HONOLULU – February 29, 2016 – Nearly 80 investors, owners, operators, asset managers, hotel brands and lenders from Shanghai, Osaka, Madrid and from across the mainland U.S. gathered in Hawaii to attend an invite-only event at the iconic Royal Hawaiian Hotel on January 28, hosted by CBRE Hotels in Hawaii. The symposium, See the World of Ho’okipa, Hospitality in a Whole New Light, provided an unprecedented view of Hawaii’s hotel fundamentals relative to the broader global context, the impact of debt and equity capital on Hawaii’s lodging sector, and performance forecasts for 2016 and 2017. The conference featured a heavyweight line up of the world’s preeminent hospitality executives.

“This symposium showcases CBRE Hotels’ comprehensive suite of services, spanning transaction, debt and structured finance, valuation, strategic advisory, asset management and research. Hawaii is rich with opportunities in the hospitality sector, and the CBRE platform in Hawaii is structured as a full-service provider to groups seeking to capitalize on these opportunities,” said Amelia Lim, Vice President of CBRE Hotels, Valuation and Advisory Services, Hawaii. “CBRE has the depth of market knowledge and strength of relationships with decision makers in Hawaii that can only come with living and working within the community for an extended period of time. The synthesis of CBRE’s intensive market penetration in Hawaii with our global platform and access to international capital markets creates a very powerful value proposition for our clients. We are the perfect solution for offshore investors and capital sources making forays into Hawaii’s hospitality sector, as well as for local hospitality firms seeking to expand their global reach.”

The Hawaii Hospitality Symposium coincided with CBRE’s announcement of the completed rebranding and integration of PKF Consulting USA, PKF Hospitality Research and PKF Consulting Inc. (Canada) into CBRE Hotels, an existing specialized advisory group. The enhanced team will provide hospitality and real estate industry professionals with a global practice and one-stop shop of unparalleled, fully integrated real estate services and products, as well as a comprehensive hospitality research platform.

“Hotel owners and operators, financial institutions, real estate developers, investors, and industry and government agencies’ product and service providers can rely on CBRE Hotels to be the worldwide authority on hospitality and lodging real estate research and solutions,” Lim said.

Forecasting presentations from CBRE Hotels’ leaders Kevin Mallory and Mark Woodworth kicked off the event, followed by a panel discussion with four industry experts about the future growth of hotel spending and investment, including Chinese interests in Hawaii, the ramifications of Airbnb’s exponential growth, as well as regulatory compliance, expanding interest rates and the impact of the rising cost of debt on investment strategy.


Mark Woodworth, CBRE’s Atlanta-based Senior Managing Director and Head of CBRE Hotels’ Americas Research provided a current and forward-looking view of the hotel and resort industry worldwide with a focus on Hawaii. Noting that occupancy reached its peak in the third quarter, with 2015 occupancy coming in at 65.5 percent, Woodworth said fundamentals suggest the industry will hover at this elevated level for quite some time.

“Hotels are performing at a very high level. We don’t see anything in the market fundamentally that represents a threat to that and we feel very good going forward,” Woodworth said. “If we look at the top 25 markets – according to STR – 12 of the top 25 in upper-priced hotels set records in 2015. Nineteen of them were well north of their long-term average. Only seven were going through supply growth.”

Woodworth noted that even with a mild recession, 2017 RevPAR growth is forecasted at a healthy 3.3 percent, in line with long-term averages, and above the forecasted rate of underlying inflation.

According to Woodworth, high occupancy levels will provide the leverage needed to achieve large real ADR increases for the next two to three years. Above long-run average occupancy levels will lead to strong profit growth comfortably through 2017, which should offset labor cost increases.

Kevin Mallory, CBRE’s Chicago-based Senior Managing Director and Global Head, CBRE Hotels, sounded a cautionary note as he presented an in-depth look at capital investment in the hotel sector, which is being impacted by current events.

“Our strong dollar hurts how foreign capital is acting in the United States, but the flipside is that the U.S. is a perennial safe harbor for foreign capital, particularly in the real estate sector. Our position as a safe harbor appears to be increasing as we see a softening of interest in other safe harbor markets throughout Europe. Capital that might have otherwise been invested in other markets is coming to the U.S.,” Mallory said.

He also noted that hotel sector REITS have all but exited the market. “Hotel REITS have been a significant investor accounting for approximately 25% and 20% of the investment capital for 2014 and 2015 respectively.” He also advised that with the fallout of the REITS, combined with high volatility in U.S. and foreign public equity markets, and a bit a bumpiness in the CMBS markets, all coupled with the fact that there is more product in the market today than ever before, that the industry may be in for a period “price discovery.”

Mallory also touched on Asian and foreign investment markets, noting recent investment by Chinese capital in Hawaii and wondering “if it was a sign of more to come? Overall, an interesting future is here.” He also noted that Asian investors from Japan, Singapore and Korea have been comfortably investing in Hawaii for a long time.

Airbnb’s effect on the hotel sector was also an important topic of discussion in both the presentations and the panel.

Woodworth noted that overall Airbnb supply represents 3 percent of traditional hotel stock, and CBRE Hotels’ research indicates that the higher the RevPAR, the greater the number of Airbnb units. However, the higher the price of the Airbnb unit, the less of a threat Airbnb is to hotels. On Oahu, as a late entrant into the Airbnb game and with a well-established vacation rental industry prior to the advent of this Airbnb, the data is different.

