33 Arch Street, 28 th Floor Boston, Massachusetts 02110 +1 212 984 7125 Office METROPOLITAN BOSTON DECEMBER 2015 Boston Area Roundup The greater Boston area hotels reported increases in RevPAR for December 2015. The 94 hotel operators in the CBRE Hotels Trends in the Hotel Industry sample for the greater Boston area achieved an average 59.0 percent occupancy at a $164.54 average daily rate (ADR) with a resulting $97.07 revenue per available room (RevPAR). These performance levels represented a 3.8 percent increase in occupancy, a 3.5 percent increase in ADR, and an overall 7.4 percent increase in RevPAR for December 2015 as compared to December 2014. For December 2015, of the Boston Core, all submarkets experienced an occupancy increase, led by the Downtown submarket at 6.4 percent. The Cambridge submarket led the Boston Core submarkets in ADR increase, at 4.7 percent, followed by the Downtown submarket which experienced an ADR increase of 3.0 percent. For the Boston Suburbs, only the Route 495 North submarket achieved an occupancy decrease, at 8.4 percent, while the Route 495 South led the Boston Suburbs in occupancy increase at 10.0 percent. All suburban submarkets saw rate growth in December 2015, compared to December 2014. The Route 495 North submarket led in ADR growth at 6.8 percent, followed by the Route 128 submarket at 3.5 percent. Overall, the Downtown submarket experienced the highest occupancy among all submarkets at 65.1 percent. As December is a low demand period in the Greater Boston market, many hotels undergo renovations and capital improvements during this month in order to displace the least amount of roomnights. Many hotels in the Route 495 North corridor underwent renovations, and due to the fewer available guestrooms, were able to increase room rates by nearly seven percent, a growth rate much greater than the two other Boston suburbs. Overall, hotels in the Greater Boston area increased rate and occupancy. Compared to previous December performance over the last ten years, based on our monthly Trends sample in each respective year, the December 2015 ADR is the second-highest ADR recorded, behind the ADR of 2007 ($168.05). Occupancy and RevPAR for the December 2015 sample is the highest ever recorded. For year-to-date December 2015, the 94 hotel operators in the CBRE Hotel s Trends in the Hotel Industry sample for the greater Boston area achieved an average 78.8 percent occupancy at a $217.63 ADR with a resulting $171.40 RevPAR. These performance levels represented an occupancy increase of 1.7 percent, a 5.6 percent increase in ADR, and an overall 7.5 percent increase in RevPAR for year-to-date December 2015 as compared to year-to-date December 2014.
For year-to-date December 2015, under the Location category, the Route 495 South submarket has achieved the most occupancy growth at 6.2 percent. The Route 495 North submarket led in ADR gain with an 8.6 percent increase, followed by the Route 128 submarket, which achieved a 7.0 percent increase. Under the Average Daily Rate category, the hotels in the Between $100 and $150 category experienced the largest occupancy gain at 3.4 percent, followed by the Under $100 category with a 2.5 percent gain. The hotels in the Between Under $100 ADR category achieved the most ADR growth at 7.4 percent, followed by both the Between $100 and $150 and the Over $200 category at 5.9 percent. Under the Size category, the hotels in the Under 150 Rooms category achieved the most occupancy growth at 2.2 percent and the most growth in average rate at 6.2 percent. Overall, hotels in the greater Boston area finished 2015 with significant increased RevPAR results compared to 2014, driven largely by increase in rate. In the following we share a Greater Boston yearend overview and an analysis of Airbnb.
