After lagging for years during an industry downturn, sales of hotels and the prices being paid for them in Colorado Springs are hot.
During the past three months, buyers have paid $35.6 million combined — an average of $63,568 a room — for the Wyndham Hotel, the Hilton Garden Inn and Towne Place Suites, all in northern Colorado Springs.
The last time a group of Springs hotels sold was in 2004, when the Antlers Hilton, Clarion and Wyndham hotels sold for a combined $38 million, at an average of $47,250 a room. In the most recent local deals, the average room rate was a 34.5 percent increase from the 2004 average room rate.
In addition to the recent hotel sales, Springfield, Mo.-based John Q. Hammons Hotels & Resorts LLC will begin construction early next year near Interstate 25 and InterQuest Parkway on the city’s first new full-service hotel in nearly 20 years.
The Renaissance Hotel, an upscale brand in the Marriott chain, is expected to cost up to $60 million and include 80,000 square feet of meeting space. That’s more than any other hotel in the Springs except The Broadmoor hotel, with meeting space totaling 185,000 square feet.
SALES SHOW INVESTOR CONFIDENCE
The recent hotel sales and The Renaissance project show that hotel developers and buyers think the Springs market is well on its way to re- covery, an industry expert said.
“These buyers (of the Wyndham, Hilton and Towne-Place) have confidence in the Colorado Springs market,” said Terry Sullivan, president of Experience Colorado Springs, the local tourism office.
“They expect the market will provide a return on their investment.”
That expectation comes from recent increases in room and occupancy rates, projections that rates will continue to rise and a general rising tide of hotel sales in Colorado and across the nation, Sullivan said.
A look at the recent local hotel deals proves the point:
The Procaccianti Group paid $16.75 million last month for the 311- room Wyndham Hotel, or more than three times what the hotel sold for 16 months earlier. It will become a Marriott.
RLJ Urban Lodging Fund LP, a partnership controlled by Black Entertainment Television Inc. founder and Charlotte (N.C.)
Bobcats basketball team owner Robert L. Johnson, paid $11.9 million last month for the 154-room Hilton Garden Inn. RLJ bought the hotel from the company that built it in 1998. The original cost is not known.
In December, a partnership controlled by J.E. Robert Cos. paid $6.95 million for the 95-room TownePlace Suites by Marriott hotel at 4760 Centennial Blvd.
Robert bought the hotel from the company that built it in 1999. The original cost is not known.
In a fourth deal, which has not yet been completed, a partnership headed by Dawson Hubert, a former Colorado Springs city councilman, is scheduled to complete its purchase this month of the 200-room Park Plaza hotel — the former Holiday Inn off Garden of the Gods Road — for an undisclosed price. The current owners paid $2.81 million for the hotel in 2004.
Hubert said he thinks occupancy and room rates in Colorado Springs are headed higher in the next few years, in part because of the addition of the two new Marriott-branded hotels in the city.
“Marriott drives rates higher in the markets they enter,” Hubert said. “That is the only way buyers can recover their investment — by raising room rates.”
Officials from RLJ and J.E. Roberts did not respond to repeated requests for interviews.
TRENDS SHOW PROMISE
The local hotel market hit the skids after a building boom flooded the city with 4,000 additional rooms during the late 1990s – - boosting the total number of rooms to more than 11,000 — and the 2001 terror-ist attacks and an economic downturn reduced leisure and business travel.
Confidence that the Springs hotel market now is worth investment comes in part from last year’s occupancy and room rates, which show an upswing.
Local hotel occupancy increased last year for the first time in nine years to 59.6 percent, and the average room rate rose 6.9 percent to a record $78.09, according to the Rocky Mountain Lodging Report.
Although improved, the occupancy rate remains below the 64.1 percent it reached in 2000.
In addition to higher rates, local confidence in the hotel market comes from a state and national trend.
In Colorado, hotel deals totaling $135 million closed last year – - the most since 1998 and more than the previous four years combined, according to data compiled by Jones Lang LaSalle Hotels, a Chicagobased hotel-investment firm. None of those deals was in the Springs.
The average price per room last year in the state was nearly $144,000, the highest since 2001.
Nationwide, buyers paid a record $21 billion for hotels last year, up 62.8 percent from the previous year, according to Jones Lang LaSalle.
The Jones Lang LaSalle report, which covers only hotels selling for $10 million and above, confirms that the growing investor appetite for hotels is tied to rising occupancy and room rates, an “overwhelmingly optimistic” outlook for the lodging industry and few new hotel projects.
Investors look at numbers, like those in a recent PricewatherhouseCoopers LLP report projecting that nationwide hotel occupancy will increase from 63.1 percent last year to 64.1 percent this year and 64.7 percent next year, while rates will rise more than 5 percent a year.
Another recent Jones Lang LaSalle report of 2,000 investors worldwide said buyers outnumbered sellers by a 5-to-1 ratio in North America, with nearly two-thirds saying they plan to buy a hotel in the near future.
Investors are pumping money into hotel deals, the company said, because they now view hotels as a better alternative to stocks, bonds or other types of real estate.
At the same time, hotel chains are selling off hotels while continuing to manage them.
At least one national deal had an impact locally: The New York- based Blackstone Group agreed last month to pay $2.6 billion for MeriStar Hospitality Corp., a realinvestment trust that owns the 500- room Sheraton Colorado Springs Hotel, the city’s second largest.
“The hotel industry has clearly recovered significantly since the 9/11 attacks. Occupancy, revenue and all of the major indicators are up, and that will continue in 2006 and into 2007,” said Kristina Paider, marketing and research director for Jones Lang LaSalle.
CONTACT THE WRITER: 636-0234 or wayneh@gazette.com
HOW THE CHAINS STACK UP
Here is how the local major hotel chains will look after the dust settles from recent sales and construction of a few new hotels: HILTON (1,417 rooms in 9 hotels)