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VOL. 132 | NO. 173 | Thursday, August 31, 2017

Memphis Receives First Check From Airbnb

Hospitality industry advocates for equal rules

By Don Wade

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Nationally and in Memphis, the hotel room supply, room demand, occupancy rate and average daily room rate were all on the rise year-to-date through July, pointing to a healthy market overall.

That’s according to information compiled by STR presented at the Southern Lodging Summit Wednesday morning, Aug. 30, at the Cook Convention Center in Memphis. The Southern Lodging Summit is an annual event hosted by Pinkowski & Co. and the Metropolitan Memphis Hotel and Lodging Association.

But it was the growing home-sharing network Airbnb that dominated much of the conversation.

“It’s the same commercial transaction as a lodging property,” said Greg Adkins, CEO of the Tennessee Hotel & Tourism Association. “So equal taxation and equal zoning are important things. This is a battle that will continue.”

A 140-room Hilton Garden Inn is being constructed across Union Avenue from AutoZone Park. (Daily News File/Patrick Lantrip)


Various panelists agreed with Adkins, at least to a point, about the industry being in a fight with Airbnb. Doug Dreher, president and CEO of The Hotel Group Holdings LLC, noted that Airbnb is “very trendy for millennials.” He added: “It’s clearly a threat.”

It became less of a threat in the city of Memphis, however, with the recent installation of a 3.5 percent room occupancy tax and a $2 per-room fee going to the Tourism Improvement District (TID).

Kevin Kane, president and CEO of the Memphis Convention & Visitors Bureau, said in an interview with The Daily News between sessions that Memphis just received the first check from Airbnb for the month of June. It was in excess of $60,000, he said, with more than $40,000 from the occupancy tax and another $20,000 in TID fees.

“And remember, Airbnb is just one vehicle,” Kane said. “There are other platforms where people sell rooms in their house or apartment.

“Obviously, that’s the month of June and not January. But if that holds true, that’s telling me our Airbnb market in the city, not Shelby County, looks like it’s worth about 120,000 hotel room nights a year. That’s not far below the total number of rooms that The Peabody sells in a year. So it’s almost like we’ve added another 400-500 room hotel to the market that’s running about 70 percent occupancy.”

Memphis, which has 249 hotels and 23,248 hotel rooms, saw a 2.9 percent increase in room supply, but a larger 4.4 percent increase in room demand through July year-to-date, according to the Wednesday morning presentation. The Memphis market’s overall occupancy rate of 66.8 percent was a 1.5 percent increase compared to a year ago, and the average daily room rate (ADR) of $96 represented a 2.4 percent increase compared to the same time period in 2016.

Nationally, room supply was up 1.8 percent and room demand was up 2.3 percent. The average occupancy rate nationally was 66.6 percent, showing a 0.5 percent increase compared to 2016, and the ADR was $127 nationally, a 2.2 percent increase.

Looking just at Downtown Memphis, where there are 17 hotels with 3,075 rooms, room supply was up 3.5 percent and room demand was up 5.0 percent, according to data in the presentation. The Downtown occupancy rate stood at 77 percent, a 1.4 percent increase, and the ADR declined slightly by 0.4 percent to $155.

Jan Freitag, senior vice president of strategic development for STR, said overall the hotel industry is in a mode of “steady as she goes.” But in looking at the numbers for Downtown Memphis, he saw missed opportunity.

“You’re selling about eight of 10 rooms every night,” he said, “and there’s no pricing power.”

Said Kane: “The group rates are pretty good and the transient rates were down. Obviously we only control the group market. But at that point, they’re gonna go to Expedia, cheaphotels.com, whatever, whatever, whatever, to get the best rate. For the general managers that were here I think it was, `Wow, there might be an opportunity on the transient side to move the rate up.’”

Downtown Memphis has seen several boutique hotels projects get delivered or start construction in the past couple of years. The 58-unit Napoleon Hotel at 179 Madison Ave., for example, opened for business in the fall of 2016.

Local hotel projects announced or under construction account for an expected increase of 3,565 rooms – or 15.3 percent more than presently exist in the Memphis market, data at the lodging summit showed.

In the Downtown Memphis market, construction is underway on the $5.3 million Arrive Hotel at 477 S. Main St. where the former Memphis College of Art graduate school was located, and another boutique hotel is being built at 158 Madison Ave. Both are projects of Wessman Corp. that are expected to be delivered in 2018.

Other Downtown hotel projects approved or under construction include the 140-room Hilton Garden Inn and a planned Holiday Inn Express hotel, both located across Union Avenue from AutoZone Park, and an $18.5 million hotel in the Central Station redevelopment in South Main.

Nationally, a total of 591 hotel projects are in the pipeline – a 12 percent increase from 2016.

The 2018 national forecast for the hotel industry is for room supply to go up 2.1 percent, room demand up 1.9 percent, for occupancy to decrease by 0.2 percent and for the ADR to rise 2.5 percent.

But Freitag said the projections for the rest of 2017 and at least the first half of 2018 could be impacted by the devastation caused by Hurricane Harvey in Houston and along the Gulf Coast.

Hurricane Katrina, which pounded New Orleans and the Gulf Coast in 2005, had a strong effect on the lodging industry over the next year. Less rooms were available in hard-hit areas and there was a higher cost for materials and labor for those wanting to push ahead with planned new construction.

“We will see projects slow down,” said Andrea Foster, senior vice president of development for Marcus Hotels & Resorts.

Freitag said large groups with business meetings slated for Houston also would be seeking to relocate, but Kane doubted they would be headed to Memphis.

“The George R. Brown Convention Center is huge,” Kane said. “Most likely a lot of the groups wouldn’t fit in Memphis. Dallas, San Antonio and Austin are all just up the road. I would think most of that business they will try and keep in Texas first.”

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