What's Making Hotels Pop
Demand for hotel rooms is back to peak and average daily rates are beginning to rise even further above the best years, says PKF Hospitality Consulting VP Andrea Foster. So developers now building new rooms, you're on the up side of the cycle. (And people getting married here, you won't have to ask your out-of-town guests to sleep on your parents' floor.)
Oxford Capital, based in Chicago, is going full tilt to convert the old office building at 59 Temple Place in Downtown Crossing (above) into a 240-room boutique hotel, The Godfrey. Two years ago, Oxford CEO John Rutledge paid $23M for the property, cementing his belief in the transformation of Downtown Crossing. His faith has been rewarded. (People told us faith was a virtue, but we never believed them.) At this point in the lodging cycle, other developers are also pursuing the construction of new properties, Andrea says.
Even so, the next couple years of average supply growth will be below the long-term average of 2% and then is forecast to increase slightly above the long-run average for a few years, she says. So, those who build will reap rewards. Among the core markets—Downtown, Back Bay, and Cambridge—RevPAR growth was strongest Downtown, at 10% from January through April, PKF reports.
The strong Boston performance isn’t being fueled by occupancy, which only rose 0.5% since the beginning of the year, according a recent PKF report. It’s the 9.4% rise in ADR that’s driving this performance. Corporate demand is very strong, Andrea says, allowing owners to charge business rates while shutting off lower rates. (If your company will go for it, perhaps it's time to try a high-end hotel like the Intercontinental above.) Downtown, RevPAR is $157.45, compared to $149.08 in Cambridge and $148.15 in Back Bay. In the Rte 128 ‘burbs, occupancy was up 6.2%, but ADR up only 3.9%, about half as much as Boston core.
In fact, strong hotel demand is turning some developers away from other property types. For one, Commonwealth Ventures CEO Dick Galvin—who built marquee offices like the new State Street HQ in Fort Point, where Mayor Walsh cut the ribbon Tuesday—says he’s now focused on hotels. CV is building an Element and an Aloft (above) to service the South Boston Convention Center. Not to be left out, the Convention Center Authority is seeking legislative approval for a $700M, 1,200-room HQ hotel. (That's potentially a pretty sizable number of Star Trek fans under one roof.) While some of the new hotels in town are select-service, there are plans for higher-end properties such as the Trinity Hotel and Residences in Back Bay.
