Lexington, Kentucky is known as the “Thoroughbred City” and the “Horse Capital of the World.” For hundreds of years, the region’s rolling fields of Kentucky bluegrass have given rise to an unrivaled equine industry, which a recent statewide study valued at $23.4 billion.1 Lexington’s other industries include manufacturing, higher education, technology, and the unique spirit known as Kentucky Bourbon. Together, these diverse economic drivers have helped Lexington through the recent recession and positioned local hotels to capitalize on events and developments in the years ahead.
The Equine Industry
Kentucky’s equine industry is valued in the tens of billions of dollars, and Lexington businesses, including hotels, benefit greatly from the activity related to horses, horse farms, and racing tracks. One of the nation’s oldest horse-racing tracks, the Red Mile hosts harness races (with horses pulling two-wheeled carts called “sulkies”) across a one-mile track of red clay. The Red Mile’s grandstands and clubhouse provide room for up to 6,500 attendees, and the track can host several races per day; the record for a single day’s attendance was set on May 30, 1988, at 24,082. Keeneland, a facility and grounds for the racing, breeding, and sales of championship horses, has hosted spring and autumn races (in April and October) since 1936. The track’s races and festivities draw upwards of 400,000 visitors to Lexington each year. Keeneland also hosts four annual horse auctions that bring in buyers from around the world. The Kentucky Horse Park comprises a working horse farm and an educational theme park; the facility also serves as retirement home to some of the world’s greatest competition horses.
Lexington also hosted the FEI World Equestrian Games in September and October of 2010. The facilities constructed for this event have allowed Lexington the opportunity to host some new upcoming events in 2013, including the Road to the Horse, several horse whispering competitions, and the Alltech National Horse Show.
Bourbon and Other Big Industries in Lexington
The distillation, bottling, warehousing, marketing and distribution of Kentucky Bourbon, a signature industry and symbol of Kentucky craftsmanship and tradition known around the world, accounts for nearly 10,000 jobs and more than $125 million in taxes each year statewide. Lexington is the launching point for the world-famous Kentucky Bourbon Trail. The trail of distilleries, merchants, and historic sites stretches from Lexington to Louisville. Nearly two million U.S. and international visitors have traveled the trail over the past five years alone, making it a strong demand generator for hotels along the route.
Local government, technology companies, and higher education buttress the Lexington economy, which has proven to be one of the most stable in the nation. The following table shows Lexington’s top employers in 2012.
Major corporations in Lexington include the Fortune 500 companies Affiliated Computer Services (acquired by Xerox in 2010), Lexmark International, and Hewlett-Packard. United Parcel Service, Trane, Tempur-Pedic, and Amazon.com also maintain a large presence in the city, where manufacturing operations include the Toyota Motor Manufacturing Kentucky plant in adjoining Georgetown and the Jif Peanut Butter plant, the most productive facility of its kind in the world.
In 2011, Forbes named Lexington the “4th Best City for Businesses and Careers.” The following table shows unemployment levels in Lexington-Fayette Urban County, the metropolitan statistical area, the state of Kentucky, and the nation since 2007.
Lexington’s lodging landscape comprises nearly 70 hotels and more than 7,500 rooms. A 2011 survey of visitors to Lexington estimated that nearly 84% stayed in a hotel, motel, or resort for an average of 2.7 nights, generating more than 1.6 million room nights for local hotels.
Proposed hotel supply in Lexington includes a 21c Museum Hotel, which is in the design phase; the hotel would be located in Downtown Lexington, off of West Main Street. The boutique 21c brand, whose first hotel opened in Louisville, represents an ultra-luxury, full-service hotel that integrates contemporary works of art and culture into guests’ lodging experience. Other proposed hotels include a rumored 105-key Hampton Inn, which would be located at the corner of Southland Drive and Nicholasville Road, and a proposed Home2 Suites by Hilton in Hamburg Place.
Overall, occupancy in the greater Lexington hotel market has reflected a decline over the past several years, suggesting that new supply since the recent recession has somewhat outpaced demand. The introduction of new, high-quality supply over several years helped average rates grow through 2010, the year in which Lexington also hosted the World Equestrian Games; the decline in average rate in 2011 and into 2012 reflects the large increase in rates hoteliers were able to command during the event in September and October of 2010.
Academic conferences and sporting events at the University of Kentucky, more than 100 corporate headquarters and facilities, and an equine industry second to none worldwide provide the Lexington economy and hotel market with grand potential. Just in the past two years, Lexington has experienced a $32-million expansion of Toyota’s manufacturing plant, a $26-million expansion of Lockheed Martin’s Logistics Support Services, and an $18-million expansion of Tempur-Pedic’s international headquarters; these expansions brought nearly 400 jobs to Lexington, and Amazon.com’s plan for a new $20-million customer service center in the city should further bolster the local economy and send business to area hotels. Hoteliers and investors looking to break into the Lexington market should proceed with caution and professional advice given the still unsure course of the national economy. But the right kind of hotel project in the right place and with the right timing could bring laurels.
1 “2012 Kentucky Equine Survey: Phase I Results.” University of Kentucky College of Agriculture. http://www2.ca.uky.edu/equine/kyequinesurvey Retrieved on January 31, 2013.