Local Lodging Market Analysis

BLUEFIELD, WV HOTEL MARKET OVERVIEW

The Bluefield, WV lodging market comprises approximately 3,560 hotel rooms located in Raleigh, Mercer, Tazewell, Giles and other counties. The primary municipal feeder market is Beckley and vicinity, which has a population of approximately 110,000 with an income per capita of $47,000 as of January 2022. This indicates that the feeder group size, which is the number of persons within a certain feeder market that are present for the sale of each room night, is 55.9 persons per sold room (PSR). This also means that the population's efficiency of selling rooms in this market is above average. Total feeder group earnings is approximately $2.6 million for each room night that was sold in this market. Accordingly, the total guest-paid hotel room revenue in the entire Bluefield, WV market is $68.8 million, which is soft relative to the Top 104 markets. The following map defines the geographical boundaries of the Bluefield, WV lodging market, the statistics of which are summarized in this section:

KEY PERFORMANCE METRICS

The following graphs summarize recent key performance metrics for the local lodging market, along with comparisons and rankings of certain categories against the Top 104 markets over the past several years:

Source: Kalibri Labs

Bluefield, WV is a custom, supplemental market with below average lodging characteristics. Its lodging performance index (LPI, or the measure of a hotel market's effective overall performance using multiple key performance metrics as inputs) would have been 0.81 in 1Q 2022 had it been recognized as one of Newmark's primary 'Top 104' markets. Although this particular market is not recognized as a primary market, the data are substantial enough to compare Bluefield, WV's performance against other major US markets. As a rank, the LPI for Bluefield, WV is 69th of 104 organized hotel markets that Newmark analyzes on a continual basis. Please see the Glossary for a more detailed description of LPI. The following table summarizes the key performance metrics for the market since 2015:

KEY PERFORMANCE METRICS

As shown in the charts below, this market's occupancy ranked 97th during 1Q 2022 and 63rd during the trailing twelve-month period (44.4% and 56.0% respectively). Average guest-paid ADR ranked 93rd during 1Q 2022 and 93rd during T12, rendering guest-paid RevPAR of $40.98 (101st) and $53.60 (90th).

In addition to these performance measures, this market's moderate revenue recovery pattern from COVID-19 is similar with respect to T-12 loyalty contribution. Specifically, 51% of all rooms booked in this market are through loyalty programs—a pace which ranks 50th overall. As a rank, length of stay is unfavorable at 72nd (1.99 nights) while booking costs were favorable at $6.44, ranking 14th. Key benchmark index observations are illustrated below:

MAJOR HOTEL DEMAND GENERATORS

The following summarizes the largest hotel demand generators in the market. ‒ King's Daughters Medical Center ‒ Cabell Huntington Hospital ‒ St. Mary's Medical Center ‒ Marshall University ‒ Marathon Petroleum ‒ Toyota Motor Manufacturing ‒ Huntington VA Medical Center ‒ Marshall Health ‒ CSX, Huntington Division ‒ Amazon ‒ U.S. Army Corps of Engineers ‒ Wal-Mart Supercenter ‒ Alcon ‒ GC Services ‒ Steel of West Virginia ‒ AT&T ‒ Huntington Alloys Corp. ‒ Allevard Sogefi U.S.A. Inc. ‒ AK Steel ‒ Our Lady of Bellefonte Hospital

SCALE AND SERVICE DISTRIBUTION

Most organized markets in the U.S. are host to all hotel chain scales and orientation of service. During the COVID-19 pandemic, we note that most markets have commenced a rebalancing of both metrics to best serve the evolving demands of the travelers to the area. The following graphic summarizes the distribution of supply as it existed in the most recent query, both in terms of chain scale and service orientation. These metrics are furthermore compared against the current distribution status of all hotels in the U.S., both in terms of number of rooms allocated to each category, as well as the penetration level of the subject market’s room count.

