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Tampa, Florida Area In the Midst Hotel Construction Boom;
Some 25 Hotels in Planning Stages or Under Construction

By Ted Jackovics, Tampa Tribune, Fla.McClatchy-Tribune Regional News

Jan. 5, 2008 - TAMPA -- If you are looking for an investment opportunity for 2008 -- someplace to park a spare $15 million or more -- you might check out the hotel industry.

That's the opinion of Lou Plasencia, chief executive of a Tampa-based hospitality investment advisory firm. He thinks there are at least 24 to 36 months of "solid investment opportunity" in the nation's lodging sector, in part because there are plenty of investors with significant equity available that are seeking immediate acquisitions.

"Hotel values will remain high as a result of continued investment appeal spurred by growth in revenue per available room and net operating income," Plasencia, the chief executive of The Plasencia Group Inc., and Rich Conti, the firm's president, said in a 2008 lodging industry outlook.

Investments in hotel properties should yield a return that is 10 percent to 15 percent higher than current fixed-income investments, such as bonds, the Plasencia report states.

The upbeat outlook for hotels as an investment could reflect favorably on Tampa Bay's continued growth in hotel properties, local hospitality industry officials said.

Local Construction Booming

Hillsborough County is in the midst of a boom in hotel construction expected to continue in 2008 and beyond.

The Plasencia Group reported in 2007 that 25 hotels were either in early planning stages, under construction, or would begin construction by this year in Hillsborough. The building trend is being fueled by rising room rates and a decline in room supply because of obsolescence or property conversions.

The average room rate the first 10 months of 2007, compared with the same period in 2006, rose 6.5 percent in the Tampa-St. Petersburg area to $104.88. Rates rose 6.2 percent in Florida overall to $118.03 and 6.1 percent nationally to $103.75 during the same period.

The favorable investment climate could result in continued construction jobs and employment in the area's hospitality segment, industry officials say. While no one has estimated how many construction or hospitality segment jobs are being created locally, hotel project trends have helped offset a portion of the decline of residential construction in recent months, officials said.

"We don't see much of a negative impact from the residential morass on overall real estate dynamics beyond mid-2008," a year-end report by Plasencia states.

Local hotel prospects got a big boost in November when the Ritz-Carlton Hotel Co. announced it would build a 269-room hotel and 176 luxury residential units on Tampa's Rocky Point to open in 2011.

A Watershed Moment

Plans for a Ritz-Carlton represent a watershed moment for the area's hospitality industry, said Bob Morrison, executive director of the Hillsborough County Hotel & Motel Association.

"Tampa has been without the kind of hotel that is expected to become a five-star rated hotel," Morrison told the Tampa Tribune editorial board last month. "The Ritz Carlton could create performance measures for other developers to follow."

Morrison explained that one reason plans fell through in 2007 for a luxury hotel and condominium project near Tampa's seaport was that Fairmont Hotels & Resorts, North America's largest luxury hotel company, had no local track record with a high-end hotel to base its financial expectations.

The new Ritz Carlton could serve as a model for other development proposals, Morrison said.

The most recent hotel transaction locally took place last month in Pinellas County, where FelCor Lodging Trust of Irving, Texas, paid a combined $225 million for the Renaissance Vinoy Resort & Golf Club of St. Petersburg and a resort in California.

No one has estimated how many construction or hotel industry jobs local projects could create.

The course of commercial real estate historically trails residential real estate by about six months, the Plasencia Group's report said.

"Hotels in particular, are very much dependent on the general economy for their health and stability; as gross domestic product goes, so goes the lodging industry."

Reporter Ted Jackovics can be reached at tjackovics@tampatrib.com or (813) 259-7817.

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Copyright (c) 2008, Tampa Tribune, Fla.

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