By: Chris Cargen, the founder + CEO of Hospitality America, a Nashville-based hotel management firm operating in seven states.
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I am Chris Cargen, Founder and CEO of Hospitality America, a Nashville based hotel management firm operating in seven states. Over the last 23 years, we have been a part of six hotels in Greenville and still manage five, three of which are in Downtown Greenville. I have managed Greenville hotels since 1986, spending an average of 100+ days per year here.
My hometown of Nashville, TN, has a downtown hotel room over-supply underway with cranes everywhere. However, unlike Greenville, downtown Nashville is seeing robust class-A office growth, it has a world-class downtown convention center + NFL/NHL sports franchises, it is a Southwest Airlines hub, Music City USA and much more. This over-supply will eventually be digested by these new and significant “Room-night Generators.”
Downtown Greenville also has significant room-supply growth. Beginning 2015, Downtown Greenville featured five hotels with 857 rooms. In 2021, hotel supply will be 15 hotels with 2,268 rooms, growth of 265% in six years! Beyond 2021, two hotels totaling 265 rooms are in planning and three are rumored. In contrast to Nashville, there is no identifiable new growth in demand beyond a very healthy “leisure” increase – unfortunately, that cannot singularly begin to fill the new rooms.
Downtown Greenville enjoys lodging demand from other sectors such as weekend leisure, visiting friends + family, sports events, some government, etc. But the most vital historic hotel demand generator in Greenville is commercial office and the visitation it generates...and in Greenville, such growth has been extremely stagnant and alarmingly insufficient to foster a healthy hotel environment. In 2010, the CBD of Greenville had total office space of 4.6 MM square feet. In 2021, total office space in the CBD is forecast to be only 5MM SF – a growth of less than 10% in 10 years! In other words, hotel room capacity will have exceeded growth of the most critically important commercial lodging demand generator by a multiple of 28 times! The end result is an 11% revenue decline of Downtown Greenville hotels in 2019 – the trend continues into 2020; it will worsen as the rooms under construction, and planned, come online.
An over-supply of downtown hotel rooms results in a buyer’s market for hotel lodging seekers. Theoretically, it might seem that lower hotel rates would increase demand + occupancy, but it rarely does. Instead, hotels compete with lower rates in a race-to-the-bottom. As a result, employment staffing is slashed to the bare minimum, reinvestment and renovation funds diminish...all leading to a decline in physical and service quality. The best local example is the Hyatt Hotel on Main Street prior to its admirable makeover by Auro Hotels. Such investment incentive does not exist today in Downtown’s rapidly declining lodging market…moreover, without a dramatic change in demand, more “neglected Hyatt’s” will exist. Since downtown hotels – the nicest and most expensive in the region – deservedly command the highest room rates relative to other sub-markets within the community, lower hotel rates + lower occupancies ripple throughout the broad market-this phenomena began in 2019.
Downtown Greenville deserves its numerous national awards, the result of great city leadership and vision – tree-shaded sidewalks, Falls Park, The Governor’s School for the Arts, remarkable culinary destinations, and much more. It is a city to which leaders + planners from other communities flock in an effort to learn the formula for success. The “Yeah, THAT Greenville” campaign does a terrific job promoting Greenville to leisure travelers, potential new residents and hopefully, new employers. Downtown has enjoyed increasingly higher leisure demand year-over-year due to its growing reputation for all above, but such leisure demand is finite. From a lodging market health perspective, Greenville lacks the tourist destination magnetism of a Charleston or Nashville necessary to sustain its hotels.
The massive increase in apartment/condo residents provides patronage to restaurants and shops. Unfortunately, companies such as Airbnb, HomeAway, and the like, lease blocks of vacant apartments and operate them as short-term rentals. This unregulated practice also dilutes downtown affordable housing opportunities.
With all due respect to a great city, Greenville does not have the lodging demand generators of Nashville, Charleston, Charlotte, etc. Its leaders must develop those which are achievable in order to be sustainable. In absolute truth, Downtown Greenville, much more than any other market of which I am aware, is facing a massive hotel supply glut.
