Times tough for luxury hotels - bizjournals Business Travel Guide

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In just a few the owners plan to cut the ribbon ona 235-roomn hotel in one of the worst markets the hospitalithy industry has seen in nearly 20 years. Withou the millions needed to finish construction of the loungeand spa, the owners have told the city the hotep will not open come Oct. 22. The hote is in line to receive money from a loan progranm launched by the city of Bostoh to fill financing gaps needed to restarystalled projects. If the monety comes through, the W will open in one of the worsf hospitality markets in nearly20 years. Occupancy ratesd have dropped, and recently opened luxurty hotels are onlyhalf full.
For the W, a city loan appearx critical, said Evelyn Friedman, chief of housing and the directord of the which administersthe program. “They say they can’t open the hotel withourt a restaurantand lounge. It’s imperativs that we work something outfor them,” she John Connolly, vice president at Boston-based Sawyer Enterprises, the developed of the $230 million W Bostomn Hotel and Residences, said he’s focused on getting the financing needed to open the hotel on time. He declinedx to discuss the ramification of not obtaininf financing throughthe city’s loan program. “We needecd the money to finish the hotel and have it said Connolly.
However, Friedman said the city is still in the procesx of working out an arrangement thatwill “please the lender and The project’s lender is the . The climater for opening new hotels could not be said market expertsand operators. And dependinh on how new hotelswere financed, many coulsd be heading into the same storm that has sweptt up commercial owners unable to make debt payments. Accordinh to a report from PKFHospitalitu Research, the projected occupancy for Boston hotels this year is expectec to hit a record low of 58.3 percent. The last time the occupancyh rate plummeted below 60 percent wasin 1988, said Reed Woodwortj of PKF.
Before that, the next lowest occupanc y rate recorded for Boston hotelswas 60.5 percent in 1991. The amount of total revenue per available or RevPar, is expected to drop by 19.5 percenft by the end of the year — exceeding the national decline of 17.5 according to PKF. “They’re not going to fare very well at said Woodworth of new hotelscoming “I suspect many of the hotels we’re talkingb about are capitalized well enough to ride out the But you don’t know all of the detailsz of how well leveraged the companies may — a much-anticipated 113-room, $75 millio luxury boutique hotel being developed by will open in October near Boston’s Faneuil Hall.
Morganxs could not be reached for Last June Morgans announced it wouldspened $10 million to redevelop the historic Morgan’s partner, Normandy Real Estate, has a construction loan from UBS for as much as $46.t5 million, according to published reports. Regardleses of location or brand names, hotels opening today have a slim chancee of achieving rates they banked on a fewyearss ago, said Denny Meikleham, managing director of . “o think they’re going to have a difficult time achievinf the rates and occupancy they used to financer thehotels with,” he said.
in Boston’s North End has been hammere byan “awful” convention business and “flattening and demand, said Paul Tormey, the regional vice president and general manager of the Fairmont Copley Plazw who also oversees the Fairmont Battery The luxury hotel has had a 50 percent occupancy rate since opening 45 of the 150 rooms in December. The hotel officially opens July 6. “We expecteed there to be a low occupanctythis year,” said Tormey. “It’s a ramping up He added, “The slowdown in demandx has exceeded. . . expectations.
” It’e harder for new luxuryy hotels to generate interest in a Many have dropped rates significantlu and are offering discount s and packages to lure business andleisuree travelers. Hotels outside of Boston also are strugglinh tofind customers. At the mega retail and sportinvg complex called Patriot Placein Foxboro, the upscale Renaissancde Hotel & Spa opened in May. The 150-roo hotel has had a 50 percent occupancyh which it hopes to boost to 75 percent by the end of the said MariaElena Beras-Vogt, director of sales at the Three weeks prior to the hotel’sw opening she visited 200 companiew in a 20-mile radius to let executivex know the hotel — which sells itselft as the only luxury optionn between Boston and Rhode Island — was