Raleigh Hotel Market: On the Rise
- Dec 08, 2017
Population gains and steady rent growth are luring investors and developers to the Research Triangle and the hospitality industry is one of the largest beneficiaries. HVS Senior Vice President Janet Snyder and Project Manager with the firm’s Detroit office Michael Bendert have carried out a report regarding Raleigh’s hotel landscape. The city was named among the top 12 destinations in the world to visit in 2017 by Forbes Travel Guide, a designation that helped boost an already strong hotel and tourism industry.
In 2015 and 2016, five hotels opened in Raleigh—three properties in Brier Creek (one under the Aloft brand), one in Crabtree Valley and another Aloft hotel in the University of North Carolina area. In the first 10 months of 2017, the city added five hotels: Four Points Raleigh North, AC Hotel by Marriott North Hills, the Residence Inn by Marriott Downtown, The Stateview—Autograph Collection on the Centennial Campus of North Carolina State University and the Fairfield Inn & Suites by Marriott Raleigh North, across from the Triangle Town Center. Initial data shows that the new guest rooms are being quickly absorbed by the market.
Moreover, three hotels in Crabtree Valley underwent extensive renovations of the public and guest spaces in 2016—Marriott, Embassy Suites by Hilton and Holiday Inn. Occupancy was negatively impacted during the modernization process, but is now ramping back up.
According to the Greater Raleigh Convention and Visitors Bureau, new hotels are currently planned for Wake County over the next several years. A Hyatt House is set to open in January 2018 in Brier Creek, while a Holiday Inn Express is under construction, although a launch date has not been announced yet. In Cary, a Homewood Suites by Hilton will become operational in May next year, while a Courtyard by Marriott recently broke ground. A Hampton Inn & Suites by Hilton is slated to open this month in Knightdale, east of Raleigh. Moreover, two new Hilton products are planned for the area close to the airport.
Demand for downtown hotels
Additionally, Marriott has announced several new projects in Raleigh, including a Westin in Crabtree Valley and two Element properties—one in the RTP/Brier Creek submarket and the other in downtown Raleigh. A regional developer plans to build a Courtyard by Marriott, set to open in 2020, on a site located north of the Raleigh Convention Center. Also, two of downtown’s new mixed-use developments, Two Glenwood and City Centre, are anticipated to include a hotel component. Construction of a dual-branded Hilton Garden Inn/Homewood Suites hotel in downtown Raleigh is scheduled to start in the first quarter of 2018.
The construction of hotels in the city’s core is expected to help boost demand for meeting and group events. The Greater Raleigh Convention and Visitors Bureau should be able to book an increasing number of large events. Currently, the limited hotel supply within walking or shuttle distance of downtown Raleigh is a challenge.
Wake County’s occupancy has grown annually since 2009. In 2016, the county’s occupancy level exceeded 70 percent for the first time since 1997. Downtown Raleigh is one of the strongest submarkets, with ADR and RevPAR levels approximately $20 higher than the Raleigh average.
HVS expects to see a robust RevPAR growth because of the city’s strong economic base, increasing popularity as a destination and state capital status. Given the recent and ongoing growth in lodging stock, average occupancy levels should decline slightly in the near-term, but demand will most likely continue to grow. Therefore, new supply should be absorbed quickly.
The economic base is diverse in Raleigh, with strong employers in the government sector and the health care, finance and technology fields. IBM, Citrix, WakeMed Health & Hospitals, North Carolina State University, Cisco Systems, SAS Institute and Duke Energy are some of the major employers in the area. Other companies headquartered in the city include BB&T Insurance Services, Carquest, First Citizens Bank, Golden Corral and Red Hat.
Research Triangle Park, the largest research park in the country, is home to more than 200 companies and employs roughly 50,000 residents. The North Carolina State University, the University of North Carolina at Chapel Hill and Duke University provide a steady supply of highly skilled, young professionals that strongly influence Raleigh’s local economy.
Downtown is seeing the strongest economic growth in the market. The GoRaleigh Transit Station was recently renovated and expanded in 2017 while Union Station, the city’s multi-modal transit center, is set to be fully operational next year. Numerous mixed-use developments are under construction or will break ground soon, including the The Dillon, One and Two Glenwood, 400H and the two-tower City Centre.
Image courtesy of HVS