January 15, 2009 2:33 PM
DNC drives hotel rates in 2008
The average room rate in the Denver area hit a new record in 2008, with the Democratic National Convention in downtown Denver accounting for almost 30 percent of the gain, according to a report released on Thursday.
Last year ended with an average room rate of $125.88, 6.1 percent higher than the previous record of $118.64, according to the report by Horwath Horizon Hospitality Advisors, LLC/Montgomery & Associates.
The DNC in August in downtown Denver accounted for about $2 of the increase, or 27.6 percent of the $7.24 increase in average room rates from 2007 to 2008, calculated John Montgomery, who heads his namesake firm and authored the report.
"That is huge," said Denver Mayor John Hickenlooper. "We knew it was going to have a major impact and a positive impact. That is why we moved heaven and earth to put it on and to make sure it was a success. But it is nice to have the impact confirmed by hard data."
Indeed, the area was led by downtown Denver in 2008, with an average year-end room rate of $156.10.
Downtown also boasted the highest occupancy rate of the sub-markets in the metro area, at 69.4 percent, compared with 66.7 percent in 2007.
The occupancy level for metro-area hotels was 66.7 percent, slightly lower than the 68.5 percent in 2007.
Metro Denver continues to "weather" the economic recession that has impacted most metro lodging markets in the U.S., Montgomery said.
Lodging demand decreased about 1 percent in 2008 from 2007.
Last year, many markets across the country suffered much greater declines in occupancies and average room rates, according to the report.
"I have not seen any national figures yet, but I talk to a lot of people in other markets and they're talking about 25 and 35 percent declines in occupancies," in many cities, Montgomery said.
"While we believe that metro Denver will experience some of the negative performance that the rest of the nation will experience in 2009, we believe the metro Denver lodging market is poised to hold its own in the upcoming years," according to the report.
The report pointed to the "unparalleled success" of the Hyatt Regency Convention Center, the opening of the Ritz-Carlton-Denver a year ago, and the increased number of flights for Southwest Airlines among the reasons for optimism.
Last year, 572 new rooms were added to the market, less than a 2 percent increase in supply. Five new hotels -- three of them at DIA -- and an aloft hotel and a Summerfield Suites, both in Broomfield, are scheduled to open this year.
Montgomery pointed out that some years, when the Denver market was in the doldrums, no new hotel rooms were added to the market.
"Despite the national economic downturn, it is our belief that this percentage occupancy level will remain approximately the same as it was in 2007," Montgomery wrote in the report.
"We believe that maintaining this level would be considered excellent given current economic conditions and the additional new lodging supply that entered the market in 2008 and is anticipated to enter the market in 2009."