Hotels Quarterly Market Report January to June 2016

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Hotel Market Update – January to June 2016

Executive Summary

The first half of 2016 has seen continued growth for business from the independent travel management company (TMC) sector, with 100,000 extra room nights booked over the two quarters versus 2015, an increase of 5.32%. In the last report we had indicated a sluggish first quarter with only marginal increases in room nights, so it is pleasing to see such a strong second quarter performance in 2016. Following the record increases in 2015, this six-month performance is extremely credible for the independent TMC sector. Increased hotel sales indicate that corporate accounts are not only continuing to travel but travelling more.

The number of bookings in the six-month period January to June 2016 was up by 7.38%. With the number of bookings exceeding the growth in room nights this demonstrates a drop in room nights per booking to an average length of stay of 1.86 room nights i.e. more bookings but shorter stays.

The average daily rate (ADR) across the globe for hotel bookings in quarter one and two 2016 has fallen to US$165.24 a decrease of 4.66% versus the same period last year. NB It needs to be noted that these decreases in ADR will be largely due to the fact that all of our figures are reported in USD and in the last year the USD has increased in strength versus most other world currencies. Therefore, as we book a high proportion of outside of the US dollar markets, the exchange rate will have the effect of reducing our reported revenues.

Global market statistics from Smith Travel Research Global (STR) (Table 1) reveal a picture which indicates average daily rates (ADRs) were ahead in both quarter one and quarter two 2016 versus 2015 for the USA and the Americas. Rates in Europe were marginally down and trending a further decrease into quarter two against 2015, whilst Asia Pacific and Middle East/Africa both indicated a decrease in both quarters but an improving picture in quarter two.

Occupancy levels from STR (Table 2) show a mixed bag by region, with improvements from quarter one to quarter two 2016 versus 2015 in both the USA and Americas, and an increase in occupancy for both Asia Pacific and Europe in the first six months. However, the Middle East and Africa is indicating reducing occupancy from quarter one to quarter two 2016 versus 2015. The positive performance for January to June 2016 is therefore ahead of the market.

Hotel Average Daily Rate Trends Jan to Jun 2016 3.2% 2.9% 2.4% 2.2%

-0.8% -0.9% -1.8% Av. Daily Rate Q1 2016

-3.2% Av. Daily Rate Q2 2016 % Change vs Q1 Q1 2015 vs Q2 & %Change -4.9% -5.8%

USA AMERICAS EUROPE ASIA PACIFIC MIDDLE EAST & AFRICA

Table 1 – Hotel ADR Q1 and Q2 2016. Source: Smith Travel Research

Hotel Occupancy Trends Jan to Jun 2016

1.7% 0.7% 0.8% 0.8% 1.4% 0.4% -0.5% -0.7%

Occupancy Q1 2016 -3.4% Occupancy Q2 2016

-6.9% % Change vs Q1 Q1 2015 vs Q2 & %Change

USA AMERICAS EUROPE ASIA PACIFIC MIDDLE EAST & AFRICA

Table 2 – Hotel Occupancy Q1 and Q2 2016. Source: Smith Travel Research

The hotel market is not surprisingly following the economic trend of uncertainty and for this reason the outlook is one of continued caution. Global group business is starting to contract and this is often an indicator for the transient hotel sector to follow. It is anticipated that with the upcoming US elections and the settling of the markets after the UK vote on Europe, a depressed oil and gas sector and the economic slowdown in China that the outlook will continue to be less than bullish.

Top UK Cities – January to June 2016

Quarter two of 2016 proved to be much stronger than quarter one 2016 for our Top 25 UK Cities (Table 3) and we saw a cumulative increase of 8.30% in room nights for the first six months of 2016 compared to the same period in 2015. There are some terrific UK regional performances with Bristol leading the way with a 40% increase, whilst , and Cambridge all demonstrating a 30% plus increase compared to the first six months of 2015.

Of the top 25 destinations all saw an improvement versus quarter one 2016 with just Oxford, Reading, Belfast, Aberdeen and York seeing a decrease in room nights for the six-month period versus last year. and the City of London saw a return to growth with +3% and +6% respectively.

The ADR appears to be down across all destinations featured but this is not a true reflection as the hotels would have been booked and paid in GBP but as our statistics are converted to USD, the strength of the dollar over the pound compared to this time last year will be skewing this figure.

