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CHICOS Returns to Bermuda, November 8-9, 2018: Caribbean Hotel Investment Conference Tackles Topics of Recovery, Investments, Diversity, and Yes, Airlift

HVS ·24m
Parris Jordan, Chairman of the Caribbean Hotel Investment Conference & Operations Summit (CHICOS) announced that the 2018 edition of CHICOS is now set for November 8-9, 2018 and will be hosted at the Fairmont Southampton Resort in Bermuda."The Bermuda Tourism Authority (BTA) has been an exceptional partner for CHICOS and we are honored to return to the island nation in 2018," says Jordan. "The leadership of the BTA and the support of the entire hospitality community in Bermuda enables us to move forward with new and innovative perspectives and ideas."Our heart beats with a Caribbean rhythm," says Kevin Dallas, Chief Executive Officer of the Bermuda Tourism Authority. "We are honored to welcome CHICOS back and are eager to showcase Bermuda and further discussions with the hundreds of investors, bankers, lenders and other interested hospitality developers. CHICOS is a critical venue for all of us to promote continued growth."As Jordan and the CHICOS team assemble the program contents, we can be sure of specific topics that are important to the region and are to be included in the agenda:Recovery updates from the island countries impacted by last year's storms;Disruptors and new paradigms for the Caribbean, off the heels of the successful sessions at last year's CHICOS event featuring executives from AirBNB and Expedia;Continued interest by equity investors seeking opportunities in the region;Topics concerning "diversity" in the region;The significance and on-going efforts for airlift intra-and inter-Caribbean airlift to support positive tourism and development growth.For conference news, updates and comments, follow CHICOS on Twitter @CHICOS_HVS and on LinkedIn at the CHICOS page. Please use #CHICOS2018. For conference registration and hotel information please visit To confirm accommodations at the CHICOS host hotel, the Fairmont Southampton, click here. About CHICOSStaged by HVS, the Caribbean Hotel Investment Conference & Operations Summit, CHICOS is the premier industry conference for the region. CHICOS 2017 welcomed 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 - all to discuss the region's markets and possibilities.In light of the hurricanes which affected the Caribbean region in late Summer/early Fall 2017, CHICOS has made a donation to the Rotary Foundation of the Caribbean in support of relief and recovery efforts for islands impacted by the recent storms. The Rotary Foundation, which has a history of operating in the region with nations impacted by hurricanes, is working to provide impacted countries with necessities such as water, canned food, and clothing. The organization has outstanding ratings, being named by CNBC as one of the "Top 10 Charities in the World." Every dollar of the proceeds received will be donated directly to beneficiaries in the Caribbean. For more information on how to contribute to the Rotary Foundation's Caribbean relief efforts, click here.

In Memoriam: HVS's Michael Brophy

HVS ·11 January 2018
HVS is deeply saddened to announce the sudden passing of Michael Brophy, Managing Director, Senior Partner of HVS Atlanta. A 14-year veteran of the firm, Mike established the HVS presence in Atlanta, a city he and his family came to love.According to Rod Clough, MAI and President of HVS Americas, "Mike was a true leader and friend. From the start of his HVS career, he was one of the most dedicated team members, working long hours when needed and with the best attitude. When an opening presented itself in Atlanta, he stepped up and took on a new leadership position with the firm, transcending into that role well beyond expectations. I selected Mike as part of my founding partnership group for a reason: his friendship, loyalty, and leadership meant the world to me. I knew he would do anything for me, as I would for him, and that I could not live without him. Now I must figure out how to do that, and it isn't proving to be easy. We all miss Mike so much.Mike fostered an extraordinary team that will continue to serve the Atlanta and Southeast markets with the same commitment to excellence under the leadership of Janet Snyder.He left behind his beloved wife, Patti, and two sons, Sean and Garrett.

Casual Dining: A Fresh Perspective

HVS ·11 January 2018
Restaurant industry studies and reports have brought much attention to the shift in consumer choices and the flattening of year-over-year same store sales growth that the Casual Dining segment has been experiencing in recent years. However, there are still many exciting growth opportunities and ways that Casual Dining can flourish.Overall the restaurant industry is on the rise, with sales for 2017 expected to peak at around $800 billion according to the National Restaurant Association's 2017 Outlook report. While Full Service (which includes Casual Dining) is seeing a decline in sales growth the Full-Service category still comprises the largest industry service segment making up nearly one third of the restaurant industry's total sales. In fact, sales are greater in Full Service than both Quick Service Restaurants (QSR) and Fast Casual segments combined.With projected sales of more than $260 billion for 2017, the Full-Service sector may have flattened in system growth, but it is not going away. Companies are being challenged to seek new ways to remain relevant, and to take advantage of the narrowing gap between the value, price, and service propositions for Casual Dining vs. Fast Casual.Key areas that we are seeing Casual Dining Operators focusing on to narrow the gap include:Intensified focus on food quality and freshness, farm-to-table offering, made from scratch, health-conscious menu choices and environmentally friendly offerings.Adjusting and broadening menus to meet varying customer dining occasions including better understanding consumer needs for each day-part and offering more diversity, variety, and smaller portion sizes.Adapting service models to meet the changing and diverse needs of consumers, such as adding differentiating service strategies based on the different day-parts. For example, breakfast and lunch offerings, lunchtime speed of service, carryout, and delivery.Leveraging the diverse and profitable separation from Fast Casual by providing superior drink offerings, both in the alcoholic and non-alcoholic space.Leveraging FOH, BOH and customer facing technologies that enhance speed of service, quality and customer satisfaction.The use of customer loyalty programs, increased spend on social media, mobile platform consumer engagement, online marketing and shifting away from traditional advertising.Casual Dining leaders are also implementing new strategies to meet the changing needs of their consumers. Here are just a few examples of Companies that are finding success through these new opportunities:Cheesecake Factory is partnering with DoorDash as its exclusive delivery partner.Dallas-based TGI Fridays introduced online take-out orders a year ago and has seen sales grow by 30%.Bloomin Brands has invested in take-out and delivery for diners who don't want to leave home.Applebee's offers appetizer and entree dinner menus for two at a fixed price of $20 / $25 providing customers a variety of new flavor choices focused on customer value and ordering convenience.Chili's Bar and Grill has continued to evolve its tabletop technology by offering many new features to improve service times and the overall guest experience including: tabletop ordering, self-cash out, drink re-ordering, check-splitting, loyalty points tracking and redemption and carryout ordering.These are just a few examples of tremendous success stories where Casual Dining is finding new traction and driving incremental sales and traffic. The recipe for Casual Dining to remain the most viable and competitive customer choice for many years is to couple creative new strategies, together with an unwavering commitment to great service, great people and great food (all of which never go out of style).

Market Pulse: Seattle, WA | By Kirsten Z. Smiley

HVS · 3 January 2018
Major Businesses & DevelopmentsMicrosoft Corporation is an American multinational technology company that develops, manufactures, licenses, supports, and sells computer software, consumer electronics, personal computers, and services. In 1986, Microsoft moved into its headquarters office in the Redmond suburb of Seattle and began its journey to become one of the Fortune 100 companies; its expansions have drawn tens of thousands of talents to the area and have cultivated a tech-friendly environment in Seattle, now considered a technology hub and home to numerous startup companies. Downtown Seattle is home to the rapidly growing, which ranked twelfth on the Fortune 500 list in 2017. The company's growth has allowed it to expand its headquarters in the heart of Downtown Seattle. Amazon reportedly employs over 40,000 people in Washington and 300,000 globally. According to Seattle Times, Amazon occupies nearly 8.1 million square feet office space in Seattle, and this number is anticipated to grow to 12 million by 2022.[1] The latest additions to Amazon's headquarters include the 521-foot-tall Day 1 Tower, which opened in 2016, and the three sphere-shaped biodomes that are under construction and will open in 2018. Aside from occupying a vast amount of Downtown office space, Amazon also fills up many hotel rooms in the CBD, Denny Triangle, and Lake Union neighborhoods. Several new hotel projects, either recently opened or under construction, are next to or near an Amazon building, including the Moxy Hotel and the Residence Inn by Marriott Downtown/Convention Center, as well as the Hilton Garden Inn in Denny Triangle. Furthermore, the company is in search for a second headquarters and has reportedly received over 200 proposals from across the United States. Another web-based tech company that will join Amazon in Downtown Seattle is Expedia, which will relocate its headquarters and 3,500 employees from Bellevue to Seattle by 2019. Additionally, several Silicon Valley high-tech companies, such as Google and Facebook, have a strong presence in Seattle. Google, with its major presence in Kirkland, announced plans to relocate its cloud division, currently located in Fremont, to the South Lake Union neighborhood of Downtown Seattle by 2019. The new campus, which broke ground in May 2017, will occupy 607,000 square feet of office space. Seattle's central waterfront, which stretches nearly two miles along the west side of the city, is amid a multibillion-dollar revamping project. One of the major components is the replacement of the Alaskan Way Viaduct, which is scheduled for completion in 2019. In addition, the existing seawall, which does not meet current safety standards, will be replaced. These two projects will create a significantly different landscape, with a pedestrian promenade connecting the waterfront to Downtown Seattle. Other projects will include an expansion of the Pike Place Market and a new Overlook Walk. The Seattle waterfront project is anticipated to create opportunities for the city to capture more tourists and businesses.In the meantime, the Washington State Convention & Trade Center (WSCTC) is set to embark on a $1.6-billion expansion and renovation project in response to the growing demand. The WSCTC features approximately 205,700 square feet of exhibition space, 61 meeting rooms (totaling roughly 105,000 square feet), and a 45,000-square-foot ballroom. The expansion is expected to more than double the size of the existing WSCC with an additional 440,000 square feet of meeting space. The expansion and renovation are slated to begin in 2018, with a completion date in 2020. With the addition, the convention center is anticipated to generate an additional $235 million in revenue annually from in-state and out-of-state visitors. Moreover, a 1,260-room Hyatt Regency is under construction adjacent to the planned expansion of the convention center. Upon completion, the Hyatt Regency will be the largest hotel in the Pacific Northwest, providing roughly 100,000 square feet of meeting space. The expansion of Amazon, the growing numbers of startups, and the increasing attractiveness of Downtown have resulted in a historically high number of developments in Downtown Seattle. Aside from the CBD, other neighborhoods, such as the Pioneer Square and SoDo, are experiencing a period of revitalization. Timber REIT Weyerhaeuser recently moved its headquarters to the Pioneer Square neighborhood from Federal Way. SoDo, an industrial district south of the CBD, houses the largest concentration of industrial facilities in Seattle and is home to two sport stadiums, the headquarters for Starbucks, and Harbor Island, the largest container port facility in the Pacific Northwest. While industrial uses remain to be the focus of the neighborhood, the construction of new office buildings and a 23-story Embassy Suites by Hilton hotel are underway. According to a report published by Downtown Seattle Association mid-year 2017, 74 major projects were under construction in Downtown Seattle, with 150 more in the pipeline,[2] which should add a significant amount of multi-unit residential, office, and retail space, as well as new hotel supply, over the next five years.AirportThe Seattle-Tacoma International Airport is the regional air hub of the Pacific Northwest and is served by various domestic and international commercial airlines. The airport handled over 45 million passengers in 2016, compared to the 31 million (rounded) in 2010. In response to the growing passenger traffic, the airport is undergoing a series of renovations and expansions, including opening a new International Arrivals Facility, installing a new baggage system, and renovating the airport's 40-year-old North Satellite concourse. Furthermore, as Seattle-Tacoma International Airport passenger counts continue to rise, the airport's master plan includes an estimated $10-billion expansion project that will add 51 additional aircraft gates over the next 20 years to sustain growth. In addition, the new, 300,000-square-foot Federal Aviation Administration's (FAA) regional headquarters office is under construction and scheduled for completion in 2018. This location will serve as the new home of the Northwest Mountain Regional FFA office.TourismSeattle's economy has been bolstered by strong tourism levels. King County welcomed roughly 39 million visitors in 2016, and visitor expenditures reached $7 billion that year, a 3.8% increase from 2015. Many visitors come to the area to take an Alaskan cruise during the summer months. In 2016, 203 vessel calls originated from Seattle's cruise terminals, carrying 980,000 passengers (rounded). The passenger count is forecast to surpass one million in 2017. According to Port of Seattle, the cruise industry generated approximately $459 million in business revenue in 2016.[3] In addition, Seattle also hosts a wide variety of cultural activities, concerts, bazaars, and festivals. Safeco Field, home to the Seattle Mariners Major League Baseball team, and CenturyLink Field, home to the NFL's Seattle Seahawks, are both located in the SoDo neighborhood. In 2017, Adam Silver, the National Basketball Association's commissioner, indicated that the NBA is planning to expand in the near future and that Seattle is one of the potential homes to a new NBA franchise. On the collegiate level, the University of Washington draws a significant number of visitors during the football season.ChallengesWhile Seattle is on the growth trajectory, the city has its own challenges. Seattle has some of the toughest labor laws, which affects the hospitality industry. In September 2016, Seattle passed a law that requires a 14-day window for setting the employee work schedule. Additionally, employers are required to offer more hours to existing employees before hiring new workers. Furthermore, the skyrocketing home prices and the increasing homeless population are also part of the growing pain. As of October 2017, the median home price in Seattle reached $725,000.Bellevue SnapshotThe city of Bellevue is located across Lake Washington from Downtown Seattle. This upscale suburb offers a growing downtown area that houses large corporate offices for companies such as Microsoft, Boeing, Expedia, Walgreens, and Verizon. In addition, T-Mobile USA is headquartered in the Eastgate neighborhood of Bellevue. In 2016, Amazon announced its plan to occupy the new Centre 425 building in Downtown Bellevue, and in 2017, moved into the 929 Office Tower. Additionally, the opening of the 400 Lincoln Square office tower will house tenants such as WeWork, Valve, Samsung, and Pokemon. Bellevue continues to provide an attractive business environment for the innovative industries. In 2016, Recreational Equipment, Inc. (REI) announced it would move its headquarters from Kent to an eight-acre site in Bellevue's new Spring District development by 2020. The Spring District is a new, 16-block, mixed-use project in Bellevue that is also a part of the Mountains to Sound Greenway. The $2.3-billion project will include a light-rail station, multi-unit residential buildings, and office space; upon completion, it is estimated to house 2,000 residents and 13,000 office jobs. According to the third-quarter 2017 Major Projects Report released by the City of Bellevue, nine major projects are under construction, encompassing over 600 residential units and at least 1,300,000 square feet of commercial office/retail space. A couple of new hotels in the pipeline include a Hilton Garden Inn and the Four 106, while the AC Hotel by Marriott and the W Hotel recently opened. In addition to these projects, 20 additional development projects in Bellevue are in various stages of planning or permitting.New SupplyThe growth of the market has prompted new hotel development. The following table illustrates new and proposed hotel supply in the Seattle-Bellevue-Redmond market.ConclusionThe Seattle metropolitan area is one of the top ten metro markets in the United States experiencing the most supply growth. According to STR, there were 4,254 rooms under construction as of October 2017, equating to 9.4% of the existing hotel rooms; nevertheless, year-to-date through October 2017 data show 6.2% RevPAR growth coinciding with the 2.9% supply growth. STR noted that Seattle will be one of two U.S. markets forecast to register growth in the range of 5% and 10% for full-year 2017, while most other major markets will grow in the range of 0% to 5%. The depth and strength of demand generators spanning the Seattle metropolitan area have supported the current strong market dynamics. While the entrance of many new hotels remains to be a concern for local hoteliers, the exponential growth of Amazon, the revitalization of Downtown Seattle, and the increasing attractiveness of Bellevue are anticipated to sustain future demand growth in the market.[1][2][3]

