United States -  Seattle

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Known as the Emerald City, Seattle is the hub for the greater Puget Sound region and home to corporate giants like Microsoft, Starbucks, Amazon, Nordstrom, Expedia, and Costco, among others. Much of the growth has been fueled by Amazon's continued expansion, coupled with a strong tourism and convention market, which have contributed to accelerated levels of value growth since 2012. The Seattle lodging market continues to perform extremely well, with market-wide occupancies exceeding 75% and average rates (ADR) continuing to register gains. However, with a significant pipeline of new hotel supply opening recently, including the 2018 opening of the 1,264-room Hyatt Regency convention center hotel, and the convention center facing capacity constraints, a slight moderation in hotel performance is already being realized. Given the strength of the economy and the region's continued expansion, inclusive of the multi-billion-dollar convention center addition, the outlook for the Seattle market remains optimistic.

Although the meeting-and-group demand segment continues to grow, Seattle’s major driver for this segment, the Washington State Convention Center (WSCC), is currently facing capacity constraints. A major expansion of WSCC is underway, which will reportedly more than double the size of the existing space, adding 440,000 square feet of meeting space; completion is scheduled for 2021. According to officials, the convention center is expected to garner strong interest in hosting events; however, until the expansion is complete, the center will not be able to support larger groups due to the size constraints of the facility, particularly during the summer months. Transient demand remains strong, as a growing cruise industry and other attractions remain in high demand. Commercial growth continues to be bolstered by the tech industry with midweek corporate travel from Amazon, Facebook, Google, Expedia, and Microsoft, among others, helping accelerate ADR growth. Hotel operators are anticipating a slight contraction in occupancy, with ADR growth registering just above inflationary levels, as the market absorbs the significant amount of new supply. Following the ramp-up of new supply and the opening of the expanded convention center, occupancy is expected to increase to prior peak levels, and ADR growth is anticipated to resume.

With strong hotel performance rendering the construction of new projects feasible, coupled with the availability of construction financing, numerous projects have emerged in recent years. Roughly 3,000 new rooms have opened in Seattle since 2017, and another 3,500 have been proposed and are currently in various stages of development. The most notable addition to the market was the 2018 opening of the 1,264-room Hyatt Regency convention headquarters hotel. The remaining hotel projects are relatively small or mid-sized, with only one other project containing more than 400 rooms. Although there is a significant pipeline of new supply set to enter the market, the outlook remains positive for Seattle given its diverse, expanding economy and the numerous public and private developments underway.

As with many major markets, transaction activity was relatively meager in Seattle in 2018. However, there were a handful of notable transactions, with purchase prices in excess of $400,000 per room. The sale of the Palladian Hotel and Motif Seattle in 2018, at $432,990 and $454,545 per room, respectively, represented the top single-asset sales in 2018. Seattle continues to be viewed as one of the nation's top gateway cities, ensuring that hotel investors will continue to pursue assets in this market for their portfolios. Despite a substantial increase in supply expected for the Seattle market, the outlook remains positive for the long term, and hotel values are forecast to remain relatively stable in the near term.

* 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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