 Sep-93 Mar-94 Sep-94 Mar-95 Sep-95 Mar-96 API Hotel investment Forum Sep-96 Mar-97 Sep-97 Mar-98 Sep-98 Mar-99 Room Occupancy (LHS) Sep-99 Mar-00 Sep-00 Mar-01 Sep-01 Mar-02 Sep-02 Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 © AHS Advisory Sep-05 Mar-06 Sep-06 Mar-07 Hospitality Real Estate & Consulting Average Room Rate (RHS) Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 RevPAR (RHS) Mar-14 Sep-14 5 July 2012 Sydney City – Occ% and Adj Room Rate $60 $80 $100 $120 $140 $160 $180 $200 $220 $240 $260 $280
  • 24.
    Comparative Performance Analysis • The performance of a hotel relative to the market and/or its competitors – Know your competitors – Know their product – Check on a regular basis • Who are my competitors? – Location – Standard / AAA Rating – Services and facilities – Branding – Guest segmentation – Guest perception • Use fair share analysis – Ratio analysis of Occupancy, Rate and RevPAR © AHS Advisory 5 July 2012 Hospitality Real Estate & Consulting API Hotel investment Forum
  • 25.
    Market Penetration Index(MPI) • Measure of room occupancy performance • Actual share versus fair share • Adjust for competitive positioning Hotel Rooms Fair Share Occ% Occ Rms Act Share MPI A B C D E F A / A total A* C D / D total E/ B 1 50 12.2% 65.0% 33 11.8% 0.97 2 60 14.6% 67.5% 41 14.8% 1.01 3 80 19.5% 70.0% 56 20.4% 1.05 4 100 24.4% 67.5% 68 24.6% 1.01 5 120 29.3% 65.0% 78 28.4% 0.97 Total 410 100.0% 67.0% 275 100.0% 1.00 © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
  • 26.
    Average Rate Index(ARI) • Measure of room rate performance • Average property rate versus average market rate • Adjust for competitive positioning Hotel Rooms Occ% Room Rate Revenue ARI A B C D E A* B* C C / C total 1 50 65.0% 80.00 2,600 0.95 2 60 67.5% 85.00 3,443 1.01 3 80 70.0% 90.00 5,040 1.07 4 100 67.5% 85.00 5,738 1.01 5 120 65.0% 80.00 6,240 0.95 Total 410 67.0% 84.01 23,060 1.00 © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
  • 27.
    Revenue Generation Index(RGI) • Actual RevPAR versus average market RevPAR • Measure of RevPAR performance • Ultimate measure of competitive performance Hotel Rooms Occ% Room Rate RevPAR RGI A B C D = MPI * ARI B* C D / D Total 1 50 65.0% 80.00 52.00 0.92 2 60 67.5% 85.00 57.38 1.02 3 80 70.0% 90.00 63.00 1.12 4 100 67.5% 85.00 57.38 1.02 5 120 65.0% 80.00 52.00 0.92 Total 410 67.0% 84.01 56.24 1.00 © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
  • 28.
    Property Performance Analysis- Summary • MPI = Market Penetration Index – Fair share / Market share – Property occupancy / Market occupancy – Measure for occupancy performance • ARI = Average Rate Index – Property average rate / Market average rate – Measure for rate performance • RGI = Revenue Generation Index – Property yield / Market yield – Measure of competitive performance • Absolute indices are important, but the real value is in the ongoing monitoring of change © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting
  • 29.
    Rutger Smits Level 6, City Mutual Building rutger@ahsadvisory.com 66 Hunter Street 0414 860 207 Sydney NSW 2000 +61 2 8212 5601 www.AHSadvisory.com © AHS Advisory API Hotel investment Forum 5 July 2012 Hospitality Real Estate & Consulting