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 international profile of Nashville as a premier tourism destination.

Following the effects of the Great Recession, occupancy levels began to recover in 2010, fueled by clean-up and recovery efforts following the Nashville flood in May of that year, and average rate (ADR) increased in 2011, largely due to rebounding demand levels that provided hotel operators the pricing power to begin to limit discounts. Lodging fundamentals continued to improve through 2016, with RevPAR increasing by nation-leading, double-digit percentage growth from 2013 through 2015. This period of strength led to a rapidly growing new supply pipeline, which prompted a modest decline in occupancy in 2017, the city's first in eight years. However, ADR growth remained strong, climbing to a new peak in 2017, amid the entrance of a highly concentrated mix of upper-upscale and luxury hotels.

Over 115 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 224-room Noelle, 255-room Cambria Hotel & Suites, 191-room Holston House, 81-room Fairlane, and 144-room Bobby, 14 new hotels (over 3,300 guestrooms) are currently under construction in Downtown Nashville, including a 533-room JW Marriott, 470-room tri-branded Marriott hotel, and 591-room Hyatt Regency. While new supply is expected to significantly weigh on operating performance in the near term, this market should prove resilient over the long term given the number of company expansions and relocations to area. Most notably, in early 2018, Philips announced it was creating 815 new jobs, while AllianceBernstein also confirmed it was relocating another 1,000 jobs to Downtown Nashville. 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. While overall demand growth is expected to continue, the outlook would best be described as positive yet cautious because of the blistering pace of supply growth on the horizon.

Transaction activity slowed in the greater Nashville area in 2017 and in early 2018 given the entrance of a significant amount of new supply. However, we note the sale of the Homewood Suites by Hilton Nashville Downtown in February 2018 did set a new per-room peak at nearly $430,000, eclipsing the previous record set by the Union Station Hotel, an Autograph Collection affiliate, in 2014. 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. Nevertheless, with anticipated RevPAR declines through the near term, Nashville hotel values are forecast to decline modestly over the next three years.

* 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:

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
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 $105.87
2018 $104.60
2019 (f) $105.59
2020 (f) $107.67

For more information, please contact:

J. Carter Allen, MAI
[email protected]
  • +1 713 252-5995 (w)
Jai Patel
[email protected]
  • +1 615 473-2447 (w)