Hotel Reflagging Affords New Image, Route to Growth in Little Rock

The Clarion banners that were draped over the outdoor signs at the Hilton hotel at 925 S. University Ave. in Little Rock last week signaled the visible start of the hotel’s reflagging process. The Hilton Medical Center hotel began operating as a Clarion last Monday.

Little Rock should see an even more striking hotel conversion to a different brand later this year, if the sale of The Peabody Little Rock goes as planned. Marriott is the brand in the works for the 11-year-old Peabody.

Marty Belz, managing member of the ex-Hilton’s operator, Arkansas Hotel Management LLC, is party to both deals.

Belz is also president and chairman of Peabody Hotel Group, a subsidiary of Belz Enterprises of Memphis that operates the three upscale Peabody hotels. In Arkansas, Belz’s companies own only two hotels, both in Little Rock.

Belz declined to talk about the expected transition for The Peabody but spoke with Arkansas Business about the Clarion.

“After operating the hotel for almost 10 years, we just think this fits our needs and the needs of our hotel better,” Belz said. “We thought the Clarion brand may fit best with the customers that stay at the Hilton, and we think we will actually be able to achieve higher occupancy at the hotel with the Clarion brand.”

Reflagging will require about $1 million in renovations. Permanent Clarion signage, a new computer system and all new TVs, carpeting and drapes are among the changes Belz’s group will work on during the next two years or so. The new signs should appear in February.

Belz’s group bought the property about nine years ago while it was in foreclosure and weathered the Great Recession with the hotel branded as it was.

However, the Hilton name has a reputation for being expensive, Belz said.

“In that market, that perception doesn’t work well with us,” he said. The Hilton’s taxable receipts, including restaurant sales, totaled $5.9 million from January to November 2012, according to data from the Little Rock Convention & Visitors Bureau.

Like Hilton, Clarion offers full-service hotels with similar amenities, like restaurants, meeting rooms, frequent traveler discounts and an online reservation system but without the Hilton’s pricey stigma — and with some actual lower costs, Belz said. Both Hilton and Clarion are international brands.

Clarion’s royalties and other fees charged to franchisees like Belz’s group are about 8 percent less than Hilton’s, he said.

As a result, the Little Rock Clarion will be able to charge 5 to 8 percent less than the Hilton did, he said.

The hotel will be Little Rock’s only Clarion.

“There are obvious synergies between the two brands, so it makes sense for this hotel to reposition to Clarion,” said Dan Sweiger, spokesman for Clarion, in an email.

However, a difference between the brands is that “Clarion focuses on providing a more casual and social environment that is more accessible to mid-market travelers and events,” he said.

The hotel will continue to operate a full-service restaurant and 12,000 SF of meeting space, as it did as a Hilton.

At the Peabody

Bruce Skidmore, sales and marketing director for The Peabody Little Rock, said details on what changes will come to the hotel are in a “holding pattern.”

Fairwood Capital LLC of Memphis hasn’t yet officially purchased the hotel, so The Peabody’s staff is waiting to hear which hotel managers will retain their jobs and what renovations will occur. All hourly associates will keep their jobs, Skidmore said.

“We’re all kind of looking for those answers, too, and I’m sure we’ll find out soon,” Skidmore said.

Fairwood intends to spend about $16 million to remodel and upgrade the property at 200 W. Markham St.

The project originally was built as the Excelsior Hotel by developer Doyle Rogers in 1982, and it had $33 million worth of renovations for its grand reopening as The Peabody in January 2002.

Some changes are certain, if the deal closes this year as planned. The hotel’s name and its restaurant’s name will change, Skidmore said. Cappricio Grill is a name specific to the Peabody brand.

Further, the famous mallard ducks swimming in the hotel’s fountain and depicted in lights on the exterior of the hotel will disappear.

Peabody is a regional brand, with locations only in Little Rock, Memphis and Orlando, Fla. Marriott, on the other hand, is an international brand with about 3,000 hotels worldwide, Skidmore said. Marriott offers a rewards program for guests and booking through an 800 number and a major brand website.

The building will be updated. “There’s no question that the physical property needs improvements,” Skidmore said.

There will be different brand standards regarding how to answer the telephone and what sheets, towels and bedding are used, he said. Guest rooms will get coffee machines and new flat-screen TVs. “I don’t know what the entire list includes,” Skidmore said.

Marriott likely has researched what it will take to increase year-over-year occupancy, he said.

“I’m not sure they would do it if they weren’t expecting a change,” Skidmore said.

The Peabody’s taxable receipts, including those for restaurant sales, totaled $15.9 million from January to November 2012.

The Peabody’s hard-earned Forbes Four Star rating, which the hotel has maintained for three consecutive years, will likely vanish, according to Gretchen Hall, president and CEO of the LRCVB.

The Marriott’s resort properties and Ritz-Carlton brands are maintained to four-star standards, she said.

Core Marriott hotels, as the Little Rock location would be, typically aren’t, she said.

Marriott referred questions about changes at the Peabody to purchaser Fairwood Capital. Representatives from Fairwood did not respond to emails and calls for comment.