Global ghmss-h1-2014

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Global Hotel Market Sentiment Survey

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Horwath HTL Global Hotel Market Sentiment Survey March 2014

Asia

31.4%

Europe49.8%

Americas18.5%

0.3%

GLOBAL INDEX SCORE JANUARY 2010 – JANUARY 2014

INTRODUCTION

The Horwath HTL Global Hotel Market Sentiment Survey gives a quick assessment of the market outlook for the global hotel industry, by the people on the ground, running the hotels. The survey focuses on the current outlook for occupancy, average room rates and total revenue and what the operators feel is going to happen based on their experience.

This report summarizes the outcome of the survey, gathered from 40 countries. Of the 1,474 respondents, 49.8 percent of them came from Europe, 31.4 percent from Asia and 18.5 percent from the Americas. It should be noted throughout the study that data from the Middle East and Africa is skewed by limited number of responses. Commentary focuses on countries and regions with at least 20 respondents.

Since February 2011, global sentiment has been volatile, with January 2011 marking the peak of optimism since July 2009. For the beginning of this year, hoteliers’ expectations are higher than the same point in 2013 and 2012; however, this is no guarantee of future performance, given the historical fluctuation of sentiment.

SHARE OF RESPONDENTSMEA



SENTIMENT RANKINGS

BY REGION SCORE

FEB JUL JAN

2013 2013 2014

50 20 40 The Americas

Asia 14 1 17

Europe 5 0 25

MEA 59 44 NA

Global Average 15 5 25

TOP 5 COUNTRIES WITH MORE THAN 20 RESPONSES SCORE

FEB 2013

JUL 2013

JAN 2014

1. Malaysia 43 46 65

2. Ireland 42 33 62

3. Poland -23 29 59

4. Japan 38 40 52

5. Hungary 15 -- 48

“The global sentiment is more positive than it has been in the last 12 months.”

RANKING SCORE KEY

Much Worse -150.0

Worse -75.0

Same 0

Better 75.0

Much Better 150.0

SENTIMENT RANKINGS

As a way to measure and compare the results across regions and countries, we have created an index to formulate an overall average sentiment score from all survey questions. Points are assigned to each corresponding response and compounded accordingly. The index utilizes a scale of negative 150 to positive 150 in which a score of negative 150 denotes a sentiment of absolute pessimism; a zero score indicates unchanged expectations from the previous year, and positive 150 signifies a very optimistic outlook. The index also allows us to track changes in market sentiment over time.

The global sentiment is more positive than it has been in the last 12 months. Hoteliers had their doubts about performance in the second half of 2013 when compared to the beginning of the same year, but they are looking up as 2014 begins. 2011, 2012 and 2013 have all shown a similar pattern of higher scores in the beginning of the year than the middle, however.

Europe and The Americas have showed the most positive growth since 2013, increasing their overall index by 25 and 20 respectively. Across both regions, only France and Macedonia reported a negative outlook for 2014. Among countries with more than 30 respondents, only France and China expressed an overall negative sentiment.

The strongest performance in Asia is anticipated by Malaysia (65), Japan (52) and Indonesia (41). In 2014, Tourism Malaysia is increasing its promotional efforts for Visit Malaysia Year, possibly leading to such an optimistic outlook for the country.

Political unrest and violent public protests in Thailand, one of the biggest markets, has deterred foreign arrivals and perhaps led to the optimistic outlook for neighbouring Indonesia.



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Occ ARR Rev

Much Better

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Same

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“Respondents have indicated expectations of growth across all three metrics in 2014”

EXPECTATION FOR 2014

Avg Occ ARR Rev 36 26 42 39

11 7 10 16

24 24 21 29

The Americas

Asia

Europe Global

Average 19 22 27

2014 MARKET OUTLOOK

WHAT IS YOUR ASSESSMENT OF THE HOTEL MARKET FOR 2014 VS. 2013? Hoteliers were asked their expectation for performance levels in 2014 compared to that recorded in 2013, in relation to hotel occupancy (Occ), average room rate (ARR) and hotel revenues. Approximately 45 percent of respondents predicted that occupancy would increase in 2014. Industry outlook for ARR was even stronger, and revenue growth predictions were stronger still. The overall global outlook for 2014 seems very positive.

OCCUPANCY

Only 22 percent of respondents expressed negative sentiments regarding occupancy performance for the coming year. Occupancy outlook in Asia was the lowest, with an index of only 7. Asia’s index was heavily effected by China’s response. This year, 46 percent of Asian responses came from China. All other regions recorded index scores above 20.

