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  • HFTP Research Report: Pre-opening Expenditures in Hospitality

    A study of the pre-opening budget; the timeline for these expenditures; timeline for onboarding of staff; and the selection, installation and training of the technology component. By Agnes DeFranco, Ed.

  • New Global Directors Join the 2018-2019 HFTP Board

    The HFTP 2018-2019 Global Board of Directors was installed during the association's 2018 Annual Convention and introduces new directors Toni Bau, Carson Booth, CHTP and Mark Fancourt. These extensive director profiles give insight into the distinguished professions and personal goals of HFTP's newest association leaders.

  • Letter from the HFTP Global President: At the End of the Year, We Reflect on the Best of the Year

    As we prepare to transition to the new HFTP Global board at the 2018 Annual Convention in October, I would like to take the time to reflect on my year serving as HFTP Global president.

  • Members Only: 2018 HFTP Compensation and Benefits Report

    By Tanya Venegas, MBA, MHM, CHIA. Results to the biannual survey conducted by Hospitality Financial and Technology Professionals (HFTP). Information includes data on compensation and benefits trends for finance and technology professionals in the club and lodging industries.

Europe Hotel Transactions Bulletin - Week Ending 15 February 2019

HVS ·15 February 2019
IHG acquires Six Senses from PegasusInterContinental Hotels Group (IHG) has agreed to buy the brands and operating companies of Six Senses Hotels Resorts Spas for $300 million/PS232 million, from Connecticut-based private asset management firm Pegasus Capital Advisors. The sale includes the management of 16 hotels and resorts, 37 spas as well as sister companies Evason and Raison d'Etre and will not include any real estate. This transaction follows IHG's acquisition of 51% of Regent Hotels & Resorts in 2018 as well as 100% of Kimpton Hotels & Restaurants in late 2014.Scandic sells Scandic Hasselbacken in StockholmThe Nordics' largest hotel company, Scandic Hotels Group, has signed an agreement for the sale of the Scandic Hasselbacken in Stockholm for around EUR22 million (EUR195,000 per room). The incoming owner, Pop House AB, will take over the hotel's operation on 1st March and already operates the nearby ABBA The Museum and the Pop House Hotel. The Hasselbacken hotel, which had been operated by Scandic since 1992, is located on the Djurgarden island and comprises 113 rooms.Principal sells MGallery by Sofitel AmsterdamPrincipal Real Estate Europe, formerly known as Internos Global Investors, has sold the INK Hotel MGallery by Sofitel in Amsterdam for around EUR60 million (EUR405,000 per room) to a fund managed by European real estate manager Amundi Immobilier. The four-star property, comprising 148 rooms, is located in the city centre and was initially acquired by Principal from Accor in a sale-and-leaseback deal in 2012. The property was renovated in 2015 and has since won two luxury boutique and design hotel awards.AccorHotels completes Orbis shares acquisitionFrench multi-business hotel owner and operator AccorHotels has completed the acquisition of a further 33% of the shares in Orbis for an estimated value of EUR442 million, which takes Accor's total ownership of Orbis to around 86%. Warsaw-based Orbis is Central and Eastern Europe's largest hotel operator and the exclusive local master franchisee for a number of Accor's major hotel brands, operating a total of 128 hotels with some 21,000 rooms in 16 countries under the Sofitel, Pullman, MGallery, Novotel, Mercure, Ibis, Ibis Styles and Ibis Budget brands.Florian Kittler becomes MD of HVS Executive Search, Europe and Asia PacificHVS is pleased to announce that Florian Kittler has been promoted and will oversee HVS Executive Search in Europe & Asia Pacific as Managing Director. Florian will be based out of London and Frankfurt and will lead this year's expansion with new offices in Singapore and Frankfurt. For the full press release please click here.

UK Banks Under Pressure to Lend to Hotel Alternatives

HVS ·12 February 2019
Delegates at the Hotel Alternatives conference held in London last week were told that UK banks are finding it tougher to compete with alternative lenders who are offering more advantageous terms to increase their share of the debt market. Nevertheless, there is still plenty of opportunity for the traditional UK lending banks to have a major impact on the hotel sector in its many alternative guises.Russell Kett, chairman of HVS London, was moderating representatives of Barclays, Clydesdale and Coutts banks, along with mezzanine provider Beaufort Capital Management, as they discussed the alternative hotel segments that are the safest bet for lenders, and how the lenders view the emergent offers. It turns out that the bankers were generally unimpressed with most of the variety of alternatives on offer, preferring to focus on student housing, serviced apartments and caravan parks.As always, the track record of the borrower is of paramount importance as is their ability to deal with issues effectively when things don't go to plan. Ensuring there is at least 30%-35% cash equity in a deal is their favoured position, with a limit of a multiple of EBITDA also factored in. Perhaps surprisingly in a hotel-oriented debt panel, there was a strong appetite for the funding of new developments as opposed to just financing existing assets. Equally surprising was an almost complete lack of impact that UK banks are seeing from Brexit on their ability to do deals in the hotel sector. With only 50 days to go until 29 March, maybe the hotel sector will demonstrate a resilience which the rest of the country could learn from?

Europe Hotel Transactions Bulletin - Week Ending 08 February 2019

HVS ·11 February 2019
Colonial sells Tryp Chamartin hotel in Madrid to MeridiaColonial Group, a Spanish investment manager, has sold the Tryp Chamartin Hotel, located north of Madrid's city centre, to investment manager Meridia Capital for EUR27.5 million (EUR138,000 per room). The 199-room hotel, which Colonial acquired from Renta Inmobiliaria in 2002 as part of the Centro Norte complex for EUR100 million, is part of a larger divestment strategy and represents the last asset belonging to the composite to be divested.Patrizia completes sale of two Holiday Inn hotels in GermanyGerman commercial real estate investor, Patrizia, has completed the sale of its 168-room Holiday Inn Essen - City Centre, near Dusseldorf, and the 164-room Holiday Inn Frankfurt Airport-Neu-Isenburg, on behalf of its special fund PATRIZIA Hotel-Invest Deutschland I. The two four-star properties underwent renovation in 2013/2014 and are being sold as part of the seller's portfolio optimisation strategy.Achat acquires a German portfolio of five hotelsMannheim-based hotel management group Achat Hotels has acquired and rebranded a portfolio of five hotels in Germany, including the 163-room Achat Plaza City-Bremen, the 96-room Achat Premium Regensburg, the 87-room Achat Premium Messe-Munchen, the 46-room Achat Comfort Airport-Munchen, and the 88-room Achat Premium Frankfurt/Egelsbach. These new additions will bring the company's portfolio to 35 hotels across Germany, Austria and Hungary.

HVS Asia Pacific Hospitality Newsletter - Week Ending 8 February 2019

HVS ·11 February 2019
HVS is Honoured to Participate in the Inaugural Serviced Apartments Summit AsiaWe will be represented by Paola Orneli Bock who will speak at the Battle of the deal makerssession on February 22nd. SAS Asia is a dedicated conference to the serviced apartment, branded residence, aparthotel, corporate accommodation and short-term rental sectors. The Summit will take place on February 21-22 at the Amari Watergate, Bangkok, Thailand. Please contact us to set up a meeting and make sure to attend first Serviced Apartments Summit Asia - we look forward to connecting with you.HVS Executive Search Promotes Florian Kittler to Managing Director for Europe and Asia Pacific regions New Offices to open in Frankfurt and SingaporeHVS, the world's leading hospitality consulting and services organization, announced that Florian Kittler has been promoted and will oversee HVS Executive Search in Europe & Asia Pacific as Managing Director. Florian will be based out of London and Frankfurt and will oversee this year's expansion with new offices in Singapore and Frankfurt.To view the full article, please click here .Chinese Investors Acquires Travelodge Rockhampton for AUD6.5 MillionA private Chinese investment group has acquired the four-star Travelodge Hotel in Rockhampton from Australia-based Tucker Box Hotel Trust ("Tucker Box Hotel Trust"), a joint venture between Australia-based companies, Mirvac Group ("Mirvac") and the National Roads and Motorists' Association ("NRMA"). The property was sold for AUD 6.5 million with a yield of 8%and will continue to be operated by Australia-based hotel management company, Toga Fast East Hotels ("TFE Hotels") under the Travelodge brand. The 74-room property features four conference and meeting rooms, two dining outlets, a swimming pool, a gymnasium and spacious parking space. NRMA is one of Australia's largest tourism providers with a portfolio valued at over AUD 800 million, which comprises over 10 hotels as well as more than 40 parks and resorts across Australia and New Zealand. Mirvac owns and manages assets across the office, retail and industrial sectors, with over AUD 18 billion of assets currently under management.Shangri-La To Acquire 23 Plots of Land and Buildings in Bangkok, ThailandHong Kong-based Shangri-La Hotel Public Company Limited ("Shangri-La") has announced their intention to acquire and enter into the land purchase agreement for 23 plots of land and six buildings from Thailand-based real estate group Sriview International Company Limited ("Sriview") for a total transaction value of THB1,885,501,630. Located at Sukhumvit 55, Khlong Tan Nuea Sub-District, Wattana District in Bangkok, Thailand, the total area of the lands span approximately 657.5 square wah (2,630 square metres). The transaction including the registration of transfer and payment are anticipated to be completed within 4 months after the execution date of the land purchase agreement on 4 February 2019. After the completion of the transaction, Shangri-La plans to demolish the buildings and use the lands to develop a 27-storeyfour stars hotel with about 350 rooms under the brand, "Hotel Jen". Shangri-La owns and manages 90 hotels and resorts across Asia Pacific region including Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, Maldives, Mongolia, Philippines, Singapore, Sri Lanka, Taiwan and Thailand, with another 10 developments in the pipeline.Red Planet Japan Acquires Thailand Hotel Portfolio for 6.6 Billion YenJapan-based Red Planet Japan, Inc ("Red Planet Japan") will acquire Thailand-based hotel operations from its parent company, Thailand-based Red Planet Hotels Limited ("Red Planet Hotels"), for 6.6 billion yen (US$60.4 million) in a deal that is expected to be completed by the end of first quarter in 2019. The portfolio includes five operating hotels, located in Bangkok's Surawong and Asoke, Phuket's Patong, Pattaya, and, Hat Yai, and a sixth property under development in Bangkok's Sukhumvit Soi 8. This acquisition is part of Red Planet Japan's expansion plans and comes shortly after its acquisition of two flagship properties in Manila in June 2018, as well as its joint venture with US-based GreenOak Real Estate ("GreenOak") to establish six new hotels over the next two years with 22 billion yen of investment. The latest acquisition will increase Red Planet Japan's portfolio to a total of 15 hotels in Japan, Philippines and Thailand, including five hotels under development. Founded in 2010, Red Planet Hotels is a privately-owned regional hotel group which owns and operates 30 hotels with 4,779 rooms across Indonesia, Japan, Philippines and Thailand. 14 additional hotels with a total of 2,669 rooms, are slated to open across Japan, Philippines and Thailand in 2019 and 2020.

