Dora Brothers Hospitality Corp.

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Indianapolis Business Journal VOL. 24 NO. 5, APRIL 14-20, 2003
Focus

New downtown hotels seeking their niche Three developments to add 500 rooms to inventory
By Matt Hendrix

Three new hotels will increase Indianapolis' downtown hotel room inventory by more than 500 rooms over the next few years, according to the Indianapolis Convention and Visitors Association and local developers.

The addition of the Conrad, Hilton Garden Inn and Best Western hotels might seem problematic during a stagnant time for the hotel industry, but developers said their hotels will fill niches in the downtown sector.

Average downtown/east-side occupancy over the last 12 months was 60.3 percent for 7,751 rooms in 44 hotels, according to Hendersonville, Tenn.-based Smith Travel Research, which monitors the hotel industry. That's a drop from 65.1 percent during the same period in 1997-98.

According to the Indianapolis Convention and Visitors Association, there are 22 hotels downtown with 5,214 rooms.
"These new hotels are all going to affect the occupancy rates across the board," said Jeffrey Brown, vice president of local Schahet Hotels Inc., which owns the 180-room Hampton Inn Downtown. "Anytime you increase the number of rooms, it's going to affect everyone."

Downtown hotels rely too heavily on Indiana Convention Center events, said Brown, who expects the Hilton Garden Inn and Conrad to aggressively pursue the convention segment. The new hotels' presence will also drain some business from suburban hotels, with more downtown rooms making it less likely downtown guests would need to look elsewhere during large conventions or sporting events, he said.

"Free enterprise is one of our country's greatest assets," Brown said. "Everybody thinks they have a niche and hoteliers will always continue to build. But downtown activity is going to have to pick up for more rooms to make sense."
Bob Schultz, senior manager of communications and marketing for ICVA, agreed that downtown hotels would like to be busier, but is optimistic about the new hotels.

"We are cautious about any hotel development, and know that demand still needs to catch up with supply," Schultz said. "But we're pleased with the private sector's desire to develop. These are all very reputable operations whose hotels will have a positive effect on downtown."

The hotels will bring experienced sales teams who will help market downtown's benefits as a destination, he said.
The increase in supply will be incremental, lessening the blow to established hotels, said Schultz, noting the Conrad won't open for several years. And the Hilton, he pointed out, is a replacement for the Ramada Limited Waterbury, which closed last year.

"There is no question all three will affect occupancy levels in the market, but it will come at different times and eventually level off," Shultz said. "It usually takes 18 to 36 months for demand and a new property's supply to catch up with each other, but it will happen."

Developing hoteliers said they're not worried.

Hilton Garden Inn
"We truly believe in the downtown Indianapolis market," said Matt Wehling, director of franchise development for Beverly Hills, Calif.-based Hilton Hotels Corp., which is bringing its Hilton Garden Inn brand to the former Ramada Limited Waterbury at the corner of Market and Pennsylvania Streets.

"We're very excited about the property," Wehling said of 108 N. Pennsylvania St., where Des Plaines, Ill.-based developer First Hospitality Group Inc. is nearly finished with the renovation of the 180-room hotel. "We believe there has been a real void of quality hotel rooms in the upper-middle market across the country. This will meet the needs of Indianapolis, one of many cities lacking products like Hilton's Garden Inn."

Garden Inns are a step down from Hilton's full-service hotels, but a notch above its Hampton Inn and Suites brand, Wehling said. The niche targets vacationers and executives trying to tighten their travel budgets, he said, noting appeal is strongest for those seeking slight downgrades from high-end habits.

Best Western
Tim Dora, partner of Anderson-based Dora Bros. Hospitality Corp., is putting his firm's money in the same basket. Dora Bros. will open Hilton Garden Inns in Carmel and Fishers in early 2004 and 2005, respectively, but its second downtown holding will be a 108-room Best Western, another bid for upper-middle clientele.

When it opens at 410 S. Missouri St. on April 14, the Best Western will join a Dora Bros. Comfort Inn and Suites on Capital Avenue in competition for downtown guests.

"The commercial business is actually pretty decent right now," Dora said. "We've invested in the type of hotel that is most protected in this bad economy."

Current economic conditions might even benefit certain hotels, he suggested. Dora agreed with Wehling that corporate travelers accustomed to pricey hotels have scaled back spending and are looking at mid-range hotels for accommodations.

With fewer funds available and a war in progress, business travelers are also avoiding flights, so former day-trip destinations are becoming overnight stops.

"Where someone used to fly from Chicago or St. Louis to Indianapolis for a business meeting, they are now driving that distance and often stay overnight," Dora said. "They need hotel rooms, and look for the best of the mid-range ones to provide amenities, but at affordable rates."

Another reason these hotels make sense is their flexibility, he said, contrasting his hotels with those maintaining less pliable overhead costs.
"We can adjust easier than huge hotels with restaurants and other services," Dora said. "When things are slow, I can run a hotel with 18 people and drop my rates. That's just not possible for a lot of places."
Calling the new hotel and the Comfort Inn "City Centre Hotels," Dora Bros. will market and operate the pair together, as it has done with Fishers Hospitality Center, the company's Fishers hotel group, Dora said.
"A synergy with the Comfort Inn should also keep things manageable," he said. "It allows us to share transportation and sales staff, reducing costs at each hotel."

Conrad
Conrad developers have another approach, bringing a ritzy international hotel chain to Indianapolis. The brand name is also owned by Hilton.

"Conrads have done extremely well in Asia and Europe and we wanted to bring a luxury brand hotel to Indianapolis," said Tom McGowan, principal of Kite Cos., which is working with Mansur Real Estate Services Inc. on the project. Developers hope to break ground on the northeast corner of Washington and Illinois streets by the end of the year, McGowan said.

"We know there is a limited depth to the market and that's why we're developing a limited number of rooms," McGowan said.

The Conrad's 220 rooms and 24 luxury condominiums will address a niche within the high-end segment and tap a client base for which hotels with fewer amenities can't compete, he said.

"It comes down to us wanting to put up a high-end international flag in Indianapolis," he said.

The current economy shouldn't be a factor when the new hotel opens in 2005 or 2006.

"We're not focused on the current economic situation," he said. "The Conrad won't be completed tomorrow. It will be more like 2-1/2 years from now and it could be a whole different world then."

Whatever the niche, developers say there's money to be made. In addition to new developments, it's a great time to remodel existing hotels, Dora said.

"The hotel business has normal cycles and this is all part of it," he said. "The important thing is, improve the product and be well positioned as the market recovers. That's what we're doing."

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