AVERAGE ROOM RATE

Almost half of all respondents had a positive outlook in regard to rate growth for 2014. The Americas are expecting to grow the most, driven by countries such as the United States (51) and Mexico (42). Again, Asia had the poorest outlook for 2014 with an index of 10, as a result of China’s index (-27).

REVENUES

Of the three metrics, revenue is expected to see the most growth. Over 55 percent of respondents expect revenues to increase in 2014 when compared to 2013. The Americas and Europe are hoping for the greatest increase in revenues, as the two regions come out of an economic crisis and continue to recover. Ireland (73), Poland (68) and Belgium (55) have the strongest revenue predictions in 2014.



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Occ ARR Rev

+10% to +15%

+5% to +10%

0% to +5%

0%

0% to -5%

-5% to -10%

-10% to -15%

“Like occupancy, a majority of hoteliers expect rates to grow in 2014, with almost 20 percent expecting growth of over five percent.”

EXPECTATION FOR 2014

Avg Occ ARR Rev 43 32 49 50

23 20 19 29

25 24 21 30

The Americas

Asia

Europe

Global Average 24 25 33

HOTEL PERFORMANCE EXPECTATION

WHAT IS YOUR EXPECTATION FOR GROWTH/DECLINE FOR 2014 VS. 2013? The second survey question asked hoteliers to give their expectation of how their respective hotels will fare in 2014 in comparison to 2013, in percentage terms.

OCCUPANCY

Occupancy projections were positive across the board, with over 60 percent of respondents expecting growth in some degree. What negativity there was came from France (-25) and Thailand (-20). Economic woes could continue to impact the outlook for France, while political instability in Thailand has crushed hoteliers’ hopes for occupancy growth going into 2014.

AVERAGE ROOM RATE

Like occupancy, a majority of hoteliers expect rates to grow in 2014, with almost 20 percent expecting growth of over five percent. The outlook for The Americas is the most positive, driven by the sentiments of The United States (53) and Brazil (49). In Asia, China’s index of -13 once again dragged down the average index. Many other countries, such as Indonesia (56) and Japan (54) were far more optimistic.

REVENUES

Over 65 percent of respondents believe that their revenues will grow in 2014. Almost a quarter of hoteliers expect growth between 5 and 15 percent. The Americas have once again topped the sentiment score driven by a combination of The United States’ economy recovering and the growth in South and Central American destinations. Revenue growth in Asia and Europe is predicted to be similar.



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F1 F2 F3 F4 F5 F6 F7

Very Positive Impact

Positive Impact

No Impact Negative

Impact Very

Negative Impact

“Economic tourism trends are believed to have the strongest positive impact on the global hotel market in 2014.”

FACTORS AFFECTING PERFORMANCE RANKING 1. Local/Global Stock Market 3

2. Local Economic Trends 28

3. Global Economic Growth Trends 29

4. Local Tourism Trends 37

5. New Competitive Supply -30

6. Global Oil Prices -20

7. Currency Exchange Rates -5

FACTORS AFFECTING PERFORMANCE

WHAT IS YOUR ASSESSMENT OF THE HOTEL MARKET FOR 2014 VS. 2013?

Each hotelier was also asked to gauge their attitude towards eight factors and how these will impact their hotels’ performance in 2014.

1. Local/global stock market2. Local economic growth trends3. Global economic growth trends4. Local tourism trends5. New competitive supply additions6. Global oil prices7. Currency exchange rates

Economic growth and tourism trends are believed to have the strongest positive impact on the global hotel market in 2014. Over 50 percent of all responding hoteliers agreed that these trends would have some kind of positive effect on their business.

Local tourism trends were seen as having the strongest positive impact on the global hotel market for 2014. This was especially evident in The Americas where hoteliers recorded an index of 45. In Europe, respondents indicated that global economic trends were likely to play an equally powerful role in improving performance.

The strongest negative effects are expected to come from new competitive supply and oil prices. Growth in supply has historically been the single lowest index score in this section of the survey and is the strongest negative influence on performance in each individual region.

Our respondents see currency exchange rates and stock market performance as having the least affect on the hotel industry.



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Corporate Leisure FIT Leisure Group MICE

Much Better

Better

Same

Worse

Much Worse

“Globally, the Leisure FIT segment is expected to fair the best, while MICE demand is seen as having the least potential for growth.”

MARKET SEGMENT PERFORMANCE 1. Leisure FIT 28

2. Corporate 16

3. MICE 5

4. Leisure Group 10

MARKET SEGMENT PERFORMANCE

HOW ARE EACH OF THE MAJOR DEMAND SEGMENTS EXPECTED TO PERFORM IN 2014 VS. 2013?

