HVS - 17 October 2017
Transactions in Asia PacificOver the past twelve months from October 2016 to September 2017, HVS has noted close to 240 transactions across Asia Pacific worth approximately US$12 billion. In comparison to the same period the previous year, transaction volume in Asia Pacific has increased by almost 12% with China contributing to 40% of the hotel transaction volume in the region. The largest transaction recorded was the portfolio of over 75 properties under Dalian Wanda China.Over the period from October 2016 to September 2017, Asia Pacific (excluding China and India) witnessed a total hotel transaction volume of almost US$4.4 billion as compared to approximately US$8.6 billion in the previous year. Reasons for slower transactional activity in the region include owners holding onto hospitality assets due to future growth potential, lack of capital strength from buyers, desire to hold onto ownership of marquee hospitality assets, amongst others.Regional Share of Hotel Transaction VolumeWe note that the majority of hotel transaction volume is still directed towards Australia, Japan and South Korea, similar to the previous period of October 2016 to September 2017.As compared to the previous period, hotel transaction volumes in Indonesia, Malaysia and Thailand have seen strong positive growths while Australia, Cambodia, Maldives, South Korea and Singapore have remained fairly stable. Markets such as Japan, Myanmar, New Zealand, Philippines and Vietnam were found to be less active.Investor ProfileWith a share of approximately 24%, the "developer/owner" dominates the hotel transactions in Asia Pacific and the "real estate operating companies" follows closely after at 23.5%.The majority of the investors who invest heavily within the Asia Pacific region are located in more developed countries such as Australia, Japan and Singapore.Read the full article here.
HVS - 10 October 2017
HVS is reminding owners and asset managers of hotels and casinos that have suffered insured losses of profits due to business interruption from the recent hurricanes that HVS has staff experienced in calculating, and supporting the claim for, business income losses. HVS will provide a calculation of the profit lost during the period that is covered under the business interruption period provided for in insurance policies.HVS has one of the largest data bases of information for Florida, Gulf Coast, Puerto Rico and other Caribbean markets in the consulting industry. The data includes market and financial data that can be used for benchmarking actual and projected results. When an entire hotel market experiences damages and closures due to events such as the recent hurricanes, the calculation of revenues lost for an individual hotel must be verified using models that are very similar to those used in the supply, demand and penetration forecasts HVS uses in its market studies and appraisals.With its in-house appraisal, design and affiliated architects HVS can assist in calculating the cost of physical storm damage repairs.HVS Asset Management's Newport, RI office will be leading the business interruption claim service effort. In its normal course of business, we analyze budgets, forecasts, rooms, meetings and catering booking pace, food and beverage, other revenue departments as well as labor and expense levels of all types of hotels and resorts in great detail. Our staff is experienced at reviewing hospitality insurance policies, with special emphasis on the business interruption coverage and requirements. Combining the analysis capabilities of our asset management team with our industry-leading hospitality intelligence and hotel and market revenue forecasting expertise, HVS is the most qualified firm to assist owners and asset managers and their law firms and insurance brokers when calculating the lost income and supporting the aggressive pursuit of business interruption claims. Our methodology will allow our clients to recover the lost profits that they deserve under their insurance coverages.For information contact either Jeff Crowley at +1 305-582-8928 or JCrowley@HVS.com or your regular HVS contact.
The Impact of the September 2017 Hurricanes on the Islands of the Caribbean | By Kristina D'Amico and Leora Lanz
HVS - 27 September 2017
And now, three years later, the Caribbean is feeling the effects of its own chain-reaction of natural disasters, while also trying to educate visitors with the topic of geography.In what appears to be a dynamic and active hurricane period, one of the busiest and most destructive season in decades, some of the islands of the Caribbean have witnessed destruction and evacuations like they've never seen before. And yet, despite these events, many more of the 32 island nations were actually not impacted at all, at least not by the hurricanes. Rather, these islands were affected by the immediate wave of cancelations and bookings, leaving hotel rooms unoccupied and inbound revenue absent.Geography Education is KeyWhich nations need recovery and support?The recent weeks have proven difficult for much of the Caribbean. The world has intently watched on as a series of destructive hurricanes have barreled through much of the region, leaving behind great devastation. While some islands escaped relatively unscathed, many were not as lucky.September 5, 2017, marked the beginning of the Caribbean destruction as Irma, an extremely dangerous Category 5 hurricane, made landfall on the island of Barbuda. The destruction continued as the storm, with maximum winds of 185 mph, passed over much of the Leeward Islands, including St. Martin/Maarten, St. Barthelemy, Anguilla, and the British and U.S. Virgin Islands. Also impacted by Irma's wrath were the Turks & Caicos and Cuba, as well as the Dominican Republic and Haiti to a lesser extent. After days of intense rain, violent wind, and dangerous storm surges, the Caribbean region was left with a devastating aftermath. Islands like Barbuda experienced virtually complete destruction of physical structures, while most others sustained severe damage to landscape, as well as physical structures, and many were left without power. The Prime Minister of Antigua and Barbuda, Gaston Browne, reported that roughly 90% of homes on his island of Barbuda were destroyed. Additionally, the hotel infrastructure on the island was damaged. These islands, which rely heavily on tourism, have been left with massive cleanup as they try to rebuild.Most recently, before reconstruction efforts could even begin to take place, the Caribbean was faced with yet another dangerous hurricane. Hurricane Maria took another hit at the already overwhelmed Leeward Islands, this time focusing its destruction on Dominica. Guadeloupe too fell victim to Maria, as well as both the British and U.S. Virgin Islands again, before the hurricane made landfall in Puerto Rico as a Category 4 hurricane with 155 mph winds. Dominica and Puerto Rico were severely impacted by the storm, both left with intense structural damage, as well as being entirely left without power. Specifically, Hartley Henry, Principal Advisor to Prime Minister Roosevelt Skerrit of Dominica, reported "tremendous loss of housing and public buildings."According to updates provided by CaribbeanTravel.com, the islands in most desperate condition are Barbuda, Dominica, St. Martin/Maarten, St. Thomas, St. John, and Puerto Rico. Still, much of the damage on these islands has yet to be completely assessed. An unfortunately active hurricane season has left much to be repaired in the region, but as many political leaders of the region have expressed, the Caribbean people are strong, and with support from around the world, they will rebuild.Which nations can welcome guests as others repair?Although many Leeward Islands have been devastated by these storms, there are still many Caribbean islands that have not been affected and are happily accepting visitors. According to Caribbean Travel Update, the following Leeward Islands, located between the northeastern Caribbean Sea and the western Atlantic Ocean, are open for business:Antigua: As of September 16, the island reports being open for business, with tours, restaurants, and hotels fully operating. More than 150 other dining locations are welcoming visitors. Around 2,000 of Antigua's hotel room inventory will be available for tourists by the end of October, following summer renovations. However, hotels open year-round are accepting travelers.Nevis: According to a September 22 update from Caribbean Travel Update, Nevis announced that the island did not suffer any significant damage post-Hurricane Maria, and hotels will reopen to guests as early as Friday, September 29.Kitts: Following investigations, the island is reopening to visitors, as it was not affected by Hurricane Maria. Hotels open year-round are completely operational. The island's international airport, Robert L. Bradshaw, resumed flights on September 20.Also available to welcome guests: While Hurricane Maria impacted many of the Leeward Islands because of their location in the path of the storm, the Windward Islands, situated in the West Indies (including Barbados, Grenada, Martinique, St. Lucia, St. Vincent, Trinidad & Tobago, and others), remain unharmed and are welcoming visitors. The Leeward Antilles, including Aruba, Bonaire, and Curacao, are islands that are situated along the southeastern Caribbean Sea and did not suffer hurricane damage. Other unharmed island options for tourists include the main islands of the Bahamas (New Providence and Grand Bahama), Cayman Islands, Jamaica, and the main tourist regions of the Dominican Republic (such as Punta Cana, as the Dominican Republic did not experience a direct hit). Bermuda, located in the Atlantic Ocean more than 1,000 miles out of the recent storms' paths, is also happily welcoming visitors at this time. What should hospitality developers know about climate-change impacts on the region?The Caribbean Basin is dependent on tourism. Unfortunately, the region is vulnerable to climate change and damage to natural resources due to the rising sea levels, erosion of beaches, and extreme weather events. Because of this, many entities and organizations throughout the region were founded on the premise of focusing their attention on improving the region's activities that involve climate change due to the significance of tourism to the national GDP of many of island nations. Instead of hiding from the facts, each island nation has taken the initiatives to develop new construction concepts to make hotel developments more resistant to climate change. A focus on energy production, land-use planning, regulations, and more stringent building codes has helped developers create new hotel products that are prepared for the changing times. Looking ForwardDespite the tragic events of this year, the Caribbean will rebuild, as tourism remains the lifeline for many of these island nations. In the wake of the devastating impact of Hurricanes Irma and Maria on various Caribbean island nations, HVS CHICOS, the Caribbean Hotel Investment Conference and Operations Summit (www.hvschicos.com ), will work with the Rotary Foundation to provide necessities such as water, canned food, and clothing to residents throughout the Caribbean that were affected by these tragic events.The Rotary Foundation has local expertise and a long history associated with operating in the region, specifically on the islands impacted by the hurricanes. The organization has stellar ratings as one of the "Top 10 Charities in the World," according to CNBC, as well as a high Charity Navigator score. Beneficiaries receive 100% of funds donated.HVS CHICOS has made a donation to the Rotary Foundation. The Bermuda Tourism Authority, representing a nation not impacted by the storms, but an island that wants to help its brothers and sisters in the region, has generously matched the HVS CHICOS donation. Given its Atlantic location, Bermuda is more than 1,000 miles out of recent storms' paths, and is fortunately safe and sound, welcoming visitors. Bermuda is also eager to welcome HVS CHICOS conference attendees in November.Those who wish to also contribute to the Rotary Foundation click here. HVS CHICOS Chairman Mr. Parris E. Jordan will serve on the Rotary Foundation's Advisory Committee to ensure that the funds donated will be put to the use they are intended.The authors wish to thank both Catherine Ostuni and Tara Tempesta from Boston University's School of Hospitality Administration for their research and contributions to this article.
HVS - 19 September 2017
In this sixth annual Lodging Tax Study, HVS Convention, Sports, and Entertainment Consulting surveys lodging tax rates and revenues across the United States. Our study includes a broad range of cities and tracks policy trends in lodging tax impositions. This research identifies the lodging tax rates levied at the state, county, city, and special district levels. We provide data on the collection and distribution of revenue from lodging taxes levied in all 50 States and the 150 largest cities in the United States.
HVS - 19 September 2017
The following HVS Market Pulse article details some of the major developments in Charlotte and their impact on the area's hotel industry.Charlotte Economic DriversFinance, technology, and manufacturing, alongside health care and education, serve as the chief economic drivers in Charlotte. Bank of America is headquartered here, and several major entities related to financial services and other industries have projects in the works. Dimensional Fund Advisors will construct its East Coast regional headquarters in South End, a project expected to bring roughly 300 new jobs. AvidXchange recently constructed its 200,000-square-foot global headquarters campus in Uptown Charlotte, and Sealed Air Corporation's $58-million, 380,000-square-foot global headquarter campus just went up near the Charlotte Douglas International Airport. Additionally, JELD-WEN, which already operates an executive office in Uptown Charlotte, will expand to its new, 120,000-square-foot headquarters and training facility in Ayrsley, a mixed-use community located in Steele Creek, just a few minutes southwest of Uptown Charlotte; the build-to-suit development is slated for completion later this year. Expansion projects are also underway or in the planning stages at the University of North Carolina-Charlotte in response to the continued increases in enrollment.Repeal of House Bill 2 (HB2)North Carolina House Bill 2 (HB2 or the "Bathroom Bill"), which passed into law in March 2016, took a heavy toll on Charlotte's economy and pipeline of projects and events. In April 2016, PayPal withdrew plans to open a global operations center in Charlotte. Additionally, the Atlantic Coast Conference (ACC) relocated its December 2016 ACC Championship Game, and the NBA relocated the February 2017 All-Star Game, both of which were planned to take place in Charlotte. The bill was repealed on March 30, 2017. As a result, the ACC Football Championship Game will return to Charlotte in December 2017; moreover, the NBA's 2019 All-Star Game will return to Charlotte, as well. Going forward, the repeal of HB2 is anticipated to contribute to commercial, leisure, and meeting/group demand growth in markets across North Carolina.Charlotte's Lodging Market PerformanceDuring the past three years, hotels in the greater Charlotte area have achieved occupancy levels from the low-to-high 70s. Average daily rates (ADRs) have ranged between $95 and $110, with premium rates in the Uptown and SouthPark submarkets, as well as the Ayrsley and Ballantyne neighborhoods, averaging between $125 and $160. Robust demand from transient corporate travelers and government contractors, as well as strong meeting and group demand growth and a gradual increase in leisure and tourism, boosted occupancy levels and produced healthy ADR gains from 2014 through late 2016. The overall strong performance of Charlotte's hospitality industry has been primarily attributed to the continual diversification of other industries in the area, which has produced varied pillars of demand.Hotel Supply In CharlotteAs of May 31, 2017, the Charlotte lodging market comprised 175 hotels totaling 23,184 rooms; 92% of hotel rooms are affiliated with a brand or a major parent company, while the remaining 8% operate as independent hotels (including the Dunhill Hotel, the Duke Mansion, and the Ivey's Hotel). Of the 21,289 branded hotel rooms, Marriott International (including the recently merged Starwood Hotels & Resorts' brands) operates approximately 29% of the inventory. Hilton Inc., Wyndham Hotel Group, Choice Hotels International, and InterContinental Hotels Group also have substantial representation in this market, ranging between 7% and 19% market share.New SupplySix nationally branded lodging facilities opened in the Charlotte market in 2016, adding 713 guestrooms to the city's hotel inventory, including the Home2 Suites by Hilton Charlotte Airport, the Holiday Inn Express Hotel & Suites Charlotte Airport, the dual-branded Residence Inn by Marriott and Fairfield Inn & Suites by Marriott Charlotte Airport, the Drury Inn & Suites Charlotte Arrowood, and the Home2 Suites by Hilton Charlotte University Area. The Embassy Suites by Hilton Charlotte Uptown, the SpringHill Suites by Marriott Charlotte Uptown, the Hampton Inn & Suites Charlotte/Ballantyne, and the Holiday Inn Express Hotel & Suites Charlotte NE-University Area have opened to-date in 2017, bringing an additional 664 guestrooms to the market. Of the currently 48 proposed hotel development projects in Charlotte, most are anticipated to feature limited-service offerings.While the full-service hotel developments are concentrated in Charlotte's Uptown, South End, and SouthPark submarkets, the proposed limited- and select-service hotels are being planned and developed in submarkets throughout the city. Of the total proposed new supply, three lodging facilities are slated to open in 2017, boosting inventory in Uptown and SouthPark by 486 total guestrooms. Meanwhile, site work or construction is underway on nine hotels, which will contribute an additional 1,092 guestrooms to Charlotte's hotel inventory between 2018 and 2019. The remaining 36 projects are in various stages of planning.Commercial and Residential DevelopmentMixed-use developments featuring office and retail components are currently underway or in the planning stages across Charlotte. These developments are anticipated to generate not only transient corporate hotel demand but also leisure and meeting/group demand for area hotels. City and county officials have focused aggressively on creating a "live-work-play" environment in Uptown Charlotte, which currently boasts the Charlotte Convention Center, a variety of entertainment venues, and corporate anchors such as Bank of America and Duke Energy. The 365,000-square-foot 615 South College high-rise office building, adjacent to the Westin Hotel, opened in late May, while the 630,000-square-foot 300 South Tryon office tower in Uptown is scheduled for completion in 2017. Highly anticipated projects in the planning stages include the 17-acre, multi-phase Brooklyn Village master-planned community in Uptown, which will feature residential and retail components, as well as office towers. The RailYard is a 3.5-acre block in South End that Beacon Partners plans to redevelop into roughly 290,000 square feet of office space and 100 multi-family residential units, with 30,000 square feet of ground-level retail. The 115-acre Riverbend Village mixed-use development is planned for construction in three phases in Northwest Charlotte. Riverbend Village will be anchored by the 78,000-square-foot Harris Teeter grocery store and will boast the $38-million Corning Optical Communications headquarters office, both anticipated to open next year. Charlotte's increasing popularity and career opportunities have also spurred residential growth. Multi-family residential developments are in the works in all four wards (neighborhoods) within Uptown Charlotte. These include Crescent Stonewall Station, which will be anchored by Whole Foods and offer the convenience of the LYNX Stonewall Light Rail Station. This development is expected to feature one twelve-story, 110-unit apartment tower and one five-story, 340-unit apartment building. The Ballantyne neighborhood will boast the Waverly, a mixed-use development featuring both single- and multi-family residential units, as well as a variety of retail venues. Meanwhile, the Steele Creek area continues to experience a boom in single-family residential developments.The FutureProspects appear favorable for the Charlotte hotel market over the next several years. The city's commercial and residential developments are anticipated to fuel continued demand growth from the transient corporate and meeting/group segments, alongside an expected rise in leisure demand. The ongoing diversification of industries within the Charlotte area should continue to strengthen the local economy. Although overall occupancy is anticipated to decline modestly in the near term with the entrance of new supply in 2017 and 2018, ADR growth is expected to remain strong, thereby maintaining RevPAR growth and strengthening demand fundamentals for the area's hotels. As of the time of writing, brand and service levels remained unconfirmed for 16 of these proposed hotel projects.
HVS - 19 September 2017
The Indian hospitality sector has woken up after a longish nap and, it is now time to set the cash registers ringing. While an assortment of influences had repressed the sector's endeavours to grow from 2009 to 2015, last year provided sufficient evidence that the next up-cycle was in the offing. Resultantly, 2016/17 played witness to a year, that has in no uncertain terms been positive on all fronts. Nationwide occupancy was the highest since 2008, countrywide average room rates clocked a clear and measurable increase over several preceding years and the overall supply-demand scale is now tilted squarely in favour of growth in demand outpacing new supply. The time to reap has arrived and industry stakeholders must not lose cognizance of the fact that the inherent cyclical nature of the hotel business would allow this opportunity only for a finite period. Lest we choose to doze off again, it is time for us hoteliers to truly elevate the sectoral performance to the next level. Indeed, Sleep is Silver, but Money is Gold!
