August 2011
U.S. Hotel Appraisals Hotel Market Snapshot: Reno, Nevada
As gaming revenues continue to fall, the future of the Reno-Sparks lodging market hedges on expansions in the commercial and meeting and group segments of hotel demand.
By Desiree Flanary
Like so many across the country, the Reno-Sparks hotel market has seen its share of difficulties over the past three years. But while some developments have faded away since the 2008/09 recession, new projects have made progress. Traditionally a gaming and leisure destination, in the face of declining revenues the “Biggest Little City in the World” has begun to turn its attention to other sources of business, including major events. The following article touches on ways in which Reno’s hotel market is shifting focus to capitalize on demand trends of the new decade.
Recent Changes in Reno’s Hotel Landscape
The Siena hotel, spa, and casino recently reopened following a multi-million-dollar renovation. CommRow, a redevelopment of the former Fitzgerald’s Reno casino and hotel, is expected to open in multiple phases starting in the third quarter of 2011. CommRow is being marketed as an “Urban Adventure” resort and will feature the world’s tallest competition climbing wall, a bouldering facility, two music venues, eleven micro-eateries, and a 136-room hotel. In addition to the CommRow hotel development, a proposed Hampton Inn & Suites in Northwest Reno is starting to show signs of life, and a local development company has reported interest in building a limited-service hotel in Central Reno. According to local hotel owner and developer Sushil Patel, “the hotel market is beginning to stabilize after the addition of the large number of new non-gaming rooms in the last few years; however, the market will need several more years and an improvement in the overall economy for demand to catch up to the current supply of rooms.”
Commercial Developments and Hotel Demand Generation
In the midst of two decades of falling revenues from gaming, the Economic Development Authority of Western Nevada (EDAWN) has worked to diversify the Reno-Sparks economic base by recruiting major companies into the market. In August of 2011, EDAWN announced that between June of 2010 and June of 2011, 17 companies moved to or expanded employment and facilities in the region, creating 670 new jobs. The 2009/10 fiscal year saw the arrival of 11 more companies and another 513 jobs.
Reno and the state of Nevada have received some positive press in the last twelve months, being ranked tenth for “Best State for Business” by Chief Executive Magazine and first for the number of geothermal projects in development according to the Geothermal Energy Association. The Tax Foundation also ranked Nevada number four among the best tax climates in the U.S. in 2011. The Reno-Tahoe Airport, which recently completed a major expansion and added non-stop flights to Houston and Minneapolis, was named the second-most efficient airport in the U.S. and Canada by the Air Transport Research Society in 2011.
On other demand fronts, the Reno-Sparks Convention and Visitors Authority continues to secure and promote annual events and conventions, including Hot August Nights, Safari Club International, and the Reno Air Racing Association’s National Championship Races. The 125,000-square-foot Cabela’s retail complex in Reno draws leisure demand from Nevada and surrounding states, and the Truckee River Whitewater Park continues to host events of widespread appeal.
Reno’s economy and hotels bank heavily on the annual United States Bowling Congress tournament, which in 2011 was estimated to have an economic impact of $96 million. Multi-million-dollar renovations and upgrades to the National Bowling Stadium in Reno are scheduled to begin soon, funded by a recently approved hotel-room tax; however, the upgraded facility will face stiff competition from a 100-lane bowling complex in Orlando, Florida, which is being developed under the banner of ESPN’s Wide World of Sports.
Occupancy and Average Rate Trends
Occupancy in the Reno-Sparks market has stood historically in the high 60s to low 70s, reaching its peak in 2007. The market experienced an economic boom and limited new hotel supply between 1998 and 2007, which helped the market achieve this stable occupancy trend. Concurrent with strong demand, average rate grew annually over these years, peaking in 2007.
The following figures illustrate occupancy and average rate trends for the Reno-Sparks market since 1998.
Seven new limited-service hotels totaling 693 rooms opened from August of 2006 through September of 2009, exacerbating the ill effects of the recession. Area hotels waged a pricing war in an effort to keep heads in beds, and average rates fell sharply in the fray. Demand has started to increase, though the market continues to absorb a significant amount of new supply. The market saw a slight increase in occupancy and average rate in 2010, and the year-to-date period through June of 2011 shows slight growth in occupancy and average rates compared to the prior year.
Conclusion
The Reno-Sparks lodging market is starting to shows signs of recovery. Occupancy and average rate have made gains in 2011, and the decline in the MSA’s unemployment rate stands as another positive sign that the volatility brought on by the recent recession has begun to calm. Given the market’s current fragility, the opening of the CommRow resort could initially depress occupancy and average rates for local hotels, though the marketing of CommRow as its own destination could lead to some induced demand. To climb back to pre-recessionary performance, the Reno-Sparks lodging market needs to continue its focus on diversifying its demand base. From this perspective, Reno’s prospects improve over the long term, as the market escapes the drag of the recent recession and finds new footing in major conventions, attractions, and events.
U.S. Hotel Appraisals Hotel Market Snapshot: Reno, Nevada
As gaming revenues continue to fall, the future of the Reno-Sparks lodging market hedges on expansions in the commercial and meeting and group segments of hotel demand.
