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Hospitality Industry Strong in Billings, Montana
with Five Hotels in the Works

By Jan Falstad, Billings Gazette, Mont.McClatchy-Tribune Regional News

Feb. 03, 2013--Billings may stage a repeat performance this year of its last hotel building spree in 2006 when at least six hotels were started.

Two extended-stay hotels are coming, and developers are working on plans to build up to three more. If all the projects are successful, Billings could see a 12 percent bump in the number of hotel rooms.

The extended-stay hotels are Hilton brands: Homewood Suites and Home2 Suites. Developers are looking at building a TownePlace Suites, which is a Marriott extended-stay hotel; a Holiday Inn Express and a fifth unnamed hotel, according to Chris Kraus, a partner and senior vice president of PKF Consulting, which bills itself as one of the premier U.S. hospitality consulting companies.

"It's capitalism. People see an opportunity. Billings is performing well in the hospitality industry, so people want to build," Kraus said.

After consulting with Chico Hot Springs a decade ago, Kraus fell in love with Montana and now lives and works out of Bozeman, plus a San Francisco office.

Montana's largest city with around 100,000 people has about 4,100 hotel and motel rooms now and a high occupancy rate, Kraus said. When hotels are full, they can raise their rates.

"That goes right to the bottom line, which increases your income and that's what's really happening in Billings now," Kraus said.

The new hotels averaging 100 rooms would add 400 to 500 new rooms to the market.

The success of two Hampton Inns on the West End prompted the Erck Hotel chain of Missoula to build a third Billings hotel, a Homewood.

"We're getting full up and thought we'd put in some extended-stay rooms," said Dustan Williams, Erck's chief operating officer and vice president.

As soon as the weather warms up, construction will start on the $14 million Homewood, which will be adjacent to the Hampton Inn and Suites on Ember Lane off Zoo Drive and Interstate 90. Erck also owns the Hampton Inn on Southgate Drive.

"The two Hamptons are very busy Monday through Friday and the weekends are picking up because the oil field workers are coming over and spending the weekend and shopping," Williams said.

Local competition prompted Erck Hotels to build earlier than planned.

As Hilton's preferred management company in Montana, Erck was notified when another developer started asking about the Billings Homewood franchise.

"We were always going to build this, but it pushed up our schedule a bit, about half a year to a year," Williams said.

He is negotiating with Martel Construction of Bozeman to build the hotel with financing through Stockman Bank in Billings.

The family-owned Erck chain owns six hotels, five in Montana and one in Nampa, Idaho, and is exploring building more hotels in western Washington state, Williams said. The company also plans on building a Homewood in Great Falls in the next four years, which will be its third hotel in that city.

Michael Bennett of Charlestown, S.C., is Erck's financial partner in the Billings Homewood, which offers rooms with full kitchens, plus breakfast and light dinners served with beer or wine Monday through Thursday. Winter room rates will be about $130 and rise to $150 in the summer.

When asked if Billings doesn't already have an excess of rooms, Williams said the numbers favor new construction.

"There's kind of a trend where some of the older hotels get taken out of the mix as the newer ones come in," he said.

The second extended-stay hotel will be a Hilton Home2.

Developer Don Cape Jr. of Bozeman said he's negotiating on two properties on the West End near the Hilton Garden Inn that he opened in 2008.

In 2006, Cape's main company, JWT Capital LLC, also built the Old Chicago Restaurant at South 24th Street West.

"Billings is a great town to do business in," Cape said. "We have experienced success with our current business and the market has received us well, so we think expansion is warranted."

Home2 will have a modern design, kitchens in the rooms and a work wall that doubles as an entertainment area for guests. Room rates will be less than the Homewood, about $100 a night per room.

Hilton hasn't officially granted the franchise yet, Cape said, but that should occur as soon as a site is selected. Construction on the $9.4 million hotel, including the land, should begin this summer and be completed in nine months.

The third potential hotel site is the former Carmike 7 Theater site on Overland Avenue.

Billings attorney and developer Dave Veeder and an unidentified partner who operate Lads Riverside, LLC bought the 5-1/2-acre property and are considering a hotel.

"It's a nice-sized parcel. We are considering a number of alternatives," Veeder said.

Veeder and Scott McRae and their wives broke into the Billings hotel fraternity when they built a Residence Inn by Marriott behind Best Buy, which opened in the fall of 2007.

While the West End is getting the newest hotels, the boutique Northern Hotel in downtown Billings is set to re-open with 160 rooms and two restaurants on March 15.

And Steve Wahrlich recently invested $250,000 in redoing the Best Western Clocktower Inn along North 26th Street to show a better face to Billings' new $80 million federal courthouse.

"We spent $250,000 completely redoing our property," he said. This was the third remodeling project totaling more than $5 million that Wahrlich has tackled since he and a partner bought the motel in 2006.

Anchored by a remodeled Northern and the Crowne Plaza Hotel down the block, the core of downtown Billings will have 600 hotel and motel rooms and conference rooms rivaling anything on the West End, Wahrlich said.

"The more meetings and conferences they have brings more people into downtown," he said. "I'll get residual business from it."

Ziggy and Stella Ziegler, who own Stella's Restaurant and Bakery, and Wahrlich, purchased a nine-room apartment building on the corner of Second Avenue North and North 26th Street. They expect to open the extended-stay City Loft Apartments by spring.

Demand for lodging in Billings has been driven by general economic growth, concentric circles of business flowing out of the Bakken and some unique one-time events like the tornado and ExxonMobil's oil spill along the Yellowstone River, according to Bozeman consultant Kraus. Also, hotel construction across the country virtually stopped during the recession, so there is pent up demand.

Local occupancy rates jumped about 22 percent last year, compared to three years ago, according to tourism researcher Judy Randall.

The rapid growth in demand for hotel rooms will eventually slow to more normal rates, Kraus said, but he expects Billings to remain an attractive market.

"It is the strongest growth of any city in Montana, which is why you're seeing all the hotels proposed for Billings," he said.

___

(c)2013 the Billings Gazette (Billings, Mont.)

Visit the Billings Gazette (Billings, Mont.) at www.billingsgazette.com

Distributed by MCT Information Services London:CIU,NYSE:MAR,NASDAQ:WSTC,



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