KANSAS CITY—Straddling the border between Missouri and Kansas, Kansas City is home to more than 200 fountains—more than any other city in the U.S., according to Visit KC, an economic development organization. The 26th largest metropolitan area in the country has seen steady growth of new hotel developments and conversions catering to the next generation of travelers.
Occupancy, ADR and RevPAR have increasingly risen in the Kansas City market since 2010, according to data from STR. Occupancy rose from 55.2% in 2010 to 65.2% in 2015. ADR climbed from 80.9% in 2010 to 94.16% in 2015, and RevPAR surged from $44.69 in 2010 to $61.42 in 2015.
Key generators fueling travel growth to Kansas City include the Crown Center, a commercial complex and neighborhood; the Crossroads Art District, a historic neighborhood of boutique shops, restaurants and art galleries; the Downtown Loop, a layout of highways; and the River Market, a riverfront neighborhood, according to Herb Warmbrodt, principal, Warmbrodt Hotel Investments, based in Kansas City, KS.
Additionally, the Kansas City Streetcar Authority will operate a $1.6-billion, 2.2-mile streetcar line beginning in May. Other major projects in the market include the new $4.4-billon Cerner Corporation Campus in South Kansas City, and plans for either a new $1-billion Kansas City International Airport terminal or the renovation and expansion of the existing Terminal A building at a cost of $350 million, which all bodes well for the market’s lodging prospects, noted Warmbrodt.
“Kansas City is a market that has been generating interest from national investors based on the metrics,” said Warmbrodt. “Your dollar gets a lot of property compared to markets like Denver and Chicago. You can get yield but you don’t have to spend as much. We are starting to see impressive per-key pricing in the market.”
Since 2014, new-build supply in Kansas City has grown by 32%, according to Lodging Econometrics. As of the fourth quarter of 2015, the overall pipeline was comprised of 25 projects with 3,184 rooms. There are currently nine projects with 955 rooms under construction, and 13 projects with 1,892 rooms that are scheduled to start within the next 12 months. All projects are associated with global franchises such as Best Western Hotels & Resorts, Hyatt Hotels Corporation and La Quinta Worldwide.
With nine projects in the pipeline, Marriott International, Inc. represents the most projects in Kansas City’s pipeline. In March 2015, Marriott and Noble Investment Group debuted AC Hotels by Marriott in Kansas City’s Westport District. The 123-room AC Hotel by Marriott Kansas City Westport, which targets the Millennial-minded consumer, is situated near a number of travel generators such as a shopping and entertainment district.
“Demand has grown over the past couple of years,” said Steven Nicholas, principal & EVP, asset management for Noble Investment Group. “There are a number of growing companies in Kansas City over the last few years driving group demand. And, when the Kansas City Royals are home 81 days a year, it attracts the locals and a lot of out-of-towners.”
Ben Brunt, principal & EVP, acquisitions & development for Atlanta-based Noble Investment Group, foresees opportunity for lifestyle hotel products as well as select-service and extended-stay segments in the Kansas City market. Growth in the region’s office, retail, multifamily, housing, industrial and healthcare sectors has spurred demand for additional hotel stays, he added.
Chartwell Hospitality, based in Franklin, TN, is attempting to seize demand for extended-stay, select-service upscale products with the development of a dual-branded Courtyard by Marriott/Residence Inn property that will bring 261 guestrooms and suites to the downtown market. Scheduled to open in May, the 10-story hotel will be located south of the downtown freeway loop and near the Kauffman Center for the Performing Arts.
“Kansas City is an interesting market,” said Will Schaedle, director of acquisitions & development for Chartwell Hospitality. “There was a lack of new supply in Kansas City. Our project would take advantage as one of the new hotels in the market. We think there’s a pent up demand for business travelers looking for new hotel product in downtown Kansas City.”
Also in downtown Kansas City, Hotel Phillips, an Art-Deco icon built in 1931 and listed on the National Registry of Historic Places, is expected to join Curio – A Collection by Hilton in 2017 after extensive renovations. Arbor Lodging Partners, which acquired the hotel in October 2015, is overseeing the significant revitalization of the property, which is currently underway.
The Chicago-based debt and equity investor identified Kansas City as an emerging market. “What we loved about this market is that guests are looking for a sense of place and Kansas City has a lot of local pride,” said Vamsi Bonthala, CEO of Arbor Lodging Partners. Bonthala highlighted the city’s signature food scene, including 100 barbecue establishments, and jazz music scene as two key drivers fueling growth for the lifestyle hotel segment in the city.
What also makes Kansas City appealing from an ownership and development perspective is the city’s “less expensive barrier to entry compared to other markets,” said Jason Swords, principal of Sunflower Development Group. The Kansas City, MO-based developer and True North Hotel Group are planning a Home2 Suites by Hilton property in Kansas City to open during the second quarter of 2017.
Other projects slated for Kansas City include another Home2 Suites, Hampton Inn & Suites, two Hotel Indigos and a Holiday Inn Express. HB