Building through the downturn

Occupancies and revenues at hotels may be taking a hit from the recession, but that doesn't mean construction of mega hotels — those structures topping out at 1,000 rooms or more — has ground to a halt. In fact, there are 10 such hotels currently under construction or recently completed in the U.S., according to statistics provided by Lodging Econometrics, the Portsmouth, N.H.-based research firm.

The top 10 hotels under construction account for a whopping 14,215 rooms. Four of the Top 10 hotels are rising in Orlando, Fla., while two are under construction in Texas.

Is the rush to build these mega hotels foolhardy? Not at all, say those in the industry. There is a need for big hotels with a large amount of meeting space, according to James E. Burba, vice president and worldwide director of advisory services at Wimberly Allison Tong & Goo (WATG), the Honolulu-based architectural, planning and design firm. “Generally speaking, there is a lack of choice for large conferences and large meetings nowadays, and these hotels are being built to serve that market,” he explained.

Such large-scale projects should not be surprising, say those in the industry, emphasizing that the hospitality sector remains cyclical. Hotel analysts note that mega hotel projects take years to plan, obtain financing and complete construction. Most of the properties now under construction were conceived in the 1997-1998 time period when money was available for such huge projects, said Robert Mandelbaum, director of research information services in the Atlanta office of The Hospitality Research Group, a division of San Francisco-based PKF Consulting.

At that point in time, the hotel industry was at its peak and the convention-style hotel segment was one of the best performing sectors. “The conventional wisdom was that it was the strongest segment and that it would continue to be in the future. Unfortunately, the risk and danger of forecasting is that you are speculating on future events,” Mandelbaum said. “There is a time gap between starting and completing construction of a large hotel and that leaves that much more room for error. I think some people now may be upset to open up a hotel in a year of recession, but that will change.”

Despite the current recession, Mandelbaum noted that these projects may in fact prove to be a smart move over the long haul. “Indications are that the demand is there and there will be a lack of development in the sector later in the decade,” Mandelbaum said. “The large hotel projects that open now or within the next couple of years may struggle a bit in the beginning, but from 2004 to 2009 or 2010 they will do very well because no new convention-style hotels are scheduled.”

Dave Kloeppel, CFO of Nashville, Tenn.-based Gaylord Entertainment Co., which is building two 1,000-plus room hotels, also is bullish on the outlook for the latest crop of mega resorts. “Despite the economic downturn, we continue to see strong demand for our convention hotels,” Kloeppel said. “Our core customers continue to have a need for the type of hotel product we offer — first-class hotel accommodations with a convention center attached.”

Although developers are forging ahead with construction, the timetable for at least one of the major hotels, the first phase of Walt Disney Co.'s Pop Century Resort, has been revised due to the economy. The opening of the first phase, originally set for spring 2002, has been temporarily delayed until business conditions improve, according to Disney executives. However, construction on the first phase will be completed and the opening will be rescheduled based on market demand.

Today's mega hotels under construction are certainly attention grabbing not only for their bold timing but also for their startling design. No longer sedate structures designed to attract staid conventioneers, today's grandiose hotels feature some of the most meticulous and whimsical designs ever seen. Disney's Pop Century Hotel, for instance, will offer pools shaped like a bowling pin, a flower, a computer, a crossword puzzle, a soda bottle and a highway sign.

Pop Century Hotel is a 5,760-room, two-phase project in Orlando, Fla., that will feature larger-than-life icons of pop culture. The resort will be a veritable time capsule of the 20th century, showcasing everything from yo-yos, tinker toys and computer games to beatniks and bobby soxers.

Outside Dallas, the 1,500-room Gaylord Opryland Texas resort and convention center is combining the grand architectural elements of a Texas mansion with the rustic feel of a working ranch.

Described as a destination where guests can experience the “full heritage” of the Lone Star State, the project will include a lush climate-controlled environment under glass that will showcase four acres of Texas vistas and landscapes. The state's rich history will be highlighted with a replica of the Governor's Mansion that will function as a five-room bed and breakfast.

In the state of Connecticut, The Mohegan Tribe will be the owner of the 34-story, 1,200-room Mohegan Sun Resort, which will offer 100,000 sq. ft. of convention space. The hotel, which is scheduled to open in April 2002, will be the second tallest structure in the state.

These are just a few of the 1,000-plus room hotels under construction or recently completed in the U.S. Below are some of the highlights of the top 10 hotel projects.

