Marcus & Millichap

Energy Belt Hospitality Research Report

Energy Belt, Second Half 2016

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Oil and Gas Downturn Tempers Occupancy, RevPAR

Hotel performance in the Energy Belt consisting of Kansas, Nebraska, Oklahoma and the Dakotas softened during the first half of the year, partly reflecting the reduced travel budgets of energy sector firms. This year, the combination of an increase in completions and decline in room demand will lower the annual regional occupancy rate and exert downward pressure primary revenue measures. Performance in the Energy Belt remains largely influenced by operations in Oklahoma, the region’s largest market. Despite steady room demand from hotels located on major interstates, the softening of the statewide economy has reduced business-related occupancy in the state. Job losses in Oklahoma City have eroded inbound business travel, while Tulsa has withstood the downturn in oil and gas somewhat better.

Property sales in the region have tapered from the elevated level of the prior year. Branded hotels are spread throughout the region and account for the bulk of trades. Limited- and select-service inns dominate activity, though some misalignment of buyer and seller expectations is likely to persist in the coming months. Assets in college markets and serving interstates could receive greater scrutiny.

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