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Atlanta's Hotels Haven't Fully Recovered, But Developers Are Aggressively Building New Ones

As Atlanta's hoteliers struggle to get back to pre-pandemic levels of performance, developers are building among the most hotel rooms in the city's history.

The thousands of rooms in the pipeline show the confidence industry experts have in the future of the city's hospitality market, which hasn't seen a significant construction boom in over a decade.

Corporate in-migration and population growth are expected to support Atlanta's new hotel supply in the coming years.

“Atlanta has been very much behind the development progress we've seen in other cities. Atlanta's been a late bloomer,” Crown Hospitality Consulting Managing Principal Amanda Chivers said. “Now that we're kind of on the map and we have all this new inventory coming … we have to strengthen our [convention and visitor business] and make sure we're bringing a lot of new events to Atlanta.”

The average daily room rate in Metro Atlanta this past February was $106.52 per night, according to a CoStar report obtained by Bisnow, far below pre-pandemic averages of $139 a night in February 2019 and $113 in February 2020. The region's revenue per available room, the hotel industry's leading performance metric, was $63.45 in February, down from more than $97 three years prior. Occupancy was hovering near 60%, compared to nearly 70% in 2019, according to CoStar.

Yet, that hasn't stopped developers.

In 2019, there were 26 new hotels under construction that added 3,300 new rooms, according to CoStar. This year, developers are underway with 42 new hotel buildings with 6,100 new rooms. The number of new hotel units under construction would increase Metro Atlanta's inventory by 5%, outpacing the national construction average. Another 100 projects are in the planning stages that could add 12,400 new rooms in the future.

Despite the apparent disconnect between current hotels' performance and the oncoming supply flood, industry experts Bisnow spoke to aren't concerned, pointing to Atlanta's robust population growth coupled with new jobs promised by a number of major companies migrating into the state.

"Those numbers don't concern me that much,” said Mary Beth Cutshall, the managing partner with Amara Capital in Atlanta. “Atlanta is definitely better insulated. Being in the Sun Belt and the growth of Atlanta compared to other cities, the attraction for new business, the diversity of commerce, the weather and just the number of people who moved from New York City to Atlanta."

Friedman Capital's Brian Friedman and Peachtree Hotel Group's Greg Friedman speak at Bisnow's hotel summit Oct. 19, 2021.

Peachtree Hotel Group CEO Greg Friedman said his firm remains bullish on Atlanta, despite the new supply. He said his portfolio's average daily room rates are approaching pre-pandemic levels already, helped by the fact that Georgia's government allowed businesses to resume normal operations sooner in the pandemic than many other states in the country.

Plus, the move to hybrid work in corporate America is having a positive effect on hotel stays in Peachtree's portfolio, Friedman said. More people are combining business travel and personal trips to visit friends and family, creating longer stays in Atlanta, a trend he called “bleisure” travel.

“You're going to start to see more of this 'bleisure' travel,” he said.

But Keith Mack, vice president of development with CIM Group, said not all new hotels are in the best position with existing competition. Smaller, boutique hotels will likely perform better than big hotel projects, he said, because they not only cater to business and leisure travelers, but also attract locals who want to take advantage of the amenities, such as restaurants and bars.

Atlanta's largest hotel under construction is the Signia by Hilton Atlanta, a 975-room convention hotel connected to the Georgia World Congress Center that is scheduled to deliver in 2024. Projects like that seem like less of a sure bet as business and convention travel have been slower to rebound than leisure travel. 

“The big convention hotels are going to have a problem a little bit longer,” he said. “If you're a hotelier and you have a 200-key hotel, you're going to be fine more often than not.”

Mark Vaughan, executive vice president of the Atlanta Convention & Visitors Bureau, said convention and citywide shows planned in the coming months are expected to bolster demand for convention hotel rooms.

About 20 major conventions and events with 5,000 or more attendees are planned in Atlanta each year between 2022 and 2024, according to a March large groups report by the ACVB. Another 71 such events are either being planned or are tentatively scheduled in the city between 2025 and 2028. According to ACVB's 2019 annual report, Atlanta hosted 19 major citywide conventions.

Vaughan said conventions are starting to generate more interest now after months of isolation and careful business travel due to the pandemic.

“People want to get out and get face to face. They miss the interaction and the networking. If you're selling a half-million-dollar piece of equipment on a trade show floor, it's tough to do that on a Zoom call,” Vaughan said. “Once we kind of get through the spring break time frame, we look for business travel to move forward in a positive direction.”

Some major citywide events this year include the International Sign Association's conference in May, the International Dairy Deli Bakery Association and the Primerica International Convention in June, Dragon Con in September and numerous sporting events, such as the Chick-fil-A Kickoff Games in September and the SEC Football Championship and the Chick-fil-A Peach Bowl, both of which are December mainstays.

While the Signia hotel is unleashing nearly 1,000 rooms all in one place, Vaughan said Atlanta's convention industry has needed a hotel like it, allowing convention organizers to more easily keep their attendees from having to scatter throughout the city to find hotel rooms.

“The next eight years actually look very good here,” he said.