Special Market Reports Issue 40 - WASHINGTON DC

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Hotel, Tourism and Leisure
Special MarketReports
Issue 40- WASHINGTON DC
June 2015
Special Market Reports
General City Information
Issue 40 - Washington DC
Population Growth Forecast
Geography
Washington D.C. sits in the mid-Atlantic region. The
city is the capital of the United States, and it is also the
core of a greater region called the Washington
metropolitan area. The district itself has 68.3 square
miles of land, and the Washington metropolitan area
covers 5,564.6 sq miles. The city is bordered by the
following feeder markets:
• Montgomery County, Maryland
• Pince George County, Maryland
• Arlington, Virginia
• Alexandria, Virginia
Demographics
Washington D.C has a population of 658,893 in 2014.
Among them, 35.80% are white, 49.50% are black or
African American, 0.6% are Native American, 3.90%
are Asian, and 10.10% are Latino. On a larger scale,
the D.C. metropolitan area has a population of about
5.9 million.
Source: U.S. Census Break
Economy
The GDP of D.C. Metropolitan area in 2013 was
463,925 millions, making it the 5th on the U.S
metropolitan area GDP ranking. In the city, there
are currently 384,200 people in the labor force,
and the unemployment rate is 7.7% (Source:
Bureau of Labor Statistics). According to U.S.
Bureau of Economic Analysis 2013, among all
industries in D.C Metro Area, the biggest sector
was private industries, which contributes 77.5%
of this region’s total GDP.
GDP Composition By Sectors
Ethnic Composition
Source: U.S. Bureau of Economic Analysis
Source: U.S. Census Break
The following chart shows the projected
population growth for the D.C. Metropolitan
Area in the next several years. The population in
this region in 2013 was 5,883,254, and it is
forecasted to grow by 5.51% to 6,207,523 by
2018. By 2023, the population is predicted to
continue its growth, reaching 6,336,783, which
was a 2.08% increase from its previous period.
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Special Market Reports
Issue 40 - Washington DC
Demand Generators
Conventions
Government Activities and Meetings
There are more than 2.2 million square feet of
event/exhibit/meeting space in Washington D.C.
Biggest convention centers include Walter E.
Washington Convention Center, Ronald Reagan
Building and International Trade Center. In 2015, a
number of important meetings and national
conferences will take place in D.C, including:
Washington D.C. is where the U.S. Federal
Government’s most important departments are
located in. The government accounted for about 29%
of jobs in the city as of 2012. Government activities
and meetings provide a significant portion of the total
revenue of the city’s lodging industry, and this
demand is very steady even during economic
downturns.
Professional Service Industry and Organizations
• American Association Neurological Annual
Meeting
• Energy Efficiency Global Forum and Exhibition
• 7th Annual D.C. Housing Expo/Home Show
Washington D.C has a fast growing professional and
business service industry. The city hosts nearly 200
foreign embassies and international organizations,
such as the world bank, the International Monetary
Fund (IMF) and Inter-American Development Bank,
etc.
Most events in this year will take place in Walter E.
Washington Convention Center, which is a major
meeting & convention venue in D.C. It has 703,000
total square ft of exhibit space and 77 individual
meeting rooms. It is fully equipped to host events in
various forms and sizes, ranging from 500 to
42,000 attendees.
Historical sites and museums
Best Performing Hotels in Washington
As the capital of the U.S, Washington D.C has many
world-renown tourist attractions, which bring in
millions of tourists all year round, providing another
steady demand for the local lodging market. Some
iconic monuments and memorials include the
Washington Monument, the Lincoln Memorial, the
Jefferson Memorial, Vietnam Memorial and the World
War II Memorial. In addition, the city has many famous
museums, such as Smithsonian National Museum of
Natural History, National Gallery of Art, American
History Museum and Natural Air and Space Museum.
Hospitality Market Overview
Tourism & Hospitality Statistics
According to Smith Travel Research, there are 151
properties with 30,082 rooms in Washington D.C. The
D.C. Metro Area has 790 hotels with 109,598 rooms in
total. In 2013, D.C. received 1.6 million international
visitors and 17.4 million domestic travelers, making it
the seventh most visited city in the U.S. (Source: DC.
gov)
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The Jefferson
This 95-room luxury hotel is only 0.8 miles away
from the White House and it is set in a 1926 beaux
arts building. On Apr 30th, the rate for a Single
King room was $599, and it is ranked as the No.1
of the 133 hotels in Washington D.C. on
TripAdvisor.
