New Hotels Chase Room Revenue Growth

The 114-room AC Hotel Little Rock Downtown at 201 W. Capitol Ave. in Little Rock.

The pulse of the Little Rock-North Little Rock hotel market is beating stronger than those of many hospitality markets around the nation, according to data compiled by a leading industry observer.

A 4.7% increase in room demand and a 6.4% increase in room revenue stood out among 1-year changes in the state’s largest hotel market tracked by STR of Hendersonville, Tennessee.

Jan Freitag, senior vice president at STR, said the Little Rock-North Little Rock market is seeing very limited development of new projects with a pretty good uptick in new room demand.

“All of this doesn’t translate into increased room prices,” Freitag said. “But the market had a nearly 6.4% increase in room revenue, which is a very healthy number because the national average was 1%.”

Relative to national averages, the Little Rock-North Little Rock hotel market tallied better 2018-19 gains, according to STR data. Average occupancy in 2019 was up 2.3% to 55.8% in the Little Rock-North Little Rock market. The average daily room rate last year was up nearly 1.4% to $83.22.

The national hotel scene registered record-breaking per-formance during 2019 but posted its lowest growth rate in revenue per available room since 2010.

In a year-over-year comparison, average occupancy in the U.S. hotel market was flat at 66.1%. Compared with 2018, the average daily room rate na-tionally was up 1% to $131.21.

Looking at the data trends does Freitag see the Little Rock-North Little Rock market as getting crowded?

“It’s in the eye of the beholder,” he said. “Are there too many rooms? Does there need to be more rooms? The developers think the market is attractive for their particular property.”

The 2019 average occupancy in the Little Rock-North Little Rock market reflects a return to 2013 levels. However, room revenue during that seven-year period grew 20.3% from $189.4 million to $227.9 million.

“The market is steady, and we have new product coming into town,” said Shawn Govind, principal at Beechwood Pinnacle Hotel Group of Little Rock.

Four hotel projects are in various stages of completion, encompassing 491 rooms and representing more than $56 million in construction. Three projects scattered in downtown Little Rock, west Little Rock and North Little Rock are making their market debuts during a 12-month span.

The AC Hotel at 201 W. Capitol Ave. opened on Feb. 18 with 114 rooms, and the 127-room Aloft Hotel at 716 Rahling Road will open in April.

Touted as a $25 million historic redevelopment, the AC Hotel project reassembled the Hall and Davidson buildings into a single property. A grand opening party for Marriott Hotel’s first AC-flagged offering in Arkansas is set for March 19.

The $13.6 million Aloft Hotel in west Little Rock represents the first unfurling of that banner in the market as well.

The 150-room Home2 Suites-Tru by Hilton under construction in North Little Rock is the first combo project of its type in Arkansas.

“It’s one building with one check-in desk and two different room concepts,” geared to extended stay and millennial guests, said Manoj Patel, chairman and CEO of North Little Rock’s Setu Hospitality Inc.

He expects his company’s $9 million project at 4221 Stockton Drive to be open by February 2021. Patel also is developing the neighboring $7 million CARTI facility at 4201 Springhill Drive as a symbiotic venture.

Beechwood Pinnacle Hotel Group’s 100-room Holiday Inn Express & Suites at 811 E. Fourth St. in downtown Little Rock could make it a party of four, but its scheduled opening is less certain.

“We have a slab and underground utilities in place,” said Shawn Govind. “I don’t know if we’ll hit 2020 to open or not but that’s our goal.”

A question mark is hovering over finer points of the $8.5 million project thanks to pending changes wrought by 30 Crossing construction.

The Arkansas Department of Transportation’s vision for an improved Interstate 30 corridor includes transforming Rector Street and restricting curb cuts, according to Govind. If implemented, that would prohibit the hotel’s plans for a drop-off drive from Rector.

The short list of new hotel brands coming to the Little Rock-North Little Rock market comes as no surprise to STR’s Freitag.

”These are all mid-sized, limited-service chains, which is the national trend,” he said.

Will the Lafayette Hotel Return?

The possible return of the Lafayette Building to hotel duty is generating a big buzz in the Little Rock hospitality community.

The would-be buyer and would-be seller aren’t talking, but secondary sources believe a deal could close in the next few weeks.

Little Rock’s G&G Hospitality Group put the 523 Louisiana St. property under option last year with the intention of transforming the bottom half of the 10-story building into hotel space.

That change, pitched by current Lafayette investor Chad Gallagher, required unanimous approval by the building’s property owners association.

“He said our property values will go up, and we will be pleased,” said Melanie Siegel, a Lafayette condo owner. “We’re cautiously excited.”

The upper five stories were redeveloped into 30 apartments by Tower Investments LLC of Woodland, California. The units were later converted to condominiums and sold off.

Gallagher’s Lafayette Building LLC purchased the building for $3 million in 2014. That deal included 10 condos. The limited liability company still owns eight of those.

Opened as the Lafayette Hotel in 1925, the property was recast as a 130,000-SF office building in 1973. The property was placed on the National Register of Historic Places in 1982.

Nick Patel, chief financial officer at G&G Hospitality, and Manish Patel, chief operations officer of the group, couldn’t be reached for comment. The same goes for Gallagher at Lafayette Building LLC.

New Hotel Projects

Little Rock-North Little Rock Hotel Market

Source: STR, the premier hotel data firm based in Hendersonville, Tennessee.