Reorganizing Spa Operations to Leverage Automation and Technology

HVS · 3 January 2018
Interpersonal Service and Talent DroughtSpa treatments and correlating services are customarily viewed as manual-therapies with an important emphasis on the unique interface between (a client and a provider). This person-to-person relational component is a critical measure that often determines the overall experience and tone of the elected treatment or service, client satisfaction and the future efficacy of this relationship. While personal-touch is an essential component of the spa industry, the impetus of the industry has accelerated at a rate much faster than the growth of the workforce necessary to support it. Combined with an influx in hospitality development, technological investment hesitation and mitigating employee turnover- keeping pace to hire and train new talent, have not made early adaption an easy process. Consequently, the lack of acclimatization not only impacts leadership, but operational consistency and fiscal volume.A recent study conducted by the United States Department of Labor, Bureau of Labor Statistics found that employment within the beauty and wellness arenas hold substantial projected growth in the U.S. economy. The study discovered "hairdressers, barbers and cosmetologists have faster than average job growth, citing an average 10% annual increase in employment from 2014 to 2024." Furthermore, the study noted a "62% average annual turnover as people seek career advancement and new opportunities", resulting in "more than 400, 000 available job openings per year, " in the U.S. alone.Further research by the Global Wellness Institute GWI, shared by the [Spa and Wellness Career Development Initiative][3] reports that "By 2018, we will need 2.7 MILLION employees in the spa industry to meet demand, with the United States, China, Germany, Japan, and Russia leading the job creation." This data underlines the scope of global spa, wellness and beauty growth which reveals the industry will "need an additional 80, 000 Spa Managers and Directors and 500, 000 Spa Therapists more than the workforce in 2013." Recognized as an industry of independent talent, this rouses important variables to consider pertaining to hiring and training. It also presents a need to reconsider operational models that promote continued progress. Understanding where the challenges are can help navigate new pathways to improve and transcend standard operational policies.Reorganizing a ParadigmTraditionally spa and wellness operations have been divided into departments and categories centered on performance and profitability, fixed on manual services to generate the bulk of treatment revenue and sales. Considering the increasing challenges to recruit and retain experienced talent, the diversification of this model requires new elements of protective foresight and calculated planning. Administration and retail components rely on savvy customer service, constant product education and the aptitude to sell. Retail sales measure between 10% to 35% of spa revenue. It's important to provide the resources and tools required to optimize the front desk and administrative performance. Appointment setting and new client intake procedures can be reintroduced with more efficiency to foster extra attention on customer care. Services and retail are a spas biggest revenue producers. However, labor costs and overhead make up a considerable portion of the yield. Compensation structures vary depending on location, region and spa-type. Nonetheless, labor costs run between 45% to 60%. In addition to operating expenses that fall between 35% to 40%. With such a big percentage of sales and service revenue going to labor and overhead, profitability can be challenging even with a well-organized and fully staffed team. A model that is solely dependent on the expertise of licensed providers with an emphasis exclusively on manual actions, will be at a disadvantage as technology continues to accelerate and improve. Whereas traditional spa treatments and personal care services cannot solidly be replaced by technology, nor should they ... It is essential to integrate a subset of automation and new applications. This process will help insulate investors and stakeholders from labor liabilities and staffing challenges that could undermine a spas peak performance. Moreover, industrializing a percentage of spa services will introduce new modalities, create profitable new income streams and protect investments with a relatively fast return on investment. In the figure below, I have simplified these components into three specific groupings based on functionality, industry evolution and impending future growth. I divided these into the following three groups: manual services, administration and retail, and automated services. Each set represents approximately a third of the operational structure in contrast to the long-standing traditional paradigm. By dividing operations into three specific sets, this introduces a "new model" focused on the future, to upsurge agility and increase profitability.InvestmentThe investment to feature new technology fluctuates considerably. These applications should be selected carefully. Without exception, all levels of change are unique for every spa. Each spa has distinct variables to consider such as location, hotel occupancy and volume. These choices should be founded on the goals of the property, company culture, budget ratification and asset planning. Deploying function without purpose, is counterproductive. And authenticity and transparency are indispensable. It's also critical to understand the opportunities associated with the investment, perceived value, marketability and required training. Embracing innovations in software will increase data capture, enhance guest profile analytics and keep marketing and strategic choices timely and relevant. Data is a currency. Data that is gathered through the hotel is pertinent to the metrics of the spa. Deciphering it with systems designed to predict important sequences can provide useful insight, mark milestones and help set important goals. Software can also support employee rotation cycles, manage daily duties more successfully and reorganize priorities vs. demands for better management of quality and time. "Because customer demand can be unpredictable and often doesn't match up with staffing schedules, it can be a challenge to fill appointments with high-quality providers. Tech like Zeel allows spas to tap a large pool of vetted, licensed providers, on demand," said Samer Hamadeh, CEO of Zeel. (3) Hamadeh also cites the value of "wellness technology as it facilitates easy payments, scheduling, and service reminders." Taking advantage of these resources leaves more time for cultivating the team of people who provide the social relationships that fuel the business. It also increases access to quality with operational flexibility.Automated TreatmentsAn increasing selection of automated services offer a wide-range of proven health and wellness benefits including: deep relaxation, sleep tribulations, stress, chronic pain, and a variety of common health issues. Some of these applications include halotherapy systems (known as salt therapy), float pods and tanks, products like BOD PODS and cryotherapy chambers. There are also a variety of frequency devices and treatment table innovations that apply modalities using chromotherapy (light and color), vibration and sound. In addition to these, there are exciting advancements in sleep, neurological health and audio-visual applications involving virtual reality and digital environments to aid relaxation, trauma and reduce stress. With distinct neural and physiological benefits, these modalities are increasing in popularity, mass and demand. Furthermore, these services do not require a licensed professional to deploy them. They generate a service fee uninhibited by typical commission models and free from provider overhead. They can be offered in place of a conventional service, introduced as pre-treatment, post-treatment or as add-ons to help manage busy scheduling and groups. Ultimately, this is a "new breed of spa services" that produce tangible wellness benefits, meet on-demand expectations and significantly increase treatment revenue. Furthermore, the personalized health landscape continues to evolve with new diagnostic customizations and wellness applications, driving a call for new services. Hotels and resorts have an extraordinary opportunity to diversify their spa and fitness programs. The International Spa Association ISPA 2016 U.S. Spa Industry Study (4) highlights "hotel and resort spas have an average of 12, 595 square feet, per establishment." (figure 2) Compared to day spas, medical spas and others that have an average square footage of 3, 904. Reallocating the space of unused treatment rooms and low-traffic fitness areas can produce viable fresh returns.Other ways to engage technology include, new aesthetic and massage instruments, live-fitness and internet applications, personalized spa apps, digital entry and more. The question is, who will use them? How will they use them? Not just today, but in one-year, two-years or more.Demand and DeliveryWhen it comes to bringing these various aspects into play, balancing integration helps manage the curve. It is vital that all elements of the up shift are understood and backed by employees and management. Whereas, these assets should be considered new resources and tools, not countermeasures designed to create uncertainty. Balancing empathy, nature and personalisation with innovation and technology epitomizes the "freedom to choose". There are plenty of people who choose not to visit a spa for the simple reason they are uncomfortable being touched. Automated services are a way to capture these customers by offering an easy, personal and hands-free alternative to traditional spa services. There's a lot of energy pursuing the millennial market. Appealing to this market requires flexibility, constant creativity and new strategies. Millennials shop products and services with a radically different view on value, quality and time. Businesses seeking the millennial spend and loyalty, need to know how to react, create the right incentives and be willing to change. Technology becomes a part of this. Statistics and data are providing realistic assumptions about market growth. And with any rapid development, there are always growing pains. By taking actions to leverage technology you can mitigate the increasing stress to remain competitive. Meanwhile, it's not solely about lateral market competition. It's about pleasing innovative and informed guests seeking services that meet their imminence and whim. Demands for spa and wellness services are changing. While massage and aesthetics are still the most commonly requested services, there are increasing modalities catered to wellness and prevention. Underestimating the benefits of new technologies will result in faster moving, more dramatic fluctuations in performance. Knowing how to choose new applications and integrate new systems is well worth taking the time to understand. Thereby, customizing new applications creates meaningful advantages for everyone, guests, employees, owners and stakeholders.Reprinted from the Hotel Business Review with permission from

Market Pulse: Fort Worth, TX | By Hunter Dietz & Kathleen D. Donahue

HVS · 2 January 2018
The following article details new developments in and around Fort Worth's primary neighborhoods that affect the area's hotel industry.Fort Worth's EconomyDespite plummeting oil and gas prices and increased activity in other parts of Texas and across the country, the energy industry continues to provide ongoing benefits to Fort Worth's economy. AllianceTexas, an 18,000-acre industrial, office, and retail development has also become a primary economic engine. Boasting a diverse workforce, Fort Worth has grown from a dusty town along the famed Chisholm Trail to the fifth-largest city in Texas and the sixteenth-largest city in the nation.MilitaryNaval Air Station Joint Reserve Base Fort Worth (NAS Fort Worth JRB) lies five miles west of Fort Worth's Central Business District and is home to a variety of Navy, Marine Corps, Air Force, Army, and Texas Air National Guard units. Lockheed Martin Corporation, based in Bethesda, Maryland, has extensive operations in Fort Worth. Lockheed Martin's Fort Worth plant produces the F-35, the nation's most sophisticated fighter jet.Energy ProductionSlick-water fracking, which traces its origins back twenty years to an area just north of Fort Worth, has lent a massive boost to the production of oil and gas from shale. The Barnett Shale is a natural gas deposit that may contain up to 30 trillion cubic feet of gas. The shale play covers 17 counties, extending west and south of Tarrant County, and is a major force for production. Local officials report that employment has stabilized at energy companies in Fort Worth, and oil and gas production started ramping up again across Texas in 2016, a trend that has continued at a slow but steady pace. Companies are also becoming involved with alternative forms of energy, with several plants in operation in small towns throughout the greater Fort Worth area.TransportationAirlines Group Inc. has its headquarters campus in the far eastern city limits of Fort Worth; a new, 1.8-million-square-foot, five-building office headquarters complex is scheduled to open in 2019. Along with its headquarters offices and ample operations throughout Dallas/Fort Worth International Airport, American Airlines Group Inc. also executes most its training operations at its DFW facilities. Burlington Northern Santa Fe (BNSF) Railway, the second-largest freight transportation company in North America, maintains its corporate headquarters in the Fossil Creek area of Fort Worth. BNSF operates a rail network of 32,500 route miles in 28 states and three Canadian provinces. In April 2016, BNSF partnered with AllianceTexas developer Hillwood and plastics logistics firm Packwell to build a new plastics export-packaging facility in Alliance Westport, the rail-connected industrial sector of AllianceTexas, a master-planned, mixed-use community located on 18,000 acres in northern Fort Worth. Owned by the City of Fort Worth and managed by privately held Alliance Air Services, Fort Worth Alliance Airport (AFW) is the world's first 100% industrial airport designed for cargo and corporate aviation. AFW also anchors the nation's fastest-growing industrial complex, Alliance Global Logistics Hub, which has roughly 9,600 acres designated as Foreign-Trade Zone (FTZ) No. 196--a major advantage in attracting importers. Alliance Global Logistics Hub is among the top FTZs in the nation. Shipping by air is reliable and quick, but also costly. Hence, air freight usually consists of highly perishable or particularly valuable goods. Dallas/Fort Worth International Airport and Alliance Airport combine to make the region one of the nation's leaders in air cargo shipments.Revitalization and GrowthA master plan that began in 1988 has since created new developments in Downtown Fort Worth that include Sundance West, Sundance East, the Nancy Lee and Perry R. Bass Performance Hall, and the Chase Bank Building. The final project, the renovation of Sundance Square, was completed in 2013. Moreover, a major catalyst that changed the infrastructure and economic landscape of the city was the Fort Worth Tornado in 2000 that devastated the downtown area, but also ultimately helped transform the face of the city's core. The January 2009 opening of the Omni Convention Center hotel changed the both the hotel landscape and the city's skyline; the 34-story luxury hotel boasts a unique structural design. Ongoing hotel development in Fort Worth includes both ground-up construction projects and the rehabilitation and adaptive reuse of existing buildings. Much of the last-decade's development of Class-A office space in Fort Worth came from the conversion of existing Class-B office space. By far the largest new development in the Downtown Fort Worth office market is the Frost Tower project, a 25-story, Class-A office building with approximately 278,000 square feet of rentable area, with Frost Bank as the largest tenant. Other tenants include Jetta Operating Company Inc. and Anthracite. This tower topped out in the fourth quarter of 2017.The Trinity River Vision, an 800-acre project directly north of Downtown Fort Worth, will effectively double the size of the downtown area. The Army Corps of Engineers has been tasked with redirecting a portion of the Trinity River to add roughly twelve miles of waterfront property, creating what will be known as Central City, but commonly referred to as Panther Island. The project will correct some flooding areas and expand Gateway Park into one of the largest urban-programmed parks in the nation. Ultimately, $526 million of a massive $10-billion federal bill will be spent on Fort Worth's Trinity River Vision. This project has already sparked development interest in the area, as construction on a 300-unit residential building started in 2017. Upon completion, this $909.9-million project is estimated to create an annual economic impact of more than $1 billion dollars.ConventionsA 2014 study of convention demand, completed by Hunden Strategic Partners, recommended a renovation of the aging Fort Worth Convention Center, as well as an increase in hotel supply to support additional convention demand. This has since spawned a collection of tax abatements and incentives. Portions of the western area of the convention center facility have been refreshed to encourage usage; however, a detailed renovation plan has not been announced. The City of Fort Worth is also considering building a second convention center from the ground up, either on the new Panther Island or in the Stockyards area. Once the money is recouped from the City's investment in the new arena at Will Rogers Coliseum, local officials believe that the next major investment will be in this proposed convention center. With the interest in expanding convention facilities, local officials are concerned with the number of hotel rooms available to convention attendants. Hotel supply has already run short, relative to demand from the existing convention center. Hence, the development of an additional convention center would likely be in tandem with a significant increase in hotel supply in Fort Worth. As with Downtown, the City seeks to maintain the historic look of the Fort Worth Stockyards while simultaneously encouraging development efforts in the area. Spearheaded by a partnership of Fort Worth's Hickman family and Majestic Realty Group, a $175-million development plan for the Stockyards will include redevelopment of vacant land and the rehabilitation of existing historical buildings.Dickies ArenaConstruction began on the first phase of the $540-million, 14,000-seat multipurpose Dickies Arena in April 2017. Voters approved $225 million for the $540-million project in 2014. Dickies Arena is expected to open by 2020. The arena will host the first and second rounds of the NCAA Division I Men's Basketball National Championship in 2022, the first NCAA men's basketball tournament held in Fort Worth since 1970.Other DevelopmentsThe Clearfork project, located farther west, along the Chisholm Trail Parkway, is a 270-acre development on the Edwards Ranch property. This mixed-use project includes luxury retail, restaurants, office, and entertainment. The open-air shopping center has been compared to the Metroplex's most upscale retail destinations, such NorthPark Center and the Galleria Dallas. The Chisholm Trail Parkway has promoted commercial and residential development in southwest Fort Worth, and the new roadway quickly links the Hulen Mall area to Downtown Fort Worth.Northern Fort WorthTexas Motor Speedway occupies a large site in the north side of Fort Worth, where other major land uses include the Fort Worth Alliance Airport, the mixed-use community AllianceTexas, a Cabela's retail store, and the Alliance Town Center. A Buc-ee's travel center southwest of Interstate 35W and State Highway 114 opened in May 2016. A Tanger Outlet mall opened in October 2017 near the Texas Motor Speedway; the 350,000-square-foot center is the chain's fourth location in Texas. While a handful of stores are still under construction, brands such as Brooks Brothers, Cole Haan, Steve Madden, Nike, and Michael Kors, for example, are all represented. In February 2017, IKEA announced plans for a 289,000-square-foot store at the southwest corner of Interstate 35W and North Tarrant Parkway.In October 2015, construction began on a $250-million, multi-year project to extend runways at the north end of Fort Worth Alliance Airport. The expansion will allow greater flight capability and enable long-haul flights to take off fully fueled under almost any weather conditions, as well as allow FedEx to offer direct air-cargo service to Europe and Asia. The project should be completed during the first quarter of 2018.Hotel TrendsDowntown Fort Worth The newest full-service property in Downtown Fort Worth is the Omni Convention Center hotel, which opened in January 2009. The most notable recent sale was the Ashton Hotel in July 2014; the 39-unit boutique hotel traded for just over $205,000 per room. Since 2014, estimated occupancy for the aggregate of full-service hotel supply in the CBD has held close to the 70% mark. Similarly, the strength of the local economy has allowed for consistent average rate (ADR) growth over the past three years, registering aggregate gains of roughly 3% per year. The aforementioned redevelopments in the city's core have also spurred interest in hotel development, and developers have aimed to bring more modern brand concepts to Downtown. In October 2017, both the 210-room Hampton Inn & Suites by Hilton and the 114-room Fairfield Inn & Suites by Marriott opened, the latter the result of a massive renovation of the former Park Central Hotel. Moreover, construction recently commenced on a 162-room, ground-up Hilton Garden Inn, while two additional hotel projects are nearly complete: the redevelopment of the Sinclair Building, to house a 164-unit Autograph Collection hotel, and the development of a 180-room Aloft hotel within the existing One City Place building. Plans are also underway for an AC Hotel by Marriott on the parking lot adjacent to the historic Kress Building; since the latest published room count of 218, the developers have announced that an additional floor would be added to the project. Other planned hotel projects in Downtown Fort Worth include a Residence Inn by Marriott, a Canopy by Hilton, and a Hyatt House.The significant influx of supply is likely to offset occupancy growth in Fort Worth over the next few years. The number of convention events and attendees, however, are on track for banner years in 2017 and 2018. The slow and steady return of demand related to the energy sector is a positive sign for both occupancy and average rate, as area hotel managers hope to capture this highly rated source of corporate transient demand. Finally, the upscale and upper-upscale nature of the incoming supply bodes well for ADR growth in the long term given the elevated quality level of guestroom product at these hotels.Hotel Trends in the Stockyards, West 7th, and the Cultural District SubmarketsPrior to 2017, only a few hotels were located within Fort Worth's Stockyards, West 7th, and Cultural District submarkets. Once viewed as periphery markets to Downtown Fort Worth, these areas continue to gain popularity for commercial office space, retail outlets, restaurants, and entertainment venues. The success of the Hilton Garden Inn and Homewood Suites by Hilton in the periphery Near Southside/Medical District, which opened in 2012 and 2013, respectively, has further encouraged developers to target submarkets outside the core of Downtown Fort Worth. The Stockyards are expected to experience a resurgence like that of Downtown following the completion of the redevelopment efforts. However, there are some regulatory design efforts by the City that may constrict some potential hotel developments in the area. The Trinity River Vision, however, has the potential to create an unparalleled amount of hotel development activity in Fort Worth. As one of the more popular destinations for nightlife, West 7th represents an appealing opportunity for developers given its significant retail, restaurant, and residential components. In February 2017, the 124-room Courtyard by Marriott opened in the Stockyards. Other planned hotel projects in the Stockyards include a SpringHill Suites by Marriott and The Armour, a boutique hotel to be located on the site of the former Armour Meat Packing Plant. In early 2017, Heart of America Group announced plans for a full-service boutique hotel, to be called Hotel Renevo, at the northwest corner of Camp Bowie Boulevard and Van Cliburn Way, among this neighborhood's many museums. The Left Bank Mixed-Use Development includes a hotel aspect, likely consisting of a 200-unit boutique hotel. A TownePlace Suites by Marriott is nearing completion at a site west of the Chisholm Trail Parkway/University Drive interchange. Boasting high-end retail and office space, as well as a variety of restaurants and outdoor space, The Clearfork development is rumored to have a boutique lodging product planned. Moreover, an extended-stay property also appears to be in the early stages of development within the Cultural District neighborhood, though no details on branding or room count have been announced.Similar to Downtown, incoming supply in these submarkets is expected to decrease occupancy over the next few years. Unlike Downtown, however, these markets do not have a large, diverse supply of existing hotels. As such, the new supply represents proportionally larger increases for these submarkets, which could be a concern. Construction of the new Dickies Arena, however, and the major events it will host once open, bode well for attracting hotel demand.Fossil Creek and AllianceTexasDespite the 2016 opening of the SpringHill Suites by Marriott, the Fossil Creek market has maintained strong occupancy and ADR levels, registering aggregate RevPAR growth of roughly 6% since 2013. This recent trend has been heavily influenced by increased commercial demand in the Alliance area, which has outpaced current guestroom supply. A new Sleep Inn Hotel & Suites is slated for completion by mid-year 2018, just south of the Holiday Inn Express Hotel & Suites Fort Worth I-35 Western Center. Explosive commercial development along Interstate 35W, particularly focused in the Alliance developments, has drawn the attention of hotel developers. A Home2 Suites by Hilton opened by the Texas Motor Speedway in August 2017, and a Fairfield Inn & Suites by Marriott is under construction. A Courtyard by Marriott at Alliance Town Center, currently one of only two select-service hotels in Alliance, is anticipated to be joined by an Aloft hotel in 2019.HVS expects demand trends in the Fossil Creek area to increase modestly. However, reconstruction efforts along Interstate 35W are anticipated to end by the close of 2017, shutting off a major source of demand for lower-rated hotels in the Fossil Creek market. Although the long-term outlook for the Alliance submarket is positive, supply increases in the short term may prove difficult for area hotel managers, as this submarket's supply is expected to more than double over the next few years. The area's master-planned community, however, is home to some of the strongest commercial demand generators in the greater Fort Worth area. As such, the incoming hotels are anticipated to capitalize on existing demand that had previously been captured by neighboring submarkets.Wrap-UpBetween multimillion-dollar, mixed-use developments, either in the works or up-and-running, and major upcoming events like the NCAA basketball tournament, which promises to draw tens of thousands, the outlook for Fort Worth's hotel industry is strong from a demand perspective. Developments like Panther Island are literally moving the earth, and AllianceTexas continues to extend its influence on the economy and hotel industry in the northern parts of the city. This demand generation makes the expansion of proposed hotels into some of Fort Worth's outlying submarkets opportune. While occupancy may decline somewhat over the next several years as the new hotels are absorbed, the strength of Fort Worth's fundamental economic drivers and hotel generators should keep the market moving in a positive direction over the long term.

