Buffalo Niagara is getting a little hotel crazy.
There’s the new Marriott Buffalo HarborCenter taking shape next to First Niagara Center. And the Courtyard by Marriott is opening just across the street at One Canalside.
There’s the Hilton Garden Inn under construction at the Tishman Building at Lafayette Square, and the Curtiss Hotel planned by developer Mark D. Croce a few blocks away. And don’t forget the hotel that Delaware North Cos. will be operating as part of its headquarters tower at Delaware Avenue and West Chippewa Street.
Buffalo developer Carl P. Paladino put up the Wyndham Garden Hotel in Amherst. And, by now, everyone knows about the Hyatt Place Hotel going up nearby at Main Street and the Youngmann Highway in Amherst.
Those are just the beginning.
A hotel boom is taking root across the Buffalo Niagara region, bringing as many as 26 new hotels – more than 2,000 rooms – to the area over the next five years, including eight under construction.
In addition to the hotels in the city – including at the Buffalo Niagara Medical Campus – and Amherst, others are planned in Cheektowaga, Grand Island, Lancaster and the Town of Tonawanda. And in Niagara Falls, there could be as many as nine new hotels over the next few years.
“That many at one time is unusual,” said Thomas J. DeSantis, senior planner for the City of Niagara Falls, “and I don’t think this is the end of it. It may be the crest, but certainly not the end.”
The question is: Why?
Developers say that they’ve done their homework and contend that the new hotels are justified, citing an aging inventory that needs to be replaced, the revival of Buffalo and Niagara Falls, and strength in niche areas. They say the demand is driven by a combination of tourists, businesspeople, air travelers and Canadian shoppers that is only likely to increase.
“At the end of the day, we think – prognostically and as a whole in this community – developers are rather bullish. There’s some really solid momentum,” said David Chiazza, executive vice president of Iskalo Development Corp.
And they say hotel chains and banks are coming to the same conclusions. “If the market wasn’t there, both the private sector and the lending institutions wouldn’t be taking the risks,” said Croce, owner of Statler City, who plans to build a boutique hotel on Franklin Street in the Curtiss Building.
Still, the surge seems to fly in the face of statistics. The region already has 13,479 rooms spread throughout 154 hotels, according to figures compiled by Hendersonville, Tenn.-based research firm STR. About one-third of the hotels are independents, not affiliated with any chain, while 40 are considered “economy” lodging, and 30 are “upper midscale.”
Last year, the area’s hotel occupancy rate peaked at 86 percent in August and bottomed out at 42 percent in January, but the average for all of 2013 was 65 percent – little changed from the last six years. Of the 4.82 million available “room nights” during the year, rooms were used on 3.14 million nights – and empty the rest of the time.
By national standards, though, that’s pretty good, said Patrick J. Kaler, CEO of Visit Buffalo Niagara.
“We’re very fortunate that as a destination we typically run an occupancy rate in the mid-60s, which a lot of destinations would love to have,” he said.
Now, however, with an additional 2,000 hotel rooms are in the pipeline, doubts are being raised about whether the market can handle that much more inventory.
“With more hotels announced each day, you have to wonder if anyone is actually taking the time to really analyze the market,” said Ronald R. Kendall, president of Buffalo Lodging Associates, a Stoughton, Mass.-based subsidiary of Benderson Development Co. that owns and operates 40 hotels in the United States and Canada.
“If developers take the pulse of the market by sticking their wetted finger in the air to see which way the wind is blowing, it may be a difficult road for all of us.”
Benderson is building the Courtyard by Marriott at Canalside and a Home2 Suites extended-stay hotel across from Walden Galleria and next to the Cabela’s store that it is constructing. It also has built several new hotels on Genesee Street near the airport. Both new hotels are still expected to do well because of the increased demand and the niches they serve, Kendall said – but not as well as originally anticipated because of the new competition. The Canalside hotel, for example, was planned as the only Marriott downtown before the Buffalo Sabres unveiled HarborCenter.
And some others who already have built or are in the midst of construction say there’s no room for more now.
“We have quite a few hotel rooms under construction right now,” said Mark E. Hamister, whose Hamister Group is developing hotels in Buffalo and Niagara Falls. “I do think those hotels will meet the current demand, and I do not think we need more than are already under construction.”
Developers cite several factors for the recent boom in hotels:
• More interest in Buffalo – Call it “Buffa-love” or whatever, but word about Buffalo’s resurgence is getting out. The image of a struggling down-on-its-luck Rust Belt city is slowly being replaced by the redevelopment of the waterfront, the growth of the Medical Campus, and the state’s Buffalo Billion development investment.
