Hotel Online 
News for the Hospitality Executive

Hyatt Place in Bethlehem, Pennsylvania Prepares to Open; A Scaled-back
 Version that Literally Was Shaped by the Credit Crunch
By Nicole Radzievich, The Morning Call, Allentown, Pa.McClatchy-Tribune Regional News

September 20, 2009 - A block away from the Victorian buildings that dot Bethlehem's Main Street stands a sleek, new Hyatt Place hotel that literally was shaped by the credit crunch.

It was once envisioned as a 21-story tower of condominiums and hotel rooms that would have change the skyline of Bethlehem. Developer Joseph C. Posh scaled it back to six stories after the economy took a tumble. Gone are plans for an upscale restaurant and the trendy downtown condos in vogue during the building boom a couple of years ago.

What's left on the three-quarter-acre lot at North and Guetter streets is a 124-room hotel that developers are confident they can fill with business travelers and tourists. The $17 million building, scheduled to open Oct. 1, represents the kind of high-stakes investment few communities in the Lehigh Valley have seen in this recession.

"It's not an 18- to 21-story project with luxury condos, but I'm really proud of this project," Mayor John Callahan said. "We're getting a $17 million hotel in a downtown in this difficult economy."

From a $48 million hotel-and-condo project in Pittsburgh's Southside Works to the $40 million Saucon Creek Resort in Upper Saucon Township, hotel projects across the country have been stalled because developers can't get the financing.

Even the Sands Casino Resort Bethlehem, which opened in May, put the brakes on a planned 300-room hotel and retail project until the casino makes more cash.

In the wake of the credit crisis, some view lending money to hotel developers risky business. During a recession, companies cut workers and business trips.

The Lehigh Valley is no exception. Smith Travel Research, which tracks the hotel industry, found occupancy rates in the Valley down from an annual average of 65 percent to about 60 percent so far this year. In August, typically a busy time for Valley hotels, occupancy fell from nearly 75 percent in 2008 to 70 percent this year, according to the firm.

"There's not a new demand for [hotel stays] now," said Dennis Costello, Hotel Bethlehem general manager. "I expect an impact on our business when the Hyatt opens."

That stagnant demand has some lenders slow to open their purses to hotel developers. Hotel Brokers International found 75 percent of lenders reported they reduced the number of hospitality loans underwritten in 2008, according to published reports.

Local leaders say there's no mystery behind how the Hyatt project got done. The developers put more of their own money in the deal, found a location where people would be in need of a hotel, kept the scale realistic and partnered with a well-established Valley hotelier, Meyer Jabara Hotels, which owns the Holiday Inn Conference Center in Fogelsville, to run the franchise.

Denise Maiatico, general manager of Hyatt Place in Bethlehem, said she expects more people will be coming to the city to visit the Sands casino.

While people may have come to tour the Christmas City, which is steeped in Moravian and industrial history, they now can sample the night life created by the Sands.

"While buses may have brought day trippers in the past," Maiatico said, "the casino gives them a reason to stay overnight."

Costello said he hasn't seen a big impact at Hotel Bethlehem from the casino, but noted hotels can count on guests who visit Lehigh University, Moravian College and Northampton Community College as well as St. Luke's and Lehigh Valley hospitals.

Those types of destinations have a built-in clientele that allows the hotel industry to weather a recession, said Joe Epstein, founder of First American Realty Associates, which specializes in hospitality financing.

Banks that did not dabble in speculative development during the boom years have money to lend hotel developers, he said. But they must do more to prove themselves credit-worthy than developers did a few years ago.

"First thing they need in new construction is an independent feasibility study that tells the lender the demand and the need," Epstein said. They also need cash, he said, about 30 percent to 35 percent cash equity. And a guarantee.

Posh secured a $2.5 million loan guarantee from the state for the Hyatt last year. That, he said, was key to getting financing.

Scott Dunkelberger, executive director of the Commonwealth Financing Authority, said more banks now require those loan guarantees to underwrite projects.

"Because the credit standards have tightened up with private banks, this guarantee is able to get some developers over the hump," Dunkelberger said.

Speculative development isn't being financed. That's part of the reason plans for Martin Tower in Bethlehem and the former Pomeroy's building in Easton never took off.

That's why Posh cut the 70 condominiums he planned to put on the hotel and redesigned the project for North and Guetter streets.

In 2005, Posh had hoped to close on the property and begin a 14-month construction period at the height of the residential building boom where condos were selling for more than single-family homes.

After only two newspaper ads, Posh said he had "reservation agreements" on a third of the condos. Most of those agreements were for higher-end units of $375,000 to $450,000.

But Posh didn't close on the property until December 2006, and by the spring, he saw signs that the housing market was softening and the cost of construction was rising.

He gutted the glitz at the so-called North Street Tower, lopping off the million-dollar penthouse on the 21st floor that had panoramic views of Blue Mountain 25 miles away. He cut the project down to 13 stories, then to nine and then six.

Tony Hanna, city director of economic development, said Posh tried to hold out hope for the trendy condos, wanting to design the frame to accommodate future floors once the market picked up. But the developers decided it was more prudent to build the hotel.

"A number of projects in Bethlehem were supersized by the economy, and they had to later be downsized in order to be realistic," Hanna said. "I think that's the story of what happened here."


To see more of The Morning Call, or to subscribe to the newspaper, go to

Copyright (c) 2009, The Morning Call, Allentown, Pa.

Distributed by McClatchy-Tribune Information Services. For reprints, email, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

To search Hotel Online data base of News and Trends Go to Hotel.OnlineSearch
Home | Welcome| Hospitality News | Classifieds| One-on-One |
Viewpoint Forum | Industry Resources | Press Releases
Please contact Hotel.Onlinewith your comments and suggestions.