Market of the Month - Knoxville, Tennessee
Knoxville, Tennessee, continues to distinguish itself as one
of the Southeast's most stable and strategically positioned secondary markets,
supported by steady population growth, a diversified employment base, and
sustained public and private investment. Anchored by the University of
Tennessee (UTK) and Oak Ridge National Laboratory, Knoxville benefits from a
unique blend of higher education, advanced research, healthcare, and
manufacturing, while maintaining a cost structure that remains attractive to
both residents and businesses. Its location at the crossroads of Interstates 40
and 75 further enhances Knoxville's role as a regional hub for commerce,
tourism, and logistics across East Tennessee and the broader Appalachian
region.
Corporate & Research Base: Knoxville has long
been recognized for its strengths in energy research, advanced materials, and
manufacturing, and is increasingly attracting investment in technology,
professional services, and life sciences. Oak Ridge National Laboratory, one of
the largest science and energy facilities in the world, remains a major
economic engine, driving innovation, federal funding, and workforce
development, while employers such as Pilot Company and DENSO Manufacturing
provide a stable employment base.
Education & Healthcare: As Tennessee's flagship
university, the University of Tennessee generates consistent hotel demand from
academic events, conferences, and nationally prominent athletic programs.
Currently, UTK is experiencing significant development on campus, including the
new Haslam College of Business, the Torchbearer Residence Hall, and the Haslam
Field Expansion, to name a few. Knoxville's healthcare sector continues to
expand, with regional medical centers supporting steady demand from patients,
families, and medical professionals.
Infrastructure & Downtown Investment: McGhee
Tyson Airport has experienced continued passenger growth, supported by terminal
improvements and expanded nonstop service. Downtown Knoxville has benefited
from mixed-use development, streetscape enhancements, and riverfront
investment, strengthening the appeal of the central business district and
convention area.
Tourism & Leisure: Knoxville serves as a primary
gateway to Great Smoky Mountains National Park, driving strong leisure
visitation throughout the year. The city's revitalized downtown, outdoor
recreation, festivals, and collegiate sports further diversify its tourism
base.
Year-to-Date Trends:
According to industry data, Knoxville's hospitality market
has demonstrated relative stability through November 2025, particularly when
compared to larger, more supply-constrained metros. As of November, Knoxville's
12-month occupancy is 63.0%, ADR is $121, and RevPAR is $76; year-over-year,
occupancy dropped a minimal 0.9%, while ADR increased by 1.7%, resulting in a
0.9% increase in RevPAR. Occupancy and average daily rate have benefited from
consistent leisure travel tied to the Smoky Mountains, a robust
university-driven event calendar, and healthcare-related demand.
While performance remains seasonal—peaking during fall
football weekends and summer leisure travel—the market's diversified demand
generators help mitigate volatility. Group and corporate travel have shown
gradual improvement, supported by university events, regional meetings, and
medical-related business.
New Supply:
Hotel development in Knoxville remains measured, with new
supply largely concentrated in select-service and upper-midscale segments near
key demand generators such as downtown, West Knoxville, and the airport
corridor. Approximately 690 rooms are under construction in Knoxville,
accounting for 4.5% of the market's inventory. According to CoStar, over the
past 12 months, only 120 keys entered the market, and the current construction
pipeline remains manageable relative to existing supply. This disciplined
development environment has helped preserve pricing power and occupancy levels,
particularly during peak demand periods. New projects are generally focused on
branded properties that cater to leisure travelers, university-related
visitation, and regional business travel.
Transactions:
Hotel investment activity in Knoxville has remained steady,
reflecting continued investor interest in well-located assets within stable,
high-barrier-to-entry secondary markets. Recent transactions have primarily
involved select-service and limited-service hotels, with pricing reflecting
Knoxville's strong fundamentals, favorable operating margins, and long-term
growth outlook. The Cumberland House Knoxville, Tapestry Collection by Hilton
illustrated the highest sale price in the last twelve months, selling at a
reported $35 Million, or $270,000/key. Institutional investors, regional
owner-operators, and private buyers continue to view Knoxville as an attractive
market for both core and value-add strategies, particularly given its
consistent demand drivers and limited new supply.
Despite its smaller scale, Knoxville offers a compelling
long-term hospitality outlook. The city's combination of university-driven
demand, healthcare and research institutions, outdoor tourism, and disciplined
development creates a balanced and resilient lodging market. Continued
investment in infrastructure, downtown revitalization, and air service
expansion further positions Knoxville for sustained growth. For investors
seeking stable cash flow, lower volatility, and durable long-term fundamentals,
Knoxville represents one of the most attractive secondary hospitality markets
in the Southeast.
