|By Dylan Rivera, The Oregonian, Portland, Ore.|
Knight Ridder/Tribune Business News
May 7, 2004 - The hotel proposed Thursday by Denver-based Sage Hospitality Resources would help restore a downtown jewel, but it isn't the crown property tourism advocates have been seeking.
The company plans to spend $80 million to $100 million to open Portland's first Renaissance hotel, a high-end brand operated by Marriott, at the top of the downtown Meier & Frank building.
While supportive of the preservation effort, Portland area tourism advocates worried Thursday whether the new rooms would flood a weak hotel market. Even worse, they said, the project could threaten the viability of a convention center hotel, a long-sought asset that might bring more business to the area's tourism industry.
"The more people who come in with 300-room hotels, the less likely the major convention center hotel would get built," said Jim Dodson, president of the Tri-County Lodging Association, which represents hoteliers. "It doesn't mean it would never happen, but it might be delayed for years."
Tourism officials and city leaders want a hotel with more than 600 rooms near the convention center to allow the city to pursue national events and conventions that spurn Portland because of the lack of a headquarters hotel to accommodate participants.
Sage announced its bid after the company learned that it won $72.5 million in federal New Markets tax credits, a financial tool intended to promote development in inner cities. The credits are worth about $20 million in current, inflation-adjusted dollars, said Ken Geist, executive vice president of development for the hotel developer.
Geist would not disclose the proposed purchase price of the Meier & Frank building. May Department Stores Co., which owns Meier & Frank, would retain ownership of the interior of the first five floors, with Sage owning all of the exterior and the top 10 floors.
The hotel developer will spend about a year studying the project's feasibility and expenses before starting construction as early as summer 2005, Geist said. It would take about two years to finish construction of a four-star hotel, he said.
The company is in talks with Marriott about using the Renaissance brand, which it also used in converting a former downtown office building in Pittsburgh.
Downtown Portland hotels had an occupancy rate of 58.7 percent in February, the most recent month available, down from 58.8 percent a year ago, according to Wolfgang Rood Hospitality Consulting.
The annual average occupancy for downtown hotels in 2003 was 65.5 percent, compared with 70.4 percent in 1999.
Geist said he's confident the Portland economy and hotel markets will recover by the time his new rooms open.
"We focus on cities that are currently in a downturn, but we believe are going to be back in a few years, and Portland is at the top of our list," he said.
Sage Hospitality, which manages about 90 hotels nationwide under various brands, has thrived in recent years by focusing on renovations of historic downtown properties, Geist said.
The 20-year-old company, a privately held concern owned mostly by its top managers, has redeveloped six urban hotels since 1992. Investments in its five most recent redevelopment projects totaled $150 million.
The company looks for cities that have significant infrastructure and investment in downtown development, Geist said. Portland's world-class downtown and infrastructure will help its economy improve faster than other cities, he predicted.
The proposed hotel's downtown location also presents a barrier to entry for other new hotels, Geist said. Because downtown development is more difficult than suburban development, the threat of new hotels adding supply and dampening the market is slim, he said.
"In the suburbs you could put one up, and 12 others could be going in six months," he said. "You don't have as much control of your destiny."
Geist said the company hopes to enter the Seattle market in the next year.
The proposal comes after a period of expansion in the downtown hotel market that dampened room rates.
The Hilton Portland Hotel opened a 327-room executive tower expansion in 2002. Hotel Lucia converted the former Imperial Hotel into 128 high-end rooms in May 2002, and the Residence Inn by Marriott Portland Downtown/RiverPlace opened with 258 rooms in July 2001.
That leaves the question of how many more rooms the city can support.
"Ultimately, more first-class rooms downtown will be good for the market if it continues to develop," said Joe D'Alessandro, president of the Portland-Oregon Visitors Association. "I worry that more rooms downtown will lessen the need for the convention center hotel, and that really is a community priority."
D'Alessandro said such a hotel would generate new business for other hotels across the region but perhaps at lower rates. "In order to be competitive, hotels are charging less than they did three years ago," he said.
Ed Dundon, who has brokered the sale of downtown Portland hotels, said adding 325 rooms in today's market conditions would be a disaster. But occupancy has stabilized in the past year, and rates soon may recover, making this an opportune time for a developer such as Sage.
"Hotels like to be on the cusp of an upcoming market," he said.
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(c) 2004, The Oregonian, Portland, Ore. Distributed by Knight Ridder/Tribune Business News. MAR, MAY, HLT,