Lodging Industry Update Year End 2015 Pinkowski & Company - PowerPoint PPT Presentation

18 th Annual Lodging Industry Update Year End 2015 Pinkowski & Company Metropolitan Memphis Hotel & Lodging Association HotelNewsNow.com STR February 12, 2016 Memphis, Tennessee

18 th Annual Lodging Industry Update Presented by:

Lodging Industry Update Program Invocation - John Rucker, Key Magazine Introduction Wayne Tabor – President MMHLA Chuck Pinkowski – Pinkowski & Company Economics of the Hospitality Industry Isaac Collazo – VP Performance Strategy & Planning InterContinental Hotels Group Health of Hotels in Memphis Chuck Pinkowski – Pinkowski & Company State of the National Lodging Market Jeff Higley – HotelNewsNow.com An Interview with Lee Hunter Chief Operating Officer – Hunter Hotel Advisors

Invocation John Rucker Key Magazine

Wayne Tabor President MMHLA

Thank You to Our Sponsors

Chuck Pinkowski

Economics of the Hospitality Industry Isaac Collazo VP Performance Strategy & Planning InterContinental Hotels

Economic and Lodging Industry Update February 2016 10

RevPAR United States Key Countries 2015 Mexico 8.1% Italy Japan 6.6% Spain 6.3% Eurozone Germany 5.2% US World India UK Canada Australia France China Brazil (20%) (10%) 0% 10% 20% 30% 2012 2013 2014 2015 Oxford Economics 11

GDP United States Key Countries 2015 India China 2.4% Spain 2.4% 2.2% Mexico World US Australia 1.5% UK Eurozone Germany Canada France Italy Japan Brazil (5%) 0% 5% 10% 2012 2013 2014 2015 Oxford Economics 12

GDP Trends Global Real GDP Year Over Year Change 10% 8% 6% 4% 2% 0% (2%) (4%) (6%) 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 World Advanced Emerging Markets Oxford Economics 13

World Trade Imports, goods, constant prices and exchange rate, US$ 25% 20% 15% 10% 5% 0% (5%) (10%) (15%) (20%) 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 Oxford Economics 14

BRICs World Trade Contribution 5% 4% 3% 2% 1% 0% (1%) (2%) (3%) 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 Brazil China India Russia Oxford Economics 15

China’s GDP Quarterly Results Year-Over-Year Change 16% 14% 12% 10% 8% 6% 4% 2% 0% 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 Oxford Economics 16

China’s Consumer Spending Quarterly Results Year-Over-Year Change 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 Oxford Economics 17

China’s Imports Quarterly Results Year-Over-Year Change 40% 30% 20% 10% 0% (10%) (20%) 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 Oxford Economics 18

Commodity Prices 12-Month Change as of February 6, 2016 10% 0% (10%) (20%) (30%) (40%) (50%) Nickel Natural Gas Oil Iron Ore Jet Fuel Beef Copper Tin Rubber Aluminum Coal Gold Plywood Sugar Cotton IndexMundi 19

Countries At Risk From A China Slowdown Rank Based On Simple Average of Ranking Of Each Indicator Australia Chile Brazil Russia US Korea Japan Canada Mexico UK Eurozone India (20) (10) 0 10 20 30 40 Net Commodity Exports, % of GDP Exports To China, % of Total Oxford Economics 20

Oil Prices Oxford Economics 100 120 20 40 60 80 0 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 Indexed to 1Q2012 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 21

Oil Supply and Demand Indexed to 1Q2012 108 106 104 102 100 98 96 94 92 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 Demand Supply Oxford Economics 22

Dollar Strength Effective Exchange Rates 4Q 2015 versus 4Q 2013 Year Over Year Change US China UK S Korea Singapore Eurozone Sweden Japan Australia Mexico Canada Turkey Brazil Russia (50%) (40%) (30%) (20%) (10%) 0% 10% 20% 30% Oxford Economics 23

World Stock Markets Daily Close — Indexed to October 1, 2013 Same Days 240 220 200 180 160 140 120 100 80 Feb-15 Mar-15 May-15 Jun-15 Aug-15 Oct-15 Nov-15 Jan-16 DJIA STOXX Europe FTSE 100 Nikkei Shanghai Wall Street Journal 24

US GDP Quarterly Change 6% 4% 2% 0% (2%) (4%) (6%) (8%) (10%) 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 Annualized Q/Q Year-Over-Year Oxford Economics 25

