Item 3c - Hilton Hotel Update — original pdf

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Hilton Austin Airport Information for Airport Advisory Commission City of Austin, Department of Aviation May 10, 2022 0 Hilton Austin Airport – Unique History • Former Headquarters of Bergstrom Air Force Base • Opened in 1968 • Three stories • Underground bunker • Enclosed courtyard • Names: • Building 2900 • The Roundagon • The Donut • The Little Pentagon • Base closed in 1993 1 Hilton Austin Airport – Facility Information Austin American Statesman December 17, 2000 • Improvements Description • Year Opened: 2001 • Property Type: Full-service lodging facility • Building Area: 206,608 square feet • Guestrooms: 262 • Number of Stories: Four • Meeting Space: 17,505 square feet • Parking Spaces: 278 (Surface) • Additional Facilities: Outdoor pool, an outdoor whirlpool, fitness center, a lobby workstation, guest laundry room, and vending areas • Food and Beverage Facilities: Restaurant and lounge, coffee shop 2 Hilton Austin Airport – Structure & Operations • Austin-Bergstrom Landhost Enterprises, Inc. (ABLE) • Texas nonprofit public facility corporation created by City of Austin (City) in 1998 • Authorized under Chapter 303 of Texas Local Government Code • ABLE acts on behalf of the City of Austin (City) • Created to be the Issuer of tax exempt bonds (1999 Bonds and 2017 Bonds) • Construct/improve public facilities at the Airport - Hilton Austin Airport (Hotel) • Department of Aviation (Aviation Department) oversight of ABLE • Staff provide liaison, business, and financial services to ABLE • Grant Agreement - Aviation Department supports Bond payments – as required • Ground Lease - Aviation Department receives Ground Rent/Administrative Fees • Operations of the Hotel are subject to Federal Aviation Administration regulations 3 Briefings to AAC Regarding Hotel • AAC Hotel briefings since the emergence of COVID-19 • 11/10/2020 – Hotel Property/Facility, Structure and Operations and Financial Information • 03/09/2021 – Update including COVID Impact, Loan Development, and Grant Pledge • 04/13/2021 - Update including ABLE Governance, Loan Agreement and Grant Payments • 12/14/2021 - Update on Loan Draws and Spending, 2021 Financial Performance • 04/11/2022 – AAC Finance Working Group – General Update on 2022 Financials • 05/10/2022 – Briefing on Report to Council Audit Finance Committee • Up Next 06/14/2022 – RCA for Amendment to Management Agreement 4 Hilton Austin Airport Information for Audit Finance Committee City of Austin, Department of Aviation April 27, 2022 5 Introductions • Tracy Thompson, Esq. Airport Chief Officer, Administrative & External Affairs Interim Airport Chief Officer, Development Vice President, Austin-Bergstrom Landhost Enterprises, Inc. (ABLE) • Rajeev Thomas Airport Deputy Chief – Finance • Guest Speaker: Willy Gonzalez Secretary/Treasurer UniteHere Local 23 6 Agenda • Financial Update • Operating Results: 2021 Q4 and 2022 Q1 • Loan Agreement with City of Austin • Grant Agreement with City of Austin • Resolution for City Rules • Living Wage Implementation • Labor Peace Agreement 7 • Upcoming RCA: Amendment to Hotel Management Agreement Operating Results 8 Hilton Austin Airport Performance 2021 Q4 and 2022 YTD through March 31, 2022 2021 Oct 2021 Nov 2021 Dec 2021 Q4 2021 2021 Full Year 2022 Jan 2022 Feb 2022 Mar 2022 2022 YTD Occupancy 87.7% 84.6% 77.0% 83.1% 62.0% Occupancy 61.4% 79.8% 88.8% 76.6% ADR $175.29 $145.05 $137.40 $153.41 $136.06 ADR $136.49 $160.68 $180.76 $162.03 $1.4m $1.2m $1.1m $3.8m $9.9m $824k $1.2m $1.6m $3.6m $512k $402k $297k $1.2m $1.8m $70k $346k $605k $1.0m Operating Revenues EBITDA before Grant and PPP Acronyms ADR: EBITDA: PPP: Average Daily Rate Earnings Before