CBRE Hotels - 20 November 2017
To understand recent trends in lodging food and beverage sales, we analyzed the financial performance of hotel restaurants, lounges, room-service, and catering departments for the period 2010 through 2016. The information came from a same-store sample of 705 full-service, convention, all-suite, select-service and resort hotel operating statements taken from the firm's Trends in the Hotel Industry database. In 2016, the hotels in the sample averaged 365 rooms in size, 76.5 percent in occupancy, and an average daily rate of $201.99.Out of the RoomFrom 2010 to 2016, total food and beverage department revenue increased at a compound annual growth rate (CAGR) of 4.5 percent. This is less than the 5.6 percent CAGR in rooms revenue, and 5.2 percent CAGR for total hotel operating revenue during the same period. With total revenue increasing at a greater pace, food and beverage revenue measured as a percent of total revenue has declined from 30.4 percent in 2010 to 29.2 percent in 2016. Being a same-store-sample, this reflects changes in existing operations. Given the recent proliferation of new limited and select-service properties, the decline in food and beverage revenue as a percent of total industry-wide revenue would be more dramatic.In 2016, six of the eight food and beverage revenue categories tracked by CBRE were greater than the nominal dollars achieved in 2010. The two sources of revenue that still lag are in-room dining and mini-bar. It is interesting to note that both of these sources of revenue are earned while the guest remains in their room. The decline in revenue from in-room sources is consistent with the emphasis hotel brands have placed on new food, beverage, workspace, and socializing concepts in the lobby area.On a percentage basis, the greatest increases in food and beverage revenue since 2010 have come from audio/visual rentals and service charges. Audio/visual services are frequently provided by a third-party vendor, and therefore less negotiable by hotel management. Service charges are frequently mandatory components of employee compensation, and therefore cannot be reduced or eliminated.Revenue from hotel restaurants and lounges (venues) has grown at a CAGR of 4.9 percent from 2010 to 2016. Beverage venue revenue (5.4 percent) has grown at a greater pace than food venue revenue (4.7 percent). The new self-service concepts have simultaneously reduced traditional restaurant sales, and reduced the average food check for per customer.During the early stages of the recovery, it was banquet revenue that led the growth in food and beverage revenue. At that time, hotels reached out to local sources for catering business that filled the event space left empty by the lag in group demand. Now, during the later years of the recovery, group demand has started to return, but has yet to fully recover. This apparently has thwarted the recent rate of growth in banquet revenue.Of the various four property types tracked by CBRE that offer restaurants, lounges, and catering, the greatest gains in food and beverage revenue have occurred at resort and convention hotels. Guests at these hotels are more captive to the events, services, and amenities occurring on-site. Therefore, these property-type categories have a greater likelihood of capturing in-house food and beverage patrons. Full-service and all-suite hotels, on the other hand, cater to more transient demand that has a higher propensity to leave the hotel to find a restaurant or lounge.Expenses and ProfitsLabor related costs represent the greatest share of direct operating expenses within the food and beverage department. In 2016, the combined cost of salaries, wages, bonuses and employee benefits accounted for 52 percent of total department expenses. From 2010 to 2016, total labor costs in the food and beverage department grew at a CAGR of 4.1 percent. Having grown just slightly less than the CAGR for department revenue, the food and beverage labor cost ratio has remained fairly constant the past seven years - roughly 44 percent. It can be assumed that hotel food and beverage department staffing requirements have been reduced considering the movement towards greater self-service options. Unfortunately, it appears that the recent surge in hospitality compensation rates has offset any labor efficiencies gained.The most significant expense savings have occurred in the cost of goods sold. From 2010 to 2016, the cost of food purchases has risen by a CAGR of 2.3 percent, while beverage purchases have grown at a CAGR of 2.8 percent. These growth rates are significantly less than the increases in revenue. Therefore, the hotel beverage cost ratio has declined from 20.7 percent in 2010 to 19.2 percent in 2016. An even more dramatic decline has occurred in the food cost ratio. This metric has dropped from 24.6 percent in 2010 to 22.5 percent. The savings in food cost are consistent with both the decline in prices for this commodity, as well as the shift in menu options at the new quick-service concepts.While food and beverage department revenue increased at a CAGR of 4.5 percent from 2010 to 2016, total department expenses grew by just 3.4 percent. With revenues growing at a greater pace than profits, the food and beverage profit margin has increased from 24.9 percent in 2010 to 29.5 percent in 2016. The net result of the relative changes in revenues and expense was a 7.5 percent CAGR in food and beverage department profits for the properties in our sample during the seven-year period.While food and beverage revenue as a percent of total revenue may be on the decline, a case can be made that more thought is being given to hotel food and beverage today than ever before. The major hotel companies are using the quality, ambiance, price-point, facility, and service levels of their food and beverage offerings to define their new brands. At existing properties, major changes are frequently being made to the food and beverage outlets during their renovations. As consumer habits change, hotel operators appear to have adapted, and brought more food and beverage dollars to the bottom-line.
CBRE Hotels - 1 November 2017
Perth -- Woolworths' hospitality arm, ALH Group, has appointed CBRE Hotels to market the Brighton Hotel in Mandurah - representing the second divestment in an $86 million portfolio of Perth venues it purchased in 2011.ALH Group acquired the Brighton Hotel as part of a portfolio of 12 assets from collapsed company Compass Hotel Group. ALH Group sold the Princes Road Tavern in 2012 and will retain ownership of the remaining 10 assets, which includes well-known venues such as The Carine, The Greenwood and the Albion.The Brighton Hotel, located at 12 Mandurah Terrace is a purpose-built tavern and restaurant located on a 1,300sqm landholding offering north-west estuary views. The venue includes a restaurant, rear public bar and courtyard, and upstairs function area - all of which capitalise on outstanding views.CBRE Hotels' Ryan McGinnity and Chloe Mason have been appointed to sell the property, which has been identified as surplus to the ALH Group's needs, via public auction.Mr McGinnity said the waterfront venue was well suited to a local, hands-on operator with great exposure to the local community."The Brighton Hotel is a well-established venue generating a substantial revenue. The venue is ideally suited to a hands-on operator that will leverage Mandurah's growing population to further boost turnover and profitability," Mr McGinnity said.The marketing campaign for the Brighton Hotel follows the recent sale of the Sebel Hotel and Peninsular Bar & Restaurant for $15 million - highlighting growing confidence and investment in Mandurah's hospitality sector.CBRE selling agent Chloe Mason commented: "While Mandurah struggled economically following the boom, when many new residential subdivisions and apartments were developed, the city has recovered and local businesses are now starting to reap the benefits of these now occupied projects."With such a prominent position on the Mandurah foreshore, and close to other amenity, the Brighton Hotel, with its underlying land and established business, is an outstanding opportunity."The property is being offered for sale via onsite auction on December 7.
CBRE Hotels - 1 November 2017
Hotel demand grew 2.4% nationally in Q3, up from the 2.3% rate in Q2. Supply grew by 1.9% from a year ago.National occupancy rose to 71.4%--the highest quarterly occupancy level since STR began collecting data in 1987.ADR grew by 1.4% nationally, the slowest rate of growth since the Great Recession. RevPAR grew by 1.9% year over year, down from 2.7% in Q2.More than half of the 60 markets tracked by CBRE Hotels' Americas Research had supply gains of more than 2% in Q3 and 35 of them had declines in occupancy.An 11.8% increase in occupancy and 4.1% increase in ADR gave Houston the largest increase in RevPAR (16.4%). Indianapolis had the second-highest RevPAR growth at 9.8%.Seven of the top-10 markets for RevPAR growth saw increases driven primarily by ADR.Driven by displaced residents and relief workers in the wake of Hurricane Harvey, Houston had the largest demand increase (16.5%). High gains also occurred in the Hurricane Irma-affected markets of Tampa (6.6%) and Orlando (6.1%).DOWNLOAD REPORT
CBRE Hotels - 18 October 2017
Atlanta, Ga. -- CBRE Hotels Americas Research announced that the average Caribbean hotel in its survey sample suffered a 4.7 percent decrease in gross operating profit (GOP) during 2016, according to its newly released twelfth edition of Caribbean Trends in the Hotel Industry. This decline in profitability follows four consecutive years of double-digit increases in GOP.The decline in the bottom-line starts with the falloff in top line revenue. During 2016, occupancy for the Trends sample declined by 2.8 percent, along with a 0.2 percent decrease in average daily rate (ADR). The net result was a 3.0 percent decline in RevPAR. All other revenue generating departments (food & beverage, other operated departments and miscellaneous income) also saw a loss in sales during the year, resulting in a 2.2 percent drop in total hotel operating revenue."A multitude of factors caused the decline in revenue for Caribbean hotels in 2016," said Scott Smith, managing director, CBRE Hotels Consulting. "These include new supply, currency exchange rates and the Zika virus."It should be noted that during the production of the 2017 Caribbean Trends report, the Caribbean region experienced two Category 5 hurricanes (Irma and Maria). The impact of the hurricane will be noted when we are able to review the 2017 annual operating data. New SupplyLodging is a cyclical industry, so it is not surprising that the strong performance of Caribbean hotels from 2012 through 2015 attracted the attention of developers from around the world. "New hotels have opened up on most all islands in the region. We have seen urban select-service properties, along with five-star all-inclusive resorts enter the market in recent years," Smith said.Compounding the impact of traditional hotel openings in historical destinations is the entry of alternative forms of lodging, plus the emergence of new venues. "Like elsewhere in the world, Airbnb is becoming a popular form of lodging in the Caribbean region. In fact, Airbnb has served as the entree form of lodging for people wishing to visit Cuba, a new and emerging destination attracting visitors from other islands in the region. Plus, parts of the long-delayed Baha Mar development opened in early 2017," Smith noted.Other Negative FactorsThe Zika virus was officially eradicated in 2017, but not before the presence of the disease scared people from traveling to the Caribbean in 2016. The negative publicity from the virus impacted both the transient and group demand group segments. Fortunately, conversations with regional hoteliers indicate that the stigma of Zika has dissipated somewhat in 2017.Given the international appeal of the Caribbean, travel to the region is sensitive to fluctuations in currencies. In June 2016, British voters surprised the world when they voted to leave the European Union. The vote caused the British pound to fall to its lowest level against the dollar in 30 years."The decline in the value of the pound limited the purchasing power of U.K. travelers, dampening their spending habits on discretionary spending, including vacations. Popular British destinations such as Barbados and St. Lucia were the most vulnerable," Smith added. "In response, I expect Caribbean hoteliers to shift their marketing focus to the U.S., where the dollar is relatively strong and purchasing power is high." Cost ControlsWith revenues declining in 2016, Caribbean hotel operators had to focus on cost controls to limit decreases in profits. During the year, regional managers cut their operating expenses by 1.2 percent.Despite the 2.8 percent decline in occupancy, rooms department expenses remained flat from 2015 to 2016. "The stagnation in rooms department expenses is surprising given the high degree of variable expenses within this department," Smith said. "On the other hand, the decreases in the food & beverage and other operated department expenses make sense and were commensurate with their respective declines in revenue."Undistributed department expenses, which are more fixed in nature, declined by 1.6 percent during 2016. "The 7.9 percent decline in utility expenses is noteworthy given the relatively high cost of energy in the Caribbean region. This could be reflective of a payoff in the green and sustainable practices that have been prevalent in the Caribbean for several years," Smith noted."The 3.5 percent rise in management fees, on the other hand, is counter-intuitive given the declines in revenue and profits experienced in 2016. Caribbean hotel owners would be advised to check the incentive clauses in their management contracts," Smith advised.ProfitsBy cutting expenses 1.2 percent, Caribbean hotel operators limited the 2.2 percent decline in revenue to just a 4.7 percent decrease in GOP.Of all the categories analyzed by CBRE, only those Caribbean properties in the upscale and upper-midscale categories achieved an increase in GOP in 2016. During the year, these hotels in aggregate converted a 4.1 percent increase in revenue to a 1.9 percent rise in GOP. "Several of the properties in these chain-scales are select-service hotels in urban locations that accommodate business travelers. Therefore, they were somewhat insulated from the factors that negatively impacted leisure travel and resorts," Smith said.
