2016 was a mixed year for the Boston Metro lodging industry, according to the Pinnacle Advisory Group, in an article published by the New England Real Estate Journal. Lodging demand in the Boston Metro increased by 3.7% during 2016, but occupancy fell as new supply outpaced demand.
Specifically, the South Boston lodging submarket experienced an occupancy decline of 2.7%, due to new supply in the Seaport District. Expanding competition also caused the Downtown and Fenway submarkets to experience declines in average daily rates during 2016.
Cambridge and the Back Bay saw very modest increases in revenue per available room, posting gains of 0.8% and 0.4%, respectively.
Overall, the lodging market felt the impact of several challenges last year:
- Fewer business conventions
- Declining corporate transient demand
- Several new hotels
- Disruption from AirBnB and other online rental services
Yet there is reason for optimism for Boston’s lodging industry in 2017. While there are new hotels and room expansions coming soon, they are on a smaller scale than last year. Also, the new hotels that opened during 2016 will scale back room discounts, now that they have established themselves in their markets.
Business conventions and trade show activity is expected to improve during 2017, according to data from the Center for Exhibition Industry Research. In their survey of 233 event executives, 59% expected event profitability to increase in 2017, largely due to a strengthening national economy and improved demand.
And while much of the business world held its collective breath during a tumultuous election year, corporations are expected to approve typical levels of business travel during 2017. Meanwhile, traffic at Boston Logan International Airport has steadily increased in recent years, with the expansion of routes and services bringing more travelers through the city than ever before.
Analysts cite the Boston Metro as one of the strongest lodging markets in the country, due to its diversity of economy and varied demand, and the relatively high barriers to entry for establishing new lodging properties. Most industry watchers expect a quiet first quarter of 2017 to be followed by rising lodging demand during the balance of the year.
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