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How Much Growth is Too Much? Thousands of New Hotel Room Under
 Construction in the Orlando Area.  Can They Fill Them?
By Sara K. Clarke, The Orlando Sentinel, Fla.McClatchy-Tribune Regional News

March 30, 2009 - As Central Florida's hoteliers struggle to fill rooms during the worst recession in decades, they're facing a threat from the other direction: thousands of new hotel rooms under construction in the Orlando market, including many that will be ready to receive guests before the end of the year.

There's the 1,400-room Hilton Orlando near the Orange County Convention Center, set to open in September, and a 1,497-room Hilton-and-Waldorf resort at Bonnet Creek near Walt Disney World, scheduled to open in October.

Another 1,600 rooms would materialize if various hotels are built as planned near International Drive, while a proposed hotel in the Lake Buena Vista area would have 900 rooms.

Meanwhile, the long-delayed expansion of the Peabody Orlando will add 750 rooms next door to the Orange County Convention Center once construction is complete next year.

Orlando ranks third in the nation in hotel construction, based on the number of rooms under way as of the end of last year.

According to Smith Travel Research, which tracks the hotel industry nationwide, the market's current inventory of 114,750 rooms will increase 5 percent when those rooms are finished.

But if you include both rooms under construction and those in various stages of planning, the market's room count could grow as much as 11 percent, Smith Travel said.

The increase in just the upscale categories could reach 23 percent.

How much growth is too much?

"It depends on who you ask," said Jan Freitag, Smith Travel's vice president of global development. "Every [hotel] owner says the healthy answer is zero," he joked.

Nationwide, growth in hotel rooms during the past two decades has averaged 2 percent a year, but the figure varies widely year to year, depending on building cycles.

Many in the business in Orlando seem to welcome this year's projected growth; some even say it's needed.

The more, the merrier "In a strange way, we're looking forward to the Hilton opening," said Bob Geller, director of sales and marketing for the Westin Imagine Orlando, which is just a short distance from where the 1,400-room Hilton Orlando is under construction. "The more big boxes you have around the convention center, the more citywide conventions you can attract."

Convention center officials agree. For years they have wanted more rooms within walking distance of their giant center.

Some of the industry groups that have held giant conventions in the facility -- including the National Association of Home Builders and the Healthcare Information and Management Systems Society -- have threatened not to return because they considered Orlando's convention-hotel offerings inadequate.

"No question about it, we've had groups who have been waiting for the Peabody and the Hilton," said Kathie Canning, the convention center's deputy general manager.

During the first two months of 2009, Orlando's hotel market has experienced an 8.7 percent decline in demand -- and a 1.6 percent increase in available rooms, according to Smith Travel.

The slump in business and leisure travel responsible for the slack demand is expected to continue until August at least.

"There's no denying that, because of the downturn, I think competition is going to be that much greater," said Richard Maladecki, president of the Central Florida Hotel & Lodging Association. "This destination has a strong history of being able to absorb new inventory -- because of the economy, it just may take longer."

Uphill battle ahead?

The two Hiltons and the Waldorf are scheduled to open during one of the slowest times of year for Orlando tourism -- in the early fall, after schools are back in session and the meeting-and-convention season is still a few months away.

Because it is common for hotels to offer special rates when they open, competitors could find themselves fighting an uphill battle during an already slow period.

The Hilton Orlando, which plans to offer pre-opening packages to both business and leisure travelers, hopes to capitalize on its novelty status during the economic downturn.

"It's kind of nice to be a new kid on the block in that scenario," said Doug Gehret, the hotel's general manager. "We are ahead of our pre-booking goals at this stage."

Still, there can be an upside for existing properties when new hotels open.

For one thing, there may be opportunities for overflow business.

And the Hilton's sales force, in working to book rooms, is increasing people's awareness of Orlando as a meetings destination -- and that could lead to more business for everyone, said Paul Tang, general manager of the Hyatt Regency Grand Cypress.

"I think the success of Orlando is to create a balance between the tourism ... and the business-convention [market]," Tang said.

Staying on their toes

New properties encourage existing locations -- such as Tang's 25-year-old hotel near Lake Buena Vista -- to remain fresh.

"Keeping up with the Joneses," as Tang put it, is one reason the 750-room Hyatt is spending $65 million on renovations." Competition is good," he said. "You see major investment coming into Orlando."

Walt Disney World, the area's largest hotel operator, expressed a similar sentiment.

"Our industry and our community as a whole benefit when hoteliers choose to invest in Central Florida," said Andrea Finger, a Disney spokeswoman. "From value-oriented accommodations to luxury experiences, this area offers something for all travelers."

Sara K. Clarke can be reached at skclarke@orlandosentinel.com or 407-420-5664.

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To see more of The Orlando Sentinel or to subscribe to the newspaper, go to http://www.OrlandoSentinel.com.

Copyright (c) 2009, The Orlando Sentinel, Fla.

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