The 131-room SpringHill Suites Andover hotel at 550 Minuteman Drive in Andover is slated to hit the auction block this week.
Talk about a rough beginning. Barely three years old and already insolvent, the SpringHill Suites Andover hotel in Andover is slated to hit the auction block this week, with Paul E. Saperstein Co. scheduled to raise the gavel on Wednesday at 11 a.m. in front of the 4-story facility on Minuteman Drive.
Developed by Maryland-based Thayer Lodging Group, the 136-room inn is being foreclosed on by its Midwest lender, Regency Savings Bank. Sources place the loan on the property in the $8 million range. Reflecting efforts to salvage the asset, the auction has been postponed in the past, but a Saperstein official said late last week that the event was still set for its mid-week date.
Although the SpringHill brand has fared well nationally and sources described Thayer as a competent, well-heeled operator, the Andover hotel has struggled almost since it opened in the summer of 2001, shortly before the Sept. 11 terrorist attacks devastated the business traveler market that the developers had positioned the property to service. Located within the Minuteman Office Park at 550 Minuteman Drive, SpringHill Suites Andover also came on line amidst a flood of competing hospitality developments opening in the area, as thousands of new rooms were added throughout suburban Boston between the late 1990s and the end of 2002.
Andover itself has been a hotbed of hotel construction, with other new properties there including the 133-room Staybridge Suites, a 120-room Residence Inn also developed by Thayer and the 84-unit Hawthorn Suites. According to one hotel expert, the Andover market “flew high and fell hard” as the technology sector that had driven growth in the suburbs crashed in late 2001 and further eroded hotel occupancy and room rates.
“It hasn’t been pretty,” said the hotel specialist, while another source familiar with the situation maintained that the Andover auction indicates lingering struggles for the suburban hotel arena. “There are probably a few others out there on the ropes,” said the source, particularly those properties developed in the outer fringes of the metropolitan region where business activity has been most impacted. Signs of economic recovery are encouraging, acknowledged the source, but he claimed that some assets may not be deemed salvageable by their owners, as appears to be the case with Thayer’s property in Andover.
Calls to Thayer official Gregory Droege in his firm’s Annapolis, Md., headquarters were not returned by Banker & Tradesman’s press deadline, while efforts to contact Regency Bank were unsuccessful as well. The hotel firm also ran into financial trouble late last year when Lehman Bros. moved to foreclose on a mezzanine loan taken out on Thayer’s Righa Royal Hotel in New York City, a 500-room facility located in the Midtown district. With a concentration on the Eastern Seaboard, Thayer also operates hotels flying the DoubleTree, Sheraton and Embassy Suites flags, and developed the Residence Inn in Andover at the same time as the SpringHill Suites Andover property. It is unclear how the Residence Inn operation has performed in the downturn.
Along with easy access to Interstates 495 and 93, the SpringHill Suites Andover also features an indoor swimming pool and whirlpool spa and extensive meeting space. The building is located on a 19-acre parcel and, as the name suggests, is an all-suite hotel, with 70 king-sized-bed suites and 66 double/double suites.
Rating the Future
While at this juncture it does not appear that Thayer will be able to overcome the challenges facing the SpringHill Suites Andover, a recent overview by Pinnacle Advisory Group of Boston seems to indicate better times ahead for the suburban Boston hospitality industry. According to Boston-based Pinnacle, the lack of new supply added in the past year and a more stable geopolitical situation bode well for hotels, so much so that the consulting company is anticipating suburban Boston occupancy rates will increase from a projected 58 percent in 2004 to 61 percent in 2005.
Similar improvement is anticipated for the region’s average daily rate, which is expected to grow from $91 in 2004 to $95 in 2005, according to Pinnacle, while revenue per available room, or RevPar, is expected to increase from $52.78 to $57, a 9.9 percent hike for suburban Boston. According to Pinnacle, RevPar in suburban Boston averaged $49.89 in 2003, while occupancy rates stood at a rather weak 55 percent.
Pinnacle also reported improvement for hotels in Boston and Cambridge at the mid-year mark, with the urban hospitality inventory expected to enjoy an increase in occupancy from 73 percent this year to 75 percent in 2005. Average room rates also are moving upward in that market, from $159 in 2004 to a predicted $166 next year, while Pinnacle estimates that RevPar will reach $116.80 in 2004 and grow to $124.50 in 2005. Looking forward in Boston and Cambridge, Pinnacle said the corporate and leisure lines will continue to rebound through next year, with only group travel expected to soften in the coming months. A dip in convention activity will likely cause the drag on the group market in 2005, Pinnacle explained.
