Strong growth in rates, occupancy driving new hotels in Charlotte

Thousands of hotel rooms will open in Charlotte over the next several months — some in the coming weeks. The influx will include some flags new to the Queen City, including Kimpton Hotels, a San Francisco-based company that’s recently made a big push into the Southeast, and Marriott International’s AC Hotel, a design-centric brand popular in Europe. There’s an upscale boutique option coming to the former Ivey’s department store on North Tryon. Then there are a few new hotels with established flags here — a Residence Inn being built on top of the AC Hotel at the EpiCentre, a SpringHill Suites across from Spectrum Arena and an Embassy Suites in Second Ward.

“We have a booming market right now,” said Vince Chelena, executive director of the Charlotte Area Hotel Association. “As far as business travel, we’re doing extremely well. The (Charlotte Regional Visitors Authority) is doing a great job working with hotels to drive convention traffic. I think developers are looking at Charlotte long term and want to be in (the market).”

SREE Hotels is building a 195-room SpringHill Suites next to the Center City Green parking deck.

SREE Hotels is building a 195-room SpringHill Suites next to the Center City Green parking deck.

SREE Hotels, based in Charlotte, has developed a number of hotels locally but its 195-room SpringHill Suites next to the Center City Green parking deck is its first in uptown.

Vinay Patel, president and CEO of SREE, said the firm looks at hotel brand availability and site location before embarking on a project. And while SREE has pursued a few opportunities in uptown, the explosive growth of Charlotte’s downtown and a diversifying local economy made the timing right to build in center city.

“We’ve been in Charlotte since 1980 as a company,” Patel said. “The uptown market has developed nicely, with arts, conventions, sports; it’s no longer just a purely corporate destination.”

Kimpton decided to enter the Charlotte market — and broader Southeast — for similar reasons, as the whole region is experiencing accelerated growth. In addition to the uptown hotel, slated to open in the fall, Kimpton is planning a 128-room project in Dilworth.

“For us, our pipeline has never been stronger,” said Mitch Linder, Kimpton director of operations in the Southeast. “The Southeast, in particular, continues to be an area of interest and expansion for us, largely driven by demand generated by job growth and demographic shifts in that part of the country. Like Charlotte, many of the cities in the Southeast are young cities.”

The CRVA tracks performance metrics for Charlotte hotels and, according to results from fiscal year 2016, the market continues to strengthen.

Fiscal year 2016, which concluded June 30, ended with 73.1% occupancy, an average daily rate of $107.27 and $78.41 revenue per available room, all increases from fiscal year 2015. More than 6.5 million rooms were sold in Mecklenburg County between July 1, 2015 and June 30, 2016. That was more than 150,000 additional rooms than the previous year. Total hotel revenue was $698 million in fiscal year 2016, up 8% over the prior year.

Chelena predicted occupancy and rental rates will remain strong, even with the new supply coming online. More than 2,000 hotel rooms are under construction or planned, with 1,000-plus of those delivering in the next 12 months. He cited Charlotte’s strong business environment as a key driver for the robust market.

Patel, who sat on the CRVA board of directors for six years, echoed Chelena’s comments, indicating the city needs new rooms.

“Our economy has been pretty robust from a hospitality and corporate travel standpoint,” he said. “When you lure in conventions and events, it creates a more robust environment. The growth has to be systematic — you have to build the right thing, the right size, and let it get absorbed by the demand.

“As an industry, it’s a very cyclical business,” he continued. “I don’t think we’ve plateaued. It’s a normal business environment. 2016 was a very good year; occupancy is maybe leveling (and) rental rates are pretty solid.”

Ashley Fahey
Staff Writer
Charlotte Business Journal

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