CHG Business Model: Points of Difference. September 2014

Transcription

1 CHG Business Model: Points of Difference September 2014

2 2 EXECUTIVE SUMMARY Cachet Hotel Group (CHG) has a highly differentiated business model for lifestyle/boutique hotels resulting in the following benefits for developers and owners: I. 40% lower cost per key versus traditional 5 star hotels II. 80% of the luxury ADR III. 20% better operating margins from outsource F&B to recognized brands and lower fixed costs IV. A simpler fee structure with lower brand, reward program fees V. Alignment with owners through investment in real estate hotels and restaurants

3 3 GLOBAL HOTEL STOCK MARKET PERFORMANCE TRENDS The lodging industry continues to outperform the stock market by a wide margin. Note: data as of December 26, 2014 * Global Hotel Index component stocks include Marriot, Starwood, Wyndham, InterContinental and Hyatt, weighted by market capitalization.

4 4 RECORD INDUSTRY GROWTH BUT NO WINNER Hotel/ Travel Intermediary 2005 (Market Cap - $64.3B) Hotel/ Travel Intermediary 2014 (Market Cap - $97.9B) Peninsula, 2.4% Ctrip, 1.4% Choice, 4.2% Mandarin, 1.1% Peninsula, 2.3% Choice, 3.3% Mandarin, 1.7% Shangri- La, 6.3% Marrio&, 21.7% Shangri- La, 5.0% Ctrip, 6.6% Marrio&, 22.8% Accor, 18.0% TripAdvisor, 11.2% Starwood, 21.8% Starwood, 14.8% InterCon:nental, 10.2% Accor, 10.8% Expedia, 12.8% InterCon:nental, 9.9% Expedia, 11.5% Travel intermediaries Travel intermediaries

5 5 GLOBAL BOUTIQUE/LIFESTYLE HOTEL MARKET Boutique/Lifestyle hotels represent ~3% of the global hotel industry but are growing 11% annually versus 4% for the industry. Why is this happening and what are the lessons? Total Market ($Bn) : Global Boutique Hotel Market ($ US Bn) 1 $0.5 $0.5 $3.0 $3.0 $0.8 $0.7 $8.5 $7.5 $1.5 $ E 2014E $8.5 $16.4 Middle East Latin America North America Europe Asia Pacific 2006 Total Global Lodging Industry = $488.6Bn Boutique Hotels ~ 3% of Global Lodging Industry 1 The World Outlook for Boutique Hotels, ICONGroup International, Inc; Global Lodging industry size from Datamonitor; The function for calculating annual revenue equals adjusted RevPar * 365 days/yr * the total number of rooms in the segment.

6 6 LIFESTYLE SEGMENT POSITIONING US BENCHMARK In the U.S. and Europe, developers recognize that boutique/lifestyle hotels generate an ADR very close to luxury brands Monthly Average Daily Rate Monthly Revenue Per Available Room

7 7 CHG LIFESTYLE HOTELS ADR COMPARISON CHG lifestyle hotels consistently achieve 85% of the luxury rate while keeping operating costs low, thus yielding significant higher returns ADR* 1,000 Time Apr 2011 *Source: STR Report Jul 2014

8 8 CHG LIFESTYLE HOTELS DEVELOPMENT COST SAVINGS CHG boutique/lifestyle hotels deliver a highly differentiated design with fewer standards and requirements resulting in a substantially lower development cost $400k $300k $200k Traditional luxury hotels $380,000+ USD/ key CHG lifestyle hotels $220,000 USD/ key CHG lifestyle hotels offer substantial development savings by not adhering to traditional luxury brand and star rating requirements such as unnecessary FF&E, equipment ie. Four fixture bathrooms. $100k Not including Land. Subject to property specific analysis Based on hotel development cost survey 2013/14

9 9 CHG LIFESTYLE HOTELS SUPERIOR COST STRUCTURE CHG s business model includes lower costs for food and beverage and marketing fees resulting in higher operating margins for owners EBITDA CHG versus Traditional Internal F&B, Traditional Outsourced F&B, CHG $1,000 s % Total Rev. $1,000 s % Total Rev. Total Revenue $110, % $97, % Expenses Departmental expenses $44,900 41% $26,074 27% Sales expenses $1,519 1% $1,417 2% Operating expenses $15,358 14% $13,075 13% Marketing expenses $6,333 6% $2,405 3% GOP $45,001 38% $52,352 58%

10 10 CHG LIFESTYLE HOTELS VALUE CREATION FOR OWNER/DEVELOPER In conclusion, CHG s boutique/ lifestyle hotels are highly profitable and generate a higher return on capital for developers and owners. Hotel LIFESTYLE LUXURY RevPar GORPAR EBITDAPAR Margin 34% 30% Maintenance Expense After-Tax Cashflow per room Cost to build per key (in '000's) AT Capital Charge Per Room - 7% Investment Returns Per Key

11 11 CHG FEE STRUCTURE LOWER AND SIMPLER 16% 14% US$ 5.2MM, 15% Reservation Charge Hotel Management and Brand and Marketing Fees Comparison Internet Booking Fee GDS Booking Fee International Brands vs. CHG (Based on Hypothetical 250 Room Luxury Hotel*) 12% Division Fees Global Fees Loyalty Program Frequent Traveler Fee Total Fees as % of Total Revenue 10% 8% 6% 4% Base Mgmt Fee Incentive Mgmt Fee US$ 3.2 MM, 9% Reservation Fee Marketing Fee Loyalty Program Base Mgmt Fee Note: *Assumes 250 room hotel, ADR of $330; Occupancy of 80%; GOP margin of 40%. Source: CHG Estimates 2% Royalty / Sales Fee Incentive Mgmt Fee Royalty / Sales Fee 0% International Brands CHG Total No. of Fee Categories: 30 6

12 12 CHG BRAND STANDARDS COMPARISON Brand Standards by Key Product and Service Touchpoints Source: Brand standardsmanuals, interviews with developers And sales reps

13 13 REAL ESTATE INVESTMENT Alignment with owners through investment in real estate hotels and restaurants CHG is a Mixed-use Real Estate Owner focusing on Land Ownership, Leases, Equity Investment and Key Money Investment. Bangkok Shanghai Qingdao Hotels and Residences Hotels Hotels and Residences Unique In-House Capabilities Financial Feasibility Master Planning Project Management Architecture and Design

14 Room 9202, Building 9, No.10 Jian Guo Middle Road, Huangpu District, Shanghai , China Website: