MARKET STUDY Proposed Hampton Inn & Suites
Total Page:16
File Type:pdf, Size:1020Kb
MARKET STUDY Proposed Hampton Inn & Suites 227 MAIN STREET HUNTINGTON, NEW YORK SUBMITTED TO:PR OPOSED PREPARED BY: Huntington Village Hotel Partners LLC HVS Consulting & Valuation c/o Division of TS Worldwide, LLC Mr. Robert Coleman CPA 1400 Old Country Road, Suite 105N Cassata Organization FLP Westbury, New York 11590 800 Cassata Drive Copiague, New York 11726 +1 (516) 248-8828 ext. 269 +1 (631) 218-6420 February-2020 February 10, 2020 Huntington Village Hotel Partners LLC c/o Mr. Robert Coleman CPA Cassata Organization FLP 800 Cassata Drive Copiague, New York 11726 HVS NEW YORK 1400 Old Country Road, Suite 105N Re: Proposed Hampton Inn & Suites Westbury, New York 11590 Huntington, New York +1 (516) 248-8828 ext. 269 HVS Reference: 2020020105 +1 (516) 248-8828 FAX www.hvs.com Dear Mr. Coleman: Pursuant to your request, we herewith submit our market study pertaining to the above-captioned property. We have inspected the real estate and analyzed the hotel market conditions in the Huntington, New York, area. We have studied the proposed project, and the results of our fieldwork and analysis are presented in this report. We have also reviewed the proposed improvements for this site. We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings. This study is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein. Sincerely, TS Worldwide, LLC DRAFT DOCUMENT Patricia Shih, Vice President [email protected], +1 (404) 791-5509 DRAFT DOCUMENT Roland deMilleret, MAI, Senior Managing Director Superior results through unrivaled [email protected], +1 (516) 248-8828 ext. 269 hospitality intelligence. Everywhere. Table of Contents SECTION TITLE PAGE 1. Executive Summary 1 Subject of the Market Study 1 Ownership, Franchise, and Management Assumptions 2 Summary of Hotel Market Trends 2 Summary of Forecast Occupancy and Average Rate 6 Summary of Forecast Income and Expense Statement 6 Scope of Work 9 2. Description of the Site and Neighborhood 11 Physical Characteristics 11 Access and Visibility 14 Airport Access 15 Neighborhood 16 Flood Zone 18 Zoning 19 3. Market Area Analysis 21 Workforce Characteristics 25 Radial Demographic Snapshot 29 Unemployment Statistics 31 Major Business and Industry 32 Office Space Statistics 34 Convention Activity 36 Airport Traffic 37 Tourist Attractions 42 4. Supply and Demand Analysis 48 Definition of Subject Hotel Market 48 National Trends Overview 48 Historical Supply and Demand Data 52 Seasonality 55 Patterns of Demand 59 Primary Competitors 63 Secondary Competitors 70 Supply Changes 72 Demand Analysis Using Market Segmentation 73 Base Demand Growth Rates 76 Latent Demand 76 Unaccommodated Demand 76 Induced Demand 77 Accommodated Demand and Market-wide Occupancy 77 5. Description of the Proposed Improvements 79 Project Overview 79 Summary of the Facilities 81 Site Improvements and Hotel Structure 82 Public Areas 83 Guestrooms 86 Back-of-the-House 88 ADA and Environmental 88 Capital Expenditures 89 Construction Budget 89 6. Projection of Occupancy and Average Rate 91 Historical Penetration Rates by Market Segment 91 Forecast of Subject Property’s Occupancy 92 Average Rate Analysis 95 Competitive Position 95 7. Projection of Income and Expense 101 Comparable Operating Statements 101 Forecast of Revenue and Expense 105 Rooms Revenue 108 Other Operated Departments Revenue 108 Miscellaneous Income 108 Rooms Expense 109 Other Operated Departments Expense 109 Administrative and General Expense 110 Information and Telecommunications Systems Expense 110 Marketing Expense 110 Franchise Fee 111 Property Operations and Maintenance 111 Utilities Expense 112 Management Fee 113 Property Taxes 113 Insurance Expense 116 Reserve for Replacement 116 Forecast of Revenue and Expense Conclusion 117 8. Statement of Assumptions and Limiting Conditions 118 Addenda Qualifications 1. Executive Summary Subject of the The subject of the market study is a 18,731-square-foot (0.43-acre) site to be Market Study improved with a boutique, limited-service lodging facility. The hotel will be associated with the Hampton Inn & Suites by Hilton brand, but will boast an upscale design that complements the character of Downtown Huntington Village as well as the surrounding affluent neighborhoods. Given its planned upscale, historic design and convenient location to a plethora of attractions and establishments, the proposed subject hotel is anticipated to become a popular destination, thereby attracting more leisure and tourism demand into the Huntington area. The property, which is expected to open on July 1, 2021, will feature 80 rooms, a breakfast dining area, a fitness room, a lobby workstation, a market pantry, and a