WASHINGTON, D.C.—Hotel markets are largely affected by both macro and micro economic factors. However, the Washington, D.C. hotel market is somewhat unique because it includes the nation’s capital, which lends itself to many benefits. Most importantly, this hotel market is more resistant to economic recession than other U.S. metropolitan markets. Its international status contributes significantly to both leisure and group demand. Washington, D.C. is home to the federal government, and the private sector is closely aligned with the business of the federal government, which is an economic anchor to the market. As a result, the hotel market enjoys a consistent base of demand.

Economy

The Washington metropolitan area is the fourth largest in the U.S. with a US$454 billion gross regional product. Its economy ranked fifth globally for gross domestic product per capita in 2008, which led all major U.S. metropolitan markets (World Knowledge Competitive Index).

 
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As the nation’s capital, domestic and international political activities abound. Many of these activities contribute significantly to the economic fabric of the area, thus creating a diversified base of demand generators for hotels. Business, tourism, and conventions thrive.
 
 
The metro area’s economy is anchored by the federal government. It influences the area in a myriad of different ways. One of the more direct and quantifiable means is through procurement. The following graph illustrates the billions of dollars injected into the metropolitan economy.

 
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Federal procurement to the Washington metropolitan area leads the nation. According to recent data, this area received approximately US$20 billion more than California (ranked second).

Currently, however, the U.S. and metro area find themselves within a global recession. According to data from the George Mason University Center for Regional Analysis, the metro’s economy appears resilient. From 1990 to 2008, its GRP compound annual growth rate has been 3.7 percent, but the area’s economy likely saw negative growth in 2009.

In comparison, the region has performed better than the U.S., most notably since 2008. According to the U.S. Bureau of Labor Statistics in its January 2010 preliminary report, 99 of the nation’s largest 100 labor markets in the U.S. lost jobs in 2009. The Washington-Arlington-Alexandria market lost 15,700 jobs, which equates to a -0.5% change, resulting in an unemployment rate of 6.2%. Of the five markets that lost more than 100,000 jobs in 2009, the largest drop was Chicago (182,300), followed by Los Angeles, New York City, Detroit, and Atlanta.

The Metropolitan Washington Council of Governments stated in its Growth Trends to 2030 Newsletter that “Two-thirds of all new jobs [Washington Metropolitan Area] are anticipated in service industries such as engineering, computer and data processing, business services, and medical research” which will require hotel accommodations. Similarly, IHS Global Insight forecasts positive growth. Its economic experts believe that the Washington Metropolitan Area’s GRP will increase by $558 billion between 2009 and 2014, which equates to 4.1 percent CAGR.

Hotel performance

The Washington, D.C. hotel market, as defined by Smith Travel Research, is comprised of 10 tracts totaling 654 hotels and 101,536 total rooms.

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As illustrated in the table above, the greatest concentration of hotel rooms is within the District. Upper-Priced rooms realized an average daily rate of US$176.07 while lower-priced rooms achieved an ADR of US$95.67.

The table below compares the Washington, D.C. hotel market to other major metropolitan areas. It illustrates the benefits of the diverse economy in the Washington, D.C. Metropolitan Area, as recorded by STR. Of the major metropolitan areas examined, the Washington, D.C. hotel market achieved the highest compound annual revenue-per-available-room growth from 2001 to 2009 and was the only lodging market not to record a double-digit RevPAR decline between 2008 and 2009.

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The following graph demonstrates the underlying strength and consistency of the Washington, D.C. hotel market through its reduced RevPAR volatility.