Sheldon S. Shafer
Hotel business in downtown Louisville probably has never been stronger and may improve even more with the impending $207million renovation and expansion of the Kentucky International Convention Center.
Occupancies are high, room taxes are low.Four new hotels have opened downtown in the last 18 months, and at least eight more of all shapes, sizes and services are in the pipeline.
But even with all that activity, hospitality officials say that hundreds of additional rooms are needed to accommodate the expected influx of visitors after the 40-year-old convention facility's makeover.
The center will close in mid-August for two years, perhaps creating a temporary lull for some hotels. But when it reopens, new-found convention business should keep the hotelrevolving doors spinning, increasing room rentals by at least 25 percent, officials predict.
Meantime, officials hope to avoid a repeat of the stunning decision made last year by the National FFA Organization to move its lucrative convention, perhaps for good, from Louisville to Indianapolis. The primary reason was that Louisville lacked enough "affordable" double-occupancy hotel rooms favored by teenagers.The annual FFA event drew about 60,000 visitors and poured $40 million into the local economy.
Currently, most of the hotels in and near downtown stay busy, catering to visitors to trade shows, conventions and attractions, as well as to sporting events, religious meetings and arts activities.
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Fourth Street Live! is abuzz. The Urban Bourbon Trail is being blazed in earnest.Louisville Slugger and othermuseums are seeing record crowds.And the KFC Yum! Center, a crowd magnet for sports and concerts, ranked eighth in the nation and 22nd in the world among all venues for ticket sales in the first quarter of this year.
To feed the frenzy, as well as to meet the anticipated increase in demand to accompany the convention center upgrade,hoteldevelopers are paying rapt attention to Louisville's hospitality industry, saidKaren Williams, president and CEO of the Louisville Convention & Visitors Bureau, the chief local convention recruiter.
"I get calls every week from hotel developers.They know this market – and the market's there," she said.
There soon may be, so it seems, a new hotel on every corner, said Brad Walker, manager of the historic Brown Hotel.
Four hotels have opened in downtown Louisville since late 2014.They added nearly 800 rooms, at a cost of around $140 million.
They are: Embassy Suites on Fourth Street (304 rooms, $80 million investment); Holiday Inn Express on Market Street (145 rooms, $20 million investment); the Aloft on Main Street (175 rooms, $22 million investment); and the Hilton Garden Inn at Fourth and Chestnut streets (162 rooms, $18 million investment).
If the eight hotels in the pipeline are completed, they will provide almost 1,500 more rooms in or near downtown and involve a total investment of around $850 million.Theyincludeluxury properties, mid-scale inns, boutiquehotelsand extended-stay locations. That adds to what already is a really good mix of hotel offerings, officials said.
Existing market strong
On apositive note, the nationwide hotel occupancy rate has recovered, after falling to a low of 54.6 percent in 2009at the height of the recession. It climbed to 65.6 percent in 2015, according to CBRE Hotels' hospitalityresearch, with 2016 also expected to be a blockbuster year for the industry.
The existing local hotel market appears strong, with the prevailing occupancy rate for all of the hotels in Jefferson County at 65.7 percent in February, up from 61.7 percent in February 2015, according to industry reports.
Comparable occupancy rates for other metro areas in February 2016 were: Nashville, 70.3 percent; Indianapolis, 63 percent; St. Louis, 60 percent, and Cincinnati, 56 percent, Williams said.
"All our hotels are doing well,"Williams said, adding that 2016 should be "among our best years ever."
Williams predicted that when the 600-room luxury Omni Hotel opens in 2018 as part of a $300 million, mixed-use development in the heart of downtown, significant new business will be drawn to Louisville and"everybody's occupancy will go up."
She said Louisville may duplicate the experience of Nashville, where convention business is thriving following theopening of an Omni Hotel in 2013 and the upgrading of the nearby downtown convention facilities.
Williams said that Louisville's hotel business is also helped by the relatively low room tax, just over 16 percent, counting the state sales tax add-on. That is slightly less than the room tax burden in Cincinnati and Indianapolis –and a major consideration for convention planners.
Metro area room comparison
There are just under 15,000 hotel rooms in Jefferson County, and 18,670 in the metro area, including nearby Kentucky and Indiana counties.
That may sound like a bunch, but incomparison with metro areas in the region, St. Louis has 38,000 rooms, Indianapolisabout 33,000, Cincinnati 37,700 and Nashville 26,600.
"We are not where we need to be," Williams said.
She said Louisville has about 4,700 rooms considered to be downtown, or within walking distance of the downtown conventioncenter.That includes about 2,300 connected to the convention center by the skyway system.
Ideally, "we need at least 5,500rooms within walking distance," Williams said. "To be attractive to meeting planners, you have to be within walking distance" of the convention facility.
Mayor Greg Fischer cited the recent nationaltourism accolades Louisville has received –along with the variety of meeting locations and the more than 2,100 new hotel rooms in development (including the Omni) –as proof that Louisville is a primedestination for a corporate meeting, event or conference.
More rooms needed
Williams said that if shehad her druthers, Jefferson County might have as many as 20,000 rooms.But any additional major increase in hotel development beyond what's now planned probably should be accompanied by a large refurbishing of the aging Kentucky Exposition Center, Williams said.
And in recent years, the Kentucky State Fair Board has run into seeming reluctance by the state legislature to fund major capital spending at the fairgrounds.
Williams said the convention center renovation and expansion and the development of new hotels go hand in hand. "You can't do onewithout the other," she said.
She said the new Omni will be the first "convention headquarters" style hotel –with ballroom, banquetfacilitiesand ample meeting space –built in Louisville since the Louisville Downtown Marriott opened in 2005.
