Final week’s sale of the downtown Seattle Hilton is the newest warning signal from a hospitality sector nonetheless discovering its means again from COVID-19.
Tokyo-based APA Group paid $69 million for the 256-room property, which, when adjusted for inflation, is 15% lower than vendor New York Metropolis-based Westbrook Companions paid for it in 2016, in accordance with county property data.
That low cost is partly about age. The resort, which has already been transformed to APA’s Coast Resorts model, has been a fixture on the nook of Sixth Avenue and College Avenue since 1970.
However the worth additionally displays continued uncertainty round Seattle’s visitor-based financial system, particularly in lodging.
Coast, which runs accommodations throughout western North America, together with in Bellevue, Pullman, SeaTac and Wenatchee, declined to share gross sales numbers or different information for the previous Hilton.
However general occupancy in downtown Seattle, although up for the reason that pandemic, nonetheless lags 2019 at the same time as prices equivalent to labor and insurance coverage have risen, in accordance with CBRE, a business actual property companies and funding agency.
“In the event you’re promoting [a hotel] in the present day on a backside line that’s decrease than it was again then, you’re going to get a decrease quantity,” stated Chris Burdett, a resort skilled and govt vp with the Seattle workplace of CBRE. “That’s simply fairly simple economics.”
Some components of the downtown hospitality enterprise have come again extra strongly. The Seattle Conference Middle expects 30% extra attendees in 2024 than in 2019, in accordance with Go to Seattle, a commerce group.
Seattle’s waterfront noticed 3% extra guests in 2023 than in 2019, in accordance with the Seattle Historic Waterfront Affiliation.
Bob Donegan, a waterfront affiliation director (and president of Ivar’s), credit that to a rebounding cruise trade, regular progress on town’s new waterfront park and the “rising notion that the waterfront is protected and clear.”
However different components of the visitor-dependent financial system are nonetheless in limbo.
Whole downtown customer numbers are down 7% versus 2019, in accordance with Could information posted by the Downtown Seattle Affiliation. Crowds at Pike Place Market in April have been practically 1 / 4 smaller, on common, than in April 2019, DSA information exhibits.
One explicit problem for hoteliers: The persistence of distant work and video conferences proceed to harm “enterprise journey throughout the board,” Burdett stated.
All of it has added as much as weaker demand and decrease revenues for accommodations. In April, downtown room charges averaged $197, which, adjusted for inflation, is round 15% under April 2019, in accordance with information from Go to Seattle and an inflation calculator from the U.S. Bureau of Labor Statistics. Total downtown resort income was down 20% in adjusted phrases.
Future prospects are additionally blended. Burdett and different specialists see demand getting a lift from the newly expanded Conference Middle and the completion of Waterfront Park, anticipated in 2025. Huge-time sporting occasions, just like the FIFA World Cup in 2026, may even carry armies of free-spending guests.
However uncertainties stay. Thanks partly to depressed enterprise journey, demand for resort rooms might sluggish.
Already, the postpandemic rebound accommodations have been having fun with in 2021 and 2022 is “beginning to stagnate,” stated Kasia Russell, a specialist in resort value determinations at HVS Lodge Administration in Portland. “We’re nonetheless shifting in the fitting course by way of restoration — it’s simply … slower.”
But at the same time as demand slows, the variety of downtown Seattle resort rooms has grown, from 16,647 in 2019 to almost 18,000 this 12 months, in accordance with CBRE, which tasks it might be 2027 earlier than downtown surpasses the typical each day occupancy fee from 2019.
One other looming strain level: Greater than 10 Seattle-area accommodations are backed by loans that mature this 12 months or in 2025, in accordance with HVS, and the upper value of capital might make refinancing tough, particularly for any underperformers.
All of which can imply bargains for buyers keen to guess on the sector’s eventual restoration.
Certainly, APA purchased the previous Seattle Hilton for 25% under the $92 million worth county tax appraisers gave it in 2023.
HVS’ Russell thinks a few of that low cost additionally seemingly displays the funding the 50-plus-year-old resort would’ve wanted to “retain the Hilton model,” which she ballparked at “upwards of $100,000 a room,” or $26 million.
Coast didn’t say how a lot it intends to spend on its new resort. However a spokesperson stated the property, which is able to proceed to be run by Stonebridge Hospitality Administration, will goal for “high-value visitors,” each leisure and enterprise vacationers.
The resort may even see a number of upgrades, together with “foyer refresh,” 55-inch flat screens and in-room bidets.
