Oct. 23, 2011--A foreclosed highway Best Western is a far cry from a 116-room riverfront hotel.

But two decades after buying a foreclosed site, local hoteliers 3H Group own and operate 14 properties and will open a riverside Marriott in June.

"It's just getting loyal employees. Work with them, train them, put good product on the market," said Harshad Shah, president of the group.

Shah and the other members of 3H Group took over their foreclosed Best Western hotel in 1990. Ten years later they officially formed the group to manage and grow what was quickly becoming a large hotel operation.

As the recession hit, business really started to pick up. In 2007, 3H Group had eight hotels. By the end of next year, they'll have 16 when they finish the downtown hotel and a Town Place Suites near Hamilton Place mall.

"We had what sounds like and feels like explosive growth, but really we've just had steady growth," said Bob Dollinger, the group's director of operations. "We grew in such a way that we could manage what we had."

The company had $24 million in revenue in 2010 and is expecting to shoot up to $30 million by the end of the year. A lot of that growth has come thanks to Chattanooga's tourism and business convention growth, according to Dollinger.

In 2011, Hamilton County hotel tax collections rose 18.6 percent over the previous year. Compare that to less than 10 percent growth nationally, and it's easy to see why 3H has half its hotels in the Chattanooga area.

"Rates are improving, occupancy has been improving, there's just a lot of positive things to say about Chattanooga," said Tom Cupo, president of the Chattanooga Hospitality Association and general manager of The Chattanoogan hotel. "I'm hoping that the new hotels increase the size of the pie and we're able to bring more groups and business that we've had to turn away."

The short drive to Chattanooga from Nashville, Knoxville and Atlanta helps position the Scenic City for both tourism and business conventions. When a company has offices in any two of the cities, Cupo said, Chattanooga's an easy in-between spot, and an easy sell.

"We're a drive market, there's no doubt about it, and we're doing well in this economy because we are a drive market," he said.

But like most other businesses, local hoteliers are feeling the squeeze from banks hesitant to lend with property prices depressed in the recession. Dollinger said that over the past three years, banks have required much larger up-front investments, slowing new hotel growth.

The silver lining is room demand is catching up to supply, and hotels that can entice business are filling. Earlier this year, the Chattanoogan sold out and had to turn away a 600-person business meeting.

Still, with half their hotels in the less successful, more competitive markets of North Carolina, Florida and Arkansas, 3H Group is not totally immune to national problems.

"We've got some rosy glasses because half our hotels are in Chattanooga. We're nowhere near as well off if you take out Chattanooga," he said.

Dollinger doesn't see those glasses fogging up any time in the near future. He's gearing up to start the two new hotels running next year, and expects 3H Group to continue its success.

"It's just a matter of repeating it," he said. "We're still a young company, so there's still a lot of time to grow."

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