Of all of the elements of commercial real estate affected by tourism, none is as positively correlated as that of the hospitality sector. Investments in, construction of and operating revenues for hotels have increased at a record pace throughout this economic expansion.
According to CoStar News, in 2019, hoteliers sold more rooms and had more rooms available than ever before, while posting all-time highs in the industry benchmarks of room revenue, average daily rate and revenue per available room. Currently, about 206,000 rooms are under construction nationwide, with about 660,000 rooms in the pipeline, mostly in larger markets. This means metropolitan areas will face supply growth rates well above the national average at least through 2020.
In Northeast Mississippi, Lee County represents a cross-section of what a small market can do to bolster tourism and support the hotel operators in the area. Unlike large markets which might be able to capitalize on professional sports, nationally-relevant attractions, and popular widely-known gathering areas (here’s looking at you Beale, Lower Broadway and Bourbon Streets), the smaller markets must have a highly-effective team of people who understand the area’s interesting features, and how to market them to the world.
According to the dominant hotelier in the area, Bruce Patel, that’s exactly what Lee County has been able to do. He touts the Tupelo Convention and Visitors Bureau and its leader, Neal McCoy, as “fantastic” in its efforts to recruit the tourists to our community. Furthermore, he explains that it is, in fact, the strong leadership of the CVB team that is the “difference in our area which outperforms his hotels in the Jackson, Mississippi area and competes favorably with Southaven/Olive Branch, which obviously have the draw of Memphis as support.”
Surprisingly, McCoy says, “the biggest demand generator for our market is the transient business traveler. Group sales (sports and conventions) make up the next largest demand generator, although admittedly the numbers may be skewed due to the challenge of tracking the individual visitors (not in groups). Of the roughly 2,000 hotel rooms currently in the Tupelo city limits, the highest occupancy percentage occurs in three summer months.”
Patel’s company, Fusion Hospitality, will open two additional hotels in summer if 2021, which will increase his total to 8 hotels in Lee County. Including a total of 179 rooms, Fusion will construct two Hilton concepts: a TRU concept, which will focus on the transient patron, and Home2Suites, which caters to visitors needing extended stay services.
Neither of these concepts is a “full service” venue so developers like Patel will almost always attempt to own land adjacent to the hotels dedicated to restaurants. The symbiotic relationship between hotels and restaurants is easily explained especially if there is not full-service element in the hotels. For the hotel, this relationship creates a full-service situation without the hotelier taking on any restaurant management responsibilities. Obviously this relationship has a huge impact on restaurant sales volumes which in turn supports the local economy from increased taxes.
Committed professional development of hotels combined with an aggressive and focused marketing team seems to be the equation for the success of our hotel market, which pays dividends for the entire local economy.