Top Cities Room Nts Jan to Jun '16 Room Nts Jan to Jun '15 Room Nts 2016 +/- % ADR (USD) 2016 ADR +/-% London 133,559 130,231 3% $232.55 -8% Birmingham 45,532 39,685 15% $117.37 -3% Manchester 39,834 36,043 11% $130.39 -3% Aberdeen 39,156 42,427 -8% $134.43 -33% Leeds 25,848 24,969 4% $123.06 -5% Bristol 25,157 17,922 40% $140.20 -3% Glasgow 21,811 15,728 39% $130.05 -8% Edinburgh 20,318 15,083 35% $148.24 -9% Liverpool 19,989 17,454 15% $113.41 0% Newcastle Upon Tyne 19,710 16,815 17% $110.99 -6% Cardiff 11,811 11,781 0% $114.16 -7% Nottingham 11,715 9,753 20% $107.83 -5% Sheffield 11,049 9,130 21% $103.05 -4% Croydon 10,748 10,414 3% $127.68 -6% Milton Keynes 10,540 10,073 5% $146.15 -5% City Of London 9,927 9,343 6% $278.48 -7% Belfast 8,601 9,818 -12% $121.70 -24% Southampton 8,558 7,692 11% $121.40 -4% Coventry 7,419 7,243 2% $115.55 0% York 6,754 7,196 -6% $126.32 -4% Reading 6,471 7,542 -14% $151.54 -3% Bournemouth 5,991 5,349 12% $128.01 -5% Cambridge 5,950 4,563 30% $194.60 -1% Exeter 5,810 5,131 13% $121.30 -4% Oxford 5,539 6,748 -18% $140.25 0%

Table 3 – Top UK Cities – January to June 2016. Source: TravelClick/WIN

This year will see 16,000 rooms added to UK hotel supply; of these, 7,000 will open in London – more than double the figure added in 2015. For the UK regions, overall hotel capacity will expand by 9,000 new rooms in 2016.

Top Cities Worldwide – January to June 2016

For our Top 25 Cities Worldwide (Table 4) we saw an increase of 2.03% in room nights for the first six months of 2016 compared to the same period in 2015. This would be up nearly 5% if it were not for the large decrease in Houston business due to the challenges in the oil industry. There are some good performances elsewhere, led by San Francisco at +41%, with Shanghai, Christchurch and Milan all demonstrating 20% plus increases. It is pleasing to see that business for Paris is now +1% and shows a good return after the awful atrocities of last November, whilst Brussels is at -8% following the attack on their airport in the first quarter.

The average daily rates are mixed with some positive and negative performances, again we have here a reflection of the strength of the dollar in some markets. Across Europe there are some good increases for a number of cities, led by Dublin at 16% and Amsterdam at 8%, whilst further afield San Francisco and Auckland are reporting 8% and 5% ADR increases respectively.

Top Cities Room Nts Jan to Jun '16 Room Nts Jan to Jun '15 Room Nts 2016 +/- % ADR (USD) 2016 ADR +/-% New York 34,307 33,883 1% $362.71 -1% Auckland 25,490 22,831 12% $139.40 5% Paris 25,426 25,158 1% $252.03 -5% Sydney 24,536 23,449 5% $208.85 1% Melbourne 24,101 23,194 4% $155.84 -6% Wellington 21,697 19,921 9% $126.95 0% Singapore 16,203 17,095 -5% $230.06 0% Houston 13,523 21,865 -38% $173.18 -5% Stockholm 12,060 11,170 8% $233.09 9% Hong Kong 12,022 11,704 3% $314.68 -1% Milan 11,995 9,670 24% $226.40 -8% Dubai 11,464 12,744 -10% $245.56 -3% Shanghai 10,526 8,121 30% $177.48 -7% Brisbane 10,446 10,196 2% $154.57 -9% Amsterdam 10,426 11,030 -5% $227.71 8% Perth 10,087 9,278 9% $164.26 -13% Johannesburg 9,728 9,525 2% $114.75 -14% Dublin 9,028 8,562 5% $198.71 16% Cape Town 8,738 9,230 -5% $116.74 -12% Christchurch 8,571 6,653 29% $122.40 -5% San Francisco 8,176 5,789 41% $374.19 8% Madrid 7,989 7,635 5% $186.51 -1% Frankfurt 7,897 8,507 -7% $221.07 -1% Brussels 6,854 7,478 -8% $186.57 -1% Chicago 6,089 6,490 -6% $276.59 -4%

Table 4 – Top Cities Worldwide – January to June 2016. Source: TravelClick/WIN

Cities with the Largest Room Night Increases – January to June 2016

There are 28 destinations that have seen over 100% growth in room nights for the first six months of 2016 (Table 5). Five locations saw quadruple digit growth; both Port Gentil and Libreville in Gabon, as well as Carrieres Sous Poissy, France; Cirencester in Gloucestershire, UK; and Finchley in North London, UK. Twelve locations in the UK have made the top of the table, with three in North London. The rest of the destinations are spread around Europe, Australia, North America, Mexico and two in China.

