NASHVILLE, Tennessee—Music City USA’s hotel scene is striking all the right notes of late, with improving performance and several high-profile projects on the horizon.
During the first quarter of 2012, Nashville’s hotels posted average occupancy of 61.6% and average revenue per available room of $57.56, both the highest on record for the city, according to data from STR, parent company of HotelNewsNow.com.
And though discounts were steep during the downturn—average daily rate dropped from $95 in December 2008 to $87 in November 2010—rates have since starting creeping back; March year to date, ADR was $93.43.
“It’s Music City USA. It has a very easily identifiable brand … which makes it easier to sell to the leisure traveler and to the group traveler,” said Jan Freitag of Hendersonville, Tennessee-based STR, which is approximately 20 miles north of downtown Nashville.
“It’s an amazing city,” said Tom Santora, chief marketing officer and senior VP of sales for Omni Hotels & Resorts, which is building an 800-room convention hotel in the market.
The market has what Santora called “the big three”: group, leisure and business travelers.
“Most markets have two. Some markets have one. But if you have business, leisure and group demand, you’re going to be successful,” he said.
Steven P. André, GM of the 248-room, luxury Hutton Hotel, saw the effects of that diverse demand base when the property opened during the depths of the downturn in February 2009.
“It was a scary time to open, but we’ve really kind of found our place in the market,” he said. “… It’s certainly been a great place for anyone to be operating a hotel in Nashville.”
The Hutton was seeing occupancy in the mid-70% range, which is where André expects the hotel to finish 2012.
On the other side of town, the Gaylord Opryland Resort & Convention Center has experienced similarly strong performance after reopening in November 2010 following a May 2010 flood that closed the property and damaged much of the surrounding area.
Gaylord executives saw the flood as an opportunity to renovate several dated areas of the 2,881-room hotel, including the 600-room Magnolia section and the main lobby, according to GM Peter Weien.
2011 was a record year for the Gaylord Opryland in terms of profitability, he said.
Investors jump on board
Several hotel investors have taken notice of Nashville’s strong performance. There are at least six hotels scheduled to open during 2012 and 2013, according to STR’s Freitag. The largest, the Omni Nashville, is an 800-room project adjacent to the as-yet-unfinished Music City Center, a 1.2-million-square-foot convention facility scheduled to open in early 2013.
Nashville had 317 hotels comprising 35,807 rooms as of 30 April, according to STR.
How will so much new construction, along with a massive new convention center, impact performance in the market?
“That’s the $200-billion question,” Freitag said.
“That’s going to really make an impact on the availability of rooms and also on the perception of the market,” he added. “That said, there is always the fear that when there is not a citywide convention that the hotel operators will feel compelled to offer value pricings and deep discounts to maintain a certain level of occupancy.”
The Hutton’s André echoed those concerns.
“It’s going to take the market south on occupancy. It’s obviously supply and demand, so rate will certainly follow,” he said.
However, André recognized the need for a new convention center and applauded the combined efforts of the city, Chamber of Commerce and Convention & Visitors Bureau for helping providing a “productive environment” for the hotel industry in general.
Weien said the Music City Center will create some healthy competition for the Gaylord Opryland that will only increase the national awareness of Nashville.
“It will stimulate interest, awareness, then it’s up to the Music City Center and the Omni and Opryland to showcase what our strengths are, our capabilities, and let the meeting planner make a decision about which meeting facility will best serve their needs,” he said.
The convention center has certainly generated interest at the Omni. The property, which is scheduled to open in late 2013, already has 100,000 roomnights on the books, Santora said.
“We’re off to a great start,” he said.
“I think that all signs are go for Nashville,” Freitag said. “It’s in a very, very good position.”