5,000 Hotel Rooms Surfacing in Next 24 Months But High-End Demand in Doubt

Fifty pieces of artwork from internationally and locally renowned artists will grace the interior of the 15-story Austrian/Bohemian-themed hotel of the 1900 period.

The lobby's rotunda will display a rare Imperial Grand Bosendorfer piano, one of only two in the world, according to Kessler, a former Atlanta developer who teamed with the late legendary Cecil B. Day in creating Days Inns of America Inc. in the early 1970s.

But locals will get a real eyeful when they check out the average daily room rates--$150 to $225, unprecedented prices for Downtown where the median rate is $100.

At least 5,000 new hotel rooms are either in the pipeline or preparing to surface in metro Orlando over the next 24 months, increasing the total inventory to about 117,000 rooms or right behind Las Vegas' 125,000 room count.

Industry skeptics already are asking: Is Orlando ready for a new wave of lodging space and more particularly, is Downtown capable of supporting a super-luxury hotel such as the Grand Bohemian?

Even a seasoned hotel developer and former lodging operator such as Robin L. Webb isn't certain yet on how high-end hotels will run the gauntlet of consumer acceptance, but he is generally comfortable with the delivery of the expected new product over the next 24 months.

"The dynamics of the hotel market in metro Orlando have always frustrated and befuddled the naysayers," Webb, vice president and managing broker for Arivda Realty Services commercial division in Winter Park, FL, tells GlobeSt.com.

"The demand side growth has kept an almost even pace with supply side escalation over the past decade, allowing the market to retain a very consistent occupancy rate in the low 70% range," Webb says. "Clearly, all of the new inventory coming on line over the next 24 months is being developed by experienced and sophisticated operators."

But the economic reality in certain markets of luxury hotels with room rates in the $200-per-day range is another matter, the broker says.

"The demand for ultra high-end hotel product is showing a softening across the nation and it is reasonable to believe the same softening will affect new, expensive product in Central Florida," Webb tells GlobeSt.com.

The Grand Bohemian, for example, faces "a tremendous rate challenge," he says. Downtown Orlando hotels consistently run in the low to mid-60% occupancy range at an average daily rate much closer to $100 than $200.

"The Grand Bohemian's challenge will be to develop a loyal following during its initial ramp-up period in order to achieve its rate objective and to handle the traditional vacancy that occurs in a commercial hotel," Webb says. "Since there is no precedent for the $200 targeted ADR in the central business district, the Grand Bohemian is navigating in uncharted waters and its ability to achieve the target in a softening national economy remains to be seen in the year following its April opening."

Also opening on April 16, is the 1,293-room, six-story Animal Kingdom Lodge, the 18th resort at Walt Disney World's 30,000-acre empire in Lake Buena Vista, FL. The daily room rate range is $200 to $500.

Disney does not disclose construction costs but construction industry estimators familiar with comparable projects tell GlobeSt.com the hard cost is at least $194 million or about $150,000 per room for the 33-acre, 800,000-sf resort.

Nashville-based Opryland Hospitality Group is confident it can speed up its originally planned February 2002 opening of the 1,406-room Opryland Hotel Florida to December of this year. The developer has not disclosed construction costs but industry estimators tell GlobeSt.com, $246 million or $175,000 per room would be a conservative number.

The estimated construction costs of the ultra high-end hotels are not lost on analysts and brokers such as Arvida's Webb. "While Disney, with almost 30,000 rooms of its own and its own reservation system, will drive occupancy to its new Animal Kingdom Lodge, Opryland will have to rely on its extensive convention space (178,000 sf) to supplement its tourist efforts," Webb tells GlobeSt.com.

In the wings is still another high-end product, the 1,000-room Royal Pacific Resort ($170 per night) being jointly developed by Universal Orlando and Loews Hotel at an estimated hard construction cost of $150 million or $150,000 per room. The tentative opening is June 2002.