OUTLOOK 2021 - masslodging.com · 20.08.2020 · OUTLOOK 2021 August 20, 2020 Rachel J. Roginsky,...

OUTLOOK2021August20,2020

RachelJ.Roginsky,ISHCPrincipal,PinnacleAdvisoryGroup

[email protected]

©PinnacleAdvisoryGroup

Today’sAgenda

1.   NationalLodgingMarket

2.   SuburbanBostonMarket

3.   Boston&CambridgeMarket

NATIONALLODGINGMARKET


HistoricMarketPerformance–National

Source:STR

$0.00

$30.00

$60.00

$90.00

$120.00

$150.00

45.0%

50.0%

55.0%

60.0%

65.0%

70.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Occupancy ADR RevPAR


YTDJune2020–National

*PreliminaryJulyfiguresSource:STR

-34.5%Occupancy

-16.8%ADR

-45.5%RevPAR

-90.0%

-80.0%

-70.0%

-60.0%

-50.0%

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

Jan Feb Mar Apr May Jun Jul*

2020USPerformancebyMonth

Occ

ADR

RevPAR


MarchtoJuly-National

Source:STR,CentersforDiseaseControlandPrevention

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

-100.0%

-80.0%

-60.0%

-40.0%

-20.0%

0.0%

20.0%

HotelOccYOY%Changevs.NewCOVID-19Cases

NewCases(U.S.) BostonMSAOcc NtlOcc


General2020Trends–National•  NewSOPsaddressinghygieneanddisinfection,employeetraining,F&Bsafety,technology,publicspacesandcapacities,

etc.Increaseinoperatingexpenseswhileprovidingcustomersconfidenceincleanlinessandsafety.

•  TheU.S.had2.8mand2.4mforeignvisitorsinJanuaryandFebruaryrespectively.BetweenAprilandJune,themonthlytotalswerelessthan40,000.Thisiswillhurtgatewaymarketsandlargercitiesdisproportionately.

•  State-ledpolicies for hotels and restaurants have created a patchworkof guidelines difficult for bothoperators andconsumerstounderstand.

•  Thelower-ratedproperties,suchaseconomyandmidscale,continuetooutperformfull-servicehotels.Giventheseverylow occupancies, and no compression to drive premiums, properties have very little pricing power. The ADR andRevPARdeclinesaresteepestwithinthefull-servicehotelscale.

•  Year-to-date through June,demandaturbanhotelshasseenasteeperdecline inRevPAR (-48%)whencompared tosuburbanmarket(-33%).Althoughstillfacingsteepdeclines,interstatemarkethasseentheleastimpact(-28%).

•  AccordingtoSTR,roughlyoneinfourluxuryroomsandaboutoneinfiveupper-upscaleroomsareclosed.Manyownersarewaitingfordemandlevelstoincreasebeforereopeningwhichwillultimatelydrivedownoccupancies.


ForwardLookingTrends–National•  Afteryearsofa‘cautiouslyoptimistic’tone,it isnowatoneofconcernwithlittleclarity.Underlininghopeforavaccineand

pentupdemand.

•  EconomicfreefallbeganinQ1.Drivenbylayoffsandfurloughswithinthehospitalityandtourismindustry(7.7million),Aprilrecordedtheworstmonthofjoblossesinmodernhistory.Highunemploymentratesnegativelyimpactincomeandconsumerconfidenceandasaresultlimittravelactivity.

•  Regional outbreaks, like those seen this summer in the south andwest, are expected to continue throughQ1 2021 if notfurther.SuccessfulcontainmentofCOVID-19isnecessaryforaneconomicrecovery.

•  International,group,andcorporatetravelwillbeimpactedsignificantly,especiallyinthetop-25markets.Groupistypicallytheslowestsegmenttorecover.Leisuretravelwillreturninmoderationwithemphasisonregional,drive-to-destinations.

•  Roomrateswillremainsignificantlydepressedandslowtorecover. Travelerswill insistonlowerratesgivenlowoccupancyandlackofsellouts.Andhigherratesthataretypicallydrivenbycompressionwillbegenerallynonexistent.

•  Constructiondelaysandabandonedstartswillreducetheamountofnewsupplyenteringthemarket.Additionallytherewillbeanincreaseinpermanentclosuresandconversionstoalternativeusesashotelsfaceincreasedfinancialpressure.

•  Dueto its severity, this recession isexpectedto take longer to recover thanthe last tworecessions.The longer thecurrentcircumstancescontinue,thelongertherecoveryislikelytotake.


