Supply pressures a factor in Coachella hotel demand dip
Supply pressures a factor in Coachella hotel demand dip
17 MAY 2019 7:34 AM

This year’s Coachella Valley Music and Arts Festival brought in a smaller crowd of attendees than previous years, which resulted in hoteliers experiencing a drop in rooms demand. According to STR, this is the first year the submarket saw a decline in demand during the festival.

HENDERSONVILLE, Tennessee—The Coachella Valley Music and Arts Festival, a music festival hosted in Coachella Valley, California, is known for drawing not only some of the biggest names in music (such as Beyoncé, Ariana Grande and Kayne West), but also significant hotel rooms demand.

Coachella 2019, however, left hoteliers underwhelmed. This year, the festival ran from 12-14 and 19-21 April.

The two-weekend-long event that attracts crowds of more than 125,000 attendees each year saw smaller attendance in 2019, which was very noticeable to local hotel owners and operators.

According to STR, the parent company of Hotel News Now, 2019 was the first year that the Palm Springs submarket saw a decline in demand during the festival. Room demand for the first weekend peaked in 2018 at just over 14,800, a 3.2% increase from 2017, but then fell 0.7% in 2019.

New supply in the submarket also put a damper on hotel performance in Palm Springs. Since 2016, supply in this submarket has grown by more than 850 rooms, an average increase of 1.9% year over year. This resulted in the average occupancy from 2016 to 2018 of 98%. Average occupancy in 2019 was 96.6%, down 1.7% from 2018. While this may not seem like a big drop, hotel supply is only expected to continue to grow in the submarket.

As of 10 May, 21 hotel properties are currently under contract in the Palm Springs submarket. Of the 21 pipeline projects, six are anticipated to open before next year’s Coachella, increasing the submarket’s supply by approximately another 800 rooms. This would result in a 5.2% increase in supply by this time next year.

These 21 properties in the pipeline are highlighted by the 4,000-room Moon USA hotel that is projected to open by the end of 2022.

(Rendering: Moon USA)

According to the Desert Sun, The $4-billion Moon USA will feature 4,000 all-suite rooms, a 10,000-seat event center, 2 million square feet of convention center space, as well as several extraordinary amenities such as a holistic health and wellness spa, an innovative night club, beach club, and several celebrity chef restaurants offering sustainable, organic and locally sourced menus. The concept for this property originated in 2002, but it has picked up some steam lately as a 24-month permitting process has begun; and after 48 months of construction, the plan is to open in 2022.

Ryan Lynch is a business development executive in STR’s Industry Partners division.

This article represents an interpretation of data collected by STR, parent company of HNN. Please feel free to comment or contact an editor with any questions or concerns.

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