HVS - 15 September 2017
AccessibilityBy AirIbiza Airport is the eighth-busiest airport in Spain in terms of passenger arrivals. The airport is seven kilometres from the centre of Ibiza Town, on the southwest tip of the island. The airport opened in 1958 during the great tourism boom in the Balearic Islands. Nowadays, visitors to Ibiza arrive primarily by plane (95% of total arrivals). Some of the airline companies that fly to and from the airport are the following: AirBerlin, AirEuropa, Air Nostrum, BA CityFlyer, British Airways, easyjet, Edelweiss, Eurowings, Evelop, Germania, Germanwings, Iberia, Jet2.com, KLM, Lufthansa, Norwegian Air Shuttle, Ryanair, Skywork Airlines AG, Swifair, SunExpress, Thomas Cook Airlines, Thomson Airways, Transavia.com, Vueling.By SeaThe three main ports are the ports of Ibiza, Santa Eulalia and Sant Antoni. The ferry companies -Balearia, Iscomar and Acciona- sail to the ports of Ibiza and Sant Antoni from different places on mainland Spain. Apart from the ferry crossings, it is also possible to reach the island by private ship, chartered crossings and various cruises. The regular sea crossings reach the island of Ibiza from Barcelona, Valencia, Denia and Palma de Mallorca.Main Regions and AttractionsIbiza old town, the capital of Ibiza island with its walled area (Dalt Vila) declared UNESCO World Heritage Site, located on the south of the city, in the municipality of Ibiza. It is known as the place where the posh night life scene evolves with a plethora of hotels, restaurants and bars bursting around the city featuring the latest trends of the hospitality or food and beverage industry. The city houses the main institutions of Ibiza and offers variety of services for the visitors and residents such as yachting marinas, business zones and hospitals. Some points of interests within area are: Ibiza Old Town, the Necropolis of Puig des Molins, Ibiza City Center, the Port of Ibiza and La Marina district and the Yaching Marina.San Antonio Bay, also known as Sant Antoni de Portmany, is located on the centre west coast of Ibiza. It is the second largest town of the island by means of population and chief leisure entertainment centre targeting the budget traveller and the young holiday makers who is looking for affordable solutions when visiting the island. San Antonio is also famous with its famous Sunset at Ses Variades (Sunset Strip), the villages of Santa Agnes de Corona and Sant Mateu d'Aubarca, Ses Torres d'en Luc Archaeological Site and Cala d'Aubarca Cove, Aquarium Cap Blanc, the churches of San Antonio, the village of Sant Rafael de Sa Creu, Cueva de Ses Fontanelles Cave, the Egg of Colombus.Santa Eulalia, also known as Santa Eularia des Riu is located on the centre east coast of the island and has a long-established reputation as the island's gastronomic and cultural centre. The city boasts several art galleries, some of the island's best restaurants, a picturesque yacht marina but it is widely known for its palm-lined promenade running the length of the broad and sandy beach. This area is considered as one of the quieter and at the same time sophisticated destinations for laid-back holidays away from the party congestion observed in the previously mentioned areas. Es Puig de Missa is the popular sight of Santa Eulalia located on the hill crowned by a church dating back to 16th century. The charming villages of Sant Carles de Peralta, Santa Gertrudis de Fruitera and Jesus, the Markets of Santa Eulalia (Las Dalias and Punta Arabi), Ethnology Museum of Ibiza and Barrau Museum are the other popular attractions and sights.Sant Joan, also known as Sant Joan de Labritja is the most rural part of Ibiza located on the northern part of the island. The municipality hosts the lowest number of inhabitants and offers the wildest natural landscapes, great flora and fauna and with spectacular cliffs that have been declared as a Natural Area of Special Interest. The Settlement of Balafia and Cova de Can Marca Cave some of the attractions in the area.Sant Josep, also known as Sant Josep de Sa Talaia is located on the south west of Ibiza. It is the administrative town and the largest municipality of the island. The municipality of Sant Josep de Sa Talaia is the most extensive on the Ibiza island and the one that boasts the greatest number of beaches within its 80 kilometers of coastline. The town is established under the highest mountain of the island. Sant Josep shares the Playa d'en Bossa beach with the municipality of Eivissa and Sant Antoni's Bay on the west. Playa D'en Bossa is known as the place where some of the most prominent resorts of the island are located. These hotels allocate large resources to the entertainment division by developing designated spaces for this activity within the properties and converting the hotel to a multifunctional space and ultimately a destination by itself.Demand for Transient AccommodationIbiza's Airport has a very high flight frequency in the summer months and a low frequency in the low season, as a result of the market's strong seasonality. According to the Airports Council International 2013 report, Ibiza Airport has one of the highest seasonality ratios in the world. Nevertheless, it seems that this trend is changing as more low-cost carriers launch new routes with higher flight frequencies per week for a number of destinations. During the last 11 years, there has been a remarkable growth in international arrivals while domestic arrivals also grew in a more moderate pace. More specifically during the examined period, international and domestic arrivals have recorded a CAGR by 6.4% and 5.3% respectively. It is worth mentioning that only during the last year international arrivals in the island grew by almost 20% showing the potential of the island. As at the end of March 2017, three new routes were added: Sevilla, Edinburgh and Rome- Fiumicino. The routes will be operated during the summer schedule.Ibiza International AirportBasic Visitation FactorsTotal visitation to Ibiza and Formentera increased significantly from 2011 to 2016, reaching three million arrivals in 2016. This increase was primarily driven by international demand, which accounted for 78.5% of total arrivals in 2016 while domestic visitation has remained relatively stable during this period with a slight decreasing trend. Pre-bookings for 2017 show that this growth in arrivals is expected to continue the following year. Overall, statistics show that nearly 97% of all visitors are travelling to Ibiza for leisure and holiday purposes, a trend which has been consistent over recent years.Ibiza and Formentera are served by the same airport, therefore arrivals in all types of accommodation refer to both destinations. With a population of just over 7,000 and no airport, Formentera is usually quieter than its neighbor Ibiza. The island of Formentera can be reached by regular feries from the Estacion Maritima in Ibiza Town but also by tourist ferries from other parts of Ibiza during high season. Formentera has a total of 17 hotels,with 2,404 beds, 12 out of which are classified as one, two and three star properties, five are classified as four-star hotels while the island does not feature any five-star properties.The breakdown of arrivals depending on the type of accommodation is depicted in Figure 3. The CAGR for the period 2011-16 was 4.8%, driven both by the increase in arrivals in hotels and similar establishments but also by the rise of sharing economy as an accommodation choice and the subsequent increase in the number of travellers choosing to stay in rented apartments.Main Source CountriesIbiza had always been a popular destination among British and 2016 has been a record-breaking year for arrivals from the UK with almost 840,000 British, 12% up from 2015, visiting the region representing 27.7% of total. For the domestic market, Ibiza is a traditional summer destination and is well connected by plane and boat, thus it is the second most important feeder market to the island. Given the country's post-crisis economic growth, Spanish people have witnessed an increase in the domestic income giving them the opportunity to travel again to to expensive destinations like Ibiza. For 2016 Spanish tourists represented almost 22% of total visitation followed by Italians with 13% and Germany with almost 11%.SeasonalityThe seasonality in Ibiza is very pronounced with the peak season being in the summer months as the island is mainly a sun and beach destination. Figure 5 depicts the seasonality pattern of the island for the last four years based on monthly arrivals in all types of accommodation. Minor changes have been recorded to the visitation pattern of the island during this period putting a strain on the hotel industry which mainly operates from April to October. Local or regional authorities and private enterprises are trying to alter this situation by undertaking a series of measures to lengthen the tourism season like the increase of number of direct flights towards various destinations during the shoulder months, the strongest positioning of Ibiza in various niche markets (wellness, mice, adventure) by targeting sophisticated travellers seeking for differentiated experiences or the opening to new markerts that do not travel exclusively during the summer peak season and are attracted to alternative forms of tourism that could be developed off season.Hotel SupplyFigure 6 summarises hotel supply in Ibiza over the past eight years. The table below accounts for star-rated hotels only and thus excludes other types of accommodation, such as aparthotels, hotel residences, camping facilities and pensions.The majority of hotel units are of one-star, two-star or three-star classification; however, five- and four-star hotel units together constitute the ones with a significantly considerable number of available rooms and beds. During the examined period , development of five-star and four-star units has recorded significant growth demonstrating the evolution of the island to a high-end destination . In general, five-star hotel rooms and beds in Ibiza have almost doubled in number during the period of 2009-16 revealing the intensive investment interest in the region by hoteliers and investors. In 2016 the average room number of a five-star hotel was 231 while average bed number was 457. Both numbers are significantly higher than the average hotel size in 2009 (63 and 126, respectively).Branded PropertiesDespite the fact that Ibiza is considered as one of the most upscale leisure destinations within Europe, almost none international high-end brand has presence in the market. The majority of hotel properties in the island, are currently operated by Spanish companies using local brands with some of the most prominent being the following:Palladium Hotel Group is a multinational corporation established over forty years ago with the aim of promoting the island of Ibiza in Spain and across Europe. Over the years it has cemented a position as one of the best-known Spanish companies worldwide. In Ibiza they currently operate 11 properties in various locations around the island under the following brands; five under the Palladium Hotels brand featuring four-star and five-star properties dedicated to family or couple holidays with all-inclusive options; four under the Fiesta Hotel and Resorts brand featuring three-star beach hotels and resorts on the sea front targeting families and couples; one under the Ushuaia Beach Hotel brand, a five-star luxurious music-themed resort targeting young, sophisticated clubbers and one under the Hard Rock Hotel brand, a five-star property which is the first Hard Rock Hotel in Europe and franchise of the Hard Rock International Brand, operated by Palladium Hotel Group. Hard Rock Hotel with 485 rooms and Ushuaia Beach Hotel with 417 rooms, both located in Playa d'en Bossa, were former three-star properties which following extensive remodelling and refurbishment were converted to five-star resorts and since then are considered to be among the leaders of hospitality in the island in terms of innovative design, music events, operational performance and high-end services.Melia Hotels International is a local hotel company with significant international presence. It is largest hotel chain in Spain in both resort and city hotels. The company currently operates more than 370 hotels in 43 countries and 4 continents under its brands: Melia, Gran Melia, ME by Melia, Paradisus, Innside by Melia, TRYP by Wyndham, Sol Hotels and Club Melia. The company features three hotels in Ibiza; two four-star properties under the Sol Hotels brand totalling 514 rooms and one five-star under the ME by Melia brand totalling 205 rooms.Insotel Hotel Group, currently has nine hotel complexes with prime beach front locations on the islands of Mallorca, Menorca, Ibiza and Formentera (Balearics, Spain). In Ibiza they operate three properties; two five star properties totalling 568 rooms and one four-star property featuring 172 rooms.Pacha Group, the Ibiza-based company behind the world-famous nightclub franchise which has been recently sold to venture capital firm Trilantic Capital Partners for EUR350 million and is considered to be the pioneer of entertainment in Ibiza operates two properties in the island; the four-star hotel El Pacha with 55 rooms and the four-star Destino Pacha Ibiza Resort with 164 rooms.Hotel Montesol in Ibiza town was the first hotel in Spain opened under the 'Curio' brand by the Hilton Group, the only international brand with presence in the island. It opened in 2016 the 'Gran Hotel Montesol Ibiza' and has 33 rooms while it is one of the few properties in the island open all year round.Following the remodelling of an already existing property Iberostar Hotels and Resorts entered the market of Ibiza in 2016 with a four-star hotel located in Santa Eulalia featuring 188 rooms.Recent and Forthcoming Tourism DevelopmentsIbiza's most recent addition five-star supply is Nobu Hotel Ibiza Bay, a member of Nobu Hotels which opened on 30th June 2017 on Talamanca Bay. The hotel features 152 rooms and is operated by MC Hotels;Sir Joan hotel, a five-star property located on Talamanca opened in June 2017 and features 38 rooms;7 Pines Resort, a five-star resort complex due to open in 2018. Located above Cala Conta Beach, in the southwestern part of the island, 7 Pines Resort Ibiza will offer a choice of three villas, 42 suites and 160 apartments, accommodating a maximum of 500 guests. Some of the holiday properties also offer private plunge pools and spacious terraces.Cine Serra, a former cinema located in Ibiza city will open as a five-star hotel in 2018 featuring 50-60 rooms.Six Senses Hotels Resorts Spas has announced the development of Six Senses Ibiza. Expected to open in 2020, the resort is located on the northern tip of Ibiza, Spain in the Cala Xarraca B. The resort will feature 134 rooms and nine private villas for sale located above the resort.It is rumored that several other high-end brands are looking for investment opportunities in Ibiza's hotel market.High-end Hotels PerformanceFigure 7 summarises the important operating characteristics of a sample of high-end hotels in the broader region of Ibiza. The chart sets out the average occupancy, average room rate, and rooms revenue per available room (RevPAR) for a sample of 13 major upscale hotel properties representing in total 2,896 hotel rooms. For consistency reasons, despite the seasonal operation of the specific hotels all occupancy percentages refer to 365 days of operation.Performance of the selected hotels in Ibiza throughout the examined period is showcasing a constant improvement. During the last four years occupancy and average rate have witnessed a CAGR of 17% and 1% respectively leading to cumulative increase of the RevPAR by 19%. Occupancy levels have remained relatively stable throughout this period due to the seasonal limitations the area is confronting. At the same time, the island is witnessing an unprecedented growth which is clearly reflected in the performance of the average rate. By not being able to absorb the demand during the high season, hotel executives are constantly pushing for higher rates leading to the increase of the average rate for 2016 to over EUR400. Aggregated seasonal occupancy for 2016 was recorded at 79% for 183 operating days . Three top performers in the market reached occupancy levels between 78% and 82% and ADR between EUR500 and EUR650. Preliminary data indicate that this growth in the average rate is going to continue the upcoming season. The island's continuous progress has also resulted in an increased appetite for hotel investments in the area which has led to the introduction of several high-end properties in the hotel market supply. Nonetheless, the region lacks a significant number of international hotel brands which could boost its upscale profile and recognition, thus leading to even higher levels of sales efficience and operating performance.ConclusionIbiza is a well-established destination with strong levels of occupancy and a high number of repeated guests, mainly in the summer months. Over the past years, the destination has managed to differentiate itself from its previous reputation as an island mainly offered for low-budget, party-centric holidays and is now considered as one of the most upscale destinations within Europe. Despite the highly-priced holidays that Ibiza offers, seasonal occupancy especially in the most famous parts of the island, reaches peak levels which leads to a very congested destination making it hard for tourists to move from one place to another. Due to the high levels of tourist demand, new international flights are announced on a yearly basis while the destination is in the process of penetrating new prosperous markets. UK is Ibiza's main international source market and therefore generates the strongest demand. However the recent Brexit has created concern for the future of the specific market in the island and the impact it will have on the visitors' travel patterns. With all the recent high-end tourism-related developments in the island, ranging from luxury meditation retreats on the north to music-themed sophisticated resorts in the south, we can easily justify why Ibiza is included in the prime leisure destinations in Europe. During the last decade lower category hotels have been either closing or reconverted to high-end properties. This, combined with the absence of branded properties and the efforts that are being made to overcome the seasonality issues, witnesses that Ibiza is yet to unfold its full potential as a leading destination.