2015 Boston Lodging Market Recap According to CBRE Hotel s Hotel Horizons most recent report, among the 59 U.S. markets forecasted by CBRE Hotel s, the Boston lodging market ranked #11 in occupancy, #5 in average daily rate (ADR), and #5 in RevPAR for year-end 2015. Looking at compound average annual growth (CAAG) from 2011 to 2015, the Boston market ranked #42 in occupancy (a lower ranking due to the market s already-strong occupancy levels), #11 in ADR growth, and #24 in RevPAR growth. The strengths of Boston as a lodging market are relatively apparent. A small, busy city with an existing hotel supply of just over 52,000 rooms; two convention centers; a balanced base of demand between corporate transient, group and leisure; and a diverse corporate, institutional, medical, and academic infrastructure from which hotel demand is generated. Additionally, supply increase has been limited in Boston over the last few years, which has allowed existing properties to benefit from increases in demand in the form of higher occupancies and increases in ADR. However, supply growth is climbing at 3.4 percent versus the past four quarter s rate of 1.3 percent, and is greater than its long run average of 1.9 percent. This is expected to have an impact on the occupancy and ADR of the greater Boston market going forward. The following table shows the performance of both the lodging and office markets for the Boston market. Though the lodging statistics reflect Boston, Cambridge and the suburban areas, the highest occupancies and rates and lowest vacancies are found in the market s core areas. Year Downtown Boston Office and Greater Boston Lodging Market Statistics Office Supply (SF) Office Vacancy Hotel Occupancy Hotel ADR Hotel RevPAR 2011 73,387,601 12.0% 71.0% $147.91 $105.09 2012 74,718,775 9.6% 71.6% $158.81 $113.79 2013 77,649,439 8.2% 73.1% $164.37 $120.16 2014 78,049,461 7.3% 75.2% $176.92 $133.12 2015 79,076,345 7.3% 76.4% $187.97 $143.64 Source: CBRE; Smith Travel Research; Hotel Horizons Since 2011, the Boston Office market has experienced continual decreases in vacancy, while seeing slight increases in supply. When looking at 2015 compared to 2014, Boston Office supply increased by over 1,000,000 square feet while vacancy remained flat. 2015 was another stellar year for the Downtown Boston Office market as it experienced over one million square feet of positive absorption for the third year in a row. For 2015, we also saw continued increases in hotel performance. Hotel occupancy increased from 75.2 percent in 2014 to 76.4 percent in 2015, while ADR grew by 6.2 percent. Boston Lodging Supply As mentioned, Boston is a relatively small metropolitan lodging market with approximately 50,000 hotel rooms in the greater market, including both the city core and suburban submarkets. Similar to most markets across the country, supply increases have been limited in the Boston market over the last several years as a result of the recovery from the Great Recession. With the strong increases in performance for the Boston lodging market in the last few years, there is now a resurgence of development interest focused primarily in the core neighborhoods of South Boston s Seaport District, Fenway, North End, Downtown Crossing/Theater District, and South End/Roxbury. The Seaport District is a hotbed for new developments, including hotels, office space, and high-end residential units for rent
and for sale. In 2015, we expect to see an increase in supply, particularly in the boutique and luxury categories. The Boston market in 2015 saw several hotel developments open, presented in the table below. Please note that in 2016, three hotels in the Boston market have already opened. The 242-room Godfrey Hotel opened Downtown, and the 180-room Element Hotel and the 330-room Aloft Hotel opened in the Seaport District across from the convention center. In addition, the Hotel Commonwealth completed a 96-room expansion in December 2015. Hotel Number of Rooms Opening Date Fairfield Inn & Suites 123 February 2015 TownePlace Suites Chelsea 140 February 2015 TownePlace Suites Wareham 85 March 2015 Holiday Inn Express & Suites Norwood 85 May 2015 Autograph Collection Envoy Hotel 136 June 2015 Hilton Garden Inn Boston Logan Airport 177 August 2015 The following table presents select hotel developments planned for the city of Boston and Cambridge over the next three years. Hotel Number of Rooms Projected Opening Homewood Suites Boston Brookline 130 2016 Porter Square Hotel 65 2016 Courtyard/TownePlace Suites North End 210 2016 AC Hotel Ink Block 200 2017 Yotel Boston 326 2017 AC Hotel Cleveland Circle 162 2017 Loftel Boston 127 2017 Moxy Hotel 346 2017 Trinity Stuart Hotel and Residences 222 2017 Chain Forge Hotel 230 2018 Four Seasons One Dalton 211 2018 Major Boston Hotel Sales Hotel sales in Boston have been solid in the last few years. Between March 2011 and December 2015 17 Boston hotels (including one hotel that was sold twice) sold for between $179K and $744K per key. With the strong performance of the Boston market, high land value and construction costs, and the diversified and stable demand base, we expect to see hotel transactions of various sizes continue to be strong in the next several quarters as investors are looking for assets in this major gateway lodging market.
The table below presents hotels in the Boston market core that have transacted since March 2011. Not presented is the record-breaking sale of the Mandarin Oriental, expected to close in April 2016, purchased at auction by Mandarin Oriental for $140,000,000, or $945,945 per key. Boston Hotel Sales Property Sale Date Number Price Per Sales Price of Rooms Room Holiday Inn Express Hotel & Suites Dec-15 72 $24,500,000 $340,278 Renaissance Boston Waterfront Hotel* Dec-15 471 $158,500,000 $336,518 The Godfrey Hotel Dec-15 242 $180,000,000 $743,802 Ames Hotel Dec-15 114 $53,250,000 $467,105 Revere Hotel Boston Common Dec-14 356 $260,400,000 $731,461 envision Hotel Boston May-14 39 $9,200,000 $235,897 Best Western Plus Roundhouse Suites Feb-14 92 $16,500,000 $179,348 Copley Square Hotel Sep-13 143 $59,320,000 $414,825 The Boston Park Plaza Hotel & Towers May-13 1,053 $250,000,000 $237,417 Loews Boston Back Bay Hotel* Feb-13 225 $84,387,000 $375,053 The Liberty Hotel* Jan-13 298 $170,000,000 $570,470 Hotel Commonwealth* Dec-12 149 $79,000,000 $530,201 Bulfinch Hotel May-12 80 $12,566,900 $227,500 Boston Common Hotel and Conference Cent Dec-11 64 $22,550,000 $352,344 Bulfinch Hotel Oct-11 80 $21,810,176 $272,627 Renaissance Boston Waterfront Hotel* Aug-11 471 $90,000,000 $191,083 W Hotel & Condos Mar-11 235 $89,500,000 $380,851 *Leasehold Source: CBRE Hotels Convention Room Nights In 2005, the Boston Convention and Exhibition Center opened in South Boston s developing Seaport District, effectively creating a two-center city with the longtime existence of the Hynes Convention Center in Boston s Back Bay neighborhood. According to the Massachusetts Convention Center Authority (MCCA), using total citywide convention room night demand as a comparison, 2016 is projected lower than 2015. After two years of slight forecast decreases, in 2017, total citywides are expected to reach over 520,000 roomnights, a 22.1 percent increase from 2016F. The following table presents the actual citywide convention demand, defined by MCCA as 2,000 room nights or greater on peak, between 2004 and 2015, and projections for 2016 through 2019.
