Demand at many hotels in and near Seattle has fully recovered from the impact of the coronavirus pandemic.
Occupancy is near 67% for the overall market which is still somewhat below pre-pandemic occupancy levels. With continued growth in demand and a relatively stable supply, we expect that hotel performance will continue to steadily if slowly improve in the coming year.
The extent of continued recovery in the Seattle hotel market is demonstrated by first half of 2023 results reflecting improvement over the first half of prior years. The overall market occupancy improved from 42.0% in the first half of 2021, to 60.5% in the first half of 2022 to 66.8% in the first half of 2023. Similarly, ADR grew from $104 to $169 in the same period. This translates to significant increase in RevPAR from $45 in the first half of 2021 to $117 in the first half of 2023.
Some downtown hotels still continue to struggle, weighed down by continued low office occupancy and a related reduction in business travel. However, many suburban hotel occupancy rates are at or above pre-pandemic levels, and room prices are increasing rapidly in the overall market. With the limited growth in supply, completion of the convention center expansion, continued cruise ship visitor growth, and Seattle being one of the host cities for the 2026 FIFA World Cup, the expectation is for continued steady growth in demand.
In the first half of 2023, there were 10 sales of hotels in the greater Seattle market with prices exceeding $5,000,000. This figure excludes properties that were purchased for demolition or conversion to an alternate use. Transaction volume has been holding relatively steady but capitalization rates have moved upwardly with higher interest rates and now average about 8.7%.
Six hotels are now under construction ranging in size from the 120-room boutique Hotel Westland in the Pioneer Square neighborhood of Seattle up the 253 room Nuovo Studios, an extended stay hotel in South Lake Union. The 252-room Intercontinental Bellevue is anticipated to open by the end of 2023. New hotel deliveries will result in modest new supply primarily in the Seattle and eastside suburban areas in 2024 or 2025.
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