The Boston MSA enjoyed an extended post-recessionary recovery between 2010 and 2015, with RevPAR growth exceeding the national rate of growth in each year except 2011 and 2013, and growth in those years was just below the national average. In 2016, however, modest average rate growth was slightly offset by a decline in occupancy. RevPAR declined by a nominal amount, largely attributable to a relatively weak year for citywide conventions, a moderate increase in market supply, and heightened economic uncertainty both nationally and globally. Nevertheless, the market continues to post healthy occupancy levels (above the long-term historical average), and the region remains economically healthy. The market is unlikely to fall into imbalance soon. The recent trends are essentially consistent with that of a soft landing or plateau, with moderate gains in RevPAR on pace with national inflation anticipated in the near term.
Boston's hotel demand growth slowed to 0.4% through 2016, down from gains of about 3% per year between 2011 and 2015, and started 2017 with a relatively soft first quarter. However, hotel operators have a favorable outlook for the balance of the year, to the extent that demand should increase basically in proportion to supply growth through 2017. Demand growth has been uneven across the city's various neighborhoods, with significant growth in the Seaport District realized to some extent through a relocation of the city's premier tenants from the CBD, the Back Bay, and Cambridge. But the Seaport also acts as a beacon of Boston's capacity for reinvention and innovation, core principles that sustain the city's foremost economic engine—technology. The study, advancement, and spread of modern technology is basic to Greater Boston's most influential employers and institutions.
Boston's supply level grew by 3.4% in 2016, the largest increase recorded by the market since 2003. New inventory has almost exclusively been realized in the form of hotels with abbreviated services and public facilities, including select-service, extended-stay, and boutique hotels, most located on the periphery of the Boston/Cambridge urban core. Within the city, the Logan Airport and Seaport submarkets have attracted most of the attention. The city's primary convention center facility is in the Seaport, as it has been under-served by sufficient room blocks within walking distance since its opening in 2004. Following the opening of Aloft and Element affiliates in 2016, and with a 326-room Yotel nearing completion as of mid-year 2017, plans for a new 1,000-room Omni headquarters hotel were announced in May, with opening slated for 2021. New affiliates of Marriott's Courtyard, Moxy, and AC brands are also under construction in various corners of the city, as well as the city's second Four Seasons hotel. The pace of supply growth for the next few years will likely be higher than the sparing increases recorded between 2004 and 2015, but are generally expected to be in proportion to the demand growth factors over the same period.
Boston is one of the most highly coveted hotel real estate markets in the world. In 2016, Boston's RevPAR finished fifth in the United States, between Miami (fourth) and Los Angeles (sixth), well ahead of other mature Northeastern metropolitan areas such as Washington, D.C. and Philadelphia. Boston is prized by institutional investors for its high barriers to entry and is perceived as an excellent bet, no matter the holding period. Transaction activity remained relatively consistent through 2016 and early 2017. Whereas RevPAR growth slowed in the past 16 months, capitalization rates remained low and arguably decreased because of stiff competition among buyers. The market's high-water mark was the sale of the Mandarin Oriental in February 2016, for just short of $1 million per room. The next-highest unit price was realized by the Envoy, an Autograph Collection hotel in the Seaport District, which sold for over $800,000 per room in July 2016.
* Although the HVI cannot tell you what a particular hotel is worth, it does provide excellent “big picture” data, indicating which market areas are experiencing positive trends, and thus may present good investment opportunities. The HVI for the U.S. is a measure of the strength of the lodging industry as a whole and, specifically, the hospitality investment market. The HVI for the various identified markets can provide a basis to evaluate and compare different geographic regions. For more insight on the limitations and applicability of the HVI, please read the message on the HVI home page by clicking on the graphic at the top of this page.