Diverse demand drivers drive Columbus hotel development

COLUMBUS, Ohio—There’s strong reason for developers to look to the Columbus, Ohio, market as it offers a diverse set of demand drivers, according to sources. The market houses a university with more than 50,000 students on its campus and solid corporate demand with a good balance of leisure business. The city also enjoys relatively low barriers to entry.

“Columbus is pretty active, more so than we’ve seen in recent years,” said Stacey E. Nadolny, managing director and senior partner at consultancy HVS. “There’s also a lot of local developers that are active in the market.”

As of July, the market had 247 hotels with 26,813 rooms open, according to STR. Meanwhile, demand growth (+1.4 percent) has outpaced supply growth (+0.8 percent).

Nadolny said 2015 was a record year for Columbus, with the market selling more rooms than ever before, and she said that hasn’t slowed down in 2016. Year-end 2015, Columbus sold about 6.3 million roomnights, according to STR data. Year-to-date July, the market has sold about 3.8 million roomnights.

Supply Driven by Diverse Demand

Columbus had 27 hotels with 3,111 rooms in its pipeline as of July, according to STR. Of those, 10 hotels with 1,176 rooms were under construction.

Nadolny said most of that development is centered around the downtown area, with 75 percent coming online downtown or in the Ohio State University and Grandview areas.

“There’s a movement of people wanting to be downtown and near demand generators,” she said.

Bob Habeeb, president and CEO of First Hospitality Group, said that new supply will be absorbed better than it would in other markets. The hotel management company has 46 hotels with 7,300 rooms in its portfolio, including two hotels in Columbus. Also in its portfolio is the highly anticipated 150-room Hotel Leveque Autograph Collection (pictured above) opening in Columbus this year.

Some other projects in the works for Columbus include a Canopy by Hilton, AC by Marriott and Home2 Suites by Hilton.

“We’re at the point in the cycle where supply and demand will hit equilibrium,” Habeeb said. “We will have oversupply in some markets. While in place in Columbus, there’s’ good, strong demand. We think it will balance out.”

Nadolny agreed that Columbus isn’t in danger of oversupply issues. She said some submarkets might feel an impact, but overall Columbus is a strong, stable market with a diversified economy and demand drivers. The market is also in a great location, with a huge transportation center and access to two major interstates, she said.

“Columbus gets a lot of national press for attracting young people with lots of places for millennials to live,” Nadolny said. “It’s driven by the university and also it’s got a little of everything: convention center, easy to get to from six-hour radius, population size and major employers are diverse and stable and active in employing.”

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Additionally, the city’s convention center is undergoing a renovation and expansion and should be completed next year. This newly renovated center is expected to drive more demand to the market.

Nadolny said the majority of the new supply is coming in the way of new-construction projects as there is less opportunity for conversions and downtown vacancy is relatively low. She said Columbus holds a strong residential market, with recent college graduates driving such projects as condos and apartments.

The Fairfield Inn & Suites Columbus Airport

Performing Strong

Nadolny noted that last year Columbus experienced great revenue-per-available-room growth over 2014. In 2015, RevPAR grew 8.7 percent to $64.48, according to STR. Average daily rate was up 5.5 percent to $99.28, and occupancy was up 3 percent to 65 percent.

Nadolny said a good case study for how hotel performance potential in Columbus is seen from the Le Méridien Columbus, The Joseph, which opened in the Short North Arts District in January 2015.

“Putting a luxury hotel in downtown Columbus was iffy, but it has shown that the right product in right location can work,” Nadolny said. “It’s the highest rated hotel in city and the first true luxury hotel in the city. It’s what [the new] Autograph is trying to emulate.”

This year, Columbus hotels are still experiencing growth, driven mostly by ADR. As of year-to-date July, RevPAR is up 2.3 percent to $67.21. ADR is up 1.8 percent to $101.55, while occupancy is up 0.5 percent to 66.2 percent.

Habeeb said he couldn’t be happier with how his Columbus hotels are performing this year. “We’ve been [in Columbus] about 10 years, and we’ve had a great run," he said. "We’ve been very happy in particularly this year.”

Interested in developing in Columbus? Want to learn more about what’s going on in the Ohio market and Midwest hotel development and investment overall? These topics and more will be covered at NATHIC Midwest, Nov. 16 and 17, at the InterContinental Hotel Chicago Magnificent Mile. To learn more about the event and to register, click HERE.