HVS - 14 September 2017
Please note that the study results are not indicative of the impact an individual brand may have on a hotel's overall profitability because only the costs, and not the benefits of the franchise affiliations, have been analyzed. Furthermore, the study does not reflect, nor does it claim to address, operating results of any one brand or any particular brand affiliation upon any single hotel property. The 2016/17 U.S. Franchise Fee Guide is meant to illustrate a basic comparison among franchise fees charged by participants.HVS has extensive experience with assisting clients in selecting the appropriate franchise and/or management brand for their proposed or existing hotels. This service also includes assisting with or managing the negotiations in coordination with experienced attorneys and other industry professionals.Types of Hotel Franchise FeesBrand attributes play a crucial role in a hotel investor's choice of franchise affiliation. When evaluating a potential hotel franchise, one of the important economic considerations is the structure and amount of the franchise fees. Second only to payroll, franchise fees are among the largest operating expenses for most hotels.Hotel franchise fees are compensation paid by the franchisee to the franchisor for the use of the brand's name, logo, marketing, and referral and reservation systems. Franchise fees normally include an initial fee with the franchise application, plus ongoing fees paid periodically throughout the term of the agreement.Summary of FindingsDisclaimerHotels are complicated investments. Selecting an appropriate franchise affiliation for a property entails exhaustive research and investigation by an investor. The information presented in this guide was developed to provide insight into franchise-fee structures and should not be relied upon by an investor other than as a preliminary resource. HVS has researched and gathered data from authoritative sources, and all efforts have been made to verify the accuracy of these data; however, given variances in reporting methods and franchise terms, HVS cannot guarantee the accuracy of all the data contained in this study. Finally, it should be noted that the 2016/17 version of this guide is not necessarily comparable with previous versions because of the new methodology of calculating franchise costs, which considers historical data for each brand and does not subject all brands to uniform assumptions.Click Here for a Complimentary Copy of the 2016/17 HVS Franchise Fee Guide
HVS - 13 September 2017
Hotel Market Update on TaiwanWith increasing strained relations between Beijing and Taipei, Taiwan has been reducing its dependency on mainland China by improving its tourism relationships with other countries. Though the number of Mainland Chinese visitors fell dramatically, the number of visitor arrivals to Taiwan decreased only modestly in the second quarter of 2017 to 2.6 million. Visa exemptions to Southeast Asian visitors, improved air connectivity, and promotions around the country's tourist spots have expanded the scope and diversity of Taiwan's tourism economy. Overall, arrivals from all the major feeder markets except mainland China experienced growth.Overall Visitor ArrivalsMainland China continues to be the largest feeder market to Taiwan with 23.4% of the market share; however, the number of Chinese visitors has dwindled by 37.9% to 605,000 this quarter from 974,000 in the same quarter last year. This registers by far the lowest number of Chinese tourists visiting Taiwan since 2012. Since the Democratic Progressive Party's Tsai Ing-Wen took office as President in May 2016, the tension in cross-strait relations has increased. As such, mainland Chinese visitation and expenditure levels in Taiwan were severely affected.To offset the steep fall in mainland Chinese visitors, Taiwan pushed for better relationships with other feeder markets, especially Southeast Asian countries. Excluding mainland Chinese visitors, overall visitor arrivals to Taiwan recorded a strong 21.0% YoY growth in visitor arrivals in the second quarter of 2017 given the relaxed visa policies for ASEAN member states. Starting from September 1st 2016, passport holders from ASEAN member states (Cambodia, Indonesia, Laos, Myanmar, the Philippines, and Vietnam) and India can benefit from a 30-day visa-free stay in Taiwan if they have previously obtained visas from any of a number of designated countries including Australia, Canada, Japan, Korea, the United Kingdom, and the United States in the past decade. The results of this initiative are now being realized through the remarkable growth seen from these countries in this quarter. Specifically, Vietnam recorded an impressive YoY surge of 119.2% to about 100,000 visitors, compared to last year with only 46,000 visitors. Malaysia, which accounts for a 4.9% of market share, registered a 21.0% YoY increase to 128,000 travellers; while its neighbour, Singapore, which accounts for a 4.0% market share, recorded a 7.3% YoY increase to 102,000 visitors. The Philippines and Thailand also encountered impressive surges of 94.5% and 72.8%, leading to 85,000 and 79,000 visitors, respectively. Notably, these visitors also include a share of workers for Taiwan's many factories.In the second quarter of 2017, Taiwan received about 467,000 visitor arrivals from Hong Kong and Macau, a 23.2% YoY increase from same period last year, making them the second largest source of foreign visitors with 18.1% market share. Taiwan has always been one of the top choices for Hong Kong travellers, due to its location and affordable airfare options. Similarly, accessibility to Taiwan for Macau residents has greatly improved with initiatives such as streamlining the permit and visa application processes, as well as opening new flights with budget airline options by Tiger Air and Far Eastern Air Transport.Apart from targeting Southeast Asian countries and the two Special Administrative Regions of China, the county's tourism industry also reached out to other countries, as a way to mitigate the shortfall from mainland Chinese visitors. Japan recorded a 2.4% YoY growth to 415,000 travellers, while Korea recorded a growth of more than 25.2% to 236,000 visitors. The growth from Korean visitors had been facilitated by the increasing presence of Taiwanese tourist sites in Korean television shows and films, as well as the improved air connectivity with more direct and budget flight options. Finally, the fifth largest source of international visitors, the United States, registered a 11.0% YoY increase to 149,000 visitors, accounting for 5.8% of market share. These trends show a successful rebalancing of the Taiwanese tourism economy to other source markets, supported by favorable government policies.Taiwan Hotel Market PerformanceIn the second quarter of 2017, the overall Taiwan hotel market experienced a negative YoY growth in RevPAR. The compound annual RevPAR growth rate from 2014 to 2017 of Taipei hotels was -4.6%, Kaohsiung hotels -2.9%, and Taichung hotels -0.7%.The Taipei hotel market registered 71.1% occupancy, a 2.3 percentage point increase from last year. Average rate decreased to NT$4,361, while RevPAR attained NT$3,102, a 1.2% YoY decline. Thus, the rebalancing of the tourism economy did come at the cost of average rates among Taipei hotels, partially offset by higher occupancy levels.The Kaohsiung hotel market registered 61.1% occupancy, an 8.5 percentage point YoY decline. Meanwhile average rate dropped to NT$2,297, and RevPAR registered NT$1,405, a drastic 14.4% YoY decline. Kaohsiung in the past had benefitted from mainland Chinese tour groups that travelled around the island. Visitors from growth feeder markets tend to stay in Taipei only or take shorter excursions.The Taichung hotel market registered 65.3% occupancy, a 1.8 percentage point YoY decline. Average rate slightly increased to NT$2,427, while RevPAR registered NT$1,585, a 1.3% YoY decline. Taichung, due to its business activity, was less exposed to the change in visitor arrivals, however, did register a modest correction.Overall for the first half of 2017, the slow growth of visitor arrivals to Taiwan and the weakening hotel performance can be mostly contributed to the drastic decline of Chinese travellers. Moving forward, the trend of a decrease in Chinese tour groups is expected to continue until the end of 2017. The increase in visitation from other, regional source markets will help to partially offset this trend. In the long-term, Taiwan needs more innovation in its tourism resources to be a strong contender in capturing higher-rated FIT demand.
HVS - 12 September 2017
The fifth edition of the Indonesia Hotel Watch highlights Indonesia's current hospitality landscape, analysing domestic and international demand and hotel supply dynamics of classified and non-classified hotels.
HVS - 12 September 2017
Silicon Valley has previously been noted as one of the fastest-growing urban economies in the United States. Unemployment in this market has continued to decline since the recession, closing out 2016 at 3.8%, down from 4.3% in 2015 and 5.3% in 2014, approximately 1.1% lower than the national average. However, venture capital investment in the region has begun to show some slowdown, with deal activity at an eight-quarter low in Q4 2016, and remaining relatively flat in Q1 2017. According to REIS, the supply for office space has begun to outpace demand, with vacancy rates projected to increase to 17.2% in 2017, up from 16.8% in 2016 and 15.9% in 2015. However, average asking lease rates continue to improve and are currently at the highest levels achieved during the last decade, with sustained growth anticipated through the near term. Meanwhile, airlift throughout the greater San Francisco Bay Area has also improved, with year-over-year increases in passenger traffic at the airports in San Francisco, San Jose, and Oakland. Major indicators for the second quarter of 2017 reflect continuation of these trends, which bodes well for the market's lodging industry.Commercial DevelopmentsTech companies continue to dominate the local economy of Silicon Valley, with a number of key employers expanding and investing in new office space and operations. Although some construction is still ongoing, Apple's new $5-billion headquarters, located approximately one mile east of the current campus in Cupertino, opened in April 2017. When completed, Apple Park will house more than 12,000 employees in a four-story circular building that totals roughly 2,800,000 square feet.In June 2017, Google announced tentative plans to develop up to six million square feet of office and R&D space with Trammel Crow near the Diridon Transit Station in San Jose. The San Jose City Council has agreed to negotiate exclusively with Google for the sale of 16 parcels on Montgomery and Autumn Streets. While negotiations have been tentatively scheduled through July 2018, an application to begin the project's development and land-use entitlements following the completed sale could also take an extended period of time, with construction not likely to commence for at least another two years.On the north side of Silicon Valley, Facebook, located in Menlo Park, is also looking to expand with its new Willow Campus. In its initial plans submitted to the Menlo City Council in early July 2017, the mixed-use development integrates its office expansion plans with a grocery store, a pharmacy, and 1,500 housing units, of which 15% will reportedly be offered at below-market rates. Facebook has reportedly pre-leased 700,000 square feet of office space currently under construction adjacent to the 250-room Hotel Nia, Autograph Collection, which is also under construction near Marsh Road and U.S. Highway 101.In May 2017, LinkedIn presented plans for a new East Whisman office campus in Mountain View, totaling nearly 1.1 million square feet. The initial plans call for the construction of three new, six-story buildings, as well as merging several existing office buildings and parcels into the site, creating a new headquarters for the company.Peninsula Corridor Electrification Project - Caltrain ModernizationConcurrent with improvements to the greater San Francisco Bay Area's economy, Silicon Valley has realized a substantial increase in population over the last decade. According to the 2017 Silicon Valley Index, Silicon Valley's population (San Mateo & Santa Clara Counties) grew 7.5% between 2010 and 2016, more than 2% higher than the average population growth for the state of California. As the local population continues to grow, Caltrain has experienced a similar increase in ridership, with strong year-over-year increases in weekday commuters between 2011 and 2016.To accommodate these increases in ridership, as well as to mitigate delays and improve service, Caltrain has announced a $2-billion modernization program that includes electrifying 51 miles of track, converting diesel-hauled to Electric Multiple Unit (EMU) trains, and implementing a new control system; benefits include more frequent trains, as well as doubling ridership capacity. When completed in 2020/21, the project will upgrade the performance, efficiency, capacity, safety, and reliability of Caltrain's commuter rail service. Although the line is anticipated to be utilized primarily by residents, it should ease traffic congestion and facilitate transportation throughout Silicon Valley and the San Francisco Peninsula.Hotel SupplyAccording to Smith Travel Research (STR), Silicon Valley's hotel inventory currently comprises roughly 46,800 rooms across nearly 420 properties. Of this set, approximately 60% belong to a brand or major parent company, with the remaining 40% operating as independent hotels. Of the roughly 38,000 branded rooms, Marriott International and Hilton Inc. combined operate approximately 48%. InterContinental Hotels Group, Hyatt Hotels Corporation, Wyndham Hotels & Resorts, and Extended Stay America also have sizeable representation in the market, ranging between roughly 4% and 8% market share.Based on recent HVS surveys of market participants, the greater Silicon Valley market achieved significant year-over-year RevPAR growth between 2010 and 2016. However, occupancy has begun to moderate downward, attributed to the entrance of new supply. Furthermore, San Francisco's Moscone Center is currently under renovation, resulting in less compression and fiercer competition for meeting and group demand between hotels in the San Francisco and Silicon Valley submarkets. Similarly, average rate growth has also experienced a modest slowdown, partially attributed to the normalization of rates in the first quarter of 2017 because of the Super Bowl's inflated rates during the same period last year, as well as further discounts to attract and maintain group demand. However, with occupancy close to capacity on Monday through Thursday nights, local operators will likely continue to pursue a rate-driven strategy through the near term.The greater Silicon Valley market continues to be driven by strong weekday demand from major corporate accounts, such as Google, Apple, Facebook, Oracle, LinkedIn, eBay, PayPal, and Samsung. While weekend demand continues to remain a challenge in most submarkets throughout Silicon Valley, with rates discounted significantly to sustain occupancy, Levi's Stadium drew a crowd of 71,088 fans for Super Bowl 50, selling out a number of hotels throughout the San Francisco Bay Area. Reportedly, the event attracted over one million visitors to the Bay Area in late January/early February 2016.The following table illustrates a list of new hotels that have opened since January 2014.As previously described in our 2015 article, the market is starting to see a significant increase in new supply, particularly in the select-service and extended-stay products that cater to Silicon Valley's strong commercial and group market segments.Opened in September 2015, the Aloft Santa Clara is located on the far north side of the city, proximate to the 430,000-square-foot America Center office development. The Clement Hotel Palo Alto is a high-end, exclusive boutique hotel located on the western edge of the city. Featuring a unique luxury product, this property is owned and managed by Pacific Hotel Management, which also owns and operates the adjacent full-service Westin and Sheraton properties. One of the first hotels to represent the brand's new Del Sol Prototype, the La Quinta Inn & Suites Morgan Hill features a distinct design meant to maximize revenue per square foot while maintaining a competitive cost per key. After numerous delays, the AC Hotel by Marriott opened in early 2017 in Downtown San Jose. This property is the first of several AC Hotels currently under development in the greater San Francisco Bay area. Opened in March 2017, the Courtyard by Marriott Redwood City was developed by OTO Development; with five other hotels, including three Marriott- and two Hilton-affiliated properties, in various stages of development in just the greater Silicon Valley market alone, it's no surprise that the Spartanburg-based company recently was named Marriott International's 2017 CONNECT Developer of the Year and Hilton's Focused Service Developer of the Year.New SupplyAs Silicon Valley maintains its status as one of the top-performing lodging markets in the United States, developers continue to propose new projects, despite the high barriers to entry and challenging entitlement processes in California. Some of the proposed projects have recently broken ground, while others have received preliminary approval, received entitlements, and/or are facing substantial hurdles that will require a lengthy development timeline. Of the 85 hotels (roughly 13,150 rooms) that have been proposed for development, 25 projects (approximately 4,000 rooms) have begun site work, broken ground, or are currently under construction.With numerous commercial and residential projects under development in the greater San Francisco Bay Area, construction costs have been increasing significantly year-over-year. According to JLL's 2016 Q4 U.S. Construction Outlook, cities in the Bay Area trail only New York in terms of building costs. As such, many hotel developers have turned toward branded limited-service, select-service, and extended-stay properties that favor lower development costs and efficient layouts of the guestrooms, public spaces, and back-of-house areas. Some notable projects currently under construction include the following: Located within the Menlo Gateway mixed-use development, the Hotel Nia, Autograph Collection is a luxury, full-service hotel that is expected to cater to Silicon Valley's individual business travelers. Managed by Sage Hospitality and offering 20,000 square feet of flexible meeting space, the eleven-story hotel will benefit from its proximity to major employers in San Mateo County, such as Facebook and Amazon, when it opens in early 2018.The Hyatt Centric is part of the second phase of development at the 56-acre The Village at San Antonio Center. The 168-room hotel is being built in conjunction with two six-story office buildings totaling 448,000 square feet. The Embassy Suites by Hilton is part of the first phase of the Bay 101 Technology Place development. The seven-story hotel is being built adjacent to site of the Bay 101 Casino relocation. The second phase of development will reportedly include a nine-story, 242,000-square-foot office building; a ten-story, 240-room hotel; and an eight-story garage with 1,325 parking stalls.The Grand Hyatt SFO represents a partnership between the San Francisco International Airport and Hyatt Hotels Corporation. This 351-room hotel will be built on the 4.7-acre site of the former Hilton Hotel that was razed in the mid-1990s. With a ground-breaking ceremony held late June 2017, construction on the new hotel is expected to be completed by July 2019. Located at the entrance of the SFO, the hotel will reportedly be built to LEED Gold standards and feature 15,000 square feet of meeting space, a Grand Club lounge, a full-service spa and health club, and an indoor pool and whirlpool. The hotel will also feature direct access to the airport's AirTrain light-rail system.Hotel TransactionsWhile transaction activity in Silicon Valley has slowed somewhat since the sales frenzy in 2014, a noticeable shift has occurred from the transfer of select-service and extended-stay hotels to full-service properties. As one of the last cities left in the Bay Area with significant portions of land available for new development, San Jose has become Silicon Valley's newest hotspot. Within the last year, Downtown San Jose has seen the sale of many of its major hotels, including the Hyatt Place, Westin, Hilton, and Marriott. In anticipation of major commercial projects, such as Google's San Jose Diridon development, real estate investment trusts (REITs), private investment funds, and ownership groups have been quickly targeting these strong, nationally branded hotels that cater toward corporate accounts and group demand.Other major transactions within the last two years include The Blackstone Group's sale of the Ritz-Carlton Half Moon Bay to China's Anbang Insurance Group Co. as part of the Strategic Hotels & Resorts portfolio; the Sofitel San Francisco Bay (now rebranded as a Pullman Hotel) purchased by CBRE Global Investments; and the Marriott San Mateo San Francisco Airport, acquired through a subsidiary of Oracle in September 2016. While the sales of select-service assets have slowed significantly, Hersha Hospitality's 2016 purchase of T2 Development's Courtyard by Marriott in Sunnyvale at a price of over $500,000 per room illustrates how desirable these efficient, strong cash-flow performing assets continue to be.As noted in our previous 2015 article, investors that are eager to enter the market are willing to purchase properties needing renovation, repositioning, and possible rebranding, rather than working through the lengthy development process or undertaking riskier new construction projects. Some notable conversions include the renovation and rebranding of the former Four Points by Sheraton to the Aloft brand in southwest San Jose, the repositioning of the former Sofitel San Francisco Bay to Accor's Pullman Hotel, and the conversion of Milpitas' former Beverly Heritage Hotel to the full-service Sonesta Hotels & Resorts brand. Within Silicon Valley's limited-service sector, there have been a number of properties that have dropped their brand affiliations to be repositioned as small, boutique hotels. These include the conversion of the former Quality Inn to The Nest Palo Alto, the former Days Inn to The Palo Alto Inn, and Mountain View's former Best Western Plus to the Mountain View Inn. Given the current strong demand in cities such as Palo Alto and Mountain View, some owners are able to eliminate franchise fees and still maintain reasonable RevPAR levels.The Silicon Valley market remains one of the strongest lodging markets in the United States. Supported by a diverse economy, the market will benefit from the planned developments and expansions at numerous major employers that will improve upon the existing foundation for future economic growth. Despite the anticipation of new supply, record levels of demand have allowed operators to continue to push average rates. Overall, the near-term outlook for the Silicon Valley market remains positive. PwC MoneyTree Q1 2017
Kais Mbarek of Melia Dunas Beach Resort and Spa Awarded Inaugural THINC Africa General Manager of the Year
HVS - 6 September 2017
The inaugural THINC Africa Awards were designed to honour and celebrate the best hotels, professionals and students in the industry. The winners were announced at the second annual THINC Africa conference, on Wednesday night."Congratulations to the winners! The THINC Awards are our way of promoting the very best in Africa to ensure the rest of the world is aware of the extraordinary experiences they can enjoy when the visit this great continent," said Tim Smith, managing partner of HVS in South Africa. "It is up to the industry to nominate the hotels and people they believe are deserving."The award categories are:Hotel of the Year Award - The nominations will be categorised by positioning and rated on both qualitative and quantitative measures.General Manager of the Year Award - General Managers will be categorised by the hotel's positioning and rated on qualitative and quantitative measures.Student of the Year - To celebrate and promote the best of the next generation in the industry, the shortlisted students will be given free entry to the conferenceAnd the winners are:Student of the year: Aldair Borges, Stenden University Port AlfredHotel of the Year: The Maslow Hotel Johannesburg South AfricaGeneral Manager of the Year: Kais Mbarek, Melia Dunas Beach Resort and Spa in Cape Verde.Special Recognition Hotel of the Year: Once in Cape TownSpecial Recognition GM Chris Godenir: The Peninsula All-Suite Hotel in Cape TownSponsor Ecole Hoteliere Lausanne (EHL) has given prizes to the winners:Summer Academy for Student of the Year1 x 50% Scholarship on MBA online (or Advanced Certificate Online) for GM of the Year10% Scholarship for all staff of The Hotel of the Year for single Certificate or Advanced Certificates."For both Hotel of the Year and General Manager of the Year, we asked for self-nominations. The quality of the nominations was exceptional in both categories, right across the continent," says Smith, who launched the South African arm of the global hotel valuation and investment consultancy in 2015. "We want to give Special Recognition Awards to one hotel and one general manager who've gone over and above their line of duty for the work that they've done. They are exceptional guys that deserve the recognition."Smith emphasises that it is important to give back to the industry. "For the Student of the Year we would like them to receive amazing opportunities; for GM of the Year, opportunities to further enhance their CV and boost the performance of their hotel with acknowledgement of great service and guest experience. And for Hotel of the Year, global exposure to highlight some of the best hotels in the world are in Africa. This is our way of acknowledging greatness and thanking them for all they do for our industry." he says.
