The Atlanta hotel’s strong performance in the last three months of 2012 may be tough to beat, says a local lodging expert.
“The fourth quarter was terrific. Is that a good thing or bad thing?” asked Mark Woodworth, president of PKF Hospitality Research LLC. Woodworth opined that it may not be the best thing going forward because it makes the year-over-year measures more difficult. Woodworth’s presentation on the Atlanta market capped off the Atlanta Lodging Outlook 2014 conference, held on Monday Aug. 26 at the InterContinental Hotel Buckhead in Atlanta.
The Atlanta hotel market recorded a great fourth quarter last year in terms of its revenue per available room (RevPAR). The biggest spike in RevPAR was in the downtown hotel market, which saw a 26 percent increase from the previous year. Every submarket increased in RevPAR in the fourth quarter compared to the fourth quarter of 2011.
Other submarkets that posted large spikes in RevPAR include Midtown, Central Perimeter, Peachtree Corners, I-85 South, Buckhead and Town Center North. PKF forecasts that RevPAR in 2013 for the entire Atlanta hotel market will be $54.79, a 4.7 percent increase compared to 2012 ($52.31).
Slide courtesy of PKF Hospitality Research
Woodworth also relayed that Atlanta’s total employment levels are slowly climbing and are expected to continue climbing through 2014. Woodworth says the metro Atlanta area should overtake pre-recession employment next year.
The expectation from PKF is that total enrollment in metro Atlanta area will reach 2.47 million jobs by third quarter 2014, nearly identical to Moody’s Analytics report of the metro area tallying 2.46 million jobs in first quarter 2008. Moody’s Analytics reports that the metro Atlanta market had 2.26 million jobs in first quarter 2011.
The Atlanta hotel market is expected to post an occupancy even with its long-term average, which is 62.1 percent. PKF forecasts that the Atlanta market’s occupancy will plateau at 62.1 percent and maintain that average through 2014.
In the upper-priced hotel market (such as Westin, Ritz-Carlton, Loews, Hyatt), PKF forecasts that occupancy will reach 67.6 percent for the rest of 2013 and tick down slightly to 67.5 percent in 2014. The long-term average for occupancy in Atlanta’s upper-priced hotel market is 66.5 percent.
PKF forecasts that occupancy in the lower-priced hotels (such as Days Inn, Holiday Inn Express, TownPlace Suites) will average 58.1 percent for the rest of 2013 and tick up to 58.2 percent in 2014. These occupancies are below the long-term average, which is 59.3 percent. Woodworth assesses that the elevated disparity between upper and lower-priced occupancy levels keeps room rate growth in check.
As far as new supply in Atlanta is concerned, there are four projects under construction totaling 510 rooms as of this writing. There is one hotel under construction in the Central Perimeter, Gwinnett, Cumberland and I-20 East submarkets. The amount under construction is 0.6 percent of existing supply in the market.
PKF reports that only eight submarkets in Atlanta have recovered in demand for all hotels: Downtown, Buckhead, I-85 South, I-20 East, Town Center North, Gwinnett Place, Midtown and Georgia 400 North. Most every submarket has recovered in demand for upper-priced hotels, according to PKF.
The overall Atlanta market is expected to tick up in occupancy, RevPAR and average daily rate (ADR) for the rest of the year and into 2014.
Slide courtesy of PKF Hospitality Research
Woodworth closed his discussion with his five conclusions on the outlook for the U.S. lodging industry:
1. No threats from the factors that historically have brought an end to the good times.
2. The fundamentals, both nationally and here in Atlanta, are solid.
3. Industry growth, while still positive, will slow relative to what we have become used to. This is particularly true in Atlanta because of difficult year-over-year comparables.
4. Room rate increases, while above average, will be more difficult for upper-priced hotel as consumers begin to “trade down” to lower-priced alternatives.
5. 2014 will be a great year for the national lodging industry, and a good year in Atlanta.
Other presenters included Peter Yesawich, the vice chairman of MMGY Global; Mark Sussman, director of trade show sales at the Atlanta Convention and Visitors Bureau; Tim Hart, executive vice president of TravelClick; and Roger Tutterow Ph.D., professor of economics at Mercer University.
The seminar was presented by the Atlanta Convention & Visitors Bureau, the Georgia Hotel & Lodging Association, the Cornell University School of Hotel Administration and the Cornell Hotel Society.
— John Nelson