Before the Pandemic

Occupancy within the Downtown submarket remained stable, consistently registering near the 70% mark, for the five years prior to the pandemic. Average daily rate (ADR) growth during that period was also consistent at a compound annual growth rate (CAGR) of 3.0%. These metrics illustrate the strength and stability of the local market, even in 2018 when the city lost its largest convention, Outdoor Retailer, as it moved to Denver, Colorado. The number of events held at the Salt Palace Convention Center rebounded in 2019. Convention attendance surpassed one million delegates in the two years prior to the pandemic.
 

Trends in 2020 and YTD 2021

In 2020, overall demand declined by approximately 50% in the Downtown submarket, while ADR decreased roughly 20%, generally in line with national trends. However, occupancy for the year-to-date period through July reached 50%, with strong month-over-month increases; moreover, occupancy surpassed the 60% mark in June and July of 2021. ADR lagged 2019 levels by roughly $40 during the first four months of 2021. However, this spread was reduced to $20 in May and $10 in June and July. A look at recent passenger traffic numbers for Salt Lake City International Airport (SLC) further illustrates the improvements in travel in recent months. Market Outlook
Robust demand recovery is anticipated to continue through the remainder of 2021, as Salt Lake City remains a popular drive-to tourist destination. The return of conferences and events, including FanX, one of Salt Lake City’s largest annual events (to be held in September 2021), should also support increased levels of demand, with occupancy levels expected to surpass 50% by year-end. Thereafter, occupancy levels are anticipated to exceed 70% in the summer of 2022; however, the 272-room dual-brand Element/Tribute Hotel and the 700-room Hyatt Regency are expected to open in the third and fourth quarters of 2022, respectively. Given this new supply, occupancy for the Downtown submarket is not anticipated to return to pre-pandemic levels until 2024/25.

Overall ADR growth for 2021 is expected to be approximately 8%, driven primarily by the anticipation that strong ADR growth will continue through the second half of the year. The return of FanX and other events at the convention center, as well as the expectation that employees will return to the office and that corporate travel will resume to some extent, should support ADR growth for the remainder of the year, in line with what was experienced in June and July of 2021. More significant growth is anticipated in 2022, likely near 10%, as the mix of business shifts to higher-rated corporate demand and as the new hotels raise the ADR ceiling for the overall market. ADR is expected to return to pre-pandemic levels by mid-year 2023. Growth above inflationary levels is also anticipated in 2024, as the new hotels ramp up operations and as stronger occupancy bases allow for continued rate increases.

For more information, contact either Katy Black, MAI, or Ryan Mark with our HVS Denver team.