Top Cities Room Nts Jan to Jun '16 Room Nts Jan to Jun '15 Room Nts 2016 +/- % ADR (USD) 2016 ADR +/-% Port Gentil 597 6 9850% $212.55 -4% Carrieres Sous Poissy 928 16 5700% $50.90 -24% Libreville 2,907 130 2136% $175.38 -18% Cirencester 565 39 1349% $151.79 24% Finchley 669 50 1238% $103.71 -7% Xiamen 1,666 177 841% $110.08 -16% Savannah 639 86 643% $152.19 -5% Atyrau 1,256 209 501% $90.76 -49% Cordoba 651 126 417% $87.62 -3% Broome 820 204 302% $132.78 -15% Tottenham 589 147 301% $180.22 -4% Xian 1,685 485 247% $101.24 -12% Bowling Green 858 263 226% $104.10 9% Enfield 1,072 337 218% $113.06 -16% Fremont 538 178 202% $167.02 -9% Dhaka 666 221 201% $209.86 -4% Walsall 2,298 915 151% $89.71 -15% Dordrecht 539 217 148% $121.51 -3% Langley Vale 1,280 522 145% $135.73 -10% Grimsby 1,460 617 137% $107.35 -13% Halifax 1,540 662 133% $123.89 3% Folkestone 629 271 132% $106.33 4% South Jordan 907 397 128% $97.53 -13% Stirling 899 411 119% $121.23 8% Gibraltar 1,528 703 117% $183.18 -18% Enschede 555 260 113% $115.55 -6% Mobile 892 428 108% $125.20 6% Bexley 849 414 105% $145.35 -3%

Table 5 – Cities Largest Room Night Increases – January to June 2016 Source: TravelClick/WIN

Cities with the Largest Room Night Decreases – January to June 2016

Thirty locations have seen a decrease in room nights of 45% or more (Table 6). There are six locations in the southern US states and eight in regional UK. The other locations to feature are spread geographically.

Top Cities Room Nts Jan to Jun '16 Room Nts Jan to Jun '15 Room Nts 2016 +/- % ADR (USD) 2016 ADR +/-% Lafayette, Lousiana, US 518 2,083 -75% $118.36 -3% Katy, Texas, US 273 973 -72% $118.87 -20% Nanjing, China 226 764 -70% $115.29 -6% Williston, N Dakota, US 586 1,944 -70% $105.54 -12% Sittingbourne, UK 327 1,078 -70% $113.40 5% Ridgeland, Mississippi, US 1,431 4,686 -69% $111.25 12% Aix En Provence, France 407 1,134 -64% $110.19 3% Ringway, UK 440 1,133 -61% $188.03 23% South Burlington, Vermont, US 910 2,282 -60% $98.08 -9% Corby, UK 277 689 -60% $103.83 -1% Saltillo, Mexico 276 668 -59% $111.06 13% Earley, UK 566 1,349 -58% $134.33 -7% Schiedam, Netherlands 280 652 -57% $139.90 -6% Kristiansand, Norway 298 675 -56% $136.81 -10% Brownsville, Texas, US 230 518 -56% $106.04 5% Saint Petersburg, Russia 445 968 -54% $218.60 30% Anchorage, Alaska, US 353 756 -53% $190.40 -1% Chatham, UK 1,122 2,392 -53% $110.58 -5% Newport Beach, California, US 599 1,277 -53% $238.95 17% Kristiansund, Norway 291 620 -53% $139.47 -12% Stoke On Trent, UK 259 540 -52% $85.13 -1% Campinas, Brazil 392 815 -52% $98.23 -22% Peterhead, UK 306 626 -51% $98.02 -15% Louisville, Kentucky, US 473 962 -51% $187.23 26% Port Of Spain, Trinidad 478 972 -51% $183.40 -8% Metairie, Lousiana, US 432 875 -51% $109.92 -3% South Yarra, Australia 751 1,495 -50% $161.72 9% Hawthorn, California, US 308 597 -48% $142.58 -2% Portland, Oregon, US 2,394 4,586 -48% $188.33 0% Farnborough, UK 493 930 -47% $211.23 1%

Table 6 – Cities Largest Room Night Decreases – January to June 2016 Source: TravelClick/WIN

Cities with the Highest Average Daily Rates – January to June 2016

The highest ADR (Table 7) for the first quarter of 2016 was recorded for Monte Carlo at US$660.94 per night. Of the 28 destinations showing average daily rates at over US$300, half are in the USA with nine of these in California and two in Florida. Two of the locations are in Japan, two are in Switzerland, two in Spain and two in the Caribbean. The only Asia Pacific locations outside of Japan to feature are The Rocks, Sydney and Hong Kong. Cannes was the top city in 2015 with an ADR close to US$750, so they have seen a drop in ADR of US$300 per night.

