WASHINGTON'S

HOTEL MARKET

Washington’s hotel market sees robust fundamentals with demand likely to strengthen in the lead up to the presidential inauguration in 2017

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The Washington, DC, metro area’s hotel sector has performed well over the past few years, with occupancy, average daily rate (ADR) and revenue per available room (RevPAR) all rising steadily since 2013. The hospitality sector is important in this region, as some of the largest and most notable hotel chains in the world are headquartered in the Washington metropolitan area, including Hilton, Marriott and Choice Hotels.

The hospitality sector in the Washington region is driven by business from the U.S. Federal Government and its contractors in the private sector. As a result, room rates for the midscale to upscale sectors are closely tied to the government’s per diem rate, and these sectors capture the bulk of the region’s hotel demand. However, the region still sees strong demand for luxury accommodations from private sector business travel and tourism, and that sector— while a much smaller segment of the market— continues to perform well.

Because of the steady demand created by the government, much of the region’s new product delivered in recent years has been in the mid- to upscale segment that falls within the per diem parameters. Over 2,000 rooms are under construction as of mid-2016—mostly select-service chains like Homewood Suites, Hampton Inn and Hyatt Place. However, the luxury segment of the market also has new product in the pipeline. The Trump International Hotel will open in late 2016, a renovation of the old Post Office Pavilion and the region’s first new luxury hotel in three years. The hospitality investment sales market in the region has experienced strong growth since 2013, with $1.2bn in sales volume in 2015, significantly above the region’s five-year average of $966 million, as strong market fundamentals continue to drive investor interest.

NUMBER OF ROOMS DELIVERED

Washington-area hotel market fundamentals will likely continue to grow in 2016, as a sturdy national economy provides consumers with more disposable income for leisure activities. In addition, continued strong regional job growth contributes to increased demand for hotels from inbound business travelers. The area’s tourism sector also continues to provide steady demand. Headwinds in the year ahead could include decreased demand from international travelers as a result of the strong dollar.

Looking forward to 2017, the presidential inauguration will generate outsized demand for hotels. Several significant projects are slated to open in time for the inauguration of the 45th U.S. president. These include the Trump International Hotel and the grand re-opening of the Watergate Hotel after its recent $125 million renovation. 


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