Demand spurring Columbus hotel growth

The Columbus Dispatch highlights comments, data, and research from David Sangree, MAI, CPA, ISHC on the recent hotel demand boom in Columbus, Ohio

Published by: Marla Matzer Roe

Published date: November 2017

Columbus has more hotels on track to open through 2019 than any other Ohio metro area, according to the Ohio Hotel & Lodging Association.

The city is expected to open 25 between 2016 and 2019, while Cincinnati should add 20 and Cleveland 18, according to David J. Sangree of Cleveland-based Hotel & Leisure Advisors .

Campus-area hotels have led the way in Columbus, with four opened between September and a year earlier. Other notable openings in the past year have included the Hotel Leveque in Downtown and two Dublin hotels: the Home2 Suites by Hilton and the AC Hotel by Marriott at Dublin’s new Bridge Park development.

Alan Assaf of Columbus hotel operator Indus Hotels moderated a presentation Monday featuring Sangree and Columbus-based Eric Belfrage of CBRE Hotels giving an industry outlook to hotel executives from around the state.

Alan Assaf, of Columbus hotel operator Indus Hotels, joked during a recent hotel industry conference held in Columbus that plentiful hotel development represented “job security” for those in attendance, since every new hotel needs to hire management and staff.

But adding hotels to a market can be a delicate balance: Without an increase in demand, a flood of new hotel rooms in a city can mean lower average occupancy rates and profits in the market. Sangree said he thinks Columbus and Cincinnati appear to be adding hotel rooms at a level that can be absorbed, since the hotels opening are mostly fewer than 200 rooms each and the rate of increase for demand has outpaced the rate at which rooms are being added.

By contrast, Sangree’s data showed the Cleveland market took a hit in occupancy following the opening of a publicly financed, 600-room hotel (the Hilton Cleveland Downtown, attached to the convention center) just before the Republican National Convention was held in Cleveland in summer 2016. Cleveland’s average occupancy declined by 2.8 percent in 2016 compared with 2015, while Columbus and Cincinnati each saw a 1.7 percent increase for the year.

Columbus and Cincinnati’s occupancy rate was in line with the 65.5 percent national average last year, with Columbus at 65.9 percent and Cincinnati at 64.3 percent. Cleveland was 61.2 percent.

On the plus side, Cleveland’s average daily rate increased in 2016 to $109.39, the highest rate in Ohio. Columbus’ 2016 average rate was $101.93, while Cincinnati’s was $101.32.

“Hotels were charging a lot more” around the political convention, which drew 50,000 visitors from around the world, Sangree said.

Ohio overall, however, lags the national average in rates. In 2016, the national average daily room rate was $123.97.

Upscale boutique hotels in renovated downtown buildings typically command some of the highest room rates in cities. In Columbus, Hotel Leveque, in the newly restored Leveque building at Broad and Front streets, is an example of this.

Hotel developers are concerned about possibly losing the historic tax credit program under the federal budget proposed by the Republicans. Sangree said that could potentially depress room rates in urban areas of Ohio and elsewhere, if developers are unable to make the numbers of historic renovation projects work without the aid of tax credits.

Another industry concern is about Airbnb, which allows homeowners to list private apartments and houses for rent. The industry is concerned about the competition from those rentals, which aren’t currently subject to the same taxes and regulation as hotels. The Ohio Hotel & Lodging Association has been working with lawmakers at the state and local level to lobby for a regulatory framework for Airbnb and similar platforms.

In response to an audience question about Airbnb’s impact, Sangree said:

“So far the effect (from Airbnb) has been more modest in Ohio than in some other places, but it’s definitely taken away room nights,” he said.

To read the article at the Columbus Dispatch, click here.