Spokane Journal of Business

Hotel industry on upswing

Conventions, events, shopping give boost to hospitality trade

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The Spokane-area lodging industry is enjoying a growth spurt thats producing increasing occupancy, rising average room rates, and growing room-tax revenues.

Industry observers credit the improvement in part to strong convention business, a downtown resurgence that has helped make Spokane a regional shopping destination, the draw of a variety of theater productions and sporting events, and a dip in hotel construction in recent years. The boost in demand, however, is spurring new hotel projects in the Spokane Valley.

Through the first half of this year, the occupancy rate at a key sample of Spokane and Eastern Washington hotels climbed to 64.3 percent, up from 62.2 percent in the year-earlier periodand up a whopping 7.5 percentage points from a rate of 56.8 percent in the first half of 1998, says Wolfgang Rood Hospitality Consulting, of Bellevue, Wash., which surveys the Northwest hotel industry regularly. This year, June, with a jump of 5.1 percentage points over the year-earlier month, and March, with a jump of 8.2 percentage points, were especially strong.

The hotels in the survey include 16 Eastern Washington establishments with 2,500 rooms, most of which are in the Spokane area, says Wolfgang Rood, a principal with the consulting firm. The survey also says that during the first six months of this year, the average daily room rate charged here increased to $65.33, up 2.6 percent from the year-earlier period.

Statewide, for the first six months of 2000, the hotel occupancy rate slipped 1.5 percentage points, to 64 percent, and the average room rate fell 1.2 percent to $95.45, the survey says. Room rates in Spokane long have lagged behind those in Seattle.

Statewide occupancy has been driven down by the addition of new rooms in several areas, including Seattle, Everett, and Bellingham, Rood says. Downtown Seattles occupancy rate dropped 3.4 percentage points to 69.3 percent; occupancy in Everett and Snohomish County dropped 2.1 percentage points to 49 percent; and occupancy in Bellingham and northwest Washington fell 3 percentage points to about 64 percent. Other than Spokane, Bellevue was the only one of eight areas to go up.

In another indicator of lodging-industry growth here, revenues derived from a 2 percent tax that the city of Spokane and Spokane County levy on room charges at establishments with more than 40 rooms have gone up sharply this year, says Mina Gokee, director of sales at the Spokane Area Convention and Visitors Bureau.

The citys second quarter room-tax revenues grew more than 7 percent compared with the year-earlier period. In Spokane County, room-tax revenues climbed less than 2 percent in the second quarter, but Gokee says the countys schedule for room-tax collections causes its quarterly revenues to fluctuate greatly, and they dont necessarily represent current market conditions. Both the city and county reported double-digit growth in room-tax revenues in the first quarter of this year.

The hotel business is cyclical, and last year and the year before were the bottom of the cycle, says Ron Anderson, Spokane-based regional manager for WestCoast Hotels Inc. and the general manager of the WestCoast Grand Hotel at the Park. He says a boom in lodging construction here several years agoespecially the building of inexpensive, limited-service hotelsglutted the market with hotel rooms. Since 1998, hotel construction has slowed, and demand for rooms now is starting to catch up with supply, he says.

Bolstering that assessment, Marples Business Newsletter, a Seattle-based publication that tracks business in the Pacific Northwest, reported in June that a three-year nationwide boom in hotel construction has slowed, and rising interest rates should help deter further overbuilding.

That doesnt appear to be the case, though, in the Spokane Valley, where work has started on a 76-unit Best Western PepperTree Inn at Liberty Lake and a 127-unit Oxford Suites hotel on Indiana Avenue east of the Spokane Valley Mall. An 84-unit Marriott Residence Inn is planned further east on Indiana. (See story, page A3.)

Growing demand

Success in attracting conventions has helped increase demand for hotel rooms here, Anderson says. He says the Convention and Visitors Bureau does a good job of bringing conventions to Spokane, and with the communitys affordability, four-season climate, and year-round outdoor recreation, delegates are happy to return.

Spokanes supply of hotel rooms available for delegates, however, exceeds the convention-hosting capacity of the Spokane Center, Anderson says. We need to expand the Convention Center as its close to full, and we need the ability to have two conventions at once or accommodate bigger events that will fill rooms, he says.

In the Spokane Valley, hotel stays generated by conventions have plateaued after improving somewhat, says Jeff Fox, general manager of the DoubleTree Hotel Spokane Valley. The convention market is tapped out because of limited (convention) facilities, he says.

Sports facilities, on the other hand, are attracting an increasing number of people to the Spokane area to participate in and watch events, and those facilities have the potential to draw ever-larger crowds, Fox says.

Were seeing the impact of sports, he says. Players and spectators at tournaments at the Valley ice rinks Planet Ice and Ice World USA, at softball fields in Liberty Lake, and at Plantes Ferry Park Sports Complex, which includes soccer and softball fields, fill hotel rooms in the Valley, he says.

Also, successful seasons for the Spokane Indians baseball club and the Spokane Chiefs hockey club have drawn sports fans from elsewhere and boosted the communitys profile in the region, Anderson says.

The range of high school, collegiate, and Olympic-level competitions at the Spokane Veterans Memorial Arena and events at Joe Albi Stadium also attract out-of-town fans, he says.

The arena staff, the chamber of commerce-affiliated Greater Spokane Sports Association, Brett Sports & Entertainment, a consulting firm owned by the owners of the Indians, Chiefs, and Spokane Shadow, and others have done a great job of sports marketing here, and even more potential exists for using sports to draw visitors to Spokane, he says.

Cultural events, particularly the G&B Presents Millennium Series that brought such Broadway favorites as Miss Saigon, The Phantom of the Opera, and Les Miserables to Spokane, also have boosted hotel occupancy rates by pulling in audiences from throughout the region, Anderson says.

The downtown core has been rejuvenated by the addition of high-end retail shops at River Park Square, the opening of the renovated Steam Plant Square, and other projects, and is serving as a regional shopping center that feeds hotel occupancy rates, Anderson says. Other retail centers, such as the Spokane Valley Mall, also draw out-of-town shoppers, Fox says. He says car shows and other events in Post Falls and Coeur dAlene help fill Spokane Valley hotel rooms as attendees push across the state line to find lodging.

Canadian travelers, who once made up a significant part of Spokanes tourist base but dropped in number as the Canadian dollar weakened against U.S. currency, are returning, Anderson says.

With continued unfavorable currency exchange rates for them, Canadians likely are choosing to come to Spokane because its a nearby U.S. destination thats more affordable than Seattle or California, he contends.

Hotel occupancy this year also got a boost from the Y2K bug, Fox theorizes. He says 1999 ended with very soft demand for rooms, attributed partly to cautious travelers who postponed trips because of worries about how computer systems would handle the year end. The no-problem transition released pent-up demand, and the hotel business picked up quickly and has sustained the upward trend, he says.

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