United States -  Kansas City

Overview:

Kansas City’s diversified economy, with strong cornerstones in the manufacturing, logistics, healthcare, and government sectors, is in the midst of a steady expansion that is paying dividends to the area’s hotel industry; this positive momentum should provide a solid basis for continuing performance improvement and steady valuation in coming years. General Motors and Ford have made recent major investments in their local manufacturing plants, which bodes well for the region’s employment base, as well as commercial demand for the area’s hotels. Furthermore, Cerner Corporation, a healthcare technology firm, is continuing a trend of rapid growth with its new $4.45-billion headquarters campus under construction in southeastern Kansas City; the first two office buildings, which will hold approximately 3,500 workers, will reportedly open in late 2016. In addition to the strong corporate demand base, the market also benefits from a variety of cultural and leisure attractions that continue to draw strong seasonal tourism to the area.

These factors have positively affected local hotel performance and begun to attract attention from hotel developers across the country. Development is particularly active in the Downtown and Crossroads neighborhoods; ten boutique hotels are currently proposed or under construction in this area, including multiple Indigo Hotels, a 21c Museum Hotel, and a boutique hotel by the Aparium Hotel Group. Furthermore, Chartwell Hospitality is developing a 257-room, dual-branded Residence Inn by Marriott and Courtyard by Marriott, which is scheduled to open in June 2016 in Downtown Kansas City. The most significant project on the drawing board is a new convention headquarters hotel. Plans call for an 800-room Hyatt that is anticipated to break ground in late 2016 or early 2017, with an opening date in 2019. The new downtown hotel rooms are expected to help the market attract increased convention activity, a hotel demand segment that has underperformed in recent years. Going forward, anticipated supply growth is expected to slow the recent trend of strong RevPAR appreciation in the market.

Over 20 hotel transactions occurred in Kansas City between January 2014 and May 2016, including three assets that each sold for over $190,000 per room: the Embassy Suites Kansas City Plaza, the Embassy Suites Overland Park, and the Marriott Kansas City Country Club Plaza. Overall recorded sales during that period averaged just under $100,000 per room. While values have experienced strong appreciation in recent years, further growth is expected to be held in check for the near term, as interest rates and capitalization rates have begun to rise.

* 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:

Kansas City United States
Previous Year +1% (33 of 71) +1% (49 of 71)
Growth in 2017 +1% (52 of 71) +2% (36 of 71)
Growth in next 3 years +5% (60 of 71) +10% (36 of 71)

Change In Value For Market:

Kansas City RevPar % Change

For more information, please contact:

Sara Olson, MAI
solson@hvs.com
  • +1 402 690-0407 (w)
Daniel McCoy, MAI
DMcCoy@hvs.com
  • +1 970 215-0620 (w)