VOL. 126 | NO. 147 | Friday, July 29, 2011
The Memphis hotel and lodging market is experiencing increased demand and rising occupancy rates thanks to no new hotel construction and flat supply.
The lobby at Four Points by Sheraton Memphis East(formerly Park Place) is part of a rebranding and remodeling of the entire property that has led to an upsurge in business.
(Photo: Lance Murphey)
“Memphis is pretty much a mid-scale market, and the market is doing better right now than it was at this time last year,” said Chuck Pinkowski of the hotel consulting firm Pinkowski & Co. “With the improving economic situation, both commercial and leisure travel are coming back.”
The overall occupancy rate for the area’s 23,000 rooms jumped to 56.2 percent in April from 53.8 percent in April 2010, according to data from Smith Travel Research, Inc.
Local mid-scale hotels total 61 properties and nearly 5,000 rooms, and the mid-scale occupancy rate is up 1.1 percent to 46.9 percent from 45.8 percent. Average daily rate (ADR) for the segment has dropped over the past year to $56.58 from $59.05, and revenue per available room (RevPAR) has also dropped to $26.58 from $27.06.
“In the last two or three years, the hotel industry nationally and locally has been decimated by falling rates, and we’ve still not gotten back to where we were in early 2008 or late 2007,” Pinkowski said.
The lack of new rooms coming online in Memphis is helping occupancy rates rise as demand increases. While there are no hotel projects currently under construction, there are a couple of projects being talked about in the rumor mill.
A new hotel may go in as part of the biotech redevelopment effort in an existing building at the southwest corner of Madison Avenue and Pauline Street, site of the old Baptist Memorial Hospital. A group from California plans to buy the building, which has been closed for a while, and convert it into a mid-scale, 160-room extended-stay Summerfield Suites hotel.
Another project being talked about is a mid-scale hotel near The Avenue Carriage Crossing in Collierville. The new hotel would be close to the Courtyard by Marriot, which has been open for a few years.
“There’s also constant talk about Overton Square and the old French Quarter Inn that’s been closed for several years,” Pinkowski said. “A lot of groups have looked into renovating and reopening that property, but no one has come up with a financial plan that works yet.”
Pinkowski said he believes many developers are looking for acquisitions right now.
“There’s still a pretty good gap between what it would cost to buy an existing building and renovate it compared to what it would cost to build the same product new,” he said.
Noble Investment Group of Atlanta has acquired the 246-room Holiday Inn property at Poplar Avenue and Interstate 240. Noble closed the hotel’s doors one week ago and plans to perform complete renovations.
The property will be re-branded as Marriott and should re-open with 230 rooms by the third or fourth quarter of next year. The renovations will shrink the overall number of mid-scale rooms in the market since the property will move into the “upper upscale” category once it re-opens.
The 126-room Four Points by Sheraton, also at Poplar and I-240, just opened in April following extensive renovations and re-branding of the 38-year-old building. Improvements were made to the property’s River Oaks restaurant, pool area, lobby, corridors, elevator and guest rooms.
“The past few months we have seen a strong turnaround at the property” said Charlie Swan of Wright Investment Properties Inc. “Our occupancy rate has doubled.”
The property, which is now supervised by general manager Linda Speer, previously had been known as the Park Place Hotel. It had suffered through the past few years without a strong brand identity, so Wright Investment urged the owners to re-brand the hotel.
Wright Investment Properties also manages four other hotels in the city, including the Downtown Crowne Plaza, the Residence Inn on Monroe, the Marriott Courtyard at Carriage Crossing in Collierville and the Holiday Inn Select on Union. Wright manages 43 properties across the country.
On the operator side, Wayne Tabor, general manager at the Holiday Inn Select on Union and president of the Memphis Hotel and Lodging Association, is cautiously eyeing gas prices for the next few months.
“If gas prices stay down, we expect to do well for the remainder of the summer with leisure transients,” said Tabor, whose hotel is in mid-scale competition Downtown with the likes of Hampton Inn, Comfort Inn, the Doubletree Hotel and the Crowne Plaza. “Gas prices are one of those things that can make or break the year. But all in all, I think we’ve fared pretty well through the recession so far.”
Downtown hotels enjoy the area’s highest overall occupancy rate, clocking in at almost 74 percent, followed by East Memphis at 63 percent. Tabor looks to September and October for a strong influx of convention guests.
“Over the next year we will be making between $500,000 and $1 million in minor renovations involving our guest rooms, our lobby, and our meeting rooms,” said Tabor, who said his hotel will also drop the “Select” in its title and re-brand as simply “Holiday Inn.”