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In Madison, Wisconsin Four Hotel Projects Are Postponed or Scrapped
 While Three Hotels Overcome Obstacles and Open

By Marv Balousek, The Wisconsin State JournalMcClatchy-Tribune Regional News

Jul. 26, 2009--Despite several flashy Downtown hotel proposals, the commercial credit crunch has withered what a year ago was a bountiful crop of proposed Madison area hotels.

Three new hotels are opening this summer, but four other projects have been postponed or scrapped due mostly to financing problems.

New hotels include Cambria Suites, 5045 Eastpark Blvd., which opened Thursday; Sleep Inn & Suites, 4802 Tradewinds Parkway, which opens Wednesday; and Fairfield Inn & Suites, 2702 Crossroads Drive, which opens Aug. 13.

Hotels on hold include Aloft Hotel/Fratellos Waterfront Restaurant at John Nolen Drive and Rimrock Road; Hilton Garden Inn, 610 John Nolen Drive; Hotel Indigo at the Hilldale Shopping Center; and Hyatt Place at West Towne Mall.

Smith Travel Research (STR) of Hendersonville, Tenn., earlier this month issued a dismal outlook for the nation's hotel industry. The firm projected that average daily rates will decline 9.7 percent this year and revenue per available room will drop 17.1 percent. In 2010, STR said rates will be down another 3.4 percent while revenue per available room will be 3.7 percent less.

STR president Mark Lomanno predicted it may take more than six years for rates to climb back to 2007 levels.

Demand expected to return

But Madison hotel proposals seem to keep coming despite the recession. Last week, Apex Enterprises of Madison, an owner and manager of local rental property, proposed a $100 million, 14-story, 300-room hotel along West Wilson Street. The hotel would serve the Monona Terrace Convention Center.

Marcus Corp. of Milwaukee also has proposed a 275-room hotel serving Monona Terrace, while Fiore Co. of Madison has proposed a 250-room hotel across from the Overture Center. A proposed $107 million renovation of the Edgewater Hotel, 666 Wisconsin Ave., would add 121 rooms.

Away from Downtown, Madison Sleep Inn & Suites owner Kevin Wilson, who also owns the Super 8 at 1602 W. Beltline, said he obtained a development loan just before last fall's national financial meltdown. He also said May was a particularly bad month for local hotel operators.

"I think demand will return," Wilson said. "The leisure traveler is still very much alive in Madison and people still go to football games, soccer tournaments and the World Dairy Expo. Where I'm feeling the pinch is the weekday business traveler."

Overcoming obstacles

Cambria Suites general manager Doug Allen credits strong local banking relationships, especially with First Business Bank of Madison, to his hotel's successful construction.

Fairfield Inn & Suites survived a construction obstacle last fall when an inspector said a 150-foot crane violated the Dane County Regional Airport's height restrictions. A month later, the construction company was granted a variance from the county Board of Adjustment.

De Pere attorney Tom Arnot, developer of the proposed Hilton Garden Inn, wasn't as fortunate as those other hotel developers.

"We are stalled. We're not able to proceed and we have relinquished our option on the land. We would pursue it if there were any freeing up of capital or equity in the markets," he said.

"We still would like to be building right now because we believe when the economy recovers, Madison is a strong market," Arnot said.

Unique to market

Financing also has been a problem for Jay Supple of Appleton, developer of the proposed Aloft Hotel/Fratellos Restaurant. His company, which this spring opened an Aloft/Fratellos in Green Bay, still owns the Madison property.

"We're still tweaking some of the plans and we're also working on the financing," he said. "Until financing terms become more favorable, there probably won't be a lot going on."

Supple said building a hotel similar to existing Madison hotels doesn't make sense to him.

"I think the Madison market is strong enough, but it has to be the right type of hotel," he said. "It has to be unique to what the market does not have."

Also on hold are the Hotel Indigo, where construction had been slated to begin this spring, and a Hyatt Place Hotel proposed near West Towne Mall. Another Hyatt Place Hotel, at 333 W. Washington Ave., which replaced a planned second condominium tower at the Capitol West development, is expected to open early next year.

Paul Lynch, managing partner of PLH & Associates, said he's confident he can get financing for a Holiday Inn Express planned at Park and Janesville streets in Oregon. He said he's awaiting a village decision on tax incremental financing and hopes construction can start this fall.

Downtown rooms needed

A study of released in January by Hunden Strategic Partners of Chicago found that Madison's hotel market is more stable than other cities because of UW-Madison and Madison Area Technical College, state government and the local health-care industry.

The study, which concluded that Madison needs more Downtown hotel rooms, analyzed six Madison hotels with 1,283 rooms and found that 45 percent of the guests were corporate travelers, 43 percent were with groups and 13 percent were leisure travelers.

Before the financial crisis hit last year, additional lodging options were the top product feature Madison visitors wanted in a 2007 survey by the Greater Madison Convention and Visitors Bureau.

"The current flurry of hotel development discussions mirrors what visitors and convention planners have expressed," said bureau president Deb Archer. "Our hope is that future hotel development complements and augments both the business levels and product offering of existing hotels."

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East side Baymont Inn renovates

Baymont Inn & Suites, 4202 East Towne Blvd., completed an $850,000 renovation project earlier this month that included new signs, paint, awning, entrance, roof and landscaping.

The project, which began in the spring of 2008, was the most extensive since it was built as an Exel Inn in 1974, said general manager Aaron Hanus. "We were open throughout the entire process," he said.

Lobby improvements included enhanced lighting as well as new flooring, wall treatments, furniture and artwork. A business center was set up off the lobby and a fitness room was added, and the breakfast area was enlarged. The 92 guest rooms also were refurbished.

The hotel is owned in a joint venture by FFC Capital Corp. of Pittsburgh and Interstate Hotels & Resorts of Arlington, Va.

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To see more of The Wisconsin State Journal, or to subscribe to the newspaper, go to http://www.wisconsinstatejournal.com.

Copyright (c) 2009, The Wisconsin State Journal

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