Glut of hotel rooms possible 3 new city hotels would compete for limited business

March 04, 1998|By Robert Guy Matthews | Robert Guy Matthews,SUN STAFF

For months, Baltimore leaders have been worrying whether there would be enough hotel rooms to handle the city's growing tourist industry. But now that another major downtown hotel project has unexpectedly surfaced, they are worrying that there might be too many rooms.

Yesterday, after the disclosure that New York developer Harvey Schulweis plans to build a 600-room Westin Hotel across from the Inner Harbor without public subsidies, hotel industry analysts warned that a glut of hotel rooms could spell disaster for older, established hotels and the new hotels planned for downtown.

"I would say that the market could comfortably support one convention hotel, two could hurt the market and three would substantially hurt the market," said Robert T. Koger, president of Molinaro Koger, a Virginia-based real estate company that specializes in hotel deals.

A glut of rooms means that hotels would have to fight for the market, industry leaders said.

Koger said that without the convention business, downtown hotels cannot succeed on business from tourists and corporate travelers alone.

"Not in Baltimore could you survive without Convention Center business," he said.

But city leaders say they will continue with their plans to subsidize construction of two downtown hotels, the 750-room Wyndham at Inner Harbor East and the 850-room Grand Hyatt that would connect to the newly expanded Convention Center.

The city is expected to contribute about $110 million in tax breaks, loans and grants for the two hotels.

By 2002, when all three new hotels would be up and running, Baltimore would have about 2,200 more rooms -- an increase of nearly 50 percent over the current number of downtown rooms.

Orioles owner Peter G. Angelos, developer of the Grand Hyatt, said through a business associate that he is undeterred from his plan to build a hotel.

"The recent development is of no relevance to us," said Tom Marudas, a spokesman for Angelos. "The proposed Schulweis hotel is not a convention hotel. Our intention and mission has been and continues to be to provide a convention hotel."

Mayor Kurt L. Schmoke and other city leaders said they doubt that Schulweis can build his Westin without public money. Public subsidies are believed to be needed to keep room rates affordable.

But industry analysts said that because of the country's robust hotel market and economy, subsidies are not needed as much as they were a few years ago. Subsidies for hotels became widely used in the late 1980s when the economy was weak.

"At one time, hotels were almost always exclusively built without public subsidies," Koger said. "Now most developers who are looking to build large hotels that can convince city governments that there is a big economic benefit to the city will attempt to obtain some public subsidy."

If Schulweis can build his hotel without public money and keep the room rates in line with what the city's market can bear, it raises questions about whether the city was wise to offer subsidies to Angelos and John Paterakis Sr., developer of the Wyndham.

M. J. "Jay" Brodie, chief of Baltimore Development Corp., which brokered the hotel deals on behalf of the city, said that Schulweis is short on key details.

For one, Brodie said yesterday, no one knows what the room rate would be. The average rates for the Hyatt and the Wyndham would be between $135 and $145 per night. If the city had not offered to subsidize the developers, the rates would have been about $165 a night -- too high for Baltimore, city leaders said.

"It makes me puzzled that he could reach that price level without any assistance," Brodie said.

Pub Date: 3/04/98

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