Hipster Asheville props up North Carolina tourism

Asheville, N.C.

Asheville has long served as the economic center of western North Carolina, and is the county seat of Buncombe County. With only 89,000 permanent residents, Asheville has transformed over the last couple decades into one of the most vibrant cities in the southeast. It is driven economically by a flourishing tourism industry, which supports around 15 percent of all jobs in the county. The area attracted 10.9 million visitors in 2016, up from 8.9 million visitors in 2011.

Asheville hotels generate at least two-thirds of their total room night demand from leisure travelers. The largest attraction is the Biltmore Estate, which was constructed in 1895 by George Vanderbilt II and is the largest privately-owned house in the U.S. Downtown Asheville is another major attraction and provides visitors with the independent vibe that defines the city. The downtown area is characterized by its artist galleries, retail shops, Friday night drum circles, street buskers and a food and brewing culture that has received numerous national accolades.

The brewing industry contributes an estimated $934 million to the local economy. There are 36 breweries in Buncombe County, including New Belgium’s $140 million east coast brewing and distribution facility that opened in 2016. Other attractions include the Blue Ridge Parkway, U.S. Cellular Center and nearby Great Smoky Mountains National Park. The region provides numerous opportunities for outdoor recreation including fishing, hiking, boating and camping. Asheville has also become a popular location for destination weddings.

FREE DAILY NEWSLETTER

Like this story? Subscribe to Operations!

Hospitality professionals turn to Operations as their go-to source for breaking news on guest rooms, food & beverage, hospitality trends, management, and more. Sign up today to get news and updates delivered to your inbox daily and read on the go.

The corporate demand segment in Asheville accounts for around one-quarter of total lodging demand. Major employers consist of Mission Health System, VA Medical Center, Biltmore Company, Eaton Corporation, Thermo Fisher Scientific and Borgwarner. Buncombe County has an unemployment rate of 3.2 percent, the lowest rate out of North Carolina’s 100 counties.

Asheville’s Biltmore Estate was constructed in 1895.

Hotel Market Trends

Asheville (Buncombe County) is a mid-size lodging market with 63 hotels representing 7,100 rooms that report to STR. The lodging market has a variety of accommodations ranging from resort hotels, franchised hotels, “mom and pops,” B&B/Inns and an active short term rental market with Airbnb.

The lodging market has become less seasonal in recent years, although summer and October leaf viewing season remain the most popular time for travel. There are frequent sell-out nights at premium rates during these prime travel times. The shoulder seasons have expanded, as more people are visiting the area during the traditional non-peak months of November through March. The city is also located at the intersection of two heavily traveled north-south and east-west corridors, I-26 and I-40. As such, more travelers have begun utilizing the area as a stop-over destination on their way to other locales.

Over the previous five and a half years (2011-June 2017), room night demand in Buncombe County has increased at an average annual clip of approximately 7.5 percent versus new supply, which has grown at 4 percent annually. As a result, the average market occupancy has grown from 63 percent in 2011 to the market peak of nearly 74 percent in 2016. The ADR in Asheville has increased at an average annual rate of 6 percent over this same period and remains just shy of $150.

Strong growth both in occupancy and ADR has resulted in impressive revenue per available room growth for Buncombe County hotels. RevPAR bottomed out in 2009 in the low $60s, and peaked in 2016 at around $109. This represents an impressive compound annual growth rate of 8.4 percent during this 7-8 year up-cycle. Interestingly, the pace of RevPar growth began to trail off in 2016 and actually posted its first decline of 2 percent through June 2017 year-to-date due to new supply negatively impacting occupancies.

Asheville has outpaced both state and national averages in RevPar growth from 2012 through 2016. RevPar is down year-over-year through the 1st half of 2017 as new supply has begun to impact the market.

New Hotel Development

Hotel developers have taken note of the Asheville lodging market as the area is in the midst of its largest hotel development boom in city history. New hotel development is taking place not only in downtown but throughout the various Asheville submarkets. Almost all of the new hotels are classified within the upper-midscale and upscale segments, with the exception of three upper-upscale hotels. Hilton and Marriott-branded product represent 51 percent of the city's new supply with 15 recently opened or proposed hotels.

The following chart summarizes a list of recently opened, under construction or planned hotels in in the Asheville/Buncombe County area.

Following nearly a decade of limited new hotel development, there were 10 hotels with 1,267 rooms that opened from September 2015 to September 2017. An additional 6 hotels with 607 rooms are under construction, and 13 hotels representing 1,236 rooms are in the planning stages. The recently opened, under construction and planned hotels represent a total of approximately 3,100 rooms, which is around 44 percent of the total market supply from early 2015. Going forward, it is unclear how many of the planned hotels will come to fruition as construction costs continue to rise, new development lending tightens and market conditions continue to shift.

Future Outlook

The city of Asheville and its lodging market have grown substantially over the last several years. Subsequently, the city has seen and will continue to see an influx of new hotels added to the market over the next few years. The degree to which the market will soften in the coming years will ultimately depend on a number of factors including how many proposed hotels will be realized and how long it takes for the market to absorb the new supply. Many local participants remain bullish on the long term future of Asheville, which has solidified itself as a major regional and national tourist destination.

Zach Spurgeon is a senior associate at Hotel & Club Associates, a national real estate appraisal and consulting firm specializing in hotel, golf and country club properties. Zach holds a MAI designation and has more than 10 years of hospitality related experience. He holds a bachelor of science degree in business management from N.C. State University, and a certificate from Cornell University in hotel real estate investments and asset management. Contact him at [email protected]

Suggested Articles

The country's first Radisson hotel will open in late-2021 in the city of Perm.

Ahead of next year's IHIF in Berlin, Corinthia's SVP/Hotel Development Paul Pisani shared how the company is wrangling new trends in luxury travel.

The company experienced an 0.8 percent decline in revenue per available room in constant currency and a 1.9 percent decline at actual exchange rates.