ATLANTA—Occupancy and demand levels have returned to notable highs for the Atlanta metro market, with the downtown and Buckhead areas showing the highest occupancy penetration levels. This has positively impacted average daily rate, which is expected to surpass 2008 levels by 2015, said presenters and panelists during last week’s U.S. Hotel Market Connections sponsored by HVS.
Strong meeting and group demand from citywide conventions helped book large blocks of rooms, creating compression for all Atlanta submarkets. With limited new supply expected in the Atlanta market over the next two years, average rates are expected to grow at above the rate of inflation for the next four years. Occupancy levels should stabilize over this period, followed by a slight decline as new supply enters the market.
Lenders are more comfortable with performance levels and trends, though many banks are looking to move troubled assets off their books. Loan discounting is becoming more common because lenders find it a better alternative than foreclosing on a property that has lost value. Developers could find opportunity in buying a distressed asset and turning it around.
The climate is also becoming more hospitable to hotel transactions. Competition has pushed sales of large, full-service hotel assets in Atlanta’s urban markets; however, second-tier markets have not attracted as many investors.
Brokers reported normal risk levels associated with transactions and recommend that now is the time to sell across all hotel property types. Overall, participants shared an optimistic outlook for the Atlanta hotel market.