Greater Worcester hotel growth outpaces national average as prices rise

Photo | Grant Welker The Homewood Suites in Berlin opened March 20, adding to a number of new hotels in Central Massachusetts in recent years.

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By Grant Welker

The Greater Worcester hotel industry has seen steady increases in occupancy rates and prices, all while more rooms come on the market.

Now, the question is whether that growth can continue – or run into what one prominent hotel industry group predicts is a widespread slowdown, including a projected plateau this year in occupancy rates.

“Room demand growth is connected to GDP growth at the hip,” said Jan Freitag, an analyst with the Tennessee industry analyst STR, referencing a leading economic indicator.

The forecasted stall in the nation's hotel industry would come as Worcester metropolitan area hotels mark five years of growth in occupancy rates and average nightly room rates.

The region's occupancy rate rose from 62 percent in 2013 to 66 percent in 2018, according to STR. At the same time, the typical room rate has risen from $103.10 to $115.92 in 2019.

A rise in the number of Worcester-area rooms – along with a bigger demand for those rooms – has helped the economy across Central Massachusetts, according to those in travel and tourism. They attribute the demand to the geographically central location and an affordability not possible in Boston.

“If you're the Massachusetts association of anything, this is in the center of everything,” said Alexandra McNitt, the executive director of the Chamber of Central Mass South in Sturbridge. “It's half the price of Boston to stay here.”

Rising occupancy rates and room prices in Greater Worcester come as the region has added new rooms.

A 118-room Homewood Suites opened on Washington Square in Worcester in 2017, and a 170-room AC Hotel opened on Front Street in April. In Sturbridge, the Publick House Historic Inn expanded by 28 rooms last year.

Plans further growth

A 109-room Homewood Suites opened in Berlin on March 20. In Worcester, plans for a $240-million redevelopment in the Canal District surrounding a planned ballpark for the Pawtucket Red Sox call for two new hotels.

A 150-room hotel and a 100- to 110-room hotel overlooking the ballpark are part of a mixed-use development slated to include 225 residential units, 65,000 square feet of retail space, and 200,000 square feet of residential or office space.

The Worcester metro area, which STR measures, does not include Middlesex County, which means Marlborough, with 11 hotels and nearly 1,900 hotel rooms, isn't counted in the regional total. But Marlborough has seen a notable increase in rooms, too.

The Apex Center of New England development on Route 20 opened in 2017 with a 108-room Fairfield Inn & Suites and a 137-room Hyatt Place. That came just a year after a 160-room Hilton Garden Inn opened in the city.

“With the opening of the Apex Center of New England, the expansion of the New England Sports Center, and the continuing flow of new businesses into Marlborough, the city has definitely seen an increase in hotel-room demand,” said Meredith Harris, executive director of the Marlborough Economic Development Corp.

“While more people are visiting and getting to know our city, they are also eating at our local restaurants, shopping at our retail stores and enjoying all Marlborough has to offer,” Harris said.

A critical piece of the economy

Even as the number of hotel rooms in and around Worcester has grown, it's still sometimes not enough, said Sandy Dunn, the general manager of the DCU Center. Larger conventions at the DCU Center sometimes require hundreds of upwards of 1,000 rooms, she said.

“We could use more hotel rooms, definitely,” Dunn said. “When we're at our peak, there aren't enough hotel rooms to service our visitors.”

In Sturbridge, with 11 hotels on or just off Route 20 alone, the industry has helped drive visitors to Old Sturbridge Village, along with weddings and meetings at a convenient location where the Massachusetts Turnpike and I-84 meet.

“It's amazing what it does not just for Sturbridge but for the surrounding area,” McNitt said of hotels and tourism.

Whether or not the region's hotel market can continue growing, the industry is central to tourism, itself a major piece of the Central Mass. economy.

Tourism accounted for $591 million of direct spending in Central Massachusetts in 2017, according to the Massachusetts Office of Travel & Tourism. That spending – more than half of which took place in Worcester – supports an estimated 3,650 jobs and brings $13 million in local tax revenue, the office reported in March.

Tourism spending was up 13 percent in a three-year period through 2017.

A forecasted slowdown

Increases in key hotel metrics in Greater Worcester mirrored what took place nationally, as the U.S. average occupancy rate hit 66 percent, an all-time high, according to STR. The national average daily room rate hit $130 last year.

“Very basically, an upswing is what the U.S. industry has been on as a whole,” said Freitag, comparing Worcester's growth to the nation's.

Much of the growth nationally has taken place in the largest markets. Among hotel rooms under construction today, 42 percent are located in the 26 largest markets, Freitag said.

More planned hotels in Worcester would join the market as STR forecasts a slowdown nationally, trending along a predicted slowdown in the overall economy.

The total number of rooms is expected to rise by less than 2 percent, which would still exceed the rate of four of the past five years.

Occupancy rates nationally are projected to be flat this year – still at the all time high set in 2018, but no longer rising. Nightly room prices are projected to rise by just over 2 percent, less than any of the five previous years, according to STR.