Space race | Several developers are vying to build hotels in Bangor, but can the market support all those new rooms?
Today, abandoned railroad tracks are all that run alongside a prime stretch of riverfront land in Bangor. Soon, though, those tracks will be replaced by a park built especially for the American Folk Festival, held in Bangor every August, and a 1,500 slot machine gambling complex. And the prospect of that development has turned the shores of the Penobscot River into a kind of gold coast for hotel developers intent on meeting anticipated demand, with the city already setting aside one riverside parcel for a new hotel and development groups looking at other locations around the city.
The temporary Hollywood Slots location at the former Miller's Restaurant has grown from pulling in $28.5 million during its first month, last November, to more than $51.7 million in revenues in July. Currently, Wyomissing, Penn.-based Penn National Gaming, the company that owns Hollywood Slots, is awaiting final state approval for a permanent gaming facility with 1,500 slot machines, three restaurants, a parking garage and possibly its own hotel located on the Riverside Block, a swath that stretches from Main Street to the Penobscot between Lincoln and Dutton Streets.
Construction of the complex requires the demolition of two hotels — the Main Street Inn and the Holiday Inn — resulting in the loss of 184 hotel rooms that the city is eager to replace. What's more, with the American Folk Festival drawing thousands of people each August to the park along Front Street, the area is slated in the city's comprehensive plan to become an entertainment and restaurant district. Rod McKay, the city's director of economic and community development, expects that district to fuel demand for new — and different — hotels. "We've had input from [local] hotels and occupancy rates are improving," McKay says, estimating occupancy rates in Bangor to be around 70%. (The American Hotel and Lodging Association estimates the average hotel occupancy rate nationwide was 61.3% in 2005.) "We're trying to avoid building a hotel of the same standard that currently exists," he says. "[We want a] high quality, full-service hotel — most hotels in Bangor don't have that."
Currently two developers — Portsmouth, N.H.-based Ocean Properties Ltd. and Bangor-based Dublin 5 LLC — are competing for the right to build a hotel on city-owned land adjacent to the planned gaming complex along the waterfront. McKay says the city hopes to select a developer soon, but that's hardly the end of hotel building in Bangor. Penn National may in a few years build a hotel of its own, while developers hope to break ground on a new Marriott Courtyard hotel near the Bangor Mall by the end of the year. If all these projects are built, Bangor would have almost 400 new hotel rooms.
But Peter Daigle, chief operating officer of Bangor-based Lafayette Hotels, which owns three Bangor-area hotels, is skeptical about the city's ability to absorb those additional beds. "Right now I don't see any unmet demand," Daigle says. "There seems to be a fervor at City Hall that if a high-end hotel comes in people will be willing to pay a lot for a hotel in Bangor."
The race to be first
In the race to supply new hotel rooms to the Bangor market, Peter Anastos is off to the fastest start. His company, Freeport-based Maine Course Hospitality Group, owns hotels and restaurants in Bangor, Brewer, Freeport and New Hampshire, and is set to begin construction on a 92-room Marriott Courtyard Hotel along Sylvan Road near the Bangor Mall.
Anastos isn't banking on either the racino or the folk festival to fill his hotel, however. "We [build] for existing business we feel is there," he says, citing the Bangor Mall as a major shopping destination for people from the northern part of the state and Canadians traveling on the strength of their dollar. "There are a lot of shopping travelers who come [to Bangor] from all over."
The proposed hotel would be located on a parcel that formerly held part of the shuttered Osram Sylvania factory, and has received approval from the city. The project needs approval from the Maine Department of Environmental Protection, which Anastos hopes to have in time to begin construction by the end of the year.
Yet even with the flurry of activity surrounding the Hollywood Slots development, Anastos isn't worried about the Bangor market being flooded with new hotel rooms. "One thing I learned [in the hotel business] is that only 26% of all hotels that get announced get built. For instance, the Westin in Portland — how many times did we hear about that? I believe it when I see it," he says, referring to a hotel and condominium project that has been delayed and scaled back in downtown Portland. "We'll be the first ones up and Marriott is the leader in the marketplace."
Some uncertainty already is apparent in Bangor. Although Ocean Properties and Dublin 5 are eager to build a hotel on the waterfront, changes in the planned location of the permanent racino have caused both firms to scale back their building plans.