The city’s success in hosting sports tournaments and midsize to large meetings – such as amateur hockey, NCAA men’s basketball or the National Trust for Historic Preservation’s annual conference in 2011 – has brought more visitors to town and enhanced its reputation. And the push for cultural tourism is drawing the curious and fascinated to the Queen City for its architecture and heritage. “I think a lot of it has to do with the changing landscape,” Kaler said. “We’re getting really good press out there.”
Figures from Smith Travel show that demand for hotel rooms in the Buffalo area has increased by 16 percent since 2009. In other words, the region last year booked 432,000 more rooms than it did five years ago.
Along with that came a 23 percent jump in total room revenues, to $301.74 million – not only because more rooms were booked, but because hotels have been able to charge more.
And in a chicken-and-egg scenario, developers say the region needs more hotel rooms to attract large conventions. The current stock of hotel rooms downtown isn’t sufficient in number or high enough in quality to satisfy meeting planners, so larger conventions go elsewhere. “We’re missing out on a lot of dollars because of the (lack of) availability of rooms in downtown Buffalo,” Croce said. “… The goal is to try to expand the market.”
• Niagara Falls – Nine projects are proposed or under construction in the Cataract City, including Hamister’s plans for an upscale hotel, apartments and retail space on Rainbow Boulevard. Investments by the city and the state in the downtown are increasing confidence, and developers want in, DeSantis said.
Tourism officials are promoting Buffalo and Niagara Falls as a combined destination. “What better place to drive regional tourism?” he said.
• Thriving submarkets – Many of the hotels now under construction or being considered are in hot locations. Each has its own distinct demand. The Medical Campus draw is different from the rest of downtown, for example. Hotels along the Thurway, Youngmann or Transit Road cater to road travelers, in contrast to those near the airport.
“Most travelers want to stay in a hotel within 3 to 5 miles of why they’re coming,” Hamister said. “If you’re a UB alum and you’re going to go to the homecoming game, you’re not going to stay in downtown Buffalo; you’re going to stay at the Marriott near UB.”
• Influx of Canadians – Shoppers and fliers from across the border are helping to fuel the growth in hotels.
Five hotels are proposed along Niagara Falls Boulevard in Niagara Falls for Canadians to get low-cost hotel rooms so they can shop an extra day at the nearby Fashion Outlets. The same is true for Benderson’s Home2 Suites in Cheektowaga, across Walden Avenue from the Galleria.
“That’s why it’s still very important for us to have a message in the Canadian market right now,” Kaler said.
Similarly, Canadians know that flying out of Buffalo is cheaper than from Pearson International Airport outside Toronto. So they come here the night before, and the hotels are capitalizing.
“What we’ve seen are a lot of deals that are being put together by the hotels near the airport,” said Thomas Adamczyk, Cheektowaga’s supervising building inspector.
• Better quality – Buffalo has faced years of criticism about the age and quality of its hotels, many of which date from decades ago, even if they’ve been updated. Until recently, the city itself had only one “upper upscale” hotel – the 30-year-old Hyatt Regency Buffalo – and still has no large luxury hotels.
So developers responded to the perceived opportunity. The hotels in the pipeline would provide a wider array of mid- to upper-scale rooms than currently exists in the region. They will also meet visitors’ expectations for top-of-the-line amenities – such as oversize showers, entertainment systems, high-speed Internet access, mini-refrigerators, fitness centers and spas, and valet services. “What I’m building,” Croce said, “is a luxury product, an upper-upscale boutique hotel.”
Hamister said the older hotels brought down the regional occupancy rate. Higher-quality hotels such as the Hyatt, Embassy Suites and the Hampton Inn post occupancy rates of up to 80 percent.
“What that is suggesting is that the individuals who are looking for hotel accommodations in downtown Buffalo are looking for quality, not cheap rates,” Hamister said.
• No one is betting the house – Even if many of them do get built, most of the proposed 27 hotel projects are relatively small – an average of 78 rooms per hotel. The biggest will be the 200-room Marriott Buffalo HarborCenter, which would make it just the 10th-largest in Buffalo Niagara.
“We’re all invested,” said John R. Koelmel, president of HarborCenter. “No one’s making a super big bet.”
In fact, many are just a piece of a larger mixed-use project with offices, apartments and retail. So developers are counting on more than one revenue source to make it work.
That said, developers acknowledge a tradeoff. “There is a very real possibility that some of those older, unimproved properties will suffer,” Croce said, “but that’s a natural progression to make things better. That’s survival of the fittest.”