HOTEL DEVELOPMENT INTENSE -- BUT HIGHLY COMPETITIVE

HOTEL DEVELOPMENT INTENSE -- BUT HIGHLY COMPETITIVE

BY WILLIAM B. KARST
Callison Architecture

Nordstrom's renovation of the old Frederick and Nelson building has galvanized the revitalization the retail core. Key cultural institutions -- including the ACT and the Seattle Symphony -- are moving downtown. Waterfront development opportunities have been spurred by the Bell Street Pier project. It's a heady mix of development, and it should be no surprise that hotel projects are part of it.

What might be surprising to some is the intensity of hotel development Seattle is currently experiencing.

In fact, Seattle today is one of the hottest hospitality markets in the country, where the development focus is on the three and four-star hotels that attract business and tourist travelers.

Why this pent-up demand for hotel rooms?

The 80s hotel construction spree that glutted most major U.S. markets left Seattle with few added rooms as area developers focused on office buildings. Even as the need for hotel rooms increased in the early 90s, the cautious investment climate (the Fed pressured banks not to loan without high developer equity) made local financing extremely difficult to secure, even for renovations.

Because of the lack of development in the U.S., most of the major operators turned to pursuing international expansion programs, particularly in Asia and South America. As a result, no significant hotel stock has been added to the Seattle market over the last ten years.

At the same time, thanks to a strong and diverse local economy -- as well as valuable ties to Pacific Rim markets and an ongoing love affair with the national media -- Seattle continues to grow in popularity as a destination for both business and tourist travelers. The total number of overnight visitors has increased nearly 10 percent since 1993. Occupancy rates for Seattle hotels last year hovered at 80 percent (70 to 75 percent is considered a strong operating performance) and experts predict the same or better for 1996. Average room rates have also increased in excess of inflation over the last three years, with rooms in major hotels now averaging $120 per night.

The numbers all add up to one thing: it pays to be in the hotel business in Seattle today. Demand is outstripping supply. Every major operator that isn't here wants to be, yet sites are scarce for large, high-rise hotels. And smaller, boutique hotels are springing up around town in both new and renovated buildings to fulfill this demand.

In the meantime, most of the larger hotels either have plans for changes or have already undergone renovations in anticipation of new competition.

Both on the local and international level, all indications are that competition is strong despite healthy demand.

In positioning themselves to remain competitive, both new and renovated hotels of all sizes are making changes in design, amenities, and operation.

What can we expect to see?

The guestroom addition to the Bellevue Club, a recent addition to the Eastside hotel stock, designed by Callison Architecture.
Two major trends are developing in response to guest needs and investor demands.

Hotels are responding to their guests' changing work and lifestyles brought on by advances in information and communication technology and a global economy. And hotel management and owners are scrutinizing the bottom line, responding to investor concerns about increasing efficiency by streamlining operations and cutting costs.

To compete, hotels must respond both to traveler demands and investor scrutiny.

More business people are on the road today. Ten years ago, the business traveler was more likely to be a senior executive doing a deal; today, the business traveler is just as likely to be a junior exec or mid-level staff member doing the work.

It has become clear to hotel operators that as the new travelers are compelled to live somewhere else for several days, they want it to feel more like home. They need to be close to the action -- dining, shopping and working. Yet they also need relief, a refuge from the action -- downtime, a workout, or individual work time.

Suite and extended-stay properties, like the Marriot Suites on south Lake Union for example, have stepped in to fill this niche, but the business and specialty hotels are looking to offer their guests some of the same amenities.

The three and four-star hotels that compete for these sophisticated guests are striving to make their properties meet these needs with measures that include the following:

Linking the hotel to other uses, such as offices, recreation, shopping, dining and transportation. This is a particularly strong trend in Asia, where often the whole complex is a ground-up, destination-oriented project. But there is more subtle evidence of the same trend here. In an effort to better respond to membership, while diversifying their business, Callison worked with the Bellevue Club (formerly the Bellevue Athletic Club) to add guest room facilities, for example.
Scaling public spaces to feel intimate and inviting rather than grand and impressive. This is both a cost-saving measure and an image play -- a more restrained, 90s reaction to the showy 80s. This trend is perhaps even more pronounced in Seattle, where guests arrive with certain expectations of casual comfort, the smell of espresso in the air and micro brews on tap. Lobbies are designed to feel like a living room -- maybe not yours, but one you'd like to relax in for awhile. They're smaller, filled with comfortable chairs, coffee bars and fireplaces. Staircases replace escalators. Comforters replace bedspreads. In general, fabrics and finishes appear less formal, more "residential."
Bringing activities -- cocktail bars, coffee bars, music -- out into the public spaces to create a lively, appealing ambiance that attracts people.
Providing extra connections in the guest rooms for business travelers to facilitate their work --voice mail, extra phone lines for faxes, modems and computers, while also providing staffed business centers.
Increasing the size and level of comfort and convenience in the guest rooms with the addition of desks with good chairs and lighting, easy chairs, computer games. Elevating guest room bathrooms to the height of indulgence -- soaking tubs and separate towers, double sinks and bigger, fluffier towels.
Splitting tour and individual guest check-in to avoid overwhelming and alienating the individual traveler while maximizing check-in efficiency for both.
Giving upgrades or discounts on rooms, or sometimes on car rentals and airline mileage. Taking cues from the airline industry, many hotels are offering "frequent guest" redemptions.

In terms of streamlining business performance, the following are some of the latest trends:

Concentrating less on exterior appearances, more on how the inside looks and feels.
Reducing multiple food and beverage outlets. Particularly in the U.S., the trend is to consolidate into one central kitchen. Both room service and a signature, street-level restaurant operate out of it, and it is often leased to an independent operator and has an entrance and identity completely separate from the hotel. Kimpton Hotels, which owns the Hotel Vintage Park (the location of Tulio's restaurant) has been very successful with this strategy, and others are taking note.
Electronic check-in, which involves inserting a credit card and receiving a room card key, all without the need of a check-in clerk.

In Asia, where the five-star market is saturated and the race is on to meet demand for straight-line business hotels, a service apartment option is often designed into a hotel project, addressing volatile market conditions by allowing a swing between hotel and housing in late stages of design.

In general, hotels today are offering more convenience, choice, intimacy and comfort for their guests. The fact is, there are enough projects on the boards right now to satisfy demand in the Seattle area for the foreseeable future. But, as one of the few places in the United States adding hotels to the market, expect to see some of these latest trends in hotel design and operation incorporated in the region's new hotels.

William Karst is principal and CEO of Callison Architecture and directs the firms efforts in the hospitality and international markets.

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