Baltimore Hotel Market 2025+ Outlook

This research article analyzes the performance of the hotel market in Baltimore for the trailing four quarters ending in Q3 2024, with a specific focus on key metrics such as occupancy, average rate (ADR), and revenue per available room (RevPAR). The report highlights the positive impact of the removal of approximately 2,500 hotel rooms from the downtown supply and discusses the potential for improved hotel performance in 2025. With strong growth in ADR and RevPAR despite some challenges in the market, the analysis suggests a robust outlook for the city’s hotel sector as demand continues to strengthen, and hotel operators capitalize on reduced supply to push rates and increase occupancy.

Key Market Indicators for Trailing Four Quarters (Ending Q3 2024)

As of Q3, CBRE has tracked that the downtown Baltimore submarket consisted of 9,143 rooms as shown below:

This total supply pre-dates the removal of several hotels from the market. Still, as shown above, the submarket is dominated by Upper-Priced hotels. The Upper-Priced hotel segment saw its RevPAR growth trail the Mid and Lower-Price categories in 2023; however, the most recent year-to-date period it realized the fastest rate of RevPAR growth.  Through the 3rd quarter of 2024, the RevPAR of the Upper-Priced hotels increased by 13.2% over the same period in 2023. The submarket is outperforming the broader market as evidenced by the RevPAR penetration at 126% of the greater Baltimore market (as of year-to-date 2024).

Occupancy and Average Daily Rate (ADR)

According to the CBRE Hotel Horizons, Q3 2024, for the trailing four quarters ending in Q3 2024, Baltimore’s hotel market achieved an average occupancy rate of 65.8%. This level of occupancy represents a modest but steady recovery from the pandemic’s impacts, signaling a stabilization in demand across both leisure and business segments. The preliminary year-end 2024 figures suggest no additional occupancy gains. Thus while occupancy remains below pre-pandemic highs, it marks a healthy rebound and sets the stage for further growth in 2025.

The average daily rate (ADR) for hotels in Baltimore during this period stood at $132.29. This represents a notable 3.9% increase over the previous trailing four-quarter period ending Q3 2023. The improvement in ADR reflects growing consumer confidence, stronger demand, and a tightening of hotel supply, which together have enabled operators to command higher prices for rooms. Looking into 2025, several upscale hotel owners/managers are projecting increases of 5% to 10% in ADR as a byproduct of the constricted supply.

Revenue Per Available Room (RevPAR)

As a direct result of the increase in both occupancy and ADR, revenue per available room (RevPAR) saw a significant 6.7% increase, reaching a strong $87.05 in Q3 2024. The RevPAR growth underscores the positive economic conditions in Baltimore’s hospitality sector and demonstrates that hotels have successfully capitalized on higher rates while maintaining healthy occupancy levels. The expectation for 2025 therefore, is a modest increase in occupancy coupled with solid rate growth. The combination of these factors could lead to a double-digit RevPAR increase for the year.

The Impact of Hotel Room Removal on Supply and Demand

A significant factor influencing the performance of the hotel market in Baltimore has been the removal of approximately 2,500 hotel rooms from the downtown supply. This reduction in room inventory has created an environment of constrained supply, which has proven to be advantageous for hotels operating in the area. Among the hotels that have closed or been repositioned as alternative uses (such as homeless shelters or multi-family apartments) are the Holiday Inn Downtown, the Sheraton Inner Harbor, the Radisson and the Holiday Inn Inner Harbor. The following table lists the closed hotels.

Supply Reduction and Rate Growth

The removal of these rooms has helped to reduce competition in the downtown hotel market. With fewer rooms available, hotels in the region have gained the ability to raise their rates without the fear of significant demand leakage to competing properties. As a result, the market has experienced upward pressure on ADR, which has been reflected in the reported 3.9% increase in average rate. Reduced supply, combined with increased demand from both tourists and business travelers, has positioned Baltimore’s hotel sector to realize stronger returns on investment.  There are 280 rooms under construction within two projects downtown. These higher rated hotels include the Hilton Garden Inn Downtown and an independent boutique property at the former Brager Gutman Department Store.  Thus, while the overall supply decreased by more than 20% between 2020 and 2024, the new supply marks only a 3.3% replacement of the lost inventory.  We do not foresee additional new construction given the rising borrowing costs stemming from the increasing spreads over US Treasuries over the past month. Therefore, we expect that the new supply will be absorbed into the market and the existing hotels should see healthy RevPAR improvements over the next two years.

