Industry Update
Opinion Article 5 February 2019

Boston & Cambridge Lodging Market Peaks in 2018 as Demand Outpaces Supply

By Sebastian Colella , Vice President at Pinnacle Advisory Group

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The Boston and Cambridge lodging market accommodated approximately 7.5 million roomnights in 2018, growth in demand of 3.4% from the prior year. The market's supply increased 2.8% with the opening of four new hotels and a guestroom expansion which combined for approximately 760 new rooms available nightly. As a result of these dynamics, the market's occupancy increased 0.3% to 82.7%, its highest point in history.

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Despite the market's continued demand growth and capacity constraints through much of the year, average daily rate (ADR) increased only 1.6% to $262. Similar to the trends experienced nationally, the market's revenue per available room (RevPAR) has begun to decelerate, increasing 1.9%.

Of the six submarkets analyzed by Pinnacle Advisory Group, the Cambridge set of hotels experienced the largest increase in RevPAR. The ADR in Cambridge increased 2.9%, due in part to many of its largest hotels undergoing renovations in 2017 and early 2018. These increases to rate, matched with a 0.5% increase to occupancy, resulted in a RevPAR increase of 3.6%, greatly outperforming the overall market. As the only submarket to experience a decline in occupancy, the hotels in the Fenway/Longwood Medical Area experienced the weakest RevPAR growth of 1.0%.

Although the key economic indicators are leading to a healthy outlook for the U.S economy in 2019, the Boston & Cambridge lodging market has two factors which will negatively impact its performance; supply growth of over 5.5% and a weak convention calendar comparative to the prior year. As Pinnacle has reported previously, the market is expected to experience a decline in RevPAR in 2019.

The Pinnacle Perspective reports the Boston & Cambridge lodging market's performance on a monthly and annual basis. Individual reports provide an indication of performance metrics by submarket, hotel size, and price point. Data is collected from over 95% of the market's rooms supply and aggregated to provide detailed market reports for its contributors.

Sebastian Colella

Sebastian J. Colella is a Vice President with Pinnacle Advisory Group based in the Boston office. With over 15 years in the hospitality industry, Mr. Colella leverages his operational knowledge and expertise from experiences in the field. Work with Pinnacle Advisory Group has included market and feasibility analysis, acquisition due diligence, departmental revenue and expense performance evaluations, facility recommendations, brand assessments and impact studies, as well as appraisals of both branded and independent hotels and resorts.

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