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Historic Charleston, South Carolina Will See 7% Increase in Number of Hotel Rooms Over the
Next Two Years; 
The Bennett-Hofford Co. Planning a $35 million 185 room Hilton
By Kyle Stock, The Post and Courier, Charleston, S.C.
Knight Ridder/Tribune Business News 

Apr. 5, 2004 - Hotels on the peninsula, seemingly immune from hard times in tourism, are about to meet the enemy: more of their own kind, too many perhaps to keep them all fat and happy. 

Both occupancy rates and room prices, two of the key ingredients to healthy profit margins, stand to take a hit in light of a 7 percent increase in the number of rooms in the market over the next two years. 

Over the years, as the Holy City has become an increasingly popular tourist destination, downtown lodgings have gotten accustomed to better-than-average profit margins. But with two just-announced hotel projects set to open in 2006, on top of a 9.3 percent increase in beds since 1999, hoteliers worry the market may be nearing saturation. 

The news has downtown hoteliers taking a hard look at the economy and visitor numbers and wondering how quickly the market can absorb the extra supply. 

"The pie is not getting big enough fast enough for all the slices to stay the same size," said Richard Widman, owner of five inns downtown, including Wentworth Mansion. "Everybody takes some of the market share away. If you sit here and say, 'I don't compete with them,' you're being naive." 

The biggest change in the local lodging landscape will be just north of Marion Square, site of the former Charleston County Library. The Bennett-Hofford Co., which owns the nearby Hampton Inn and Embassy Suites, announced plans in February to build an eight-story, 185-room hotel on the parcel. 

The building will cost about $35 million when all is said and done and probably will fly the Hilton flag. It will be the peninsula's fifth-largest hotel in terms of rooms when finished in 2006. 

A 69-room inn is scheduled to open about the same time just around the corner on John Street. Ted Stoney, developing the project with his brother Richard, envisions a contemporary hotel unlike anything else in Charleston. 

Developer Robert L. Clement III is considering a hotel for a 4.2-acre plot his Midlands LLC bought in June. The land, bordered by King, Meeting and Spring streets, lies a little farther north. 

Hotel occupancy rates in Charleston County are consistently about 10 percentage points higher than the national average. Lodgings downtown also charge about three-quarters more per room, about $65, than the average U.S. hotel. 

Numbers such as those are, in part, what persuaded Bennett-Hofford and the Stoney brothers to develop hotels instead of retail shops, office space or other commercial projects. 

But lodgings on the peninsula and off have been struggling with a rash of new rooms that have come online since the mid-1990s. 

The 131-room Charleston Harbor Hilton Resort opened in July 1997 just before the Marriott Courtyard Hotel started renting its 179 rooms. 

Widman's 21-room Wentworth Mansion opened in June 1998. More recently, the 164-room Renaissance Charleston Hotel opened downtown in January 2001 and the independent Market Pavilion Hotel tacked on 66 plush rooms in 2002. 

Countywide, room inventory has climbed 16 percent since 1999. 

Because of this growth, Charleston County occupancy rates have lagged 1999 levels, despite the fact that the total number of visitors coming to town has increased by about 25 percent to 4.6 million a year. 

"Five years ago at this time of the year, almost every hotel downtown would be full every night of the week. Right now I think you could make a call and you'd find rooms at every property," Widman said. "If those new hotels were to open their doors tomorrow, it would be a disaster." 

The question is, will demand for peninsula hotel rooms grow by 7 percent before 2006? 

If it doesn't, occupancy rates and profit margins will suffer, especially at properties that will go head-to-head with the Bennett-Hofford Hilton, namely Doubletree Guest Suites, the Francis Marion, the Mills House Hotel and the Renaissance Charleston Hotel. 

"We'll feel it," predicted Jim Flynn, director of sales and marketing at Renaissance Charleston. "We'll feel it particularly in the first year or so." 

A faltering economy or more terrorist attacks could make the picture even more bleak for lodgings. 

Some economists and hotel players are more optimistic and believe that business will get even better should a discount airliner start service out of Charleston International Airport. 

"Our market will easily be able to absorb (the new rooms)," said Al Parish, an economist at Charleston Southern University. "If somebody chooses one of the new places, somebody else will take their place in the other." 

Steve Litvin, a College of Charleston hospitality professor, said that in the tourism industry, supply often drives demand. 

"If you build it, they will come," Litvin said. "Undoubtedly, there will be some properties that get hurt by it ... but overall, adding more product in that high-end class will be a real benefit." 

Litvin noted that some of the properties that stand to lose the most market share are the Embassy Suites and Hampton Inn, both of which are owned by Bennett-Hofford. 

"These are smart guys," he said. "Obviously, they've got it figured out that it's going to be overall beneficial." 

Ted Stoney commissioned a feasibility study and hired a consultant before committing to his inn project. He stressed that the inn he imagines wouldn't have a direct competitor in town, but he still took a close look at the supply-demand equation. 

"The numbers worked," Stoney said. "There's just not many places for a hotel on the peninsula." 

The real threat might not be so much to the overall pool of hotels but to the cluster of lodgings farther down the peninsula. Although the two new hotels likely will steal market share from the Francis Marion and the Holiday Inn Historic District, they also will draw more traffic from downtown and give those properties overflow business when they're fully booked. 

"Marion Square could become in five years what the Market is today," said Duane Parrish, general manager at the Hampton Inn Daniel Island. 

-----To see more of The Post and Courier, or to subscribe to the newspaper, go to 

(c) 2004, The Post and Courier, Charleston, S.C. Distributed by Knight Ridder/Tribune Business News. MAR, HLT, IHG, 


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