No vacancy: North Carolina is benefiting from a nationwide hotel boom, but will investors check out early?

AuthorSinge, Kerry
PositionNC TREND: Commercial real estate

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Walk into 21c Museum Hotel in Durham, and it's clear this isn't your grandfather's Holiday Inn.

Contemporary art collections hang in a former corporate bank boardroom. The old vault is a cocktail lounge. Four-foot fuchsia plastic penguins greet visitors in hallways.

Opened last year, the 125-room, $48 million 21c is just one of the innovative properties that have sprung up during a statewide hotel boom. From the coast to the mountains, developers are building thousands of rooms: A Hotel Indigo planned for Winston-Salem. Two Kimpton Hotels headed for Charlotte's urban core. A Hilton Garden Inn and AC Hotel landing in Asheville. A Residence Inn coming to downtown Raleigh.

"I think it's an unprecedented development cycle," says Tom Murray, chief executive officer of the Charlotte Regional Visitors Authority, which promotes hospitality and tourism.

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"We've been outpacing the nation in hotel supply and demand," says Lynn Minges, president and chief executive officer of the N.C. Restaurant and Lodging Association. More than 17,430 hotel rooms, equivalent to 11.5% of the state's total supply, are either in construction or planning stages, she says. Nationwide, more than 100,000 rooms are scheduled to open this year, according to hotel research company STR.

As of July, occupancy rates, room rates and room demand in North Carolina were performing better than national averages, STR data show, though hotel owners say that House Bill 2, the state's controversial public-accommodations law that Gov. Pat McCrory signed in March, is blunting tourism and discouraging development.

But is there too much room at the inn already?

In downtown Charlotte, according to Center City Partners, 2,236 hotel rooms are proposed or under construction, which some people in the industry say will result in an oversupply. An Asheville Citizen-Times letter writer complained in June about downtown's "WalMartization" due to hotel development.

As much as any sector of commercial real-estate development, hotels run in boom and bust cycles. In the mid-2000s, for example, city leaders concluded that Charlotte needed more hotel rooms to attract bigger conventions and sporting events. The city's economy was flourishing, and people were traveling for work and fun. Then the recession of 2007-09 hit, crippling travel and hotel development, and forcing owners of several Charlotte hotels to restructure their debt under pressure from lenders or...

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