"The fall months have been pretty good for hotels," Dundon tells GlobeSt. "I don't have all the hard data to support it yet, but from my conversations with hotel operators around the city, markets that were softening – the airport, the suburban Westside and downtown – have leveled off or have turned the corner and are improving."
Also, says Dundon, Portland is perceived by developers around the country as being very healthy for investment, but one in which you would develop new hotels with caution in order to have the timing to hit the market right as it is turning up. "We're not in a boom, but we're not in an unhealthy or declining market, and its pretty steady with prospects for improvement," says Dundon. "So I think it's a good time to sell hotels because there are buyers out there that recognize that there is upside in the market."
At the same time, however, Dundon says debt is less readily available for hotel purchases, and construction financing is a bit tighter, due in part to the a warning earlier this year by the FDIC that Portland was one of several cities at risk of overbuilding in the hotel and multifamily sectors. "(The FDIC's) announcement is unfortunate because from my conversations it appears the FDIC weighs too heavily on the supply side without taking into account the demand side, the future demand growth," says Dundon. "Still, the clients I'm dealing with all seem to have financial resources and lending sources available to them; I have not yet seen a lack of financing be the reason for a deal not going through."
Still, the concern has slowed hotel room growth in the area, according to Dundon, who has been responsible for all of the major hotel deals in the region as of late, including the $25 million sale of the Heathman Hotel to the Rim Corp. this fall. In Dundon's March report, some 12 hotels (1,100 rooms) were under construction. Now, says Dundon, construction has slowed to five hotels and closer to 800 rooms.
Alas, says Dundon, there is a huge amount of demand creation all across the region, including the rapid absorption of the new Fox Tower office building downtown, the upcoming expansion of the Oregon Convention Center in the Lloyd District, the redevelopment of the five-block Blitz-Weinhard Brewery in Northwest Portland, and the rapid development of office and industrial flex space in the Sunset Corridor. Add in a substantial amount of mixed-use projects planned for newly laid light rail track heading to the airport, and Dundon sees lots of reason to think there plenty of ways to see continued improvement through 2001.
"I've watched these cycles now for a number of years," says Dundon. "New supply comes on the market, things slow down, occupancies sink, demand catches up, and then more supply comes on the market." Dundon especially likes prospects for the upscale downtown hotel market, which he says has been hovering at around 70% occupancy after boasting 80% occupancy through much of the early 1990s. The region wide average is closer to 50%, Dundon says. "I have a lot of confidence in downtown," Dundon says. "It's a great market for hotels because of the balance of retail, office and residential - something many downtowns have not achieved."
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