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Developer Ken Defoor's Plans to Convert a Recently Purchased Chattanooga,
Tennessee Office Building into a 200-room Hotel is a Sign the Continued
 Growth of the City's Hotel Industry which Enjoyed a
17.4 Percent Jump in Revenue in 2010

By Ellis Smith, Chattanooga Times Free Press, Tenn.McClatchy-Tribune Regional News

May 01, 2011--Four months after buying one of Chattanooga's signature downtown office buildings, developer Ken Defoor says he wants to convert the vacant tower into one of Chattanooga's most luxurious hotels.

Defoor, who paid BlueCross BlueShield of Tennessee $6.15 million to buy the 180,000-square-foot Gold Building on Pine Street, said he is looking at spending at least $10 million to renovate the gold-tinted tower into a 200-room hotel.

DeFoor is cresting a wave of at least a half-dozen new hotels proposed for Chattanooga in the next two years, following the addition of seven downtown inns in Chattanooga over the past decade and a half.

Chattanooga's hotel industry enjoyed a 17.4 percent jump in revenue last year after taking a recessionary 2.5 percent hit in 2009, according to statistics from Smith Travel Research.

The growth in hotel business and hotels stands in contrast to the nearly 1 million square feet of empty office space downtown.

Transforming one of Chattanooga's premier but empty office buildings into a hotel is a sign of the times, Defoor said.

Built as a giant insurance building, the Gold Building has more than enough parking to serve a potential hotel, DeFoor said, and could even have some left over for other uses.

The Gold Building was designed by Atlanta architect John Portman, who also designed Atlanta's Hyatt Regency hotel.

"Since it's sort of a sister building to the Hyatt Regency, we perceive that there are some strong possibilities," DeFoor said. "We're very deep into purchasing a [upscale hotel] franchise."

New Holiday Inn

Others agree that the $760 million-a-year tourism industry in Hamilton County is set to get even bigger, and are putting their money where their mouth is.

In fact, according to first-quarter 2011 figures, Chattanooga is on track to top 2010 hotel revenue.

In the first three months of the year, Smith Travel Research estimates room income in Chattanooga totaled $34 million, up from $30.6 million in the first quarter of 2010.

"Chattanooga had a pretty good year in 2010, and the momentum continues in 2011," said Jeff Higley, vice president for digital media and communications at Smith Travel Research.

Roshan Amin, who has developed a number of hotels in the Chattanooga area and still owns three, has set his sights on the former location of the Chattanooga Ducks for his next venture.

There, Amin said he will build a 140-room, seven-story Holiday Inn and Suites.

"We've had a lot of third-party feasibility tests done, and they have come back to us and said there is still a high demand for hotels in this area," Amin said. "During the peak season, there's often times where people can't even find hotel rooms."

He plans to pursue LEED certification for the Holiday Inn, and will build in a pool, sports bar, conference center and two-level parking deck, he said.

Amin also is looking to Cleveland, Tenn., for additional growth, and has purchased land there for another hotel down the road, he said.

Reeling in the tourists

Meanwhile, following the completion of his Hampton Inn & Suites downtown, Vision Hospitality's Mitch Patel has announced hotels in Cleveland, Kimball, Tenn., and at Hamilton Place. Patel's projects, which all will use the Hampton Inn brand, should add 438 rooms through the summer of 2013, he said.

In effect, Patel is gambling $46.7 million that hotel demand in Chattanooga will continue to grow, a wager that Bob Doak, head of the Chattanooga Convention and Visitors Bureau, thinks is a safe bet.

Hotel and attraction revenue during this year's spring break, which is a barometer for future revenue, was up 20 percent to 25 percent across the board, Doak said.

He chalks the growth up to the city's continued insistance on advertising, even during the depths of the recession.

Doak has specifically targeted a $1.2 million award-winning TV campaign at visitors from Atlanta, Birmingham, Huntsville, Knoxville and Nashville, with a smattering of nationwide commercials going out as well.

"We've got Chattanooga's message going out through the entire United States," he said. "That approach has been very successful."

Campaign coordination

The Chattanooga Convention and Visitors Bureau collects a share of hotel revenues from the county's room tax, so its budget grows if it's successful in drawing tourists.

Besides television and Internet advertising, the tourism agency also distributes hotel tax revenues to the Chattanooga Convention Center, the Greater Chattanooga Sports and Events Committee and Finley Stadium.

It's the success of the CVB's campaigns and the draw of Chattanooga's natural beauty that brought the 115-room Spring Hill Suites by Marriott to the city's downtown waterfront, Doak said.

The $16 million, six-story hotel could open by late 2001, and includes 3,000 square feet of meeting space.

The development, which includes townhouses, a restaurant, boat slips and a riverwalk, is known as Cameron Harbor, and is just the first of what could be a number of new attractions in coming years.

"I think we're going to see some movement in some additional attractions coming up pretty soon," Doak said.

The future

But Chattanooga isn't completely immune to the economic pressures affecting the rest of the country.

High fuel prices have kept some motorists at home with their gas guzzlers in the garage.

Persistantly high unemployment in Chattanooga's feeder cities could tamp down tourism, as potential tourists save money for necessities instead.

"Consumer confidence is one you have to watch carefully, and general economic problems -- that has a larger effect on our business than anything," Doak said.

However, the city's wide variety of price points, coupled with its overall affordable nature, could be one factor that has allowed the tourist industry here to thrive while other cities have struggled to survive, he said.

Chattanooga has gained popularity in markets like Cincinnati and Destin, Fla., and many of it's available outdoor activities are not just unique to the geography here, but virtually free as well.

"It's turned into a pretty cool city," Doak said. "I don't think we could always have said that."


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Copyright (c) 2011, Chattanooga Times Free Press, Tenn.

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