United States -  Nashville

Nashville benefits from a vibrant economy driven by the rapidly expanding tourism industry and strong healthcare sector. Market demand levels have improved steadily and significantly during the last ten years, attributed to a variety of factors, including the opening of the $623-million Music City Center, in addition to several new downtown attractions, such as the Johnny Cash Museum and Ascend Amphitheater; a multitude of corporate expansions and relocations in the area, including Nissan North America, UBS, and HCA's Parallon Business Solutions and Sarah Cannon Research Institute; the addition of new special events, such as the SEC Men's Basketball Tournament; and the increasing national profile of Nashville as a premier tourism destination.

Lodging fundamentals improved significantly from 2011 through 2016, with RevPAR increasing by nation-leading, double-digit percentage growth from 2013 through 2015, driven by a relatively low amount of new supply and the 2013 opening of the Music City Center, allowing hoteliers to raise rates aggressively while also improving occupancy. However, as significant new supply opens citywide, hotel operators are anticipating a flat to slightly reduced occupancy trend in 2017, coupled with above-inflationary ADR growth. Furthermore, as more new supply opens, occupancy losses are expected to intensify in 2018 and 2019. Given the high-quality nature of the new supply, average rates are anticipated to remain generally stable during this period, thus moderating RevPAR declines.

Over 100 new hotels are proposed for the MSA, representing a roughly 40% to 50% increase in guestroom inventory. In addition to the recent openings of the 453-room Westin, 224-room Thompson Nashville, and 124-room 21c Museum Hotel, fifteen new hotels, representing 2,743 guestrooms, are currently under construction in Downtown Nashville, including a 532-room JW Marriott, 470-room tri-branded Marriott hotel, and a 255-room Cambria Suites. While new supply is expected to moderate operating performance in the near term, this market should prove resilient over the long term given the number of planned mixed-use and commercial developments across the city. Furthermore, following the entrance of several new, large, convention-center-focused hotels, the Music City Center should be able to accommodate much larger groups, thus bolstering meeting and group demand growth and mitigating further occupancy losses. Nevertheless, with anticipated RevPAR declines and a modest increase in capitalization rates in 2018 and 2019, Nashville hotel values are forecast to decline slightly over the next three years.

The popularity of the city is evident in its strong transaction environment, which continues to heat up. While sales in the two years have failed to eclipse the per-room peak of over $420,000 set by the Marriott Autograph Collection Union Station in 2014, several high-profile assets have recently traded for well over $300,000 per room, including the Hilton Garden Inn Nashville Downtown Convention Center, Courtyard by Marriott Downtown, Courtyard by Marriott Vanderbilt West End, and Hampton by Hilton Downtown. While investor interest continues to be strong, some market participants are waiting to witness how the market absorbs the significant amount of new supply in its pipeline. Nashville continues to be viewed as one of the nation's top tourist destinations and fastest growing cities, ensuring that hotel investors will continue to pursue assets in this market for their portfolio. While overall demand growth is expected to continue, albeit at a more modest pace, the outlook would best be described as positive yet cautious because of the blistering pace of supply growth on the horizon.

* 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%

Nashville RevPAR Change

Nashville RevPAR

Year RevPAR
2006 $55.83
2007 $59.12
2008 $57.53
2009 $49.29
2010 $50.45
2011 $57.87
2012 $63.09
2013 $70.73
2014 $84.16
2015 $93.06
2016 $100.52
2017 (f) $102.97
2018 (f) $96.72
2019 (f) $94.78

For more information, please contact:

J. Carter Allen, MAI
callen@hvs.com
  • +1 713 252-5995 (w)
Jai Patel
jpatel@hvs.com
  • +1 615 473-2447 (w)