Local Hotel Sector Reflects Much-Needed Improvement (Commentary)

Streetsmart NWA researches data pertaining to a total of 7,428 limited-service and full-service hotel rooms in the two-county area.

An additional 125 rooms are researched in bed and breakfast and special-purpose hotel properties.

A limited-service hotel is a facility that typically provides a continental breakfast and small meeting room capability in addition to nightly room rental. A full-service hotel includes a restaurant, meeting rooms/convention facilities, lounge, etc., along with nightly room rental.

The majority of the hotel rooms in Benton and Washington counties are in limited-service hotels.

In fourth quarter of 2010 the average quoted nightly rates for the limited-service/full-service hotel properties researched in the two-county area were $81.50 for weekday, $69.91 for weekend, and $82.60 for Sunday.

Bed and breakfast and special-purpose hotel properties reflected an average quoted nightly rate of $125.67.

The hotel sector has struggled nationally over the last two to three years; however, there are recent signs of improvement. This is true locally as well.

It appears occupancy rates are slowly improving as business travel increases. Each of the five major cities in the two-county area charge a 2 percent tax on hotel/motel receipts, except Springdale, which levies a 1.5 percent tax.

In the 2007-2010 time period, reported hotel/motel tax receipts hit a high point in Bentonville, Fayetteville, Rogers and Siloam Springs in the second quarter of 2008.

The high point for Springdale was fourth quarter of 2007.

The country officially entered into the “Great Recession” in December 2007.

The low point in reported hotel/motel tax receipts in the 2007-2010 time period was the first quarter of 2010 for Bentonville, Fayetteville and Springdale; fourth quarter 2009 for Rogers; and first quarter 2007 for Siloam Springs. Obviously, new rooms coming online impacts valid comparisons.

Comparisons over the past two years provide a better picture of the situation. In this time period, basically the same number of rooms were researched, with the exception of three hotel properties.

Between fourth quarter of 2008 and fourth quarter of 2009, each of the cities reflected a decline in hotel/motel tax proceeds collected, except Siloam Springs. The declines were 26.7 percent in Bentonville, 8.4 percent in Fayetteville, 14.4 percent in Rogers, and 20.7 percent in Springdale.

Siloam Springs experienced a 21.3 percent increase during this time period.

What is encouraging is the turnaround that occurred over the past year in the hotel sector.

Each of the cities researched experienced an increase in hotel/motel tax proceeds collected between fourth quarter of 2009 and fourth quarter of 2010, except Siloam Springs. The increases were 14.4 percent in Bentonville, 15 percent in Fayetteville, 11.6 percent in Rogers, and 9.1 percent in Springdale. Siloam Springs experienced a 12 percent decline during this time period.

A total of 328 hotel rooms were added in the past two years.

Townplace Suites in Johnson opened in the first quarter of 2009 with 92 rooms, Homewood Suites in Fayetteville opened in second quarter of 2009 with 96 rooms, and the Cherokee Casino Hotel in West Siloam Springs, Oklahoma opened in second quarter of 2010 with 140 rooms.

The lack of additional supply added has been a plus for the overall improvement in the hotel sector.

Also, as previously indicated, increased business travel has been a major contributing factor to improved conditions.

Monday through Thursday business travel is critical to the success of many hotel operations in Benton and Washington Counties.

It appears the hotel sector is rebounding faster from the recession than most analysts predicted; however, there remains significant room for improvement.

Tom Reed is a partner in Streetsmart NWA which produces quarterly reports pertaining to the residential, multifamily, and commercial sectors of the real estate market. Company offices are located at 2804 Main Drive, Suite C, Fayetteville, Arkansas. The phone number is 479-575-9100.