Talk of Maine
With four recently built hotels and four more on the way, some wonder if there will be more rooms than the city can fill.
Hotels are the talk of Portland.
Currently there are four major hotel projects in the works and one of the city’s oldest and largest hotels is in the midst of a major renovation and expansion. You might think all this hospitality industry development would be a welcome sign of recovery from the recession, but Maine newspaper headlines give the impression that the new hotels are not welcome at all.
“Need for more rooms at the inns questioned,” announced the Kennebec Journal. “Hotels thrive, but how many does Maine need?” asked the Morning Sentinel. “Proposed hotels would add 500 guest rooms in Portland, but can the city absorb them?” questioned the Bangor Daily News.
“There is strong evidence to say that the downtown area can absorb these new rooms,” insists Jim Brady, a veteran hotel developer who is seeking financing to transform the former Guy Gannett newspaper office at the top of Portland’s Old Port into a 109-room boutique hotel. “Portland is being discovered. I really believe that.”
Brady and the developers of a new 131-room Courtyard by Marriott inn on Commercial Street, a 130-room Hyatt Place Portland–Old Port at the corner of Fore and Union, and a 125-room hotel planned as part of The Forefront at Thompson’s Point complex just off the Portland peninsula all believe there is pent-up demand for hotel rooms in downtown Portland. As evidence they point to the fact that the four hotels that have opened in the Old Port district in the past ten years are all doing well despite the worst recession since the Great Depression.
The mistake the press and the public make when they doubt the viability of more hotels is using market data for the entire Greater Portland area, says Jim Brady, who has worked for Starwood Hotels and Olympia Properties and is an investor in the Hilton Garden Inn. Smith Travel Research (STR), which tracks the international hotel market, reports that there are 6,809 rooms in the Portland Metropolitan Statistical Area with an annual occupancy rate of about 60 percent, the break-even point for most hotels. But Brady points out that the Greater Portland MSA extends all the way to Biddeford-Saco. There are really only about 2,200 rooms in the city of Portland and around 1,000 on the downtown peninsula.
What the press and public should be looking at, says Brady, is the data for Old Port hotels, because they are the only ones in direct competition. “The downtown competitive set,” says Brady, pulling up an STR report on his laptop, “has had a robust occupancy rate for a number of years. In 2012, they had an occupancy rate of 75 percent and an average daily rate over $180.”
The number of hotels in a city’s downtown can be viewed as a barometer of its vitality. In Portland, that number has fluctuated over the years, coincident with the city’s economic fortunes. Back in 1953, for instance, before all the major retailers moved to suburban shopping malls, downtown Portland supported at least seven hotels — Chase, Columbia, Eastland, Everett, Falmouth, Graymore, and Lafayette. The Everett on Oak Street advertised itself as being “in the heart of Portland’s shopping district.” Had it not been converted to a residence hall for the Maine College of Art (which itself is housed in the former Porteous, Mitchell & Braun department store), the Everett these days might advertise itself as being “in the heart of Portland’s arts district.”
By 1983, when the Portland Museum of Art’s Charles Shipman Payson Building opened and a new era in the cultural life of Portland began, a visitor who wanted to stay on the urban peninsula basically had two choices — the old Eastland across Congress Square from the museum and the new Holiday Inn by the Bay behind the museum on Spring Street. The Eastland, a dowager of a hotel built in 1927, is currently undergoing a major makeover, adding fifty-eight rooms for a total of 290 and rebranding itself the Westin Portland Harborview. The Holiday Inn is an artifact of urban renewal, built in 1972 after several blocks of quaint nineteenth-century homes were razed to make Portland friendlier to automobiles.
In 1987, with the locus of galleries, shopping, dining, and nightlife shifting down to the Old Port, the Portland Regency opened in the former State of Maine Armory. And that was about it for hotel development until the twenty-first century when Portland finally became the destination city it long aspired to be and the first wave of new hotels opened — the Portland Harbor Hotel in 2002, Hilton Garden Inn in 2004, Residence Inn by Marriott in 2009, and Hampton Inn in 2011.
Tim Soley, president of East Brown Cow Management, has renovated or developed more than one million square feet of office and commercial space in Greater Portland since 1989, but the Hyatt Place Portland–Old Port is his first hotel. Why?
“Because hotel demand right now — the allure of the Portland market for pleasure and business — is higher than at any time in my lifetime,” explains Soley, who grew up in Camden. “I want more hotels downtown. It adds to the urban fabric and these buildings supply the people in the streets who eat at the restaurants and shop at the stores.”
Soley, who owns the three-office cluster of Canal Plaza and the parking garage next to the new hotel site, has seen how bank, insurance, and law office buildings tend to leave a downtown emptied and deserted in the evening and on weekends. He has also seen how Portland has come alive as a destination over the past fifteen to twenty years. The Portland City Hall Web site posts more than thirty popularity lists that Portland has made in recent years, from the Foodiest Small Town in America and One of America’s Hippest Hipster Neighborhoods to one of its Greenest Cities, Most Livable Cities, and Hottest Cities for Entrepreneurs.
