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Deep Freeze on Hotel Development in Metro Atlanta Begins
to Thaw with New Projects on the Horizon

By J. Scott Trubey, The Atlanta Journal-ConstitutionMcClatchy-Tribune Regional News

March 10, 2013--The Great Recession put new hotel projects in the deep freeze in metro Atlanta and nationwide.

But developers are warming again to the idea of building hotels.

The area around Perimeter Mall is getting a new Hyatt hotel. Downtown and Alpharetta also are on developers' radar, and several hotel properties in the metro region are getting extensive overhauls and new brands. Alpharetta officials also are studying a possible hotel and convention facility.

It's a sign business travel is improving, though the national meeting and convention business is still struggling. Companies are beginning to refill empty office space in most Atlanta neighborhoods, and they are spending more to bring clients and workers here to do business.

Many major markets across the Southeast, including Atlanta, are enjoying improved occupancy, and hotels are getting more money per night for their rooms.

Metro hotel occupancy stood at 61 percent at the end of 2012, up from 59 percent a year earlier, according to data from Smith Travel Research provided by the Atlanta Convention and Visitors Bureau.

"When you have a lot of people visiting town, people will want to start building stuff," William Pate, president and CEO of the ACVB, said in a recent interview with the editorial board of The Atlanta Journal-Constitution.

Pate said 70 percent could be a special milestone in attracting new development. Occupancy figures for intown neighborhoods, including downtown, were at 67.1 percent at the end of December. That was up from 64.9 percent for 2011.

The average daily room rate for a metro hotel room was up 3.6 percent compared with a year earlier, and up 5.5 percent in the city.

Smaller hotels that don't have meeting facilities or full-service restaurants continued to be built through the recession, but developers now "are dusting off pre-recession plans" for full-service hotels, said Scott Smith, a senior vice president with hospitality consulting group PKF Consulting in Atlanta.

However, Smith said, "construction financing is still difficult to get. That's still the main hurdle."

The recession was a gut-punch to business travel hubs like metro Atlanta -- where hospitality had an economic impact measured last year at more than $12 billion, according to the ACVB.

Large-scale hotels can employ hundreds of people and guests dine and shop in the communities they visit, spinning off business to metro neighborhoods.

Last decade's real estate arms race included several high-rise hotels in metro Atlanta that helped to shape the city's skyline. But as the recession hit, and companies canceled conventions and pared back their spending, development went from a torrent to a trickle, dashing or delaying several high-profile projects.

The city was left with a glut of hotel rooms when projects planned during better days came online. Premium names like the Mansion in Buckhead and Hotel Palomar in Midtown opened and quickly changed ownership or management companies amid a challenging operating environment.

But while metro hotel occupancy is still below its 2007 peak, in core markets like downtown, Midtown and Buckhead, it's up as much as 17 percent from the trough in 2009.

Revenue per available room, a key industry metric, is up 21 percent in Atlanta, according to data from the ACVB.

The ACVB has set a goal of attracting 20 conventions annually to Atlanta, up from a typical year of 15. Those conventions fill hotel rooms across the city for several nights and help fill local restaurants. Atlanta is on track to meet or exceed 20 in several upcoming years, officials said.

David Marvin, president of Legacy Property Group, a major player in downtown real estate, is in the early planning stages for another downtown hotel in the Luckie-Marietta area near the Georgia World Congress Center.

His company also is part of a team developing a 176-room Hyatt hotel in the Perimeter Summit office complex near Villa Christina. The campus is in the newly incorporated city of Brookhaven, near Ashford Dunwoody Road and I-285.

The Hyatt hotel is slated to open in April 2014, and it would be the first newly built full-service hotel in that area in more than 20 years.

The floodgates for new hotel development in the metro area aren't opening, Marvin said, but deals are happening where the business trends are favorable.

"The projects currently in development are ones we've been working on through the recession and they finally came together," he said.

The former Hotel Midtown is being renovated to become another new Hyatt hotel, and a Le Meridien opened in February in a refurbished facility in Dunwoody that was formerly a W hotel -- among other brands.

In Alpharetta, city officials ordered a feasibility study to evaluate whether a hotel and convention center might work, Assistant City Administrator James Drinkard said. He cautioned that the city's analysis is "still very early in the process," though preliminary results have been encouraging.

Separately, North American Properties is planning two hotels as part of Avalon, the massive mixed-use development in Alpharetta at Ga. 400 and Old Milton Parkway. One will be a four-star level luxury hotel and the other a smaller limited-service property.

North American principal Mark Toro said his firm is looking at a brand such as Westin or Marriott Renaissance for the 300-room hotel, with a brand such as Hotel Indigo or a boutique Marriott brand for its 150-room second hotel.

The hotels are part of the second phase of the development, which includes hundreds of high-end apartments, single-family residences, luxury retail, a Whole Foods grocery, a movie theater and high-grade office space.

The hotels likely would not open for a few years, and by that time it will have been about 15 years since the last full-service hotel opened in the Alpharetta area, Toro said.

"There is pent-up demand just by the lack of product," he said.


(c)2013 The Atlanta Journal-Constitution (Atlanta, Ga.)

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