HVS Asia Pacific Hospitality Newsletter - Week Ending 1 February 2019

HVS · 4 February 2019
YTL Corporation Acquires Westin Perth Hotel in AustraliaMalaysia-based integrated infrastructure developer, YTL Corporation ("YTL") has acquired The Westin Perth and a mixed-use development, Hibernian Place from Australia-based developer and construction group, BGC Group ("BGC") for an undisclosed amount. The transaction is estimated at a sale price of more than AUD200 million and is expected to complete in the first quarter of this year. Opened in April 2018, the 368-key hotel is situated in the east end of Perth central business district, approximately twelve kilometres from Perth International Airport and in close proximity to world-class infrastructure projects including Elizabeth Quay, Perth City Link, Western Australian Museum and Riverside. The hotel features 2,300 square metres of meeting space, seven dining outlets, an infinity edge outdoor swimming pool, a fitness centre and an award-winning Australian Spa Bodhi J. Hibernian Place is a 2,000 square metre outdoor plaza located adjacent to the hotel that features multiple noteworthy F&B tenants. Prior to the acquisition, YTL is involved in both ownership and management of 33 hotels and resorts across Australia, China, Indonesia, Malaysia, Thailand and UK.First Sponsor Group Acquires Hotel Property in Milan for EUR9.3 MillionSingapore-based developer, First Sponsor Group Limited ("FSGL"), has acquired a hotel property located in Milan, Italy from BNP Paribas real estate investment fund Fondo Kona ("Fondo Kona") for approximately EUR9.3 million (SGD14.4 million) on 24 January 2019. The transaction was fully paid in cash resources with an estimated acquisition costs of EUR1.4 million (SGD2.2 million), which included an insurance premium and taxes paid in relation to the insurance policy. The six-storey property, which designated use remains as a hotel, is currently vacant but used to house a 65-room four-star hotel named "Grand Hotel Puccini". Since 2015, FSGL has embarked on initiatives to accelerate its growth through selective developments and acquisitions in Europe. Prior to the acquisition, FSGL's portfolio comprises 24 hotel properties across China and the Netherlands.GreenTree to Become a Major Shareholder of ArgyleChina-based franchise and hotel management chain, GreenTree Hospitality Group Ltd. ("GreenTree") has entered into a share purchase agreement with Australia-based hotel owner and operator company Argyle Hotel Management Group Pty Ltd. ("Argyle"). GreenTree will become a major shareholder of Argyle while Argyle's founder, CEO and management team will remain one of the largest shareholders of Argyle and become an integral part of GreenTree's management team. The transaction is subject to customary closing conditions and is expected to be completed by March 31, 2019. Argyle manages over 100 hotels and resorts across Asia Pacific, with the majority of its properties located in South West China. Argyle hotel network consists of eight brands ranging from mid-scale to luxury and long-term stay. GreenTree opened its first hotel in 2004 in Shanghai and grew its portfolio thought acquisition and development. GreenTree's portfolio currently comprises of 8 main brands and 2,434 hotels across 267 countries.Yuhu to Expand Luxury Jewel Project after Gold Coast Land PurchaseAustralia-based developer, Yuhu Group ("Yuhu"), has reached an agreement to purchase a new parcel of 1,264 square metres land on the Gold Coast from China-based, Dalian Wanda Group, for USD11.25 million. As the owner and developer of One Circular Quay in Sydney, another premium Australian tower, Yuhu has bought the site which acts as an extension to the company's luxury Jewel mixed-used project ("Jewel") for additional developments. These will include additional amenities to support leisure, exhibitions, entertainment, and business activities. Designed by renowned architects Chad Oppenheim and Barry Lee, Jewel is currently under construction and is positioned to be one of the most desirable destinations for both residents and visitors in Australia. Construction started in February 2016 and is expected to be completed by mid-2019. Once completed, Jewel will feature three crystalline towers consisting of a five-star hotel and a serviced apartment complex.Bangkok Airways to Launch Direct Flight from Bangkok to Cam RanhThe national airline of Thailand, Bangkok Airways Public Company Limited ("Bangkok Airways"), has launched direct flights connecting Bangkok with Cam Ranh in Vietnam,starting from 25 January 2019. With current flights to Danang, Phu Quoc and Hanoi, Cam Ranh will become the fourth destination in Vietnam on the airline's global network. The airline operates four flights per week, serviced by Airbus A319 with a total capacity of 144 seats. Located on the Southeastern coast of Vietnam, Cam Ranh is known as the "Riviera of South China Sea" and is only 30 minutes away from Nha Trang, a holiday destination famous for its beaches, sightseeing and recreational activities.

Supply Increase Impacts Occupancy in UK's Provincial Hotels

HVS ·30 January 2019
According to the latest UK Hotel Market Tracker: Q4 2018, produced by HVS London, AlixPartners and STR, average rates in Q4 also rose by 5% in London's hotels, to PS157.20, boosting RevPAR by an impressive 10%. RevPAR growth was 3% for the full year.Conversely, in Q4 hotels in the provinces failed to see any growth in average rates, causing RevPAR to plateau. For the full year, however, RevPAR in the provinces grew by 2%.'For the UK's hotels, Q4 was a very different trading picture in London compared with outside the capital,' commented HVS chairman Russell Kett.'Hotel supply outside London grew 1.8% in Q4 of last year, causing supply to exceed demand. As a result of more intense competition, operators were unable to lift average rates.'While supply growth was also strong in London at 2%, in 2018 demand resulting from a number of high-profile events boosted visitor numbers and meant that in Q4 London's operators were able to mitigate the impact of the increasing number of hotel rooms available.'According to the Tracker, supply is expected to grow further in 2019 both in London and in the regions, with a 4% rise in inventory in the capital and 3.3% supply growth outside London.'This increase in supply to the UK market means that hotel operators will have to work harder to boost their average rate unless demand for rooms grows significantly. This, as well as rising costs and the impact of Brexit, means that 2019 will be another tough year for hotel operators,' added Kett.The Tracker also reports that hotel transactions in the UK have seen a slowdown, with a PS1 billion fall in the sale of hotels during 2018. This can be attributed to both buyers and sellers awaiting a Brexit solution and sellers keen to avoid selling too cheaply.'If a Brexit solution is found quickly that is well received by the financial markets, we could see some of the remaining PE funds' holdings making a dash for the market. Otherwise, buyers and sellers will wait for the outcome, so transaction activity will remain sluggish for the time being,' concluded Kett.The full tracker can be found by clicking here.

HVS Asia Pacific Hospitality Newsletter - Week Ending 25 January 2019

HVS ·28 January 2019
Ascott's Global Portfolio Increases to More Than 100,000 UnitsSingapore-based serviced residence owner and operator, The Ascott ("Ascott"), has secured contracts for another 26 properties with 4,600 units across 11 countries. This will increase Ascott's portfolio to over 100,000 units globally, and represents Ascott's second consecutive year of expansion. Half of the new properties will be established in China between 2019 and 2023, while one is slated to open in Singapore this year. In 2017, Ascott's portfolio grew twice as fast over 2016, with the addition of more than 30,000 units across 189 properties. Ascott has mainly achieved this growth through its strategic moves over the past few years including the investments in Quest Apartment Hotels (Australasia market), a partnership with Tauzia Hotel Management (Indonesia market), a joint venture with Huazhu Hotels Group and CJIA Apartments group (China market), and a franchised property in Amsterdam, Netherlands. Ascott's global footprint now extends to 172 cities across 33 countries. The company seeks to expand its presence in India, Indonesia, the Philippines, Thailand and the UK among other countries, and has a target of 160,000 units worldwide by 2023.Angsana Debuts in Xishuangbanna City of ChinaSingapore-based Banyan Tree Hotels & Resorts ("Banyan Tree") has recently announced the opening of Angsana Xishuangbanna, the first Angsana resort in Xishuangbanna, Yunnan Province and also its fifth in China. Located in Menghai County, the 'Hometown of Pu'er Tea', the resort features 407 guestrooms, suites and villas with a terrace. Food and beverage outlets include an all-day dining restaurant, a Chinese restaurant, a specialty restaurant, a lobby bar and a pool bar. The resort also features a pillar-less ballroom of 600 square metres, which can be divided into three individual rooms, as well as two multi-function rooms covering an area of 98 square metres, which can be combined and divided according to guests' need. In addition, other facilities include an Angsana SPA, a Gallery, a gym, indoor and outdoor swimming pools, a kid's club, KTV and mahjong rooms. Banyan Tree manages more than 40 resorts and hotels, 60 spas, 70 retail galleries and three championship golf courses across 28 countries.Malaysia Extended Temporary Visa Exemption for Chinese and Indians TouristsMalaysia has announced the Malaysian Government's approval of an extension for the temporary 15-day visa exemption for China and India tourists to the end of 2019. The exemption was previously planned to cease on 31 December 2018. The ease of visa restrictions is expected to help facilitate tourist arrivals by staying competitive with neighbouring countries including Indonesia and Thailand. Currently, Chinese nationals travelling to Malaysia pay US$40for a single-entry e-visa and an additional US$40 as service fee while Indian nationals pay US$21.50 for a single-entry e-visa, US$45 for a tourist visa and US$35 for standard processing service fee. In an effort to boost awareness of Malaysia and to showcase the Malaysian Chinese culture and heritage, Malaysia has also launched other tourism initiatives including the organising of Malaysia-China Spring Festival Carnival in Kuala Lumpur on 16 February 2019.American Airlines and China Southern Airlines Begin Expanded PartnershipUS-based airline American Airlines, Inc ("American Airlines") and China-based airline China Southern Airlines Co Ltd ("China Southern") are growing their partnership to codeshare on additional routes beyond key destinations in China and the United States, starting on 15 February 2019. The partnership will also include nine trans-Pacific routes between China and the US. Upon completion of the partnership expansion, the two airlines will codeshare on flights to 20 destinations in China beyond Beijing and Shanghai, and 21 destinations in the US including Los Angeles, San Francisco and New York. The two airlines will also codeshare all their long-haul flights between China and the US. This partnership expansion will further enhance loyalty offering to customers of both airlines, with reciprocal lounge access and reciprocal loyalty program benefits. American Airlines and China Southern began their relationship in March 2017 and started codeshare service in January 2018.Royal Brunei to Relaunch Brisbane ServiceBrunei-based Royal Brunei Airlines ("RB") will restart its route between Brunei and Brisbane from 11 June 2019. Serviced by Airbus A320NEO with 12 Business and 138 Economy seats, the seven-hour non-stop route will operate four times per week, bringing an additional 62,400 seats each year. Following the launch of daily London-Brunei flights in October 2018, the reinstated route will be part of RB's one-stop service between London and Brisbane, offering an additional Australian travel destination for UK travellers. Brisbane was the second Australian city that RB flew to via Darwin in 1994. The direct route first opened in 1997 but was suspended in 2011. The reconnection of Brunei and Brisbane is expected to strengthen trade, investment, tourism, and cultural ties among the three countries. Founded in 1974, RB operates a network covering 16 destinations across Southeast and East Asia, the Middle East, Europe, and Australia.

Europe Hotel Transactions Bulletin - Week Ending 18 January 2019

HVS ·21 January 2019
UBM sells the Super 8 Hotel Mainz Zollhafen, GermanyVienna-based developer UBM Development has forward-sold the 216-room Super 8 Mainz Zollhafen to the German insurance group Wurttembergische Lebensversicherung AG for EUR24 million (EUR111,000 per key). The hotel, set to open in the first quarter of 2020, is currently under construction and will be operated by GS-Star GmbH under a 20-year lease agreement.Art-Invest acquires dual-branded Ibis Styles and Ibis Budget in Bayreuth, GermanyGerman real estate fund Art-Invest Real Estate is acquiring the dual-branded Ibis Styles and Ibis Budget hotel in Bayreuth, Germany from local developer Fuchs & Sohne. The property is currently under construction and is planned to open in 2020. Both hotels will be operated by GHotel Germany GmbH under a long-term lease agreement and subject to a franchise agreement with AccorHotels. The property will have a combined 180 rooms, with 96 operated under the Ibis Styles brand and 84 under the Ibis Budget brand.Dominvs buys Arbor City Hotel in LondonLondon-based Dominvs Group has acquired the 115-room Arbor City Hotel in London. The hotel, located in London's Whitechapel area, will be rebranded as a Hampton by Hilton and will be operated under a franchise agreement. The new owners are also planning on expanding the hotel by converting the adjacent parking lot into 150 additional guestrooms.Whitbread acquires development site in central DublinAbarta Investments has sold the Twilfit House development site in central Dublin to Whitbread, owner of Premier Inn. Whitbread will start developing a 180-room Premier Inn hotel on the site that has been sold with a secured planning permission. The acquisition represents Whitbread's second development project in the city, with only one Premier Inn currently operating in Ireland, at Dublin Airport.