Capella, Georgetown
This 49-room hotel is situated in the heart of
Georgetown along the historic C&O Canal. Personal
assistant service is available 27/7 at this hotel as the
property’s signature service. This hotel’s room rate
for a Single King room was $695 on April. 30th, and
it is ranked as the second of the 133 hotels in this
area on TripAdvisor.
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Special Market Reports
Issue 40 - Washington DC
The Hay-Adams
Hotel Performance Indexes
This hotel is housed in a historic Italian Renaissancestyle building. It has 145 rooms and some of them
feature views of the White House from private
balconies. The room rate was $399 on May 1st for a
Single Queen room and it is No. 3 of 133 on
TripAdvior.
Occupancy
Four Seasons
This 222-room, five-diamond hotel was designed by
world-renowned architects, and its unique design of
the property is often discussed by design critics. Room
rate for a Single King room on May 2nd was $665,
and it is #4 of 133 on TripAdvisor.
Avenue Suites, Georgetown
This property offers only suite-style accommodations. It
sits on Pennsylvania Ave and is within walking distance
to George Washington University and Washington
Monument. The hotel has 124 rooms and the rate on
May 1st was $359 and it is ranked as the No. 5 of the
133 local hotels.
Source: Smith Travel Research
In the past three years, occupancy in this area
showed a steady trend of increase. In 2012,
occupancy rate in Washington D.C. was 74.90%,
and it grew by 1.6% to 76.10%. Then it kept
growing by 1.1% to 76.90% in 2014.
ADR
Property Class
Source: Smith Travel Research
ADR in the market grew significantly from 2012 to
2013, from $203.36 to $209.08, which was a 2.8%
increase. However, the growth was quite flat from
2013 to 2014, which was only a 0.6% increase to
$210.27.
Source: Smith Travel Research
RevPAR
Among the 151 hotels in Washington DC, there are 22
luxury hotels, 53 upper upscale hotels, 36 upscale
properties, 15 upper midscale hotels, 9 midscale
hotels, and 16 economy hotels. According to the chart
above, upper upscale hotels provide the most supply
in the market.
Source: Smith Travel Research
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Special Market Reports
Issue 40 - Washington DC
Benefiting from the growths in occupancy and ADR,
the market’s RevPAR grew quite a bit in the past three
years as well. In 2012, RevPAR was $152.22, and it
grew 4.6% to 159.15. Then, it kept growing by 1.6%
and reached $161.67 in 2014.
recent years. In general, cap rate in D.C. has been
lower than the national average. Especially in the
past year, the gap became larger, indicating higher
sales prices in the hotel transaction market in
Washington D.C.
Market Pricing
Hotels Under Construction
Average Price Per Unit
Source: Real Capital Analytics
Average price per unit (PPU) in D.C. Metro Area in the
first quarter of 2015 was $174,678, which was higher
than the national average of $154,000. The market
price has been showing a good trend since the first
quarter of 2014, and it exceeded the national average
at the end of 2014. Currently, PPU in D.C. Metro Area
is still outpacing the national average, although the
national average is gradually catching up.
Cap Rate
Currently, there are a number of active pipeline
projects in D.C. These new developments are
expected to increase the market supply significantly
in the next two to three years. Some major hotels
under construction include: 278-room
InterContinental in the Wharf opening in 2017,
164-room Hyatt Place opening in June 2015, 343room Water Gate Hotel Opening in this summer,
270-room Trump International Hotel opening in
mid-2016, 370-room Conrad Washington D.C
opening in early 2018, A Courtyard and A
Residence Inn by Marriott.
Top Buyers in the Market
In the past 24 months, the top five buyers in the
market of Washington D.C were Ashford Hospitality
Trust, MetLife, Bestford Capital, Westmont and
Great Eagle Holdings Limited. From them, we see a
trend of foreign capital flowing in because Bestford
Capital is a private group in Singapore, Westmont is
a private group in Canada and Great Eagle is a
public group in Hongkong. The rest two buyers are
U.S. companies.