CBRE Hotels - 16 October 2017
Unfortunately, 2016 was a disappointment. Revenue and profits increased, but not at the levels that were budgeted. Occupancy and average daily rate (ADR) growth fell short of expectations, which led to a revenue shortfall. While the lower occupancy levels resulted in less expense growth, it was not enough to offset the limited revenue growth. Therefore, the goals for increases in profits were not met.As general managers, controllers, and directors of sales prepare their budgets and marketing plans for 2018, we present the results of our most recent look at the budgeting accuracy of U.S. hotel operators. From CBRE Hotel's Americas Research's Trends in the Hotel Industry database, we identified 629 operating statements that contained both actual and budgeted data for 2016. Using these statements, we compared the revenues and expenses projected for 2016 with what was actually earned and spent during the year.Budget Accuracy FallsSince 2001, CBRE Hotels' Americas Research has assessed the accuracy of hotel budgets. Over the past 16 years, one trend has become predictable. During times of industry prosperity, hotel budgets are more accurate than during industry downturns.During the historical years of growth, hotels beat their budgeted revenue goals by an average of just 0.5 percent, while profit goals were exceeded by 1.4 percent. For the purpose of this analysis, profits are defined as earnings before income taxes, depreciation and amortization (EBITDA).Given this historical trend, along with forecasts for a continued healthy environment for travel, 2016 budgets had the potential to be very accurate. Unfortunately, accuracy slipped during the year. The hoteliers in our sample forecast a 4.1 percent increase in total operating revenue for 2016. Unfortunately, revenues grew by just 1.9 percent during the year, for a miss of 2.2 percent.On the bottom-line, hoteliers projected a strong 7.9 percent gain in EBITDA. Ultimately, the revenue deficit was too much to make up. EBITDA at the properties in our sample increased by a modest 3.8 percent, or a budget deficiency of 4.1 percent.Expense Gap Less Than Revenue ShortfallThe shortage in revenue was the result of budget gaps in both occupancy and ADR. For 2016, the hotel managers in our sample forecast a 1.2 percent occupancy gain along with a 4.1 percent increase in ADR. At the end of the year, however, occupancy for these properties remained flat, while ADRs grow only 2.2 percent.The net result was a full three-point budget deficit in rooms revenue, which contributed significantly to the 2.2 percent shortfall in revenue. Given the magnitude of the gap in rooms revenue, it can be assumed that the budgeted changes in other hotel revenues were more accurate.By accommodating fewer rooms than budgeted, the hotels in our sample did incur less expense growth than planned. During 2016, expenses at the properties in the study sample increased by 1.1 percent. This is 1.6 percentage points less than the budgeted expense growth rate of 2.7 percent.What To Budget for 2018According to the September 2017 edition of Hotel Horizons, CBRE Hotels' Americas Research is projecting that a 2.4 percent increase in RevPAR will lead to a 2.3 percent gain in total hotel revenues during 2018. Concurrently, operating expenses are forecast to rise by 2.6 percent, leading to an improvement in profits of roughly 1.8 percent.On the one hand, the positive market forecast indicates that the odds are favorable for U.S. hotels to achieve their budgeted targets in 2018. However, given the modest gains expected for both revenues and profits, the softness of the 2018 forecast could contribute to budget deficits during the year. Pressure from owners makes it difficult for hotel managers to prepare conservative budgets. Let's just hope any inflated expectations for revenues and profits that might be contained in the 2018 budgets are not too exaggerated.
CBRE Hotels - 26 September 2017
Key TakeawaysFlorida's prime office and industrial markets reported minimal impact from Hurricane Irma--mainly temporary power outages, downed trees and minor leakage.Except for the Florida Keys and certain parts of Jacksonville, flood and wind damage to Florida retail properties was also minimal. Certain retail segments, such as building supplies, food and fuel, should see a significant uptick in sales in the coming months.Single-family residential properties bore the brunt of Hurricane Irma's destruction, particularly in the south, central and northeast regions of the state. As a result, demand for multifamily properties is expected to increase in the short term.Hotel properties in the state's major markets have reopened for business, except for many in the Florida Keys. Demand may increase by an average 15% for the next four months as displaced residents, aid workers and construction workers seek accommodations. Longer term, the stigma of the hurricane could affect the state's tourism industry.Overview and economic impactHurricane Irma made its initial U.S. landfall in the Florida Keys on Sept. 10 as a Category 3 storm, and later that day made a second landfall at Marco Island on Florida's west coast before barreling north through the state. Cities on both coasts experienced flood surges and extremely strong winds.Both short- and long-term preparation significantly minimized Irma's impact on commercial properties. Evacuation plans, emergency fuel and power supply arrangements, as well as contingency plans, were critical short-term preparedness factors. Long-term preparation consisting of enhanced building codes and infrastructure readiness was critical to the state's ability to both withstand damage and assess how quickly infrastructure and power losses could be restored.For commercial properties, building-level preparation was key in minimizing damage. Approximately one-third of the 240 office buildings managed by CBRE's Asset Services division were impacted by Irma. Of those affected, the majority experienced only power loss. A smaller portion (less than 5%) sustained water and wind damage. Less than one week after the storm, almost 100% of Florida's mainland power grid and infrastructure (major ports, airports, roads and commercial districts) were operational. The relatively quick recovery minimized business losses.Despite the hurricane's strength, initial damage assessments suggest that quick and decisive state and local government action, an emphasis on preparedness and upgraded construction standards minimized the potential long-term economic impact on Florida.Florida's legislature estimates initial damage at between $25 billion and $45 billion. Tourism and agriculture, both strong drivers of the state's economy, were impacted by the storm. The impact on agriculture likely will be more severe due to destruction of crops. Florida's thriving tourist industry likely will see a much shorter-term lull. Overall, Florida's economy will remain largely unaffected by Hurricane Irma over the long-term, as there was minimal commercial property damage and no long-term loss of power.Prior to Irma, Florida recorded year-over-year job growth of 2.6%--almost double the national average--and had an unemployment rate of 4%. This strong economic environment going into the storm will likely lessen disruptions within the labor market.Florida's building code may have been the X factorFlorida's preparation for a major hurricane has been more than 20 years in the making. Since Hurricane Andrew in 1992, the state has worked diligently to upgrade its building codes in order to protect real estate assets from hurricanes. The state now has the strongest building codes in the U.S. that are a benchmark for hurricane protection nationally. Construction standards have been enacted to withstand wind speeds of up to 175 miles per hour or a Category 5 hurricane.In addition to wind speed standards, South Florida has invested heavily in pump systems and building standards that enable easy and efficient flood drainage. Irma hit parts of South Florida, including Miami's Brickell CBD, during a high tide that exacerbated the storm surge. Nonetheless, by the end of the first day of the storm, Brickell had no standing water. Upgraded building standards ensured complete drainage by the next day, and businesses reopened within three days after the storm. Minimal office damage reportedFlorida office buildings withstood Hurricane Irma relatively well. From wind-resistant glass, to sump and discharge pumps, to strategic placement of vital building systems, the office sector was well-prepared. According to many of the state's top office landlords, major Florida markets largely experienced minimal building damage: fallen trees, landscaping issues and minor leakage through window seals and roofing from heavy rains and wind. CBRE Research findings indicate that most damage was minor, with repair costs likely to be less than the insurance deductible for many properties. Additionally, CBRE Asset Services reported that 95% of its 240 managed office buildings in Florida were back in service after power restoration and repair of minor damage within 48 hours after the storm. The remaining 5% were operational within 72 hours. According to CoreLogic's 2017 Storm Surge Report, of the top 10 metropolitan areas most at risk for storm surge, six are in the state of Florida. Office inventory in these Core Based Statistical Areas (CBSA's) accounts for approximately 43% of the total office inventory in the state. Despite this risk, and the temporary storm surges that occurred in several of these CBSAs, resiliency strategies employed in these markets proved overwhelmingly effective in the face of a seemingly catastrophic event. Given that there was no major tenant displacement and only minor business disruption due to extensive power outages, no near-term increases in short-term leases are expected. Tenants who experienced the greatest disruptions were those who had not established the proper fault-tolerant networks and built-in redundancy plans to ensure business continuity in the face of prolonged power outages. On the capital markets front, sales transactions are moving forward following some minor delays due to the impending storm and subsequent assessment of impact. Industrial supply chain infrastructure back in businessMost of the state's industrial buildings had little to no damage. CBRE 's assessment, as well as surveys conducted by several publicly-traded REITs, found no major storm damage to major industrial portfolios, including those held by Prologis (173 buildings), DCT Industrial (34) and EastGroup Properties (23).Florida's industrial market had an average vacancy rate of 5% in Q2 2017, which is expected to fall further in the short term due to post-storm demand from disaster relief agencies and building supply companies.Florida's supply chain was put to the test in the week before and the week after Hurricane Irma. There are no refineries or pipelines providing the state with direct access to petroleum products; rather, the state relies on fuel deliveries from ports. All of Florida's major ports were reopened within two days after the storm, bringing needed fuel to the state. Retail sales expected to increase for key goodsA dramatic increase in gas and food sales is expected to continue for the next two months of an active hurricane season. Big-box stores should perform well in the short term. Home goods, building supply, discount and sporting goods stores all provide needed supplies to help state residents and businesses withstand large storms. Building-supply companies should see an uptick in sales and a challenge in maintaining inventory, as repairs to residential structures begin. Property damage to retail buildings across the state was mainly comprised of downed trees, debris, minor leakage and damaged signage. Impacts to retail property are based on CBRE's managed properties as well as assessments by several publicly-traded REITs. Other than power outages, there was no major damage reported by Kimco Realty (63-building retail portfolio), DDR Corp. (60 buildings), Kite Realty Group Trust (35) and Weingarten Realty (31). While most of the state's retail properties did not incur significant damage, retailers in certain areas of Jacksonville and the Florida Keys were impacted to a greater degree. In the San Marco area of Jacksonville, many local shops and restaurants were flooded, with shutdowns from a few days to ongoing. In the Florida Keys, many businesses remain shuttered or destroyed. Florida Governor Rick Scott is providing additional support to this area, with the ambitious goal of having the Keys open for business by the end of October. Extensive single-family sector damage will increase multifamily demandExtensive single-family sector damage will increase multifamily demandSingle-family residential properties bore the brunt of Hurricane Irma's destruction. According to the Florida Office of Insurance Regulation, as of September 19, a total of 452,205 Hurricane Irma claims were filed with estimated insured losses of $2.7 billion. Of those claims, 392,967 or 86.9% were for residential property. The highest number of claims have come from south, central and northeast Florida. Much of the media coverage has suggested that a majority of the damage has occurred in low-rise apartment buildings and has run the gamut from minor water intrusion to lost roofs and partial wall collapses.Increased demand for multifamily product is expected due to the extensive single-family home damage. Prior to the hurricane, Florida's six primary MSAs had year-over-year rent growth, led by Orlando (4.8%), Tampa (1.8%) and Miami/South Florida (1.7%), according to CBRE Research. The short-term increased demand, coupled with any completion delays, should keep rent growth positive across Florida's major markets.Demand for temporary housing of construction workers will further buoy apartment absorption, especially in the hardest hit areas. Prior to the storm, the state had a shortage of high-skill construction workers, which was increasing labor costs. Florida's Construction Workforce Taskforce reports that prior to the hurricane, many contractors and subcontractors in search of higher margins left the single-family housing market and focused on luxury multifamily projects. The increased demand on the single-family side will put further strain on the construction sector but may encourage additional in-migration to fill these in-demand roles, which in turn will increase multifamily demand. Hotels likely to get a near-term boostThe hotel industry is exposed not only to the physical risk of property damage, but the economic risk of a decline in tourism due to natural disasters. South Florida's economy is highly dependent on tourism. Areas most heavily affected, like the Florida Keys, face the danger of stigmatization by tourists for some time. In the near term, hotels are uniquely positioned to provide shelter for those displaced by the storm.The Florida Keys had approximately 10,000 hotel rooms before Hurricane Irma. Since then, the Keys remain closed to tourists, but many hotels hope to reopen in time for the busy fall and winter seasons. Officials hope to fully reopen the Keys for tourism by late October. Most hotels in Naples and Marco Island are closed while operators assess damage and make repairs. Most hotels in Jacksonville, St. Petersburg, Tampa, Ft. Myers, most of Miami, Miami Beach and the Orlando area have reopened and are accepting guests.Looking at hotel data from four comparable disasters, we find that demand rose by 10% to 40% in the surrounding markets in the month after the event. Demand was still up an average of 15% four months after the event because of displaced residents, FEMA staff, emergency personnel and construction workers needing accommodations. Growth rates by market will vary from Hurricane Irma's aftermath, with Miami likely to see the largest increase in demand. Nearby cities like Orlando, Ft. Lauderdale and Palm Beach may also see demand from displaced residents. An important long-term risk to the hotel industry following disasters is stigma related to traveling to a disaster-ravaged area. Stigma results in the reduction in lodging demand because of psychological and emotional barriers to travel. Markets may be stigmatized for protracted periods of time. After hurricanes Andrew and Katrina, demand fell below previous levels for extended periods. While some of this effect may be a result of economics and/or reduced lodging capacity, it is also likely that stigma negatively impacted people's choices to travel.