Total Boston Convention/Meeting/Exposition Demand by Center 2004 through 2019F Number BCEC Total Hynes Total Number Total BCEC Hynes All Citywide Year Citywides Demand % Chg Citywides Demand % Chg Citywides Demand % Chg 2004 2 20,325-6 65,279-8 85,604-2005 4 56,815 179.5% 11 144,991 122.1% 15 201,806 135.7% 2006 14 317,374 458.6% 12 145,944 0.7% 26 463,318 129.6% 2007 15 294,430-7.2% 12 140,303-3.9% 27 434,733-6.2% 2008 14 274,614-6.7% 11 112,489-19.8% 25 387,103-11.0% 2009 16 249,494-9.1% 8 108,260-3.8% 24 357,754-7.6% 2010 16 353,097 41.5% 4 44,323-59.1% 20 397,420 11.1% 2011 13 182,457-48.3% 7 81,757 84.5% 20 264,214-33.5% 2012 15 298,724 63.7% 9 125,452 53.4% 24 424,176 60.5% 2013 12 193,153-35.3% 7 96,056-23.4% 19 289,209-31.8% 2014 17 336,405 74.2% 7 105,176 9.5% 24 441,581 52.7% 2015 20 381,227 13.3% 4 48,928-53.5% 24 430,155-2.6% 2016F 19 321,843-15.6% 8 105,110 114.8% 27 426,953-0.7% 2017F 19 434,352 35.0% 7 86,963-17.3% 26 521,315 22.1% 2018F 18 396,399-8.7% 2 25,734-70.4% 20 422,133-19.0% 2019F 12 223,676-43.6% 4 55,580 116.0% 16 279,256-33.8% Source: Massachusetts Convention Center Authority (MCCA) According to the MCCA, the two Boston convention centers in 2015 generated an economic impact of approximately $784 million and over 630,000 hotel roomnights, and hosted 262 events and 724,292 attendees. The greater Boston lodging market has seen significant growth over the recent years. Supply has remained at bay while demand has increased, allowing hotels to achieve high occupancies and rate growth. As supply is starting to increase and growth is above the historical long-run average, hotel occupancies are expected to decline in 2016, and in 2018 through 2020. However, due to projected increases in rate, RevPAR growth is projected to remain positive for the next five years. Mark VanStekelenburg is a Managing Director of CBRE Hotel s Northeast Practice (www.cbrehotels.com). He can be reached at mark.vanstekelenburg@cbre.com, or at (212) 984-7125. Jenna Finkelstein, Consultant and Trends Coordinator in the Boston Office, assisted in the preparation of this article. To purchase a copy of CBRE Hotel s quarterly Hotel Horizons econometric forecast reports, please visit www.store.pkfc.com.
Boston Airbnb Insights The following analysis presents data sourced from CBRE Hotels America s Research Airbnb Insights report for Q4 2015. This report was created for all 59 major markets tracked by CBRE and their respective submarkets. The full 22-page report, which analyzes monthly performance for each unit type, and by submarket, can be purchased online at www.store.pkfc.com. The sharing economy has become a prominent though not well understood economic phenomenon over the past several years. One of the most widely known companies within this new system of sharing is Airbnb, which operates a platform allowing residential real estate to be used as transient lodging by enabling people to rent a bedroom, a couch, or an entire home to guests on a short-term basis. The company was founded in August 2008 in San Francisco as a community marketplace for people to list and book unique accommodations around the world, either online or via their mobile application. As of December 2015, Airbnb had sixty million users providing access to locations in 34,000 cities in over 190 countries, averaging half a million stays per night. To gain insight into the economics of Airbnb, CBRE Hotels America s Research compiled select information from STR, Inc. and Airdna for hundreds of U.S. markets and began to assess the relevancy of this sharing platform to the traditional hotel industry. Supply In September 2015, the Greater Boston hotel market was comprised of 52,119 hotel rooms and 4,147 active Airbnb units. Active Airbnb units represent 8.0 percent of total hotel supply. As a point of comparison, active Airbnb units represent 19.5 percent of total hotel supply in New York City. A breakdown of active Airbnb units for the Greater Boston market is presented below.
