Alticor Hotel Great Timing

April 1, 2005
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GRAND RAPIDS — When Alticor Inc. picked Marriott International Inc. to operate its new 340-room, yet-to-be-named downtown hotel, the firm selected the nation's eighth-largest hospitality chain.

Marriott owns 1,646 properties in the U.S. that have 212,766 rooms. Those numbers give Marriott 3.5 percent of all the domestic properties and 4.5 percent of all the nation's hotel rooms. The lodging chain has a dozen brands, including its very popular "Courtyard" name, and had sales revenue of $9 billion in 2003.

Alticor chose Marriott because company executives believed that having such a high-profile name with a lot of networking power would draw convention-goers to the city.

"The hotel project is designed to support the new downtown convention center and be an economic engine for Grand Rapids. By bringing in a partner with such a strong marketing and convention sales system, we've added horsepower to that engine already," said Doug DeVos, president of Alticor.

"Marriott is a great brand. Grand Rapids is a great city. There's no better combination. We're proud to put the Marriott name on our new hotel," added Steve Van Andel, chairman of Alticor.

If the firm's choice of an operator was a good one, then when it chose to open the new hotel, in September 2007, might turn out to be an even better decision.

According to the most recent profile from the American Hotel and Lodging Association, the industry began climbing out of its doldrums in 2003 after two years of losses. Industry sales that year were up by $3 billion from 2002 to $105.3 billion for a pre-tax profit of $12.8 billion.

"Although we're a long way from the record-breaking number of $24 billion we netted in 2000, hoteliers are being very resourceful in building back business and they're starting to see it pay off," said Joseph McInerney, association president and CEO.

AHLA figures for 2004 won't be available until mid-year, but it seems the industry might be continuing the rebound it began two years ago. Two weeks ago, Smith Travel Research said hotel revenue was up nearly 9 percent from the same week in March of last year. The average occupancy rate reached 65 percent in mid-month for a gain of about 3 percent, and room rates rose by 6 percent.

"I think the future is real bright," said Amway Grand Plaza Hotel President Joe Tomaselli, whose firm and Alticor will own the new hotel.

"It is a market-driven decision to build a hotel," he added. "The inventory comes on in 2008."

And Tomaselli could very well be more than just right, he could be room-service right.

The AHLA reported that certain indicators point to a stronger performance ahead for operators. While an inability to raise room rates, higher energy costs, and third-party Internet providers cut into industry profit, more promotional spending, better occupancy numbers, and a higher per-room take are signs that business is good and likely to grow.

If it does, the business traveler will make it happen. In 2003, the business traveler made 52 percent of all reservations. This guest is typically male, between 35 and 54 years old, in a professional or managerial position, earns roughly $83,000 a year, and pays $91 a night for a room.

But according to D.K. Shifflet & Associates Ltd., the downside to the business traveler is that three-quarters stay in their rooms instead of spending money in the city they're visiting.

Still, for 2003, the lodging industry had an average occupancy rate of 61 percent.

Although the rate here was below 55 percent last year, revenue from the lodging excise tax rose for the first time in four years. Added to the industry's national recovery, some see that tax revenue gain as an optimistic sign that the local industry will rebound, too, and reach the occupancy rates well over 60 percent that area operators had during the previous decade.

Alticor is betting about $70 million on that happening. Officials said their new hotel, set to go up at

Campau Avenue
and
Pearl Street NW
, would contribute $650,000 annually to the county's hotel-motel tax. To reach that figure, the hotel needs $13 million in room revenue each year, and those connected with the project don't seem to have any reservations about that number.

"I'm very confident that what we are doing today is going to produce enough results to not only fill what we have downtown, but to provide economic viability in occupancy in all the hotels in KentCounty," said Tomaselli. "This is the icing on the cake, if you will."    

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