CBRE Hotels - 21 September 2017
In the current market environment of modest growth in revenue, hotel owners and operators are paying extra attention to their operating expenses. Per the June 2017 edition of Hotel Horizons(r), RevPAR growth in the U.S. is forecast to remain under 3.0 percent from 2018 through 2021. Therefore, it will be management's ability to control expenses that will enable profits to grow.One expense that management has less control over are franchise fees. Most of the fees charged by the franchising companies (brands) are assessed as a percent of a source of revenue. Therefore, owners and operators have mixed emotions when franchise-related costs rise. After all, if you are paying more franchise fees, then it is likely that your property's revenue is also on the rise.To assist hotel management and ownership in their assessment of the franchise-related costs they are paying, we have analyzed data from 1,587 U.S. hotels that reported franchise fee payments each year from 2010 through 2016. The data comes from our firm's annual Trends(r) in the Hotel Industry survey of operating statements from thousands of hotels across the nation. Some of these properties are owned and/or operated by a brand. Others license the brand, but are operated independently, or by a third-party management company.In our Trends(r) database we capture four different franchise-related fees on a discrete basis. They are:Royalty PaymentsMarketing AssessmentsReservation FeesGuest Loyalty Program FeesFor this analysis, the sum of these four components comprise "total franchise fees". These are the data that we analyze in this article.The Cost of FranchisingAs noted before, franchise-related fees are typically assessed as a percent of revenue; most frequently rooms revenue. Therefore, it is not surprising that total franchise fees measured as a percent of rooms revenue has remained fairly constant from 2010 through 2016. In 2010, franchise fees averaged 6.8 percent of rooms revenue, or $2,326 dollars per available room (PAR). This metric increased to 7.2 percent in 2016, or $3,381 PAR.Due to the ascending average daily room rates, franchise fee payments on a dollar per available room basis increase as you go up in chain-scale. In 2016, properties in the midscale segment averaged total franchise fees of $1,897 PAR, while luxury hotels paid $3,970 PAR. Conversely, franchise fees measured as a percent of revenue ranged from a high of 9.6 percent for upper-midscale hotels to a low of 5.2 percent at luxury properties.The ComponentsThe increase in franchise fees as a percent of revenue indicates that they have grown at a greater pace than rooms revenue. From 2010 to 2016, total franchise fees increased at a compound annual growth rate (CAGR) of 6.5 percent. Concurrently, rooms revenue for the hotels in the sample experienced a CAGR of just 5.5 percent. By analyzing the four individual components of franchise-related expenses, we can identify those elements that have led the rise in fees, and those that have lagged.In 2016, royalty payments constituted the greatest portion (29.5%) of franchise fees, followed by guest loyalty program fees (27.9%), marketing assessments (25.6%), and reservation fees (17.0%). This differs somewhat from the profile of payments made in 2010 when the largest share went towards guest loyalty program fees (27.3%), and royalty payments were only 26.8%.The increase in franchise fees has clearly been driven by the royalty payment component. From 2010 through 2016, franchise royalty payments have grown at a CAGR of 8.1 percent. This is 260 basis points greater than the growth in rooms revenue during the same period. Guest loyalty program payments (6.8%) also increased at a greater pace than rooms revenue the past seven year. Lagging in growth were marketing assessments (5.9%) and reservation fees (4.2%).Management Structure MattersSixty percent of the properties in the study sample were owned and/or operated by the brand affiliated with the hotel. The remaining forty percent was either managed by the owner (non-brand), or operated by a third-party management company. Between the two management structures, we see differences in both the composition of the franchise fees, and how each component has grown since 2010.In 2016, the components of franchise fee payments were more evenly distributed at the hotels operated by the brand. Since the brand is also earning management fees at these hotels, it can be assumed that they will alter components of the franchise fees as needed to win the management contract. At the brand-operated properties, the greatest share of franchise fees went towards the guest loyalty program (30.7%). However, the greatest growth in franchise fees at these properties since 2010 has occurred in the royalty payment (11.0% CAGR) component. Overall, total franchise fees at brand-operated hotels increased by a CAGR of 6.6 percent from 2010 to 2016, while rooms revenue grew by 5.5 percent CAGR.At the hotels that are self-operated or managed by a third-party company, royalty payments (45.4%) dominate the total dollars paid to the franchisor. Since the brand is not receiving any management fees at these properties, they are less likely to negotiate any reductions in franchise royalty payments. From 2010 to 2016, the component of franchise fees the increased the greatest was the guest loyalty payments (9.2% CAGR). This is significantly greater than the increase in rooms revenue (5.6%) for these properties over the same period. Since the amount paid for guest loyalty program fees is influenced by the benefit received from these programs, it can be assumed that these hotels have received an increasing volume of business from loyalty program guests over the years.Assessing ValueWith the prospects for revenue growth limited for the next few years, hotel owners are paying particular attention to the costs associated with acquiring revenue. They want a better understanding if the investments they are making in distribution channels, management, and their brand are providing a sufficient payback.When assessing the return they are getting for the franchise fees paid to their brands, owners also have the ability to dissect the value of the individual components. This enables them to make more specific comparisons to alternative brands, reservation systems, referral sources, management options, or even soft-brand alternatives offered by the franchisor.
CBRE Hotels - 1 September 2017
Hotel demand has just reached an all-time high in the U.S., according to CBRE Hotels' Americas Research. Occupancy levels and demand for rooms are also buoyant in Europe and Asia Pacific.1Demand for hotel rooms is highly sensitive to business conditions, particularly on the downside.When business revenues and personal incomes are squeezed at the end of the cycle, hotel demand drops away very quickly. Hotel demand has shown strong growth since the middle of 2016, suggesting that business conditions in the U.S., and elsewhere in the world, are robust despite relatively weak GDP growth.But there is more in these data than a solid cyclical upswing.A major structural shift is underway as well. We can see this in Figure 1, where the bounce back in hotel demand after the Great Financial Crisis was large and rapid. Figure 2 analyzes this in more depth.This chart shows the number of hotel rooms sold each quarter in the U.S., divided by the number of people over the age of 16 (my definition of the working-age population). I make this adjustment because the working age population has increased by 38% since 1988, some 70 million people, and I would expect the number of hotel rooms to expand over time, just to accommodate this cohort.So, what are the key takeaways?The number of hotel rooms sold is increasing at a rapid rate, even after controlling for the growth in the working-age population. And, as noted above, it is now at an all-time high.This growth in demand is taking place at the same time as non-hotel lodging is being supplied into the marketplace by online platforms such as Airbnb. Airbnb only accounts for 5% of total hotel rooms sold in the U.S., but when we add it to the hotel total, and express it as a ratio of the working-age population, the true scale of the structural shift becomes clear.Why is hotel and non-hotel lodging in such high demand?The business cycle is more robust than the GDP numbers suggest. Government statisticians can't quite keep track of the increasingly important virtual economy; and, the current recovery, which drives demand for hotel rooms, is stronger than we think. I give this three out of five as an explanation.Demographic change is boosting demand for experiences over physical goods. Older consumers spend a higher proportion of their income on health, education, recreation and leisure. Since 2000, the population of the U.S. over the age of 45 has increased by 45%. Millennials, too, have a high propensity to travel.2 I give this four out of five.Hotels are getting better at delivering a great experience at whatever price point consumers choose. Four out of five.Online platforms such as Priceline, Expedia, Kayak, Trivago, Hotels.com, etc. have made the process of booking hotels incomparably easier, and consumer reviews have increased the transparency of the marketplace. I give this five out of five.Budget airlines have revolutionized global travel. It is now possible to circumnavigate the globe with budget flights for $1,620. Legacy carriers (i.e., non-budget airlines) would charge $3,877.3 Five out of five.What are the implications for real estate?Activity in the hotel sector suggests economic growth is both solid and improving: Investors can take confidence in real estate fundamentals more broadly;The new economy is outpacing the old. Retailers have not had such a good recovery as the hotel sector, but they are in the same marketplace for consumers' discretionary spend. They need to do more on service, offer and experience at every price point to regain market share.As an afterthought, let's not forget that the hotel sector in most of the developed world depends to a much greater extent than other industries on migrant labor. If the flow of migrants is diminished, it is not at all clear that the jobs would be taken up by native-born workers; it's more likely the growth of this highly vibrant sector would be constrained. That would be a shame.For more Ahead of the Curve content, click here.STR, Inc., Hotel Review Report, August 2017.Vicki Gelfeld, American Association of Retired Persons, 2017 Travel Trends presentation, November 2016.Wall Street Journal, Budget Airline Ambitions Remake Global Travel, August 24, 2017.
CBRE Hotels - 23 August 2017
Atlanta -- The U.S. lodging industry will enjoy continued growth in all major metrics in 2018, albeit at a slower pace. Based on the recently released September 2017 editions of Hotel Horizons(r), CBRE Hotels' Americas Research is forecasting year-over-year increases in occupancy, average daily room rate (ADR), rooms revenue (RevPAR), total operating revenue, and gross operating profits (GOP) from 2017 to 2018."As hotel owners and operators begin the process of preparing their 2018 marketing plans and budgets it is vital that they receive critical inputs on what will drive industry performance," said R. Mark Woodworth, senior managing director of CBRE Hotels' Americas Research (CBRE). "Based on our analysis of the economic and operating environments, we believe that U.S. hotels will once again achieve record occupancy levels and continued growth in profits, during the upcoming year."CBRE is forecasting a 0.1 percent occupancy increase along with a 2.3 percent rise in ADR for 2018. The net result is a projected 2.4 percent boost to RevPAR. "The limited growth rates may be disappointing or even troubling for some industry participants. However, 2018 will mark the ninth consecutive year of rising occupancy, something we have not seen since the 1990s. While the slow growth in occupancy does indicate we are at the top of the business cycle, all factors indicate that we are in the midst of a record breaking, sustained period of prosperity for U.S. hotels," Woodworth said. "Like occupancy, CBRE also is projecting a ninth consecutive year of growth in RevPAR, total operating revenue, and GOP in 2018."CBRE also has identified an uptick in new lodging supply. For 2018, CBRE is forecasting a 2.0 percent increase in the number of available rooms. This does exceed the 1.8 percent long-run average annual rate of supply growth as reported by STR. "Historically, we have seen rising supply precede industry downturns. Fortunately, as has been demonstrated for several years now, the economic factors that matter most for hotel demand growth exceeded the changes in supply," said John B. (Jack) Corgel, Ph.D., professor of real estate at the Cornell University School of Hotel Administration and senior advisor to CBRE Hotels' Americas Research. "Looking forward, employment levels and income gains are expected and remain attractive. These movements will result in growing levels of demand and occupancy to counter balance supply growth."Local MarketsThe influence of new supply is somewhat muted when reviewing the national statistics. Supply growth in excess of demand is the reason why 50 of the 60 major markets in the CBRE Hotel Horizons(r) universe are projected to realize a decline in occupancy in 2018. The disparity between the performance of the overall national market and the major local markets is driven by the skew of development activity. Nearly 90 percent of the new hotel rooms entering the U.S. in 2018 will reside in the 60 Hotel Horizons(r) markets. "Now more than ever, the 'street corner business' adage we've always touted applies to the hotel industry. It is very important to gain a thorough understanding of local market conditions when preparing hotel budgets for 2018," Woodworth noted.Despite the increase in competition, the aggregate occupancy levels for the Hotel Horizons(r) markets are forecast to remain above 70 percent through 2021. In 2018, 52 of the 60 markets are projected to achieve occupancies above their long-run average. "Given such lofty occupancy levels, 49 of the Hotel Horizons(r) markets are forecast to enjoy an ADR increase in excess of the projected 2.2 percent rate of inflation. Real ADR growth in the face of declining occupancy speaks to the strength of most U.S. lodging markets," Corgel added.Pushing Profits"In a low revenue growth environment, it is a struggle to grow profits. This is especially true given the labor shortages and resulting upward pressure on compensation rates that our clients are reporting to us," said Woodworth. "If revenues increase at our forecast growth rate of 2.3 percent in 2018, then expense growth needs to be kept to something less than 3.7 percent in order for profits to rise. With the average hourly compensation rate for hospitality employees currently increasing at a pace of 4.1 percent, and labor costs comprising roughly half the costs of a hotel operation, you can see how the math becomes challenging."U.S. hoteliers have overcome this same obstacle in recent years. Profit margins for U.S. hotels have grown each year since 2009 and in 2017 are forecast to be at their highest levels since 1959. "Given their track record, we believe hotel operators will once again control costs sufficiently to allow for profit growth in 2018," Woodworth said.Life at the Top"The market and operating metrics we are seeing at the top of this business cycle are quite remarkable given the 90-plus years our firm has been tracking the U.S. lodging industry. I understand why people are disappointed in the slow pace of growth. However, the fact that we are achieving such strong levels of occupancy and profit margins, combined with the positive economic outlook, makes us very comfortable forecasting sustained growth for the foreseeable future," Woodworth concluded.To assist hotel owners and operators in the preparation of their 2018 budgets, the September 2017 editions of Hotel Horizons(r) for the U.S. lodging industry and 60 major markets can be purchased by visiting:https://pip.cbrehotels.comCBRE Hotels is a specialized advisory group within CBRE providing capital markets, consulting, investment sales, research and valuation services to companies in the hotel sector. CBRE Hotels is comprised of more than 385 dedicated hospitality professionals located in 60 offices across the globe.