HVS - 6 September 2017
Through this IHW 2017 publication, we present detailed research and unbiased opinions to encourage data-driven fundamental analysis to take lead in the decision-making process. We have analysed the overall hospitality landscape in Indonesia, highlighting the demand and supply dynamics and future growth potential. Given the strong growing domestic middle class, HVS has decided to provide greater insight on its growth in Indonesia. 2017 started on a sluggish note but is expected to improve following a strong 5% GDP growth in 2Q2017. Of the ten markets we track, five markets have positive RevPAR change from 2015 to 2016. In addition, three markets are forecasted to have positive RevPAR growth for 3-year CAGR. Special thanks to our Singapore and India teams for their efforts in the preparation of this publication.
HVS - 5 September 2017
In this sixth annual Lodging Tax Study, HVS Convention, Sports, and Entertainment Consulting surveys lodging tax rates and revenues across the United States. Our study includes a broad range of cities and tracks policy trends in lodging tax impositions. This research identifies the lodging tax rates levied at the state, county, city, and special district levels. We provide data on the collection and distribution of revenue from lodging taxes levied in all 50 States and the 150 largest cities in the United States.
HVS - 29 August 2017
What makes some hotels more successful than others? It is true that the selection of a site, market, brand, and management team are crucial to the success of a property. But after many years at HVS in the Consulting & Valuation division, and hundreds of consulting assignments later, I contemplated the question, "Aside from these things, what really makes some hotels work?" In this article, I share what I believe to be some of the most important factors that must be considered in the acquisition or development of a hotel, which ultimately lead to a property's financeability, profitability, and long-term success. I have focused on owners, developers, or hospitality teams that consistently outperform the market with their acquisition or development projects, and have set to distill their priorities into an easy-to-understand summary. While some of the points below may not be anything new to some, it is important to keep in mind that it is the fact that these are considered a priority, not an afterthought, that leads to the success of hospitality projects.1. Proximity to Demand GeneratorsWe have all heard the real estate adage "location, location, location." While this remains true for hotels, nothing is more important to a hotel than its proximity to demand generators, as well as understanding the depth of those demand generators. For example, let's take a major U.S. market like Manhattan, where a hotel's demand generators are likely to be in the same building, on the same block, or in the immediate area. Companies in Manhattan often establish negotiated rates with hotels that not only meet their needs, but that are also located near their offices. They will likely turn down the opportunity to send their clients to a better hotel if its farther away, as this will add extra traveling time, along with transportation and safety implications to their employees. Now, of course, this scenario changes in other cities that are less dense, but it still holds true; hotel development is frequently "clustered" near major demand generators in respective submarkets, such as a Central Business District, Uptown District, or suburban business park. Visitors to one submarket are unlikely to stay in a hotel in a different submarket. As developers look to acquire or build hotels, it is vital for them to understand not only the location of the demand generators, but the depth of that demand. Will the hotel be located proximate to the demand generators, and will that demand be sufficient to support the hotel and/or its competitive set?2. Proximity to Retail & Pedestrian-friendly, Vibrant Neighborhood/DistrictIt is important to note that proximity to retail and a pedestrian-friendly vibrant neighborhood or district alone will not guarantee the success of a hotel project (aside from one scenario, in my opinion, explained in more detail below); however, today's traveler, whether for business or leisure, is looking to experience more of the area that is being visited. This is where proximity to retail, restaurants, bars, or simply a vibrant pedestrian-friendly neighborhood adds value to a hotel. More and more, we are seeing hotels developed within mixed-use communities that include retail, office, and residential. Today's traveler is increasingly seeking to experience the surroundings and nearby amenities, which is the easiest way to add to the lodging experience. The inconvenience of either renting a car or using a driver service, such as a city taxi or Uber, simply to go to a restaurant will eliminate a hotel from being selected by such travelers. While the larger, dense urban cities have a built-in advantage in respect to a typical hotel's proximity to other venues and attractions, this becomes increasingly important in other less-dense urban areas where the car is still king.There is one exception, from my experience, where a hotel's location close to retail and/or in a more desirable neighborhood of the city has guaranteed its success, and this occurs in developing markets. In such scenarios, while the hotels were not located near the area's demand generators, the neighborhood surrounding those demand generators were so undesirable that travelers opted to travel farther to stay in a more vibrant and/or desirable location. This is common in developing countries that are undergoing growth and redevelopment, or simply cities that have not experienced as much growth. The only caveat with developing such project away from the demand generators is that, over time, cities grow and the lodging market become more segmented (i.e., more and more hotel submarkets are created). Retail or other attractions are eventually built closer to the demand generators, decreasing the attractiveness of the hotels farther away. When this happens, the demand that was previously accommodated by the hotels farther away is siphoned to the newer, more proximate lodging facilities, thus affecting the future performance of the original properties.3. The Perfect Business MixFollowing a hotel's proximity to demand generators and its location near amenities in a desirable neighborhood, is the perfect business mix. This "perfect" mix will be different and will vary by each market. Generally speaking, properties that are too dependent on one source of demand have a higher risk of being affected or completely collapsing if that source of demand disappears. Returning to the Manhattan hotel example, we can see how a property in Manhattan can receive a steady flow of both business and leisure travel throughout the year. This mix can be drastically different for a traditional business-focused hotel in a suburban business park. While it may do extremely well in capturing business demand Monday through Thursday, occupancy levels may decrease substantially on Friday through Sunday nights. I use this example for illustrative purposes. Ideally, the business-park hotel will seek to maximize group and leisure travel during slower periods in order maintain or improve its operational performance. However, what happens if there is no group business or leisure travel to be captured? What happens if the single corporation supporting all hotels in the business park decides to relocate? Ultimately, the hotel's performance will be negatively affected. There are other well-established markets where the one-industry rule is often ignored and hotel occupancies remain elevated year-round, such as Miami Beach, for example. Nevertheless, even those markets experience seasonality, and it is crucial for hotels in those markets to maximize their demand segmentation. For those hotels, even though they are mostly dependent on leisure business, the capture of group, FIT (free independent traveler), and wholesale demand needs to be maximized so that the property is not dependent on one source of leisure business and is better able to handle the market's seasonality. A healthy mix of business, group, and leisure, along with a well-balanced demand segmentation, adds to the long-term success of a property.4. Well-controlled Costsh3While there is no doubt that top-line revenue is important in the performance of the hotel, this become meaningless if expenses are so elevated that they erode the profitability of the hotel. Some owners and developers make the mistake of assuming "standard" expense factors when completing their initial analyses and pro formas, and while this may be helpful in quickly understanding an asset, the reality is that expenses can vary significantly by region, and a full understanding is a must. Some of the most common offenders are labor costs, utilities, and property taxes. Remote locations or unionized hotels often have to operate with elevated labor costs that are near to impossible to change. Utilities can vary drastically, as well, and can be extremely high in various parts of the country or the world. Property taxes can also vary by county or jurisdiction, and are best forecasted through an in-depth analysis of the tax burden for competitive properties, along with a full understanding of that jurisdiction tax rates and assessment standards (e.g., property taxes can easily be less than 1% in some parts of the world, but closer to 10% in other areas). Understanding and preparing for a property's respective costs from the onset is a key component in the success of a hotel.5. Fully Understanding Supply DynamicsWhile we all know that there are two sides to the supply/demand equation, supply changes are often overlooked in the acquisition or development process. Besides the possibility of a main demand generator leaving the market, nothing can affect the future performance of a hotel more than unexpected changes in the supply dynamics. Hotel markets are always changing, and this may include future hotels closing (unlikely), as well as future hotels opening (highly likely). If new supply is not on the horizon in the near future, it is almost guaranteed that, at some point in the asset's holding period, new supply will enter the market. The impact that this new supply will have on the subject asset will depend on its competitive weight and the size of the market. If we are discussing a 4,000-room hotel market with 200 rooms planned to open, the impact will be minimal. However, this scenario drastically changes if we are discussing a highway exit market with 400 rooms and 200 rooms planned to open. In the latter scenario, the increase in supply represents a 50% increase. Will demand suddenly increase in line with the increase in supply? If not, we can imagine the negative impact this increase in supply will have on the future performance of all hotels in this market.6. A Unique ExperienceMore and more guests are craving a unique travel experience, and hotels that reflect the uniqueness of their surrounding are well positioned to capture this demand. It is not a coincidence that hotel designs are becoming less standardized and more reflective of the local area, even for national brands. Similarly, in recent years, new brands have been released that seek to appeal to either the uniqueness of the traveler or the neighborhoods in which the hotels are located. This desire to experience more of the local surroundings also explains the rise of Airbnb. Technology continues to change the way we travel. Websites such as TripAdvisor, Kayak, and Booking.com, as well as many others, are making it incredibly easy for travelers to see in detail what they are purchasing before arriving at a property. Written reviews, photos, and even videos that point out all the good or bad can provide assurance to travelers that they are making the right or wrong decision, regardless of a hotel's brand affiliation. As such, all quality aspects being equal, a traveler may choose to go for the hotel that provides a more unique experience. This factor is now important to understand and take into account in the hotel's design, facilities, and amenities offering. How can the hotel be innovative and in line with the latest standards and expectations in order to add to the guest experience?The acquisition or development of a hotel property can often be complex, forcing one to review and consider many factors. Often, the performance of the property or market, along with branding, management, and/or transaction considerations, can cloud other key aspects. There are owners or developers that consistently acquire or develop well-performing assets. It was my goal to set out to distill those priorities or nuggets of wisdom in this short article. By having a full understanding of these factors, owners and developers can incorporate them as priorities, allowing them to make informed and educated decisions that lead to the hotel's long-term success.
HVS - 29 August 2017
The reverberation from the sharp declines in mainland China visitor arrivals post-2014 echoed into the first quarter of 2016, negatively impacting hotel markets across the region, especially in Hong Kong and Macau. Given that both cities are less than an hour away from mainland China, they suffered from the new restrictions placed on Chinese citizens. For Hong Kong, this included a limit to one visit per week from neighbouring Shenzhen, and for Macau, a stricter control over gaming activities to reduce corruption. However, the market appears to have bottomed out and growth is beginning to stabilize.Hong KongA series of political incidents during 2014 to 2015 caused a slump in Chinese tourist arrivals, leading to a difficult recovery period for the tourism industry, which, until then, had all its eggs in one basket. However, since the first quarter of 2016, Hong Kong is gradually picking up its visitor arrivals pace, albeit not at the levels witnessed in 2014. In the second quarter of 2017, total visitor arrivals to Hong Kong registered 13.6 million, a 1% year-on-year (YoY) increase. The top six feeder markets demonstrated positive YoY changes, except Taiwan with a YoY decline of 1.1%.Mainland China continues to be the largest feeder market recording 10 million arrivals with a 0.8% increase compared with the same period last year. This represents a 74.2% overall share of visitor arrivals. An emerging trend among Chinese travellers can be seen through their travel choices which, while fuelling growth, may also be a potential limitation. Given increasing disposable income levels and a desire for more diverse travel experiences, mainland Chinese are becoming more adventurous with their travel choices. Over the past years, this directly benefited the growth of their arrivals in rival destinations such as Japan and South Korea and markets further afield, after having visited the more familiar environment of Hong Kong. With the growth of infrastructure in second- and third-tier cities and better high-speed rail links in mainland China, Hong Kong is hosting new groups of Chinese travellers from these areas. Therefore, the number of travellers coming from mainland China is stabilizing, however not reaching back to the peak in 2014 with 12 million travellers.Among the major feeder markets, the Philippines registered the highest YoY increase of 15.8% with 250,000 arrivals, a 34,000 increase from the same period last year. Accounted for 1.9% and 2.5% of the market share, Japan and South Korea both recorded a remarkable 11.9% and 7.0% YoY increase, respectively, with 263,000 and 337,000 arrivals. Meanwhile, USA recorded a positive but relatively lower increase as well through a 1.3% YoY with 316,000 arrivals. However contrary to the trend seen, India faced a drastic 17.3% YoY drop with a total of 27,000 decrease of travellers to 129,000. A major reason for this decline can be explained by the visa restriction proposed by the Hong Kong immigration authorities, making it difficult for Indians to visit without reviews and approvals. Originally intended to prevent an abuse of the asylum system, this proposal had since discouraged a great number of Indian tourists and businessmen from coming to Hong Kong. Additionally, Indian banknotes demonetisation implemented in November 2016 to reduce corruption had trimmed many Indian travellers' budgets. Overall, after years of recovering, the market is slowly catching up at a steady pace; demonstrating a rebound from the bottom.In the second quarter of 2017, 6.5 million of visitors to Hong Kong stayed overnight, a 3.7% increase from the same period in 2016. Overnight visitor arrivals recorded a YoY growth of 14% to 4.2 million. Overnight visitor arrivals exhibit a similar trend to total visitor arrivals.Comparably, mainland China continues to account for the biggest share of overnight visitors at 64.3%.As a result of eliminating parallel trading, the Chinese government replaced multiple-entry permit with a once-a-week restriction for Chinese citizens. The result was successful in incentivizing mainland Chinese to stay in Hong Kong for a longer period, which achieved a 4.5% YoY increase--an addition of 180,000 visitors--to 4.2 million in total in the second quarter of 2017.As the second largest market with 4% market share, South Korea recorded an 8.8% YoY increase to259,000 overnight stayers. Although comparatively not as strong, USA also contributed to growth with0.8% to 226,000 Americans staying overnight in Hong Kong. The two strongest growth markets, Japanand the Philippines, posted strong performances for the quarter with a remarkable 18.6% YoY increase to 166,500 overnight visitors and a significant increase of 11.8% YoY with 207,000 travellers, respectively. Conversely, Taiwan's overnight visitors declined by 3.6% with only 215,000 arrivals and India followed suit with a drop of 13.5%, leading to only 95,000 overnight visitor arrivals.Hong Kong Hotel Market PerformanceOverall in the second quarter of 2017, the Hong Kong hotel market experienced a growth in occupancyrates by 1.6 percentage points to 86.6%. However, gains in occupancy were offset by a 2.2% decline inaverage rate to $1,187, resulting in a 0.2% decline in RevPAR to $1,029. High-Tariff A-Hotels experiencedthe same trend, where while occupancy increased slightly by 1.0 percentage point to 82% from last year, average rates continued to suffer a decline to $1,940, likewise closing RevPAR 4.2% lower YoY at $1,616. However, Hong Kong's hotel market supply continued to grow. In quarter two of 2017, this supply grew to 89,900 rooms, having increased by 4.1% YoY. In particular, the Unclassified category of hotels expanded at a significant 12.8% YoY increase to 5,615 hotels, attracting visitors with a variety of hotel options at both lower and higher price points. Supply from both High Tariff A and B categories also registered positive changes at 3.2% and 6.5%, respectively. Overall, hotel supply has grown from developments that commenced during the boom years, especially in 2014. However, with the slowing demand from mainland China, the number of new projects from developers may slow. Hong Kong's hotel supply is expected to soon stabilize over the next few years at a lower growth rate, with signs of oversupply.MacauIn the second quarter of 2017, Macau posted a significant YoY gain in visitor arrivals at 5.4% with 7.69 million visitors. One of the key source markets, South Korea, contributed heavily to the rising number of visitors. The number of South Korean tourists heading to Macau jumped by 47% to 204,000, an addition of 70,000 travellers, compared to the same period last year. This was aided by the automated immigration clearance services adopted in December 2016 which streamlined the process for Koreans visiting Macau, further extending the number of Korean travellers. Additionally, the success of promoting Macau as a tourist destination by the Macau Government Tourist Office (MGTO) to South Koreans helped with achieving this result. Promotions included sending officials to promote in South Korea, hosting tourism fairs in South Korea's largest indoor and outdoor theme parks, and collaborating with South Korea's Munhwa Broadcasting Corporation to produce a featured show about Macau. More significantly, Korean entertainment shows and TV shows started shooting scenes in Macau, which created an influential attraction for many Koreans to visit. An increase in low cost and direct flights made it more accessible for travellers to visit Macau as well.Out of the 7.69 million visitors, mainland China accounted for 65.2% of market share, recording a 4.5% YoY increase with 5 million travellers, surprisingly. The Chinese government enforcing stricter rules for visas to Macau in order to suppress corruption, contributed to the decline of Chinese travellers, especially high-rollers, crossing the border to gamble. Therefore, the increase in Chinese visitors this quarter implied that Chinese travellers are now visiting Macau with a different purpose, rather than solely gambling. An-hour-away neighbour of Macau, Hong Kong is responsible for 20.7% of the overall visitor arrivals, also recorded a 6.4% YoY jump with 1.6 million travellers. Conversely, Macau registered a 1.6% YoY decline of 265,000 Taiwanese travellers. Surpassing Japan, the Philippines eventually became the fifth major feeder market in Macau with its YoY growth of 7.0% or 85,800 travellers. Other countries also recorded a significant surge, including Russia at 16.5% with 6,539 travellers, Indonesia at 14.2% with 52,500 travellers, and Japan at 13.6% with 72,900 travellers.Although overall visitor arrivals from China's YoY change is only at 4.5%, the overnight YoY increased 15.8% to 2.8 million this year. The restriction on Chinese travellers' frequency of visits to Macau could be a large contributor to this surge, which prolonged travellers' average length of stay. Similar to the overall visitor arrivals trends, Korea achieved the strongest YoY growth of an impressive 81.0% from 70,600 to 128,000 travellers in the second quarter of 2017. All the major feeder markets experienced impressive YoY growth as well, with Hong Kong reaching an 8.7% increase of 786,000 visitors, Taiwan at 0.7% with 135,000 travellers, and Japan at 11.9%. Regional markets, including Indonesia and Malaysia also registered positive change.With a remarkable growth in visitors staying in Macau, the overall hotel performance recorded a 2.3%growth in RevPar at MOP1,068 in the second quarter of 2017. Although average rate faced a negative 5.0% YoY change from MOP1,269 to MOP1,201, the overall occupancy posted a 6.6 percentage point YoY increase, which benefited the overall hotel industry in Macau.Due to the regulatory policies enforced by the Chinese government, Macau's gross gaming revenue had fallen by a three-year compound annual growth rate (CAGR) of -14.8% from 2013 to 2016. However, the overall market still expanded in the last ten years from 2006 to 2016 with a strong ten-year CAGR of 14.5%. For the second quarter of 2017, gaming revenue registered a 21.9% YoY increase to MOP 62.9 billion, suggesting that the Macau gaming industry has bottomed out. Continuing forward from this trend, the gaming industry in Macau seems optimistic as it continues its focus on attracting more mass-market guests.With the growth of international visitor arrivals, Macau is diversifying its economy to serve both touristsand leisure gamblers as well. The largest two revenue-driving games, VIP Baccarat and StandardBaccarat, recorded positive signs of recovery. VIP Baccarat increased 35% YoY to MOP 36 billion; whileStandard Baccarat witnessed a 5.7% increase to MOP 19.7 billion. This stronger quarter may have beeninfluenced by a newly added casino by S.J.M., Casino Hotel Legend Palace, in February 2017. Overall, thenumber of gaming tables posted a 6.9% YoY increase to 6,413 and slot machines a 18.2% increase to16,204. Compared with the first half of last year, overall casino winnings registered a 10.5% YoY increaseto MOP 9.4 million per gaming table unit per day.