Disney's Pop Century, Orlando, 2,880 rooms

Filled with memorabilia and artifacts that allow guests to experience the eras of the last 100 years, Disney's Pop Century Resort will be a lodge-style development that will be built in two phases. The first phase is the 2,880-room “Legendary Years” of the 1900s to 1940s. The second phase, not yet under construction, is the 2,880-room “Classic Years” of the 1950s to 1990s. There will be themed pools in each phase.

When the entire resort is completed — and no definite date has been given — Disney's Pop Century Resort will add 5,760 guestrooms to the Walt Disney World resort.

Borgata Hotel & Casino, Atlantic City, N.J., 2,010 rooms

Boyd Gaming Corp. and MGM Mirage, both based in Las Vegas, are gambling that another large hotel is needed in Atlantic City, N.J., often called Las Vegas East.

Work is progressing on The Borgata, a $1 billion entertainment resort at the seaside resort's Renaissance Pointe. The 43-story project is on schedule and on budget for a mid-summer 2003 opening, officials said.

William S. Boyd, chairman and CEO of Boyd Gaming, which is developing The Borgata through a joint venture with MGM Mirage, said the company began conceptual work and development of the project in late 1998. “We are very excited about opening Atlantic City's first new casino resort in more than a decade,” he said. “I am pleased to see the entire project is moving ahead, on schedule and on budget.”

The Borgata will feature 2,010 hotel rooms, a 120,000 sq. ft. casino, 10 retail shops, 11 restaurants and a variety of entertainment venues.

Gaylord Opryland Texas, Grapevine, Texas, 1,500 rooms

You could call it a Taste of Texas. The Gaylord Opryland Texas, scheduled to open in summer 2004, will be a 1,500-room hotel and convention center featuring a nine-story oil derrick in homage to the history of the oil industry. Located in Grapevine, eight minutes from Dallas/Fort Worth International Airport, Gaylord Opryland Texas will feature four acres of Texas vistas and landscapes under a glass dome, as well as 400,000 sq. ft. of meeting, convention and exhibition space.

Gaylord Entertainment, the developer of the project, boasts the hotel's multi-sensory experience “will reflect Texas' proud heritage” and incorporate the hospitality and entertainment traditions that are the signature of Gaylord Opryland in Nashville, Tenn., the original Opryland hotel.

Gaylord Palms hotel & convention center, Kissimmee, Fla., 1,406 rooms

Not content with one mega hotel project, Gaylord Entertainment is constructing another in the Sunshine State. Outside Orlando in Kissimmee, Gaylord Entertainment is building the 2.2 million sq. ft. Gaylord Palms, includes design elements of the Florida Everglades, St. Augustine, South Beach and Key West, as well as other distinctive features of the Sunshine State. The project is one of the few with a very exact opening date and time: February 2 at 2:02 p.m.

The $385 million project will feature 1,406 guestrooms, including 106 suites and nine presidential suites. The resort also will include four acres of gardens under domed glass, along with several restaurants, lounges, shops, a spa and fitness center, two swimming pools, a wedding gazebo and entertainment venues. The hotel, on the southern end of International Drive about one mile from the main gate of the Walt Disney World Resort, will include a 178,000 sq. ft. exhibition hall, plus three ballrooms and meeting rooms.

Hilton Americas, Houston, Texas, 1,200 rooms

After decades of planning, the city of Houston has begun construction on the 1,200-room Hilton Americas adjacent to the George R. Brown Convention Center, which is being expanded. A pet project of Houston Mayor Lee P. Brown, the $285 million hotel and the $165 million convention center expansion are expected to be completed in the fall of 2003.

Houston-based Hines is the developer of the project and Beverly Hills, Calif.-based Hilton Hotels Corp. will be the operator. “The city's ability to finance the project at lower rates and still use the expertise of a private developer and operator has been key to the success of this project,” Brown said.

The mayor noted that the city has lacked enough hotel rooms near the convention center, and the combination of more hotel rooms and more exhibit space “will enable Houston to attract the larger and more lucrative conventions that have been bypassing our city in recent years.”

Bonds for the project will be repaid through revenues from the city's hotel occupancy tax, parking revenues and property tax rebates. The hotel and adjacent garage remain mortgage free.

Mohegan Sun Resort, Uncasville, Conn., 1,200 rooms

The eagerly awaited hotel at the Mohegan Sun Resort is the final phase of Project Sunburst, an undertaking that includes the recently opened Casino of the Sky featuring 82 table games, 2,564 slot machines, the Shops at Mohegan Sun, the 10,000-seat Mohegan Sun Arena and a 300-seat cabaret.

