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All-Inclusive Caribbean Development Continues, Lenders Show Renewed Interest in the Region, and CHICOS Soccer Tournament Donates to Caribbean Rotary Fund

HVS ·16 November 2018
The 2018 edition of the Caribbean Hotel Investment Conference & Operations Summit (CHICOS) concluded last week with energetic and renewed interest in the region, as well as optimism, as displayed by a notable presence of lenders and banks eager to meet with developers.As CHICOS Chairman Parris Jordan noted, "In 2017, our region was struck with two catastrophic weather events just after the fears of Zika were subsiding. In some markets, after severe storms, hotel values tend to decline, creating opportunities for buyers to make more affordable purchases; however, this was not the case for the Caribbean lodging market in 2018. Interestingly, we are seeing even greater interest among lenders to finance projects, more so than in the past ten years. This was evidenced in our equity and debt-financing panels.The islands of Anguilla, British Virgin Islands, Puerto Rico, and St. Barts have demonstrated a relatively fast recovery and have most of their hotel and villa rental inventory available for this upcoming peak season. The islands of Dominica, St. Martin/Maarten, and the United States Virgin Islands continue their recovery efforts, albeit at a slower pace; limited inventory is still available on these islands as they continue to rebuild. Despite the challenges stemming primarily from the Zika Virus, which affected the region in 2015/16, as well as the 2017 hurricane season, the market continues to be resilient, as demonstrated by the strong hotel operating performance, occupancy, ADR, and RevPAR levels over the last few years.Other takeaway messages from this year's CHICOS:There is a noticeable uptick of interest in development of the all-inclusive model in the region, particularly in the Dominican Republic.More capital is available for investor lending in the Caribbean region at this point in the development cycle.Total revenue increased eight of the nine months reviewed during 2018, compared to the same period in 2017; occupancy increased slightly; ADR grew more than 5% for the last five months (May through September 2018); and RevPAR increased 3.8% over the same period last year.Aruba, Curacao, Cayman Islands, Dominican Republic, Jamaica, and Puerto Rico are among the strongest performing islands in terms of year-to-date RevPAR growth, with the Cayman Islands leading the charge, up over 27% from the same period last year.The first-ever CHICOS (soccer) Showdown was held on the first day of the conference. Executives from HVS, KPMG, global hotel brands, banks, and governments, as well as other attendees, participated in the hour-long match. With a final score of 3-2 (HVS taking the trophy), money for each goal was donated to the Rotary Foundation, an organization with a history of assisting Caribbean nations impacted by hurricanes. The Foundation provides necessities such as water, canned food, and clothing, and was named by CNBC as one of the Top 10 Charities in the World.CHICOS 2019 is scheduled for November 14-15, 2019, at the Secrets Resort in Montego Bay, Jamaica.

All-Inclusive Caribbean Development Continues, Lenders Show Renewed Interest in the Region, and CHICOS Soccer Tournament Donates to Caribbean Rotary Fund

HVS News·15 November 2018
The 2018 edition of the Caribbean Hotel Investment Conference & Operations Summit (CHICOS) concluded last week with energetic and renewed interest in the region, as well as optimism, as displayed by a notable presence of lenders and banks eager to meet with developers.

Market Snapshot: Asia Pacific 2018 | By Hok Yean Chee

HVS ·12 November 2018
Geographically, the pick up in transaction activity can be attributed to the North Asia and South-East Asia markets, while Australia markets witnessed a slowdown. Reasons for the increase in transaction activity could plausibly be attributed to the increase in investment opportunities, potential for growth in developing markets, buyers willingness to meet seller's demands, amongst others.Frequency and Volume of Hotel Transaction VolumeOver the period from 4Q2017 to 3Q2018, South Korea leads in number of hotel transactions with 65 transacted properties, 45 more than the previous four quarters. The increase comes despite weakening hotel market performance, indicating that investors' sentiment in the market remains optimistic. Markets across South-East Asia (including Maldives) recorded 27 transactions from 4Q2017 to 3Q2018, almost double the 16 recorded in the previous four quarters. With the exception of Philippines and Vietnam, all South-East Asia markets recorded more transactions in the last four quarters.Article by Hok Yean CHEE , Ho Mei Leng , Jeremy Teo, Larissa Lam, Fan Yang, Kok Xin, Hemant Chawla, Stacey Zhu ,Chloe Pang, Deborah RollandSee full article

HVS Asia Pacific Hospitality Newsletter - Week Ending 9 November 2018

HVS ·12 November 2018
The Market Snapshot: Asia Pacific 2018 highlights an overview of transaction activity in the region and presents 16 markets' current hospitality landscape; each covering demand and supply dynamics, hotel performances, and key transactions.Hiap Hoe Acquires Aloft Perth Hotel and Office Building for AUD100 MillionSingapore-based and SGX-listed real estate group, Hiap Hoe Limited ("Hiap Hoe"), has entered into a sales and purchase agreement with Australia-based BAAC Pty Ltd ("BAAC") to acquire Aloft Perth hotel and an office building for AUD100 million. Located at 25-27 Rowe Avenue, Rivervale, Western Australia, the properties are situated along the Great Eastern Highway corridor in proximity to multiple blue-chip companies and are between the Perth central business district and Perth Airport. The 224-key hotel is currently managed by Starwood Australia Hotels, featuring three restaurants, a fitness centre, heated outdoor swimming pool, 593 square metresof conference space and a rooftop terrace area. The office building has a net lettable area of 10,569 square metres and parking area for 509 vehicles. Hiap Hoe has already paid AUD11 million on November 1 and will pay the remaining through a combination of internal resources and debt. The completion of the acquisition is still subject to relevant approvals and agreements from the regulatory authorities of Australia, including the Foreign Investment Review Board of Australia.Naumi Acquires Two Wellington Central Business District Hotels in New ZealandSingapore-based hotel owner and operator Naumi Hotels ("Naumi") has acquired the 115-key Comfort Hotel Wellington and the 62-key Quality Hotel Wellington for an undisclosed price. Centrally located and 15 minutes from the Wellington International Airport, both hotels will continue to operate under their respective names until completion of the renovation in Q4 2019. Thereafter, the Comfort Hotel, which is located within an iconic historic building, will be converted into the Naumi Heritage Wellington with 115 rooms, while the Quality Hotel will be converted into the Naumi Suites Willington with 62 suites. With the acquisition, Naumi, part of the Singapore-based hospitality family firm Hind Group ("Hind Group"), will count a total of five properties in Auckland, Singapore, Sydney and Wellington. Colliers International national director of hotels, Dean Humphries, was marketing the two acquired properties last year at a price of approximately NZD40 million.Garuda Indonesia To Launch New Route Between Singapore and Belitung IslandIndonesia's national airline, Garuda Indonesia, has launch a direct flight between Singapore and Tanjung Pandan in Belitung, Indonesia starting from 29 October 2018. The four-time weekly flight will be served by a Bombardier CRJ 1000 aircraft which has a total capacity of 100 seats. Over the last three years, domestic tourism in Belitung has increased by over 25 per cent and Belitung hopes to become the new gateway destination for Singaporean and other foreign tourists in Singapore. According to Berlianto Situngkir, Economic Function Coordinator at the Indonesia Embassy (KBRI) in Singapore, five-star hotels and a golf course are currently being prepared to be used by foreign travelers at the end of 2018. The Association of the Indonesian Tour & Travel Agencies (ASITA) will conduct sales mission in Singapore to promote this new destination and attract more international visitors. In addition, The Ministry of Tourism will provide promotional support to airlines and entrepreneurs aiming to attract international visitor to Belitung.Western Australia To Roll Out Marketing Campaign In The Indian MarketThe Ministry of Tourism in Western Australia has recently announced its first major investment of AUD300,000 in attracting Indian tourists. The first phase of the marketing campaign is a partnership with Thomas Cook to market tour packages for the first-ever cricket test match between India and Australia which will take place in the new stadium in Perth on December 2018. As part of the engagement, the ministry has also appointed a full-time marketing representative at the trade commission office in Mumbai. Paul Papalia, Minister of Tourism, Western Australia, added that they are keen on addressing the lack of direct connectivity from India by introducing direct flights between Perth and key markets in India including New Delhi and Mumbai as well as other Indian cities. The tourism minister also revealed that there will be a multi-million-dollar investment, post the commencement of direct flights to Perth, in the next three years. India is a fast-growing market for Western Australia, welcoming approximately 28,200 Indians annually.

CHICOS 2018 to Feature First Hospitality Executive Soccer Match: Caribbean Hotel Consultants and Investors to Play Athletic Showdown of Authentic Football

HVS News·23 October 2018
In response to years of prodding from the attendees, speakers and sponsors of the Caribbean Hotel Investment Conference & Operations Summit (CHICOS), the 2018 event will, for the first time, feature a scheduled soccer match between host organization HVS and rival consultancy KPMG. Professionals from other firms will also participate among the two (loosely!) organized teams.

