While Washington D.C.�s hotel market continued its relatively strong performance in the first half of 2001, demand plunged significantly following the terrorist attacks on the nation�s capital and New York City. Although D.C.�s high government and low manufacturing composition continues to buffer it against the sluggish economic conditions in the rest of the country, numerous new hotel developments and weakened travel are anticipated to further soften D.C.�s lodging market.

Major Demand Changes

Prior to September 2001, D.C.�s convention center was already preparing for a slow year with 27 percent fewer room nights booked for future conventions as of December 2000, compared to the previous year. Due to the attacks, several large conventions have cancelled, driving down occupancy expectations for 2002. The Military Association cancelled its 30,000-person convention, causing a $3.4 million hit in lost revenue for D.C.�s hospitality industry. Hope is on the horizon for increased convention business as the new convention center, containing 2.3 million square feet, is scheduled to open on time in March 2003. The project is anticipated to inject approximately $1.4 billion into the local economy through 2006. The center has already secured 11 conventions, representing a total of 221,800 room nights for July and August 2003.

Dulles Airport ranks fourth in the nation for transatlantic service based on number of available seats, despite a 7.2 percent decline in passenger traffic from the preceding year. Although passenger traffic recovered slightly following the attacks, it still lags behind pre-September levels with significantly reduced flight schedules. While all expansions already underway will be completed, Dulles is putting its $3.4 redevelopment program on hold for re-evaluation given the recent drop in air traffic. As the area�s second major airport, Ronald Reagan National Airport was affected to a much greater extent than Dulles, as it re-opened on October 4th, 23 days after the attacks.

In a combined effort with Baltimore, Washington has received additional federal funding to potentially build the nation�s first super-speed magnetic levitation (Maglev) train, linking the two cities. The $3.8 billion project would have a vast economic impact, including reduced travel time between the cities by more than 60 percent as well as improving the region�s chances of winning its bid to host the 2012 Summer Olympics. In October, the Baltimore and Washington region advanced as one of the final four cities to the last phase of the U.S. Olympic Games bidding process.  The Smithsonian National Museum of the American Indian will open its gates to the public in 2002, solidifying Washington�s position as the nation�s museum leader. 

Construction of the National Harbor, an entertainment and retail destination resort located on the fringe of Washington, is set to begin late 2001.

Major Supply Changes

LaSalle Hotel Properties announced plans to spend $74 million to upgrade four of its economy D.C. hotel properties into boutique hotels including the Topaz (formerly the Canterbury Hotel), the Rouge Hotel (formerly Quality Inn & Suites Downtown), the Clarion Hampshire, and the Howard Johnson Plaza. Two of the properties, the Topaz with 99 rooms and the Rouge Hotel with 137 rooms, completed their renovations in 2001, while repositioning plans for the other two properties remain uncertain in the light of the recent decline in travel. All four properties will be managed by the Kimpton Group. Construction for the following hotels will continue in 2002: 225-room Sofitel located at 806 15th Street, anticipated to open early 2002; 172-room Hotel Monaco at 7th and F Street, projected to open May 2002; 93-room Ritz-Carlton at 31st and K Street, anticipated to open September 2002; and a 472-room hotel by the Urban Development Group, due to open December 2003.

The city is evaluating four proposals for the planned 1,000-plus room headquarters hotel adjacent to the new Washington Convention Center. 

Proposed development plans include a 1,400-room Marriott Hotel on the 900 block of Massachusetts Avenue, a Hilton Hotel at Seventh Street and New York Avenue, a hotel at the former wax museum site at Fifth and K Streets, and a hotel on Massachusetts Avenue between Fourth and Fifth Streets. 

Plans to move ahead with the proposed 400-room Mandarin Oriental Hotel at the Portals Development on Maine Avenue remain uncertain. If pursued, construction would commence late 2001 with an anticipated opening date in late 2003. Other hotels in the planning stages include a 200-room property by the Urban Development Group at 12th and K Street, a conversion of the old post office pavilion to a 220-room hotel, a 150-room hotel as part of the mixed-use Potomac Center II, and the 2,000-room Opryland Hotel Potomac at the National Harbor project in Prince George�s County.

Political/Economic/Legal Changes

D.C. government officials and local hospitality industry representatives are seeking $2 million in federal aid to fund future marketing efforts to promote travel to the capital. If granted, the federal aid would be matched by an additional $2 million from the city for a total of $4 million to boost the local tourism industry.

Alan Gittelson, Washington DC
Georgi Fsadni, New York
Josie Mok, New York 

BOSTON
Paul Griesmer
Aaron Greenman
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Chuck Bedsole
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Jeff Dallas
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Michael Fishbin
Georgi Fsadni
Brian Tress
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Bruce Kaminsky
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Michael Straneva
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