North & South Carolina Hotel Market Report
Charlotte, NC
Market Overview
Charlotte, the second-largest financial hub in the U.S., hosts the most employment centers for three of the nation’s six biggest banks: Bank of America, Wells Fargo, and Truist Financial. In 2019, following the merger of BB&T and SunTrust Banks to form Truist, the newly created bank relocated its headquarters to Charlotte, making it the second bank headquartered in the city after Bank of America.
Charlotte’s significant corporate presence means its local hotel market depends more on business travel compared to the many beach and resort destinations in the Southeast. Group demand is also crucial, making up over 30% of the rooms sold in Upper Upscale and Luxury hotels.
Market Performance
Hotel performance in the Charlotte market has benefited from an increase in business travel and group meetings over the past 12 months. Although growth slowed in Q1 2024, the 12-month average ADR and RevPAR remain at peak levels of $124 and $81, respectively. Continued growth is expected, with occupancy projected to rise by 1% and ADR by about 3% in 2024, resulting in a 5% increase in RevPAR.
Construction
The construction activity in the market is gaining momentum following a period of gradual growth. In 2024, over 900 rooms are set to be completed, marking an increase from the more than 750 rooms that were delivered in 2023. This surge represents the highest annual opening since 2017, when 1,200 rooms became available. By comparison, an average of nearly 550 rooms opened each year from 2020 to 2022.
Sales
In terms of hotel sales, while activity remains robust with 23 trades in the past year (compared to an average of around 17 trades in typical years), prices have softened, averaging $12 million ($101,000 per key) compared to $20 million ($168,000 per key) in 2022.
Greensboro/Winston-Salem, NC
Market Overview
The employment landscape in Greensboro/Winston-Salem has been experiencing a 1.2% annual growth rate, adding around 8,000 jobs. While this is a positive trend, it represents a slowdown compared to the previous 12 months, which saw job creation rates peaking at 1.2%. The Greensboro/Winston-Salem hotel market comprises approximately 230 hotel properties, housing a total of around 22,000 rooms. The average room count per hotel, at about 96 rooms, aligns with the national standard.
Market Performance
Over the last 12 months, occupancy rates in the market stood at 58.2%, nearly reaching the national average of 62.7% for the same period. As of March, the average RevPAR in Greensboro/Winston Salem’s hotel market has been increasing annually at a rate of 1.6%, which is consistent with the national average.
Construction
The ongoing development in the Greensboro/Winston-Salem market includes 590 rooms currently under construction, contributing to a 2.7% growth in hotel inventory. This reflects a sustained trend of new projects, with 7 developments totaling approximately 710 rooms delivered in the past three years.
Sales
In terms of hotel transactions, Greensboro/Winston Salem saw 13 trades in the past year, slightly below the usual activity seen in previous years.
Raleigh, NC
Market Overview
Raleigh, the state capital of North Carolina and its second-largest city, benefits from a substantial government and public administration sector, providing stability to the region’s varied economy and contributing to business travel demand for local hotels. This area is commonly referred to as the Research Triangle because of the concentration of technology and academic institutions in and around Raleigh, Chapel Hill, and Durham. The recent success of hotels in this market reflects the improving landscape of business travel. Raleigh-Durham is a hub for industries like life sciences, technology, and advanced manufacturing in the Research Triangle and relies heavily on business-related travel compared to many other Southeastern hotel markets.
Market Performance
Hotels within the Raleigh market have demonstrated strong performance in the past year, with a notable 11% increase in RevPAR. This growth can be attributed to an 8% rise in ADR and a 3% increase in occupancy. However, despite this positive performance, forecasts are indicating a moderation in RevPAR growth to approximately 5% in 2024. This projection is based on significant supply expansion and expectations of an economic slowdown during the year.
Construction
The construction activity in the market is gaining momentum following a period of gradual growth. In 2024, over 900 rooms are set to be completed, marking an increase from the more than 750 rooms that were delivered in 2023. This surge represents the highest annual opening since 2017, when 1,200 rooms became available. By comparison, an average of nearly 550 rooms opened each year from 2020 to 2022.
Sales
In terms of hotel sales, while activity remains robust with 23 trades in the past year (compared to an average of around 17 trades in typical years), prices have softened, averaging $12 million ($101,000 per key) compared to $20 million ($168,000 per key) in 2022.
Charleston, SC
Market Overview
Charleston’s coastal position in South Carolina makes tourism a vital part of its economy. Visitors are attracted to Charleston for its outdoor activities along rivers and beaches, as well as its renowned dining scene. Additionally, the area’s rich history, including Fort Sumter, the site of the Civil War’s first battle, draws many tourists.
Market Performance
Leisure travel remains the main driver of hotel demand in the Charleston market, though there has been a slight decline in this segment. Over the past 12 months, RevPAR decreased by 0.2%. The ADR increased by 0.6%, nearly balancing the 0.8% drop in occupancy. Since Q2 2023, quarterly RevPAR changes have been under 2%, fluctuating between positive and negative values. The peak season for Charleston is from March to April, with occupancies ranging from 75% to 81%. Changes in leisure travel patterns have led to slight declines in occupancy during peak season, though this has been somewhat offset by an almost 10% increase in group occupancy for conferences and conventions year-to-date through April. Group occupancy now makes up about 17% of total occupancy, still below the 2019 level of over 25%.
Sales
Hotel investment volume in the Charleston market has decreased, mirroring national trends. Over the past 12 months, only 11 hotels were sold, totaling approximately $79.4 million in sales. The challenging capital market has led to limited hotel transactions both nationally and in other commercial real estate sectors. This downturn has affected Charleston, where the average annual sales volume over the past three years has been $247 million.
North Charleston, SC
Submarket Overview
North Charleston is smaller than the typical U.S. hotel submarket, with about 4,000 rooms across 51 properties. Compared to the broader market, North Charleston features relatively small hotels, averaging 78 rooms per property, significantly lower than the market-wide average of 103 rooms per building. The national average is about 90 rooms per building.
Submarket Performance
Over the past 12 months, the average monthly occupancy in North Charleston was 66.1%, slightly below the market average of 69.7%. During this period, the twelve-month RevPAR in North Charleston’s hotel submarket decreased by 5.2%, contrasting with the market-wide trend where RevPAR remained essentially flat year-over-year.
While there are 710 rooms under development in the broader Charleston hotel market, no new constructions are underway in North Charleston. However, there has been some recent development, with about 160 rooms delivered in the past three years.
Sales
In the past year, only one property transaction occurred in North Charleston. Although this submarket is not among the most actively traded in the U.S., it typically sees several trades annually.
Columbia, SC
Market Overview
Columbia is a smaller U.S. hotel market with approximately 13,000 rooms across 163 properties. The average hotel has around 82 rooms, which is close to the national average. High-end lodging is slightly less common here than in the average U.S. market, but the overall distribution of hotel classes is typical.
Market Performance
In the past year, monthly occupancy in Columbia averaged 61.5%, slightly below the national average of 62.7%. As of April, the 12-month average RevPAR in Columbia was increasing at an annual rate of 1.4%, which is roughly in line with the national average. Currently, there are about 600 rooms under construction, the largest pipeline in over a decade, continuing a trend of new development. In the past three years, around 460 rooms were added, partially offset by the demolition of a 120-room hotel.
Sales
Columbia saw 8 hotel transactions in the past year, slightly below the average of recent years. Employment in the market has been growing at an annual rate of 2.8%, adding approximately 12,000 jobs. Although positive, this is the weakest job creation rate in the past year, which had peaked at 3.3%.
