United States -  St. Louis

Overview:

Several major developments, the continued expansion of area business, and a burgeoning tech start-up industry are positively affecting the greater St. Louis economy and hotel demand. Meanwhile, the supply base of existing hotels has been pared down and revitalized. The combination of these trends has buoyed area hotel values in recent years. Among the numerous area developments, the long-awaited openings of Phase 1 of Ballpark Village and CityArchRiver represent two of the most impactful from a travel and tourism standpoint. The $100-million, 120,000-square-foot first phase of the Ballpark Village dining and entertainment complex has quickly become a popular destination in Downtown St. Louis, and the CityArchRiver initiative is in the process of revitalizing and transforming the riverfront grounds of the Gateway Arch. In addition, economic stalwarts Monsanto and Express Scripts have continued to add to the workforces of their St. Louis-area headquarters, and the development of the latest phase of the Cortex Innovation Community is supporting the area’s growing reputation as a haven for technology entrepreneurs. All of these factors are expected to support hotel demand in the coming years.

Meanwhile, new hotel supply has been subdued in the recent past; furthermore, no major hotel construction projects are under development or even on the drawing board. In fact, hotel supply has decreased overall since 2011, as older, obsolete properties, such as the former 700-room Millennium, exited the market. Supply levels dipped slightly in 2015, but are expected to begin increasing in 2016 with the recent and ongoing development of multiple limited- and select-service hotels in several suburban submarkets; however, supply growth in the urban core is likely to remain in check, with only a handful of relatively small boutique hotels currently on the drawing board. Thus, as demand fundamentals remain positive, the market should continue to realize positive RevPAR growth. From a valuation standpoint, however, the anticipated operational gains are expected to be somewhat offset by anticipated trends in the capital markets. Further value appreciation is expected to be held in check in the near term, as interest rates and capitalization rates have begun to rise.

The pace of local transactions remained somewhat subdued in 2015, a continuation of the trend from recent years, as the majority of property owners in the region have taken a buy/build-and-hold approach. Transaction highlights in 2015 included the sale of the Embassy Suites St. Louis Airport to an institutional owner. The transaction reflected the exit of a private equity group that had renovated and repositioned the property after acquiring it in 2010. Another significant transaction in 2015 was the purchase of the 440-room Crowne Plaza Downtown. New ownership reportedly plans to convert a portion of the property to residences and substantially upgrade the hotel’s remaining facilities.

* 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:

St. Louis United States
Previous Year +0% (55 of 71) +1% (49 of 71)
Growth in 2017 +3% (6 of 71) +2% (36 of 71)
Growth in next 4 years +13% (29 of 71) +12% (32 of 71)

Change In Value For Market:

St. Louis RevPar % Change

For more information, please contact:

Daniel McCoy, MAI
DMcCoy@hvs.com
  • +1 970 215-0620 (w)
Tim Sauer, MAI
tsauer@hvs.com
  • +1 314 922-6734 (w)