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What will be the Impact of Amazon HQ2 to the Hotel Industry?

The second headquarters for Amazon in Arlington, VA is obviously a hot topic in local commercial real estate. Much of the focus so far has been on projected residential price increases and increased commercial leasing. But, let’s not forget about the hotel industry. The forecast for much higher hotel traffic in the area was the reason the Transient Occupancy Tax was included in the incentive package negotiated by the state and local governments. 

Namely, 15% of new net Transient Occupancy Tax revenue associated with increased business travel to the area will be available to Amazon to pay for the construction and other costs associated with the new Arlington headquarters. Arlington County estimates the total value of this incentive as $23 million over a 15 year period.

Currently, according to the Crystal City Business Improvement District, visitors spend about 2 million room-nights per year in Crystal City area hotels. There are 17 hotels currently within the new National Landing submarket (which consists of Crystal City, Potomac Yard and Pentagon City) representing a total count of approximately 6,000 rooms. According to Arlington County, when Amazon’s new Arlington headquarters is fully operational, it will generate an additional 100,000 to 150,000 hotel room-nights each year. Based on these projections, occupancy rates should clearly increase for the existing hotels and there should be a need for new hotel development and redevelopment in the area.

Another big expansion that should also drive hotel development and increase occupancy rates is the planned Virginia Tech innovation campus in the Potomac Yard area of Alexandria.

In a future post, I will discuss projections for residential price increases and how this will affect individuals and businesses in the neighborhood now and in the future.

John G. Kelly has experience representing hotel owners in connection with the acquisition, financing and leasing of their properties.  Please contact him should you have any questions.

  • Shareholder

    John Kelly is a shareholder of Bean, Kinney & Korman and focuses his practice on general corporate law and real property law, including commercial real estate leasing, financing and acquisitions, and business mergers and ...