Severe weather conditions and a shaky economy have left Atlanta feeling battered, but Catherine Chetwynd finds the hotel market is riding it out.
The effects of the credit squeeze are beginning to show even in Atlanta, where the hotel sector has been enjoying a boom in occupancies and construction over the past few years. Add in the aftermath of the tornado that hit the Downtown area of the city in March, affecting some hotels and the Georgia World Congress Centre (GWCC), and it might look as though the capital of Georgia is having a rough time.
The hospitality industry is worth US$11 billion to the city and there are 93,000 hotel rooms in Atlanta, with another 3,352 under construction. According to research by DK Shifflet and Associates on behalf of the Atlanta Convention and Visitors Bureau (ACVB), of the 38.1 million visitors to the city in 2006, 32 per cent were business visitors, who stayed on average 2.49 days. The UK is the number one international visitor market, followed by Germany.
Atlanta is divided into four areas – Downtown, Midtown, Buckhead and Hartsfield airport. Downtown is the business and convention district and is also where the government resides. Midtown, home to many large law firms, is a relatively new ingredient in the mix. Marsha Middleton, director of public relations for Four Seasons hotel Atlanta, said: “When we opened here in 1997, there was us, Starbucks and a lot of abandoned buildings. Now there is the High Museum of Art, the botanical garden in Piedmont Park and the Alliance Theatre.”
Buckhead is popular with business travellers not only because many financial institutions are based there, but also because it is only a short taxi or subway ride away from Downtown and is much more interesting at night. It offers great shopping and a choice of 300 restaurants within a one-mile radius of the centre.
In fact, although the adverse conditions and resultant lack of confidence in the economy have had a notable affect on hotel construction, occupancies are still high and tariffs are so far unaffected. Chris Griffin, audit partner for Deloitte, said: “The Atlanta hotel market is still strong, particularly in the Downtown, Midtown and Buckhead areas. In Downtown and Midtown the boutique hotel concept will provide enhanced service, especially to business travellers. This is evident in the development of three W hotels and other lifestyle properties.
“There is something of a slowdown in projects where funding is not yet approved, with greater scrutiny and more stringent evaluation as a result of the tightening of the money market. Atlanta is a top leisure and convention destination and the convention sector is particularly strong because of the facilities and the airport – there is global access, so investors think it is a good hotel market.
“But the city has had a weak housing market in the past eight months and where new developments have a combination of hotel and condos, they have had to be re-evaluated. Hotels are still being built but with tighter underwriting standards.”
An example of this is Palomar Atlanta, an upscale boutique Kimpton property in Midtown, originally planned with apartments and scheduled to open early 2009. Stacey Ellis, a spokeswoman for Kimpton, said: “The developer decided to pull the condos out of the plans before the project broke ground. It was going to be a 250-room hotel but now it will have 310.”
Griffin also highlights the question mark over a planned Ritz-Carlton and a Mandarin Oriental as an example of greater stringency. Mandarin Oriental declined to comment but a spokeswoman for Ritz-Carlton said: “As far I know, there are no confirmed plans for a third Downtown location.”
Starwood Capital plans to open a Baccarat hotel and residences as well as a “1” hotel and residences in Streets of Buckhead, a Rodeo Drive-style development, where there were to be three hotels. One is no longer on the cards and a spokeswoman for Starwood Capital said: “We don’t have anything to say about it at the moment.” So perhaps the jury is out there too.
The GWCC congress centre in Downtown attracts a lot of business to the area, as is reflected by the presence of mega-hotels like the 1,663-room Marriott Atlanta Marquis and the neighbouring Hilton Atlanta which has 1,226 rooms. Lauren Jarrell, director of communications for Atlanta Convention and Visitors Bureau, said: “There are 12,000 rooms Downtown in six big business hotels: Westin Peachtree Plaza, Sheraton Atlanta, Hyatt Regency Atlanta, Hilton, Marriott Marquis and the Omni Hotel.
“There were always upscale and limited-service hotels and not a lot of luxury or boutique properties, but there has been a diversification of product. Hotel Indigo was the first boutique property in the city and now there are three Ws and a Kimpton. The opening of the boutique Ellis Hotel in Downtown in October last year is a sign of movement into a new offering for the business traveller.”
