Dec. 30, 2003 - Developers are betting there is demand in Atlanta for chic alternatives to the nationally branded hotels that are abundant in the metro area. 

Such hotels, called "boutiques," are popular in cities such as New York, New Orleans and San Francisco, but there are few around Atlanta -- particularly downtown. 

Three developers plan to change that, having selected three locations downtown to convert existing buildings to stylish alternatives to the national chains that dominate the area. 

But in a city lodging market emerging from the worst economic years in its history, observers question whether a hotel, even a small hotel, is a developer's best investment. 

Bill Howard, vice president of the Atlanta Convention & Visitors Bureau, which is charged with filling Atlanta hotel rooms, contends there is too much room at the downtown inns. 

"We'd rather see investment in new attractions, things that create destination appeal, and less investment in hotels," Howard said. "I'm not sure just saying 'we have a boutique hotel' is necessarily that marketable." 

But that's not stopping the developers. 

Crow Hospitality Investment Group, a local company, has plans to convert the historic Medical Arts Building on Peachtree Street into a small hotel. 

Crow has the 12-story building under contract and a deal could close this spring, said Steve Labovitz, an attorney with McKenna Long & Aldridge. Labovitz is representing the building's current owner. 

That project would follow Legacy Property Group's idea to convert the 1920s-era Glenn Building on Marietta Street into 120 hotel rooms. 

Meanwhile, Denver-based Steve Holtze Hotels is moving forward with its hotel project in the old Winecoff Hotel on Peachtree Street. 

The lack of boutique hotels locally makes developers keen on the idea, said David Marvin, head of Legacy Property Group, which bought the Glenn Building on Dec. 15. 

"Many cities have them; Atlanta does not," Marvin said. "(It) gives us the opportunity to deliver something unique and more personable than the vanilla franchise, an offering many travelers are seeking to avoid." 

Developers also like the various tax breaks they can get from reviving historic properties in an economically challenged district like downtown. 

Steve Holtze Hotels' Winecoff restoration, set to begin this summer, is eligible for $4.5 million from the city and the U.S. Department of Housing and Urban Development. 

But currently, the local lodging market isn't exactly on a roll. There are 10,000 hotel rooms downtown and more than 90,000 in the city as a whole, according to Mark Woodworth, executive vice president of the hotel research firm PKF Consulting Inc. Since Sept. 11, 2001, local occupancy has been at all-time lows. 

Occupancy in the larger hotels downtown was 60 percent through October. That's down from 65.6 percent for the same period last year. The occupancy numbers will improve next year, but not dramatically, Woodworth said. 

"It's a bit premature to add rooms to downtown, maybe," he said. 

"You'd be close-minded not to think (a small hotel) doesn't have some benefit (to downtown)," said Gary Gentile, general manager of the Atlanta Marriott Marquis, but demand for rooms "has not returned yet." 

"I'd love to see them invest in things to bring life to the city now, like retail and residential, things that get us to be a 24-hour city," Gentile said. 

But larger trends suggest hotels can show better returns for developers over the next several years compared with office space, which also has high vacancy here and across the country, or residential, Woodworth said. Large property investors are buying U.S. hotels because of that trend, he said. 

Some developers have the same outlook. "The convention market has been down everywhere," said Jeff Sheppard, chief financial officer with Steve Holtze Hotels, which plans to restore the Winecoff. "But I definitely foresee people will loosen up their purse strings and get back out to conventions. Once that turnaround happens, we will be well-positioned." 

Downtown boosters are happy to see any investment in the district, said A.J. Robinson, president of Central Atlanta Progress, the downtown advocate. As Robinson put it, "These are buildings that have been vacant so long, we welcome any investment for some product that may help downtown." 

-----To see more of The Atlanta Journal-Constitution, or to subscribe to the newspaper, go to http://www.ajc.com 

(c) 2003, The Atlanta Journal-Constitution. Distributed by Knight Ridder/Tribune Business News. MAR,