Economic Trends Affecting Hospitality Sellers in Today s Turbulent Marketplace webinar will be begin shortly. If you need technical assistance with the webcast, contact us at hsmai@commpartners.com and we will assist you immediately. Economic Trends Affecting Hospitality Sellers in Today s Turbulent Marketplace Tuesday, December 2, 2008 10 11:30 a.m. EST presented as part of the series Leading Through the Economic Crisis and Preparing for Recovery by Hospitality Sales and Marketing Association International (HSMAI) 2
Today s Moderator John Parke, CMP President/CEO Leadership Synergies, LLC jparke@leadershipsynergies.com Leadership Synergies, LLC is a company that specializes in sales strategy consulting, sales training and sales audits. Before forming Leadership Synergies, John Parke worked for Marriott International for more than 18 years, most recently as Vice President of the Global Account Sales Organization. In that capacity, he was responsible for overseeing more than 200 senior sales executives and $1.3 billion of annual revenues. Under Mr. Parke's leadership, the Marriott sales force was rated Number 1 by Sales & Marketing Magazine for 3 consecutive years. Mr. Parke was profiled in the March 2004 and June 2007 issues of Selling Power Magazine. Mr. Parke is a visiting lecturer at Cornell University and teaches the Sales and Marketing Management program. Mr. Parke is a frequent public speaker on sales cultures, organizational branding, and personal branding. He has published articles in Velocity (Strategic Account management Association) Board Member (Center for Nonprofit Boards), Executive Update (American Society of Association Executives), The Meeting Professional (Meeting Professionals International), Convene (Professional Convention management Association) and CMP Update (Certified Meeting Professionals). 3 HSMAI Alliance Partner 4
HSMAI Alliance Partner 5 POLL QUESTION #1 How many people are participating in this webinar at your location today? 1 2 3 4 5 6 7 8 or more 6
Program Goals Help your team understand the macro trends and how they relate to the current marketplace Outline a forecast for 2009 Let you know the key indicators to watch 7 Speaker Bjorn Hanson, Ph.D. Clinical Associate Professor Preston Robert Tisch Center for Hospitality, Tourism & Sports Management bjorn.hanson@nyu.edu Bjorn is well known for his research, statistical and econometric analysis of the travel and lodging industries. Professional experience Bjorn retired from PricewaterhouseCoopers LLP in June 2008 as the founder of PwC s Hospitality and Leisure businesses. Just a few of his positions with PricewaterhouseCoopers included: Global Industry Chairman Hospitality & Leisure Global Industry Chairman Real Estate Director of Appraisal Services Global Financial Advisory Services Management Committee, Member Selected honors One of the 33 Most Influential People in the Travel Industry, Travel Weekly One of the 25 Most Influential People in the Meetings Industry, Meeting News One of the Lodging Industry s 75 Leaders, AH&LA Profiles in Leadership Cornell s Hotelier of the Year Speeches and publications Bjorn is one of the most cited industry executives with multiple citations in Forbes, Fortune, Business Week, Time, Newsweek, The Wall Street Journal, The New York Times, Financial Times, US News & World Report, Barron s, Cornell Hotel and restaurant Administration Quarterly, and many others. He has authored chapters in multiple textbooks, appeared on the Today Show, Wall Street Journal Business Report, WCBS, CNBC, Fox Business, CNN, Bloomberg, Nightly Business Report, National Public Radio s Marketplace and other televisions and radio broadcasts. 8
U.S. Lodging Industry Update Bjorn Hanson, Ph.D. Clinical Associate Professor, Tisch Center, NYU December 2008 Agenda 1. Recent U.S. Lodging Trends 2. U.S. Recessions 3. Lodging Industry Issues 4. Forecasts 5. Implications
Recent U.S. Lodging Trends Recent U.S. Lodging Trends 140 ADR 130 120 110 100 ` RevPAR Supply Demand Occupancy 90 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008* * Forecast Source: Smith Travel Research and PricewaterhouseCoopers
Recent U.S. Lodging Trends As of December 2008, there have been 14 consecutive months of occupancy decline 12 months following September 2001 The longest period since 1990 91 (18 months) U.S. Recessions
National U.S. Recessions Dates Duration Aug. 1929 to March 1933 43 months May 1937 to June 1938 13 months Feb. 1945 to Oct. 1945 8 months Nov. 1948 to Oct. 1949 11 months July 1953 to May 1954 10 months Aug. 1957 to April 1958 8 months April 1960 to Feb. 1961 10 months Dec. 1969 to Nov. 1970 11 months Nov. 1973 to March 1975 16 months Jan. 1980 to July 1980 6 months July 1981 to Nov. 1982 16 months July 1990 to March 1991 8 months March 2001 to Nov. 2001 8 months Source: National Bureau of Economic Research National U.S. Recessions 1929 1932 1935 1938 1941 1944 1948 1951 1954 1957 1960 1963 1967 1970 1973 1976 1979 1982 1986 1989 1992 1995 1998 2001 2005 2008 Source: National Bureau of Economic Research
U.S. Recessions and Lodging Cycles U.S. Recessions Months Lodging Cycles Months Dec. 1969 to Nov. 1970 11 Feb. 1969 to Feb. 1971 12 Nov. 1973 to March 1975 16 Aug. 1974 to May 1975 9 Jan. 1980 to July 1980 6 Oct. 1979 - July 1981 to Nov. 1982 16 to May 1982 19 July 1990 to March 1991 8 Feb. 1990 to March 1991 13 March 2001 to Nov. 2001 8 Sept. 2000 to Sept. 2003 36 Source: Smith Travel Research and National Bureau of Economic Research U.S. Recessions and Stock Market
