It was a rocky end to 2019 for Boston’s hotel sector.
While U.S. hotels have generally performed well this cycle, Boston hotels had the steepest decrease in three key hotel metrics of any top 25 market in Q4, according to STR.
Occupancy rates in the city dropped 6.5% to 70.3%, average daily rates dropped 5.5% to $192.80, and revenue per available room, or RevPAR — the leading performance metric for the hotel industry — declined 11.6% to $135.46.
Boston, San Diego and Detroit all had experienced 2.3% drops in occupancy for all of 2019, the worst performance of the top 25 markets.
While Beantown's hotels are feeling the blues, the tune in most of the country is far more upbeat.
The national ADR ($131.21) and RevPAR ($86.76) were the highest STR has ever recorded. Supply and demand were also at record levels, with 1.9 billion room nights available and about 1.3 billion nights sold. But the 0.9% national RevPAR growth rate in 2019 was the lowest seen this cycle and below the 3.2% long-term historical average for the industry.
Boston ended 2019 with occupancy at nearly 74% for the year, ADR at $199.35 and RevPAR at $147.41. But local hotel industry analysts aren’t ready to sound an alarm bell.
Roughly 2,500 hotel rooms are under construction in Boston and Cambridge and 5,600 rooms are either approved or in the planning process. The oncoming supply is expected to lower the two cities’ combined long-term average occupancy to 78%, according to Pinnacle Advisory Group.
Hoteliers at a Bisnow event in September said that was still an enviable place to be, considering U.S. occupancy was just over 66% in 2019.
As for the poor Q4 showing, Pinnacle Advisory Group Vice President Sebastian Colella said it stemmed from Q4 2018 being such a strong quarter due to World Series home games, three citywide conventions in October and November of that year, and people displaced from their homes due to the Merrimack Valley gas explosion.
“When we factor in the eight new hotels which entered the market in 2019, the declines are not too surprising,” Colella said. “No one should hit the panic button just yet. Despite 2019 ending with declines in both occupancy and rate, the market accommodated more room nights and generated more room revenue than ever before.”
Cities that performed well in 2019 included Phoenix, which had the highest rise in occupancy (1.6%) and RevPAR (4.5%), and Atlanta, which had the biggest increase in ADR (4.2%) stemming from hosting the 2019 Super Bowl.
“Moving forward, we’re not forecasting much of a change from the current fundamentals,” STR President Amanda Hite said in a statement. “Supply growth has remained manageable at the national level, but there is an uneven amount of new inventory in the limited-service sectors as well as certain major markets. That is where we will see the greatest challenges as the industry embarks on another year of low performance growth levels.”
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