3 Things to Know Right Now about the Boston Lodging Market
Boston's a hot spot within a hot hospitality market nationwide, with high occupancies and RevPAR not seen since before the recession. We asked Pinnacle Advisory Group VP and hotel guru Sebastian Colella to give us a rundown on Boston lodging through the rest of '16.
1) Last Year = Another Banner Year
The Boston/Cambridge lodging market experienced growth across all demand segments in 2015, resulting in another banner year, Sebastian tells us. The market’s occupancy increased 0.2 points to 81.8%, its third consecutive year above 80%. Average daily rate (ADR) increased 6.4% from the prior year to $254.10.
The resulting RevPAR was $207.83, a historic high for the market and a 6.7% increase from 2014. The Boston/Cambridge lodging market has experienced RevPAR growth for six years running.
2) Demand Outpaced Supply
At year's end, the Boston/Cambridge lodging market was made up of 101 hotel with about 23,000 rooms. Between 2010 and 2015, the market welcomed seven new hotels of about 801 rooms, of which over 70% opened in 2015, Sebastian notes.
Yet when accounting for minor room count changes and expansions, the local market’s room supply has increased only 0.7% compounded annually over the last six years. During this same period, accommodated demand has increased a compound annual growth rate of 2.4%.
3) Supply Ramping Up, But No Glut Ahead
The Boston/Cambridge market is expected to welcome five new hotels (977 rooms) this year, a 4% increase to existing supply, and an annual increase not seen since '06, when the InterContinental and the Westin Waterfront (pictured) opened, adding 1,217 rooms. There are now 27 hotel projects, or about 5,400 rooms, in the Boston Redevelopment Authority’s pipeline, though some of them might not move forward.
Still, Sebastian explains, despite the risk of new supply, the market's positive fundamentals are expected to continue as the basis for underwriting new hotel projects and maintaining a high level of investor interest. Pinnacle Advisory Group projects market occupancy will remain above 80% in 2016, and the increase in ADR will once again be the driver behind RevPAR growth.
