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Thursday, July 31, 2008

Hotel Deathwatch

posted by on July 31 at 15:28 PM

It’s a bad time to build hotels, according to a story in today’s NYT. High gas prices, more expensive airfares, fewer flights, and the advent of the staycation are keeping down occupancy rates. But the cranes are still going up.

The industry now has about 6,000 new hotels, with nearly 800,000 rooms, under development, a 27 percent increase from last year, according to Lodging Econometrics, a consulting firm in Portsmouth, N.H. About 2,000 of those hotels are already under construction, and construction is scheduled to begin on many more in the next year….

But perhaps more telling is the number of projects called off in the last three months — 327 — after investment banks like Lehman Brothers, UBS and Merrill Lynch began to reduce financing for new construction, according to Lodging Econometrics. It was the highest number of cancellations since immediately after Sept. 11.

Construction will certainly halt in some of the most obvious tourist destinations—such as Vegas, Hawaii, and beach towns—but what’s going to happen in Seattle?

Prospective demand for more hotel rooms has driven many developers to propose hotel-condo hybrid towers—for example, the Candela Hotel and Residences, the AVA tower, the ID Building, the tower on 2nd and Virginia, and the Heron & Pagoda Towers. Those projects haven’t broken ground, but 1 Hotel & Residences, which broke ground and stalled, leaving a hole on 2nd Avenue, is overhauling its luxury hotel concept.

Meanwhile, local realtors, developers, and economists foresee that demand for condos here will resume in a few years, just as the supply from buildings currently under construction runs dry. So I’m guessing we’ll see a pre-building conversion wave—in which hotel plans will be scrapped and replaced by condos.

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Strictly anecdotal, but my son works at the Marriott Waterfront, and they were trying to find a hotel room for a couple (as a courtesy since they were full) a few Saturday nights ago. Everything in Seattle, Bellevue, Seatac, etc., was full: They found exactly one room, in a cheapo hotel in Kirkland, for $160.

Yes, it's the height of tourist season, but this was also a weekend, when there is very little business travel, particularly in the summer. So there seems to be quite a bit of demand.

Posted by rjh | July 31, 2008 3:37 PM

yeah, 2 weeks ago was nuts. there was nary a hotel room available, seriously.

Posted by Bellevue Ave | July 31, 2008 4:04 PM

Just take the light rail to Sea Tac and get a hotel there - and you can get a B&B in most Seattle neighborhoods for a fraction of that.

Posted by Will in Seattle | July 31, 2008 4:06 PM

Please stop saying "staycation", oh and "veepstakes".

Posted by Slim | July 31, 2008 5:00 PM

So when are condos going to get turned into apartments? When?

Posted by Greg | July 31, 2008 5:01 PM

@ 4) You're right, "staycation" is a gay word, but it serves a function. "Veepstakes," on the other hand, is repugnant and should be discarded.

@5) Most of the new housing going up around town--especially 3-6 story buildings in neighborhoods--are apartments. Even many buildings originally proposed as condos are being built as apartments.

Posted by Dominic Holden | July 31, 2008 5:10 PM

1 Hotel's hotshot restaurateur, Stephen Hanson, is featured in today's Restaurants & Institutions magazine. Twas Hanson who named the hotel's restaurant..."Ocean." Obsessive-compulsive guy should have checked first. "Oceanaire" is just up the street, "Earth & Ocean" even closer.

Posted by Cornichon | July 31, 2008 7:14 PM

Yeah, well, that doesn't explain why hotel prices in such hot vacation spots as Walla Walla or Richmond BC are through the roof.

Posted by K | July 31, 2008 8:37 PM

Check out the bar at the new Arctic Club Hotel--it's fantastic!

Posted by NapoleonXIV | August 1, 2008 8:06 AM

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