Hoteliers Converting Historic Washington Buildings

The conversion of historic buildings into hotels—as well as renovations and reflaggings—have dominated the Washington market, with the openings of the Hotel Monaco, Washington Terrace and Sofitel during the past month as the latest evidence of the trend.

The 184-room Monaco, which was built in the 1840s as the city's original General Post Office Building, today is a national historic landmark. The 220-room Washington Terrace also had an earlier incarnation as the Doubletree Park Terrace, and the Sofitel, meanwhile, relocated last month to a newly restored, 237-room building on Lafayette Square near The White House, a conversion of a 1920s-era Art Moderne office building.

As is true for most gateway cities, the barriers to entry for new build hotels in Washington can be considerable. "This helps explain why so many new properties are either conversions or renovations," said Thierry Roch, executive director of Historic Hotels of America. "Plus, many Washington structures are rich with historical detail, so hotels fashioned from them can make distinctive projects."

For buyers who book a significant number of room nights in Washington, the new centrally located inventory gives them additional options for their programs. This is especially true if travelers' business appointments take them to downtown locations where availability in nearby hotels can be an issue. New properties also may be prepared to negotiate particularly favorable rates for 2003 as a way of generating trial usage.

Relative to other U.S. gateway cities, Washington's lodging inventory has performed reasonably well in the past few months. Occupancy rates and room revenues in May, for example, were down 1.9 percent and 3.8 percent, respectively, over the prior year, according to Smith Travel Research. By contrast, occupancies and room revenues in Chicago for the month dropped 8 percent and 11.8 percent, respectively, and, in the most extreme case, 13 percent and 25.7 percent, respectively, in San Francisco.

Similarly, the Washington market has staged a strong recovery relative to Sept. 11. In January, for example, when Reagan National Airport still was closed, occupancies and room revenues in the city were down 13.2 percent and 27.4 percent, respectively.

One reason for the Washington market's recovery is what Mike DeFrino, general manager of the Hotel Monaco, called its "built-in demand generator. Much business travel here is government-related and that travel continues regardless of the economy," he said. "In fact, when you think of the turmoil these days in corporate finance, there may be even more travel for bankers and lawyers to the Securities & Exchange Commission, for example." The Monaco is part of San Francisco-based Kimpton Hotel Group.

While business travel typically slows in the summer, Pete Carroll, general manager of the Washington Terrace, expected the spring's positive performance to carry over to the fall. "When Congress is in session, there tends to be the most incremental business travel." The Washington Terrace closed last November as part of a major renovation. "The second floor, which contained guest rooms and staff offices, is now a technologically sophisticated conference center," he said.

In recent years, Washington has evolved into a global as well as domestic gateway, as represented by the new and expanded Sofitel. "With our French heritage, we bring a sense of international style and design to the city," said general manager Francis Cossutta. In trying to build its U.S. visibility, Sofitel's parent, Paris-based Accor Hotels and Resorts, has targeted such other gateways as New York, Philadelphia and Chicago as sites for the most recent Sofitels.

The recovering market also can benefit existing properties. "We opened right after Sept. 11, following a year-long renovation," said Don Schoen, general manager of the 240-room Melrose, located in the West End, two blocks from Georgetown. "Right after Sept. 11, the market was decimated, so we took that time to get our name out to travel buyers. Now that the market has strengthened, we're ready to start building relationships with the corporate community." The Melrose started life as an apartment building and was subsequently a Wyndham.

Given all the new competition, an established deluxe property, such as the Four Seasons Washington, can risk losing marketshare or it can fight back. Located in Georgetown, the 260-room property has opted to enhance its luxury profile further. "The booking window has grown very narrow, but we're seeing significant short-term pickup," said Christopher Hunsberger, general manager. "One thing we've been careful not to do is cut back on service levels. Our customers' expectations regarding service remains the same, regardless of the economy. In fact, we've taken the opportunity to move forward with renovations, including the addition of high-tech suites, since it's easier to do this kind of work when it's a bit quieter."