Disaster-related Hotel Business Loss Recovery - Unique Challenges

HVS ·19 October 2018
Hurricanes Michael and Florence are both gone, but the extent of their destruction is now coming into clearer focus.Michael-caused losses in property and income are estimated to be $15 to $21 billion, according to Moody's Analytics. Boston-based insurer Karen Clark & Company (KCC) released an estimate of $3.7 billion for storm surge alone. KCC's catastrophe models estimate that Hurricane Michael caused about $8 billion in privately insured losses, which do not include losses covered by the National Flood Insurance Program.While Michael was the fourth-strongest storm to hit the U.S. since record-keeping began 1951, it was far from the most damaging. By comparison, Florence's weaker winds and slower speed caused more damage. With two feet of rainfall over a wide swath of North Carolina, many rivers were still rising two weeks after landfall. Moody's updated estimates of losses range between $38 and $50 billion.The following table shows the location of the 68 hotels (4,475 rooms) that were closed because of Florence-related damage, as reported by STR, provider of hotel market data and benchmarking services:And last year was much worse for catastrophic events. Hurricanes Harvey, Irma, and Maria combined with devastating Western wildfires and other natural catastrophes to make 2017 the most expensive year on record for disasters, at $306 billion, according to a January update by Adam Smith, an economist at the National Oceanic and Atmospheric Administration (NOAA).Hotels and beachfront resorts in coastal areas are particularly vulnerable, and business interruption can be long-lasting. According to David Jefferys of Conde Nast Traveler, six notable hotels remained unopened or partially open a year after Maria's September 20, 2017, landfall in Puerto Rico: Dorado Beach, a Ritz-Carlton Reserve; El Conquistador, A Waldorf Astoria Resort; El San Juan Hotel; St. Regis Bahia Beach Resort, Puerto Rico; The Ritz-Carlton, San Juan; and W Retreat & Spa, Vieques Island.Storm surge is not just a beachfront problem, and the risk extends many miles inland in some parts of the Southeast, as illustrated in the following map.NOAA Storm Surge Vulnerability Map (red indicates possible surge of nine feet or more)The strongest storms may be getting more frequent as this century plays out. The following NOAA model shows the possible increase in Category 4 and 5 storms in red:NOAA Geophysical Fluid Dynamics Lab - 21st Century possible Increase in Category 4-5 StormsFloods are the most common and most destructive natural disasters in the United States. Ninety percent of all natural disasters involve flooding, and all 50 states have experienced floods or flash floods in the past five years, according to The damage from a flood is not covered under a standard insurance policy. Flood insurance is a special policy that is federally backed by the National Flood Insurance Program (NFIP) and managed by the Federal Emergency Management Agency (FEMA). The NFIP aims to reduce the impact of flooding on private and public structures by providing affordable insurance to property owners and by encouraging communities to adopt and enforce floodplain management regulations. These regulations are based on floodplain maps called Flood Insurance Rate Maps (FIRMs), which monitor Base Flood Elevations (BFEs). The relationship between the BFE and a structure's elevation determines the flood insurance cost, according to the National Association of Insurance Commissioners. The most important aspect of this federally supported insurance program is a potentially onerous rebuilding provision that is intended to reduce future losses: if the cost of a repair, rebuild, or addition is more than 50% of the pre-flood value of the building, the new or renewed structure must be 100% in compliance with existing building and floodplain management regulations. This is the case even if the building was constructed prior to the FIRM or if the regulations became stricter after construction. This means that compliance could require elevating the entire building above BFE or undertaking a major reconstruction project. Natural catastrophe or "nat-cat" losses generally fall into two primary categories: physical loss related to structure, FF&E, and inventory and loss related to business interruption. Physical repairs to hotels can have additional challenges, such as tightened building codes or zoning ordinances both in- and outside of flood zones. Also, debate may center around whether planned rebuilding constitutes a return to "as was" or an arguable improvement. Loss recovery (indemnity) will be based on an agreement of the insured and the insurer as to the categorical cause of loss. For example, it is critical that both parties understand how "flood" and "wind storm" are being defined in a policy. According to Duncan Ellis, U.S. Property Practice Leader at Marsh, an insurance brokerage and risk management company, "while you may have coverage in one area--i.e., flood--you may find that the very same loss is actually storm surge under wind storm." Resolution of a business interruption claim for hotels can be particularly challenging because it can have so many moving parts (hotel departments, for example, are run like mini-businesses within a hotel) and because the loss-of-business duration usually exceeds the physical rebuilding period. "The impact on profits, on business income, from natural disasters can be more significant than on the cost to fix physical damage," reports Linda Kornfeld, Vice Chair of the Insurance Recovery Group at law firm Blank Rome. Basic business interruption policies will cover lost profits from a complete or partial shutdown of the hotel. Partial shutdowns can result from guestrooms, F&B operations, or income-producing amenities being out of order or inoperable. A partial shutdown can also be caused by hotel suppliers' or service providers' inability to service the hotel normally. Complete shutdown can be caused by acute physical damage or diminished accessibility, such as civil evacuation mandates or infrastructure issues like impassable roads or utility grid failures. When making a business interruption claim, credibility counts. That means having established disaster plans in place and a claims team at the ready. This team should have well defined roles and responsibilities and should consist of risk management, legal, HR, and hospitality operations and valuation/appraisal professionals. A partial shutdown will likely put immediate stress on the cash flow of a damaged hotel, as operating costs weigh heavily on reduced revenues. Even in the case of a total closure, obligations such as salaried payroll, taxes, mortgage obligations, and, yes, insurance - continue. Experts believe that the most important focus for an owner (after the safety and welfare of employees) is claim-based income from the insurer. "When there is P&L or balance sheet impact, it is critical that we get the insurer on board with the funding of losses--that is one of the most strategic things you can deal with," suggests Paul McVey, Managing Director of Marsh Claim Practice. Ray Hutnick, financial practice leader at Marsh Risk Consulting, concurs with the need for proper support for a request for interim payments. "Transparent structured interim payments should be based on properly supported committed costs. You don't want to be fronting a lot of money and then have checks come later. So, if you properly document during this process . . . it can help you recover and get back into normal operations." Ultimately, losses for both physical damage and business interruption need to be tallied by specialists. In her Checklist for Business Interruption Losses, Lorelie Masters of Jenner and Block, an insurance litigation and counseling practice, points out that "policies typically contain general provisions for determining the amount of business income loss and extra expense involved. They may point to the need for help from [experts]." In formulating an initial claim estimate, a hotel expert will collect and review departmental P&Ls, budgets, and staffing--adjusted for such variables as seasons, holidays, school breaks, conventions, and special events. S/he will ideally have--or have access to--the historical performance of competitive hotels in the market in order to benchmark against those with minimal or no operating impact from the damaging event. A chosen hotel consultant should be an experienced appraiser with strong financial analysis capabilities, as well as National Flood Insurance claims experience. The ability to mine supporting information and to identify, analyze, and lucidly explain special circumstances will fortify a claim presentation to an insurance adjuster and bring significant stability to a destabilizing event.

Equity Yield Rates on the Decline

HVS ·19 October 2018
HVS continually tracks the rates of return on the assets that we consult on. In our most recent review, we found that equity yield rates, on average, have been declining, due in part to the expectation of slowing EBITDA Less Replacement Reserve growth. The sample size of available data is also a contributing factor.Equity yield rates were notably lower for full-service and luxury hotels, averaging 16.8% for the year-to-date 2018 period (below the 17.7% level recorded for 2017), driven largely by a lower number of total transactions of this asset type, coupled with an increase in full-service sales of iconic assets in highly sought-after coastal markets with high barriers to entry.Equity yield rates for select-service and upscale, limited-service hotels averaged 18.8% for the year-to-date period ending September 2018, while the average equity rate for lower-tier limited-service hotels was 20.1% for the noted 2018 period. We note that the comparatively greater risk of supply growth within these asset classes contributes to investors' need for higher hurdle rates on equity investments.Total property yields (overall discount rate) similarly declined for full-service and luxury hotels, while holding steady in the other categories. Total property yields are averaging 10.0% thus far in 2018 for the full-service and luxury category. Higher levels of 10.9% for select-service and upscale limited-service hotels, and 11.8% for lower-tier limited-service hotels were recorded. This relationship to equity yields also reflects expectations of increased debt costs for hospitality investments. Rates of return are calculated using the actual sale prices of the hotels with forecasted cashflows, and inputting market terms for fixed-rate financing on a ten-year hold.

How Hotels Can Compete in the Airbnb Landscape

HVS ·18 October 2018
Airbnb came on the scene in 2008, amidst corporate scandal, economic downturn and instability. Initially people were skeptical, but Airbnb has gained remarkable momentum building its platform with transparency and trust, at a time people were greatly seeking both. In the early years, Airbnb's inclusive and diverse model provided low-cost travel options with uncommon flexibility, which became an enticing alternative to the traditional big-name hotel booking systems.The social component and owner-intimacy of Airbnb also intrigued adventurous solo travelers, seeking more local and organic destination experiences. The notion of exploring beautiful places "off the beaten path" always holds distinct appeal. These systems produced bookings based on realistic travel and stay expectations and a digest of genuine, host and guest reviews. This created an alternative to staying at expensive hotels and made travel experiences more accessible and adventurous for a wider variety of people, incomes and lifestyles.Another upside of Airbnb is that it is widely perceived as a people's platform. It has empowered an enormous volume of people to earn money by hosting guests in their homes, rooms or by sharing travel and tour experiences. These features in addition to a foundation of honesty and process transparency have made Airbnb a game changer for the travel market.Sustainability and HealthThe popularity of Airbnb has generated not only new views on style and stays, but they have moved into the experiential and event market, promoting local attractions, events, and various travel experiences. In April, Airbnb expanded its programming yet again to include a new Global Office of Healthy Tourism and announced the formation of its new Tourism Advisory Board. These new dynamics support local resources, sustainable tourism, rural regeneration and ecological impact.Airbnb released new data highlighting their strides and support of healthy tourism. Some of these include, "88% of Airbnb hosts around the world incorporate green practices into hosting, 79% of guests said they decided to use Airbnb because they wanted to live like a local, and 66% of guests said the environmental benefits of home sharing were important in their choice of Airbnb."There's no question, forming alliances and collaborating with other companies is a magnificent thing. We are experiencing an era of soft and dramatic and change across multiple industries. A part of that change, is increasing the propensity to work together in bigger ways. While this is true, hotels and resorts have traditionally maintained their autonomy within their singular locations or the boundaries of their respective brands.As new travel aspects surface across Airbnb initiatives, the contest to compete is constantly evolving. For hotels and resorts this presents an exciting opportunity to initiate innovative hotel experiences. It's time to review and replace outmoded guest methodology and program structures with new, more adaptable and effective strategic targets.Comparative PricingDepending on the choice of property, destination and time of year, hotel pricing can vary substantially. Many times, pricing is based on availability, season or simply demand. Airbnb pricing can vary for similar reasons to hotels. However, these rates have become increasingly competitive as the Airbnb platform continues to thrive. The chart below, highlights hotel vs. Airbnb average rates in some select U.S. cities.In some cases, such as New Orleans, Airbnb rates have shown to exceed the ADR of local hotels. As a result of this, the New Orleans City Council has temporarily "banned new whole-home-short-term rentals in residential neighborhoods." This action subjects temporary STR's with a 90-day limit until new regulations can be introduced to ratify short-term rentals.This is a common outcry amongst popular second and third tier destination cities. And further supports the call for updated hotel performance reviews and potential program revisions. It's essential to know where the opportunities exist to recalibrate new pricing structures and tactical planning.Spa and Wellness InclusivityWellness inspired themes are stirring global demand, in life, work and travel. Hospitality initiatives focused on well-being are becoming a high-demand property feature. This includes healthy food, restaurants tailored to alternative and/or restricted diets, as well as activities and spa and wellness services that promote well-being. An increasing number of guests look to the spa and wellness components of a property seeking services that authentically enhance the quality of their stay.Unlike Airbnb, hotels and resorts can offer an inclusive experiential stay. Despite the rising variety of activities offered through Airbnb, these often lack the luxury amenities of a hotel or resort spa. People seeking upscale spa and wellness experiences will find these features to be a particularly motivating component of their stay. These programs can also represent strong and unique selling points for a hotel property.Developing programs that extend spa and wellness services more actively to outside guests, can increase the occupancy of the spa overall. Creating new opportunities to collaborate with local Airbnb hosts can add experiential value for the hosts as well as the hotel. In the short term, this can upsurge spa engagement and in the long term this can form lasting, beneficial new partnerships. Furthermore, this provides more visibility for the hotel with new considerations for use in the future.Packages and PromotionsHotels have some clear advantages when it comes to marketing and promoting hotel engagement. Unlike a single hosted Airbnb deal, a hotel has the ability to create unique guest packages and modify or expand these as necessary. They also have the media reach and market advantage of brand recondition and loyalty programs.Creating special guest incentives in conjunction with the unique selling points of the property presents a full experiential package. Exploring new variations of these, by combining packages with cooking classes, wine pairing, or different class types, can enhance standard offers and traditional hotel packages. Being creative and exploring new value propositions and local partnerships is another way to boost hotel and spa and wellness engagement.Branded loyalty and membership programs can entice commitment. However, depending on the number of stays or level of points, these can often have lackluster benefits. Formulating these with more inclusive paybacks for a wider spectrum of members, can have distinct appeal. Consumers are seeking authenticity and value. They are seeking substance in the brands they believe in, where they stay and where they choose to travel.New Guest TypeThe last decade has created a new dimension of travelers. Remote business is a common factor, allowing people to work while traveling and exploring the world. These newfound freedoms have transformed the way people perceive doing business and how that intersects with their lifestyle. Heading to the office may mean sitting in a coffee shop, a hotel lobby or on a lounge chair by the beach. These aspects have evolved into a new travel sector that has elevated guest expectations and altered conventional stay preferences.To improve competitiveness as a business, it's key to include healthy diversity and boost the quality and scope of services ongoing. Today's guests are savvier than ever, and they have a plethora of options at their fingertips. Capturing their attention and spend, requires constant review, responsiveness and relevance.Hotel and Resort Program TipsIdentify and Create Rewarding Guest PackagesIntroduce a new selection of entertainment, events and activities. These can stagnate over time and need regular refreshing.Add Smart Wellness IncentivesHealth and wellness have become cornerstones of the lifestyle market. Integrating unique spa and wellness incentives can leverage unique property strengths.Technology and TimeIntegrating new technology and increasing conveniences can support activity and leisure time. This can also enhance social media streaming, promote cool new offers and special events.Fitness and YogaOffering personalized fitness and yoga sessions provides a teachable moment and memorable experience. For those new to the practice of yoga, or meditation these can be popular activities.Provide Fresh, Healthy and Delicious CuisineIn response to diversity and new dietary preferences, people are seeking healthy food options as a part of new experiences. Cooking classes, wine pairing sessions, etc. can generate strong engagement.If the hotel lacks the staff to initiate these programs, reach out to local people who can supplement these services as special guests. This can effectively rotate new events, and special programs in conjunction to guest packages and add new energy to the activities calendar.Hotel Stability and GrowthMost companies are not designed for rapid growth or swift change. The global growth of Airbnb has had an enormous impact on the hotel and travel market. Airbnb has revealed new travel trends, increased the demand for versatility and enhanced the mode of modernization.The upside is that this has created ripples of timely innovation throughout the hospitality sector. In many ways, this is a great thing! This makes way for new perspectives on programming, amenity investments, and creative solutions to increase capture. This has also produced a new type of guest, opened a new dialogue of predilections and added healthy diversity to the mix of travel and stays.Final ThoughtsHotels will continue to thrive. The ones who are prepared to evolve and adapt will have stronger legs to stand on. These businesses will know where they are, understand the challenges before them and be better able to protect their investments. Meanwhile, properties who witness fluctuations in occupancy and property performance without the agility to respond, may be subject to fragmented stability and persistent challenges. There are unlimited ways to improve the fundamentals of any business, given the right lens. Exploring effective ways to integrate them, can result in powerful strategic plans.

