Executives' outlooks remain positive for 2004 - Development: new-build plans

Lodging executives are fairly upbeat about increased development during 2004, but with the realization that development won't grow quickly soon.

Isaac Collazo, v.p. of performance strategy and planning for InterContinental Hotels Group, said there will be development in major markets such as Orlando, Houston, Las Vegas and Atlanta. Collazo said there will be less growth in smaller markets and said as business grows in larger markets, companies will replace old hotels with new ones.

"Someone always believes they can do better," he said.

Collazo said development will be strong in the midscale-without-food-and-beverage and upper-upscale segments. Also, he said there could be a renaissance of the midscale-with-F&B segment during late this year and next.

Bill Fortier, senior v.p. of franchise development for Hilton Hotels Corp., said 80 percent of Hilton's growth the past three years has been through new development and he expects that to continue. Hilton Garden Inn, Homewood Suites by Hilton and Hampton Inn lead new-build growth for the company. The development growth is mostly franchised, but the company is developing the 1,200-room Hilton Americas-Houston, along with Hiltons in Austin, Texas; and Omaha, Neb. Also, it's working on financing for a Hilton in San Diego.

Fortier said development for the Hilton brand is related primarily to city-financed convention-center hotels.

"We don't have big changes in our strategy," he said. "There are not many chances for conversions for Garden Inn, Homewood and Hampton. [At the end of 2002], we didn't know what was going to happen, but [last] summer construction starts and applications increased. [This year], we're even more optimistic about development."

Sam Winterbottom, executive v.p. of development for Carlson Hotels Worldwide, said there are a couple of new-build Radisson hotels in the works on the West Coast, but 85 percent of Radisson's growth will be conversions. Winterbottom said the company is developing a 156-room Country Inn & Suites in New Orleans that's expected to open during December.

"The brand has power to succeed in nontraditional Country Inn markets," he said. "We can take the brand into large markets and succeed."

Most of Hyatt Hotels Corp.'s development is overseas--seven properties are expected to open this year. Hyatt also has two projects in development in the United States: the 298-room Grand Hyatt DFW in Dallas that's expected to open during 2005 and the 1,100 Hyatt Denver Convention Center, which is expected to open during 2005.

Julie Purnell, v.p. of development for Loews Hotels, said Loews needs to enhance the brand on the West Coast, so she spends most of her time looking for deals there. Purnell said most growth will not happen through new-builds.

"We won't buy an asset if we can't put our name on it," she said.

Carlson developed a new prototype for the Park Inn brand. The concept is described as contemporary and comfortable with a bold use of color. Park Inn had been the company's main vehicle for conversions in the limited-service segment, but Winterbottom said the company is ready to expand its new-build opportunities.

Park will be developed in secondary suburban locations, and the company will try to develop more Country Inn hotels in urban markets.

"[This year] will be more conducive to development in general," Winterbottom said. "The economy will be better. The capital markets will be favorable to pricing, and the interest rates will be good. I don't see tightening by the lenders.

"We'll have rational growth on the supply side by keeping the balance on the Radisson front, which will be mostly conversions. We'll see more growth in the condo/hotel model. The Regent South Beach [in Miami] is an example of that and is under construction and is expected to open in December. There is another Regent with residences being built in Boston."

Fortier said FelCor Lodging Trust is trying to put new development deals together for Embassy Suites. He said there's a lot of room for growth for the Homewood brand, considering there are 130 Homewood hotels open and there are 500 Residences Inns by Marriott open. Residence Inn is Homewood's primary competitor. He said the growth will be mostly in suburban markets even though the company would like to see more growth in urban areas.

Fortier said he isn't worried about oversupply in the near future because Hilton's brands are pretty well established in each segment and they don't bleed over into other segments. He said that in weaker markets, there can be a situation where there is too much product.

"We've denied 28 deals that got to my desk [in 2003]," he said. "There were three or four times that that got denied in the field."

Fortier said there are about 400 Hilton hotels that are in various stages of development.

"We lead the industry with the number of hotels under construction," he said.

jwalsh@advanstar.com

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