Practical Tack Puts Hoteliers Back on Track

The future of hotels in Northwest Arkansas in 2006 was breathtaking.

To wit, an 18-story tower with a price tag of $40 million didn’t even qualify as the most audacious project in downtown Fayetteville. That honor went to a project aimed at constructing a nine-story, $70 million hotel at the corner of Dickson and Block Streets.

Perhaps the boldest venture of all was farther up the Interstate 540 corridor, near the Pinnacle Promenade in Rogers. That’s where developers planned to erect the tallest building between Little Rock and Tulsa, a 22-story, $100 million luxury hotel that would change the face of the industry in the Northwest Arkansas market.

In all, nine new hotels were either under construction or in the planning stages in late July 2006. Together, they promised more than 1,300 new guest rooms, not to mention dozens of swanky condominiums.

And while the number of new hotel rooms opened since the beginning of 2006 actually has topped 2,000, (see map) none of the most sparkling projects reached fruition. Only five of the nine planned hotels stand today.

Whereas most of those that failed promised would-be occupants extravagant amenities and irresistible entertainment options, those that have succeeded employed a more reliable formula. Doubletree Guest Suites in Bentonville, for example, combines above-average accommodations with more simple pleasures, as evidenced by the giant chocolate-chip cookie that adorns an Interstate billboard.

More rational approaches are further evident in the other types of properties that have been built in the last three years. No less than 15 of the 21 new hotels built in Northwest Arkansas since 2006 are touted as all-suite or extended-stay hotels.

“I think that’s a national trend,” said Marilyn Heifner, executive director of the Fayetteville Advertising and Promotion Commission. “People want to go where they can get the comforts of home.”

Leah Hendricks, sales manager at TownePlace Suites in Johnson, practically echoed Heifner’s sentiment.

“It really is designed for people to settle in,” Hendricks said of TownePlace. “We try to supply some of the conveniences of home.”

Such hotels cater to the needs of many of the kinds of people who flock to areas that have seen the kind of growth Northwest Arkansas has experienced over the last decade. Hendricks said many business travelers and trainees, as well as construction crews and other blue-collar workers, seem to prefer a suite-style setting.

“As an area booms, these hotels come in and while they look kind of like an apartment, they have a lot more amenities than an apartment,” Hendricks said.

TownePlace Suites, for example, offers fully equipped kitchens, separate living and sleeping quarters, a fitness center and outdoor swimming pool, wireless Internet access and two business centers. A complimentary hot breakfast is available daily, and “manager’s receptions” are held three times a week, typically featuring food catered by a local restaurant. Such amenities are common among all-suites and extended-stay properties.

Because it’s located in Johnson, estimates of room revenues for TownePlace Suites were unavailable, but Hendricks said earnings in both June and July “well-exceeded what was projected.” Homewood Suites by Hilton in Rogers also has been a top performer, ranking as one of only 14 area hotels to generate more than $2 million in revenue in 2008, while Country Inn and Suites, also in Rogers, ranked 20th with $1.54 million.

(See the Northwest Arkansas Business Journal’s annual list of largest hotels by clicking here.)

Homewood Suites general manager Matthew Disheroon said such hotels are probably a better fit for Northwest Arkansas — at least right now — than the super-posh projects that flopped.

“I think Embassy Suites is a good option for high-end customers, but I think some of those others probably would’ve charged $250 to $300 a night,” Disheroon said. “I think what you’ve seen open in the meantime appeals to people looking for something in the more middle- to upper-scale segment.”

Finding the right fit can be a rewarding endeavor. Northwest Arkansas’ top 57 hotels, which account for nearly 6,000 guest rooms, all brought in $500,000 or more in revenue in calendar 2008. All together those 57 hotels generated $92.14 million. Even in a down economy, that reflects a 9.7 percent increase from what the same hotels made in 2007.

That said, Heifner and Tom Galyon, executive director 
of the Rogers Convention and Visitors Bureau, said the increase in the number of guest rooms over the last three years should sustain Northwest Arkansas for a while.

“We have saturation at the moment,” Galyon said of Rogers.

Heifner voiced a similar opinion about Fayetteville.

“When you bring in 75,000 screaming Razorback fans, some of them might have to stay in Springdale or Rogers or Bentonville,” Heifner said. “Or when you bring in 300,000 people for a motorcycle festival, some of them might have to stay in Springdale or Rogers or Bentonville, and some of them might have to stay in Fort Smith or Joplin, Missouri.

“But we only have a shortage about five or six times a year.”

Older, more traditional hotels continue to rank high, too. Hampton Inn properties in Rogers, Fayetteville and Springdale were among the top 15 revenue-producers in 2008, as was the Holiday Inn Express property in Fayetteville. Three of the four were built before 1999.

Matt Behrend, general manager at the Holiday Inn Express in Fayetteville said top-notch service is what wins repeat business. Behrend also said his hotel hopes to get a boost from a potential “re-launch” in early 2010 that would feature not just new signage, but new bedding and flat-screen television sets in every room.

Such upgrades are a result of fierce competition within the industry, but not necessarily against the extended-stay properties, Behrend added.

“It can cut into our business, but I think overall it’s less than if a hotel of the same caliber as ours came in right next to us,” Behrend said. “Our main focus is to take away market share from the hotels that are more along the same lines as us.”

Dreams of new markets — or at least new ways of tapping into existing markets — will always exist, of course, and one such vision was brought to light late in June. That’s when Starwood Hotels & Resorts Worldwide Inc. announced its plan to build a 234-room Sheraton Hotel adjacent to Bentonville Plaza.

The hotel would be controlled by FBE Limited LLC, a private real estate investment firm that owns Bentonville Plaza and about 15 surrounding acres. Paul Wischermann, who is president of the Minneapolis-based group that would manage the hotel for FBE, said the estimated cost of the project is $42 million, according to an earlier report by the Business Journal.

Grubb & Ellis, Solomon Partners of Bentonville manages Bentonville Plaza, and Grady Mathews is the director of leasing and marketing for the property. He said any skepticism surrounding the project is somewhat understandable given some of the past failures in the area.

Mathews also knows one question is inevitable: Why will this one work? His answer begins with the established and experienced backing behind the project.

Mathews also is quick to add the proposed Sheraton would satisfy an existing need rather than a projected demographic.

“My question would be, ‘Why wouldn’t it work?’” Mathews said. “People typically come to Bentonville to do business with Wal-Mart. With car service to and from the airport, we can put them within walking distance of Wal-Mart and provide them with everything they need while they’re here.”

Mathews also addressed the weekend void departing business travelers create for many area hotels. He believes a coming attraction like the Crystal Bridges Museum of American Art can help in that regard.

 Maybe those in the hotel industry in Northwest Arkansas have learned a valuable lesson from the recent past. Maybe they’ve learned that brainy beats breathtaking.