Heidi's Market of the Month: Atlanta,
GA
Each month, I'll bring you an overview of a different
hotel market, highlighting where we see opportunities for hotel owners and
investors. First up? HVMG's headquarters city: Atlanta, Georgia.
As the saying goes, "Atlanta influences everything." The
largest metropolitan area in the Southeast, Atlanta is home to the world's
busiest airport, one of the top five largest convention centers in the U.S., 13
Fortune 500 and 24 Fortune 1000 headquarters, Mercedes-Benz Stadium, Truist
Park, and several popular tourist attractions, such as World of Coke and Georgia
Aquarium.
The Big Picture: With the addition of new upper-upscale
and luxury supply and a softening of weekday occupancy, Atlanta has experienced
a slight RevPAR decline. Hotel transactions have lagged behind annual averages
for the last two years. The silver lining is that we see excellent
opportunities for value-add hotel investments, particularly in the second half
of 2025 if interest rates come down and the buy/sell spread continues to
lessen.
Year-to-Date Trends: In keeping with national trends, the Atlanta hotel market noted a slowdown in the first quarter of 2024; this was in part due to several non-repeating citywide events, such as the AHR Expo in February and the Helicopter Expo in March. The addition of high-end assets, such as FORTH Hotel Atlanta and the Signia by Hilton, helped with overall ADR growth; however, this supply, coupled with a general decline in occupancy, led to a RevPAR performance decline of 1.7% through August. While weekday occupancy has been the most impacted, group demand did note an increase of 3% through August.
New Supply: Atlanta continues to have steady supply
increases. According to CoStar, there are 28 projects with about 3,1000 hotel
rooms under construction as of August 2024, which equates to 2.7% of the
market's existing supply. More than 2,200 rooms opened in 2023, and in January
2024, the 976-room Signia by Hilton Atlanta opened, Atlanta's largest ground-up
hotel development project in 40 years. The addition of this asset is expected
to drive ADR in the market and allow the Georgia World Congress Center to accommodate
more and larger citywide conventions. Hotel investors can leverage this by
renovating or converting existing product to be more competitive.
Transactions: Given the challenging capital market
environment and conditions in the debt markets, sales continue to lag based on
historical data. In the past 12 months, only 43 hotels traded, compared to a
typical 70 for the market. The average sale price per key was roughly $103,000,
up from approximately $89,000 per key in 2023. These sales come from the
suburban areas, while no hotels in the CBD have traded this year or last.
As one of the largest hotel management companies in the
Atlanta metro, we continue to feel optimistic about the market. Large events
continue to announce plans to come to Atlanta, such as FIFA; in 2025, Atlanta
will host the 2025 Club World Cup Tournament, and the city will host eight
games during the FIFA World Cup in 2026. Furthermore, the Mercedes Benz Stadium
will also host the 2025 College Football Playoff National Championship. Projects
like as Centennial Yards, a $5 billion mixed-use development, will create
further demand for the area, creating jobs and revitalization in Downtown
Atlanta.
Have a market you'd like to know more about? Reach out to discuss!
