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The 414-room Loews Hotel Atlanta Set for April 2010 Opening;
Last of New Luxury Hotels in Atlanta for Some Time to Come

By Leon Stafford, The Atlanta Journal-ConstitutionMcClatchy-Tribune Regional News

February 5, 2010 --When the Loews Atlanta hotel opens in Midtown this spring, it will mark both a grand debut and a last hurrah.

The past decade saw a boomlet in high-end, ultra-luxury hotels in the city, as chains like Rosewood, W and Intercontinental arrived atop the real estate bubble. They brought personalized pampering such as butlers, luxury sedan shopping shuttles and hot stone spa treatments, all at nightly rates ranging into the high hundreds. They catered to business travelers, many of them in town to forge multimillion-dollar deals.

Now that market has hit a wall. Like most of metro Atlanta's hotel industry, which saw occupancy at a historic low of 53 percent in 2009, high-end hotels struggle to fill rooms, and rates are down.

Experts say Loews will be the last of the new luxury properties to hit the market for some time to come.

"Three years ago, it was a a very different landscape," Loews spokeswoman Emily Goldfischer said, referring to when the Midtown location was conceived. "Many people were building in Atlanta. At that point, it was very optimistic."

Many of the high-end projects included condos, and that market is in even worse shape now.

"In most of those luxury developments, the economic justification was driven in no small part by what developers thought was a very viable opportunity to incorporate condos in the hotel cost structure," Mark Woodworth, president of PKF Hospitality Research, said.

City saw boom in rooms

Before 2004, the area's only high-end lodgers were the Four Seasons, the W Hotel Perimeter, the Grand Hyatt and the Ritz Carlton hotels in downtown and Buckhead. The high-end market was regarded as underserved, drawing more brands and additional locations for those already here.

In the first 10 years of the new century, metro Atlanta added more than 2,000 luxury hotel rooms, while total rooms rose to nearly 94,000.

In addition to those that opened, which also included the St. Regis and the Palomar, a Mandarin was planned for Midtown and there was talk of a third Ritz-Carlton and a second InterContinental. Peninsula and Waldorf Astoria were also said to be interested in opening here.

But since the banking crisis kicked off in late 2008, the segment's high-flying clientele have either lost their jobs or had their travel budget severely cut, hotel experts said.

To adjust, the existing high-end lodgers have offered packages that include a free night's stay, or have lowered daily rates to attract visitors. Some rooms that normally cost $200 and up have gone for as little as $75 a night.

The Rosewood, for instance, is offering on its Web site a third night free stay through May, and the W downtown is running an online special that allows guests to pay $259 the first night but an amount corresponding to the last two digits of their birth year the second and third nights (a visitor born in 1965 would pay $65).

'AIG effect' has an impact

Rooms across the board, luxury and otherwise, can be found for less than visitors would have paid in the first quarter of 2008, said Amanda Joiner, area director of marketing for both Ritz Carlton locations.

The luxury brands' woes are made worse by the "AIG effect" -- some businesses shying away from putting executives in high-end properties to avoid appearing to spend lavishly during hard economic times, Woodworth said. The insurance giant's executives were roundly criticized for hosting a meeting at a high-end resort while the company was going over a financial cliff.

"It very quickly became a stigma attached to anyone who spent money at a luxury hotel," Woodworth said. "That's taken a good year and a half to two years to reach its peak and to subside to where we are today."

The expansion in the high-end niche is a positive, said Mark Vaughan, executive vice president and chief sales and marketing officer for the Atlanta Convention and Visitors Bureau.

The luxury hotels broaden Atlanta's product mix, he said, helping attract chief executive officers and senior business staff, convention leaders and Hollywood stars. They also provide places for corporations to entertain well-heeled clients during big sports events.

"If you want filet mignon for dinner but the menu only offers a T-Bone, you probably won't go to that restaurant," Vaughan said. "Having a diverse selection of hotels makes Atlanta an option for travelers that are seeking a specific experience, and now those options include staying at a luxury hotel."

Optimism, cost-cutting

During a media tour of the new 414-room Loews on Thursday, company officials detailed its upscale features, including flat-panel TVs in bathrooms as well as bedrooms, Audi Q7 SUVs to escort visitors around town and a presidential suite with carpeting that cost $400 a square foot.

Goldfischer, the Loews spokeswoman, said the New York-based chain is optimistic about the hotel's first-year performance. The property is sold out its first three days of operation, and new properties usually capture a lot of annual events like charity balls and big meetings.

But in a nod to the down market, hotels have taken steps to control costs. Loews, for instance, will run its restaurant in-house instead of using a big-name New York chef -- de rigueur at the height of the building boom four years ago. A Pano Karatossos restaurant at the St. Regis, which was supposed to be the flagship of the restaurateur's Buckhead Life Group chain, has been put on hold.

Woodworth said there is good news for luxury hotels: Occupancy began improving in the third quarter of 2009, albeit in large part because of discounts.

"More and more travelers became value-oriented as opposed to just purely cost-conscious," he said. "With rates so discounted in the luxury tier, the value proposition that resulted was so appealing that a lot of travelers began to buy the rooms."

Tough year for luxury

Atlanta's high-end hotels took a hit from the financial downturn.




2008 2009





Occupancy
59.70% 53.60%
Avg. daily rate
$203 $172
RevPAR

$121 $92





Source: Smith Travel Research

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