CBRE Hotels - 15 August 2017
Based on the results of CBRE Hotels' Americas Research's 2017 edition of Trends(r) in the Hotel Industry, hotel management was able to contain the growth of labor costs in 2016. On average, the combined cost of the salaries, wages, other compensation and benefits paid to both employees and contracted/leased personnel at the hotels in the Trends(r) sample increased by just 2.8 percent during the year. Given in the 3.6 percent rise in compensation, the 2.8 percent growth in total labor costs implies that hotel managers implemented cost saving measures such as reducing the total hours worked at their properties, or improving employee productivity.Despite their best efforts, labor costs still accounted for 90 percent of the 1.6 percent rise in total operating expenses from 2015 to 2016. Further investigation reveals that it was the non-benefit component (payroll) that was the main driver of labor costs during the year. Payroll by itself accounted for 66.8 percent of the 1.6 percent total operating expense growth rate.The CBRE Trends(r) survey tracks five payroll sub-categories within each operating and undistributed department of a hotel. The sub-categories are consistent with the 11th edition of the Uniform System of Accounts for the Lodging Industry (USALI). They are:Salaries and Wages: Non-ManagementSalaries and Wage: ManagementService Charge DistributionContract, Leased, or Outsourced LaborBonuses and IncentivesA sixth sub-category is used to track other compensation data that is not identified, but this totals just 0.6 percent of payroll costs.Analyzing the salaries, wages, service charges, contact/leased labor and bonus payments made by U.S. hoteliers in 2016 provides some insight into how they were able to contain the increase in labor costs to just 2.8 percent. The following paragraphs summarize our analysis of the 2016 labor cost data from 4,028 properties in the Trends(r) sample that provided detailed labor cost information in conformity with the 11th edition of the USALI. For the purposes of this analysis, we are going to refer to the entirety of non-benefit compensation as "payroll."Payroll ComponentsThe salaries and wages paid to non-management personnel comprised 63.8 percent of payroll in 2016, followed by the salaries and wages paid to management (24.1%). The remaining 12.1 percent consisted of service charge distributions, payments to contract/leased labor, bonuses, and unassigned payroll.Non-management salaries and wages measured as a percent of payroll was greatest at limited-service hotels (69.5%), while management salary and wage payments were the most at extended-stay hotels (29.8%). Given the high incidence of mandatory gratuities, it is not surprising the service charge distributions made up the greatest percentage of payroll at convention (6.6%) and resort (6.2%) hotels. All-suite hotels allocated the greatest percent of their payroll dollars to contracted/leased employees (6.7%). Resort hotels, the property type that achieved the greatest gain in gross operating profits (GOP) in 2016, also spent the greatest percent of payroll on bonus payments (4.4%).From 2015 to 2016, the payroll component that saw the greatest percentage increase was service charge distributions (12.3%). In many jurisdictions, management has limited control of these mandatory payments that must be made to employees. The increase in payments made to contact/leased labor (5.4%) exceeded the growth in salaries and wages paid to management (3.0%) and non-management (2.8%). The slowdown in GOP growth most likely contributed to the 5.5% decline in bonus payments made in 2016, compared to 2015.Incidence of ComponentsThe use of contract/leased labor is frequently cited by operators as a tactic that can be implemented to overcome labor shortages, and potentially control the rising costs of compensation. In 2015, 42.7 percent of the properties in the study sample reported payments made to contract/leased employees in at least one of their departments. In 2016, this number increased to 45.2 percent. Resort hotels reported the highest incidence payments made to contract/leased employees (67.5%), while extended-stay hotels appear to use contract/leased employees the least (35.7%).Among the operating and undistributed departments, the greatest use of contract/leased employees in 2016 occurred in the food and beverage department (33.7% of hotels), followed by the rooms (33.3%) and administrative and general departments (17.5%). The greatest increase in the use of contract/leased employees was observed in the food and beverage and rooms departments. Conversely, it appears that the use of contract/leased labor declined in the other operated, information and telecommunications, and maintenance departments.Overall, the incidence of paying service charges grew from 17.7 percent of the sample in 2015 to 18.1 percent in 2016. Resort hotels are the property type most likely to pay a service charge to their employees (62.9%). As expected, the distribution of service charges was most frequently observed in the food and beverage department (39.7%), followed by the rooms department (4.6%).While the aggregate dollar amount of bonus payments made by the study sample declined by 5.5 percent from 2015 to 2016, the number of hotels that paid bonuses during the year increased. In 2015, the properties that paid bonuses comprised 89.2 percent of the total sample. In 2016, this metric increased to 89.7 percent.Employees in the sales and marketing (91.6% of hotels) and administrative and general (80.1%) departments were mostly likely to be paid a bonus. This is consistent with the typical compensation agreements for general managers, as well as sales personnel. Least likely to receive a bonus in 2016 were employees in the other operated and information and technology departments.It is interesting to note that the percent of hotels reporting bonus payments made to sales and marketing employees increased from 2015 to 2016, while the percent of hotels reporting bonus payments made to administrative and general personnel declined. In 2016, the number of hotels that enjoyed an increase in rooms revenue was greater than the number of properties the achieved a rise in GOP. Most sales and marketing incentives are based on revenue achievements, while general managers are more frequently rewarded for growth in profits.Payroll PressureGiven the political and economic landscape for the next few years, it appears there will be more pressure on the payroll component of labor costs versus the benefits piece. Accordingly, hoteliers need to pay attention to the increased labor reporting standards introduced in the 11th edition of the USALI. With greater transparency, owners and operators are better able to analyze the many components of labor costs, and act accordingly.1 Before deductions for management fees and non-operating income and expenses.
CBRE Hotels - 13 July 2017
An expense that has consistently grown at pace greater than the average of all other costs from 2010 through 2015 has been management fees. When growth of an expense item exceeds the overall average, owners typically become concerned. However, since management fees are designed to reward operators for positive performance, excessive growth in management fees is not necessarily unwelcome.Most management contracts include two components for compensation - a base fee and an incentive fee. The base fee is typically charged as a percentage of total revenue. Incentive fees, on the other hand, are paid to the management company once a certain profit threshold is reached. Incentive fees are designed to make management more conscious of the bottom line since owners achieve their returns and pay their debts from profits, not revenue.To gain a better understanding of this expense we analyzed the performance of hotels that reported paying a management fee for CBRE Hotels' Americas Research's annual Trends(r) in the Hotel Industry survey of property-level operating statements.The PercentagesFor the hotels that reported paying a management fee in 2015, the combined payments for the base and incentive fees averaged 3.5 percent of total revenue. This expense ratio was the greatest at extended-stay hotels (4.2%), and lowest at suite hotels with food and beverage (2.9%). Relative to the bottom-line, total management fees averaged 15.5% of profits.During the 2010 to 2015 recovery period, management fees typically grew at a faster annual pace than total revenue. In 2015, we observed a departure from that trend, when total revenue grew by 5.3 percent, but total management fees increased by just 5.1 percent. Through 2014, profits maintained their double-digit annual growth rates. Therefore, it can be assumed that the incentive fee component had a significant impact on the growth in management fees. However, when the pace of profit growth slowed down to 7.1 percent in 2015, this would have reduced the increase in the incentive fee component, thus muting the pace of the rise in overall management fee expense.Incentive FeesAs profits have increased, it is not surprising that the incentive fee requirements within management contracts have been met at a rising number of hotels. In 2015, 18.1 percent of the properties in our Trends(r) sample that reported paying a management fee also reported paying an incentive fee. This is up from a low of 5.8 percent in 2009, and 2014's ratio of 14.5 percent.With the number of properties paying a management fee growing from 2014 to 2015, but the pace of management fee payouts slowing down, one can assume the required profit margins, or profit level, needed to trigger the incentive fee are being achieved. However, the magnitude of the growth in profits has diminished, thus limiting the growth in the amount of the management fee payment.As expected, the properties that paid an incentive fee in 2015 achieved greater increases in both revenue and profits. During the year, hotels that reported paying an incentive fee saw their total revenue grow by 6.0 percent, while their profits increased 17.5 percent. At the properties that did not pay an incentive fee, total revenue increased by 4.7 percent, while profits grew by 16.3 percent.When analyzing incentive fee payment data over the two year period 2014 and 2015, we see that the intended "incentive" for management companies appears to be working. Properties that paid an incentive fee in 2015, but not in 2014, saw their profits increase by 30.3 percent in 2015. Conversely, for properties that paid an incentive fee in 2014 but not in 2015, profits increased by 20.4 percent in 2015.Given the relatively strong 20.4 percent increase in profits achieved at hotels that did not pay the incentive fee in 2015 after paying in 2014, it can be assumed that the incentive management fee requirements at these properties are very strict. Alternatively, the management contract for this group may have a revenue component to them. The revenues for the hotels that paid a management fee in 2014 but not 2015 suffered a 1.2 percent decline in total revenue during the period.Keeping Management MotivatedThe expected operating environment for U.S. hotels for the next few years is one of limited growth in both revenues and profits. Therefore, both owners and operators should brace for subdued growth in their respective paybacks: returns for owners and management fee income for the management companies.With revenue growth expected to be muted over the next few years, management companies will be even more incentivized to boost profit growth in order to earn more income for themselves. However, with profit margins currently well above long-run averages, and labor costs on the rise, growing profits will be a challenge. For owners that signed contracts with profit-based incentive clauses, these contract terms may prove to be of great value over the next few years.
CBRE Hotels - 2 June 2017
In this video Robert Mandelbaum , Director of Research Information Services for CBRE Hotels' Americas Research, discusses the highlights of the firms' 2017 Trends (r) in the Hotel Industry report. In 2016, U.S. hotel operators were able to extract a 3.7 percent gain in gross operating profits from a 2.4 percent increase in total operating revenue. This was accomplished by controlling the rise in operating expenses to just 1.6 percent.Click here if the video doesn't display
After Strong First Quarter, CBRE Forecasts Eighth Consecutive Year of Occupancy Growth for U.S. Hotels
CBRE Hotels - 23 May 2017
Atlanta -- The U.S. lodging industry started 2017 on a strong note. During the first quarter of 2017, hotel demand increased by 2.8 percent. The result was an occupancy of 61.1 percent, the highest first quarter occupancy rate reported by STR in the past 30 years."Since bottoming out in the fourth quarter of 2009, U.S. lodging demand now has grown for 29 consecutive quarters, and led to the record occupancy levels we currently are observing," said R. Mark Woodworth, senior managing director of CBRE Hotels' Americas Research (CBRE). "We realize that favorable prior year comparisons contributed to the strong growth in first quarter demand, and that pace cannot be sustained through the rest of 2017. However, given the positive economic outlook for the remainder of the year, we are projecting demand to outpace supply once again in 2017, thus resulting in an eighth successive year of occupancy growth for the U.S. lodging industry."According to the recently released June 2017 edition of Hotel Horizons(r), the supply of available rooms in the U.S. is projected to increase by 2.0 percent during 2017 following a 2016 gain of 1.6 percent per STR. Concurrently, lodging demand is forecast to rise by 2.1 percent. The net result is an increase in occupancy from 65.4 percent in 2016 to a third consecutive annual record occupancy level of 65.5 percent in 2017.Room to Grow"We are in a period of record annual and quarterly occupancy levels. Accordingly, we need to look at specific days of the week, seasons of the year, and markets with new supply to identify when and where new lodging demand can be accommodated," Woodworth stated. "These factors help to guide and explain our forecasts."From 1988 through 2016, the highest U.S. hotel occupancy levels on average have been achieved during the third quarter. This trend continues in 2017 when CBRE is forecasting an occupancy rate of 70.7 percent from July through September. "Because of realistic capacity constraints, third quarter demand growth will be limited to 1.3 percent. Hoteliers should not misinterpret this relatively low level of demand growth and distort our positive outlook for travel this summer," Woodworth said.While seasonal patterns have been consistent over the years, there has been a shift in lodging performance by day of the week. Per STR, occupancy and ADR levels have grown greater on the weekends versus weekdays since 2000. In fact, U.S. hoteliers are now able to charge higher room rates on Friday and Saturday nights compared to the other days of the week."In 2016, weekend occupancy averaged 71.3 percent, while weekday occupancy was 62.3 percent. This indicates that there is room to accommodate new corporate and group demand, and the outlook for the economic indicators that drive these market segments is quite positive for the next few years," Woodworth noted. DowntownCBRE Hotels' Americas Research not only prepares forecasts for the six U.S. chain-scales, but for six U.S. location categories, as well. When assessing CBRE's forecasts of performance by location category, the robust amount of development activity occurring in urban areas becomes evident."To paraphrase Billy Joel, it's an uptown world for hotel development," said John B. (Jack) Corgel, Ph.D., professor of real estate at the Cornell University School of Hotel Administration and senior advisor to CBRE Hotels' Americas Research. "Developers have been leaping over historical hurdles and getting deals done in the urban core of the nation's major markets." For 2017, CBRE is forecasting the nation's urban areas to experience a 3.4 percent increase in their lodging stock."In our lodging forecasts, it is important to note that we project accommodated demand. Urban developers have tapped into the preferences of today's travelers by building moderate-priced and select-service properties in these urban areas. Accordingly, our forecasts of 3.3 percent demand growth in urban markets almost matches the 3.4 percent increase in supply," said Corgel. For 2017, CBRE is projecting urban hotel occupancy to be 73.0 percent, which ties airport areas for the greatest occupancy level among the six location categories.Still Strong"After so many quarters and years of record breaking performance, plus all the new supply, labor and geo-political challenges, it is not surprising that industry participants are leery regarding the future of the U.S. lodging industry. However, when you take a hard look at the data and scrutinize issues like seasonality, locational variances and weekday/weekend demand patterns, you can see where there still is some upside potential," Woodworth concluded.To purchase copies of the June 2017 editions of Hotel Horizons(r) for the U.S. lodging industry and 60 major markets, please visit: https://pip.cbrehotels.comCBRE Hotels is a specialized advisory group within CBRE providing capital markets, consulting, investment sales, research and valuation services to companies in the hotel sector. CBRE Hotels is comprised of more than 385 dedicated hospitality professionals located in 60 offices across the globe.
