United States -  Portland

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The downward trend in occupancy in 2017 continued in 2018, as new supply outpaced demand growth. Positive demand levels, however, have allowed market-wide occupancy to remain well above 70% since 2014. Sustained positive changes in demand have contributed significantly to average rate (ADR) growth in recent years, including a robust 10% increase in 2015. Other positive factors have also contributed to the resurgence of the local real estate industry, including another massive expansion at Intel’s Ronler Acres campus in Hillsboro slated to start in 2019 and Nike’s continued expansion of its Washington County headquarters. Convention demand has strengthened, with the Oregon Convention Center reporting pre-recession booking levels, and future booking pace is expected to be especially strong given the anticipated opening of the new Hyatt Recency convention headquarters hotel in February 2020. Relocations to the area, corporate expansions, and a growing tourism industry have transformed the local lodging industry, and these factors are expected to continue to support the local economy and hotel demand over the long term.

Portland commercial demand remains strong, and leisure demand continues to increase annually, reaching peak levels during the summer and early fall. The Oregon Convention Center (OCC), a major economic engine for the metro area, supports healthy levels of meeting and group demand. Local officials have worked for years to attract a developer to build a convention headquarters hotel, and the opening of the 600-room Hyatt Regency, scheduled for February 2020, is anticipated to draw thousands of additional delegates and millions of dollars in convention-related spending. Construction of the hotel broke ground in late 2017 and is nearing completion. Convention center officials point to a recent market study that found that the Hyatt Regency would help secure an additional five to ten citywide conventions each year, which is estimated to increase convention-related tourism spending to nearly $600 million on an annual basis. According to discussions with OCC officials, approximately 300,000 group room nights have already been secured from 2020 (after the opening of the Hyatt Regency) through 2027.

In addition to the construction of the aforementioned Hyatt Regency, several new, high-profile hotel projects opened in 2018, including the Canopy Pearl District, Woodlark, The Porter Portland - Curio Collection by Hilton, Radisson Red, and The Hoxton. Projects that opened in 2017 include the Hampton Inn & Suites by Hilton Pearl District, the AC Hotel by Marriott, and the Hi-Lo, an Autograph Collection Hotel. An additional ten hotel projects are in various stages of development in the greater Portland area. The area’s strict urban-growth regulations, high barriers to entry, marginal new supply growth until recently, and strong average rates across all market segments are driving values higher. However, the pace of value growth will be tempered in the near future, with new supply putting downward pressure on value acceleration. Nonetheless, strong economic fundamentals and a growing and ever-popular urban core are keeping the Portland market high on investors’ watch list.

The number of Portland-area hotel transactions have remained relatively low, as the ask-bid gap widens and softening economic conditions suggest caution on the part of investors. Conversely, attractive tax-deferment opportunities driven by new federal tax legislation has brought fresh capital sources to the market. The highest-profile transaction in 2018 was the sale of The Porter Portland, Curio Collection by Hilton hotel to a German pension fund. Only one other transaction over $450,000 per key has occurred since that time. With efficient operations in place, strong NOI levels, and values exceeding their prior peak, owners are becoming increasingly interested in asset disposition/acquisition opportunities; however, the entrance of new supply and tempering industry metrics will likely put short-term downward pressure on values in 2019.

* 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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