HVS Europe Hotel Transactions Bulletin - Week Ending 12 October 2018

HVS ·15 October 2018
Pandox Acquires the Radisson Blu GlasgowSwedish traded hotel fund Pandox has acquired the 247-room Radisson Blu Glasgow from London based Azure Hotels for PS39 million (PS158,000 per room). The deal reportedly reflects a yield of 7%, and post-acquisition Pandox will continue to operate the hotel.Union Investment Buys Four-Hotel Development Portfolio in GermanyGerman fund manager Union Investment has acquired a portfolio of four hotel developments in Germany from Benchmark Real Estate Development via a forward purchase agreement. The portfolio comprises two Super 8 developments, the 176-room Super 8 Dresden and the 156-room Super 8 Oberhausen, both due to open during Q3 2019 and to be operated by Primestar Hospitality GmbH and GS Star GmbH respectively. The other two properties are the 190-room Hyatt Place Eschborn near Frankfurt, and a 153-room Adagio Access Freiburg, both due to open in Q1 2020 and to be operated by HR Group.Commerz Real Acquires The Dorint Messe Hotel in CologneThe 313-room Dorint Hotel An der Messe, in the German city of Cologne, has been acquired by German investment manager Commerz Real from Messehotel Koln. The property, which opened in 2001, will be operated under a double-net lease agreement for 25 years by Dorint Hotels & Resorts.Ten Brinke Sells Ibis Styles Kiel And Adagio Access Kiel to Art-InvestGerman real estate investor Art-Invest has acquired a two-property portfolio in Kiel, Germany from Dutch developer Ten Brinke Group. The 238-room portfolio comprises the 148-room Ibis Styles Kiel and the 90-room Adagio Access Kiel and will continue to be managed by the current operator, Success Hotel Group.Hotel Indigo Glasgow Sold to Consortium Led by Heeton HoldingThe 94-room Hotel Indigo Glasgow was sold to a Singaporean consortium of investors comprising Heeton Holdings, KSH Holdings and Lian Beng Group, from Chardon Hotel Growth Fund and London-based private equity fund Maven Capital Partners. The property, operated under a franchise agreement, will remain managed by Interstate.

HVS Europe Hotel Transactions Bulletin - Week Ending 12 October 2018

HVS ·15 October 2018
Pandox Acquires the Radisson Blu GlasgowSwedish traded hotel fund Pandox has acquired the 247-room Radisson Blu Glasgow from London based Azure Hotels for PS39 million (PS158,000 per room). The deal reportedly reflects a yield of 7%, and post-acquisition Pandox will continue to operate the hotel.Union Investment Buys Four-Hotel Development Portfolio in GermanyGerman fund manager Union Investment has acquired a portfolio of four hotel developments in Germany from Benchmark Real Estate Development via a forward purchase agreement. The portfolio comprises two Super 8 developments, the 176-room Super 8 Dresden and the 156-room Super 8 Oberhausen, both due to open during Q3 2019 and to be operated by Primestar Hospitality GmbH and GS Star GmbH respectively. The other two properties are the 190-room Hyatt Place Eschborn near Frankfurt, and a 153-room Adagio Access Freiburg, both due to open in Q1 2020 and to be operated by HR Group.Commerz Real Acquires The Dorint Messe Hotel in CologneThe 313-room Dorint Hotel An der Messe, in the German city of Cologne, has been acquired by German investment manager Commerz Real from Messehotel Koln. The property, which opened in 2001, will be operated under a double-net lease agreement for 25 years by Dorint Hotels & Resorts.Ten Brinke Sells Ibis Styles Kiel And Adagio Access Kiel to Art-InvestGerman real estate investor Art-Invest has acquired a two-property portfolio in Kiel, Germany from Dutch developer Ten Brinke Group. The 238-room portfolio comprises the 148-room Ibis Styles Kiel and the 90-room Adagio Access Kiel and will continue to be managed by the current operator, Success Hotel Group.Hotel Indigo Glasgow Sold to Consortium Led by Heeton HoldingThe 94-room Hotel Indigo Glasgow was sold to a Singaporean consortium of investors comprising Heeton Holdings, KSH Holdings and Lian Beng Group, from Chardon Hotel Growth Fund and London-based private equity fund Maven Capital Partners. The property, operated under a franchise agreement, will remain managed by Interstate.

GCC Hotel Development Cost Trends

HVS ·11 October 2018
Hotel Development CostWith the exception of Budget & Midscale Hotels which focus on efficient & flexible design, development cost per key for all other hotel classes have increased between 10%-20% since 2013, resulting in lower project returns. We consider that further reduction in development costs "HVS 2018 Recommendations" is achievable through increasing efficiency per key, design flexibility, and alignment between the intended positioning/achievable average rate and project investment.Serviced Apartment Development CostDevelopment cost per key for Midscale Serviced Apartments in the GCC dropped by approximately 5% since 2013, and increased significantly for Upscale/Five Star Serviced Apartments during the same period, resulting in lower project returns. We consider that further reduction in development costs "HVS 2018 Recommendations" is crucial in order to achieve an alignment between the target market/achievable average rate and project investment.

GCC Countrywide Hotel Performance Indicators

HVS ·11 October 2018
GCC Countrywide OccupancyHistoric (1998-2017) and Forecast - 5 Year Average5 Year Average GCC Countrywide Occupancy with HVS ForecastA number of demand generators will induce additional room nights in each of the GCC countries over the next 5 and 10 years. Specifically, we forecast occupancy in Qatar to average 66% on account of the ongoing developments and the 2022 World Cup. Major projects and government initiatives in KSA will allow the country to achieve 66% countrywide occupancy in the next couple of years. UAE specifically continues to introduce new projects and Expo 2020 will support growth in occupancy to average of 75% for the next five years. Bahrain, Oman and Kuwait will also register a rise in demand attributed to the government tourism initiatives and overall policy reforms to support international investments and tourism growth.Historic (1998-2017) and Forecast - 10 Year Average10 Year Average GCC Countrywide Occupancy with HVS ForecastMarketwide Occupancy can be misleading when not considered in the context of supply and demand dynamics. All GCC countries have registered double digit growth in accommodated roomnight demand in the last 20 years, further illustrating the growth of the tourism sector in the region.Historical occupancy in the GCC countries in the last 10 and 20 years averaged approximately 62% and 64% respectively, UAE consistently outperforming the GCC average hotel occupancy. HVS forecast hotel occupancy over the next 10 years: KSA is expected to register the largest growth in occupancy levels (8pp), followed by Oman and Bahrain (5pp). Despite the increase in visitation to the UAE, the strong supply pipeline will result in constrained occupancy of 75%.GCC Countrywide Average Daily RateHistoric (1998-2017) and Forecast - 5 Year Average5 Year Average GCC Countrywide Average Daily Rate USD - HVS ForecastA review of yearly marketwide average rates across GCC countries since 1998 indicate a peak in the years 2006 to 2008, after which average rates have started to normalise and in certain cities decline.The entrance of additional hotel rooms to the GCC market will continue to impact the achievable average daily rate, despite the potential demand induced by new developments and government initiatives. HVS forecast countrywide ADR in UAE, Oman and Qatar to remain stagnant. KSA is likely to benefit from the recent changes in tourism government policies; average rates across KSA is forecasted to grow to USD200.Bahrain and Kuwait will both register further drops in market wide average rate, as a result of increased competition and the phase out of the hotel rate cartel agreement effectuated by the hotel owners' association.Historic (1998-2017) and Forecast - 10 Year Average10 Year Average GCC Countrywide Average Daily Rate USD - HVS ForecastHistorical average daily rates in the GCC countries in the last 10 years averaged approximately USD197, an increase of 32% over the period 1998-2007, with Bahrain, Kuwait and Qatar overpenetrating the GCC market wide average rate.HVS forecast KSA to achieve an ADR of USD225 over the next ten years while all other GCC countries are likely to experience a stagnation or decline in average daily rates as a result of aggressive development pipeline and increased competition.GCC Countrywide Revenue per Available RoomHistoric (1998-2017) and Forecast - 5- and 10-Year AverageGCC Countrywide Revenue per Available Room USD - HVS ForecastMarketwide Revenue per Available room in the GCC dropped by 15% in the recent five years, with the exception of KSA which has remained resilient at USD116. The declining RevPAR performance is expected to continue in Bahrain and Kuwait. HVS forecasts a RevPAR increase in KSA, UAE, Oman in the next five and ten years, attributable to increased occupancy and roomnights driven by new developments. 5 Year (2018-2022) and 10 Year (2018-2027),GCC Countrywide Revenue per Available Room USD GCC Countrywide Performance Indicators in SummaryOccupancyHistoric GCC Countrywide Occupancy% 1998-2027 - HVS ForecastAverage Daily RateHistoric GCC Countrywide Average Daily Rate USD 1998-2017 - HVS ForecastRevenue per Available RoomHistoric GCC Countrywide Revenue per Available Room USD 1998-2017 - HVS Forecast

Interviews with Leaders - Mr. Haitham Mattar, CEO at RAKTDA

HVS News·11 October 2018
Ras Al Khaimah is a unique destination that offers nature based adventure and cultural experiences that are distinct in the UAE and the region. Everything we do is focused on how we compliment the other Emirates and add value to the UAE as a whole, particularly with our 45-minute proximity from Dubai International Airport, beautiful pristine white sand beaches that stretch across a 64km coastline and a unique desert and mountain terrain.

