Washington, D.C. holds a worldwide reputation as a cosmopolitan city rich in museums, monuments, and culture, bustling with political power. As the nation’s hub of political affairs, the city is the center of governmental action and policy in the U.S. From Capitol Hill to Embassy Row, the National Mall, and historic Georgetown; the Washington metropolitan area also boasts a diverse concentration of national and international organizations and associations. A number of major universities, educational agencies, healthcare institutions, and museums are located within the market. The Washington, D.C. area's hotels occupancy and average rate (ADR) levels have risen over the past several years; the collection of corporate, government, and educational institutions continues to support an economy that is relatively resilient to major downturns on a national level.

Tourism continues to be a strong component of demand for area hotels; however, the Washington, D.C. area's major driver of room-night demand remains the federal government. The volume of travel related to government activity, complemented by steady tourism demand, sustained occupancy levels in the mid-60s, even during the market's slowest years. ADR growth among the midscale to upscale hotels is largely tied to the federal per-diem rate, which is set annually. Occupancy and ADR illustrated strong growth trends in 2017, as the convention activity remained healthy and the Presidential Inauguration and Women's March created a significant amount of compression. RevPAR should be expected to correct itself in the 2018 and 2019 years from the inflated performance of 2017 given the lack of these major events, as well as a softer convention calendar.

The new supply within the metropolitan area is expected to contribute to the forecasted trends over the next several years. In 2017, more than 2,200 rooms entered the greater D.C. market area, and this trend is likely to continue. In addition to the new development projects proposed for the market, rebranding and conversion projects are on the rise, which certainly has the potential to change the hotel market dynamics in certain submarkets. While the advent of new supply is likely to constrain overall market growth, much of the new supply and conversion projects within the District fall into the  luxury or upper-upscale hotel class categories that typically operate at higher ADRs, which should help to mitigate rate declines.

Transaction activity over the past year has demonstrated investor confidence in the market. The quality assets in long-standing, reputable neighborhoods continue to command strong prices, as evidenced by the sales in Northwest. Most recently, and after being marketed for some time given the extent of renovations necessary, the Beacon Hotel & Corporate Quarters sold in late February 2018 for $291,457 per key. Within the District, limited available land leads investors and developers looking to renovate, rebrand, or reposition existing hotels within the market. Areas outside of the District, such as Arlington in Virginia, have recorded strong per-key transactions, as well, with the sales of the Westin Crystal City and Marriott Key Bridge. The outlook for hotel investment and underlying values remains positive for the Washington, D.C. metropolitan area.

* 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.

ADR, Demand, Occupancy, RevPAR, and Supply Projections:

Change In Value For Market:

Washington DC RevPAR Change

Washington DC RevPAR

For more information, please contact:

Chelsey Leffet [email protected] +1 202 434-8793 (w) +1 302 740-2772 (m)