IndustryProjections–National

STR PWC CBRE

Occupancy -39.7% -41.4% -38.0%

ADR -20.9% -19.9% -22.5%

RevPAR -52.3% -53.1% -51.9%

STR PWC CBRE

Occupancy 30.5% 49.9% 36.3%

ADR 5.6% 10.6% 8.9%

RevPAR 37.9% 65.9% 48.4%

2020 2021

Source:STR(8/13),PWC(5/27),CBRE(7/1)*STR&CBREreflecttotal-roominventorymethodology,assumingnotemporaryhotelclosures

SUBURBANBOSTONLODGINGMARKET


SuburbanBostonHistoricPerformance

Source:STR

Since2000AverageOcc:64.5%Peak:73.3%(2000)ADR(CAGR):1.5%

SinceRecession(‘09)AverageOcc:67.3%Peak:72.7%(2015)ADR(CAGR):3.9%

$0.00

$25.00

$50.00

$75.00

$100.00

$125.00

$150.00

$175.00

45.0%

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

80.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Occupancy ADR RevPAR


YTDJune2020–SuburbanBoston

Note:TheGovernorofMassachusettsdeclaredastateofemergencyonMarch10.BeginningApril1,hotelswereonlypermittedtoaccommodatetheCOVID-19essentialworkforce,otherworkersrespondingtotheCOVID-19publichealthemergency,andvulnerablepopulations.ThisorderranuntilJune8whenhotelswerepermittedtoreopentothegeneralpublic.Source:STR*Adjustedtoreflecttotal-roominventorymethodology,assumingnotemporaryhotelclosures

-47.3%Occupancy

-22.5%ADR

-59.1%RevPAR

-0.5%

2.4%

-49.3%

-82.9% -82.9% -80.1%

-100.0%

-80.0%

-60.0%

-40.0%

-20.0%

0.0%

20.0%

Jan Feb Mar Apr May Jun

2020BostonSuburbsPerformancebyMonth

Occ ADR RevPAR Demand


SuburbanBostonNewSupply2020Hotel City Scale Rms Opening

HamptonInnChelsea Chelsea UpperMidscale 105 Aug

AvidHotelRevere Revere Midscale 104 Aug

HolidayInnExpressRevere(dual) Revere UpperMidscale 80 Aug

StaybridgeSuitesRevere(dual) Revere Upscale 72 Aug

HamptonInnSalem Salem UpperMidscale 113 Sep

HiltonGardenInnBrookline Brookline Upscale 174 Nov

HiltonGardenInnCanton Canton Upscale 138 Dec

HamptonInn&SuitesWatertown Watertown UpperMidscale 146 Dec

TownePlaceSuitesWrentham(dual) Wrentham UpperMidscale 80 Dec

SpringHillSuitesWrentham(dual) Wrentham Upscale 80 DecSource:VariousSources,CompiledbyPinnacleAdvisoryGroupProjectedchangestosupplydonotreflecttemporaryclosures

+3.0%SupplyIncrease

in2020


SuburbanBostonNewSupply2021

Hotel City Scale Rms Opening

EVENBedford Bedford Upscale 130 Q2

TheBeaconStreetHotel Somerville Independent 35 Q2

HyattPlaceBraintree(reopening) Braintree Upscale 204 Q2

TownePlaceSuitesMedford(dual) Medford UpperMidscale 72 Q2

HiltonGardenInnPlymouth Plymouth Upscale 101 Q3

CambriaSomerville Somerville Upscale 163 Q4Openingsdatesaresubjecttochange.Source:VariousSources,CompiledbyPinnacleAdvisoryGroup

+3.9%SupplyIncrease

in2021


Source:ColliersInternational

Inventory(SF)

Absorption(SF)YTD2020

VacancyQ22020

InnerSuburbs 6.8M 35,200 12.1%

Route128 68.2M 517,800 14.0%

Route495 45.6M (104,000) 19.6%

TotalSuburbs 120.0M 449,000 16.0%

SuburbanBostonOfficeMarkets,Q22020


SuburbanBostonLodgingTrends•  In theBurbs,occupancyandADR ishighermidweekthanonweekends.Thesuburban lodgingmarketsreliesheavily on corporate demand, much of which is driven by the local office inventory. A collection of majoremployershaveannouncedremoteworkthroughyearend,othersthroughJuly2021.Withoutanactiveofficeinventoryinthesuburbs,corporatetravelwillbeextremelylimited.