CBRE Hotels - 19 May 2017
Per the Uniform System of Accounts for the Lodging Industry (USALI), payments to intermediaries are classified as commissions. In recognition of the rise in intermediaries, the 11th edition of the USALI stipulates two commission expense categories within the rooms department; one for commissions paid for the booking of transient business, and one for commissions paid for the booking of group business. The commissions paid within the rooms department cover sales made for not only guest room rentals, but for any other ancillary revenue associated with those guests. If, however, an intermediary secures business solely for the benefit of the food and beverage department (i.e. local catering business without guest room rentals), then the commission payment is recorded within the food and beverage department.Not included in the rooms department commission expense category are payments made to agents for the rental of commercial space within a hotel. These commission payments are recorded as professional fees within the administrative and general department.In recognition of the rise in intermediaries, CBRE Hotels' Americas Research began to track commission payments within the rooms department starting in 2015. Our firm's Trends(r) in the Hotel Industry database captures the combined commissions paid for both transient and group business. The following paragraphs summarize the magnitude of rooms department commission payments in 2015 for U.S. hotels.A Significant ExpenseOn average, commission payments are the second largest expense within the rooms department, behind labor costs. This ranking does vary by property type. At limited-service and extended-stay hotels, the cost of providing complimentary meals exceeds commission payments. At resort properties, more money is spent on the laundry, linen, and supplies provided in the guest rooms.Measured as a percent of revenue, commission payments averaged 3.0 percent of total rooms revenue in 2015. Unfortunately the metric we do not have access to is the percentage of rooms revenue subject to a commission payment. Therefore, we are unable to calculate the average commission rate charged by travel agents and other intermediaries.Commissions calculated as a percent of rooms revenue were greatest at convention hotels (4.5%). This confirms the increased use of housing companies and other agencies by meeting planners. Historically, hotels would deal directly with the meeting planner, and for the most part not have to pay a commission.Commissions paid as a percent of rooms revenue were lowest at extended-stay properties (2.1%). In this segment, it appears that hotel sales managers are still able to deal directly with the corporate travel executives booking the long-term stays. Given recent trends in the convention segment, extended-stay hotel owners and operators should monitor intermediary activity in their segment going forward. The Dollar AmountBecause of the differences in room rates, the dollar value of the commission paid by a hotel is influenced by the average daily rate (ADR). Therefore, it is not surprising that commission payments measured on a dollar per occupied room (POR) basis tend to follow the ADRs achieved by the various property types and chain-scales.In 2015, convention hotels recorded the highest commission POR payments among all the property types ($8.14), followed by resort hotels ($6.22). When analyzing commissions POR by chain-scale, luxury properties paid the most ($10.25). Not only do luxury hotels and resorts achieve high ADRs, their guests are most likely to use the services of a travel agent.At the low end of commission POR payments are extended-stay ($2.13) and limited-service ($3.35) properties. These hotels achieve relatively low ADRs, and their guests may not be using intermediaries as much as other travelers.Looking ForwardIn an effort to measure the impact of intermediaries on the financial performance of hotels, the American Hotel and Lodging Association's Consumer Innovation Forum is working with several hotel franchising, ownership and management companies to establish metrics that measure the "total acquisition cost" of hotel revenue. Commissions are just one component of this equation. Other components include reservation fees, marketing costs, and other expense incurred to secure revenue.At CBRE, going forward we will be able to monitor annual changes in the commissions paid to intermediaries. This will shed some light on the ability of hotels to control this cost by negotiating more favorable contracts with the intermediaries, or increasing the frequency of guests booking directly with the hotel.tO purchase a copy of Trends(r) in the Hotel Industry, please visit https://pip.cbrehotels.com, or call (855) 223-1200. This article was published in the April 2017 edition of Lodging.
CBRE Hotels - 3 May 2017
They asked, "Should we pay such high prices now, given that the boom may turn into a bust?" As a college professor, I offered the standard response: "It depends, what do you think?" As a hotel market forecaster, I promised to think and write about hotel property market bubbles with regard to their questions, and likely those of others, about current pricing in local markets.Boom and bust experiences over the past few decades--with tech stock prices and housing prices, for example--have generated an avalanche of books and articles about short-term, extraordinary asset pricing volatility. A summary of these writings appears as follows:The grand debate centers on whether asset price bubbles either emerge from rational responses to fundamental stimulants by market participants or from irrational behaviors, such as sentiment and over-optimism, not directly related to fundamentals (see surveys by Glasser and Nathanson, 2014; and Mayer, 2011).The other grand debate involves measurement. The time-honored definition of a bubble is when asset prices markedly depart from fundamental values. The analysis machinery becomes clogged when trying to deal with the term "markedly depart" and further challenged with attempting to compute "fundamental values." Hence, no firm conclusions have been reached about how to detect bubbles ex ante. Ex post detection is far easier, in some cases like a slam dunk into a five-foot-high basket!Credit excesses have been found to be instrumental in the creation of many, but not all, asset market bubble cases (see Levitan and Wachter, 2013). Non-credit causes come in many different flavors. Examples of housing market bubbles from non-credit related causes include supply-side constraints and demand factors such as income instability, and social interaction issues (see Jorda, Schularick and Taylor, 2016).All of the research on real estate bubbles focuses on housing markets except Levitan and Wachter (2013), who laid the blame on mortgage credit excesses in pricing of commercial real estate during the last cyclical peak. To my knowledge, no publications have addressed hotel market bubbles.Positive economics spinNobel Laureate Milton Friedman championed the cause of positive economics in the context of model building by postulating that a model should be evaluated based on how well it predicts rather than on the elegance of its underlying assumptions.An analog for market bubble investigation is that the focus ought to be on timely identification and warning signals instead of whether they originate from rational or irrational behaviors as in much of the academic work on the subject. As a practical matter, it is more important to know when a bubble has formed than how it was formed. Also because of the macroeconomic policy implications, studies predominately examine national market booms and busts. Localized bubbles are not often referenced, but to participants in markets for fixed-location assets such as hotel properties, extraordinary pricing at the city level has important return implications (see Bourassa, Hoesli and Oikarinen, 2016).Bubble measurementWithout the benefit of proof-positive models of fundamental values, the operative metrics become simple ratios of prices divided by incomes. Prices should not markedly depart from incomes in either a long-run average or some relative context. Thus, abnormally large, period-specific ratios signal the possibility of bubble formation.The relevant metric in the stock market is some variation of a price-earnings ratio. For housing markets, the house price-to-household-income ratio is most often applied and found to be most useful (Bourassa, Hoesli and Oikarinen, 2016). The equivalent metric in commercial real estate market cases including hotels logically would be the reciprocal of the capitalization rate (1/R) - the net operating income multiple.Hotel market bubble report cardCBRE Hotels' Americas Research manages a repository of data from in-house collections, STR and RERC that allow for the computation of values for a typical hotel in the U.S. and each of the 60 city markets included in the firm's Hotel Horizons forecasting platform. The values come from income capitalization and can be calculated for the most recent quarter, any quarter in the past several decades, and future periods using NOI and capitalization rate forecasts. (STR is the parent company of Hotel News Now.)Exhibit 1 presents the results of an analysis whereby the value of a typical hotel in each market during Q4 2016 is compared with its corresponding value at the previous market peak--in other words, the quarter of previous peaks differ somewhat by market. Unique indexes are produced for each market. The height of the bars shows how much in percentages that the value indexes changed in real terms during the current recovery and expansion period.Here is the complication: Values are not prices! A price is an observable fact and a value is an estimate from a model designed to predict what a price should be. The two components of values (V) presented in Exhibit 1 are NOI and capitalization rate, where V = 1/R (NOI). If the values mostly come from NOI expansion, then they have a decidedly fundamental origin. If multiple expansion is the main determinant of value, then the pricing (normal or extraordinary) of incomes takes center stage.To this point, the bars in Exhibit 1 are split into two parts such that the darker segment represents multiple expansion and the lighter segment shows the NOI growth contribution. The height of the bars does not portend a hotel price bubble, but instead shows which markets are prone to the largest busts should local conditions suddenly change.(CLICK TO ENLARGE.) Note: For each year in each city, the NOI is estimated from samples of actual property performance in the CBRE Hotels' Americas Research Trends data base is divided by the capitalization rate for each year in each city using RERC and RCA data to obtain value estimates. Previous value peaks were determined and percentage changes from these city-specific peaks relative to 2016 values are computed. Capitalization rate multiples and NOI growth rates are determined by simple proportional allocations.Hotel property values in the U.S. during Q4 2016 stood at 14.6% above the previous peak, yet several city markets shown on the right side of Exhibit 1 did not achieve levels that exceed previous peaks. The threats of bubble collapses and their consequences in most of the top 60 markets do not appear imminent from this evidence.However, eight markets--San Jose/Santa Cruz, California; San Francisco; Nashville, Tennessee; Oakland, California; Dayton, Ohio; Oahu, Hawaii; Portland, Oregon; and Los Angeles--experienced hotel value increases 40% greater than their previous peaks. In another half-dozen or so markets, value increases approached 30%. Markets in the western U.S. dominate the most quickly growing group. Notwithstanding, the contribution from NOI growth far outweighs the contribution from multiple expansion in all of the markets in which value growth exceeds 25%. These data points indicate that the largest local value increases have a fundamental reason to exist!Exhibit 1 presents what happened to property values in U.S. hotel markets in the past. Exhibit 2 shows what CBRE Hotels' predicts will happen to the components that generate value changes, although the actual value changes across the cities are not presented. This scatterplot comes from intersecting the forecast NOI multiple from 2017 through 2020 on the x-axis and the real NOI growth rate for the same future period on the y-axis. If hotel property values are expected to increase more because of real NOI growth, then investors may find more comfort than if multiple expansion is expected to be the engine of value appreciation.The forecast for the U.S., indicated as 13 on the chart, is comprised of approximately 3% multiple expansion and negligible real NOI growth.The markets positioned the farthest out to the right shown in the boxed area are those expected to realize value growth most dependent on multiple expansion. Dayton (1) is forecast to experience value increases based on strong positive changes in its multiples, but also value growth comes from relatively high growth rates in NOI. For Oakland (2), Charleston, South Carolina (7), and Norfolk-Virginia Beach (6), future multiple expansion is among the highest of the major hotel markets in the U.S. and is expected to dominate in contributing to value increases. Hot city markets in California and locations such as Nashville and Oahu that demonstrated large percentage increases in hotel values from the historical pricing perspective are not represented (except Oakland) in the boxed area of Exhibit 2.(CLICK TO ENLARGE.) Note: For each future year 2017-2020 in each city, forecasts of NOI are developed using historical data from actual properties in the CBRE Hotels' Americas Research Trends database and a set of econometric equations created to predict other revenues and various expenses from room revenue. Room revenue forecasts come from CBRE Hotels' Hotel Horizons forecasting platform. To obtain value estimates, these future NOIs are divided by forecasts of capitalization rates for each year in each city using RERC and RCA data and an econometric model of capitalization rates specified with Gordon Growth model components. Future values for model components come from forecasts of capital market rates produced by CBRE's Econometric Advisors and the foregoing NOI forecasting activity (NOI growth rates). Future values are proportionally allocated to real NOI growth and capitalization rate multiple expansion, then plotted.ConclusionReaders always draw their own conclusions from results such as these.My take is the national and city hotel markets by the end of 2016 did not begin floating from an infusion of non-fundamental helium. During the next four years, a handful of markets are forecast to have the hotel property value growth characteristics to justify being on the bubble watch list.ReferencesBourassa, S. C., M. Hoesli, and E. Oikarinen, (2016). Measuring House Price Bubbles. Swiss Finance Institute, Research Paper Series No. 16-01.Glasser, E. L. and C. Nathanson (2014). Housing Bubbles. NBRE Working Paper No. w20426.Jorda, O. M. Schularick, and A. M. Taylor (2016). Bubbles, Credit, and Their Consequences. FRBSF Economic Letters 2016-27 (September).Levitan, A. J. and S. M. Wachter (2013). The Commercial Real Estate Bubble. Harvard Business Law Review 3, 83-118.Mayer, C. J. (2011). Housing Bubbles: A Survey. Annual Review of Economics 3, 559-577.AcknowledgementBram Gallagher, Ph. D., Economist with CBRE Hotels' Americas Research, provided invaluable assistance in the preparation of this report.Jack Corgel, Ph. D., is Managing Director of CBRE Hotels' Americas Research and Professor of Real Estate at the Cornell University School of Hotel Administration.The assertions expressed in this article do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Please feel free to comment or contact an editor with any questions or concerns.