Demand For the period of October 2014 through September 2015, Airbnb units recorded an occupancy of 58.0 percent and an ADR of $139.98, while Greater Boston hotels achieved an occupancy of 76.2 percent and an ADR of $186.44. This represents an ADR premium of approximately $46, or 24.9 percent of ADR. When comparing the ADR of individual unit types to the average hotel ADR, only three unit types achieve lower rates. The ADR discount of a one-room entire home/apartment is less than 10 percent, while the ADR discount of a private room and shared room is 53.3 percent and 66.1 percent, respectively. Entire homes with two, three, and over four bedrooms achieve significant premiums above hotel ADRs. Thus, driving the ADR discount of Airbnb are the low-cost rentals of a private room within a shared apartment and a shared room. Airbnb offers significant values to large groups who desire to stay in one shared space, and those that are not in need of hotel services. Guests that are opting for the shared spaces within bedrooms and apartments are not looking for the services and amenities at hotels, but are looking for a no-frills experience and an inexpensive lodging option. Similar to this concept are hostel hotels, and while already popular in Europe, hostels are beginning to become a factor in the market in the United States. To stay competitive, economy hotels must pay attention to how their product is being perceived in the market place. Before booking their Airbnb unit, renters spend a lot of time on the Internet researching their desired unit, especially when renting shared apartments to address concerns of safety. Thus, it is important that economy hotels present a positive picture of their product through an array of photographs and consistent positive reviews on travel websites. Groups also prefer Airbnb as it offers a higher value proposition for guests as it tends to be cheaper on a per person basis and allows everyone to share one space. While hotels can accomplish this by suites and connecting rooms, it is imperative that hotels are able groups privacy from other guests while still maintaining a social environment. Overall, while Airbnb has achieved significant growth in both supply and demand over the recent years, the fundamentals of the hotel market in Greater Boston remain strong, and hotels can expect increased revenues. Airbnb has identified the needs of a unique market segment, and the hotels that adapt to the changing marketplace are able to tap into this market and see various benefits as a result of their innovative ways of meeting the dynamic and changing needs of travelers. To purchase the full Boston Airbnb Insights report, visit www.store.pkfc.com.
REPORT OF ROOMS BUSINESS BY LOCATION STATISTICS AND TRENDS OF HOTEL BUSINESS BOSTON MONTHLY TRENDS MONTH OF DECEMBER AVERAGE DAILY ROOM RATE OCCUPANCY PERCENT REVPAR 2015 2014 VAR 2015 2014 VAR 2015 2014 VAR BACK BAY $189.98 $187.17 1.5% 64.2% 63.1% 1.7% $121.87 $118.06 3.2% DOWNTOWN 194.83 189.17 3.0% 65.1% 61.2% 6.4% 126.79 115.73 9.6% CAMBRIDGE 177.89 169.94 4.7% 60.6% 57.8% 4.9% 107.82 98.21 9.8% Boston Core Average $190.03 $184.55 3.0% 63.8% 60.9% 4.9% $121.33 $112.35 8.0% ROUTE 128 108.32 104.66 3.5% 53.7% 53.4% 0.6% 58.21 55.91 4.1% ROUTE 495 NORTH 106.28 99.55 6.8% 41.4% 45.2% -8.4% 44.03 45.03-2.2% ROUTE 495 SOUTH 107.34 104.46 2.8% 50.0% 45.4% 10.0% 53.63 47.44 13.0% Boston Suburbs