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Strong economy helps Twin Cities’ hotels
May 6 2013

A diverse economy, new office development and the promise of a new convention center are helping the Minneapolis/St. Paul hotel market grow.

Highlights
  • ADRs should exceed inflation levels for the next few years.
  • Conventions could be a growth area for hotels in the Twin Cities.
  • Hotels in the market have become attractive to institutional investors.
By Tanya J. Pierson, HVS
HNN correspondent

MINNEAPOLIS—Employment in the Minneapolis/St. Paul area is doing remarkably well relative to the nation as a whole, with a diversity of businesses generating commercial demand for area hotels, said presenters and panelists during last week’s U.S. Hotel Market Connections.

Given strong mid-week demand throughout the year, strong weekend demand during the summer months and the entrance of new upscale supply, average-daily-rate growth for the metro area is expected to rise above inflationary levels for the next several years. New office construction also should bode well for commercial demand levels in the future.

Conventions are seen as an area for growth in the Twin Cities, especially if plans materialize for a new convention headquarters hotel. The recent sales of the Comfort Suites and the Hotel Minneapolis (part of Marriott International’s Autograph Collection) indicate the attractiveness of the market for institutional investors. Another downtown property, the Hotel Ivy, is actively being marketed for sale.

Distressed and structurally obsolete assets are having a negative impact on overall values for Minneapolis hotels, though real estate-owned transactions are on the decline—a good sign.

Brand awareness plays a big role in obtaining financing, with Hilton Worldwide, Marriott International, and InterContinental Hotels Group brand families being the most attractive to lenders. Lenders also want to see strong, experienced management in place at the hotel level. Public-private partnerships provide another avenue for facilitating hotel construction.

Brokers convey confidence in Minneapolis’s hotel market given the diversity of the area’s economy and the quick recovery of occupancy following the recession.

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