Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, April 2, 1995 TAG: 9503310029
SECTION: BUSINESS PAGE: F5 EDITION: METRO
SOURCE: JEFF STURGEON STAFF WRITER
DATELINE: LENGTH: Long
The group, Future Business Leaders of America, long had held its three-day annual gathering at Hotel Roanoke every other year or so until the hotel closed in 1989. In 1990, events then were staged at the Roanoke Civic Center. But meeting organizers quit coming to Roanoke after that because of the inconvenience of shuttling the youths between other hotels and the downtown meeting facilities.
The reopening of the Hotel Roanoke won back the high school group's business, which is expected to infuse at least $75,000 into the local economy in just three days and benefit two other hotels - the Sheraton Inn Roanoke Airport and Roanoke Airport Marriott - where students also will stay. Next year, the Future Business Leaders plans to convene at Reston's Hyatt Regency and after that the group is not sure about returning to Roanoke.
This time the problem isn't the inconvenience about where delegates stay, but about costs.
Sarah Lowe Thompson, an activity coordinator for the group, said she can't get the Hotel Roanoke's reopening discount for meetings beyond this year and the regular surcharge for meeting facilities - about $11,000 for a group her size - is a "major concern."
Unlike the Iowa family that plowed its corn fields for a baseball diamond in the movie "Field of Dreams," taking on faith that a good field would attract legendary players, officials of the Hotel Roanoke and Conference Center must lure guests with more tangible proof: high-tech meeting and guest rooms, and food and beverages, at good price.
It's not, "if you build it, they will come" as they said in the movie, quipped Martha Mackey, executive director of the Roanoke Valley Convention and Visitors Bureau.
And the Hotel Roanoke and Conference Center must try to establish itself in a field already overgrown with dozens of other quality hotels competing for the same business. As a conference center, it must do a healthy portion of its business with groups holding meetings rather than individual travelers.
To its advantage, the hotel reopens Monday during an upturn in the hotel industry and as few new hotels are coming onto the market. The project is the nation's only new conference center opening this spring, said Tom Bolman, executive director of the International Association of Conference Centers in St. Louis.
Still, the Hotel Roanoke and Conference Center faces a marketing challenge - attracting business that wouldn't otherwise come to the Roanoke Valley.
"We don't have enough companies in Roanoke alone to support us and all the other hotels that are around," said Gary Crizer, sales and marketing director for the project and an employee of Doubletree Hotels Corp.
Skeptics of the Hotel Roanoke project point out that the hotel's 332 rooms will dramatically expand the supply of higher-priced lodging in the Roanoke Valley. Taking the Roanoke Airport Marriott, Sheraton Inn Roanoke Airport, Radisson Patrick Henry and Holiday Inn-Tanglewood as a group, Hotel Roanoke will expand the upper-end room supply by 45 percent.
It follows, then, that unless Hotel Roanoke lures that much new hotel business, it simply will take customers from the other like-priced hotels, critics said.
If that happens over the long run, "we have failed," said Harold Kurstedt Jr., a member of the Hotel Roanoke Conference Center Commission. Kurstedt and others close to the project are, however, much more optimistic.
A second possible concern is that the hotel and conference center won't meet financial projections. The project's organizers are aware of the risk and have set aside an undisclosed amount of money to cover losses.
To break even, the hotel must collect an average of $80 per room and post an average occupancy rate of 64 percent, said Ray Smoot, vice president of finance at Virginia Tech.
The Doubletree system has performed that well - and better. The company collected an average of $85 per room at its 104 hotels last year, up from about $81 in 1993, exceeding the rate of inflation. The company posted a 71 percent occupancy rate last year, up from 69 percent the year before, the company said.
While the Roanoke Valley's upscale hotels achieved a 72 percent occupancy rate - above that hoped for at Hotel Roanoke - the hotels collected an average of $60 per room last year, $20 less than the amount projected for Hotel Roanoke, according to Smith Travel Research, a hospitality consulting firm in Gallatin, Tenn. The average price for all grades of the valley's 4,000 hotel and motel rooms was $48.50.
While the project has a reserve, it is not unlimited. If the project loses more money than budgeted, Virginia Tech and the city of Roanoke would make up the difference on the conference center's books.