HVS Asia Pacific Hospitality Newsletter - Week Ending 18 January 2019

HVS ·21 January 2019
Worldwide Hotels Group Wins Club Street Hotel Site Bid with SGD562 Million in SingaporeSingapore-based hotel owner and operator, Worldwide Hotels Group ("Worldwide Hotels"), has acquired a 99-year leasehold hotel site along Club Street in Singapore's Central Business District. The bid of SGD562.2 million (SGD2,148.50 per square foot per plot ratio) was made through Worldwide Hotels' subsidiary, Midtown Development, and is a record price for a 99-year leasehold land at a state tender. The bid was also 22% higher than the hotel site sale at the Singtel site on Hill Street in February 2018. With an expected investment of more than SGD700 million, Worldwide Hotels envisages a four-star property that will become the group's landmark hotel. Worldwide Hotels currently owns and manages six hotel brands in Singapore.Thailand Extends Temporary Visa-On-Arrival Fee Waiver for TouristsThe Tourism Authority of Thailand ("TAT") has announced the Royal Thai Government's approval of an extension for the Visa-On-Arrival (VOA) fee waiver for citizens of 20 countries until 30 April 2019. Previously, the waiver was applicable from 15 November 2018 to 13 January 2019. The continuation of the stimulus measure is timely as Thailand is set to celebrate the Lunar New Year in February and the Thai New Year (Songkran) in April. The measure also aims to enhance the country's attractiveness and promote tourism. Other notable events and festivals scheduled during the period include the World Wai Kru Muay Thai Ceremony on 17 March at Ayutthaya and the Poi Sang Long Festival during March or April in the northern province of Mae Hong Son. The THB2,000 (US$63) VOA fee waiver is eligible for citizens arriving with the purpose of touring for not more than 15 days from: Andora, Bulgaria, Bhutan, China including Taiwan, Cyprus, Ethiopia, Fiji, India, Kazakhstan, Latvia, Lithuania, Maldives, Malta, Mauritius, Papua New Guinea, Romania, San Marino, Saudi Arabia, Ukraine and Uzbekistan.Vietjet Launches Third Route to JapanVietnam-based VietJet Air ("Vietjet") has launched a new service between Hanoi and Tokyo on 11 January 2019. Following the opening of the Hanoi - Osaka and Ho Chi Minh City - Osaka routes, it is the third direct route between Vietnam and Japan, operating daily return flights with a length of approximately 6 hours per leg. The new route is expected to strengthen trade, investment, tourism, and cultural ties between the two countries. As the capital city of Vietnam, Hanoi provides travellers from Tokyo and the Kanto region with convenient access to other famous destinations in Vietnam. To further boost travel demand between the two countries, Vietjet has cooperated with Japan Airlines on a code-share flight service, which is also applicable to its domestic routes, such as Hanoi - Ho Chi Minh City - Da Nang. Vietjet operates a network comprising 39 domestic routes and 66 international routes with over 385 flights per day, covering major destinations in North and Southeast Asia.Park Hotel Group Debuts in SeoulSingapore-based hotel owner and operator, Park Hotel Group ("Park Hotel"), has opened its first property in Seoul, South Korea. The newly built Park Hotel Yeongdeungpo, is owned by South Korea-based firm K2 Group ("K2 Group") and will be managed by Park Hotel. Located in the Yeongdeungpo district, the 14-storey hotel is next to Seonyudo Station, a 10-minute drive to the Yeouido financial hub, and a 50-minute and 25-minute drive from Incheon International Airport and Gimpo International Airport respectively. The 140-key property features five room categories, all with floor-to-ceiling windows or balconies with panoramic views of the city skyline or the Hangang River. It also offers a 24-hour fitness room, a business centre, a meeting room, a banquet hall, and three restaurants. Park Hotel currently manages 15 properties across eight countries including Australia, China, Hong Kong, Indonesia, Japan, Malaysia, Maldives and Singapore.Hilton Opens Flagship Property in Da NangUS-based hotel franchisor and hotel management company, Hilton Hotels & Resorts ("Hilton")has debuted in Da Nang with the opening of 223-key Hilton Da Nang, Vietnam. The property is conveniently located near the Han Bridge and Bach Dang street with access to Da Nang's main entertainment, shopping and business facilities. The hotel is accessible via a 10-minute drive from Da Nang International Airport and 5-minute drive from Da Nang Beach. The hotel offers rooms and suites ranging from 36 square metres to 202 square metres and a lounge on the 27th floor serving breakfast and drinks. In addition, the property features an all-day dining restaurant, a cafe, a rooftop grill bar, 725 square metres of meeting space, a 24-hour gym and a heated outdoor swimming pool. The new opening represents Hilton third property in Vietnam after Hilton Hanoi Opera and Hilton Garden Inn Hanoi.

Hotel Cap Rates Hold Steady - Values Under Pressure

HVS ·17 January 2019
Following a year of robust transaction activity, hotel capitalization rates remain stable, while hotel NOI and values are under pressure due to slowing RevPAR growth and increasing operating expenses. This article looks at hotel sales and capitalization rate trends, the impact of slowing RevPAR growth on hotel values, and the outlook for 2019. [1]With a more business-friendly administration in place and the passage of the Tax Cut and Job Act (TCJA) in December 2017, the outlook for the economy and hotel performance became brighter in 2018. Hotels generate higher returns than other commercial real estate and reflect changes in economic conditions overnight, positive attributes in an "up" market for investors chasing yield.Hotel owners and investors took advantage of the market's optimism, with 2018 turning out to be a robust year of transaction activity. The lodging sector attracted greater interest from investors looking for higher returns, and existing owners availed themselves of improved market conditions to strategically fine-tune their portfolios. According to preliminary data generated by RCA, single-asset and portfolio hotel sales transaction volume soared, increasing by a whopping 47% to $41.0 billion (from $27.8 billion in 2017), recording the second-highest volume in the last decade, though still well below the $50 million achieved in 2015.The average price per key for all sales (price of $2.5 million and over) increased by 21% from $127,000 in 2017 to $153,000 in 2018, driven by the sale of a greater number of larger, higher-priced hotels. Total volume for hotels that sold for $10 million and over (major hotel sales) increased by a substantial 56%, while the number of hotels that sold in this price category increased by only 6%, reflecting that larger, higher-priced deals drove the volume increase. The average price per key increased by 24%, from $221,000 to $274,000.Individual property sales volume increased by a modest 3.8%. The volume of portfolio transactions, defined by RCA as the sale of two or more hotels, increased by 220%, from $3.9 billion in 2017 to $12.5 billion in 2018. A greater number of large, high-priced deals also drove up sales volume; five hotels transacted at prices exceeding $500 million, including the Plaza in NYC that sold for $600 million ($2.6 million per key), as well as two Waldorf Astoria resorts, the Grand Wailea that sold for $1.1 billion ($1,312,000 per key) and the Boca Raton Resort and Club that sold for $1 billion ($955,000 per key). The Grand Wailea was one of a three-hotel portfolio that sold for $1.06 billion. Pebblebrook's acquisition of LaSalle in the 4th quarter for $4.4 billion was the year's only entity transaction.Click here to read the full article on HVS
Article by Erich Baum

Possessory Interests in Hotel Real Estate

HVS ·17 January 2019
What is a Possessory Interest?A possessory interest is created when a private-sector tenant is granted exclusive use of real property (land and/or building) that is owned by a tax-exempt entity, typically a municipality or a state or federal government agency. The right to occupy and use the land and/or building is usually conferred via a leaseThe Trump International Hotel opened in September 2016 with 263 rooms and was adapted from the historic Old Post Office and Clock Tower. Trump Hotels leases the land and building from the General Services Administration (GSA), a tax-exempt independent agency of the United States government.The Marriott Marquis Washington, D.C. opened in May 2014 with 1,175 rooms, on land leased from the District of Columbia (and a related quasi-public agency). The District aggregated the land through multiple acquisitions for the express purpose of expediting the hotel's development. The property functions as the District's convention center headquarters hotel.In the case of the Trump Hotel, the possessory interest includes both the land and the building. For the Marriott, the possessory interest includes only the land. As in a typical ground lease, the Marriott lease stipulates that ownership of any building improvements constructed by the tenant will revert to the landlord at the lease's termination. Thus, ownership of the Marriott includes both a possessory interest in the land and a leasehold interest in the building. In both the Trump and Marriott cases, the leases run for approximately 100 years, including extension options. Because of the long term and the high quality of the assets, each interest has an investment profile basically consistent with that of a fee simple interest, except for the property rent burden.The Four StandardsTo qualify as a possessory interest, four standards must be met. The tenancy must be independent, durable, and exclusive of the rights held by others, and it must provide private benefit to the possessor above that which is granted to the public. Independence means that the tenant enjoys the freedom to use the property without the landlord's undue intervention. Durability is established by the contractual term over which the tenant will enjoy the use. And with exclusivity, the possessor can legally exclude others from interfering with its use of the property.Sounds Like a Leasehold Interest, Right?When appraising a possessory interest, the appraiser must exclude the value of any rights retained by the public owner/landlord, or any rights that will revert to the public owner/landlord when the lease expires. These same considerations hold true for any valuation of a typical leasehold interest. Furthermore, in a typical ground or property lease, the tenant is responsible for all property tax payments, land and building. The same is true of a possessory interest. Essentially, possessory interest is different from a leasehold interest in name only, the key distinction being that the landlord is a tax-exempt public entity.Why Then Was Possessory Interest a Necessary Creation?Possessory interest as a distinct form of taxable property was created to assure that private-sector tenants occupying public property were appropriately taxed for any enjoyment and/or economic benefits conferred to them by the lease. Because the landlord is exempt from property taxation, tenants have argued that it is unfair for them to have to pay taxes on property that hasn't been taxed previously and are only now taxed because of the fact of their tenancy. Tenants have asked, why is paying rent to the government or other public agency not enough?The logic underlying the additional payment of property tax expense holds up upon further consideration. The tenant pays rent to occupy the land and/or building; that is the public's return on the value of the property. These rent payments are unrelated to ad valorem property taxation, which is levied to fund municipal services. In the case of a large-scale commercial hotel, the tenant's possessory interest tax payments compensate the municipality for the costs of providing infrastructure, fire and safety services, and public education. These burdens are funded through ad valorem taxation. Without a taxable possessory interest, the tenant's share of these expenses would be unfairly distributed to the municipality's other taxpayers.How to Value?The valuation methodology is basically the same as the methodology applied in a typical leasehold appraisal. A discounted-cash-flow (DCF) analysis is recommended; if the remaining lease term exceeds 50 years, then the standard ten-year DCF methodology typically applies, with reversionary proceeds from an assumed sale quantified at the end of the tenth year.For leases with less than 40 remaining years, HVS typically employs a DCF analysis extending through to the year of expiration, with no reversion included.Lease terms with 40 to 50 years remaining are open to interpretation. The appraiser can extend the DCF over the remaining life and exclude the reversion, or use a ten-year DCF and reversion, adjusting the terminal capitalization rate upward to reflect for the shorter lease life remaining.In cases where the contractual rent fluctuates significantly in comparison to the assumed inflation rate, the appraiser is advised to extend the DCF to the full term, no matter how many years remain, and again exclude the reversion.What if the Assignment is a Property Tax Appraisal?When determining the property value for ad valorem taxation, the ground and/or building rent is excluded as an operating expense in the forecast of EBITDA Less Replacement Reserve. The rent represents the contractual return on the possessory interest component. Excluding it as an expense assures that the possessory interest value component is captured in the total real property valuation used to calculate property tax expense. If a single-year direct capitalization methodology is applied, the property tax rate can be loaded into the selected overall capitalization rate. If a DCF is used, the property tax expense should be iterated using the total property value and the Year One property tax expense as mutual unknowns. Appraisers sometimes avoid the iteration process by loading the tax rate into the discount rate instead, but the results are mathematically erroneous, with the error becoming more significant with the magnitude of the value. In a DCF, the tax rate can and should be loaded into the terminal capitalization rate in either case, however.ConclusionPossessory interest is less complicated than it sounds. It exists primarily as a means of ensuring fair distribution of ad valorem property tax expense across the population of taxpayers. For appraisals performed for bank or acquisition purposes, the same set of factors that are associated with typical leasehold valuations apply. For appraisals developed for property tax assessment purposes, the property rent is excluded from the income approach forecast so that the possessory interest's real property value component is appropriately captured.

Many Hotel Sellers Won Big in 2018

HVS ·17 January 2019
We queried our database for hotels that were sold between $10 million and $20 million during 2018, and then we compared their prior sales price to the most recent one. For those hotels that were sold previously (between 2000 and 2017), winners far outpaced losers at a margin of 6 to 1. A few properties that were sold during the prior peak of 2006 through early 2008 had not yet regained their prior-peak pricing. Ten hotels in our survey were sold in the 2006-2008 period and were resold last year; of these, four exceeded the prior sales price, but six did not. For those hotels that were previously sold in the 2009-2017 period, 75 out of 82 exceeded the prior sales price, by an average of 79%. These 75 hotels reflected an average annual-price-appreciation rate of 16%. It is important to remember that many of the properties that were previously sold at very low prices had a significant PIP that the buyer needed to complete in order to regain market share, strengthen room rates, and secure a brand for the longer term.106 hotels in the sampleOverall total price increase of 34% for the 106 hotels, appreciating from $1.1B to $1.5BAverage annual compounded price gain of 11% (16% for those hotels first purchased between 2009 and 2017)85% of hotels sold for more than the prior sales priceWe expect winners to outpace losers again in 2019. As my previous article discussed, metrics should remain favorable for much of 2019. If your hotel is coming off a strong 2018, as evidenced per the profit-and-loss statement, and you purchased your property during the 2009-2014 timeframe, now may be the time to sell, if not refinance.

