The occupancy rate at Maine hotels remained relatively flat in 2016 as the new supply of rooms nearly caught up with demand, said presenters at the Maine Real Estate and Development Association’s annual forecasting conference Thursday in Portland.
Three new Maine hotels were completed in 2016, adding 239 rooms to the state’s total supply, according to Mitchell Muroff of Mitch Muroff Hospitality Group in Newton, Massachusetts. They were Hampton Inn in Oxford, Homewood Suites in Augusta and 250 Main in Rockland Harbor.
A far greater number of hotel projects are under construction or expected to break ground in 2017 that would add an estimated 650 rooms to Maine’s overall supply. Five hotels are under construction and three more in are the planning phase.
If all are built, those eight projects would bring the total number of hotel rooms in Maine to roughly 38,000.
The five hotels under construction are Hampton Inn in Kennebunk, Tru by Hilton in South Portland, AC Hotel Portland on Fore Street in Portland, Home2Suites in South Portland and a still-unnamed upscale hotel at Oxford Casino in Oxford.
Why is this happening? Muroff said the reason is that despite little movement in occupancy rates, hoteliers in Maine have succeeded in squeezing progressively more revenue out of their guests each year since 2009.
“The average daily rate has increased every year for the past eight years,” he said. “It’s been a great run – it really has been.”
The hotel occupancy rate in Maine reached about 56 percent in 2016, up slightly from 55 percent the previous year, according to Muroff. In Portland, the average occupancy rate was 63.4 percent in 2016, up 4.6 percent from the previous year.
The U.S. hotel occupancy rate also remained flat in 2016 at just under 66 percent. Maine’s occupancy rate always lags behind the nation because of the state’s highly seasonal tourism industry.
But while occupancy is flat, the revenue numbers for hoteliers continue to rise.
The average daily room rate in Portland was $133.24, an increase of 4.7 percent over 2015. Revenue per available room, a metric used to gauge a hotel’s financial performance, was $84.54 in 2016, up “a whopping 9.5 percent” from the previous year, Muroff said.
Those are compelling statistics that have convinced many hotel developers once skeptical of building additional supply in Maine to change their attitude, said Jim Brady, developer of The Press Hotel in downtown Portland, which opened in May 2015.
Brady said that when he was seeking financing for that project, no lender in Maine would give him the time of day.
“I had to go with an out-of-state bank because not a single bank in Maine would loan us money,” he said.
But things have changed, in part because of the success of Brady’s project.
Brady said it’s possible that the Portland area, which already has about 5,500 hotel rooms, can absorb the additional supply that is under development.
However, he said it would require a continuation of the recent trend of growing popularity that the area has enjoyed.
“If we’re fortunate enough that the Portland market continues to expand,” Brady said, then it will be able to handle the new supply without a drop in occupancy rates. It really comes down to marketing the area properly, he said.
For instance, Brady said he would like to see a push to draw more tourists to Portland in the winter, possibly by creating and promoting holiday markets and festivals.
“We really don’t need more demand per se in July,” he said. “We need more demand in the off months.”
Major drivers of increased hotel occupancy in Portland included the “micro-brewing and foodie craze,” which kept demand high in the city, said Muroff.
Elsewhere in the state, lodging revenues are similarly strong. Maine’s average daily room rate reached $120 last year, a 33 percent increase over the $90 average rate from 10 years ago. Revenue per available room also increased, from roughly $57 in 2007 to $67 in 2016.
Total room sales volume in Maine was on track at the end of September to improve upon 2015’s total sales of $856 million by 9.2 percent.
Muroff predicted another flat year for Maine hotel occupancy in 2017, while the U.S. hotel occupancy rate is expected to decline slightly.