Agood mix of brands,ratesand types of hotels creates more options and makes the city more salable for convention business, Williams said. And she said the new and planned hotels coming downtown "areinvery good places."
Groups want improved facilities
Many groups thathave long been convening in Louisville have been "dying" for improved convention and hotel facilities, said Donna Marquez,chairwomanof the Greater Louisville Hotel & Lodging Association and general manager of the Louisville Hyatt Regency.
"I hear from the mouths of meeting planners that they want" the improved convention center, Marquez said. She agreed that there should be ample business for all the hotelsafter the center reopens.
Marquez said it seems that new hotels "are popping up every day" – and for good reason.
Walker, the Brown Hotel's manager, said its occupancy has been running around 75 percent and has risen every year since the recession ended.
Walker said that overall local hotel occupancy may level off temporarily because of the convention center makeover. But he saidthat in a few years, "everybody will catch up. Louisville has a lot of activity, with a lot of amenities." He also said that the Omni project "will bring in new business."
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Citing the convention center project, Amanda Lambert, spokeswoman for the Al J. Schneider Co. that owns the Galt House downtown and the Crowne Plaza near the airport, said, "We do believe there will be enough demand" for all the hotels.
Williams predicted that the likely sale of the 1,300-room Galt House "probably won't change the marketor affect competition to any great degree."
"We need its attributes, especially the rooms and its convention space," she said of the huge riverfront hotel.
The list of eighthotels either planned or under development in or near downtown does not include the proposed Hotel Louie on Bardstown Road in the Highlands that accountant Glenn Barber said "is still a possibility. We are trying to raise the equity.I want to make it happen."
The menu of new hotels coming to the city center range from extended stay to boutique brands.
Architect Bill Weyland's City Properties Group and hotel developer First Hospitality Group jointly are seeking financing for a Home2Suites by Hilton at Jefferson and Hanco*ck streets. Weyland spokeswoman Lora Mindel said the market for the project is excellent,noting that ahotel is needed close to hospitalsand rehab centers. She said the hotel will provide a place to stay for families of patients undergoing treatment at the nearby facilities.
Theboutique properties constitutea rapidly developing sector of the hospitality market. They provide specialized, even tailored services –but usually for a premium price.
Hudson Holdings of Delray Beach, Fla., is working on converting two major downtown historic office buildings into boutique hotels.
Steven Michael, afounder of Hudson Holdings, said the 17-story Starks Building at Fourth Street and Muhammad Ali Boulevard will have about 260 hotel rooms and will be operated under the Canopy by Hilton brand.The hotel is part of a $110 million renovation of the Starks that also will include apartments, restaurants and retailing.
Hudson Holdings also has purchased the 11-floor Republic Building a block away at Fifth and Ali. It plans a $40 million redevelopment that will include about 110 hotel rooms operated as a Hotel Indigo, a brand of the InterContinental Hotels Group.
Michaelsaid the two hotels a block apart will help handle the additional demand for rooms generated by the convention centerredevelopment.
"I think the current market is quite a bit underserved, based on the current demand and the number of conventions and the amount of tourism," he said."The big trend in the hospitality market right now is the high-end, luxury boutique hotel."
Williamssaid poshboutique guest quarters appeal especially tomillennials and to leisure travelers with money to spare.
Evidence of the popularity of boutique properties is the 21c Museum Hotel chain in Louisville.In the past several years it has established properties in Cincinnati, Lexington, Durham, N.C., and Bentonville, Ark., and it has another hotel under construction in Oklahoma City and yet another planned in Nashville.
The starting room rate at 21c Louisville is $259 per night.
"Many travelers today are looking for more than just a comfortable bed and free Wi-Fi.They are looking for a unique experience and for new foods and beverages," said Craig Greenberg, 21c's president.
Many of the existing hotels have spent significant sums in the past year or two on enhancements, intending to keep up with the competition and with new properties coming online.
The Brown, for instance, plans a $750,000 rooftop garden and event space, the Seelbach Hilton recently completed a $10 million renovation of its public spaces, andthe GaltHouse has made over its lobby and conservatory and installed energy-efficient windows. The Hyatt Regency Louisville just completed a $16 million improvement program, fancying up all 393 rooms.
Reporter Sheldon S. Shafer can be reached at (502) 582-7089, or via email at sshafer@courier-journal.
New hotels
Four hotels have opened in downtown Louisville since late 2014. They added nearly 800 roomsat a cost of around $140 million. They are:
- Embassy Suites on Fourth Street (304 rooms, $80 million investment);
- Holiday Inn Express on Market Street (145 rooms, $20 million investment);
- the Aloft on Main Street (175 rooms, $22 million investment);
- and the Hilton Garden Inn at Fourth and Chestnut (162 rooms, $18 million investment).
At least eight more properties are in the pipeline — hotels that, if all completed, will provide almost 1,500 more rooms in or near downtown and involve a total investment of around $850 million.
Convention Center plans
- The Kentucky International Convention Center will close in August for twoyearswhile undergoing improvements, officials said.
- It will get a minimum of 200,000 square feet of column-free exhibit space and a 40,000-square-foot ballroomwithin the existing footprint.
- Consultants predict a 25 percent increase in business will translate into an additional $10 millionin annual economic impact downtown.
- Convention officials believe Louisville missed out on around 20 conventions and 67,000 hotel room nights last fiscal year — an economic impact of $57 million — because downtown convention facilities were inadequate.
- Consultants hired by the fair board concluded that the convention center's problems include a confusing layout — the facility's lower level is bisected by Third Street — poor signs, a small registration area and outdated facilities, including elevators.