HVS Market Pulse: Center City Philadelphia | By Kim Lindell & Scott Killheffer

HVS ·19 December 2017
Philadelphia lays claim to many firsts in the U.S., including the first state capital, public library, hospital, stock exchange, and even the nation's first zoo. Today, revitalization efforts continue to fuel the city's engine of innovation, building on a base of airport, tourism, education, and convention demand drivers. Strong group demand in recent years, combined with rising levels of transient corporate and leisure travel, has boosted occupancy and average daily rate (ADR), especially within Philadelphia's Center City submarket.Major Economic DriversCenter City Philadelphia, which includes the Central Business District and central neighborhoods of Downtown Philadelphia, has grown into the second-most-populated downtown area in the United States, after Midtown Manhattan in New York City. Many colleges and universities make Philadelphia a top international-study destination, and the area continues to evolve as the educational and economic hub of the Delaware Valley. Higher-education institutions located within the city include the University of Pennsylvania, Temple University, Drexel University, Philadelphia University of the Sciences, and Philadelphia College of Osteopathic Medicine. The healthcare sector also contributes to the economic vitality of Center City, further supporting hotel demand in the area. Jefferson Health System's flagship hospital, Thomas Jefferson University Hospital, and Hahnemann University Hospital, which is affiliated with Drexel University College of Medicine and St. Christopher's Hospital for Children, are located in Center City. Additionally, Independence Blue Cross is the region's largest health insurer.The Pennsylvania Convention Center (PCC) plays a vital role in the area's economy; its success is supported by the city's convenient location with respect to both New York and Washington, D.C., as well as its popular facility layout and capacity. In July 2016, the convention center hosted a number of caucus meetings related to the 2016 Democratic National Convention, which attracted approximately 60,000 participants. According to officials at the PCC, activity at the convention center is expected to be down in 2017 and 2018; however, numbers are anticipated to increase in the ensuing years.Future Business CaptureThe aforementioned demand generators in the education, healthcare, and convention sectors have the potential to attract additional price-sensitive guests seeking midscale hotel accommodations in Center City.Existing Hotel SupplyThe Center City submarket currently includes approximately 11,000 hotel rooms, comprising primarily upscale and upper-upscale, full-service hotels; moreover, the submarket's existing luxury hotels include the Ritz-Carlton, Rittenhouse Hotel, and Hotel Monaco. However, there is a notable void of limited-service hotels within the Center City submarket, and no limited-service properties are in the anticipated pipeline of new supply.Proposed SupplySupply growth in Center City Philadelphia is positioned to exceed 18% over the next two years. The most significant growth is occurring within the luxury chain scale, which represents 32% of the proposed new supply, with upscale hotel development falling just behind it. The development of a new Four Seasons hotel is underway atop the under-construction, 1.28-million-square-foot Comcast Innovation & Technology Center; the 60-story, 1,121-foot tower will neighbor Comcast Center, Comcast Corporation's global headquarters, and become a dedicated home for the company's growing workforce of technologists, engineers, and software architects. Additionally, the Courtyard by Marriott is currently undergoing a $23-million renovation in its rebranding to an Autograph Collection by Marriott affiliate, a higher-rated hotel product. The construction and renovations of higher-tiered hotels in Center City come on the heels of some record sales in the submarket, including Hersha Hospitality Trust's purchase of the Westin Philadelphia for over $495,000 per key in June 2017. Furthermore, the dual-branded W Hotel and Element, now under construction, will represent the largest hotel property in Downtown Philadelphia.Even with the expected introduction of nine hotels in the downtown area over the next two years, there are still areas of opportunity for hotel development in this rapidly growing city.Potential Opportunities for Midscale HotelsThree of the nine proposed hotels in Philadelphia--one third--are luxury properties, a reflection of strong demand generation from the city's corporations, among other high-end generators. At the same time, the city's relatively low number of midscale to upper-midscale, limited-service supply is expected to increase by just one hotel. Hence, even after the completion of the proposed new supply in Philadelphia's Center City, limited-service hotels will be the most underserved hotel type, currently representing just 7% of the total guestroom supply, and anticipated to move up less than 1% in the next two years. Additionally, midscale and upper-midscale hotels will only represent 3.3% and 8.9% of guestrooms, respectively, with the completion of the new supply entering the market. Given the availability of a well-located site, coupled with an appropriately priced construction cost, the Center City Philadelphia submarket represents a favorable option for the development of additional properties in this hotel class.ConclusionGrowth and expansion are undoubtedly underway in Philadelphia's Center City, with ongoing projects such as the construction of the Comcast Innovation & Technology Center and a ramping up of the Philadelphia Convention Center creating jobs and hotel demand. Furthermore, city officials have been actively working on attracting large events, such as the Papal visit in 2015, the Democratic National Convention in 2016, and, most recently, the NFL draft, which should continue to bode well for hotel demand growth in the near term. The significant increases in proposed supply over the next two years are anticipated to be easily absorbed by unaccommodated demand in the submarket. Furthermore, a larger, more diverse hotel base will allow for substantial citywide conventions to be accommodated in Philadelphia. While the influx of new supply may seem like a dissuasion for potential hoteliers, midscale to upper-midscale, limited-service hotel properties do have potential to gain a foothold in the Center City submarket over the next several years.

Market Pulse: Anaheim/Garden Grove | By Li Chen

HVS ·19 December 2017
Major Economic Contributors & DevelopmentsDisneyland ResortDisneyland is undoubtedly a prominent demand generator for hotels in Orange County, attracting over 15 million leisure visitors per year. Disneyland's 60th anniversary celebration, which began in May 2015 and concluded in September 2016, induced a significant amount of demand, making 2015 a banner year for the market. Moreover, according to Visit Anaheim, 12,083,000 visitors traveled to Anaheim in the year-to-date period through June 2017, an increase of 10.6% over the same period in 2016.The Star Wars: Galaxy's Edge will open with two anchor attractions: one that gives guests the chance to pilot the Millennium Falcon on a customized secret mission, and another that puts guests right in the middle of a battle between the Frist Order and Resistance. Construction on the 14-acre attraction, which began in April 2016, is slated for completion in early 2019.Anaheim Convention CenterThe Anaheim Convention Center (ACC), which opened 50 years ago, is the largest convention center on the west coast, spanning a total of 1.8 million square feet. Completed on September 26, 2017, the convention center's seventh expansion created 200,000 square feet of additional space.ACC representatives report a strong booking pace associated with the recent expansion and the addition of new hotel supply in the market, which will reportedly allow the convention center to target higher-rated medical and high-tech groups.LT Platinum CenterThe 14.5-acre LT Platinum Center, located near the Honda Center and Angel Stadium, is a mixed-use development project that will include a 200-unit hotel, an urban food market, an entertainment venue, and a town plaza, as well as 400 residential units, upon completion in 2022.Orange County's First Shipping-Container Food Hall SteelCraft Garden Grove, to be located on a 1.8-acre lot behind City Hall in Garden Grove, will feature 20 artisanal retailers and restaurants selling goods from cargo containers measuring as long as 40 feet in length. The project is part of a major effort by city officials to revitalize Downtown Garden Grove with destination shops and dining and is scheduled to open in 2018.Lodging Market OverviewThis Anaheim/Garden Grove market spans nearly 160 open and operating lodging facilities. Lodging revenues and transient occupancy taxes have increased year-over-year since 2010/11.New SupplyFollowing the success of the addition of "Cars Land" at Disney's California Adventure, the recent expansion of convention center, and in anticipation of the opening of " Star Wars: Galaxy's Edge," several hotel projects throughout Anaheim and Garden Grove have either recently opened or are in various stages of development.Recent Transactions Strong hotel performance and the potential of this market have drawn investors to seek hotels located here. The following table sets forth hotel transactions in the Anaheim/Garden Grove market since 2015.ConclusionThe Anaheim/Garden Grove market is primarily driven by the tourism and leisure industry, with visitation levels continuing to increase. The recent expansion of the convention center is expected to attract new events and visitors, which should positively affect the local economy. Given the area's desirable weather, many tourist attractions (including Disneyland), and the presence of three international airports within 70 miles, the market outlook is positive.

Market Pulse: Detroit, MI | By Brandon Leversee

HVS ·19 December 2017
The Detroit metropolitan area has experienced significant economic growth in recent years, fueled by a strengthening auto industry as well as the continued diversification of the local employment landscape. The hotel sector is benefitting from existing employers expanding operations locally and new entrants to the market. The Big Three automakers continue to invest in the region, while companies like e-commerce giant Inc. are building large warehouse facilities. Revenue gains for hotels were accordingly robust during the 2010-2016 period. Revenue per available room (RevPAR) during that stretch grew nearly 71 percent, rising from a low of roughly $38 in 2009 at the depths of the Great Recession to over $64 by year-end 2016. Both the average daily rate (ADR) and occupancy have posted consistent gains since 2010. Moreover, hoteliers sold a record number of room nights in the city of Detroit in 2016, according to STR. Occupancy levels approached 70 percent by the end of 2016, with ADRs of nearly $150 in the central business district (CBD). The data for 2017 show a relatively stable occupancy level with robust gains in ADR. The record performance achieved in this expansionary period has spurred tremendous hotel development in the downtown core and suburbs.CBD is Hotbed of ActivityIncreased room demand within Detroit's CBD has outpaced additions to supply, resulting in historically high occupancy levels and even stronger ADR growth. Year-to-date through September, the metro Detroit hotel market posted a 0.4 percent increase in the occupancy rate and a 5.6 percent rise in the ADR. This has resulted in an overall 6 percent increase in RevPAR when compared to the same period in 2016. Multiple developments are underway throughout the CBD, helping drive this growth. Little Caesars Arena, a new multipurpose arena for the Detroit Red Wings and Pistons that opened this fall, anchors the District Detroit, a 35-acre, $1.2 billion entertainment district. The opening of the arena has positively affected the leisure segment in the CBD. There is movement afoot to make the downtown area a technology hub. In February, software maker Microsoft announced plans to move its Michigan Microsoft Technology Center from Southfield, Michigan, to downtown Detroit in early 2018. There are about 40 such technology centers around the world. It's a place where Microsoft clients come to work on projects with the company's technicians. In October, Google announced plans to relocate to a new office building in the District Detroit. Healthy growth within the commercial segment is expected in the CBD due to the ongoing revitalization efforts that are transforming this market into a premier relocation destination for businesses and corporations. A number of hotel projects are in various stages of the development pipeline or have been recently completed. In May 2017, Aparium Hotel Group opened The Detroit Foundation Hotel, a 100-room boutique property. Furthermore, Bedrock Real Estate Development is currently constructing the boutique, 130-room Shinola Hotel, which is slated to open in fall 2018. The Siren Hotel, a redevelopment of the Wurlitzer Building by Brooklyn, New York-based development firm ASH NYC, is another boutique property under construction in the CBD. The boutique hotels are expected to help drive up ADRs. Other notable developments include an adaptive reuse project undertaken by Starwood Hotels & Resorts Worldwide that will convert the Metropolitan Building in downtown Detroit into a 110-room Element Detroit hotel, which is slated for completion by July 2018. Meanwhile, West Elm is set to open a 120-room hotel in Midtown Detroit in 2018, marking the retailer's first hotel development. Also, a planned 120-room Hampton Inn by Hilton Midtown at Woodward Avenue and Alexandrine Street is slated to open in the first quarter of 2021. The anticipated entrance of several smaller boutique properties, plus the renovations of existing hotels such as the planned $20 million refurbishment of the Westin, should support continued ADR growth with minimal impact on hotel occupancy levels.Strong Demand in SuburbsThe growth in hotel demand across the suburbs has outpaced new supply in recent years, resulting in a similar pattern in occupancy and ADR. The suburban submarkets are more reliant on the commercial segment than the CBD. The peak demand is Monday through Thursday, with a slight decline during the weekend. The strengthening auto industry has benefitted many other automotive suppliers. Meanwhile, manufacturers have expanded their operations. As a result, a rush of hotel development has begun throughout Detroit's suburbs, including the Farmington Hills, Novi, Livonia and Plymouth areas. Group 10 Management Co., based in Southfield, has multiple developments underway. A 106-room Courtyard by Marriott in Farmington Hills opened in early 2017. Adjacent to that property is a 140-room Holiday Inn scheduled to open in early 2018. Rounding out Group 10 Management's development pipeline is a 110-room Hampton Inn & Suites by Hilton in Livonia. Occupancy levels are expected to decrease slightly in the coming months as the new supply is absorbed. ADR growth is also forecast to slow in the near term, as market participants aim to maintain occupancy rates. Other suburbs are likely to experience similar trends.This article first appeared in the December 2017 issue of Heartland Real Estate Business magazine.

