Finance & DevelopmentMarket ReportsDetroit Hotel Market is Shifting Gears

Detroit Hotel Market is Shifting Gears

Following three years of consecutive RevPAR growth and occupancy gains, Detroit has repositioned itself as a key hotel market. With the ongoing recovery of the auto industry and revival of the downtown corridor, hoteliers are starting to see Detroit as a viable option for investment success.

“If you take a look at lodging trends since 2010 on a year-end basis, Detroit has kind of been a shining star,” says Adam McGaughy, managing director at Jones Lang LaSalle Hotels. In 2011, Detroit saw a gain in RevPAR of 13.6 percent as compared to an 8.1 percent rise in the United States. In 2012, RevPAR was up 7.1 percent in Detroit with a U.S. average of 6.8 percent. And the city continues to show signs of growth this year with RevPAR up 7.4 percent thus far. A lot of that growth is focused on the occupancy side, McGaughy explains. “In 2010, occupancy gained 13.1 percent over 2009. In 2011, the city saw another 10.3 percent gain,” he says. “That’s a big chunk of occupancy growth over a two-year period.”

Positive trends in the auto industry have brought more business travelers into Detroit hotels, but the consolidation of the sports facilities downtown and the major renovation taking place at Cobo Center, Detroit’s main convention facility, are also having a positive impact. “Weekends are picking up in terms of tourism,” says McGaughy. “People want to take advantage of a lot of built-in demand generators.”

New supply is slowly creeping into the market, due in part to investors taking advantage of distressed assets. A 136-room Aloft hotel is being developed in the historic David Whitney Building and is expected to open in 2014, and the 367-room Detroit Riverside Hotel, originally known as the Pontchartrain, was purchased and will reopen as a Crowne Plaza this summer.

“The city has been very, very proactive in the past in terms of offering options for developers coming in,” says McGaughy. “Developers are confident in where the overall hotel market is and feel that they can get a return on their investment for new supply.”