The last question dealt with each participant’s opinion with regard to primary market demand segments, which are Corporate, Leisure FIT, Leisure Group and MICE (Meetings, Incentive, Conference, and Exhibition), and how they are expected to perform in 2014.

Globally, the Leisure FIT segment is expected to fare the best, while MICE demand is seen as having the least potential for growth.

Almost 50 percent of respondents expect the Leisure FIT segment to do better or much better in the coming year. The Americas have the strongest expectations (30) with Europe (29) and Asia (26) not far behind.

MICE demand was given the lowest index score in each major region: Asia (-8), Europe (9), the Americas (14). 25 percent of hoteliers across the world expect performance from the MICE segment to decrease in 2014. China’s expectations for MICE demand are very negative as a result of reduced government spending policies. Government agencies have drastically reduced their expenditures for external meetings, events and banquets, cutting into the country’s MICE demand.

The Americas are the only region that expects Leisure Group business (24) to grow faster than the Corporate segment (21), although not by much. However, performance in both segments is expected to increase more in the Americas than in any other region.

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OTHER MARKET SENTIMENT REPORTS

BY REGION ASEAN Benelux South East EuropeAsia South East

BY COUNTRY Austria Brazil China Hungary Indonesia Italy Ireland JapanNorway Switzerland

BY CITY/DESTINATION Beijing Hong Kong Shanghai

CONCLUSION

Encouragingly general market sentiment is positive across the world.

Outloo has improved since the middle of and is better than the same time in and . As global and local economies and tourism trends continue to change, most hoteliers remain optimistic about the performance and health of our industry.

We should not overloo the pattern of volatility in the surveys themselves. Sentiments tend to dip midyear and improve again as a new year starts. However, the global inde has not been negative since uly of , so there would appear to be an overall positive trend. Asia s sentiments were the lowest of the major regions as a result of pessimistic growth e pectations for Occupancy, ARR and Revenue. China registered an inde of possibly due to slowing economic growth partly caused by reduced government spending and massive influ es of supply. Thailand averaged an inde of , li ely because of continued political unrest.

In contrast, the Americas seem the most optimistic . The combination of a recovering economy in

the United States and the rapidly growing hospitality industry in Central and South America have led to such a positive outloo .

One massively complicating factor is the recent series of events in the U raine and the Crimea, which could have a huge affect on the EMEA region if a diplomatic solution is not found imminently.



ASIA PACIFIC AUCKLAND, NEW ZEALAND [email protected]

Bangkok, Thailand [email protected]

BEIJING, CHINA [email protected]

HONG KONG, SAR [email protected]

JAKARTA, [email protected]

KUALA LUMPUR, MALAYSIA [email protected]

MUMBAI, INDIA [email protected]

SHANGHAI, CHINA [email protected]

SINGAPORE, SINGAPORE [email protected]

SYDNEY, AUSTRALIA [email protected]

TOKYO, JAPAN [email protected]

AFRICA CAPE TOWN, SOUTH AFRICA [email protected]

LATIN AMERICA BUENOS AIRES, ARGENTINA [email protected]

SÃO PAULO, BRAZIL [email protected]

MEXICO CITY, MEXICO [email protected]

DOMINICAN REPUBLIC [email protected]

SANTIAGO, [email protected]

BOGOTA, COLOMBIA [email protected]

EUROPE AMSTERDAM, NETHERLANDS [email protected]

ANDORRA LA VELLA, ANDORRA [email protected]

BARCELONA, SPAIN [email protected]

BUDAPEST, HUNGARY [email protected]

DUBLIN, IRELAND [email protected]

FRANKFURT, GERMANY [email protected]

ISTANBUL, TURKEY [email protected]

LISBON, PORTUGAL [email protected]

LONDON, UK [email protected]

MADRID, SPAIN [email protected]

MOSCOW, RUSSIA [email protected]

OSLO, NORWAY [email protected]

PARIS, FRANCE [email protected]

ROME, ITALY [email protected]

SALZBURG, AUSTRIA [email protected]

WARSAW, POLAND [email protected]

ZAGREB, CROATIA [email protected]

ZUG, SWITZERLAND [email protected]

NORTH AMERICA ATLANTA, USA [email protected]@horwathhtl.com [email protected]

DALLAS, USA [email protected]

DENVER, USA [email protected]

LOS ANGELES, USA [email protected]

MONTREAL, CANADA [email protected]

LAS VEGAS, USA [email protected]

SAN FRANCISCO, USA [email protected]

CHICAGO, USA [email protected]

NEW YORK, USA [email protected]

PHOENIX, USA [email protected] [email protected]

TORONTO, CANADA [email protected]

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