CBRE Hotels - 25 April 2017
Atlanta -- U.S. hoteliers enjoyed a seventh consecutive year of increasing profits in 2016 despite a slowdown in the rate of revenue growth. According to the recently released 2017 edition of Trends(r) in the Hotel Industry by CBRE Hotels' Americas Research, total operating revenue, driven by a 0.2 percent rise in occupancy and a 2.5 percent growth in average daily rate (ADR), increased by 2.4 percent in 2016 for the average hotel in its survey sample. However, by limiting the growth in operating expenses to just 1.6 percent, managers at the Trends(r) properties were able to extract a 3.7 percent increase in gross operating profits (GOP) for the year."The competitive market conditions faced by U.S. hotels in 2016 have been well documented. With the results of the 2017 Trends(r) report, we now have an understanding of the impact that the modest revenue gains had on the bottom-line," said R. Mark Woodworth, senior managing director of CBRE Hotels' Americas Research. "Clearly, U.S. hotel operators saw the threat of stagnant or declining occupancy and slow ADR growth and reacted by controlling expenses. The 3.7 percent increase in profits is the lowest we have observed since the Great Recession, but was a commendable accomplishment given the upward pressures on labor and distribution costs."Trends(r) in the Hotel Industry is the firm's annual survey of operating statements from thousands of hotels across the nation. The 2016 operating data collected for the 2017 survey was compiled in accordance with the 11th edition of the Uniform System of Accounts for the Lodging Industry. Controls and CutsThe nominal 1.6 percent increase in operating expenses during 2016 was achieved by a combination of controlling variable expenses and cutting costs that are more fixed in nature. Understanding that the typical hotel in the sample experienced an increase in occupancy, it was noteworthy that operated departmental expenses (with a high degree of variable costs) only grew by 1.7 percent during the year. Concurrently, undistributed expenses (with a high degree of fixed costs) increased by just 1.3 percent."With hourly compensation for hospitality industry employees increasing by more than 4.0 percent, it was somewhat surprising that total labor costs grew by just 2.8 percent for the year. This implies that managers controlled staffing levels and/or increased productivity," said John B. (Jack) Corgel, Ph.D., professor of real estate at the Cornell University School of Hotel Administration and senior advisor to CBRE Hotels' Americas Research. "In spite of the noble efforts, for a second year in a row, it was the salary and wages component of labor costs that drove the increase in total labor costs, not employee benefits."Labor costs comprise roughly half of the operating expenses. The other half of the operating expenses consists of a variety of fees, commissions and costs for goods and services. In total, the growth of these other operating expenses increased by just 0.3 percent in 2016."Hotel operators benefited from low inflation, as well as a reduction in the costs for items such as food and utilities. However, as revenues continue to rise, so do the costs for related expenses like credit card commissions, management and franchise fees," Woodworth noted. "The one expense item that really stood out was the 6.8 percent increase in commission payments made to travel agents, OTAs and other intermediaries. This is consistent with what we are hearing from our clients."Location MattersThe growth in GOP during 2016 was 3.7 percent for the entire Trends(r) sample. However, when analyzing the data by regions across the country, CBRE Hotels' Americas Research observed some dramatic differences. GOP growth was strongest for hotels in the Mountain/Pacific (7.0 percent) and South Atlantic (6.1 percent) regions. Conversely, properties in the South Central region suffered a GOP decline of 0.4 percent."We constantly advise our clients to pay attention to their local markets. In 2016, there was great diversity in economic performance across the country. In Texas, there is a depressed energy industry, while technology continues to drive the economy in California. When looking at the 2017Trends(r) survey results by geography, the relationship between local economics and lodging performance becomes evident," said Corgel.Diversity in performance also was observed by property type. The resort hotels in the Trends(r) sample enjoyed the greatest GOP increase (6.0 percent), while limited-service profit growth was restricted to just 1.4 percent. "For the resort properties, it was mainly a revenue story. Compared to others in the sample, resort operators achieved the greatest gains in occupancy, ADR and other operated department revenue during 2016. However, limited-service managers, facing a higher degree of fixed and uncontrollable costs, struggled to curb increases in their expenses," Woodworth said.Future Focus on ExpensesIn the March 2017 edition of Hotel Horizons(r), CBRE Hotels' Americas Research is forecasting RevPAR growth rates ranging from 1.7 to 3.0 percent from 2017 through 2021. At these modest levels, management's ability to control costs will enable profit growth."During the next few years, owners and operators should spend just as much time thinking about expenses as they do RevPAR. Effectively managing those two metrics will dictate the profitability of their operations. Ultimately, it is bottom-line profits that influence values, stimulate transaction activity, pay the debt and provide returns for owners and investors," Woodworth concluded.To purchase a copy of the 2017 edition of Trends(r) in the Hotel Industry report, please visit https://pip.cbrehotels.comCBRE Hotels is a specialized advisory group within CBRE providing capital markets, consulting, investment sales, research and valuation services to companies in the hotel sector. CBRE Hotels is comprised of more than 385 dedicated hospitality professionals located in 60 offices across the globe.
CBRE Hotels - 19 April 2017
The definition of "select-service" within the lodging industry may vary from person to person, but there is no doubt that properties in this segment are the most popular among developers. Using the broadest definition of select-service, this category comprised an estimated 89 percent of the total hotel projects under construction according to the December 2016 U.S. Hotel Pipeline report from STR.As the name implies, select-service properties offer limited degrees of services and amenities compared to full-service hotels. While most select-service properties do not contain extensive meeting, recreational and retail facilities, there is diversity when it comes to the offering of food and beverage (F&B) service for sale. Within the select-service category, there are brands that offer retail food and beverage service, and others that do not.To gain a better understanding of the performance of select-service hotels, we analyzed a group of 233 properties that provided year-end operating statements for our firm's Trends(r) in the Hotel Industry survey each year from 2010 through 2015. One-third of the properties in the sample offer some degree of retail food and beverage service (e.g. Hilton Garden Inn, Courtyard by Marriott, Hyatt Place), while the remainder of the sample is true limited-service hotels (e.g. Hampton Inn, Fairfield Inn, Comfort Inn). For the purposes of this analysis, we limited our analysis to properties that operate in the upper-midscale and upscale chain-scale segments, and are affiliated with brands that are generally considered to be "select-service". Excluded from the analysis were extended-stay hotels and full-service suite hotels, as well as traditional full-service hotels, convention hotels and resorts.Operating EfficienciesFor hoteliers, a large part of the reason for the popularity of owning and operating select-service properties is the relative ease of operations. Without the extensive array of facilities, services, and amenities, select-service hotels have fewer departments to manage, and are more efficient to operate. In 2015, the properties in our select-service sample achieved a gross operating profit (GOP) margin of 44.2 percent of total operating revenue. This compares to a 37.5 percent average GOP margin for all properties in our Trends(r) survey. GOP is defined as income before deductions for management fees and non-operating income and expenses.Like all property types, labor is the largest expense item for operators to manage. However, labors costs are minimized at select-service hotels. This contributes to the efficiency and profitability of this segment. In 2015, the combined costs of salaries, wages, and benefits equaled 22.6 percent of total operating revenue, or $8,109 per available room (PAR). This compares to 31.6 percent, and $22,224 PAR for the overall Trends(r) sample.Select F&B For ProfitsIt is generally accepted that limited-service hotels (no retail food and beverage outlets) are more profitable than full-services hotels. Within the overall lodging industry, this is true. According to the 2016 Trends(r) in the Hotel Industry report, limited-service hotels in the U.S. achieved a 44.6 percent GOP margin in 2015, compared to 36.9 percent at full-service properties. However, within the select-service segment, we have seen a recent shift in conventional wisdom.In 2010, the select-service properties in our study sample that do not offer retail food and beverage service achieved a GOP margin of 42.9 percent. This was greater than the 41.9 percent GOP margin set by the select-service hotels with restaurants and lounges. Five years later, this trend reversed. In 2015, it was the select-service sample with food and beverage that achieved the greater GOP margin (45.6%) compared to the select-service hotels without food and beverage (42.9%). From 2010 to 2015, gross operating profits PAR at the select-service properties with F&B increased at a compound average annual rate (CAGR) of 7.5 percent, compared to 5.5 percent for the select-service hotels without F&B.When analyzing the data, greater efficiencies in the food beverage department of select-service hotels contributed to the enhanced profitability. From 2010 through 2015, food and beverage department profits at select-service hotels have increased at a healthy CAGR of 8.7 percent.Changes in the F&B offerings at select-service hotels appear to have contributed to the increase in department profitability. Most select-service hotels have limited the hours and extent of food and beverage service at their outlets. Select-service hotels have pioneered the grab-and-go, and lobby coffee-house styles of food and beverage service. While this has resulted in a slowdown in the pace of F&B revenue growth, is has also limited the increases in the cost of F&B operations. From 2010 through 2015, select-service F&B department profit margins have increased from 17.8 percent to 20.4 percent.Another factor contributing to the enhanced profitability of the select-service with food and beverage sample has been the ability to control labor costs. Labor costs measured on a per-occupied-room (POR) basis at the select-service with F&B sample increased at a CAGR of 2.6 percent from 2010 to 2015. This compares to 3.5 percent for the select-service without F&B sample. The enhanced efficiency in the use of labor at the select-service hotels that offer food and beverage can be partially explained by the service changes made to the restaurants and lounges.Development DecisionWhile select-service hotels are very efficient and profitable operations, the decision to develop a property requires additional information. In 2015 the gross operating profit PAR for our select-service sample was 40 percent less than the GOP for our overall Trends(r) survey sample because of lower average daily rates and lack of other revenue sources. After considering the cost of capital and desired level of return, developers need to determine if the 40 percent deficiency in profits can still cover the assumed lower cost of development. Then, once the decision has been made to enter the select-service segment, owners need to choose between select-service properties with, or without, food and beverage.
CBRE Hotels - 4 April 2017
CBRE's Mark Woodworth and Jack Corgel discuss our latest lodging industry forecasts. CBRE Hotels is a specialized advisory group within CBRE providing brokerage, valuation, consulting, research and capital markets services to companies in the hotel sector. CBRE Hotels is comprised of over 375 dedicated hospitality professionals located in 60 offices across the globe.
