HVS was the Platinum Sponsor for the 2019 Western Canadian Lodging Conference (WCLC) that was held in Vancouver on November 25 and 26, 2019. The event welcomed more than 400 delegates, the highest attendance in the history of the conference. The main takeaways from the conference are briefly summarized in this article.
Madison, the state capital and seat of government for the state of Wisconsin, is home to a diverse economy, including education, healthcare, insurance, government, and technology. Although long home to the University of Wisconsin - Madison and American Family Insurance, it was the growth of Epic Systems Corporation and other healthcare technology companies and services that spurred downtown hotel and residential development over the last ten years. Increased demand for highly educated workers led to greater retention in the market of recent college graduates and improvements in quality of living.
Salem, the state capital of Oregon, has not historically been known as a tourism destination. However, in recent years, the city's local economy has diversified to include manufacturing, distribution, and technology. Thus, with the expansion of economic drivers and the increased population, Salem has entered a period of revitalization in order to offer more retail, dining, and entertainment facilities. This has also increased Salem's attractiveness as a tourism destination. Furthermore, a vision for the rejuvenation of one the premier attractions in the area, Riverfront Park, is fostering high expectations for the city's future tourism growth. Additions to the park include a floating boardwalk, the Court Street entry plaza, and renovation plans for the Amphitheatre, which hosts the Salem Summer Concert Series.
The Circle City is currently experiencing a period of growth led by the hospitality sector, sporting events, and citywide conventions, coupled with added jobs and expansions throughout the CBD from companies such as Salesforce, Rolls-Royce, and Eli Lilly. Downtown Indianapolis has welcomed a limited amount of new supply since 2011, experiencing roughly a 4% increase in rooms through year-to-date 2019. As demand continues to grow across all sectors, the new hotel pipeline has grown significantly (up to 20 hotels), with this new supply planned to range from midscale to luxury branded products.
My first article about Reno was in 2008, just after I moved to the market. As I was falling in love with this unique city that was struggling from the Great Recession, local officials were working to diversify its economic base away from gaming. Occupancy and average rate (ADR) in the market not only struggled because of the decline in demand associated with the Great Recession, but this was further exacerbated by the addition of new supply continuing to enter the market after the recession had hit. In 2017, I wrote an updated article on the market focused on the growth that had occurred while the market recovered from the Great Recession and as the new supply was starting to enter the market. Fast forward to now, a record number of non-gaming hotels are proposed for development and entering the market, and developers continue to be interested in hotel development in the Reno market. Is there enough diversity in the marketplace to support all this new supply?
At the 2019 Phoenix Lodging Conference, the HVS Team heard muted optimism and a view that growth in the next 24 months may vary widely across markets. We would encourage owners to investigate the sometimes overlooked top 50 MSAs that still could experience value appreciation in those 24 months.
Government per diem rates are set for a number of locations, many applying to multiple regions or localities in each state. A per diem rate is made up of three components: a lodging allowance, meals allowance, and incidental expense allowance[1]; however, this article and the data presented below focus solely on the lodging allowance. The per diem lodging rates, which provide a maximum amount that a federal traveler can reimburse, are based on the costs of mid-priced hotels and are set annually by the U.S. General Services Administration (GSA). The following article examines the per diem trends of the top 24 lodging markets, as defined by STR, which reportedly make up roughly 32%[2] of the total number of hotel rooms across the country. Hawaii is typically included in this list of top lodging markets; however, it has been excluded because the per diem rates are only set for the continental states.
As the second-largest city in the Portland metro area, and the fourth-largest city in Washington state, Vancouver will benefit from 5,500 additional housing units in the pipeline, according to city representatives. Among the projects is Murdock Tower, to include 70,000 square feet of Class-A office space and representing the largest tower project in Vancouver in over 20 years, with 90% already leased. Coupled with the residential boom is an unprecedented increase in hospitality operations in historic Downtown Vancouver. In a mere five years, over 47 new restaurants have opened in addition to numerous coffee shops, brew pubs, and wine-tasting rooms.
There are 15 full-service hotels in Colorado Springs representing nearly 3,900 of the 10,550 total hotel rooms in this market. Interestingly, there are three full-service hotels that are branded under the Wyndham Hotels & Resorts parent company. The Mining Exchange Hotel opened in 2012 as a Wyndham Grand, The Antlers Hotel affiliated with Wyndham in 2016 after de-flagging from a Hilton, and the Cheyenne Mountain Resort joined Wyndham under the Dolce Hotels & Resorts affiliation in September 2017. Combined, these three hotels have over 700 rooms, which is only about 70 rooms shy of The Broadmoor. Hyatt, Hilton, Marriott, Radisson, and IHG represent the other major hotel parent companies that have full-service products in Colorado Springs. The following pie chart illustrates the portion of the total full-service hotel rooms that each parent company or hotel has in this market.