•  ThesuburbshasindirectlybenefittedfromthecapacityconstraintsofBoston&Cambridgeformanyyears.Thesuburbs accommodate compression from the city, transient demand from colleges, friends/family, touristslooking for lowerpricedhotels.Given the lowdemand levels, these travelers, assuming theyvisit in thenearterm,willhavemoreoptionsatlowerrates.

•  GroupdemandinthesuburbsismostlymadeupofSMERF,suchassportsteams,socialeventsweddings.Thelarger, full-servicehotelsaccommodatecorporategroup.Unfortunatelyduetosocialdistancingmeasuresandguidanceonlargegathers,groupdemandhasmostlybeeneliminatedfromthemarketanditisexpectedtobetheslowesttoreturn.

•  Collegesanduniversitieshavebeguntorentblocksofhotelroomsinanefforttospreadtheirstudents.Collegeslocatedinthesuburbshavealreadybeguncontractingtheseblocksinawin:winrelationship.

•  Following 9/11, ADR declined three straight years, and took almost 8 years to fully recover. After the 2008financial crises, ADR in the suburbs declined one year and took almost 4 years to recover. Given the steepdeclinesseenthelastthreemonths,ADRisexpectedtotakeanextendedperiodoftimetorecoveryfully.


SuburbanBostonProjections2020

2019 2020 %Change

Occupancy 68.2% 32% -53.1%

ADR $143.83 $104 -27.7%

RevPAR $98.05 $33 -66.1%

Reflecttotal-roominventorymethodology,assumingnotemporaryhotelclosuresSource:STR(Historic),PinnacleAdvisoryGroup(Projections)

2020 %Change

36% -47.9%

$104 -27.7%

$37 -62.3%

Assuming10%ofinventoryisofflineatYE:


SuburbanBostonProjections2021

2020 2021 %Change

Occupancy 32% 46% 42.5%

ADR $104 $116 11.5%

RevPAR $33 $53 59.0%

Reflecttotal-roominventorymethodology,assumingnotemporaryhotelclosuresSource:STR(Historic),PinnacleAdvisoryGroup(Projections)

2021 %Change

51% 42.5%

$116 11.5%

$59 59.0%

Assuming10%ofinventoryisoffline:

BOSTON&CAMBRIDGELODGINGMARKET


Boston&CambridgeHistoricPerformance

Source:PinnaclePerspective,PinnacleAdvisoryGroup

$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

$300.00

60.0%

65.0%

70.0%

75.0%

80.0%

85.0%

90.0%

Occ ADR RevPAR


Boston&CambridgeSupply&Demand,%Change

Source:STR(supply),PinnacleAdvisoryGroup(demand)

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Supply Demand


Boston&CambridgeRevPAR%Change

Source:PinnaclePerspective,PinnacleAdvisoryGroup

10.6%

6.2%

10.5%

4.1%

10.5%

6.3%

-0.5%

3.0%2.5%

-1.0%-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019


Boston&CambridgeYTDPerformance

YTDJune2020-TotalRoomInventoryJan Feb Mar Apr May Jun YTD

Occ 66.8% 73.0% 30.2% 5.0% 5.5% 7.1% 31.1%ADR $170 $179 $203 $127 $110 $141 $175RevPAR $114 $130 $61 $6 $6 $10 $54

YTDJune2020-Partial/ActualRoomInventoryJan Feb Mar Apr May Jun YTD

Occ 66.8% 73.0% 34.7% 15.6% 22.9% 22.9% 49.9%ADR $170 $179 $203 $127 $110 $141 $175RevPAR $114 $130 $70 $20 $25 $32 $87*Actualinventoryassumespropertiesthataretemporarilyclosedforthefullmonthareremovedfromsupply.

Supplyestimatesbasedonpropertysurveys,GBCVB,andinterviewswithpropertymanagement

*Totalroominventoryassumesallpropertiesremainopen,exceptseasonalclosuresandpropertiesunderrenovationforgreaterthansixmonths.

