Washington's prosperous hotels, traditionally more successful than most in keeping their rooms full, are beginning an expansion boom that could cut their enviable occupancy rates and ultimately their profits.
At least 20 new hotels with upwards of 8,000 rooms are ready to open, under construction or on the drawing board in the District of Columbia, a census by The Washington Post shows.
If all of them are built, the number of hotel rooms in the District will jump almost 50 percent, from the present 16,532 to more than 24,000 in the next four years.
Some of those projects are little more than a gleam in a developer's eye, and may never be constructed. But even a more conservative count by the city planning department projects a 7,000 room leap -- 40 plus percent.
The hotel boom was triggered by the decision to build the D.C. Convention Center and fueled by District policies that encourage hotel construction, particularly in the convention center neighborhood.
But the convention center alone can provide no more than 40 percent of the guests needed for a downtown hotel to operate profitably, estimated Fred Mosser, a hotel specialist with the accounting firm of Laventhal & Horwath, a consultant on several of the new projects.
"They need to have an additional market to get the average annual occupancy to the point of making a profit," said Mosser, who figures a hotel must run better than 60 percent full to make money.
Mosser is not afraid of overbuilding. "The potential certainly exists, but I don't anticipate it happening," he added, admitting, "We see an awful lot of plans and proposals making the rounds."
But others with hotels in the works are anxious about saturation. "It scares me with all the hotels that are coming," said Payton Fletcher of Westminster Investing, a B.F. Saul subsidiary that's planning a hotel on Pennsylvania Avenue.
"I am concerned about it," agreed hotelier Al Wheeler, who is six weeks away from opening his new Georgetown Marbary House at 30th and M Streets NW, next door to the Georgetown Dutch Inn, which he also owns.
Like most of the new hotels planned, Georgetown Marbary House will offer luxury lodging, Wheeler said, "in the same class with the Four Seasons or the Georgetown Inn," from which some key employes have been lured.
Rooms will averge $90 a night at the 207-room Georgetown hotel, which has a high proportion of suites, including several two-level layouts with balcony bedrooms.
Wheeler's Dutch Inn opened in 1968 and thrived. "We've had occupancy rates in the 80s all the time and for five years were in the 90s," the owner said.
Such a full house is extraordinary even by the standards of Washington hotels, which industry sources say average about 72 percent occupancy, compared with a national average of about 68 percent.
Adding a couple of percentage points to occupancy rates can result in big profit increases for hotels, because once the cost of running the place is covered, each extra guest is gravy for the innkeeper.
Luxury hotels historically are more profitable than budget accommodations, Mosser said, and as a result the 20 new properties planned here are mostly geared to the carriage trade.
The high cost of real estate in the District also makes luxury hotels more attractive, said the hotel consultant, who figures it costs $80,000 to $120,000 a room to build a downtown hotel, counting land, construction and development expenses.
Wheeler's Marbary House will be the nation's first Quality Royale, a new upscale chain being developed by Quality Inns International of Silver Spring.
Phoenix-based Ramada Inns is pursuing a slightly different upscale strategy and sometime around the first of the year will open a 360-room Ramada Renaissance at 1143 New Hampshire Ave. NW. The only other Ramada Renaissance in the United States is in Denver, but the group will be expanded to 16 by 1983.
Ramada Renaissance is meant "to reach a portion of the market that the Hiltons and Hyatts don't," a spokesman said. "We will offer the same services and amenities for 10 to 15 percent below their rates."
The new Ramada Inn is in a former hospital that was gutted and refitted by FCH Services, a Washington firm, and will be managed by Ramada.
Another conversion is under way on the opposite edge of downtown, at 10th Street and Massachusetts Ave. NW, where an old apartment building called Tudor Hall is being turned into a 100-room luxury hotel by local developers Coakley and Williams.
In between, the venerable Willard at 14th Street and Pennsylvania Avenue will be reopened in three years by Oliver T. Carr Co., Florida developer Stuart Golding and Fairmont Hotels Co. of San Francisco.
Fairmont is one of several big-time lodging companies that are moving into Washington, bringing their computerized reservations networks and international marketing plans with them.
The Carr company has signed a letter of intent with Meridien Hotels, a subsidiary of Air France, to run one of two hotels Carr plans to build in the West End -- the rapidly rebuilding neighborhood between downtown and Georgetown.
Carr officials are negotiating with a big domestic hotel chain to run the second hotel, and Omni Hotels will run a 540-room hotel as part of a project in the same neighborhood where a hotel is planned by U.S. News and World Report and Boston Properties Inc.
Under construction behind the Madison Hotel at 15th and L Streets NW is a 420-room hotel to be run by Vista International, the name used in the United States by Hilton International. The overseas affiliate of Hilton Hotels has grown so big it is expanding back into the United States.
Barely a block from the new Vista, a 75-room addition is planned for the Holiday Inn at Thomas Circle. Also discussing an addition is the Fairfax Hotel at 2100 Massachusetts Ave. NW.
The biggest of the new inns will be a group of downtown hotels catering to the convention and visitor markets: the 800-room J. Willard Marriott facing Pennsylvania Avenue between the National Theatre and National Press Building; another 800-room hotel to be built on the block north of Woodward & Lothrop by Quadrangle Development Corp.; a 600-room property that a group of minority developers plans to build atop the Gallery Place subway station; a 500-plus-room Hilton planned near the convention center by Watergate builder Giuseppe Cecchi.
Construction of hotels adjacent to the convention center -- between 9th and 11th Streets, H Street and New York Avenue -- is being encouraged by the District government. A special "hotel incentive zone" in effect lets developers build hotels with two more floors than an office building on the same site.
The incentive zone stretches along Massachusetts Avenue from a half block east of Thomas Circle almost to Union Station.
Though the effectiveness of the zoning incentives has been questioned by some developers, the bonuses encouraged a Dutch developer, Kalian N.V., to plan a 300-room hotel to be called the Inns of Court at Fifth Street and Massachusetts.
City Planning Director John Fondersmith said the District "is very interested in getting a critical mass of hotels" in that neighborhood where the Hyatt, Quality Inn and Bellvue are now. "If you can get another 500 or 1,000 rooms in that area, you'll have enough."
A couple of thousand hotel rooms in that neighborhood northwest of the Capitol, Fondersmith explained, would put people on streets that are now largely deserted after 5 p.m. and on weekends. Restaurants, shopping and a more diversified neighborhood ought to follow.
That planning philosophy is also behind city efforts to attract hotels to the convention-center area. "Hotels there serve the convention center and they plug into the downtown retail core. You get support for the retail shopping that you may not get if hotels are built in other areas," he said.
District planning regulations count hotels as "residential" property in mixed-use developments, which also benefit from zoning incentives. The spin-off benefits of hotel construction include sales taxes the city collects from guest expenditures as well as the District's hotel-room tax.
Hotels also provide more job opportunities for low-income District residents than office buildings, the city planners argue, citing the need for cooks, maids and maintenance workers.
Putting up a hotel instead of an office building can also be economically attractive to developers, said hotel consultant Mosser. "A developer in Washington can put up an office building with a certain degree of assurance and predictability of profit," he explained. "With a hotel you may have to wait a little longer, and the risks are greater, but so is the payoff."