Hotel Source Strategies, Inc. BRAND ReportReport Hotel Industry Performance Results METRO GROWTH SLOWS AS OIL PATCH DEMAND INCREASES By Paul Vaughn, Source Strategies, Inc. August 2017 Issue #130 ROOM REVENUES UP SLIGHT 0.9% STATEWIDE! Total Texas lodging room 2nd Quarter 2017 revenues were $2.741 billion in the Second Quarter, up from $2.715 billion last year. The Metro Growth Slows 0.9% revenue gain compares as Oil Patch to the 5.8% gain in the First Demand Increases Quarter and shows a significant cooling of growth in the market. Page 1 Revenue growth was only 0.6% in calendar year 2016 and 3.3% Metros Compared in 2015. 2nd Quarter 2017 - P. 13 In the Second Quarter, Non- Year of 2016 - P. 14 Oil & Gas areas of the state increased 1.5% from a year ago. Quarter Brand Performance The Oil & Gas areas of the state Higher Priced Brands - P. 15 increased a tepid 0.2% from Mid-to-Low Priced Brands - P. 17 a year ago. Rural areas of the oil patch along with Midland/ Annual Brand Performance Odessa, Victoria and San Angelo Higher Priced Brands - P. 19 were strong, but Houston’s Mid-to-Low Priced Brands - P. 21 declines offset those gains in the overall Oil & Gas area numbers. Best of the 2nd Quarter: REAL LODGING GROWTH The Top 500 Hotels UP 1.7%, SLOWING FROM Ranked by REVPAR THE FIRST QUARTER. P. 23 Second Quarter room-nights sold increased 1.7% from the Second Services From Quarter of 2016. For the quarter, Source Strategies demand in Oil & Gas areas P. 37 (O&G) increased a healthy 3.3%, while the balance of Texas increased by only 0.5%. Accurate Tax-based Performance Data from all Texas Hotels, representing 8% of the U.S. market METRO GROWTH SLOWS AS OIL PATCH DEMAND INCREASES REVPAR DECLINED 2.6% FROM 2Q 2016. Revenue Per Available Room fell 2.6% from Second Quarter 2016, with a 1.2 point decrease in occupancy and sliding room rates (down 0.8%). Oil & Gas areas saw the biggest decline with REVPAR falling 3.9%, while the balance of Texas lost 1.5%. SECOND QUARTER OCCUPANCY 64.9%. Second Quarter occupancy was 64.9%, down 1.2 points from the Second Quarter of 2016. Second Quarter occupancy in non-O&G areas of Texas was 67.5%, down 1.7 points from a year ago. In Oil & Gas areas, occupancy declined 0.6 points to 62%. Statewide annual occupancy in 2016 was 65.2%, 64.9% in 2015, 65.9% in 2014 and 63.8% in 2013. LODGING SUPPLY GROWTH CONTINUES TO SURPASS DEMAND GAINS. Second Quarter net room supply grew by 3.6% over the Second Quarter of 2016. With real demand growth increasing only 1.7%, supply continues to exceed demand leading to declines in occupancy. Supply gained 3% annually in 2016, 2.4% in 2015, and 1.6% in 2014. REVENUE GROWTH COOLS After the strong growth of the First Quarter (up 5.8%), revenue growth cooled significantly to just 0.9%. Oil & Gas areas of the state saw revenues increase a mere 0.2% due to a 3% rate drop and a 3.3% increase in Room Nights Sold. Non-Oil & Gas areas of Texas saw revenues increase 1.5%. Gains in the Non-O&G areas were the product of a 0.5% increase in Room Nights Sold and rate increases of just 0.9%. All information contained in the Hotel Brand Report is based on opinion, surveys and research from sources considered reliable; no representation is made as to accuracy and no liability of any kind can be accepted. © 2017, Source Strategies, Inc. Press quotation is encouraged with attribution. The Hotel Brand Report, Issue # 130 is published by Source Strategies, Inc., 134 Laurel Heights Place, San Antonio, Texas 78212-5219. The Hotel Brand Report is published quarterly in February, May, August and November. One year subscription rate is $100. Two years $175. Phone: (210) 734-3434. The Hotel Brand Report is delivered via email and can be printed by recipients. International Serial # 10954988. Send address changes to Hotel Brand Report to P.O.Box 120055, San Antonio, Texas 78212- 9255, or [email protected]. Visit SourceStrategies.org for more information. 