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Atlanta Hotels Projected To Be Even More Profitable In 2017, 2018

Atlanta Hotels Projected To Be Even More Profitable In 2017, 2018
Room at The Ritz-Carlton Atlanta hotel

Atlanta's hotel market should let the good times roll in 2017. And maybe even 2018.

“There's momentum behind Atlanta, and that's only continuing to rise,” Hunter Hotel Advisors President Teague Hunter said.

A recent CBRE Hotel Horizons report predicts Atlanta hotel RevPAR, or revenue per available room, will increase by 4.4% during 2017, mainly on the shoulders of a 4% average daily room rate gain. Much of that will be seen in the lower-priced hotel segment.

While 2018 is expected to see a similar RevPAR increase in Atlanta, CBRE officials predict that, next year, the upper-priced hotel segment will benefit, with a 4.5% increase.

Hunter Hotel Advisors
Teague Hunter, president, Hunter Hotel Advisors

Various hoteliers, during calls with stock analysts over the past month, expressed optimism over their Atlanta properties that reflects CBRE's findings:

  • “The Georgian Terrace in Atlanta had a great quarter, with RevPAR increasing 13.3% compared to the market's increase of 4.6%, resulting in an 840 basis point capture of fair share from the competitive set,” Sotherly Hotels President David Folsom said on May 12.
  • “Owned, leased and other revenue net of expenses was $16M better than we expected in the first quarter, largely due to forecast beats at hotels in Atlanta, Barcelona, London, Toronto and Tokyo,” Marriott International Chief Financial Officer Kathleen Kelly Oberg said on May 9.
  • RLJ Lodging Trust CEO Ross Bierkan told analysts on May 9 that RevPAR growth at its Atlanta portfolio was 12.5%, second only to the Salt Lake City portfolio's RevPAR growth of 24.5% for the quarter.
  • Condor Hospitality Trust CEO William Blackham told analysts on May 15 that its 254-room Aloft Hotel off Spring Street in Downtown Atlanta — which it purchased last August in a joint venture with Three Wall Capital for $43.5M — posted RevPAR growth of 11.7%.

Success breeds development.

According to a recent Marcus & Millichap report, 2,500 new hotel rooms opened in Georgia last year, with an additional 5,200 new rooms under construction at the start of 2017. That includes 1,900 select-service rooms in Metro Atlanta.

Even the luxury hotel side is beefing up, with Solis under construction next to Porsche North America's headquarters south of the city, and plans in the works for a new InterContinental Hotel being developed attached to the domestic terminal at Hartsfield-Jackson Atlanta International Airport.

Atlanta Hotels Projected To Be Even More Profitable In 2017, 2018
The Ritz-Carlton Downtown Atlanta

Ashford Hospitality Trust has earmarked $21M for a major room renovation of The Ritz-Carlton in downtown, according to information filed with the Securities and Exchange commission. The renovation of the 444-room property off Peachtree Street, expanding its Ritz-Carlton Club Lounge and the gift shop into an “upscale retail market,” is expected to start in the fourth quarter, according to SEC filings.

It is part of a plan by Ashford Hospitality to spend $200M in capital expenditures for guest room renovations on several hotels, like the Hilton Boston Back Bay, Marriott Crystal Gateway in Arlington, Virginia, and Renaissance Palm Springs.

That supply will have an impact going forward on Atlanta's hotel market, Hunter said.

While many of the pundits predict RevPAR and occupancy to be stable for Atlanta in the next couple of years, Hunter said he is less optimistic.

“[New supply] has to have an impact," he said. "I think in general we can absorb it, but I think what will happen is the properties on the fringe will be impacted the most.”