Sustainable Extravagance: Water-Wise Hospitality

HVS ·14 December 2017
Currently the biggest socio-economic problem facing the Western Cape region is severe drought and related water shortages. The drought reached crisis levels in early October 2017 when the City of Cape Town estimated it only had 5-months of water left. It has been ongoing since 2015 when water storage in the city's dam levels began to drop, declining from 71.9% in 2014 to 50.1% in 2015. Declared the city's worst drought in a century, some dams and reserves have less than 10% of their usable capacity remaining. The biggest cause of water scarcity is the El Nino weather pattern with increased water demand due to population growth exacerbating the problem. Since 1995, Cape Town's population has grown from 2.4 million residents to an estimated 4.3 million by 2018, representing a near 80% population increase in 23 years. Dam water storage in the same period only increased by 15%.In response to the ongoing water shortage, the Hotel Industry in the region has had to embark on various initiatives to mitigate the challenges water scarcity brings to a water intensive enterprise. Studies show individuals can use two to three times the amount of water in hotels than they would use at home.The current environment has called for innovative measures in finding the delicate balance between complying with water restrictions on one side and keeping or improving quality service and the occupancy rate on the other. The hotel industry has remained agile in dealing with this trade-off, implementing training and awareness programmes across the value chain and Cape Town continues to welcome international and local travelers despite water crises.Through primary research HVS sought to gather information on how the industry struck this fine balance. By and large, the anecdotal findings suggest that hotels in the region have embraced the challenges of water scarcity.Discussions and FindingsA survey was sent out to over 100 hotels in Cape Town and the Western Cape. From hotels in the CBD where there is no possibility of acquiring a borehole to establishments in the Winelands requiring an increased amount of irrigation for vineyards and others located along the Garden Route facing ecological challenges- many different water restriction scenarios were probed. Nonetheless, all the respondents stated they comply with the location applicable water restrictions and did not have a municipal water consumption increase month-on-month, even though they are reaching peak occupancy levels at this time of year.Use of marginal resourcesTwo respondent hotels were already completely off the grid and another hotel is planning to be fully self-sustainable in the very near future. Even one of the big hotel chains in South Africa has announced that four of their establishments are being considered for off the grid, stating there are discussions currently happening with "various city partners around desalination plants and alternative water augmentation".There is one lucky city hotel which has a Table Mountain spring running through their property which has been used over 100 years for their laundry, to top up the pool and soon to flush all their toilets. 29% of respondents are not using marginal resources at the moment, but a further 24% have applied to drill a borehole or are actively reviewing the availability of ground water. Another 18% are mainly investigating rainwater harvesting systems.The biggest problem with switching to ground water, as one respondent succinctly put it, is "[the] legal process to register and legally [...] use this source of water takes several months, time that we don't have.".Water metering and costThrough water metering and frequent checks, possible leaks and high consumption areas can be identified and remedied. 76% of all respondents have been able to reduce their municipal water consumption. The One & Only has managed to cut their water consumption by 25% and Spier by over 50% in the last six months. Even Hotel Verde, known to be an environmentally conscious establishment (previously using 65% less water than regular hotels), has managed to decrease their meagre consumption by a further 27.8%.Two hotels in the city centre are installing water meters and dashboards to closely monitor individual consumption against certain targets. Even though consumption has decreased, 24% of the respondents experienced an increase in cost of water to the business, some by up to 20%. The problem is "[w]e are using far less water [but] the price per KL has gone up substantially [...] the net result is not cost saving to the business.". 18% of respondents, however, did see a decrease in water expense to the business.New storage facilities24% of all respondents have new storage facilities, including 10,000l, portable, static and rainwater tanks and a further 12% are planning on purchasing new/improved storage tanks soon.Tanks can overflow if the electronic warning systems fail but this is far outweighed by the benefits harvesting grey water.New devicesWhile over half of the respondents had already installed water saving devices like low flow shower heads in guest rooms, flow restrictors, aerators or sensor taps on all taps in guest and public bathrooms, kitchen and bar areas and waterless urinals. 6% are currently installing some of these devices and 12% are planning to in the near future. Bearing in mind the rising cost of water per kiloliter, perhaps they will have to go further in future. One respondent has purchased an atmospheric water generator that collects water vapor in the air, condenses and filters it to produce potable water. This water is so pure it is then sold as bottled water in the restaurant. Ellerman House in Cape Town even installed a device in every guest shower which counts down and warns guests when 2 minutes are up. Greywater systems47% of the establishments which responded to our survey already have grey water systems in place. One of them is a recovery system that utilises the laundry water, for irrigating gardens. Another establishment installed two grey water systems: one that treats and stores water from the kitchen and a number of rooms and is being used to flush public toilets in the banquet area and water the gardens. The second system recycles swimming pool backwash water for reuse in the pool. Some hotels in the Cape Winelands managed to recycle almost 100% of their grey water to irrigate vineyards and gardens. Budgetary constraintsThe installation of new systems, the purchase of new devices or drilling a borehole are large expenses for businesses and were previously not included in the budget. Two separate establishments stated that they incurred expenses of R250,000 or more over the last six months, which have not shown a reciprocal saving in reduced costs. This substantial investment is, however, sure to prove its worth in a lasting period of drought.Changed proceduresAll the respondents have changed their operational procedures in different ways. In the bar and restaurant area defrosted ice from machines, buckets and fridges is being collected and reused to water the gardens, pot plants or vegetable patch. Sinks to rinse and wash are only filled half way and rinsing water from fruits and vegetables and dishwashing water is being kept and re-used. All hotels who use disposable napkins cited reduced laundry as a primary reason. One group of hotels stated that they are even trying to eliminate the use of table linen whenever possible. And one 'sensible' establishment is suggesting saving water by drinking their wine. 88% of our respondents have made changes in the housekeeping department: including purchasing water saving washing machines, only washing with full loads and encouraging guests to re-use their towels and linen. Some establishments have outsourced their laundry or changed over to a more water-wise supplier. The majority of all respondents have removed their bath plugs or added a tag onto the plug, encouraging guests to take a shower instead. Ellerman House in Cape Town has made a point of only changing linen and towels every 4th day. 94% of Respondents have made alterations for their pools: covering them to counter evaporation, not refilling them automatically or closing them entirely. Spier has closed 6 of their 7 pools- the remaining one operates from harvested water. The only problem arises when guests would like to use the pools during hot weather however most guests show understanding. Another establishment says that their steam room is closed to avoid water wastage. Some other interesting practices include planting water-wise vegetation, closing off or reducing pressure on less-used taps inside and outside the building, low-drip irrigation systems under the lawn to reduce evaporation and making use of an environmentally friendly disinfectant called Eco-Lyte that itself is 99% water to reduce dishwashing cycles. For most hotels these new practices and procedures are being adopted well by their staff, and the water crisis is being mentioned at every staff meeting.Insurance and economic policyMany respondents have insurance or an economic policy for business continuation in place but the question remains: will the businesses be covered under those policies if the drought can be viewed as a natural disaster. Awareness Campaign100% of Respondents have water-saving awareness campaigns running for guests and staff via several channels including welcome letters, tip cards, posters, TV displays and during check-in.However, campaigns can only do so much when they run counter to expectations: "It can be a challenge to [get] international guests to cut back on water use as they view staying at a hotel as a luxury experience and want all of the trimmings." said one Respondent.challenge to [get] international guests to cut back on water use as they view staying at a hotel as a luxury experience and want all of the trimmings." said one Respondent.Going forwardInnovation is clearly going to be the deciding factor. How can we give guests more while using less?Here are some sterling recommendations from Respondents: "Invest in low-flow fittings and other technology now to reap financial rewards in the long run." - Hotel Verde "[...] [S]omething that we can suggest is installing [more] water meters. Not only will this give insight into how much you are using but importantly inform you when you have a leak." - Mont Rochelle Hotel & Vineyard "Analyse your operational consumption, focus on habits as this is easy to accomplish, gather data and implement water management project to reduce the high consumption areas. Recycle as much water as you can for alternative uses and communicate continuously without fail." - Spier "Start thinking innovatively to come-up with new, fresh ideas to prevent this crisis from extending any further." 94% of the survey respondents stated that the period of drought has permanently changed their business practices and personal habits. It's these personal habits - small, daily measures by staff and guests - that will make the biggest difference the longer this crisis goes on, but to solve it we'll need world-class innovation.Wesgro is proud to announce that Cape Town and Western Cape Convention Bureau has secured the International Water Association's (IWA) 2018 Water Loss Conference. Speaking on the subject, Western Cape Opportunities Minister Alan Winde said, "The water crisis presents an opportunity for innovative solutions, and I am looking forward to the recommendations which will emerge from the IWA's 2018 Water Loss Conference.". Implementation of those recommendations won't be left to individual hotels alone: "FEDHASA Cape supports the Western Cape Province and the City of Cape Town's Water Saving initiative, they signed a pledge which will be displayed in their respective properties for all to see and be reminded that Cape Town hotels are doing what's necessary to conserve water. In addition, FEDHASA Cape will also establish a 'Water Task Team' to assist members to, among other things, develop a water wise policy and implementation plan for their businesses, as well as assist with the capturing and monitoring process."It's time for everyone to pull in the same direction: with the drought heading into its second year, there is no excuse to be wasteful. Learn where you can reduce, save what you can recycle and continue forming habits that respect every drop.

HVS Market Pulse: Lubbock, Texas | By Hunter Dietz

HVS · 7 December 2017
Economic GrowthTexas TechTexas Tech University continues to be one of the most prominent economic drivers in Lubbock. The university's new Maddox Engineering Research Center opened in 2016, and the Honors Residence Hall opened this year. These facilities follow the expansion at Jones AT&T Stadium, which added more than 6,000 seats to the north end-zone prior to the 2016 season. As of late September 2017, a $48-million Sports Performance Center was still under construction south of Jones AT&T Stadium, but was already in use by the school's athletes. More recently, the Health Sciences Center (HSC) broke ground on the single-largest construction project undertaken at Texas Tech since its inception. The $85.9-million project will comprise three initiatives: a northern expansion with two new buildings, a western expansion of the existing Health Sciences Center facilities, and a new boulevard entrance to the entire HSC campus. The University, which comprises eleven colleges, currently has a student population of roughly 37,000, but expects to push that to 40,000 students by the 2020 enrollment year.RetailThe City of Lubbock is a primary shopping destination for West Texas and Eastern New Mexico, and also serves the needs of the growing Texas Tech student body during the school year. Citywide retail growth continues, especially in the West End District of Lubbock. The West End Shopping Center, which opened its first stores in November 2015, has recently welcomed new ones; as of October 2017, a Costco Wholesale, Cabela's, Marshalls HomeGoods, Nike Factory Store, and Gap had all opened retail locations. Dining options at the West End expanded with the opening of P.F. Chang's in June 2017; other restaurants onsite include Lubbock's first In-N-Out and Panera Bread.Health Care Covenant Health System's $450-million project, which began last year, is expected to span five to seven years. The project includes a $28-million expansion and renovation of the Joe Arrington Cancer Center, a new five-story Women's Health Center, a handful of new clinics, and a new $40-million hospital in Plainview, Texas, a town roughly 40 miles north of Lubbock. Similar to retail, Lubbock's healthcare offerings serve the growing student body at Texas Tech, as well as residents across West Texas and parts of Eastern New Mexico.Major Downtown DevelopmentsDowntown Lubbock, which encompasses the Central Business District, the Depot District, and the Arts District, serves as greater Lubbock's main economic and government hub. The Downtown Redevelopment Commission issued its Downtown Revitalization Plan in 2005, proposing a three-phase redevelopment of Downtown Lubbock. Phase I includes construction of the Buddy Holly Hall of Performing Arts & Sciences, which commenced this past April. Phase II incorporates the renovation of the Lubbock Civic Center; a $10-million renovation of the interior of the Civic Center was completed in early 2017. The final phase involves the development of a full-service, nationally branded hotel on the site of the Lubbock Memorial Civic Center. The public backing (and funding) of much of the Downtown Revitalization Plan has also spurred interest from private developers. In early 2017, the old Lubbock County Jail was acquired by a private developer who plans to turn the building into a combination of office space and residential units, according to local officials. This follows the redevelopment of the old Pioneer Hotel. The building, which was constructed in 1925 and purchased in 2005 by the McDougal Companies, reopened with luxury living, office, and retail components in 2012.Overton DistrictThe revitalization of Downtown Lubbock comes on the heels of the completion of a similar process in the Overton District, which lies just to its west. At the time, the Overton redevelopment was the largest privately funded, master-planned redevelopment undertaking in the nation, led by the local McDougal Companies. What had previously been an undesirable area is now popular with students, residents, and visitors alike, thanks to an abundance of dining, retail, and lodging options. The successful revitalization of the Overton District sets the precedent for the forthcoming redevelopment projects in Downtown Lubbock.Civic CenterThe Lubbock Memorial Civic Center, which was built to commemorate victims of a 1970 tornado at that site, primarily hosts local events and attracts only limited demand from outside the greater Lubbock area. To meet the needs of larger conventions, city officials have been researching the potential for a full-service hotel adjacent to the facility. This hotel, which represents the final phase of the Downtown Revitalization Plan, is still in the early stages of development and is being reviewed by the City. The hotel's development would be a public-private partnership, with revenues reinvested into the further revitalization of Downtown. Moreover, several officials have expressed interest in expanding the Lubbock Memorial Civic Center into a modern convention center, with the goal to attract larger events and groups to Lubbock year-round; however, no concrete plans have yet to materialize.Buddy Holly Hall of Performing Arts & SciencesThe new Buddy Holly Hall of Performing Arts & Sciences is currently under construction to the northwest of the Lubbock Memorial Civic Center; the state-of-the-art performing arts center will include a 450-seat community theatre, a 2,200-seat main performance hall, a 6,000-square-foot multipurpose room, a ballet academy, and a full-service bistro upon completion, which is scheduled for late 2019 or early 2020. The new hall will be the preeminent entertainment venue in West Texas, expected to host top touring musicians and entertainers.Hotel DevelopmentSupply growth in Lubbock across all service levels started in late 2013 and peaked in 2016. Local hotel developers have led the trend of growing supply. However, even in its initial stages, the revitalization of Downtown began to attract interest from regional developers and operators.DowntownThe recent renovation of the Lubbock Memorial Civic Center and the start of construction for the Buddy Holly Hall for Performing Arts & Sciences have generated new interest in hotel development Downtown. This follows the opening of several hotels in Downtown Lubbock in recent years, including the Courtyard by Marriott in 2014.Beyond DowntownThe area surrounding Texas Tech University continues to be attractive to area developers. The Hyatt Place in the Overton District, which opened in February 2016, is the most recent hotel to be developed around the university, with three others to open in the next few years. South of Downtown Lubbock, several properties are in the pipeline along either Loop 289 or Interstate 27/U.S. Highway 87. The growth of the West End Shopping Center has made the southwest area of the city a more prominent retail destination, as well.A Time of TransitionWhen the Overton Hotel & Conference Center opened, it marked the first new-build, full-service hotel in Lubbock since 1983, as both the Embassy Suites and the MCM Elegante were conversions of existing properties. The success of the Overton has piqued the interest of local and regional developers alike. As shown in the preceding tables, three new-build, full-service properties are in the pipeline. Furthermore, a full-service property, which had previously operated as a Radisson before being left vacant, is in the process of being converted to a DoubleTree by Hilton. This influx of new-build, nationally branded, full-service hotel properties should increase the overall, market-wide average daily rate (ADR) in Lubbock.Prior to the recent surge in hotel supply, which occurred between 2013 and 2016, market-wide ADR had hovered between $100 and $110; however, market-wide ADR has remained between $120 and $125 since 2014. According to the most recent available data, ADR is on track to stay in that higher range through 2017.New Supply AbsorptionThe sheer percentage increase in new hotel supply raises the question of how many more rooms the Lubbock lodging market is prepared to absorb. Here, it's important to note that nearly all product tiers and types are represented in the pipeline of new hotel supply. In addition, each major brand has several products in the pipeline represented throughout the city, so the benefit of any individual brand affiliation, both existing and proposed, could be diluted over the next few years. Finally, the incoming supply follows several years of similar increases. These conditions point to an extended period of absorption, even given the expected increases in demand generation from revitalization and other projects throughout the city.The demand generated by ongoing commercial and healthcare growth throughout Lubbock should help offset the influx of hotel supply. Furthermore, revitalization efforts in the downtown core, specifically the completion of the Buddy Holly Hall of Performing Arts & Sciences and recent improvements to the Lubbock Memorial Civic Center, will produce demand that had not previously existed in the market.ConclusionThere's no doubt that Lubbock's hotel market is entering a new era. Commercial and governmental efforts have spurred growth across multiple economic sectors, and this growth, in turn, has led to a boom in the development of new hotels. The absorption of the new supply should prove manageable--and ultimately beneficial to metrics such as average rate--in the market. Hence, Lubbock's hotel market looks to not only stand on solid ground, but be poised for significant expansion over the next several years.
Article by Court Williams

Differentiating Lifestyle Hotel Brands in an Increasingly Competitive Category

HVS · 7 December 2017
Millennials Making WavesStatistics from Mintel show 83% of millennials took a leisure trip during 2016, compared with only 75% of all U.S. consumers[1]. They are also spending more on vacations than in previous years, with almost 25% expressing their interest in using "economy" services such as shared accommodations. This makes millennials a major target audience, who prefer to travel affordably without the extra cost of unnecessary frills.The primary factors driving this change in demand are:Highly educated and more experienced travelers, who avoid generic brand experiences and "sameness."The proliferation of digital content, particularly social media, which promotes the value of unique experiences delivered by authentic, hyper-local and destination-specific travel.Price is a huge purchasing factor, which leads travelers to seek out cost efficiencies wherever possible.With the disruption caused by the sharing economy (e.g. AirBnB) and the ongoing popularity of immersive experiences--evident in the excitement surrounding virtual reality and 3D films--hotel brands have no choice but to look for new ways to enthrall the traveler.A Shift in PhilosophyThe opportunity to have hyper-local experiences specific to a destination is a significant factor in the popularity of accommodation options. Guests want to interact with the local community and experience a sense of belonging.Many lifestyle hotel brands have realized this and incorporate it into their offerings, with restaurants, bars and even lobbies targeting local residents as much as travelers. In the world we live in, however, these attractions need tempering with assurances of relative personal safety.Experiences backed by the reputation of an established hotel brand therefore offer a higher level of confidence for travelers, which is one reason the rise of shared accommodations has not really affected the hotel industry.The New RealitySo, what will be next and what is the future for the lifestyle hotel concept? I believe it's a mix of personalization and simplicity, with a healthy dose of technology.Travelers no longer want the most popular option, they want the one that's right for them. Oftentimes, this means clearing out the clutter and giving guests a downsized experience that enables them to simply lie on a beach for 10 days. Too many entertainment options can make a trip "touristy" and impersonal, so scaling back on the commercial activities (and their costs) could be a winning formula.Building relationships with local (vetted) tour operators who are confidently recommended may be a better option than organized excursions or activities. The ability to browse or search for activities on a mobile device using an app over free WIFI is far more effective with this target market than brochures on the front desk.The Dawn of DataThe collection and mining of data, of course, is going to be the pivot on which the market turns. With most hotels now using electronic systems for almost everything, gathering information on consumer preferences has never been easier. The hotel industry has been slow to embrace big data, however, and that needs to change--fast! Artificial intelligence will enable brands to personalize their offering more fully, often without the need for human intervention. Lifestyle's Long-Term ProspectsGeneral consensus in the travel industry tells us that whatever the new trend towards authentic experiences may end up being called, it is here to stay. Building connections with the community is as important as having an interactive, social lobby area. Hotels are no longer simply a gateway to a destination, or merely a place for travelers to lay their heads. Navigating between achieving simplicity and offering a personalized, immersive experience will be challenging for brands, but with lifestyle hotels already comfortable with "being different" from traditional brands, this segment is perfectly poised to become ground zero for future travel. [1] Source: Lightspeed GMI/Mintel Marketing to Millennials - U.S., May 2016

