26 th European Hotel Investment Conference The only way is up? Chairman s welcome Nick van Marken, Deloitte

Transcription

1 26 th European Hotel Investment Conference The only way is up? Chairman s welcome Nick van Marken, Deloitte

2 Important notice The document is proprietary to Deloitte LLP and should not be discussed, presented, copied, reproduced or circulated without the express written authority of Deloitte LLP. Where Deloitte is accredited as the author/source, such authority will not be unreasonably withheld. Any requests should be forwarded (via ) to: Nick van Marken Global Head Advisory Travel, Hospitality & Leisure Industry Group Deloitte LLP 2 New Street Square London EC4A 3BZ Tel: +44 (0) nvanmarken@deloitte.co.uk

3 Agenda Economy heading north? Performance moving upstream? Investment the bulls return? Outlook onwards and upwards?

4 Economy

5 Although somewhat bumpy, growth is forecast everywhere % % % % % % % % % % % % % % % % % % Compared to this time last year Source: IMF Oct 14 IMF global growth forecast for % ( 0.5ppt up on 2014)

6 GDP growth (%) Although the picture is very different to Source: IMF

7 US$ -nominal 2010=100 and the commodity supercycle is slowing Source: World Bank commodity super cycle Agriculture Energy Metals end of an era?

8 GDP (PPP) tn The balance has shifted Source: IMF, FT China overtakes the US as the world s largest economy (c.5 years earlier than expected )

9 Although the US still remains more valuable on a per capita basis and appears to have regained its global position of power $55k $12k Source: IMF, FT GDP per capita (PPP)

10 In fact, in China = $ per tonne Plunging demand for steel in China has pushed prices in some markets as low as the equivalent retail cost of cabbage Source: FT

11 Whilst in the good old US of A Economy - 6.6% larger than pre-recession Industrial output - highest since pre-crisis Unemployment - claimant count is lowest since 2000 Job gains - on pace for strongest year since 1999 Car sales - highest in 8 years Source: Bloomberg, US Treasury, Reuters Consumer sentiment - highest since July 2007

12 By George, has he done it? Unemployment at lowest levels since 2008 Confidence at a 3-year high Absolute consumer spending back at 2007 levels Seven consecutive quarters of growth >0.5% 2014 may be strongest year since 2007 Source: Deloitte, CBI

13 but, in news from the crisis-prone Eurozone We ve seen this before? Its all over Apparently not The new mediocre October 2013 Eurozone crisis officially over October 2014 Eurozone has a 40% chance of recession October 2014 Economic recovery brittle, uneven and beset by risks. Source: IMF, FT

14 The outlook certainly appears to remain challenging GDP growth (%) Inflation (%) Unemployment (%) Govt. debt (% of GDP) % 2.2% 7.5% 52% % 0.5% 11.6% 74% Source: IMF Oct 14 A combination of weak growth and low inflation

15 All ahead slow 7.7% 3.2% 1.4% 0.4% 1.3% (0.2)% Source: IMF GDP growth, Oct 2014 Europe grinds to a halt?

16 So, what s the solution? well, according (again) to the IMF It is one of the great conundrums of macroeconomics that sometimes when there is debt, and it causes a lot of unemployment and slack the answer is more debt, David Lipton, IMF (October 2014) Source: IMF World Economic Outlook

17 Despite mixed messages, confidence is approaching pre-crisis levels Financial crisis 10% 5% 5 0 (5%) -5 (10%) -10 (15%) -15 (20%) -20 (25%) -25 (30%) (35%) Q Q Q Q Q Q Q Q US Asia UK Europe Consumer confidence Source: Thomson Datastream

18 Which is all the more impressive given A bank of Black swans

19 Performance

20 Up, Up and Away # of international tourist arrivals in millions; Global & Europe Global 980 Global Global Global Europe 535 Europe 563 Europe 586 Europe f Source: UNWTO

21 RevPAR on the Rise YTD Sept 2014; RevPAR % chg, Constant Currency +8.1% +5.2% +7.7% +1.0% +3.1% STR Global % +10.4% +5.8%

22 More Heads in Beds 12MMA Demand % chg; Sept 2007 Sept 2014 (indexed at Sept 2007)

23 Europe: Poised for Pricing Power 12MMA ADR % chg; Sept 2007 Sept 2014 (indexed at Sept 2007)

24 West is Best; East is Least 12MMA RevPAR; Sept 2007 Sept 2014 (indexed at Sept 2007)

25 Lower Tiers are Head of the (Growth) Class YTD Sept 2014: Existing room supply by Class Europe Supply Share

26 Setting Stage for GOPPAR Growth 2013 % Change TrevPAR & GOPPAR by Region -0.6% +1.4% +5.4%$ +9.1%$ TrevPAR GOPPAR +3.0%$ +1.8%$ +3.3%$ +5.4%$ -2.3%$ -0.5%$

27 US Pricing Power Pushing Profitability GOPPAR (indexed at 2008), Consistent Sample

28 Profitability Promising in Europe (indexed at 2008)

29 Supply Growth is Largely Immaterial Pipeline % by Subcontinent 3.2% Europe Northern 5.0% 10.2% Eastern Western 2.0% 1.5% Southern

