Skift and Amadeus’ New Video Series on the Startup Mindset: The Takeoff Sponsored This content is created collaboratively with one of our sponsors.
The cruise industry, tourism from Asia and business expansion are leading to a hotel boom in Seattle, one of the fastest growing cities in the U.S.
Seattle’s rapidly growing downtown is luring billionaire John Pritzker’s Commune Hotels & Resorts for a $104 million lodging and residential project, adding to a surge in development as employment and tourism climbs.
Commune and Pritzker’s Geolo Capital are working in a joint venture with Seattle developer Touchstone for a two-tower property that will include a luxury Thompson hotel. The 12-story buildings, which will have 159 guest rooms and 97 rental apartments, will be adjacent to Pike Place Market, with views of the surrounding Puget Sound and Olympic Mountain Range, the companies said in a statement. Opening is slated for 2016.
Seattle, the fastest-growing among the top 50 U.S. cities, is attracting a wave of development as employers such as Amazon.com Inc. expand and lodging occupancies reach records. Three hotels opened in 2013 and two were completed early this year, while almost a dozen have been proposed in or near the central business district, according to a report by local commercial real estate broker Kidder Mathews.
“Seattle is among the top three office markets in the U.S., next to San Francisco and New York,” Douglas Howe, Touchstone’s president, said in a telephone interview. “There is a strong need for business-hotel hospitality.”
Hotel demand is also benefiting from growing tourism, which has been bolstered by the arrival of the cruise-ship industry and an increase in travelers from Asia, Howe said.
Hotel occupancies in Seattle climbed to 73 percent in the first six months of 2014 from 69 percent in the first half of last year, while the average nightly rate jumped 6.1 percent to $128.09, according to Hendersonville, Tennessee-based research company STR Inc. That compares with occupancies of 64 percent and average room rates of $114.06 nationwide.
Two Seattle hotels changed hands in the past two months for record prices per room, according to John Gordon, a senior hotel appraiser at Kidder Mathews’s office in nearby Bellevue. On July 1, the boutique Hotel 1000 downtown sold for $517,000 per room, an all-time high for the city, and breaking the previous record of $410,000 per room set when the bigger Red Lion Hotel downtown, renamed Motif Seattle, was sold in June, he said.
“Strong occupancy and rising rates have made Seattle a high-profile target for hotel developers,” Kidder Mathews said in its second-quarter report. The central business district and South Lake Union, where Amazon is based, are two areas of particular interest, the firm said.
Amazon moving its main offices to just north of the downtown core and the Bill & Melinda Gates Foundation opening new headquarters near downtown have been major draws for hotels, according to Gordon.
“Assuming it’s an urban hotel, they live and die by business travelers,” Gordon said in a telephone interview. “It’s generally accepted that if you have a healthy office market, that will support a high volume of demand.”
Seattle’s growth has brought with it concerns over density and affordability, as well as increased traffic and parking congestion. Major crimes were up 19 percent in the first four months of 2014 from a year earlier, spurring Mayor Ed Murray to begin a series of community walks with residents, police and city officials to improve public safety.
Other developments in Seattle include a 137-room Element Hotel, a brand owned by Starwood Hotels & Resorts Worldwide Inc., in the Belltown neighborhood and a 184-room luxury SLS Hotel in the office district. A 278-room Embassy Suites, a Hilton Worldwide Holdings Inc. chain, is planned just north of CenturyLink Field, where the Seattle Seahawks National Football League team plays.
The “most ambitious” plan is a 1,680-room convention hotel with 160 apartments, restaurants and retail space on a block occupied by the former Greyhound bus station, according to Kidder Mathews. The project, awaiting permits, would be the biggest hotel ever in Seattle, the firm said. The developer is R.C. Hedreen Co., founded by veteran hotel developer Richard Hedreen.
The Thompson hotel will be the brand’s first in the Pacific Northwest. The chain is a collection of luxury boutique properties that feature such amenities as custom woodwork and rain showers in rooms and infinity pools and rooftop lounges. It has outposts in cities including Chicago and Toronto.
Thompson will create a “lifestyle” experience that caters to the city’s young professional market, Commune Chief Executive Officer Niki Leondakis said in an interview.
“There is a lot of new supply coming, however, our Thompson brand is dead on the right thing for Seattle,” she said. “There are many indicators that Seattle is still booming.”
Pritzker, the son of the late founder of the Hyatt Hotels Corp. chain, a year ago bought the 50 percent of closely held Commune Hotels that he didn’t already own for an undisclosed amount. In addition to Thompson, Commune owns the Joie de Vivre chain.
To contact the reporters on this story: Nadja Brandt in Los Angeles at email@example.com; Hui-yong Yu in Seattle at firstname.lastname@example.org To contact the editors responsible for this story: Kara Wetzel at email@example.com Christine Maurus