Hotel News Now published an article based on data from STR that looked at convention-center hotel openings and closings in Nashville, Tennessee; Cleveland; San Francisco; and Louisville, Kentucky to reflect on the performance data, pipeline and business mix of their respective submarkets.

Published by Stephanie Ricca/Hotel News Now
Published date: September 2018

Convention-center openings and closings have a clear effect on hotels in U.S. submarkets, as shared in a data presentation at the recent Hotel Data Conference.

Shawn Grenley, client account manager at STR, parent company of Hotel News Now, shared case studies of hotel performance and pipeline data in submarkets with recent convention-center openings (Nashville and Cleveland) and submarkets with recent closures (San Francisco and Louisville, Kentucky).

In general, convention-center openings drive new hotel supply growth, and convention-center closures result in a shift in the group/transient business mix of a submarket, Grenley said. But multiple factors contribute to the overall dynamics in a given submarket.

Nashville’s Music City Center
In the five years since Nashville’s Music City Center opened, Grenley said the Nashville central business district submarket added 20 hotel properties and more than 4,000 guestrooms. The region has seen 55% growth in annual room nights sold since the Music City Center opened in 2013.

“That’s just huge growth,” he said, pointing to the additional 18 hotel projects and 3,339 guestrooms currently in the submarket’s in-construction pipeline.

Occupancy, average daily rate and revenue per available room all increased dramatically in the five years since the opening, notching leaderboard positions among all U.S. submarkets during that time span.

Currently, the submarket’s supply/demand balance is shifting a bit, Grenley said.

“Double-digit supply and double-digit demand are taking place, and those are really huge numbers,” he said. “Now we’re starting to see some occupancy declines” because supply is slightly outpacing demand. Still, he pointed to the submarket’s “healthy rate growth over the last 12 months” as a positive.

Cleveland’s Huntington Convention Center
“If a convention center opens, obviously hotel supply is a key driver because new hotels want to be a part of that, and that’s what we’re seeing here,” Grenley said about Cleveland, where the renovated Huntington Convention Center of Cleveland opened in June 2013.

While demand in the Cleveland central business district and Independence, Ohio, submarket has grown 28% since the convention center opened, Grenley said “the pipeline is cold” right now, with no record of new properties under construction in the submarket.

ADR has increased by $25 in the submarket since the opening, and RevPAR has increased by $13, compared an increase of $18 in total U.S. RevPAR during that period.

“Occupancy has declined since the opening, by 2.7%,” he said. “We talked about demand growing, but we did have supply growth that is cutting into the demand, so we have occupancy declines.”

San Francisco’s Moscone Center
Grenley shifted focus to U.S. submarkets surrounding major convention centers in periods of closure, beginning with San Francisco’s Moscone Center, which closed partially for renovation in April 2017 and has had phased reopenings, with a full completion scheduled for January 2019.

This closure illustrates the impact convention-center business can have on a submarket’s overall guest mix, Grenley said, pointing to how group demand shifted to transient demand in the entire submarket during the highest closure period.

While demand growth in the submarket was down 2.8% during the lowest point and occupancy was down 2%, ADR was a positive, Grenley said.

“From the time (The Moscone Center) closed until today, ADR actually grew a couple dollars,” he said.

Louisville’s Kentucky International Convention Center
The Kentucky International Convention Center reopened earlier this month after two years of full closure for renovations, affecting the Louisville central business district.

During that period, the submarket grew by five hotel properties, contributing 1,004 guestrooms—the largest of which was the Omni Louisville, which opened in March 2018 with 612 guestrooms.

“That’s going to be a key staple product to help the new convention center,” Grenley said.

On the pipeline side, the submarket has an additional five hotels and 725 guestrooms currently in construction.

During the two years the convention center was closed, occupancy was down, which Grenley attributed to new supply coming online in anticipation of the center reopening.

The bright spot for the submarket came in ADR, which grew $4 during the closure, despite dips in demand, occupancy and RevPAR, Grenley said.

Shawn Grenley, client account manager at STR, parent company of Hotel News Now, shared case studies of hotel performance and pipeline data in submarkets with recent convention-center openings (Nashville and Cleveland) and submarkets with recent closures (San Francisco and Louisville, Kentucky).

In general, convention-center openings drive new hotel supply growth, and convention-center closures result in a shift in the group/transient business mix of a submarket, Grenley said. But multiple factors contribute to the overall dynamics in a given submarket.

Nashville’s Music City Center
In the five years since Nashville’s Music City Center opened, Grenley said the Nashville central business district submarket added 20 hotel properties and more than 4,000 guestrooms. The region has seen 55% growth in annual room nights sold since the Music City Center opened in 2013.

“That’s just huge growth,” he said, pointing to the additional 18 hotel projects and 3,339 guestrooms currently in the submarket’s in-construction pipeline.

Occupancy, average daily rate and revenue per available room all increased dramatically in the five years since the opening, notching leaderboard positions among all U.S. submarkets during that time span.

Currently, the submarket’s supply/demand balance is shifting a bit, Grenley said.

“Double-digit supply and double-digit demand are taking place, and those are really huge numbers,” he said. “Now we’re starting to see some occupancy declines” because supply is slightly outpacing demand. Still, he pointed to the submarket’s “healthy rate growth over the last 12 months” as a positive.

Cleveland’s Huntington Convention Center
“If a convention center opens, obviously hotel supply is a key driver because new hotels want to be a part of that, and that’s what we’re seeing here,” Grenley said about Cleveland, where the renovated Huntington Convention Center of Cleveland opened in June 2013.

While demand in the Cleveland central business district and Independence, Ohio, submarket has grown 28% since the convention center opened, Grenley said “the pipeline is cold” right now, with no record of new properties under construction in the submarket.

ADR has increased by $25 in the submarket since the opening, and RevPAR has increased by $13, compared an increase of $18 in total U.S. RevPAR during that period.

“Occupancy has declined since the opening, by 2.7%,” he said. “We talked about demand growing, but we did have supply growth that is cutting into the demand, so we have occupancy declines.”

San Francisco’s Moscone Center
Grenley shifted focus to U.S. submarkets surrounding major convention centers in periods of closure, beginning with San Francisco’s Moscone Center, which closed partially for renovation in April 2017 and has had phased reopenings, with a full completion scheduled for January 2019.

This closure illustrates the impact convention-center business can have on a submarket’s overall guest mix, Grenley said, pointing to how group demand shifted to transient demand in the entire submarket during the highest closure period.

While demand growth in the submarket was down 2.8% during the lowest point and occupancy was down 2%, ADR was a positive, Grenley said.

“From the time (The Moscone Center) closed until today, ADR actually grew a couple dollars,” he said.

Louisville’s Kentucky International Convention Center

The Kentucky International Convention Center reopened earlier this month after two years of full closure for renovations, affecting the Louisville central business district.

During that period, the submarket grew by five hotel properties, contributing 1,004 guestrooms—the largest of which was the Omni Louisville, which opened in March 2018 with 612 guestrooms.

“That’s going to be a key staple product to help the new convention center,” Grenley said.

On the pipeline side, the submarket has an additional five hotels and 725 guestrooms currently in construction.

During the two years the convention center was closed, occupancy was down, which Grenley attributed to new supply coming online in anticipation of the center reopening.

The bright spot for the submarket came in ADR, which grew $4 during the closure, despite dips in demand, occupancy and RevPAR, Grenley said.