On recent visits to Las Vegas to host an internal training meeting at Mandalay Bay and then to complete a consulting engagement at a suburban limited-service hotel, I found the city to be extremely active. This was reflective in the statistics for the hotel market, with citywide occupancy approaching 90%, according to the Las Vegas Convention and Visitors Association. There were no discernable signs of the city's heightened activity slowing down, yet. With all this talk of a pending economic slowdown and lackluster RevPAR growth nationwide, I thought I would check with some of my firm's C&V leaders to see what they have to say about their respective markets and the current pulse (hot, mild, or cooling) in their backyards. As the recaps below show, most aren't slowing down yet.
Columbia, the state capital of South Carolina and the home of the University of South Carolina (USC), is a growing metroplex. Not only is the city expanding with notably annual population growth, the MSA population is expected to increase from roughly 800,000 to over 1,200,000 by 2045. The recent and current growth within the hospitality industry has been driven by growing population, visitation, new and expanding companies, and a pro-business environment. Fort Jackson remains a strong presence in the market, and over 100,000 family members attend basic-training graduation annually; several hoteliers in multiple submarkets within Columbia note that the graduation ceremonies are primary sources of demand. USC, which has an enrollment of almost 35,000 full-time students, drives hotel demand not only through the typical college events but also through providing an educate workforce and vibrant community that helps to attract new businesses.
Later this month the 25th Annual Lodging Conference will be held in Scottsdale, Arizona, an event that historically caps off the "conference year" for many in the hotel business. It is a time to reconnect with industry friends and colleagues, but it also gives us a few days to pause and reflect on the past year and speculate on the year to come. Heading into the event there are a number of agenda items that pique our interest, so let's dive in.
In a recent New York Times op-ed titled Why Rate Cuts Don't Help Much Anymore[1], Austan Goolsbee, former economic advisor to President Obama, cited a study on the effect of Federal Reserve rate cuts on demand for mortgages, stating:
Most hotels in urban centers profit considerably off of available parking capacity and, depending on the garage size and operational strategy of the hotel owner, garages can be significant value drivers. Our experience reflects that parking garages can operate with departmental profit as high as 40% to 50% if managed internally, or garages can be significant profit centers when operated by experienced, third-party garage operators. With more and more travelers using shared ride services to get around town, smart hotel operators are renting excess parking capacities on monthly contracts to commuters working in adjacent office buildings. These monthly contracts can boost profits even higher. Moreover, monthly pass users leave garage capacity available overnight when hotel guests may require the spaces the most.
RevPAR across the U.S. strengthened 1.2% through the first half of 2019, and STR is projecting the calendar year to end at roughly 2.0%. Profit margins should remain generally stable in light of an increase in operating expenses, particularly attributed to rising labor costs in connection with low unemployment levels. RevPAR growth through the near- to mid-term is expected to come in the form of ADR growth, with occupancy remaining generally stable. As illustrated, while RevPAR is down slightly across the top 25 markets, all other markets are averaging 2.3% growth, which is moderately above the current inflationary rate of roughly 1.8% and, therefore, indicative of a "real" RevPAR gain.
At year-end 2018, the Boston and Cambridge lodging market was comprised of 105 hotels with approximately 24,000 rooms. While this has grown considerably in four years, lodging supply in this market remains small relative to other major gateway cities. The ongoing building boom in Boston and Cambridge has contributed greatly to the recent surge in lodging supply and is expected to continue through 2021 and beyond.
Las Vegas is both iconic and unique, providing over 147,000 guestrooms; numerous casinos; a wide range of food, beverage, and entertainment options; shopping venues; and meeting and convention space. Overall, Las Vegas is expected to continue generating demand from local, national, and international sources at various price points. New, large-scale developments in the professional sports and entertainment fields could prove major draws as they come to fruition. Such efforts are necessary for Las Vegas to maintain its competitive status.
HVS Brokers Survey, HVS Hotel Valuation Index (HVI), HVS Development Cost Survey, HVS Franchise Fee Guide, HVS Lodging Tax Report, HVS Quarterly Industry Statistics Update, HVS Spa Performance Report.
In mid-June, HFTP hosted the 47th annual Hospitality Industry Technology Exposition and Conference, better known as HITEC. The event occurred in Minneapolis, Minnesota and welcomed more than 6,000 attendees, making it one of the largest hospitality technology conferences in the world. What brought these people together? A common interest in hospitality technology.
Much like other markets in the "rust belt" Midwest, Toledo is experiencing a period of redevelopment, with major projects occurring in the healthcare, public, education, tourism, and, yes, hospitality sectors. Eight new hotels have opened since 2014 (including the fully renovated Renaissance), accounting for a 24% increase in overall supply in Lucas County during a five-year period. For several years, the growth areas in Toledo were clustered in the suburban markets of Holland and Maumee, as the city's major employers moved to the south suburbs, leaving major vacancies Downtown. Further south, Perrysburg, in Wood County, has also realized substantial hotel growth.