1.5MOccupiedRms

$175ADR

62%RoomsSupplyAssumptionYTD

100%RoomsSupplyAssumptionYTD

Twoapproaches…


Boston&Cambridge2020Closures

Source:PinnacleAdvisoryGroup,GreaterBostonConvention&VisitorsBureau

0

200,000

400,000

600,000

800,000

Jan Feb Mar Apr May Jun Jul

AvailableRooms(OpenvsClosed)byMonth2020AsofAugust15,2020

Open Closed


Boston&CambridgeYTDPerformance

Note:TheGovernorofMassachusettsdeclaredastateofemergencyonMarch10.BeginningApril1,hotelswereonlypermittedtoaccommodatetheCOVID-19essentialworkforce,otherworkersrespondingtotheCOVID-19publichealthemergency,andvulnerablepopulations.ThisorderranuntilJune8whenhotelswerepermittedtoreopentothegeneralpublic.Source:PinnaclePerspective*Adjustedtoreflecttotal-roominventorymethodology,assumingnotemporaryhotelclosures.

-61.4%Occupancy

-31.1%ADR

-73.4%RevPAR

7.3%1.9%

-66.1%

-97.5% -97.8% -96.4%-100.0%

-80.0%

-60.0%

-40.0%

-20.0%

0.0%

20.0%


Boston&CambridgePerformancebyMonth

Occ ADR RevPAR Demand


Boston&CambridgeNewSupply2020&2021

Source:VariousDevelopers,Operators,BrandRepresentatives,etc.CompiledbyPinnacleAdvisoryGroupEstimatedopeningdatessubjecttochange.Projectedchangestosupplydonotreflecttemporaryclosures.

Opening2020 Neighborhood Scale Rms Est.Opening

Home2byHiltonSouthBay Dorchester UpperMidscale 130 Aug

907Main CentralSquare Independent 67 Sep

HyattPlaceBostonSeaport SeaportDistrict Upscale 293 Sep

HiltonGardenInnLoganAirport(expansion) EastBoston Upscale 83 Nov

TheNewbury(prev.TheTaj,closedNov‘19) BackBay Luxury 286 Dec

+2.0%2020Increase

+6.0%2021Increase

Opening2021 Neighborhood Scale Rms Est.Opening

HamptonInnBostonSeaport(dual) SeaportDistrict UpperMidscale 245 Q1

HomewoodSuitesBostonSeaport(dual) SeaportDistrict Upscale 166 Q1

TheLangham(closedApr‘19) Downtown Luxury 312 Q1

OmniBostonSeaport SeaportDistrict UpperUpscale 1,055 Mid/Late


GreaterBostonEconomicEnvironment

Source:BureauofLaborStatistics

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

Jan-17

Apr-17

Jul-1

7

Oct-17

Jan-18

Apr-18

Jul-1

8

Oct-18

Jan-19

Apr-19

Jul-1

9

Oct-19

Jan-20

Apr-20

MonthlyUnemploymentRate

BostonMSA USA

-58%

-70% -50% -30% -10%

TotalMining&Logging

ConstructionManufacturing

Trade,Transport,andUtil.Information

FinancialActivitiesProfessional&BusinessServices

Education&HealthServicesLeisure&Hospitality

OtherServicesGovernment

Mass.EmploymentbyIndustryJune2020,12-month%Change


BostonLoganInternationalAirport

Source:MassachusettsPortAuthority

•  2019wasanotherrecord-breakingyearforpassengertraffic.Reaching42.5million,a3.9%increasetoprioryear.Internationalpassengertrafficincreased9.7%.

•  Driven by the negative impacts of the globalpandemic, traffic through Logan Airport hasdecreased60%YTDthroughJune2020.

•  April was an all time low, with less than 100,000passengers. This has increased the last twomonthsreachingover430,000inJune.

•  Expansionplanshavebeensignificantlyreduced;themonorail, two parking garages, and three of theoriginalsevennewinternationalgateshavebeenputonhold.

0

1,000,000

2,000,000

3,000,000

4,000,000


TotalMonthlyPassengers

2019 2020


Boston&CambridgeOfficeMarket,Q22020

Boston Inventory(SF) Absorption(SF) Vacancy%2019 72.0M 1,358,800 7.9%

Q12020 72.4M (154,000) 8.6%

Q22020 72.3M (1,500,000) 10.6%

Source:ColliersInternational

Cambridge Inventory(SF) Absorption(SF) Vacancy%2019 24.5M 582,800 4.7%

Q12020 24.5M 127,300 4.2%

Q22020 24.7M 301,900 4.2%


Boston&CambridgeDemandTrends

Corporate•  Employers-Remoteworking,Travelcuts,Managingrisks•  International–Dampeningtravelactivity•  Economy–Stockpricesvolatile,Chapter11,Uncertainty

