Denver Market Faces Growing Pains From Proposed Convention Center Expansion

DENVER? While the hotel market downtown here is relatively stable, with an occupancy of 73% in 1998 and average rate of $117, some people are concerned that it may not last. A proposed expansion of the Colorado Convention Center to 600,000 square feet paired with two hotel developments? a proposed new 1,100- room Marriott convention hotel and conversion of an existing building into a 659-room Hilton? may shake things up more than the local hoteliers would like. According to a study conducted by Hospitality Real Estate Counselors, the proposed projects would have a negative impact on the performance of hotels in the area, but is not expected to impair their ability to stay competitive. In fact, Denver has a history of absorbing first-class hotel supply without any major consequence, according to the survey. Hotels such as The Adam?s Mark, a 481-room property, and the 189-room Hotel Monaco were absorbed within the last two years, leaving the market relatively unscathed, indicating how strong the market has been. And while a hint of softening is apparent in this region, the market is expected to remain stable for the next several years. The Marriott hotel project however, which has not even been approved yet, is making waves with its anticipated impact on competitive hotels of about two to three occupancy points in the 2003? its first year of operation. This impact is forecasted to mitigate itself to a long-term impact of one percentage point by 2005, the third year of operation for the Marriott. The hotel would be developed by a joint venture between Bruce Berger Realty of Denver and Marriott International. The two already signed a letter of intent to build the hotel. The project may be funded in part by a $52.4 million public subsidy. Bruce Berger Realty filed a request for the public funding, however a decision will not likely be made until after the vote on the convention center expansion, according to Eugene Dilbeck, president of the Denver Metro CVB. The proposed Marriott is slated to have 1,100 guestrooms and between 70,000 and 100,000 square feet of meeting space, according to a spokesperson for Marriott International. Marriott already has a significant presence in the greater Denver market with five full-service Marriott hotels: the 613-room Denver Marriott City Center; 238-room Denver Airport Marriott; 596-room Denver Marriott Southeast; 625-room Denver Marriott Tech Center; and 307-room Denver Marriott West. The proposed Hilton Denver Performing Arts hotel is a conversion of an existing lodging facility called the Executive Tower. The project would only mean an additional 322 rooms in the downtown market and would have a much subtler effect on operating hotels in the area. Mile High Properties has already applied for a public subsidy of about $10 million on behalf of Lennard Properties, which recently bought the building. According to the market study, demand for large, full service hotels is strong in Denver. The HREC report showed that demand for this segment grew 12% in 1998, while supply increased 11.6%. The 1999 statistics through June show continued demand growth with no increase in supply, the report said. There is softening occuring in the area of room rate growth for full service hotels. In 1998, the overall average room rate increased at a rate less than in the previous years of 1996 and 1997. In 1999, the pace of room rate growth is slow, with an increase of only 0.7% over the same period the prior year, according to the study. The Marriott project largely depends on the expansion of the Colorado Convention Center, which has yet to be approved. Denver voters will decide in November if the project will move forward. The convention center expansion is estimated to cost $268 million. Hand-In-Hand ?If you don?t have an expanded convention center, it?s unlikely that we?ll have a hotel,? said Bruce Alexander, executive director of the Denver Urban Renewal Authority. According to Dilbeck, the convention