|By Christopher Calnan, The Florida Times-Union, Jacksonville|
Knight Ridder/Tribune Business News
Mar. 26, 2005 - The downtown Adam's Mark hotel is probably too big for the Jacksonville market, some hotel industry experts say, and they speculated that the new owner could seek to convert part of the building to condominiums.
The 966-room hotel, the city's largest, is scheduled to be sold next week to an unidentified West Coast investment group. But it has struggled since it opened 4 years ago and Fred Kummer, president of Adam's Mark's parent company, HBE Corp., said earlier this week such a large hotel was difficult to market in the First Coast.
Some industry observers agreed.
"Jacksonville is a mid-sized hotel market, 900 rooms is mighty big," said Gary Andreas, a principal in Tellatin Andreas & Short, a St. Louis-based hospitality industry consultancy. "If they were attached to a convention center, for a stand-alone that's a lot of rooms."
Jeff Weinstein, editor in chief of Hotels magazine, concurred.
"If they don't have a [major] convention center, that's awfully big for the market," he said.
Kummer said the buyers are negotiating with the Hyatt Corp. to manage the hotel. But Hyatt officials haven't returned telephone messages seeking comment so their plans are unclear.
Andreas said most Hyatt Regency hotels are 450-600 rooms. Hyatt hotels as big as the Adam's Mark are usually in larger cities like Chicago or San Francisco, he said.
Kummer also declined to reveal the selling price.
The price the investment group pays will be important because it will determine the room rates. If the selling price is too high, the new owners would naturally try to recover some of the investment through higher room rates. But that could make it more difficult to attract business, Andreas said.
Bob Rauch, director of the Center of Hospitality and Tourism Research at San Diego State University, said the hotel's proximity to a convention center is just one factor in the level of its success. Travelers also often consider whether a hotel is a member of a frequent-use reward program.
John Reyes, president of the Jacksonville & the Beaches Convention and Visitors Bureau, said Adam's Mark is good for Jacksonville because its size increases options for meetings. The hotel can book single large groups or multiple smaller groups.
"Customers look for different types of properties," he said. "It basically tells customers you're a player in attracting different kinds of business."
Weinstein and Jack Corgel, a professor of real estate at Cornell University's School of Hotel Administration, said it's possible the new owner would convert upper floors of the hotel to condominiums.
"My guess is they're not going to expose all 900 rooms," Corgel said. "My guess is they're going to break it up. They may develop a combination condominium-hotel."
Rauch said condominium conversion is a popular trend, and it may work for the Adam's Mark if it's combined with a re-branding of the hotel.
It wouldn't be the first time a city-assisted project went condo.
The developer of the nearby Berkman Plaza, Atlanta-based Harbor Cos., used $9.3 million in city incentives to build the $36 million downtown apartment building that was completed in September 2002.
Harbor then sold the property in July 2003 to a company that began converting the units into condominiums two months later, prompting criticism of deal made by the city.
Mike Weinstein, former executive director of the Jacksonville Economic Development Commission, said the city's 1998 redevelopment agreement with Kummer requires him to get city approval on the new operator of the hotel. However, he didn't remember any reference to condominium conversion in the agreement.
Adam's Mark received more than $21 million in city incentives to build its hotel in Jacksonville.
Regardless of the condo possibility, experts agree that Hyatt would be a good choice for the hotel.
"Hyatt brings a lot of group [meeting] strength and group expertise," Andreas said. "With Adam's Mark you didn't know what you were getting. With Hyatt, you know it's going to be a high-end product."
During the last two years, Kummer has sold most of his 24 hotels to focus on his core business of building hospitals. He was critical of what he perceived as Jacksonville's negative environment when confirming the deal this week.
"Some of the folks in Jacksonville are their own worst enemies," he said. "They bad-mouth the town and they bad-mouth the hotel. And that's a real problem."
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