30 The Only Way is Up! Demand: up 10% from previous peak Supply: pipeline remains stable (+3.2%) Occupancies: remain high (~70%) Rate: 13 months of growth; 2% off previous peak GOPPAR: 10% off peak; solid foundation for recovery/growth

31 Investment

32 bn A banner year in prospect? bn 7.8bn c. 10bn UK c.40% of total Portfolio Single Asset UK Source: Deloitte research (2014 = YE forecast) European transaction volumes ( bn)

33 How do you spend 10bn? 40% on UK and 20% on French assets Add some Yanks ( 2.7bn) 5.1bn on portfolios Some change from the Gulf ( 0.8bn) 10% on simple luxuries Add some Chinese ( 0.7bn) Reignite PE interest ( 2.2bn) A few Russians ( 0.6bn) and get operators to join the party ( 1.6bn offloaded by corporates) Source: Deloitte

34 Qatari flush Source: Deloitte research Spend by Qatari investors across Europe since 2007 now > 7bn

35 Out with An bang An icon changes hands Chinese investors splurged $3.1bn on European real estate in 2013 Source: Hilton Worldwide, Deloitte, Real Capital Analytics

36 And here in good old blighty Source: Deloitte A veritable surge in UK portfolio deals, with a host of new players in town

37 Phenomenal demand for successful brands 4.25% Source: AMPM Yield on Hub by Premier Inn London forward sale

38 On borrowed time c. 18bn pre-crisis 75% of UK provincial hotel debt has been written down/re-financed or restructured since the crisis began Source: Deloitte estimates

39 Three-letter word IPO market back to pre-2007 levels?? The public markets return to favour expect more to come

40 Back where we all started (only better and bigger) $13bn 8bn $22bn 6bn $14bn 2007 c.$56bn 2009 c.$27bn Today c.$56bn Source: Brokers reports - October Market capitalisation

41 Q3 a stunning quarter Reported Q3 growth in RevPAR 7.0% 4.6% 7.4% 8.4% 8.7% 4.6% 7.6% 3.5% Some interesting comparators (revenue growth) 7.0% 7.0% Source: Brokers notes, Annual reports

42 Back to the future Hilton returns to the NYSE Conrad Hilton acquires portfolio of Texas hotels Hilton acquired by Blackstone Hilton Hotels Corporation formed, and files to list on the NYSE HLT coming full circle - $2.5bn raised

43 Value ( bn) Rooms (000) Thinking back Source: Deloitte research Cumulative value Cumulative rooms saw a raft of P2P s in Europe

44 London cements its crown as top spot for inward RE investment $30bn $11bn $11bn Source: Cushman & Wakefield (Q3 13 Q2 14)

45 Your thoughts on London London remains the most attractive city for hotel investment Other 4% and even money on value Over valued 51% Fairly valued 45% Source: Deloitte pre-conference survey

46 Your view on the most prominent European investment themes % Respondents noting these as prominent themes (rating 5 or 4) Continued acquisition appetite from PE 79% Investment in gateway cities exceeding regions 71% Investment in 'trophy assets' dominated by overseas HNWIs 67% Capex investment in line with market upturn (shape and hold) 53% Investment in recovering secondary cities 52% Disposals from PE firms 50% Investment in Europe likely to be driven by quest for high-quality assets Source: Deloitte pre-conference survey

47 Your view on where financing will come from 68% 53% 31% 31% 36% 10% Hedge funds Alternative lenders (pension funds etc.) Source: Deloitte pre-conference survey SWF Institutional Traditional bank debt (senior debt) PE expected to be most active in 2015 PE

48 Outlook

49 Budget flying high Annual sales 34% (to Mar14) Passengers 12m Sales 15% (6 months to Aug14) Market share to 4.3% Revenue per seat 10 Occupancy 3.6ppts to 84% Source: Thomson Reuters Datastream Budget beds in

50 Budget flying high Share price % p.a % p.a. Source: Thomson Reuters Datastream Budget beds in

51 A wave of positive value drivers Risk appetite hits a new high Demand and trading is on the up and supply outlook is benign A substantial pool of capital is seeking a home Sentiment shifts decisively, but product remains scarce BUT A return to easy credit CFO s rate credit as cheaper and more available than at any time since the last boom Economic and political risks remain a worry 2015 elections, Euro area weaknesses and interest rates remain on the agenda Source: Deloitte

52 Reasons to be cheerful A resurgent US economy International arrivals at record levels 1.1bn in 2013 and up 5% in H1 14 c.50% travelling to Europe T&T contribution to global GDP hits 9.5% Global aircraft fleet will double over next 20 years T&T grew faster than the world economy

53 Reasons to be nervous Eurozone recovery is slow Southern Europe remains challenged European consumer confidence remains mixed Mixed messages from emerging markets MENA remains in the news for all the wrong reasons The unknown..

54 What you think the key risks are in 2015 Lack of economic growth (67%) OTA s (26%) Geopolitical instability (63%) Elections and policy shifts (21%) Black or grey swans (40%) New entrants (16%) Source: Deloitte pre-conference survey

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