Tennessee Hospitality Market Report
Nashville | Economy and Midscale Performance Overview
Economy
- Inventory Rooms: 8,278
- Under Construction: 126
- Occupancy: 57.23%
- ADR: $70.23
- RevPAR: $40.19
- Price/Room: $55.4K
- Market Cap Rate: 9.61%
Midscale
- Inventory Rooms: 6,971
- Under Construction: 632
- Occupancy: 65.84%
- ADR: $103.93
- RevPAR: $68.42
- Price/Room: $74.9K
- Market Cap Rate: 9.29%
Last 12 months | Source: CoStar Group
Recent performance metrics indicate that Nashville’s hotel market is experiencing a moderate contraction. Due to changes in travel patterns and economic headwinds, most performance metrics have been subdued. TSA has reported record-high travel levels, whereas hotel occupancies are experiencing near all-time lows, which has affected the U.S. 12-month RevPAR. Growth for the Economy class dropped by 15.88% from $47.77 to $40.19, and by 7.35% from $73.85 to $68.42 for Midscale. This came to be due to the effect of a “dual edged sword” where the market displayed decreases in occupancy and ADR for both Economy and Midscale properties.
For Economy, ADR decreased by 8.52%, moving from $76.77 to $70.23, coupled with the decrease in occupancy by 8.04% from 62.23% to 57.23%. As for Midscale, ADR decreased by 6.56% from $111.23 to $103.93, along with the decrease in occupancy of 0.84% from 66.40% to 65.84%. It is these aforementioned metrics that have led to the market decreases in RevPAR over the past 12 months for both Economy and Midscale properties. The decrease in RevPAR has also led to increased risk, coupled with decreased stability, causing cap rates to increase by 0.22% from 9.39% to 9.61% for Economy, and by 0.18% from 9.11% to 9.29% for Midscale.
Construction
There are six Economy and Midscale buildings currently under construction, with 758 rooms underway in Nashville that have opening dates through 2026. This equates to 4.97% of existing supply, significantly higher than the national average of 2.7% and one of the highest among STR’s Top 25 markets. As of June 2023, 45 Economy and Midscale rooms have opened over the past 12 months. During the same time period, there are now four less existing Economy class buildings, from 133 in June 2023 to 129 in June 2024, showing a 3.01% decrease in existing Economy buildings. The existing Midscale buildings remained constant at 88 buildings throughout this 12-month timeframe.
In addition to that, no Economy rooms or buildings have been delivered compared to last year’s 188 rooms that were part of two buildings. Whereas there have been 44 Midscale rooms delivered in the past year, which is still down by 38.89% from last year’s 72 rooms delivered. In addition to that, only one Midscale building has been delivered over the past 12 months, which remained constant in comparison to the previous year’s one building delivered. This points toward a market shift from lower end hotels toward a preference for higher-end products, which is in line with the Nashville market’s dependency on its Central Business District that is notable for its sheer volume of higher-end products.
Nashville Economy
Nashville is a popular destination for leisure travelers. It offers live music venues, a rich music history, and a variety of festivals, conventions, and sporting events. The city’s culinary scene has gained recognition over the past decade, especially for Southern cooking, barbecue, and Nashville Hot Chicken.
One of Nashville’s biggest events is the CMA Fest, a country music festival in June that attracts tens of thousands of visitors for nearly a week. Other significant annual events in the city include the Academy of Country Music Awards and CMA Awards.
Sports events are also essential to Nashville’s tourism economy, with the Tennessee Titans NFL team, Nashville Predators NHL team, and Nashville SC MLS team drawing visiting teams and their supporters. Nashville hosts several annual sporting events, including the Music City Bowl college football game, the Music City Grand Prix IndyCar race, and NASCAR at Nashville Superspeedway.
New Developments in Nashville
Recently, Nashville signed a $2.1 billion agreement to build a new enclosed Nissan Stadium for the Tennessee Titans, constructed on undeveloped land along the Cumberland River. The deal includes a minimum of $1.26 billion in public funding, making it the largest public subsidy for a stadium in U.S. history. The new stadium’s construction will provide ample riverfront property for the city to implement its “Imagine East Bank” plan. This 340-acre initiative aims to rejuvenate the Cumberland River waterfront area and generate 8,500 employment opportunities by 2031.
Nashville has two convention centers: the Gaylord Opryland Resort & Convention Center, which offers 640,000 SF of meeting space and 19 food and beverage outlets, and the Music City Center, which provides 2.1 million SF of space in the heart of downtown. The hospitality industry in Nashville relies heavily on group demand, and the Music City Center has contributed significantly to the development of the SoBro area with new hotel developments, restaurants, bars, and attractions.
The Nashville International Airport is currently undergoing a $1.2 billion expansion as part of the BNA Vision plan, which includes a new concourse, an international arrivals facility, a hotel, several parking garages, and a large-scale terminal area expansion/renovation. In June 2022, the airport announced New Horizon, a plan to further construct and renovate Nashville International Airport, with Concourses A & D improvements, roadways, and baggage handling systems. This project is expected to cost an additional $1.4 billion and will be phased in over the next six years, with completion scheduled for late 2028.