HVS Europe Hotel Transactions Bulletin - Week Ending 05 October 2018

HVS ·10 October 2018
Barclay Brothers Buy London's Beaumont HotelSir David and Sir Frederick Barclay have acquired from Grosvenor Estates the leasehold interest in The Beaumont, an iconic art-deco styled luxury hotel situated in London's Mayfair district. The property, comprising 73 rooms, is reported to have been traded for around PS130 million (PS1.78 million per room).Aviva Acquires the Premier Suites Plus, Dublin BallsbridgeIrish hotel company Prem Group has sold the 49-room Premier Suites Plus Dublin Ballsbridge, through a sale and leaseback transaction, to the UK-based multinational insurance company Aviva for EUR17.5 million (EUR357,000 per room). Prem Group will continue to operate the hotel based on a 35-year lease.Echo Building in Liverpool Sold to Select GroupDubai-based Select Group has entered a forward funding deal to acquire the redevelopment of the mixed-use Echo Building in Liverpool. The project, to be completed by 2020, will include a 207-room, 4-star Innside by Melia hotel, as well as four retail units and two floors of Grade A office space.Champneys Acquired Mottram Hall Hotel in Cheshire, UKThe 120-room Mottram Hall Hotel located in Cheshire, half an hour away from Manchester, has been sold to the British destination spa operator Champneys. The property is set to undergo a PS10 million refurbishment, which includes the spa areas, golf club, conference facilities and the addition of 30 rooms. Champneys currently operates five spa destinations across England.Langdor Sells Three Mercures in GermanySwiss hotel owner operator somnOO partnered with investment funds Extendam, RIVE Private Investor and 123 IM to close its first investment in Germany, acquiring three Mercure Hotels from Langdor Hotel GmbH. Located in Hagen, Hamm and Ludenscheid, this 458-room portfolio will be operated by somnOO and continue to be affiliated with the Mercure brand.

HVS Asia Pacific Hospitality Newsletter - Week Ending 5 October 2018

HVS ·10 October 2018
Thakral Acquires Three Properties for SGD66 Million in Osaka, JapanSingapore-based, SGX Mainboard-listed Thakral Corporation Limited ("Thakral") under a new pooled investment structure, has invested in two new properties, the Hotel White Bear Family (WBF) Namba Motomachi and an office building, Utsubo East Building. In addition, Thakral has also acquired the Legal Itachibori Building from the group's current pooled investment vehicle. The total value for these three properties is at approximately SGD66 Million (about JPY5.46 Billion). This acquisition is in line with the group's overall strategy to broaden its asset and earnings in Japan by capitalising on the country's strong economic fundamentals and tourism boom. Located seven-minutes' walk away from Namba Station, the 111-key Hotel WBF Namba Motomachi comprises of 26 double, 84 twin and one accessible twin room. The hotel is purchased on a fixed leaseback for five years to the current operator, WBF, a reputable brand which operates 11 hotels in Osaka and over 30 across six prefectures in Japan. With this acquisition, it will bring Thakral's total number of investment properties in Osaka to nine.Archipelagio International Signs a Master Franchise Agreement in Saudi ArabiaIndonesia-based hotel group Archipelagio International ("Archipelagio") has signed a long-term Master Franchise Agreement with Saudi Arabia-based Warifat Hospitality Limited ("Warifat Hospitality"), a newly formed subsidiary of the real estate company Jabal Omar Development Company ("JODC"). Under this multi-hotel agreement, Warifat Hospitality will acquire development and branding rights for three of Archipelago's Grand Aston, Aston and Harper brands, enabling the roll out of these brands across the Kingdom of Saudi Arabia. The first hotel developed under this agreement will be part of JODC's flagship project, an integrated real estate development incorporating commercial malls, luxurious residential units and premium hotels. Located within walking distance to the Grand Mosque in Makkah, the 560-key Jabal Omar Grand Aston will be Archipelago's first hotel in Saudi Arabia and is due for completion in July 2019. JODC is one of the largest real estate developers in the Middle East and one of the largest listed companies in the Saudi Tadawul Stock Exchange. Archipelagio is Indonesia's largest hotel group, operating a portfolio of 137 properties with 19,000 rooms across nine core brands in Indonesia, Malaysia and Philippines.Ascott Debuts Citadines Connect Fifth Avenue New YorkSingapore-based serviced residence owner-operator, The Ascott Limited ("Ascott"), has opened Citadines Connect Fifth Avenue New York, its first Citadines property in the United States. The 125-key renovated property offers rooms in a variety of guestroom types ranging from premier rooms with king or double beds to one-bedroom suites that come with a separate living area. The boutique hotel features, a large communal area in the lobby, a 24-hour business centre as well as a gourmet deli with daily complimentary grab and go breakfast. Located in the heart of Manhattan, guests are within walking distance from Theatre District and Rockefeller Center, and a 10-minute walk from key attractions such as the Empire State Building, the Museum of Modern Art and Grand Central Station. Ascott's portfolio includes over 120 Citadines properties with more than 20,000 units around the world. Ascott is slated to open another Citadines Connect in Cupertino Sunnyvale, Silicon Valley, California in the second half of 2019.Singapore Airlines and Tourism Australia Sign AUD11 Million Marketing DealSingapore Airlines (SIA) and Tourism Australia have renewed their commercial ties with the signing of an AUD11 million marketing deal. The strategic cooperation will fund tourism campaigns and promotional activities in eight of Australia's key inbound markets such as China, Germany, India, Indonesia, Japan, Malaysia, Singapore and the UK. According to Tourism Australia's managing director, John O'Sullivan, these markets represented four million international visitors and a collective spending of AUD22 billion in 2017. SIA currently operates more than 130 flights per week to Australia, serving Adelaide, Brisbane, Canberra, Melbourne, Perth and Sydney, representing 8% of all Australia's international arrivals. The Singapore Airlines group, including its subsidiaries SilkAir and Scoot, has approximately 170 weekly flights to Australia.Alila Villas Koh Russey to Debut in CambodiaUS-based hotel operator Two Roads Hospitality ("Two Roads Hospitality") has opened Alila Villas in Koh Russey, its first property to be located in Cambodia. Located on a private island in the Koh Rong archipelago, the 63-key ecological resort will be accessible via a 20 minutes' car transfer and speedboat ride from Sihanoukville Airport. Slated to open in November 2018, the property features 50 pavilions, 13 villas, two specialty restaurants, a beachfront Spa Alila, an infinity pool, and a fitness centre. Alila portfolio consists of 16 upscale to luxury hotels across Asia-Pacific, India, Middle East, the US. Singapore-based hotel management company, Alila Hotels and Resorts ("Alila") plans to open another 3 properties in Jakarta, Sri Lanka and Wuzhen by the end of 2018.

Europe Hotel Transactions Bulletin - Week Ending 28 September 2018

HVS · 1 October 2018
Corum acquires a Finnish portfolio from CapManFrench real estate investor Corum Asset Management has acquired a 6-hotel portfolio in Finland from Nordic private equity firm CapMan for EUR72 million (EUR83,000 per room). The 870-room portfolio comprises three city centre hotels, located in Turku, Kemi and Rauma, all being operated by Scandic Hotels, plus three Holiday Club Spa Hotels in the resort locations of Saariselka, Kuusamo and Katinkulta.Legoland Windsor Resort Hotel acquired by Aberdeen Standard InvestmentThe Lego themed Legoland Windsor Resort Hotel, comprising 150 rooms, has been sold by Aprirose to Aberdeen Standard Investments' Standard Life Long Lease Pension Fund, for PS36 million (PS240,000 per room). The property, located within the park, is let to the resort's owner Merlin Entertainment PLC under a long-term lease agreement with 28 years remaining.Castlebridge sells the Hilton Garden Inn, Birmingham Airport to BlackRockThe newly opened 178-room Hilton Garden Inn, Birmingham Airport has been sold to US-based asset management firm BlackRock. The property, adjacent to the airport, will continue to be operated by its former owner and developer, Castlebridge, subject to a franchise agreement with Hilton.Holiday Inn Paris Gare Montparnasse acquired by Paris Inn Group and ExtendamPGIM Real Estate has sold the 100-room Holiday Inn Paris Gare Montparnasse to French investment managers Paris Inn Group and Extendam, representing their seventh acquisition together. The French duo will invest a further EUR3.8 million into extensive renovation of the asset.Postillion Hotel Haren Groningen sold to Frans KappenburgLocal entrepreneur Frans Kappenburg has acquired the Postillion Hotel Haren Groningen from the Dutch hotel group Postillion Hotels. The 97-room property is to be converted into apartments and the land occupied currently by a gas station will be used to build a new hotel, the Hotel Haren.Semper Constantia acquires Hotel niu Saddle from P&P GroupHotel niu Saddle in Furth, Bavaria, has been sold by German developer P&P Group to Semper Constantia, a subsidiary of Austria-based Semper Constantia Privatbank. Opened in April 2018, the hotel, which comprises 103 room including 16 extended stay apartments, will continue to be managed by the current operator Novum, the parent company of niu Hotels.GBI AG sells the niu Air Frankfurt Hotel to Select GroupGermany's largest hotel developer GBI AG has sold the 344-room niu Air Frankfurt Hotel to Dubai-based Select Group. The hotel, to be operated by Novum, is scheduled for completion in Q4 2019 and represents the company's first German acquisition for their real estate portfolio.
Article by Thomas Hazinski

2018 HVS Lodging Tax Report - USA

HVS ·25 September 2018
In this seventh annual Lodging Tax Study, HVS Convention, Sports, and Entertainment Consulting surveys lodging tax rates and revenues across the United States. Our study includes a broad range of cities and tracks policy trends in lodging tax impositions. This research identifies the lodging tax rates levied at the state, county, city, and special district levels. We provide data on the collection and distribution of revenue from lodging taxes levied in all 50 States and the 150 largest cities in the United States.
Article by Chelsey Leffet

