Vacancy signs

Nashville has seen a spate of activity on the hotel front in the last year as several new full- and limited-service venues have opened their doors. But with an economic downturn pairing with the cyclical nature of the hospitality business, don't look for many more in the coming months.

While Nashville isn't considered overbooked, it does have plenty of rooms to hold tourist traffic, conventioneers and other visitors at the moment. That's especially true in the limited-service category, defined as hotels that do not have restaurants or bell staff onsite.

"That category represents about 5,000 of the 7,000 new rooms we've added in Nashville since 1995," says Terry Clements, director of tourism development for the Nashville Convention & Visitors Bureau.

For the year to date, Nashville is averaging 64 percent occupancy for its rooms, down 4.6 percent from last year, according to information from Smith Travel Research. That's down a few percentage points from previous years, but also reflects the sheer number of rooms that have been coming online since the mid-1990s.

Hotel building really took off here in 1996, Clements says, as financing packages were assembled and land deals were made. A crystal ball might have come in handy at the time, however.

"I don't think any of those people who have built here said they would see a downturn in the economy in 2001," Clements says. "It's hard to tell when we'll be fully absorbed. The economy will affect everything, as usual."

The recent meltdown in the tech stock sector actually played out well for the limited-service sector of the market, he adds.

"Right after that, they jumped for joy," he says. "When corporate travel was curtailed, people were told to stay in cheaper places. That worked well for a month or two, and then the full-service people began calling corporate travel managers and saying that they'd give them the same price."

What is likely to happen in coming months is that high-end hotels will continue to cut their overnight rates to stay competitive and keep customers, but they'll raise them once the downturn shifts, he says.

Competition would appear to be the order of the day, but at least one new full-service hotel is planning on good business from the outset. The 307-room Nashville Marriott at Vanderbilt University is scheduled to open on Nov. 16. Located on the busy West End corridor, the hotel's management plans to capitalize on both its location and name, says Russell Archuleta, general manager.

"Our timing for actually opening the doors may not be the best, but in the hotel business that's a risk you run," Archuleta says. "We're optimistic that the brand, the location, will work so that's not a long-term problem for us. Our challenge now is that we're going to be fighting with the best of them in the marketplace. Being the new kid, consumers are going to want to try us, to give us a shot, and having the Marriott name and being on Vanderbilt University property are pluses, in my opinion."

The hotel was conceived around five years ago when the site was made available for prospective builders, Archuleta says. The university was looking for a commercial building with retail and hotel facets, on ground it would lease to the developer. The Marriott's developers won out for, among other things, the highly recognized brand.

When the slump began earlier this year, he says the hotel market did take notice, realizing that "the good times have plateaued."

"We're not going to continue to grow, but the question is, how is the supply in Nashville? From what we've seen in the past two years, growth has averaged 6 percent, but demand for rooms has remained flat."

Still, he says, the developers and management team at the Marriott realize the nature of the business, and no one's predicting anything worse than a soft opening and perhaps a slow first few months. That attitude appears to be the same at other sites nationwide, he says.

"Everyone's still optimistic," he says. "The hotel industry made a great recovery from the late 1980s, when tax changes and REITs were introduced into the marketplace. The market indicators were so positive that not only our project begin, but a lot of other development within the Nashville market did as well."

Reader Comments

• More News Headlines
• Popular News Stories