HVS Asia Pacific Hospitality Newsletter - Week Ending 11 January 2019

HVS ·14 January 2019
Oxley Sells Mercure and Novotel Hotels for SGD950 Million in SingaporeSingapore-based property developer, Oxley Holdings Limited ("Oxley Holdings") wholly-owned subsidiary, Oxley GEM Pte. Ltd. ("Oxley GEM"), has accepted a letter of intent ("LOI") dated 10 January 2019, for the purchase of Mercure and Novotel Hotels on Stevens at the consideration of SGD950 million, exclusive of goods and services tax. Situated on 28 and 30 Steven Roads, the 518-key Mercure Singapore and 254-key Novotel Singapore began operations in late 2017 and occupy a land area of 18,477 square metres. Based on Oxley Holding's latest corporate presentation slides in November 2018, the two hotels generate an occupancy rate of 83% with a total recurring income of SGD53 million per annum. Under the terms of LOI, upon the receipt of SGD9.5 million (1% of the consideration) as a non-refundable deposit, the purchaser will be entitled to carry out property due diligence until 15 April. The purchaser shall then pay SGD38.0 million (4% of the consideration) on 28 February, and an additional sum of SGD47.5 million (5% of the consideration) on the signing date of the sale and purchase agreement or April 15, whichever earlier.Ascott Reit Sells Ascott Raffles Place Singapore for SGD353 MillionSingapore-based Ascott Residence Trust ("Ascott Reit") has reached an agreement with private investor Cheong Sim Lam to sell Ascott Raffles Place Singapore for SGD353 million. The sale price is 64.3% higher above the property's latest valuation of SGD215 million as at 31 December 2018. Formerly known as Asia Insurance Building, the 20-storey conserved building at 2 Finlayson Green, on a 999-year lease, is zoned commercial and has a gross floor area of 168,952 square feet with 146 serviced apartments. Cheong Sim Lam, whose family developed Hyatt Regency Singapore, International Plaza, and Pacific Mansion, is also the developer of residential projects such as Robinson Suites and the previous owner of 137 and 139 Cecil Street. Once the deal is completed in May 2019, Ascott Reit is expected to realise an estimated net gain of approximately SGD134 million. Other operational properties of Ascott Reit in Singapore includes Citadines Mount Sophia, Somerset Liang Court, and Ascott Orchard.Vietnam Opens Van Don International Airport in Halong BayAfter two years of construction, Vietnam's first privately-owned international airport opened on 30 December 2018. Situated in the northeastern coastal province of Quang Ninh and approximately 50 kilometres away from the UNESCO World Heritage Site of Halong Bay, Van Don International Airport was jointly built by local property and Vietnam-based infrastructure company, Sun Group ("Sun Group") at a total cost of VND7.463 billion (USD321 million). As a new gateway to Halong bay, visitors will be able to reach the bay within a 90-minute drive as compared to a four-hour bus journey from Noi Ba International Airport in Hanoi. The 290-hectare new airport will be able to accommodate large commercial jets, handle up to 2.5 million passengers annually for the next two years and 5 million passengers annually by 2030. The addition of the facility is in line with the government's plan to have a total of 13 international and 15 domestic airports by 2023. Sun Group has also unveiled two other major infrastructure projects costing a total of VND13.1 trillion (USD563 million) in Quang Ninh Province: The new four-lane, 60 kilometres-long Halong-Van Don Highway and the Halong International Cruise Port.BHMA Announces Lease Management with Bali ResortAustralia-based Flight Centre Travel Group's ("FCTG") in house Thai hotel management company BHMA Hotels and Resorts ("BHMA") has announced the opening of its first Away Resort in Bali, Indonesia. Currently called The Camakila Legian, the upscale resort will be rebranded as Away Bali Legian Camakila under a long-term leasing agreement between Camakila Hotel and BHMA. Located between Kuta and Seminyak, the 117-key property is a few steps from the beach and features two restaurants, a gym, a spa, a 120-square-metre ballroom, a lagoon pool as well as a beachfront infinity pool. The four-star hotel is BHMA's 22nd operational hotel and Away Resort & Villas' 6th property. Acquired by FCTG in July 2017, BHMS also operates X2 Cross To and X2 Vibe brands across South East Asia. According to Kent Davidson, Managing Director of BHMA, the company expansion will continue with a particular interest in key city throughout the Asia Pacific, Fiji, The Maldives and the ski fields of Japan.China Records 650 Million Border Crossings in 2018The National Immigration Administration has recorded a total of 650 million domestic and international travellers crossed China borders in 2018, representing a year-on-year (y-o-y) increase of 9.9%. Chinese travellers increased by 12% y-o-y to 560 million, enjoying steady growth for 15 consecutive years. The number comprised of 340 million residents from mainland China, 160 million residents from Hong Kong, 50.3 million residents from Macau and 12.3 million residents from Taiwan. International travellers made up 95.3 million border crossings, up 11.6% over 2017. The top 10 nationalities entering China were Myanmar, Vietnam, South Korea, Japan, the United States, Russia, Mongolia, Malaysia, the Philippines and Singapore.
Article by Monique Rosszell

2018 Canadian Hotel Valuation Index

HVS · 7 January 2019
Since the debt crisis hit the market Canadian lodging in 2009, causing a 12.3% contraction in RevPAR, the industry has been on an upward trajectory.In fact, RevPAR growth has been registered for 106 consecutive months--the longest period of sustained growth on record. In 2017, the RevPAR increased by 7.7%, fuelled by a 5.2% increase in ADR and a 3.2% gain in demand, supported by limited supply growth of just 0.8%.The three airport markets in Montreal, Toronto, and Vancouver led the country in rate increases in 2017 with growth of 11.8%, 11.6%, and 10.4%, respectively. The other markets registered more moderate ADR growth in 2017, the only exceptions being Saskatoon and Regina, which both experienced a 5.3% rate decline, and Calgary, which sustained a 1.5% drop in ADR.The value of a hotel room in Canada increased by 8.0% to $133,389 in 2017, up from $123,427 in 2016. This is slightly less than the value per room of $134,800 that was projected for 2017 in the previous HVI report, reflecting the fact that the rebound in Alberta and Saskatchewan has been slower than anticipated. The economic indicators for Canada are positive for 2018, especially with the rebound of the oil and gas sector. The increase in oil prices has been stronger than expected, which has positively affected exports. The national GDP is expected to finish the year up by 1.9% in 2018, following on the stronger increase of 3.0% that was realized in 2017.Download the 2018 Canadian Hotel Valuation Index

Europe Hotel Transactions Bulletin - Week Ending 21 December 2018

HVS ·21 December 2018
Aprirose completes UK acquisition of De Vere Theobalds Estate from Starwood CapitalUK hotel investor Aprirose has completed the acquisition of the De Vere Theobalds Estate Hotel in Cheshunt, UK, from Starwood Capital for PS24.2 million (PS173,000 per room). The four-star property, built in the 18th century and set in a 55-acre Italian garden, is located some 10 miles north of London and comprises of 140 bedrooms, a restaurant and a bar.Orchard Street completes acquisition of two hotels in Newcastle, UKLondon-based asset manager Orchard Street Investment Management has completed the acquisition of two hotels in Newcastle for a combined PS38 million (PS135,000 per room), from Union Property Development Ltd. The deal included the purchase of the 120-room Travelodge Quayside, which opened in 2017, as well as the adjacent, forward-funded 161-room INNSIDE by Melia, Newcastle, which is set to open in summer 2020. Both hotels are supported by 25-year leases subject to inflation-based rent reviews every five years. The combined purchase price reflects a net initial yield of 4.5%.Apple Leisure Group to acquire majority holding in Alua Hotel & ResortsPennsylvania-based Apple Leisure Group (ALG) has announced the signing of an agreement to purchase a majority share of the Spanish hotel chain Alua Hotel & Resorts. Following the deal's closing, Alua will be integrated into ALG's European operations, with ALG looking to grow the Alua brand in both Europe and the Americas. Founded in 2015 with the support of European private equity firm Alchemy Partners, Alua currently operates 12 four-star properties, totalling some 3,000 rooms, in Spain's Balearic and Canary Islands, which are owned by major investors such as KKR and Blackstone. ALG has been owned by KKR and KSL Capital Partners since early 2017.

2019 United States Hotel Industry Outlook | By Rodney Clough

HVS ·21 December 2018
According to Goldman Sachs, business owners still expect to increase investments into their businesses by 4% in 2019. This will likely prompt continued hiring, and we should see largely positive gains in national employment overall, at least through the first two quarters of 2019. Hiring, while likely to be on the upward trajectory for much of 2019, is anticipated to continue to cool off, not posting the levels of job gains realized during much of 2018. While the Fed sees "full employment" at a 4.5% unemployment rate, our current trajectory may take us as low as 3.0%, which is good for the hotel market in 2019. The latest Wall Street Journal economists survey reflected GDP growth slowing by 0.7 of a point in 2019, but ultimately remaining above 2.0%. Therefore, despite the current stock market volatility and expected hiring and GDP wane, demand related to hiring, training, and relocation should remain steady through much of the year.Larger corporations may start to brace themselves for a downturn, however minor, that they perceive may occur in the 2020-2022 timeframe. Accordingly, these entities may curtail (not eliminate) travel and event spending this year in order to bolster their balance sheets. This may start to take a greater effect in the latter half of the year, when hiring activity may pull back the most. Once you layer in the continued flow of new supply, hotel occupancy on a national level will start to trend slightly downward after a long upward trajectory for so many years. Most of my consultant team expects a slight tick down in occupancy in 2019.National hotel occupancy, which will likely land between 66.2% and 66.4% by year-end 2018, is anticipated to drop to between 65.5% and 66.0% in 2019 (about a half-point decline), per the majority of HVS consultants surveyed.Average rate, which is likely to reach roughly $130 in 2018, is anticipated to move to approximately $133 by year-end 2019, reflecting an increase of 2.3%. Most HVS consultants expect ADR to increase between 2.0% and 2.5%.The home-buying spree experienced in many markets leading up to 2018 is in a cooling-off phase. Rising interest rates, heady loan approval requirements, and high home prices have certainly applied the brakes to this part of the economy, which is likely allowing the Fed to sleep a little more soundly these days. If families haven't depleted their savings on a down payment for a recent home purchase or to keep up with a newly high mortgage payment, maybe they can still opt for a healthy family travel and vacation budget for 2019? We can only hope.Even though the Fed recently pulled back on such firm language that it will raise rates throughout 2019, it is hard to imagine that it won't continue to raise rates with unemployment at such lows, especially if inflationary pressures move well beyond the 2.0% sweet spot. The next increases are likely to occur in March and June, according to economists surveyed by the Wall Street Journal in December. This may keep some new construction in the hotel market at bay, which would ultimately strengthen the industry's occupancy/ADR balance. As long as equity yield requirements remain realistic, we are expecting a healthy flow of refinancing activity in 2019 despite modestly higher interest rates.Our Brokerage division sees this as an opportune time to sell off one or two (or more) hotels within a portfolio that may ultimately help a hotel owner to shore up its balance sheet and prepare for the years beyond 2019. What better time to do it than now, when P&L statements are likely to show a healthy view of performance. Make sure to call on us if you are interested in a BOV from this capable team.Finally, it's important to remember that each submarket across the U.S. is different, and national trends and expectations may not fit perfectly into a localized view.

Europe Hotel Transactions Bulletin - Week Ending 4 December 2018

HVS ·17 December 2018
LVMH to acquire luxury hotel and leisure company BelmondFrench luxury goods conglomerate LVMH, owner of numerous global brands including Louis Vuitton, Christian Dior, Moet & Chandon and TAG Heuer, has entered an agreement to acquire London-based luxury hotel and leisure company Belmond. The reported price of $3.2 billionincluding debt, reflects a value of $2.6 billion for the overall equity of the group. In the year to September, Belmond reported adjusted earnings before interest, tax, depreciation and amortisation of $140 million from revenues of $572 million. The transaction is expected to complete in the first half of 2019. The acquisition of Belmond's 46 luxury properties in 24 countries will complement LVMH's Cheval Blanc and Bvlgari hotel brands. Previously known as Orient-Express Hotels, Belmond also sells high-end train travel, river cruises, safari and restaurant experiences.Travelodge Bath Waterside in the UK sold by LaSalle to CCLALaSalle Investment Management has sold the 125-room Travelodge Bath Waterside to a fund managed by CCLA Investment Management for PS22 million (PS176,000 per room). Since LaSalle's acquisition in 2013, the hotel has undergone a full refurbishment including the addition of a new bar cafe area and 30 premium rooms.Holiday Inn Cardiff North sold to Fairview HotelsUK-based Fairview Hotels has acquired the 95-room Holiday Inn Cardiff North, which is the hotel group's first franchise agreement with IHG. With the acquisition of the three-star hotel, Fairview now operates 13 properties in the United Kingdom, mainly under Accor's Mercure, Novotel and Ibis brands.

