Performance of D.C. area hotel market possibly affected by sequestration

September 1, 2013

Although the Washington region’s tourism sector appears to be running strongly this summer, there are signs business travel to the region is beginning to take a hit as federal spending slows and sequestration kicks in.

The District welcomed 18.9 million visitors in 2012, a 5.6 percent increase over the 17.9 million visitors in 2011, according to the city’s marketing group, Destination DC. Through the end of July, the Smithsonian Institution venues recorded a total of 20.7 million visitors, compared to 29.9 million during all of 2012.

Overall air traffic in the region has remained steady, with about 42.2 million passengers going through Reagan National and Dulles International airports in the 12-month period ending April 2013. But the two airports performed differently: Traffic was up 6.6 percent at Reagan National and down 4.6 percent at Dulles compared with the same period in the previous year.

The performance of hotels locally trailed that of the industry nationally, as the region dealt with federal spending cutbacks. In the Washington area, average hotel occupancy through July was 68.9 percent, down 1.2 percentage points from the same period in 2012, according to Smith Travel Research. The average daily rate was up 1.2 percent compared with 2012. With a 0.8 percent increase this year in rooms available, revenue per available room, a key performance metric, has fallen by 0.6 percent compared with the same period in 2012.

Nationally, average daily rates are up 4 percent this year, compared to 3.5 percent in the South Atlantic region of the country, which includes the District, Maryland and Virginia.

The Washington area ranks sixth in average daily rates among all metro areas at $148.59, behind New York, Oahu, Miami, San Francisco and Boston. It exceeds the national average of $109.95 by 35 percent.

The hotel development pipeline is quite active in the region. As of mid-year 2013, there were almost 3,000 rooms under construction and another 4,300 rooms that should start construction within the next year. Openings in the District this year include the Capella Hotel (49 rooms) and the Graham (57 rooms), a 149-room Courtyard by Marriott, and a 116-room Hampton Inn. New hotels in the suburbs include a 148-room Hyatt House in Fairfax and a 183-room Residence Inn on North Quincy Street in Arlington.

David Parham is senior vice president at Delta Associates. Staff at Delta Associates contributed to this article. For more information, please visit www.deltaassociates.com.

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