Woodworth also explained the future impact of Airbnb and other alternative lodging could translate into fewer traditional hotels rooms being built.


Mark Owens, Executive Vice President for CBRE Hotels, originally from Kailua, Hawaii, and now Head of Hospitality Capital Markets for CBRE in New York, moderated the panel.

Harris Chan, Vice President of Operations for Hawaii and French Polynesia for Starwood Hotels and Resorts acknowledged it was a banner year for tourism in 2015 with arrivals increasing by 4.2 percent, which was higher than expected. However, the increased arrivals only translated to a 2.3 percent increase in hotel occupancy, which Harris partially attributed to the strength of Airbnb and other alternative lodging options.

Meanwhile, Yvonne Siew, Executive Director and Head of International Capital at CBRE China, explained that the strong dollar is the lure of investing in the U.S., especially since the renminbi outlook is anticipated to depreciate another 5 percent in 2016. “I’m in touch with the major insurance companies and State Owned Enterprises (SOE) with specific mandates to invest in U.S. assets,” Siew said. “The strong dollar versus the local Reminbi is perceived by the Chinese as a form of investing into safe assets. Hawaii is very much open to foreign capital. We see this as a great opportunity for Chinese capital.”

Siew noted that Chinese construction companies, railway and infrastructure groups are concerned the local outlook in China will not give them the growth and profits, so investors are looking for investment and marketing opportunities abroad. Those opportunities could be in tourism, oil or gas investments. Siew said that according to reports, if 3 percent of the high net worth individuals in China moved just 7 percent of their wealth out of their country, it would add up to $1.5 trillion in U.S. dollars.

CEO and Co-Founder of Chartres Lodging Group, Robert Kline, from San Francisco touched on who is investing in the hotel industry and why.

“We’ve seen a dramatic shift,” Kline said. “The private equity fund industry raised $107 billion last year; with 75 percent of that money raised with a target for opportunistic investments. But then public lodging REITS were dropping precipitously which caused these funds to pull back because valuations seemed vulnerable.”

Kline pointed to a risk of potential problems, including rising labor costs, issues with unions, headwinds in operating fundamentals, causing this nervousness.

“So these funds are pulling back, and waiting for ‘price discovery.’ Perhaps prices will go down, so the thought is ‘let’s not catch a falling knife and see what happens.'” Kline noted there will be price disintegration as these funds look to buy in at a higher yield, interested in seeing stronger cash flow.

“Cap rates are going up, when they see good yield going in – renovation, repositioning – there is not as much patience. We are having to underwrite for a longer hold period.”

Kline said that Chartres finances investment conservatively, layering in opportunities for a longer-term financing structure, yet with the availability to quickly move and exit the loan without prepayment penalty. “Basically the hotel investment industry is moving toward a ‘having my cake and eating it, too’ mentality.”

Providing a financing perspective was Christopher Jordan from Washington D.C., who heads a specialty lending platform known as the Hospitality Finance Group with Wells Fargo, the largest provider of balance sheet financing to the hospitality industry. Jordan noted that Wells Fargo remains very active throughout the United States including Hawaii, Canada and the United Kingdom, and is committed to supporting its hotel clients throughout the cycle. “Industry fundamentals remain generally positive, although we do see clear evidence that room demand growth overall in the U.S. is slowing, new room supply is increasing in many markets, and hotel values are in the process of being reset downwards,” said Jordan.

“As a result of these late cycle conditions, we are being more cautious and selective with respect to new lending in 2016. Moreover, the recent extreme volatility in the equity and credit markets, weak commodity pricing, and the China / emerging market slowdown have changed investor psychology,” Jordan added.

“While the United States should escape recession in 2016, we do worry that financial market volatility is producing fear and negativity that could eventually bleed into the real economy. Businesses and consumers may eventually turn more defensive and defer spending, hiring, and travel. We could, in effect, talk ourselves into a U.S. recession. I think this is real risk and, consequently, we are building in a little extra cushion of safety in everything we do today in the hotel arena,” Jordan said.

Hawaii’s neighbor islands also were a topic of discussion.

Chan noted that while spending in hotels has hit a record level in Hawaii, the growth on Oahu is not as strong as the neighbor islands, where Maui led the pack. Chan pointed to the future growth of tourism through the neighbor islands, because Waikiki is at its saturation point. “I believe the neighbor island valuation is very reasonable, and now is the time to acquire and redevelop for the future,” Chan said.

Other panelists agreed with Chan, including Kline who said, “Can we convert existing product? The former Chris Hemmeter massive resorts aren’t going to happen now unless it is a timeshare product.”

Kline and Chan both pointed out that select-service hospitality redevelopment is a popular option. “With select-serve product there is less cost of entry, and less ancillary products. I haven’t seen a wave of select-service yet but as people are investing more in the neighbor islands, it will be interesting to see if funds find their way into the select-service model,” said Kline.

*Image Details: Mark Woodworth (CBRE Hotels), Christopher Jordan (Wells Fargo), Kim Lord (CBRE), Harris Chan (Starwood Hotels and Resorts), Yvonne Siew (CBRE China), Robert Kline (Chartres Lodging Group), Kevin Mallory (CBRE Hotels), Mark Owens (CBRE Hotels), Amelia Lim (CBRE Hotels)