Downtown Hotels: Too Many? Too Few? Just the Right Number?

Oliver Hotel, Union Avenue, Knoxville, September 2019

 

I get these kinds of questions often. Most of the time they are asked from the perspective of doubts about whether downtown can support all the new hotels that have sprung up in recent years. In the nine years I’ve been writing about downtown, four new hotels have opened to go with the five that were already present. Three of the existing five have been seriously upgraded during that time, another new one is scheduled to open this fall and yet another has been announced.
According to the most recent numbers provided by Visit Knoxville, our city hosted 6,500,000 overnight visitors in 2018. That number has grown 8.3% since 2015. Occupancy rates have grown 11.9% since 2012. During that same period, average daily rates (cost of an overnight stay) have increased 25.6%.

Crowne Plaza, Summit Hill, Knoxville, September 2019

Future Home of Embassy Suites, Gay Street, Knoxville, September 2019

In all of Knox County, occupancy has increased from 58.2% in 2014 to 64.8% in 2018. During that same time period, rates have grown about 3.5% a year, moving from $78.82 in 2014 to $93.50 in 2018
Downtown’s occupancy rates are similar, though slightly higher. In 2014, the downtown hotel occupancy rate was 63.9%. That rate has grown more slowly and fluctuated slightly as new hotels and additional rooms have come online. For 2018, it was 65.1%, yielding a 1.9% growth during those five years.

Hampton Inn, Main Street, Knoxville, September 2019

The total number of downtown rooms has grown to about 2,200 in recent years. The increase in number of rooms is only one part of the story for downtown, however. The average rate for an overnight stay was $112.32 in 2014 and grew to $132.08 per night by 2018, for a 17.6% increase over the five-year period. Given the large increase in the number of rooms downtown, the slight increase in occupancy rates and the large increase in prices, downtown hotels are generating far more revenue than they were just a short time ago.
There are other signs that Knoxville’s tourism industry is doing well. The Visit Knoxville website was visited almost 1.3 million times in 2018. Some of that was driven by major events like the Bassmaster Classic which drew a three-day attendance of over 153,000 people and the USA Cycling Championships.

Hyatt Place, Gay Street, Knoxville, September 2019

Marriott, Church Avenue, Knoxville, September 2019

The Tennessean, Henly Steet, Knoxville, September 2019

An interesting sidelight to these major events is the fact that many smaller events come and go, often utilizing the Knoxville Convention Center (now managed by SMG and booked by Visit Knoxville) and, unless you are really tuned in, you never know they are here. For example, did you know Knoxville hosted the Southeastern Theatre Conference? Probably not, but it drew 4,500 attendees from across the south.
You may have noticed the Wing Ding, with all the Honda Gold Wing bikes circling around, but would you have guessed that event brought in 8,000 visitors? Kim Bumpas, of Visit Knoxville, says the Convention Center is completely booked to the point that some events get bumped for larger ones and are moved to other local venues.

Visitor Spending in Knox County

For a big-picture reference point, Visit Knoxville works with 110 local hotels with about 9200 rooms. These hotels are the beneficiaries of the conventions, exhibitions, sporting events and overnight getaways people come to our city to enjoy. It also benefits us, the citizens of Knox County. The hotel tax generated about $8.7 million last year, in addition to the sales tax collected on those rooms. And that does not include money spent on meals, entertainment and retail purchases made while visiting.
The occupancy rate for downtown hotels and for county-wide hotels is up slightly from several years ago. For downtown, this comes despite a major increase in the number of available rooms and significant increases in price. It comes as a result of increased high-profile and lower-profile gatherings in the city, as well as a general increase in tourism interest in the city. There may come a time when we have too many hotels, but we do not seem to have reached that threshold yet.

Comments

  1. Another great article backed by research. Good to see Knoxville hotels increase occupancy almost 12 percent in the last 4 yrs. Hope that continues as new hotels are added to the mix.

  2. Thanks for your reporting, Alan. I don’t know what I would do without your blog!

  3. Hey KnoxvilleUrbanGuy,
    Things I’d like to hear updates about. First is OliBea. In your article from December 2018, regarding it moving locations, you said “You should expect the new restaurant to open in late spring or early summer.” From the current looks of things at the new site it appears completion is still a long ways away. Second is the Wild Wing Cafe on gay street. Per your article it said they would be aiming to open in time for football season this year and it appears absolutely nothing has been done other than putting up a poster in the window announcing something wild is coming. Lastly is the tiki bar (Tern Club Cocktail Bar). I thought they would have opened by now. If you have posted updates about these I must have missed them. Thanks

  4. “another new one is scheduled to open this fall and yet another has been announced.” .. I’m assuming the one opening this fall is the Embassy Suites, but what hotel were you referring to that has been announced? I remember reading a while back that an Aloft hotel was planned at the site of the old supreme court building, but also seem to remember hearing that an Aloft hotel may go up in the space/ hole on gay street between mast general and chivo taqueria. Am I remembering correctly?

    • KnoxvilleUrbanGuy says

      The Aloft was discussed for the Supreme Court site. A hotel was discussed for the hole on Gay Street, but I don’t remember a brand being attached. Nothing is currently planned for the hole on Gay Street, but plans call for a hotel that will operate more-or-less like a big Air B&B on the Supreme Court Site.

  5. Great read, thanks Urban Guy.

    What would even be better is if Visit Knoxville, would allow local downtown STR’S, like myself with 5 located on market square, to be allowed to join the growing number of hotels who profit. Unfortunately VK, who I love by the way, won’t for lack of better words ruffle the feathers of these larger corporations, leaving the smaller hotel guy outside.

    Capitalism at its best…

    • KnoxvilleUrbanGuy says

      Not to argue one way or the other on inclusion of short-term rentals, but I do think it is more complicated than simple capitalism. Once each month the Visit Knoxville staff visits each of the 110 hotels they promote. This is to make sure they are comfortable promoting them to our visitors. Some hotels fall off the list if they aren’t up to standard. If short-term rentals were included, it would be impossible for those to have the same scrutiny. It removes the ability of Visit Knoxville to make certain they aren’t setting up visitors for a poor or even unsafe experience. I’ve used STRs before and loved it, but that doesn’t mean that it’s practical for a visitor bureau to promote them. Just giving a different nuance to the issue.

  6. Aaron Thompson says

    Visit Knoxville is doing great things for the city!

  7. We will never get a final four they like having those events in a 60k plus dome. We might have enough hotels to host a NCAA tournament pod or possibly a regional.

  8. I like this idea of all the downtown hotels banding together for shuttle service. Interesting approach. Which city do you know off hand that does it?

    • Most recently, it was Denver, which has lots of hotels scattered on and around an enormous tract of land. There, I think there are two different clusters served by two different shuttles. They don’t serve downtown Denver, of course, but the distances for many of their “airport hotels” are similar to the distance from McGee Tyson to downtown Knoxville.

  9. I am curious as to why we are not in the running for more national sporting events. They used to say we couldn’t host events like a Final Four because we didn’t have enough downtown hotel space. Clearly, that is no longer true.
    The other thing I have wondered is why the downtown hotels don’t band together to offer shuttle service to and from the airport. Most other cities do this. It would be another point in favor of light rail service also, since tracks run from the airport to downtown.
    Food for thought, anyway. Great article’

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