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NEWS FEATURE

12 17 02

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Through the 1990s, New Orleans enjoyed one of the greatest hotel building growth spurts in its history. Now, only a handful of projects remain on the table.

By Garry Boulard

It was, by almost anyone's measure, one of the greatest building booms in New Orleans history. Beginning in the summer of 1994, as the city was still reeling from the negative effects of a deep oil-inspired recession from the decade before, the profile of some of New Orleans' most valuable commercial properties began to change, ushering in an era of new hotel growth unlike anything in its past, compiling a record that may be unbeatable anytime in the near future.

By early 2001, says Wade Regas, director of the Real Estate Marketing Center at the University of New Orleans, the city's hotel-building craze had reached its peak, accounting for the addition of some 10,000 new rooms over the 24,000 in existence in l994. "Almost everything that was talked about or planned ended up getting built," says Regas, who characterizes the seven-year spree as "one very, very long ongoing expansion."

Today, New Orleans has more than 35,000 rooms, the most available hotel and motel space in the city's history. And the spree is very much over. "One city can only absorb so many new hotel properties," notes Mark Lomanno, president of Smith Travel Research in Hendersonville, Tenn., who says that even after the terrorist attacks of 9/11 -- which in one day nearly entirely ended the nation's hotel-building binge -- New Orleans still saw a 7.4 percent increase in the amount of new hotel rooms.

Today, hotel developers in New Orleans are not unlike the wizened wildcatters who used to hang around the old Gardner Hotel in downtown Shreveport, talking about the good old days and hoping for one more precipitous roll of the dice. Only a handful of projects are currently on the boards: an 800-room $150 million hotel that may be built on top of the old Canadian Pavilion from the l984 World's Fair; the 280-room Lowes Hotel at the old Lykes office building near the Piazza d'Italia; and the 400-room Marriott, slated for construction across the street from the Morial Convention Center.

"Everything stopped on 9/11," says Veronica Martinez, the manager of the New Orleans chapter of the Construction Industry Association. "Tourism died, and then the backers began to get scared. Before that, we kept hearing about all of these new projects starting up. Every time you turned around there was a new job. It isn't anything like that today."

The sudden halt in new hotel building was hardly limited to New Orleans. Across the country, the only hotel projects underway were the ones that had started before 9/11.

"Nationally, hotel building has been off by about 20 percent," reports Mark Casso, president of the Construction Industry Roundtable, a Washington association made up of CEOs from the nation's top 100 construction companies. "But these numbers are deceiving because new hotel construction has actually returned to its former level in some markets in the South and West."

For those who track new hotel growth, the disparity between the generally depressed national numbers and hot-spot construction is entirely a matter of geography. Only in what analysts calls "first-market" cities has hotel building continued in 2002 at a pre-9/11 pace. Orlando, according to Smith Travel Research, this year leads the nation in new hotel growth with the addition of more than 12,000 rooms, followed by San Diego with 3,400 and Las Vegas at 2,700 rooms. New Orleans -- an established first-market destination city if ever there was one -- continued to enjoy high hotel room increases throughout 2001 and well into this year, adding some 2,500 rooms to its overall total during that time.

Developers are still hoping to find financing for the 695-room reconversion of the World Trade Center. Others continue to nourish dreams about the old Krauss warehouse building in the Warehouse District, which some say could be reconverted into a 200-room hotel. "But that's it," says Martinez, who should know: every day she monitors dozens of new public and private projects in the planning room of the Construction Industry of America's office on Canal Street. If something, anything, is going to be built in New Orleans, Martinez is usually among the first people in the city to know about it.

"It's not like there's no construction activity going on in the city," says Martinez, noting that housing starts in the metro area have remained strong for most of 2002, not to mention highway repair and construction projects. "It's the hotel building that's flat. Nothing is going on."

For local hoteliers confronting a declining occupancy rate, the lack of new competition may actually prove the best thing that ever happened to them in 2003. "In a weird way, the timing was perfect," Regas says. "We were reaching the saturation point sometime before 9/11. The market was very much at risk of being over-built. If you had to pick a time for a slow-down in new hotel construction in New Orleans, you couldn't have picked a better time than late last year, heading into this year."