Hotel Rates To Rise In Boston Despite New Supply
Despite the addition of new supply due to two new major hotels—InterContinental Boston and Westin Boston Waterfront—in Boston last year, analysts expect the city's average 2007 hotel room rate to rise by more than 6 percent, year over year.
"Average rates in the Boston market in 2007 will be driven by strong increases in other national markets, by momentum from 2006 that is very likely to carry over to this year, by the luxury orientation of new product, large citywides and continued strong demand that will help compression," said Matt Arrants, managing director of Boston-based hospitality consulting firm Pinnacle Advisory Group.
Pinnacle predicts average room rate will be $204.94 per night in 2007, up from $192.72 in 2006, about a 6.3 percent increase.
Occupancy in the market for 2007 is expected to drop by about 1 percent, largely due to new supply. "The two new hotels that opened last year will have a big effect on that 1 point," Arrants said. "Occupancy in 2006 in the Boston-Cambridge market was 78 percent. It's expected to be 77 percent this year."
"In terms of occupancy and room rate performance, Boston is one of the top five markets in the nation every year because of its strong balance of corporate and leisure business," Arrants said. "This provides the market with the ability to adjust to seasonal shifts in demand. For example, in the summer, when corporate demand is lower, the leisure travel market is way up. So, when one segment is weak, the other balances it out, helping to keep the market strong throughout the year."
In 2007 and beyond, he said, factors that will keep the Boston market strong include new supply—including the addition of the 308-room Charles Street Jail Hotel in the Beacon Hill area in May and a 477-room Renaissance in the Waterfront District in December—increased meeting and convention demand, and increased leisure demand. This year in suburban Boston, Arrants said, look for limited new supply, slightly less compression, an improved economy and conversions.
Boston-based corporate agency Great International Travel CEO Carole Swartz foresees a bright year for the city's hotel market. "While hotel prices will be up, every room will still be full. That's because there is a shortage of hotel rooms in the Boston market," Swartz said, noting that the new Westin already is talking about an addition. "Boston needs and wants to get to the next level in terms of rooms."
The 424-room InterContinental, the brand's first-ever Boston hotel, offers high-speed Internet, a 24-hour business center and 32,000 square feet of meeting and event space.
The 17-story Westin, with 793 rooms, on Boston's waterfront is connected to the 516,000-sq.-ft. Boston Convention and Exhibition Center, which opened in 2004. Business travel-related amenities include high-speed wired and wireless Internet access.