U.S. Recessions and Stock Market Year Magnitude of Decline Months of Decline Months Until Full Recovery 1929 to 1933 83% 34 151 1937 50% 13 58 1946 22% 6 35 1962 22% 6 10 1970 29% 19 9 1974 43% 21 21 1987 30% 3 18 2002 45% 25 40 2008 47% 13*?? * To date. Source: Center For Research In Security Prices (University of Chicago) Lodging Industry Issues
U.S. Lodging Demand 170 160 150 140 130 120 110 100 90 80 70 60 Upscale Midscale without F&B Luxury Upper Upscale ` Economy Midscale with F&B 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008* * Forecast Source: Smith Travel Research and PricewaterhouseCoopers U.S. Lodging Rate 150 140 130 120 110 100 Midscale with F&B ` Midscale without F&B Luxury Upscale Upper Upscale Economy 90 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008* * Forecast Source: Smith Travel Research and PricewaterhouseCoopers
170 160 150 140 130 120 110 100 Demand Elasticity and Correlation to Real GDP 1987 value = 100 180 US Real GDP 87 88 89 90 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07 Sources: Lodging demand PricewaterhouseCoopers LLP based on Smith Travel Research data; Real GDP- U.S. Bureau of Economic Analysis; Air travel demand - Air Transport Association. 170 160 150 140 130 120 110 100 Demand Elasticity and Correlation to Real GDP 1987 value = 100 180 US Real GDP Lodging Demand (Room Nights Sold) 87 88 89 90 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07 Sources: Lodging demand PricewaterhouseCoopers LLP based on Smith Travel Research data; Real GDP- U.S. Bureau of Economic Analysis; Air travel demand - Air Transport Association.
Long-Term U.S. Occupancy Occupancy Percentage 95% 90% 85% 1946 92.5% Long-Term Trend 66.5% (79 Years) 1987 to 2007 Trend 62.7% (20 Years) 80% 75% 70% 65% 1979 72.2% 1995 64.8% 60% 55% 50% 1933 50.6% 1971 53.4% 1991 61.9% 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94 97 '00 '03 '06 Sources: PricewaterhouseCoopers LLP (1928 to 1986 and 2008), Smith Travel Research (1987 to 2007). 2002 59.0% 2008 Forecast 62.8% Long-Term Occupancy Levels and Profits Income Before Income Taxes, Billions of Dollars $30 Aggregate Profits Occupancy Occupancy Percentage 66% $25 $20 $15 $10 64% 62% 60% $5 $0 ($5) 58% 56% ($10) 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 54% Sources: Smith Travel Research Note: STR change in method in 2002.
Which Demand Segment Will Lead The Recovery? Business Domestic Business International Leisure Domestic Leisure International Groups / Conventions Ultra-wealthy Forecasts
2009 U.S. Lodging RevPAR Forecasts Source 2009 RevPAR Growth (%) Goldman Sachs (10.0) PricewaterhouseCoopers (5.8) Deutsche Bank (4.8) Morgan Stanley (4.5) PKF Research (4.3) JP Morgan (3.0) to (6.5) Smith Travel Research (2.5) Source: Individual organizations and analyst reports Implications
Implications For 2009 This recession may be most similar to the 1970s recession Four years Four years for the stock market to recover Occupancy of 58.6 %, (3.5 %), lowest level since 1971 Average daily rate (2.4 %), largest decline ever Recompression of average daily rates Reduced spending on capital expenditures The buyer balance of power best in 33 years Industry profits will decline, second occurrence since 1980 U.S. Lodging Industry Update Bjorn Hanson, Ph.D. Clinical Associate Professor, Tisch Center, NYU December 2008
Questions & Answers After the webinar session is adjourned you are welcome to email additional questions for Bjorn Hanson to Kathy Tindell at HSMAI ktindell@ 33 Today s speaker Bjorn Hanson, Ph.D. Clinical Associate Professor Preston Robert Tisch Center for Hospitality, Tourism & Sports Management bjorn.hanson@nyu.edu 34
Leading Through the Economic Crisis and Preparing for Recovery series Later today, December 2, 2008 Segment #2: Maximizing Revenue in a Downturn, 2 3:30 p.m. EST Bill Caroll, Senior Lecturer, Cornell University: School of Hotel Administration Bonnie Buckhiester, President/CEO, Buckhiester Management USA, Inc. Dan Kowalewski, Vice President Revenue Management Services, Wyndham Hotel Group Tom Walker, Managing Director, RoomRevenew 35 Leading Through the Economic Crisis and Preparing for Recovery series Wednesday, December 3, 2008 Segment #3: Getting Your Message Across with an Integrated Marketing Strategy, 10 11:30 a.m. Susan Thronson, SVP Global Marketing, Marriott International Kim Schaller, VP, Chief Marketing Officer, Hershey Entertainment & Resorts Jim Wood, President/CEO, Louisville CVB Segment #4: Ten Actions Your Sales Team Must Take in the Next 90 days, 2 3:30 p.m. Serge Asensio, Managing Director, Topline Group, LLC Mark Tunney, Managing Director, Convention Sales, Chicago Convention & Tourism Bureau John Washko, VP of Sales & Marketing, The Broadmoor 36
Conclusion LINKS box Webinar Evaluation Form Please take a moment now to click on this link and complete the evaluation. Be sure to click on Submit when you have completed the evaluation to send us your responses. Your comments & suggestions are very important to us, and they help us to provide you with this kind of quality programming. You will also find links to the HSMAI and HSMAI University websites in the LINKS section, should you be interested in more information about the association who presented this webinar today. www.. 37