Colorado Real Estate Journal - December 2, 2015
Despite the volatile nature of the oil industry, the national economy has gotten back on track over the past five years, which has resulted in a change in consumer behavior across the country. With a stable economy, consumers are now making more money, which allows them to spend more. An added benefit of this stability is the rise in leisure travel. Leisure travel, that is travel for pleasure rather than for business, has reemerged as a national trend, greatly benefitting states like Colorado that have a diverse offering for tourists and guests. Colorado is consistently one of the most sought-after destinations in the U.S., and in 2014, set state records for the tourism industry, with 71.3 million visitors spending $18.6 billion within our borders. In 2014, Colorado saw a 7.4 percent increase over 2013 in this spending, nearly 3 percent more than the national average of a 4.5 percent growth. Additionally, Denver trends are showing a 9 percent hotel valuation index growth in 2015, which outpaces the national growth of 7 percent. These statistics indicate that Colorado is outpacing the national tourism growth rates in every category. What’s most interesting is that 66 percent of the money spent was a result of lodging costs for overnight visitors. Boasting five professional sports teams, acclaimed shopping areas, the nation’s most acclaimed outdoor amphitheater and proximity to the mountains, Denver is not surprisingly one of Colorado’s top travel destinations. Drive just a few hours outside of Colorado’s most prominent city and visitors can explore the beautiful Rocky Mountains, whether for the scenic views found in Rocky Mountain National Park or world-class skiing at one of Colorado’s 28 ski resorts. With more than 700 square miles of national parks, visitors can hike among the golden aspens in Rocky Mountain National Park, play in the giant sandbox that is the Great Sand Dunes, or take in Colorado’s breathtaking views at Mesa Verde National Park or Black Canyon of the Gunnison National Park. It’s a safe assumption that regardless of what travelers are seeking, Colorado has almost anything they could be looking for, and hotel and lodging statistics back up that notion. According to Smith Travel Research, so far in 2015, national occupancy rates have surpassed the all-time-high mark set in 1995, and that looks to stay on target through the end of 2015. While there are hundreds of metrics used to measure travel and spending, the two that show the industry’s overall strength are average daily rates and revenue per available room. When compared to the national averages, it’s clear that Colorado outpaces much of the competition. The Colorado ADR is higher than the national average at $125 per room, which indicates a higher demand for our hotel and lodging space versus that in many other states. Colorado’s RevPAR, which is a more telling statistic for measuring both ADR and occupancy rates, continues to increase year after year, and currently sits at $81 per room, which is nearly $2 more than the national average. Even though the national occupancy rate has overcome the 1995 all-time-high record, Colorado, and specifically Denver, is seeing even more success. Colorado’s occupancy rates are surpassing the national level, but Denver’s rates are a solid 10 percent above the national level. Again, this is one of many indications that Denver is enhancing its position as a top destination for leisure travel. Over the next few years, lodging demand is expected to continue to grow in Colorado. There are, however, a significant number of new hotel projects expected to open to the public, thereby outpacing demand growth. This will then, in turn, slightly decrease occupancy percentages in the metro area while actually boosting the overall number of occupied lodging space. Of these projects that are adding a total of 5,600 rooms across the state in 2016, most are located in the Denver metro area, including the Millennium Magnolia Hotel expansion project, the Westin Denver International Airport project, the recently announced 1,500- room Gaylord project near Denver International Airport, a Hyatt hotel and convention center at Fitzsimons Village campus in Aurora and the Kimpton Hotel Downtown, among others. Another reason for the increased demand for hotel and lodging space, and one that greatly influences the industry, is the overall employment and population growth of Colorado over the past few years. As more people move to a city or state and join the labor force, they encourage friends and family to visit, increasing the volume of leisure travelers to the state. It also is hard to ignore the impact that the marijuana industry has had on Colorado’s overall economy, as well as what it has done for the travel industry. In just the first year of legalization, Denver International Airport saw record traffic, the real estate market has boomed and online searches for “Denver hotels” saw a rise of 25 percent. While a direct correlation cannot be established, this is one of Colorado’s offerings that should not be overlooked as something that attracts leisure travel. Thus far, 2015 has been a good year for the hotel industry, especially in Denver. Expansion and growth have been robust, as exemplified by ADR, RevPAR, occupancy rates and new construction. Overall, as the economy continues to recover and grow, demand continues to outpace supply – a good sign for the future of the hotel industry.