HVS Asia Pacific Hospitality Newsletter - Week Ending 14 December 2018

HVS ·17 December 2018
YTL to Acquire Spanish Hotel Property for USD250 MillionMalaysia-based YTL Corp. ("YTL") has reached an agreement with Spain-based KKH Property Inventors ("KKH") to acquire SOL HTL Project ("SOL") for USD250 million. The price includes payment for loans that SOL owes KKH. Given an expanded partnership between Marriott and YTL Hotels, the property will be converted into a 200-room Marriott International Edition, set to open by 31 December 2020. The property is strategically located at Plaza de Celenque No. 2, part of which also houses the Fundacion Obra Social y Monte de Piedad de Madrid. According to the stock exchange filing, the proposed acquisition is in line with the company's geographical diversification and business expansion, which will allow the company to better position itself in Madrid's growing luxury hotel segment. Subject to local regulatory approvals, the acquisition is expected to be completed by 30 June 2021.Grab Invests USD100 million in OYO HotelsSingapore-based ride-hailing company GrabTaxi Holdings Pte. Ltd. ("Grab") has announced a USD100 million investment in India's budget hotel chain company, OYO Hotels & Homes ("OYO"). With a common major investor Japan-based Softbank Group Corp. ("Softbank"), both companies are expected to benefit from the investment, as it enables OYO to scale faster in Southeast Asia with Grab's existing presence while benefitting Grab as guests of Oyo and Oyo's booking platform will utilize GrabPay. Currently, OYO is present in seven countries including India, China, Indonesia, Malaysia, Nepal, UK, and the UAE. In Indonesia, OYO plans to expand its operations of over 30 exclusive hotels and 1,000 rooms in Jakarta, Surabaya and Palembang, to the top 35 cities, including Yogyakarta, Bandung and Bali over the next 15 months. Founded in 2013, the OYO aims to become the world's largest hotel chain by 2023, with further expansion in the Middle East, South East Asia and Europe.Air New Zealand to Operate Seasonal Christchurch-Singapore FlightsAir New Zealand will offer a seasonal service between Singapore and Christchurch that runs five times weekly from 1 December 2019 to 22 February 2020, following approval for a five-year extension of its joint venture alliance with Singapore Airlines until March 2024. The joint alliance will also offer three daily services between Auckland and Singapore as well as four times weekly service between Wellington and Singapore via Australia. According to the Air New Zealand chief strategy networks and alliances officer Nick Judd, new seasonal services are aimed to meet the fast-growing demand for travel to New Zealand in the South and Southeast Asia market. Prior to the new addition, Singapore Airlines operates the seasonal service three times per week as well as daily service between the two cities.Vietnam to Receive a USD45 Million Loan to Develop Tourism in Secondary TownsAsian Development Bank ("ADB") has approved a USD45 million loan to help Vietnam develop its secondary towns into more economically inclusive, competitive tourism destinations. Under the Second Greater Mekong Subregion Tourism Infrastructure for Inclusive Growth Project, climate-resilient transport and urban infrastructure will be constructed in the Hoa Binh, Nghe An, Quang Binh, Quang Tri, and Thua Thien Hue provinces to boost tourist arrivals and tourism services investment. The project will upgrade about 31 kilometres of urban-rural roads and 13 passenger piers to provide visitors and residents with more convenient access to cultural and historic sites in all participating provinces. Other plans include developing urban green spaces and public beaches. The project is expected to benefit about 168,000 residents and more than eight million visitors annually. Using training, certification programmes, and policy incentives, the project will also help ensure that tourism management in project areas meets standards set by ASEAN.TAT Opens New Office in Fukuoka, JapanThe Tourism Authority of Thailand ("TAT") has opened a new office on 30 November 2018, in Fukuoka Prefecture, the largest population on Kyushu Island, Japan. Located on the 11th floor of Hakataza Nishigin Building at Hakata-Riverain-East-Site, Shimokawabatabashi, the TAT Fukuoka office will tap into potential market from major cities in Southern Japan. These cities include Hiroshima, Yamaguchi, Ehime, Kochi, Fukuoka, Saga, Nagasaki, Kumamoto, Oita, Miyazaki, Kagoshima and Okinawa. As per the Letter of Intent signed on 8 February 2018 between TAT and the Kyushu Tourism Promotion Organisation (KTPO), the TAT Fukuoka office will help to promote tourism cooperation and increase the number of visitors between Thailand and Kyushu. The two-year agreement covers all seven provinces of Kyushu and includes initiatives such as travel exchange, public relations activities, information dissemination to promote Thailand's image, and cooperation with the Japan High School Golf Association to organise familiarisation trips for local tour operators. TAT is targeting 1.7 million Japanese visitors, generating an estimated 77.5 billion baht (265 billion yen) for 2019.

Jamaica to host Caribbean Hotel Investment Conference and Operations Summit (CHICOS) in November 2019

HVS · 7 December 2018
Jamaica has been selected to host the next Caribbean Hotel Investment Conference and Operations Summit (CHICOS) on November 14-15, 2019. Co-sponsors Apple Leisure Group (ALG) and AMResorts will provide the conference venue, Secrets Wild Orchid Montego Bay and Secrets St. James Montego Bay. The event is expected to attract 300 attendees interested in hospitality development in the Caribbean.CHICOS is the premier industry conference for the region. The event brings together governmental representatives, opinion leaders, developers, bankers and other lenders, tourism officials, investment funds, hotel brand executives, individuals/companies seeking investors for their tourism projects, and public and private institutions to discuss hospitality development possibilities. "We are pleased to bring this important conference to the island nation of Jamaica," shares CHICOS Chairman Parris Jordan. "Jamaica will benefit from serving as host nation, as numerous hotel industry leaders and investors will be in attendance. Additionally, CHICOS will work with the government to showcase Jamaica's development sites for hotel projects."The Jamaica Promotions Corporation (JAMPRO) is the planning partner for the event and will showcase Jamaica as a viable tourism investment destination, advancing strong potential investment interest from targeted companies, and increasing awareness of various tourism investment opportunities, particularly those under the Shovel Ready Investment Programme (SRIP). In addition, JAMPRO will showcase local properties that are available for joint venture or greenfield projects.ALG is North America's only vertically integrated hospitality group, and the nation's largest provider of charter flights that offers resort owners and tour operators competitive advantages. Through its hospitality brands, ALG has been actively involved in Jamaica's tourism sector for nearly five decades, bringing 163,000 guests to the island in 2017; that number will double in 2019 thanks to the addition of new brands to its Vacations segment. In 2008, through AMResorts, the company opened the AAA Four-Diamond properties, Secrets Wild Orchid Montego Bay and Secrets St. James Montego Bay. Today, AMResorts has six luxury resorts across its award-winning brands in Montego Bay, which employ nearly 2,000 personnel."Jamaica has been an integral part of our growth strategy for years, and it remains a strong investment opportunity for resort development with its abundance of natural beauty and welcoming culture," said Javier Coll, Executive Vice President and Chief Strategy Officer of Apple Leisure Group. "We are committed to supporting the country's economic growth and anticipate our resorts to offer the perfect location to foster fruitful discussions on the future of Jamaica and the Caribbean's tourism industry."Positioning Jamaica as a leader in the tourism industry: Tourism remains one of Jamaica's key sectors, and investments have increased with the addition of approximately 3,000 rooms in 2016 and 2017. An additional 6,000 rooms are scheduled to be built over the next three to five years.Currently, the thrust toward new investments in Jamaica's hotel industry includes targeting the development of luxury properties, timeshares and attractions. Per JAMPRO President Diane Edwards, "We are pleased to welcome such a prestigious event to Jamaica, as it will serve to further increase Jamaica's profile and visibility as a premier tourist destination and position the country as the most attractive destination for tourism investments in the region."JAMPRO's mission is to drive economic development through growth in investment and export. JAMPRO is an Agency of the Ministry of Industry, Commerce, Agriculture and Fisheries.***Apple Leisure Group (ALG) is the leading North American travel, hospitality, and leisure management group with the only vertically integrated business model, serving travelers and destinations worldwide. ALG consistently delivers exceptional value to travelers and strong performance to resort owners and partners by strategically leveraging the power of its portfolio of brands across five segments, comprising the largest seller of vacation packages and charter flights in the U.S. for travel to Mexico and the Caribbean, moving approximately 3.2 million passengers annually through the well-established vacation brands Apple Vacations, BeachBound, Funway Holidays, Travel Impressions,, Blue Sky Tours, Southwest Vacations, Funjet Vacations, and United Vacations; brand management of 5-star and 4-star luxury resorts through AMResorts award-winning brand portfolio, including Zoetry Wellness & Spas Resorts, Secrets Resorts & Spas, Breathless Resorts & Spas, Dreams Resorts & Spas, Now Resorts & Spas, Reflect Resorts & Spas, and Sunscape Resorts & Spas; best-in-class destination management services provided by Amstar DMC and Worldstar, the exclusive loyalty program Unlimited Vacation Club; and the innovative technology solutions provider Trisept Solutions, connecting over 88,000 travel agents with leading travel suppliers. To learn more about the Apple Leisure Group advantage, visit collectively provide sales, marketing, and brand-management services to seven individually unique resort brands including Zoetry Wellness & Spa Resorts, Secrets, Breathless, Dreams, Now, Reflect and Sunscape Resorts & Spas. The Newtown Square-based company is continuously raising the all-inclusive concept to a new level of luxury with its signature Endless Privileges, Unlimited-Luxury, Defined Delights, and Unlimited-Fun programs. Located throughout Mexico, Jamaica, Curacao, Dominican Republic, Costa Rica, and Panama, AMResorts' 55 award-winning properties treat every guest to premium accommodations, desirable locations, and extraordinary inclusions. The brands in the collection include boutique Zoetry Wellness & Spa Resorts (; 1-888-4-ZOETRY); adults-only Secrets Resorts & Spas (; 1-866-GO-SECRETS); high-energy Breathless Resorts & Spas (; 1-855-65-BREATHE); family-friendly Dreams Resorts & Spas (; 1-866-2-DREAMS); vibrant Now Resorts & Spas (; 1-877-NOW-9953); spirited Reflect Resorts & Spas (; 1-855-4REFLECT); and fun-filled Sunscape Resorts & Spas (; 1-866-SUNSCAPE). Images, logos, and informational material about the AMResorts Collection of brands and properties are available at by HVS, the Caribbean Hotel Investment Conference & Operations Summit (CHICOS)is the premier industry conference for the region. CHICOS annually welcomes governmental representatives, opinion leaders, developers, bankers and other lenders, tourism officials, investment funds, hotel brand executives, individuals/companies seeking investors for their tourism projects, franchise and operations companies, public and private institutions, consultants, advisors, architects, and designers to discuss the region's markets and

