ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Monday, April 15, 1996 TAG: 9604150073
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: JEFF STURGEON STAFF WRITER
NOTE: below
THE REINCARNATED Hotel Roanoke didn't quite make a profit in its first year. But wait a bit, supporters say.
When she is at work, Susan Irby inhabits two worlds light years apart: the scrubbed white basement of Hotel Roanoke, a room containing institutional laundry machines and vats of cleaning solution, and the hotel's cushy corridors and restrooms.
High standards apply on both levels. In a memo on the wall, a boss has outlawed the wearing of music headphones in deference to the high rating given the hotel by the American Automobile Association.
"Four diamonds," the memo says, "means a four-diamond appearance."
Irby is one of the housekeeping staff's most tenacious dust fighters - and last year's top hotel employee. In her black and white uniform, she vacuums the light green carpets outside the Regency Room, the hotel's main dining room, and tidies nearby restrooms.
During the past year of heavy employee turnover, "I did see people leaving [for] different reasons. The hotel business is not for everybody," she said. "The pace of [the work] didn't really bother me. In fact, it was sort of exciting when you got that rush of business and, at the end of your shift, you have this feeling in knowing, well, 'You did it. Everything's through and everything got done.'''
Irby is but one player on the 350-person team that brought the hotel and its conference center through the inaugural year of operation.
The hotel was closed in 1989 and given by Norfolk Southern Corp. to Virginia Tech. It then underwent a $28.5 million renovation while construction crews attached a $13 million conference center. Doubletree Hotels Corp. of Phoenix was hired to run both. A joint project of Tech, Roanoke and the region's residents and businesses, the expanded hotel marked the first anniversary of its opening April3.
Despite some early disappointments in the Regency Room restaurant and the problem with turnover, the hotel has managed to get the next-to-highest rating in the auto club's TourBook travel guide and a listing on the National Register of Historic Places. The Regency Room served an average of 329 meals per day, and the conference center served an average of 274 meals per day.
From nearly the beginning of the restoration effort, some have wondered whether a hotel that was not financially viable when operated by Norfolk and Western Railway and its successor in a merger, Norfolk Southern, could be viable if reopened. Now there is some reason to think the answer is "maybe so," because its cash registers took in 97 percent of the money expected.
"I'm excited," said Ray Smoot, Tech's vice president of finance. "Whenever you make estimates for a project of this [size], they are just that - estimates - and you do hold your breath a bit to see how it's really going to work out. I'm pleased that after a year of operation, the hotel financially was able to support itself."
Steady showering
The renovation job looked good to one return visitor, 87-year-old Jack Trayer of Bristol, Va., who was first at Hotel Roanoke in 1935. Gesturing to the antique furnishings around him, he said construction crews had preserved the building's charm.
"I would describe it as elegant," said Trayer, the former manager of a Holiday Inn. "The setting for this. ... You just don't find this. The warmth this lobby has, you don't come by."
The warmth that afternoon was owed in part, perhaps, to free champagne, which was flowing all day on the anniversary.
Three pleasure travelers, Francine Livaditis of Vienna, her son, Garrett, 12, and her mother, Ruth Benscoter of Nescopeck, Pa., rented rooms on curb appeal alone. That was the day before the anniversary party. They saw the sights and couldn't leave. "We decided to stay another day," Livaditis said.
"Just the scope and scale of the place is amazing," she said. "It has the feel of your older hotels with the luxury of modern conveniences." The group particularly liked trekking above the railroad tracks to downtown's City Market via the enclosed glass Market Square Walkway.
Added Garrett: "The showers don't change [temperature] when you flush the toilet."
From the hotel's mailbag, the compliments pour out:
"We traveled to a lot of places," wrote North Carolinian Sherry Riddle, "and most of the time in a hotel such as yours, the people who ask for valet service and a bellhop, driving a Mercedes and wearing silk and cashmere, receive preferential treatment. However, we drove up in our 6-year-old Nissan wearing khaki cotton, parked our car and carried our luggage and were treated as royalty the whole weekend."
The praises are echoed at the City Market, but they run along different lines. The shopkeepers and restaurant owners have reported new business from the hotel's overnight guests and those visiting the conference center for seminars and conventions, said Matt Kennell, executive director of Downtown Roanoke Inc. Newcomer merchants are vying for a piece of the action, leading to a growing shortage of available retail space in the area, he said.
Kennel said when he takes the walkway to the hotel, he sees "well-dressed people heading the other direction - downtown." They go to places such as the T-Shirt Factory, where hotel guests account for 30 percent of customers, and it is not unusual for them to spend $20 for a couple of shirts, said Tammy Robertson, assistant manager. Many are from New England and headed to or back from Florida, she said.
The businesses benefiting the most are "the more unique type niche businesses ... like Oxford Mercantile," Kennel said. "We continue to hear a lot of good things from the retailers, predominantly in the Market area. ... I hope it's helping the entire downtown area."
One who might disagree is William Carder, general manager of the Patrick Henry Hotel, about two blocks south on Jefferson Street.
Industry statistics show the demand for the region's highest-priced hotel rooms and occupancy rates is dropping. To Carder, that means the Patrick Henry has lost business to Hotel Roanoke. Carder said his room demand, a primary measure of business, was down 7 percent at the end of last year. Renovations are under way at the Patrick Henry, which is striving to increase business, Carder said.
Smith Travel Research in Hendersonville, Tenn., said its survey of 10 full-service hotels in the Roanoke Valley found a 9.1 percent drop in occupancy rate last year from 1994. During the first two months of this year, the rate was down 15.5 percent compared with the 1995 period. Rates for individual hotels are not available from Smith Travel. Hotel Roanoke would not release its occupancy rate.
