Report

Atlanta Hotel Market Update, Feb 2023

Atlanta’s hotel market continues growing, keeping up with the national trend.

While there is 1.9% room supply growth in the US market, the 11.0% growth in demand has greatly boosted the occupancy and ADR on a national basis, with annual growth rates of 8.9% and 19.1%, respectively.

The positive trend also arrived in Atlanta, which showed an 8.4% growth in occupancy and 18.0% growth in ADR, only slightly behind the national data for the year 2022.

Transients serve as the major revenue stream, while better revenue management could drive up performance.

For the Atlanta market, transient customers have made up 60.5% of the demand in the market. The ADR for transient customers is $196.93, which serves as a major source of revenue for hotels. Group customers take up 32.7% of demand at $185.42. The rest of the demand is contributed by contract customers, who pay at a discount of $97.70.

Positive Outlook for Meetings and Events Despite a lag in recovery, Atlanta shows a promising future for large meetings and events. For 2023, there are over one million room nights booked, surpassing targets by 30%. Over the next six years, group reservations are projected to average 38% above target.

Leading in COVID Recovery Atlanta has shown strong recovery from the pandemic, with visitor numbers rebounding from 32 million in 2020 to 44 million in 2021. By 2022, passenger volume reached 99% of 2019 levels, with domestic travel surpassing 2019 figures and international travel reaching 80%.

Hotel Market Performance Atlanta’s hotel market mirrors national trends, with an 8.4% increase in occupancy and an 18.0% rise in Average Daily Rate (ADR) in 2022. However, the robust construction pipeline, including over 4,900 rooms, may hinder full occupancy recovery to pre-pandemic levels in the near term.

ADR Outperforming Pre-Pandemic Levels December 2022 saw Atlanta’s occupancy at 57.2% and ADR at $113.05. While ADR growth in Atlanta was 6%, it trailed the Top 25 Markets’ growth of 11%.

Revenue Streams and Performance Transient customers dominate Atlanta’s market, constituting 60.5% of demand with an ADR of $196.93, while group and contract customers represent 32.7% and the remainder respectively. Atlanta’s ADR performance lags behind the Top 25 Markets due to a higher proportion of group and contract customers.

Investment Trends Investor focus has shifted to midscale hotels, demonstrating resilience during economic downturns. The price per key decreased to $129k in Q4 2022 from $151k in Q1 2020. The overall market cap rate is expected to stabilize at 8.3% in 2023, with midscale and economy class hotels at 8.7%.