2 REVENUE GROWTH COOLS After the strong growth of the First Quarter (up 5.8%), revenue growth cooled significantlyREVENUE to just 0.9% GROWTH. Oil &COOLS Gas areas of the state sawAfter revenues the strong increase growth a mere of the 0.2% First Quarter due to a 3%(up rate 5.8%) drop, revenueand a 3.3% growth increase cooled in Room Nightssignificantly Sold. Non to-Oil just & 0.9% Gas. areasOil & ofGas areas of Texas saw therevenues state saw increase revenues 1.5% increase. Gains a mere in the 0.2% Non-O&G dueareas to werea 3% ratethe productdrop and ofa 3.3% a 0.5 increase% in Room Nights Sold. Non-Oil & Gas areas of REVENUE GROWTH COOLS increase in Room Nights Sold and rate Texas saw revenues increase 1.5%. Gains in the After the strong growth of the First Quarter increases ofNon just-O&G 0.9%. areas were the product of a 0.5% (up 5.8%), revenue growth cooled increase in Room Nights Sold and rate significantly to just 0.9%. Oil & Gas areas of increases of just 0.9%. METRO GROWTH SLOWS AS OIL PATCH DEMAND INCREASES the state saw revenues increase a mere 0.2% Percentage Change Vs Year Ago CHANGES VS YEAR AGO due to a 3% rate drop and a 3.3% increase in Room Room Rooms % $ $ CHANGES VS YEAR AGO RoomSecond Nights Quarter Sold. Nonrevenue-Oil & growth Gas areas of Year Supply RevPercentage $ Sold ChangeOCC VsPrice Year REVPAR Ago TexasSecondof 0.9 saw %Quarter revenueswas positiverevenueCHANGES increase growthbut 1.5% VS of YEAR. 0.9%Gains wasAGO in the positive but substantially less than the First 2012 0.9 10.0Room Room5.8 Rooms4.9 4.0% $ 9.1 $ substantially lessSecond than Quarter the First revenue growth Year Supply Rev $ Sold OCC Price REVPAR NonQuarter.-O&G These areas results were thewere product driven of by a a 0.5 0.8%% 2013 1.2 8.6 3.3 2.1 5.2 7.4 increaseQuarter in .Room These Nightsof results 0.9% Sold werewas and positive rate but 2012 0.9 10.0 5.8 4.9 4.0 9.1 ADR drop and a weaksubstantially 1.7% demand less than increase. the First 2014 1.6 9.7 4.8 3.3 4.6 8.1 increasesdriven byof justa 0.8 0.9% %.ADR drop and a 2013 1.2 8.6 3.3 2.1 5.2 7.4 REVPAR fell 2.6%Quarter erasing. Thesethe gains results of thewere 2015 2.4 3.3 0.6 -1.5 2.7 1.1 previousweak 1.7 quarter.% demand increase. 2014 1.6 9.7 4.8 3.3 4.6 8.1 driven by a 0.8% ADR drop and2016 a 3.02015 0.6 2.4 0.53.3 -2.50.6 0.1-1.5 2.7 -2.4 1.1 REVPAR fell 2.6weak% erasing 1.7% demand the increase. Percentage Change Vs Year Ago 2016 3.0 0.6 0.5 -2.5 0.1 -2.4 NOTABLEgains of the DEVELOPMENTS previousREVPAR quarter fell .2.6 % erasing the CHANGES VS YEAR AGO 1st Q '17 3.5 5.8 2.6 -0.8 4.0 2.7 Room Room Rooms % $ $ Second Quarter revenue growth San Antonio’s revenuesgains ofrose the 5.1% previous to lead quarter 2ndthe .five Q '17 1st3.6 Q '17 0.9 3.5 1.75.8 -1.82.6 -0.8-0.8 4.0 -2.6 2.7 Year Supply Rev $ Sold OCC Price REVPAR of 0.9% was positive but majorNOTABLE metros. RevenuesDEVELOPMENTS in non-metro areas of 2nd Q '17 3.6 0.9 1.7 -1.8 -0.8 -2.6 2012 TexasSan0.9 Antonio’sincreased10.0 11.1%, revenuesNOTABLE5.8 driven4.9 rose DEVELOPMENTS by4.0 5.1higher % to oil lead 9.1patch the five major metros. Revenues in non-metro substantially less than the First 2013 activity.1.2 Killeen/Temple,8.6 San3.3 Antonio’s Waco,2.1 Brownsville/ revenues5.2 rose7.4 5.1% to lead the five major metros. Revenues in non-metro These results were areas of Texas increased 11.1%, driven by higher oil patch activity. Killeen/Temple, Waco, Quarter. 2014 Harlingen,1.6 9.7Abilene areas 4.8and ofLongview 3.3Texas increased4.6 also saw 11.1% healthy8.1 , driven revenue by higher increases. oil patch activity. Killeen/Temple, Waco, Brownsville/Harlingen, Abilene and Longview also saw healthy revenue increases. driven by a 0.8% ADR drop and a 2015 2.4 3.3 Brownsville/Harlingen,0.6 -1.5 2.7 Abilene1.1 and Longview also saw healthy revenue increases. weak 1.7% demand increase. 2016 3.0 0.6 0.5 -2.5 0.1 -2.4 REVPAR fell 2.6% erasing the Second Quarter 2017 Total Revenue (000s) Second Quarter 2017 Total Revenue (000s) gains of the previous quarter. 1st Q '17 3.5 5.8 2.6 -0.8 4.0 2.7 Metropolitan AreasMetropolitan % MarketAreas %2016 Market 20172016 %2017 Change % %Change Occ $% ADR Occ $ ADRREVPAR REVPAR 2nd Q '17 3.6 0.9 1.7 -1.8 -0.8 -2.6 NOTABLE DEVELOPMENTS Dallas-Ft Worth-ArlingtonDallas-Ft Worth-Arlington28.2% $788,20028.2% $773,652$788,200 $773,652-1.8% 70.0%-1.8% $108.9070.0% $108.90$76.23 $76.23 San Antonio’s revenues rose 5.1% to lead the fiveHouston major -metros.Baytown -HoustonRevenuesSugarland-Baytown in non-Sugarland20.8%-metro $598,31120.8% $570,003$598,311 $570,003-4.7% 62.2%-4.7% $106.7462.2% $106.74$66.39 $66.39 areas of Texas increased 11.1%, driven by higher oilAustin patch- Roundactivity Rock.