.bodytext {float: left; } .floatimg-left-hort { float:left; margin-top:10px; margin-right: 10px; width:300px; clear:left;} .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 10px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 10px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 10px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} The last time Greater Des Moines had this much new hotel development, a national golf tournament was about to descend on the city and plans for a major shopping center were taking shape.

Fast-forward eight years to today. At least seven new hotels are being built or planned for Greater Des Moines, in addition to proposals for a few others.

“The last time I remember seeing this many hotel rooms added to the inventory was in 1999, when the Jordan Creek area was planned and we were getting ready to host the U.S. Senior Open,” said Vicki Comegys, the Greater Des Moines Convention and Visitors Bureau’s director of sales and services.

Comegys estimates that the seven new hotels, several of which are already under construction, will add nearly 900 new rooms to the area’s inventory by next spring. By comparison, the local inventory grew by only 260 rooms last year. In addition, developers are toying with the idea of building large hotels in West Des Moines, Altoona and downtown Des Moines. The flurry of hotel development is creating a stir among members of the hospitality industry, some of whom say the timing makes no sense.

“I’m not seeing the numbers right now to support the demand for all this construction,” said Brian Bocken, general manager and part owner of the Quality Inn & Suites Events Center. “People sometimes think that if you build a hotel, the people will come to fill it, but that’s not how it really works.”

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Mike Heffling, general manager of the Holiday Inn Hotel & Suites Northwest in Urbandale (formerly the Four Points by Sheraton hotel), agrees with Bocken. He points to occupancy numbers in Greater Des Moines to support his argument against more hotel development. Over the past couple of years, hotels in Greater Des Moines have hovered around 60 percent occupancy, according to the Greater Des Moines Convention and Visitors Bureau’s records.

But Comegys points out that despite occupancy barely changing among Greater Des Moines hotels in 2006 from 2005 – it went to 60.7 percent from 60 percent – travel is increasing. She said business travel has been strong over the past year, and leisure travel is also doing well.

“Inventory was higher, and we still went up in occupancy,” Comegys said. “People are definitely visiting Des Moines in greater numbers.”

Hotel-motel tax receipt figures support Comegys’ observations that more people are coming to Des Moines. The hotel-motel taxes that area hotels paid to the state jumped 14 percent between 2005 and 2006, indicating a boost in business at local hotels.

Heffling’s property is among the fortunate ones that have experienced increased occupancy over the past year, but he thinks those gains will be erased once all these new hotel rooms hit the market.

“Des Moines as a market has never been a high occupancy market by any means,” Heffling said. “It has generally been accepted in the industry that a property needs to sell its average cost of a room between 65 and 70 percent of the time to break even. That said, we must have many hotels not breaking even.”

One hotel near the Des Moines International Airport may fall into this latter group. The Best Western Des Moines Airport, formerly the Four Points by Sheraton Airport, was not meeting occupancy goals and changed its brand recently in hopes of remedying the problem.

The challenge of keeping occupancy rates up extends across all parts of Greater Des Moines. In Altoona, the Adventureland Inn tends to average about a 50 percent occupancy rate, according to its manager, Matthew Krantz. The Holiday Inn Downtown’s occupancy is slightly higher, according to its owner

“There are lots and lots of hotels around right now, and a number of smaller ones are having problems,” said Krantz. “I understand why cities want new hotels, but I wonder how everyone is going to make it.”

In with the new

Mike Whalen’s company, Heart of America Restaurants and Inns, currently owns and operates four hotels in Greater Des Moines and is building another two. One project is a Fairfield Inn & Suites at 6840 Fleur Drive, near the Des Moines International Airport. The other is a Holiday Inn & Suites at 60th Street and Mills Civic Parkway in West Des Moines. Both hotels should be complete by April of next year.

Growth in Greater Des Moines drove Heart of America’s decision to begin these projects, Whalen said. “The whole Greater Des Moines area is growing,” Whalen said. “We saw the opportunities for these franchises and thought that they were good products.”

Whalen is expecting local tourism to increase as the nation’s Baby Boomers hit retirement age and start to do more traveling.

Paul Rottenberg, president of Orchestrate Management, is also counting on strong travel trends to support the hotel his company is building, a TownPlace Suites in Johnston, and the one it recently opened, a Holiday Inn Express in Altoona. Orchestrate also owns the Hotel Fort Des Moines and the Hilton Garden Inn in Urbandale, which is next to the TownPlace Suites being developed.

Seeing the surge in new hotels being built, Rottenberg chose the locations for his new projects carefully. High occupancy at the Hilton Garden Inn located near the 86th Street interchange off Interstates 35/80 prompted the idea for a second hotel nearby, one that could serve a slightly different demographic than the Hilton property. TownPlace Suites cater primarily to extended-stay travelers and offer lower rates than Hilton hotels. The decision to build in Altoona was related to development in that area.

“I’ve always wanted to stay out of West Des Moines, because there is so much development going on out there,” he said. “We have been careful to evaluate our niches and be diversified with our locations and products in case the competition starts nipping or the market takes a dip.”

