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2019 Nashville Market Wrap Up

It is no secret – Nashville has a kind of pixie dust on it when it comes to growth and opportunity. Development is up, unemployment is down. Way down. What has not changed is the amount of hotels and restaurants entering the market. Additionally, 2019 saw Nashville again take a national stage by hosting the NFL Draft. The three-day event again showed the extent of Nashville’s ability to lead as a top destination. With the addition of major league soccer, Nashville will open to another market of sports fans. All of the growth has been profound. In fact, according to the Nashville Convention and Visitors Corporation, visitors to Nashville spend $13,000 per minute during a stay in Music City. However, there is a darker side to every fairytale and Nashville certainly has its own Big Bad Wolf. Workforce issues lead the change in challenges the industry is facing, as well as development and construction fatigue among Nashville residents and local politicians.

In 2018, Nashville ended the year with 5,611 rooms under construction. Of those rooms under construction in 2018, 1,395 opened in 2019. Then in 2019, we ended the year with 5,887 rooms under construction – a 4.9% increase. That means another 1,671 rooms were added to the construction pipeline after the openings and others were added to the construction list. With the new supply, one might expect numbers to soften. While individual hotels have seen some decline in ADR or occupancy, according to STR Inc, the market as a whole saw a 10% increase in demand year over year. Additionally for hotels in Davidson county, occupancy is up 1.5%, ADR is up 2.7%, RevPAR is up 4.2%. All of this with an increase in supply of 8.4%.

SHORT TERM RENTAL PROPERTIES
According to Airdna, Nashville increased active listings by 65.4% (3,172 listings). These have primarily been added in the downtown and East Nashville markets. Some of these properties blur the lines between hotels and short term rentals in that they offer common gathering places and food and beverage options. These properties are currently running at 60% occupancy with a $239 ADR, which is about 15% less in occupancy than hotels in the market.

RESTAURANTS
One area did see a slight decrease in 2019. According to the Nashville Convention and Visitors Corporation, the amount of restaurants opened was only 112 compared to the 133 restaurants that opened in 2018. We also saw more closures in 2019 at 32 as opposed to the 20 restaurant/cafe/bar closures in 2018.

So what does all of this mean for Nashville? That we are in a labor shortage just like every other market. “Hotels and restaurant chains can recruit salaried levels nationally or transfer in needed team staffing, but hourly workers cannot afford to move here and cannot afford the 87% increase in average apartment rental,” said Randy Rayburn, owner of Midtown Cafe.

The need for workers to staff the hotels and restaurants is at critical mass and chefs and hotel owners are looking at new ways to manage their businesses with few employees to assist guests.

“The competition for employees, both salary and hourly, is fierce,” said Jennifer Kuykendall, president of human resources firm Premier Hospitality Resources. “No longer are employees looking to build a foundation for a long-term career, but are instead looking for a one to two year stepping stone. Longevity benefits are no longer an incentive and the savvy employer has to be creative in customizing the employee experience while not sacrificing customer satisfaction. It’s a tough but exciting time, as it is forcing employers to be more creative than ever.”

CONCLUSION

Travel to Nashville and demand for hotels and restaurants has stayed on a consistent growth path for a solid ten year streak. But Nashville, like other markets, is not immune to the challenges that are faced when filling hourly and management positions, ultimately leaving owners and operators left with smaller staffs or reduced services. Nashville is also feeling the fatigue of development and construction. However, the silver lining to the tale of Nashville is that 2020 appears to have a strong outlook for demand.

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