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Low occupancy rates at downtown hotels don’t deter plan for new one

By Rachel Molenda, Staff writer
LAWRENCE PIERCE | Gazette
The old Holley Hotel site on Quarrier Street.

Charleston doesn’t fill the hotel rooms it has — and more could be on the way.

Negotiations will soon take place between the Charleston Urban Renewal Authority and Richmond, Virginia-based KM Hotels to determine the specifics of what will be built at the former Holley Hotel site, currently a parking lot, on Quarrier Street. All indications point to another hotel.

Mayur Patel, of KM Hotels, couldn’t be reached for comment Wednesday or Thursday, but he has been involved with Hilton brand hotels, including a Hampton Inn in the suburbs of Richmond.

On Wednesday, Jim Edwards, CURA’s executive director, said after the board voted to negotiate with Patel, that any development at the former Holley Hotel site would “most likely” include a hotel.

This is despite downtown Charleston having 1,500 hotel rooms, once construction of the Courtyard by Marriott at the confluence of the Elk and Kanawha rivers is completed.

Data from the Charleston Convention and Visitors Bureau show that the city’s 2013 hotel occupancy fell below 60 percent in January, November and December.

In July and November 2013, occupancy dropped more than 10 percent, compared to a year before.

This year, hotel occupancy appears to be doing better.

Charleston hotels saw a 6 percent drop in occupancy in January, compared to 2013 occupancy.

“I think there are a lot of factors in play,” said Tim Brady, CVB vice president of sales and services, of the drop in numbers.

Charleston is typically a business travel destination, Brady said. However, with a decline in such travel, the CVB has rerouted its marketing strategy to sell the city to leisure travelers, Brady said. While Brady said “it’s tough sometimes to tell” if new marketing efforts are having a positive effect, the city’s hotels saw an upswing in occupancy in May and June, which Brady said is positive.

So does downtown Charleston need more hotels?

Edwards and Brady both said that’s up to the market and developers to decide.

“The people who build hotels base those decisions on research and data,” Brady said. “Our job is to sell the city. As a convention and visitors bureau, to say whether or not we need more hotels, that’s not really what we do.”

Edwards said that, obviously, Patel thinks there is a market for more hotel rooms in Charleston, because that’s what he’s proposed.

“I don’t think a public agency’s role is to determine whether the decision is feasible or not,” Edwards said. “That’s a decision for the private marketplace.”

Brady said a new hotel with a new brand could open Charleston to a different market. “Hotel brands have their own loyalty programs and a client base that’s loyal to them,” he said. “Any time you can have access to a new market, that’s never a bad thing.”

Charlie Wendell, of MountainShore Properties, the losing bidder for the land on the 1000 block of Quarrier Street, said he doesn’t think Charleston needs more hotels. Wendell said his development would not have included any hotel space, but would’ve been a “transformative” development for downtown, with housing, retail and office space included.

Wendell is the developer of the new Courtyard by Marriot.

“We would’ve made a $75 million investment, not build one hotel,” Wendell said of the Quarrier Street site. “The decision was very shortsighted.”

Mayor Danny Jones said he “was involved” with and supported Wendell’s proposal.

Edwards said Wednesday that the board took issue with Wendell’s proposal because MountainShore aimed to acquire more properties adjacent to the Holley Hotel site without a guarantee they could secure the parcels and get the project off the ground in a timely fashion.

Wendell said he understood the board’s concerns about a lack of timeline and offered to sell the property back if his plan for downtown did not materialize. He said MountainShore also offered to pay CURA for lost parking revenue — Edwards estimates that CURA makes at least $60,000 annually in parking fees — if the project never materialized. CURA also would have been given veto power over the plans MountainShore proposed, Wendell said.

Wendell said he believes that one of the reasons MountainShore lost out on the bid was because CURA valued a quick development over something that would’ve changed the downtown, albeit at a slower pace.

“If someone is proposing to do a major development, it’s going to take time,” Wendell said. “The site has been sitting vacant for 20-plus years. Why would we want something fast when there’s the possibility of putting something transformative on the site?”

The CURA vote on Wednesday to negotiate with KM Hotels was 4-2, with member Andrew Jordon abstaining. Rusty Webb and Karen Haddad voted against the proposal. On Thursday, Webb said there already are enough hotel rooms in Charleston.

“I just don’t think we need another hotel in Charleston right now,” Webb said. “There’s not enough occupancy to justify another hotel.”

Another downtown hotel has the potential to upset existing hoteliers, Jones said.

“Hotel operators in this city aren’t happy about it,” Jones said. “They think we have enough hotel rooms. But it is what it is.” Jones added, though, that developing the lot is better than letting it sit vacant.

Because CURA voted only to negotiate with KM Hotels, specifics still need to be worked out. Edwards said at issue now is the type of development that would be built on the site. He said he would urge the board to support a mixed-use project in negotiations. Edwards wants the bottom floors to include retail and office space. The top floors could include hotel space, he said.

Edwards said he doesn’t want to see a suburban-style single-use building surrounded by parking space. “That’s certainly not what downtown needs,” Edwards said.

Reach Rachel Molenda at rachel.molenda@wvgazette.com, 304-348-5102 or follow @rachelmolenda on Twitter. Reach Jack Suntrup at jack.suntrup@wvgazette.com, 304-348-5100 or follow @jacksuntrup on Twitter.


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