HVS - 17 August 2017
Boise is closing in on the ranks of the top ten cities in which to live in the U.S., according to the 2017 survey by U.S. News & World Report. The reasons for the elevated ranking--number 12, as of this year--include affordability, job prospects, and overall quality of life. This reflects Boise's ascendance in other spheres, including population, visitation numbers, and the number of proposed hotels, especially in the city's downtown corridor.The ongoing development boom compares to the Grove Plaza-centric boom of the late 1980s and '90s, when architectural staples of Downtown Boise arose, including the Wells Fargo building, the Grove Hotel, and the Boise Centre convention center. The following HVS Market Pulse article details recent events in the Boise economy and the dynamics of supply, demand, and performance for the city's hotels.The MarketThe Boise economy, while having diversified over the past two decades, is still predominated by food processing/distribution, heath care, and higher education. Albertsons, Inc. was one of Boise's top employers before a substantial portion of the company was sold and relocated in 2006, affecting its headquarters operations in the city. The recession of 2008/09 intensified the strain on Boise's economy, and by 2013, the Albertsons portfolio had shrunken to 192 stores nationwide. Albertsons began to rebuild with the purchase of several grocery store brands, including Safeway Inc., in January 2015. Albertsons now operates approximately 2,300 stores nationwide under 18 banners. This has led to 26,000 new jobs across the nation, specifically tied to the Safeway Inc. acquisition, and has contributed to expanding the Boise corporate office from 200 to 600 workers. St. Luke's Health Systems, Boise's top employer, continues to invest in its facilities and locations in the greater metro area. In June 2016, St. Luke's Boise Medical Center received approval for a $400-million expansion and renovation; the 576,000-square-foot expansion is expected to include a new children's medical center, medical office buildings, a parking garage, and a medical tower. Furthermore, St. Luke's Health has entered a purchase agreement for approximately 600,000 square feet of additional office space, including all buildings in Washington Group Plaza, to house all administrative offices and accommodate further expansion as part of the facility's Master Plan. Higher education is expanding, as well. Boise State University reported that its fall 2016 total enrollment increased 8% over the same period the previous year. The growth included first-time degree-seeking students from both within Idaho and out of state. The proposed Idaho College of Osteopathic Medicine (ICOM) will be located at the Meridian Health Science Center at Idaho State University (ISU), just outside Boise. The privately funded ICOM will be independent of the university, however, and separately licensed. In May 2017, the proposed ICOM received pre-accreditation status, and construction of the roughly 96,000-square-foot, $31-million building is expected to begin once the school receives provisional accreditation. Other developments in the Boise market include the recently opened JUMP (Jack's Urban Marketplace), a community and interactive creative center; the new, nine-story J.R. Simplot headquarters' building in Downtown Boise, which opened earlier this year; Saint Alphonsus' $80-million hospital in Nampa; several multi- and single-family housing projects under development; various new restaurants; and 13 hotels. Overall, development across the greater Boise market supported a 24% increase in jobs between September 2015 and September 2016, a higher percentage than any other metro area in the nation.H3What's Behind the Boise Boom?Idaho's favorable business climate, including an inviting tax structure and business incentives, has been very successful in bringing new businesses to Boise. In 2012, the state lowered both personal and corporate income taxes. The following year, the state exempted more than 90% of Idaho's businesses from paying personal property tax. Other commercial incentives in Idaho include:According to the Idaho Department of Labor, the state is projected to register the sixth-fastest job growth in the nation through 2024, growing 20% from 2014 through 2024, with jobs across diverse industries and sectors.TourismBoise CentreBoise Centre is Idaho's largest convention, meeting, and tradeshow facility. A 36,000-square-foot expansion was completed in September 2016, giving the facility 86,000 square feet of flexible meeting and event space. The addition of a concourse connecting the new Boise Centre East space to Boise Centre's original convention space began in July 2016 and was completed in April 2017. The final stages, scheduled for completion by the end of this summer, include the renovation of the original convention space and the addition of a junior ballroom, meeting room, outdoor patio, and new restrooms. Upon completion, this will bring the total square footage of Boise Centre to nearly 100,000 square feet.The Boise Centre expansion has already resulted in large gains, with an increase of approximately 19% in the number of conventions and 7% in the number of delegates in 2016 versus the previous year. Expectations are set even higher for 2017. Just this June, Boise Centre hosted the annual convention of the Council of State and Territorial Epidemiologists. With approximately 1,400 attendees and an economic impact estimated at $2.5 million, this was the largest conference in the city's history. Hotel supply in Boise was a major factor in attracting this conference. At the time of booking, the Boise Convention & Visitors Bureau helped secure guestrooms at several hotels that were still under construction yet set to open by June. Looking forward, Boise Centre has secured the Football Bowl Association in 2018 and the Industrial Asset Management Council in 2020.Hotel SupplyFrom 2006 to 2008, approximately twelve new hotels entered the greater Boise market. The new supply, coupled with the 2008/09 recession and the downsizing of Albertsons, dealt a blow to hotel performance in Boise. While several hotels in the market changed flags over the next several years, no new hotels opened in Boise until June 2016. The lack of new supply from 2009 to 2016 resulted in substantial growth in both occupancy and rate for existing hotels, especially as Boise entered back into a period of economic growth. Existing guestroom supply in the greater Boise market, including the cities, towns, and communities of Caldwell, Eagle, Meridian, Nampa, Garden City, and Atlanta, consists of the following chain-scale percentages: 2% Luxury, 6% Upper Upscale, 18% Upscale, 35% Upper Midscale, 22% Midscale, and 17% Economy.In January 2017, The Inn at 500 Capitol was the first luxury hotel to open in Downtown Boise. That opening was followed by the Hyatt Place Boise/Downtown, which opened in May 2017; moreover, the proposed Residence Inn by Marriott Downtown is scheduled to open in September of this year. Following the opening of the Holiday Inn Express Hotel & Suites Boise Airport in 2016, the proposed Comfort Inn & Suites broke ground in May 2017 at Boise Airport. In the surrounding market, three hotels have also opened in 2017, including the My Place Hotel Meridian, the Best Western Plus Peppertree Inn Nampa Civic Center, and the Holiday Inn Express Hotel & Suites Nampa - Idaho Center. The following table illustrates new and proposed hotel supply in the Boise market.City officials report that businesses and convention authorities welcome the new supply of hotels in Boise, as large conventions were formerly turned away for lack of rooms. This is especially true after the convention center's expansion, which is expected to attract more and bigger events in the future. On the other hand, hoteliers express some concern that the influx of new supply, unprecedented since 2006 to 2008, could undermine the trend of performance growth in the market. Given that most of the new supply is located within the downtown corridor, the surrounding submarkets could experience a reduction in overflow demand related to compression; however, these submarkets are also realizing demand growth that is not directly associated with the downtown market, such as the proposed Idaho College of Osteopathic Medicine in Meridian and the Saint Alphonsus' hospital in NampaThe OutlookAlthough Boise has not experienced a period of full-steam development since the Grove Plaza-centric boom in the 1980s and '90s, the economic growth is well balanced among commercial, residential, and leisure projects. As new supply enters the market over the next two years, occupancy is anticipated to soften in the near term; however, given the growing strength of the Boise economy, a quick recovery is expected. Overall, the outlook for Boise is optimistic. http://www.idahostatesman.com/news/local/community/boise/article62376822.html Boise Convention & Visitors Bureau
HVS - 10 August 2017
Interpersonal Service and Talent DroughtSpa treatments and correlating services are customarily viewed as manual-therapies with an important emphasis on the unique interface between (a client and a provider). This person-to-person relational component is a critical measure that often determines the overall experience and tone of the elected treatment or service, client satisfaction and the future efficacy of this relationship.While personal-touch is an essential component of the spa industry, the impetus of the industry has accelerated at a rate much faster than the growth of the workforce necessary to support it. Combined with an influx in hospitality development, technological investment hesitation and mitigating employee turnover- keeping pace to hire and train new talent, have not made early adaption an easy process. Consequently, the lack of acclimatization not only impacts leadership, but operational consistency and fiscal volume.A recent study conducted by the United States Department of Labor, Bureau of Labor Statistics found that employment within the beauty and wellness arenas hold substantial projected growth in the U.S. economy. The study discovered "hairdressers, barbers and cosmetologists have faster than average job growth, citing an average 10% annual increase in employment from 2014 to 2024." Furthermore, the study noted a "62% average annual turnover as people seek career advancement and new opportunities", resulting in "more than 400,000 available job openings per year," in the U.S. alone.Further research by the Global Wellness Institute GWI, shared by the Spa and Wellness Career Development Initiative reports that "By 2018, we will need 2.7 MILLION employees in the spa industry to meet demand, with the United States, China, Germany, Japan, and Russia leading the job creation." This data underlines the scope of global spa, wellness and beauty growth which reveals the industry will "need an additional 80,000 Spa Managers and Directors and 500,000 Spa Therapists more than the workforce in 2013."Recognized as an industry of independent talent, this rouses important variables to consider pertaining to hiring and training. It also presents a need to reconsider operational models that promote continued progress. Understanding where the challenges are can help navigate new pathways to improve and transcend standard operational policies.Reorganizing a ParadigmTraditionally spa and wellness operations have been divided into departments and categories centered on performance and profitability, fixed on manual services to generate the bulk of treatment revenue and sales. Considering the increasing challenges to recruit and retain experienced talent, the diversification of this model requires new elements of protective foresight and calculated planning.Administration and retail components rely on savvy customer service, constant product education and the aptitude to sell. Retail sales measure between 10% to 35% of spa revenue. It's important to provide the resources and tools required to optimize the front desk and administrative performance. Appointment setting and new client intake procedures can be reintroduced with more efficiency to foster extra attention on customer care.Services and retail are a spas biggest revenue producers. However, labor costs and overhead make up a considerable portion of the yield. Compensation structures vary depending on location, region and spa-type. Nonetheless, labor costs run between 45% to 60%. In addition to operating expenses that fall between 35% to 40%. With such a big percentage of sales and service revenue going to labor and overhead, profitability can be challenging even with a well-organized and fully staffed team.A model that is solely dependent on the expertise of licensed providers with an emphasis exclusively on manual actions, will be at a disadvantage as technology continues to accelerate and improve. Whereas traditional spa treatments and personal care services cannot solidly be replaced by technology, nor should they ... It is essential to integrate a subset of automation and new applications. This process will help insulate investors and stakeholders from labor liabilities and staffing challenges that could undermine a spas peak performance.Moreover, industrializing a percentage of spa services will introduce new modalities, create profitable new income streams and protect investments with a relatively fast return on investment. In the figure below, I have simplified these components into three specific groupings based on functionality, industry evolution and impending future growth.I divided these into the following three groups: manual services, administration and retail, and automated services. Each set represents approximately a third of the operational structure in contrast to the long-standing traditional paradigm. By dividing operations into three specific sets, this introduces a "new model" focused on the future, to upsurge agility and increase profitability.InvestmentThe investment to feature new technology fluctuates considerably. These applications should be selected carefully. Without exception, all levels of change are unique for every spa. Each spa has distinct variables to consider such as location, hotel occupancy and volume.These choices should be founded on the goals of the property, company culture, budget ratification and asset planning. Deploying function without purpose, is counterproductive. And authenticity and transparency are indispensable. It's also critical to understand the opportunities associated with the investment, perceived value, marketability and required training.Embracing innovations in software will increase data capture, enhance guest profile analytics and keep marketing and strategic choices timely and relevant. Data is a currency. Data that is gathered through the hotel is pertinent to the metrics of the spa. Deciphering it with systems designed to predict important sequences can provide useful insight, mark milestones and help set important goals. Software can also support employee rotation cycles, manage daily duties more successfully and reorganize priorities vs. demands for better management of quality and time."Because customer demand can be unpredictable and often doesn't match up with staffing schedules, it can be a challenge to fill appointments with high-quality providers. Tech like Zeel allows spas to tap a large pool of vetted, licensed providers, on demand," said Samer Hamadeh, CEO of Zeel. (3) Hamadeh also cites the value of "wellness technology as it facilitates easy payments, scheduling, and service reminders." Taking advantage of these resources leaves more time for cultivating the team of people who provide the social relationships that fuel the business. It also increases access to quality with operational flexibility.Automated TreatmentsAn increasing selection of automated services offer a wide-range of proven health and wellness benefits including: deep relaxation, sleep tribulations, stress, chronic pain, and a variety of common health issues. Some of these applications include halotherapy systems (known as salt therapy), float pods and tanks, products like BOD PODS and cryotherapy chambers. There are also a variety of frequency devices and treatment table innovations that apply modalities using chromotherapy (light and color), vibration and sound.In addition to these, there are exciting advancements in sleep, neurological health and audio-visual applications involving virtual reality and digital environments to aid relaxation, trauma and reduce stress. With distinct neural and physiological benefits, these modalities are increasing in popularity, mass and demand.Furthermore, these services do not require a licensed professional to deploy them. They generate a service fee uninhibited by typical commission models and free from provider overhead. They can be offered in place of a conventional service, introduced as pre-treatment, post-treatment or as add-ons to help manage busy scheduling and groups.Ultimately, this is a "new breed of spa services" that produce tangible wellness benefits, meet on-demand expectations and significantly increase treatment revenue. Furthermore, the personalized health landscape continues to evolve with new diagnostic customizations and wellness applications, driving a call for new services.Hotels and resorts have an extraordinary opportunity to diversify their spa and fitness programs. The International Spa Association ISPA 2016 U.S. Spa Industry Study (4) highlights "hotel and resort spas have an average of 12,595 square feet, per establishment." (figure 2) Compared to day spas, medical spas and others that have an average square footage of 3,904. Reallocating the space of unused treatment rooms and low-traffic fitness areas can produce viable fresh returns.Other ways to engage technology include, new aesthetic and massage instruments, live-fitness and internet applications, personalized spa apps, digital entry and more. The question is, who will use them? How will they use them? Not just today, but in one-year, two-years or more.Demand and DeliveryWhen it comes to bringing these various aspects into play, balancing integration helps manage the curve. It is vital that all elements of the up shift are understood and backed by employees and management. Whereas, these assets should be considered new resources and tools, not countermeasures designed to create uncertainty.Balancing empathy, nature and personalisation with innovation and technology epitomizes the "freedom to choose". There are plenty of people who choose not to visit a spa for the simple reason they are uncomfortable being touched. Automated services are a way to capture these customers by offering an easy, personal and hands-free alternative to traditional spa services.There's a lot of energy pursuing the millennial market. Appealing to this market requires flexibility, constant creativity and new strategies. Millennials shop products and services with a radically different view on value, quality and time. Businesses seeking the millennial spend and loyalty, need to know how to react, create the right incentives and be willing to change.Technology becomes a part of this. Statistics and data are providing realistic assumptions about market growth. And with any rapid development, there are always growing pains. By taking actions to leverage technology you can mitigate the increasing stress to remain competitive. Meanwhile, it's not solely about lateral market competition. It's about pleasing innovative and informed guests seeking services that meet their imminence and whim.Last thoughtsDemands for spa and wellness services are changing. While massage and aesthetics are still the most commonly requested services, there are increasing modalities catered to wellness and prevention. Underestimating the benefits of new technologies will result in faster moving, more dramatic fluctuations in performance. Knowing how to choose new applications and integrate new systems is well worth taking the time to understand. Thereby, customizing new applications creates meaningful advantages for everyone, guests, employees, owners and stakeholders.References(1) http://www.career.org/news/shortage-of-skills-in-the-beauty-and-wellness-industry(2) http://www.spaandwellnesscareers.com/jobs.cfm(3) Quote: Samer Hamadeh, CEO of Zeel(4) International Spa Association (ISPA) 2016 U.S. Spa Industry StudyReprinted from the Hotel Business Review with permission from www.HotelExecutive.com
Hotel Bulletin Q2 2017: UK Sees Record Level Of Room Openings As Q2 2017 Reports Strong Results For Hotel Sector
HVS - 10 August 2017
The first six months of 2017 has seen the highest number of hotel bedrooms opening in the UK since 2012, according to Hotel Bulletin Q2 2017, published this week by HVS, AlixPartners, STR and AM:PM. Growth in hotel RevPAR [rooms revenue per available room] in all but two UK cities; double-figure growth in Edinburgh, Cardiff and Belfast; and London recording an 8% uplift demonstrates that international visitors are still coming to the UK on the back of a weaker pound and a number of high-profile events. The hotel sector is well placed for further growth in visitor numbers with more than 7,500 new hotel bedrooms opening during the first half of 2017, up 40% on last year's figures. Budget brand Premier Inn continued its expansion during Q2, with two new hotels opening as well as the group's fifth hub by Premier Inn, at London's King's Cross. However, Q2 also saw notable activity from independently branded hotels, striking an alternative to the more traditional hotel offer. 'While there will always be a strong demand for branded hotels, we are certainly seeing a growing appetite amongst hotel guests, primarily those in London, for something a little different. Boutique hotels in quirky buildings with a strong stamp of personality and a more unusual proposition are becoming very fashionable amongst discerning customers,' commented HVS London chairman, Russell Kett. Typical examples include the new 252-room, five-star The Ned, opened by Soho House in May. The hotel, converted from the former Midland Bank, boasts nine dining venues and a bar in the Bank's former vaults. In a similar vein, plans have been submitted for a four-star, 214-room Hoxton Hotel in London's Shepherd's Bush with a cafe and leisure scheme, a third London hotel for Hoxton Hotels. A number of designer hotels have also opened in Shoreditch, billed as London's new creative hub, including the high-end Curtain Hotel and The Nobu Hotel, a first for London, although the third Nobu restaurant to open in the capital. 'A recognised brand name is less important in London as it's a strong market. The new, independent hotels emerging like the Hoxton benefit from their association with Soho House for their restaurants and bars; and The Ned benefits from its co-ownership by Soho House,' added Kett. There is also a clutch of luxury hotels in London's hotel pipeline bringing new brands to the capital such as the Armani at Admiralty Arch, Raffles in the Old War Office, Belmond in the redeveloped Cadogan Hotel, and Cheval Blanc in the former US Embassy. In addition, The Peninsula London on Hyde Park Corner, due to open in 2021, will have the largest rooms of any luxury hotel in the city. 'This activity confirms that London is still a magnet for high-end global hotel brands and demonstrates that the hotel sector is adapting to customer demand and the need to stay ahead of the game by offering something on-trend and edgy,' Kett said.
