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Westin developers aim high on room rates

Westin_Jackson_rgbDowntown Jackson’s hotel market has been on a rollercoaster of sorts over the past six years as occupancies fell to less than 40 percent some months and climbed into the high 60 percent range other months.

Revenue per room — calculated by multiplying a hotel’s average daily room rate by its occupancy rate — has fluctuated significantly as well, dropping to as low as the high $20s some months and rebounding to as high as the upper $40s other months, according to data from Smith Travel Research.

There’s more stability in the rates for the rooms that are getting filled, with average daily rates staying in the mid-to-high $60s and low $70s.

Yet those rates are far below the $145 nightly rate that Joseph Simpson and his partners at Capital Hotel Associates expect to get from the 204-room Westin Hotel they plan to build at 315 Tombigbee St., near the Hinds County Courthouse, Mississippi Museum of Art and the Jackson Convention Complex.

» READ MORE: Judge dismisses challenge to Jackson’s $9M hotel loan

Still, Simpson sees ample upside and insists he is “100 percent” convinced the Westin and the luxury category it will occupy can compete strongly in the downtown market.

“We will be the only full service Starwood hotel in Mississippi,” he said, referring to a luxury hotel and resort company which in addition to Westin includes Sheraton, Le Meridien, St. Regis and W hotels.

“I think I am being very conservative,” Simpson, an investment adviser and co-owner of downtown’s Iron Horse Grill, said of his nightly rate expectations.

In late 2011, Transcontinental Realty Inc. of Dallas, Texas, proposed a convention center hotel for Jackson under the Crowne Plaza flag. The developers projected a nightly rate of $150, double that of other lodging properties in the central business district, as well as revenue-per-room of $90.

Such lofty expectations worried some metro Jackson hoteliers queried at the time. They noted that the $150 was significantly higher than rates other Crowne Plazas around the country charged. Should the hotel fail to reach its rate targets, it would be forced to lower rates and put pressure on other Central Business District properties to lower rates, the hoteliers said.

They acknowledged as well, however, that by meeting the $150 nightly rate, the Crowne Plaza would drive up rates throughout the CBD.

The last time downtown Jackson had seen a high RevPar occurred just after hurricane Katrina in the middle of the last decade. Even with the swollen demand during that period, RevPar never climbed above $65.15.

Many city officials say a convention center hotel is the most pressing need for Jackson’s Central Business District.

To that end, Jackson city officials have vowed to issue a new Request for Proposals for a convention headquarters hotel. But will the new Westin preclude that effort?

Jackson lawyer Herb Irvin thinks so. He represents developer Don Hewitt, who teamed with an Austin, Texas, hospitality group in a bid to build the convention center hotel in 2013.

Hewitt has said he wants to try again, either by himself or with a development partner. But the opening of a Westin Hotel in the CBD will make that pursuit far less appealing, Irvin said.

“As Don and I have maintained since hearing about the Westin coming to Jackson, this market is not able to support the room rates and occupancy levels to be profitable,” said Irvin, who this week failed in a legal challenge to the Jackson City Council’s decision to use general fund dollars to back a $9 million Jackson Redevelopment Authority bond for the Westin.

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