DENVER—Buoyed by a percolating entrepreneurial economy and a bounty of natural assets, Denver’s hotel market is on the fast track to recovery.
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Orly Ripmaster
STR Analytics
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The city’s hotel industry posted positive year-over-year occupancy gains every month during 2010, averaging to a 9.4% increase to 62.9% through July 2010, according to data from STR. Revenue per available room has been less consistent, albeit generally positive; after a 4.6% decrease during January and another stutter during April, the market experienced jumps of 18.8%, 19.1% and 15.6% during May, June and July, respectively. Through July 2010, RevPAR growth has averaged 8.3% to US$58.80.
“Denver is the second fastest recovering RevPAR city (since April 2010 based on a trailing 12-month analysis),” said Orly Ripmaster of Boulder, Colorado-based STR Analytics. “In the short term, it’s doing very well.”
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| A guestroom in the Hotel Teatro |
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That’s certainly the case at the Hotel Teatro, a 110-room luxury boutique property in downtown Denver that caters to mostly business travelers.
“We’re seeing the return in business travel and some growth in our transient travelers especially from the mountain regions,” general manager David Craig said. “The trend that I’m seeing is appearing to be consistent with what other hotels in Denver are seeing.”
Nearly eight miles west along I-40, the Candlewood Suites Denver-Golden-Lakewood is a case in point. The all-suites property has done very well during 2010, director of sales Lisa Kennedy said, exceeding budget expectations by about 10% thus far and by 6% during the second quarter.
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| Candlewood Suites Denver-Golden-Lakewood |
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“Denver is rebounding,” said Mike Cahill, CEO and founder of HREC, a brokerage and advisory services firm based just outside Denver. “It’s more of a situation where people are looking at recovery, looking at numbers to see if Denver is coming back. Some of the hotels are coming back pretty strong.”
A shorter climb
While the pace of recovery is impressive, the Denver hotel market hasn’t had as far to climb from the depths of the downturn, said Steve Hennis, director at STR Analytics.
“The Denver market hasn’t really seen as much of a downfall as other markets have,” he said. “Certainly it’s gone downhill, but recovery is going pretty well here.”
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Steve Hennis
STR Analytics
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During 2009, for example, leisure tourism saw a 4% increase compared to a national decline of nearly 5%, according to Rachel Benedick, VP of sales and services for Visit Denver. Convention business was down 6% compared to the national average of 22%.
Sources attributed the cushioned blow to the market’s relatively vibrant economy, which is fueled by both entrepreneurial and green start-ups as well as the growing presence of major national corporations.
“There are a huge number of new companies that have relocated or expanded out here,” Hennis said, citing ConocoPhillips’ plans to build a new hub for training and development along the Boulder corridor.
The market also has benefitted from increased airlift at Denver International Airport, as well as the announcement of a new commuter rail system that will connect the airport to downtown.
Market challenges
A shorter climb out of the recession doesn’t necessarily mean it will be an easy one, however. The Denver hotel market still faces obstacles, many of which are out of the hands of owners and operators.
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David Craig
GM
Hotel Teatro
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“There are so many other factors that impact the state of the economy. … If housing values are dropping and homes are not turning over, that gets the media latched on to the potential that the economy is not turning around,” the Hotel Teatro’s Craig said.
“We want to see an increase in corporate travel,” he added. “That’s a barometer of economic confidence.”
The market’s convention business also is faced with growing competition from new markets, Benedick said. Whereas meeting planners for city-wide conventions used to rotate between five or six cities, they now can choose between recently built facilities in 10 to 12. “The competition continues to be fierce among cities and convention centers,” she said.
Competition extends beyond the convention sector, however. The city’s downtown will soon be faced with two major hotel openings: the 239-room (and 21-suite) Four Seasons Hotel Denver and a 403-room Embassy Suites.
“People are waiting to see how that supply is absorbed,” Cahill said, citing the Four Seasons in particular because the downtown area already boasts the Ritz-Carlton Denver as a luxury-segment offering. “The real test will be how deep the luxury market is with the Four Seasons.”
Denver hotel market pipeline
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Existing |
In Construction |
Total Pipeline |
| Hotels |
288 |
3 |
23 |
| Rooms |
39,327 |
786 |
3,068 |
Source: STR/TWR/Dodge Construction Pipeline Report
But perhaps most challenging is the ability to push rate.
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Mike Cahill
CEO and founder
HREC
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“Denver has historically been a relatively low room-rated city compared to comparable cities,” HREC’s Cahill said.
Average daily rate growth in the market began the year on a down note with declines from January through April. Despite modest increases in May, June and July, Denver has averaged a 0.9% decline to US$93.56 year-to-July.
There’s hope for the Mile-High city yet, however. In her top-level analysis, Ripmaster found the top 25 markets that have successfully been able to grow rate during the trailing 12 months since April 2010 also have achieved slightly greater than 2% TTM occupancy growth.
“Denver has certainly hit that occupancy threshold,” she said. “For the hotel market in general, rates should start rising.”
“What I’m hoping in this rebound is that Denver will keep it up and be able to push room rates more in line with what I think they should be long term,” Cahill said.
