How Many Hotels is Too Many?
Writing about the Old Post Office a couple weeks ago, I theorized that downtown's hotel market might be "saturated," even though most proposals for the building's redevelopment involve a hotel component. That observation was based on the fact that there are so many hotel rooms in the pipeline: 1,600 by the Convention Center, another 238 in the West End, and 400 at CityCenterDC. Meanwhile, it looks like tourists are more are more willing to take a risk on previously-unattractive New York Avenue options. Is it really a good idea to get rolling on another big luxury hotel downtown?
Well, let's look at some numbers. According to data from Smith Travel Research, in the last few years at downtown's 27 hotels, room rates (dollars per night) and occupancy rates (rooms rented per night) trended up sharply, even as supply (rentable room nights per year) rose as well, after a dip in the mid-2000s when a few were down for renovation. It's clearly a robust market.
But what happens when you add another 2,200 rooms to the mix? In the downtown Business Improvement District, there are about 9,600 rooms total, meaning supply is going to expand by 23 percent over the next three years or so. D.C.'s convention market may still be strong, and the private sector still hiring even as the feds slow down, but that's a lot of new capacity to get absorbed all at once.
Of course, that doesn't mean that a unique, luxury hotel right by the White House wouldn't do just fine. Especially if they have a foreign dignitary rate.