With tourism in Seattle achieving record high visitation numbers and hotels in the central business district looking at 80 percent occupancy for the fourth consecutive year, hotel developers are scrambling to get new inventory on the market as fast as possible while hotel investors are grabbing up some prime properties.
Seattle will welcome more than 1,700 new hotel rooms this year, according to commercial real estate firm Kidder Mathews’ second quarter hotel real estate market review. Current construction proposals could add 2,000 more rooms over the next four years. So far this year, four hotels opened in or near Seattle and five more are expected to open before year-end.
The four hotels that opened within the first six months of this year in Seattle were the 97-room Palladian boutique property on 2nd Street; the 130-room Staybridge Suites extended-stay property on Aurora Avenue North; the 172-room extended-stay Hyatt House on 5th Avenue North; and the 222-room Hilton Garden Inn on Boren Avenue.
Chris Burdett, a senior vice president for CBRE Hotels in Seattle, said the city’s hotel industry is the most robust it’s been since 2006.
“Through the second quarter of this year, Seattle has experienced unprecedented growth in both average daily rate (ADR) and occupancy,” Burdett said. “Our hospitality services arm, PKF [Consulting USA], shows a 2015 projection of growth in ADR and occupancy of 6.2 percent and 1.3 percent, respectively. Most of the RevPAR (revenue per available room) growth going forward is expected to come through ADR growth, including 7.8 percent in 2016 and 6.2 percent projected for 2017.”
In Seattle’s central business district, upscale hotels are reporting an estimated daily RevPAR of $175 compared to $158 last year, a 10.7 percent difference, according to Kidder Mathews. RevPAR at midscale properties in the district are reporting an estimated $131 for this year, compared to $124 last year, a 4.9 percent jump.
During the first half of 2015, hotel sales included the historic 151-room Roosevelt Hotel, which sold for $37 million, or $245,033 per room and $418 per square foot, as part of a change in the ownership structure of the partnership, according to Kidder Matthews. The downtown hotel was formerly part of Vancouver-based Coast Hotels and is now affiliated with Provenance Hotels of Portland. Also, the 72-room La Quinta Inn & Suites in the Denny Triangle area sold for $16.5 million, or $229,167 per room and $270 per square foot.
In King, Pierce and Snohomish counties, eight other hotel properties sold in the first six months of the year, each for more than $2 million. The downtown Hilton Seattle is currently on the market with expectations that bids will reach $120 million, according to industry trade publication Real Estate Alert’s Web site.
By comparison, Kidder Mathews said there were a total of nine hotel sales in 2011, 15 in 2012, nine in 2013 and 15 in 2014.
The private, nonprofit marketing organization Visit Seattle reported that a recent study by the national research firm Tourism Economics found that overnight visitor volumes in Seattle and King County increased 3.7 percent in 2014 to 19.2 million, an all-time record. Overseas markets led the pack, with Sea-Tac International Airport reporting that international traffic grew 16 percent last year.
Visit Seattle said convention business is booked solid, and more than 300 conventions representing nearly $1.6 billion in future business were turned away in the past five years due to the convention center’s limited size. According to Jeffrey Blosser, president and CEO of the Washington State Convention Center, a proposal for adding a second, larger convention venue one block northeast of the existing structure is in the proposal stage and work is under way to secure the land, develop a design concept and set pre-construction plans. Construction could begin in 2017 with completion set for 2020, Blosser said on the convention center’s Web site.
Besides the new meeting facility, several hotels are also in the mix nearby, said Burdett of commercial real estate firm CBRE. A new Residence Inn is scheduled to open in the first quarter of 2017 a block from the new facility. Also, a 1,285-room adjacent convention hotel at 800 Howell St. is still in the planning phase.
The convention hotel “is a critical development for Seattle” and its ability to attract large national conventions, Burdett said.
“Seattle has the capacity and growth to not only absorb these projects, but a few more as well,” he added. “We need the rooms not only for the growth in group demand, but also for massive growth in both commercial and transient leisure growth.”