Belz's Peabody Suites project put on hold -Ailing luxury hotel segment among reasons for the delay
Memphis Business Journal - by Andy Ashby
Construction at the 160-room Peabody Suites expansion Downtown has been temporarily halted due to a tough lending market, a challenging luxury hotel segment and Belz Enterprises, Inc.’s focus on other projects. “We’ve completed the demolition and are continuing to work through the design and financing,” says Andy Groveman, senior vice president at Belz. Large portions of the former Muvico Theater space have been cleared and the site is ready for redevelopment. Construction could start back up later this year or in early 2010, according to Peabody Hotel general manager Doug Browne.
“I don’t see the economy turning in a big way until we’ve started the next year, at least that’s what hotel analysts say,” he says. In October, there were 38 hotel projects under construction in the Memphis market, according to local consultant Chuck Pinkowski. Now there are eight, including a 127-room Hyatt Place on Winchester and a 131-room Courtyard by Marriott Downtown. “Anything which has been planned is on hold,” Pinkowski says. “If it’s not on hold, it’s been canceled.” Luxury hotels have been especially hard hit, with that segment’s revenues down 38% compared to last year, according to a Smith Travel Research report. Pinkowski attributes some of it to the “AIG phenomenon.” When the federal government bailed out American International Group, Inc., the insurance company used the money to pay bonuses and for meetings in luxury destinations. “They got chastised by the government for doing both of those things,” Pinkowski says. “So the whiplash effect has been other companies which were planning to go to Four Seasons or Ritz Carlton or another fabulous location, canceled their plans or changed their plans to another location.”
The current lending market is another reason. “If you’re trying to borrow $50 million or $60 million, it’s not the best of conditions and the best deal you would want for a project that size,” Browne says. Finally, Peabody Hotel Group, Belz’s hotel company, is halfway through a $450 million-$500 million, 750-room expansion at its Orlando, Fla., hotel. “That’s a huge project and I think that’s taken a lot of focus,” Browne says.