September 5, 2009 - --The Houston-based Valencia Group specializes in luxury hotels, but it didn't have a local property until now.

Its new

Hotel Sorella at CityCentre looks chic enough for Milan. The pool glows aqua at night.

This fall, three restaurants will debut in the Sorella: two operated by Alex Brennan-Martin, along with Straits Cafe, a modern Singaporean cuisine concept from San Francisco.

While the hotel industry is getting hammered during the recession, the Valencia Group is eyeing opportunities.

Part of the company's strategy is to create hotels that provide entertaining experiences, like the Sorella, said Valencia Group's president and CEO, Doyle Graham.

Best known for its two Hotel Valencias, in San Antonio and San Jose, the Valencia Group is growing its business by offering services to other hotel brands as well.

"We are fairly nimble," Graham said. "We're a full-service company," skilled in financing, construction, development, branding and management, he added.

Valencia Group offers services to independent luxury hotels and developers.

"We provide an alternative to developers who are looking create a luxury independent hotel but don't want to be part of a national cookie cutter brand," said Roy Kretschmer, the company's vice president of operations. "We can help brand them either as an independent luxury hotel or they can operate under one of the existing Valencia flags," he said.

For example, Valencia Group helped the Hotel Georgia in Vancouver re-establish its original identity, which had been diluted after it became part of a hotel chain. Valencia Group also manages it.

Valencia Group owns and manages Hotel Valencia Riverwalk in San Antonio and Hotel Valencia Santana Row in San Jose. Valencia Group co-developed and partnered with the Midway Cos., developers of CityCentre, on the Sorella. Valencia Group also manages the Sorella.

Valencia Group is also a partner in two Hampton Inn & Suites in Austin, which was developed by an affiliate of the Valencia Group in the late 1990s.

Valencia Group opened Valencias in San Antonio and San Jose in 2003. Both hotels are designed to appeal to corporate, group and leisure travelers, Graham said.

Valencia-branded hotels are more traditional and Mediterranean in style, while the new Sorella concept has a more modern flair.

Last year, the Valencia Group's combined hotel occupancy rate was 80.3 percent, according to the company, compared with the national full-service average of 69.8 percent, according to PKF Consulting.

Valencia Group has 25 corporate employees and more than 500 in its hotels.

Still profitable

The Valencias are not performing as well this year because of the economy, but are still turning a profit, Graham said.

In general, the Valencia hotels have outperformed their competitors in their markets, said Randy McCaslin, a vice president and practice leader at PKF Consulting, although he hasn't seen recent figures.

Nationally, PKF forecasts that revenue per available hotel room will decline 18.5 percent in 2009, McCaslin said.

Luxury hotels, such as the Houstonian and St. Regis Houston, aren't being hit as hard as full-service flag hotels, like the Hiltons, which cater to corporate travelers, McCaslin said.

PKF has forecasted that Houston area hotel occupancy will drop below 60 percent over the next two years, which would be the lowest it's been since 2004.

"It's going to take a while for hotel occupancies and room rates to go up," said McCaslin, who predicted that "things will look much better" in 2011 and 2012.

How others are doing

Susan Ward Freeman, general manager of Alden Houston downtown, said that while the hotel's corporate business is down, she sees encouraging signs for the fall.

"Our weddings are a huge market for us," she noted.

Shawn Gracey, general manager of Hotel Icon, says that while occupancy is still solid, in the mid-70s, the hotel has made considerable rate concessions.

"It's been a soft year, but fall looks strong," said Silvia San Martin, director of sales and marketing at the Omni Houston Hotel, which is completing a $30 million renovation.

Prime area in west

The 244-unit Sorella, which will have its grand opening in November, benefits from being in a prime area in west Houston, which includes Memorial and the Energy Corridor, Graham said, and it can draw on CityCentre's amenities.

The Valencia Group plans to open more Valencia and Sorella hotels, said Graham, who noted that both are luxury four-star concepts.

"We are identifying markets that may be down, but will be coming back up," said John Keeling, Valencia Group's executive vice president.

"Everybody is down on the hotel industry, but we're excited about it," he said.

[email protected]

-----

To see more of the Houston Chronicle, or to subscribe to the newspaper, go to http://www.HoustonChronicle.com.

Copyright (c) 2009, Houston Chronicle

Distributed by McClatchy-Tribune Information Services. For reprints, email [email protected], 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.