Proposed Hotel Brentwood
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MARKET STUDY Proposed Hotel Brentwood BRENTWOOD, CALIFORNIA SUBMITTED TO:PROPOSED PREPARED BY: Ms. Peggy Berglund Suzanne R. Mellen, MAI, CRE, FRICS, ISHC City of Brentwood HVS Consulting & Valuation City Manager's Office Economic Development Division of TS Worldwide, LLC Division 100 Bush Street, Suite 1625 150 City Park Way San Francisco, California 94104 Brentwood, California 94513 +1 (415) 896-0868 +1 (925) 516-5187 January‐2020 January 9, 2020 Ms. Peggy Berglund City of Brentwood City Manager's Office Economic Development Division 150 City Park Way Brentwood, California 94513 HVS SAN FRANCISCO Re: Proposed Hotel Brentwood 100 Bush Street, Suite 1625 San Francisco, California 94104 Brentwood, California +1 (415) 896‐0868 HVS Reference: 2019021316 +1 (415) 896‐0516 FAX www.hvs.com Dear Ms. Berglund: Pursuant to your request, we herewith submit our study of the Brentwood hotel market. We have evaluated multiple potential hotel sites and analyzed hotel market conditions in the Brentwood, California, area. The results of our market research are presented in this report. We hereby certify that we have no undisclosed interest in the property, and our employment and compensation are not contingent upon our findings. This study is subject to the comments made throughout this report and to all assumptions and limiting conditions set forth herein. Sincerely, TS Worldwide, LLC Suzanne R. Mellen, MAI, CRE, FRICS, ISHC, Senior Managing Director - Practice Leader [email protected], +1 (415) 268-0351 McKenna Luke, MAI, Director [email protected], +1 (303) 704-2636 Superior results through unrivaled hospitality intelligence. Everywhere. Table of Contents SECTION TITLE PAGE 1. Executive Summary 5 Subject of the Market Study 5 Brentwood Market Overview and Conclusion 6 Summary of Hotel Market Trends 7 2. Market Area Analysis 9 Proximity to Local Demand Generators and Attractions 11 Tourist Attractions 13 Public Transportation 14 Airport Access 14 Workforce Characteristics 17 Unemployment Statistics 21 Major Business and Industry 22 Office Space Statistics 26 3. Site Overviews and Hotel Product Recommendation 29 State Route 4 Sites 29 Neighborhood 32 Access and Visibility 35 Neighborhood 35 4. Supply and Demand Analysis 38 Definition of Subject Hotel Market 38 San Francisco Bay Area Lodging Market 38 Historical Supply and Demand Data 40 Seasonality 43 Patterns of Demand 47 Primary Competitors 50 Secondary Competitors 57 Supply Changes 59 Demand Analysis Using Market Segmentation 60 Latent Demand 64 5. Statement of Assumptions and Limiting Conditions 67 Addendum - Charts 70 Qualifications 1. Executive Summary Subject of the The objective of this study was to assess hotel market conditions in northeastern Market Study Contra Costa County and evaluate the potential for hotel development within the city of Brentwood. Multiple hotel sites were evaluated, five of which were considered to offer the best prospects for development of a lodging facility. Based on the profile of lodging demand and existing hotels in the market, we have concluded that the market can support a new limited-service and/or extended-stay hotel, as will be further discussed in this report. The existing supply of hotels in Brentwood comprises a 59-room Hampton Inn, a 49-room Holiday Inn Express & Suites, and a 50-room Best Western Inn. Because the city’s supply of existing hotels is limited, and much of the area’s commercial demand is generated in towns west of Brentwood, we also considered hotels in the greater Contra Costa County, including Pittsburg, Oakley, and Antioch. We conducted market interviews with city officials, market participants, and local businesses within Contra Costa County to understand the area’s growth trajectory, current market demand, and existing and proposed hotel supply. In addition, lodging supply and demand trends were investigated based on HVS’ database of hotel performance and an STR Trend report. Product As noted, we concluded that five sites offer the best potential for hotel development. Recommendations and Four sites along State Route 4 (SR 4) were considered, any one of which would be Takeaways favorable for hotel development. Of these, no single site was selected; thus, in this report we will refer to the SR 4 hotel sites in aggregate. The fifth site is a parcel on Brentwood Boulevard, which will be referred to as the Brentwood Boulevard site. The SR 4 sites and Brentwood Boulevard site are viewed as having the greatest potential for successful hotel development. Based upon the locations of the sites, the surrounding uses, traffic counts, sources of demand, our conversations with the client, and other factors, we concluded that one midscale, upper midscale, or upscale limited-service hotel