May 11, 2016
The Boston/Cambridge market experienced declines in occupancy and average daily rate (ADR) in the month of March compared to the same period last year. The month’s occupancy was 79.6%, more than four points below its level last year, while ADR declined 2.0%. The month’s resulting revenue per available room (RevPAR) of $177.10 was down 6.9% compared to March of 2015.
Year-to-date through March, the Boston/Cambridge market had an occupancy of 69.5%, a decline of 1.5 points to last year. ADR is also down from $197.14 to $195.80, a 0.7% decline. The lodging market’s first quarter RevPAR of $136.03 is a 2.8% decline compared to the prior year.
Four contributing factors for the decline in both occupancy and rate in the first quarter were as follows:
- According to the Pinnacle’s Group Booking Pace reports, the combined Back Bay and Downtown market was down approximately 21,600 roomnights, or 9.2%, compared to the first quarter of 2015. While January and February experienced a slight decline, the bulk of the lost roomnights were from March which declined by approximately 20,900 rooms. A large portion of this decline was a result of the Penny Arcade Expo (PAX East) event which is held at the BCEC annually, bringing an estimated 26,000 attendees to the area and approximately 13,000 roomnights. This citywide took place in April this year, shifting a considerable amount of demand which was accommodated in March last year.
- The aloft and element hotels in the Seaport, the Godfrey Hotel located downtown, and the guestroom expansion at the Hotel Commonwealth combined for over 800 new rooms, all of which opened in January and February. New hotels typically encounter a ramp up period and operate at lower occupancies prior to reaching stabilization. In addition to being in a ramp up phase, these new rooms opened during Boston’s low demand period in the first quarter of 2016.
- The local market struggled through most of the first quarter as a result of the mild winter. This compares to the first quarter of 2015 when submarkets that rely on business related to Boston Logan Airport benefitted from record breaking snowfall which produced a significant amount of distressed passengers and stranded convention goers.
- Operators typically experience a lull in both corporate and group demand leading up to the Easter Holiday. The holiday came early this year, taking place on March 27th, as opposed to April the prior year.
Based on group booking reports and the aforementioned shifts in demand between March and April, we believe April will make up for some lost demand and ADR growth. One of the reasons 2015 was such a successful year for the local lodging market was its performance in the first quarter. While the City is down through March and there is new supply to absorb, Pinnacle Advisory Group is projecting the lodging market to finish the year at 80% occupancy with above inflationary rate growth.
The Pinnacle Perspective data sample is made up of approximately 80 hotel properties and over 93% of the Boston and Cambridge rooms supply. For more detailed information on the market’s performance please contact Sebastian Colella at 617-722-9916 or [email protected]
