By Jon Peterson
The Seattle hotel market is showing off a very strong performance and is attracting new investment players in the region.
There are now a total of 13,200 rooms in the Seattle hotel market, and the region has now reached a milestone from an average occupancy standpoint. “The overall occupancy of the market is now at 80 percent. This is the first time the region has reached this level in two decades,” says Chris Kraus, a manager director with PKF Consulting USA, a CBRE company. He works out of the company’s regional office in San Francisco. He is responsible for coverage of the Seattle market for the company.
The Seattle market had a strong year in 2014 for RevPAR growth and more is expected in 2015. “RevPAR grew in Seattle by 14 percent in 2014, and we are predicting that for this year it will grow by 10 percent to 11 percent this year,” said Kraus.
One of the results in this strong performance of the hotel market is that Seattle is attracting new sources of capital. One of the most recent new buyers of hotels to come into the Seattle market is Bethesda, Md.-based RLJ Lodging Trust.
The public REIT paid $37.9 million or around $223,000 per key to acquire the 170-room Homewood Suites Seattle/Lynwood. This is the company’s first acquisition in Seattle. The pro forma cap rate on the transaction is 8 percent, a return based on the hotel’s projected net operating income for 2016.
This kind of pricing shows off the difference in a market like Seattle and San Francisco. Many of the recent sales in San Francisco have tended to be properties acquired at the range of $500,000 per room and a cap rate rates of 5 percent or less.
The strong market demographics in Seattle are also leading some hotel companies to consider new development. One of these is Stanford Hotels Corporation, which is planning a 151-room project in Seattle as part of a mixed-use project at 1933 Fifth Avenue. The project also has in the works some apartments and a parking facility.
San Francisco-based Stanford Hotels did not respond to several calls seeking comment for this story.