HVS - 3 August 2017
The following article provides an overview of economic drivers, market dynamics, and future hotel growth in Bermuda, where there is a surge of international hotel brands gaining representation, as the island springboards on positive momentum created by the 35th America's Cup.Growth as a Tourism DestinationA comprehensive review by the Bermuda Tourism Authority (BTA) verified that the island's total air arrivals for 2016 increased to 244,491 travelers. When compared with the 219,814 travelers to arrive in 2015, the year-over-year increase is 11.2%. Among the 162,321 visitors who said their purpose of visit was vacation, that group spent an estimated $222.1 million on the island in 2016, a 23.2% jump (or $41.8 million) from the year before. Vacationer arrival and spending data continue to show positive trends into 2017. In the first quarter of 2017, visitor spending was up an additional 30.5% to $26.3 million, representing an increase of $6.1 million. Through May 2017, vacation air arrivals increased 18.5%, compared to the same five-month period in 2016, with particularly robust growth from the United States and Canada. Bermuda has experienced 17 consecutive months of year-over-year growth in leisure air arrivals, dating back to January 2016. At the time of our research, June 2017 was expected to be the 18th consecutive growth month given increased visitation during the America's Cup.elping to fuel growth is a steady increase in airline-seat capacity over the past two years, particularly from New York's John F. Kennedy Airport, where seat capacity forecasts indicate a further jump in capacity of 23% for 2017. Boston is following the same pathway as New York, expected to climb 18% in seat capacity for 2017, compared to 2016. American Airlines and JetBlue have been at the forefront of the increased capacity. The U.S. generates 75% of Bermuda's air travelers, with signs pointing to further growth in 2017 given the added seat capacity. Visitors from Canada and the United Kingdom are a distant second and third, generating 10% and 9%, respectively. The U.S.'s East Coast remains Bermuda's top source market for vacation arrivals, specifically New York and Boston, which accounted for 52% of all U.S. vacation air arrivals in 2016. The following chart illustrates visitor air-arrival statistics categorized by country of origin since 2010.Another notable change in 2016 was the average age of the Bermuda leisure visitor, showing a younger demographic than in years past, which is a strong signal to the viability and sustainability of the island's tourism industry. Seventy-six percent of the leisure visitor growth in 2016 represented travellers under the age of 45.Bermuda Hotel SupplyAccording to the BTA, as of December 2016, Bermuda offered 42 hotels, spanning 2,334 rooms, with most belonging to the upper-upscale and luxury classes. The two largest hotels are the 593-room Fairmont Southampton and the 400-room Fairmont Hamilton Princess. Per the STR Destination Report on Bermuda for May 2017, hotel occupancy reached nearly 55% year-to-date through May 2017, up an eighth of a percentage point from the prior year. Bermuda, like most island destinations, is subject to a level of seasonality, which is opposite the typical seasonality patterns in the Caribbean. Arrivals (and Bermuda hotel occupancy levels) decline significantly in the winter months given the large share of visitors from the U.S. who rank warm weather as an important vacation criterion and are more likely to choose the warmer Caribbean destinations in the winter. Bermuda's occupancy peaks between May and August and benefits from a long shoulder season (averaging six months of the year). Average monthly annualized occupancies over the last four years are estimated in the following graph.Hotels are the most popular choice of accommodation among the majority of both leisure and business guests, having hosted nearly 75% of Bermuda's travelers for an average length of stay at 4.69 days per the year-to-date May 2017 period. Although hotels are the first choice of tourists traveling to Bermuda, the vacation rental market is showing signs of strength in popularity, as well as longer lengths of stay, averaging 10 to 12 days. Per the BTA, the island has approximately 466 rental units available that can accommodate nearly 2,000 guests. The number of guests staying in vacation rentals increased 73% year-to-date through May 2017, compared to the same period in 2016.New Hotel DevelopmentHotel development activity indicates promise for the future of the island's tourism product, as more hotel brands show interest in Bermuda. Most recently, The Loren at Pink Beach, a 37-room property that opened in April 2017, was the first new hotel in Bermuda in nearly a decade. While many projects are still under consideration or in the pre-development phase, several luxury hotel projects have broken ground or are close to that stage in Bermuda. Notably, international hotel brands are gaining representation.The independent Azura hotel is currently under construction along the south shore. Phase I of the development includes a boutique, luxury resort with 46 hotel rooms and 18 villa residences. The first phase of the project is slated for completion in early 2018.A Ritz-Carlton Reserve is under construction at Caroline Bay. Phase I, which will include an ultra-luxury hotel component and residences, is slated to open by April 2019. A superyacht marina on this site has already been completed.A 122-room St. Regis resort, comprising a hotel component and 28 luxury condominiums, has broken ground on the east end of Bermuda. This development is scheduled for completion in 2020.Plans to resurrect Ariel Sands with a hotel and residential component are currently in the works. Michael Douglas, owner of the site, is in the process of finding a partner to bring the project back to fruition. Though no timeline for development has been finalized, there has been great interest in the project. Bermuda is on pace to add 1,500 hotel rooms to its island-wide inventory over the next decade.The Impact of the America's CupSuccessfully hosting the 35th America's Cup in 2017 and the Louis Vuitton America's Cup World Series in 2015 put Bermuda on the world stage as an international sailing destination. Bermuda was seen on television in more than 162 countries during 50 hours of sports programming, with an additional 159.5 million impressions on social media during the weeks-long event. The media exposure put Bermuda on a strong footing to attract new visitors, and the near flawless execution of the event elevated the small country into conversations about hosting future events. Now, Bermuda is working on new regulations and legislation to attract superyacht owners and superyacht events to Bermuda more regularly. Fueled by the America's Cup, superyacht visits to Bermuda are up 106% thus far this year. Building on this reputation, Bermuda will host the ITU World Triathlon Series in April 2018, 2019, and 2020. PricewaterhouseCoopers is expected to release a comprehensive report in October of this year to illustrate the total impact of the America's Cup on Bermuda, including on its tourism industry.Looking ForwardBermuda tourism is moving forward with a new brand identity and a bright future. The outlook for the island is optimistic for 2017 and beyond as the BTA continues its initiatives to promote Bermuda as a tourism, events, and meetings destination after the success of the America's Cup. Further growth in airline capacity from the U.S. market is anticipated, and a new state-of-the-art airport terminal building is currently under construction, with a planned opening in 2020. In addition, the presence of several international hotel brands will only help raise Bermuda's prominence as a tourism destination. A new law, expected to pass the Bermuda Parliament soon, will provide incentives to stimulate and reward investment in the island's tourism infrastructure.About CHICOSCaribbean Hotel Investment Conference & Operations Summit (CHICOS) is the annual event that brings together international investors and operators, as well as leading hotel investment decisionmakers, including governmental representatives and international industry and opinion leaders, to discuss the markets, developments, and opportunities for hotel growth in the Caribbean region. Now in its seventh year, CHICOS is the only investment conference of its kind held in the region.About the AuthorsThe authors wish to thank the Bermuda Tourism Authority for its contributions to this market report.
HVS - 3 August 2017
If you would like a detailed hotel performance data for all of Canada, STR offers their Canadian Hotel Review. The Canadian Hotel Review is available by annual subscription. For further Information, please contact: firstname.lastname@example.org or +1 (615) 824-8664 ext. 3504.HVS Canada performs major portfolio appraisals and single-asset consulting assignments and valuations from coast to coast. Our professional team is expert in appraisal work, feasibility studies, market studies, portfolio valuation, strategic business planning, and litigation support. The managing partners in both the Toronto and Vancouver practices have their AACI, MAI, and MRICS/FRICS appraisal designations, and all associates are candidate members of the Appraisal Institue of Canada. HVS partners and associates are also members of the Appraisal Institutes of Alberta, New Brunswick, and Nova Scotia. Our bilingual associates enable us to work in French, which is of utmost importance in the provinces of Quebec and New Brunswick.
HVS - 3 August 2017
The workplace is experiencing a dramatic evolution as Millennials begin replacing Baby Boomers at an exponential rate. According to the Bureau of Labor Statistics, by 2025 Millennials are estimated to represent three quarters of the workforce. As a result, there has been a disruption of traditional company culture that isn't exclusive to advancements in digital technology. In many companies, what began as a "water-cooler" culture is being replaced with a high-end cappuccino machine and meditation room. Workers now expect more comforts, more conveniences, and better opportunities for advancement than ever before. They also demand that their company of choice have a heart, give back to the community, and promote empathy and inclusion.In exchange for an enhanced work environment, employees can sometimes expect to spend longer hours in the office and tied to a mobile device, albeit with a flexible schedule. Largely employees once experienced an "in and out" office-based occupation, with formal dress in roughly a 9 to 5 environment. Now there is an expectation of a relaxed office culture featuring casual dress, good food, a social conscious, and fun.Some changes we have observed in an office environment are as follows;Health and wellness programs, nutritional and chemical dependency counseling, yoga, massage, and acupuncture servicesHealthy living seminars, cooking classes, on-site haircuts, and stress reduction workshopsMeditation roomsFlexible vacation and extended maternal/parental leaveSubsidized dining facilities and in-house nap roomsErgonomic workstations with standing desks and stability ballsPaid gym and sports membershipsCorporate community service days and donor gift matching programsTech and startup companies set the bar for the evolving expectations of today's workforce. This phenomenon has trickled down to other industries such as hospitality. We have identified three companies that have achieved an evolved work environment across the hospitality sector and as a result they are experiencing better retention and attracting top talent. This is noteworthy in today's labor market where tenures can be short and competition for employees is at an all-time high.Hospitality TechnologySquaremouth Inc. is a digital company that has achieved a unique balance of work and fun in their office. This emerging tech leader in the digital travel industry has a workforce of 75% millennials and a 97% approval rating from its employees. Squaremouth quickly identified that you don't always have to incentivize employees with money. It's the intangibles that build loyalty from millennials, a generation that average a one-year tenure with a company.Some of the ways Squaremouth has created a favorable work environment are:Unlimited paid vacation each yearQuarterly profit sharingCompany-paid tripsPersonal use of the company boatWeekly lunches and happy hoursSponsored continued educationCasual dressOpen office conceptBeer on tap at the officeSquaremouth's Florida headquarters also features arcade games and a snooker table employees can use at their leisure. According to their website, Squaremouth employees enjoy a relaxed corporate atmosphere where one can sit shoeless at his/her desk. Colleagues are also seen as friends, the office is fun, and due to a promote from within culture, employees have little incentive to look elsewhere for career advancement.HotelsKimpton Hotels has always boasted a unique and engaging culture, and the hotel company continues to evolve its workplace to attract top talent. Named the 14th best place to work by Forbe's Fortune 100 Best Companies, Kimpton's employees thrive in a flexible and inclusive environment with an empathetic culture. Of Kimpton's 8,142 employees, 94% say their opinions are heard, they are celebrated as individuals, and that they are proud to work for the company. According to Ginny Too, Kimpton's SVP of People and Culture, this is a conscious effort made by the company to set them apart as an employer of choice. She says, "What makes Kimpton a great place to work is that we hire people with passion and heart. There's no book that outlines how we demonstrate empathy and connect with one another, so it's imperative that we attract people who share these qualities. Our leaders continue to reinforce this through role modeling and coaching. That's what helps foster a culture of heartfelt care with our guests and between employees." Kimpton offers flexible schedules (when possible), allows employees to bring pets to work, and has an on-site fitness center, fully-paid sabbaticals, benefits for same-sex couples, and partial college tuition reimbursement.Other benefits include:Pet bereavement leaveChildren and elderly backup careSix weeks of paid maternal and paternal leaveFree snacks and beverages during the dayFree lunch dailyThe company's lack of corporate hierarchy and promote-from-within culture empowers employees and fosters loyalty.Early on Kimpton recognized that a growing standard for corporate culture is an ethical environment that gives back to the community. Ms. Too stated, "Today's employees are interested in working for companies that mirror their core values. Kimpton's corporate social responsibility practices have been a fundamental pillar of our culture. Our focus areas include individuality and inclusiveness, health and wellness, and the environment - all of which resonate and are driven by our passionate employees."RestaurantsAccording to an Associated Press-Gfk poll, Millennials are more likely to say that citizens have a "very important obligation" to volunteer. Millennials have been exposed to volunteering and fundraising in more areas of their life than their older generation counterparts. One of those areas is their place of work, where employee volunteer days and giving programs are becoming more common. "According to the 2014 Millennial Impact Report, one-third of millennials surveyed said their companies' volunteer policies affected their decision to apply for a job, 39% said that it influenced their decision to interview, and 55% said that such policies played into their decision to accept an offer," as stated by Forbes.Texas Roadhouse has a company culture of people and community first. With almost 500 restaurants in 49 states and five countries, Texas Roadhouse employs 48,000 people, of whom 94% "feel good" about how the company contributes to their community.In 2002, Texas Roadhouse created Andy's Outreach Fund, a non-profit charitable trust to help employees during medical emergencies, death, fire, natural disasters, personal injuries or crises, and financial hardships. Since its inception, Andy's Outreach has benefited more than 5,000 employees and has given employees over $5.3 million during times of crisis. The nonprofit has a separate school supply program to furnish everything an employee's child may need for school as well.Texas Roadhouse's commitment to establishing a unique and inclusive company culture is evident both in their corporate office and individual restaurants. At its inception the Texas Roadhouse team made sure to implement a culture of family and fun into their organization."Our break room was this tiny kitchen in the corner. Every Friday, Kent [Taylor, founder of Texas Roadhouse], would wheel a cooler in full of beer. At three o'clock, we'd sit and have a few beers and talk about what was going on. We still do those social events where we all get together, even as big as we are. I think that's the one thing we've really worked hard at -- to make sure we're keeping that culture alive," says Senior Investor Relations Director, Tanya Robinson. To perpetuate this endeavor each restaurant has a "fun budget" so they can go bowling, throw pizza parties, and ensure that their environment is a balance of social and work.In an article in Harvard Business Review, Tony Schwartz notes that a key concern for employers is "how to best attract, manage, and retain Millennials, who now represent the largest generation in the workforce, expect more flexibility in the way they work, and prefer to work for employers with a mission that goes beyond maximizing profit".Fueled by a deluge of Millennial employees, companies are adapting to changing expectations of dress, offered amenities, workspace, benefits, and corporate culture. We have observed that a stodgy formal office environment is a thing of the past. Younger employees are attracted to companies with a more compassionate, holistic, and even fun environment prompting some organizations to play catch up.