Market Pulse: Tampa, FL | By Mallory B. Hall & Jeffrey D. Pennington

HVS · 6 December 2017
Area DevelopmentsThe first phase of a multibillion-dollar development in Downtown Tampa officially broke ground in September 2017 with the Morsani College of Medicine and Heart Institute, an urban medical school. The project will include the redevelopment of several vacant lots, as well as the construction of a 500-room convention hotel (including 75,000 square feet of banquet space) near the Amalie Arena. Additional components of this development include corporate headquarters, condominiums and apartments, Class-A office space, and a boutique hotel, as well as shops and restaurants. Additionally, the reconfiguration of a portion of Channelside Bay Plaza, which began in October 2017, aims to open the pedestrian walkways between the plaza and neighboring attractions, such as the Florida Aquarium and Amalie Arena; this portion of the master-planned development will be known as Water Street. Furthermore, changes to the roadways and sidewalks, which are already underway, will promote a more walkable Central Business District. The initial phase of the project, led by Strategic Property Partners, is expected to deliver to market in 2020, with subsequent phases delivering through 2026. Hillsborough County officials are in talks with the Tampa Bay Rays to relocate its home field from across the bay in St. Petersburg to Tampa. The County Commissioner announced in October 2017 that they have reached an agreement with land owners in the Ybor City District to gain control of approximately 14 acres of land on which the ballpark would be located. Although Tampa is a strong contender to win the site selection for the Major League Baseball team, other locations in Pinellas County, including a redevelopment of the Tropicana Field site, are also under consideration. An agreement made in 2016 between the City of St. Petersburg and the Tampa Bay Rays allows the team three years to shop around for a new home field. That deal reportedly runs out in January 2019, although the team is expected to make a decision favoring the Ybor City site by the end of 2018. In October 2016, Johnson & Johnson opened a new Global Service Center in North Tampa. The 88,500-square-foot facility opened with nearly 250 employees; it is anticipated to bring another 300 employees to the market by 2020. Tampa International Airport is undergoing a bevy of expansion projects and upgrades, geared toward accommodating increased travel through the region well into the future. A $2.5-billion master plan was approved in April 2013 for the airport. The first phase of this plan, which will include the construction of a $417-million, 2.6-million-square-foot consolidated rental-car facility; a 1.4-mile automated people mover; and an expansion of the Main Terminal is scheduled for completion in 2018. A Hard Rock Cafe and a P.F. Chang's Bistro were added to the main terminal (pre-security) in August 2016. An additional 63 concessions will be open by December 2017, 32 of which will represent food-and-beverage establishments, and 31 of which will feature retail operations. Additional changes will include the expansion of the current terminals to accommodate an increased number of international travelers; the development of additional commercial, retail, restaurant, and hotel space; and the construction of a new air-traffic-control tower. In 2016, passenger traffic almost surpassed 19 million, a level not reached since 2007, and data for 2017 reflect continued growth in passenger traffic.Major IndustriesThe greater Tampa area benefits from diverse economic drivers, including finance, government/military, and tourism and leisure, and area universities support the market by providing an educated workforce. This market has benefited from the distribution of stimulus funds, which have paved the way for construction projects such as the $421-million Selmon Expressway/Interstate 4 connector project and improvements at the airport. Completed in 2014, the connector features dedicated exit/entry lanes to the Port of Tampa, which officials report is critical to the expansion and competitiveness of the Port's container trade and cruise ship businesses. One of the largest employers for the market is the MacDill Air Force Base, home of the 6th Air Mobility Wing and 53 mission partners, including United States Central Command and United States Special Operations Command. MacDill's diverse missions and global responsibilities place it on the cutting edge of the Air Force's transformation. According to base officials, MacDill has an estimated annual economic impact of $5 billion on the greater Tampa area and employs roughly 18,000 personnel. Tampa draws over 20 million tourists annually, the majority of which are domestic visitors, resulting in an annual economic impact of nearly $6 billion. Major attractions in the area include Amalie Arena, Raymond James Stadium, and the numerous beaches in St. Petersburg and Clearwater, as well as the Busch Gardens and Adventure Island theme parks. Moreover, the Tampa Bay area is home to franchises in the MLB, NHL, and NFL. In October 2017, the NFL gave the final approval for Tampa to host Super Bowl LV in 2021, after the originally selected venue in Los Angeles reported delays to the opening of its venue.Meetings and ConventionsThe primary meeting and event venue serving the Tampa-St. Petersburg-Clearwater area is the Tampa Convention Center, located in Downtown Tampa. The Center's statistics from 2008 through 2016 are illustrated below. In 2012 (a peak year for hotel room nights generated by the Center), Tampa hosted the Republican National Convention, accounting for a large number of attendees that year. According to officials at Visit Tampa Bay, 2016 attendance at the Tampa Convention Center was bolstered by several large-scale events, including the National Baptist Convention's National Baptist Congress, International Shriners 2016 Imperial Session, AEAONMS Prince Hall Shriners 2016 Imperial Session, Varsity Spirit NCA Dance 2016 Summit, and NCAA Frozen Four Championship. Most recently, Tampa hosted the College Football National Championship in January 2017.Existing Hotel SupplyOf the approximately 17,700 hotel rooms in Tampa proper, roughly 92% belong to branded properties, with the remaining 8% operated independently. Of the 16,400 branded rooms, Marriott International currently has 33% of the market share, while Hilton Inc. operates approximately 24% of the market share. Additionally, Wyndham Worldwide, InterContinental Hotels Group (IHG), and Choice Hotels International each represent a notable portion of the branded rooms in the market, ranging between 7% and 10% market share.New Hotel SupplyMost of the current hotel development in the city is concentrated in and around Downtown Tampa and the surrounding submarkets. Nearly 1,400 rooms are in various stages of development. The Westshore/Airport market in South Tampa closely follows, with approximately 1,300 rooms under development. Other areas of Tampa, such as Wesley Chapel and Citrus Park, are in the process of developing a number of limited- and select-service hotels. Additionally, the DoubleTree by Hilton Tampa Airport - Westshore is expected to be converted from a hotel to a transportation hub affiliated with Tampa International Airport; according to city officials, the conversion is anticipated to take place within the next five to seven years.ConclusionTampa remains among the most cost-efficient places to live and do business in the nation, and the greater MSA contains one of the largest financial-services clusters and overall largest office-space communities in Florida. The government/military sector also continues to be one of the region's major employers, which contributes substantially to the local economy. Development continues in Downtown Tampa; other areas of growth include the neighborhoods surrounding the University of South Florida, as well as the Westshore area. Greater Tampa is home to a myriad of scenic beaches, Busch Gardens Tampa Bay, and the Port of Tampa, a launching point for various cruise-ship operators, which all boost visitation. The overall outlook for Tampa is optimistic due to the abundance of projects occurring throughout the area. Furthermore, Hillsborough County is fast approaching the possibility of being declared a "high-impact tourism" destination, meaning that it generates nearly $30 million per year in bed tax. Once it reaches the $30-million mark, expected to occur by the end of 2017, the County will be eligible to increase the bed tax from its current 5% to 6%.
Article by Peter Szabo

Five Reasons why Developers and Owners Love Hotel Leases

HVS ·30 November 2017
Capitalisation rates for fixed income prime hotel investments such as lease contracts have reached sub 5%, according to a report from property experts HVS Hodges Ward Elliott. The number of investors buying into leased hotels has also trebled since 2009 as the asset class has become an increasingly attractive investment target for institutional investors. While the likes of Marriott, Hilton, IHG and Accor have moved away from lease contracts in the past, operators such as Deutsche Hospitality (formerly Steigenberger), Movenpick Hotels & Resorts and Dalata Hotel Group are continuing to opt for lease deals. Leases remain an attractive operating format in Europe for many brands, particularly in the budget sector with operators such as Premier Inn in the UK or Motel One in Germany most commonly seen to sign lease contracts due to their low risk operating model enabling them to take on long-term, index-linked fixed leases, commented report author Peter Szabo, associate at HVS HWE. They are an effective way to separate the risk associated with hotel operations and real estate ownership - and the new-found popularity of leases now makes commercial sense for both developers and long-term owners, particularly in this economic cycle. In addition a number of more upscale operators such as CitizenM and 25hours hotels, perhaps with a long-term view of expanding into management contracts, are increasingly taking on leases as a way to initially prove their concept. The report details that the current economy supports fixed-income hotel investments, so there has never been a better time for investors and developers to sign lease contracts. Not only are hotels with leases particularly attractive to institutional investors, they provide a low exit risk for developers. The re-emergence of hotel leases is also likely to lead investors to considering alternative lease-based investments such as those outside the budget sector or turnover-based rent structures as well as the emergence of permutations such as sandwich and ground leases. Operators' willingness to commit to long-term indexed lease agreements and investors' readiness to buy as well as forward-fund hotel projects has enabled the fixed-income hotel market to become far more commoditised in this cycle than ever before, added Szabo. While hotels being accepted as an asset class of their own has benefited the hotel industry, investors and developers should keep in mind that hotels are ultimately trading assets and well-timed investment decisions must be supported by professional advice when it comes to lease term negotiations, rent coverage and the hotel's income generating ability. Download a copy of the full report here

The HVS Quarterly Macau Update | By Christy Tung & Daniel J Voellm

HVS ·30 November 2017
The past two years have been a difficult period for Macau since the Chinese President Xi Jingping announced a campaign to crackdown corruption and government official's lavish spending, triggering significant slumps in visitor arrivals and revenue growth in the tourism and gaming sectors in Macau. After two years as of 2017, Macau's resilience has been demonstrated through the growing visitor arrivals, hotel performance, and casino revenue, even after the detrimental Typhoon Hato.MacauOn 23 August 2017, the Category-10 Typhoon Hato struck Macau to become the worst natural disaster the city had encountered in more than half a century. Four days later, another Category-8 typhoon battered the city, leaving extensive damage to the Special Administrative Region. The typhoons took the lives of ten people and deprived 50 per cent of the population of power and water supply for a week. The Four Seasons Hotel had to close its casino and restaurant operations while the Wynn Hotel was left without water and power. The Macau Government Tourism Office (MGTO) requested its tour agent partners to suspend group tours to Macau for a week to allow the city to recover from the aftermath of Typhoon Hato.The negative impact from these two typhoons in Macau is evidenced by a 0.6% decline in visitor arrivals in August 2017 compared to the same period in 2016. Additionally, visitor arrivals from July to August posted a 1.8% decline in 2017, in contrast to a 3.1% and 14.5% increase during the same periods in 2016 and 2015, respectively. Despite this misfortune, Macau was still able to capture a 2.4% year-on-year growth in visitor arrivals in the following month of September, at 2.5 million. With the additional increase in hotel room supply, total quarterly visitor arrivals to Macau in the third quarter of 2017 posted a 2.1% year-on-year increase to 8.3 million, compared to 8.1 million in the same quarter of 2016. This emphasises the resilience of the Macau market and quick recovery, surpassing 2016's performance. Collectively, year-to-date through September 2017 registered an additional one million visitors to total 23.8 million, a strong 4.2% year-on-year growth.During the third quarter of 2017, the top five key source markets remained the same (in order of size): mainland China, Hong Kong, Taiwan, South Korea, and Japan. Supported by China's buoyant economy, mainland China continued to be the largest source market constituting 69.6% of the market or nearly 5.8 million travellers to Macau. This figure reflects solid growth of 6.6% compared to the same period in 2016. The growth in the number of visitors from South Korea was also outstanding, at 27.8% in the third quarter of 2017 compared to the same period in 2016. The 211,000 visitors may be attributed to Macau's adaption of the automated immigration clearance services for Koreans in 2016 and the city's successful promotion initiatives in South Korea, where gambling for locals is restricted to one single, remote casino. As the Japanese government is encouraging its citizens to go abroad, Japan registered a 7.7% year-on-year growth to 82,000 visitors in Macau. The increase is indirectly aided by the rising popularity of the city's an-hour-away neighbour, Hong Kong, among Japanese as well. A 14.4% year-on-year increase in Japanese visitor arrivals to Hong Kong was recorded during the third quarter of 2017. This growth is partially attributed to expanding flight capacity between Japan and Hong Kong, including new flights added by both the legacy carriers and low-cost carriers, such as Hong Kong Express, Jet Star and Vanilla Air from Tokyo and Peach from Osaka.On the contrary, Hong Kong and Taiwan both faced a decline of visitors to Macau. In particular, Hong Kong arrivals plunged significantly by 11.3% to 1.5 million compared to 1.7 million in the third quarter of 2016. The negative impact from the typhoons was one contributor to the decrease in Hong Kong visitor arrivals together with an aggressive hotel promotion campaign in place the year earlier. To a lesser extent, Taiwan also saw a 2.6% decrease to 282,000 visitations in Macau.111Macau Overnight VisitorsCompared to the 2.1% rise of visitor arrivals to nearly 8.3 million, overnight visitors in Macau experienced robust growth of 6.9% to 4.5 million during the third quarter of 2017. This jump was mainly contributed by the significant growth from two market sources: South Korea and mainland China. Fueled by Macau's successful marketing promotions, South Korea achieved a 57.3% year-on-year growth in overnight stays to 140,000 travellers in the third quarter of 2017, after a strong expansion of 81.0% overnight visitors from the previous quarter. Mainland China also received a positive growth at 15.5%, sending 3.2 million overnight visitors to Macau this quarter. Meanwhile, Japan overnight visitors increased slightly by 1.0%, contributing 46,000 travellers to Macau.Relative to the 11.3% decline in total visitor arrivals, Hong Kong overnight visitors indicated an even stronger dip by 17.6% to 754,000 travellers in quarter three 2017, a total loss of 161,000 travellers from the same period in 2016. Taiwan also registered a negative 1.3% year-on-year change in visitors staying overnight to 145,000 travellers only.222Macau Overnight VisitorsThe third quarter's 2.1% year-on-year visitor arrivals growth rate, despite the storms, further reflects the city's resilience in attracting visitors to the gaming hub. Moving forward, Macau will continue to thrive given the Pearl River Delta Economic Zone development and the improving infrastructure. The long-awaited Hong Kong - Macau - Zhuhai bridge is expected to open at the end of 2017, which will shorten the current travel time from four hours to thirty minutes, enticing more visitations from cities nearby. The Macau Government Tourism Office (MGTO) also plans to attract 40 million visitors by 2025. This is achieved by diversifying the mix in focusing on non-gaming tourism, family holidays, conventions and exhibitions, as well as rebranding Macau as a multi-day destination, which also indicated the city's confidence and hopes in its tourism sector.Macau Hotel Sector PerformanceAmid the recovery in the tourism industry, Macau's hotel market received great benefits from the remarkable 10.8% year-on-year growth in overnight visitors during January to September 2017, compared to the same period in 2016. As of September, occupancy in Macau recorded a 4.8 percentage point increase to 88.3%. This growth in occupancy was partially driven by the average rate repositioning, in which it registered a year-on-year 1.7% decline from MOP1,279 to MOP1,257, yet closing at a 3.9% jump on revenue per available room (RevPAR) to MOP1,111.In quarter three alone, the city's hotel sector recorded a 3.8% growth in RevPar to MOP1,153. The equilibrium between occupancy and ADR can be found among hotels in the city, given that both registered an increase in the third quarter of the year. Occupancy recorded a 1.4 percentage point year-on-year increase to 90.7% while ADR achieved a 2.1% growth to MOP1,272.The city's ability to quickly recover was illustrated after the typhoon month. Due to the typhoons, some hotels in the city offered promotions in September to capture overnight guests. In September, the average rate received a 4.4% decrease compared to August from MOP1,327 to MOP1,268. However, the decreased average rate from August still posted a slight 0.1% increase from September in the previous year. The impact of this promotion seemed successful as the occupancy for September reached 90.0%, a two percentage point increase from August in 2017 and a four percentage point increase from September in 2016. The RevPAR for September recorded a 4.6% year-on-year increase to MOP1,141.333444Macau Gaming Sector PerformanceDespite the fact that VIPs are still the casino industry's bread and butter, income from the mass market is increasing as well. As China restricts VIP junket operators to bring wealthy mainlanders to Macau, the only place in China where casino gambling is legal, casinos are aiming to become less dependent on VIPs. To protect the longevity of the gaming industry, new resorts such as the Parisian, Wynn Palace, and Studio City have been created to lure the mass market to Macau, which requires a far larger number in visitor arrivals. The city is seeing a return, as it attracted a 4.2% increase in visitor arrivals during the first nine months of 2017.From January to September 2017, total gaming revenue registered a 18.7% year-on-year increase to MOP194 billion, compared to MOP163 billion in 2016. This is believed to have been aided by the average number of slot machines which rose by 10.9% in the first three quarters to 16,177 and the average number of gaming tables which rose by 4.9% to 6,428 in 2017. Compared to 2016, casino average winning in the first three quarters registered a moderate 13.5% year-on-year increase to MOP104,756 per gaming table per day and a slight 3.3% increase to MOP2,160 per slot machine per day.Despite the damage the typhoons caused in the city, its casino sector remained to show a year-on-year revenue jump of 21.8% to MOP67.2 billion in the third quarter. A healthy sign of casinos recovery is shown with the positive growth of the largest two revenue-driving games, VIP Baccarat and Standard Baccarat. In the third quarter of 2017, VIP Baccarat had a significant 35.0% year-on-year increase to MOP38.7 billion; while Standard Baccarat witnessed a 7.3% increase to MOP20.8 billion. This is mainly driven by the return of the mainland Chinese market, displacing lower gambling-spending markets.Additionally, Macau welcomed Casino Royal Dragon in September, where the casino relocated twenty gaming tables from others casinos under the licence of SJM Holdings. In quarter three, the number of gaming tables in Macau posted a 2.3% year-on-year increase to 6,449 and slot machines a 3.4% year-on-year increase to 16,310 as supply from Wynn Palace phased in. Average casino winning registered an impressive 19.5% year-on-year jump to MOP107,497 per gaming table per day and a 9.6% increase to MOP2,147 per slot machine per day.In the first three quarters of 2017, VIP Baccarat and Standard Baccarat play make up 88.4% of the total games of fortune revenue, with the VIP portion alone making up 56.9% of the total revenue, compared to 52.6% in the same period in 2016. As the number of mainland Chinese visitors is restoring steadily, the same force of high-roller takes that disappeared in 2014 and 2015 is gradually returning to the gaming tables in Macau this year.555

