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Struggling Sector: These Are The Top Buy, Sell Markets In The Hotel Industry As Of Q3

Of the five sectors within commercial real estate, the hotel market remains the weakest link. The industry suffers from declining RevPAR growth and slowing demand, in spite of major transaction activity this year.

BRIC Phase 1, San Diego

Hotel was the only sector that failed to see positive growth in pricing due to a continued supply-and-demand imbalance and increased competition from online home-sharing sites like Airbnb, according to Ten-X’s Nowcast report for November. The firm uses proprietary technology, Google trends data and investor surveys to determine what's happening with CRE pricing in real time.

“While our research indicates the hotel sector will see modest growth over the next two years, a number of factors continue to erode demand, right as a surplus of supply prepares to hit the market,” Ten-X chief economist Peter Muoio told Bisnow.

Taking the challenges into account, the Ten-X forecast reveals the top five buy and sell markets in the hotel sector below.

Top 5 Buy Markets

Ten-X research shows investors should consider buying into these five markets, each of which is benefiting from strong economies that are driving hotel demand and well-timed supply. 


Las Vegas

Hotel business is projected to thrive within the next few years, particularly due to an expected decline in oncoming supply. The sector had modest growth last year with occupancies jumping by 110 basis points to 73.4%, according to STR. Las Vegas’ otherwise volatile economy is seeing high employment levels and three straight years of healthy growth. 

Jacksonville, FL 

Jacksonville is benefiting from a shift in demographics and a growing economy that had a 4.7% increase in job growth last year. As the market’s business and professional services sectors continue to gain momentum, Ten-X projects the population will continue to grow at an accelerated rate, driving economic expansion. This will have an overall positive impact on Jacksonville’s hotel industry. 

Sacramento, CA

Demand in Sacramento’s hotel market is expected to outpace supply through 2018, a positive for California’s capital considering its occupancy rates are below 70%, according to Ten-X. Still, all is not doom and gloom for the market, as room rates and RevPAR have increased for 13 quarters straight.  

Los Angeles

After a weak Q2, hotel demand in Los Angeles rebounded with room rates jumping 9% from a year ago. Supply has been depressed, driving occupancy rates to 80.9%, and according to Ten-X research these rates should not fall below 78% in 2019 and 2020. 


At first glance, Indianapolis’ hotel market is in some trouble. Demand has been on the decline, evidenced by occupancy rates that fell by 60 bps to 64.7% in Q3. However, Ten-X reports the market is expected to rebound, with RevPAR gaining 6.5% through 2018. 

Top 5 Sell Markets

One thing the top sell markets have in common is the amount of supply coming online in the midst of slowing demand. The economic conditions in these cities vary, but all are being inundated with supply at a time when international travel is down and the hospitality industry overall is weak. 



It’s no surprise that this energy-dependent market is suffering from slumping oil prices. Texas’ largest city has seen a 6.8% drop in energy and manufacturing jobs this year, and hotel demand is experiencing a corresponding dip, with occupancy rates dropping to 64% and RevPAR down a whopping 15.6% from the year before. Increased supply on the horizon will further exacerbate the market’s sluggish demand, Ten-X reports. 

New York City

New York’s economy continues to soar, but that success is not corresponding to its hotel business. A hefty stream of supply coupled with weakening industry fundamentals is hitting the market, with the city’s total room count increasing by 5% last year. Continued competition from the likes of Airbnb is impacting demand in the market, contributing to declining RevPAR year-over-year. Ten-X projects occupancy rates will drop to 83% by 2018 in NYC. 


Pittsburgh’s overall economy is on the decline due to stagnant job growth and a population that has dropped for three consecutive years. This has translated to a dip in the hotel market, which suffers from supply-and-demand imbalance, occupancy rates that have dropped 660 bps year-over-year and RevPAR that is down 11%. 

San Jose 

Despite a growing economy, San Jose’s hotel market is poor. Occupancy rates have declined 100 bps to 75.8% as of Q3, marking the third consecutive quarter of declining demand. Ten-X projects occupancy in San Jose will level off in 2018 before plummeting to lows of 62.7% due to high volatility in the local economy. 

Northern New Jersey 

The hotel market in Northern New Jersey continued its downward trend in Q3, with RevPAR dropping by 2.9% and a huge glut of oncoming supply cutting into demand. Though Ten-X expects supply to slow in 2017, weak demand is expected to worsen, keeping occupancies on a downward spiral. In addition, NYC’s rising supply is projected to exacerbate New Jersey’s lagging demand.