Eight hotels proposed for Baltimore in the past three years would add 25 percent more rooms to a city focused on luring more visitors, but despite enthusiastic announcements by developers at some of downtown's most prominent locations - and even some public subsidies - none has broken ground.
Blame the economy. Blame the Sept. 11 terrorist attacks on the nation's government and financial centers. Blame lenders who believe Baltimore cannot handle more hotel rooms, developers have said for months.
But with travel creeping back up, and lenders cautiously loosening the purse strings, developers say, several of the projects have gained momentum.
The developers insist their hotels will be built, although none has set a groundbreaking date and few have shown where they will get the money to finance the projects.
"You need someone like a John Paterakis. We didn't get all the pieces, but he said, 'I'm going to start writing checks,'" said Michael S. Beatty, who heads Paterakis' H&S; Properties Development Corp.
Unable to find lenders, Paterakis funded the beginning stages of the Baltimore Marriott Waterfront Hotel and the Courtyard by Marriott, which together added almost 1,000 hotel rooms to Inner Harbor East when they opened last year - the first hotels in the city in about a decade.
H&S; has since sold most of its interest in the projects, and the company is proposing to construct a 150-room extended-stay hotel near the others at Inner Harbor East.
Other developers seeking traditional lenders for their hotels have had to wait. And Baltimore has had to wait for its Ritz-Carlton, its Hampton Inn and its Marriott Residence Inn.
Travel is still way down nationwide. Revenue from occupied rooms is off about 20 percent during the week, when business people are typically on the road, said Brian Lancaster, a hotel analyst at Wachovia Bank. Those numbers have made lenders wary of backing multimillion-dollar hotels.
"While travel has come back significantly since Sept. 11, a big piece is still missing: the business traveler. That piece will come back when the economy comes back. It's still sluggish," Lancaster said.
He said luxury hotels have been hit the hardest because traveling business people are finding less costly places to stay.
That has been bad news for the $190 million Ritz-Carlton hotel and condominium project proposed at the Inner Harbor. Its construction schedule has been delayed more than a year, although the developer now says he has an agreement with European lenders to finance the project.
Edward V. Giannasca II, the developer, said the deal will close soon and groundbreaking will follow shortly thereafter on the 225 guest rooms, 97 condos and 500 parking spaces.
The financing hinges on sale of the condos, which provides cash to pay down the debt.
The other hotels proposed in the city are more modest than the Ritz and would cater to business travelers. They include:
A 72-room, moderately priced hotel inside Baltimore's Pennsylvania Station. Amtrak chose the developer, James M. Jost & Co. Inc., in 1999 but delayed the $5 million development while the passenger rail service looked for alternative offices for its workers. Now, the fate of the hotel is unclear as Amtrak faces possible insolvency.
A 176-room Marriott Residence Inn on Redwood Street. A battle with preservationists over historic buildings demolished for the project delayed this hotel by developer Donald J. Urgo and Associates. Then Urgo said the Sept. 11 attacks jeopardized its financing. The city offered tax breaks worth $3.2 million over 10 years, but a city official said a technical glitch in the legislation's passage by City Council has delayed the groundbreaking again. Work could begin this month on the site, which now is just a hole in the ground.
A 171-room Hampton Inn and Suites on Redwood and Calvert streets by Focus Development LLC. The $25 million project was supposed to break ground by the end of 2000 but had to retool physically and financially when the city tagged one of its proposed buildings for a parking garage. The project could start by the end of this month.
A 160-room limited-service hotel in the $100 million Canton Crossing development on the industrial east side of the Inner Harbor. Banker and businessman Edwin F. Hale Sr. is vying to build a cruise ship terminal for the state, and he has since proposed building a second hotel to accommodate those travelers. His schedule is pending approval of the terminal and an agreement with a hotel chain.
A 300-room Embassy Suites or other Hilton brand at One Light Street. J.J. Clarke Enterprises Inc.'s project has been through several incarnations as the economy dried up financing. The latest plan, according to J. Joseph Clarke, company president, is for a 270-space garage and hotel. Clarke is negotiating with FelCor Lodging Trust, a Dallas-based real estate investment trust, to purchase the hotel and Hilton Hotels Corp. to manage it.
"We do believe they are anxious to make a deal," Clarke said. "The site will either be a hotel or a surface parking lot."
On top of these proposed projects, the city would like to build a large 1,000-room convention hotel to bolster the 6,500 rooms that support its convention center, expanded in 1997.
There are no formal proposals, but two sites have been named for such a project.
The first is a Light Street parcel once occupied by McCormick & Co. and controlled by the Rouse Co. A spokesman for Rouse has said several people are interested in the site. Lawyer and businessman Peter Angelos has let an option to buy the land expire, saying economic timing for a hotel is bad.
Real estate sources say, despite the Inner Harbor's location and water views, the $15 million to $20 million asking price for the land, now a parking lot, might be too high. It is also unclear whether any of the interested developers propose building a hotel on the site.
"The site continues to be viewed as one of the premier commercial real estate locations on the East Coast. Certainly a hotel would be an appropriate use; however, it could also serve as a terrific residential, parking or retail location as well," said David L. Tripp, a Rouse vice president and director of investor relations.
The second site is a city-owned lot on Pratt Street next to the convention center.
There are no plans yet to seek formal bids for that land, said M.J. "Jay" Brodie, president of the Baltimore Development Corp., the city's economic development arm.
"I have some nibbles, and I'm exploring the nibbles. And if they turn out to be serious, we'll consider taking the next steps," he said.
Brodie has said the city would likely be willing to subsidize a convention hotel because the costs are generally too high - and the risks too great - for private developers and their lenders. No developer has recently sought the subsidies for such a project.
Subsidies, however, may not be enough to bring a hotel. Industry analysts say hotels are the riskiest type of real estate because they need to be leased every night and they are heavily dependent on the economy.
Bankers, who often fund hotel construction, want developers to put up large amounts of equity, even half the cost, before they will lend money for the rest. Even if bankers are willing to make a loan, institutional lenders, who generally provide the permanent mortgages on hotels, have shied away from the extra risks, analysts say.
In addition to needing cash, developers need a quality flag, or brand name, a good reputation for completing deals, a good site and a bottom line that shows there will be enough income to cover the cost to build and run a hotel.
Rod Petrik, a managing director at Legg Mason Wood Walker Inc. who follows the hotel industry, said most of the new hotel projects that have financing got it before Sept. 11.
"Some traditional lenders have started to re-enter the market, but most are refinancing hotels that are already up and running, or they're providing debt for acquisitions, but new hotels are not generally being done," he said.
That means that all of Baltimore's proposed hotels will not likely open, hotel analysts and developers agree. But some have faith that at least some of the efforts will pay off.
"I know when the lights go on and how long their cars are outside," said Robert Sapero, landlord to the Ritz developer's offices on Key Highway. "I don't have any apprehension. ... They're doing something good for Baltimore."