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Dallas Area Hoteliers Sprucing Up for Company

Renovations on the Rise in Anticipation of Travelers Return

By Karen Robinson-Jacobs, The Dallas Morning NewsMcClatchy-Tribune Regional News

April 17, 2011--On the 16th floor of the Marriott City Center in downtown Dallas, a vacant, cavernous space is morphing into a sleek, techno-friendly lounge for the chain's top customers.

At the edge of the campus of Southern Methodist University, the trendy Hotel Lumen is enjoying a growth spurt, adding guest rooms, banquet space and a pool.

The Hilton Anatole, which just completed a major indoor renovation, is adding a covered exterior corridor.

While some hoteliers across the country are still hoarding cash, mindful of how the economic downturn drained coffers, growing numbers of Dallas-area innkeepers are getting their properties all gussied up. They're primping for what they hope will be the post-recession return of the traveler.

"Investing within the context of a down cycle many times makes a lot of sense, especially if you have confidence that the negative environment is temporary, will self-correct, and occupancy and/or rates will rise," said Michael Tregoning, chief financial officer of Dallas-based Headington Cos., which owns the Lumen and the Joule, Dallas, both of which are slated for renovations.

"The fact that it is a downturn [means] there aren't as many new properties coming on line, reducing competition when the economy improves. For these projects, waiting for economic improvement was never given serious consideration."

Across the U.S., many innkeepers are waiting, both to conserve cash and because financing has been hard to come by.

"It's still tough getting loans today," said Thomas Corcoran Jr., past chair of the American Hotel & Lodging Association. It's "impossible for new [hotels]. For existing and refinancing there is some, and for renovations there is some."

"It's on a case-by-case basis," said Corcoran, who also is chairman and co-founder of Irving-based FelCor Lodging Trust Inc., a hotel real estate investment trust. "But I'd say that capital markets and money for hotels are still very difficult today."

Marriott City Center

Dallas-area hotel conversions in the first quarter of this year -- upgrades done after a hotel changes brand names -- fell by 73 percent from the first quarter of 2008, according to New Hampshire-based Lodging Econometrics, which studies hotel real estate trends. Conversions plummeted from 11 hotels with 3,851 rooms in early 2008 to three hotels with 476 rooms in this year's first quarter, the company said.

Major renovations usually happen in conjunction with brand changes because the property has to meet new specifications, said Patrick Ford, president of Lodging Econometrics.

A name change is largely behind the estimated $15 million renovation of the Marriott City Center, which last year left the Westin fold when it was purchased by Inland American Real Estate Trust Inc., which is based in Oak Brook, Ill. The hotel will be managed by Marriott International Inc. under a long-term agreement.

The three-phase project, the most extensive renovation of the 400-plus-room hotel since 2003, began in March and is expected to end in December.

The hotel is installing a 3,500-square-foot private lounge on the 16th floor for "Elite" members of its loyalty program.

The fitness center will be moved from the second to the 16th floor, and its size will more than triple, boosting workout space from about 400 square feet to about 1,500 square feet.

The hotel will also revamp its restaurant and renovate guest rooms, adding touches such as Herman Miller desk chairs and LED lighting in the headboards.

"By having [the new owners] invest in this renovation, we can attract groups and the individual traveler," said Andrew Pena, the Marriott City Center's director of sales and marketing. "Our goal is to increase both of those segments."

Joule expansion

Several hotel projects now busying construction crews don't stem from conversion requirements, but from the owners' hope to lure new customers with added attractions.

The mammoth Gaylord Texan in Grapevine, for example, will spend about $13 million to create a 10-acre outdoor resort pool and lazy river complex that's set to open in late May. The attraction will be open to hotel guests only, but at no additional charge.

One of the largest renovation projects taking shape now is an estimated $85.8 million expansion of the Joule hotel downtown -- a project that will launch in earnest in June, aided by a $20.7 million tax increment financing subsidy that was approved by the Dallas City Council last May.

By adding space from up to seven buildings adjacent to the original two in the 1500 block of Main Street, the company headed by billionaire Tim Headington hopes to fulfill a vision for the hotel that dates back to the first land acquisitions in the 1990s.

"At the beginning we knew that there were things that we wanted to do but really didn't have the space to do them," Tregoning said. "So we had basically, in the back of our minds, always thought at some point we'll have the opportunity to buy property and address those items that we were unable to incorporate in the original plan."

It so happens that the "some point" coincided with the tail end of the recession and the launch of an expansion project at the company's other local hotel, the Lumen.

The downturn had "no impact on timing or scope" of either project, Tregoning said. "In a way, it had a positive impact. The cost of ... getting good construction crews, materials, etc., had reached a real frothy level before '08. They've come down some."

The ambitious Joule expansion involves adding more banquet and event space, three new penthouses and a rooftop garden.

A new elevator will be largely glass-encased.

A new lobby entrance will open to Commerce Street, and foodies can dine at a new ground-level restaurant. The hotel will also add a high-end spa.

"It's a much larger project than the Lumen," which is adding a building, Tregoning said. He declined to list the cost of the Lumen project, but a construction permit from University Park, where the hotel is located, puts the value of the building at $6.5 million.

Added to the current tally of 56 rooms will be 28 new rooms and two suites, along with a ground-level pool, rooftop terrace and open areas that can be used to host events, said Brian Harris, general manager of the Lumen.

It will be the first major remodeling since the hotel opened in 2006.

Hilton Anatole

At the Hilton Anatole, northwest of downtown Dallas, Harold Rapoza, the recently installed general manager, led a visitor through an oversize atrium to an exterior walkway that was abuzz with buzz saws and work crews. Their task: to enclose the 450-foot walkway that connects the main hotel with an onsite conference center.

At about $2.3 million, the project is much smaller than the $20 million atrium renovation that was completed in November. But Rapoza sees it as an added touch -- and one requested by past guests -- that will help the hotel boost its appeal to future travelers.

"You want your hotel to be at its best when demand starts coming back," he said as a clutch of convention-goers trekked back to the main hotel. "As the economy starts coming back, you'll be ahead of the game."


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