United States -  New Orleans

After six straight years of RevPAR growth averaging 8% per year, the New Orleans hotel market slowed somewhat in 2016, with RevPAR declining 1.2%. Supply growth exceeded demand by a measurable amount for the first time since 2011, as long-gestating projects finally materialized; moreover, weaker-than-usual first-quarter group demand contributed to declining occupancy, prompting operators to rely more heavily on OTAs, thus limiting rate growth. While the New Orleans' reliance on meeting and group demand can cause fluctuations due to scheduling differences, the market's drivers remain vibrant. The city continues to be a top-tier convention destination; bookings are strong, particularly for the 2018 tercentennial year, with 28 groups of 2,500+ peak room nights scheduled. Tourism, which drove much of New Orleans' renaissance over the past decade, also continues to grow. In 2016, the number of visitors to the city reached a peak of 10,450,000, exceeding the previous record set in 2004, and finishing 6.9% higher than the 2015 level.

The two major drivers of hotel demand in New Orleans—conventions and tourism—continue to grow, although the city remains behind pace to reach its goal of 13,500,000 visitors in 2018. Nevertheless, the 2018 tercentennial is the first of a handful of events and developments that bode well for near-term demand; the year-long celebration and a particularly strong convention schedule should draw significant room nights to the market. The early 2019 opening of a new, 35-gate, billion-dollar terminal at the Louis Armstrong New Orleans International Airport should bolster tourism levels and further solidify the city's convention status. In 2020, New Orleans will host the College Football Playoff National Championship, an event that played a large part in the market's double-digit RevPAR growth in 2012. New supply remains a concern for New Orleans, and convention scheduling will always cause fluctuations, but the strength of the city's demand generators should support ADR growth and allow occupancy to stay near current levels.

Although New Orleans has captured investor interest throughout the current cycle, supply growth was particularly significant in 2016. Boutique hotel development in the New Orleans CBD included the 35-room Catahoula Hotel, developed within a historic building; the Ace Hotel, which opened in March; and The Troubadour, a Joie de Vivre Hotel, which opened just before year’s end. The Holiday Inn Express opened on the north side of town in May, and the TownePlace Suites by Marriott opened near the new Fremaux Town Center in December. A TownePlace Suites also opened in Laplace, as petrochemical expansions have been driving extended-stay demand in the River Parishes. A TownePlace Suites also recently opened in Harvey. Construction began on the new airport expansion in 2016, and supply growth is following that development; a WoodSpring Suites and Best Western Plus were built in Kenner, and a Homewood Suites by Hilton opened in Metairie. Despite delays in many projects, the new supply pipeline continues to expand; almost 30 hotel projects have been announced for the Central New Orleans market. Although the Four Seasons development at the former World Trade Center is still stalled, and concrete plans for the convention center have not been finalized, a World War II Museum hotel has been announced, and the second Virgin Hotel in America is planned for New Orleans. Hotels are under construction on the West Bank and River Parishes, up to six properties have been announced near the airport, and developers are interested in building hotels in New Orleans East. The trend of redevelopment has continued in New Orleans, with a MOXY by Marriott and Fairfield Inn & Suites by Marriott opening in older hotels, and The Ponchartrain reopening after over $10 million in renovations; major renovations have helped other hotels like the AC by Marriott, Q&C, and Old No. 77 Hotel & Chandlery reposition themselves for higher future sales prices.

Transaction activity slowed in the greater New Orleans area in 2016. The Avalon Hotel New Orleans sold for $3,120,000, under $20,000 per room; the hotel underwent a property-wide renovation following the sale, and has since been rebranded as a Wingate by Wyndham. The Capri Motel in Mid-City was sold for $3,300,000, over $60,000 per room; the new owners have submitted an application to demolish the building with hopes to build a 200-unit apartment complex in its place. The Chateau Hotel represented a rare French Quarter hotel sale; the 18th century mansion sold for $11,000,000, almost $230,000 per room. Three CBD hotels sold in 2016. The Hotel Modern was sold for $17,500,000, or just under $130,000 per room; the buyers will renovate the property as part of a plan to brand the hotel. The renovated Old No. 77 Hotel & Chandlery was sold for $20,000,000, about $120,000 per room, reflecting an increase of more than 25% from its 2013 sale. Additionally, the Country Inn & Suites by Carlson was sold for $39,000,000, with a sales price about 40% higher than its 2014 sales price. The new owners plan to renovate the hotel, add more rooms in a vacant part of the building, and rebrand the property.

* 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.

Change In Value For Market:

Legend
Significant Value Increase: Greater than +10%
Moderate Value Increase: Between +3% and +10%
Stable Values: Between -3% and +3%
Moderate Value Decline: Between -3% and -10%
Significant Value Decline: Less than -10%

New Orleans RevPAR Change

New Orleans RevPAR

Year RevPAR
2006 73.24
2007 67.33
2008 74.02
2009 65.35
2010 74.97
2011 78.26
2012 89.70
2013 95.53
2014 99.82
2015 103.44
2016 102.00
2017 (f) 107.68
2018 (f) 113.65
2019 (f) 117.65

For more information, please contact:

Adam Lair, MAI
alair@hvs.com
  • +1 415 896-0868 (w)
  • +1 504 231-2651 (m)
Lauren Hock
lhock@hvs.com
  • +1 805 431-0729 (w)
Bunmi Adeboye
badeboye@hvs.com
  • +1 504 250-0891 (w)