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HVS In-Depth United States Hotel Valuation Index:
Detroit is known as the world's traditional automotive center, home of the invention of the automobile and its mass production (headed by Henry Ford), and also boasts a long history of producing groundbreaking and influential musical talent. These two historical legacies are celebrated by the city's familiar nicknames: Motor City and Motown. Detroit and the surrounding region constitute a manufacturing powerhouse, most notably as home to the Big Three automobile companies: General Motors, Ford Motor Company, and Fiat Chrysler’s American (FCA) headquarters. In 2017 and 2018, major restructuring efforts took place among the Big Three. Most notably, GM began the process of idling five major manufacturing facilities in North America, as it turns its focus to autonomous and electric vehicles. Ford began work on its new, $740-million campus in Downtown Detroit, where it will locate its autonomous and electric vehicle divisions. Furthermore, FCA announced plans in late 2018 to build the first vehicle-manufacturing facility in the City of Detroit since the 1980s. Financial services and healthcare have remained cornerstones of Detroit economy, as well. Metro Detroit ranks among the nation’s top five financial districts, with major financial service employers including KPMG, Fifth Third Bank, Comerica, Deloitte, Ernst & Young, and PricewaterhouseCoopers. In 2018, Chemical Bank announced plans to construct a new headquarters building in Downtown Detroit. Headquartered in Downtown Detroit, Quicken Loans is the largest online retail mortgage lender and the third-largest overall retail lender in the U.S. Additionally, the greater Detroit area is home to more than a dozen major hospitals and healthcare organizations, including the Detroit Medical Center, Henry Ford Health System, St. John Hospital, and John D. Dingell VA Medical Center.
Five years after the City of Detroit filed for bankruptcy, the city has become a symbol of resilience and resurgence. Several factors are contributing to an improved economic outlook and healthy demand levels, including the strengthening of the Big Three automakers and the continued diversification of the local employment landscape. Many business that left the city over a decade ago are flocking to the Downtown and Midtown areas, spurring multimillion-dollar developments. Most notably is Bedrock Real Estate Development Detroit's plans for the development of a 52-story, $1-billion building on the site of the old J.L Hudson department store on Woodward Avenue; this development, which will represent Michigan's tallest building, broke ground in late 2017. Multiple other projects have been completed, including The District Detroit, a 35-acre, $650-million entertainment district anchored by a new multipurpose arena for the Detroit Red Wings and Pistons, which opened in the fall of 2017. In addition, lower unemployment levels and improving vacancy rates for commercial office space are indicators of the positive changes occurring in the market. Value gains for hotels were accordingly robust during the 2010–2018 period. Market-wide average rate (ADR) and occupancy have posted consistent gains since 2010; moreover, a record number of room nights were sold in 2018.
The Detroit metro area and CBD lodging markets have experienced significant and record growth in recent years. The CBD’s demand growth has outpaced the additions to supply, resulting in occupancy levels similar to those experienced in the late 1990s and early 2000s. ADR peaked for the market in 2018. The renovations of existing hotels and the entrance of several additional, smaller boutique properties supported this continued ADR growth, with minimal impact on hotel occupancy levels. Most notably, the Detroit Foundation Hotel, a boutique property built in the former Detroit Fire Department Headquarters, opened in May 2017, and the Siren Hotel opened in the renovated Wurlitzer Building in March 2018. Additionally, the 130-room, boutique Shinola Hotel opened in late 2018; this property is anticipated to lead the market in average rate over the next few years. In the greater Detroit market, approximately 1,500 rooms are under construction, with another 7,000 in the planning phase. The outlook remains positive for Detroit, despite the expected supply growth, because of the strong overall demand levels, which should continue to grow given the amount of development occurring in the market.
Limited sales volume has occurred in Detroit since 2015, with most sales occurring in the surrounding suburbs and representing limited-service lodging facilities. No transactions of noteworthy importance took place in Downtown Detroit in 2016 or 2017. In 2018, two properties sold in Downtown Detroit. The Holiday Inn Express, which sold for $97,000 per room, is expected to be rebranded as a Hotel Indigo by year-end 2019. The Greektown Casino sold for a reported $1,000,000,000. Overall, moderate value gains are expected in 2019, before tapering off somewhat through 2020.
* 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.
The widespread impact of the coronavirus (COVID-19) has had an unprecedented impact on hotels and hotel values worldwide.
Consequently, the latest HVI analysis may no longer reflect the most current measure of lodging industry strength or the
hospitality investment market.
In each of our offices across the globe, we are working tirelessly to analyze the impact of recent events and provide timely
insights to help you navigate these uncharted waters. Because it is unclear how long the pandemic will last or how long related
restrictions will be in place, we are updating our analyses on a weekly basis using the most current data.
Additionally, examination of value trends in prior cycles can provide useful information. Historical patterns, together with
an understanding of the market’s current expectations for the eventual recovery of the industry and its performance, can provide
insights on the likely trajectory of decline and recovery for hotel values.
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ADR, Demand, Occupancy, RevPAR, and Supply Projections:
|Market Demand Change
|Hotel Occupancy Increase/Decrease
|Market Supply Growth