The downtown hotel market has a high occupancy rate, rising rates, and many more rooms in the development pipeline.
The occupancy rate for downtown's 1,798 hotel rooms rose to 67.7 percent in the first seven months of 2012, up from 64.9 percent a year earlier, according to Smith Travel Research, a research and consulting firm. The national occupancy rate for the same period was 62.3 percent (see table below). Downtown Buffalo occupancy rates ranged from a low of 45.5 percent in January to 82.7 percent in June. Industry standards suggest it takes a 60 percent occupancy rate for a hotel to break even.
Hoteliers are responding by hiking prices: For the first seven months of the year, the average downtown daily room rate rose to $107.84 up 4.4 percent from the same period in 2011. Room demand has increased from 226,687 rooms booked from Jan-July 2010 to 237,987 in the same period in 2011, and 250,738 this year. Revenue per available room (RevPAR), a key metric that accounts for both occupancy and room rate, rose from $61.77 in 2010 to $67.04 in 2011 to $73.05 in 2012.
For all of Erie County's 9,163 rooms, the January through July occupancy rate was 65.7 percent, up from 64.3 percent for the first seven months of 2011 and 61.6 percent in 2010. There were three hotels with 326 rooms added outside of downtown from January 2011 through July of this year. The average daily room rate from January through July was $93.05, an increase of 3.8 percent for the same period in 2011. Revenue per available room (RevPAR) went from $53.52 in the January to July 2010 period to $61.17 in the same period this year.
Room demand in Erie County has been increasing in recent years in large part due to Canadian travelers and shoppers. There were 2,062,665 rooms booked from August 2009 to July 2010. From August 2010 to July 2011 the number booked was 2,161,954. In the following twelve month period through July 2012, 2,231,337 rooms were booked. Downtown has 18.8 percent of Erie County's hotel rooms and is 'capturing' 19.6 percent of the total number of rooms booked.
Downtown and the region's positive hotel numbers are drawing interest from developers.
Currently there are two properties with 128 guestrooms under construction downtown: the 32-room "Lofts on Pearl" and a 96-room Courtyard by Marriott at 125 Main Street. These will increase the number of downtown hotel rooms by seven percent.
Developers aren't satisfied as the supply of hotel rooms could balloon over the next few years. Redevelopment projects at the Tishman Building, Curtiss Building, and the Statler are each expected to have hotel components. New buildings at 50 Court Street and 1001 Main Street are also planning for hotel rooms along with office and retail space, and Uniland Development is said to be considering an Aloft hotel for the corner of Delaware Avenue and Chippewa Street. A full-service hotel with 200 rooms, which would be the largest new hotel built since the Hyatt opened in 1984, is planned by Sabres' owner Terry Pegula and Benderson Development for the Webster Block.
All totaled, the 700 or more planned rooms will increase the number of hotel rooms downtown by 1/3 or more.
Hotel development isn't limited to downtown. A number of hotels are planned or underway near the airport, in Williamsville, Amherst, and elsewhere. Even if all of the planned projects don't materialize, the local hotel market is going to get a lot more competitive.
Source: Smith Travel Research