Clips/ Feature Article

Room for Growth
By Richard Trombly | BusinessWest: March 2000

A Booming Economy and Rejuvenated Tourism Industry Bring Opportunities for the Hospitality Industry

Reflecting trends seen nationwide, the region's hospitality industry is in a strong growth mode, buoyed by a strong economy that has triggered both increased corporate spending and a boom in tourism. The phenomenon has manifested itself in a number of ways - from additions and renovations, to plans for additional hotels. One facility is even creating a "presidential suite."

Recent developments in the region's hospitality industry - and there have been many -reflect the most basic of all business formulas: supply and demand.

Demand has been increasing steadily in the past several years, a function of an improved economy that has prompted greater spending by corporations and tourists alike. And, slowly but surely, the supply is increasing as well. Several area hotels have added rooms or are in the process of doing so, and there are also plans on the table to add two new hotels.

But in the meantime, climbing demand and a mostly stagnant supply have prompted hoteliers to invest in their facilities to capture greater market share.

Meanwhile, demand has increased enough to allow modest increases in room rates at most facilities.

Overall, the picture is quite positive for the region's hospitality industry, and the best news is that it promises to get even better, largely because the Valley is becoming an increasingly popular destination point.

Indeed, more than $100 million in improvements and additions over the past several years have made Six Flags (formerly Riverside) a draw for a much larger audience, with many more visitors requiring overnight accommodations. Meanwhile, with plans to construct a new convention center and expand the Basketball Hall of Fame on the table, the prognosis for the hospitality industry is for greater expansion and prosperity.

Staying Power

To appreciate where the hospitality industry is today, one need only look at where it was a half-decade ago, when it was waiting... for something, anything to happen to spur the local economy.

In 1996, despite luring conventions and increased business and leisure travel in the area, the occupancy rates for the Springfield area were only about 70. With surplus rooms, no guarantee that the economy would remain strong, and an industry awaiting the fate of a bid for a local casino and Springfield waterfront development, there was no new construction slated for the area.

But while the casino issue died, the wait for greater demand ended as the economy continued to surge.

Nationwide, the hospitality industry has benefited from the strong economy to report record years, according to Tennessee-based Smith Travel Research. In 1998, the industry showed an increase in profits of 23, and surpassed 1997 as the most profitable year in the lodging industry. Gross profit rose to $20.9 billion in 1998, which is nearly double the amount earned in 1996, The data for 1999 will not be available until mid-2000 but the projections are for continued growth through the end of this year.

Locally, the scenario took longer to play itself out, but the national trends have been verified.

"We have seen little or no growth in the number of rooms in the Valley since the late '80s, when the last new hotel, the Hampton Inn, was built," said Steven Root, executive director of the Greater Springfield Convention and Visitors Bureau.

"Due to the strong economy and the draw, of the region, occupancy rates have steadily increased to more than 80 in the Springfield area. We are seeing many hotels adding rooms and facilities."

Perhaps the most highly visible example of this trend is the Springfield Sheraton, which is in the process of adding 21 new rooms. The project's first phase - six extended-stay business suites - opened on Feb. 21.

"These hotel rooms are equipped with a kitchenette, as well as computer and office facilities," said Paul Picknelly, president of Springfield Sheraton and Monarch Place.

"They are designed for the business traveler staying for two to three weeks," Picknelly said that the second phase of construction will begin in March and will provide another 15 guest rooms and suites.

"One will be a presidential suite," he said. "It will be two and a half times the size of a normal guest room, with a marble bathroom and a Jacuzzi." The cost? $350 per night.

Space for the project was created by converting three meeting rooms on the fourth floor, and utilizing 6,000 square feet of former office space in Monarch place as meeting rooms.

"We are taking the existing space and using it better," said Springfield Sheraton director of sales, Kathy DeLand. "That is how we have added a junior ballroom and full-service business center. I call it finding the hidden gems."

The need for additional rooms was made apparent by the numbers recorded by the Sheraton in 1999. Picknelly said that there were almost 150 nights last year when the Sheraton had full occupancy and an overall occupancy rate of 82.5. He attributes much of his business to the convention and conference market.

"We have had the luck of cooperating with the other downtown hotels to draw conventions and conferences," he said. "Springfield is an ideal location for conventions of under 500 people. The conference space and the attractions of the surrounding area are a real draw. We can provide the same services as Boston for nearly half the price."

"Our business is connected to the improved economy," said DeLand. "There is no sign of decreased business travel, instead the economy fosters increased business functions and more time on the road. Springfield is doing things right and things are going well in the whole local economy, not just the hotel industry. I think we all will reap the benefits."