Key Takeaways: AHLA & AAHOA's - Legislative Action Summit 2018

HVS ·25 September 2018
2018 Legislative Issues Affecting the Hotel and Lodging IndustryThe lodging industry is facing issues across a wide scale; however, the LAS event strategically focused on a few "call to action" pieces. With mid-term elections looming, the call to push bill signing and co-sponsorship was not as strong this year at LAS; instead, attendees were reminded how important the relationships with our representatives and congressmen and women are to the industry and that these connections and the event overall is a building block for future support. Issues that are important for industry professionals to be aware of and well versed in include immigration, illegal hotels, human trafficking, wages and benefits, per-diem rates, resort fees, OTAs, tax reform, Americans with disabilities, and joint employer models. The following sections briefly describe only some of the main points and issues addressed at LAS this year.Online Booking ScamsIt is understood that fraudulent websites and call centers posing as the hotel or event, without the consumer knowing, have led to guests not being assigned the room type they were expecting, their private information being stolen, a lost or canceled reservation, the loss of a down payment, extra or hidden fees charged to their account, or forfeiting their reward loyalty points. The bipartisan Stop Online Booking Scams Act would help protect these consumers from scams by prohibiting websites from misleading consumers and pretending to be a certain hotel property or event's representative. With this bill, these websites would need to prominently display that they are not affiliated with the hotel in question and are in fact a third party. This would help to increase consumer confidence in the hotel industry's legitimate booking channels. Per data reported during the LAS, it is estimated that roughly 55 million online hotel bookings were made through misleading or fraudulent sites in 2017, which in turn affected $5.2 billion in hotel booking transactions. Similar to the 2017 Legislative Action Summit, protection of consumers against online booking scams is still an important issue.Tax ReformAHLA and AAHOA representatives urged participants to speak to their local representatives and officials about the Tax Cuts and Jobs Act of 2017 that was reported to have been very positive for the lodging industry, allowing for increases in employee wages, enhanced benefits, new jobs, development, and capital improvements. U.S. Travel Association trends reported that, as of July 2018, domestic travel has expanded for 103 straight months, as the travel industry moves through its ninth consecutive year of expansion. Many of the provisions that are helping small businesses are set to expire in 2025, and it is AHLA's and AAHOA's stance that these deductions for small businesses and the lower rates for individuals must be made permanent to capitalize on the momentum of the industry.International Travel & Brand USAThe lodging industry plays a vital role in supporting the micro and macro economies. AHLA and AAHOA reported that travel and tourism generate roughly $2.3 trillion in economic output, as well as supporting one in nine American jobs. While global travel and tourism has increased in recent years, and is projected to continue growing, the market share of international travel to the United States has diminished. Established as part of the 2009 Travel Promotion Act, Brand USA is our nation's first public-private partnership to coordinate marketing efforts to promote destinations across the United States and to communicate U.S. visa and entry policies. Brand USA is up for reauthorization in 2020; given its success (at no expense to American taxpayers), AHLA and AAHOA strongly encourage that our elected officials support this organization. Another important piece of the USA's global presence and competitiveness centers on the sponsorship of the Jobs Originating through Launching Travel (JOLT) Act. This piece of legislature would reportedly modernize the Visa Waiver Program, as well as renaming it to the Secure Travel Partnership Program, to help streamline safe travel into the U.S. from member countries.Career Opportunities in HospitalityAs mentioned previously, the growth of the industry has allowed for many companies and hoteliers to expand and reinvest. It was reported that the number one concern in the industry has been access to a viable workforce. Furthermore, the LAS audience participants were asked to raise their hands if there was an opening within their company or at their hotel, and more than half of the room raised their hands. The lack of a qualified workforce is forecast to hinder the growth potential of our industry. In 2017, the President signed an Executive Order that was designed to reduce the regulatory burden on apprenticeship programs in non-traditional industries, such as hospitality. Even more, in July 2018, the Strengthening Career and Technical Education Act for the 21st Century, a revision of a bill from 2006, became law; it was established to provide funding, encouragement, and establish benchmarks. The lodging industry does and should continue to support proposals that allow for technical education, apprenticeship, financial assistance, and training to address the workforce shortage.In ClosingRegardless of one's role in the hospitality industry, or one's political affiliation, it is important to be knowledgeable of the issues affecting the industry. The potential effect of legislation and regulation on the lodging industry is important when considering return on investment and value. The Legislative Action Summit is an organized and rewarding way to become educated; to be provided the unique opportunity to meet congressional representatives, elected officials, and their staffs; and to be a part of the shaping of our industry's future.Through its various staff members, HVS is active in the AHLA, AAHOA, and various state and city hotel associations. We encourage everyone who is involved in the hotel industry to consider becoming active in the associations that support our industry's interests.

Blurred Lines Between Hotels and Airbnb

HVS ·24 September 2018
In this new day in age, the meaning of travel has taken an interesting turn in terms of what is driving consumers away from home. The generation of material pleasantries has come and gone, and what people are really looking for these days are new and engaging experiences. Curiosity is driving interest away from the status quo. While the necessities, like having a great location, providing safety and security while keeping a high standard for quality, will always hold value, consumers are seeking ways to leverage their travel by experiencing and becoming one with the surrounding environment. A new fine line has been created between simply staying somewhere overnight and taking advantage of and enjoying the nuances of the surrounding environment.We have seen the hotel industry recognize this and proactively meet these evolving expectations and desires recently. Hotels are beginning to favor local flavors and ingredients for their food and beverage outlets. A big push for brands to separate themselves from the norm is evident, as well. Hotel companies are straying away from the "me too" brands and proving that being successful and consistent doesn't always mean being identical at every location.Over the last decade, this has led to an outburst of boutique and lifestyle hotels. Marriott's Autograph Collection emphasizes boutique hotels with unique passion, design, and connection with the local area. Hyatt entered the space with its Unbound Collection of "story worthy" properties around the world, featuring exclusive locations, famous architecture, and incredible dining experiences. Tru by Hilton is emphasizing an interactive social environment that seeks to combine business and pleasure altogether. InterContinental Hotels Group's Hotel Indigo is all about the neighborhood that surrounds each property and incorporates these aspects into the fabric of the hotel. The list goes on with brands such as W Hotels, Canopy by Hilton, Kimpton, Aloft, Tribute Collection, Cambria, Moxy, Design Hotels, and more. These major brands incentivize travelers to experience these unique properties while also benefitting from the advantages of a large hotel company, such as service standards, consistency in facilities and amenities, and the plethora of benefits of each company's rewards programs.Meanwhile, a juggernaut has risen in the lodging space over the last decade. Airbnb has managed to compete successfully with large lodging companies and brands that have been well established in the marketplace. Airbnb has found a way to offer these truly unique experiences at sometimes a fraction of the price of a hotel room. Customers can customize their search to locate accommodations that cater to their specific needs. Location options can be extremely flexible, including every possible neighborhood in a city. By empowering consumers to select, in every aspect, how and where they want to travel, Airbnb has created an extremely successful business model. As an example, an Airbnb experience can range from a studio apartment in Manhattan to a five-bedroom house in Houston, from an Airstream trailer in Malibu to a Treehouse in Atlanta or even a campsite in the Sahara Desert. While some would say that the idea of home sharing has been around for many years through sites like VRBO, HomeAway, and OneFineStay, these unique real-life experiences have not only been made available but are increasingly becoming more common place through the advent of Airbnb.Where Airbnb has thrived and become more than just a home-sharing website is how it offers its product. To the Millennial generation, Airbnb is cool and tech savvy. The website is fun to use and easy to navigate. Consumers enjoy the process of filtering through what they want and don't want for each property or location. There is something exciting about staying in somebody else's home and experiencing the local culture. The privacy and exclusivity aspect to the guest is also a tremendous benefit. Most of the time, there's no need to check in at a front desk, no room keys to worry about losing, and every amenity offered is available specifically for you, the guest. Additionally, compared to the typical hotel room, on average, Airbnb offers a significant more amount of space per unit, given that travelers are typically renting an entire apartment or house, for similar or lower prices. Lastly, as a company, Airbnb has an advantage that hotel companies do not have, which is to increase or decrease the supply of rooms as needed. Airbnb hosts can remove some of the inventory from the market during periods of low demand and increase the inventory when the market calls for more Airbnb houses or rooms, particularly during peak seasons or special events, whereas a hotel is unable to do so.With 4.5 million listings as of 2018, Airbnb has proven to be very successful. However, as with any company, there are areas (internal and external) for improvement, and where traditional hotels still hold an advantage. The company has a limited set of guidelines and standards for its product and offerings. While this has been generally helpful in growing its inventory, it is a fact that it is not going unnoticed by guests. In some markets, Airbnb has also been allowed to compete with hotels but has not been held to the same standards as related to the payment of taxes, the provision of life-safety/security measures, the acquisition of permits, and the compliance of ADA regulations. In other instances, Airbnb places somewhat of a burden on its customers, as guests are sometimes on their own for food, toiletries, and general information, as the only real "staff" available is the owner of the unit, who sometimes may not even be in the same city.Additionally, Airbnb is not able to compete as strongly in attracting business travelers or meeting/group demand generated by in-house meetings, since unlike large hotels, Airbnb units lack conference facilities. Nevertheless, over the last few years, Airbnb has shown that it can attract such demand during special events, large conferences, or periods of peak demand and occupancy in highly saturated markets. To combat some of these issues, Airbnb has implemented standards that allow some units to be designated as "Airbnb plus." To be considered for this designation, the homes must be comfortable, well equipped, well maintained, and thoughtfully designed, passing a 100-point in-person quality inspection. Lastly, although Airbnb has not traditionally offered a customer loyalty program, which may not have incentivized customers to keep using Airbnb, as of 2018, the company launched a pilot program to reward regular and high-rated customers known as "superguests." According to the company, "superguests" will receive benefits such as discounts, airport pickups, flight upgrades, and lounge access. Airbnb is also aggressively pursuing marketing campaigns that show how its product can be ideal and even superior to a hotel room for business travelers and group travelers.For these reasons and many others, Airbnb can be considered a direct competitor to hotels. However, the opposing train of thought argues that, despite the arrival and growth of Airbnb, national demand and hotel performance has continued to increase since our last recession, with occupancy and ADR levels increasing from a low of 54.5% and $97.50 in 2009 to 66% and $126 in 2017, respectively, with further increases being experienced in 2018. Without a doubt, the lodging market nationwide is operating at the highest RevPAR levels ever recorded. As such, this helps support the reasoning that even with Airbnb and other home-rental services, occupancy and demand levels continue to rise for hotels across the nation. Based on this information, it is easier to see how Airbnb could be considered less of a competitor and a less of a threat to the hotel industry. Many believe that Airbnb has instead done for the hotel industry what Uber has done for the taxi industry, satisfying demand that existed but remained dormant, only becoming noticeable when the new service and product was provided. While Uber affected the taxi industry by taking a portion of market share, much of the demand for Uber consisted of new clients that would have not otherwise taken a taxi. Similarly, it can be assumed that a portion of individuals traveling across the world and now using Airbnb are guests that would have not otherwise made the trip were it not for the availability of lodging provided by a service such as Airbnb.In the U.S. alone, Airbnb is estimated to have approximately 700,000 listings; ultimately, in a market of five million hotel rooms, it's hard to see how it could possibly not be a direct competitor. Hotel brands are becoming increasingly aware of this threat and the desire for guests to seek unique lodging opportunities and experiences. As noted previously, hotel companies continue to create brands that are increasingly independent in nature, with new brands or collections of unique properties catering to clientele that wants a unique experience. However, in recent years, hotel brands are taking a step further toward becoming somewhat more like home-sharing services, like Airbnb.As an example, in April 2018, Marriott launched a six-month trial program called Tribute Portfolio Homes, where guests can rent homes and earn Marriott Rewards. The Unbound Collection by Hyatt has also launched a similar program through its acquisition of Oasis, which just like Airbnb, allows homeowners and guests to rent and lease properties, further blurring the lines between hotel companies and Airbnb. However, Airbnb is also changing. While individual units remain the focus of the company, many hosts are realizing the advantages of increasing their unit count to benefit from economies of scale. Some Airbnb hosts are seeking to transform entire apartment buildings and convert them to hotel rooms listed only on Airbnb. For example, in Boston, an owner of a building with as many as eight units rents each unit on Airbnb with labels such as "Airbnb Hotel #1" or "Airbnb Hotel #2."Airbnb itself has partnered with Niido to develop as many as 14 home-sharing apartment complexes by 2020. The first two of the part-apartment/part-hotel complexes known as "Niido powered by Airbnb" are already in operation in Kissimmee, Florida, and Nashville, Tennessee. In 2017, global real estate behemoth, Brookfield Property Partners LP, announced that it planned to invest as much as $200 million into Niido to support its efforts in converting apartment complexes into Airbnb hotels.Furthermore, Airbnb is not opposed to working with the existing hotel industry. The Airbnb website clearly states that Airbnb welcomes listings hosted by professional hospitality providers, as long as they offer unique spaces and personal hospitality to the Airbnb community. Some of the qualities Airbnb looks for in these listings include guest rooms that are individually unique or local in design, common spaces that incorporate local influences, and distinctive design characteristics. Airbnb goes as far to say that ideal properties include bed-and-breakfast inns, boutique hotels, nature/eco lodges, timeshares, serviced apartments, and hostels. The platform has also now added search categories so that users can more quickly locate the property type for which they are searching.The reality is that the lines between hotels, hotel brands, and home-sharing services continue to be blurred. It is becoming more and more evident that while guests continue to seek unique lodging products and experiences, providers, from large hotel corporations to individual hosts, are seeking to cater to this demand. Most noteworthy is that these changes have occurred rapidly over the last decade, leaving us with an industry and lodging products that seem to change by the day. It will be interesting to see how else the industry transforms itself in the upcoming years, as consumers behaviors and demands continue to change.