Group•  CorporateandSMERFalmostcompletelygonefor2020•  CancellationsnowpushingintoQ1andQ2of2021,especiallyforlargergroups

Leisure•  Schools–Hybridmodelswithvirtualandin-personlearning•  Tourism–Limited,potentialimpactfromnewtravelrestrictionsandquaratinerequirement•  Sports/Events–Sportswithoutfans,eventsandconcertscancelled/postponed

Contract•  Flightanddestinationreductions•  Contractingtolocalcollegesanduniversities


Boston&CambridgeConventionDemandTrends

AsdefinedbyPinnacleAdvisoryGroup,aCitywiderepresentsaneventwith2,000+roomnightsonpeak.DatadoesnotincludeHeadoftheCharles&theBostonMarathonRoomnightsrepresenttotalroomsbookedanddoesnotaccountforattritionorroomsbookedoutsideoftheblock.*AsaresultofCOVID-19,therewerenoeventsheldateitherconventioncentersin2020afterMarch9th.Source:MCCA

0

5

10

15

20

25

30

35

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2015 2016 2017 2018 2019 2020* 2021 2022

ConventionCenterRoomnights&CitywidesOnthebooksasofJuly29,2020

Roomnights Citywides


AsdefinedbyPinnacleAdvisoryGroup,aCitywiderepresentsaneventwith2,000+roomnightsonpeak.DatadoesnotincludeHeadoftheCharles&theBostonMarathonRoomnightsrepresenttotalroomsbookedanddoesnotaccountforattritionorroomsbookedoutsideoftheblock.Source:MCCA

2021:+15%over2019

0

25,000

50,000

75,000

100,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

ConventionRoomnightsAsofJuly29,2020

2019

2021

2022

Boston&CambridgeConventionDemandTrends


Boston&CambridgeADRTrendsPastRecessionRecoveryPeriods

•  ADRdeclined15.2%the12monthsfollowingSeptember11,2001.Ittook68monthstoreturntothelevelsexperiencedforthe12monthspriortotheevent.

•  ADRdeclined12.5%the12monthsfollowingtheFinancialCrisesof2008.Ittook50monthstoreturntothelevelsexperiencedforthe12monthspriortotheevent.

•  ADRdeclinesexperiencedsinceMarcharesignificantlysteeperthanthoseseenduringtheserecessions.

Groupvs.Transient•  Duringpastrecessions,operatorsdiscountratesandutilizeOTAchannelstoincreasedemand.Leisuretravelersare

lookingforthesebargainsalready.

•  Inpriorrecession,groupADRactuallyincreasedatafasterratebecausegroupcontractshadbeennegotiated12+monthsprior.However,withlower-ratedchannelsopentothepublic,meetingattendeesintheblocksoftentimescanceledandrebookedoutsideoftheblock.

Compression•  Compressionnight(marketoccupancyat/above90%)andareresponsibleforthelion’sshareofannualRevPAR

growthdrivenbyADRgains.Cityaveragedapproximately145compressionnightsthelastthreeyears.Withoutcompressionverylittlepricingpower.


Boston&CambridgeProjections2020

2019 2020 %Change

Occupancy 82.5% 28% -65.7%

ADR $261.31 $175 -32.9%

RevPAR $215.61 $50 -77.0%

Reflecttotal-roominventorymethodology,assumingnotemporaryhotelclosuresSource:PinnacleAdvisoryGroup

2020 %Change

40% -52.0%

$175 -32.9%

$70 -67.8%

Assuming10%ofinventoryisofflineatYE:


Boston&CambridgeProjections2021

2020 2021 %Change

Occupancy 28% 45% 58.1%

ADR $175 $195 11.3%

RevPAR $50 $87 75.9%

Reflecttotal-roominventorymethodology,assumingnotemporaryhotelclosuresSource:PinnacleAdvisoryGroup

2021 %Change

50% 25.3%

$195 11.3%

$97 39.4%

Assuming10%ofinventoryisoffline:


TheSilverLiningAlthoughtherecoverywillbeslow,GreaterBostonwillbenefitfrom…• Reductioninnew/existingsupply•  Leisuretravelersoptingfordomestictravelvsinternational•  Solidmixofbusinesswithdiverse,stabledemandgenerators• Drive-tomarket,centrallylocatedinNewEngland

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OUTLOOK 2021 - masslodging.com · 20.08.2020 · OUTLOOK 2021 August 20, 2020 Rachel J. Roginsky,...

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