or one upper midscale extended-stay hotel would be appropriate for the Brentwood market at this time; a dual-branded hotel consisting of a mix of limited-service and extended- stay products would also be a viable option. Based on the existing brands/products already in the market, potential limited-service products include SpringHill Suites (upscale) and Fairfield Inn & Suites (upper mid-scale), both by Marriott; and Tru by Hilton and Avid by IHG (both midscale). Extended-stay hotel products include Home2 Suites by Hilton, TownePlace Suites by Marriott (both upper midscale), or Candlewood Suites by IHG (midscale). Possible dual-branded hotels include a January‐2020 Executive Summary Proposed Hotel Brentwood – Brentwood, California 5 SpringHill Suites or Fairfield coupled with a TownePlace Suites; a Tru coupled with a Home2 Suites by Hilton; or an Avid coupled with a Candlewood Suites. Mixed- parent dual-branded hotels are also an evolving product. Given the profile of the typical traveler to Brentwood and the proximity of services, particularly restaurants and bars within short walking distance of each of the sites/locations, we believe the most feasible lodging product would likely be a limited-service hotel that does not offer food and beverage for purchase. A limited- service hotel offers no food and beverage outlet, but often provides a complimentary buffet-style breakfast within a small dining area. The market’s deep residential base and senior-living community, as well as the construction and contract commercial demand, is conducive to the development of an extended-stay product. Mid-rate and upper mid-rate extended-stay hotels typically provide a complimentary buffet-style breakfast within a small dining area. The feasibility of either a limited-service or extended-stay hotel would depend on the land and the construction cost of the specific developer. We concluded that market demand is adequate to support a new hotel in this market, but we caution the reader that the project’s feasibility can be determined only once the economics of the hotel are fully analyzed. Brentwood Market Brentwood provides an attractive environment for visitors given its numerous Overview and retail and dining options and its sports and leisure facilities. The recent completion Conclusion of the State Route 4 extension, connecting Brentwood to neighboring cities, provides an opportunity for this submarket to expand its capture of lodging demand in greater Contra Costa County. Transient and extended-stay travelers have proven their willingness to travel to stay at strongly branded, modern hotel facilities with proximity to dining and entertainment options in a safe and attractive location. It is our opinion that Brentwood is able to serve local and transient visitors as well as travelers doing business in cities to the west. The Contra Costa County market, including the city of Brentwood, is experiencing a period of economic strength and expansion, primarily influenced by the overall strength of the greater San Jose/San Francisco Bay Area economy. Based on the unemployment rate, average weekly wage, job growth rate, GDP per capita, and GDP growth rate, two Northern California metro areas—San Francisco-Oakland- Hayward and San Jose-Sunnyvale-Santa Clara—are ranked as having the best economies in the country. These two metro areas are considered the center of the tech world and continue to generate economic expansion throughout the nine county San Francisco Bay Area, which includes Contra Costa County where Brentwood is situated. Our market interviews and research revealed that Brentwood continues to benefit from its status as a high-quality bedroom January‐2020 Executive Summary Proposed Hotel Brentwood – Brentwood, California 6 community of the San Francisco Bay Area. Thus, the outlook for the market area is positive. Hotel developers typically evaluate the operating performance (average rate and occupancy) of existing hotels in a market to assess the potential for new hotel development. The newest hotel in the competitive market is the Holiday Inn Express & Suites, which opened in March 2017. Because of the limited number of hotels in the market, this property provides the best indicator of Brentwood’s ability to support new hotel development. The rapid ramp-up of this property, as will be discussed later in this report, is a good indicator of the competitive market’s ability to absorb new supply. Summary of Hotel The performance of Brentwood and the surrounding submarkets over the past Market Trends decade is important to understanding the market’s dynamics. The following table provides a historical perspective on the supply and demand trends for a selected set of hotels, as provided by Smith Travel Research (STR). FIGURE 1‐1 HISTORICAL SUPPLY AND DEMAND TRENDS (STR)