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El Paso's Hotel Construction Boom has Slowed but Not Stopped

Occupancy Rates Exceeding State Average by Nearly 10% Spurring Interest in Future Developments

By Vic Kolenc, El Paso Times, TexasMcClatchy-Tribune Regional News

July 05, 2011--With annual occupancy rates continuing to trend at nearly 10 percent higher than the state average, the hotel business is the inn place to be in El Paso.

Three East Side hotels are under construction, and El Paso airport officials are seeking someone to build a full-service hotel near the airport.

Downtown also may see hotel additions in the future. A Dallas company is looking at the possibility of buying and revamping the closed Artisan Hotel while an El Paso group has plans to convert a vacant Downtown building into a 44-room, boutique hotel.

Hotel developers see El Paso as a good market because occupancy rates have been holding strong -- beating the Texas statewide average.

From January through May, the latest data available, El Paso's hotel occupancy rate averaged 67.2 percent -- virtually the same rate as last year for the same months, reported STR, a Tennessee company which tracks hotel data worldwide.

The Texas occupancy rate averaged 58.9 percent for the same months this year, and 54.6 percent for those five months last year, STR reported.

"Business is good. But will it stay that way?" asked Joe Frandina, president of the El Paso Hotel-Motel Association, and a partner in the Holiday Inn Express Downtown and the Days Inn East on Yarbrough.

"We still don't know if we will absorb these new rooms. Definitely everyone is feeling the loss of last year's bowling tournament," Frandina said. "All these rooms are targeted at the same customer -- the corporate

traveler."

The El Paso occupancy rate averaged just over 70 percent when the U.S. Bowling Congress Women's Championships were held here from April through June.

El Paso County has 93 hotels with more than 9,000 rooms, STR data show.

Vicki Castellanos, general manager of the Holiday Inn Airport at Airway and Interstate 10, said she thinks El Paso can absorb the new rooms because the hotel industry is doing well here.

The Holiday Inn Airport has reduced its rooms from 205 to 133 because the hotel's owner closed rooms to build a second, 102-room hotel on the property, Castellanos reported. A building separate from the Holiday Inn's main building is being expanded and remodeled into a Comfort Inn and Suites. It's expected to open by mid-August.

"The building was detached and a lot of guests felt they were not part of the hotel," Castellanos said.

The Holiday Inn owner, Manir Hotel Operations, which also owns a Holiday Inn in Vail, Colo., determined it was better to have two separate hotels, she said. The Comfort Inn, which will include 17 suites and 17 kitchenette rooms, will go after long-term stay customers, she said.

The Holiday Inn Airport is across I-10 from El Paso's newest hotel row -- four hotels on the border of Western Refining's El Paso refinery. Construction has just been completed on a 109-room Staybridge Suites, which opened Friday. It was built by Tharaldson Hospitality of Fargo, N.D. The company also operates the next-door, 109-room Holiday Inn Express, which opened last November.

Those hotels are next to a 114-room Homewood Suites by Hilton, which opened in April 2008. Texas Western Hospitality of Dallas, which manages the hotel, also will manage a 140-room Hilton Garden Inn, now being built next to the Homewood Suites. The Hilton Garden Inn is expected to open in February.

Texas Western likes the airport area because hotels have performed well in that area for a long time, said Michael Mahoney, vice president of Texas Western.

"El Paso has done well during the (economic) downturn. There's a lot of contributing factors," he said. Expansion of Fort Bliss is part of it, he added.

Monica Lombrana, director of aviation at El Paso International Airport, said airport officials decided this is a good time to seek proposals, due July 20, for someone to build a full-service, brand-name hotel on eight acres of vacant land the airport owns at Airway and Boeing, near the airport's entrance. The airport will lease the land to a hotel operator.

An improving national economy makes this a good time to try to develop this prime location for a hotel, Lombrana said.

The land recently became available because the airport terminated a long-term lease on the property early this year after the lease holder failed to pay required lease payments, she said. The land once had a jeans factory on it.

Summit Hotel Properties of Sioux Falls, S.D., plans to eventually put two hotels on property it owns next to Mission Chevrolet near Interstate 10 and George Dieter.

"We still are planning to build those as soon as the economy is back to full strength," said Chris Eng, Summit vice president and general counsel. "The market there (El Paso) is fine. It's still difficult to get financing."

Summit recently signed a purchase contract to buy the 90-room Courtyard by Marriott near Interstate 10 and Airway for $12.8 million.

Meanwhile in Downtown, Atlantic Hotels, which operates five brand-name hotels in Dallas, is studying whether it wants to go through with a proposed $2 million sale of the 126-room Artisan Hotel at 325 N. Kansas.

The Artisan closed in March 2010 after a rocky five months of operation by Douglas Da Silva, its controversial Las Vegas owner, who tried to operate the hotel while it was in bankruptcy proceedings.

Perry Molubhoy, president of Atlantic Hotels, said his company plans to ask for a study period in its sales agreement with a Las Vegas investors group to be extended beyond a mid-July deadline.

Atlantic is waiting to see if a hotel brand will approve the Artisan location for a brand franchise, he said. It's seeking a Marriott Courtyard or Aloft, a new brand in the Starwood Hotels and Resorts group, he said. Starwood has nine hotel brands, including Sheraton and Westin.

Atlantic also wants to get economic development incentives from the city of El Paso, he said.

The Artisan would have to be gutted and redone to a hotel brand's specifications, Molubhoy said. The remodeling cost hasn't been determined yet, he said.

Also in the works is an El Paso group's plan to redevelop a vacant Downtown building at 209 N. Stanton into a 44-room hotel. The group, led by Miguel Fernandez Jr., president of Transtelco, a cross-border telecommunications company based in El Paso, has yet to divulge many details of its plan. The building, currently owned by River Oaks Properties, is next to the Percolator Coffee Shop.

Vic Kolenc may be reached at vkolenc@elpasotimes.com; 546-6421.

Occupancy rates Average annual hotel occupancy rates in El Paso and Texas in recent years: El Paso 200869.2 percent 200963.2 percent 201066.2 percent 2011--67.2 percent Texas 200862.8 percent 200953.5 percent 201055.0 percent 2011--58.9 percent --Average for January through May.Source: STR

The latest moves 1 Plans to convert a Downtown building into a 44-room boutique hotel were announced June 21.

2 A Dallas company announced recently that it was looking into the possibility of buying and revamping the closed Artisan Hotel, which filed for bankruptcy a second time in December.

3 Three hotels are currently under construction along Interstate 10 in East El Paso.

4 El Paso International Airport officials are looking into the potential of a full-service hotel near the airport.

5 The Holiday Inn Airport has reduced its rooms from 205 to 133 because the hotel's owner closed rooms to build a second, 102-room hotel on the property.

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To see more of the El Paso Times, or to subscribe to the newspaper, go to http://www.elpasotimes.com.

Copyright (c) 2011, El Paso Times, Texas

Distributed by McClatchy-Tribune Information Services. For more information about the content services offered by McClatchy-Tribune Information Services (MCT), visit www.mctinfoservices.com. NYSE:EP,



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