Nashville, Tenn., continues to be a darling of hotel developers and investors, alike. The latest news: Chicago-based investment firm Walton Street Capital bought the 337-room DoubleTree by Hilton for nearly $70 million, or around $207,000 per key.
Walton Street is no stranger to The Music City, having bought the 220 apartments at Velocity In the Gulch two years ago.
The acquisition by Walton comes at a heady time for the city. The Tennessean, using STR data, cites Nashville's 19.6-percent growth in revenue per room for the first five months of this year, which ranked No. 1 among the top 25 U.S. hotel markets. Consider the national average of 8 percent and you can see quickly why real estate developers and owners want to get in while the getting is good.
Further, for this year's first five months, Nashville's average occupancy was 70.3 percent vs. 66.8 percent last year. The average daily room rate was $113.78 vs. $100.50 last year, according to STR.
As The Nashville Business Journal writes: A dominant theme in Nashville real estate today is the volume of outside investors trying to establish a foothold.
"You're going to see more of these over the next six months," Chuck Pinkowski, a Memphis hospitality industry consultant, told The Tennessean, also predicting more acquisitions of hotels in the Nashville area.
There are pending sales. Among them, Dallas-based Crow Holdings has a deal to buy the 300-room Franklin Marriott Cool Springs and ARC Hospitality Trust has a contract to buy the 127-room Hampton Inn & Suites in Franklin. The Hampton Inn & Suites Nashville Downtown across from the Music City Center is said to be under a contract for roughly $300,000 a key.
Developers are keen, too. In May, 21c Museum Hotels, a boutique hotel company and restaurant group, said it was buying a historic downtown building with plans for a new luxury hotel. It has other properties already in cities such as Cincinnati and Louisville.
The sale of DoubleTree by Hilton comes seven years after a joint venture that included hospitality development and management firm Wright Investment Properties of Cordova, Tenn. and Boston-based real estate investment firm AEW Capital Management paid $50 million for the hotel.
So, how long will the good times last? Mark Bloom, a Nashville real estate investor, told The Tennessean that with luxury properties in some of the top MSAs selling for more than $1 million per key, prices of luxury hotels in downtown Nashville are starting to approach valuations of $400,000 a key.
"Nashville has hit the big time as far as lodging valuations around the nation," he said.