Strong tourism numbers are good news for Washington’s hospitality industry

April 21, 2013

Anyone riding the Metro to work or to any of the area’s many points of interest this spring no doubt has realized something recently: We have a lot of company.

Metro officials confirmed that the system logged its fourth-heaviest day of trip volume (on April 11, a Wednesday) in its 37 years of operations, with more than 870,000 trips. In addition to the usual throng of commuters coming and going from work, the Nationals were in town hosting one of their early games of the season, along with a flood of tourists in town for cherry blossom season.

Each year, Washington accommodates millions of domestic and international travelers in town to conduct business or explore the monuments, national treasures and halls of decision-making. Playing host to these throngs is not only a function of being one of the most important global gateway cities, it is also big business for the area because those tourists need places to stay, food to eat, transportation to landmarks and maybe a little entertainment beyond the National Mall. Indeed, the tourism industry generates a healthy 13 percent of the District’s revenue.

This is just one source of steady growth for the area. According to the Metropolitan Washington Airports Authority, passenger traffic through Reagan National Airport hit a record high last year, at 19.2 million travelers, and total air passenger volume in the region ended the year strong with year-over-year growth of 1.7 percent as of December 2012.

The real estate sector that most directly benefits from this growth is the hospitality sector. Over the past decade, Washington’s destination status has been demonstrated by cumulative demand growth for hotel room nights that has outpaced the U.S. average by 10 full percentage points.

One advantage that the region’s hospitality industry boasts is a balance between business (49 percent) and leisure travelers (51 percent), which provide a counter-cyclical buoy for demand. That was particularly evident over recent weeks, as tourists piled in to the area to catch coveted glimpses of our famous cherry trees at their peak bloom, offsetting what could be a reduction in demand resulting from the current stymied business environment.

However, despite the record numbers of visitors, all hotels are not benefiting equally from the influx of visitors. Location and cost also seem to come into play, as indicated by recent reports on stagnant room rates among District hotels.

The decline in demand for hotel rooms in D.C. proper despite net positive demand growth in the region may simply be a matter of tourists exhibiting price sensitivity and opting to stay outside of D.C., where hotel rooms are a lot cheaper. Of course, that would also help explain the recent record Metro ridership.

Erica Champion is a senior real estate economist with CoStar Group in Washington.

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