Occupancy Improves Regionwide, Driven by Gains in Smaller Markets
Energy industry drives rapid demand growth in North Dakota. Oc-cupancy across the Upper Midwest states continues to steadily climb, highlighted by North Dakota. A recovery in energy prices over the past couple of years renewed shale oil production in the state, which is second only to Texas in total output for 2018. The rapid expansion of the industry in the area has substantially increased hotel demand across the state. Above-national-level job growth is also supporting net in-migration into Des Moines, where the added business and leisure travel should bolster the need for hotel rooms. A contracting construction pipeline in the metro will aid revenue metrics.
Accelerated construction impacts existing Twin Cities hotels. The inventory of hotel rooms in Minneapolis-St. Paul increased by 4 percent in the 12 months preceding July, representing about 1,700 new keys. Another 3,400 rooms are under construction, weighing on occupancy and RevPAR growth in the short term even as rising tourism bolsters hotel room demand. In the region’s other major hospitality market, Chicago, completions were also elevated over the past four quarters, with more than 3,200 deliveries. The pipeline will contract moving forward, though, with only 1,900 rooms un-derway. Fewer arrivals, paired with the metro’s status as a regional business and tourism hub, should continue to improve local hotel performance metrics.