United States -  Washington DC

Overview:

Washington, D.C. holds a worldwide reputation as a cosmopolitan city rich in museums, monuments, and culture, bustling with political power. As the nation’s hub of political affairs, the city is the center of governmental action and policy in the U.S. From Capitol Hill to Embassy Row, the National Mall, and historic Georgetown, Washington, D.C. also boasts a diverse concentration of national and international organizations and associations. Furthermore, a number of major universities, educational agencies, and museums—including Georgetown University, George Washington University, Howard University, Catholic University, American University, and the Smithsonian Institution—are located within the District of Columbia. This collection of corporate, government, and educational institutions supports an economy that is relatively resilient to major downturns on a national level.

 

The stabilizing presence of the federal government has long buffered the Washington, D.C. region from the extreme impact of economic downturns, and 2009 was no exception. Buoyed by the surge in demand related to the presidential inauguration of Barack Obama in January and the related changeover in administration, the Washington, D.C. market recorded a relatively modest 8.6% decrease in RevPAR in 2009, a year in which the top 25 U.S. markets recorded an aggregate RevPAR decline of 19.0%. However, the market paid the price for this relatively soft landing. After a modest recovery in 2010, occupancy and average rate remained essentially flat through 2013. The extended stagnation was the result of numerous influences, the most significant of which was the government itself, as sequestration and government-mandated cuts in travel spending curtailed demand levels. Improving conditions in the private sector somewhat mitigated the decline related to the government sector, but the net effect was a four-year plateau in market performance. This pattern was finally broken in 2014, as the end of sequestration combined with private-sector strength to support a 5.4% increase in demand, and occupancy surpassed the 69% mark for the first time since 2005. ADR growth remained modest, influenced by the minimal government per-diem increase that was established the prior year.

 

The strong fundamentals that emerged in 2014 that supported the increases across the board were not as pronounced in 2015, yet remained positive; the pace of average rate growth can be expected to accelerate as the per-diem rate continues to catch up with market trends. Offsetting the favorable outlook of growth in the metro area is the significant influx of new supply anticipated for this market. As of early 2016, a total of 23 hotels were under construction in the metro area, including nine in the District of Columbia. The 3,154 rooms in these properties represent a 2.9% increase in supply, and many more projects are in the pipeline. As of June 1, 2016, 14 hotels are still slated to open in 2016, and eleven are expected to open in 2017, not factoring in the rebranding and conversion projects recently completed or underway, which will potentially change hotel market dynamics in some submarkets. The advent of new supply will likely constrain overall market growth. However, the continued growth of the convention segment and an anticipated spike in demand following the 2016 presidential election should mitigate the effect of new supply and support the performance of the city and region.

 

Transaction activity over the past year has reflected a more diverse array of assets than was the case several years ago, particularly in the District itself. As a result, the range of prices per room has widened as well. Nevertheless, quality assets in reputable neighborhoods continue to command strong prices, as evidenced by the March 2015 sale of the Hilton Garden Inn Washington D.C./Georgetown at $447,479 per room and the December 2015 sale of the Ritz-Carlton Georgetown at $581,395 per room.

* 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:

Washington DC United States
Previous Year +1% (34 of 71) +1% (49 of 71)
Growth in 2017 +2% (22 of 71) +2% (36 of 71)
Growth in next 3 years +12% (17 of 71) +10% (36 of 71)

Change In Value For Market:

Washington DC RevPar % Change

For more information, please contact:

Chelsey Leffet
cleffet@hvs.com
  • +1 202 434-8793 (w)
  • +1 302 740-2772 (m)
Anne Lloyd-Jones, CRE
alloyd-jones@hvs.com
  • +1 516 248-8828 (w)