CBRE Hotels - 22 March 2017
Atlanta -- U.S. hotels enjoyed another year of life at the performance peak in 2016 and are forecast to continue to live the high life in 2017. According to the recently released March 2017 Hotel Horizons(r) forecast report from CBRE Hotels' Americas Research, rooms revenue (RevPAR) grew for a seventh consecutive year in 2016, and the prospects for RevPAR growth are projected to be solid for the foreseeable future. What is surprising, however, is the impetus for sustained revenue expansion comes from some unexpected sources."The hotel business is cyclical. The upper-priced properties led the U.S. lodging industry out of the recession and have continued to achieve occupancy levels in excess of 70 percent. However, recently it has been the lower-priced properties that have shown the greatest gains in RevPAR," said R. Mark Woodworth, senior managing director of CBRE Hotels' Americas Research. "In the past five years, RevPAR for U.S. hotels increased at compound annual rate (CAGR) of 5.7 percent. The only chain-scale close to achieving this pace of revenue growth was the economy segment whose average annual RevPAR increase was 5.6 percent during this period. That means independent and economy chain-affiliated properties have been the primary drivers of the industry's recent strong performance."Looking forward, this trend is expected to continue. From 2017 through 2021, CBRE Hotels' Americas Research is projecting that the U.S. lodging industry will achieve a RevPAR compound annual growth rate (CAGR) of 2.2 percent. During this period, the RevPAR CAGR is projected to be 2.8 percent for the economy chain-scale. "We recognize that economy properties still achieve the lowest levels of occupancy and ADR, but investors looking for a 'growth story' shouldn't overlook this segment of the industry while some of the other chain-scale categories begin to stall out," said Woodworth.SMALL M ARKETSIn addition to lower-priced hotels, small markets also are enjoying significant RevPAR increases. In 2016, RevPAR growth for the 60 markets covered by CBRE's Hotel Horizons(r) forecast reports averaged 2.8 percent. This is below the aggregate 3.6 percent RevPAR growth achieved by hotels located outside of the 60 markets. The gap in performance is expected to widen in 2017 when Horizons(r) universe is forecast to see RevPAR increase by 2.0 percent. Concurrently, the remaining markets are projected to achieve a 3.8 percent increase in RevPAR during the year."So much attention is being paid to the major urban and gateway markets," said John B. (Jack) Corgel, Ph.D., professor of real estate at the Cornell University School of Hotel Administration and senior advisor to CBRE Hotels' Americas Research. "Over three quarters of the new hotel rooms forecast by CBRE to enter the U.S. lodging industry in 2017 will be located in the 60 major markets we track, even though these markets represent just 48 percent of the overall national hotel inventory. The increased competition in major markets certainly helps explain why these markets have recently lagged in RevPAR growth and are expected to continue to suffer in the near term."NOT TOP OF MIND"When you read the hotel trade journals there is a growing sense of skepticism among industry analysts and attendees at the major industry conferences. I attribute this to the large sums of public company money that have been invested in upper-priced properties located in major markets," Corgel noted. "Economy and independent hotels, as well as the secondary markets, are left off the agenda, so they are they are not top-of-mind.""The fact is that U.S. hotels are achieving all-time record occupancy levels and near record profit margins. A lot of money is being made from hotel operations these days. While the prospects for growth in revenues and profits are moderating, opportunities still exist. Investors just need to investigate some of the historically overlooked chain-scale and geographical segments to find better returns," Woodworth concluded.Note: * Before deductions for management fees and non-operating inco me and expensesSource: CBRE Hotels' Americas Research, March 2017 - May 2017 Hotel Horizons(r) ForecastSource: CBRE Hotels' Americas Research, March 2017 - May 2017 Hotel Horizons(r) ForecastSource: CBRE Hotels' Americas Research, Trends(r) in the Hotel Industry Source: CBR E Hotels' Americas Research, STR To purchase copies of the March 2017 editions of Hotel Horizons(r) for the U.S. lodging industry and 60 major markets, please visit: https://pip.cbrehotels.com.
CBRE Hotels - 13 March 2017
Changes in rooms revenue per available room (RevPAR), and RevPAR penetration receive a lot of attention from hotel managers. This is because the monies hotels receive from renting guest rooms is the major source of revenue across all property types in the U.S. According to the 2016 edition of Trends in the Hotel Industry, rooms revenue averaged 68.1 percent of total operating revenue in 2015. This metric exceeds 97 percent at limited-service and extended-stay hotels. Alternatively, rooms revenue comprises only 51.8 percent of total revenue at resorts.Even more impressive than the contribution of rooms revenue to total revenue, is the influence of the rooms department on hotel profitability. On average, the profits generated by the rooms department made up 81.7 percent of total department profits in 2015. This ratio ranged from 68.2 percent at resorts to 99.1 percent at limited-service properties. In short, as the rooms department goes, so goes the hotel.To gain a better understanding of the profitability of hotel rooms departments, we examined the performance 1,809 properties that submitted data to our Trends survey each year from 2007 to 2015. This allows us to analyze changes in rooms department expenses and profits through the latest industry cycle.Labor IntensivePer the Uniform System of Accounts for the Lodging Industry, representative expenses assigned directly to the rooms department include items such as labor costs, the cost to launder linens, guest room supplies, reservation system expenses, travel agent commissions, and complimentary food and beverage.By far the greatest expense within the department is labor. Personnel within the rooms department consist of room attendants, laundry workers, front desk clerks, bellmen, reservationists, and concierges. In 2015, the combined cost of salaries, wages, and benefits for these positions equaled 61.3 percent of total rooms department expenses.As expected, convention, resort, and full-service hotels have the highest percentage of labor costs measured against department revenue. These properties offer the most extensive levels of services and amenities, and therefore have the greatest staffing levels. Conversely, extended-stay hotels achieve the lowest labor to revenue cost ratio because they only service guest rooms periodically and have lower volumes of check-ins and check-outs.Despite the extensive array of expenses and high dependency on labor, rooms departments are very profitable. On average, the properties in our study sample averaged a department profit margin of 74.5 percent in 2015. This ranged from 71.3 percent at convention hotels to 81.3 percent at the extended-stay properties.The Other ExpensesRevPAR for the study sample increased at a compound annual growth rate (CAGR) of 1.6 percent from 2007 to 2015. Unfortunately, total department expenses increased by a CAGR of 2.5 percent during the same period. Therefore, department profits grew at a CAGR of just 1.3 percent.While labor is the largest expense within the rooms department, over the past eight years it has been the other rooms department expenses that have subdued the ability of management to increase profits. During the past eight years labor costs measured on a per available room basis increased at a CAGR of 2.1 percent, but the combined cost of all other department expenses grew by 3.0 percent. This same pattern holds true when measuring these same items on a dollar per occupied room basis.Labor costs within the rooms department tend to be more variable compared to other departments. Management can vary the schedules of housekeeping, laundry, front desk and bell staff personnel with fluctuations in occupancy. Going forward, however, controlling labor costs will be more challenging as occupancy levels remain near all-time record levels, and salary and wage rates increase.The rise in the other department expenses may be partially explained by increases in brand standards. Over the years, we have heard from our clients that the hotel brands have raised their standards for items like bedding and linens, in-room gratis coffee and water, and complimentary breakfasts. Further, the commissions paid to third parties have increased given the proliferation of online travel agencies.With expenses growing at a greater pace than revenues, rooms department profit margins for the subject sample in 2015 (74.5%) were below 2007 levels (76.3%). The only property type able to improve their profit margin during this period was all-suite hotels.Challenges in the FutureCBRE Hotels' Americas Research's December 2016 edition of Hotel Horizons is forecasting RevPAR gains of less than three percent from 2017 through 2019. Facing modest growth in rooms revenue, hotel managers will be challenged to maintain growth in both rooms department profit levels, and profit margins. Given the link to overall hotel profitability, hotel owners and operators need to pay attention to rooms department expenses, not just RevPAR.
Majority of Real Estate Investors in The Americas Expected to be Net Buyers in 2017, CBRE Survey Finds
CBRE Hotels - 10 March 2017
Los Angeles Retains Position as Number One TargetIndustrial is Most Attractive Property Type for InvestmentMore than Half of Institutional Investors Plan to Deploy $1 Billion or More in 2017The prospect of increased U.S. economic growth combined with less regulation, means that investor sentiment for commercial real estate investment is marginally more positive than last year, despite the potential for rising interest rates, according to the CBRE Americas Investor Intentions Survey 2017.The 2017 survey results reveal that investors will remain actively engaged in real estate investment this year, with the majority (67%) intending to be net buyers (more acquisitions than dispositions). The percentage of net buyers has increased since 2015 (60%) and 2016 (65%). The vast majority of these investors (83%) intend to maintain or increase their purchasing activity in 2017.Slow global economic growth that could undermine occupier demand (22%) was identified as the greatest risk factor for real estate investors, just ahead of rising interest rates (21%). Concern about property being overpriced and "a bubble waiting to burst" (16%) is a distant third among the list of potential threats. Investors are relatively unconcerned about the potential effects of government policy measures."While investors expect to largely maintain last year's investment activity levels, they also intend to retreat on the risk curve, becoming more conservative in strategy and risk appetite. This is counterbalanced by the search for yield," said Brian McAuliffe, president, Institutional Properties, Capital Markets, CBRE."Echoing concerns that arose at the beginning of 2015, investors perceive the global economy and rising interest rates as the greatest threats to property markets; they also continue to have concerns about asset pricing. If the anticipated level of inflow into commercial real estate materializes, this should to some extent counteract any pricing pressure resulting from a rise in interest rates," Mr. McAuliffe added.Investors continue to be strongly interested in U.S. gateway markets. Los Angeles maintained its position as the most preferred metro for investment in 2017, ahead of Dallas/Fort Worth and New York City. Washington, D.C. moved up the ranks from eighth to the fourth most preferred metro for investment in 2017. Atlanta, Seattle and Houston are also viewed as attractive markets for investment. The majority of investors are focused on real estate in the Americas and do not intend to make asset purchases in other regions of the world.Half of the investors surveyed (51%) are primarily searching for yield, relative to both government bonds (30%) and other asset classes (21%). This trend is even more pronounced among institutional investors, with 53% searching for yield.Among the five different asset types by strategy--prime or core, good secondary, value-add, opportunistic, and distressed--value-add remains the preferred strategy (39%) and at similar levels to 2016. Investors' appetite for good secondary (non-core) assets increased significantly in 2017, ranking second. This displaced core, which was ranked second-highest in 2016. The relatively diminished appetite for core product is attributed to a combination of low cap rates (which are not expected to get lower), weakening property fundamentals, and the search for higher yielding assets.Reversing 2016 trends, the industrial sector (38%) is viewed as the most attractive asset class for investment in 2017, replacing multifamily (28%), with office (18%) in third position. Reflecting the headwinds in the retail sector from e-commerce competition, only 8% of investors cited retail as an attractive option in 2017, significantly lower than the 17% in 2016. Among "alternatives", retirement housing was the only sector with an increase in interest, albeit small at 2%. Conversely, there were sharp drops in interest in real estate debt product and the leisure/entertainment sector."U.S. industrial has emerged as a preferred asset class for institutional investors, both domestic and foreign. Global investors are targeting the sector for acquisitions and development, especially opportunities with scale. Investors realize that the fundamentals are robust with record-setting metrics for net absorption and rental rate growth, while new economic drivers such as e-commerce and the 'Last Mile' are creating even more growth in the sector," said Jack Fraker, vice chairman and managing director, Industrial Properties, Capital Markets, CBRE.Institutional investors (comprising sovereign wealth funds, insurance and pension funds) intend to be strong net buyers in 2017. More than half (54%) of all institutions plan to deploy more than $1 billion of capital in the Americas this year. Marking a departure from the wider pool of survey respondents, institutions are still primarily focused on core assets, closely followed by value-add. CBRE Research estimates that SWFs in particular are under-allocated to commercial real estate (with top 20 SWF's allocating an estimated 3% of total assets to real estate), which accounts for expected higher levels of capital deployment.To download a copy of CBRE's Americas Investor Intentions Survey 2017 or to speak with a CBRE expert, please contact Aaron Richardson (212.984.7126 or email@example.com) or Ayana Miller (212.984.6506 or firstname.lastname@example.org).Survey methodology and composition of respondentsThe 22-question Americas Investor Intentions Survey 2017 was conducted among CBRE clients between January 6 and February 6, 2017. The Americas survey is part of the larger global survey, for which nearly 2,000 responses were received.Nearly 1,000 survey respondents indicated that the Americas is the global region which they are most responsible for in their current position. This report covers the responses of these investors.The Americas survey respondents represent a wide cross-section of real estate companies and investor types. The largest category is fund or asset managers at 28%, followed by private property companies at 14% of the total. Private equity firms, developers and REITs were also well-represented by the survey.The survey respondents invest in a wide variety of investment modes. Most investors use multiple types of investment vehicles (and chose multiple types in the survey).
