Oct. 21--Four years ago, H. Mark Daley III opened six hotels in one year, all aimed at the growing number of business travelers in the Triangle and throughout the Southeast. 

"There was a sense of urgency," said Daley, president of Durham-based hotel developer The Generation Companies, which operates three hotels in the Triangle. "It was more of a race to get position in the market." 

This year, developers are in no rush to build. Hotel construction has nearly come to a standstill in the Triangle: The effects of last year's recession have left hotel owners with higher vacancy, lower room rates and no idea when there will be a rebound in business and leisure travel. 

Next month, two hotels will open in the Triangle -- a Holiday Inn Express off Capital Boulevard in North Raleigh and a Best Western Inn & Suites on New Bern Avenue near Interstate 440 in Raleigh. 

Several other hotels are planned, but none has set dates for starting construction. 

The drop in hotel construction locally mirrors national hotel construction, which is at its lowest level in eight years. 

Hotel operators say a delayed recovery in the national economy and overbuilding in the Triangle during the late 1990s make it hard for them to justify new projects to banks. The hotel room occupancy rate in the Triangle slid to 60.4 percent during the first eight months of the year from 62.9 percent through August 2001, according to Henderson, Tenn.-based Smith Travel Research. 

Although that decline is moderate, hotel operators say their revenue is down because they have had to cut their rates steeply to compete for travelers. Average rates per room in the Triangle dropped to $70.02 through August, down from $73.31 during the same period last year. 

Raleigh-based Winston Hotels, the largest hotel owner in the Triangle with eight hotels, issued a warning to investors last week that its income and revenue per available room (revPAR) would drop more than expected for the second half of the year. Company President Bob Winston said the company hasn't started a hotel in the Triangle in four years and hasn't opened a hotel in any city for two years. 

Winston mothballed his projects as dozens of other hotel operators came to the Triangle to build, just as office and warehouse developers built millions of square feet in anticipation of a sustained economic boom. 

"I knew the end was near when every hotel conference I went to rated the Research Triangle with the highest revPAR of any market," Winston said. 

The economic slowdown cut off the growth in business and travel that developers were counting on to absorb the new construction. In 1998, 27 hotels opened in the Triangle. The next year, 16 more came on line. 

Most were extended-stay hotels built near RTP and aimed at business travelers who would stay for a week or more for training and conferences at the offices of Nortel Networks, IBM and Cisco Systems. That business has all but dried up since companies began paring their travel budgets. 

Leisure travel has been slow to recover from last year's terrorist attack, leaving the traditional overnight hotel market overbuilt, or, as Daley said one of his colleagues put it, "under-demolished." 

That's an option, too. Before the last jump in hotel room supply during the late 1990s, hotel rooms in the Triangle shrank nearly 3 percent between 1994 and 1995, as more properties closed than were opened. The recession in the early 1990s, coupled with the high debt of many hotel operators and interest rates, forced many out of business. 

This recession has forced some out of business. Two hotels have closed in the Triangle this year: a former Doubletree hotel and a Travel Lodge, both on Capital Boulevard in Raleigh. Other operators have delayed spending during the business slowdown. The Clarion Hotel near Crabtree Valley Mall has frozen a $1.25 million renovation to the property. The operator, Davidson & Jones Hotel Corp., hasn't set a date for restarting work. 

Some operators with access to cash are hoping to take advantage of bleak market conditions to buy hotels at bargain rates. Daly Seven, a Danville, Va.-based hotel operator with seven properties in the Triangle, has bought five hotels in North Carolina since 2000. 

Winston Hotels has bought two properties this year and has taken options to buy on five hotels, all outside the Triangle. 

Winston said he would have liked to have bought more hotels, but bargains were hard to find. Low interest rates mean that owners can pay their debts with less room revenue. Winston expects that if the hotel slump continues, finding deals will get easier. 

"As this rebound has not taken place, more owners are starting to say that maybe it's time to get out," Winston said. "The longer this downturn lasts, the more opportunities we will have to buy." 

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