The HVS Quarterly Hong Kong Update | By Christy Tung & Daniel J Voellm

HVS ·29 November 2017
The third quarter of 2017 recorded the highest number of mainland Chinese arrivals since the same period in 2015, which bodes well for Hong Kong tourism. Safety concerns towards other destinations in the region and fewer headline-making news about Hong Kong are the key contributors to the increase in visitor arrivals from mainland China. Thus, the tourism and the retail sectors in Hong Kong enjoyed a steady recovery after a slump in mainland arrivals in 2016.Hong Kong Visitor ArrivalsThe robust 2.2% growth to 42.6 million visitor arrivals in Hong Kong during the first nine months of 2017 is a strong indicator of a recovery in the city's tourism sector. According to Hong Kong Tourism Board (HKTB), in the third quarter of the year, Hong Kong registered an increase of 268,000 arrivals, a 1.8% rise over the same period in 2016. Specifically, September contributed the largest growth rate to this quarter at a 4.8% year-on-year, followed by July at 2.4%, while August registered a 1.2% decline due to the Category-10 and Category-8 typhoons sweeping across the city at the end of August. The top five feeder markets (by order of size) are mainland China, Taiwan, Korea, Japan, and the United States. Mainland China and Japan registered a positive YoY change, while the other three demonstrated a decline in visitor arrivals in the third quarter, partly due to a higher competition from other Asian countries.Accounting for 78.3% of arrivals in the third quarter of 2017, mainland Chinese visitors registered 2.7% year-on-year growth to 11.6 million. This is good news for Hong Kong as the city had lost out on attracting experienced Chinese travellers to more 'flashy' destinations, in Asia and Europe. Given that safety concern is a predominant criteria while making travel decisions, headlines of terrorist attacks in Europe and North America, the de facto ban on package tours to Korea, and the strained relations with Taiwan, helped to drive mainland Chinese travellers back to Hong Kong. Furthermore, Hong Kong's relatively calm political climate and reduced negative news in offical mainland media are recuperating its reputation for mainland Chinese travellers. The 20th handover anniversary celebration with President Xi Jingping's visit to the city in July also helped to boost the modest growth of visitor arrivals in the third quarter of 2017, of which its newly appointed Chief Executive also benefits indirectly.Among other non-mainland Chinese feeder markets, Japan recorded the highest year-on-year growth of visitor arrivals at 14.4% to 325,000 visitors in the third quarter of the year. Aided by HKTB's effective campaign at this year's Tourism Expo Japan, Hong Kong had become a more popular destination among Japanese. The improved tourism partnership between China and Japan also rejuvenated the growth of Japanese visitors, to some extent. But the main factor to the increase was due to the rising flight capacity between Japan and Hong Kong. New flights added by both the legacy carriers and low-cost carriers, such as Hong Kong Express, Jet Star and Vanilla Air from Tokyo and Peach from Osaka, further improving lower-cost travelling options.Taiwan and South Korea both experienced a slight decline by 2.3% and 0.9% to 516,000 and 334,000 arrivals, respectively. Surpassing Macau, the United States become the fifth largest visitor arrivals source market with 1.8% of market share, sending 267,000 Americans visitors to Hong Kong despite a minor 0.5% year-on-year decrease.Hong Kong Overnight Visitor ArrivalsRelative to the moderate 1.8% increase in visitor arrivals in the third quarter of 2017, Hong Kong attracted overnight visitors at a high margin of 3.1% compared to the same period in 2016. During the third quarter, over 7 million of visitors stayed overnight, an additional 218,000 visitors from 2016.Among the rising number of Japanese travellers, 66.2% of them stayed overnight. An outstanding surge at 18.6% year-on-year or 215,000 overnight Japanese visitors are recorded in the third quarter of 2017. Although only 43.9% of mainland China visitors stayed overnight in the third quarter, its growth remains visible at a 5.2% year-on-year increase--equivalent to an additional 251,000 visitors--to 5.1 million in total for the third quarter of 2017.On the contrary, Taiwan registered a stronger plummet in overnight visitors at 7.1%, year-on-year, in contrast to a slight 1.2% decline from the same period in 2016. One of the reasons for only 42.2% of Taiwanese visitors staying overnight, compared to 44.4% in 2016, could be explained by the increasing number of Taiwanese visitors transiting in Hong Kong, as the flights options from Taiwan to China are limited. To a lesser extent, South Korea, as the second largest overnight visitors source market, posted a 1.5% year-on-year decrease to 257,000. The United States exhibited a similar trend with a decrease of 1.5% overnight visitors, leading to only 188,000 Americans staying overnight in Hong Kong.Compared to other regions, Southeast Asia overnight visitors declined by a sizeable amount during the third quarter of 2017. As a result of the slow economy and weaker currency in Southeast Asia, travellers from the region preferred to travel to destinations nearer to home. As 2017 marks the 50th anniversary of the Association of Southeast Asian Nations (ASEAN), the association initiated substantial marketing promotions to boost tourism in affiliated countries, such as offering affordable tour packages. In addition, Taiwan and Japan began to loosen visa requirements towards Southeast Asian countries, further dampening Southeast Asian visitors desire to visit Hong Kong as they have a wider range of travelling options now. Explicitly, Indonesia recorded a decrease from the same quarter in 2016 by 13.8% to 84,000 travellers, Malaysia by 15.0% to 68,000, Thailand by 12.2% to 79,000, and India by 14.6% to 63,000.Hong Kong Hotel Sector PerformanceAfter a slump in mainland visitor arrivals in 2016, the hotel market players in Hong Kong remained cautious about trading off average rate gains versus maintaining or increasing occupancy. The strong return growth of overnight visitors in the year-to-date through September 2017 period stimulated the recovery of the hotel market.In the third quarter of 2017, hotel occupancy reached a one percentage point increase to 89.4% from the same period in 2016. Despite the sluggish improvement of average rate at only 0.6% to HK$1,192, revenue per available room (RevPAR) for the overall market still registered a 1.8% year-on-year growth to HK$1,065.Similarly, year-to-date through September 2017 period Hong Kong hotel market's RevPAR is up by 1.8% to HK$1,072. This increase was to be achieved by a decrease in average rate by 1.1% to HK$1,217 in exchange for a 2.5 percentage point increase in occupancy to 88.0%. In particular, Medium Tariff hotels and High-Tariff B hotels received remarkable growth. Meanwhile, High-Tariff A hotels experienced a rebalance of demand to more value-oriented segments which triggered a declining average rate, in order to drive up occupancy.With the rising pickup in demand and the lower cost of operations, Medium Tariff hotels witnessed a swifter recovery than other hotel categories. Its noticeable improvement on RevPAR at 12.7% year-on-year to HK$601 was accelerated by a 5.1 percentage point surge in occupancy to 89.8% and a 6.3% growth in average rate to HK$668. Likewise, High-Tariff B hotels posted a 2.9% increase in RevPAR with a 1.1 percentage point increase in occupancy to 88.9% and 1.7% increase in average rate to HK$996.On the contrary, High-Tariff A hotels registered a 2.0% decline in RevPAR to HK$1,683 from HK$1,717 during the first nine months of 2017. The reflection of heavily reliance on lower-rate demand can be seen in this category, as High-Tariff A hotels sacrificed their rate for an increase in occupancy. Year-to-date through September, 2017 High-Tariff A hotels recorded a 2.4 percentage point increase in occupancy to 84.7%, yet faced a downward average rate at 4.8% to HK$1,986.For the outlook, in our opinion, the high level of competition and modest business travel spending, specifically among High-Tariff A hotels will provide limited upside potential for average rate, while compression from strengthening of demand could mitigate these trends. For 2018, we foresee a continuous recovery in occupancy in the hotel market, given the growth in overnight visitor arrivals and capacity at hotels in periphery locations.Hong Kong Hotel Sector Performance - SupplyFrom 2006 to 2016, the supply of hotel rooms increased at a 10-year compound annual growth rate (CAGR) of 5.1%. Among the five categories, guesthouse registered the strongest CAGR of 8.5%, followed by High-Tariff A hotels with a CAGR of 5.3%.Amid the gradual recovery in the tourism sector, Hong Kong's hotel market supply continued to grow. As of September 2017, there were 273 hotels and 1,463 guesthouses in Hong Kong, housing a total of 90,291 rooms. This figure reflects solid growth in hotel supply of 4.2% compared to September 2016. In particular, High-Tariff A and High-Tariff B hotel rooms expanded at a year-on-year growth rate of 3.1% and 7.9% to approximately 18,600 and 30,000, respectively; they accounted for 20.6% and 33.2% of total hotel room inventory. Notable additions to supply during this period include Pentahotel in Tuen Mun with 298 guestrooms, iClub Hotel in To Kwa Wan with 340 guestrooms, Bridal Tea House in Hung Hom with 382 guestrooms, Kerry Hotel in Hung Hom with 546 guestrooms, and Disney Explorers Lodge in Lantau with 750 guestrooms.In recent years, some noticeable trends occurring in the hotel supply market include converting industrial lands into hotels and redeveloping hotels into office buildings. With the expanding presence of Chinese companies in the city, commercial property values have appreciated rapidly prompting real estate owners to consider alternative uses for hotels. As new supply slows, conversion of existing hotels to offices, vertical retail or co-living concepts could potentially have a positive impact on the city's hotel market performance.Hong Kong Retail Performance2015 and 2016 were challenging years for both the tourism and retail sectors in Hong Kong. While Hong Kong retail sales registered a remarkable compound annual growth rate of 54.3% from 2006 to 2016, this jump was mainly credited to the surge in mainland Chinese visitor arrivals. However, following the implementation of quantity restrictions on infant formula purchases, anti-corruption drive, political tensions and negative publicity about Hong Kong on the mainland, visitor arrivals slowed and turned the city's retail sales negative, both in 2015 by 3.7% and 2016 by 8.1% (mainland Chinese visitor arrivals fell by 2.6% and 7.0% in 2015 and 2016). Specifically, the jewellery, watches and clocks, and valuable gifts (JWCG) category suffered a downturn of 26.6% in 2016.Retail sales during the year-to-date through September 2017 period were lacklustre at a 0.9% growth. However, compared to the same period in 2016, which registered a 9.6% decline, the downward trend seems to have come to an end. Robust local consumption and improved inbound performance helped support retail sales performance in 2017.As big-spending mainland Chinese shoppers flew elsewhere to buy luxury goods, more Hong Kong retail landlords attempted to cope with the falling number of mainland visitors by adjusting their tenant mix to increase the proportion of food and beverage or mass market brands. Additionally, international brands' alignment strategy such as Chanel and Burberry lowered their prices in Hong Kong in order to encourage local consumption as well. Specifically in July, the celebrations for the 20th anniversary of Hong Kong's return to Chinese rule created a positive impact on attracting more tourists to the city, as the total visitor arrivals in that month increased by 2.4% and mainland Chinese visitor arrivals by 3.7%. Luxury goods sales in July 2017 noticed a strong recovery from the previous year, as JWCG registered an increase of 13.3%, the biggest growth since almost four years ago in August 2013 at 19.9%. Looking ahead, the retail performance in Hong Kong is set to maintain moderate growth.

HVS Market Pulse: Galveston, Texas | By J. Carter Allen

HVS ·29 November 2017
A weak energy sector has led to negative lodging fundamentals throughout much of the greater Houston region; however, one destination continues to illustrate its resilience. Galveston Island has realized year-over-year growth in total visitation in each of the past seven years following Hurricane Ike. While the rate of growth has slowed in recent years, no doubt somewhat affected by volatility in the energy sector, positive factors such as the recently completed expansion of the cruise terminal and the low gasoline prices have contributed to the growth in visitation numbers. This article will explore tourism trends on Galveston Island. Galveston Island is a 64-square-mile barrier island located 50 miles southeast of Houston. With 32 miles of beaches, a variety of historic neighborhoods, ample leisure attractions, and a multitude of festivals, the tourism industry remains a mainstay of the local economy. The relative affordability of the island, and the proximity to and size of the Houston metropolitan area contribute to the strength of this industry.Tourism TrendsIn 2016, Galveston welcomed 6.5 million visitors, increasing for the seventh consecutive year. Tourism developments, such as new hotel supply and increased cruise-passenger capacity, have fueled this economic expansion. The following table illustrates total visitation for Galveston Island since 2008.Unemployment trends can provide additional perspective on the overall economic health of the city. As illustrated in the following table, after strengthening from 2012 through 2015, economic headwinds in the energy sector likely contributed to a slight uptick in unemployment in 2016. However, recent data illustrate a positive trend, with unemployment in July 2017 down 50 basis points from the prior year.According to the Galveston Park Board of Trustees, the July 4th holiday weekend saw a material improvement over the prior year, with occupancy up almost 15% and average daily rate (ADR) up nearly $20. Good weather and special events were cited as contributing factors.[1] Other major factors that have contributed to the continued strengthening of the tourism industry include low gasoline prices (Galveston is primarily a drive-to market) and increased cruise-ship calls and passenger numbers. The Port of Galveston ranks fourth among all U.S. cruise ports, according to the most recent study completed by Cruise Lines International Association.[2] Carnival Cruise Lines and Royal Caribbean International are the two primary cruise lines operating out of Galveston, both of which have increased their presence in recent years. The Port completed a $10-million, 60,000-square-foot expansion of Terminal No. 2 in 2016. The expansion was part of an agreement with Royal Caribbean International to accommodate larger cruise ships, such as Liberty of the Seas, which began sailing from Galveston in late 2015. Decreased competition from the nearby Port of Houston cruise terminal in Pasadena, which closed in 2016 after only opening in late 2013, has contributed to the strengthening passenger numbers at the Port of Galveston. The following table shows the cruise-ship calls and total passenger numbers for the Port of Galveston since 2007.The potential addition of a third terminal and an additional sailing by Carnival Cruise Line (scheduled to begin in September 2018) are expected to bolster visitation numbers and hotel performance in the coming years, as many cruise passengers typically spend the night prior to their departure and after their return in Galveston.Hotel DevelopmentsNew hotel supply continues to open in Galveston, although the percentage increase in new supply remains low relative to the national average given Galveston's high barriers to entry. New hotel openings in 2016 included a 60-room Americas Best Value Inn and a 96-room Best Western Plus, while an 88-room Homewood Suites by Hilton opened in 2017. This new supply should be quickly absorbed given the strength of the leisure segment in Galveston, bolstered by a $48-million beach-nourishment project that was completed in 2016, as well as by recently completed expansion and renovation projects at major attractions such as Schlitterbahn Galveston Island and Moody Gardens.Hurricane HarveyIn late August, Hurricane Harvey struck the Texas Coast and caused wide-spread damage from North Padre Island to Houston. Galveston was affected with flooding; however, the damage was considerably less than that caused by Hurricane Ike, specifically related to commercial property damage. No major closures of hotel properties were reported, and the beaches and tourism attractions were reopened in time for the Labor Day holiday. However, the Port of Galveston reports that five cruises were canceled due to the storm. While the long-term effect of the considerable damage suffered by residents of Houston, Galveston's main feeder market, is likely to have some affect on Galveston, the Island remains a popular, relatively low-cost option for discretionary income spending.ConclusionDespite the depressed energy sector, the lodging fundamentals on Galveston Island remain sound. A favorable supply pipeline, continued public and private development, and increased cruise-ship calls should bolster performance in the near term. Potential increased cruise competition from developments in South Texas and city regulations on hotel development along the seawall are possible issues of which developers and owners should remain watchful. Galveston is a city and community that has weathered many storms in its long history, and it continues to emerge stronger and better. Given the continued investment in and advancement of the tourism industry, coupled with economic mainstays such as healthcare and education, the outlook for this resilient Texas town is positive. Proper due diligence should prepare hotel stakeholders to find niches in the market and maximize hotel profitability.

Market Pulse: Hotel Demand Takes Flight at LAX | By Jessica White

HVS ·23 November 2017
El Segundo, a city located to the south of LAX, has become known for its business-friendly environment because of its proximity to the airport and Interstates 105 and 405. El Segundo is home to numerous Fortune 500 corporate headquarters, local companies, and government organizations. Although the city's population is approximately 16,900 (U.S. Census 2013 estimate), over 85,000 employees commute to the area every day. Major employers in the market include Northrop Grumman, SpaceX, Mattel, Gartner Inc., Raytheon, Boeing, Ricoh USA, Chevron, and the LA Air Force Base, which all contribute to hotel room-night demand.Major Developments Support Growing Demand LevelsSeveral developments are underway in the market, as well as throughout the greater Los Angeles area, that are expected to support growth in tourism and hotel demand in the future.City of Champions Stadium: The Rams NFL football team made their triumphant return to Los Angeles for the 2016 season, and the San Diego Chargers joined the Rams for the 2017 season at the Los Angeles Memorial Coliseum. In 2020, the two teams will share the new, $2.6-billion "City of Champions Stadium," now under construction in Inglewood.Developments at LAX: The $14-billion capital improvement program at LAX, which began in 2006, includes over 20 projects and is considered the largest public-works program in the history of Los Angeles. The centerpiece of the program is the new Tom Bradley International Terminal, which opened in 2013. More recently, the renovated, $229-million Terminal 5 opened in June 2015, and in July 2016, Delta Air Lines announced its $1.9-billion plan to modernize, upgrade, and connect Terminals 2, 3, and the north side of the Tom Bradley International Terminal. These upgrades will coincide with the largest project in the program, the Landside Access Modernization Program (LAMP), which will feature a 2.25-mile Automated People Mover (ACM) that will connect to a Consolidated Rent-a-Car Center (ConRAC), two Intermodal Transportation Facilities, and the Aviation/96th Street Metro stop.[1]Metro Crenshaw/LAX Line: The 8.5-mile Crenshaw/LAX Line is currently under construction and will connect the Green Line to the Expo Line. The line is slated for completion in 2019, but will achieve its full traffic-reducing potential in 2023 when the Aviation/96th Street Metro stop is connected to the LAX ACM. This will be the first time that airport passengers will be able to access the terminals without relying on a vehicle or bus.[2]More to Come in Los Angeles: Other major projects anticipated to support growing airport and hotel demand levels include the planned expansion of the Los Angeles Convention Center, the 2028 Olympics, and the new Los Angeles Football Club (LACF) soccer stadium in Exposition Park.Hotel LandscapeLodging facilities are a critical component of an airport's success. Guestrooms for transient visitors, distressed passengers, and airline crews support the popularity of an airport destination. The LAX/El Segundo market is well supported by a diverse array of over 30 hotel lodging facilities, ranging from economy, limited-service hotels to first-class, full-service hotels.New SupplyThe sheer volume of passenger traffic traveling through LAX bodes well for hotels in the immediate market. In response to recent robust occupancy levels and the positive outlook for passenger volume, several hotels have opened in the market in the last five years, and more are in various stages of planning and construction.According to projections by the Southern California Association of Governments, LAX could reach over 100 million passengers annually by 2040[3]. As a result, hoteliers in the market expect supply additions to be quickly absorbed.Transient Occupancy Taxes and Hotel PerformanceHistorical transient occupancy tax (TOT) collections illustrate the increased demand for hotels in the markets surrounding LAX. As an example, the following table outlines historical TOT collections for the City of El Segundo, which has a current tax level at 12%, one of the lowest in Los Angeles County.In 2015, TOT collections declined following the closure of the 600-room Hacienda Hotel. The property was converted to the recently opened dual-branded Aloft and Fairfield Inn by Marriott. As a result, TOT collections rebounded significantly by the year-end 2016; moreover, the City has forecast a 26% increase in TOT collections in 2017 given the recent additions of the Hampton Inn & Suites by Hilton and the Cambria Suites.Our HVS database of hotels within El Segundo and the Century Boulevard Corridor illustrate that occupancy neared 90% by year-end 2016, while average rate registered in the low $160's range, resulting in an 11% change in RevPAR over the prior year. This impressive RevPAR growth marked the third consecutive year of double-digit growth in RevPAR. This trend has continued in the year-to-date period, albeit at a more moderate pace, with RevPAR increasing nearly $4, a 3% gain over the same period in the prior year. Increased passenger volume and strong lodging demand from local companies should continue to support the high occupancy levels in the market and, therefore, increase transient occupancy tax collections.Hotel TransactionsThe diverse demand generators, numerous developments, and strong hotel performance have drawn investors to seek hotels in the LAX/El Segundo market. The following table sets forth hotel transactions in the LAX/El Segundo market since 2012.Since 2012, over $656 million in assets have traded hands in the markets surrounding LAX. Notably, the Belamar Hotel transacted twice within three years, appreciating nearly 83% during that period. The appetite to own an asset in this market continues to be high, considering the consistent demand levels and robust hotel performance.Outlook: The market has hit cruising altitude and is still risingA well-developed transportation infrastructure, including one of the nation's busiest international airports, should contribute to this market's continued strength and expansion. The breadth of companies in the LAX/El Segundo area, Los Angeles' reputation as a leisure destination, and the developments at LAX are expected to support continued growth in lodging demand; thus, the lodging market should continue to soar.

