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Luxury hotels may be delayed across Atlanta
Atlanta Business Chronicle - by J. Scott Trubey Staff Writer

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The Sheraton Gateway Hotel Atlanta Airport finished its first two quarters of 2008 with occupancy rates ahead of 2007, but those numbers took a rapid dive this summer, said Kerry Ringham, the facility's general manager.

"What you see is travel budgets being eliminated or caps on spending, so if any hotels are going to gain in this environment, it typically is the lower or moderate tiers," he said.

Thanks to the weak economy, the rest of this year and 2009 will be a challenging time for Atlanta's hospitality industry, but will improve long term, according to industry experts.

Large convention bookings that occupy 5000 hotel rooms or more are down for 2009, but those decisions were made four to six years ago and do not reflect current economic conditions, said Mark Vaughan, executive vice president of the Atlanta Convention & Visitors Bureau.

Atlanta's hotel demand overall is down, with revenue per average room, a critical measure of hotel health, estimated to close at 56.59 for 2008, 2.32 points from 58.91 in 2007, said Mark Woodworth, president of PKF Hospitality Research Inc., which tracks U.S. hotel performance.

He added that 2008 average occupancy is estimated to be 61 percent, compared with 63.5 percent in 2007, with the average daily rate at $92.76, down slightly from $92.91 in 2007.

Overall Midtown and airport hotel markets are faring well while Buckhead and Central Perimeter have declined, according to a PKF econometric forecast for the third quarter of 2008.

The downward slide is predicted to continue over the next four quarters, while supply will climb 2.4 percent, according to the study.

However, that growth is less than the long-run average of 3.1 percent.

One possible plus is that the Midtown and Buckhead W hotels are actually rehabs of existing inventory. Several of the new class A projects, such as the W, The Mansion on Peachtree and the St. Regis, represent lifestyle brands not previously served in the Atlanta market, said Paul Breslin, managing partner for Panther Hospitality LLC, a consulting firm that assists specialty hotel developers.

On the other hand, those rooms were out of the market for a year during those renovations, Ringham said.

The economy's slowdown also is hitting restaurants, and an indicator of that impact can be seen in a 15 percent to 20 percent decline in fine wine sales, while mid- and low-tier wine sales remain flat, said Dale Lowenstein, sales manager with Atlanta-based Empire Distributors Inc.

Service-oriented restaurants that exceed customer expectations and value-driven eateries will likely do the best in the current climate, said Harold Shumacher, president of The Shumacher Group Inc., a real estate brokerage and consulting firm that specializes in regional and national restaurant chains.

"I don't think things have gotten so bad yet that people are changing their habits, but they are downscaling," he added.

Those wishing to launch new restaurants will face limits on credit availability by lenders, said Keisha Carter, public affairs director for the Georgia Restaurant Association.

On a positive note, while airline capacity reductions will decrease the number of passengers making connections at Hartsfield-Jackson Atlanta International Airport, the reductions should result in little or no change in hotel room night demand for passengers with Atlanta as a final destination, Woodworth said.

In addition, convention business will bounce back quickly in 2010 with bookings already at 140 percent of annual averages and ahead of pace for the following seven years, he added.

The opening of the Center for Civil and Human Rights and a new international air terminal are both scheduled to take place in 2010.

Growth in hospitality

Experts offer tips on how businesses in the hospitality industry can come out ahead.

• Find creative ways to differentiate your business from your competitors through superior customer service, special price promotions and community outreach.
• Reach out to metro Atlanta-based companies and other groups to fill meeting space that in other years might be filled with national groups.
• Don't cancel renovation plans. The slow year is a great time to position your property for the future.
• Don't cut room rates. Atlanta is still a good value compared with other major U.S. cities so no new demand will be generated by raising rates.
• Deliver excellent service.
• When the phones stop ringing, concentrate on relationship-building.
• Don't forget that Atlanta is known for its Southern hospitality. Take care of all your customers.

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