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Omaha is outpacing the U.S. when it comes to hotel growth, and more is on the way

Omaha is outpacing the U.S. when it comes to hotel growth, and more is on the way

They’re being built tall, small. In an office high-rise, by a mall. They target all types: urban, suburban, history buffs, those who want to stay buff.

Nowhere, it seems, is terrain too tough: They’re planned in the Bluffs, by the river, on a midtown sliver.

Welcome to the story of Omaha-area hotels — a market where construction and conversion of lodging rooms has become more prevalent than the green eggs and ham in the pages of a Dr. Seuss book.

In short, the number of hotel rooms in the Omaha area has jumped about 16 percent in the past five years — that’s higher than the 7 percent increase for the United States over the same period, according to STR, a data firm that tracks trends in the hospitality industry.

If one were to count the roughly 1,500 hotel rooms that are right now in various stages of planning and construction, the growth would be even greater — a 27 percent leap since 2013.

Keith Backsen, who heads the area’s Convention and Visitors Bureau that’s also known as Visit Omaha, said the city’s diverse businesses, its central location, robust real estate development and tourism generators such as the annual College World Series have commanded the attention of hoteliers looking for their next investments.

So far this year, more hotel rooms have been booked than in any of the first six months of the year since at least 2008. And STR reports that revenue from local room bookings is up nearly 10 percent compared with the same period last year.

Hotels track how often they’re booked by occupancy rate, or how full a hotel is on an average night. Overall, the area’s occupancy rate so far this year is nearly 62 percent, up just slightly compared with the last few years. But certain pockets in certain months do much better, relatively, and those occupancy rates at times surpass 80 percent.

With jobs and bustle ramping up — at places like the University of Nebraska Medical Center, the planned West Farm mixed-use development, proposed riverfront overhaul and eventual airport expansion — Backsen doesn’t see hotel demand deflating any time soon.

“The way my crystal ball looks, we continue a pretty good ride here in Omaha,” he said.

Who wins and who loses in the proliferation of guest beds and pillows?

Backsen and others say competition is good news for the traveler and the local family looking for a weekend getaway or pool party. There’s more variety to pick from; properties spruce up to win guests. And ample supply typically keeps room prices from skyrocketing.

Challenges intensify for some, though.

With a local unemployment rate around 3 percent, hotel managers will scramble even more for good employees, said Tim Darby of downtown’s upscale Magnolia Hotel. He worries about keeping a strong workforce even more than occupancy rates these days, Darby said.

“Every hotel that opens makes it that much more difficult to hire people,” said Darby, past president of the Metropolitan Hospitality Association, a group of local hotels and motels. “This is really becoming a hot topic in our industry, and one that needs to be seriously looked at. I don’t know how all these hotels are going to staff up.”

Amid the expansion, older, existing hotels must work harder to lure guests. Those without refreshed suites and hallways are left in the dust. According to the tourism agency’s Backsen and industry reports, the midscale category — think brands such as Quality Inn or Baymont Inn & Suites — locally have taken the biggest hit in the last five years in terms of rooms closed or converted into something else.

Consider these stats from STR, the data tracker:

  • The number of available hotel rooms in the Omaha area has increased from 13,018 in 122 properties five years ago to 15,091 in 141 properties today, a nearly 16 percent jump. If you included hotels in various stages of planning or construction, the room growth since 2013 would raise to 27 percent. That doesn’t even account for hotels envisioned but still in the discussion stage for developing projects such as West Farm near Boys Town, Turner Park East in midtown or the proposed revamp of the downtown Conagra Brands campus.
  • Hotel room revenue in the Omaha area has risen annually since at least 2012. This year, likewise, is on pace to surpass 2017. Looking only at the downtown area, room rental revenue is up about 27 percent when comparing the first six months of 2018 with the same time frame in 2013. Suburban hotels reported 32 percent growth. (Room revenue accounts only for lodging sales, not for food, beverages or other frills.)
  • So far this year, the hotel occupancy rate in the overall Omaha area is about 62 percent, less than the national 66 percent rate but higher than the 56 percent for a region that includes Nebraska, Iowa, Missouri, Kansas, South Dakota, North Dakota and Minnesota.
  • Omaha’s amount of revenue per available hotel room (called RevPar in industry parlance) grew by 6.8 percent this year over the same period last year, better than the 3.8 percent increase for the country. The recent gain for Omaha, however, followed a few annual dips. The figure is calculated by multiplying a hotel’s average daily room rate with its occupancy rate.

Deepak Gangahar, a local heart surgeon-turned-hotel developer, said he anticipates a drop in occupancy and revenue for a while after bunches of new rooms come online. But he foresees a catch-up afterward. “To me it is a reflection of the dynamic growth of the city of Omaha and its economy.”

Gangahar’s company built the fitness-themed Even Hotel on 24th and Farnam Streets and is building a Holiday Inn Express across the street.

Nationally, Jan Freitag, senior vice president of STR, said the hotel industry is enjoying a prolonged positive cycle. He said June marked the 100th month of consecutive RevPar growth (the metric commonly used to measure industry health).

He said hotels nationally are buoyed by factors including strong economic growth, a low unemployment rate that translates to job confidence and more travel, both leisure and business.

Freitag expects the country’s demand and growth trends to continue at least a couple more years.

Meanwhile, new hotels and plans for new hotels keep coming locally — from downtown to suburbia.

They’re historic: A development team, for example, just revealed a plan to return the century-old Blackstone building back into a hotel near the UNMC campus. A 105-year-old downtown structure has started to be converted into the boutique Peregrine Hotel.

They’re brand new: Construction just started on a six-story Marriott Moxy in the Old Market; work is wrapping up or ongoing on sites in the Aksarben area and west Omaha. Last summer, the 333-room, full-service Marriott opened in the still-developing Capitol District.

They’re creative: The 15-story Landmark complex downtown is turning some offices into boutique hotel rooms. Gangahar is building a millennial-targeted Aloft hotel — Omaha’s first flag for that brand — near 180th Street and West Dodge Road.

High-profile hotels also have been put on the market, as owners sense the market is ripe. For example, the 132-room Element Hotel, which was a key piece of the Mutual of Omaha’s Midtown Crossing campus, is for sale. Spokeswoman Molly Skold said the move was due in part to “increased demand for institutional quality hotels throughout the Midwest region” and a desire to redeploy the proceeds.

The City of Omaha earlier this month announced a lease-purchase deal with a Seattle-based firm to take over the full-service, 600-room Hilton Omaha city-owned hotel attached to the CenturyLink Center.

Indeed, hotels have been envisioned as a key piece of many major redevelopment plans announced in the area, including the West Farm residential and shopping development near Boys Town, the proposed Avenue One mixed-use mall near Elkhorn and the Lot B site near the downtown CenturyLink Center.

Darby, the Magnolia hotel manager, said he views the flurry of construction and increased competition as good — mostly. He chuckled, saying it’s hard work and lots of pressure on existing hotel staffs to keep improving a property to stay in the race.

“When you continue to drive as hard as you can and your results remain flat, so to speak, it sure would be nice for someone to start building apartments!”

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Cindy covers housing, commercial real estate development and more for The World-Herald. Follow her on Twitter @cgonzalez_owh. Phone: 402-444-1224.

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