HVS - 24 July 2017
Social Media Marketing in the Hotel Industry: Trends and Opportunities in 2017As social media platforms gain traction in usage rates and become ubiquitous in day-to-day life through the proliferation of mobile devices, they are proving to be valuable marketing channels, especially when targeting younger consumers. Although several prominent hotel brands have begun to scratch the surface of utilizing these social media channels for marketing and bookings, the state of this practice in North America is in its infancy. Other technology giants around the world have already capitalized on this opportunity with their social-media, mobile-adept user base. Nonetheless, the mass adoption of digital payment in North America is likely to take place in the near future given that technology companies are actively working out the technological and legislative challenges. The advent of digital payment has the potential to create new challenges for the North American hotel industry, but with these challenges comes opportunities for those who have done their groundwork. Hoteliers should embrace the new ways people are communicating and be ready for the changes in consumer behavior and expectations that are on the horizon. By being up to date with social media marketing trends and developing a dynamic online presence, hotel companies can quickly adapt to the disruption and achieve an early adopter advantage when attracting business from tech-savvy millennials.Mobile Device & Social Media GrowthGlobally, the number of mobile device subscriptions has seen exponential growth over the past decade. At the end of 2016, there were 4.8 billion unique mobile subscribers--65% of the world's population. By 2020, it is estimated that there will be 5.7 billion mobile subscribers, representing a mobile phone penetration rate of 73%. The growth in mobile device usage has transformed the travel and tourism industry; travel bookings are increasingly occurring through mobile devices. Consumer engagement has begun to shift towards mobile platforms, and rightfully so; the vast reach and worldwide interconnectivity of mobile devices make them a suitable platform for commerce. As mobile device penetration rates strengthen globally, consumer engagement through this platform is only expected to strengthen.Social media usage is likewise on the rise. Today, digital consumers are spending more time on social networks and messaging platforms than ever before. It is thus important for hotels to have a brand presence and a marketing effort on social media channels, especially since social media marketing has been proven to be more effective than traditional marketing (when utilized correctly). Social media marketing allows for two-way communication between consumers and customers; this interactive element helps companies cement a long-term consumer following. Additionally, social media marketing supports the real-time promotion of new products and services, all while yielding measurable consumer data that can be further leveraged to target, engage, and grow a base of consumers. Popular social media networks--Facebook, Instagram, Twitter, and Snapchat--are steadily growing on a global scale. The following chart shows the number of active users over time on each of these social media networks. Most of these social media networks have achieved stellar year-over-year growth in daily active users; the only exception is Twitter, whose user-growth trajectory seems to have plateaued. With the rapid growth in these social media channels, the pool of potential consumers that they provide access to is also growing in tandem. Significantly, all of these potential consumers are directly accessible through marketing on these channels.New Opportunities from the Rise of Consumer SharingDigital media is ever moving towards greater consumer empowerment and content creation given the ease with which digital media (particularly photos and videos) can be transmitted through mobile platforms and the internet. As part of sharing their own content and experiences through pictures and videos, users are also spreading digital word-of-mouth about a brand, a product, or an experience to their personal networks, which can reach a substantial audience. Geo-locational tags and brand hashtags allow user posts to be found via metadata searches, thereby increasing the reach of such posts.Hotels can capitalize on this trend by motivating consumers to use branded hashtags or specific hashtags that are relevant to a current promotion or event. For example, Starwood hotels launched a campaign in 2016 to encourage the #SPGLife branded hashtag on Instagram. Posts with this hashtag feed into the Starwood website's guest gallery of user-generated content, where visitors can also book a hotel room directly via a link. A simple hashtag is effective because it allows users to easily discover related content through a search filter.Influencer MarketingIn influencer marketing, an individual's expertise, popularity, or reputation is used to sway someone's thoughts and purchasing behavior. Although this method of marketing has been used for decades, the rise of social media platforms that allow for user-generated content has empowered more people from all walks of life to become influencers. Additionally, social media platforms have an added a layer of measurability to influencer marketing that go beyond mere conversions/sales, such as cost per thousand impressions (CPM), inbound links, and lead growth (number of followers, social mentions, etc.). With these added metrics, businesses can more accurately identify their return on investment against marketing dollars spent.In 2015, Starwood Hotels experimented with Snapchat geofilters at some of its W Hotels to see how guests would use them. Geofilters allow users of Snapchat to add a sponsor-created geolocational tag to their photo or video message (coined "Snap") that can only be used when sending a Snap within a sponsor-defined geographical area (e.g., within a 10-metre radius of the hotel). The usage rates and number of views for the geofilters were well above what Starwood had anticipated, indicating that Snapchat may be a viable option for future brand marketing initiatives.Marriott Hotels recently launched a Snapchat campaign that features social influencers who created organic content on the brand's Snapchat account to showcase the brand's loyalty program and several hotels around the world. The social influencers also used their own Snapchat accounts to broadcast their experience to their followers, hoping to create brand awareness among millennial travellers in the process.Opportunities for PersonalizationWithin the hospitality industry, improved personalization is coterminous with a higher level of service. As such, hotel companies are attempting to personalize communications by interacting with consumers through their mobile device. Mobile phones are often perceived as an extension of an individual, or as an intimate partner that accompanies a person into almost every aspect of daily life. Reaching an individual through their mobile phone thus has the benefit of seeming like a personal interaction. To capture this opportunity for more personalized interaction, hotel companies must become phone-friendly and create the infrastructure necessary to allow guests to interact with the hotel easily and meaningfully through their mobile device.Personalization through the mobile phone ecosystem and social media platforms is constantly evolving. Personalization can occur on a broad level, such as an interaction between a brand's social media channel and a consumer account, or on a more granular level, such as communication between a hotel guest and the hotel's guest services team through a messaging application. From an advertising standpoint, several social media platforms have launched dynamic advertising whereby a consumer's recent travel searches will trigger personalized advertisements, which present a touchpoint for possible consumer conversion (by a direct hotel booking, for example). This represents a critical opportunity for hotel companies, particularly since the use of online travel agents (OTAs) diminishes the profitability of a hotel. In 2016, IHG began using Dynamic Ads on Facebook to target "high-potential" customers with personalized advertisements--and live pricing--based on searches, which yielded an increase in the brand's ability to reach relevant travellers and a lower cost per booking. In the big picture, social media channels are beneficial to hotel companies because they offer an opportunity to create personalized interactions with consumers, which can be leveraged to yield more direct online bookings.Digital Payment Platforms: A New OpportunityWith the proliferation of mobile devices and internet access around the world, the use of digital payment has seen accelerated growth. According to Allied Market Research, "the global mobile payments market is estimated to reach $3,388 billion by 2022, representing a compounded annual growth rate of 33.4% from 2016 to 2022," with the Asia-Pacific region accounting for most of this growth. The North American market, although far from mass adoption, is amenable to digital payment. Based on the 2016 North American Consumer Digital Payments Survey, consumers are becoming increasingly aware of digital payment options, and American consumers responded that they foresee being more likely to use mobile payment apps and mobile wallet apps in 2020 than in 2016.For the North American hotel industry, the projected adoption of digital payment, along with the growth of social media users, is an opportunity for direct booking and quicker conversions directly through mobile devices. In China, for example, mobile payment has already become part of daily life--the country is advanced in this area relative to North America. The two major digital payment platforms in use there, WeChat Wallet and Alipay Wallet, have enabled digital payment through mobile devices and have had incredible success in adoption; this form of payment is accepted at almost all vendors in major cities. Notably, WeChat has evolved from a person-to-person messaging application to an all-in-one social-media, messaging, and digital-wallet application. The integration of a mobile digital wallet into the social media and messaging application has allowed users to send money to each other and/or make purchases entirely through the WeChat ecosystem. Through the account feed of a vendor, users can pay for not only restaurants and retail purchases but also such things as utility bills and public services, all through their mobile wallet. Through WeChat, vendors are able to offer discounts or reward loyalty points, thereby further incentivizing the use of the channel. For example, the Kempinski Hotel in Chengdu has launched a function that allows direct bookings through its official WeChat account and also provides a discount or an amenity to those using this channel. In the case of WeChat, hoteliers were able to directly tap into a pool of daily active consumers and generate conversions through the social media messaging platform.In North America, digital wallets such as Apple Pay, Samsung Pay, Android Pay, and PayPal exist; however, mobile users lag in adoption. Traditional forms of payment, such as cards, are not yet seen as "broken," so many consumers don't see a need for change. As digital payment adoption is expected to grow in future years, it is important for hotel brands to keep up with consumer expectations. Given that the evolution of messaging applications into mobile-purchasing ecosystems has already started, hotel companies need to be in a position to provide digital payment options in anticipation of the change in consumer behavior, especially since this will be key to protecting the online reputation of the company. In Canada, a 2016 study into mobile wallet usage by the Nielsen Company found that 76% of respondents would switch to a mobile wallet as their primary mode of payment if all reward programs would honour mobile transactions, 75% would make such a change if more merchants accepted mobile transactions, and 74% would do so if rewards programs and mobile wallets could be integrated to redeem rewards instantly. Therefore, an opportunity may exist for hotel companies to integrate their rewards programs with digital payment.In North America, hotels are slow in the adoption of mobile payment platforms that take the form of a digital wallet. Nonetheless, several hotel brands have implemented the use of messaging platforms that allow guests to interact with customer service agents and even property-specific guest service agents, and also book directly (but without digital wallet capabilities). Through brand-specific native applications, third-party applications, and established messaging applications such as WhatsApp and Facebook Messenger, hotel brands are experimenting with personalized guest communication, which will likely lead to a more seamless adoption of mobile payment at a later date. In 2014, for example, Starwood Hotels launched "Let's Chat," which allows guests to communicate with the company's guest service team at more than 150 properties worldwide through WhatsApp, BlackBerry Messenger, or iMessage at any time, from anywhere.Moreover, Hyatt hotels was the first to provide customer service through the Facebook Messenger platform following the launch of Facebook's Businesses on Messenger in 2015. Through the platform, Hyatt customer-service agents can help with bookings worldwide, and also respond to guest requests.Hotel brands clearly see an opportunity in tapping into the vast user base among these messaging platforms, and they are beginning to implement these platforms as a means of communicating with guests. The personal experience of messaging builds loyalty and guest engagement even as the messaging platform serves as another vehicle for direct bookings; however, the mobile ecosystem in North America has not gained as much traction as other markets internationally. Nonetheless, the continued growth of mobile devices and social media users is expected to align with digital payment in the near future, thereby connecting a pool of potential consumers with seamless mobile purchasing platforms once digital payments become mainstream.ConclusionThe tactics and tools employed in social media marketing within the hotel industry are constantly evolving. Companies that are early adopters of new social media marketing tools hope to gain an edge over the competition; being first to the plate can yield success, but it is not without risk, both of failure and of squandered resources. For hoteliers to remain relevant in this dynamic field, it is essential to understand the pulse of current technology trends within the hotel industry, and be prepared for changes in consumer behaviour. A positive outlook remains for the hotel industry as companies continue to expand their scope of social media marketing. Meanwhile, the mass market is inexorably moving towards the adoption of digital payment; its anticipated convergence with social media and messaging platforms will generate new opportunities for personalization, engagement, and conversion.
HVS - 20 July 2017
Looking Back - Game Reserves & Sustainable TourismMost national parks in the late-19th to mid-20th centuries were established with the purpose of protecting wildlife and to preserve their natural habitat. Often it was the hunters who turned to conservation and led the way in establishing protective boundaries for depleting animal populations. As animal populations flourished there was an increasing interest from tourists to witness the wildlife in its natural habitat, which led to establishment of park rules and regulations. Game reserves found a way to sustain themselves while generating tourism revenue. While this seems straightforward, it is important to note that the right balance between tourism and conservation is the key for the successful national parks and is critical to sustainable tourism in the long run.In South Africa, The South Africa National Parks (SANParks) is the body responsible for managing the national parks in of which Kruger is the most popular game reserve. A quick comparison of SANParks annual report from 2004/05 and 2015/16 points out a steady increase in tourism over the decade.It is interesting to note that the annual increase in absolute visitation in room nights and units sold has increased steadily but not at an alarming pace. However, the tourism revenue has increased by more than 5 times (over 16% year-on-year increase) pointing out to an effective strategy that can be adopted by national parks and overall by the lodging industry. Visitation to national parks cannot be a volume driven approach and hence the rate strategy is very important.The co-existence of Kruger National Park and the adjacent Greater Kruger National Park - GKNP (privately owned game reserves) offers a fitting example of a public-private association upholding the principles and values of conservation, sustainable land use and local community development. It simultaneously ensures free movement of animals across boundaries increasing grazing area, extending their natural habitat and by extension the potential gene pool. The private game reserves strictly governed by park entry rules offer exclusivity and uncrowded safaris, night drives, walking safaris and more luxurious accommodation setting it apart the experience in lodges in Kruger National Park (KNP). Together GKNP and KNP offer a wide range of choices, price points and experiences for travellers and wild life enthusiasts visiting from across the globe. Other key success elements are the number of domestic visitors and the amount of repeat guests that sustain year-round revenue inflows.Parks Entry Traffic and FeesThe volume of visitors to game reserves has always been a topic of debate. Rules and regulations have only been made stricter in most cases to allow for conservation goals to precede tourism. A news headline maker was a law suit in India that provisionally banned all wildlife tourism in India in 2011. It was based on the claim that tourism was adversely impacting wildlife rendering many parks and lodges to suffer temporary closures. While it is necessary to maintain a balance, it is imperative to study the impact of tourism on wildlife before setting a ceiling or a blanket-ban. Tourism can actually contribute to the conservation, local community and long-term sustainability of the reserves. There is always a case to manage the visitation and still extract the highest yield from tourism activities. Kruger National Park has amongst the highest tourist visitation to a game reserve in Africa with over 1.7 million tourists every year. This may well change in a few years if demand increases beyond the endurable levels. KNP may actually have to control day visits to park or allow for guests which contribute more (spend more) to the park revenues.The entry fees to parks are also a major tool to control park visitation. Park fees across Africa can vary from US$10 to US$80 per day. Governments and park authorities must use park fees to effectively manage the visitation across peak and low months of the year to manage expected/target visitation. Government in Kenya for example aims to promote Masai Mara as a high-end tourist destination focussing on 'quality over quantity' and has to that effect increased park entrance fees every few years (currently at 80$ for non-resident foreign tourists) to keep the quantum of tourists in check. Park entry fee for residents, however, is relatively low as US$12.Accessibility is Key As travel patterns shift from one long holiday in a year towards multiple short trips, the accessibility of lodges (and the national park itself) from major cities or ports of entry is critical for the lodge industry. The availability of flights, maintenance of airstrips, national highways and motorable tracks within reserves are all crucial factors that impact seasonality in wild life destinations.Managing peaks and troughsMarketing the wildlife destinations as year-round destinations (where applicable) is essential to ensure a steady and sustainable operation. Seasonality trends have been reducing for most developing markets as accessibility improves, however, showcasing the best of all seasons and managing non-peak occupancy/income through engaging repeat guests and price sensitive markets is essential in sustaining operations financially.Human ResourcesStaffing in remote leisure locations without access to everyday city facilities is always a challenge. On site accommodation for a majority of the working staff is a very effective tool in retaining rangers and hospitality personnel. Additional facilities (recreational, canteen, creche) go a long way in ensuring low attrition. A 6-weeks on 2-weeks off policy for staff is the accepted norm at the better managed luxury wildlife lodges and ensuring work life balance is more than essential. From a development cost perspective, this means that in effect you are developing two hotels as the staff village is likely to accommodate an equal number of people as the guest accommodation, if not more, and will need access to resources such as a food store, water, electricity and recreational facilities of their own.Do you Stand Out?The experience is what drives the industry, it is not just the physical attributes of the accommodation/lodge; it is important to ensure a friendly yet non-intrusive service philosophy. The guest experience starts from and includes the interaction while booking, sense of arrival, quality of safari vehicles, number of guests per vehicle, surprise elements, 'wow' factors and customised experiences. Similarly, rangers and naturalists need to know their trade and have the right skill set to tell the story and educate/engage the guests. The ultimate question is whether you can deliver an unforgettable guest experience and customise experiences for families, couples, wild life enthusiasts to earn their loyalty, keep them coming back for more and turn them into active conservationists.Looking at the opportunity aheadTravel trends are, to an increasing degree, not being carved by successful middle-aged or the retired wealthy but by the millennials who are looking for an 'Authentic Experience' not just comfort and luxury. Luxury travel is no longer about pampering and spoiling yourself at a hotel with a heated pool and Egyptian cotton sheets, it's about 'experiencing' the world and moments that are social media worthy. The African safari experience and the excitement of spotting something natural and unexpected is unique and not available on every continent. The popularity of tourism in the plains of Serengeti, or the dotted landscape of Mara, the vastness of Kruger, the deltas and deserts of Botswana are examples of this trend. We anticipate this momentum to grow as tourism and connectivity in African wildlife destinations continues, presenting a strong investment potential for passionate developers/wildlife conservationists especially in upcoming wildlife destinations in Africa (reserves of Botswana, Namibia, Rwanda and Zambia among others).Bird's Eye ViewFinding the optimum mix of facilities and accommodation types/numbers to maximise revenues while matching the available seats on safari vehicles for an "uncrowded" game drive experience is crucial for lodges especially at a higher positioning. Structuring the Concessions/land leases is a very important element and must be investigated as it can be an important factor in determining profitability and return on investment.Factoring an incubation period is very important as these projects require strong funding and are usually not profitable in the initial years of operations.ConclusionEven as game reserves continue to fight the challenges of poaching and efforts are being made to ensure that tourism is secondary to conservation, it is important to educate and involve the travel community from across the globe into preserving the rich wildlife on the planet. Patronage from travellers can go a long way in ensuring the availability of resources for conservation, and hence, responsible tourism should be viewed as an important instrument in the preservation of wildlife reserves.Conservation & TourismAs per the WWF's Living Planet Report, the global populations of vertebrates have declined by 58% between 1970 and 2012 and without immediate intervention global wildlife populations could drop two-thirds by 2020. There are less than 98,000 giraffes left in the world (a 40% decline from the estimated 163,000 in 1985); the global rhino population is down to just 30,000 and the lion population is estimated to be less than 30,000 in Africa today. As per a recent study, the Cheetah population in the wild is down to just 7,100 from an estimated 14,000 in 1975 and a 100,000 a century ago. Most of these declines in populations have come about largely due to human activities and unless we invest into conservation we may well be the last generation to see some of this stunning wild life as it exists in the wild today.Air connectivity to and within Africa is improving and more people are now travelling within their countries in Africa. The African game drives present a truly rewarding holiday and are likely to remain in high demand in future. With practical development costs and financial structures, you can help preserve some of the planets most valuable resources and build a high value asset with a return on your investment in the long run.Lessons from Past ExperiencesGet there early - Understanding the micro-climate and ecosystem, identifying and procuring rights for conservation and lodge development can give you a head start.* Collaborate - Including the local community as both a partner and a beneficiary will go a long way in the success of the project.* Conservation is important for sustainable growth - At no point should the importance of conservation be secondary as it is the very basis for the game lodge industry and its sustainability.* Accessibility is important - All-year access to the parks and lodges and easy connectivity can open avenues for tapping into global tourism.* Experience over product - Game lodges and wild life safari experiences are driven by the overall guest experience and not just the physical attributes/comforts.* Managing peaks and troughs - To sustain lodge operations financially one must adopt marketing strategies to manage low season.* Service philosophy - The guest interaction upon arrival, in a restaurant, stories with rangers can create a wow factor for the guests and keep them coming back. * Get the business plan right - Building the right facilities mix and structuring the investment to account for a gestation period is important.* Everyone is a conservationist - The safari experience leaves every guest enthralled and aware of the need to preserve our planet's wildlife. The lodging industry needs to act as a facilitator to engage the guests and turn them into conservationists contributing to the cause.