Our performance for California is supported by PKF who have indicated that hotels located in the West Coast and Mountain West regions of the USA continue to lead the nation in ADR growth, where employment and income gains have continued to outperform the USA as a whole.

Top City ADR 16 Monte Carlo $ 660.94 Menlo Park $ 550.83 Beverly Hills $ 486.13 Chiyoda $ 485.95 Cannes $ 453.54 Santa Monica $ 417.50 Palo Alto $ 409.34 Marbella $ 387.33 Miami Beach $ 375.53 San Francisco $ 374.19 Al Jubail $ 373.39 Herzliya $ 364.88 New York $ 362.71 Minato $ 362.06 Grand Cayman $ 361.17 Palma $ 358.15 West Hollywood $ 349.75 Boston $ 337.70 Redwood City $ 334.45 Palm Beach $ 328.76 Zurich $ 325.27 Bermuda $ 320.13 Geneva $ 319.81 Los Angeles $ 316.86 Hong Kong $ 314.68 Marina Del Rey $ 310.65 Washington $ 309.40 The Rocks $ 302.59

Table 7 – Cities Highest ADRs – January to June 2016. Source: TravelClick/WIN

2016 – The Outlook

Rates and occupancy have appeared to plateau in many markets. 2015 was a record year for hotel occupancy and rates for most areas, and sustaining these levels into 2016 has got to be seen as a positive result for most hotels. Our own performance to date puts us ahead of the market but there are a potential number of head winds on the horizon. The 's vote to leave the European Union didn't occur until late June so it is too early to quantify the impact on the UK and the European hotel industry. Geopolitical instability will continue and major hoteliers, including , and Hotels Corp., revised down their full-year growth projections in revenue per available room.

The Global Business Travel Association’s (GBTA's) Global Travel Price Outlook for 2017 shows only marginal increases or flat travel prices. Asia Pacific is expected to see hotel prices fall slightly, by 0.6%; EMEA again varies by region as geopolitical issues impact on hotel rates. Also, low oil and gas prices have decreased corporate travel for the sector, primarily in the Middle East, Africa and Russia. It is anticipated that Eastern Europe prices will fall 2.4%, Western Europe prices will increase 1.8%, and Middle East and Africa rates will fall slightly, by 0.5%. Prices in Latin America and the Caribbean are projected to decrease by 0.9%.

Overall, North American hotel prices are expected to rise by 4% in 2017, but it will be a tale of two coasts. West Coast cities, including Seattle, Los Angeles, San Jose and Vancouver, will experience high single- to double-digit growth because of the high-tech boom and a shortage of hotel rooms. Meanwhile, East Coast cities including New York City and Toronto, as well as Canada’s oil and gas region, will face low growth or even a reduction because of an over-supply of hotel rooms.

Trends to watch: • Hotel rate increases will slow through the rest of 2016 and the occupancy records of 2015 will be hard to recreate.

• Rate increases/decreases will as always vary by destination, however a redress of the balance of supply with demand means we are starting to see a slowing in rate increases and in some cities rate reductions.

• Changes in Europe will lead to volatility in rates in some markets. London has already seen a number of rate reductions.

• Asia has seen an equalling of supply to demand which, coupled with the China market concerns, will help to keep prices relatively low in a number of markets.

• Rates available to us via our GDS booking system are more often than not at parity or better to the OTAs/bed banks.

• Duty of care and company liability are now high priorities. So direct booking with hotels can upset corporate policy and by-passing booking through us means we are not capturing all traveller data should something unforeseen happen.

• Faster Wi-Fi upgrades, and city taxes are creeping into ancillary costs payable directly by clients on departure. • Airbnb are trying to position themselves as an alternative for younger and millennial travellers, but concerns exist about liability and duty of care.

• The major chains are introducing brands for ‘independent’ hotels to align to, offering the customer access to the hotel loyalty schemes and the hotels access to their central systems and marketing power e.g. Unbound by Hyatt, by Hilton and Tribute by .

• The major chains will get larger through acquisition. There will be further consolidation in 2016. Further consolidation could lead to rate increases.

• An increased number of special offers are being introduced to the market – watch out for updates on hotel specials. We have many negotiated rates to include ancillaries (e.g. high speed Wi-Fi, breakfast, parking, etc)

Resources: TravelClick Smith Travel Research Global (STR) Global Business Travel Association (GBTA) WIN

Please note this is just a view and we cannot be held responsible for any of the figures or comments contained in the summary. This is a summary of the hotel market, designed to provide an overview. Further statistics are available should you require more specific information.

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