New downtown hotels proliferate as visitation grows

In Perspectives by Joe Sullivanleave a COMMENT

A previous column highlighted downtown’s budding resurgence as a place to work, complementing its ongoing growth as a place to live.

Another important contributor to downtown’s overall vitality is its growing popularity as a place to visit. A key barometer of this growth is the dramatic increase in hotel occupancy and room rates, and perhaps even more dramatically the spate of new downtown hotels that it has spawned.

For the 12 months ending in April of this year, occupancy rates at downtown’s six hotels rose to 65.7 percent from 63.2 percent in the comparable period a year before and 61.5 percent in the prior year. Average room rates over the same span went up to $126.70 in the current year from $120.68 and $114.40 in the two prior years respectively. (All of these data are gleaned from reports furnished to hotels by STR, the global compiler of hotel statistics.)

The six hotels included with a total of about 1,400 rooms are the Crowne Plaza, Hampton Inn, Hilton, Holiday Inn, Marriott, and the Sheraton Cumberland House (although the latter two are just outside of downtown proper.) But their recent success has not come without competitive consequences.

No fewer than five new hotels with a prospective total of about 700 rooms are either just open, in the works, or on the drawing boards. The chic 70-room Tennessean that opened in April in a renovated former state office building on Henley Street is due to be followed in November by the 165-room Hyatt Place at the corner of Gay and Clinch that was once the home of the historic Farragut. A block to the south on the former News Sentinel site, work is well underway on a 232-room complex that will be part Residence Inn and part Courtyard by Marriott. A few blocks to the west, the same developer who is investing $25 million in the Hyatt Place (Rick Dover) has included plans for a 100- to 120-room Aloft Hotel in his winning proposal for mixed-use redevelopment of the former State Supreme Court site. And finally, just across the river, the developer of the former Baptist Hospital site envisions yet another 100- to 120-room hotel going up there within the next year or so.

So what gives rise to all these surges? The robust growth in room demand is more readily explained than an almost perplexing 50 percent prospective spike in room supply.

What’s classified as leisure travel has been the biggest contributor to the growth. As word has spread of downtown’s myriad new attractions, more and more visitors have been drawn to the city. That’s especially the case during the spring months when festivals abound. Big Ears, Rhythm and Blooms, Dogwood, Rossini, and the International Biscuit Festival have all been drawing cards. And Visit Knoxville’s extensive promotion of the city for “three-day getaways” has contributed as well.

“Our occupancy and room rates on the weekends are now higher than during the week, which is just the opposite of what used to be the case,” reports the Crowne Plaza’s veteran general manager, Ken Knight. He hastens to add that business travel, conventions, and other categories have all been growing as well. “Overall, occupancy is better than at any time since I moved here 24 years ago.”

But is it better enough to support anything like the 50 percent increase in downtown hotel rooms that are coming on the market? Or will rising supply create its own demand?

Knight doesn’t think so on either count. “People won’t come here just because we have more hotel rooms. With all this new supply, it’s inevitable that occupancy will drop and rates will drop. It’s not going to be good for business in the near term,” he says almost forebodingly. Another hotelier on condition of anonymity declares, “It scares the hell out of me.”

Both the Tennessean’s owner, Nick Cazana, and the ubiquitous Rick Dover are convinced their properties will carve out upscale niches for themselves. The developer of the Baptist Hospital site, Vic Mills of Southeastern Development Associates, believes there’s a place for a new hotel with a lot of amenities there as well. “A large portion of our existing rooms have a lot of age,” he observes. Indeed, only the 85-room Hampton Inn and the 129-room Sheraton Cumberland House have been built since the 1982 World’s Fair.

If there’s a potential odd man out, it could be the Marriott. Built in the early 1970s as a Hyatt Regency adjacent to the then new—but now antiquated—Civic Auditorium and Coliseum, the Marriott would appear to be at a locational disadvantage. There have been published reports of a possible foreclosure sale. But neither the Marriott’s general manager, Dylan Walker, nor its owner, Kentucky-based Columbia Sussex, responded to phone calls or emails seeking comment.

One thing that’s helped keep the Marriott going up to now is the fact that it’s the only hotel with that flag in or near downtown. Brand loyalty rewards are important in attracting guests, especially frequent business travelers. So when the new Courtyard by Marriott opens in downtown proper, it could pull a lot of business away from the old Marriott to the east.

Hotel occupancy is by no means the only way to measure Knoxville’s visitor growth.

For another, the Knoxville Convention Center reports an increase from 173 events with total attendance of 286,409 in 2014 to 194 events with total attendance of 348,694 in 2016. And Visit Knoxville continues to ramp up convention bookings for the years ahead.

An annual analysis of the Economic Impact of Travel conducted for the Tennessee Department of Tourist Development shows that travel expenditures in Knox County topped the billion-dollar mark in 2015, the most recent year for which data is available. The total of $1.014 billion for that year was up from $988 million in 2014.

So by just about measure, visitors are making a big and growing contribution to the city’s economic well being.

Columnist

Joe Sullivan is the former owner and publisher of Metro Pulse (1992-2003) as well as a longtime columnist covering local politics, education, development, business, and tennis. His new column, Perspectives, covers much of the same terrain.

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