Gov. Patrick Quietly Approves Up To Seven Select-Service Seaport Hotels
By Jim Cronin
Banker & Tradesman Staff Writer
Just because you build them, doesn't mean they will come. But if you want them to come, you've got to go ahead and build them anyway.
Which is why, with the stroke of a pen, Gov. Deval Patrick gave the Massachusetts Convention Center Authority the green light to build up to seven hotels with 2,700 rooms along the South Boston waterfront - including a 1,200-room headquarters hotel.
Patrick signed legislation into the recently approved 2013 state budget that allow for the creation of the hotels. The legislation includes language requiring the developers and operators of those hotels to enter a contract with the authority that would include provisions regarding cooperative marketing and pricing to encourage the use of the Boston Convention and Exhibition Center.
The authority has been arguing for years that increasing the number of hotel rooms adjacent to the Boston Convention and Exhibition Center in South Boston is necessary to draw more and larger conventions to the city. As it stands, event planners are fed up with spending more money on transportation to hotels in other areas of the city - and as a result, Boston just isn't at the top of the list for conventions.
So building more hotel rooms makes a lot of sense - to a point.
According to a local hotel development expert, 2,700 is just too many rooms, plain and simple. While convention business is welcome, it does not create near the demand needed to justify such a proliferation of new keys, the source told Banker & Tradesman.
A portion of those seven potential new hotels will likely be built on a 5.5-acre parcel the authority is negotiating to purchase from Boston's Intercontinental Real Estate Corp. on D Street adjacent to the convention center, according to news reports.
While the authority maintains that more hotel rooms will increase convention activity, there's a catch with that convention crowd, according to another hospitality industry source. As welcome as the business is, event planners often ask for heavily discounted rates in exchange for booking large blocks of hotel rooms. But that can sometimes be balanced by raising daily rates.
Even so, convention activity alone is certainly not enough to justify building a hotel, sources say. PKF Hospitality Research group recently reported that convention group demand has accounted for just 4 percent of annual occupancy for Greater Boston hotels, and 5.6 percent of total Greater Boston demand, over the last 11 years.
"Because of the percentage of overall convention demand, it's certainly not something to be relied upon," to carry business, said Andrea Foster, vice president and director of hospitality services for New England for PKF Consulting. "But we continue to see demand in all segments. What we're finding is that demand in Boston continues, and compression is being created to push demand into suburban submarkets. Certainly there is room in the Boston hotel market for some rooms to be absorbed. Putting additional hotels around the BCEC creates the opportunity to capture more conventions."
And it remains to be seen how the authority will pay for all this new development. Average new hotel construction in Boston can cost upward of $300,000 per room for the type of less expensive, select-service, second-tier hotels planned. Only one, the headquarters hotel, is allowed as a convention center headquarters hotel, like the posh Westin now adjacent to the convention center.
"When [authority executive director James Rooney] first started talking about the expansion, it was about the need for another hotel for the convention center," said Vivien Li, head of the Boston Harbor Association, which monitors development projects in the Seaport. "Now the discussion is about ... seven or eight additional hotels. This proves ... how quickly Jim Rooney is moving ahead with this plan."
