Aggressive Expansion Underway At Peabody

MEMPHIS? An ongoing capital infusion plan that dispersed an estimated $6 million companywide over the past year brought increased RevPAR and a successful 1999 to Peabody Hotel Group, according to David Shamoian, executive vp. This year, that momentum is expected to continue. An aggressive expansion plan is in place to add at least two new properties representing 605 rooms to PHG?s portfolio of eight proprietary and franchised hotels. ?The big impact to our company will be our fairly strong development activity and new hotel openings,? said Shamoian. Some of the projects on the agenda are already completed or under way. On March 15, PGH opened a Hampton Inn & Suites in downtown Memphis, where it also is starting construction on an Embassy Suites. ?We also are expanding The Peabody Memphis? ballroom and function space and at the same time, we?re in the final stages of acquiring The Excelsior hotel in Little Rock, AR and it will become a Peabody Hotel,? Shamoian added. The property, built in the mid-1980s and connected to the city?s convention center, is in need of ?a major renovation and repositioning, but we think once we?re done it will be a landmark property,? he said. PHG also is focusing on expanding its convention accommodation space at another property, the 891-room Peabody Orlando, where it plans to add 1,000 rooms, said Shamoian. ?Being in such proximity to the Orange County Convention Center and given the quality of our hotel, we turn away a lot of business. While the mid-market in Orlando might be saturated, in the upscale, convention-type market clearly we can use additional rooms at our hotel,? he noted, adding ?We?re also still working on plans to build a 1,000-room Peabody hotel in Tempe, AZ. That will be a significant destination resort.? PHG tracks in two directions, having both its proprietary Peabody brand and franchises out of Hilton Hotels and Bass Hotels & Resorts. It also has one independent boutique property, The Ridgeway Inn in Memphis. Shamoian indicated that wider distribution of the Peabody brand was on the agenda. ?We think we can be a major player. With only a few Peabody Hotels, it?s amazing the brand recognition we have right now,? he said. ?As far as other areas of the country, we think that the Peabody brand can be expanded in major markets? Atlanta, Miami, Boston, New York, Chicago and Washington, D.C. At the same time we would like to continue with our strategy of having franchised hotels in many of those markets where we have a large Peabody or where we think we can develop a small cluster of franchise properties.? The 38-year-old company, part of real estate development firm Belz Enterprises, tends to cluster properties as part of its strategy. ?We like to develop in the same markets. From a managerial standpoint, it makes us much more efficient, it?s much easier to oversee and it lets us be very effective in terms of how we improve our overall market penetration,? Shamoian said. ?We have two hotels [in Massachusetts]that one could say are competing against each other, but in fact, they work very well together. We?re able to maximize rate potential, we can use each for overflow, and we?re able to get the benefit of some specific purchasing opportunities,? he said. With $1.47 million in total revenues for 1999, Shamoian believes PHG has a distinct advantage. ?We?re an established management company that brings an owner?s perspective to a property because we?re primarily real estate owners. We know what it?s like to own a hotel and we also know what it?s like to turn around a distressed property or to maximize a property?s potential. That?s somewhat unique in the industry. We?re not just a third-party management company; we?re bringing that ownership focus to it and we think we do it very well,? he said.