Nashville’s hospitality scene is music to investors’ ears

Nashville is on the move, and that move is taking Music City higher and higher on the list of attractive targets for hotel investors.

“For sophisticated investors, Nashville has been on their radar for 15 or so years,” explains Jan Freitag, national director for hospitality market analytics at CoStar. “The cost of financing is high everywhere in the U.S., so the question is, can you get the required returns despite this high cost of capital? In this town, the investor sentiment is clearly ‘yes.’”

There are a couple factors currently driving visitor demand which are then, in turn, driving investor demand. Nashville International Airport (BNA) broke its passenger record at the end of its last fiscal year (May 2023), welcoming nearly 22 million people. This volume was up 18.7 percent from the previous fiscal year, which had also broken its passenger record. A $1.5 billion airport expansion that included the addition of six international gates and eight satellite gates was recently completed, while another $1.5 billion expansion is expected to wrap up in 2028.

A new stadium for the NFL’s Tennessee Titans will also welcome fans in 2027. Nissan Stadium is expected to bring its own increased attendance, especially due to its dome shape, which will allow for year-around activation. On the convention front, Nashville was ranked the No. 2 convention destination by Cvent.

All this is to say nothing about hotel activity. Occupancy was just shy of 70 percent last year, according to HVS, with an ADR of nearly $180. Nashville had about 58,000 existing hotel rooms at the end of 2023, with an additional 7,600 in the pipeline and planning stages.

Out-of-Town Investors

The biggest hotel deal to come out of Music City recently involves Host Hotels & Resorts’ acquisition of a two-hotel complex in downtown Nashville in April for $530 million. The all-cash deal includes the 215-room 1 Hotel Nashville and the 506-room Embassy Suites by Hilton Nashville Downtown.

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