Selling BT Courageously Current US Forecasts In June of 2009 for 2010 PKF -3.5% STR -3.7% In January of 2010 for year end 2010, and 2011 PKF -1.1% for 2010, and 5.8% for 2011 STR -3.2% for 2010, and +4.2% for 2011 In June of 2010 for year end 2010 and 2011 PKF +1.7% for year end 2010, and 7.8% in 2011 STR +3% for year end 2010, and 6.5% in 2011 What does BT mean to Sage Current Sage Performance and Forecast June YTD RevPAR +$1.47 to budget RevPAR +.45 to last year Full year Forecast RevPAR +$1.22 to budget RevPAR +.47 to last year YTD June Market Share for Sage YTD RevPAR Index 100.6%, -0.5% -1.9% in occupancy, and +1.3% in ADR index Sage Historical BT production mid year • 2010 o 246,754 $109 $27m • 2009 o 204,566 $122 $25m • 2008 o 219,608 $126 $28m • 2007 o 193,847 $115 $22m Sage Historical BT production Full Year • 2010 F o 500,106 $108 $54m • 2009 o 420,125 $117 $49m • 2008 o 370,389 $126 $47m • 2007 o 326,358 $116 $38m Current Markets How Did We Get Here • 2009 and 2010 were both very difficult years for the BT market o Many financial companies put into place travel freezes through the first half of 2009 o The big companies that continued to travel demanded decreases as much as 15% o An over saturation of hotel supply caused many hotels to undercut each other and further drive down BT rates o 2010 began the quest for occupancy and hotels were doing anything possible to capture new business including giving away many value adds along with lower rates What Does the Current Market Look Like • 2010 has already started to see a turnaround o Hotels are beginning to see a bump in occupancy, however this demand is very elastic and price sensitive Marriott reported a 9.9% growth in RevPAR for the second quarter, with ADR growing a slim 1.6% compared to last year o Most markets are beginning to notice that the bleed on ADR has started to slow Much of this slowing is due to a shift in business With more BT coming into the market, hotels are able to rely less heavily upon discounts o The increase in supply has started to slow This means there will be less rooms in the market as demand continues to grow Eventually compression will start occurring which will allow hotels to yield for more rate How do we make this a dynamic shift? • Aggressive Revenue Management is key – Ability to limit other discounts quickly when demand is surfacing • Demand is increasing already, moving from northeast to the west • Know your market, and your accounts • Forecast your high demand • ADR crossed over prior year for first Looking ahead to 2011 What are the brands, peers, and customers predicting for next year What do the Brands Expect Next Year to Look Like • 2011 will be the year to grow ADR o Historically BT rates have a slower rebound than retail rates o The largest players in the market may continue to want rate decreases or flat rates for next year and possibly into 2012 o Most rate growth will be captured through small to mid production business from the local area rather than global and national accounts Marriott is targeting an 8-10% increase for BT accounts Hilton is bracing for some resistance on their major accounts and therefore expects a 3-5% increase IHG is focusing on the value adds attached to accounts to show value to any rate increases they may propose Starwood is being cautiously optimistic, however has not given any figures regarding a target increase for BT accounts What some of our peers are saying… • Destination Hotels and Resorts o 5%-8% Revenue increase through room night production, flat in rate • White Lodging o 5%-6%, RVP Signature required for 'Flat Account Rates' • Interstate o 10%-15% expected growth, mostly rate Customer Expectations Current Feedback • IBM RFP has come out, 3 to 5% decrease to 2010 rates. • JPMC and Oracle projecting flat • Accenture an PWC are forecasting flat, with a possible slight increase • FedRooms - slow ADR lift, but not forecasting peak until 2013. • Bank of America - Expecting flat ADR, with 40% increase in occupancy. Also expecting on doubling meeting planners for 2012. • Pepsi - Expecting occupancy growth, but flat ADR and looking to grow number of hotels in travel program. Expectations - pg 2 • Starwood GSO Quote-Customers are expecting increases from hotels, therefore, they will come out of the gate aggressively to keep rates down. • Fair amount of Blackstone customers, according to Ryan Buck, are expecting flat, for those that did not already sign a two year deal. • Local accounts may provide additional rate opportunity, but may be slower in developing their RFP process. • Some hotels are re-evaluating 2010 with their accounts, and cannot get a read from customers on 2011. Project Business Expectations Project overview •Companies like Accenture, Deloitte, Capgemini, KPMG, PricewaterhouseCoopers represent a great opportunity for special corporate and project business •The average consultant is on pace to travel about 88 days in 2010, down from 91 days in 2009 and 99 days in 2008, according to Consulting’s survey. Consultant Survey Travel projections 2010 • Accenture : $332 Million hotel spend – 84% compliant to preferred hotel program • Deloitte : 800,000 room nights – 60% complaint to preferred hotel program • KPMG : 500,000 room nights – 75% compliant to preferred hotel program The Cycle of Emotions 2007 2008 – 1st Half 2011-12 2008 – 2nd Half 2004 2011 2009-2010 THE HOTEL MARKET CYCLE Moving Past the Trough Rapid Rapid Development Development Development Lodging Decline, Picks Up Equilibrium Leads Other ADR Sectors 2013-2014 Long Run U.S. is Here Occupancy A Year Ago 2011-2012 ADR and Occupancy Margins Declines, ADR Recover Follows Development Occupancy Slows Recovers July 2010 Development at Minimum Levels Lodging Recovers, Lags Other Sectors www.pkfc.com Given what you have seen… • Where do you think we will finish 2010? • Where do you think 2011 will end?
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