"We like the Florida market in general and Jacksonville in particular," said Jatin Desai, CIO of Peachtree Hotel Group, which has been active in north Florida in several segments. Last month, the company paid $15.8 million for the 159-room Sheraton at St. Johns Town Center and plans to spend $4 million to upgrade the property.
"Like other submarkets in Jacksonville, St. Johns Town Center has a lot of corporate offices and great leisure business on the weekends, plus the group business coming to the area," Desai said. "It has a significant seven-day business stream."
Through an affiliate, Peachtree was involved in another recent acquisition in the market. One of three properties acquired by Condor Hospitality Trust (previously Supertel Hospitality) for $42.5 million is a 120-room Courtyard by Marriott in Jacksonville. Peachtree's management affiliate operates all three properties.
According to Visit Jacksonville, the market has had 20 months in a row of positive gains in revenue per available room. In July, the city booked a record 34,549 roomnights for the month, well above the previous month record of 19,912 roomnights set in July 2007. During July, 25 groups had booked space in the city.
"Jacksonville is an interesting market because while most of the cities in Florida are tourism-focused first and the balanced focused on business, it's the opposite in Jacksonville," said Bernie Moyle, COO and CFO of Vantage Hospitality Group, which recently purchased a former Wyndham near downtown Jacksonville and converted it to the 323-room Lexington Hotel & Conference Center.
Moyle said one reason Vantage was attracted to Jacksonville was because of the size of the hotel market.
"It's a tier-two market, in the top 50 but not among the top 25 hotels markets, which makes it relatively affordable for acquisitions," he said. "The acquisition parameters were perfect for us. At the end of the day, with a full renovation to the rooms, meeting spaces, exterior, pool and porte cochere we will be into the property, including purchase, for less than $90,000 a door."
Year-to-date through May, the Jacksonville hotel market posted a 71.6-percent occupancy, up from 68.9 percent for the same period in 2014. Average daily rate for the first five months of 2015 was $101.10, up 7.4 percent; and revenue per available room rose 11.9 percent. During the same time, hotel supply in the Jacksonville market increased by 0.2 percent.
Several Jacksonville submarkets have performed even better. Occupancy in the beachside submarket was 77.8 percent year-to-day through May, with RevPAR up 16.1 percent. Other submarkets with double-digit increases in RevPAR include Arlington, up 21.1 percent; northside/airport, up 19.6 percent; westside, up 12.5 percent; and southside/Mandarin, up 11.8 percent.
The city's hotels should get a boost this fall, when the University of Notre Dame and Navy football teams play in Everbank Field, home of the Jacksonville Jaguars. Jacksonville also hosts the annual Georgia-Florida football game, which this year will be held a week before the Notre Dame-Navy contest.
ROOM IN THE PIPELINE
Despite the city's robust economy and strong hotel performance metrics, the Jacksonville development pipeline is relatively light.
According to Lodging Econometrics, 14 hotels with 1,560 rooms are in the pipeline. Two properties are being built, construction will start on 10 more in the next 12 months, and two more hotels are in the early planning stage of development.
One hotel is forecast to open before the end of the year, and five will debut in 2016.
The Jacksonville market is the 42nd largest in the U.S. with 244 hotels and 26,474 guestrooms. About half of the market's inventory (in terms of rooms) are in midscale and economy hotels with the remainder divided between luxury, upper-upscale, upscale and unbranded properties.