Real Deals

New owner plans makeover for Raleigh's Clarion Hotel

dbracken@newsobserver.comSeptember 5, 2012 


The Clarion Hotel (right) on Hillsborough Street in downtown will be renovated and converted to a Holiday Inn. Photographed from the Local Government Federal Credit Union Building on Jones Street on Wednesday September 5, 2012.


The new owner of the cylindrical Clarion Hotel in downtown Raleigh plans to convert it back into a Holiday Inn and invest millions renovating the interior and exterior.

Miami-based Sound Hospitality Management, which acquired the 202-room hotel for $9.35 million last week, expects to complete the makeover in the next nine to 12 months, said Ben Castera, the company’s president.

“We want to upgrade this hotel into a good, quality mid-scale product,” he said.

Sound plans to close one floor at a time – and not the entire hotel – while it makes improvements.

Castera said the company’s investment in Raleigh fits neatly into Sound’s strategy of buying – and holding for long periods – medium-priced hotels in growing markets. Sound’s portfolio also includes three hotels in Florida, two in Arlington, Va. and one in Columbus, Ohio.

The company has owned its properties in Florida and Arlington since Sound was formed two decades ago, Castera said.

Sound actually considered buying the Clarion several years ago when it was last on the market. The hotel was bought in 2004 by Roundabout Partners, a local group that included developer Arthur Sandman, his son Michael Sandman and Joe Rouse.

The partnership made $8 million in upgrades to the 20-story building, which by then was suffering from years of neglect.

“The previous owner had done amazing work but only on mechanical, electrical and plumbing – only the structural part of the hotel,” Castera said. “The hotel needs badly some cosmetic work.”

That means new carpet, furniture, improved Wi-Fi access and a new facade for the exterior, among other improvements. It also means renovating the rooftop restaurant on the hotel’s top floor.

Sound was originally started by European investors. Castera, who lives in Miami, was born in France.

The Clarion is the first hotel Sound has purchased since it acquired a Holiday Inn in Columbus about five years ago. Like the Clarion, that hotel is near a convention center and state government offices.

Castera said now is a good time to be acquiring mid-priced hotels, which have been performing better

He said that segment of the market is benefitting from two complementary trends: While the hotels have been improving the product and services they offer, customers who traditionally stayed at nicer hotels have been seeking out less-expensive alternatives.

“When you look at it nowadays, there are lot of brands offering an upscale product but the clientele is somewhat limited, and obviously has been shrinking with the economic downturn,” Castera said.

Castera said his group has already been in touch with the folks at the Greater Raleigh Convention and Visitors Bureau, who are no doubt ecstatic to see further renovations to an existing hotel near the convention center. Downtown now has about 1,000 hotel rooms, but boosters have been clamoring for additional units that would increase the convention center’s chances of landing larger events.

The occupancy rate in downtown hotels was 63.5 percent through the first six months of year, which is slightly better than the rate for Wake County, the state and the U.S., according to Smith Travel Research, a Tennessee company that tracks the lodging industry. More important for hotel owners, revenue per available room was $74.62, up 7 percent from the same period last year.

The Clarion first opened as a Holiday Inn in 1969, one of 25 round motels conceived by Holiday Inn founder Kemmons Wilson. Castera said Sound has experience repositioning older properties to meet the expectations of modern guests. A Holiday Inn the company owns in Coral Gables, Fla., is among the brand’s oldest in the U.S.

As for the look of the Clarion, Castera is a fan.

“It’s a landmark, that’s what they are” he said. “I think it’s interesting. Why not?”

Bracken: 919-829-4548

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