Main St To Wall St: What's Trending and How Will It Impact Hotels in - PowerPoint PPT Presentation

Main St To Wall St: What's Trending and How Will It Impact Hotels in 2018 Wall Street Perspective: Initial 3Q Review and 4Q17/2018 Outlook Vince Ciepiel, CFA Important disclosures may be found in the appendix

What We Will Cover Cleveland Research Overview Providing a Macro Backdrop Revenue Manager Survey Results Publicly Traded Hotel Co’s Results Summary Appendix

Who is Cleveland Research? An independent research firm headquartered in Cleveland, Ohio. Founded in 2006, Cleveland Research includes:  15 research teams  Across 50 key channels  Publishing research on over 150 companies We pride ourselves on a disciplined research process that has us regularly and deeply engaged with the industries and companies we cover. Our partners find value from getting in front of key themes and trends that lead to faster and better strategic and financial decisions.  What is happening now?  Why is it happening?  What happens next? 3

Big picture 1. GDP Good  Growth for 17 & 18 seeing positive revision  One of the more synchronized years globally in a while 2. Business investment ticking up, Corporate profits and Consumer Confidence strong 3. Supply likely topping out in Urban in 18 and in US in 19  Construction starts slowing (more challenging financing and costs on the rise) 4. Divergence in growth  International growth accelerating: Led by Asia and Europe 5. Domestic RevPAR growth moderating  Industry RevPAR up 2% in 3Q vs. 1H up near 3%  In U.S. underperforming: Top 25 (9 are negative), Urban, Luxury/Upper Up  Rates seem to be the issue (demand/occupancy upside YTD again) 4

Domestic Revenue Manager Survey Results Feelings, Expectations, & Momentum 5

How does our survey look?  3Q – Relative to your expectations , did portfolio RevPAR growth come in  a) in line  b) slightly worse  c) slight better  October/4Q – relative to 60 days ago, how are you feeling on October/4Q RevPAR growth?  a) the same  b) slightly worse  c) slight better  4Q – How do you expect the level of 4Q RevPAR growth to compare to what you saw in 3Q?  a) the same  b) slightly lower  c) slightly higher  2017 & 2018 – Relative to 60 days ago, how are you feeling on 2017 & 2018 RevPAR growth?  a) the same  b) a bit worse  c) a bit better

5 Things to Remember from our Survey Where we have been 1. 1Q Beat (Thank Trump and Easter), 2Q Miss (Misplaced Optimism)  Stronger Jan (Women’s March and Inauguration), in line Feb, stronger March on Easter shift  June disappointing, in line May and an April that wasn’t as bad as feared 2. 3Q seems to be in line with a low bar – Story of holiday shift and hurricane benefit  July softest month, Aug feedback better/in line, Sept a bit better than expected  Early read on 3Q results looks in line with lower bar/tempered budgets provided in June Where we are headed 3. 4Q feels ok – Off to a “decent” start  October seeing Jewish holiday benefit (1H strong) and hurricane benefit linger (FL, TX) line with lower bar/tempered budgets provided in June 4. Feeling the same on 2017 – Core growth unchanged in 2H vs. a prior hope for accel  17 still tracking towards mid to lower end of budget (in line with 60 days ago) 5. Trend lines into 2018 unchanged (Leisure strong, Group Ok, Corp underwhelming) 7

3Q Survey Results Quarterly Growth vs. Plan/Budget  100% Slightly better in 3Q vs. slightly worse in 2Q 6% 6% 12% 19%  ~80% of respondents were in line or slightly better than 13% 17% 28% 41% 75% 50% expectations, 20% missed 25% 47% 39% 50% 81% 38% 78% 33% 56% 25% 41% 33% 22% 17% 0% 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Source: Cleveland Research, % Slightly Worse % Inline % Slightly Better Growth Tracking Relative to Plan/Budget in 3Q17  July weakest, August ok, September better (vs. budget) 100%  ~40% of respondent beat in September 16% 29% 41% 75% 47% 50% 42% 25% 25% 37% 34% 29% 0% July August Sept Source: Cleveland Research % Slightly Worse % Inline % Slightly Better