Art, architecture, music, theater, sports teams, food, shopping, the natural setting, and the human scale all conspire to attract close to four million visitors a year to Portland, a city that tourists once passed by on their way up the coast.
“This hotel will be a legacy asset integrated into the fabric of the community,” promises Soley.
The Hyatt Place hotel that East Brown Cow is building is near the site of the old Falmouth Hotel, which was built in 1868 by the venerable J.B. Brown & Sons in the wake of the Great Fire of 1866 that destroyed much of downtown Portland. Today, J.B. Brown & Sons is still one of Portland’s largest property owners with one million square feet of warehouse space, 500,000 square feet of office space, and fifteen acres of developable land on the peninsula. And J.B. Brown is now building the Courtyard by Marriott on West Commercial Street.
“The economic conditions for J.B. Brown to build another hotel,” says company president Vincent Veroneau, “haven’t existed for 145 years. They do now.”
Veroneau, a Portland native, agrees with Jim Brady and Tim Soley that downtown Portland needs new hotels. “The success of the tourism industry in Portland could have a backlash effect if more hotel rooms aren’t built,” says Veroneau. “You can stay in Boston for less than you can stay in downtown Portland.” Some Old Port hotels enjoy close to 100 percent occupancy during the summer months even when charging more than $300 a night.
Greg Dugal, executive director of the five hundred-member Maine Innkeepers Association, says he expects the new hotels to do well, especially in the peak summer months. “Off-season is the big question for the downtown hotels,” says Dugal. “The real question is what impact the new hotels will have on the year-round occupancy of the peripheral hotel market.”
Dugal believes added competition in the downtown market will benefit consumers with lower room rates. But Barbara Whitten, president of the Convention and Visitors Bureau of Greater Portland, disagrees. “When you look at the Hilton Garden Inn, Hampton Inn, Residence Inn and Portland Harbor Hotel, all built since 2002,” says Whitten, “that didn’t reduce the average daily rate in Portland, it increased the average daily rate.”
That’s because new hotels up the ante in terms of quality, design, and amenities. So the prospect of some five hundred new hotel rooms opening in 2014 is naturally cause for concern for existing hotels. “You’re talking about an almost 60 percent increase in supply [downtown],” says Gerard Kiladjian, general manager of the elegant Portland Harbor Hotel. “That’s the alarming number for the rest of us.”
Kiladjian agrees that the Portland market can handle an increased number of rooms, but he would prefer they not all come at once, noting that the Portland Harbor Hotel, Hilton Garden Inn, Residence Inn, and Hampton Inn opened at two- to five-year intervals. “It will certainly have a negative impact on everyone in the market for the first year or two,” Kiladjian says. “If there is pent-up demand in the market, you will see it absorbed over time.”
Kiladjian expects it to become more difficult to fill the upscale Portland Harbor Hotel in the summer once the new hotels open, but he does not expect the competition to lower the hotel’s rates, which run from $289 to $339 a night in summer, and $169 to $209 in the off-season. “I don’t anticipate any decrease in rates,” says Kiladjian. “I think it’s going to impact occupancy until the pie grows.”
Whitten believes the new hotels will do well, but she worries that other hotels will lose business unless something happens to increase demand. “It’s going to take a convention center or more tourism marketing money or more businesses downtown,” says Whitten, “to guarantee enough business for everyone to do well.”
“There is no convention center in Portland,” observes Maine Innkeepers Association’s Greg Dugal, “so anything that could be built at Thompson’s Point would be a benefit. Good quality meeting space would benefit all of the hotels.”
The proposed $105 million Forefront at Thompson’s Point, a project associated with the Maine Red Claws development league basketball team ownership, envisions not only a 125-room hotel, but also a sports medicine facility, 180,000 square feet of office space, a parking garage, and, more to the point at hand, a 75,000-square-foot events center that might provide some of the meeting and convention space that Portland lacks.
Chris Thompson, an associate professor of art history at Maine College of Art and a partner in the Forefront at Thompson’s Point project, says he is counting on the events center as well as the proximity of Thompson’s Point to the Maine Mall, Portland International Jetport, Maine Medical Center, the new Mercy Hospital, University of Southern Maine, and Portland Transportation Center to help create a market for his new hotel. But Thompson, who has developed hotels in Portsmouth and Exeter, New Hampshire, and in Auburn and Lewiston, thinks the three new Old Port hotels “will have a negligible impact on a Thompson’s Point hotel.”
“There’s the Old Port and there’s everywhere else,” says Thompson. “They are two very different destinations. Five miles from downtown you are in a totally different world.”
Thompson expects there to be an 8 to 10 percent dip in occupancy rates when all the new hotels come online, but he also expects to see the occupancy rates rebound within a couple of years.
Tim Soley at East Brown Cow is bullish on the future of Portland and sees the current hotel boom as a positive sign of good times to come. “There is a possibility that increased supply will unleash additional demand,” he enthuses. “There are eight hundred or so rooms in the downtown competitive set. That may double in ten years. But it’s not about an increase in the number of rooms; it’s about the rebirth of Portland.”