In April 2024, the trailing 12-month occupancy rate of 70.2% for the overall market was still below pre-pandemic occupancy levels but steadily improving.
Demand in the Seattle CBD submarket continues to be hampered by a lack of business travel compared to prepandemic levels, but leisure travel is tracking to match 2019 levels this year according to data from Downtown Seattle Association. With continued growth in demand and a relatively stable supply plus rising room rates, we expect that hotel performance will continue to steadily improve.
The extent of continued recovery in the overall Seattle hotel market is demonstrated by 2Q24 results reflecting continued improvement since the start of the pandemic in 2020. Immediately before that, trailing 12-month occupancy was 73.5% in 1Q20 which fell to 32.6% in February of 2021. Overall market occupancy rose to 53.1% in 1Q22, to 66.8% in 4Q23 and to 68.5% in 2Q24. ADR fell from $160 in 1Q20 to $100 in 1Q21 with the onset of the pandemic. It has since consistently improved notching $177 in 2Q24. This is a significant increase in RevPAR from $35 in 1Q21 to $122 in 2Q24 which is above the RevPAR of $118 in January 2020 just prior to the pandemic.
Some downtown hotels still continue to struggle, weighed down by continued low office occupancy and a related reduction in business travel. However, most suburban hotel occupancy rates are at or near pre-pandemic levels, and room prices have increased rapidly in the overall market and all submarkets. With 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 2Q24, there were 3 sales of hotels in the greater Seattle market with prices exceeding $10M. This includes the sale of the 256-room Seattle Hilton for $268,555/room. The buyer will rebrand to hotel as Coast Seattle after a significant renovation. Transaction volume has fallen significantly with the rise in the interest rates. Capitalization rates have risen and now average about 8.8%.
Six hotels are now under construction ranging in size from the 120-room boutique Hotel Westland in the Pioneer Square neighborhood of Seattle up to the 223-room Trademark Collection, a limited-service hotel in Redmond. The 252-room Intercontinental Bellevue is anticipated to open in mid-2024. New hotel deliveries will result in modest new supply primarily in Seattle and Eastside suburban areas in 2024 or 2025.
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