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VOL. 128 | NO. 252 | Monday, December 30, 2013

Fewer Reservations

Memphis hotel market battles sluggish 2013

By Michael Waddell

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The Memphis hotel market is being classified as somewhat sluggish in 2013 because of slower than anticipated convention traffic, but hotels such as the Memphis Marriott East and Downtown’s Madison Hotel reported busier second halves of the year.

International visitors Amit Nevrekar and Beatrix Leisi enjoy the view at Madison Hotel’s Twilight Sky Terrace, a new addition to the Downtown hotel. 

(Daily News/Andrew J. Breig)

“Occupancy is down slightly for the city this year,” said hotel consultant Chuck Pinkowski of Pinkowski & Co. “Part of that is driven by the fact that 2012 was a great convention year, and 2013 has been good but not quite as strong. There’s still some hesitancy on the commercial individual demand side, as it hasn’t come back as strong as was anticipated in 2013.”

The overall market occupancy rate averaged 62 percent by August, down almost 2 percent in 2013, while average daily rates were close to $81, up nearly 4 percent this year, according to data from Smith Travel Research.

Collectively the 16 Downtown hotels amassed a 71.4 percent occupancy rate through July at an average rate of $135 per night, making Downtown the strongest submarket in the city.

“Expectations were a little high from the forecasters. The year started a bit sluggish, but we made a lot of it up in the summer through the fall,” said Madison Hotel general manager Angie Hines. “Our occupancy is up a little bit, and our ADR of $192 is flat to the previous year.”

The 110-room Madison enjoys strong weekend leisure business and has grown its small group meeting business on weekdays.

Food and beverage revenues are up more than $500,000 this year for the hotel.

“Our true claim to fame in the food and beverage area is our Twilight Sky Terrace. We opened the rooftop area last April, and it has been a phenomenal success. We have some of the best unobstructed views in the Downtown area, we serve food, and there is a fire pit and conversational seating,” Hines said. “We’ve made it into a year-round space with additional heaters, and we even serve hot toddies.”

The hotel plans to install new hardwood flooring in many of its guestrooms next year, and Hines hopes a new Main Street cafe could open sometime during the year.

“We think we can capture some of the walk-up demand and allow our guests to be able to have a bit and a cocktail sitting outside on Main Street,” Hines said.

Upscale hotel chains such as Courtyard by Marriott, Residence Inn and Hampton Inn showed the highest average occupancy at 73 percent. Average nightly rates for upscale rooms in the city are roughly $104.

“The upscale segment has been driving the market as far as major performance,” Pinkowski said. “When you look at midscale and economy, their occupancies are down in the 50s.”

Average nightly rates for midscale rooms were $73, while economy averaged $41, upper midscale averaged $91, and upper upscale hotels averaged $121.

Memphis Marriott East opened at 5795 Poplar Ave. in East Memphis at the end of 2012 and is enjoying a surge in business in the second half of 2013. The hotel became the only Marriott in the city earlier this year after two other Marriotts lost their flags. The 320-room former Memphis Marriott at 2625 Thousand Oaks Blvd. now operates independently as Hotel Memphis, while the 600-room Memphis Marriott Downtown at 250 N. Main St. kept its same ownership but changed in August to a Sheraton-branded hotel.

The 232-room Memphis Marriott East formerly operated as a Holiday Inn before an 18-month, $20 million makeover of the entire property.

“This is a total reinvention,” said Greg Lindner, Marriott East Memphis general manager. “In the second half of the year, our demand has skyrocketed. It took awhile for the hotel to catch on because people did not know about us, but when the other two Marriotts left our system, obviously that was huge for us.”

Lindner expects the positive growth to carry over to next year, including at its restaurant, Table – A Delta Grille, and its Great Room lobby bar and lounge.

“I think we’re in the best place to do business here in the East Memphis corridor on Poplar,” Lindner said. “The first half of the year was very difficult, but we’ve had a phenomenal second half of the year. I expect our occupancy to stay in the middle to upper 70 percent range in the future.”

Several area hotels enjoyed major renovations this year, including the Holiday Inn Downtown, the Residence Inn Downtown, the Courtyard by Marriott in Collierville, and the Hampton Inn and Homewood Suites on Hacks Cross Road in East Memphis. Also reopening soon will be a renovated Holiday Inn on Democrat Road just west of Airways Boulevard.

Next year, Pinkowski expects to see overall occupancy increase 1 percentage point to 62 percent, along with a 5 percent increase in average daily rates to $85.50 from the current $81.50.

“Operators are starting to realize that they need to, and they can, push rates and not have it affect the occupancy,” Pinkowski said. “Next year will probably be the biggest increase in average daily rate on a percentage basis in the last six to seven years.”

Although there’s been no new construction this year, work could start sometime next year on a new Hilton Garden Inn just south of Wolfchase Galleria in Cordova.

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 84 84 5,157
MORTGAGES 103 103 6,812
FORECLOSURE NOTICES 15 37 1,593
BUILDING PERMITS 0 0 11,979
BANKRUPTCIES 60 105 5,405
BUSINESS LICENSES 28 28 2,089
UTILITY CONNECTIONS 97 97 7,155
MARRIAGE LICENSES 24 24 1,482

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