Meeting Mentor Magazine

December 2023

Hotel Hot Streak Expected to Continue Into 2019

On one hand, it’s easy to see why new meetings-focused hotels haven’t been rolling out in big numbers in recent years. Transient demand, which is up 22 percent since 2011, has been outpacing group demand, which only increased 9 percent in the same time period, said Ryan Lynch, business development associate, industry partners, for hotel market data and benchmarking firm STR, during a presentation at CDX18 in Cleveland earlier this year.

However, this is changing: While transient demand barely shifted from 2.2 percent growth in 2017 to 2.1 percent in 2018, the group demand growth rate went from 0.9 percent to 2.1 percent over the same period — a significant uptick.

Hotel companies are responding to the possibility of more group business by building more meetings-oriented hotels. While only seven properties with more than 50,000 square feet of meeting space opened between 2012 and 2015, “when you look at 2018-2019, it’s an entirely different picture,” Lynch said. “We’re expecting a total of six properties to open in 2018 with that much meeting space — and an additional five in 2019.”

All told, there are about 190,000 hotel rooms currently under construction in the U.S., he noted, up from 188,000 in 2017. There are an additional 223,000 in the final planning stages, meaning that ground is scheduled to be broken within the next 12 months, and 195,000 more in the works that aren’t on the docket for construction to begin for at least a year. About 30 percent of those in-construction rooms will be in luxury and upper upscale full-service properties: “That’s where we’re really seeing expansion.”

And where are all these new rooms cropping up? New York City tops the list with 13,389 rooms under construction now, representing 11 percent of its existing supply. Next up is Dallas with 6,337 new rooms. Nashville, Tenn., third on the list, is also riding a room-construction rocket — the 5,210 rooms under construction there mean “there’s pretty much a crane on every corner in that city right now,” said Lynch. Rounding out the top five are Denver with 4,516, and Seattle with 3,128. “This is assuming all these rooms under construction complete their construction and open,” he added. “We anticipate these numbers will come down as we get closer to their opening dates.”

All this new supply means that demand will still outpace occupancy in 2019, “but not at the rate we saw in 2018,” especially not in the markets experiencing the most growth in supply. These markets may actually see a dip in growth for average daily room rate (ADR) and revenue per available room (RevPAR) next year. In a lot of cases, secondary and tertiary markets may see more positive growth in occupancy, ADR and RevPar, according to Lynch.

Overall, he said, the 2019 forecast currently is for an increase of 1.9 percent in supply, 2.1 percent in demand, 0.2 percent in occupancy, 2.4 percent in ADR and 2.6 percent in RevPAR growth.

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