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Bolstered By Political Rallies, Conventions, D.C.'s Hotel Market Posts Strong 2017

Visitors from across the U.S. stayed in D.C. hotel rooms last year while attending a large number of political demonstrations and conventions, helping D.C.'s hospitality market rank as one of the strongest in the country in 2017. 

The Wharf's dual-flag Canopy by Hilton and Hyatt House hotels
The Wharf's dual-flag Hyatt House and Canopy by Hilton hotels

The average daily rate for D.C.-area hotel rooms grew to $159.63 in 2017, a 4% increase from the prior year, according to hospitality research firm STR. This growth rate was nearly double the national average and tied for fourth among the top 25 U.S. markets, with only Nashville, Orlando and Detroit pushing rates faster. 

With higher rates came more revenue for hotel owners. The D.C. area's RevPAR, which stands for revenue per available room and is one of the key metrics the industry uses to measure a market's health, grew 3.9% in 2017 to $115.06. This ranked among the 10 highest growth rates of the top 25 markets. 

This growth in hotel rates and revenue occurred despite the D.C. market experiencing its highest rate of new hotel supply since the Great Recession. The D.C. metropolitan area added a net of 12 hotel properties and 1,950 rooms in 2017, increasing the total number of room nights by 2%. 

Among those new hotels were three delivering at The Wharf in October; the InterContinental, the Canopy by Hilton and the Hyatt House. The Line D.C. hotel opened in Adams Morgan in December, and the Pod D.C. microhotel opened in May. 

While D.C.'s room supply is growing, that growth is much slower than other markets, such as New York City, which experienced a 4% increase in available rooms in 2017, leading its average daily rate and RevPAR to decline. 

"I think D.C., New York, San Francisco, Dallas, all those types of markets are good markets to be in long term," STR Senior Vice President of Operations Bobby Bowers said. "But D.C. right now, when you compare it to New York in particular, they don't have anywhere near the amount of new room supply flowing into the market, so that helps them." 

DC Metro inauguration hotel demand
DC-area hotel demand for the two nights around the inauguration 2001-2017

The D.C. market's 2017 hotel performance was boosted significantly by the January weekend when the inauguration and the Women's March brought crowds of visitors to the nation's capital. Hotel demand in the Metro area for that weekend outpaced the four previous inauguration weekends

Average daily rates in January 2017 were 37% higher than January 2016, and RevPAR was 51% higher. But beyond inauguration weekend, an overall increase in political demonstrations in President Donald Trump's first year boosted the number of visitors and hotel guests throughout the year, Destination D.C. President Elliott Ferguson said. 

"In terms of the inauguration, it was really the women's march that made the big difference during that weekend," Ferguson said. "The combination of those double events, plus the LGBT march in June 2017 and other marches and protests in the city, really assisted us."

Airbnb, which posted its highest weekend of D.C. demand ever during the inauguration and women's march, also saw broad growth throughout 2017. The home-sharing service reported roughly 428,000 total guests arrivals in D.C. last year, up 49% from 2016. 

The Marriott Marquis next to the Walter E. Washington Convention Center
The Marriott Marquis next to the Walter E. Washington Convention Center

The year's performance was also bolstered by D.C.'s busiest convention schedule since 2008. D.C. hosted 22 city-wide conventions last year, providing a total of 486,183 hotel room nights, according to Destination D.C. That is up from 15 city-wide conventions in 2016 and 14 conventions in 2015.  

Large-scale conventions typically make reservations five years in advance, Ferguson said. Five years before 2017, the Marriott Marquis at the Walter E. Washington Convention Center broke ground. Ferguson said the construction of this hotel drew more conventions to the District, and the increased business is now starting to materialize. 

While the lack of an inauguration weekend will make it difficult for 2018's hotel numbers to compare with last year, the convention calendar remains busy. D.C. is planning to host 21 citywide conventions this year that will bring in 422,434 total hotel room nights. 

Supply growth is also projected to slow down slightly from last year's peak. The 2,637 hotel rooms currently under construction would increase the supply by about 2.5%, Bowers said, but that will likely be spread out over the next two years and could be partially offset by hotel closings. STR projects D.C.'s average daily rate will grow 1.7% in 2018 and its RevPAR will grow 1.5%, significantly slower growth rates than the market experienced in 2017. 

A rise in political action during Trump's presidency has increased D.C. hotel demand from within the U.S., but some worry the president's rhetoric and policies around immigration are discouraging international visitors and could impact the hotel market. Data from the Commerce Department showed the U.S. experienced a 4% decline in inbound travel in 2017, costing the country $4.6B in lost travel spending. 

"President Trump is viewed by some people in a very positive way and by some people in a more negative way, and I think if you're in that camp of the negatives, then it would probably be a deterrent for those who want to travel to the U.S.," Bowers said. "Because to me there's been a little bit of a tone set there that we're going to make sure it's America first and take care of ourselves, and certain countries could feel like they're not welcome in the U.S."

D.C. will not have its final data on 2017 international tourism until at least May. Ferguson believes international reaction to Trump will likely contribute to lower travel to the U.S. and the nation's capital, adding that other factors such as a weakened Canadian dollar, Brexit and turmoil in Brazil could also play a part.

“We’re going to realize some lower numbers simply because of those things compounded with the rhetoric from the current administration’s effect on tourism in 2017,” Ferguson said. “We won’t know how well we did until later this year, but we know there’s probably an effect.”