Interest, Depreciation and Amortization Paycheck Protection Program Operating Revenues EBITDA before Grant and PPP 9 Hilton Austin Airport 2021 Performance Trend Actuals through December 31, 2021 2021 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec YTD unaudited Occupancy 22.1% 34.8% 51.3% 52.1% 53.1% 67.9% 73.9% 66.0% 71.8% 87.7% 84.6% 77.0% 62.0% ADR $106 $110 $110 $122 $127 $131 $130 $133 $146 $175 $145 $137 $136 $236k $347k $571k $641k $706k $856k $902k $890k $1.0m $1.4m $1.2m $1.1m $9.9m ($209k) ($120k) $4k $86k $55k $194k $163k $166k $248k $512k $402k $297k $1.8m • 2021 Operating Revenues of $9.9m exceeded Budgeted Revenues of $7.7m by $2.2m • 2021 EBITDA before Grant & PPP of $1.8m exceeded Budget of $100k by $1.7m Acronyms ADR: EBITDA: PPP: Average Daily Rate Earnings Before Interest, Depreciation and Amortization Paycheck Protection Program Operating Revenues EBITDA before Grant & PPP 10 STAR Performance: Competitive Set Hotels (Austin) 2021 YTD through December 31, 2021 2021 Hilton Austin Airport Market: Austin Primary Competitive Set Occupancy Dec YTD 62.1% 62.6% 49.8% ADR Dec YTD $135.77 $127.12 $121.98 RevPAR Dec YTD $84.35 $79.63 $60.79 • Primary Competitive Set – DoubleTree @ 290, Marriott South, Austin Southpark Hotel, Radisson Hotel Austin • DoubleTree – TX Dept. of Emergency Management winding down at hotel – in market since start of pandemic • Austin Southpark Hotel – Omni was sold and rebranded in August, in future will become Tribute by Marriott • Radisson Hotel Austin – previously Crowne Plaza Acronyms ADR: RevPAR: Average Daily Rate Revenue per Available Room 11 STAR Performance: Airport Hotels Comparison 2021 YTD through December 31, 2021 2021 Hilton Austin Airport Airport Hotel Comparative Set Occupancy Dec YTD 62.1% 53.8% ADR Dec YTD $135.77 $107.46 RevPAR Dec YTD $84.35 $57.86 Airport Hotel Comp Set – full-service hotels in non-hub airports with enplanements similar to AUS • DoubleTree by Hilton - New Orleans Airport (MSY) ** • Hilton - New Orleans Airport (MSY) • Marriott - St Louis Airport (STL) • Crowne Plaza - St Louis Airport (STL) • Sheraton Hotel - Portland Airport (PDX) • Marriott - Pittsburgh Airport (PIT) ** Temporarily closed portion of 2021 due to Hurricane Ida. 12 Acronyms ADR: RevPAR: Average Daily Rate Revenue per Available Room STAR Performance: Competitive Set Hotels (Austin) 2022 YTD through March 31, 2022 Hilton Austin Airport Market: Austin Primary Competitive Set Occupancy Mar YTD 76.7% 62.8% 48.8% ADR Mar YTD $161.74 $157.83 $136.79 RevPAR Mar YTD $124.02 $99.04 $66.80 • Primary Competitive Set – DoubleTree @ 290, Marriott South, Austin Southpark Hotel, Radisson Hotel Austin • DoubleTree – TX Dept. of Emergency Management winding down at hotel – in market since start of pandemic • Austin Southpark Hotel – Omni was sold and rebranded in August, in future will become Tribute by Marriott • Radisson Hotel Austin – previously Crowne Plaza 13 Acronyms ADR: RevPAR: Average Daily Rate Revenue per Available Room STAR Performance: Airport Hotels Comparison 2022 YTD through March 31, 2022 2022 Hilton Austin Airport Airport Hotel Comparative Set Occupancy Dec YTD 76.7% 61.6% ADR Dec YTD $161.74 $119.81 RevPAR Dec YTD $124.02 $73.80 Airport Hotel Comp Set – full-service hotels in non-hub airports with enplanements similar to AUS • DoubleTree by Hilton - New Orleans Airport (MSY) ** • Hilton - New Orleans Airport (MSY) • Marriott - St Louis Airport (STL) • Crowne Plaza - St Louis Airport (STL) • Sheraton Hotel - Portland Airport (PDX) • Marriott - Pittsburgh Airport (PIT) ** Temporarily closed portion of 2021 due to Hurricane Ida. 14 Acronyms ADR: RevPAR: Average Daily Rate Revenue per Available Room Loan Agreement – Through 2022 Q1 15 Loan Overview • Purpose: To cover hotel operating