United States -  Charleston

The Charleston hotel market continued to strengthen in 2016, reaching a historically high market-wide occupancy level of roughly 75%, with average rate climbing slightly above $135. Charleston benefits from strong diversification efforts. The city, which is home to JointBase Charleston, the Medical University of South Carolina, and Boeing, enjoys robust military, educational, healthcare, and retail sectors, as well as strengthening manufacturing, energy, and technology industries. An affordable cost of living, relatively low unemployment figures, and a diverse economy remain attractive to business professionals and families. As new businesses enter the market, demand continues to spread out to the various submarkets, specifically Mount Pleasant and Summerville. One of the biggest new demand generators for the market is Volvo; Volvo is currently building a $500-million facility in Berkeley County that will produce up to 100,000 cars per year and could create up to 4,000 jobs. The presence of the military, multiple colleges and universities, and the continued expansions at Boeing should continue to spur growth for the Charleston area.

Charleston is a popular tourist destination; Condé Nast Traveler magazine readers have ranked Charleston the top tourist town in the United States for the past five years, and in 2012 and 2016, the readers voted Charleston the top tourist destination in the world. As Charleston continues to gain prestigious accolades as a popular tourist destination, leisure demand has continued to increase; in addition, this has also influenced group demand, with Charleston being a top destination for weddings and a growing destination for reward travel by companies. Furthermore, in 2009, Boeing entered the market, allowing for a quick recovery following the Great Recession. Boeing continues to expand, and a considerable number of supporting businesses have entered the market since 2009. New airlines entering the market and increasing passenger traffic has also continued to support demand in the area. As the Volvo facility is constructed and production begins, we anticipate demand to increase in the Summerville and North Charleston submarkets. Additionally, the government per-diem rate is strong in the market, thus positively affecting average rates in the area. While, new supply is expected to outpace demand in 2018, we anticipate the supply to be absorbed quickly and occupancy to flatten.

Supply growth has remained moderate in recent years, adding guestroom inventory to each of the submarkets. While a 50-room ban was placed on new hotel growth on the peninsula in 2015, several projects had been preapproved, including the 179-room Hotel Bennett, which is expected to open in the fall of 2017. The addition of this luxury hotel and several other openings of luxury and upscale properties over the last two years, including The Dewberry, The Spectator Hotel, and The Grand Bohemian, have all had an impact on average rate in the market. With the high barriers to entry, new hotels must command a high average rate in order to be feasible. While Charleston is not a top-25 market, it is one in which many large REITs and development companies hope to own and/or manage a trophy asset. In addition to the growth in Downtown Charleston, new supply has been strong in Mount Pleasant, North Charleston, and Summerville. We anticipate occupancy to continue to increase in 2017; however, following the opening of a significant amount of new supply, to begin in late 2017, we anticipate a slight decline in occupancy in 2018, followed by stability in 2019.

The pace of transactions in the Charleston market remained modest in 2016 and during the first quarter of 2017, with some activity among the nationally branded, limited- and select-service assets. The December 2015 sale of the DoubleTree by Hilton Hotel & Suites - Historic District at roughly $600,000 per room, represented the highest sale price per key in Charleston's history. While we expect future sales to command higher transaction prices, we do not anticipate high turnover in the market, as most owners prefer to hold onto their assets in this market.

* 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%

Charleston RevPAR Change

Charleston RevPAR

Year RevPAR
2006 $70.07
2007 $76.56
2008 $72.13
2009 $62.52
2010 $67.93
2011 $72.98
2012 $77.42
2013 $83.78
2014 $92.97
2015 $97.27
2016 $102.07
2017 (f) $107.22
2018 (f) $110.95
2019 (f) $114.28

For more information, please contact:

Heidi Nielsen
hnielsen@hvs.com
  • +1 843 847-1986 (w)