The new D.C. Convention Center has sparked construction of several hotels in the area surrounding it. Many of them were planned years ago during better economic times, but are just now getting off the drawing board, and they are raising fears of a hotel-room glut.
At least 12 new hotels with nearly 6,000 rooms are ready to open, under construction or being planned in the District of Columbia. This space would add 25 percent more rooms to the approximately 20,000 existing rooms in the District.
"If every hotel that is conceived is built, there would be too many hotels," said Fred Mosser, vice president of development for Quality Inns International of Silver Spring. But he added, "the market is self-regulating."
Mosser argues that developers are being forced to build luxury-style hotels, catering to a high-class clientele, because of the high cost of construction. He estimates that construction costs for any hotel downtown run between $60,000 and $100,000 per room.
For several years, worsening economic conditions prevented hotel developers from going ahead with their plans. "If it weren't for the recession and high interest rates at the same time the convention center was being built, by now there would be one or two hotels there," said John Fondersmith, chief of the downtown division of the city's office of planning and development.
If survival of the fittest, or of the fastest, could be applied to hotels, the next few years should see a number of developers scrambling to be the first one to build a hotel around the center, with several being caught in their developing tracks. "It's going to hinge on who can get their financing first and meet all their operational costs," Mosser said.
"The center has created a huge new market. It alone would generate the need for 3,000 hotel rooms," Fondersmith said.
However, industry experts say that the convention traffic alone is not enough to sustain a hotel. "You can't depend on the convention center for all your business," said Leonard E. Hickman, executive vice president of the Washington Hotel Association. The convention center trade can supply only "somewhere around 40 percent" of the guests needed for a downtown hotel to operate profitably, Mosser added. Last year, the hotel occupancy rate in the city was roughly 60 percent, which is below the break-even point for new hotels.
To keep occupancy rates up, Hickman said, "you're going to have to appeal to businessmen, tourists and smaller meetings." He added that the opening of all the new hotels in the convention center area will create super-heated competition among the city's hotel operators. "They're going to have to steal from someone else," he said.
Among the new hotels that will be vying for a share of the market are several currently under construction.
A 775-room Marriott Hotel at 14th Street and Pennsylvania Avenue NW is being built by Quadrangle Development Corp. and is scheduled to open next spring. Also scheduled for completion next spring is the Sheraton Capital Place, a 265-room hotel on New Jersey Avenue NW; Phoenix Park, a 99-room renovation of the old Commodore hotel, and the 265-room Regency Hotel at 23rd and M streets NW.
The opening dates for the 581-room renovation of the Willard Hotel on 14th Street and Pennsylvania Avenue NW and the 350-room Western Hotel at 22nd and M streets NW still are up in the air.
Hotel development in the immediate convention center area has been repeatedly postponed, even though the District government has promoted development of a core of hotels around the convention center as part of its downtown revitalization plan.
However, developers of several major convention center hotels have been able to overcome their economic restraints and plan to break ground in the next few months.
* Convention Square, an office-hotel-retail complex directly across from the center at 11th and H streets NW is scheduled to get under way in November in a joint venture of Quadrangle Development Corp. and Woodworth & Lothrop. The 800-room hotel could, by virtue of its location, become the major headquarters hotel for the center. The 124-room Ebbitt Hotel currently on the site will be torn down.
* Ninth and I International Developers Inc. plans a 900-room hotel, scheduled to begin within the next year.
* Gallery Place. Groundbreaking for a 750-room office-hotel-retail complex is also planned for this November, said Michael Flaxman, director of development for Trustforte Hotels, the hotel operator. Also planned is a 200-unit apartment building. Completion is set for some time in 1985 or 1986.
* Inns of Court at Fifth Street and Massachusetts Avenue NW is a proposed 368-room hotel. Quality Inns International plans to operate the hotel at lower, more competitive rates. "We plan to break ground sometime between mid- to late-1983," Mosser said.
* Mount Vernon Square is a proposed 400-room hotel to be built on the University of the District of Columbia site near Massachusetts Avenue NW. This project is expected to begin within the next year.
* Metro Center, an office-hotel-retail complex, planned by Oliver T. Carr and Theodore R. Hagans, will include a 400-room hotel. This also will be the site of a new Hecht Co. store. Carr said he expects to complete the project by 1985.
While planned hotels in the immediate Washington Convention Center area are still months away, existing hotels have reaped the benefits of the new convention center trade.
Rick Fowler, regional director of advertising for the Hyatt chain, said the company already has felt the effects of the center at the Capitol Hill Hyatt Regency, which is eight blocks from the center. "We have four groups coming to us in 1983 that are directly attributable to the convention center," Fowler said. Each group--Fancy Food and Confection; Gutenburg Expositions; the American Society for Training and Development, and the Christian Booksellers, have each committed a 400- to 700-room block.
Fred Kleisner, the Capitol Hilton's general manager, said several convention center shows have booked rooms in his 721-room hotel. More than 250 rooms were taken by members of the American Society of Executives for their event at the center.
The 98-room Henley Park at 10th Street and Massachusetts Avenue NW and the 420-room Vista International at Thomas Circle NW are the two most recent downtown openings. Both of these are small, deluxe facilities whose primary target will not be conventioneers but business travelers.
Jack Daniels, director of the marketing and hotel division of Coakley & Williams, the company that developed the Henley Park, said most of the convention business it attracts will be executives rather than delegates.
But Chuck Barren, managing director of the Shoreham Hotel at 2500 Calvert St. NW, said the impact on the 800-room hotel would be limited. Only conventions requiring 3,000 to 5,000 rooms will have a noticeable effect on the Shoreham, he said.
Similarly, the Sheraton Washington Hotel, a 1,505-room facility at Connecticut Avenue and Woodley Road NW, expects to handle conventions that need more than 2,000 rooms for their delegates, according to public relations director Penny Cummings.
High-priced rooms near the convention center could push delegates to stay in cheaper, less accessible hotels out of the center city area, said Mosser.
And lower-priced, suburban hotels would be the likely beneficiaries. Suburban hotel operators also are counting on the ripple effect of business travelers displaced from District hotels because of large convention groups. John Donnes, sales director for the Sheraton Inn in New Carrollton, estimates that only a convention needing 4,000 to 5,000 rooms would be forced to look for rooms out in the suburbs. "However, in 1985, we know there will be a big push for space in Washington that will push regular hotel business into the suburbs," he said.
Frankie Harbrick, director of sales and marketing for the Sheraton National Hotel in Arlington had a similar response: Our opinion is that we won't get as much of the convention center business directly as much as a ripple effect of displacement. Most people want to stay as near as possible," she said.
The city prefers development of hotels rather than office buildings around the center, because hotels will keep people in the area after working hours. "Because of the location, conventioneers relate to the retail core and Chinatown. People are likely to eat at least one meal in Chinatown and we'll get more activity, people spending more money," Fondersmith said.