United States -  Memphis

Overview:

Memphis continues to serve as a world-class logistics hub, with superior access to rail, river, interstate, and airport cargo infrastructure. These attributes are prompting logistics firms, including Dominion Freight Line, ABF Freight, and Volvo Group, to invest in new distribution centers in the area, and manufacturers, such as Electrolux and Smucker’s, to invest in new production facilities. Memphis’s logistics credentials are enhanced by the presence of the global headquarters for FedEx, and the area is home to major operations for other corporate heavyweights, such as International Paper, Nike, and Hilton Hotels. Meanwhile, tourists continue to flock to Memphis for it rich musical heritage, and in 2014, the owners of Graceland announced plans for a major resort expansion. However, the Memphis-area economy has struggled with stubbornly high unemployment levels in recent years. Furthermore, the hotel market has been negatively affected by significant reductions in passenger traffic at Memphis International Airport since the 2009 merger of Delta Air Lines and Northwest Airlines. In 2013, Memphis officially lost its Delta “hub” status, as passenger traffic was down over 30% from the prior year. While these issues are expected to continue influence the area’s economy, data for 2015 indicate that the market may be turning the corner. Unemployment, which increased in 2013 due to public-sector layoffs, began to decline in 2014 and continued to decline through 2015, bolstered by job growth at Conduit Global's new call center and Old Dominion Freight Line's new distribution center. Moreover, discount carriers Southwest Airlines and Frontier Airlines have increased flight offerings.

Memphis-area hotels capitalized on the strengthening economy in 2014, after realizing a lackluster value increase in 2013. Hotel values continued to grow in 2015, consistent with national trends. Limited sales volume occurred in Memphis in the last two years, with twelve hotel sales recorded at a sales price averaging just over $55,000 per room. The highest-priced sale, on a per-key basis, was the Marriott Memphis East, which sold in 2015 for almost double the next closest sale because of its strong brand affiliation and full-service orientation. The average sales price of the remaining eleven sales was just under $45,000 per room. Given the various factors influencing the Memphis economy, hotel performance expectations vary by submarket, with a cautious outlook for hotels in the airport area balanced by more optimistic expectations for the corporate-heavy East Memphis and Germantown areas, as well as the tourism-oriented Downtown submarket. Although new hotel development projects are beginning to gain momentum, the outlook for supply growth is limited in the near term. As such, the overall Memphis hotel market is anticipated to continue a gradual recovery trend.

* 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:

Memphis United States
Previous Year +1% (31 of 71) +1% (49 of 71)
Growth in 2017 +2% (15 of 71) +2% (36 of 71)
Growth in next 3 years +6% (58 of 71) +10% (36 of 71)

Change In Value For Market:

Memphis RevPar % Change

For more information, please contact:

J. Carter Allen, MAI
callen@hvs.com
  • +1 713 252-5995 (w)
Jai Patel
jpatel@hvs.com
  • +1 615 473-2447 (w)