guest laundry room. The hotel will also contain the appropriate parking capacity (40 parking garage + 20 offsite surface lot spaces) and all necessary back-of-the-house space. RENDERING OF PROPOSED HAMPTON INN & SUITES PROJECT The subject site’s location is 227 Main Street, Huntington, New York 11743. Pertinent Dates The effective date of the report is February 3, 2020. The subject site was inspected by Patricia Shih on January 30, 2020. In addition to the inspection, Patricia Shih participated in the research for this assignment and assisted in the report’s February-2020 Executive Summary Proposed Hampton Inn & Suites – Huntington, New York 1 preparation. Roland deMilleret, MAI, participated in the analysis and reviewed the findings but did not personally inspect the property. Ownership, Franchise, The developer of the proposed subject hotel is Huntington Village Hotel Partners and Management LLC, which is based in Holtsville, New York. The subject site, which includes the Assumptions existing improvement on the site, was last sold in 2019. Huntington Village Hotel Partners LLC has owned the site since that time, having purchased it from 227 Main Street LLC for a reported price of $4,632,650 (inclusive of closing costs) for the purpose of developing a new hotel that will incorporate a significant portion of the existing improvement. The site is neither listed nor under contract for sale, and we have no knowledge of any recent listings. We assume that the proposed hotel will be managed by a professional management company that is experienced in the operation of upscale, extended-stay hotels in this region. The management team had not been selected as of the date of this study; therefore, details pertaining to management terms had yet to be determined. Our projections reflect a total management fee of 3.0% of total revenues. The proposed subject hotel will reportedly operate under a franchise agreement with Hampton Inns Franchise LLC, a subsidiary of Hilton Inc., as a Hampton by Hilton; however, the terms of this agreement had yet to be determined at the time of this appraisal. Based on our review of the agreement’s terms or expected terms, the Hampton Inn & Suites by Hilton franchise is reflected in our forecasts with a royalty fee of 6% of rooms revenue, and a marketing assessment of 4% of rooms revenue. Summary of Hotel During the illustrated historical period, occupancy increased from 2011 through Market Trends 2016 (with the exception of a dip in 2014) and then remained relatively stable in 2017 and 2018. Meanwhile, average rate gains were achieved in 2011 and then ADR continued to grow each year through 2019, with RevPAR increasing by roughly 29.0% between 2011 and 2019. RevPAR reached its high point in the summer of 2018. It is important to note that the robust average rate gains in 2019 were due in part to the PGA Championship Tournament that took place at Bethpage Black in May 2019 with the presence of Tiger Woods. As such, we have adjusted the ADR in 2020 to a more normalized level given that that PGA Championship Tournament appearance may not recur this year. Hotels in this Long Island submarket benefit from corporate weekday base business, with supplemental leisure demand on weekends and during seasonal periods. As such, this improvement in market conditions was driven largely by the lack of new supply combined with the continued strong corporate-transient demand from the area companies and strong leisure demand from New York City residents as well as tourists. February-2020 Executive Summary Proposed Hampton Inn & Suites – Huntington, New York 2 The following table provides a historical perspective on the supply and demand trends for a selected set of hotels, as provided by STR. FIGURE 1-1 HISTORICAL SUPPLY AND DEMAND TRENDS (STR) Average Daily Available Occupied Average Year Room Count Room Nights Change Room Nights Change Occupancy Rate Change RevPAR Change 2010 2,256 823,440 — 574,871 — 69.8 123.77 — 86.41 — 2011 2,256 823,440 0.0 % 590,191 2.7 % 71.7 126.73 2.4 90.83 5.1 % 2012 2,257 823,685 0.0 623,062 5.6 75.6 132.81 4.8 100.46 10.6 2013 2,391 872,770 6.0 683,236 9.7 78.3 136.30 2.6 106.70 6.2 2014 2,517 918,705 5.3 699,351 2.4 76.1 140.18 2.8 106.71 0.0 2015 2,517 918,705 0.0 718,475 2.7 78.2 142.66 1.8 111.57 4.6 2016 2,517 918,858 0.0 737,761 2.7 80.3 146.79 2.9 117.86 5.6 2017 2,518 919,070 0.0 738,448 0.1 80.3 150.69 2.7 121.08 2.7 2018 2,643 964,695 5.0 772,884 4.7 80.1 152.54 1.2 122.21 0.9 2019 2,643 964,695 0.0 % 774,120 0.2 % 80.2 158.16 3.7 % 126.92 3.9 % Four Points by Sheraton Plainview Long Island Upscale Class Secondary 103 Sep 2005 Aug 1961 Holiday Inn Plainview Long Island Upper Midscale Class Secondary 125 Apr 1963 Apr 1963 Hampton by Hilton Inn Long