When the new guest room furniture began arriving at the Shoreham Hotel a year ago, manager Charles Barren ordered it stored in the basement.

The furniture couldn't go into the rooms until they were renovated, and with interest rates at 15 percent plus, Dunfey Hotels, owner of the Shoreham, was reluctant to start rebuilding the 52-year-old hotel.

But Dunfey executives decided shortly that the Shoreham couldn't wait for the economy to turn around.

"We waited a year," said Barren, "But we had to go ahead. The alternative was to sit here and watch business flow out the door. To compete in the market place, we had to invest more money."

Now, in the midst of one of the most difficult years ever for Washington hotels, the Shoreham is completing a $15 million facelift.

In the last few months, $10 million has been spent to refurbish and refurnish 300 guest rooms and all the Shoreham's major public spaces. From custom-made carpeting to hand-painted murals and newly gilted gargoyles, the hotel has been brought back to good-as-new grandeur.

Another $5 million will be used this year to redo the remaining rooms as the next step in Dunfey's effort to rescue the Shoreham from the deteriorated state it had slipped into before Dunfey acquired it.

The goal is to repeat what the Dunfey chain has done with most of the 21 other hotels it owns: take an aging underachiever and turn it into a classy, competitive hotel. A subsidiary of Aer Lingus, the Irish airline, Dunfey's properties include the Parker House in Boston, the Ambassador East in Chicago and Berkshire Place in New York, all older buildings that have been modernized into luxury hotels.

"Our goal is to reposition the Shoreham as a luxury convention hotel," said Barren. "We want to be the leading convention hotel for groups of 1,000 to 2,000 people."

The 1,200-room Washington Hilton and the 1,800-room Sheraton will have an edge in attracting larger groups, he conceded, "but no one else is aiming at that 400 to 500 room market."

"It's no secret the Shoreham suffered in the past from a declining image," added Barren. In the six years that American Airlines ran the Shoreham, none of the rooms was renovated.

Redoing the hotel, Barren explained, requires taking 100 rooms at a time out of service. The work is more than cosmetic, because after more than half a century, the plumbing, heating and electrical systems needed work as well.

Renovated rooms, however, can rent for higher rates--15 percent to 20 percent more than the old rooms--and they can also draw the upscale groups the Shoreham is aiming for.

The convention business is attractive to hotels, because conventioneers tend to eat where they meet. Even when they're not at luncheons and banquets, the group travelers tend to stick closer to their rooms than tourists or business guests.

As much as 80 percent of the hotel's business comes from the convention and meeting markets. On most nights, individual travelers fill about 100 of the 800 rooms.

Occupancy rates have slipped from the high 60s (percent) to the mid-to-low 60 percent level, but "it looks like the cycle is starting to swing back" Barren said.

Depositioning the Shoreham requires not only fixing up the rooms, but clothing the staff in $75,000 worth of new uniforms ("that's given us a tremendous morale lift," says Barren) and revamping the restaurants and entertainment facilities.

Since comic Mark Russell played out his contract, the Shoreham has added a dance floor and brought "swing music from the 1930s, '40s and '50s" to the Marquee Lounge.

The remainder of the guest rooms will be renovated by next year, Barren said. But Dunfey is still waiting for economic conditions to improve before proceeding with its next major expenditure--replacement of the 1950's style motor hotel behind the main building. Plans call for tearing down the brick motor hotel and building luxury condominiums overlooking Rock Creek Park.