Smoot said excess hotel losses would require an infusion of cash from Renew Roanoke, a community foundation that owns 33 percent of the hotel; or the Virginia Tech Real Estate Foundation, which owns 67 percent. If those sources fall short of the need, Smoot said the hotel would have to find additional investors.
Crizer said he isn't overly concerned about his hotel's siphoning business from competitors. "When the hotel closed, it helped everyone who was left do extremely well," he said.
Moreover, he predicts the hotel will cultivate its own customers during its first three to five years in business - people drawn to the region's mountains, downtown Roanoke and the conference center. Crizer sees the center ranking among the region's best technologically, because it provides guests with computers wired to the Internet, plug-ins for laptop computers, a satellite-broadcast receiving dish as well as comfortable meeting rooms.
Calling it the "foundation" on which he will build the business, Crizer noted that the hotel already has received commitments from some groups that never have met in the Roanoke Valley, including at least one Fortune 500 company. He declined to identify the groups.
Its marketing team has already sold 40,000 nights of lodging, or "room-nights," and has leads for 30,000 more nights of potential business, most of it concentrated in 1995 through 1997.
At the projected average room rate of $80, that means the hotel can count on at least $3.2 million of revenue over the first three years. That, however, is a fraction of the project's projected revenue.
According to budgets, the hotel will take in $10.8 million and the conference center will earn $1.8 million from July 1 to June 30, 1996, according to Smoot and the Hotel Roanoke Conference Center Commission.
The largest portion of the revenue is to come from room charges. Doubletree officials have set Hotel Roanoke's room prices, excluding suites, as follows: On weekdays, rates will be $119 to $139 for tourists and $109 to $129 for corporate travelers. On weekends, rates will be $79 to $99. The hotel's suites rent for $450 per night.
Many guests will pay less, however, because those are base or "rack" rates against which discounts are given for booking multiple rooms or a single room during slower periods, such as Easter weekend or on a Tuesday night.
Hospitality journals, travel publications and newspapers have been getting the word out that Hotel Roanoke is reopening.
Roanoke has more than doubled city funding for the convention bureau, which is marketing to the hotel and conference center to people such as corporations and professional meeting planners.
Those groups now can choose from a wide menu of destinations, many of them resorts in vacation spots.
Crizer sees his most formidable competitors as including the Lansdowne Conference Resort, a nine-story complex incorporating a Frank Lloyd Wright-inspired design, golf course and luxurious amenities in Leesburg; the Kingsmill Resort, a 405-room luxury hotel and conference center on the James River near Williamsburg; and the Westfields International Conference Center by Marriott at Chantilly in Northern Virginia, a complex with 40,000 square feet of meeting rooms and 335 guest rooms.
One of the state's leading meeting planners said Hotel Roanoke is in the same league as those facilities and has a good shot at attracting groups that alternate their conventions among several Virginia destinations.
"The Hotel Roanoke is in demand. There's no question about it," said Christi Ruddy, president of the state chapter of the Meeting Professionals International in Dallas, Tex., a trade group for meeting planners and the hospitality industry.
It will face stiffer competition for groups that range over the mid-Atlantic region and even stiffer competition for national meetings, Ruddy said. Its chief liability, she said, is that visitors can fly directly to Roanoke Regional Airport from only a short list of cities.
Aware of that concern, Crizer has strived to drum up business from corporations and associations in Washington; D.C.; Baltimore; Atlanta; Pittsburgh; and Charlotte and Raleigh, N.C., because guests can fly directly from those cities to Roanoke.
To its advantage, the Hotel Roanoke reopens Monday as the hotel industry climbs out of its worst slump in 25 years.
The nation's hotels were more than 65 percent full last year for the first time since 1982, according to Smith Travel Research. Sixty-five percent occupancy is considered a break-even point for the average hotel. Room rates, which influence revenue, rose faster than inflation for the first time in the industry's recovery.
Compared to 1990, when the industry lost $5.7 billion, it posted profits of $4.7 billion last year, Smith Travel said.
"Let's just call it great planning by the ownership," said William Sinclair, vice president for new business at Doubletree.
by CNB