Downtown St. Louis Hotels Were Taken Over, But Observers See Improving Market
Date Posted: April 18, 2023
Posted In: News, Projects,
From St. Louis Business Journal: Word that two downtown St. Louis hotels were put into receivership raised concerns among some about the local market, but industry observers say it appears healthier than those events would suggest.
The key metrics most prized by hotel operators, including revenue per room and average daily rate, so far this year have returned to levels near or exceeding 2019, before the pandemic. And although statistics are often calculated across the region, operators of downtown hotels told the Business Journal they have seen business approach 2019 levels even as convention traffic and corporate travel have not yet fully returned.
That bodes well for the future viability of the market and could explain why most major new mixed-use projects proposed downtown feature new hotels, analysts said. But as construction costs surge and the city reprioritizes development incentives, experts said that could change in future years. Even taking into account the struggles of some downtown hotels due to the pandemic, existing hotels might benefit without new competitors, one analyst suggested.
Although the receiverships could give some lenders pause, projects will still be vetted on a case-by-case basis, analysts said.
“If the question is would we run the other way with our hair on fire screaming if somebody proposed that we do another loan in St. Louis, no, that’s not the case,” said Bill Schachat, managing director for Access Financial, the Atlanta-based construction lender to one of the hotels that was put in receivership, the Home2Suites/Tru by Hilton, 1221 Locust St.
Hotel metrics rebound, conventions still off
Hotels in St. Louis and elsewhere hit rock bottom during the pandemic, and haven’t regained all the corporate travel and convention visitors that were lost during that period. But local hotel managers like how the market is recovering, and statistics seem to back that up.
“There’s no indications that the (St. Louis) hotel market is doing poorly,” said Colin Sherman, director of hospitality analytics for data and analytics firm CoStar Group, which publishes data on markets through its affiliate STR.
Although occupancy is down from 2019, the current average daily rate in St. Louis is about 20% higher than before the pandemic, said Bruce Ford, senior vice president and global business director of Portsmouth, New Hampshire-based consulting firm Lodging Econometrics, which publishes data on the hotel industry.
“You pay about 20% more to stay in a hotel today than you did in 2019, but you’re still not selling quite as many rooms as you did in 2019 on a daily basis,” Ford said. “That is very much in tune with what the national average is right now. I’m not quite selling as many rooms, but I’m selling them for more.”