Developers checking in with more hotel rooms
Some wonder if demand will meet the supply
The Embassy Suites hotel in the Avant building on Delaware Avenue added 150 suites to the city's portfolio of downtown hotel rooms when it debuted in July.
That opening could turn out to be just the start of a wave of new hotels entering the market. Several others have either been proposed or are in development, creating potentially hundreds more guest rooms.
Whether all of these projects will be built is not yet clear. But if all or even just some of the new projects are completed, is there sufficient guest demand for the supply of rooms?
"Obviously there's no way of knowing that until it's put to the test in a live situation," said Edward J. Healy, vice president of marketing for the Buffalo Niagara Convention and Visitors Bureau.
While the Embassy Suites has already entered the fray, others want to follow suit. Some of the projects are moving through the approvals process, while others are still in the idea stage. The prospect of new properties receiving subsidies is also a source of controversy.
They aspire to join a downtown market that already contains properties such as Adam's Mark, Hampton Inn & Suites and the Hyatt Regency Buffalo. Beyond downtown, Erie County has dozens more hotels vying for customers.
Restaurateur Mark Croce is working on a $19 million project to create a 57-room hotel at Franklin and West Huron streets. He has described it as an upscale boutique hotel, akin to the market served by The Mansion.
At the waterfront, James Pitts' company and Specialty Restaurants Corp. are planning a 98- room, $11 million Erie Basin Wingate Inn. Separately, a hotel is in the development plan for Canal Side near the Erie Canal Harbor.
Developer Rocco Termini has talked about putting a 117-room hotel into the former AM&A's store on Main Street. The prospective buyers of the Statler Towers want to make a hotel part of a $100 million overhaul. At the outer harbor, a hotel was included in plans for a later phase of a revitalization of the old Freezer Queen complex.
North of downtown, Chason Affinity Cos. plans a 100-room hotel, condominium and retail complex at Elmwood and Forest avenues, near Buffalo State College. Just down the street, a boutique hotel has been talked about as part of a planned rehabilitation of the Richardson Olmsted Complex.
All told, that is a lot of hotel rooms. But some developers say they are aiming at particular segments of the industry and believe the city could use more brand-new rooms.
The downtown market currently consists of about 1,800 hotel rooms, according to the Buffalo Niagara Convention and Visitors Bureau. Specific figures were not available for all the projects, but plans for several of them would add more than 370 rooms to the market, which would be a 21 percent increase.
At Avant, the Embassy Suites hotel had an occupancy rate of 68 percent to 73 percent in the July through September period, said Michael J. Montante, vice president of Uniland Development Co. "It's been doing as we projected."
Montante said Uniland saw a need downtown for more suites, a product type appealing to families who might otherwise have to book two rooms. The suites also appeal to business travelers, who can get more room for the money here than in more-expensive cities, he said.
"I think the market can absorb more hotels, especially hotels that provide customers with a product travelers want," he said.
Still, he said, the risk of overbuilding should not be dismissed. "My feeling is the law of supply and demand will help regulate that."
According to Smith Travel Research, downtown hotels from January through September had a 63.3 percent occupancy rate, down 8.5 percent from last year. The national rate during that period was 56.6 percent, down about 10 percent a year ago.
The average daily rate for the downtown Buffalo hotels was $94.73, up 1.3 percent from a year ago. But revenue per available room, which takes into account both the daily rate and occupancy, was $60, down 7.3 percent from a year ago.
Some developers, such as Pitts, say the city would benefit from newly built hotel rooms, rather than just upgrading rooms in its existing properties.
Pitts said a number of new hotels have opened in the past few years in the Genesee-Transit area near Buffalo Niagara International Airport. But that setting doesn't suit everyone who comes to the city to attend events, he said.
"I think there is a tremendous demand that can be developed in the city and met with new rooms," Pitts said.
Pitts said he envisions the Erie Basin Wingate, planned next to Shanghai Red's, as catering to guests including business travelers and visitors from Canada and places like Erie, Pa.
As for the number of other hotel projects in the works, Pitts said, "The market will ultimately decide who survives and who doesn't."
David Hart, president and chief executive officer of Hart Hotels, said he isn't opposed to new competition in the downtown market. But he sharply criticized providing government subsidies to new hotels at a time when he says that market is struggling.
"We don't need government-subsidized hotel rooms," said Hart, whose business operates a Holiday Inn on Delaware Avenue. "We need more customers."
If developers feel the downtown market is so hot, Hart said, they shouldn't need subsidies to get started. "If they want to do a private equity deal with their own money, then step up to the plate, fine."
New hotels that are subsidized merely "cannibalize" customers from the properties that have come before it, creating more downward pressure on the market, he said.
Conventions and meetings held in the Buffalo Niagara Convention Center are one source of guests for the downtown hotels.
Some larger conventions create a logistical challenge. The CVB sometimes brings suburban hotels into the lodging mix to serve all the downtown visitors, but that requires shuttling guests back and forth.
If the CVB bears the transportation costs, the convention becomes a less-lucrative source of business, Healy said. If the event has to bear the cost, Buffalo becomes a less-attractive choice, compared with cities with ample rooms close to the convention site.
"From our perspective, more rooms downtown makes Buffalo a more viable convention destination," Healy said.
Amateur sports are another area the CVB targets, said Michael Even, vice president of sales. The NCAA basketball tournament, the Empire State Games and the World Junior Hockey Championships are all on the 2010 schedule.
Cultural tourism is another of its targets. The National Trust for Historic Preservation will hold its 2011 conference in Buffalo and is expected to draw 2,000 people.
The hotel planned for Elmwood and Forest is trying to carve a geographic niche a bit removed from downtown.
Jeffrey Birtch, CEO of Chason Affinity, says that hotel would tap into cultural attractions like the Burchfield Penney Art Center, Albright-Knox Art Gallery and the Darwin Martin House, as well as Buffalo State. It would also be an option for people who are visiting residents in that section of the city, he said.
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