HVS Asia Pacific Hospitality Newsletter - Week Ending 21 September 2018

HVS ·24 September 2018
Ascott Invests USD26 million for 70% stake in Indonesia's TauziaSingapore-based developer CapitaLand's wholly-owned serviced residence business unit, The Ascott Limited ("Ascott"), is investing USD26 million for a 70% stake in Green Oak Hotel Management ("GOHM"), the holding company for Indonesia-based hotel operator, TAUZIA Hotel Management ("TAUZIA"). This is Ascott's first major move into the lodging segment beyond its core serviced residence business and apartments for corporate lease as it seeks to capitalize on the rapidly expanding middle-class business hotel segment. The consideration for the acquisition comprises of USD12.95 million paid on 17 September 2018 and the remainder payable over a five-year period commencing from 1 January 2018, up to an aggregate amount of USD12.95 million. TAUZIA is one of Indonesia's top five hotel operators with close to 60% of its portfolio located in key cities of Indonesia, such as Jakarta, Bali, Bandung, Surabaya and Yogyakarta. Approximately 70% of TAUZIA's hotels cater to business and convention travellers, while 30% target leisure travellers. With this investment, Ascott's portfolio will increase by 20,000 units spanning 122 hotels in Indonesia, Malaysia and Vietnam, half of which are under development. This puts Ascott's portfolio at more than 94,000 units globally, surpassing its 2020 target of 80,000 units. Ascott currently owns 17 serviced residences and more than 3,000 units in Indonesia.iPG's Sydney Park Regis Hotel Sold for AUD54 million to Yeh's GroupAustralia-based investment group iProsperity Group Pty Ltd ("iPG") sold the Sydney Park Regis Hotel for AUD54.18 million to Sydney-based Yeh's Group ("Yeh's Group"). The sale price represents a 23 per cent capital gain in less than two years, having purchased the 122-key hotel from Australia-based hotel operator, Staywell Hospitality Group ("Staywell") for approximately AUD46 million in 2016. Located in the central business district, the property comprises ten floors of a 45-level mixed-use tower overlooking Hyde Park. The deal is expected to close on October 31, 2018 and the hotel will remain under a management agreement running until 2021 with Staywell. Yeh's Group, led by Sydney-based hotel developer Johnson Yeh, has four other hotels under development, set to open in Sydney's CBD in the next five years. The sale positions iPG to continue its growth trajectory towards a portfolio value of AUD10 billion by 2020. iPG controls about AUD1.8 billion of real estate in Australia and has recently acquired the 419-key Pullman On The Park Hotel in Melbourne for an undisclosed sum.Dusit Thani Acquires Shares in LVM Holdings and Elite Havens for USD15 millionThailand-based hospitality company, Dusit Thani Public Company Limited ("DTC"), through its wholly-owned subsidiary, Dusit Overseas Company Limited ("DOC"), has acquired all shares in Singapore-based hospitality investment and management company, LVM Holdings Pte. Ltd. ("LVM Holdings") for approximately USD15 million (About THB495 million). LVM Holdings is the ultimate holding company of Bali-based luxury vacation rentals provider, Elite havens luxury villa rentals ("Elite Havens"). The investment in LVM Holdings is in line with DTC's three-pronged growth strategy of balance, diversification and expansion. With the addition of Elite Havens, DTC enters the luxury villa rental market which is expected to enhance the company's capacity to provide integrated services and drive revenue growth. DTC currently operates 27 properties worldwide and has more than 50 projects in the pipeline across Africa, Bhutan, China, India, Indonesia, Middle East, Myanmar, Philippines, Singapore, Thailand and Vietnam. Elite Havens maintains a portfolio of more than 200 fully-staffed villas across Indonesia, Thailand, Sri Lanka and the Maldives.Outbound Chinese Travellers Record 71.31 Million in H1 2018According to the China Tourism Academy and Ctrip Joint Report, outbound Chinese travellers reached 71.31 million in the first half of 2018, recording a year-on-year increase of 15%. The Top 20 outbound travel departure cities were Shanghai, Beijing, Guangzhou, Chengdu, Chongqing, Shenzhen, Nanjing, Wuhan, Xi'an, Hangzhou, Kunming, Tianjin, Changsha, Zhengzhou, Nanchang, Guiyang, Jinan, Hefei, Nanning and Fuzhou. The Top 20 cities where residents spent the most were Changchun, Wenzhou, Beijing, Dalian, Shenyang, Shanghai, Harbin, Xiamen, Qingdao, Suzhou, Shijiazhuang, Taiyuan, Fuzhou, Shenzhen, Guangzhou, Hangzhou, Kunming, Ningbo, Nanjing and Tianjin. The Top 20 overseas destinations for Chinese were Thailand, Japan, Vietnam, South Korea, Singapore, Indonesia, Malaysia, Russia, America, Cambodia, the Philippines, Australia, France, the UAE, Turkey, Italia, Maldives, Germany, Sri Lanka and England. Among the outbound travelers, 53% were female and 47% were male. Post-80s were still the backbone of outbound tourism, accounting a proportion of 31%.Qatar Airways To Launch New Route Between Doha And Da NangQatar Airways Company ("Qatar Airways") will launch a direct flight between Doha and Da Nang on 19 December 2018. With current flights to Ho Chi Minh City since 2007 and Hanoi since 2010, Da Nang will become the third Vietnamese destination on the airline's global network. This four-time weekly flight will be served with a Boeing 787-8 aircraft, with a total capacity of 254 seats. The new addition is expected to boost tourism in Da Nang where the number of visitors already reached 6.6 million tourists in 2017, twice times more that in 2013. Currently, Da Nang Airport is served by 24 international airlines, operating 15 frequent direct flights to and from international destinations.

Budapest - On The Up

HVS ·18 September 2018
Budapest is the capital of Hungary and the ninth-largest city in the EU, with close to 1.7 million inhabitants in 2018. Budapest traditionally had a strong industrial focus, but has since shifted to the service industries including banking, finance and real estate. The city is also a cultural and historic centre, with several renowned monuments including UNESCO World Heritage sites such as the Buda Castle district and the banks of the Danube. The city is also filled with various museums, parks, squares and a variety of restaurants and bars, making it the perfect weekend destination.ECONOMIC INDICATORS - HUNGARYPolitical and Economic BackgroundHungary has been a member of the European Union since 2004, and a democratic parliamentary republic since 1989. Economic recovery following the global economic crisis was relatively slow; however, the Hungarian economy has been growing steadily since 2013, with GDP growth reaching 4% in 2017, one of the highest in the EU and ahead of countries such as the UK, France and Germany. Unemployment is low (3.8% at the end of 2017), which, combined with a steady decrease in the debt-to-GDP ratio of the country, has resulted in increased interest from international investors over recent years. With the corporate tax rate lowered to 9% in 2017 (the third lowest in the EU after Malta and Monaco), this international interest is set to grow further.Tourism DemandVisitation to Budapest has in the past been made up of international travellers primarily; this category accounted for more than 85% of the total number of visitors in 2017. 2009 marked an 8.8% drop in visitation due to the global financial crisis and decrease in tourism. Since then, total visitation has shown signs of continuous recovery. In the last three years, Budapest has seen a significant 12% growth in visitation, far surpassing pre-crisis levels.Hotel PerformanceDuring the economic crisis (2008-10), hotels experienced drops in visitation. To remain competitive they reduced rates, resulting in price wars. However, the market has recovered strongly, with hotel performance continuously improving, making Budapest one of the fastest-growing hotel markets in Central Europe. The increased arrivals to the city provide a positive outlook for average rate and occupancy growth, already evident in 2016 and 2017, with above-average RevPAR growth in the market.Hotel SupplyHungary has seen continued growth in hotel supply since 2010. As of December 2017, the country had 1,094 hotels providing some 151,000 beds, approximately 35% of which are in Budapest.Owing to the positive trend in visitor arrivals and the strong trading performance of hotels, there has been increased interest in the city from developers and operators. Several of the world's leading hotel brands, including Four Seasons, Ritz-Carlton, Kempinski, InterContinental, Hilton, Marriott and Sofitel, are already represented in Budapest. Within the next three years, Hyatt, as well as Marriott's W and Luxury Collection brands, are also due to open, which will further boost the draw of the Budapest market. Several other proposed new hotels are also in the pipeline; however, we would also note that construction costs have risen sharply and hence some of these projects might not materialise.HOTEL PIPELINE - CITY CENTREInvestment MarketBudapest's tourism boom and improved hotel market performance have drawn significant attention from investors, who now see the city as a good long-term investment opportunity. The number of hotel transactions and deals in recent years has increased, as illustrated in the adjacent table; however, in the past two years this has been dominated by Orbis acquiring seven ibis and Mercure hotels that they previously leased. The most recent hotel transaction, in May 2018, was Orbis's sale-and-manage-back of the Sofitel Chain Bridge, after Orbis had acquired the freehold interest in the same property a year earlier from UniCredit Austria. The new owner is Starwood Capital, which will reportedly now undertake a EUR16 million renovation of the hotel. For the latest value trends, please refer to our European Hotel Valuation Index.HOTEL TRANSACTIONSOutlookThe outlook for visitation to Budapest remains positive, with an expected continued increase in arrivals to the city. The recent boost in hotel performance is one of the main reasons behind the growing interest from investors, developers and operators in the market. Although RevPAR levels remain somewhat lower compared to other European cities, the development and increased offer of five-star properties is expected to help increase average rates in the market.

