Sofitel opens $80 million hotel in City of Brotherly Love In its first North American hotel project in more than 10 years, Paris-based Accor has opened the 306-room Sofitel Philadelphia. The $80 million project involved the conversion of the former Philadelphia Stock Exchange building and an adjacent site into a 14-story limestone and glass hotel. New York-based Accor North America manages the property.
Located at the corner of 17th and Sansom Streets, the hotel is near Philadelphia's business and historic districts. Amenities include 12 meeting rooms, a 5,000 sq. ft. ballroom and a French brasserie. Accor also plans to open a Sofitel in New York this month and is developing hotels in Chicago, Dallas and Washington, D.C.
Peabody's ducks are in a row for 1,700-room expansion The 891-room Peabody Orlando in Orlando, Fla., known for its twice-daily parade of ducks, will more than double in size and once again be known as the tallest building in the city following a two-phase expansion scheduled to begin in mid-2001. Owned by Orlando-based Peabody Hotel Group, the hotel is located on International Drive across from the Orlando/Orange County Convention Center, which is undergoing a 2 million sq. ft. expansion.
Phase one, slated for completion in fall 2003, will include the construction of a 42-story tower containing 1,000 rooms. The first phase alsowill add 125,000 sq. ft. of meeting space, themed restaurants, specialty shops, a full-service spa, an English garden and a 2,800-space parking garage. An elevated walkway will connect the hotel with the expanded convention center. Phase two, scheduled for completion in late 2006, will add 700 guest rooms.
Ramada starts $30 million growth strategy program Parsippany, N.J.-based Ramada Franchise Systems is embarking on a $30 million strategic growth plan for its Ramada Inn and Suites brand, with the company's first prototype to be built in New Orleans. Ramada's growth strategy is designed to enhance the chain's position in the upper- to mid-market hotel segment, and bolster its presence in gateway cities, key secondary markets and airport locations. As part of the growth plan, new prototype properties may be eligible for Development Advance funds.
The New Orleans Ramada Inn and Suites prototype features a welcome center with an electronic check-in/check-out kiosk. New Orleans-based St. Charles Hotel LLC will own the three-story, 130-room hotel, which will be built on 3.4 acres of land at James Business Park near the New Orleans International Airport. Construction is expected to begin this summer, with completion scheduled for summer 2001.
Two new W hotels open in the Crescent City White Plains, N.Y.-based Starwood Hotels & Resorts Worldwide Inc. has opened two W hotels in New Orleans - a 98-room hotel in the French Quarter and a 423-room hotel in the business district.
Located on Rue Chartres, the five-story W New Orleans French Quarter occupies the former Hotel De La Poste site. The most extensive renovations took place in the lobby, which has been converted into W's "living room" lobby.
Formerly a Four Points Sheraton, the 23-story W New Orleans located at 333 Pydras St. in the business district features a three-story, red glass wall in the lobby, and a marble and glass staircase leading to the Zoe Bistrot restaurant. The hotel features a 1960s-style Paris brasserie and the Whiskey Blue cocktail lounge.
$25 million hotel going up in the other city by the bay Construction is under way on a $25 million, five-story Courtyard by Marriott, the first new hotel in downtown Oakland, Calif., in 17 years. Located at 988 Broadway at the entrance to Chinatown, the 162-room hotel is scheduled to open in late 2001.
Owned and managed by San Francisco-based Park Lane Hotels International, the Courtyard by Marriott is part of Oakland's focus on downtown redevelopment. The last hotel built downtown was the 500-room Oakland Marriott City Center, which opened in 1983. The new hotel will include 1,300 sq. ft. of meeting space, 2,000 sq. ft. of retail shops on the ground level, an outdoor pool and rooms with high-speed Internet access.
A $110 million expansion of Harrah's Atlantic City will add 450 rooms, boosting the hotel's capacity to more than 1,600 rooms. Scheduled for completion in first-quarter 2002, the renovation will coincide with the construction of an access tunnel connecting to the marina district. The hotel is owned by Las Vegas-based Harrah's Entertainment Inc.
San Francisco's 1,192-room Westin St. Francis has been sold for $243 million to BRE/St. Francis of New York. Previously owned by San Francisco-based The Westin St. Francis LP, the deal was finalized by White Plains, N.Y.-based Starwood Hotels & Resorts Worldwide Inc. Built in 1904, the Westin St. Francis is nearing completion of a $65 million restoration.
Atlanta-based U.S. Franchise Systems Inc., franchiser of Best Inns & Suites, plans to install Evergreen purification systems at all 153 Best Inns & Suites properties by mid-summer. Ten percent of the rooms at each property will be equipped with air purification systems that remove odors, airborne allergens and dust. Water and shower filters will eliminate chlorine, sulfur and other contaminants. The chain-wide upgrade follows successful pilot tests on the systems.
Jones Lang LaSalle pinpoints key issues for buyers A recent PricewaterhouseCoopers study predicts revenue growth in the hotel industry will fall from 3.9% this year to 2.8% in 2001, which would be the smallest revenue growth since 1992. Art Adler, managing director/North America for Chicago-based Jones Lang LaSalle Hotels, says those projections are unlikely to scare off hotel investors.
"The economy is still clicking along," says Adler. "What I've heard in the marketplace through the first quarter is that operators are exceeding their budgets, that they're surprised at how resilient the market is and how strong the market is."
Adler expects investment in the hotel market to remain strong, especially given the unpredictability of other types of investments. "With the volatility in the stock market, particularly the Nasdaq, hard assets are a pretty good investment," says Adler. "You know you're going to get a good, solid yield and you also know that the assets over time will appreciate."
In light of the current hotel market, Jones Lang LaSalle Hotels, one of the nation's largest hotel financing intermediaries, has prepared a report that pinpoints five key issues for North American buyers:
Properties with upside potential Most buyers aren't looking for stability. Instead, they want to buy at the bottom of a downturn and ride the upside. In most cases, that upside comes from improving a hotel's performance and making it more competitive, the report states.
Buyers' criteria Cap rates for hotels range from 4% to 14%, while yield requirements range from 15% to 25%. According to the report, most buyers today only will focus on assets that meet 90% of their investment criteria. Adler adds that there are more types of buyers in the hotel industry today compared with a few years ago when REITs were the dominant investors. Buyers on the market today include owner-operators partnered with equity, pension funds and offshore capital. "We do have more types of buyers, but they're all looking for very specific types of assets, says Adler.
Markets with growth potential Mid-market hotels are poised for stronger growth than their luxury cousins, which are experiencing a drop in room revenue per available room (RevPAR) following a three-year run of double-digit growth in markets such as New York City. In addition, the devaluation of European and South American currencies is reducing the number of affluent business and leisure guests, and there is a trend of customers seeking out more affordable rooms.
Availability of financing Institutional lenders and equity investors are returning to the hotel debt market due to the liquidity of capital markets and attractive returns in hotel debt. Buyers, in turn, are focusing on acquiring assets with a 60% to 70% loan-to-value ratio.
Supply and demand trends Several markets in North America recently witnessed dramatic increases in supply and experienced similar decreases in occupancy rates.
However, Las Vegas is witnessing healthy occupancy rates despite large increases in supply. A 10.5% increase in room supply in the city has been balanced by a 10% jump in visitors.