Earlier this month the city of Raleigh’s Planning Commission recommended approval of Summit Hospitality Group’s plans to build a 166-unit Marriott Residence Inn on the west side of Salisbury Street, between West Lenoir and West South streets in downtown.
Construction is expected to begin this spring, which would be roughly three years after the project was first proposed. For all the renewed interest in downtown Raleigh, and all the talk about how more hotel rooms are needed, the area has had a hard time getting any hotel projects out of the ground.
While boutique hotels such as Aloft and AC move forward in west Raleigh and North Hills, downtown projects for the most part remain in the planning stage.
“There’s been a lot of activity, a lot of inquisitive inquiry-type activity,” said Loren Gold, an executive vice president with the Raleigh Convention and Visitors Bureau. “Shovels in the ground? Not so much.”
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The lack of new construction has occurred despite the fact that the performance of downtown Raleigh’s few hotels improved dramatically last year, according to several key metrics.
The average daily room rate last year in downtown hotels was $136.33, up 7 percent compared to 2013, according to STR, a Tennessee company that tracks the lodging industry. (Those figures reflect the performance of four hotels: The Raleigh Marriott City Center, the Sheraton Raleigh Hotel, the Holiday Inn-Raleigh Downtown (formerly the Clarion) and the Hampton Inn & Suites in Glenwood South.)
Revenue per available room at the four hotels jumped 19 percent to $92.14 last year. Room occupancy rose 11.2 percent to 67.6 percent.
Those numbers are more impressive when you compare them to the entire Wake County market, which saw occupancy increase 6.7 percent; average daily room rates 5.5 percent and revenue per available room 12.5 percent.
“I think what you’re seeing is a continued success story at the convention center – we’re still continuing to book conventions and bring in a lot of different groups,” Gold said. “But I think what you’ve also seen is a big swing in individual business travelers because of downtown entities like Citrix and Red Hat growing and other tech and new companies coming into downtown.”
Still, the question is whether such momentum will translate this year into more projects getting approved and built. There are at least four developers now considering hotel projects in downtown Raleigh. One is an existing hotel owner in downtown, Gold said.
Another is a Huntersville developer, Narsi Properties, that filed plans earlier this month seeking to rezone a half-acre site at the intersection of South Wilmington and East Lenoir streets just east of the Charter Square office building now under construction on Fayetteville Street. If approved, the rezoning would allow a building up to 12 stories tall. The site is now home to two residential houses and a headquarters building for the General Baptist State Convention.
Also still alive is a Greensboro developer’s plans to build a 140-room Hilton Garden Inn at an old Turn Key Tire Service store at 200 W. Davie St., between Dawson and Salisbury streets.
Two other sites now up for sale – a roughly 1-acre site in the warehouse district near Citrix’s headquarters; and the city-owned site at 301 Hillsborough St. – also could support redevelopment projects that may include a hotel.
The city will soon have a better idea how many new rooms the downtown market could support. The city is seeking to hire a company to do a hotel feasibility study on the market, which is expected to be completed by the end of Raleigh’s fiscal year in May.
The four hotels being considered for downtown contain 1,082 rooms.
“What we’re looking to see is can the market sustain, ideally, another 600 rooms,” Gold said.
The Convention and Visitors Bureau would like to see a dual-brand project get approved, which would include a full-service hotel, such as a Sheraton or a Marriott, and a mid-tier brand next door that are both owned by the same owner.
“And then the discussion becomes how proactive are we in telling the story collectively as a city,” Gold said. “What are we out there showing the potential developer from a private land opportunity and a public land opportunity. We’re trying to work together to kind of push together towards a more proactive strategy.”