No worries for hotel developers, investors in Atlanta

Marriott International and Noble Investment Group announced the groundbreaking of Marriott’s first-ever dual brand of an AC and Moxy, to be located on a full city block in Midtown Atlanta.

An important benchmark in the industry when it comes to hotel supply continues to be 2 percent. Generally speaking, once a hotel’s supply growth begins to creep over that threshold, people start to worry.

That’s not so much the case for Atlanta, according to Tim Osborne, VP of Atlanta-based Hunter Hotel Advisors. As of February, Atlanta’s supply growth clocked in at 1.2 percent, according to STR. Demand, meanwhile, fell 0.6 percent.

Osborne said he’s bullish on the market for many reasons, including but not limited to:

  • two new stadiums are coming to the market;
  • Mercedes-Benz is building a new headquarters there;
  • the market is home to many tech companies and startups;
  • it’s the No. 1 city people are moving to;
  • Atlanta continues to attract business from Hollywood movies;
  • it’s home to the world’s busiest airport;
  • Atlanta is lauded as the No. 1 city for income growth; and
  • it doesn’t have unions.

When looking at the diverse demand drivers, it’s clear to most investors why the market is a winning one.

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Conventions and events also are big drivers in the market. For example, Atlanta, home to two major convention centers, is set to host at least 18 citywide conventions this year. Additionally, the $1.5-billion stadium in the downtown area for the National Football League's Atlanta Falcons should further drive leisure demand when it opens this year. Major sporting events also are scheduled to be held in Atlanta: the 2019 Super Bowl; the NCAA College Football Championship in 2020; and the NCAA Final Four in 2020.

“We’re knocking down our old stadium and building a stadium for the Falcons, which, by the way, comes with a new [Major League Soccer] team,” Osborne said. “And as much as we have going on, they’re going to build a 1,200-room hotel next to our convention center, and you’ll have better and more conventions.

“It’s more rooms, yes, but when you have that inventory right next to the convention center, you’re going to get better conventions and better access—and that benefits everybody.”

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As of February year to date, the Atlanta market saw occupancy fall 1.8 percent to 66.2 percent, according to STR. Average daily rate was up 3.8 percent to $108.17, and revenue per available room rose 1.9 percent to $71.56.

Openings and Projects

According to STR, the Atlanta market has 84 hotels with 9,663 rooms under contract in the pipeline. Of those, 29 hotels with 3,946 rooms are in construction.

Most recently, Marriott International and Noble Investment Group announced the groundbreaking of Marriott’s first-ever dual brand property, which consists of an AC and Moxy. The $70-million, five-story hotel will be located on a full city block in Midtown Atlanta and is expected to open in the middle of 2018.

Atlanta-based Noble is no stranger to the AC brand in Atlanta, however. In August, the developer, along with Simon Property Group, debuted the 166-room AC Hotel Atlanta Buckhead.

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Other hotels on tap include:

  • a 166-room Embassy Suites;
  • the 264-room Omni Hotel at SunTrust Park’s Battery Atlanta;
  • the 214-room Solis Hotel at Porsche’s North American headquarters near Hartsfield-Jackson International Airport;
  • an InterContinental hotel at Hartsfield;
  • a 1,200-room hotel at the Georgia World Congress Center;
  • 186-room Hampton Inn & Suites by Hilton in Buckhead;
  • the SLS Atlanta Hotel & Residences with 214 guestrooms and 66 condos;
  • 260-room Omni Atlanta at SunTrust Park (the flagship hotel of SunTrust Park, which is the new park and mixed-used development for Major League Baseball's Atlanta Braves); and
  • the 204-room Renaissance Atlanta Airport Gateway Hotel.

Savannah in the Spotlight

Osborne said Savannah, Ga., is also a “key” market developers have their eyes on.

“They’re killing it down there. They just have really strong performance, and everyone is trying to build down there,” he said.

As of February, hotel performance in Savannah has seen across-the-board increases, according to STR data. Occupancy was up 3.9 percent to 65 percent; ADR rose 1.7 percent to $103.39; and RevPAR increased 5.7 percent to $67.18.

Although supply in the market has grown 3.2 percent, demand growth has outpaced it at 7.2 percent as of February, according to STR. The market has 28 hotels with 3,697 rooms in the pipeline. Of those, nine hotels with 1,459 rooms are under construction.