Chapel Hill News

July 27, 2014

Proposed Rosemary Street hotel could add to Triangle boom

A South Carolina developer says a 116-room hotel at 212 W. Rosemary St. would be a “great amenity” for downtown.

A South Carolina developer says a 116-room hotel at 212 W. Rosemary St. would be a “great amenity” for downtown.

OTO Development, based in Spartanburg, wants to build a four-story, upscale “select-service” hotel with 117 underground parking spaces at the corner of Church Street. The developer did not identify a brand that might be interested in the space, but similar hotels include Courtyard by Marriott and Ramada.

The project would replace three buildings occupied by Los Potrillos restaurant, N.C. Chiropractor and an attorney’s office. It would face 140 West Franklin and sit beside La Residence restaurant.

“We believe that given this project’s core downtown location and proximity to the University of North Carolina, the hotel will serve as a great amenity for the entire town of Chapel Hill,” OTO Development real estate manager Jordan Rathlev said in a letter to the town. “In addition, the hotel will benefit from its close proximity to numerous dining and retail options located along historic Franklin Street.”

It also would be more affordable than lodging available now, the developer said, and create more than 100 construction jobs and two dozen hotel jobs.

The hotel would generate more than $200,000 in additional property taxes a year, plus over $130,000 in annual occupancy tax revenue, according to the developer’s application. East Franklin Street residents Michael and Kimberly Slomianyj own all three lots, now collectively valued at $2.3 million and generating roughly $38,579 in property taxes in town, county and school taxes.

Orange County charges hotel guests a 3 percent occupancy tax; Chapel Hill, Carrboro and Hillsborough charge an additional 3 percent.

The developer also noted the project would take advantage of an “opportunity site” identified in the town’s Rosemary Imagined planning process.

The town and the Chapel Hill Downtown Partnership have been leading community conversations for more than a year about Rosemary Imagined – a potential redevelopment of the Rosemary Street corridor into a technology and entrepreneurial hub with greenways, parks, shops and other amenities. The town expanded the conversation this month to include all of downtown Chapel Hill.

Hotel demand

Tourism industry statistics for May show Orange County had 1,623 rooms available in 16 hotels, according to Smith Travel Research. Several more hotels are in the planning stages or under construction, including a 112-room Hyatt Place hotel at Southern Village.

That may raise questions about whether Orange County can support more hotel rooms, but Laurie Paolicelli, executive director of the Chapel Hill-Orange County Visitors Bureau, said it depends on the brand and the individual hotel’s business plan. Chapel Hill and Carrboro attract more weekend and short-term visitors than business travelers who stay Sunday through Thursday, she said.

Orange County has seen a net gain in tourism over the last 10 years, she said. Industry reports show roughly 71.8 percent of the local hotel rooms were booked each day on average in May. That was up slightly from the 69.4 percent reported in May 2013, reports show, and continues a trend since 2009, when Orange County’s hotel occupancy rate was 58.9 percent.

Durham and Chapel Hill together reported a 69.1 percent occupancy rate in May, industry reports show, compared to 68.4 percent at the same time last year. Wake County reported a May occupancy rate of 70.2 percent for its roughly 15,500 hotel rooms.

“Chapel Hill, Durham and Raleigh, frankly, are really ahead of a lot of tourism right now,” Paolicelli said. “Chapel Hill is very attractive. The numbers are impressive, and many developers feel like we’re not overdeveloped.”

It’s more likely, with the large number of hotels coming on line in Durham now, that the counties will start to cannibalize each other’s business, she said. The Durham Convention and Visitors Bureau reports that county now has 7,610 rooms in 65 hotels, and another 1,697 rooms in 14 projects underway.

Now is not the time to hold back, Paolicelli said.

“The more competitive it’s getting, we’ll have to get more competitive, too,” she said. “You can’t just put a sign on the door that says welcome to Orange County.”

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