Will the Party Bus Run Out of Gas, or Will the Good Times Roll?
The thriving Nashville lodging market has experienced 15 to 20 years of exceptional performance fueled by several key factors - employment and population growth levels that have outpaced the national average by more than a factor of two; robust tourism and leisure demand growth including event-driven demand; a deep and diverse corporate demand base; convenient airlift; and perhaps most importantly, the addition of the Music City Center in 2013. Together, along with the touch of southern flair the city offers, these factors have made Nashville appealing across the hotel demand spectrum. The question is: have supply and demand reached a state of equilibrium, or is there still room to grow?
Examining the past 24 years, the city's remarkable expansion from a southeastern regional hub into a secondary gateway market has been mirrored by a significant expansion of its hotel sector. From 2000 through 2023, Nashville added over 15,000 hotel rooms within the CBD/Downtown and Nashville West/Midtown submarkets (as defined by CoStar/STR). This reflects a more than 225% increase in room supply or almost 5.3% per year on average, well above the long-term national average of just over 1.1% per year. Even more impressive, this substantial increase in supply was outpaced by demand, which increased more than 275% from 2000 through 2023 or just over 5.9% per year on average. Combined with annual average daily rate (ADR) growth of 4.6% per year, revenue per available room (RevPAR) levels for these two core submarkets grew at an average annual rate of 5.2%, nearly double the national average during this period.
This article discusses each of the major contributors to the market's ability to absorb new supply, examines new supply over the near- to mid-term horizon, and ultimately considers whether this party bus is running out of gas, or just getting started. If you are questioning the party bus analogy, visit Nashville's Broadway at any time of day on almost any day of the year, and you will understand.
