United States -  Pittsburgh

Overview:

Pittsburgh is the second-largest city in Pennsylvania. Once known as an industrial center, Pittsburgh's economy shifted to education, finance, healthcare, and technology, among several other sectors, after the collapse of the United States steel industry in the 1970s and 1980s. The economy further shifted with the discovery of the Marcellus Shale Formation in 2002. Exploration companies, such as CONSOL Energy, Chevron, EQT, Exxon Mobil, Range Resources, and Royal Dutch Shell, changed the economy of the region with natural gas drilling activity. With abundant natural resources throughout the region, Western Pennsylvania's energy boom is expected to generate approximately $1.5 trillion in federal, state, and local taxes, as well as royalty revenues. However, in 2015, the energy sector in the region experienced a slowdown brought upon by oil and gas price reductions. Pittsburgh is also home to the following six Fortune 500 companies: Allegheny Technologies, H.J. Heinz, PNC Financial Services Group, PPG Industries, United States Steel, and WESCO International. In 2014, Forbes Magazine ranked Pittsburgh in the top 50 cities for best places for business and careers, and in the top 100 cities for education and job growth. In 2015, Money Magazine ranked Pittsburgh as the number one city in which to live in the Northeast.

According to the Pittsburgh Downtown Partnership, an estimated $5.5 billion has been invested into the redevelopment of the downtown area since 2006. Downtown Pittsburgh has transformed tremendously over the last decade, and the expansion of the lodging market is a hot topic, particularly in the boutique sector. Occupancy and average rate in both the Pittsburgh metropolitan area and the CBD have experienced significant growth and record figures in recent years. The market also welcomed a record amount of additional supply, and several new hotels are slated to enter the greater market through 2017. The strength of the local lodging market should easily absorb this new supply as the city benefits from a robust economy. We anticipate RevPAR levels to continue to strengthen in the 4% range during 2016 and 2017, thus supporting further growth in the valuation metrics.

Over 20 hotel transactions occurred in Pittsburgh during the last three years, including eleven assets that each sold for over $150,000 per room. The largest sales transaction on a per-room basis was the Residence Inn by Marriott Pittsburgh North Shore, which sold for nearly $245,000 per room and a total purchase price of just over $44,000,000.

* 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:

Pittsburgh United States
Previous Year +1% (32 of 71) +1% (49 of 71)
Growth in 2017 +2% (26 of 71) +2% (36 of 71)
Growth in next 3 years +12% (18 of 71) +10% (36 of 71)

Change In Value For Market:

Pittsburgh RevPar % Change

For more information, please contact:

Jerod Byrd, MAI
jbyrd@hvs.com
  • +1 901 481-3058 (w)