|By Al Greenwood, The Fayetteville Observer, N.C.|
Knight Ridder/Tribune Business News
June 25, 2004 - The Holiday Inn Bordeaux, Fayetteville's largest hotel, is going up for sale next week, following a trend that has led to the sale of six hotels in the area in a little over a year.
For nearly three years, hotels in Fayetteville have been filled with reservists. That has driven up room rates and occupancy rates. In 2003, the occupancy rate of the Holiday Inn Bordeaux was 88 percent while the national average was 59 percent. That kind of performance has attracted buyers.
In March, Stout Properties -- which owns the Holiday Inn Bordeaux -- was approached by a representative from the hotel brokerage Hodges Ward Elliott, said Dr. Frank Stout, chairman. "He said, 'Why don't we expose the Holiday Inn Bordeaux to the marketplace?' " Stout said.
If Stout Properties can get what it considers an acceptable price, then it will sell, he said. The company could then buy smaller full-service hotels in the Southeast. A full-service hotel includes convention space and dining.
If Stout Properties does not get any acceptable offers, then it will continue operating the Bordeaux, Stout said. "All we are doing is testing the waters." The listing did not include an asking price.
But Ted Mandigo, a hotel consultant, said hotels the size of the Bordeaux typically are worth about $20 million.
The Holiday Inn Bordeaux has 289 rooms and 30,000 square feet of meeting space, making it the largest hotel in Fayetteville.
The Stout family opened the hotel in 1973 as the Bordeaux Motor Inn. It became a Holiday Inn franchise in 1990.
Over the years, the Bordeaux has hosted cotillions, New Year's Eve parties and large conventions. The Board of Elections posts election results at the hotel. Candidates often rent rooms for hoped-for victory parties.
Testing the market The Holiday Inn Bordeaux is not the only hotel testing the market. The Radisson Prince Charles in downtown is up for sale for $4.55 million. Hotel operators have said that two other properties are for sale, but the listings for those properties were not available.
For more than a year, companies have been buying hotels throughout Fayetteville.
Stout Properties has sold the Best Western and the Knight's Inn to companies headed by Hitesh Patel. Stout Properties sold the two hotels because they were limited-service hotels. A limited-service hotel usually offers only a continental breakfast and has no convention space. The company wanted to leave that market and focus on the full-service market.
Investors are purchasing hotels because the properties can pay high returns in a good market, said Mandigo, president of T.R. Mandigo & Co., a hotel consultant in Elmhurst, Ill. Investments offering high returns have been elusive during the years following the recession in 2001, he said. "Hotels give you a stronger return in a good market."
Hotels can provide investors with an immediate return on their money, Mandigo said. When investors buy hotels, they look for markets where room rates could increase, he said. Room rates generally rise after occupancy rates increase.
As the national economy continues to improve, more investors are considering buying larger hotels, Mandigo said. Leisure travel has already picked up as a result of the economic recovery, and corporate travel should also improve in the fall.
"We are seeing some pretty good hotel performance coming off 2003. The consensus is that 2004 should be a little stronger," he said The growth in the economy is happening while interest rates are still low, making it cheaper for investors to borrow money, Mandigo said.
Fayetteville is not the only market that has done well during the months following the recession and the Sept. 11, 2001, attacks, Mandigo said. Hotels in Washington and in other military towns have also done well.
Fayetteville's hotels could continue to have high occupancy rates for at least another year. The Army has a contract to lodge reservists up to 16 months.
The Holiday Inn Bordeaux should do well beyond that period, Stout said. The hotel was renovated in 2000. The Bordeaux has more convention space than any other hotel in Cumberland County. "Because of its niche position, it will continue to do well," Stout said.
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