OMAHA, Nebraska—The story of Omaha, Nebraska, is one of give and take. It tells of an evolving city growing and expanding but unable to shake its past.
An overall trend report of the Omaha market shows a 9.9% decline in revenue per available room since 2006 and an ongoing decline of 0.9% in RevPAR for 2011 year-to-date.
Closer analysis of the Omaha market using data from STR, parent company of the Hotel Investment Barometer, unveils the truth behind the numbers and the culprits suppressing Omaha’s hotel performance. The graph below shows the four classes that comprise the majority of room supply in Omaha and the vast difference between their performances:
Comparing the month-over-month changes since 2006 in all classes and locations, it seems downtown, west Omaha and the Council Bluffs areas have fared better. However, during some months, western Omaha seemed to steal guests from downtown hotels. Regardless of location, the newer properties held higher occupancy and ADR, while the older properties suffered occupancy rates at or below 50% and desperate average daily rates (in some cases, RevPAR averaging approximately US$3 for an entire month).
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There seems to be a shift in guest behavior, as travelers are choosing to stay in more upper-midscale and upscale hotels rather than economy and midscale hotels, which was the class of choice several years ago for guests visiting the market. Several factors might be contributing to this trend, such as the strengthening economy and growing number of major businesses based in Omaha, including Fortune 500 companies such as Berkshire Hathaway, Union Pacific and ConAgra Foods. Also, the burst in upper-midscale and upscale hotel growth during the past few years might be swaying potential guests as they look at Omaha hotels on the Internet and begin comparing brand new hotels with older hotels in need of a makeover. Even the older upper-midscale and upscale hotels are not faring as well as the newer upper-midscale and upscale properties.
It seems the older hotels in Omaha have two choices: Undergo major renovations to keep up with the new properties that have recently penetrated the market, or continue to disappear into obsolescence as they lose competitiveness.