HVS Asia Pacific Hospitality Newsletter - Week Ending 30 November 2018

HVS · 3 December 2018
Ascendas Hospitality Trust Acquires Ibis Ambassador Seoul for 77.5 Billion WonSingapore-based hospitality trust, Ascendas Hospitality Trust (A-HTrust) has agreed to acquire the Ibis Ambassador Seoul Insadong for KRW77.5 billion (SGD94.5 million) on 28 November 2018. The acquisition is expected to be fully funded by debt and to be completed by end of December 2018. The property was priced at a 3.1% discount to its latest valuation and translates to a pro forma net property income yield of 4.6%. This is A-HTrust second acquisition in Seoul since it purchased The Splaisir Seoul Dongdaemun in April this year. Built in 2013, the 363-room property is conveniently located near major business district and several prominent tourist attractions. It features a restaurant, a bar, two meeting rooms, a gym, a sauna and 24 car park spaces. The current operator, Ambasstel Inc., is part of Seoul-based Ambassador Hotel Group (AHG), which has a joint investment partnership with France-based AccorHotels Group (Accor). A-HTrust was listed in July 2012 with an asset portfolio of 12 hotels with more than 4,000 rooms across Australia, South Korea, Japan and Singapore.Worldwide Hotels Acquires Golden Wall Centre for SGD276.2 millionSingapore-based owner-operator, Worldwide Hotels (Worldwide Hotels), has acquired a freehold commercial property in Singapore, Golden Wall Centre, through its wholly owned subsidiary, City View Holdings (City View), for SGD276.2 million. The property is conveniently located within walking distance to two MRT stations and enjoys good visibility as a corner plot with 180-metre triple frontage along the main thoroughfare of Rochor Canal Road, as well as Short Street and Albert Street. Sold at 6% higher than its reserve price of SGD260 million, the property sits on a land area of 2,251.9 square metres, commanding SGD2,331 per square foot per plot ratio. Currently zoned for commercial use within a mixed-use cluster under the Master Plan 2014, an application to convert it to hotel use at the existing approved gross floor area of 11,008 square metres with a plot ratio of 4.88 has been approved by the Urban Redevelopment Authority. Worldwide Hotels currently owns and manages six hotel brands including Hotel Boss, V Hotel, Hotel Mi, Value Hotel, Venue Hotel and Hotel 81.Novotel New Plymouth Hobson Hotel Sold to Ngamotu Hotels for NZD23 MillionNew Zealand-based Ngmotu Hotel Limited Partnership (Ngmotu Hotels) has acquired the Novotel New Plymouth Hobson Hotel for NZD23 million from New Zealand-based hotel owner and operator Hobson Hotel Property Holdings Limited (Hobson Hotel), that will continue in a management capacity. This is Ngmotu Hotels first investment since its creation by a trio of Taranaki iwi businesses. The new joint venture entity is composed by Parininihi ki Waittara Inc (PKW), Te Atiawa Iwi Holdings (TAIH), and Taranaki Iwi Holding (TIH). The 85-room property, part of France-based AccorHotels Group (Accor) franchise, cost NZD25 million to build. Opened in 2015, it is one of the newest hotel in New Plymouth. The hotel sector in Taranaki and New Plymouth is promising, with 1.1 million visitors and 14 percent increase in visitor spend in 2018. By 2025, The Taranali region is expected to achieve a 7.5 percent increase of annual visitor growth.2025 World Expo to be Hosted in Osaka, JapanJapans second largest metropolitan city, Osaka, was selected to host the 2025 World Expo on 23 November 2018, edging out Russias Yekaterinburg and the Azerbaijan capital of Baku. Japan last hosted the 2005 expo in Aichi Prefecture and the 1970 World Expo in Osaka. Under the theme of Designing Future Society for Our Lives, the 185-day event will be held on Yumeshima, a man-made island in Osaka Bay, from 3 May to 3 November. The concept will showcase advanced technologies, particularly in the fields of artificial intelligence, virtual reality and biotechnology, designed to help meet 2030 United Nations sustainable development goals in health and welfare, especially in aging societies. Infrastructure projects cost at Yumeshima have been estimated at approximately JPY125 billion. The Japanese government anticipates the event to generate JPY2 trillion (USD17.7 billion) in economic benefits and attract about 28 million visitors. Another round of stimulus will follow in the upcoming 2020 Tokyo Olympics and Paralympics.F1 Grand Prix Coming to Vietnam in 2020In a multi-year deal signed between Vietnam-based real estate development company, Vingroup (Vingroup) and Formula 1 (F1), Hanoi, the capital city of Vietnam will be the next new street race venue for the F1 Grand Prix from April 2020. This will be the first new grand prix announced under the ownership of United States-based mass media company, Liberty Media (Liberty). Located 12 kilometres west of Hanoi near the My Dinh National Stadium, the new street circuit will be a 5.6 kilometre track with 22 turns. Vietnam Grand Prix will become the fourth race in Asia, joining China, Japan, and Singapore. The event will require close collaboration with The Hanoi Feasibility Group, F1 Motorsport team, and the City of Hanoi in the following years. This deal is viewed as an opportunity for Vietnam to showcase Hanoi as a tourist destination, as well as its ability to host events on a global scale.

HVS Asia Pacific Hospitality Newsletter - Week Ending 23 November 2018

HVS ·26 November 2018
Ascott Enters into Partnership with CiputraSingapore-based lodging owner-operator, The Ascott Limited (Ascott), has entered into a strategic alliance with Indonesia-based property developer, Ciputra Development Group (Ciputra). Through the partnership, Ascott will manage serviced residences to be developed by Ciputra in Indonesia and China over the next five years. The first of these properties will be the 253-key Citadines Sudirman Jakarta. Slated to open in 2021, the property will be located within Ciputra World, a mixed-use multiplex development in Jakartas Central Business district. The alliance comes closely after Ascott signed another partnership with Indonesia-based hotel operator, Tauzia Hotel Management (Tauzia), in September. These partnerships will help boost Ascotts pipeline in Indonesia. Ascott currently has a portfolio of over 130 serviced residences and business hotels with close to 22,000 units, across 39 cities in Indonesia.CDL Hospitality Trusts Acquires its First Italian PropertySingapore-based hospitality trust CDL Hospitality Trusts (CDLHT) has acquired 95% interest in Hotel Cerretani Florence, MGallery by Sofitel for 40.6 million at an annualized net property income yield of 4.6% for the nine months ended 30 September 2018. This marks CDLHTs first property in Italy. The 86-key 4-star hotel is conveniently located in the historic city centre of Florence and is within walking distance to major tourist attractions. The freehold property is 8-minute walk away from the main train station and a 25-minute drive from Florence International Airport. The property will be leased and operated by the current lessee based on a new management lease agreement for the next 20 years and will remain marketed under the MGallery by Sofitel brand, pursuant to an existing franchise agreement with France-based hotel group Accor Hotels Group (Accor). The lessee, part of German-based EVENT Hotels group (EVENT Hotels) will continue to hold the remaining 5% indirect stake in the property. EVENT Hotels is the largest fully integrated hotel management platform which owns, operates and manages approximately 14,100 keys in Europe. CDLHT, listed on the Singapore Exchange Securities Trading Limited, is a group comprising of CDL Hospitality Real Estate Investment Trust and CDL Hospitality Business Trust with assets within the Asia Pacific region and Europe valued at $2.7 billion.Leisure Ventures Acquires Castello Del Nero in Tuscany, ItalySingapore-based hospitality management company, Hotel Properties Limited (HPL) has announced that its associated company, Singapore-based Leisure Ventures Pte Ltd (LVPL) is acquiring the freehold interest of a 740-acre hotel site in Tuscany, Italy for approximately EUR22.6 million (SGD35.4 million). Located less than 25 kilometres to Florence and 35 kilometres to Siena, the five-star hotel, Castello Del Nero, is surrounded by vineyards and olive groves. The 50-key hotel features two restaurants, a spa and a fully consecrated chapel. The site also includes a separate 12-apartment agro-tourism accommodation and five additional residences with consent for refurbishment into independent villas. For the purpose of the acquisition, LVPL has set up a wholly-owned subsidiary company in the United Kingdom, Leisure Ventures Europe Limited (LVEL). This acquisition will allow HPL to further diversify its hotel portfolio geographically. HPL owns hotels, resorts and shopping galleries in 13 countries across the Asia Pacific region, East Africa, South Africa, Vanuatu, United Kingdom and the United States of America.Huazhus Net Income Rises by 44% YOY to RMB668 Million in Q3 2018As of 30 September 2018, China-based hotel management company Huazhu Group (Huazhu) had a total of 4,055 hotels with 409,516 rooms in operation, comprising of 698 leased hotels, 3,139 manachised hotels and 218 franchised hotels in 391 cities across China. According to its unaudited financial report ended 30 September 2018, net revenue from operations, net income and adjusted EBITDA recorded a year-on-year growth of 15.9%, 44% and 19.1%, achieving RMB2,768 million (US$403. million), RMB668 million (US$97.2 million) and RMB1,007 million (US$147 million) respectively. In the third quarter of 2018, RevPAR was RMB217, up by 7.1%year-on-year, ADR was RMB239, up by 9.8% year-on-year while average occupancy rate for all hotels in operation was 90.7%. Huazhu expects that net revenue for the fourth quarter to grow between 17% and 19% year-on-year. For the whole year of 2018, the Group anticipates the growth in net revenue to be at a high level of 18% to 22%.Opening of Myanmar-India Border to Stimulate Overland TravelSince September, travellers of all nationalities arriving from India have been given clearance to enter Myanmar by using the two overland borders of Tamu and Rih Khaw Dar. Previously, travellers from Europe and Asia will utilise the Old Silk Road that passes through China and circumvent Myanmar. It will now be possible to cross through Myanmar from India and then towards Thailand by using Thai border check points. This fall within the Act-East Policy, previously called Look-East Policy, an initiative of the Indian Government to enhance stronger economic and strategic relations with Southeast Asian countries. The opening of these land border crossings is expected to boost tourism growth in both Northeast India and Myanmar. However, according to Bertie Lawson of Myanmar-based boutique tour operator, Sampan Travel (Sampan), Myanmar will need to develop its current infrastructure and tourism amenities further in order for the nation to become a popular touristic destination.

Europe Hotel Transactions Bulletin - Week Ending 23 November 2018

HVS ·26 November 2018
Dogus to sell Villa Magna Madrid to RLH Properties Mexican banker Allen Sangins-Krauses luxury hotel investment vehicle RLH properties is reported to be acquiring the 150-room Hotel Villa Magna in Madrid for 210 million (1.4 million per room). Seller of the hotel is the Turkish group Dogus Holdings, which acquired the hotel in 2016 for 180 million, and are reported to be under pressure due to the depreciation of the Turkish Lira earlier this year. Once the deal closes, the Villa Magna will join RLHs other luxury hotel holdings including the Four Seasons Mexico City and the Rosewood Mayakoba.CDL Hospitality acquires the Hotel Cerretani Florence MGallery CDL Hospitality Trust, the Singaporean REIT, has paid 40.6 million for a 95% stake in the Hotel Cerratini Florence, MGallery by Sofitel, reflecting a value for 100% of the hotel of 42.7 million (497,000 per room). The 86-room property in Florences centre is CDLs first acquisition in Italy, which it has made in conjunction with EVENT Hotels, who retain a 5% ownership stake. The hotel will continue to be managed by EVENT under the MGallery brand, on a 20-year lease contract, reflecting a reported yield of 4.6% for CDL.Corestate buys Moxy in Darmstadt, GermanyHannover Leasing, an affiliate of Corestate Capital, has acquired a mixed-use development including a 178-room Moxy Hotel plus a 9,200 sqm office complex in Darmstadt, Germany. The property opened in November 2018 in Darmstadts Telekom-City and was developed by Unit Gesellschaft fr Projektentwicklung. It will be operated under a 20-year lease agreement by the Odyssey Hotel Group.