In addition, the Carnegie Building is being transformed into a 155-room Indigo, due to open in December 2009, another boutique property for Downtown. Marriott Marquis’s US$138 million refurbishment project reaches completion in July and, according to director of hotel sales Michael Fletcher, will reposition the hotel for the next 25 years. Work included a new 2,600-sqm ballroom, spa and gym. “We are also building a bridge to link the hotel with the Hilton, so we can share events,” he said.
Occupancy levels at both properties suggest that Atlanta’s conference business remains stable. In the first quarter of 2007, occupancy at Hilton Atlanta was 72.1 per cent, and in the first quarter of this year it rose to 78.2 per cent. Fletcher says: “We are cautiously optimistic about this year’s figures. We are ahead of last year’s pace and we are forecast to finish the year ahead. However, we were under renovation all of last year. Overall, we are doing well, but we are monitoring every aspect of our business very closely, based on how vulnerable our business mix is to the ever-changing economic conditions.”
Hotel Indigo, opposite the Fox Theatre in Downtown, is due for refurbishment this year. General manager Gabriele Webster says: “We have a lot of theatre business and we have convention business booked one or two years in advance. Our occupancies are in the 70s and if the economy were different we would be doing even better, but we have not taken our rates down. European business is as strong as ever.”
In Buckhead, popular business hotels are the Ritz-Carlton, which is undergoing a renovation, Westin Buckhead, Intercontinental, JW Marriott and Mansion on Peachtree, which opened in May with 127 rooms and the luxury of a butler on every floor. In addition, a St Regis opens in spring next year, with 150 rooms and 50 condominiums. Westin Buckhead’s occupancies for the first quarter of this year are up on last year, but as Kathryn Bryant, director of sales and marketing, said: “The booking window has narrowed a bit for group and transient business, although volumes have not decreased.”
Like Buckhead, Midtown provides a more vibrant area for executives to stay. Four Seasons’ Middleton says: “Business travellers who are visiting organisations in Downtown and Buckhead stay here because they want to be in this area and they are the bulk of our business.”
The hotel completed a US$13 million refurbishment in December 2006, which included the opening of a spa. Middleton said: “Occupancies are high – on average 80 per cent – but from March 25-27, for example, we were sold out.”
W Atlanta Midtown, formerly a Swissotel, was taken over and spruced up by Starwood in 2006. Kelly Spikes, marketing manager for W Atlanta Midtown and W Atlanta Buckhead, said: “We have not seen any cancellations this year due to market conditions and there is no falling away of large groups, but we are seeing a lot more business on shorter-term bookings, so I think people are waiting.”
Long-stay options are largely on business parks on the outskirts of the city. Typical of this is IHG’s upscale Staybridge Suites, where 80 per cent of guests are staying on business and 60 per cent stay for seven days or more. Those at Candlewood Suites, a mid-scale product, generally stay for 15 days. There are four Staybridge Suites properties, three outside the Atlanta metropolitan area and one in Buckhead. A fifth opens in Midtown in 2010, and a new Candlewood property in Camp Creek Parkway in 2009.
Only at airport properties can travellers expect a discount on rates. Lisa Cole, a spokeswoman for Hilton Hotels Corporate, said: “Occupancies at Hilton Atlanta Airport have been less affected by the credit crunch than by the increased supply and decreased demand in the airport marketplace, and we are dropping room rates and, for some segments, adding value.”
Although the picture looked positive for the first quarter of this year, the tornado in March may not have heralded the only storm clouds and there is a spirit of caution. The last word goes to Brendan Barnes, director of tourism for ACVB. He said: “We are starting to hear hoteliers talking about the credit crunch, especially in the light of the number of new properties going up. There is a lot of competition, so we are worried about the effect it may have.”
Getting there
Served non-stop by BA from
Gatwick, also by Delta from Heathrow and Gatwick. Return fares with BA (quoted
by ba.com) are: £606 economy class, £1,052 premium economy, £3,646 business and
£7,208 first class. Return fares with Delta (delta.com) start at: £582 (from
Gatwick) and £616 (from Heathrow) for economy with business (from either
airport) priced at £3,219. Prices quoted are for midweek travel
in early July.
