U.S. Hotel Appraisals Market Snapshot: Shreveport-Bossier City, Louisiana
A boom in the energy sector has helped the Shreveport-Bossier City market power through the recent recession. As the development of the Haynesville Shale deposit moves into its next phase, can local hotels find other means to maintain demand levels?
By: Richard Jander, MAI
The Shreveport-Bossier City metro area hinges the commerce and culture of the Ark-La-Tex region, which comprises southern Arkansas, northwest Louisiana, and eastern Texas. Historically an important center for steamboat commerce on the Red River, the introduction of riverboat gambling in the mid-1990s spurred a revitalization of Shreveport’s downtown and riverfront areas, which attract millions of leisure travelers each year. Military operations and energy exploration also draw demand to local hotels. The following article explores the economic makeup of Shreveport-Bossier City and the impact of new developments on its hotel landscape.
Economic Drivers and Local Employment
The present economy of Shreveport-Bossier City is based primarily on service industries, which were hit hard during the recent recession. While unemployment in the market appears still to be on the rise, this is due in large part to the MSA’s expanding population, which has grown steadily over the past few years.
The Shreveport-Bossier City market remained somewhat buffered from the recent recession because of the area's strong federal government presence, ongoing developments in the energy sector, and casino-related tourism. Despite the recent rise in unemployment, Shreveport-Bossier City ranked 7th among mid-size cities in Forbes’ 2011 list of “Best Cities for Jobs,” a vote of confidence in the area’s prospects.
Commercial Activity
The 8th Air Force, the 2d Bomb Wing, and the 917th Wing are all headquartered at Barksdale Air Force Base, one of the area's largest employers. Additionally, the Air Force Global Strike Command opened in August of 2009 on the Barksdale base. The 2d Bomb Wing provides global combat capability and trains all B-52 crews.
In March of 2008, Chesapeake Energy Corporation announced the discovery of the Haynesville Shale, and the company currently leases approximately 510,000 acres in northwest Louisiana. Other companies controlling vast amounts of acreage in the area include Petrohawk Energy Corporation and a joint venture between EXCO Resources and BG Group. Chesapeake estimates that the Haynesville Shale could contain between 7.5 and 20 trillion cubic feet of natural gas, making it the largest known onshore natural gas field in the U.S. This project led to increases in lodging demand through 2010 while initial research efforts were underway on the Haynesville Shale deposits; however, this demand has since declined. As mineral rights leases are negotiated and drilling begins, demand is expected to return, though not at the levels seen in the 2010 spike.
The cyberspace industry has become an emerging force in the market with the development of the Cyber Innovation Center/National Cyber Research Park. This 3,000-acre development is located adjacent to Barksdale Air Force Base and comprises over 500,000 square feet in its first phase. The facility is also near Bossier Parish Community College and is anticipated to facilitate collaboration between academic, private, and government entities. The promise of further development of the Cyber Innovation Center/National Cyber Research Park illustrates the potential growth and breadth of the industry as a force in the market.
Leisure Demand
Casinos and gaming serve as the main attraction for Shreveport-Bossier City’s leisure demand. A proposed 400-room Margaritaville Resort and Casino goes before the Planning and Zoning Commission in November; the project is expected to receive approval, with the developers, Paradise Casino LLC, planning to break ground immediately afterward. The $170-million project is anticipated to ultimately generate 1,200 jobs, though no completion date has been announced.
Most of the Shreveport-Bossier City casinos are approaching 20 years old and collectively have seen admissions decline over the past decade. The opening of the 1,000-room L'Auberge du Lac in Lake Charles has siphoned off a great deal of demand since 2006, though the arrival of the new Margaritaville Resort and Casino should prove a major attraction and restore a good degree of lost leisure travel to the local market.
