How Portland hoteliers are weathering supply growth
How Portland hoteliers are weathering supply growth
11 JULY 2018 7:36 AM

In Portland, Oregon, hotel owners and operators are crafting unique experiences that revolve predominantly around F&B as one way to drive demand, which has lagged behind supply growth in the market.

REPORT FROM THE U.S.—Seeing the effects of new supply in the market, hotel owners and operators in Portland, Oregon, are looking to boost demand by continuing to offer unique experiences.

Hotel performance data from STR, parent company of Hotel News Now, shows hotel occupancy in the Portland market—which includes several surrounding suburbs and Vancouver, Washington—is down 2.9% to 69.4% year to date through May 2018. Average daily rate is up just 0.4% to $126.44 year to date, while revenue per available room is down 2.5% to $87.79 over the same period.

Portland has seen consistent occupancy declines month to month in 2018 and most of 2017, when full-year occupancy decreased 1.4% year over year to 74.4%.

Blake Reiter, director of custom forecasts at STR, confirmed that supply increases, and demand that has failed to keep pace, are to blame.

“There could be some growing pains as the market continues to absorb a significant amount of new supply,” Reiter said. “Only time will tell how things will shake out in Portland, but what we do know is there is still a pretty robust pipeline. And when there’s a robust pipeline, if demand does not grow at least an equal clip to supply growth, there’s going to be a downturn in occupancy until the market absorbs the new supply and demand growth exceeds growth in supply.”

Through June 2018, STR’s hotel pipeline data is tracking 2,507 rooms in construction in Portland, which is 8.5% of the market’s existing supply of 29,328 rooms.

“In the short run, there could be some drops in occupancy as the market absorbs the new supply,” Reiter said. “That said, ADR growth has been positive for the last seven years—albeit slower in recent years—so any drops in occupancy could be to an extent offset by ADR if ADR continues to grow. RevPAR has been growing each year for the last eight years, though the RevPAR growth has slowed considerably: 14% in 2015, 5.7% in 2016, 1% in 2017, and in 2018, May year-to-date RevPAR growth is down 2.5%.”

Delivering unique Portland experiences
One way hoteliers in the market are looking to turn those metrics around is by focusing on Portland’s reputation for its diverse food and beverage scene.

Chris Bebo, corporate director of operations at Provenance Hotels, said guest relations staff at the company’s Portland properties work to give visitors exactly what they’re looking for. Provenance has six independent hotels in Portland with The Woodlark scheduled to open in 2018.

“While domestic travel certainly has increased over time, the biggest increase is in foreign travel coming in to Portland,” said Bebo, who recently was promoted from a role as the company’s Portland-based regional GM.

“We create menu offerings in our restaurants that reflect that changing demographic and create curated experiences here in Portland that help us tell the Portland story specifically to those who have never been to Portland before or who are traveling from outside the country.”

Hotel Lucia even hosts a nightly craft beer hour, taking advantage of an opportunity to create a unique social experience that reflects Portland’s craft beer scene, Bebo said.

“Everyone in Portland has a wine hour, but we started this craft beer hour in conjunction with our rebranding, and we have growlers that we place in our guestrooms that can be filled in a number of different venues throughout town,” he said. “In fact, on the growler itself is a list of places you can go to get it filled, and we will also fill it for you. These are really fundamental reasons why a lot of people have come to Portland. The craft beer scene is huge here, and the food scene is huge here, and both of those are appealing to international travelers as well as domestic travelers certainly.

“You’d be surprised at how smart these people are when they come here and the questions that they ask. They’re prepared, so our teams have to be prepared to be up on the latest and greatest and be able to listen and create personalized experiences based on what our guests are telling us, and I think our teams do a really good job of that.”

Ken Widmaier, COO of Sage Hospitality, emphasized the importance of the local partnerships to provide locally-sourced food options, coffee offerings and curated art collections that have made Sage’s Portland properties stand out. The Denver-based company has four Portland assets, including three Marriott International brands—an AC Hotel, a Courtyard by Marriott and The Nines, which is part of The Luxury Collection—and the independent Hotel Modera.

“The brands that we work with allow us to be flexible with their standards to deliver a true guest experience that fits in Portland,” Widmaier said via e-mail. “Knowing that a standard one-size-fits-all hotel won’t work in a city that’s proud to be weird, we make sure no matter the brand, we’re using creativity to appeal to discerning locals and guests.”

He added Sage’s leisure guests come to Portland looking for “a more experiential stay rather than luxury-level amenities.”

“They want to be around people like them and be able to access the local neighborhood like they live there,” Widmaier said. “Having F&B is a plus but just being nearby to Portland’s wealth of amazing restaurants has benefited our hotels who don’t have something in house. Truly the demand continues to be authentic, local experiences and that happens to be Sage’s sweet spot.”

Two takes on market dynamics
Market-wide performance declines aren’t unique to Portland, added Widmaier, who expressed confidence that Sage’s hotels will endure.

“We are seeing that trend in many markets,” he said. “Portland is a vibrant market, and it won’t take long for demand growth to outpace in the increase in supply.”

He said Sage’s strategy is to focus on the uniqueness of its properties and the market.

“First, we look to expand our group business, and the way we do that is by creating things that are unique,” he said. “We add on experiences and amenities that go above and beyond what guests are expecting to make us stand out. We also continue to focus on customer service and talent. Often it takes new hotels a while to settle in with the guest experience; that’s one thing our hotels in Portland excel on, and we’re not afraid to showcase that.”

A king guestroom at the 192-room AC Hotel Portland Downtown, Sage Hospitality’s third hotel in downtown Portland. (Photo: Marriott International)

Bashar Wali, principal and president of Provenance Hotels, said there is cause for concern for hotel supply increases and demand instability in the market.

“It is a question that keeps me up at night every night, truth be told,” Wali said. “We’re only seeing the beginning of it.”

He noted that downtown Portland lacks a significant demand generator since the corporate offices of Nike and Intel are located outside the city in Beaverton and Hillsboro, respectively. He added there’s still plenty of room for some select-service hotels in the region to capture business travelers, but few are booking downtown at the high-end properties.

“The weekend traveler is nice, but it doesn’t pay the bills,” he said.

Bebo added that supply concerns in the market have had an impact on Provenance’s customer acquisition strategy.

“Market-wise, the real challenge, of course—and it has been for a long time—has been all this supply growth is coming in, and cyclically we’re at a point within the economy where you would expect a downturn or a cooling off,” Bebo said. “When you add that new supply into what we’re expecting to be a normal kind of economic cycle, the next three to five years could be really tough.

“We’ve got to stay even more focused on staying nimble and making quick decisions and being able to identify these changes in the market and then create experiences individually and independently based on the market we’re going after.”

Senior Reporter Bryan Wroten contributed to this report.

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