United States -  Hartford

Overview:

Hartford is a secondary market of relatively small scale. With a population of approximately 125,000, Hartford is the fourth-largest city in Connecticut, behind Bridgeport, New Haven, and Stamford. The economy is characterized by a high degree of dependence on the insurance sector. Although the state government is based here, large insurers headquartered in Hartford and the surrounding suburbs (including Aetna, Travelers, CIGNA, The Hartford, The Phoenix, and UnitedHealthcare) are the primary drivers of the economy and are some of the better capitalized companies in the country. Nevertheless, Hartford is also one of the most impoverished cities in the nation, with 30% of the city’s families living below the poverty line, due in part to the decline of the region’s manufacturing industry over the past several decades. The decline was accelerated during the Great Recession, and the recovery has yet to materialize in earnest.
 
Public and private city leaders have made cooperative efforts to spur growth in the region in recent decades, with a particularly significant investment made in the form of Adriaen’s Landing, a 30-acre mixed-use project on the downtown riverfront that includes a convention center and headquarters hotel (Marriott), both completed in 2005. But the promise has yet to manifest in a meaningful way. Weak returns on investment have suppressed appetites for further capital commitments in the city’s urban core. The hotel market’s metrics reflect the economy’s struggles. In 2015, the market’s occupancy rate barely surpassed 60%, after nine straight years below that modest threshold. The region’s average rate growth has been basically inflationary in recent years. There have been no recent transactions in Hartford’s urban core, but four suburban hotels have been traded since early 2015. The Homewood Suites by Hilton in Glastonbury sold for $136,000 per room, the Inn at Middletown sold for $103,000 per room, the Crowne Plaza in Cromwell sold for $35,000 per room, and the Fairfield Inn by Marriott in Wallingford sold for $25,000 per room.
 
On a positive note, the $56-million Dunkin Donuts Stadium was completed in April 2016 on a downtown site; the venue serves as the new home of the AA Hartford Yard Goats, a minor league baseball team. New hotel development has been rumored in conjunction with this development, but is still speculative at this stage. Otherwise, prospects for growth are primarily found in the suburbs. The University of Connecticut (UConn) Health Center, located in the western suburb of Farmington, is in the midst of a long-term, $1-billion plan intended to transform the 206-acre campus into a bioscience research hub. And in East Hartford, the redevelopment of a former airfield into an outlet mall (Shoppes at Rentschler Field) is underway, scheduled for completion later this year.
 
If history is a guide, the Hartford economy will likely continue to struggle, with the decline in manufacturing partially offset by growth in the services sector, and imbalanced wealth conditions continuing to act as a destabilizing force. Opportunistic investors may find satisfactory returns through the acquisition of existing hotels at a discount to replacement cost, but new development opportunities will be rare. Best case, hotel values will grow in line with inflation in the near future.
 
* The HVI is an index, a statistical concept reflecting a measure of the difference in the magnitude of a group of related variables compared with a base period. As such, it is a measure of broad market trends, rather than a conclusion as to the specific value of any asset, and cannot be applied to an individual asset. A good comparison is the Consumer Price Index. While this index provides a reliable measure of the overall rate of inflation in a region, it does not indicate how the price of milk has changed at your grocery store. So how can the HVI be of use to an individual investor? 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.

Valuation Trends and Predictions:

Hartford United States
Previous Year -3% (65 of 71) +1% (49 of 71)
Growth in 2017 -1% (62 of 71) +2% (36 of 71)
Growth in next 4 years +2% (62 of 71) +12% (32 of 71)

Change In Value For Market:

Hartford RevPar % Change

For more information, please contact:

Erich Baum, CRE
EBaum@hvs.com
  • +1 603 502-6625 (m)
Preston Puleo, MAI
ppuleo@hvs.com
  • +1 910 723-3579 (w)
Brian Bisema
bbisema@hvs.com
  • +1 781 454-8930 (w)