HVS Hotel Development Cost Survey 2017/18

HVS ·22 November 2018
In 2017/18, the national lodging market continued to climb to new heights. In 2017, hotels in the United States operated at the highest occupancy and average rates ever recorded, with additional growth across both metrics in the 2018 year-to-date period. Hotel development activity correlates directly with the ebbs and flows of hotel-sector performance. As the market continued to reach a new peak for the current development cycle in 2017, developers pursued hotel construction and redevelopment at a pace not seen since 2006 and 2007, and the pipeline of new hotel projects gained momentum. HVS has tracked hotel development costs for the last three decades, collecting data from actual hotel cost budgets during our assignments. This year's sample reflects the largest sample HVS has analyzed given the number of hotels in the pipeline, as well as our growing presence in 40 U.S. markets. This 2017/18 survey reports per-room hotel development costs based on data compiled by HVS from hotel projects proposed or under construction during the 2017 calendar year. With the availability of more data, we elected to add a redevelopment category to account for projects that did not include ground-up construction, such as those that involved a complete renovation, conversion, or adaptive reuse. Thus, our data now reflect ten product categories: budget/economy, limited-service, midscale extended-stay, upscale extended-stay, dual-branded, select-service, full-service, lifestyle/soft-branded, redevelopment, and luxury hotels. The HVS Hotel Development Cost Survey sets forth averages of development costs in each defined lodging product category. The survey is not meant to be a comparative tool to calculate changes from year-to-year, but rather, it reflects the cost of building hotels across the United States in 2017. As will be discussed, the averages set forth in this survey are greatly affected by the types and locations of hotels being developed at this point in the development cycle. Our goal in sharing this publication is to provide a basis for developers, investors, consultants, and other market participants in evaluating hotel development projects. Given that development costs for hotels are dependent on a multitude of factors unique to each development and location, this report should not be relied upon to determine the cost for actual hotel projects or for valuation purposes, but rather, it is intended to provide support for preliminary or actual cost estimates, as well as to show a comparison across the various categories.Supply and Demand Dynamics Allowing for Increased Hotel DevelopmentWithout a doubt, 2017 served as another banner year for hotel occupancies and average rate (ADR). STR reported national year-end 2017 occupancy and ADR at 65.9% and $126.72, respectively, with both metrics increasing to 67.7% and $130.37 in the year-to-date period through September; this reflects a 0.5% and 2.5% increase in occupancy and ADR, respectively, when compared to same year-to-date period in 2017. Except for a few markets, such as Chicago, Minneapolis, and Orlando, where RevPAR levels were negatively affected by an increase in supply that exceeded demand, most U.S. markets experienced the exact opposite in 2017. Demand levels across the country generally exceeded increases in supply, which, coupled with rising ADRs, resulted in higher RevPAR levels across the country, as illustrated below.A deeper look at the supply-and-demand picture across the nation helps to explain the rise in these metrics. While the number of rooms available in the U.S. increased by 6.5% from 2010 through 2017, or an average of 0.9% annually, overall rooms sold grew by approximately 22%, or an average of 2.8% annually, during the same period, resulting in the rising occupancy and ADR levels that the nation is now experiencing and that is ultimately translating into higher RevPARs.Following these eight years of consecutive growth since 2009, analysts agree that we are likely to be reaching the top of the cycle in terms of hotel occupancy. It is these record RevPAR levels that have continued to prompt new hotel development, as the likelihood for the feasibility of a project resulting from increasing revenue and NOI levels is now, more than ever, viable. In 2008 and 2009, new supply entered the market in excess of 2.0% of the prior year's available supply, as many projects that opened during that time had started construction in late 2007 or early 2008. However, the pace of growth in new supply slowed substantially to an annual average of 0.6% from 2011 through 2015. Yet, as previously shown, accelerating occupancy and ADR dynamics, coupled with the availability of favorable financing, once again increased that pace to 1.5% and 1.8% in 2016 and 2017, respectively, as illustrated below.EXHIBIT 3: U.S. Change In Supply and DemandThe 1.8% increase in supply in 2017 represented approximately 90,000 new hotel rooms, and the pace of new supply growth continued to accelerate in 2018. According to the American Hotel & Lodging Association (AHLA), as of year-end 2017, 189,000 new hotel rooms were under construction across the country, representing an imminent supply increase of 3.7%. In October 2018, despite the opening of approximately 100,000 hotel rooms over the prior twelve months (a 2.0% increase over the prior year), the number of hotel rooms under construction remained relatively unchanged at 190,000, as proposed hotels moved from the planning phase to the construction phase, further illustrating that the pace of hotel development and new supply growth continues its momentum. In 2017 and 2018, the markets with the highest supply growth included Dallas, Denver, Nashville, NYC, and Seattle. These markets reported new supply increases over 4.0%, more than double the national average.Although 190,000 rooms are currently under construction, with an additional 206,000 in the planning phase, these 396,000 rooms will not all enter the market at the same time, but rather over the course of two to four years, as each project completes the development process over the course of time. Furthermore, the rapid increase in construction costs will cause developers to delay some projects indefinitely, or cancel them altogether, as competition for construction labor and materials among various product types, such as commercial, residential, and public works, continues to increase. Nevertheless, assuming most of these projects do enter the market during the next four years, this would represent an average annual supply increase of nearly 100,000 rooms, in line with supply increases over the last two years. While the feasibility of hotel development in some markets may have been previously hindered by stringent financing, high land costs, lower RevPAR levels, or the lack of available brands, these factors have been largely offset by improving dynamics within each of these factors, which is reflected in the increasing numbers of projects under construction or in the planning phase. As an example, while typical loan-to-costs ratios for new hotel development remain near 60% (relatively low when compared to 2006 and 2007), new financing vehicles such as PACE financing or the USDA's Business & Industry Guaranteed Loan Program have created the possibility for higher leverage for some projects that fit these programs' requirements. Additionally, options for development have continued to expand as many new brands, some affiliated with the most dominant companies, continue to gain momentum and acceptance with lending institutions.Macro EnvironmentThe positive momentum experienced thus far, not only in the lodging market, but also in the national economy, has come with at least one headache for hotel developers: the steady increase in labor and construction costs. According to the Turner Building Cost Index, which has tracked costs in the non-residential building construction market in the United States since 1967, the index increased by 5.0% in 2017 and by 5.51% in the 2017/18 trailing twelve months ending in June 2018. According to Turner, the index has increased year-over-year since 2011, outpacing inflation since 2012. Rider Levett Bucknall, which also provides a quarterly construction cost report, illustrated a rise of in its construction cost index of 4.2% in 2017, with metropolitan areas such as San Francisco, Los Angeles, Seattle, Portland, and Chicago reporting increases between 5% and 8% per year. The Turner Building Cost Index is determined by the following factors considered on a nationwide basis: labor rates and productivity, material prices, and the competitive condition of the marketplace. The change in the Turner Construction Cost Index compared with the change in the Consumer Price Index (CPI) during the same period is illustrated in the following graphic.Long-term construction inflation is normally double that of consumer inflation. Since 2013, the rate of change in the Turner Cost Index has outpaced the rate of inflation, illustrating how construction costs continue to rise at a steady pace. Construction inflation during growth years can accelerate faster, such as those shown in the illustration above. The Turner Cost Index registered increases at a rate of 10.6%, 7.7%, and 6.3% in 2006, 2007, and 2008, respectively. Although we can safely say we are nowhere near those figures yet, construction costs have been slowly creeping upward since 2011 and are now steadily increasing above 5% annually, although certain U.S. markets are experiencing cost increases well above this level. With national unemployment registering 4.1% for 2017, and decreasing further in 2018, shortages in skilled labor were evident throughout the year. The widespread damage inflicted by the hurricanes in Texas and the Caribbean, along with the record-setting wildfires and mudslides throughout California, further exacerbated the tight labor market in the U.S. during 2017. However, a presidential executive order expanded federally funded apprenticeship programs by redirecting $100 million to industry groups to develop training programs for trade workers. The private sector also stepped in, with The Home Depot Foundation, as an example, investing $50 million into its Home Builders Institute apprenticeship programs. According to the Bureau of Labor Statistics, construction employment increased by 210,000 by year-end 2017, compared with a gain of 155,000 in 2016. Despite the gain in construction jobs, 149,000 construction jobs remained unfilled by year's end, illustrating the continued dearth of labor in the construction sector. While higher wages typically follow the tight labor market, these increases were not yet fully evident in 2017. Despite construction wages rising the most among all employment categories, these increased only 1.3% in 2017, still below the pace of inflation. On the other hand, material costs increased at a pace of 4% to 6%; a few key materials increased more rapidly, including lumber, steel, aluminum, and cement. It is important to note that the costs of materials in 2017 do not yet reflect the potential impact of the tariffs implemented by President Trump in 2018. However, many remain watchful of the impact that the steel tariff (25%), the aluminum tariff (10%), and the looming trade war with China may have on the cost of materials in 2018 and beyond.Hotel Development Cost CategoriesThe Uniform System of Accounts for the Lodging Industry (USALI) provides industry participants with a common language for analyzing the financial performance of a hotel. However, no such system exists for hotel development budgets. Evaluating the completeness of a budget is often challenging, as different line items are used, and some components are unintentionally omitted. Based on our experience in reviewing actual developers' budgets, as well as preparing the annual HVS Hotel Development Cost Survey, we have developed the following summary format for hotel development budgets, which forms the basis for the presented cost categories. We find that these categories are meaningful for hotel professionals when undertaking an analysis relating to hotel feasibility, and they provide a basis from which to analyze proposed projects. The following illustration shows the five categories defined by HVS, as well as the typical items that each include.The categories are not meant to be all-encompassing but do reflect the typical items in a development budget. In construction accounting, development budgets are generally presented in far greater detail than for general investment analysis.Data Collection and Sample SizeIn 2017, HVS collected actual hotel construction budgets across 46 states. While not every construction budget was captured (due to a variety of reasons, including incomplete data, skewed data, or development attributes), the construction budgets sampled span the United States. Furthermore, construction costs vary greatly in different parts of the country. In this sample, the highest construction costs per key, as would be expected, were for projects in New York City, while select high-barrier-to-entry markets in California, Texas, and Florida also exhibited high costs per room. Conversely, the lowest costs per room were evident for limited-service hotels in highway-adjacent or tertiary markets throughout the country. Our selection includes complete and reliable budgets that form the basis for this year's survey. The budgets included projects that reflected both ground-up development and the redevelopment of existing buildings. Approximately 10% of the total budgets were for projects where all or a portion of the building was existing; as such, these have now been categorized under a separate "redevelopment" category. When comparing the average cost of redevelopment projects against ground-up projects, as would be expected, redevelopment projects exhibited much higher site-acquisition costs as a percentage of total costs, as the acquisition of the site typically includes both the land and an existing structure. Conversely, for these projects, total construction and site-improvement costs were lower as a percentage of total costs, given that some building and site-improvement cost savings are realized through working with an already existing structure. Because this is the first year for this category, we studied the cost variances further to quantify any potential difference that is generated through redevelopment deals. As illustrated below, for the full-service and lifestyle/soft-branded hotels, which are the most common product types for redevelopment projects, the average cost variance was 11% when compared with ground-up projects. It is important to note that this differential should not be extrapolated to an individual project. In some cases, the cost of redevelopment may exceed the cost of a new build for the same project due to the complexities of adaptive reuse.Lastly, we also examined the lodging product tier (STR chain scale) breakdown of our data set against the national data from STR. According to STR, approximately 65% of all hotel rooms planned to open over the next three years in the U.S. are categorized as upper-midscale or upscale. By comparison, our five categories that include upper-midscale to upscale brands comprised 64% of our total sample size; as such, our data are considered representative of the development pipeline for the nation.Per-Room Hotel Development CostsAs noted previously, we have changed our categories this year to include hotels that were part of a redevelopment project, as opposed to ground-up construction. The averages reflect a broad range of development projects across the U.S., including projects in areas with low barriers to entry and in high-priced urban and resort destinations.EXHIBIT 4: 2015/16 Hotel Development Cost Per Room AmountsAs illustrated above, budget/economy hotels averaged a development cost of nearly $80,000 per room in 2017. However, it should be noted that this was the category with the least development activity in our survey, as the land and construction costs necessary to develop this product are not typically justified by its revenue potential; thus, new construction is often not feasible. Limited-service and extended-stay hotels (midscale and upscale) illustrated average costs per rooms in the mid-to-high $100,000s and represented the most popular product type, with over 50% of the projects in our survey falling in these three categories. Select-service and dual-branded hotels both had similar average costs per rooms, at nearly $220,000. Quite noticeable is the disparity in development costs from select-service to full-service and lifestyle/soft-branded hotels, with the latter product type costing, on average, $100,000 more per room than a select-service hotel. Lastly, the cost to develop luxury hotels continues to increase, with this product costing, on average, just over $600,000 per room; the most expensive hotel in our survey, which is currently under construction, has a development cost of $1.8 million per room. Over the last 42 years that HVS has conducted the development cost survey, a trend has remained, which is worth illustrating further, and this is the general consistency of the percentages of development costs per category across all ten product types, as illustrated above. The one exception, as would be expected, is for the redevelopment category, where site acquisition costs are noticeably higher and site improvement costs are lower. As such, with this information, we believe developers are now increasingly able to find the support necessary to estimate total costs for individual projects; particularly, if the two most important factors, land costs and building and site improvement costs, have been determined (as these two cost categories add up to approximately 75% of a hotel's total development budget). Below we present a summary of how costs are allocated across all categories, based on the results of this survey.ConclusionThe budgets analyzed in this survey are provided directly by the developers, owners, and lenders on both ground-up and conversion hotel projects during the course of an entire year. We believe the results of the survey provide a wealth of information, as the survey combines the data from actual construction budgets organized across ten product types. However, there are also limitations, as the results comprise unique hotel projects that cannot be replicated by the inherent nature of hotel development. A multitude of factors affect a hotel's development budget. As such, we recommend that users of the HVS Hotel Development Cost Survey consider the per-room amount in the individual cost categories only as a general guide for that category. The averages in each cost category do not add up to the sum of the categories, as the total costs shown in the preceding tables are from per-room budgets for hotel developments and are not a sum of the individual components. Construction companies are the best sources for obtaining hard costs and FF&E costs for a specific hotel project. It is also advised that developers consult more than one source in their hotel development process to more accurately grasp the true costs of development. As always, HVS remains available to assist in this process. All individual property information used by HVS for this cost survey was provided on a confidential basis and deemed reliable. Data from individual sources are not disclosed.Other contributors: Suzanne R. Mellen, MAI, CRE, FRICS, ISHCMegan ThunemLizzette CasarinAstrid Clough McDowell