HVS - 20 July 2017
Israel's hotel sector saw a relatively stable performance during 2016 with significant potential for future growth due to a rise in incoming tourism and expansion in the sharing economy, according to our latest report, Trends and Opportunities: Israel Hotel Market Overview.Despite the volatile geo-political situation in Israel and its neighbouring states, hotel occupancy in 2016 averaged 67%, with average rates and RevPAR remaining steady at US$202 and US$136.Israel, whose large number of business start-ups and booming technology sector make it the world's second most innovative country, saw significant GDP growth of 4% in 2016. The country is currently seeing large-scale improvements to its infrastructure, including a new airport in Eilat and a high-speed train link between Tel Aviv and Jerusalem.A further boost to international tourism in Israel came in 2012 with the signing of the EU Open Skies agreement, increasing the number of flights into Israel and lowering their cost.Hotel performance still varies from one region to another, and with relatively high room rates the country is still expensive to visit compared with other Mediterranean destinations. Israel's regions also have a pronounced divide between international and domestic markets, with resorts such as Eilat and the Dead Sea more reliant on the domestic market, while Jerusalem and Tel Aviv remain the favourite destinations for international visitors.However, the emergence of alternative accommodation in Israel, such as Airbnb, could become a game-changer for both locals and travellers to Israel with currently more Airbnb listings in Tel Aviv than hotel rooms.'There is potentially room for further growth in the budget segment, which would attract different types of travellers who can already benefit from lower air fares. This would have the effect of reducing overall average rates making the destination more affordable,' commented HVS analyst Lionel Schauder, co-author of the report.With the number of airlines adding flights and the country's hotel pipeline remaining strong, there remains real potential for substantial tourism growth, particularly if security concerns in the region can be overcome.'The first half of 2017 reached a record in terms of tourist arrivals with an increase of 26% over the same period last year,' added co-author Russell Kett, chairman, HVS London. 'The 3 million arrivals mark could conceivably be reached for the first time in the country's history by the end of the year.'
HVS - 12 July 2017
HIGHLIGHTSWe conducted a new survey this year, which analysed a number of different operating characteristics and, while some show a clear commonality across the participants, many vary according to the brand and are therefore heavily driven by the operators' strategy, were it to target the traditional long-stay market or, contrarily the short-stay market, bearing more characteristics with a hotel operation.Operators seem to get more creative with their product offering as they grow their portfolio. Recent additions to the sector showed that some have added more common spaces with communal dining areas at the expense of in-room kitchens, marketing them as a more affordable experience (or microapartments).The branded serviced apartment sector is getting more crowded. Almost every established hotel group now has an extended-stay product and new kids on the block are rapidly appearing such as Base in Switzerland and Cityden in Amsterdam. Other, more distribution-focused groups such as Saco and Bridgestreet are also rapidly increasing their portfolio of managed properties.Our analysis of Gross Operating Profit (GOP) margins revealed some impressive results. Nevertheless, the bandwith of GOP margins remains broad, confirming that some properties operate less profitably.The serviced apartment pipeline remains strong and focused on Western Europe. As brands get more traction, new projects increasingly also appear in secondary cities and new markets. Franchising aids expansion; however, only the larger companies have so far relied on this while many groups manage, own or lease their properties. Ascott recently announced its move to franchising in Europe with two contracts for future Citadines in France.Transaction evidence for serviced apartments exists but remains limited and often with little transparency in terms of the sales price. However, institutional investors are entering the sector, eyeing mostly brands with a solid track record.We would like to thank all of the survey participants for their generous input into the study. Your opinions and experiences are crucial in facilitating understanding of this thriving sector. We urge more operators in the sector to recognise the value of sharing data to enable serviced apartments to gain more attention from potential investors.Much has been announced in terms of product and brand expansion in the past year; we take a look at what has actually materialised.CREATIVE SPACE: INNOVATIONS, OPENINGS, ANNOUNCEMENTSBridgestreet opened its first Studyo serviced apartment in Paddington, London in March 2017. The affordable brand offers rooms fitted with the essentials and shared common spaces (including kitchen). Later this year, Bridgestreet will open its STOW property in Waterloo consisting of 20 prefabricated modular microapartments.Saco Apartments rolled out its first Locke properties in Aldgate, East London, in October 2016 and Edinburgh in June 2017. The design-led brand takes inspiration from the local neighbourhood and community.Visionapartments has become the first serviced apartment provider to accept payment in Bitcoins and, as such, follows a global trend of making the 'digital currency' more readily usable. Long-stay travellers (a month and more) can equally benefit from a new partnership with topbonus, Air Berlin's frequent flyer programme.Go Native has recently strengthened its position in the private rented sector (PRS) with a series of management contracts secured in London and Manchester. According to Guy Nixon, the brand's CEO, it is likely to see other serviced apartment brands move into this space, as PRS constitutes an enormous market and has many similarities to the operation of serviced apartments.NEW BRANDS AND CONCEPTSAdagio, a comparatively 'historic' aparthotel brand, revealed its new look with the opening of the Adagio Edinburgh Royal Mile in November 2016. Not only is the interior design of the units more contemporary, Adagio has also added an open lobby concept, demonstrating that it remains up to date with recent hotel trends.Ascott has announced its new lifestyle brand lyf (pronounced 'life') 'designed for the millennial market, including technopreneurs, start-ups and individuals from music, media and fashion'. To accurately cater for this segment, lyf properties will be managed by lyf Guards, millennials themselves, acting as community managers, city and food guides, bar keepers and problem solvers. The pipeline will focus on key gateway cities in Australia, France, Germany, Indonesia, Japan, Malaysia, Singapore, Thailand, China (where the pilot property will open in 2018) and the UK, aiming at opening 10,000 units by 2020.A new concept - Livinghotel - has been implemented in Visionapartments' newest additions to the portfolio. The apartments in Vienna and Vevey (both former hotels) will not have in-room kitchens, but will offer access to large public spaces with a shared kitchen where tenants can eat together; an interesting move, considering that an in-room kitchen was the original USP for the serviced apartment concept!SURVEY RESULTSDuring May 2017, HVS analysed data from 17 individual serviced apartment providers with a combined total of 17,150 units. The following paragraphs present our analysis of the aggregate data. Wherever there are sufficient data, we have provided more detailed or market-specific results.Unit MixThe room mix of a serviced apartment block plays a crucial role in optimising performance results. Some brands have therefore implemented certain ranges of apartment types to standardise their products  or to best adapt to their desired market segmentation . Others remain more flexible and adapt to the opportunity and the market. On average, our sample suggests that almost 60% of units are made up of studios and approximately a third are one-bedroom apartments, with the remainder falling into larger unit types. Units with more than two bedrooms are rare and only exist where the appropriate target market is present.The breakdown by country provides further insights.1 Residence Inn's typical room mix comprises 90% studios and 10%one-bedroom apartments (Source: Brand Factsheet)2 Adagio assumes approximately 60% Business and 40% Leisuretravellers (Source: Brand Factsheet)While the rooms mix of serviced apartments in France and Germany is broadly in line with the aggregate of the sample, Switzerland has a considerably larger proportion of studios, and serviced apartment units in the UK have a much smaller percentage of studios but a relatively high proportion of one- and two-bedroom apartments. Serviced apartments in the Netherlands (mostly Amsterdam) present the largest proportion of two+ bedroom units.Minimum Stay RequirementsServiced apartments were originally conceptualised for extended stay guests, often because of planning restrictions, but this has changed considerably and apartments have become popular with more transient guests as well, if local planning regulations permit it. It is therefore not surprising that more than 90% of our sample is reluctant to introduce minimum-stay requirements. The short-stay business also enables rooms to be filled between longer-staying tenants. Some providers impose a minimum stay of two nights over the weekend; one of our survey respondents, focused on the long-stay market, has a three-night minimum stay at all of its properties. Other, more specialised and upscale providers which cater to the traditional long-stay market require a minimum stay of 90 days.Average Length of Stay (ALOS)In relation to the minimum stay requirements, we also analysed the average length of stay.The very low minimum of often one night confirms that certain serviced apartments operate much like a hotel, whereas the maximum of just under two months is more in line with the extended stay market definition and expectations. The following graph displays the distribution of stays across different bands of overnights.The largest block is made up of stays of between four and nine nights; 75% of the respondents had an ALOS of fewer than 20 nights in 2015 and this proportion increased to 80% in 2016.It is apparent that vast differences exist in the average length of stay between different providers and locations. It is therefore difficult to conclude what dictates this key performance indicator in a serviced apartment unit. Our data show that certain brands put an increased focus on the short-stay market and therefore operate very much like a hotel. They run the risk of failing to benefit from the economic advantages arising from longer stays.StaffingOur data suggest that, on average, 17 guest-facing staff members (full-time employees - FTEs) were employed for every 100 serviced apartment units in 2016. No particular regional differences were apparent in our sample. Budget figures for 2017 indicate a slight increase in the average number of FTEs to 17.8. Staffing at serviced apartments can vary significantly; our sample covers a range of 2.3 to 32.1 staff members per 100 available units. These differences stem mainly from different operating models, such as having a more substantial food and beverage outlet (serving breakfast, for example), as well as a 24-hour manned front desk.Travel Agent CommissionA substantial portion of serviced apartments, especially smaller, non-branded units and apartments focused on the transient market, are highly dependent on travel agents (including online travel agents - OTAs). On average, the commissions paid by serviced apartments represent 7% of rooms revenue with the majority falling within the 6%-10% range (52%) and the 1%-5% range (37%). We found no meaningful correlation between the commission percentage and the average rate or size of the property, although it is likely that brands with a strong track record or substantial supply are able to negotiate lower percentage commissions than the somewhat punitive 15%-25% paid by some.Occupancy and Average Rate PerformanceThe following charts present an overview of the recent occupancy and average rate performance in the UK and the rest of Europe, as provided by our survey respondents 3 We recognise differences between our survey's data and those from STR's benchmarking services are be due to sample differences.Overall, the performance is encouraging in light of recent political events. The UK Regions and London recorded marginal growth in occupancy in 2016 and average rate growth of 3% and 4% for London and the regions, respectively. The devaluation of the pound in H2 2016 may well have helped the average rate, making the UK more affordable to European and US travellers. The outlook, however, remains more modest; flat growth is forecast for the regions and London's serviced apartments are aiming at another 3% growth in average rate in 2017. The UK's decision to leave the European Union could affect certain serviced apartments in the longer term, especially those focused on the corporate market, some of which may choose to move away from London eventually. However, it is too early to jump to such conclusions.Our European sample has shown less movement; a small drop in occupancy in 2016 was offset by some growth in average rate. The sentiment for 2017 seems to be positive with budgeted growth in both occupancy and average rate.TrevPARUnsurprisingly, the difference between TrevPAR  and RevPAR is marginal as many serviced apartment providers do not offer significant restaurant and bar options. The difference between TrevPAR and RevPAR (that is, ancillary spend) appears to be slightly higher for the serviced apartments on the Contnent. While we do not have complete figures for 2017, operators seem to budget for a larger spend on other income with a widening gap between RevPAR and TrevPAR. With a growing trend of adding open lobby spaces and flexible food and beverage concepts, this dynamic may well become more significant in the near future.4 TrevPAR represents total revenue per available room and, compared to RevPAR, can give a more complete view of a hotel's performance.GOP MarginConventional wisdom suggests that serviced apartments achieve a higher profit margin compared to hotels due to the reduced service offering and often the absence of any food and beverage outlets (and the associated labour cost). Our sample showcases a large range of GOP margins, from the high teens to the low eighties which is somewhat worrying (for the weaker performers). The median of the sample is approximately 60%; the trend in the first and fourth quartile indicate that the bandwith of margins is becoming smaller.Naturally, the GOP margin is positively correlated with average rate, RevPAR and the average length of stay. We found that the weighted average GOP margin for short stays (less than 5 nights) is 40%, 57% for stays between 5 and 15 nights and 78% for stays longer than 15 nights, confirming that longer stays make the operation more profitable. A negative correlation was found between the size of the units and staff members which is reasonable as labour costs can be a major expense in certain markets. Unsurprisingly, a strong positive correlation (~80%) was found between RevPAR and GOPPAR; that is, the higher the RevPAR the higher the GOPPAR.EUROPEAN PIPELINESome 10,000 serviced apartment units are currently in the pipeline in Europe, focused mostly on Western Europe. Eastern Europe, although becoming a hot spot for hotel investment, has so far benefitted little from the rise in serviced apartments. The majority (37%) of the pipeline should materialise in the remainder of 2017, 28% in 2018 and 25% in 2019. The fact that most projects we listed in last year's article can still be found in this year's update is reassuring and shows that little speculation exists when it comes to new developments. However, a considerable number of serviced apartments we were aware of last time experienced delays and are now scheduled to open at a later date. The size of the planned projects varies from as little as 18 units to blocks with 300 apartments; the average size is 120 units but the median of 80 suggests that the average might be skewed by larger projects.Unsurprisingly, the UK and Germany lead the pack, accounting for 41% and 32% of the pipeline, respectively. While London is the top spot for development in the UK (44% of the UK pipeline), Manchester, Edinburgh and other regional cities will also see openings in the near future. It appears that brands with a large presence in the UK are now venturing into Ireland, where development activity is heating up in Dublin. Germany presents a more balanced spread with Hamburg and Berlin (each at 14% of the German pipeline) representing the top destinations. Further, more hotel groups are jumping on the bandwagon to establish an apartment brand, such as Novum LikeApart by Germany's fast-growing Novum Hotel Group. Switzerland comes third in the country ranking and the pipeline is almost exclusively driven by Visionapartments, which is already by far the largest serviced apartment provider in the country, but new providers such as Base are also appearing.Residence Inn by Marriott currently has the largest pipeline with approximately a dozen hotel projects in Europe. The majority are franchised, allowing more rapid expansion, a contrast to the Marriott Executive Apartments where only a handful exist in Europe. Franchising can also help overcome certain expansion challenges in Europe, such as the fact that every European country has different planning laws (and potentially a different language and currency). With the recent Starwood takeover, Marriott also inherited the sustainability-friendly Element brand (currently only in Frankfurt and Amsterdam), but it remains unclear how its expansion will continue. Staycity is solidifying its position in Dublin, the UK and France while also expanding into Germany. Saco and Bridgestreet are now steadily bringing on stream their own concepts which were announced last year. Quest Apartment Hotels, an established serviced apartment provider in Australasia (recently backed by Ascott), is also eyeing a European expansion, focusing on primary and secondary cities in the UK, although no concrete project has been announced. Some of the more aparthotel-type brands are well suited for dual-brand projects, of which there are a few in the pipeline, especially if they are part of a larger brand portfolio, such as Residence Inn (Marriott) or Staybridge Suites (IHG).TRANSACTION AND INVESTMENT ACTIVITYThe following table outlines recent, single-asset, serviced apartment transactions in Europe over the last 18 months, which are available in the public domain.The investor landscape is represented by developers, operators and institutional investors. The initial hesitance from the last towards serviced apartments is fading, especially when collaborating with well established brands with a good track record, as was the case for the Adina transaction in Nuremberg at the beginning of the year. Nevertheless, there is still limited transparency as few of the sales prices (or even the buyer/seller in some cases) remain publicly disclosed. SACO Property Group has secured a number of development sites, such as the Zanzibar nightclub in Dublin, where it plans some 100 units, as well as the Whitworth site in Manchester, subject to a complete refurbishment. Cycas Hospitality continues its expansion with the acquisition of the Staybridge Suites properties it operates in Liverpool in February 2016 and Newcastle in October 2016. On a corporate level, Ares acquired a 70% stake in Go Native in December 2016 for an undisclosed sum. US headquartered Ares is a publicly traded company and, with $100 billion of assets under management, one of the largest alternative asset managers worldwide. Its investment focus lies on three groups: credit, private equity and real estate.CONCLUSIONThe serviced apartment sector is steadily finding its place in the investors' community as the pipeline is larger than ever and increasingly including secondary and tertiary markets as well as countries where the concept is somewhat novel. Survey results confirm that this product can be operated very efficiently with high GOP margins, a result of low staffing levels and few additional services. Nevertheless, more 'hotel' type services, such as open lobby or communal spaces, may become popular in the future. The high profitability, combined with the fact that many guests today recognise the benefit of apartments (in terms of size and pricing) bodes well for the continued growth of the serviced apartment sector.