TRENDS, RISKS, AND INVESTMENT RATES

Bluefield, WV has certain characteristics that contribute to its status as a below average hotel market. The following summarizes key performance trends in recent months: ‒ Revenue growth potential, which is an assessment of total revenue growth over the past three to five years against the Top 104 markets, is average. Specifically, it ranked 41st. ‒ Supplier power trend, which is an assessment of a market's ability to maximize loyalty and profits, and to ward off booking costs over the past 12 months, ranked 22nd out of 104 (above average).

‒ Our analysis of investment yields is such that the market's investment parameters (yields, OAR, IRR, interest rates, etc.) against Top 104 markets was below average, ranking 74th. ‒ Supply risk, which is an assessment of market supply growth over the past 12 months that is still in the process of absorption, ranked 13th out of 104 markets. This is above average. ‒ Labor risk, which is a measure of current employment health over the past two years relative to the other markets (factoring in COVID fluctuations), ranked 20th, which is above average. As a result of these observations, it is our opinion that investment rates (once transaction volume regains pace) are moderate. The following scattergram summarizes this market's investment positions relative to the Top 104 US hotel markets in the major hotel categories.

PERFORMANCE CYCLE

The Bluefield, WV market is currently in the 'Regeneration' stage of the performance cycle. In this stage, hotels and the underlying economy are generally underperforming. The highest and best uses of hotel assets are challenged whether by COVID-19 impacts, oversupply, weak economic indicators, and/or poor corporate contribution. Hotel investors look for opportunities to either exit or regenerate demand. Example markets in this stage include Chicago, IL; Columbus, OH; and Detroit, MI.The following chart illustrates this market's position in the performance matrix relative to the other 104 lodging markets:

PUBLISHED RATE ACTIVITY

Travelers within the subject market book rooms through a variety of distribution channels. There are moderate rate variances amongst the channels with respect to free and independent travelers; however, significant variance can exist between the published rate and ultimate guest-paid rate, particularly with respect to the lead time. As the lead time increases, so does the spread between these two rates. The more published rates are manipulated by operators, the higher the rate competitiveness becomes and the longer a market could take to recover.

UBLISHED RATE ACTIVITY

7-30 Day Advance vs. Three Weeks Prior

The U.S. on average also experienced positive change of 2.9% to its 7/30 lead time rates over this same interval. This represents calmer rate volatility compared to the U.S. where hotel operators are less inclined to overreact to changes in demand and more confidence exists in future upside in the market.

NET HOTEL CLOSURES

As discussed, COVID-19 prompted several thousand lodging facilities to temporarily shutter. The highest velocity of closures in the United States occurred in the last week of May. Since this time, hotels have continued to close down, some temporarily and others potentially permanently. As shown in the following graph, net closures in the State of WV market reached peak velocity on about May 18th, plateauing shortly thereafter. The maximum number of hotels closed in this market during the COVID period was 40 and the approximate number of hotels most recently closed (as of April 11, 2022) was 24. Overall, a total of 80 hotels were closed at one point since the beginning of the pandemic. Looking back over the past few weeks, the velocity of hotels reopening (the inverse of net closings) appears to be behind that of the nation, according to Hotel Compete. The following graph summarizes the mix of currently closed hotel properties relative to that of the nation.

LOCAL AIRPORT STATISTICS

In mid-2020, air travel declined precipitously due to the pandemic crisis and by late 2020, air traffic began to recover. The following chart summarizes historical long-term growth in passenger enplanement counts as well as annual changes over the past 12 months.

CONCLUSION

Overall, the Bluefield, WV lodging market is below average relative to the Top 104 US markets tracked by Newmark. As this market recovers from COVID-19, the expectation of a full recovery within four to six years is unfavorable.

As this market progresses through its recovery curve, investors will keep track of potential risks, such as Total Rooms Sold, Total Rooms Supply, and Short-Term Historical Supply Growth. However, Feeder Group Earnings PSR, Feeder Group Size, and Long-Term Historical Supply Growth are positive characteristics that will help in the healing process.