2018 HVS Performance Report: Spa Department

HVS ·21 November 2018
On average, spa and wellness departments run profitably and can contribute significantly to a hotel's bottom line. This report is the first annual performance report published by HVS that will track and monitor spa department performance and profitability. The data presented reflect spa operating-statement averages and data points from 2017 through the third quarter of 2018.Across HVS's 40 U.S. locations, our expert associates are continually consulting on hotels and resorts with significant spa and wellness operations, which are captured within their own departmental statement on an operating profit and loss statement. In 2017, HVS partnered with Mia Mackman, our Managing Director of Spa & Wellness Consulting, to better understand the accelerating spa and wellness assets and evolving lifestyle market.This report reflects a sample of 51 hotels and resorts, with 25 in the upper-upscale category and 26 in the luxury category. Hotel, guestroom, and treatment-room counts are summarized in the following table, along with total spa revenue for the survey group.Survey ParticipantsOverall comparisons between the two hotel segments show that luxury hotels have larger spas on average, which would be expected (11 treatment rooms on average for upper-upscale hotels vs. 15 rooms on average for luxury hotels). Spa revenue generated per occupied hotel room can also be significantly different between the two product types, averaging $16 for upper-upscale vs. $46 for luxury hotels. Treatment-room averages reflect roughly $110,000 per room for upper-upscale hotels and $173,000 (rounded) for luxury hotels.Survey ResultsSpa Revenue per Treatment RoomPer our study, expense ratios are similar between the two hotel-type categories, averaging just above 77% of revenue. Labor costs typically represent the largest percentage of spa department expenses. Departmental expenses tend to vary widely in each group, between roughly 51% to 120% overall. Most expense ratios fall between 75% and 85%, reflecting an average profitability of 23%. Spa Departmental RatiosSpas are becoming influential assets for hotels and resorts given the increasing demand related to wellness and lifestyle programs. With growing hotel and resort pillars being developed and dedicated to well-being, examining the depth of spa and wellness performance has become a fundamental factor of strategic growth and valuation. Moreover, understanding how these assets are performing plays a critical role in core strategic planning, including ADR and RevPAR performance.If your spa is operating at a loss or notably above the typical expense ratio for a spa, as shown here, HVS can help. Also, if you are not driving significant revenue levels from your spa operation (a full-service spa should generate 5.0% or more of total revenue, on average), our expertise can help you derive strategies for improvement, as enhancing or modifying programs and services can reduce expense percentages and increase revenues throughout multiple departments.

A New Day in the Sun: CHICOS 2018

HVS ·21 November 2018
Resiliency of the RegionWith the 2017 record-breaking hurricane season behind us, the recovery effort has been impressive. The islands of Anguilla, British Virgin Islands, Puerto Rico, and St. Barts have demonstrated a relatively fast recovery, with most of their hotel and villa rental inventory available for this upcoming peak season. The islands of Dominica, St. Martin/Maarten, and the United States Virgin Islands continue their recovery efforts, albeit at a slower pace; limited inventory is still available on these islands as they continue to rebuild. Despite the challenges left from the 2017 hurricane season, the market continues to be resilient, as demonstrated by the hotel operating performance, occupancy, ADR, and RevPAR levels over the last few years, despite the challenges in the region that stemmed from the Zika Virus and 2017 hurricane season.In addition, total revenue increased eight of the nine months reviewed during 2018, compared to the same period in 2017; occupancy increased slightly; ADR grew more than 5% for the last five months (May through September 2018); and RevPAR increased 3.8% over the same period last year. Aruba, Curacao, Cayman Islands, Dominican Republic, Jamaica, and Puerto Rico are among the top islands with the strongest year-to-date RevPAR growth, with the Cayman Islands leading the charge, up over 27% from the same period last year.High Interest in Financing ProjectsIn 2017, the Caribbean region was struck with two catastrophic weather events, which followed the fears of the Zika Virus that affected the market in 2015/16. In some markets, after severe storms, hotel values tend to decline, creating opportunities for buyers to make more affordable purchases. However, this was not the case for the Caribbean lodging market in 2018, as evidenced in the equity and debt-financing panels. Currently, there is greater interest in financing projects, more so than in the past ten years, as well as a renewed interest in investment and a notable influx of capital to the region. The region has shown significant increases in lending activity from regional banks and other alternative lending sources, as banks and non-bank financiers have more confidence in the market today than during the past decade. Driven by the resiliency of the market and how fast the region is capable of rebounding from events (such as the Zika Virus and hurricanes, which seasoned investors understand are inherently part of the dynamics of the region), investors are seeking more attractive yields in the Caribbean, as attractive yields in the United States are becoming more difficult given the competition to acquire quality products at reasonable pricing. Debt financing is also more readily available than years past, although lenders continue to be selective on projects. Because of the risks with Caribbean hotel investment, lenders continue to advise investors that strong sponsorship, locational attributes, and airlift are key criteria when acquiring financing.Dominican Republic & All-Inclusive SegmentThe Dominican Republic continues to exhibit solid fundamentals and has shown ADR increases for the past consecutive twelve years. Strong occupancy performance, resulting in annual occupancy levels above 70% since 2012, is driven by strong visitor demand, largely from the U.S. and Canada, as well as additional demand from Europe. This demand mix in the Dominican Republic is one of the most diverse, and this demand is contributing to a robust pipeline with nearly 6,700 rooms under construction, per STR. Many of these rooms are in the all-inclusive segment, as this business model has gained popularity in recent years. The segment has recently trended to a far more upper-upscale and even luxury vacation experience, with prices remaining extremely reasonable for the luxury services and the value that guests receive. As increased competition continues in the all-inclusive segment, owners and operators alike understand the importance of developing a unique experience at each individual resort, as rooms and food and beverage are generally a commodity. A variety of new, all-inclusive brands are under construction in the region, including the 1,565-room Senator Puerto Plata, 1,020-room Lopesan Costa Bavaro Resort & Spa, and the 909-room H10 Hotel Punta Cana. In addition, many of the traditional hotel companies, such as Hilton, have entered this segment and will continue to expand their products in the near term.ConclusionThe resiliency of the Caribbean hotel market continues to shine, as investors are active (more than ever) in the region, which is evident from a lending and transaction standpoint. Visitation continues to grow, surpassing 30 million for the region for the first time ever. Demand for the region has grown for the past seven straight years, which continues to drive investment. In addition, the pipeline is robust, particularly in the all-inclusive segment. The outlook for the region is cautiously optimistic as conditions normalize following the 2017 hurricane season, with many hotels coming back online in the near term while new hotels enter the marketplace.About CHICOSStaged by HVS, the Caribbean Hotel Investment Conference & Operations Summit (CHICOS) is the premier industry conference for the region. CHICOS annually welcomes governmental representatives, opinion leaders, developers, bankers and other lenders, tourism officials, investment funds, hotel brand executives, individuals/companies seeking investors for their tourism projects, franchise and operations companies, public and private institutions, consultants, advisors, architects, and designers to discuss the region's markets and possibilities. CHICOS 2019 is scheduled for November 14-15, 2019, at the Secrets Resort in Montego Bay, Jamaica.

HVS Asia Pacific Hospitality Newsletter - Week Ending 16 November 2018

HVS ·20 November 2018
Fragrance to Develop Hotels Along Waterloo Street and Tanjong Pagar Area, SingaporeSingapore-based development company Fragrance Group Limited ("Fragrance") is planning to redevelop the Waterloo Apartments in Bras Basah-Bugis area and the Tower 15 in Tanjong Pagar area into hotels. Fragrance acquired the 999-year leasehold Waterloo Apartments for SGD131.1 million, a site of 14,369 square feet that currently comprises of 30 apartments. Outline Planning Permission (OPP) has already been secured to change the property zoning from "residential with first-storey commercial" with a 2.8 plot ratio to hotel use with a 4.2 plot ratioor maximum gross floor area of approximately 60,348 square feet. In addition, Fragrance has applied to the Urban Redevelopment Authority for a change of use for Tower 15, a 29-storeycommercial building with a three-storey hotel and multi-level carpark, to full hotel usage. According to Fragrance, the change of use will result in an increase of approximately SGD210 million to the fair value of Tower 15. As one of the largest chains of economy hotels in Singapore, Fragrance hotel is currently operating 21 hotels island-wide.Average Occupancy of Chinese Star-Rated Hotels Registers 57.54% in Q2 2018According to the national statistical management system of star-rated hotels in China, a total of 9,332 star-rated hotels satisfied the reviews of provincial tourism administrations in the second quarter of 2018. These includes 60 one-star hotels, 1,583 two-star hotels, 4,497 three-star hotels, 2,367 four-star hotels and 825 five-star hotels. All these qualified star-rated hotels generated a total revenue of RMB49.959 billion, showing a generally flat year-on-year increase. Food & beverage and room revenues contributed RMB19.509 billion (39.05%) and RMB24.095 billion (48.23%), respectively. The average room rate of all star-rated hotels was RMB349.43 per room night, up by 4.78% year-on-year while average occupancy rate was 57.54%, up by 2.41%year-on-year. This generated revenue per available room (RevPAR) of RMB201.07, up by 7.30%year-on-year and an average operating income per room of RMB35,718.20, up by 7.91% year-on-year.Tourism Authority of Thailand Launches Domestic Travel CampaignTourism Authority of Thailand (TAT) have launched a new campaign in an effort to promote domestic tourism during the high season until the end of the first quarter in 2019. The new initiative called "Let's go no plan" is set to entice Thais to visit second-tier provinces. TAT aims to target consumer via online and social media channels by promoting local culture, food, and products from designated secondary cities. In an effort to facilitate the campaign, the TAT has teamed up with the Stock Exchange of Thailand (SET) to encourage publicly listed Thai companies to organize packages and corporate social responsibility activities in secondary provinces. Additionally, Thai Airways International (THAI) is currently offering 20 domestic packages ranging from full-tour options to just flight and hotel bookings. TAT forecasts that domestic travel to secondary cities will grow by 5% with over 60 million visitors to the secondary cities, while generating an estimated 165 billion baht, an increase of 9% year on year.Banyan Tree Debuts Angsana Brand in CubaSingapore-based Banyan Tree Hotels & Resorts ("Banyan Tree") has recently opened its first Angsana hotel in Cayo Santa Maria, Cuba on 15 November 2018. Located within a UNESCO Biosphere Reserve which is home to coral reefs and underwater fauna, the 252-key adults-only beach resort Angsana Cayo Santa Maria is accessible via a 48 kilometre causeway from the Cuba mainland. The property also features 14 room categories, five food and beverage outlets, a 200-metre long private beach, Angsana Spa, a watersports centre, two pools, a marine lab, and a boutique shop. Banyan Tree was the first Asian and Singaporean hospitality brand to enter Cuba in 2017 with the opening of Dhawa Cayo Santa Maria, a 516-key resort. To date, the Banyan Tree Group manages and/or has ownership interests in over 47 hotels and resorts, 59 spas, 71 retail galleries; as well as three golf courses in 25 countries.Movenpick Debuts in the MaldivesSwitzerland-based Movenpick Hotels & Resorts ("Movenpick") has opened its first resort in the Maldives, Movenpick Resort Kuredhivaru on a private island in the Noonu Atoll. Just 45 minutes by sea plane from Male, the resort features 105 villas and suites comprising of 72 overwater pool villas, 30 beach pool suites and three beach spa pool residences, each with its own private plunge pool. There are also three restaurants, a wine bar, a diving centre, a tennis court, a fitness centre, a spa, a water sports centre as well as the Movenpick Little Birds Club which offers a range of family activities and babysitting services. The property is one of the few properties located in the Noonu Atoll house reef, home to some of the most beautiful diving spots in the Maldives. With the opening of the new airport on Maafaru island in the same atoll in early 2019, the resort will be accessible by a 15-minute speedboat ride. Part ofFrance-based AccorHotels ("Accor"), Movenpick Hotels & Resorts has more than 80 properties in 24 countries across Asia, Europe, Africa and the Middle East.


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