Top Sellers in the Market
Source: Real Capital Analytics
The cap rate in D.C. hotel transaction market in the
first quarter of 2015 was 6.93%, and it was
significantly lower than the 8.08% national average.
From the chart, we see both the national average
and the average in D.C. have been quite steady in
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Just like the trend of buyers in the market, most of
the top five sellers in Washington D.C. are foreign
companies. The biggest seller in the market is an
institutional group called JBG Cos, which is a private
company. The second is Prudential RE Investors, and
it is also an institutional group. Next on the ranking
are three foreign investment companies from
Canada: Westmont private group, Caisse de Depot
and Innvest REIT.
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Special Market Reports
Issue 40 - Washington DC
Source: Real Capital Analytics
Top Brockers in the Market
In the past two years, the top brokers in Washington
D.C. hotel transaction market were Estdil, Colliers
International, Hodges Ward Elliott, JLL and Cassidy
Turley. For all their deals, they worked as the sellers’
representatives. The transaction volume varied a lot,
from 39 million to 349 millions.
Top Transactions in the Market
In the past 12 months, there were 37 property
transaction in the D.C Metro Area, totaling 1,033
million. The average PPU was $174,678, which was
higher than the national average of $154,000.
General Economic Development Strategy
According to the city’s Five-Year Economic
Development Strategy, Washington D.C is planning to
create 100,000 new jobs and generate 1 billion in
new tax revenue by diversifying the economy and
preparing the workforce for new employment
opportunities. Resonating with the objective, the city
has established six “bold visions” to transform D.C.
These are:
• Most business-friendly economy in the nation
• Largest technology center on the East Coast
• Nation’s destination of choice
• End of retail leakage
• Best-in-class global medical center
• Top North American destination for foreign
investors, business and tourists.
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Currently, the real estate and construction
industry has the highest employment rate in
Washington D.C, and it is poised to increase in
the next couple of years, thanks to the upcoming
projects like Saint Elizabeth, McMillan and
Southwest Water Front ground breaking.
In the technology industry, employment grew by
50% in the past decade, and this trend is still
ongoing due to the sufficient private and public
investments and technology advancement. It is
expected that this industry will add 20,000 jobs to
the city.
The city is developing a medical hub at the Mc
Millian Reservior site. This project alone will bring
at least 5,000 new jobs to the higher education
and health care segments.
The city is also targeting in eliminating 1 billion in
retail leakage, and this endeavor is expected to
create 2,500 new jobs for the local retail
industries.
In addition to those industries, the city is
expanding its professional services, hospitality and
contractors. Through this effort, the government
is hoping to increase the city’s business
attractions, bringing in more tenants to local
business buildings. This is estimated to bring
17,500 new jobs.
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Special Market Reports
Issue 40 - Washington DC
WRITTEN BY:
PAUL BRESLIN
Principal
HorwathHTL USA, Atlanta
email:pbreslin@horwathhtl.com
Paul Breslin, Principal of Horwath HTL, is a 35 year veteran of
the hospitality industry. His background within the industry is
all encompassing, as he has extensive experience in hotel
operations, development and asset management with major
branded hotels as well as independent and smaller luxury
hotels. Mr. Breslin, who is qualified as a Certified Hospitality
Educator (CHE), is also a respected and well-known teacher
and leader within the industry. He is the Executive-in-Residence
in Lodging in the J.Mack Robinson College of Business, Cecil B.
Day School of Hospitality at Georgia State University.
HANJIE TANG
Analyst
HorwathHTL USA, Atlanta
email:htang@horwathhtl.com
Hanjie Tang is currently pursuing his bachelor’s degree in
Hospitality Management at Cornell University, School of Hotel
Administration, with a minor in Real Estate. He joined the
Horwath HTL team as an intern in January 2015. Hanjie has
extensive work experience in hotel operation and knowledge of
hotel development. At Cornell hotel school, Hanjie is serving as a
teaching assistant for Hotel Development & Planning and
Marketing Principles. For this position, Hanjie helps professors
come up with assignments and tutors students. In addition,
Hanjie is the co-founder of AH&LA Cornell Student Chapter, a
member of Cornell Real Estate Club, and was the chief editor of
Cornell Global China Focus.
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