Area sees hotel growth

City-financed plan comes amid boom

November 28, 2005|By JUNE ARNEY | JUNE ARNEY,SUN REPORTER

As Baltimore pushes ahead with its campaign to build a publicly financed convention headquarters hotel, a private building boom is adding thousands of rooms to the region's supply.

More than 1,000 new hotel rooms have opened in the two years since city officials unveiled plans for a 752-room Hilton on a site just north of Oriole Park at Camden Yards.

Another 2,000 are in the pipeline in Baltimore's downtown and around Baltimore-Washington International Thurgood Marshall Airport.

The publicly financed convention hotel, expected to cost as much as $305 million, has long been promoted as the savior of the flagging Baltimore Convention Center, which never lived up to projections since reopening in 1997 after a $151 million expansion that tripled its exhibit space.

But critics have argued that private developers should build the headquarters hotel, allowing the free market to support what customers demand, as is happening with the current crop of new hotels. They add that taxpayers should stay out of what might be a risky venture.

Backers of public financing, however, say the project requires government support so that Baltimore does not lose lucrative conventions, because many groups won't consider coming to a city without a headquarters hotel. And despite the private investment in thousands of hotel rooms, no one has come forward to build exactly the kind of anchor hotel that city tourism officials say they need.

Industry experts caution that striking a balance between supply and demand can be tricky. Adding too many rooms too quickly could drain business from existing properties, forcing hotels to cut rates -- and profits, said Judy A. Siguaw, dean of Cornell-Nanyang Institute of Hospitality Management in Singapore.

"Unless you are seeing an upswing that is keeping a pace with world tourism, then adding more hotel rooms to the mix is obviously going to drop occupancy rates," Siguaw said. "If I were the Baltimore hoteliers, I would be concerned unless they believe that the total number of visitors to the city are going to vastly increase."

Local officials say there's room for the new hotels -- including the convention Hilton -- because the local market has room to grow.

Proximity to the nation's capital is a powerful stimulus, they say, and a convention headquarters hotel would draw more meetings here. The prospect of thousands of new jobs from the military's realignment of area bases will further stimulate demand, they say.

"There's been a wave of new hotels," said Bill Badger, president and chief executive of Anne Arundel Economic Development Corp. "So far, the market is absorbing the new inventory fairly well. ... The rising tide has lifted all boats."

Statistics bear that out, according to Smith Travel Research, a Hendersonville, Tenn., company that tracks hotel occupancy across the country.

Average occupancy in the Baltimore area was 71.1 percent in the first nine months of this year, stronger than tourist meccas including Phoenix, Chicago and Boston, and up from 68.2 percent two years earlier.

The average daily rate for the area's more than 27,044 rooms also rose, to $106.45, up 4.4 percent from the same period the previous year.

"Hoteliers were easily able to absorb any new inventory, and occupancy increases were healthy," said Jan Freitag, Smith Travel Research vice president.

In Baltimore, the 116-room Hampton Inn & Suites opened at the corner of Calvert and Redwood streets in March 2004. Nearby, a new Residence Inn at Redwood and Light streets added 188 units to the market in July.

In addition, a Hilton Garden Inn, with about 200 rooms, and a Homewood Suites, with 150 rooms, are planned for Harbor East.

And, blocks from the Convention Center, work has begun on a 126-room limited-service hotel at Washington and Greene streets, whose flag has not been announced.

Around the airport, a Residence Inn, a Courtyard by Marriott, a Hampton Inn & Suites and a Country Inns & Suites -- with a total of 506 rooms -- have recently opened. Another eight hotels with about 1,500 rooms are either under way or planned.

Despite the buildup, city officials say a convention hotel remains a pressing need. Officials hope to wrap up financing soon and break ground early next year, with a goal of opening by June 30, 2008.

There are no full-service hotels on the horizon with meeting space and the capability to do catering, said Irene E. Van Sant, project analysis director for the Baltimore Development Corp., the city's economic development agency.

"These limited-service hotels, to me, are going to pull demand from the airport," she said. "There are so many days of the year when you can't get a room in the city."

Convention hotel boosters remain convinced that it will be able to pay its own way, although critics say many publicly financed hotels have fallen short of projections in cities such as San Antonio; Sacramento, Calif.; and Overland Park, Kan.

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