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Hotel Construction Poised to Escalate in Anchorage; Occupancy Rose
in 2005, Encouraging Lenders to Move Ahead

By Sarana Schell, Anchorage Daily News, Alaska
Knight Ridder/Tribune Business News 

December 6, 2005 -Demand for Anchorage hotel rooms hiccupped in 2003 but recovered last year and stayed strong this year, according to Seattle-based consultants Kennedy & Mohn. Room prices held steady as well, said consultant Michael Mohn, and more hotels are on the horizon. 

On average, 70 percent of hotel rooms were full this year and last, nearly 10 percentage points better than the national occupancy rate, consultants said in a recent report for state lending agency Alaska Industrial Development and Export Authority.

After several hotels opened in the last few years, AIDEA asked the consultants to evaluate the hotel markets in Anchorage and Fairbanks last year, then update their report in October.

"We had some concerns about the growth in hotels in Anchorage," AIDEA deputy director Jim McMillan said. His agency partners with banks on much of the business lending that occurs in Alaska, especially the multimillion-dollar deals.

"We get a lot of requests because they're big-ticket items," he said.

Anchorage has about 8,200 hotel rooms, up from about 4,700 in 1992, according to city statistics.

In the last five years, Anchorage and Mat-Su have added 923 hotel rooms, the AIDEA report said. Most were in Midtown, with others downtown, in Eagle River and in Wasilla.

Occupancy rates that peaked at 75 percent in 1996 fell slightly as more hotels opened during a late-1990s building boom. The rates were still stronger than Outside figures, Mohn said.

Investors kept building. 

AIDEA halted hotel lending last year, McMillan said, after occupancy slumped to 67 percent in 2003.  But in 2004, despite an 18 percent increase in midpriced rooms in Anchorage alone, the occupancy rate bounced back to 70 percent, Mohn said. 

The cost of a room stabilized as well. In 2003, the average per-night cost dropped to $108 from $113 in 2002, Mohn said. The $108 average has held for the last two years.

The price slide is partly due to less demand for pricier, upscale rooms, Mohn said, as some guests switched to new, better midscale properties.

Princess Cruises has also worked to shuttle more of its passengers to its own hotels far from Anchorage, he said.

In Denali National Park, Princess is expanding both its hotels by more than 100 rooms, Holland America has started on the first 135 rooms of what could grow to 540 rooms, and Cook Inlet Region Inc. plans to add 250 rooms, Mohn said.

Demand is predicted to grow by nearly 5 percent a year in Anchorage, and 2 percent annually in Fairbanks, from 2006 to 2010, the consultants estimated.

A growing cruise industry bodes well for demand in Anchorage, said Susan Bell of Alaska consulting firm McDowell Group.
"Anchorage is very well-positioned," Bell said.

And more hotels are planned, Mohn said.

In Anchorage, an upscale, 135-room Embassy Suites that was postponed has been redesigned to work around high steel prices and limited concrete supply and is now due to go up next summer, Mohn said. Construction of a 160-room Holiday Inn is also set to start next summer, he said.
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To see more of the Anchorage Daily News, or to subscribe to the newspaper, go to http://www.adn.com.

Copyright (c) 2005, Anchorage Daily News, Alaska

Distributed by Knight Ridder/Tribune Business News. For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com. 



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