The Hotel Roanoke project's lead organizers knew this downturn might happen initially, but they hold out hope that the hotel, with its spacious conference center, can draw new visitors to the area.
"The assumption made going into all of this was, the hotel was not going to do well by trying to take business from other competitors in the market, that we needed a bigger pie; and the pie has not grown as rapidly as we would all like," said Tom Robertson, chairman of Renew Roanoke.
The harsh winter crimped the influx of new business, as has the habit of meeting planners to book events years in advance, Robertson said. Convention organizers often do not bring their business to a facility until they have seen it. They could not have seen the Hotel Roanoke until last spring and, even if they were pleased, may not bring events to it until 1997 and beyond.
Based on future bookings of both rooms and conference space, general manager Gary Walton said he has reason to believe the hotel will just get busier. A national meeting of General Electric Co. managers was held at the hotel and conference center, as was a meeting involving Burlington Industries of Greensboro, N.C., showing that the hotel has had some success bringing in new conference dollars, Walton said.
But, he said, "it has to be much better, and it will be. It takes time. We need to be able to pull from Atlanta, to pull more from Pittsburgh, to pull more from Baltimore and bring that kind of business into the valley."
Luring new travelers
Tech's Smoot offered one explanation that others advanced in the past - that the Roanoke Valley Convention and Visitor Bureau lacks the money it needs to make the same amount of noise about the Roanoke region as is made by places such as Virginia Beach and Charlotte and Asheville, N.C., about their attractions and hotels. Executive director Martha Mackey said the agency is working to increase its budget.
The importance of luring travelers who have never visited before is - for Hotel Roanoke - tied to its ability to grow, pay hefty construction debts and ultimately become a cash cow for Tech and Roanoke.
As envisioned by those who put the project together, if the hotel and conference center are a total success, the Virginia Tech Foundation and Renew Roanoke ultimately will channel their yearly profits into the university and civic improvements indefinitely. These entities own the hotel, with the foundation holding a two-thirds interest.
As is now clear, the hotel did not make money its first year. This did not surprise industry officials, who are aware that new or extensively remodeled hotels often require at least two or three years to turn a profit.
During those initial 12 months, the hotel collected $9.77 million in room and food charges and the conference center took in $1.33 million on meetings and food. The sum, $11.1 million, fell $200,000 short of expectations, but the hotel managed to pay its bills, including its mortgage, by tapping a reserve fund, Smoot said.
About 80 percent of the reserve is left, which, he said, is enough to meet future shortfalls. Its purpose is to ensure that the hotel pays about $40,000 per month in interest and principle on a $6.5 million renovation loan from a consortium of five banks and an insurance company - an obligation of about $480,000 per year. Smoot declined to give the size of the reserve fund, saying details such as that and the occupancy rate must be kept confidential to avoid giving an edge to competing hotels.
In addition to the reserve, the hotel's owners have a backup plan to meet expenses, a plan that could in the future involve Renew Roanoke going back to the community and asking for more donations. This year, that wasn't necessary, and that,
That fact, according to Smoot, indicates the project has achieved a measure of success.
"The way I view it is whether I have to put any additional money into it," he said. "We didn't have to put any additional money into it to make it work."
Not only that, but the project paid $925,000 in taxes. Roanoke's share of those taxes covered its cost of staying current on bonds that the city issued to pay for the conference center, with $250,000 expected to be left over as of June 30, said Jim Grisso, finance director.
"I wish all our economic development projects produced this kind of cash flow in the first year," Grisso said.
Returning the favor
However, the project's next real test is right around the corner as additional loan payments begin coming due in July, meaning the hotel will need even more revenue to meet the obligation.
Some $6 million borrowed from the federal government, plus interest, will be owed starting July 1, and Roanoke taxpayers should take heed: The city will divert funds normally used for community programs - including job training, alcohol and drug abuse counseling and home repair - to the hotel project if the hotel can't meet this added obligation. It also adds up to about $480,000 per year.
Although these debts could take 20 years to retire, Renew Roanoke's Robertson said the organization expects to collect a share of the hotel's profits within 10 years, because the hotel can return profit even before the debt is retired, as long as debt payments are made first.
Ultimately, those connected with the hotel who see dollar signs in its future are counting on people such as housekeeper Susan Irby to keep guests happy so they will come back.
Walton noted with a measure of pride that Irby was one of 150 originally hired employees who are still with the hotel. He said he is proudest of how employees have taken to their responsibilities.
A union to which employees belonged before the hotel closed, the Food and Beverage Workers Union in Washington, D.C., watches from a distance, with no active organizing campaign under way, an official said.
Walton said he has worked hard to treat employees right, hoping to make them believe they have no reason to join a union.
Irby, a Covington native and former garment factory employee, called her housekeeping position the best job she has ever had. In addition to her paycheck, she receives insurance coverage, retirement benefits, paid days off and uniforms.
The hotel gave her a room and meals during the big January snow to ensure she was available to work. As another fringe benefit, for $25 a night, she can stay at any other lodging establishment managed by Doubletree Hotels.
Irby tries to return the favor each day as she pushes her cart. She can speak from memory of the steps to be taken for guests who are declared by an internal process to be VIPs: "We turn down the beds, we prop up the pillows, we turn the radio down low for them. We pull the drapes."
LENGTH: Long : 227 lines ILLUSTRATION: PHOTO: ERIC BRADY/Staff. 1. Guests and friends cut the Hotelby CNBRoanoke and Conference Center's first birthday cake April 3. 2. The
expanded and refurbished hotel has the next-to-highest rating in the
American Automobile Association's TourBook travel guide and is
listed in the National Register of Historic Places. color. 3. Susan
Irby, who finds the hotel's pace ``sort of exciting,'' lends a hand
keeping the restroom up to four-diamond standards.