Changes abound in Portland area hotel market
Photo/Rebecca Goldfine
The new Hampton Inn in Portland, bordered by Franklin, India, Middle and Fore streets, will open in July
When the Hampton Inn that is under construction on Franklin Street opens in July, 500 additional rooms will have been added to the local hotel market since 2007, putting the total number of hotel rooms in Portland and the Maine Mall area at around 4,200.
In 2007 and 2008, two new hotels in the Maine Mall area opened, a Marriott Courtyard and a Hilton Homewood Suites, followed by a Marriott Residence Inn in Portland in 2009. Meanwhile, the out-of-state investors who bought the Eastland Park Hotel last week have indicated that they will upgrade the 84-year-old hotel, increasing the competitiveness of their new property in an increasingly crowded market.
Industry experts say that all the new hotel construction, much of it planned before the recession, has created a situation where room supply will still match demand, but barely, before creating a surplus. "We're close. We're on the border," says Sean Riley, an executive with Maine Course Hospitality Group in Freeport, which owns the new Courtyard and Homewood in the Maine Mall area.
Greg Dugal, the executive director of the Maine Innkeepers Association, says a few years ago when the economy was stronger, there was a spurt of new hotel construction. "There was a little bit of a flurry. Occupancy rates were high, and everyone thought, ‘Why not?'" he says. "If you get an idea in 2007, you don't open until two years later. The growth was aggressive at the time, and at the time, the sky seemed like the limit."
That being said, he adds, "I still think it was a good thing to do." Portland's growing reputation as a foodie city will help draw in visitors, he predicts, and other economic and tourism trends also bode well for hoteliers. But some are debating whether the hotels in Portland or near the Maine Mall will fare better.
Daren Hebold, a broker with Daigle Commercial Properties in Portland, says the Maine Mall area might be overbuilt by this point, and that it could take a few years to raise occupancy rates there. But he predicts that the new Old Port hotels -- the Hampton and Residence Inns -- will perform well. "They are strong enough flags that they will bring in new demand," he says, although he adds that at least for the next few seasons, half of their clientele might be new visitors, and half will "be robbery from other hotels."
Hebold says he also sees demand shifting away from the Maine Mall to Portland proper, with its oceans views and proximity to restaurants, and "where people can come park their car and leave it, and walk to the Old Port," he says. "It is how younger travelers and baby boomers operate. They like to go somewhere, park their car and be done, just walk around."
On the other hand, Riley sees the Portland market as being more densely packed with hotels than the Maine Mall at the moment. Plus, the mall attracts a different kind of traveler, as well as more business travelers because of its access to the jetport. "We have guests who don't want to stay downtown, and others who want to be in the Old Port; they are two different customer bases," Riley says.
Recession opportunities
Even though hotel business plunged in 2009, the tough economy also opened up some windows for investment, especially in coastal communities, according to Hebold. He says the town of Ogunquit, for instance, saw the sale of four hotels in the past year.
"Basically what we're seeing is liquidity coming back to the market," Hebold says. "It almost completely seized up in 2009. You have a unique window of time because you have properties being offered at realistic prices -- even though they are climbing quick -- and you have low interest rates. We are also finally seeing banks willing to do short sales of hotels."
Greg Kirsch, who is building the new Hampton Inn with his Belmont, N.H.-based company Opechee Construction Corp., says he and his partner Mark Woglom plan to open their 122-room Hampton Inn in July. Opechee Construction has built 30 hotels in New England, including several in Maine, but the Portland Hampton Inn will be the first the two partners own themselves, Kirsch says.
They bought the site, the former home of Jordan's Meats, in February 2010 for less than the $4.75 million asking price, according to the Portland Press Herald, after The Procaccianti Group of Rhode Island paid $6 million in 2005. This low price opened up the rare chance for a hotel developer to acquire valuable and scarce downtown land. Kirsch, reached by phone recently, didn't reveal financials, but said, "I think there was an opportunity to acquire the site during the darkest days of the recession and the real estate crash, and it improved the economics of hotel ownership."
The timing and opportunity to invest in Portland's downtown may have been fortuitous, but a fire destroyed the old meat-packing plant there last spring, delaying the opening of the hotel by a month and slightly increasing costs. Twelve condos that are being built on the hotel's sixth floor have already been sold for between $210,000 and $450,000, according to Kirsch.
As all the hotels gear up for what they hope will be a busy season, Dugal says the current room supply in the Portland and Maine Mall market will "definitely meet the demand," and that from this point on into the near future, few changes are likely.
"Frankly, I don't believe there will be, short of some economic miracle, many sales or new builds beyond the Hampton Inn going in now," he says. "It's as tight as it needs to be, and any additional building would put downward pressure on occupancy."
Most Recent
Most Recent
Comments