Hotel Performance
Occupancy in the Shreveport-Bossier City market hovered around 60% from 2001 through 2009, with a significant spike in late 2006 as southern Louisiana residents fled north to escape Hurricane Rita. Market-wide occupancy exceeded 70% in 2010 due to an increase in energy-related demand from surveyors, engineers, and energy company executives seeking leases from land owners. This energy-spurred growth has since waned, however, as year-to-date 2011 figures fall more toward the upper end of the market’s historical range. The movement of the Air Force Global Strike Command to Barksdale in 2009 and the continued training under the 2d Bomb Wing have also been a strong source of demand since 2009. The bomb wing’s two-day training sessions occur monthly, and there are minimal lodging facilities on base, which pushes business to local hotels.
Average rate in the market has fluctuated widely over the past ten years. The most significant swing occurred in 2006 when rates jumped due to high hurricane-related occupancies. From 2007 through 2009, the market’s average rate grew with the pace of inflation, though rates began to fall in 2010 as hoteliers offered steep discounts to compete for energy-related demand. These discounting practices have started to subside, however, buoying average rates back up to 2009 levels.
Hotel Supply
The Shreveport-Bossier City market has recently seen an influx of new and proposed hotel developments, as noted in the table below.
Aside from the proposed casino, no full-service hotels have been announced in the construction pipeline. The Hilton Garden Inn/Homewood Suites is expected to feature Hilton Worldwide’s new design for these brands; the two hotels will be C-shaped and enclose a central courtyard. The addition of these proposed properties will likely lead to a short-term decline in occupancy and average rates for the market, though performance should stabilize over the next two to three years.
Conclusion
While the new supply coming to the market may limit existing hotels’ immediate gains in occupancy and rate, Shreveport-Bossier City’s strong military presence, growing gaming industry, and active energy sector should prove enduring demand sources for the foreseeable future. Although some oil and gas activity has shifted to other parts of the country, the industry continues to provide significant employment and hotel demand in the area, and the emerging cyberspace industry has begun to spur further growth. As the nation continues to recover from the Great Recession, the Shreveport-Bossier City market is poised for solid growth over the long term.
A boom in the energy sector has helped the Shreveport-Bossier City market power through the recent recession. As the development of the Haynesville Shale deposit moves into its next phase, can local hotels find other means to maintain demand levels?
By: Richard Jander, MAI
The Shreveport-Bossier City metro area hinges the commerce and culture of the Ark-La-Tex region, which comprises southern Arkansas, northwest Louisiana, and eastern Texas. Historically an important center for steamboat commerce on the Red River, the introduction of riverboat gambling in the mid-1990s spurred a revitalization of Shreveport’s downtown and riverfront areas, which attract millions of leisure travelers each year. Military operations and energy exploration also draw demand to local hotels. The following article explores the economic makeup of Shreveport-Bossier City and the impact of new developments on its hotel landscape.
Economic Drivers and Local Employment
The present economy of Shreveport-Bossier City is based primarily on service industries, which were hit hard during the recent recession. While unemployment in the market appears still to be on the rise, this is due in large part to the MSA’s expanding population, which has grown steadily over the past few years.
The Shreveport-Bossier City market remained somewhat buffered from the recent recession because of the area's strong federal government presence, ongoing developments in the energy sector, and casino-related tourism. Despite the recent rise in unemployment, Shreveport-Bossier City ranked 7th among mid-size cities in Forbes’ 2011 list of “Best Cities for Jobs,” a vote of confidence in the area’s prospects.
Commercial Activity
The 8th Air Force, the 2d Bomb Wing, and the 917th Wing are all headquartered at Barksdale Air Force Base, one of the area's largest employers. Additionally, the Air Force Global Strike Command opened in August of 2009 on the Barksdale base. The 2d Bomb Wing provides global combat capability and trains all B-52 crews.
In March of 2008, Chesapeake Energy Corporation announced the discovery of the Haynesville Shale, and the company currently leases approximately 510,000 acres in northwest Louisiana. Other companies controlling vast amounts of acreage in the area include Petrohawk Energy Corporation and a joint venture between EXCO Resources and BG Group. Chesapeake estimates that the Haynesville Shale could contain between 7.5 and 20 trillion cubic feet of natural gas, making it the largest known onshore natural gas field in the U.S. This project led to increases in lodging demand through 2010 while initial research efforts were underway on the Haynesville Shale deposits; however, this demand has since declined. As mineral rights leases are negotiated and drilling begins, demand is expected to return, though not at the levels seen in the 2010 spike.
