WASHINGTON, DC—Washington DC received 17.4 million US visitors last year, according to a report prepared by D.K. Shifflet, for an increase of 3.1% over 2012. Even better, these visitors spent $6.7 billion, according to IHS Global Insight, for an increase of almost 8% over 2012. These figures were released in tandem with the city’s annual Travel Rally, which was held at the Park at CityCenter at the new CityCenterDC development as part of the Travel National Travel and Tourism Week’s festivities.
For the retail real estate asset class, the increased spending bodes particularly well. Hotels, though, are another story. Their performance has been mixed bag here, but largely lackluster as a sampling of earnings reports for Q1 show.
Bethesda, MD-based Pebblebrook Hotel Trust first-quarter’s performance was better than the REIT expected on all operating metrics—but no thanks to its hotels in DC. Said CFO Raymond Martz during the earnings call: “RevPAR growth exceeded our outlook of 5.5% to 6.5%, largely due to the strong performance from our West Coast hotels which generated RevPAR growth of 13.1%. This strength helped to offset weaker performance from our hotels in the DC area…”
LaSalle Hotel Properties, also in Bethesda, reported a RevPAR decline of 10.1% for its Washington DC properties, which was comprised of a 7.6% decrease in occupancy and a 2.7% decrease in ADR. Excluding Washington DC, its first quarter portfolio RevPAR increased 7.7%.
Hersha Hospitality Trust was an exception. Like the other REITs, the Philadelphia-based Hersha noted strong performance on the West Coast and reported consolidated hotel EBITDA margins of 30.2% for the quarter, a 40-basis point improvement. EBITDA margins were also bolstered by the strength of its New York City and Washington, DC portfolios, which registered EBITDA margin growth of 250 and 640 basis points, respectively, according to CFO Ashish Parikh.
To be sure, many of the REITs made the same observation about the DC market: the presidential inauguration in 2013 made for a very tough comparison in the first quarter of 2014, although as Host Hotels and Resorts CEO Edward Walter noted, the inauguration “was not as beneficial in 2013 as we would have hoped. So it still was a challenge for the market for this year, but perhaps not as big as in a historical context.” The Bethesda-based REIT reported flat RevPAR for the city for Q1.
The good news is that 2014 does hold promise. The new convention center hotel, The Marriott Marquis Washington, has opened its doors. There are 17 city-wide conventions, two of which—the Microsoft Worldwide Partner Conference in July and Jehovah’s Witness International Convention in August—are very high profile.
A number of associations have booked space for 2015, as well, including annual meetings of the American Academy of Neurology, American Dental Association and American Gastroenterological Association-Digestive Disease Week.