HVS Key Takeaways: CHICOS 2017 | By Kristina M. D'Amico & Kristin Rinaudo

HVS ·22 November 2017
While last year's CHICOS experienced a similar "buzz" because of its November date, just one day after the U.S. presidential elections results were announced, the hot topics of last year regarding the impact of the election and, more notably, the impact of the Zika virus, were virtually unmentioned just one year later. Less predictable than its neighboring U.S. hotel market, the Caribbean hotel market is ever changing and keeping hoteliers on their toes. The 2016 CHICOS was neutral to slightly positive in tone; however, the 2017 CHICOS sentiment was markedly more positive despite the new challenges that have developed. Seemingly unbothered, industry leaders agreed that to be able to stomach events like Zika and hurricanes, investors must be in it for the long haul; not for the faint-of-heart, where some stakeholders wane in the face of uncertainty associated with a dynamic market such as the Caribbean, but the risk/reward stakes are raised for those with patient money. A few key takeaways from this year's conference are presented below.Despite the intense hurricane season, hotel owners and operators have a positive outlook on the future of the Caribbean region given its resiliency.While the impact and conversation surrounding the mosquito-borne Zika virus continued to decline through 2017, the Caribbean was fraught with a new challenge: the record-breaking 2017 Atlantic hurricane season. While both Hurricane Irma and Maria devastated certain islands and many iconic resorts in the region, speakers wanted to get the message out to both visitors and investors that the Caribbean is open for business. Of 32 island nations, just seven were significantly affected (three quite severely). Leaders emphasized the importance of educating the public on the geography of the region and that each island is unique and should be marketed individually. The notion that the entire Caribbean region was devastated is incorrect, as more than 75% of the region was unaffected by the hurricanes but by the immediate wave of cancelations and bookings, leaving hotel rooms unoccupied and inbound revenue absent. However, on the positive side for the affected resorts, insurance funds will provide hotel owners the opportunity to carry out capital expenditures, modernize, and renovate while they are closed. Given the pipeline of new projects in the Caribbean, these resorts will reopen in better condition and be more market competitive than previously. Despite the challenges primarily associated with Zika perceptions in 2016, RevPAR increased in every month for six months leading up to September. Increases were registered across most metrics, including overall visitor arrivals, total revenue, demand, supply, occupancy, ADR, and RevPAR.We delve deeper into this topic in The Impact of the September 2017 Hurricanes on the Islands of the Caribbean.Increased visitor arrivals and the robust development pipeline has notably shifted focus to the all-inclusive product.Continued increases in airlift and demand have provided developers with opportunities for new projects in the islands. Construction is taking place in almost every major island and, per STR, construction is up 25% from 2016, with 43% of this new inventory in the luxury tier. Not surprisingly, some of the region's most populous island nations, the Dominican Republic and Jamaica, dominate the 2017 development pipeline with all-inclusive resort development given the value proposition associated with these resorts. The all-inclusive inventory continues to grow with the recent openings of a 454-room Riu in Montego Bay, a 457-room Secrets in Cap Cana, and a 150-room Breathless in Montego Bay, as well as the recent announcements from Karisma Hotels on the development of 500 rooms in Cap Cana, from Playa Hotels regarding the development of 750 rooms in Cap Cana, and from AMResorts on the development of 600 rooms in Punta Cana. However, despite the continued boom in the all-inclusive segment, many industry leaders also see an opportunity to build in the select-service and midscale space given recent consumer preferences trending to the select-service segment and the lack of this inventory on many of the islands. Furthermore, the increasing presence of low-cost airlines opens Caribbean travel to a wider customer base.Additionally, continuing with the theme of new supply and changing consumer preferences, one of the most notable panels included representatives from Airbnb and Expedia, and although hoteliers may oftentimes see them as the enemy, they are options that customers chose as part of their overall travel experience. Despite that Airbnb is competition, per Shawn Sullivan, Public Policy, Caribbean and Latin America Airbnb, Airbnb recently included boutique hotels in their booking platform, providing this option to boutique hoteliers to sell their inventory. And per Hari Nair, Global Senior Vice President Expedia Media Solutions, Expedia sees itself as a technology company that provides consumers with a hotel marketplace and access to customer reviews. But what was clear from this panel is that both companies are focusing their efforts on taking care of the consumers entire experience, making memories for the customers, and using technology to do so in a way that customers can choose the booking mechanism that works best for their travel needs.The Caribbean hotel financing landscape is maturing, and capital is available through creative financing for sponsors if key criteria are met.While conventional lending from regional banks continues to be limited, the region experienced significant increases in lending activity and capital infusion from alternative sources in 2017, particularly from institutional equity sources for power-play deals, such as KSL and KKR's acquisition of Apple Leisure Group/AM Resorts and the Playa Hotels & Resorts merger. High-net-worth individuals and increasing interest from foreign investment from Asia and the Middle East are also factors at play. Our Financiers' Outlook panel, consisting of capital providers active in the region, noted higher confidence levels this year over last year, despite recent events coupled with the late stage of the real estate cycle. The Caribbean hotel financing landscape continues to mature, evidenced by several factors. In addition to unprecedented levels of institutional equity capital for major projects in 2017, the Caribbean is experiencing a robust pipeline and healthy levels of transactions (i.e., increased liquidity), as well as improved market performance fueled by the growth of feeder markets, and capital markets continue to remain rational, with sponsors bringing significant equity to the table when seeking debt. Because of the risks inherent to Caribbean hotel investment, financiers advise that investors must ensure that several important criteria are met to succeed in acquiring financing. Strong sponsorship, location, and airlift capacity are key, and branded hotels are more apt to receive funding than independent ones. Other considerations include the impact of new supply, competency of property management, availability of labor, and a strong overall business plan.ConclusionThe resiliency of the Caribbean hotel market has been demonstrated particularly well over the last few years. The negative impact of Zika is largely over, as market hotel performance metrics exhibited consistent improvement beginning in the first quarter of 2017. While the region has more recently been challenged by an atypically hyperactive Atlantic hurricane season, affected hoteliers expect to come out of it better off, as aging product is forced to undergo renovations. Meanwhile, the pipeline is robust (particularly in the all-inclusive segment), transaction activity is healthy, and the lending environment has been more active and consistent in 2017 than in years past. From both an investment and visitation standpoint, the Caribbean is open for business.

Market Pulse: Raleigh, NC | By Janet L. Snyder & Mike Bendert

HVS ·22 November 2017
The City of Raleigh, also known as the City of Oaks, is the capital of North Carolina, the seat of Wake County, and one of the most economically diverse cities in the state. The capital city has long been known for its high standard of living and skilled industries, which has made it one of the fastest growing cities in the southeastern United States. According to recent data reported by the U.S. Census Bureau, the state of North Carolina, as a whole, was the sixth-fastest-growing state in the U.S. from 2015 to 2016. Raleigh was also named in the top twelve destinations to travel to in 2017 by Forbes Travel Guide[1], sharing the ranks with destinations such as Oahu, Lisbon, Santa Barbara, and Bali. This growth has helped to bolster an already strong hotel and tourism industry in Raleigh.Economic DriversThe economic base is diverse in Raleigh, with strong employers in the government sector and the healthcare, finance, and technology fields. Major employers in the Raleigh area include IBM, Citrix, WakeMed Health & Hospitals, North Carolina State University, Cisco Systems, SAS Institute, and Duke Energy, among many others. Companies headquartered in Raleigh include BB&T Insurance Services, Carquest, First Citizens Bank, Golden Corral, and Red Hat. The city is best known for the Research Triangle Park (RTP), the largest research park in the country. Located between Raleigh and neighboring Durham, RTP is home to over 200 companies (including IBM, Cisco Systems, and GlaxoSmithKline) and employs over 50,000 workers. The local economy is also strongly influenced by the presence of world-class educational facilities, such as North Carolina State University (NCSU), the University of North Carolina at Chapel Hill, and Duke University. The universities provide a steady supply of highly skilled, young professionals that help to make Raleigh an ideal location for employers. Downtown is realizing some of the strongest growth in the market. The GoRaleigh Transit Station was recently renovated and expanded in 2017, and Union Station, the city's multi-modal transit center, is set to be fully operational in 2018. Numerous mixed-use developments are under construction or are starting construction soon, including the 2.5-acre The Dillon, One and Two Glenwood, 400H, and the two-tower City Centre. When Raleigh's Yadkin Bank was acquired by First National Bank, FNB announced it would build a new 22-story tower in Downtown Raleigh for its regional headquarters. Moore Square park on the east side of Downtown will be closed and completely renovated in 2018, to become one of the area's premier public spaces. Finally, Downtown Raleigh continues to realize significant residential growth, including luxury apartments at SkyHouse, rowhomes at Hargett Place, and townhomes at The Ware, among many others. Rebuilding will begin soon on the Metropolitan Apartments, which were under construction in early 2017 when they were destroyed by a five-alarm fire. A major storyline in Raleigh and the state of North Carolina in 2016 was the March passage of the controversial Public Facilities Privacy and Security Act, also commonly known as House Bill 2 (HB2) or the Bathroom Bill. The legislation was immediately met with public outcry as advocates for the bill's repeal challenged the element of the law that eliminates anti-discrimination protections for members of the LGBT community. While other cities across the state were also affected by the passage of the bill, as the state capital, Raleigh was at the heart of controversy and felt the effects of the public uproar on multiple fronts. Economists estimate that the state lost between $450 million and $630 million because of the passage of the legislation, from business relocation and expansion interruptions, loss of large meeting and group events, curtailed visitation and lodging revenues, and the relocation or cancelation of numerous concerts and sporting events. In March 2017, officials enacted House Bill 142 (HB142), compromise legislation that repealed and replaced HB2. With this repeal, Raleigh and the state can begin to repair the damage to their reputation and economy.Current Hotel SupplyThe Raleigh hotel market is divided into several different submarkets that have individual demand generators and guest profiles. The main hotel submarkets include:Hotel demand in each individual submarket is largely driven based on the proximate location to a variety of economic and leisure demand generators. However, given the city's relatively compact size and ease of access through the area, competition between submarkets does overlap quite a bit. In 2015 and 2016, five properties opened in the Raleigh hotel market, including two properties in Brier Creek, one in the Crabtree Valley area, and Aloft hotels near Downtown Raleigh in the University area and in Brier Creek. According to local market participants, the new supply was quickly absorbed by the market. In the year-to-date period through October 2017, three long-anticipated hotels opened: the AC Hotel by Marriott North Hills in March, the Residence Inn by Marriott Downtown in July, and The Stateview - Autograph Collection on the Centennial Campus of North Carolina State University in October. In addition, the Fairfield Inn & Suites by Marriott Raleigh North opened in October at the intersection of Capital Boulevard and Interstate 540, across from the Triangle Town Center. Initial data reflect that the AC Hotel and the Residence Inn by Marriott are also being quickly absorbed by the market. In addition, three hotels in Crabtree Valley underwent comprehensive renovations to public and guest spaces in 2016, including the Marriott, Embassy Suites by Hilton, and Holiday Inn. While occupancy levels at these hotels were negatively affected during the process, they are ramping back up quickly, and management should be able to drive strong average daily rate (ADR) growth given their significantly improved products.New Hotel SupplyAccording to the Greater Raleigh Convention and Visitors Bureau, numerous new hotels are currently planned for Wake County over the next several years, with several properties currently in some stage of construction as of November 2017. In Brier Creek, a Hyatt House is set to open in January 2018, while a Holiday Inn Express is under construction, although an opening date has yet to be confirmed. In Cary, a Homewood Suites by Hilton is scheduled to open in May 2018, and construction recently began on a Courtyard by Marriott. Just east of Raleigh, a Hampton Inn & Suites by Hilton is slated to open in December 2017 in Knightdale. Meanwhile, two new Hilton products, a Home2 Suites by Hilton and a Tru by Hilton, are proposed for the airport submarket; however, opening dates are unknown for both projects. Additionally, Marriott has announced several new projects in Raleigh, including a Westin in the Crabtree Valley area, and two Element properties, scheduled for the RTP/Brier Creek area and Downtown Raleigh. The Downtown market has several other properties planned or rumored for future development. Construction of a dual-branded Hilton Garden Inn/Homewood Suites property is scheduled to start in the first quarter of 2018, with approximately 15 months planned for construction. A regional developer purchased a site immediately north of the Raleigh Convention Center and plans to build a Courtyard by Marriott, which will likely open in 2020. Finally, two of Downtown's new mixed-use developments, Two Glenwood and City Centre, are anticipated to include a hotel component, although details of these projects are still being finalized. The construction of hotels in Downtown Raleigh is expected to help boost future meeting and group demand with increased bookings at the Raleigh Convention Center; the Greater Raleigh Convention and Visitors Bureau should be able to bid on an increasing number of larger events, which it has previously had to turn away given the limited hotel supply within walking or shuttle distance of the center.Hotel Market DemandWake County's lodging market continues its strong performance and remains one of the top markets in the state. Countywide occupancy has grown each year since 2009. In 2016, Wake County realized an occupancy level over 70% for the first time since 1997, which is five percentage points higher than the statewide average. Occupancy in the City of Raleigh reached just beyond the county average, at 69%. ADR continued to improve each year, as well, remaining slightly above the average for the state in 2016; countywide ADR increased approximately $4.00 from 2015. Downtown Raleigh is one of the strongest submarkets, with ADR and RevPAR levels approximately $20 higher than the average for the City of Raleigh. We expect Raleigh to continue to realize robust RevPAR growth through the future because of its strong economic base, continued increasing popularity as a destination, and status as the state capital. Given the recent and ongoing increase in lodging supply, average occupancies should decline slightly in the near term, but demand should continue to grow, and the new supply should be absorbed relatively quickly. Hoteliers believe the greatest opportunity for RevPAR gains is through ADR growth given the introduction of high-rated supply and significant improvements at numerous hotels in the market.ConclusionRaleigh's economy and lodging industry continues to realize strong growth, as the area remains a premier destination for business and tourism. Hotel development should continue through the near future, and the new supply should be absorbed relatively quickly given the improving demand levels. Further revenue growth is anticipated through higher average rates due to the significant renovations of several properties in the market and the positioning of the new supply that is entering the market.[1]

Canadian Lodging Outlook Quarterly 2017-Q3

HVS ·21 November 2017
If you would like a detailed hotel performance data for all of Canada, STR offers their Canadian Hotel Review. The Canadian Hotel Review is available by annual subscription. For further Information, please contact: info@str.comor +1 (615) 824-8664 ext. 3504.

Las Vegas Casino & Hotel Market Outlook 2017

HVS ·16 November 2017
The primary drivers of the Las Vegas economy are tourism, gaming, and conventions, which in turn feed the retail and restaurant sectors. Las Vegas' economic base continues to diversify into sectors such as manufacturing, distribution, wholesale trade, and construction. Nevada's favorable tax structure for individuals and corporations provides the impetus for corporate in-migration. While these sectors have emerged within Las Vegas, the area's driving force is, and will continue to be, tourism. Las Vegas normally enjoys high tourism levels year-round given its marketing as a tourist destination and desert-like climate. Demand is generally strongest during key weekends and special events. Las Vegas' new National Hockey League franchise will play home games at the recently opened T-Mobile Arena. Plans for development of the stadium for the National Football League's Oakland Raiders franchise continues to move ahead. In addition, many of the city's iconic hotels and casinos have recently undergone renovations, and development continues on the Resorts World Las Vegas casino, which is scheduled to open in 2020, and other projects.This article examines trends affecting the dynamics of the Las Vegas hospitality market. Click here to request a complimentary report

Conducting Impact Studies

HVS ·15 November 2017
With the pace of new supply growth accelerating, owners of existing hotels are increasingly concerned as to how their properties will fare in a more competitive market. As brands continually add new product types to fill a niche, hotel operators are becoming more aware of the potential threats from within their brand family. From Vib and GLo, which are part of the Best Western family, to Tru by Hilton and Marriott's Moxy brand, hotel companies are introducing new product and revamping their brands' design prototypes, such as the Formula Blue initiative for the Holiday Inn Express, which reflects a new contemporary design. The merger of hotel companies also has owners questioning the future of their properties, such as the Marriott/Starwood merger and InterContinental Hotels Group acquisition of Kimpton Hotels.The hospitality industry recognizes two types of impact: base and incremental. Base impact refers to the effect of any new hotel rooms in the lodging market on an existing hotel. Incremental impact arises from the shared brand affiliation, which comprises a common reservation system, website, national marketing programs, frequent guest programs, and similar brand recognition. Impact is most commonly measured in terms of occupancy; however, average daily rate (ADR) should also be considered, particularly when assessing incremental impact, as demand driven by the branded reservation system and frequent guest program often achieves a proportionately higher ADR.In assessing impact, consideration must be given to the following issues:Economic Conditions: focusing particularly on the outlook for future growth or decline that would affect lodging demand in the market areaDemand: including an assessment of key demand generators in the market and for the existing hotelSupply: including an assessment of the existing competitive supply and the timing and likelihood of additions to the competitive supplyFacilities: of both the existing hotel and the development program for the proposed hotelLocation: of both properties, focusing on proximity to major concentrations of business activity, demand generators, and major transportation routesMarket Orientation: of the existing hotel and anticipated market orientation of the proposed hotelDevelopers need to look at the impact that a proposed hotel will have on the existing supply in a market during their initial due-diligence phase. In addition to a possible decrease in occupancy with the entrance of new supply, it's important to look at how it will affect average rate, particularly if the proposed hotel will share the same parent company with an existing hotel in the market, even if it will not be 100% competitive, such as a straightforward limited-service hotel versus a limited-service, extended-stay hotel. Often, corporations have a contract in place with a particular parent company, such as Marriott or Hilton, where they may have negotiated rates at a full-service, select-service, and limited-service hotel (under that parent company) all within the same market; as such, their employees may select to stay at any of these hotels, making hotels under the same affiliation more competitive than others (under a different parent company) with a similar product offering entering the market. On the other hand, hotels located within markets that rely heavily on interstate travelers, or those located near a military installation, may not be as affected as the hotels that rely heavily on corporate demand generators. In many instances, new supply will increase market-wide average rate; however, for hotels under the same ownership, or competing directly with the new hotel, hoteliers will often decrease their ADR to maintain occupancy and to be more competitive with the new product.HVS takes an in-depth look at the market and the supply and demand changes over the past ten years and analyzes the impact that new supply will have on a particular property. It's important for developers to contact their parent companies and see what they will accept. Some parent companies hire a third party, like HVS, to conduct an impact study, while other parent companies evaluate this in-house. Each parent company has its own guidance for how much impact is considered too much on an existing property, but it is also important to note that each market is different; thus, while new supply can be detrimental to a particular hotel in one market, other markets can quickly absorb the new supply and continue to thrive, and while the base demand may be affected, the incremental demand may not, at least not to the same degree.
Article by J. Carter Allen