The cyberspace industry has become an emerging force in the market with the development of the Cyber Innovation Center/National Cyber Research Park. This 3,000-acre development is located adjacent to Barksdale Air Force Base and comprises over 500,000 square feet in its first phase. The facility is also near Bossier Parish Community College and is anticipated to facilitate collaboration between academic, private, and government entities. The promise of further development of the Cyber Innovation Center/National Cyber Research Park illustrates the potential growth and breadth of the industry as a force in the market.
Leisure Demand
Casinos and gaming serve as the main attraction for Shreveport-Bossier City’s leisure demand. A proposed 400-room Margaritaville Resort and Casino goes before the Planning and Zoning Commission in November; the project is expected to receive approval, with the developers, Paradise Casino LLC, planning to break ground immediately afterward. The $170-million project is anticipated to ultimately generate 1,200 jobs, though no completion date has been announced.
Most of the Shreveport-Bossier City casinos are approaching 20 years old and collectively have seen admissions decline over the past decade. The opening of the 1,000-room L'Auberge du Lac in Lake Charles has siphoned off a great deal of demand since 2006, though the arrival of the new Margaritaville Resort and Casino should prove a major attraction and restore a good degree of lost leisure travel to the local market.
Hotel Performance
Occupancy in the Shreveport-Bossier City market hovered around 60% from 2001 through 2009, with a significant spike in late 2006 as southern Louisiana residents fled north to escape Hurricane Rita. Market-wide occupancy exceeded 70% in 2010 due to an increase in energy-related demand from surveyors, engineers, and energy company executives seeking leases from land owners. This energy-spurred growth has since waned, however, as year-to-date 2011 figures fall more toward the upper end of the market’s historical range. The movement of the Air Force Global Strike Command to Barksdale in 2009 and the continued training under the 2d Bomb Wing have also been a strong source of demand since 2009. The bomb wing’s two-day training sessions occur monthly, and there are minimal lodging facilities on base, which pushes business to local hotels.
Average rate in the market has fluctuated widely over the past ten years. The most significant swing occurred in 2006 when rates jumped due to high hurricane-related occupancies. From 2007 through 2009, the market’s average rate grew with the pace of inflation, though rates began to fall in 2010 as hoteliers offered steep discounts to compete for energy-related demand. These discounting practices have started to subside, however, buoying average rates back up to 2009 levels.
Hotel Supply
The Shreveport-Bossier City market has recently seen an influx of new and proposed hotel developments, as noted in the table below.
Aside from the proposed casino, no full-service hotels have been announced in the construction pipeline. The Hilton Garden Inn/Homewood Suites is expected to feature Hilton Worldwide’s new design for these brands; the two hotels will be C-shaped and enclose a central courtyard. The addition of these proposed properties will likely lead to a short-term decline in occupancy and average rates for the market, though performance should stabilize over the next two to three years.
Conclusion
While the new supply coming to the market may limit existing hotels’ immediate gains in occupancy and rate, Shreveport-Bossier City’s strong military presence, growing gaming industry, and active energy sector should prove enduring demand sources for the foreseeable future. Although some oil and gas activity has shifted to other parts of the country, the industry continues to provide significant employment and hotel demand in the area, and the emerging cyberspace industry has begun to spur further growth. As the nation continues to recover from the Great Recession, the Shreveport-Bossier City market is poised for solid growth over the long term.
About the Author:
Richard Jander, MAI, is a Project Manager with the U.S. Hotel Appraisals office in Dallas. Richard’s valuations experience spans residential, retail, industrial, recreational, and hotel properties, as well as office buildings and agricultural land and ranches. Richard has also developed market valuations of real estate for use in financial reporting, asset management, acquisition, financing, and legal proceedings. He is a designated member of the Appraisal Institute and a certified general appraiser in Texas and surrounding states. Contact Richard at (214) 608-1361 or rjander@ushotelappraisals.com.