Virginia Beach resort-area hotels prove good bet for investors

Accommodations throughout the state have suffered major money losses around the earlier two a long time. This has not been the circumstance for Virginia Seashore resort spot hotels, and the market’s strong overall performance need to appear as no surprise.

My associates at Grand Bay Advisors and I broker transactions with hotel makes during the United States — Marriott, Hilton, InterContinental Motels Group and Choice Hotels, to name a number of. When considerably of our organization is executed outdoors Hampton Streets, it is gratifying for our Norfolk-primarily based organization to work with motels right here locally as well.

About the past couple of years, our advisory team has shut on Virginia Seashore Oceanfront hotel bargains that stand for more than $60 million in product sales for our consumers. Irrespective of the economic challenge that national resort marketplaces have confronted around the past 10 years (which include throughout the pandemic), the resort spot has held its possess — and then some.

Given that currently being recruited to Hampton Roadways from Washington, D.C., in 1999 to open up and run the initially Marriott-branded lodge at the Oceanfront, I recognized that the market was underserved and underpriced. The initially budget I offered for the hotel was $1 million in earnings earlier mentioned what the owners were projecting. The lodge hit my quantities all through the very first entire yr.

That is when I realized: Virginia Beach’s resort hotel effectiveness was a perfectly-kept mystery.

Most individuals may perhaps be unaware that soon after 9/11, when almost each and every hotel sector in the state contracted, two markets grew yr in excess of yr. One was Philadelphia, which grew at about 4%. The other was the Virginia Seashore vacation resort, which grew at about 11%.

The next wonderful obstacle for the resort marketplace arrived in the course of the Good Recession, when nearly every single hotel industry in the U.S. contracted. The Virginia Beach front resort place continued to expand 4-6% every single year from 2008 to 2011. It was not till 2012 that advancement eventually slowed, to all over 2-3%, due to sequestration. Continue to, the resort marketplace never ever knowledgeable a contraction through this period of time, although most other U.S. hotel marketplaces did.

In modern memory, not till COVID struck did the Virginia Beach vacation resort practical experience a contraction or calendar year-around-calendar year decline. Even then, the downturn was a lot more shorter-lived and much less remarkable than most of the rest of the nation.

Through the pandemic’s early days, most U.S. hotel marketplaces knowledgeable occupancy declines of 50% or a lot more. Just 90 times just after the March 2020 U.S. lockdown, Virginia Beach location resorts had been generating 70-80% pre-pandemic occupancies. Only 15 months right after the first lockdown, Virginia Beach’s high quality-branded inns previously have been exceeding pre-pandemic occupancy amounts. All through the 12 months commencing in Might 2021, quality-branded Virginia Seashore area hotels exceeded pre-pandemic occupancies in six or much more months. Nonetheless, occupancy development was not the sole contributor to Virginia Beach’s spectacular overall performance during the pandemic. Normal each day amount (ADR) was up in 2021 in excess of 2019 for lots of of Virginia Beach’s vacation resort-space inns.

Smith Journey Investigate, which publishes hotel information for U.S. and world markets, ranked the Norfolk/Virginia Beach front resort marketplace as No. 1 in phrases of restoration for the duration of considerably of the initially year of the pandemic. Though Norfolk motels are incorporated in the functionality facts, the markets differ enormously with the Oceanfront vacation resort driving significantly of that beneficial knowledge.

To even further solidify the resort area’s reputation, various Oceanfront inns are closing in on the $200 Profits for every out there area (RevPAR) mark. The hospitality marketplace utilizes this metric to evaluate a property’s means to fill its accessible rooms at a variety of fees. A about $200 RevPAR is viewed primarily in gateway markets, like Boston, Chicago, Los Angeles and D.C.

We believe it will be only a issue of time — maybe this yr or upcoming — when Virginia Beach’s vacation resort location fulfills that benchmark. As large combined-use jobs are created at the resort’s North Close in close proximity to Neptune Park and to the south at Rudy Loop, a $200 RevPAR could turn out to be the common for the nicest Oceanfront lodges, this sort of as the new Marriott Resort Virginia Seashore Oceanfront assets and the new Embassy Suites Hotel scheduled to open in the up coming yr.

Though some could be astonished to find out that Virginia Beach vacation resort inns outperform most non-gateway markets close to the U.S., my associates and I are not surprised. With easy obtain to visitors from the mid-Atlantic and Northeast, merged with a robust company foundation and governing administration and governing administration contracting existence, the Oceanfront functions an great combine of company and leisure that gives the current market benefits commonly uncovered only in gateway markets.

Matthew Winston is the co-founder of Grand Bay Advisors, a countrywide complete-provider hospitality asset administration, brokerage and consulting firm in Norfolk.