Chattanooga hotel growth doubles U.S. pace since recession

The Roberts and Jones families check out of the Hamilton Place Embassy Suites hotel while on vacation recently. The hotel has been ranked highly by both Trip Advisor and Expedia.
The Roberts and Jones families check out of the Hamilton Place Embassy Suites hotel while on vacation recently. The hotel has been ranked highly by both Trip Advisor and Expedia.

By the numbers

* $80.66 - Average room rate in Chattanooga in 2014, or 30 percent less than the U.S. average of $115.03 for all hotels * 59.4 percent - Average hotel occupancy rate in Chattanooga in 2014, 5 percentage points less than the U.S. average occupancy of 64.4 percent. * 10,258 - Number of hotel rooms in Chattanooga, up by 1,232 rooms from the start of 2009. * $178.8 million - hotel revenue in 2014, up nearly 41 percent from $127.2 million in 2009. Source: Smith Travel Research, figures for hotels in metropolitan Chattanooga, which includes Hamilton, Marion and Sequatchie counties in Tennessee and Catoosa, Dade and Walker in Georgia.

With professional, community and academic members from across the South, the Southeastern Theatre Conference Inc., tries to rotate its annual convention among a variety of Southern cities.

But Betsey Horth, the conference's executive director, says Chattanooga remains the favorite city for the annual theater gathering, which in March drew 4,200 participants to the Scenic City.

"We just love Chattanooga - it's such an accommodating city and so easy to get around and enjoy," she says. "I think most of our constituency would be very happy if we returned to Chattanooga every year."

Four times in the past 11 years, Chattanooga has hosted the 5-day Southeastern Theatre Conference annual meeting, which pumps more than $2.6 million into the local economy every year. The Tivoli Theater, Chattanooga Theater Center, Marriott Hotel, Chattanoogan and Chattanooga trade center all offer attractive venues for the group's five theater festivals during the week, Horth says. The downtown shuttle and nearby hotels and restaurants also help transport, entertain and house conference attendees.

The theater group is among dozens of major conventions held each year in Chattanooga that utilize the Chattanooga Convention Center, Chattanoogan conference center or a host of area hotels or meeting places for business, association and religious gatherings.

Being located within 150 miles of 14 million Americans - and within 400 miles of more than 62 million Americans - Chattanooga is well suited for state and regional conferences.

"Chattanooga enjoys a central location for many people to easily drive to our town and we're an affordable city for those booking conventions, meetings or family reunions," says Ed Dolliver, vice president of sales for the Chattanooga Convention and Visitors Bureau.

The growth in the convention and travel business has helped Chattanooga double its tourism industry since the start of the 21st century and helped encourage hotel developers to add, on average, more than 200 additional hotel rooms every year in Hamilton County.

Chattanooga doesn't have the convention facilities, arenas or air service to accommodate most major national conventions that bigger cities like Atlanta and Nashville can handle. But as a midsize market, Chattanooga's hotel rooms are typically about 30 percent cheaper than the U.S. average and Chattanooga's family-friendly attractions, parks, hotels and meeting facilities make the Scenic City an entertaining and easily accessible place for most meetings.

photo The new six-story Hampton Inn will have 134 rooms and 2,000 square feet of meeting space.

"We don't try to book the biggest conventions, but we get a very high satisfaction rating from those who do come to Chattanooga and see all that we can offer," Dolliver said.

Chattanooga has added hotel rooms at more than twice the pace of the country as a whole since the Great Recession. In the past six years, the number of hotel rooms in metropolitan Chattanooga grew by more than 12 percent, adding 1,232 rooms since the 2009 recession, according to Smith Travel Research, a Hendersonville, Tennessee consulting firm that tracks the hotel industry around the globe. In the same period, the number of hotel rooms nationwide grew about 6 percent.

Bobby Bowers, senior vice president of operations with Smith Travel Research, said the hotel market is improving as the economy rebounds and business travel increases.

"During the recession, a lot of business travel and conventions were canceled or cut back," he said. "But as the economy has improved, business and leisure travel is definitely coming back."

Hotel occupancy nationwide grew in 2014 by 2.2 percentage points to 66.4 percent, while average room rates increased by $5.03 a night to $115.03.

"Nationwide from an occupancy perspective for hotels, the fundamentals are really strong and demand has exceeded the growth in supply for a number of years," Bowers says.

But the Chattanooga market, which has grown its hotel supply twice as fast as the national market overall, is showing lower occupancy and room rates. In 2014, average hotel occupancy slipped by 0.5 percentage point s to 59.4 percent, according to surveys by Smith Travel Research. Average room rates in Chattanooga increased by only $1.32 a night last year to an average $80.56 per night.

The construction crane has not yet migrated from Chattanooga's hotel skyline, however. Roshan Amin and Bob Bhagat are building what they hope will be the last full-serve hotel in downtown Chattanooga for a while. The Dynamic Group partners, who previously built a Staybridge Suite hotel near Hamilton Place, are building a $19 million Holiday Inn and Suites at the corner of Chestnut and Fifth Streets slated to open by September.

"Downtown has remained a strong market for both business and leisure travelers," Bhagar says. "But I think once our hotel is finished, the market will pretty well be saturated for right now."

photo Vision Hospitality Group closed last week on the purchase of almost an acre near the Walnut Street bridge, a location on which the company plans to build a 90-room boutique hotel. This rendering shows what it might look like.

Bhagar's Holiday Inn and a 90-unit boutique hotel near the Walnut Street Bridge planned by Vision Hospitality Corporation will add another 230 units in downtown Chattanooga within the next year. Developers have offered proposals to possibly convert two largely vacant office buildings - the former BlueCross BlueShield headquarters on Pine Street and the former Chattanooga Bank building on Eighth street - into upscale hotels that could add more than 300 more rooms. But those projects are still on the drawing board.

Since the Tennessee Aquarium opened in 1992 on Chattanooga's downtown waterfront, 10 new hotels or bed and breakfasts have already been added downtown. At least a half dozen other new hotels have been added near Hamilton Place mall and the eastern part of Hamilton County over the past two decades. While some older hotels are closing and the Chattanooga Choo Choo is converting 100 hotel rooms to apartments, the number of new hotels coming into Chattanooga reflects the healthy growing demand for hotels, from business travelers leisure tourists and convention and meeting goers.

"We continue to grow faster than most markets and our charge every day is to keep that momentum going," said Bob Doak, president of the Chattanooga Convention and Visitors Bureau.

This story originally appeared in Edge magazine.

Upcoming Events