Occupancy Alone Not a Predictor of Markets' Future Hotel Development – CoStar

Factors Include Growth of Employment, Population and Commercial Real Estate

High hotel occupancy in a market is not necessarily an indicator of future hotel development.

During the “The Development sweet spot: Plotting hotel performance amid shifts in CRE supply” session at the 2021 Hotel Data Conference, CoStar Director of Hospitality Analytics Emmy Hise said an analysis of occupancy and supply growth in top U.S. markets shows that factors driving hotel development interest go beyond occupancy and demand for hotel rooms.

“There’s clearly more to the story than high occupancy for hotel development,” she said.

An analysis of the top 10 U.S. hotel supply markets from 2015 through 2020 studied factors such as population growth, employment growth, office square footage inventory increases, retail square footage increase, multifamily units and hotels — and how those factors coincided with development booms, which were qualified as adding 6,000 or more hotel rooms to the market.

Each of the top 10 supply markets had a boom in employment as well as population, but not always in that order, Hise said. Multifamily units were the first commercial real estate to be developed, followed by offices. Retail did not factor much into the trend.

“The last thing, and last among almost every single market, was hotels,” she said.

Click here to read complete article at CoStar.