"We've had a good run, especially this past year and we want to put it back into the business," said Steven Stein, general manager of the Holiday Inn.

"Springfield has become a magnet for leisure travel. We are at the crossroads of New England and have easy access to Bradley Airport. It's also an easy drive from Boston, Hartford, Albany, or New York," said Stein.

He noted that the steadily high rate of occupancy has allowed increased room rates, which has boosted revenues.

"We have been able to charge in excess of $100 a night and still provide a much less expensive stay than in Boston and other larger cities," he said. "All this makes us an ideal alternative for regional conferences. The goal now is to attract more business and visitors from beyond the region.

With the projects like the redevelopment downtown of the civic center, Union Station, the addition to the Basketball Hall of Fame, Six Flags, and the new convention center, I think it will bring visitors."

To fully capitalize, however, the region will need more rooms, and while speculation continues on where and how volume will be increased, some projects are already taking shape.

Going Up

One answer to the call for more rooms in Springfield is the Court Square project announced by Peter Picknelly, chairman of Peter Pan Bus Lines and the city's most active developer. He intends to refurbish the 100 year old building which was once the Court Square Hotel and a former office complex.

"The plan is a $10 million project to renovate the building into a 150-room boutique type hotel," said Picknelly. "The idea is to preserve the past rather than to provide new construction."

He compared the planned hotel to the Parker House in Boston or the Goodwin Hotel in Hartford, The hotel is slated to open in September of 2001, he said, Targeting a similar market further upriver, George Page, owner of the Delaney House restaurant, is planning to build an inn-style hotel that will be attached to his ' restaurant. It will be a division of Radisson Country Inns and Suites by Carlson, said Page.

"There is already a good range of midlevel establishments in the Northampton area," said Page, "but I am targeting the upscale niche."

He said that his market will be driven by corporate events and social functions, as well as the colleges. "The meetings and functions at the restaurant draw people here and they need to stay somewhere... I want to capitalize on that," he said. "We will have a lot of unique and interesting rooms with fireplaces and special features.

Page said he plans to open the hotel by the end of the year.

Meanwhile, Edward Riley, vice president of the Hampshire Hospitality Group (HHG) and general manager of the Inn at Northampton, said that his establishment had no plans to expand or renovate.

"We just finished in 1998," he said. "We capitalized on the strong economy and are pleased with the results. We fully refurbished the inn and brought in Montana's Steakhouse."

Though Riley was reluctant to give specific numbers, he said business has been so good that revenue goals for 2000 were reached by the end of 1999.

Steven Schwartz, vice president of the HHG and general manager of the Hadley Howard Johnson's and the University Lodge, is adding another title to his name.

He will also be general manager of the new Holiday Inn Express Hotel and Suites, set to open soon.

We will be offering 78 rooms and 22 meeting rooms and three board rooms and we will have a full service business center, The hotel will feature extended stay suites and provide the services needed by the business traveler and generated by the colleges."

"There was a definite need for more rooms in the area. We were experiencing many weekends and weeks throughout the year with full occupancy at our establishments," said Schwartz. "Our occupancy rate stays in the high 70% range. Though not as high as Springfield, but it is more stable because of the colleges. The peaks and valleys are minimized."

Spreading the Wealth

While the hospitality industry has been reaping the rewards of improved business and tourist travel, the phenomenon has Motel Association's 1998 economic impact report, only between 8 and 30 of atypical traveler's expenditures are the room itself. With an average room rate of more than $78 nationwide, that means that the tractions being developed in downtown Springfield and the Northampton-Amherst area bring business not just to hotels and the attraction itself.

"The 2 million people who visit Yankee Candle yearly and the 1.7 million who go to the Big E will patronize other establishments and help out the whole economy in general," said Root. "I think the new developments in downtown Springfield, Six Flags, and the new butterfly conservatory coming to Deerfield have the sort of draw to bring people back or to entice them to live and work or start businesses in the area."

Businesses that cater to travelers seem to have gone slightly upscale to accommodate the demand of the public in this long period of economic growth. Travelers have the money to spend on tourism and want a more unique experience as evidenced by all the upscale renovations at area hotels. There is also a trend toward providing high quality services and eating establishments to capitalize upon the economic benefits that come with the tourism industry in general.

Riley echoed a common feeling when he turned prognosticator: "I believe that the expansion we have seen in the hotel Industry since 1993 will continue for one-and-a-half or two years. It will then level off to a plateau after nearly a decade's growth.''