Orlando's robust inventory of lodging options will move up a notch with the scheduled opening next summer of the Grande Lakes project, combining a deluxe 584-room Ritz-Carlton Hotel adjacent to an upper upscale 1,000-room J.W. Marriott Hotel.
The projected July 2003 opening will follow a pair of recent major upscale debuts in the market: Loews Hotels opened its 1,000-room Royal Pacific Resort at Universal in June, while Gaylord Entertainment opened the 1,400-room Gaylord Palms in February. This past spring, meanwhile, Starwood Hotels & Resorts Worldwide debuted the upper upscale 250-room Westin Grand Bohemian the same month Walt Disney World Resorts added the upscale 1,300-room Animal Kingdom Lodge to its complex.
In the extended stay category, Marriott International, manager of the Grande Lakes project, this spring opened both a midprice 105-suite TownePlace Suites and an upscale 350-suite Residence Inn in Orlando.
One of the characteristics of the Orlando market always has been its strength primarily as a group destination and, secondarily, as a transient business travel destination. Underlying both of these revenue sources, Orlando is a world-class leisure destination. In this way, it resembles Miami's second business travel hub
(BTN, April 22).Yet, like other of the top 25 U.S. hotel markets, Orlando has not been immune from the downturn in the economy and the subsequent cutback in corporate travel. In June, for example, occupancy rates were down 3.1 percent compared with the same month a year earlier, according to Smith Travel Research. However, revenue per available room, a key indicator of hotel profitability, fell a more significant 7.1 percent, indicating how severely operators cut room rates in an attempt to drive demand.
More disturbing still, Orlando's supply growth picture is not promising. Of the top 25 markets, PricewaterhouseCoopers and Lodging Econometrics have projected that Orlando's supply growth is expected to show the greatest increase—rising 5.25 percent—in 2002. By contrast, the median percentage increase for the top 25 is 3 percent.
In light of these market conditions, buyers who bring a significant number of room nights to Orlando will be in a strong negotiating position as the 2003 bid season picks up steam. This is especially true if they have consolidated their group and transient spend and, therefore, can leverage the larger spend in negotiations. Given the intense competition hotels will be facing, buyers prepared to move marketshare—and have policy mandates in place to ensure compliance—particularly will be well positioned.
Considering the nature of the supply pipeline, Orlando hotels coming online today began construction 18 months to 24 months ago. "Given the number of projects in the development pipeline and recent demand changes, supply growth is anticipated to outpace negative demand growth, resulting in a downward trend in occupancy and average rate for 2002," said Mark Lunt, a lodging industry analyst with Ernst & Young LLP.
On a more positive note, Lunt cited the $750 million, 1 million-sq.-ft. expansion of the Orange County Convention Center, which will attract more large group events to Orlando when it is completed in late-2003. "By the time the expansion is completed, group demand is expected to increase by approximately 30 percent over traditional levels," Lunt said. "By that time, the national economy is likely to have shown signs of recovery."
In undertaking the Grande Lakes project, Marriott sees an unfilled niche in the crowded marketplace. "There's been a shortage of premium hotel rooms in Orlando and, consequently, we intend to provide the levels of service that these kinds of accommodations would warrant," said Bruce Seigel, director of marketing for the Ritz-Carlton portion of the project. "While Orlando has long been famous as a vacation destination, there never really have been facilities for the high-end business traveler before." Like the J.W. Marriott, Ritz-Carlton is part of Marriott International. The J.W. is the high-end tier of the core Marriott brand.
Cognizant of Orlando's draw as a group destination, the project will offer a total of 105,000 square feet of meeting space—33,000 square feet in the Ritz-Carlton and 72,000 square feet in the J.W. Marriott. Included are four ballrooms, 37 conference rooms and two boardrooms. Complementing the meeting space will be comparable golf and spa facilities.
The Royal Pacific project at Universal Studios joined two other Loews-managed properties already in operation: the Portofino Bay Hotel and the Hard Rock Hotel. Combined, the three are equally as large in scale as the Grande Lakes project, with 2,400 guest rooms and 128,000 square feet of meeting space. "The Royal Pacific certainly has its own décor, style and feel, but at the same time it shares Loews' service standards and guest orientation," said Jonathan Tisch, Loews chairman and CEO.
In building their project, executives at Nashville, Tenn.-based Gaylord Entertainment hoped to equal the success of their initial convention hotel undertaking, the Opryland Resort and Convention Center in their headquarters city, which grew in stages to its present massive size. By contrast, the Gaylord Palms, with 400,000 square feet of meeting and convention space was super-size from opening day.
Given its size, management has taken a separate 362-room area out of its total 1,400-room inventory and created what John Caparella, senior vice president and general manager, called a hotel within a hotel.
The self-contained area is named Emerald Bay, wherein guest rooms are all suites. Emerald Bay includes boardrooms, other meeting facilities and "There are additional services available, so this part of the project has the feel of a boutique hotel," Caparella said. Part of the strategy is that entire small meetings can be held in these more intimate surroundings with attendees not having to engage the larger hotel, if they so choose.
The 250-room Westin Grand Bohemian is small compared to these other new arrivals in Orlando. It also is located downtown, away from much of the theme park-driven group and leisure traffic. "Though the property does feature 9,600 square feet of meeting space," said Sue Brush, Westin senior vice president for brand management, "what really distinguishes the hotel are the themes of classic, 19th century art and music, which are part of the design and style of the property."
As in other Westin properties, Brush said business guests have responded very positively to the now brandwide standard Heavenly Bed.
Unlike the other new full-service Orlando hotels that feature substantial amounts of meeting space, Disney's Animal Kingdom Lodge strictly is a residential facility, built to accompany the Animal Kingdom Park. Large amounts of meeting space can be found elsewhere on the Disney grounds. According to designer Peter Dominick, the sprawling six-story lodge was built to resemble a horseshoe, a motif adapted from African villages.
Meanwhile, both Residence Inn and TownePlace Suites have a large business traveler following, given their residential atmosphere intended for stays of five nights or longer. "Orlando is such a strong leisure destination, there's a good chance families on vacation also will be drawn to the extra space in the suite portion as well as the strong price-value proposition," said Tim Sheldon, Marriott senior vice president of extended stay lodging.
Other brandwide amenities, however, still are designed primarily for the business traveler. "The meeting room at the Residence Inn would be an example, as would the dataports and voicemail at the TownePlace Suites," Sheldon said.