Colorado Real Estate Journal - December 16, 2015
Downtown Denver’s hotel market is hot and likely to stay for the foreseeable future. Despite a surge of hotel development, industry experts say there’s room for growth in the hospitality sector, with downtown occupancy as high as it gets and average room rates at record levels. Carter Wilson of STR Analytics, a global provider of information to the hotel industry, said downtown Denver hotels have averaged 6 percent rate growth and 76 percent occupancy over the past 12 months. “At 76 percent, you’re effectively sold out. It’s really hard to grow occupancy much beyond that. “In terms of how it’s been able to fill rooms and grow rates, Denver is a very hot market,” he said, noting hotels nationally are performing very well. “Denver has really come into its own this real estate cycle,” added Mike Cahill of HREC-Hospitality Real Estate Counselors. “Denver has proven itself as a desirable, growing economy where people want to live and employees want to locate.” Recent activity in downtown’s hospitality market includes: • The $10 million acquisition of “Block 47,” a 15,655-square-foot development site at 16th and Market streets by a group affiliated with Newport Beach, California-based T2 Development. Although the property is zoned for a range of uses, T2 is known as a hotel developer. Integrated Properties sold the site, which investment broker Tim Richey of CBRE said “may prove to be one of the best development sites between Los Angeles and Chicago.” • The sale of the Embassy Suites by Hilton Denver–Downtown/Convention Center at a record $421,836 per key. • The opening of one of the first dual-branded Hyatt Place/ Hyatt House properties at 440 14th St. The hotels comprise 361 rooms. • Groundbreaking of the first co-branded hospitality project by Marriott International and Starwood Hotels & Resorts Worldwide, which soon will combine to become the largest hotel company in the world. The 495-room, 19-story building at 15th and California streets will house the Le Méridien Denver and AC Hotel Denver. According to STR Analytics, 13 new hotels are either under construction or planned in downtown Denver, for a total of 2,331 rooms. They include a 462-room Hilton, details of which haven’t been announced; a 172-room hotel at the Dairy Block near Denver Union Station; a Cambria Hotel & Suites at 1320 Glenarm Place; and others. The new supply is comparable to what’s being added in some other top 25 markets, said Wilson. “Generally it’s a strong enough market that it’s well-poised to take in the supply.” “As long as there’s not some unforeseen external, macroeconomic event, I believe the product will be absorbed relatively well,” added Cahill. The average room rate downtown is $180, the highest it’s been since STR Analytics began tracking rates in 1987. Among the top 25 hotel markets in the country, the central business districts are performing very well, “and Denver of all of those is one of the top markets right now in terms of its overall occupancy and how it’s been able to grow rates,” said Wilson. Group travel has been strong, and a planned $100 million expansion of the convention center will further fuel the downtown hospitality market. “We expect the robust room night demand trends for downtown Denver, in particular for properties located within steps of 16th Street and the Colorado Convention Center, to continue and ultimately even gain further momentum with the forthcoming expansion of the convention center,” said Deno Yiankes. Yiankes is president and CEO of investments and development for White Lodging Services Corp., a hotel ownership, development and operations company that is developing the Le Méridien/AC Hotel and also completed the new Hyatt Place Denver/ Downtown and Hyatt House/ Denver Downtown hotels. According to HREC, the Denver metro area as a whole has 42,170 existing hotel rooms. It projects that number to grow to 47,520 by 2018.