4Q Outlook Survey Feeling on Budget Today vs. 45 days ago 100% 38% 42% 46% 75% 50% 38% 38% 38% 25% 25% 19% 17% 0% Oct Outlook 4Q Outlook 2017 Outlook Source: Cleveland Research % Slightly Worse % Inline % Slightly Better  Most feeling the same or better on October and 4Q RevPAR growth  Group trends in October padding 1H on easy compares; hurricane supporting some lift

2017 & 2018 View – More of the same Feeling on Full Yr Budget Today vs. 60 days ago 100% 5% 6% 6% 9% 11% 15% 22% 38% 31% 75% 38% 68% 50% 82% 83% 38% 72% 63% 25% 46% 26% 25% 9% 6% 0% 16 from 1Q 16 from 2Q 16 from 3Q 16 from 4Q 17 from 1Q 17 from 2Q 17 from 3Q Source: Cleveland Research, % Slightly Worse % Inline % Slightly Better  Feeling same or better about 2017 today vs. end of 2Q survey where revenue managers were feeling worse  Most still expect to hit the midpoint of their 2017 budget (1-3%), but optimism faded after a worse 2Q than expected as some realism set in with tempered outlooks  2018 initial view points to 1-2.5% growth – hard to point to catalysts for an acceleration in growth

