U.S. Hotel Appraisals Hotel Market Snapshot: Atlanta
The 2011 U.S. Hotel Appraisals Hospitality Conference will be held in Atlanta, home to multi-national hotel headquarters and diverse submarkets. How have national economic trends impacted Atlanta hotels, and where can we see growth on the horizon?
By Mike Brophy
Let’s have the bad news first up front: Like major metropolitan markets nationwide, the economic turmoil of the past three years has had a pronounced effect on the city of Atlanta. Unemployment here has exceeded the national average, only recently dropping below the 10% mark. Housing prices are down more than 30% in many communities. To add insult to injury, the city lost its NHL Thrashers to Winnipeg just this year. But is all lost for Atlanta’s economy and hotel market? Not by a long shot. A brief look at recent trends shows how area hotels are progressing along the improvement track.
Hotel Performance Factors
The Atlanta metro market saw a large increase in supply from 2007 into 2010, with several high-profile openings of top-tier luxury hotels and many branded limited-service hotels across the city’s submarkets. New supply increased more than 20% in the Atlanta market, and the additional rooms were one of the reasons occupancy levels dropped to ten-year lows in 2009. Demand declined in most of Atlanta’s submarkets an average of 5% in 2009; the Airport submarket was the exception, buoyed by the Delta/Northwest merger and seeing little to no decline in demand.
Various low-rated economy group events were also pre-booked at the onset of the economic downturn in an effort to fill the gap left by declining higher-rated demand. Demand returned in a big way in 2010, supported by a record citywide convention season featuring several large-scale conventions that cycle through the city every five years. Convention compression extended from Atlanta’s Downtown submarket to virtually all the outlying suburban markets in 2010. In addition, several large commercial entities began to hire and expand in Atlanta in 2010 after suffering setbacks the previous year; these include The Home Depot, Lockheed Martin, AT&T, CSX Railroad, and the Atlanta Mart.
Despite the increase in demand and occupancy in 2010, average rate continued to decline in the summer and fall of the year, with hoteliers uncertain about how long the growth trend could continue given the state of the economy and the need to attract more guests with low rates. Local hoteliers grew more confident in the market’s stability and began to push rates as demand levels held; average rate in most submarkets leveled off or showed slight increases in late 2010.
In 2011, hoteliers were expecting demand growth to continue unabated due to the lack of any recent hotel openings and none on the radar for several more years; however, with an unforeseen weak convention season in Atlanta in the spring and summer of 2011, occupancy and demand just managed to hold stable overall, with some submarkets seeing a slight decline. This somewhat stymied average rate growth, which has been slow to stable compared with the same period of 2010.
Going Forward
U.S. Hotel Appraisals is forecasting growth for both hotel demand and average rate in Atlanta, an outlook supported by the strong convention season in 2012, as several substantial national medical conventions are scheduled to cycle back through the city. It also bears mentioning that, in the context of thrift-centric economic perceptions, Atlanta hotel submarkets are considered good places to book large groups, since the city does not carry the stigma of being a lavish resort destination.
Rate growth may be somewhat muted in the near term given the current economic stagnation and uncertainty in the financial markets, but stronger growth should resume with renewed economic stability in 2013 and 2014. No new supply is expected for several years in any of Atlanta’s submarkets, which should further help existing hoteliers push rates.
Conclusion
Atlanta remains a leisure and entertainment stronghold for the Southeast, with corporate headquarters, professional sports teams (the Falcons, the Hawks, and the Braves), major conferences, and regional festivals attracting hotel demand. RevPAR for Atlanta hotels is expected to chart a steady upward course over the next four years, and as the economic recovery gains momentum, performance growth for local hotels should spur more confidence and investment in the Atlanta metro area.
The 2011 U.S. Hotel Appraisals Hospitality Conference will be held in Atlanta, home to multi-national hotel headquarters and diverse submarkets. How have national economic trends impacted Atlanta hotels, and where can we see growth on the horizon?
