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New 300-room Royal Phoenix Hilton Hotel Planned for Memphis
Could Lower Downtown Occupancy Rates for Three Years

By Wayne Risher, The Commercial Appeal, Memphis, Tenn.McClatchy-Tribune Regional News

July 23, 2010--A 300-room hotel near FedExForum would provide a substantial boost to Downtown's supply of hotel rooms that would take three or four years for the market to absorb.

But the planned Royal Phoenix Hotel, approved Wednesday for $45 million in taxable revenue bonds, could help convention planners by providing another large block of rooms in one property, hotel industry consultant Chuck Pinkowski said.

"Obviously, it will be a large increase in supply. There are about 2,800 rooms Downtown now, so that's about a 10 percent increase," said Pinkowski, of Pinkowski & Co.

With occupancy growing about 3 percent a year, it could take three to four years for the market to absorb the added supply, and it might also affect room prices, he said.

Royal Phoenix developers are putting together financing for a $68.7 million, 11-story Hilton-branded hotel on vacant land at Fourth and Linden.

The bond issue approved by the Memphis-Shelby County Industrial Development Board will provide the bulk of the financing.

The development activity comes as the industry recovers from slumping occupancy rates during the recession. Elsewhere Downtown, new hotels have been mentioned as potential pieces of the Bass Pro Shops redevelopment of The Pyramid and revitalization of the adjoining Pinch historic district.

Pinkowski said any major increase in room supply takes time to absorb, though it's possible a new property could cause occupancy to grow at a faster clip.

"I think there are a lot of people who are concerned," he said. "They would include the owners of hotels Downtown and the operators. Downtown has been a pretty good market, but we've gone through some pretty hard times for whole industry in the last 18-24 months."

Regarding Bass Pro, he said, "I strongly believe what they're planning is going to create a lot of new visitation to the city, which will support a certain number of new hotel rooms."

Smith Travel Research reported 4,300 hotel rooms in the Downtown, Midtown and University of Memphis areas had a 61.8 percent occupancy rate through June 30, up from 57.8 percent last year. The average rate was $113.25 per night, down from $116.27.

Pinkowski said Downtown hotels typically have higher occupancy rates and prices.

The 23,026-room metro market, including DeSoto and Crittenden counties, showed a similar occupancy increase, to 56.7 percent from 52.4 percent in the first six months of 2009. Average price was $76.12 per night, down from $79.70.


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