Occupancy Levels and the Supply-Demand Balance

While occupancy levels have increased from the pandemic lows, they have not yet fully recovered to pre-pandemic levels. The decrease in the number of available hotel rooms, however, has helped to keep occupancy levels higher by tightening the competition. The removal of more than 2,500 rooms has effectively redistributed demand across a smaller pool of available rooms, enabling those remaining hotels to fill their properties at a higher rate of occupancy.

Moreover, with the ongoing evolution of the workforce landscape, including an uptick in corporate travel and an increase in meetings and events as part of post-pandemic recovery, the reduced supply coupled with strong demand is poised to push occupancy levels higher, particularly in the coming years.

Outlook for Baltimore’s Hotel Market in 2025

Demand Drivers for 2025

As we look forward to 2025, several factors are expected to contribute to the continued growth of the hotel market in Baltimore:

1. Business and Corporate Travel: With businesses adopting hybrid and flexible work models, there is a renewed focus on in-person meetings, conventions, and corporate events. Baltimore’s proximity to major metropolitan areas like Washington, D.C., and its attractive downtown venues make it a prime location for such events. This could lead to an uptick in corporate travel and higher occupancy for hotels.
2. Tourism Recovery: Baltimore has seen a resurgence in tourism as travelers are eager to explore cultural attractions, historic sites, and waterfront destinations. As travel restrictions continue to ease, the city’s tourism sector is expected to experience significant growth, benefiting hotels with increased leisure travel.
3. Conventions and Major Events: Baltimore’s strategic position as a hub for conferences and conventions also positions its hotels to benefit from the influx of eventgoers. With the recent expansion of event venues and increased focus on creating attractive destination experiences, hotel demand tied to conventions and large-scale events is expected to grow.

According to Visit Baltimore, there are 87 events on the calendar for 2025 ranging in attendance from 275 to 75,000 people. These events are projected to generate 71,329 room nights in the downtown Baltimore market.  The data shows that for every 5 attendees there is approximately one room night generated. Furthermore, these events will fill 23% of the available rooms in the downtown market over the course of the upcoming year.

4. Long-Term Supply Constraints: The removal of 2,500 hotel rooms will likely continue to exert pressure on supply and support occupancy levels at existing properties. As demand rises in 2025, hoteliers in the market should find themselves better positioned to push room rates further while maintaining solid occupancy.

Strategic Opportunities for Hotel Operators

As the market progresses into 2025, hotel operators in Baltimore will have several opportunities to capitalize on the evolving landscape:

• Rate Optimization: With the reduced supply and growing demand, hotels should continue to focus on rate optimization strategies, using dynamic pricing models to maximize ADR during peak demand periods, such as conventions, summer tourism season, and holiday weekends.
• Enhanced Guest Experience: Given the competitive nature of the market, providing an exceptional guest experience will be crucial to maintaining high occupancy levels. Hotels can invest in upgrades and services that appeal to both leisure and business travelers, enhancing the overall value proposition.
• Sustainability and Wellness Trends: As sustainability becomes an increasingly important factor for travelers, hotels in Baltimore can leverage environmentally-friendly practices and wellness-focused amenities as key differentiators. Capitalizing on the increasing demand for eco-friendly travel options can attract a growing base of conscious travelers.

Conclusion

The Baltimore hotel market has shown strong resilience and growth in the trailing four quarters ending in Q3 2024, with a significant uptick in both ADR and RevPAR. The removal of approximately 2,500 hotel rooms from the downtown supply has played a critical role in creating a more favorable supply-demand balance, which has enabled operators to push rates and maintain solid occupancy levels. Looking ahead to 2025, the outlook for the hotel market in Baltimore remains positive, supported by strong demand drivers from business travel, tourism, and events. The reduced supply, combined with a continued recovery in demand, offers significant opportunities for hotels to further capitalize on rate increases and occupancy growth, positioning the city’s hospitality sector for continued success in the years ahead.

David P. Fuller, MAI, Senior Vice President, is located in the Bethesda, MD office of CBRE.  He can be reached at [email protected].