US Consumer Spending Oxford Economics (4%) (3%) (2%) (1%) 0% 1% 2% 3% 4% 5% 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 Quarterly Change 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 26

US Consumer Spending Index 2011 Index 135 Lodging 130 125 Food Airlines 120 Rec Services 115 Consumer 110 Spending 105 100 95 90 85 80 75 Gas 70 65 2012 2013 2014 2015 Bureau of Economic Analysis 27

US Labor Market 400 10 9 350 8 300 7 Unemployment Rate New Jobs (000) 250 6 200 5 4 150 3 100 2 50 1 0 0 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Employment Additions Unemployment Rate Oxford Economics 28

College Educated Employment Index 130 120 110 100 90 80 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 US Employment US College Employment Bureau of Labor Stats 29

US Job Creation 2011 Base Year 130 120 Ed/Health Leisure Professional 110 Services Trade/Transp 100 Financial 90 Manufacturing Construction 80 70 2008 2009 2010 2011 2012 2013 2014 2015 Bureau of Labor Statistics 30

US Household Wealth Oxford Economics (20%) (15%) (10%) (5%) 10% 15% 20% 0% 5% 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 Quarterly Change 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 31

US Corporate Profits Quarterly Change 60% 50% 40% 30% 20% 10% 0% (10%) (20%) (30%) (40%) 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 Oxford Economics 32

Lodging Demand Seasonally-Adjusted 125 120 115 110 105 100 95 90 85 80 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Global United States STR, Inc.; STR Global; IHG PS&P 33

US Demand and GDP US Demand & GDP Annual Change 10% 8% 6% 4% 2% 0% (2%) (4%) (6%) (8%) 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Demand GDP STR, Inc.; Oxford Economics 34

US Net Demand 8% 6% 4% 2% 0% (2%) (4%) (6%) (8%) (10%) 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 STR, Inc. 35

US Occupancy 66% 64% 62% 60% 58% 56% 54% 52% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 STR, Inc. 36

US Occupancy Market Comparison Number Of Markets By Year End Occupancy 80 70 60 50 40 30 20 10 0 Under 60% 60%-64.9% 65%-69.9% 70%-74.9% 75%-79.9% 80%+ 2006 2015 STR, Inc.; IHG PS&P 37

US ADR Change 10% $110 8% $105 6% $100 4% $95 2% $90 ADR Change Real ADR 0% $85 (2%) $80 (4%) $75 (6%) $70 (8%) $65 (10%) $60 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 ADR Change Real ADR STR, Inc.; IHG PS&P 38

US ADR Weekly Trend Year-Over-Year Change 10% 8% 6% 4% 2% 0% (2%) (4%) 7/4 7/18 8/1 8/15 8/29 9/12 9/26 10/10 10/24 11/7 11/21 12/5 12/19 1/2 1/16 1/30 Week Ending STR, Inc. 39

US ADR Change Market Comparison Number Of Markets By Year End ADR Change 100 90 80 70 60 50 40 30 20 10 0 Negative 0%-0.9% 1%-1.9% 2%-2.9% 3%-3.9% 4%-4.9% 5%-5.9% 6%+ 2006 2015 STR, Inc.; IHG PS&P 40

US Real ADR Real ADR Indexed To Prior Peak 105 100 95 90 85 80 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 Months From Trough 2001 Recession 2009 Recession STR, Inc.; IHG PS&P 41

Monthly Price Indices Of US Goods & Services Seasonally-Adjusted — 2007 Index 140 135 130 125 120 115 110 105 100 95 90 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Airlines Food Average Hourly Earnings New Cars Hotels Bureau of Labor Statistics 42

GDP Forecast United States 2016 Key Countries India China 2.5% 2.4% Spain 2.4% Mexico Australia 2.0% World UK Germany US Eurozone Canada France Italy Japan Brazil (4%) (2%) 0% 2% 4% 6% 8% 2014 2015 2016 2017 Oxford Economics 43

Consumer Spending Forecast United States 2016 Key Countries China 3.1% India Mexico 2.7% Spain 2.5% 2.5% UK Australia World US Germany Eurozone Canada Italy France Japan Brazil (4%) (2%) 0% 2% 4% 6% 8% 2014 2015 2016 2017 Oxford Economics 44