Hala Matar Choufany, President HVS, MEASA, Highlights Challenges and Opportunities for Women in African Hospitality Sector at THINC Africa 2018 Conference

HVS ·12 September 2018
Participating in the panel were Lee-Ann Singer, Marketing Director Singer Group; Talya French, Business Development Manager, Marriott International; Ronleigh Gaddin, CEO Amani Spas; and Simone Kuhn, Manager Business Development Radisson Hotel Group.Emphasising on the progress women have made in the hospitality sector, Hala stressed, "In the last 10 years, more women have taken leadership positions and while we still have to catch up, governments and organisations are realising the key role women play in the workplace. We have seen remarkable change and growth for women in the hospitality industry where they have proven that they are every bit as capable and qualified as men. Development of detailed career plans as well as improvement in corporate practices and policies within enterprises continue to be instrumental in promoting equal opportunities for women in career progression."So, what is it that holds women back from taking the top management positions in the hospitality sector especially in Africa? What are the barriers to upward mobility or career advancement of women. Hala stated, "Challenges and issues around women and men work inequality are universal and not continent specific. There are many internal and external factors that could impact women's career path such as their own motivation, skills, educational level, lack of support or equal opportunities. Balancing work and family is potentially a challenge at times, especially due to perpetuation of traditional gender roles. Hospitality industry demands long hours and a great deal of crisis management and problem solving and this could be quite exhausting for some women. Also, different kinds of cultural norms, values and stereotypes often act as constant barriers."Hala added, "To close the gender gap in the workforce and overcome societal barriers, women need support and training. Successful women should become more visible and support other women. Organisations too must go above and beyond to ensure women have a chance to work in positions that have been traditionally filled by men as well as have more opportunities to grow in their career."Hala's message to all women out there is: "Be confident and believe in yourself. Have passion, empathy and be flexible. Don't focus on what other's think and the challenges out there, rather focus on where you want to be. Women have natural abilities to multi-task and that's a big advantage. Remember there is a huge scope for you to shape your career."

HVS Asia Pacific Hospitality Newsletter - Week Ending 7 September 2018

HVS ·10 September 2018
Heeton and KSH Jointly Acquires Smile Hotel Asakusa in Tokyo, JapanSingapore-based real estate conglomerate Heeton Holdings Limited ("Heeton") and Singapore-based property investment group, KSH Holdings Limited ("KSH") have jointly acquired the 96-key Smile Hotel Asakusa in Tokyo for an undisclosed sum. This acquisition marks the duo's second hospitality asset in Japan, the first being the 164-key Super Hotel Sapporo in Susukino in April 2016. Located in close proximity to Asakusa metro and within a bustling district known for its numerous Shinto festivals, the hotel is approximately 25 minutes' drive away from Haneda airport. The 10-storey freehold property spans a land area of 361.38 square metres and a total gross floor area of 1,793.43 square metres, and feature a local restaurant and on-site spa facilities. The hotel will remain operating under the Smile Hotel brand and by the current hotel operator. Heeton's hotel portfolio includes nine properties world-wide and will continue to prioritise in developing the hotel division.iPG Acquires The Pullman On The Park Hotel In MelbourneAustralian-based investment group iProsperity Group Pty Ltd ("iPG") bought the five-star Pullman On The Park Hotel in Melbourne from the Canadian real estate asset management company Brookfield Assett Management ("Brookfield"). The price of the transaction was not disclosed but it was listed for AUD200 million-plus by Brookfield in February. Located in Melbourne's CDB close to the Melbourne Cricket Ground and the Rod Laver Arena the 419-rooms property includes conference facilities, a 1000-person ballroom, an outdoor swimming pool, a 215-cars parking lots, along with a brand-new lobby and bar that was recently renovated for AUD12.5 million. This acquisition will add significant value to iPG AUD1.8 billion real estate portfolio. With its backing in the AUD1 billion SB&G Hotel Group, which owns six IHG hotels, iPG is one of the biggest hotel owners in Australia.Waldorf Astoria Debuts in BangkokUS-based Hilton Worldwide Holdings Inc. 's luxury brand, Waldorf Astoria Hotels & Resorts ("Waldorf Astoria") has opened its first property in Southeast Asia with Waldorf Astoria Bangkok. The 171-key hotel is housed within the 60-storey building Magnolias Ratchadamri Boulevard and is owned by Thailand-based developer Magnolia Quality Development Corporation Limited ("MQCD"). Located by the Ratchaprasong intersection, the hotel is within walking distance of the renowned shopping precincts, Erawan Shrine, the luxurious Gaysorn Village mall and both lines of the Bangkok Mass Transit System (BTS) Skytrain. Waldorf Astoria Bangkok also features three distinct dining outlets, a lounge, two bars, an open-air infinity pool with private cabanas, a 24-hour fitness center, a spa, and the Magnolia Ballroom with 730 m2 of event space which can host up to 700 standing guests. Waldorf Astoria Bangkok is the most recent addition to Waldorf Astoria's Asian portfolio which consists of three other hotels in Beijing, Chengdu, and Shanghai.Greenland Opens its First Moqi Hotel in ChinaChina-based Greenland Group ("Greenland") recently announced the opening of its first Moqi hotel in China. Located at the Greenland Central Plaza in Wuhan City, the hotel is adjacent to AEON MALL, Ren Xin Hui Shopping Mall and other fashion centers. The modern hotel features 220 rooms and suites with a stylish individualized living space, an open kitchen and other amenities. Representing the group's first E-sports-themed property, the hotel offers special E-sports playing space and advanced E-sports facilities catered to young people. In addition, its public spaces are designed to include a club, a bar, an outdoor standard skate park and a basketball court. Greenland has a presence in more than 80 mainland cities with most of its projects in either large-scale mix-use developments or skyscrapers.

HVS Asia Pacific Hospitality Newsletter - Week Ending 31 August 2018

HVS · 3 September 2018
Singapore's KOP Limited in Joint Venture for SGD1.2 Billion Integrated Development in ShanghaiSingapore-based SGX catalist-listed property developer KOP Limited ("KOP") has entered into a joint venture with Chinese state-owned enterprises, Shanghai Lujiazui Development (Group) Company and Shanghai Harbour City Development (Group) Co. Together, all three companies have set up Shanghai Snow Star Properties to jointly develop the SGD1.2 billion integrated ski resort, Wintastar Shanghai. Slated to open in 2022, the year of the Beijing Winter Olympics, Wintastar Shanghai will cover a gross floor area of 227,000 square metres. The massive development will consist of its centrepiece, a 90,000 square-metre alpine-themed ski and snow park, along with four themed hotels with over 1,000 keys that will be managed by KOP's luxury hospitality brand, Montigo Resorts. KOP will invest SGD360 million for the integrated resort, equating to a 30 per cent stake in the joint venture company and will also have a 70 per cent stake in the operating company that will run the integrated resort.Nearly VND162 trillion across 66 projects committed in Quang Binh Province, VietnamThe Quang Binh province has awarded investment licenses and cooperation deals for 66 projects worth nearly VND162 trillion at the Quang Binh Investment Promotion Conference on 27 August. Certificates of investment registration were granted for 36 projects owned by 23 investors with a total investment of VND29.7 trillion (USD1.27 billion) and investment cooperation agreements were awarded for 30 projects owned by 24 investors with a total investment of VND132.5 trillion (USD6.05 billion). Notable investment registration certificates include a USD47.3 million 357-key Pullman Quang Binh by Hanoi-Quang Binh Tourism JSC, slated to open in 2020 and another USD30.1 million hotel project invested by Quang Binh Investment Co. Ltd.. Among the investment cooperation agreements were the USD104 million Son Hai Resort project by Son Hai Group and the USD208 million TMS Quang Binh resort by TMS Global JSC. The province registered a 71% increase in the number of tourist arrivals and a 110% increase in foreign arrivals last year. With a robust growth in tourist arrivals, the Quang Binh province is looking to further develop its tourism services, including the upgrade of the Dong Hoi Airport into an international airport by 2020.New Integrated Mixed Development in Bundusan, PenampangConstruction of 360 Boulevard Bundusan, a new integrated mixed development, has begun on 18 August. The development, with a RM1.5 billion gross development value, will be built on a 10-acre site located in the heart of Bundusan Town, Penampang, a suburb of Kota Kinabalu in East Malaysia. 360 Boulevard Bundusan offers approximately 280,000 sqm of commercial space that comprises 50,000 sqm retail space, an eight-hall cinema, an 'edutaiment' centre with co-working space, two office towers, a hotel and 750 serviced suites. Developed by Homesign Network and Borneo Kemuncak Riang Sdn Bhd., 360 Boulevard Bundusan is expected to become a tourist destination in Kota Kinabalu, attracting locals and tourists alike. Slated to complete in four years, the development will benefit the surrounding community by offering more business, investment, and job opportunities and will meet the increasing tourism demand in the area.Malaysia's First W Hotel Opens in Kuala LumpurW Hotel by US-based Marriott International, Inc ("Marriott") debuted its first Malaysian hotel in the heart of Kuala Lumpur (KL), strategically located next to the iconic Petronas Twin Towers. Owned by Malaysia-based Tropicana Corporation Berhad ("Tropicana"), the 150-key property provides guest rooms and suites, including two WOW suites and the lavish Extreme WOW Suite (its presidential suite). Other facilities include six diverse food and beverage options, a 1,100-square-metre AWAYSpa, a FIT gym and over 1,500 m2 of event space. W Hotel Kuala Lumpur will join the list of latest luxury hotel openings in the capital city of Kuala Lumpur, after the opening of the 236-key Four Seasons Hotel Kuala Lumpur and the 323-key Banyan Tree Kuala Lumpur in recent months.Wingate by Wyndham Debuts in Sanya, ChinaUS-based Wyndham Hotel Group ("Wyndham") announced the opening of its first Wingate by Wyndham Hotel in Sanya City of China, also its first in Asia Pacific. Enjoying an excellent location, Wingate by Wyndham Sanya Luhuitou backs the beautiful Luhuitou Scenic Area, overlooks the natural Nanbain Harbour, while being just a 10-minute drive from downtown and 30-minute drive from both Sanya Phoenix International Airport and Sanya Railway Station. The hotel offers 190 modern, stylish guestrooms designed to provide guests with a comfortable and unique lodging experience. The hotel features five distinctive restaurants and bars as well as flexible meeting spaces. Other entertainment and leisure facilities at the hotel include a fitness center, a yoga room, a large outdoor swimming pool, a photography studio, a kid's club and a heated kid's swimming pool.

