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Hotel Occupancy in Atlanta from January through July of 2005 Averaged
 about 64%; Expecting About 2% Growth in New Rooms
 During Next 3-5 Years

By Leon Stafford, The Atlanta Journal-Constitution
Knight Ridder/Tribune Business News

Sep. 29, 2005 - If Atlanta's success in attracting 100,000-plus mega-conventions lies in building more large intown hotels, the city is out of luck.

The number of rooms in Atlanta is expected to grow only about 2 percent annually over the next three to five years because of sluggish demand and escalating construction costs, according to PKF Consulting, a national firm that annually assesses Atlanta's accommodations health.

What will come online will be specialized properties like boutiques, which are smaller hotels that aren't designed to be the first choice for conventioneers.

That means Atlanta will have to find another way to appeal to huge groups like the National Association of Home Builders. The NAHB -- the city's biggest convention at more than 100,000 participants -- pulled its 2007 and 2008 shows out of Atlanta earlier this year, in part because the organization's leaders said the city lacked enough hotel rooms within walking distance of the Georgia World Congress Center, metro Atlanta's main convention hall.

While metro Atlanta boasts more than 93,000 hotel rooms, the majority are in suburban communities that would be a hump for conventioneers to get to easily.

But Mark Woodworth, executive vice president of PKF's Atlanta office, said the hotel industry shouldn't base its growth on the few monster events. Most conventions have attendance of between 5,000 and 25,000 people, and Atlanta's downtown hotels can handle that easily.

"You don't build the church for Easter Sunday," he said. "There are times during the year when the demand is really up there, but ideally you want to appeal to as many different user groups as you can."

Slower growth is also healthy for an industry that has recovered slowly during the last few years, industry leaders said.

"Downtown supply growth of no more than 2 percent is actually a good thing for the downtown hotels," said Greg Pierce, chief financial officer and vice president of the Atlanta Convention & Visitors Bureau, which books much of the city's convention business. "There is currently ample supply downtown to absorb increasing demand before additional supply comes online."

The outlook on hotel growth today is quite a contrast from the early 1990s. With the 1996 Summer Olympics on the way, Atlanta was building large, full-service hotels at a healthy clip, Woodworth said.

This decade, demand was weakened by the bursting of the technology bubble and the erosion of the telecommunications industry, both fields in which Atlanta was heavily invested. When the industries suffered, the demand dropped for hotel rooms to accommodate business travelers, Woodworth said.

Hotel occupancy in Atlanta from January through July of this year averaged about 64 percent, according to PKF. That is up about 5 percent compared with the first seven months of 2004, when occupancy was 61 percent.

Still, the addition of more hotel rooms -- especially downtown -- could help Atlanta better compete with Las Vegas and Orlando, the nation's leading convention towns. Atlanta, like those cities and dozens of others across the country, increased the size of convention facilities just as businesses and associations downsized their meetings.

The GWCC -- the fourth-largest facility in the nation -- added 420,000 square feet of exhibition space in 2003.

While Atlanta is not rushing to build hotels to handle a fully booked GWCC, the city is adding smaller properties that aren't geared toward conventioneers.

The almost-completed Glenn Hotel downtown and Midtown's Twelve are among six boutique hotels aimed toward business travelers and tourists.

The Glenn, a renovation of the circa 1923 Glenn Building at Marietta and Spring streets, will have a rooftop bar, 110 rooms with plasma TVs and windows in the showers so guests can watch television while lathering up. It opens this winter.

"It's not lost on us that Atlanta's hotel stock is dominated by large, convention-type hotels," said David Marvin, president of Legacy Property Group, which is doing the Glenn work.

The Twelve hotel, scheduled to open in February at Atlantic Station, is going after 25- to 40-year-olds who crave technology, not just to operate computers but also to communicate with the front desk. Guests at the 101-room hotel will have the option of checking in at kiosks in the lobby instead of the front desk, ordering room service via in-room computers, and having wireless Internet access, or wi-fi, in their suites, said spokeswoman Cathy High.

A 102-room hotel, Twelve Centennial Park, is to open in late 2007.

Twelve President Jim Veil said while his hotels will benefit from convention traffic, his primary customers will be business travelers and tourists drawn to downtown offerings like the soon-to-open Georgia Aquarium.

"I'm not building a convention hotel," he said.


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Copyright (c) 2005, The Atlanta Journal-Constitution

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