Go Westin, Young Man
Will a hotel boom mean big bucks for the city?
What do the city of Memphis, Shane Battier, Pitt Hyde, John Elkington, and Morgan Freeman have in common? They're all investors in the newest downtown Memphis hotel project -- the Westin Hotel and parking garage across from FedExForum.
Memphis, as census reports indicate, is losing well-to-do residents, but it is pulling in well-heeled visitors. When the Westin opens next spring, the rate for its 220 rooms will exceed $200 a night. The three-year-old Hampton Inn and Suites next to it on Beale Street charges $179 a night, one of the highest rates anywhere in the United States for the mid-range Hampton chain.
"Memphis is a momentum city in the hospitality industry," says Kevin Kane, head of the Memphis Convention and Visitors Bureau. "In the last couple of years, we've finally gotten on the radar screen of the big national hotel companies."For nearly 20 years, The Peabody and the Marriott (formerly the Crowne Plaza) next to the convention center were the lonely hotel bookends of downtown. A no-frills Sleep Inn at Court Square was one of the few new entries until the upscale Madison Hotel opened in 2002. Since then several fancy hotel projects have been announced, ranging from the 28-room River Inn of Harbor Town to a high-rise hotel and condo at Beale Street and Riverside Drive. Jeff Sanford, head of the Center City Commission, says there are at least five hotel projects in the works, while others put the number as high as 12.
The $40 million, nine-story Westin Hotel is scheduled to open in March in time for the stretch run of the NBA regular season and playoffs. An $11-million parking garage next to it will have a blues club and restaurants on the ground floor and a car wash and extra-wide parking spots for SUVs.
"With the new arena, Beale Street, and now the hotel, it's kind of like the perfect storm," says John Elkington, head of Performa Entertainment Real Estate and an investor in the garage.
Do construction cranes on the skyline signal an era of prosperity for Memphis? The answer is a qualified yes. The city, which owns the land under the new hotel and the parking garage, is partner to a complicated structure of leases and subleases. Downtown and the tourism industry will certainly get a boost because a big chunk of taxes and revenues are recycled into projects in those areas. The city will get a flat fee of $60,000 a year from the garage for five years, escalating to $150,000 a year after ten years. It also gets five percent of gross revenue from restaurants on the ground floor of the garage, one of which is partly owned by actor and Mississippian Morgan Freeman.
Senate Hotel Partners owns the hotel. By agreement with the city, 25 percent of its ownership group is racial minorities, including former Grizzlies star Battier and American Indian-owned Flintco construction company. Pitt Hyde, one of the local owners of the Memphis Grizzlies, is guarantor on a $6.25 million mortgage on the hotel. The hotel partners will pay the city one percent of their monthly gross as rent in addition to the so-called bed tax of 6.7 percent, which is passed on to visitors and plowed back into tourism and conventions. Bed tax revenues, which were up six percent last year, are helping pay interest on the bonds to build FedExForum.
"We have not had that kind of growth in a long time," says Kane.
Hotel industry analyst Chuck Pinkowski of Pinkowski & Company in Memphis expects the new Westin -- the first in Tennessee -- to do well, with room prices stabilizing at $175-$200 a night. He believes as many as 12 new hotels are coming to Memphis, including a blues-themed hotel, a Hilton Garden Inn, and a Homewood on the parking lot of the old Chisca Hotel southwest of the arena.
"What's exciting," notes Pinkowski, "is that some of these projects are unique and they're coming from places that have not invested in Memphis before."