The aerospace and military technology industries are a major source of employment for the Hampton Roads area. Many of the top companies in these fields maintain significant operations in the area, including SAIC, AMSEC LLC, Northrop Grumman, Lockheed Martin, and Raytheon. Most of these companies work closely with the area's government institutions as contract engineers, consultants, and manufacturers. In addition, the National Institute of Aerospace is a world-class research and education facility created to conduct aerospace and atmospheric research, as well as develop new technologies. 

The medical industry is important within this region. Sentara Healthcare is one of the most progressive and integrated healthcare organizations in the nation, providing services to more than two million Hampton Roads residents. Sentara operates more than 100 care-giving sites, including ten acute-care hospitals, outpatient-care campuses, seven nursing centers, three assisted-living centers, and over 380 primary care and multi-specialty physicians. Sentara also offers a full range of award-winning health coverage plans, home health and hospice services, physical therapy and rehabilitation services, and Nightingale (a regional air-ambulance service). The Sentara Leigh Hospital, located in Norfolk, is in the midst of a $126-million renovation. The renovation, which is scheduled for completion by early 2016, will reportedly include two new towers, a new lobby and a new outpatient center, an outpatient pharmacy, and a parking garage, increasing the total size of the hospital by 40%. Thus far, the 400-space parking garage and one of the new towers have been completed.

The MSA has traditionally recorded lower unemployment levels than the nation, but higher than the state of Virginia. These levels are attributed to Hampton Roads’ stable military and navy operations, as well as the area’s defense technology and medical industries. Unemployment rates in the area decreased in the middle of the last decade before rising in 2008. In line with national trends, the MSA registered notable increases in unemployment levels beginning in the second half of 2008 due to the impact of the national recession and the mid-year 2007 closure of the Ford Motor Company F-150 plant, previously the largest manufacturing plant in the area. Increases in unemployment continued through 2009 and 2010. However, unemployment rates began to decline in 2011, and this positive trend continued through 2014; furthermore, the most recent comparative period illustrates continued improvement, as indicated by the latest available data for 2015.

Trends in occupied office space are typically among the most reliable indicators of lodging demand, as firms that occupy office space often exhibit a strong propensity to attract commercial visitors. Thus, trends that cause changes in vacancy rates or in the amount of occupied office space may have a proportional impact on commercial lodging demand and a less direct effect on meeting demand. 

The greater Norfolk/Hampton Roads market comprises a total of 17.8 million square feet of office space. The Norfolk submarket comprises 4.4 million square feet. The Virginia Beach office market comprises 6.3 million square feet of office space, with a vacancy rate of 22.9% in 2014, which was above the overall market average. The average asking lease rate of $21.80 in Virginia Beach is roughly $2.50 above the average for the broader market. 

It is reported that many companies are looking at Hampton Roads as a lower-priced alternative to other competitive markets; however, the limited available Class A space is a hindrance to growth. There are several suburban office projects in the pipeline, however, and market participants reveal that new supply would benefit the market area.

 

 

Convention centers generate significant levels of demand for area hotels, particularly those within a radius of three miles. Convention headquarters hotels command premium rates and, in addition to capturing event-related demand, can also benefit from hosting related banquet events. Major conventions also push demand to peripheral hotels in the market.

The market features a variety of convention spaces, including the Virginia Beach Convention Center. This facility is located off I-264 in Virginia Beach and features approximately 181,000 square feet of meeting and exhibition space. The Waterside Convention Center, which is attached to the downtown Marriott Norfolk Waterside, offers 45,000 square feet of meeting space and is the second-largest meeting facility in the Norfolk/Virginia Beach area. The Hampton Roads Convention Center, which opened in 2005, is located midway between Virginia Beach and Williamsburg and features 344,000 total square feet of versatile convention and exhibit space. The John Q. Hammons Embassy Suites is adjacent to the convention center, and other accommodations are within easy reach. Furthermore, the Newport News Marriott Hotel & Convention Center, located at Oyster Point in Newport News, features a 65,000-square-foot conference center with several ballrooms and meeting rooms.

Statistics related to all of Hampton Roads’ conference and convention centers were not available for review. However, reports from the market reflect that these facilities are frequently used for consumer and trade shows that predominately attract visitors from within the region; the larger spaces, such as the Hampton Roads Convention Center, are also able to attract state and regional meetings and groups.

As previously mentioned, the Hilton Norfolk at The Main is anticipated to open mid-year 2017, adding roughly 50,000 square feet of conference space and 300 rooms to the Norfolk hotel and conference center market. The facility’s main ballroom will be larger than the nearby Marriott's.

 

Airport passenger counts are important indicators of lodging demand. Depending on the type of service provided by a particular airfield, a sizable percentage of arriving passengers may require hotel accommodations. Trends showing changes in passenger counts also reflect local business activity and the overall economic health of the area.

