United States -  New Orleans

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After six years of RevPAR growth averaging 8% per year, the New Orleans hotel market slowed somewhat in 2016 and 2017; however, the 2018 tercentennial year reflected a recovery in market-wide RevPAR. The over 2.5% increase in new supply reflected more upscale and luxury hotels, allowing an increase in rate; in addition, strong transient and convention demand bolstered occupancy. Although year-end 2018 numbers have yet to be released, it is important to note that the New Orleans CVB and the New Orleans Tourism Marketing Corporation began tracking visitation using data collected by D.K. Shifflet & Associates in 2017. The company is widely used by cities with which New Orleans competes; while the New Orleans Hospitality Industry Task Force planned to attract 13.7 million visitors by 2018, the new calculation showed that New Orleans had far exceeded that goal by attracting 17.74 million visitors in 2017.

The two major drivers of hotel demand in New Orleans—conventions and tourism—continue to grow, although year-end 2018 numbers have yet to be released. The year-long celebration of the 2018 tercentennial was bolstered by a strong convention schedule, and the number of cruise ships disembarking from the Port of New Orleans continues to increase. The opening of the new, 35-gate, billion-dollar terminal at the Louis Armstrong New Orleans International Airport has been delayed to the fall of 2019. In 2020, New Orleans will host the College Football Playoff National Championship, an event that played a large part in the market's double-digit RevPAR growth in 2012. Construction began on the Convention Center Boulevard pedestrian park upgrade in September 2018 and is slated for completion by 2021; this is the first step of a convention center district expansion expected to include a 1,200-room hotel by 2024, the same year the city will host Super Bowl LVIII. The introduction of more upscale hotels and the slowing of the development pipeline are anticipated to support rate growth, particularly in years with major events, going forward.

After years of significant growth, the pace of new supply began to slow in 2018. Only the Hotel Peter & Paul opened, representing the first major development of an upscale lodging property in the Marigny. Rebranding and repositioning continues to be a trend in the New Orleans market; the former Clarion reopened with a new restaurant concept as the Ascend Collection St. Charles Coach House after extensive renovations. After delays in several projects, the new supply pipeline has somewhat slowed; fewer than 20 hotel projects remain in in the pipeline for the Central New Orleans market. The Maison de Luz opened in April 2018; the separate building is a more upscale concept by the developers of the Ace Hotel. Construction continues on the Residence Inn St. Charles Avenue and the Curio Collection by Hilton World War II Museum Hotel, both of which are expected to open by year-end 2019; work is also ongoing at the site of the Four Seasons at the former World Trade Center and the Hard Rock Hotel on Canal Street. The Harrah's hotel expansion was canceled, and no site work has started on the Virgin location; however, construction resumed at the former Oil & Gas Building in early 2019. Growth continues on the Westbank and in the River Parishes, attributed primarily to the airport extension, construction at Ochsner, and new petrochemical developments.

Transaction activity in New Orleans remained relatively stable in 2018. Three economy hotels sold for under $3 million. Of the three, only the Days Inn located off Read Boulevard in New Orleans East retained a national brand; the Midtown Hotel New Orleans in Mid-City continues to operate independently, and the New Orleans Courtyard Hotel is now operated as the French Quarter Suites. Three full-service hotels were sold in 2018; the Embassy Suites and the former Omni Royal Crescent each sold for under $200,000 per key and were in need of renovations at the time of sale. The biggest sale of the year was the New Orleans Downtown Marriott at the Convention Center in December; the $73-million sale (over $222,000 per key) was lower than the previous year's top per-room sale of the Westin. Several hotel sales in recent years have reflected the upside of renovating and repositioning independent or distressed assets; in 2018, the MOXY sale, part of a nine-hotel portfolio, had an allocated price per room of nearly $213,000, a 135% increase over the hotel's sale in 2014 when it was the Quality Inn & Suites (that hotel, which sold for only $90,000 per room, closed for a nearly year-long renovation to rebrand as the second MOXY to open in the United States).

* 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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