News for the Hospitality Executive
|By Michael Kinsman, The San Diego Union-Tribune
Knight Ridder/Tribune Business News
Apr. 14, 2004 - After years of stumbling in a highly competitive downtown hotel market, the U.S. Grant Hotel may be regaining some clout.
Starwood Hotels & Resorts Worldwide, the operator of Sheraton, W, Westin and other brands, said yesterday it would add the U.S. Grant to The Luxury Collection, its international group of upscale hotels.
The hotel will enjoy the marketing power of the prestigious Starwood chain once it joins The Luxury Collection early next year after a $10 million renovation.
"Our expectation is that the U.S. Grant will fit in with our top-of-the-line properties," said Joe Terzi, vice president of Starwood and chairman of the San Diego Convention & Visitors Bureau.
The Sycuan Band of Kumeyaay Indians bought the U.S. Grant for $45 million in December as part of its investment diversification. At the time, Sycuan said it was hopeful it could restore the luster to the U.S. Grant, one of the most storied hotels in the region.
The stately 11-story hotel was opened in 1910 by the son of President Ulysses S. Grant. It fell into disrepair in the 1970s and seemed destined to be demolished. Since that time, it has gone through a series of owners and upgrades, but it has struggled to compete against new hotels that have cropped up around it and on the downtown waterfront.
"The Starwood connection will be an enormous benefit for Sycuan," said Jerry Morrison, a hotel analyst in La Jolla. "They've hit a home run with this."
Morrison said he believes the Starwood affiliation may help the U.S. Grant boost its room rates to among the highest downtown.
"I think ADR (average daily room rate) could go up to $250 or even as high as $300," he said.
But San Diego-based hotel operator American Property Management Corp., which will manage the U.S. Grant's operations, is more modest in its estimate.
Michael Gallegos, president of APMC, said he expects room rates to rise from about $150 today to $225-$275.
"Our goal is to make this one of the top hotels in San Diego," he said.
In 2003, the average daily room rate at downtown hotels was $139, according to PKF Consulting, a hospitality consulting firm.
Sycuan's Tina Muse said the $10 million renovation will include all 284 guest rooms, the lobby, the Grant Grill restaurant and meeting rooms. In addition, Sycuan is considering opening a nightclub on the first floor of the hotel at the corner of Broadway and Fourth Avenue.
The renovation work on the hotel should be concluded by early next year, she said.
Bob Rauch, director of San Diego State University's Center for Hospitality & Tourism Research, praised the link to Starwood and the marketing power that would come from that partnership.
"One of the problems the U.S. Grant has is that it has not been part of one of the leading brands," Rauch said. "But Starwood is one of the four top hotel brands and has the marketing connections with the meeting planners and corporate travel agents that will be important for the hotel."
He said the U.S. Grant's location off the waterfront and along Broadway may hinder it in economic downturns, however, when visitors continue to flock to bayside hotels downtown at the expense of other properties. If that happens, the U.S. Grant would have to drop rates to compete.
"When times are good, it should do well," he said. "But you wonder how it will be impacted in a downturn. Its occupancy and rates could both go down at the same time."
Terzi said that while there are more attractive locations for hotels downtown, he thinks the unique style of the U.S. Grant will be a selling point.
"We wouldn't have done this if we didn't believe it was a good property and unless there had been a commitment to a $10 million renovation that Sycuan has made," he said.
The Luxury Collection is a group of 65 hotels worldwide, some of which are resorts. Only 10 hotels in the United States have the designation. The rest are scattered in such locations as Bora Bora, Bali, Morocco, Venice, Athens and Buenos Aires.
"We look for hotels that have an identity and don't necessarily fit in our various brands," Terzi said. "These are some of the finest hotels in the world."
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