Initially, both the Ocean Properties and Dublin 5 proposals called for a 150-room, full-service hotel that included a restaurant, a gym and pool, a parking garage and 10,000-15,000 sq. ft. of conference space — conference space that was supposed to replace the Bangor Auditorium, where many believed the permanent racino would be built. When the city and Penn National decided to move the permanent facility across the street to the Riverside Block, the need for that much new conference space disappeared, and according to McKay, so did funding that was supposed to come from federal and state sources. As a result, both developers asked the city to help pay for their conference and parking facilities.
That request raised the ire of existing hoteliers like Daigle of Lafayette Hotels, who spoke out against a proposed tax break for new hotel development. "We've been adamant in our opposition," Daigle says. "It makes sense to bring a [tax increment financing district] to encourage development for G.E., but not to fund a plan that completes with opposing business."
Following Daigle's testimony before the city council last May, the city reconsidered its plan and withdrew the conference and parking requirements of the development. Both Ocean Properties and Dublin 5 (which did not respond to repeated requests for comment for this story) subsequently submitted revised proposals with only 3,000-5,000 sq. ft. of conference space, which would be built without public funds. "It was highly unlikely that the city would provide those incentives or subsidies," McKay says. "We're sensitive to providing incentives that would be unfair to existing hotels."
Robert Baldacci, vice president of development at Ocean Properties, doesn't think the reduced conference space will threaten the success of a waterfront hotel. "We're prepared to build a full-service hotel," he says. "The thing we're looking at is the impact of the current hotel market and of other hotel projects in Bangor and the site plan."
The elephant on the Riverside Block
The other possibilities that have Baldacci concerned include Penn National erecting a hotel at the permanent racino site. As part of the city's agreement to allow the company to own and operate the racino, Penn National is required to negotiate with the city for the construction of a new hotel once the facility averages $120 million in annual revenue over a three-year period. But with a new downtown hotel already slated in city plans, and a healthy existing stock of rooms, Penn National is approaching the deal with caution. "We want to focus our full efforts and attention into developing a first-class gaming facility," says Eric Schippers, a spokesman for Penn National.
If a racino hotel were built, it would be a 150-room, seven-story building located at the rear of the complex, near the waterfront. "It's not ideal," says Schippers of the potential hotel's location, "but it does provide the city with a glimpse of how we could construct a hotel."
Still, any hotel constructed by Penn National is long way off, and Schippers says the gaming company is satisfied with the current supply of hotel rooms and the prospect of a new, high-end hotel on the waterfront. "If in fact these other hotel projects come in, that may suffice," he says.
Robert Baldacci also sees the prospect of a second 150-room hotel in central Bangor as overkill. "I think [Bangor] can support one good hotel on the waterfront," he says.
Like Anastos, Baldacci doesn't think a full-service downtown hotel would draw many racino patrons. But he adds that the gambling hall itself does create opportunities for new development. "It's not that the clientele of the racino will stay at our hotel — we think some people will — but the racino helps open up the door for another hotel because it removes two [existing hotels] from the market," he says.
For Rod McKay, the issue of a future hotel on racino grounds is not a major sticking point. "What the city is interested in is a hotel," he says. "We're not particular about who builds the hotel, we're particular that a hotel gets built."
Yet others say the city should be thinking about the long-term impact of multiple hotel projects. The hotel market in Bangor, according to Daigle, is just getting back to where it was 15 years ago. "Taxable lodging sales [in the Bangor region] in 1991 were $24 million," he says, citing statistics from the State Planning Office's Bangor Economic Summary. "In 1994 it went to $17 million, and in 2003 we were back at $25 million… and the supply hasn't change drastically."
Daigle attributes the rebound primarily to the strong Canadian dollar, which has brought more Canadian tourists to Maine, and to an increase in military and civilian flights through Bangor International Airport. Daigle sees these factors, along with the yearly overflow of summer tourism from the coastal region, as more important to his business than the new slot machines.
Still, with the Main Street Inn already demolished and the nearby Holiday Inn expected to meet the wrecking ball by year's end, the city is looking to award development rights for a waterfront hotel soon. What's most important, says McKay, is that Bangor's hotels keep up with the city's plans for growth. "We haven't built a new hotel in 15 years," McKay says, "so we feel that there is a need."
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