Aug. 27, 2003 - It's been 16 years since the last luxury hotel was constructed in the Triangle.

Now six are being proposed -- at a time when a sluggish economy has made finding investors to back hotel construction nearly impossible.

Developers say that the two projects with the most chance of succeeding are a four-star hotel planned for Cary's Arboretum that earlier this month received the backing of SAS Institute and another planned near the new downtown convention center that the city of Raleigh has said it will back with $20 million.

That kind of financial backing is necessary, industry experts say, because banks and hotel operators don't think the Triangle has enough upper-crust travelers to justify building a new Four Seasons or Ritz-Carlton.

"Everybody thinks this area deserves a four-star hotel, but in the marketplace, you deserve what you'll pay for and patronize," said Bob Winston, president of Raleigh-based Winston Hotels. "Are you willing to pay $250 or $350 per night to stay in Raleigh?"

Winston's family owns land across from the RBC Center where he envisions a luxury hotel serving events at the arena. But those plans are on hold until office and retail development begins again in West Raleigh.

By some measures, a really fancy hotel has never been built in the Triangle. The Mobil Travel Guide lists no hotels higher than three stars, out of a possible five, in the Triangle. The travel rating service of the American Automobile Association gives the area three four-diamond hotels -- The Siena Hotel and The Carolina Inn in Chapel Hill and The Washington Duke Inn in Durham. Fearrington House in Pittsboro is classified as five diamonds by AAA.

Earning the designation requires many expensive extras such as an on-site spa, meeting rooms, a top-quality restaurant, doorman, valet parking and rooms with amenities such as marble sinks. Construction costs for a four-star hotel can run $250,000 per room, compared with $60,000 or $70,000 per room at a midprice property such as Hampton Inn, industry analysts say.

SAS Institute wants to build a 150-room luxury hotel at The Arboretum, a shopping center on Harrison Avenue in Cary. The software company regularly flies executives to its campus for conferences and training.

Ann Goodnight, wife of SAS founder Jim Goodnight, said she has watched luxury hotel chains back out of The Arboretum repeatedly since the project was announced in 1996.

"They basically said our market is not ready for it," Goodnight said. "We think the Triangle has been underestimated consistently by retailers, the hospitality industry and restaurants."

Goodnight took control of the project after Raleigh hotel developer Summit Hospitality failed to attract a luxury hotel to the site. Goodnight said the hotel will be independent and will open by September 2005, but wouldn't say how much it is expected to cost.

But Winston said that if the hotel is built, it wouldn't reflect the market.

"They know what they want there and they have enough money that supply and demand doesn't apply to them," Winston said.

In Raleigh, the city says it will subsidize construction of a 450-room hotel with $20 million in public funding. Downtown boosters say building the hotel is vital to attracting national and regional conferences to the $180 million convention center the city plans to build. The city is seeking a four-star or three-star chain that will invest in and manage the property.

Where public subsidies or billionaire investors are absent, industry analysts said new luxury projects in the Triangle could be delayed for many more years.

"Outside of the top 15 markets, [the luxury brands] usually don't have a lot of presence," said Bobby Bowers, vice president of Smith Travel Research. "When you look at markets that are smaller like Raleigh, Nashville and Memphis, you don't have the numbers of people and the corporate headquarters to make it happen."

In April, N.C. State University officials said they would delay plans for a 250-room, $71 million complex on Centennial Campus. Developers had asked the school to guarantee $4.5 million in annual revenue for the operation.

At North Hills Mall in Raleigh, a Rocky Mount developer is working on a deal to build a 150-room luxury hotel. Bill Hull of Pegasus Properties Inc. said he wants to open the hotel by 2005, but hasn't decided whether the hotel will be part of a national chain.

At The Streets at Southpoint Mall in Durham, Raleigh hotel developer Summit Hospitality plans to open a 180-room Embassy Suites by the second quarter of 2005. The project recently won approval by the Durham City Council, but Summit hasn't set a start date for construction.

Any project that successfully breaks ground could set plans for the other hotels back further, said Tim Smith, head of Preston Development. Smith is one of the biggest developers in the Triangle, and as a real estate adviser to SAS' Jim Goodnight, he has watched several hotel deals fall through at The Arboretum.

"You can't have three or four luxury hotels in this area," Smith said. "Whoever is the first out of the blocks is going to knock out a couple of the other projects, and if there's a big one announced downtown, I guarantee you that some of those other deals will go away."

By Steve Cannon and Samantha Thompson Smith

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(c) 2003, The News & Observer, Raleigh, N.C. Distributed by Knight Ridder/Tribune Business News. FS, MAR, WXN,