One boutique, two boutique, three boutique, four Whether you’re a purist who defines boutique hotels as having no more than 150 rooms or are willing to stretch the limit to include the larger “lifestyle” variety, one thing is certain, a new crop is sprouting up fast downtown.
The urban core of San Diego, which includes the bustling Gaslamp Quarter and Little Italy, now counts 44 hotels with a total of 11,200 rooms, the largest room inventory in the county.
Add to that the 334-room Renaissance, 420-room Hard Rock, 191-room Diegan, and the 1,190-room Hilton San Diego Convention Center Hotel, which are in various stages of construction, as well as the remodeled 270-room U.S. Grant, scheduled to reopen with a $52 million face-lift in mid-October, and one might wonder how some soon-to-open boutiques, including the 43-room Keating, 159-room Ivy and 212-room Sofia, can compete on such crowded turf.
Will they get lost in the shuffle? No way, said Reint Reinders, the retired chief executive officer of the San Diego Convention & Visitors Bureau, who now runs his own hotel-consulting firm, Reint Reinders and Associates.
Convention Center To Benefit
One major factor prompting hotel development in downtown is the San Diego Convention Center. Since it was doubled in size in 2001, the 2.6 million-square-foot waterfront facility has had a tough time booking simultaneous large-scale events due to a lack of hotel rooms nearby. A dramatic increase will enable it to beef up its event calendar, and the new hotels, including the boutiques, can feed off the additional business, because bigger is not necessarily better.
“Many travelers today demand more intimate settings, more personalized attention and a higher level of service in a hotel that offers them a more residential feel” than the larger big box properties offer, Reinders said.
Conventioneers that might have stayed at one of the headquarters’ hotels in the past, such as the 1,361-room Marriott Hotel & Marina, or the 1,625-room Manchester Grand Hyatt adjacent to the Convention Center, may opt on a return trip to stay at a boutique they’ve heard about from a friend or co-worker.
“Boutiques are becoming very much in vogue,” Reinders said. “You’re seeing this happen in San Francisco and New York, and a lot of people know about them regardless of the fact that they may not be big brands.”
Word-of-mouth advertising is a strong endorsement to have. But the new kids in the neighborhood can’t rely on it solely. That’s where online global distribution systems that list hotels worldwide and provide booking and reservations services come in.
No Reservations About IHotelier
Edward Kaen, owner of the Keating, which plans to open in late October at Fifth Avenue and F Street, said it has contracted with iHotelier, a global distribution system, because “it’s what all the travel agents use.”
“Even though we’re small, we’re basically set up like any big hotel,” Kaen said. “If you go to our Web page, and click on ‘reserve’ or ‘book now,’ that’s iHotelier.”
Andrea Winslow-Upp, general manager of Sofia on Broadway, said that distribution systems, which are relatively new, have put smaller, independently owned and operated hotels, such as hers, on a level playing field with national and international brands.
The Sofia’s strategy is to occupy the “affordable” niche among the new contenders, she added. Rooms in the historic building on Broadway, formerly the Pickwick Hotel, will start at $149 nightly. Suites will go for $320.
“We knew that was the market segment we wanted to be in because we felt there was a lot of competition at the high end,” she added. The Sofia underwent a $16.3 million renovation and is scheduled to open in December.
High Rates
Slated to open in January, rooms at the Ivy, a remake of the historic Maryland Hotel, will range from $400 nightly to as much as $2,500 for a high-end suite, said Mike Kelly, chairman and chief executive officer of Kelly Capital, a local private investment firm that owns the property. Kelly Capital’s tab for the project was $75 million.
Kaen said the Keating’s rates would start at $499 per room and go up to $1,029 for a suite. He declined to disclose the purchase price of the Keating Building that houses the hotel, or what is being spent on the remodeling.
If those room rates sound high, that’s because they are, said Bob Rauch, a professor in the hospitality and tourism program at San Diego State University and a hotel owner, considering “that top convention hotels” are fetching average nightly rates that exceed $200, but haven’t broken the $300 mark.
In Rauch’s opinion, the rates the new boutiques will be able to charge will fall into the same range, yet will provide their owners “a reasonable rate of return.”
“The $400 threshold would be hard to achieve,” he said, unless the hotels are sold out. As a rule, however, that doesn’t happen more than 30 or 40 nights a year, he added.
In addition to the Sofia, Ivy and Keating, Aloft, a new sub-brand of the W, owned by Starwood Hotels, will also debut on the downtown scene fairly soon.
JMI Realty, the real estate arm of San Diego Padres owner John Moores, plans to develop an Aloft along with a yet-to-be-announced extended stay brand of Westin Hotels east of Petco Park.
Construction could begin at the end of 2007 and take up to 18 months to complete. Expectations are that rooms would be priced at $175 nightly, putting the property in the affordable bracket.
The Aloft and Westin sub-brand would be built from the ground up as two hotels under one roof.
Rehabilitation Projects
That the 255-room Solamar , a JMI developed property that was recently sold , is the only downtown boutique that wasn’t a rehab of an older property, gets to the real estate strategy behind the trend: There are scant few plots on which to build new hotels in downtown, Kaen pointed out.
“So the next thing you do is adaptive reuse,” he said.
Downtown’s first boutique hotel, the 132-room Horton Grand on Island Avenue, combined two historic hotels that had been torn down and rebuilt brick by brick in 1986. The 258-room W San Diego in downtown’s Marina District, which caters to Generation Xers, is another example of adaptive reuse.
Along with adding to the revitalization of downtown, they’ve helped to reposition hotels as social gathering spots with their popular nightspots and restaurants that draw locals as well as tourists.
“It’s back to the future,” Rauch said. “Hotels are now considered the cool icons that they once were.”