Publicly Traded Company RevPAR Performance 11

3Q17 Results to-date and Updated Guidance Lodging Brands and REITS RevPAR Guidance Domestic Quarterly RevPAR Growth Annual Growth Quarterly Guide Annual Guide Ticker Company 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 2014 2015 2016 2Q17 3Q17 4Q17 17 from 4Q 17 from 1Q 17 from 2Q 17 from 3Q Loding Brand Co's HLT Hilton Worldwide Holdings Inc 6.6% 5.2% 5.8% 3.7% 2.1% 2.9% 1.3% 0.9% 2.5% 0.5% -0.1% 7.3% 5.4% 1.8% 1-2% 0-1% 1-3% 1-3% 1-3% 1-2% 1-2% MAR Marriott International, Inc. Class A 6.8% 5.3% 4.5% 3.8% 2.6% 2.9% 2.2% 0.8% 3.1% 0.9% 0.6% 6.6% 5.0% 1.8% 0-2% 0.0% 0.5-2.5% 1-3% 1-2% H Hyatt Hotels Corporation Class A 7.4% 5.6% 5.4% 3.9% 2.2% 2.3% 2.5% 2.0% 4.8% 1.4% 0.5% 6.7% 5.5% 1.9% 0-2% 0-2% 1-3% IHG InterContinental Hotels Group PLC Spons 5.9% 4.4% 4.8% 2.4% 1.5% 2.5% 1.3% 1.3% 1.9% -0.4% 0.4% 6.1% 4.4% 1.8% --- --- --- --- WYN Wyndham Worldwide Corporation 1.7% 0.0% 3.3% 0.0% -1.6% -0.6% 1.9% 2.9% 1.7% 2.8% 2.3% 4.4% 0.0% 0.0% --- --- 0-2% --- --- LQ La Quinta Holdings, Inc. 8.2% 4.0% 2.1% -0.3% -2.5% 0.2% 0.8% 1.8% 2.8% 1.9% 2.0% 8.0% 3.5% 0.0% --- --- --- --- CHH Choice Hotels International, Inc. 9.6% 6.7% 5.8% 4.3% 1.2% 4.3% 4.5% 5.0% 3.8% 2.0% 1.8% 8.5% 3.7% 3.9% 2-3% 1-2% 3-4% 3-4% 2-3% Average 6.4% 4.4% 4.6% 2.6% 0.8% 2.0% 2.1% 2.1% 2.9% 1.3% 1.1% 6.7% 3.7% 1.6% 1.7% 0.7% 2.0% 1.8% 2.1% 1.9% 1.5% Lodging REIT's Full Service: HST Host Hotels & Resorts, Inc. 3.8% 4.8% 2.8% 3.2% 3.6% 2.0% 3.8% 2.1% 3.8% 1.8% -0.6% 5.7% 3.8% 2.5% --- --- 0-2% 0-2% 1-1.75% LHO LaSalle Hotel Properties 5.4% 4.1% -2.4% 0.9% 2.1% 1.7% 4.3% 2.5% 1.4% -1.6% -3.6% 8.8% 2.6% 2.5% --- --- --- --- DRH DiamondRock Hospitality Company 7.9% 6.0% 2.2% 3.1% -2.1% 0.8% 0.8% -0.3% 1.9% 2.0% 2.1% 11.6% 4.7% -0.2% --- --- -1-1% -1-1% 1-2% RHP Ryman Hospitality Properties, Inc. 4.0% 3.1% -1.8% 9.1% -0.4% 5.9% 8.9% -2.1% 7.6% -0.7% -2.0% 7.5% 3.7% 2.9% 0-1% (3)-(1)% 0-3% 0-3% 1-3% PEB Pebblebrook Hotel Trust 3.6% 3.8% 4.0% 1.7% 8.0% 2.5% -0.1% 0.0% -2.9% -2.4% -3.1% 1.5% 3.3% 2.4% (3.5)-(1.5)% (4.5)-(2.5)% -0.5-1.5% -1-1% -1-1% (2)-(1)% (2)-(1)% CHSP Chesapeake Lodging Trust 9.5% 7.0% 7.2% 3.8% 10.1% 2.2% -0.7% -0.6% -2.5% -3.7% -2.5% 9.5% 5.7% 2.3% (6.0)-(4.0)% (4.5)-(2.5)% (3.5)-(1.5)% (3.5)-(1.5)% (3.5)-(1.5)% SHO Sunstone Hotel Investors, Inc. 7.0% 7.1% 3.9% 4.1% 1.5% 1.3% 2.2% 0.4% 5.5% 2.5% 2.0% 6.8% 5.9% 1.3% 0.75-2.75% -0.5-1.5% 0.5-2.5% 0.5-3.5% 1.5-3.5% 1.5-3.5% 2.25-3.25% Average 6.5% 4.8% 2.4% 3.7% 3.3% 2.3% 1.7% 0.3% 2.1% -0.3% -1.1% 7.4% 4.2% 2.0% -1.9% -2.2% #DIV/0! 0.3% 0.4% 0.6% 0.6% Select Service: HPT Hospitality Properties Trust 10.1% 10.7% 7.8% 6.2% 4.4% 4.9% 3.8% 0.6% 1.0% -0.3% 10.2% 8.7% 3.6% --- --- --- --- --- RLJ RLJ Lodging Trust 10.7% 5.0% 2.9% 2.5% 2.1% 1.9% 0.0% -0.3% -0.6% -3.4% 7.2% 3.9% 1.1% --- --- --- -1-1% -1-1% (2)-(1)% INN Summit Hotel Properties, Inc., 8.8% 7.6% 4.9% 5.7% 3.8% 6.5% 1.6% 1.0% 0.2% -3.5% 0.6% 10.9% 7.3% 3.3% (1)-0% -2-0% 0-2% 0.5-2.5% 0.5-2.5% -1-0% (0.75)-(0.25)% Average 9.9% 7.8% 5.2% 4.8% 3.4% 4.4% 1.8% 0.4% 0.2% -2.4% 0.6% 9.4% 6.6% 2.7% -0.5% -1.0% 2.0% 0.8% 0.8% -1.0% #DIV/0! Small Caps FCH FelCor Lodging Trust Incorporated 13.1% 7.3% 7.0% 5.4% 4.7% 2.6% -0.7% -2.0% -1.3% -1.0% 8.9% 8.1% 0.9% --- --- --- 0.5-2.5% 0.5-2.5% CLDT Chatham Lodging Trust 7.9% 6.4% 5.3% 4.7% 2.6% 0.6% -2.1% -0.8% 1.2% -0.5% 1.0% 8.0% 5.6% 0.0% -1.5-0% -1-1% -1-1% -1-1% -1-1% -1-1% 0.3-0.8% Average 10.5% 6.9% 6.2% 5.1% 3.7% 1.6% -1.4% -1.4% -0.1% -0.8% 1.0% 8.4% 6.9% 0.5% -2.5% 0.8% 0.8% 0.0% 0.6% Source: Company Filings 12