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The St. Louis hotel market remained dynamic, yet relatively stable, in 2018. The area benefits from a diverse economy that provides a solid foundation for steady economic growth, anchored by strong healthcare, education, and government sectors, as well as growing financial services, life-science, and manufacturing industries. Several major developments, the continued expansion of area businesses, and a burgeoning tech start-up industry are positively affecting the greater St. Louis economy and hotel demand.
Demand continued to grow in 2018, on par with the pace from the prior year, but somewhat slower than 2014 through 2016. Looking forward, commercial hotel demand in St. Louis should be positively affected by the construction of the new, $1.75-billion western headquarters of the National Geospatial Intelligence Agency, which is scheduled to begin in 2019 and extend through 2025, as well as the continued growth of the Cortex Innovation Community, a regional hub of bioscience and technology research. Other major regional developments and expansions include Pfizer's new, $236-million research and development campus, projected for completion in 2019, and Centene Corporation's ongoing $770-million expansion of its Clayton headquarters campus. Hotel demand from activities at The America’s Center Convention Complex declined in 2018 from the all-time high in 2017; however, officials with the St. Louis Convention & Visitor’s Commission anticipate a stronger event calendar for 2019 through 2022, and a planned renovation and expansion of the convention complex received funding approval in early 2019. Additionally, funding for an expansion of the convention complex was approved in early 2019, which could bolster convention demand as early as 2023. Special events in 2020, including the NHL All-Star Game and U.S. Olympic gymnastics trials, should provide a temporary influx of demand. Furthermore, investments in new leisure demand generators are supporting leisure demand growth, including the $380-million renovation of the Gateway Arch and the surrounding grounds, which was completed in 2018. Additionally, the St. Louis Aquarium at Union Station is slated to open in 2019.
Over the last several years, the growth in the supply of hotel rooms has been modest; however, hotel supply growth accelerated in 2016 and 2017. Although supply growth remained steady at around 1.5% in 2018, the number of rooms in the market reached a new high, and demand growth did not keep pace. This resulted in a modest occupancy correction for the second year in a row and caused average rate (ADR) growth to slow below the rate of inflation. We are currently tracking numerous projects that are under construction and proposed. As such, the rate of supply growth is anticipated to double in 2019 and remain elevated in 2020. As a result, occupancy levels are expected to continue a trend of modest decreases, and ADR growth is forecast to remain minimal. It remains to be seen how decreases in occupancy, a dip in market RevPAR, and rising construction costs will affect the development pipeline in 2021 and beyond. We anticipate that these factors will result in a slowdown in supply growth and a subsequent rebound in hotel performance metrics, assuming national economic conditions remain stable.
Transaction activity in the St. Louis region accelerated in 2018 compared to the years prior, with the number of hotel sales nearly doubling from 2017. Despite the increase in the number of transactions, the overall dollar amount remained relatively stable in comparison to 2017, when two record-setting transactions representing a combined $150 million occurred. The majority of the 2018 transactions were limited-service assets, including the top price-per-key for the year, achieved by the Hampton Inn Clayton. This sale, which was part of a portfolio, marked the first local limited-service hotel to transact above $200,000 per room. Overall, investment conditions remained relatively stable in 2018, although there was increased interest and activity from national investors and developers not based in the local market.
* 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