|By Steve Vaughan, The Virginia Gazette,
WilliamsburgMcClatchy-Tribune Regional News
May 14, 2011--While it's still early, it appears the tourism slump is turning around. But is it too late for hoteliers to hang on?
One owner has reportedly had three properties repossessed by TowneBank, which is now running them. Bank president Anne Conner would not comment, and the owner did not return calls.
But others are aware of the situation. "If he got out, he's lucky," said one commercial real estate broker who didn't want to be quoted on the details. "Good for him."
Another commercial realty professional, Chris Henderson, predicted last year that this would be the year that commercial would suffer the foreclosures that plagued homeowners.
"We see that happening,"â€ˆhe said in an interview. "We see the banks taking over these properties and revaluing them at much lower prices."
Falling commercial real estate has left some investors owing more on the property than it's worth. "In our market, in that sector I'd estimate that 25%-40% of the properties are underwater."
That has ratcheted up pressure. "With the occupancy rates we've seen over the last three years, it's almost impossible to operate profitably," Henderson added.
One problem is a glut. "We're not so much over-built as under-demolished," he said.
Williamsburg still has several motels dating from the 1950s, '60s and '70s that have probably seen the end of their useful lives.
"Is there an effective adaptive re-use for those properties?" he asked rhetorically. "In most cases the answer is no."
Henderson pointed to Riverside's QuarterÂpath at Williamsburg project, which took out two old motels for Doctors Hospital. "That was the better use."
Who's a good candidate for re-use?
"Those who owned the property for 10 years or more and have been able to pay down their debt and build some equity in the property," Henderson said. "Properties that came online in the last ten years will be stretched."
He figures that if some of the older properties are weeded out, that would give breathing room to newer hotels.
He has found one bright spot.
"Look at Great Wolf Lodge. That's one of the [chain's] most successful units. You have to think there's a market for a niche hotel that offers something beyond the normal room and breakfast.
"They've done a great job of advertising in the Richmond market and touting the uniqueness of their water park, particularly in winter."
Priscilla Caldwell, executive director of the Hotel-Motel Association, said her members are encouraged by early signs of a tourism rebound, but added, "I think they are in a holding pattern."
Loopnet.com lists six properties for sale, including the Quality Inn on Bypass Road for $7.2 million, Pineapple Inn & Lodging Center on Richmond Road for $2.4 million, and Lexington George Washington Inn on â€ˆMerrimac Trail for an undisclosed price.Â
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Copyright (c) 2011, The Virginia Gazette, Williamsburg
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