Key Takeaways: Lodging Conference

HVS ·14 November 2017
Economic Outlook - Baring political and geopolitical uncertainty, the economy is anticipated to continue to expand by 2.5% to 3.0% annually for the next two years.Lodging Fundamentals - Demand continues to outpace supply, a relationship that is forecast to change in 2018.New Supply - The supply pipeline continues to grow, but remains well below the peak set in 2008. Brand Growth - Brand companies continue to look for opportunities to increase scale in order to provide consumers with more options, which present both opportunities for new development and concerns over market saturation for owners and developers.Lifestyle Semantics - With the growing proliferation of "lifestyle" brands, one of the breakout sessions aimed to define what exactly is lifestyle. While no universal definition was reached, the most compelling argument came from John Cohlan, CEO of Margaritaville Hotels, who contended that to truly be a lifestyle hotel, the consumer has to have a preconceived idea of what experience to expect before showing up to the property. This is most easily achieved by new "lifestyle" brands that have other business lines beyond hospitality. Natural Disasters - Hurricanes, floods, and fires have impacted hotels across the country in the last several months. Owners in affected areas will need to manage short-term increases to labor and material costs throughout rebuilding, and long-term increases to insurance costs.Valuation Factors - Rising interest rates are a concern for investors; however, the more substantial factor influencing valuation and closing transactions is the substantial PIP requirement that is becoming more common place.
Article by Court Williams

The Future of Casual Dining: What to Expect

HVS ·10 November 2017
Targeting future audiences is a longstanding marketing strategy, and that's exactly what the casual dining restaurant industry is doing in a current effort to survive. Cracker Barrel's Holler and Dash, is a new chain with a fast-casual concept built around fresh-baked biscuits. With bare-brick walls and concrete floors, H&D is targeting a younger demographic than its parent chain.This is part of an industry-wide shift by outdated restaurant chains to reinvent themselves, by creating "offshoot" brands under a new name and image that are aimed at Millennials and younger diners.Downward DriftA casual dining industry analysis shows that during 2016 the sector experienced more rapidly declining sales and traffic than others. Although the slipping sales have been attributed to everything from the weather to politics, the fact is the industry has seen a downward trend in growth since the beginning of 2015.The impact has been most significant for chain restaurants, which have been hard-pressed to close venues and lay off staff as the trend continued. Meanwhile, quick service restaurants, fine dining and upscale casual venues have all been in positive territory over the same period.Incorporating New TrendsFor restaurant venues setting out to conceptualize a new image, new casual dining industry trends worth incorporating are:Free wifi: 80% of Millennials have used free wifi in a restaurant in the past year, making this the highest-ranking consumer trend according to the National Restaurant Association.Local food: 56% of consumers prefer food locally sourced from farmers and producers in their own community.Saving the planet: 60% of consumers make restaurant choices based on the serving of environmentally-friendly food.Combine these options with the streamlined service of the fast-casual environment, and the entire industry undergoes a metamorphosis.Statistics Worth NotingWith total restaurant sales projected to reach almost $800 billion by the end of the year, feeding people now accounts for 4 percent of the U.S. GDP. Casual dining industry statistics showed franchise restaurants are the most common of all restaurant types, comprising one third of all venues in the U.S.A report from shows consumers are increasingly looking for healthier meals, with 70 percent likely to visit venues that offer locally-sourced foods. Diners also want dynamic options beyond the basic burger-and-fries, with 25 percent stating they wanted to try unconventional cuisine.Keeping Market ShareIn spite of the declining levels of the casual dining market share, restaurant brands in this space would do well to focus on three critical areas in their efforts to remain relevant. These are:Innovative menu planning, which meets demand for healthier options based on locally-sourced produce.Improved service, delivered by competent, trained staff. Since part of the casual dining value proposition continues to include full service, companies will need to continue investing in service that is exceptional, for patrons to accept higher price points.The use of technology to streamline and automate processes, especially client-facing ones. Statistics show more than 70 percent of diners presented with tablets for ordering purposes used them, and were impressed by the chance to do so.There's no question the casual dining restaurant industry is currently going through some changes, but with careful planning and innovation a new version may rise and take advantage of the huge numbers of younger diners looking to enjoy eating out.

HVS Market Pulse: Indianapolis, IN | By Jai B. Patel & Justin Kaminski

HVS · 9 November 2017
The following HVS Market Pulse report provides a look at the key industries, economy, hotel demand generators, and recent performance dynamics of the hotel industry in Indianapolis.Key Industries and Business DevelopmentIndianapolis remains one of the largest bio-medical and pharmaceutical hubs in the United States. In fact, according to a recent industry report from BioCrossroads, Indiana's life sciences exports totaled $9.8 billion, the second highest in the U.S. For example, Eli Lilly and Company, which was founded in Indianapolis in 1876, has grown to become one of the top-ten-largest pharmaceutical companies in the world. Eli Lilly recently completed an 80,000-square-foot expansion of its insulin-manufacturing plant in Indianapolis; the $140-million investment added 100 new high-paying jobs in 2015. Most recently, company officials announced in March 2017 that the firm would invest $850 million in its U.S. operations, including $85 million for a new manufacturing facility in Indianapolis. Other notable biomedical and pharmaceutical companies in Indianapolis include Roche Diagnostics, Anthem, Apria Healthcare, Endocyte, Harlan Laboratories, ImmuneWorks, and The Medicines Company.Located on the east bank of the White River in Downtown Indianapolis, Indiana University-Purdue University Indianapolis (IUPUI) enrolls over 30,000 students and collects millions of dollars in research funds for its medical, nursing, and dental schools. The campus is part of the economic triangle that links Bloomington and West Lafayette to Indianapolis. The 1.3-million-square-foot Eskenazi Health complex opened on IUPUI's campus in December 2013; the $754-million facility includes a 315-bed hospital with 19 operating rooms, 12 labor and delivery rooms, a 90-bed emergency department, and an Adult Level I Trauma Center. In addition, Indiana University Health is in the process of developing a new $1-billion medical center at 16th Street and Capitol Avenue as part of a major project that will tear down two century-old buildings, while renovating the middle part of the hospital. Moreover, the "16 Tech" economic development initiative is currently underway in Downtown Indianapolis to establish a master-planned development near Downtown, the IUPUI campus, and the Indiana University School of Medicine. The project is intended to attract research firms, contract service providers, and high-tech companies in industries including information technology, health information technology, motorsports, biotechnology, and clean energy. Additionally, Indiana has more manufacturing jobs per capita than any other state, and Central Indiana is a leader in engineering electric car and truck components. A major area employer in this industry, Rolls-Royce, opened a $42-million advanced aerospace production and repair facility in March 2015, and it is currently undergoing a five-year, $600-million renovation to its Indianapolis facilities. Indianapolis is also home to major operations of Allison Transmission, United Technologies Carrier Corporation, The Adidas Group, and Raytheon Technical Services. In August 2016, Raytheon was awarded a $92-million contract for development of the Enterprise Air Surveillance Radar (EASR), with contract options that could increase the value of the project to $723 million by completion. Moreover, given its central U.S. location, the city serves as a major distribution and logistics hub. Further boosting its profile, Interstate 69 will be extended north from Evansville by mid-year 2018, connecting to Interstate 74/465 at State Highway 37 in South Indianapolis, and eventually opening a direct trade route stretching from Canada to Mexico. Joining major distribution operations of FedEx, Toyota Motor Corporation, PepsiCo, DHL, and, and Tempur Sealy International recently opened large new distribution facilities in Plainfield, creating over 600 new jobs since 2015. In addition, John Morrell Food Group recently opened a new $43.5-million distribution center in the Access 70 Business Park, which created over 250 additional new jobs in 2016. Lastly, UPS recently announced its intentions to build a $260-million new logistics hub in Plainfield that will create as many as 578 jobs by the end of 2023. Indianapolis's diverse economy, united with its growing retail and residential sectors, low cost of living, and attractive business climate, continue to boost its profile as a top choice for corporate relocation and expansion.Downtown ExpansionIndianapolis's well-balanced economic base has allowed its economy to weather the recession better than most Midwest and secondary markets. A short downturn has been followed by years of economic growth and revitalization. Furthermore, downtown development continues to pick up momentum, led by the technology sector, with an anticipated $2.8 billion in investments planned through 2022, and 1.2 million of commercial space to be renovated or added by year-end 2018. Most notably, Inc. relocated to the former 950,000-square-foot, 48-story Chase Tower (now Salesforce Tower) in 2016 to consolidate its operations in 400,000 square feet of space, creating 800 new staff positions by 2021, adding an additional 500 apprentice positions by 2020, and investing $40 million over ten years as part of its expansion. Subsequently, India-based Infosys announced in May 2017 that it would open a tech hub in OneAmerica Tower, adding 100 workers by year-end 2017 and 400 additional employees next year, with a potential of creating up to 2,000 new jobs by 2021. Moreover, Octiv, formerly known as TinderBox, also plans to expand its downtown operations, creating 224 new high-wage jobs and investing $3.2 million by 2021. Lastly, we note the state's newest tech hub, The Union 525, recently relocated into the Brougher Building in Downtown Indianapolis in February 2017; the hub, which offers space for startup and scale-up companies, was created to appeal to tech startups on the brink of serious growth. Additionally, Cummins Inc. recently moved into its new, ten-story, global distribution business headquarters office building in early 2017, including a parking garage, 15,000 square feet of retail space, and a large public plaza on the former site of the Market Square Arena; the building is expected to house up to 400 Cummins employees, with 250 employees upon opening and an additional 200 in the next several years. Lastly, two new TIF districts are under consideration to spur redevelopment, which should benefit Downtown Indianapolis. On the west side of the White River along West Washington Street, the site of the 103-acre former GM plant (closed 2011) is under consideration for a $550-million mixed-use redevelopment initiative, while efforts to develop the Market East District are underway at Alabama and Market Streets.Meetings and ConventionsConventions and events held at the Indiana Convention Center produce the bulk of meeting and group demand in Indianapolis, predominantly representing the association, corporate, and SMERFE segments; however, notable meeting demand is also booked directly with hotels and coporate events, as well as sports tournaments and social events.Located in the heart of Downtown Indianapolis, the Indiana Convention Center currently houses 566,000 square feet of contiguous exhibit space. The facility has historically been associated with and connected to the RCA Dome, which was demolished in 2008 to make way for the expansion of the convention center. The convention center is now connected to Lucas Oil Stadium, a multi-use facility that can accommodate a variety of events, including sporting events, concerts, conventions, and tradeshows. In January 2011, the Indiana Convention Center completed a $275-million, two-level expansion, which included the construction of 254,00 square feet of exhibit space, 63,000 square feet of meeting space, and approximately 103,000 square feet of pre-function and registration space. A three-level, glass-entry pavilion was also created as the focal point of the center. In total, exhibit space in the combined facilities equates to approximately 750,000 square feet, plus additional meeting, ballroom, and pre-function space. The Indiana Sports Corporation brings major sporting events to the area, including Olympic, NCAA, Big Ten, and professional All-Star events. During these major events, hotel rooms are in demand and sellout situations are experienced throughout the greater metropolitan area. Area hotels benefit from these sports group blocks, which constitute hundreds of guestrooms. Demand for Indiana Sports Corporation events are spread throughout the year for various sports. Indianapolis has emerged as a premier youth and amateur sports destination, led by the opening of the $45-million Grand Park sports campus in nearby Westfield in the spring of 2014. The 400-acre sports "mega park" features 26 diamonds for baseball and softball; 31 multipurpose fields for soccer, lacrosse, football, rugby, and field hockey; 2 large indoor facilities to accommodate off-season play and training; and more than ten miles of paved trails. Moreover, the complex added an indoor soccer and basketball/volleyball facility in January 2016.Leisure AttractionsIndianapolis benefits from a variety of tourist and leisure attractions in the area. According to the Downtown Indy Partnership, tourism generates over $4.4 billion in economic impact for Central Indiana. In fact, Indianapolis attracts over 26 million visitors annually, with a typical traveler spending an average of $169 per day. Leisure demand comprises visitors to the area's universities and colleges; interstate motorists; medical patients; and regional travelers attending local concerts, festivals, and sporting events. The peak season for tourism in this area constitutes the warmer months, from May to September. Notable local attractions include:The Indianapolis Motor Speedway is the world's largest spectator facility and the only racetrack to host the Indy Racing League, NASCAR, and Formula One. Most notably, the Indianapolis Motor Speedway annually hosts the Indy 500 in May and the Brickyard 400 in July. Furthermore, the Red Bull Air Race was held for the first time at the track in early October 2016.Lucas Oil Stadium, the home of the NFL's Indianapolis Colts, opened in the fall of 2008, and basketball fans can enjoy Indiana Pacers home games at Bankers Life Fieldhouse. Moreover, the Indianapolis-based NCAA organizes the Final Four collegiate basketball championship every spring, and this event is periodically held at Lucas Oil Stadium; the Final Four, which was last held in Indianapolis in April 2015, is slated to return in 2021. Victory Field is a minor-league ballpark that is home to the Indianapolis Indians of the International League.Indianapolis is home to several museums, including the NCAA Hall of Champions, the Children's Museum of Indianapolis, and many more. Additionally, the Indianapolis Zoo hosts approximately one million visitors each year and plays a major role in worldwide conservation and research.Market Performance & SupplyThere are approximately 280 hotels and over 30,000 rooms in Indianapolis MSA, while Indianapolis itself offers approximately 175 hotels totaling more than 23,000 rooms. Since 2005, the greater Indianapolis market has realized an increase of approximately 7,625 new hotel rooms, representing a 24% increase in supply, with roughly 2,500 of those rooms in the downtown area. However, between 2012 and mid-year 2017, supply increases slowed to a rate of just 5.7%, as illustrated in the corresponding table.Furthermore, since 2012, approximately 15 hotels have closed in the metropolitan area. This loss of available room nights has contributed to the slowed supply rate growth and has assisted in mitigating the impact of the new rooms that have and will be added across the market. According to our interviews with market participants, market-wide demand growth has generally well outpaced supply increases in recent years, leading to market-wide occupancy levels not experienced since prior to the Great Recession. Demand improvements have primarily been driven by continued strength in meeting and group demand from the expansion of the Indiana Convention Center in 2011 and the opening of Grand Park in 2014. Subsequently, average rate and RevPAR have also reportedly climbed to new peaks in recent years. Citywide meeting and group lodging demand was buoyed with the 2011 expansion of the Indiana Convention Center (ICC), coupled with the 2010/11 opening of Marriott Place, which added 1,626 downtown guestrooms. The combination of the additional meeting space and guestrooms has allowed the ICC to accommodate much larger groups. Moreover, the center's flexible configuration and sky bridge access allows it the capability to host two significant groups simultaneously. The timing of the last expansion somewhat insulated the market from the last recession, as the market did not realize as severe of an economic downturn as many comparable markets. The number of meetings at the newly expanded ICC continued to grow through 2013; however, attendance contracted in 2013, before climbing to a new peak in 2014. Following the state's passing of the controversial Religious Freedom Restoration Act (RFRA) in early 2015, both the number of events and attendees declined, as select events were canceled. However, according to convention officials, convention attendance and room-night bookings rebounded strongly, suggesting mitigation of RFRA's impactCitywide meeting and group demand has also benefited from the opening of Grand Park in the spring of 2011, which has injected an estimated 40,000 additional room nights each year through year-round sporting events at the youth, high school, and collegiate levels. Although Grand Park produces a majority of its demand in the spring and summer months, the addition of its indoor soccer and basketball/volleyball facility in January 2016 has helped supplement demand in seasonally slow winter months. Indiana Convention Center's increased group capacity and Grand Park's abundant success have renewed hotel-development interest across the market, especially in the downtown and northern submarkets of Indianapolis, as illustrated in the table below. As of October 2017, 10 new hotels, representing approximately 1,750 additional rooms, were under construction in the Indianapolis MSA. However, many other hotel projects were in the early development stages, and as such, were not listed.OutlookFavorable supply and demand dynamics have kept Indianapolis's hotel industry roaring in recent years. However, many new hotels are scheduled to open in 2017, including nine additional hotels by year-end, representing over 1,000 rooms. The supply changes will make the hotel environment more competitive, though the exact impact on average rates and overall occupancy remains to be determined. Through 2016, hoteliers continued to achieve rates unprecedented for this market, as hotel operators and entities, such as Visit Indy and the Indiana Sports Corporation, successfully raised the city's competitiveness to regional and national peer markets. HVS anticipates continued average rate growth in 2017 and 2018; however, occupancy rates are expected to soften as new supply comes online. Moreover, given the anticipated reopening of the newly expanded Kentucky International Convention Center in Louisville mid-year 2018, which competes with Indianapolis for conventions, as well as the near-term openings of several new convention center hotels in competitive convention destinations, we expect meeting and group demand associated with the ICC to be somewhat subdued in the coming years. Market upside is anticipated given the pent-up demand for high-level sports events and a reported lack of metro-area hotel rooms during peak periods, in conjunction with Indianapolis's strong reputation as a sports hub, which should bolster leisure travel in the area over the long term. Additionally, company expansions and relocations, particularly in the technology sector, are expected to continue to fuel strong commercial demand growth in the near term. Taken together, these dynamics support a generally positive outlook for the Indianapolis hotel market over the next several years.


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