Market of the Month - Ann Arbor, MI
By Heidi Nielsen, Vice President of Business Development
Ann Arbor, Michigan, is a highly distinctive and resilient
hospitality market that blends academic prestige, healthcare innovation, and a
vibrant downtown culture. Best known as the home of the University of Michigan,
the city attracts a consistent mix of leisure, academic, medical, and business
travelers year-round. A walkable downtown, a strong arts and dining scene, and
a nationally recognized sports culture anchored by Michigan Stadium drive
steady visitation year-round. With proximity to Detroit Metro Airport and
strong regional connectivity, Ann Arbor continues to outperform many peer
college-town markets, driven by a diversified demand base and limited barriers
to entry.
Education and Healthcare: These are the foundation of Ann
Arbor's economy, led by the University of Michigan, one of the largest public
universities in the U.S. The university supports tens of thousands of jobs and
drives year-round hotel demand from faculty, visiting scholars, prospective
students, alumni, athletics, and conferences.
Michigan Medicine, consistently ranked among the nation's
top academic medical centers, generates significant demand from patients,
families, clinicians, and medical researchers. Additional support comes from
the VA Ann Arbor Healthcare System, further solidifying the city's role as a
regional healthcare hub.
Automotive & Advanced Manufacturing: Ann Arbor's
proximity to Detroit positions it firmly within the nation's automotive
manufacturing ecosystem, attracting major firms such as Toyota, Ford, Honda,
Hyundai, Mercedes-Benz, and Faurecia. The Michigan Strategic Fund approved two
major projects that will create 750 jobs and generate nearly $18 million in
private investment, including Torc Robotics' Engineering Innovation Center.
Technology: The Ann Arbor technology sector is rapidly
expanding, with a growing emphasis on artificial intelligence, cybersecurity,
software development and data-driven services. Major employers such as Thomson
Reuters, IBM, Quantum Signal AI, and University of Michigan spinout companies
benefit from the region's designation as a state-supported "SmartZone." This
momentum is reinforced by the University of Michigan's strong computer science
pipeline and the recently announced $7 billion OpenAI-Oracle "Stargate" data
center in nearby Saline Township, representing the largest private investment
in Michigan's history.
Tourism: Tourism and events play an outsized role for a
market of Ann Arbor's size, driven by Big Ten athletics, concerts, cultural
festivals, and a nationally recognized downtown dining scene. The Ann Arbor Art
Fair is held every July and attracts nearly 500,000 visitors, and Michigan
Stadium alone draws more than 100,000 attendees on home football weekends,
creating compression across the hotel market. Ann Arbor also benefits from
consistent weekend leisure travel tied to arts, music, and seasonal events.
Year-to-Date Trends:
Lodging performance in the Ann Arbor/Jackson market remains anchored by stable
transient demand tied to the University of Michigan, healthcare activity, and
leisure travel, with peak periods aligning with the academic calendar, football
season, and major spring events.
Group demand remains steady, supported by university
conferences, corporate meetings, and association events, with spring and fall
representing the strongest booking seasons. Market fundamentals are relatively
stable, with trailing 12-month occupancy at 57.7%, modest year-over-year growth
in ADR (up 1.7%) and RevPAR (up 1.5%).
Throughout the forecast, Ann Arbor's university-driven
demand growth is expected to outpace national levels and exceed elevated supply
growth, except for 2026, given the hotel projects that are expected to open
this year. Ann Arbor ranks fifth among LARC's 62 markets for demand growth over
the next five years.
New Supply:
New hotel supply in Ann Arbor remains limited due to zoning constraints, land
availability, and high development costs. Recent and planned projects have
largely focused on upscale, boutique, and extended-stay products, aligning with
the market's demand profile. According to CoStar, the market comprises 110
hotel properties with approximately 8,000 rooms. Approximately 310 rooms are
under construction, accounting for roughly 3.6% of its existing inventory. These
include a Residence Inn by Marriott, AC Hotel, and the Keefer House, a boutique
hotel.
Transactions:
Over the past decade, hotel investment in the Ann Arbor/Jackson submarket has
been dominated by local and national investors, with upper midscale, upscale,
and upper upscale assets accounting for roughly 86% of transaction volume,
split fairly evenly between branded and independent hotels. Transacted
properties have averaged 72 rooms and 50 years in age, making this the most
active investment submarket in Michigan South, a trend that has largely
continued over the past two years, with recent interest expanding into midscale
assets. However, over the past 12 months, only five hotels traded for $11.7
million; all were in the midscale and economy segments.
Despite broader economic uncertainty, Ann Arbor stands out
as one of the Midwest's most durable and well-balanced hospitality markets,
supported by a rare combination of top-tier education, world-class healthcare,
technology investment, and event-driven tourism. While near-term supply additions
in 2026 may create modest pressure, long-term fundamentals remain compelling
given strong demand growth, high barriers to entry, and limited development
opportunities. For owners, operators, and investors, Ann Arbor offers a
resilient, institutional-quality market with steady year-round demand and
attractive long-term upside relative to peer college-town and secondary
markets.