The nature-inspired design of Mohegan Sun is a collaborative effort by several of the world's most renowned architectural and design firms. New York-based Kohn Pedersen Fox Associates designed Mohegan Sun's dramatic exterior and hotel tower with inspiration and cultural direction from the Mohegan Tribe.

Situated in southeastern Connecticut on 240 acres along the Thames River, the hotel — scheduled for completion in April — will boast a spa, salon, full-service fitness center and more than 100,000 sq. ft. of high-tech and highly flexible meeting and function space, as well as the Northeast's largest ballroom.

Mohegan Sun, owned by The Mohegan Tribe, is being billed as one of the largest, most distinctive and spectacular gaming and entertainment destinations in the U.S.

Tuscany Suites, Las Vegas, 1,019 rooms

The 1,000-room Tuscany hotel-casino, which opened late last year, features an Italian theme aimed at “middle-class and upper-middle-class” convention visitors and leisure travelers. The hotel also boasts over-sized guestrooms and two-bedroom suites with television Internet access.

A project of CMH Real Estate Development, Tuscany Suites is located in Las Vegas on Flamingo Road, east of Koval Lane and west of Paradise Road, and features a 60,000 sq. ft. casino with 1,000 slot machines.

The first phase of the development, a 716-suite hotel with 10,000 sq. ft. of meeting space, is expected to be followed by additional hotel rooms and a casino. The project's cost is not being disclosed.

A variety of dining will be offered, including Palazzo Ristorante, the Piazza Lounge and the Cabana Bar & Grill, located next to a lagoon-style pool.

Westin Diplomat Resort & Spa, Hollywood, Fla., 1,000 rooms

In Hollywood, Fla. — between Fort Lauderdale and Miami — the new 1,000-room Westin Diplomat Resort & Spa promises to bring back the days of glamorous soirees and celebrity performances in lounges. White Plains, N.Y.-based Starwood Hotels & Resorts Worldwide Inc. is developing the 39-story resort tower, which will be adjacent to an Italian-villa style country club, and will include a golf course, a European spa and a pristine beach.

Amenities at the Westin Diplomat, scheduled to open later this month, will include the Celebrity Room Lounge, which will be reminiscent of the original Diplomat Hotel that opened in 1958. The five-story, glass-enclosed lobby will feature an elaborate fountain along its entire length and views of an “infinity-edged” pool with a clear bottom to view the 240-foot lagoon pool below.

An enclosed pedestrian skywalk will connect the resort to a 217,000 sq. ft., state-of-the-art convention center with meeting rooms, ballrooms and a 50,000 sq. ft. Great Hall with exhibition space. The complex also will include the Diplomat Landing with 52,000 sq. ft. of retail space.

Royal Pacific Hotel, Orlando, 1,000 rooms

Royal Pacific Hotel, a project by New York-based Loews Hotels Corp., is the third on-site resort to be constructed at Universal Studios Florida in Orlando. It is scheduled to open in July. Guests will be able to step outside their rooms and head to Universal Studios Florida, Islands of Adventure and the Universal CityWalk Orlando entertainment complex.

The 1,000-room resort will recreate the environment of the South Pacific, complete with waterfalls and lagoons. Amenities will include several restaurants, retail shops, a business center, fitness centers, meeting space and a 28,000 sq. ft. ballroom.

JW Marriott Hotel, 1,000 rooms

Bethesda, Md.-based Marriott International Inc. and Annapolis, Md.-based Thayer Hotel Investors are constructing the Grande Lakes Resort in Orlando, Florida, a property that will include a 1,000-room JW Marriott Hotel and a 584-room Ritz-Carlton hotel. The resort, which Marriott will manage under a long-term agreement, also will offer an 18-hole golf course designed by Greg Norman and a 40,000 sq. ft. luxury spa.

The $547 million Grande Lakes Resort, expected to open in the third quarter of 2003, is located on a 450-acre site. Thayer is leading a group of investors who are making a $65 million equity investment in the project. In addition to selling the underlying land to the Thayer venture for $31 million, Marriott also will provide development services during the two-year construction period.

Over the next few years, the U.S. hospitality industry is expected to experience a boom in mega hotel construction, noted Burba of Wimberly Allison Tong & Goo, who stressed that the current economic outlook for the hospitality industry shouldn't affect the long-term aspirations of these ambitious hotel projects.

“Today's economic challenges won't have a direct impact on these projects,” Burba said. “It might impact some bookings, but the marketplace goes through periodic ups and downs. Just because we quickly went into a down cycle shouldn't change the fundamental reasons why these hotels are being built.

Mike Sheridan is a Houston-based writer.

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