By Mike Brophy
Let’s have the bad news first up front: Like major metropolitan markets nationwide, the economic turmoil of the past three years has had a pronounced effect on the city of Atlanta. Unemployment here has exceeded the national average, only recently dropping below the 10% mark. Housing prices are down more than 30% in many communities. To add insult to injury, the city lost its NHL Thrashers to Winnipeg just this year. But is all lost for Atlanta’s economy and hotel market? Not by a long shot. A brief look at recent trends shows how area hotels are progressing along the improvement track.
Hotel Performance Factors
The Atlanta metro market saw a large increase in supply from 2007 into 2010, with several high-profile openings of top-tier luxury hotels and many branded limited-service hotels across the city’s submarkets. New supply increased more than 20% in the Atlanta market, and the additional rooms were one of the reasons occupancy levels dropped to ten-year lows in 2009. Demand declined in most of Atlanta’s submarkets an average of 5% in 2009; the Airport submarket was the exception, buoyed by the Delta/Northwest merger and seeing little to no decline in demand.
Various low-rated economy group events were also pre-booked at the onset of the economic downturn in an effort to fill the gap left by declining higher-rated demand. Demand returned in a big way in 2010, supported by a record citywide convention season featuring several large-scale conventions that cycle through the city every five years. Convention compression extended from Atlanta’s Downtown submarket to virtually all the outlying suburban markets in 2010. In addition, several large commercial entities began to hire and expand in Atlanta in 2010 after suffering setbacks the previous year; these include The Home Depot, Lockheed Martin, AT&T, CSX Railroad, and the Atlanta Mart.
Despite the increase in demand and occupancy in 2010, average rate continued to decline in the summer and fall of the year, with hoteliers uncertain about how long the growth trend could continue given the state of the economy and the need to attract more guests with low rates. Local hoteliers grew more confident in the market’s stability and began to push rates as demand levels held; average rate in most submarkets leveled off or showed slight increases in late 2010.
In 2011, hoteliers were expecting demand growth to continue unabated due to the lack of any recent hotel openings and none on the radar for several more years; however, with an unforeseen weak convention season in Atlanta in the spring and summer of 2011, occupancy and demand just managed to hold stable overall, with some submarkets seeing a slight decline. This somewhat stymied average rate growth, which has been slow to stable compared with the same period of 2010.
Going Forward
U.S. Hotel Appraisals is forecasting growth for both hotel demand and average rate in Atlanta, an outlook supported by the strong convention season in 2012, as several substantial national medical conventions are scheduled to cycle back through the city. It also bears mentioning that, in the context of thrift-centric economic perceptions, Atlanta hotel submarkets are considered good places to book large groups, since the city does not carry the stigma of being a lavish resort destination.
Rate growth may be somewhat muted in the near term given the current economic stagnation and uncertainty in the financial markets, but stronger growth should resume with renewed economic stability in 2013 and 2014. No new supply is expected for several years in any of Atlanta’s submarkets, which should further help existing hoteliers push rates.
Conclusion
Atlanta remains a leisure and entertainment stronghold for the Southeast, with corporate headquarters, professional sports teams (the Falcons, the Hawks, and the Braves), major conferences, and regional festivals attracting hotel demand. RevPAR for Atlanta hotels is expected to chart a steady upward course over the next four years, and as the economic recovery gains momentum, performance growth for local hotels should spur more confidence and investment in the Atlanta metro area.
About the Author:
Mike Brophy is Managing Director of the U.S. Hotel Appraisals consulting and valuation office in Atlanta. Mike earned his bachelor's degree in Hotel and Restaurant Management from East Stroudsburg University and has over 25 years of experience in hospitality and real estate, including consulting and appraisal assignments for nearly 300 hotels. Mike is a certified general appraiser in Georgia and surrounding states. Contact Mike at (678) 628-6577 or mbrophy@ushotelappraisals.com.