By Desiree Flanary
Like so many across the country, the Reno-Sparks hotel market has seen its share of difficulties over the past three years. But while some developments have faded away since the 2008/09 recession, new projects have made progress. Traditionally a gaming and leisure destination, in the face of declining revenues the “Biggest Little City in the World” has begun to turn its attention to other sources of business, including major events. The following article touches on ways in which Reno’s hotel market is shifting focus to capitalize on demand trends of the new decade.
Recent Changes in Reno’s Hotel Landscape
The Siena hotel, spa, and casino recently reopened following a multi-million-dollar renovation. CommRow, a redevelopment of the former Fitzgerald’s Reno casino and hotel, is expected to open in multiple phases starting in the third quarter of 2011. CommRow is being marketed as an “Urban Adventure” resort and will feature the world’s tallest competition climbing wall, a bouldering facility, two music venues, eleven micro-eateries, and a 136-room hotel. In addition to the CommRow hotel development, a proposed Hampton Inn & Suites in Northwest Reno is starting to show signs of life, and a local development company has reported interest in building a limited-service hotel in Central Reno. According to local hotel owner and developer Sushil Patel, “the hotel market is beginning to stabilize after the addition of the large number of new non-gaming rooms in the last few years; however, the market will need several more years and an improvement in the overall economy for demand to catch up to the current supply of rooms.”
Commercial Developments and Hotel Demand Generation
In the midst of two decades of falling revenues from gaming, the Economic Development Authority of Western Nevada (EDAWN) has worked to diversify the Reno-Sparks economic base by recruiting major companies into the market. In August of 2011, EDAWN announced that between June of 2010 and June of 2011, 17 companies moved to or expanded employment and facilities in the region, creating 670 new jobs. The 2009/10 fiscal year saw the arrival of 11 more companies and another 513 jobs.
Reno and the state of Nevada have received some positive press in the last twelve months, being ranked tenth for “Best State for Business” by Chief Executive Magazine and first for the number of geothermal projects in development according to the Geothermal Energy Association. The Tax Foundation also ranked Nevada number four among the best tax climates in the U.S. in 2011. The Reno-Tahoe Airport, which recently completed a major expansion and added non-stop flights to Houston and Minneapolis, was named the second-most efficient airport in the U.S. and Canada by the Air Transport Research Society in 2011.
On other demand fronts, the Reno-Sparks Convention and Visitors Authority continues to secure and promote annual events and conventions, including Hot August Nights, Safari Club International, and the Reno Air Racing Association’s National Championship Races. The 125,000-square-foot Cabela’s retail complex in Reno draws leisure demand from Nevada and surrounding states, and the Truckee River Whitewater Park continues to host events of widespread appeal.
Reno’s economy and hotels bank heavily on the annual United States Bowling Congress tournament, which in 2011 was estimated to have an economic impact of $96 million. Multi-million-dollar renovations and upgrades to the National Bowling Stadium in Reno are scheduled to begin soon, funded by a recently approved hotel-room tax; however, the upgraded facility will face stiff competition from a 100-lane bowling complex in Orlando, Florida, which is being developed under the banner of ESPN’s Wide World of Sports.
Occupancy and Average Rate Trends
Occupancy in the Reno-Sparks market has stood historically in the high 60s to low 70s, reaching its peak in 2007. The market experienced an economic boom and limited new hotel supply between 1998 and 2007, which helped the market achieve this stable occupancy trend. Concurrent with strong demand, average rate grew annually over these years, peaking in 2007.
The following figures illustrate occupancy and average rate trends for the Reno-Sparks market since 1998.
Seven new limited-service hotels totaling 693 rooms opened from August of 2006 through September of 2009, exacerbating the ill effects of the recession. Area hotels waged a pricing war in an effort to keep heads in beds, and average rates fell sharply in the fray. Demand has started to increase, though the market continues to absorb a significant amount of new supply. The market saw a slight increase in occupancy and average rate in 2010, and the year-to-date period through June of 2011 shows slight growth in occupancy and average rates compared to the prior year.
Conclusion
The Reno-Sparks lodging market is starting to shows signs of recovery. Occupancy and average rate have made gains in 2011, and the decline in the MSA’s unemployment rate stands as another positive sign that the volatility brought on by the recent recession has begun to calm. Given the market’s current fragility, the opening of the CommRow resort could initially depress occupancy and average rates for local hotels, though the marketing of CommRow as its own destination could lead to some induced demand. To climb back to pre-recessionary performance, the Reno-Sparks lodging market needs to continue its focus on diversifying its demand base. From this perspective, Reno’s prospects improve over the long term, as the market escapes the drag of the recent recession and finds new footing in major conventions, attractions, and events.
About the Author:
Desiree Flanary is a Vice President with the U.S. Hotel Appraisals office in Reno, Nevada, overseeing and executing a wide variety of appraisals, market studies, and feasibility studies for limited- and select-service hotels in the region. Desiree graduated from the University of Northern Colorado and has conducted consulting and appraisal assignments for nearly 200 hotels. Desiree belongs to the professional associations WIN (Western Industrial Nevada) and CREW (Commercial Real Estate Women) in Northern Nevada, serving on CREW's Board of Directors in 2010 and 2011. Contact Desiree at +1 (970) 381-9794 or dflanary@ushotelappraisals.com.