MATTHEW R. ARRANTS
‘Down market’ improving
For developers and owners alike, it has been an inhospitable stretch for the hotel industry, but many believe the tide of bad news is finally about to turn, at least in the Massachusetts sector.
“It has obviously been a down market, but we don’t expect it to remain this way much longer,” said Matthew R. Arrants of Pinnacle Advisory Group in Boston. As Pinnacle principal Rachel J. Roginsky prepares to give her annual mid-year address on the regional hotel market next week before the Massachusetts Lodging Association, Arrants said there are indications that declining room rates and increasing vacancies are leveling off in the Bay State, especially for Cambridge and Boston.
Reflecting the confidence in the local market, several hotel projects have recently reached significant milestones, including the kickoff late last month of the 220-room Jurys Doyle Hotel in the Back Bay, as well as the opening of the upscale Nine Zero inn on Tremont Street by Intercontinental Real Estate. Another sign of investment belief that the Boston hotel market has long-term legs was the bid by some potential buyers for 470 Atlantic Ave. in Boston to turn the 14-story office building into a hotel. While that notion was trumped when General Electric acquired the asset last month, with plans to maintain the status quo at the property, sources said the willingness of investors to chase it as a hotel was encouraging.
New Developments
Arrants cited several reasons for such optimism, including the upcoming completion of the Big Dig, the new Boston Convention and Exhibition Center and the modernization of Logan International Airport. Despite lingering impacts from last year’s terrorist attacks on both corporate and leisure travel, Arrants said most believe a rebound in both sectors is likely. That should mean good news for Boston, considering the city’s historic ability to draw from a range of travelers. If one or both markets do stabilize, that should help operators throughout the area, with the urban markets garner the greatest upside. “Boston is a popular city and has always performed well as a hotel market,” said Arrants.
As for the new activity on the hotel development end, most agree it is badly needed to help sell bookings for the $700 million convention center, which is slated to open next year. Indeed, one key stumbling block in marketing the convention center has been the inability of Starwoods Hotels to find financing for a hotel to be built alongside the hulking convention facility now under construction in South Boston. After winning a spirited competition in 1998 to build the inn, Starwoods has required several deadline extensions to keep the concept alive.
Smaller projects have also struggled, with a 185-room hotel at Battery Wharf in the North End far behind schedule, while Sawyer Enterprises has yet to nail down financing for a 395-room hotel in the Hub’s theater district.
Finally, however, the logjam is beginning to break free, as witnessed by last month’s opening of Nine Zero. After several previous players had unsuccessfully attempted to build a hotel on the site, located across from Boston Common, Brighton-based Intercontinental stepped in and put together a winning effort. Featuring 190 rooms and such amenities as oversized marble baths and Mario Russo accouterments, dramatic vistas of Boston, and modern technology including high-performance Internet access, Nine Zero is expected to service the luxury hotel crowd.
Meanwhile, Battery Wharf appears to be moving ahead, while the Saunders Hotel Group is planning a September groundbreaking for the 220-room Jurys Doyle Hotel, to be built in the former Boston police headquarters on Berkeley Street. Observers also say the Sawyer hotel, with Loews as its operator, has a solid enough location to ultimately get underway, possibly late this year. Rumors are even circulating that Starwood is working to finally get the convention center project together, possibly by eliminating all banquet and function space in the property.
One promising sign for Boston has been the arrival of several new players into the Hub, said Arrants. Destination Hotels & Resorts has made its first foray into the region as operator of Nine Zero, while the Back Bay hotel will also be a new geographical conquest for Ireland-based Jurys Doyle. Regent Hotels will have its first local flag as well at the $216 million Battery Wharf complex.
“That’s a good concept for the area,” said Arrants of the Saunders project, explaining that many people are drawn to independent hotels. Interestingly, the Saunders family has a long history of such independence as operators of the Lenox and Copley Square Hotels, both of which are also in the Back Bay.
The police headquarters hotel makes sense for several other reasons, according to Arrants. If the nearby Hynes Convention Center remains in operation, that facility should draw guests to the Jurys Doyle product, he said, while the site should also service corporate office users and tourists visiting the area. “It’s a good location,” said Arrants. “It has some very strong attributes that will serve them well.”
In the meantime, a large crowd of real estate professionals is expected for Roginsky’s speech on July 17 at the Colonnade Hotel in Boston. The annual overview is fast becoming a key barometer for assessing the local hotel market, so much so that details are not released prior to the program at MLA’s request.
