United States -  Kansas City

After several years of strong and steady RevPAR growth, the Kansas City market experienced a sharp correction in 2018. After a banner year in 2017, during which occupancy and ADR reached new peaks, declining demand and increasing supply resulted in a negative trajectory for the market in 2018. While the market will continue to face supply headwinds in 2019 and 2020, the metro area’s diversified economy continues to strengthen and should support demand improvement going forward.

Kansas City’s diversified economy, with strong cornerstones in the manufacturing industry and the logistics, healthcare, and government sectors, is amid steady expansion. Despite this, demand dropped in 2018 to a level below what was achieved in 2015 through 2017, due in part to a lack of major events such as those that benefitted the market in 2017, including the solar eclipse, U.S. Figure Skating Championships, and multiple major NCAA events. Additionally, the local Harley-Davidson plant began shutting down operations in 2018 for a planned closure in 2019. Despite the negative trend in 2018, the strength and diversity of the economic base should provide a solid basis for continuing demand growth in coming years. The 2020 addition of a new, 800-room convention center hotel is expected to induce new meeting and group business in the market, attracting larger conventions and meetings that Kansas City has historically been unable to accommodate. Additionally, one of the market's major employers, Cerner, is amid developing its new, $4.5-billion headquarters campus. The project, which is slated for completion in 2025, is the largest economic development project in history for the state of Missouri. Lastly, construction on the $1.5-billion renovation and modernization of the Kansas City International Airport will begin in 2019.

The record occupancy levels and strong ADR growth patterns from 2015 through 2017 resulted in significant new hotel development in the market, particularly in the Central Business District (CBD) and Crossroads neighborhoods, as well as Johnson County, Kansas. The pace of hotel supply growth jumped to over 2.5% in 2018 and will be a bit stronger in 2019, before reaching over 5.0% in 2020 when the new Loews Hotel at the convention center opens. After a year in which occupancy declined over three points and ADR dipped slightly, the supply growth in 2019 is expected to cause a further decline in RevPAR. Nevertheless, Visit KC reported a strong sales year in 2018, with a positive trend in future convention bookings coinciding with the upgraded hotel inventory and anticipation of a new headquarters hotel. As such, we remain optimistic that the induced convention demand in 2020 and beyond will help offset and absorb the substantial increase in available room nights.

The transaction market remained relatively healthy in 2018. An increase in the number of local transactions was supported by the portfolio sale of nine extended-stay hotels in the area. However, even without that portfolio, the overall dollar volume of transactions increased approximately 18%. The most significant trade in 2018 was the 347-room Hilton Kansas City Airport that sold in December at a price of nearly $40,000,000. This represented the successful exit of a Los Angeles-based private equity owner that had purchased the property in 2012 for less than half that amount when the hotel was in need of renovation.

* 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%

For more information, please contact:

Daniel McCoy, MAI
[email protected]
  • +1 970 215-0620 (w)
Sara Olson, MAI
[email protected]
  • +1 402 690-0407 (w)