The Hampton Roads metropolitan area is served by two main airports, the Norfolk International Airport and the Newport News/Williamsburg International Airport. Norfolk International Airport, southeastern Virginia's dominant airport, added many new nonstop destinations between 2010 and 2012, and an $11.7-million renovation was completed in early 2014, with upgrades to the public areas, restaurants, and retail outlets. Additionally, renovations to Concourse B were completed in March 2014, inclusive of an updated security checkpoint, new technology, new noise-reducing windows, and new flooring; similar upgrades to Concourse A should be completed by the spring of 2016. Passenger traffic has decreased since 2013, and local officials report that there are too few direct flights to and from the airport to sustain past levels of traffic. The reduced flights and a rise in ticket prices have hurt the airport in the recent past. New renovations are expected to help the airport realize growth in passenger counts.

The Newport News/Williamsburg International Airport is located northwest of Downtown Newport News, Virginia. While the various commercial airlines that service the airport do not offer any international flights, the airport handles a number of corporate international flights. In 2010, a new $13-million concourse opened, the airport's largest runway underwent an extensive rehabilitation at a cost of approximately $16 million, the USO facility was expanded, and numerous terminal upgrades were completed. In addition, a $4-million hangar and office-space complex at the airport opened in early 2011. Furthermore, in 2013, a customs inspection facility was opened, allowing international flights to fly directly to the airport. 

In March 2012, AirTran stopped service to Newport News/Williamsburg International Airport and Delta Air Lines reduced its number of flights. The airport took a major hit when AirTran flights were pulled, worsened by Frontier’s cessation of all nonstop service to Denver in January 2014. The collapse and departure of People Express, a small airline, also negatively affected the airport. Without another low-cost carrier at the airport, its future remains in question. 

Aside from the previously noted economic forces in Hampton Roads, the area also benefits from a thriving tourism industry, including Busch Gardens Williamsburg and the Historic Triangle, as well as the Virginia Beach Oceanfront and its three-mile boardwalk. Historically, hotel occupancy in the Hampton Roads metro area has peaked from June through August, with the highest occupancy in July, as the summer months attract tourism and leisure demand. Additionally, the region’s tourism industry creates over 10,000 seasonal jobs during the peak summer months. Top attractions in Hampton Roads include the following:

The Virginia Air and Space Center is the visitors' center for NASA Langley Research Center and Langley Air Force Base. This world-class facility features the Adventures in Flight gallery and more than 100 hands-on exhibits that tell the story of air and space exploration. Visitors can see the Apollo 12 Command Module, a Mars meteorite, and a three-billion-year-old moon rock.

The Cape Henry Lighthouse has long been important for the large amount of ocean-going shipping traffic along the region’s harbors, rivers, and the ports of the Chesapeake Bay. Dating from 1792, it was the first lighthouse authorized by the U.S. government.

Comprising Jamestown, Yorktown, and Colonial Williamsburg, the aptly named Historic Triangle is another one of Hampton Road’s top tourism draws. Rich with American history, Colonial Williamsburg includes 88 original 18th-century structures and is populated with historic re-enactors who demonstrate aspects of daily life in the historic past. Colonial Williamsburg has become one of the most popular tourist destinations in Virginia, with more than 100 million visitors having enjoyed the attraction since 1932. The Colonial Williamsburg Foundation is a private, not-for-profit educational institution that includes hotels, museums, restaurants, convention facilities, and golf courses.

Busch Gardens Williamsburg is a 383-acre theme park located in James City County, Virginia, about three miles southeast of Williamsburg. The park opened on May 16, 1975, adjacent to Anheuser-Busch's brewery and near its other developments, including the Kingsmill Resort complex. Busch Gardens is often recognized as one of the highest-quality theme parks in the world; it has received dozens of awards for its themed attractions and show quality, as well as its landscaping and culinary operations. 

Bass Pro Shops Outdoor World attracts 1.5 to 2 million visitors per year, with the majority of all visitors traveling from outside of the immediate Hampton Roads area. The retail giant features in-store interactive sports such as fly-casting, rock climbing, and a shooting arcade. The store displays unique interior motifs, including waterfalls, a 10,000-gallon aquarium, and true-to-life wildlife exhibits.

The Hampton University Museum, founded in 1868, is the oldest African-American museum in the country and one of the oldest museums in the state of Virginia. The collection contains examples of traditional and contemporary African, American Indian, African-American, and Pacific Island art.

 

Hampton Roads’ strong, diverse economy has recovered well from the recent recession. Several of the market’s top industries have undertaken expansion projects, and the unemployment levels in the Virginia Beach-Norfolk-Newport News, VA-NC Metropolitan Statistical Area have declined year-over-year since 2010. With business activity having regained its thrust, hotel values, transactions, and performance are trending toward pre-recession levels. HVS interviews and market research support a forecast for this positive trend to continue. The market’s reliance on the government and military made it prone to the temporary negative impact of federal budget sequestration in 2013. Overall, however, activity generated by government contractors, Navy operations, and the Department of Defense has proven essential to the Hampton Roads economy and hotel industry. As the local, regional, and national economies continue to surmount the tide, Hampton Roads’ hotel industry is expected to continue its rise, giving well-advised hotel stakeholders incentive to seek out opportunities in the region.