Average $107.73 $103.72 3.9% 50.4% 49.6% 1.5% $54.26 $51.49 5.4% OVERALL AVERAGE $164.54 $158.96 3.5% 59.0% 56.8% 3.8% $97.01 $90.30 7.4% REPORT OF ROOMS BUSINESS BY AVERAGE DAILY RATE AVERAGE DAILY ROOM RATE OCCUPANCY PERCENT REVPAR 2015 2014 VAR 2015 2014 VAR 2015 2014 VAR OVER $200.00 $251.92 $243.51 3.5% 60.2% 60.3% -0.2% $151.70 $146.88 3.3% $150.00 TO $200.00 173.86 168.65 3.1% 64.3% 60.1% 7.0% 111.73 101.28 10.3% $100.00 TO $150.00 126.21 122.04 3.4% 55.6% 53.3% 4.5% 70.21 65.00 8.0% UNDER $100.00 85.21 80.41 6.0% 49.0% 50.2% -2.3% 41.76 40.33 3.6% OVERALL AVERAGE $164.54 $158.96 3.5% 59.0% 56.8% 3.8% $97.01 $90.30 7.4% REPORT OF ROOMS BUSINESS BY SIZE OF PROPERTY AVERAGE DAILY ROOM RATE OCCUPANCY PERCENT REVPAR 2015 2014 VAR 2015 2014 VAR 2015 2014 VAR UNDER 150 ROOMS $124.81 $119.49 4.4% 55.1% 54.1% 1.9% $68.81 $64.67 6.4% 150 TO 400 ROOMS 164.90 160.64 2.7% 55.8% 56.8% -1.8% 92.02 91.29 0.8% OVER 400 ROOMS 183.92 178.43 3.1% 65.7% 58.4% 12.5% 120.81 104.15 16.0% OVERALL AVERAGE $164.54 $158.96 3.5% 59.0% 56.8% 3.8% $97.01 $90.30 7.4% Survey includes 94 properties in the Boston area with 19,915 available rooms. SOURCE: CBRE HOTELS
REPORT OF ROOMS BUSINESS BY LOCATION STATISTICS AND TRENDS OF HOTEL BUSINESS BOSTON MONTHLY TRENDS TWELVE MONTHS ENDED DECEMBER AVERAGE DAILY ROOM RATE OCCUPANCY PERCENT REVPAR 2015 2014 VAR 2015 2014 VAR 2015 2014 VAR BACK BAY $262.15 $249.61 5.0% 81.3% 80.9% 0.4% $213.05 $202.04 5.4% DOWNTOWN 265.85 249.98 6.3% 82.5% 81.8% 0.9% 219.31 204.47 7.3% CAMBRIDGE 249.48 237.99 4.8% 82.1% 80.5% 2.0% 204.72 191.53 6.9% Boston Core Average $261.24 $247.16 5.7% 82.1% 81.3% 1.0% $214.51 $200.93 6.8% ROUTE 128 139.14 130.07 7.0% 78.0% 76.0% 2.6% 108.50 98.90 9.7% ROUTE 495 NORTH 111.65 102.80 8.6% 67.0% 66.1% 1.5% 74.86 67.93 10.2% ROUTE 495 SOUTH 117.77 110.30 6.8% 67.1% 63.2% 6.2% 79.02 69.71 13.4% Boston Suburbs Average $128.44 $119.88 7.1% 72.7% 70.4% 3.3% $93.36 $84.36 10.7% OVERALL AVERAGE $217.63 $206.01 5.6% 78.8% 77.4% 1.7% $171.40 $159.47 7.5% REPORT OF ROOMS BUSINESS BY AVERAGE DAILY RATE AVERAGE DAILY ROOM RATE OCCUPANCY PERCENT REVPAR 2015 2014 VAR 2015 2014 VAR 2015 2014 VAR OVER $200.00 $324.58 $306.50 5.9% 80.4% 80.6% -0.3% $260.87 $247.03 5.6% $150.00 TO $200.00 239.87 226.63 5.8% 82.3% 81.1% 1.5% 197.43 183.83 7.4% $100.00 TO $150.00 167.53 158.14 5.9% 76.0% 73.5% 3.4% 127.27 116.22 9.5% UNDER $100.00 104.21 97.04 7.4% 72.1% 70.3% 2.5% 75.09 68.23 10.0% OVERALL AVERAGE $217.63 $206.01 5.6% 78.8% 77.4% 1.7% $171.40 $159.47 7.5% REPORT OF ROOMS BUSINESS BY SIZE OF PROPERTY AVERAGE DAILY ROOM RATE OCCUPANCY PERCENT REVPAR 2015 2014 VAR 2015 2014 VAR 2015 2014 VAR UNDER 150 ROOMS $155.62 $146.56 6.2% 74.6% 72.9% 2.2% $116.03 $106.91 8.5% 150 TO 400 ROOMS 217.14 205.51 5.7% 77.6% 76.5% 1.4% 168.45 157.16 7.2% OVER 400 ROOMS 250.13 237.03 5.5% 82.7% 81.2% 1.9% 206.94 192.47 7.5% OVERALL AVERAGE $217.63 $206.01 5.6% 78.8% 77.4% 1.7% $171.40 $159.47 7.5% Survey includes 94 properties in the Boston area with 19,915 available rooms. SOURCE: CBRE HOTELS
Boston Area Market Mix
Boston Area Market Mix is compiled and produced by CBRE Hotels. Readers are advised that CBRE Hotels does not represent the data contained herein to be definitive. Neither should the contents of this publication be construed as a recommendation of policies or actions. Quotation and reproduction of this material are permitted with credit to CBRE Hotels.