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Hotels surrounding expanded convention centers record an average $79M revenue premium over five year period; Dallas, Las Vegas, San Diego, Atlanta and Phoenix reap rewards
Dec. 5, 2012 – Hotel owners would do well to promote an expansion of convention centers in their markets, according to Jones Lang LaSalle Hotels’ newest research study, FocusOn: Convention Centers Impact on Hotel Markets. In urban markets where convention centers have undergone a major expansion, hotel revenue premium over a five year period averages $79 million[i]. The report, which examines 15 urban hotel markets[ii], finds a strong correlation between convention center attendance and revenue per available room (RevPAR) and shows the positive effects construction or development of convention centers has on those markets.
“Convention centers are often the single largest demand generator in hotel markets, and over the last decade we’ve seen cities expand their convention centers one or more times to accommodate demand, or simply reconstruct from scratch,” said Greg Hartmann, Executive Vice President for Jones Lang LaSalle Hotels. The firm’s report confirms the thesis that the expansion of a convention center, in most cases, has a positive impact on hotel RevPAR performance making it a key driver in investment decisions.
For the 15 markets assessed in the study, real (inflation-adjusted) hotel RevPAR increased by an average of 0.4 percent per year over the historic time period reviewed. The analysis yielded a measurable impact that, of various convention center expansions:
• three years after an expansion was completed, real RevPAR increased on average 2.2 percent per year, versus the alternative (no expansion) in which the real RevPAR increased on average by 0.4 percent per year• five years after an expansion was completed, real RevPAR increased on average 1.6 percent per year, versus when no expansion took place, real RevPAR increased on average by 0.4 percent per year
“Convention Center expansion and attendance are major drivers that increase RevPAR premiums. This correlation will likely drive up hotel values, and should significantly inform investors looking to expand from their current core gateway markets,” added Andrea Grigg, Senior Vice President for Jones Lang LaSalle Hotels. “Long term convention center attendance growth rates for the 15 markets included in the study averaged 4.2 percent per year, meaning markets like Dallas, San Diego, Atlanta and Phoenix, whose RevPAR is highly correlated to convention center attendance, will likely remain stable. While convention centers saw a decrease in attendance during the recession, most large centers rebounded with notable growth in 2011.”
In addition, the report also analyzed the ties between convention center attendance and real RevPAR in order to assess how significant the impact of a convention center is on the metro-wide lodging market. In Las Vegas, the lodging market’s performance is highly correlated to annual attendance figures at the city’s three main convention venues. The same holds true for Dallas, San Diego, Phoenix and Atlanta. Markets that showed a medium correlation include Washington D.C., New Orleans and Chicago.
Hartmann added, “We project annual growth in convention attendance levels to range from two to four percent, implying a slowdown in growth over the long-term historic average as the market matures. On the other hand, international attendance levels are rising more rapidly than they have in the past and hotel investors should keep an eye on the construction, expansion or renovation of convention centers to gauge the potentially significant impact of convention attendance or the boost of compression resulting from a citywide convention, as it relates to the value of their asset.”
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