Hotels Hot Thru '17

From Marlborough to the Seaport District, new hotels are under construction or being developed. (Soon there will be more people visiting Boston than living here.) Few are for sale and existing assets saw increases in occupancy, ADR and RevPAR in 2013, with 2014 looking even stronger, according to PKF VP Andrea Foster.

CSM Corp just started permitting for a 153-room hotel in Marlborough. Carpenter & Co is planning a $700M mixed-use project that includes a five-star hotel in Back Bay. At the Seaport, construction started in Q4 on Phase 1 of the Convention Center’s $1B expansion: two mid-priced hotels; while the Massachusetts Convention Center Authority just issued an RFP for a $700M, 1,200-room HQ hotel to service its conventioneers. The nearby Envoy is under construction and slated to open April ‘15. Throughout the region, 49 new hotels with 7,831 rooms are in the pipeline (Boston is single-handedly keeping the decorative soap industry afloat), says Andrea (above). PKF just completed its analysis of the region’s 51,000-room market performance for ’13 and forecast through ‘17.

This development activity isn’t excessive. It reflects interest from investors impressed with Boston’s strong demand for lodging. Carpenter’s Richard Friedman, who’s advancing his plan for One Dalton (above) says there’s amazing amount of capital trying to enter this market. The economy is growing and for the first time in decades, so is Boston’s population. By Q4, expanding and relocating companies occupied a historic amount of office space--54.3M SF--and the city’s vacancy fell to 11.9%, Colliers reports. (Does that mean we can finally get a date?) The Seaport, only 10% of the office supply, last year nabbed about 25% of the leasing activity. In ’13 in the metro hotel market, occupancy hit 73.1% (up 2.1% vs ’12).

Norwich Partners is building the 136-room Envoy; no doubt with rising room rates in mind. Last year, metro ADR rose 3.4% to $164.25; RevPAR was up 5.6% to $120.10. This year, PKF forecast occupancy up 0.9%, ADR advancing a strong 7.1% and RevPAR up 8%. Convention activity usually runs in two-year cycles as event planners/sponsors try to circulate around different regions of the country. In ’14, the MCCA expects 461,000 rooms to be booked, up from 424,000 in ’12.

Next year, PKF forecasts sustained growth. Certainly, some visitors will gravitate to their traditional haunts like the Fairmont Copley Plaza (above). Greater Boston occupancy is likely to hit 74%; ADR $187.38 and RevPAR, $138.65. With ample access to capital, and interest rates for acquisition and development still relatively low, investors and lenders expect to be busy over the next few years, through '17.

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