Denver, the capital and most populous city of the state of Colorado, is situated in the high plains at the eastern edge of the Rocky Mountains. Denver offers a diverse economy supported by the retail, banking, telecommunications, high-tech, and government sectors, among others. Strengthening economic conditions and development projects throughout the market have been noted over the past few years. Growing industries throughout the market include bioscience, aerospace and defense, and transportation logistics. This diverse economy, combined with an educated work force and high quality of life, as well as corporate relocations and expansions, has resulted in a growing population. The resulting boom has created a robust hotel lodging market in terms of both performance and new development. Prior to 2012, Denver's market-wide occupancy was in the low-to-mid 60s annually; however, the influx of new corporate demand generators and residential population increases have allowed the lodging market to expand. Despite the addition of over 9,200 new hotel rooms, market-wide occupancy levels have averaged in the low-to-mid 70s.
The greater Denver market benefits from a diverse economic base, including more than ten Fortune 500 companies located in the Denver metropolitan area. Two of those are among the largest in the telecommunications industry, making Denver a major center for telecommunications, information technology, and broadcasting. Moreover, financial, banking, and investment institutions are prominent in the greater Denver area; companies such as Western Union, U.S. Bank, and Wells Fargo have a strong presence in the local market. In addition, the healthcare and medical technology industries, as well as the education sector, are well represented in Denver. The Fitzsimons Life Science District, which includes Anschutz Medical Campus, serves as a major regional hub for healthcare and biotechnology, with over 19,000 employees. This complex currently features the University of Colorado Hospital and Children's Hospital Colorado, and it will be the future home of the Veterans Administration Hospital. Furthermore, according to economic development officials, the University of Colorado announced plans to further expand its presence on the medical campus over the next five years, which is anticipated to significantly increase enrollment at the campus. In addition, the Gaylord Rockies opened in December 2018. The completion of the Gaylord, which offers over 1,500 guestrooms, is expected to be a catalyst for additional tourism and development in Aurora and the surrounding Denver International Airport market area. The city also enjoys a well-developed transportation infrastructure, and the recent completion of the RTD Light-Rail Line R should boost economic activity and increase the area’s attractiveness to employers and residents.
From 2012 through 2018, supply in the Denver market increased by over 9,200 rooms in 58 new hotels. Supply growth in the past three years has occurred at levels not seen in the market in at least a decade. From 2016 to 2018 alone, 35 new hotels opened (5,452 new rooms) in the market, including the 1,501-unit Gaylord Rockies. This increase in supply is expected to continue, albeit at a slower pace, with approximately 2,600 rooms coming online in 2019 and 2020. Overall, demand growth has allowed the market to absorb the influx of new supply, typically resulting in RevPAR growth. However, in 2018, RevPAR remained similar to 2017 levels. We anticipate only modest rates of growth in 2019 and 2020, as the market will need time to absorb the recent high levels of new supply. However, the rate of new supply entering the market has begun to decline, which should promote future RevPAR growth.
Transaction activity in Denver increased in 2018, with a total of 40 transactions. The sale of the Halcyon, a hotel in Cherry Creek, occurred in March 2019, at $603,896 per room, while the recent sale of the Ritz-Carlton Downtown Denver represented the top single-asset sale in 2018, at $496,287 per room. While investor interest continues to be strong, some market participants are waiting to witness the anticipated market recovery from high levels of new supply that occurred in 2018 and 2019 before putting their assets on the market. Denver continues to be viewed as one of the nation's emerging and diverse cities, ensuring that hotel investors will continue to pursue assets in this market for their portfolios. While overall growth is slowing, the outlook remains positive for Denver given its diverse economy, company relocations, and numerous developments underway.