CBRE Hotels - 28 February 2017
U.S. hotels enjoyed another year of life at the performance peak in 2016 and are forecast to continue to live the high life in 2017. According to the recently released March 2017 Hotel Horizons(r)forecast report from CBRE Hotels' Americas Research, rooms revenue (RevPAR) grew for a seventh consecutive year in 2016, and the prospects for RevPAR growth are projected to be solid for the foreseeable future. What is surprising, however, is the impetus for sustained revenue expansion comes from some unexpected sources."The hotel business is cyclical. The upper-priced properties led the U.S. lodging industry out of the recession and have continued to achieve occupancy levels in excess of 70 percent. However, recently it has been the lower-priced properties that have shown the greatest gains in RevPAR," said R. Mark Woodworth, senior managing director of CBRE Hotels' Americas Research. "In the past five years, RevPAR for U.S. hotels increased at compound annual rate (CAGR) of 5.7 percent. The only chain-scale close to achieving this pace of revenue growth was the economy segment whose average annual RevPAR increase was 5.6 percent during this period. That means independent and economy chain-affiliated properties have been the primary drivers of the industry's recent strong performance."Looking forward, this trend is expected to continue. From 2017 through 2021, CBRE Hotels' Americas Research is projecting that the U.S. lodging industry will achieve a RevPAR compound annual growth rate (CAGR) of 2.2 percent. During this period, the RevPAR CAGR is projected to be 2.8 percent for the economy chain-scale. "We recognize that economy properties still achieve the lowest levels of occupancy and ADR, but investors looking for a 'growth story' shouldn't overlook this segment of the industry while some of the other chain-scale categories begin to stall out," said Woodworth.Small MarketsIn addition to lower-priced hotels, small markets also are enjoying significant RevPAR increases. In 2016, RevPAR growth for the 60 markets covered by CBRE's Hotel Horizons(r) forecast reports averaged 2.8 percent. This is below the aggregate 3.6 percent RevPAR growth achieved by hotels located outside of the 60 markets. The gap in performance is expected to widen in 2017 when Horizons(r) universe is forecast to see RevPAR increase by 2.0 percent. Concurrently, the remaining markets are projected to achieve a 3.8 percent increase in RevPAR during the year."So much attention is being paid to the major urban and gateway markets," said John B. (Jack) Corgel, Ph.D., professor of real estate at the Cornell University School of Hotel Administration and senior advisor to CBRE Hotels' Americas Research. "Over three quarters of the new hotel rooms forecast by CBRE to enter the U.S. lodging industry in 2017 will be located in the 60 major markets we track, even though these markets represent just 48 percent of the overall national hotel inventory. The increased competition in major markets certainly helps explain why these markets have recently lagged in RevPAR growth and are expected to continue to suffer in the near term."Not Top of Mind"When you read the hotel trade journals there is a growing sense of skepticism among industry analysts and attendees at the major industry conferences. I attribute this to the large sums of public company money that have been invested in upper-priced properties located in major markets," Corgel noted. "Economy and independent hotels, as well as the secondary markets, are left off the agenda, so they are they are not top-of-mind.""The fact is that U.S. hotels are achieving all-time record occupancy levels and near record profit margins. A lot of money is being made from hotel operations these days. While the prospects for growth in revenues and profits are moderating, opportunities still exist. Investors just need to investigate some of the historically overlooked chain-scale and geographical segments to find better returns," Woodworth concluded.To purchase copies of the March 2017 editions of Hotel Horizons(r)for the U.S. lodging industry and 60 major markets, please visit: https://pip.cbrehotels.comCBRE Hotels is a specialized advisory group within CBRE providing capital markets, consulting, investment sales, research and valuation services to companies in the hotel sector. CBRE Hotels is comprised of more than 385 dedicated hospitality professionals located in 60 offices across the globe.
CBRE Hotels - 24 February 2017
The national unemployment rate fell to 4.7% in Q4--the lowest level since the Great Recession--and non-farm employment increased by 165,000 jobs per month, according to the Bureau of Labor Statistics (BLS).Lodging demand grew 2.3% year-over-year in Q4, compared with 1.6% in Q3. The solid demand gains pushed up occupancy by a half percentage point to 60.7% in Q4--the highest fourth-quarter occupancy level since STR began recording this metric in 1987.The year-over-year number of available rooms nationally increased slightly by 1.7%. Rooms under construction grew 2.2% from the Q3 total to about 187,000 units, with another 150,000 rooms expected to open within 12 months.Despite record occupancy, overall ADR growth was somewhat muted in Q4 at 2.6%. Economy hotels had the largest ADR growth at 3.2% in Q4 compared with a year earlier.Download the full report.
CBRE Hotels - 17 February 2017
The offering of complimentary services and amenities by U.S. hotels is on the rise. From 2007 to 2015, hotel expenditures on complimentary food, beverages, in-room media, services, and gifts just within the rooms department increased at a compound annual growth rate (CAGR) of 3.6 percent. For comparison purposes, all hotel operating expenses rose at a 1.1 percent CAGR during the same time period.Much of the proliferation can be attributed to brand standards which mandate the offering of complimentary food, beverages, newspapers, internet, and other services and amenities. Most frequent travelers, especially those staying at properties within the lower-priced chain scales, have come to expect at least a free breakfast. At the upper-priced properties, an increasing number of frequent guest programs now provide complimentary internet access.In response to the increased incidence of complimentary services and amenities, the 11th edition of the Uniform System of Accounts for the Lodging Industry (USALI) expanded the number of expense categories to capture this rising cost. Within the rooms department three discrete expense categories now record the costs associated with the offering of complimentary food and beverage, in-room media and entertainment, and services and gifts. In addition, a complimentary services and gifts cost category was added to almost all operated and undistributed departments.To analyze recent trends in complimentary services and amenities, we examined the combined expenditures for complimentary services and amenities within the rooms department. This includes all three complimentary expense categories:Complimentary Food and Beverage: Gratis breakfasts, cocktail receptions, concierge floor, coffee in the lobby.Complimentary In-Room Media and Entertainment: Gratis cable TV, music, games, satellite video.Complimentary Services and Gifts: Promotional gifts to guests and vendors such as newspapers, VIP gifts, guest room flowers and fruit baskets for a frequent guest.The data comes from the operating statements of 1,077 properties that participated in CBRE Hotels' Americas Research's annual Trends(r) in the Hotel Industry survey each year during the period 2007 through 2015. Please note that the analysis does not include the amount of money hotels spend to offer complimentary WiFi, guest supplies (toiletries, writing paper, shoe mitts, etc...), or services and gifts within other departments.Resorts Lead The WayAs expected limited-service, extended-stay and all-suite properties spend relatively high dollar amounts to provide complimentary services and amenities to their guests. Most properties in these segments are chain-affiliated, and brand standards require the offering of a complimentary breakfast. Some extended-stay and all-suite brands even require a gratis manager's cocktail reception during the early evening.In 2015, all-suite hotels led these three property types and spent $2.36 per occupied room on complimentary services and amenities. This compares to $2.24 at extended-stay hotels and $2.12 at limited-service properties.Somewhat surprising is that resort hotels lead all hotel categories in complimentary rooms department expenditures. In 2015, resorts spent $2.70 per occupied room. It is not common for these property types to routinely offer complimentary breakfasts and receptions, so it can be assumed that these hotels invest in gratis concierge lounges, welcome beverages, newspapers, and gifts.Since complimentary food and beverage is not frequently found at convention ($1.41 POR) and full-service ($1.68 POR) hotels, these properties recorded the least amount spent on complimentary services and amenities. It can be assumed the frequent guests at these hotels are the primary recipients of any gratis expenditures.Complimentary RoomsAnother service that hotels provide to demonstrate goodwill and attract guests is the offering of complimentary stays. Per the 11th edition of the USALI, a complimentary room is defined as, "Free rooms provided to any guest, often for marketing purposes, but not related to an existing contractual relationship. Not classified as complimentary rooms are rooms provided due to a trade-out arrangement, rooms provided in connection with a promotion (e.g., stay two nights, get one free), or rooms provided as part of a group contract (e.g., book 50 rooms, get one free)."Unlike the offering of complimentary services and amenities, the granting of complimentary stays is on a downward trajectory. Evidently, as occupancy levels reach all-time highs, managers are less likely to offer free rooms to potential customers and friends.From 2007 to 2015, the number of complimentary rooms granted at the subject properties has declined by 14.2 percent. The number of complimentary rooms in the subject sample peaked in 2008, the first year of the great recession. As a percent of total occupied rooms, complimentary rooms averaged 1.0 percent in 2015. This ratio hit its high in 2009 at 1.33 percent, primarily due to that year's low occupancy level.Per the USALI, complimentary rooms are not included in the calculations of occupancy and average daily rate (ADR). However, if they were, in 2015 the occupancy level for the sample would have increased from 74.8 percent to 75.5 percent. Concurrently, the ADR would have dropped from $184.09 to $182.33.Guests Expect FreebiesAs room rates have climbed, guests expectations for complimentary services and amenities have increased. Topping most surveys of guest satisfaction are the offering of complimentary internet access and breakfast. As revenue growth tappers off at the peak of the lodging cycle, hotel managers are now looking at cost containment to improve profitability. This will put pressure on the continuation of offering complimentary services and amenities.
CBRE Hotels - 10 January 2017
While 2016 was a slow deal year for major transactions, there was significant activity involving regional and leisure assets.Looking ahead, new supply will be a concern in many major markets in 2017.In Melbourne, it will be hard to drive room rate growth given continued new supply. Strong occupancies are still being achieved but rate growth will be moderate.In Sydney, the average daily rate will continue to be strong with limited new supply and the new Sydney Exhibition Centre coming on line. This will make Sydney the number one performing hotel market for the next three to five years.In Brisbane, rates and occupancy levels will remain under pressure given the level of new supply and the lack of major new demand generators. However, with head works starting and road closures now in place for the start of works on the Queens Wharf Redevelopment, the announcement of the $20b Adani Coal Mine and recovering coal and iron ore pricing, we expect that the Queensland hotel market will begin to recover from 2018 onwards.Counter cyclical opportunities will arise for astute investors in areas such as Brisbane and Perth. However, we expect that most deals done in these markets will be off market deals rather than on market.Cairns, the Gold Coast and the Whitsunday Island regions will continue to experience a strong recovery in room rates and occupancies as inbound tourism arrivals numbers continue to grow with the lower Australian dollar.However, until the mining industry fully recovers there may be distressed sales occurring in some areas of Australia as valuations of properties are ordered by the banks. Areas that will be affected will be the sub regional markets like Mackay, Townsville and Gladstone and regional areas of WA in towns that were once thriving due to the mining boom. If one bank moves on owners in these regions other banks will be sure to follow suit.
CBRE Hotels - 5 January 2017
Washington, DC -- The outlook for the U.S. lodging industry, particularly historic hotels, continues to be extremely strong, according to CBRE Hotels' Americas Research (CBRE).For the third consecutive year, CBRE Hotels' Americas Research presented a Historic Hotels of America - CBRE five-year forecast at the Historic Hotels of America annual conference. CBRE relies on historical hotel performance data from STR, and economic forecasts from CBRE Econometric Advisors, to prepare its lodging forecasts.Key points presented by Mark Woodworth, Senior Managing Director at CBRE, to more than 200 owners, asset managers, general managers, and sales and marketing leaders at the Historic Hotels of America annual conference at The Royal Hawaiian, A Luxury Collection Resort(1927) in early November, 2016 include:'Per STR, through the first three quarters of 2016, the aggregate RevPAR for historic hotels that are members of Historic Hotels of America placed between the national averages for all upper-upscale and all luxury hotels in the U.S.Over the next five years, RevPAR for historic hotels is expected to grow at a compound average annual rate of 2.7 percent, which is greater than the RevPAR forecasts for the nation's upper upscale hotels at 2.0 percent and 1.7 percent for luxury hotels. Most of the RevPAR growth is expected to stem from increases in ADR.Annual occupancy levels for hotels that are members of Historic Hotels of America remains 8 to 10 percentage points above the national average occupancy level through 2020.Based on a set of information pulled from CBRE's database of hotel operating statements, historic hotels (including those that are not members of Historic Hotels of America) had an average ADR of $256.11, higher by more than 11.6 percent than the $229.59 ADR for contemporary hotels. (See chart below) Historic hotel revenue has recovered fully from the 2007 down-turn while comparable contemporary hotels are still lagging in revenue recovery."The data strongly supports the idea that many consumers favor and will pay more for the unique hotel experience historic properties can offer," noted Woodworth."Historic Hotels of America helps the consumer differentiate the authentic historic hotel from other older hotels," said Lawrence Horwitz, Executive Director, Historic Hotels of America and Historic Hotels Worldwide "For the third year in a row, historic hotels inducted into and participating in Historic Hotels of America realize a competitive advantage as well as a substantial premium with their rates, occupancy and RevPAR compared to other hotels" CBRE Hotels is a specialized advisory group within CBRE providing capital markets, consulting, investment sales, and research and valuation services to companies in the hotel sector. CBRE Hotels is comprised of more than 385 dedicated hospitality professionals located in 60 offices across the globe.