expense shortfalls and certain required administrative expenses under the 2017 Bond Indenture for 2020 through 2022, resulting from the impact of COVID-19 • Loan Amount: $2,600,000 • Base Loan – set amount to fund after closing: • Contingency line of credit – available if needed: $1,350,000 $1,250,000 • City Council approval: June 3, 2021 16 Loan Draws and Spending Through March 31, 2022 Base Loan – funded August 9, 2021 Total Draw Amount Loan Proceeds Returned to Dept. of Aviation $1,350,000 $824,599 $525,401 • Due to better than anticipated recovery of hotel occupancy, full Base Loan was not needed • Unused loan proceeds of $525,401 were transferred to Department of Aviation on March 11, 2022 17 Grant Agreement Update 18 Grant Update 2017 Grant Agreement to support ABLE’s bond payments Requires Dept. of Aviation to replenish to Debt Service Reserve Fund if Hotel proceeds are insufficient • Grant Agreement Payments • October 1, 2020 payment amount of $1,561,041 to DSRF • April 1, 2021 payment amount of $1,084,391 to DSRF • October 1, 2021 payment in the amount of $2,188,609 to DSRF • Future Grant Agreement Payments • No future payments are anticipated • Grant Agreement remains as an obligation in the Bond Indenture • Total Payments to Date: $4,834,041 19 Credit Rating Upgrade by S&P • In connection with rating Airport’s revenue bonds, S&P also updated its rating of ABLE’s bonds. • Upgrade from 'A-' to 'A' • ABLE’s bond ratings benefit from surplus net airport revenues pledge under the Grant Agreement 20 ABLE Board Resolution 21 ABLE Board Resolution • On February 22, 2022, ABLE’s Board of Directors passed a resolution regarding ABLE’s commitment: • To comply with all applicable rules of the City of Austin • Applicable rules currently in effect, promulgated in the future, and as may be amended from time to time • Examples include, but are not limited to, the City’s rules on: • Living Wage • Better Builder Program (third party development) 22 Living Wage Implementation 23 Living Wage and Hilton Austin Airport • Current City Living Wage: $15/hr • ABLE approved an Amended 2022 Operating Budget that implemented wage changes at the Hotel • Effective February 18, 2022, wages for non-tipped employees were increased to the City’s $15 living wage 24 Labor Peace Agreement 25 Labor Peace Agreement • In Fall 2021, UNITEHERE contacted Dept. of Aviation to discuss options related to a Labor Peace Agreement (LPA) • Dept. of Aviation facilitated the negotiations between: • Boykin Prospera LLC • UNITE HERE Local 23 • LPA executed April 4, 2022 • Parties agree to waive certain rights under federal law regarding union organizing activities • Union - refrain from strikes; Employer - remain neutral on organizing activities • LPA achieved in advance of the requirements of Resolution No. 20210603-075 • ABLE corporation supports the LPA between Prospera and UNITEHERE 26 Upcoming RCA: Amendment to Hotel Management Agreement 27 Amendment to Hotel Management Agreement • Current Hotel Management Agreement expiration – October 31, 2022 • Proposed Amendment to Hotel Management Agreement: • Extend Term to October 31, 2024 • Includes labor peace objectives established in Resolution No. 20210603-075 • Includes the City of Austin Living Wage requirements • Schedule: [updated for AAC] • April 27, 2022 – Audit & Finance Committee briefing • May 23, 2022 – ABLE’s Board to review draft Amendment to Management Agreement • June 14, 2022 – AAC – RCA – Amendment to Management Agreement • June 16, 2022 – ABLE Council Briefing for RCA for Council approval of Amendment to Management Agreement 28 Comments Willy Gonzalez – Secretary/Treasurer Unite Here Local 23 29 Thank you, City of Austin, Department of Aviation Austin Bergstrom International Airport 30