Increased group travel energizes convention hotel development

Group bookings are set to pick up at the end of this year, and are expected to see even more activity going into 2016. The industry is bullish on developing to draw group demand to specific markets, and in some cases local governments are stepping in to provide the financing needed to generate tourism dollars.

The biggest news in convention construction is the $2.3-billion convention center underway in Las Vegas, but it is by no means the only example. A new $225-million hotel has been proposed for Anaheim, Calif., next to the city's convention center. The Orange County Register reported FJS, an affiliate of the Wincome Group, will start construction on the 634-room hotel in 2018. The property is designed to attract higher-income guests traveling to Anaheim for conferences, and is located near the Disneyland Resort. The property's brand has yet to be announced.

"We really need to attract that luxury-hotel market, so I don’t see this as a glut at this point," Paul Sanford, asset manager for the Wincome Group, told the Orange County Register. "We want the market to be calculated carefully so that we’re all successful."

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On the opposite coast, the Hilton Palm Beach will be lending nearby rooms to the Palm Beach County Convention Center when it opens Jan. 27, 2016. The 400-room hotel is expected to generate over $1 billion in economic impact over 10 years, with Steve Crist, associate vice president of meeting and convention sales at Discover Palm Beaches, telling the South Florida Business Journal that corporate meetings and conventions in South Beach had an economic impact of $95 million for 2015

Miami Beach is following suit, with voters to decide on the addition of a new $400-million convention center hotel to the city. Atlanta-based Portman Holdings would lease the land for the development, which will consist of a 30-story, 800-room hotel. According to the Miami Herald, voting on this property will begin in March.

Most recently, Marriott closed on a $500 million construction loan to build the Gaylord Rockies Resort and Convention Center in Aurora, Colo. The hotel is part of an owner-developer partnership with RIDA Development Corp. and Ares Management. The 2-million-square-foot, 1,500-room hotel is shooting to finish construction in late 2018.

Hotel construction may look like it is attempting to match supply growth in many markets, but convention development is more pent up than other segments. For example the upcoming Anaheim hotel is the third luxury property announced for the city, but is the closest to the convention center. Will supply continue to necessitate development at this level? With 2016 coming up fast, we won't have to wonder for long.