Business & Real Estate

Sacramento-area hotels now seeing big numbers after dismal times during recession

Empty rooms equate to hard times in the hotel business, and that was pretty much where Sacramento lodging operators were just five years ago.

Back in 2010, as Sacramento was struggling to emerge from the doldrums of the recession, San Francisco-based hotel industry tracker PKF Consulting USA pegged the average occupancy rate of area hotels below 65 percent. Noting that the rate was around 60 percent in 2009 and trying to be optimistic, PKF projected that Sacramento-area hotels might see the rate edge up to 68 percent in 2012.

That was less-than-joyous news to local hotel operators, as lodgings analysts consider 70 percent occupancy the point at which hotels can comfortably raise rates.

Things have changed dramatically since then. Sacramento-area hotels have long since blazed past the 70 percent threshold and are making more money as a result.

PKF’s latest monthly report on the Northern California hotel industry shows an average occupancy rate of 76.2 percent in the Sacramento area in September, with an average daily room rate of $113.64 and revenue per available room of $86.63. In September 2012, the occupancy rate among area hotels was 66.9 percent, with an average daily room rate of $92.70 and revenue per available room of $61.98.

Numerous things have happened to change the game.

Catherine Bolstad, a PKF director, mentioned an improved economy but focused in on employment gains in particular: “I think a lot of it has to do with employment. All the jobs lost in the recession have been gained. Organic growth has been important.”

Perhaps most encouraging for Sacramento, hotel occupancy has been sustained and consistent. Through nine months this year, the occupancy rate among area hotels was 76.3 percent, nearly matching the percentage for September 2015 alone. Bolstad believes Sacramento will remain on a growth trend in the near future.

“A number of factors are contributing to a great year and a very positive foreseeable future,” said Mike Testa, chief operating officer at the Sacramento Convention & Visitors Bureau.

He added: “Sacramento’s profile has been significantly elevated with construction of the new arena, the success of the Republic FC (soccer team) and the national foodie and media attention that continues to grow from the farm-to-fork initiative, to name just three. Each of those examples is relatively new in the Sacramento market, and all three have helped to increase attention on, and ultimately the demand in, the market.”

Hospitality analysts also noted that Sacramento hosted a leg of the Amgen Tour bike race and the U.S. Senior Open professional golf tournament this year.

“Sacramento is also poised to have its most successful convention year in its history, which provides a hugely important business base for our hotels,” Testa said.

“We’re booking business further out than we were just two years ago, and that has an important impact on overall occupancy. That base layer of convention business plays a significant role in hotel occupancy increases.”

Testa pointed to the recent addition of hospitality industry heavyweights Westin, Marriott Autograph and Kimpton in the Sacramento-area market.

In April this year, the Sacramento Kings and development partner JMA Ventures announced that the San Francisco-based Kimpton Hotels & Restaurants chain will operate the 250-room hotel being developed adjacent to the new downtown arena. The upscale 16-story tower is expected to open in early 2017.

“We’re seeing interest from higher-end brands that are seeing opportunity in Sacramento that they were not seeing even just a few years ago. That’s a good indication that the Sacramento market continues to move forward and provides a glimpse of the demand that continues to increase,” Testa said.

PKF noted that Sacramento has another subtle advantage: Hotel accommodations are much more affordable here than in other Northern California locales.

In the latest PKF report, for example, hotels in the San Francisco market had an enviable 92 percent occupancy rate in September, but the average daily room rate was $304.82. Average room rates were even pricier in the Monterey/Carmel area and Napa County, both coming in at slightly more than $338 a night on average.

Mark Glover: 916-321-1184, @markhglover