While some of the top U.S. markets such as San Francisco are poised to shine for hoteliers, others such as Washington, D.C., are going through a rough patch, according to executives.
REPORT FROM THE U.S.—Performance expectations for 2019 vary greatly among the top markets in the United States, according to commentary from real estate investment trust executives during recent earnings calls.
Here’s what some REIT executives had to say about what markets they expect to shine and which ones leave them feeling less than optimistic.
Tom Baltimore Jr., president and CEO, Parks Hotels & Resorts
“With the Moscone Center renovation complete (in San Francisco) and convention room nights up 78% … we expect the city to be among our top performers in 2019, with (revenue-per-available-room) growth forecasted to be in the mid to upper single digits. In Hawaii, we expect our two hotels to collectively generate RevPAR growth above the top end of our 2019 RevPAR guidance. Specifically at our Hilton Waikoloa Village Hotel, group pace is up nearly 80% with the hotel benefiting from two separate group buyouts while facing easier year-over-year comps following disruption related to last year's volcanic activity, which negatively impacted income by approximately $5 million in 2018. At the Hilton Hawaiian Village, results are expected to be driven in part by a forecasted increase in group pace of roughly 8%, coupled with favorable booking trends in Asian wholesale business, a reversal of the trend we experienced last year.
“A testament to the team's efforts to proactively group up business in an otherwise soft citywide year is best illustrated by both Chicago and New York, two markets which are expected to witness a 30% plus drop in citywide roomnights in 2019. Despite these challenges, our group pace in Chicago was up nearly 8%, while in New York we are expecting group pace to be up north of 6% with the hotel also expected to benefit from solid increases in transient demand led by contract and business transient.”
Michael Bluhm, CFO, Host Hotels & Resorts
“The Orlando World Center Marriott had difficult comparisons to last year because the hotel benefited from the post Hurricane Irma business last year and some of its competitors had rooms out of service for renovations during the fourth quarter of 2017.
“Washington, D.C., experienced a RevPAR decline of 3.3% in the fourth quarter, as attendance from citywides were lower than anticipated, hindering our ability to drive higher-rated transient business and requiring the hotels to take more discounted business.
“Moving to 2019, we expect markets such as the Florida Gulf Coast, Atlanta, Hawaii and Miami to outperform the portfolio from below average supply growth and continued strength in corporate and leisure demand and strong citywides. Conversely, we expect Seattle, Boston and (Washington) D.C. to underperform the portfolio due to above average supply or weak citywide calendars.”
Jon Bortz, chairman and CEO, Pebblebrook Hotel Trust
“In general, the convention markets get better. We see Portland better; we see San Diego better in 2020; we see Chicago better; we see Boston better; we see D.C. much better. We think Seattle will be slightly weaker. (San Francisco) will be a little bit weaker, but still very strong obviously from a historical perspective. And Atlanta won't have the Super Bowl, which will move to Miami, which will help that market. So that's kind of the way we see, at least for our major markets 2020, in terms of convention impact.”
“So, there have been no changes in expectations in San Francisco. We still expect the market to be up 8% to 9%. We expect our portfolio to be up 9% to 11%. Some of that is the tailwinds from the renovations. Some of that is ramp-up in the portfolio from prior renovations in prior years. And some of that ultimately is probably going to come from the synergies that we talked about in that individual market.”
Jeremy Welter, COO, Ashford Hospitality Trust
“I want to address the impacts felt from the government shutdown. While we did not see much impact during the fourth quarter, the government shutdown has certainly played a more prominent role during the first quarter of 2019. We own nine hotels in the Washington D.C., Maryland, Virginia area. And the Washington, D.C., area ranks first in terms of the number of room and hotel (earnings before interest, taxes, depreciation and amortization) in our portfolio. Currently, the estimated impact of the government shutdown is north of $1 million as comparable RevPAR for our Washington, D.C., area hotels during January decreased by 12.3%. Though negligibly affected by the government shutdown, our fourth-quarter RevPAR was affected by the midterm elections and renovations at our two largest D.C. hotels, Marriott Gateway and Embassy Suites Crystal City. Excluding D.C., our entire portfolio’s comparable RevPAR would have been positive for the quarter.”
Leslie Hale, president and CEO, RLJ Lodging Trust
“Our hotels in the New York market achieved solid RevPAR growth of 3.2% in the fourth quarter and benefited from the favorable timing of the Jewish holidays and the continuation of strong leisure and corporate trends. Looking ahead, we expect the strength in leisure and corporate demand to continue in 2019. In Louisville, we face a very difficult comp during the fourth quarter with RevPAR up 11.4% last year. This combined with the renovation at our largest hotel, the Marriott Louisville, led to an 18.5% decline in our RevPAR. We are confident that our newly renovated hotel will outperform in 2019 due to a strong group pace and a continued ramp up of the recently renovated convention center which is connected to our hotel.
“Our D.C. market experienced a RevPAR decline of 3.5% during the quarter, due to a decrease in citywide roomnights, weak congressional calendar and lower per diem rate. In 2019, we expect the similar backdrop, and as a result, we expect DC to be one of our softer markets.
“Lastly, among our top markets, (Denver) RevPAR growth was constrained due to a combination of soft citywides, new supply and some non-repeat business, while Houston, South Florida and Austin were impacted by tough hurricane comps. As a result, our RevPAR decline in these markets was consistent with our expectations in the fourth quarter. For 2019, we expect the continued strength in leisure demand to be a positive driver in South Florida, while new supply will constrain growth in Houston, Austin and Denver.”