New anchor in town

Hyatt project adds a hospitality hub

It has been more than 30 years since a seismic shift began to occur in New Orleans’ primary business district. The opening of the Hilton Hotel at the foot of Poydras Street on the Riverfront was the spark. The big Hilton created the first major hub of commercial activity outside the Canal Street corridor, long the city’s business core. In years to come the hotel would anchor developments that would include a massive new convention center. It would also get people thinking about the potential for the rest of Poydras Street, looking north toward the Superdome.

In the 1970s, developers laid plans to populate the 15 blocks or so between the Hilton and the ’Dome with new office towers. Eventually those buildings would come to house hundreds of New Orleans companies and thousands of downtown workers. The Poydras corridor would become the city’s de facto Central Business District.

Since the 1980s completion of the last new office building on Poydras, construction activity along the corridor has been scarce – until a few months ago. That is when work began to restore and reopen the Hyatt Regency hotel near the Superdome.

The work currently under way could go almost unnoticed by a driver cruising along Poydras, but the combined activity at the Hyatt, a neighboring office building and the site of a former shopping mall next to the Dome represent the largest development – not just in that area but in the entire city – in decades.

“We’re spending $275 million to reopen this hotel,” says Michael Smith, general manager of the Hyatt Regency New Orleans.

For the past five years the Hyatt has stood as a symbol of the destruction Hurricane Katrina waged on New Orleans. With blown-out windows and a pock-marked exterior, and situated next to the Dome, which housed thousands of refugees from floodwaters, the Hyatt has been a painful reminder of August 2005.

During the last few years owners of the building struggled to get a renovation of the hotel off the ground. Recently, the owners and new partners managed to package a financing deal that will put the hotel back into service by fall 2011.

Smith says what the public will see will not be a mere restoration of the former Hyatt, but essentially a brand new 1,200-room hotel configured to accommodate large meetings and serve as a hospitality anchor for the sports and entertainment district taking shape around the Superdome.

“We’ll have 200,000 square feet of meeting space, and our back yard is Champions Square,” Smith says, referring to the entertainment plaza that New Orleans Saints owner Tom Benson has developed on the site of the recently demolished New Orleans Centre mall. “Between the Hyatt and the floor of the Superdome, we can put together 400,000 square feet of meeting and exhibition space right here,” Smith says.

While large local meetings now center around the million-square-foot Ernest N. Morial Convention Center and the hotels that lie near it, Smith says the Hyatt-Dome complex will form an additional meeting hub. He sees prospective users coming from the nearby expanding medical district and corporate tenants who will occupy the next-door Benson Tower office building.

Benson recently purchased that building, which has sat mostly empty since Katrina, and will reopen it in December. State employees will occupy about two-thirds of the tower, leaving about 160,000 square feet to be leased.

The purchase and renovation of the office building, along with demolition of the mall and creation of an entertainment plaza in its place, represent upward of $80 million of investment. Smith says it couldn’t come at a better time. A surge of major sporting events slated at the Superdome and next-door New Orleans arena during the 18-month period after the Hyatt’s opening includes:

• Allstate Sugar Bowl Football Classic, January 2012 and 2013
• BCS Championship Game, January 2012
• SEC Men’s Basketball Tournament, March 2012
• NCAA Men’s Final Four, March 2012
• Super Bowl XLVII, February 2013
• NCAA Women’s Final Four, April 2013

While such events are sure-fire bets to fill hotel rooms and restaurants, keeping occupancies high between big meetings and events will remain a challenge. Worldwide economic recession has reduced corporate spending on travel and conventions, and the trend has left many prominent convention centers struggling. With a current hotel inventory of more than 38,000 rooms, New Orleans could find it difficult to fill 1,200 more at the Hyatt.

Figures from Smith Travel Research, a Tennessee-based hospitality consulting firm, show that New Orleans hotel occupancy has climbed slowly this year after a few years of decline. On the upside, New Orleans hotels have performed better, on average, than their peers nationwide in terms of both occupancy and revenue. Local room rates have held up better than most, and revenue-per-available-room in August was up 23 percent from August 2009.

The local visitor industry has fingers crossed for continuation of an upward trend. They may be rewarded. Hotel analyst PKF Consulting Inc. has forecasted a 4 percent gain in U.S. hotel occupancy and an 11 percent rise in revenue through 2011. If New Orleans stays near the front of the U.S. hotel pack, that could bode well for both the Hyatt and existing local properties.

In Smith’s view, the stars are aligning beautifully. Pointing out that the Hyatt’s new configuration will put the hotel’s main entrance on Loyola Avenue, he notes that the Regional Transit Authority soon will begin work on a new Loyola Avenue streetcar line that will link to the existing Canal Street line.

“When the Hyatt owners got financing to reopen the hotel, they didn’t even know the trolley would be coming right in front of us,” Smith says. “The streetcar is icing on the cake.”

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