The debate is ongoing as to whether the Indianapolis market is undersupplied with hotels.
Lisa Wallace, senior communications manager for conventions and meetings at Visit Indy, said the convention and visitors bureau is in the middle of its Tourism Master Plan, which is a roadmap to determine where the city’s tourism should be by 2025.
“Over the past two years, during feedback collection from business and community leaders, two topics routinely brought up were if we need to expand the convention center and add more hotel rooms,” she said.
As of July, the Indianapolis market had 279 hotels with 31,185 rooms open, according to STR. Looking at data back from 2010 to present, that supply number has been almost stagnant, with supply ranging from 274 to 280 hotels and rooms never hitting the 32,000 mark throughout the past six years.
As of year-to-date July, supply growth is flat at 0.1 percent, while demand has grown 1.9 percent, according to STR data.
“Supply has declined in 2012, ’13 and ’14, which is definitely different from the national average,” said Jan Freitag, SVP at STR.
The most recent data from STR shows the market has 23 hotels with 2,733 rooms in its pipeline. Of those, six hotels with 693 rooms are under construction. Eleven hotels with 1,148 rooms are in the final planning phase.
Get a behind-the-scenes look at what's to come for Ironworks Hotel Indy! https://t.co/GwcT57rLdA— Ironworks Hotel Indy (@IWHotelIndy) October 5, 2016
“The hotel rooms that are planned right now [for Indianapolis] would have no impact at all on existing business and it probably will help grow more of the existing business,” said Bharat Patel, chairman and CEO of Sun Development & Management Corporation.
Indianapolis-based Sun Development has five hotels in the Indianapolis market with more rooms under development. Downtown, the company is adding 460 rooms. In Indianapolis suburbs, the company is adding 375 rooms. All in, Sun Development will add 835 rooms to the whole Indianapolis market.
“Back in 2003-04, we commissioned a study that ultimately determined there was sufficient demand to support a new headquarter hotel and convention center expansion, and that resulted in an expansion of the Indiana Convention Center and the JW Marriott coming online in 2011,” Wallace said.
“The market has performed well since 2011, and we saw back-to-back record breaking convention bookings in 2014 and 2015,” she added.
Visit Indy recently commissioned HVS to do a feasibility study to determine if there is demand for additional rooms, and if an increase would be sustainable. Wallace said the results are not available yet, and HVS declined to comment on the Indianapolis market when HOTEL MANAGEMENT reached out.
Patel said the market’s low supply has created opportunity for his company to develop so much in Indianapolis.
“Downtown has lost a hotel that was a convention center hotel at the [Indiana University-Purdue University Indianapolis] campus, which was a huge hotel,” he said. “That in itself has created an opportunity to do a 200-room brand at the IUPUI campus.” The hotel to which Patel referred is the 278-room University Place, which closed in 2012.
Sources said that Indianapolis is a solid market for hotels.
“It’s a market that’s sort of right in the middle of everybody else, and their [revenue-per-available-room] growth is a little bit stronger than the average,” Freitag said.
Year-to-date July, revenue per available room was up 7.4 percent to $72.96. Average daily rate was up 5.4 percent to $107.60, and occupancy was up 1.8 percent to 67.8 percent.
“We like where the business has gone in the last five years and with future bookings and the things to come,” Patel said, citing conventions and mega events for the market.
Patel said the market offers many demand drivers, such as hospitals and university campuses with about 50,000 students.
“Looking at the six-, seven-year trend and looking at how occupancy has stabilized even through the slower times, I think that’s the ticket for us to bring in a fresh, new set of rooms,” he said.