One Year Later: The Rebound of the Caribbean following the 2017 Hurricane Season

HVS ·31 August 2018
Strong Recovery EffortOf the 32 Caribbean island nations, just seven were significantly affected (three quite severely) by the 2017 hurricane season. Significant progress has been made on each of these seven major islands, as follows:In addition to the significant progress that has been made in the rebuilding process, there are many new developments in the pipeline of the affected islands, including 400 new hotel rooms in Dominica and more than 3,000 rooms in Puerto Rico. In addition, St. Martin/Maarten is also experiencing new hotel stock with renovations and conversions to new brands, such as the former Riu Palace to a Secrets Resort, and the Sonesta Great Bay Beach Resort to an all-inclusive Planet Hollywood Resort.Lessons LearnedOne year later, hoteliers have learned many lessons. The 2017 hurricane season was unique given that the region had not faced a major hurricane in years; thus, many hoteliers were not prepared for what was to come. After discussions with many hotel owners that experienced different levels of damage, one of the biggest topics was related to insurance policies. Hotel owners quickly learned to be patient, as there was an unexpected challenge given the overload of claims and lack of adjusters. Delays were evident, and not planned, due to the lack of personnel to assess each claim. Historically, given the high costs to operate assets in the Caribbean, many owners have focused on keeping insurance costs low with high deductibles because of so many years of non-activity. Owners have now learned the importance of having a significant amount of money in their reserve accounts for such an occurrence. In addition, with the many delays to receive insurance settlements, owners realized how much more crucial it was to be able to react with significant capital reserves available, as without the significant funds, many hotels were forced to close. Owners on islands with damages not related to structural issues (e.g., landscaping, minor water intrusion, and general cleanup) also learned the importance of understanding the details of their premiums, as these items did not add up enough to meet their deductibles; therefore, the entirety of the money needed to be funded from reserves. However, on the positive side for the affected resorts, insurance proceeds have helped to provide hotel owners the opportunity to carry out capital improvements in an effort to renovate and modernize their properties. Many hoteliers have taken advantage of this opportunity to reposition and will reopen as a different brand to better position their assets going forward. Concurrent with the rebuilding process, building codes will be more strictly monitored going forward, which may help mitigate damages in the future.Positive Regional Outlook, Bolstered by New Air LiftOne of the most crucial elements to the success of the region is airlift, as tourism to any island destination is dependent first and foremost on the accessibility of the destination. Despite the minor setback in the region, American, Delta, JetBlue, and Spirit Airlines have announced new routes and increased their frequencies to many islands in the Caribbean, as shown in the chart below.In addition to the above U.S.-based carriers, carriers such as Bahamas Air, Copa, and Sunwing have also announced new routes to the Caribbean, attesting to the strength and resiliency of the region, as well as the renovations at major airports, to grow capacity throughout the region. Both St. Vincent and the Grenadines Argyle International Airport and Antigua's V.C. Bird Airport underwent major transformations during the last few years and are now benefitting from the additional airlift. St. Martin's Princess Juliana International Airport's renovation is scheduled to begin in the fall of 2018 and will include an 18-month rebuild to a state-of-the-art facility with roof designed to sustain Category-5 wind gusts. St. Thomas Cyril E. King Airport also recently announced an expansion plan to create new jet bridges, build new parking garages, and connect a ferry terminal to expedite travel to St. John and St. Croix. Curacao's Hato International Airport, an island unaffected by the 2017 hurricane season, is also amid a major transformation with a new arrivals hall, check-in area, and terminal expansion. Increases in airlift and capacity have provided developers with opportunities for new projects in the islands, helping to bolster a robust pipeline of development. The significant and ongoing intra- and inter-Caribbean airlift continues to support positive tourism and development growth.Closing ThoughtsIn the song "Better Boat," Kenny Chesney sings "Now and then I let it go/I ride the waves I can't control/I'm learning how to build a better boat." One year later, affected hoteliers have also had to build a "better boat" for their businesses. Through this rebuild, many positive conclusions have been drawn from the situation, as aging products were forced to undergo renovations and as insurance policies were thoroughly reviewed anew. Even throughout the trials and tribulations in the region due to hurricanes and previous epidemics, such as the Zika virus, visitors to the Caribbean keep coming back, as evidenced by the recent increases in airlift. The Caribbean is unlike any destination and is meant for long-term hospitality investments. To learn more about the topics presented in this article, as well as hotel investment opportunities in the Caribbean, join HVS for the 8th Annual Caribbean Hotel Investment Conference and Operations Summit (CHICOS) to be held November 8 & 9 at the Fairmont Southampton in Bermuda. CHICOS brings together more than 300 regional and international investors and operators, in addition to the numerous other industry stakeholders, each year to discuss the region's markets and possibilities.

Dual-Brand Hotel Market Overview

HVS ·31 August 2018
HistoryJust as the early 2000s realized the proliferation of the boutique hotel concept, the second decade of the new millennium will arguably be known for the growth of the dual-brand hotel concept. While the concept of dual-branded hotels is not new by any means, the pipeline for these projects has exploded in recent years. Originally, developers maximized the return to a site by developing two hotels, in two separate buildings. While this method allows for some management efficiencies and enables the property as a whole to capture a wider range of demand, it fails to achieve significant development cost efficiency. The model prevalent today is the development of two brands within a single building, thereby allowing the developer to build a denser product that maximizes the return to the land. This pairing of multiple brands within one building allows management to capture a greater range of demand, improving revenue potential while capitalizing on development and management cost efficiencies.Factors Influencing DevelopmentMany factors must be analyzed prior to developing an opinion as to the highest and best use of a particular site. Demand trends must be identified to determine the timing and use that best fits the site. The potential development of a dual-branded hotel, or multi-branded hotel for that matter, is simply an expansion of the highest-and-best-use analysis. A build-up analysis should be preformed to identify the primary market area. This analysis essentially quantifies the existing demand in a market by estimating occupancy and market segmentation for each hotel in the competitive set and results in a forecast of occupancy for each brand. Dual-brand hotel developments are most prevalent when the size of the site allows for a hotel with a relatively large room count; however, the market demand analysis would not support a large hotel of a single brand. For example, the demand analysis may suggest that there is not enough demand in the market to support a 225-room select- or limited-service hotel but could support a 125-room select-service hotel and a 100-room limited-service, extended-stay hotel. The ability to build a denser product also delivers more value to the land, which is why dual-branded developments have become popular in urban areas and mixed-use developments where available land is limited. Dual-branded hotels must work in concert with one another to maximize management's ability to capture demand and drive RevPAR. The pairing of the two brands is therefore of the upmost importance. The most popular pairings are of select-service and extended-stay hotels under one roof, enabling the developer to offer two different products while maintaining relatively similar chain scales and guest profiles. While this type of development is attractive to developers, and the synergies between the two somewhat comparable brands are significant, substantial design issues can still arise, as the respective amenities and brand identify of each product must be protected.The Dual-Brand RelationshipAs part of our research, we have collected historical occupancy, average daily rate (ADR), and revenue per available room (RevPAR) indices for four comparable dual-branded hotels located throughout the United States. The properties analyzed comprise one select-service hotel and one limited-service, extended-stay hotel. All properties were affiliated with Hilton or Marriott. As one may expect, the occupancy relationship between the select-service hotel and the limited-service, extended-stay hotel within a dual-brand model is typical and similar to how one would anticipate the properties to operate independent of one another. The following table illustrates the typical occupancy, ADR, and RevPAR relationships between the two brands.The data are consistent with the system-wide differences between Hilton and Marriott's respective select-service and limited-service, extended-stay brands, which suggest that an extended-stay product would operate four to six points higher in occupancy. However, system-wide data suggest that the extended-stay brand would also perform at a higher ADR, contrary to the data illustrated above. The all-suite, extended-stay package and popular amenity set (specifically, the complimentary breakfast and evening manager's reception) are primary factors that contribute to this trend on a system-wide basis. The inclusion of hotels in secondary and tertiary markets likely contributes to the difference in data, as the comparable hotels are located primarily in urban areas in strong markets, where the select-service property is able to charge a rate premium. Accordingly, the dual-brand model is most widely seen in strong markets with high barriers to entry, as management teams can command a rate premium for the select-service property by leveraging multiple demand sources. In weaker markets with less rate differential, the two products become much more competitive, decreasing the likelihood of success. Accurate micro lodging trends, including market segmentation and ADR levels, are necessary to properly understand the rate potential of each hotel separately within the market. The two hotel operations related to the respective brand must be forecast independently of each other and each must have support within the market for occupancy and ADR positioning.Expense RatiosOne of the factors that make dual-branded developments attractive is the relatively high yields that investors can achieve compared to other types of hotel development. For example, a developer is able to build a hotel with a room count comparable to a full-service property, but with the operating ratios of a select-service hotel. The higher profit margins compared to a full-service development make the projects more attractive to both debt and equity investors. The following table illustrates the composite operating statement of the four dual-branded hotels analyzed.The comparable operations achieved a relatively wide range of house profit from 37% to 51%; however, the composite figures are consistent with the aggregate data we collected for the Courtyard by Marriott, Hilton Garden Inn, Residence Inn by Marriott, and Homewood Suites by Hilton brands. Based on an overview of more than 250 operating statements, the four brands combined to achieve a house profit of 46.0%. Separately, the aggregate of the select-service hotels reflected a house profit of 45%, while the extended-stay hotels achieved a house profit of 48%. The data suggest that a dual-branded lodging property should operate at expense ratios consistent with a blended average of what the two brands would be anticipated to achieve individually. Specifically, departmental expenses tend to be more consistent within a ratio-of-sales and per-occupied-room basis, while undistributed operating expenses tend to have a closer relationship on a per-available-room basis. The operational benefit for dual-branded hotels is realized primarily when the management company can run both hotels and employ just one person for key positions, such as the General Manager, Director of Sales, and Chief Engineer. This seems to be the typical arrangement; however, every project is looked at independently, and some brands may require multiple positions for the property. While hourly employees are generally brand-specific, the ability to cross-train team members can also lead to operational efficiencies.ConclusionsThe dual-brand model offers developers and owners a chance to command a larger share of the market, maximizing potential cash flows and producing a greater return to the land. However, not all sites are best suited for dual-branded hotel development, and accurate market segmentation and demand trends are critical components to success. Moreover, dual-brand projects often require much more time to work through the design process to ensure the protection of individual brand standards and amenities. The benefit of multiple brands is that management is able to leverage multiple sources of demand to drive RevPAR premiums over the competitive set, while maintaining profit levels consistent with select-service operations. While the size of the dual-brand hotel market is growing at a rapid pace, the number of transactions of this property type is not yet significant enough to analyze differences in investor sentiment. Our conversations with developers, owners, and investors reflect that these assets are comparable to other select-service hotels in similar locations. Exit strategies should be particularly vetted early in the development stage. The unique design of a dual-brand hotel is incredibly specialized and could potentially lead to extensive capital costs when the property requires retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by


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