Boston Hotel Market Hits Historic High
Boston lodging is on fire, with occupancy peaking and room rates rising briskly. That explains the recent spate of sales and new development proposals lining up, says Pinnacle Advisory Group owner Rachel Roginsky.
Bostons 79% occupancy rate is a huge number and cant get any higher because the severe winters curtail travel. (At least until they invent an ice train.) Nevertheless, it outshines the national average--69% occupancy--and Boston room rates are among the top five in the country, says Rachel. Every day, she gets calls asking if she knows of any hotel properties for sale in The Hub. Financing is flowing, and lenders have a big appetite to fund acquisitions, she tells us. (There's enthusiasmfor new construction, but lenders aren't dolingout money wildly.) Still, the availability of capital is a complete turnaround from the dark days of 09.
Savills managing director Marc Magazine advised Loews Hotels & Resorts on its $84.4M purchase of the Back Bay Hotel that closed earlier this month. A big draw to Boston for the New York-based investor was the nearly 12% rise in RevPAR here last year--far superior to the growth in NYC and DC and almost 50% more than the national average of 8% for the period, Marc says. The prospect of acquiring the four-star property was a motivator for the Loews team to engage in complex negotiations: The Saunders Group held the ground lease and The Doyle Collection owned the property, Marc explained.
Savills managing director of hospitality Tom Baker says that investors who want to be a national player in the US hotel market have to at least try to enter Boston. It has the three major demand drivers hoteliers seek: Its a big college town, a popular leisure destination, and strong business market. (There's also a lot of movies filmed here for people who want to be extras in crime films.) Also appealing: the limited supply of new product. Rachel says that about a dozen development proposals are being discussed. In this high-barrier-to-entry town, some will fade, and the ones that do advance wont open their doors for three or four years.