Les Kinseth’s company, Kinseth Hospitality Cos. based in North Liberty, is also choosing to steer clear of West Des Moines with its newest project. Kinseth will break ground this spring on a Courtyard by Marriott on the south side of Ankeny.

“We saw a need for a full-service hotel in the Ankeny area with a conference center,” Kinseth said. “The new supply that has been added to the Ankeny market has been absorbed rather quickly, and we feel that this property will do well.”

Both Whalen and Rottenberg agree that new hotels such as the ones they are building are needed to replace some aging properties that are losing their luster.

“If you start adding up the hotels here that are 20 to 30 years old, it’s a high number,” Rottenberg said. “As they age, they reach their life cycle and become lower-tier products like Best Westerns and Ramadas. To some extent, we are replacing older products.”

Competitive forces

Carolyn Berndt manages an older hotel, the Best Western Des Moines Airport. At the beginning of this year, her hotel dropped the Four Points by Sheraton moniker, and last week converted to a Best Western. Keeping things functioning during the interim, while the hotel was operating without a well-recognized brand, was challenging.

“Occupancy has been low because we’ve had no brand,” Berndt said. “But even before that, we knew that we needed to grow. We’re expected to do that now by bringing in more leisure travel as a Best Western.”

Berndt’s hotel is owned by Kinseth Hospitality, the same company that owns the Holiday Inn Hotel & Suites on Merle Hay Road, which also dropped the Four Points by Sheraton brand a little over a year ago.

“The Four Points brand wasn’t delivering much for us, and Holiday Inn is a really strong brand with a well-recognized name,” Heffling said. “The conversion made a lot of sense for us, and we’re seeing good results from it.”

When hotels reposition themselves by adopting a new brand, renovations are usually part of the strategy. Guest rooms and public areas were remodeled at Heffling’s hotel to accompany the name change in 2006. Now, Berndt’s hotel is getting updates on a smaller scale.

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Renovations are not only a must for hotels undergoing a brand change. Customers expect all hotels to keep their properties in top condition.

“Just like any other business, if you don’t keep your product fresh to the customer, you aren’t going to be as successful as those who do,” Whalen said. “Travelers are more sophisticated than ever, and you have to continually improve your product.”

For hotel owners, this means making big investments. The Des Moines Marriott Downtown began a $13.5 million renovation last year in commemoration of its 25-year anniversary. Bob Conley, owner of R.J. Conley Hotel Group, whose properties include the Holiday Inn Downtown, has invested more than $11 million on improvements to his hotel since 1988. Despite his investments, his property’s occupancy rate is in the upper-50-percent range, slightly below the market average.

Brian Bocken, general manager and part owner of the Quality Inn & Suites Events Center, said his family spent about $2.5 million to renovate the 30-plus-year-old hotel in 2005. He said he has seen a return on his investment since the upgrades, and he has been able to maintain an occupancy rate of about 60 percent.

Concerns over big hotels

Owners of the older downtown hotels have additional motivation to maintain their properties with the proposal to build a headquarters hotel at the Iowa Events Center. Last month, the Polk County Board of Supervisors signed a resolution of support to begin negotiations with Minneapolis-based Mortensen Development Co. for a proposed 16-story, 425-room Hilton hotel north of Veterans Memorial Auditorium.

The development of additional large hotels in the near future could have a profound impact on the local hospitality industry.

Greg Edwards, president and CEO of the Greater Des Moines Convention and Visitors Bureau, met with representatives from General Growth Properties Inc. earlier this month to discuss possibly adding a “several-hundred-room” hotel at Jordan Creek Town Center. In addition, Prairie Meadows Racetrack and Casino still has a large hotel in its long-range plans, according to Gary Palmer, Prairie Meadows’ president and CEO.

“With this large hotel concept, to have three communities in the metro area talking about doing their own, it’s really frightening,” said Orchestrate Management’s Rottenberg.

The new downtown hotel, which appears to be the furthest along in discussions of the three large hotel projects, is opposed by several local developers and hotel leaders.

“Des Moines already has a 450-room hotel with the Downtown Marriott,” Rottenberg said, “and it doesn’t have the occupancy rate to indicate that it isn’t meeting the demand.”

Conley from the Holiday Inn Downtown compares the idea of building a large headquarters hotel at the Iowa Events Center to “building a cathedral for Easter Sunday.”

“When Events Center business comes to town, occupancies all go up, but the Events Center is only occupied about one-seventh of the time,” he said. “You need constant business, and we don’t have that right now. I don’t understand what the hurry is to build the hotel.”

What upsets Conley the most about the prospect of a new large-scale hotel are the negative effects it could have on his employees and the fact that the city and county are likely to provide financial assistance for the hotel project.

“We have to have enough business to support payroll,” Conley said. “You’re talking about the livelihood of not just my family, but families of the 120 people who work here.”

Heffling from the Holiday Inn & Suites Northwest has crunched some numbers on how a large hotel might perform downtown, with the assumption that it would increase convention business. If the hotel would help attract one new convention a week, with an average of 500 to 1,000 people staying for an average of three nights, he estimates that occupancy for the property would still only be about 20 percent.

“You can almost convince yourself that there might be a reason for a new hotel – until you look at some of the numbers,” Heffling said.