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Several area hotel developments stall as obtaining financing proves to be a challenge
A Best Western hotel stands uncompleted at the I-95 interchange at Thornburg.
MIKE MORONES/THE FREE LANCE-STAR
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Date published: 10/11/2010
Several Fredericksburg-area hotel projects have stalled in the middle of construction, a trend occurring throughout the U.S.
The delayed local projects include two hotels in Spotsylvania County--a Candlewood Suites near Interstates 95's Exit 126 and a Best Western near Exit 118--and another Best Western just outside the town of Orange.
Projects are typically stalled due to both tight financing conditions and owners slowing down the pace of development due to weaker demand from customers, said Jeff Higley, director of communications for Smith Travel Research, which tracks hotel data.
Higley said there are signs that the U.S. hotel market is starting to rebound. More room nights were sold in July than ever before, which he said is mostly due to a pickup in business travel.
There are also signs that the local hotel market is starting to improve, according to data provided by Smith Travel Research. Through August this year, both revenue per available room and average daily rates for hotels in the Fredericksburg region were higher than they've been for those eight months dating back to at least 2004. Occupancy rates were up from 2009 but down from prior years.
Now that demand is picking up, Higley said, financing needs to loosen up to get stalled projects moving.
Jud Honaker, president of commercial development for the Silver Cos., said loans for hospitality projects are the toughest type of financing to obtain. He has had firsthand observations of that over the past few years as Kalahari Resorts struggles to obtain financing for its $260 million planned water-park resort in Fredericksburg's Celebrate Virginia South, which Silver is developing.
Too much supply and not enough demand is leading to the lack of financing for hotel projects, said Bruce Whitehurst, president of the Virginia Bankers Association. He said many stalled projects were started during the economic boom of a few years back, and now the economy can't sustain the cash flow that hotel developers need to obtain and pay back loans. He said most of the stalled projects are in formerly high-growth areas.
None of the developers for the three stalled area hotel projects could be reached for comment for this article.
The Candlewood Suites developer, Massr Hotel LLC, is close to obtaining financing to resume the project, according to construction management firm ICM Consulting LLC, which is assisting with the project. Spotsylvania spokeswoman Kathy Smith said the developer has a valid building permit, has had inspections and is current with its real estate taxes. A Candlewood Suites spokeswoman said the hotel is scheduled to open in early 2011.
The Best Western at Thornburg had a building inspection in September 2009, Smith said. The developer, Octain Kim Development, owes 2010 first-half taxes of about $19,500.
Lynne Lochen, Orange County's tourism director, toured the Best Western outside Orange a month ago and said it appeared almost done other than the furniture being delivered. She said it looks very nice and will be a welcome addition when it finally opens.
Bill Freehling: 540/374-5405
Stafford's hotels are outperforming others in the region on several metrics used in the industry. "Occupancy" is rooms sold divided by rooms available. "RevPAR," or revenue per available room, is room revenue divided by rooms available. "ADR," or average daily rate, is room revenue divided by rooms sold. All data are year-to-date for 2010 through August, and were compiled by Smith Travel Research. For more STR data, go to the Business Browser blog on fredericksburg.com.
*The region includes all of the listed counties as well as King George, whose sample was too small for Smith Travel Research.