Published February 2004

Despite vacancy rates,
hotels remain optimistic

By Eric Fetters
Herald Business Writer

When the Lynnwood Landmark Inn opened its doors at the end of 1976, it catered mostly to visitors and businessmen who were sightseeing or attending meetings in Seattle.

With the hotel having opened its doors again in January after a $1.4 million renovation and a name change, it’s hoping to rely less on the market to the south in the years to come.

Instead, there’s an opportunity to capitalize on this county’s growing convention and tourism activity, said Bernd Wohlschlaeger, general manager of the hotel, now known as the La Quinta Inn.

“We’ll be doing even better once we get the convention center here,” said Wohlschlaeger, referring to Lynnwood’s $31 million center, which is slated to open in 2005.

The La Quinta is just one of several Snohomish County inns that have renovated recently, and construction has begun on an all-new motel in south Everett. Even more rooms are planned as the county works to raise its profile with event planners and tourists.

But consistently filling most of the 5,000 or so rooms at local hotels and motels will take more work and time, said Sandy Ward, director of the Snohomish County Tourism Bureau. She and others agree the county is overbuilt when it comes to rooms.

The numbers reinforce the notion. In November, the average occupancy rate at area motels surveyed for the Smith Travel Report was just 53 percent. That was up nearly 7 percent from November 2002.

Chris Burdett, a vice president at the Seattle office of Colliers International Hotels, said the county’s average occupancy rate was the worst in the state during the first 10 months of 2003, according to figures from the PKF consulting firm.

All of the other areas tracked in Washington state averaged occupancy of at least 60 percent, while Snohomish County’s was 56 percent. Sixty-five percent occupancy is a standard break-even figure in the industry.

“There are no signs the market’s getting any better. That’s what surprises me most about south Snohomish County and Snohomish County in general,” Burdett said. “It’s frustrating to watch people build new hotels, because it’s just not a good time.”

Many local hotels and motels have struggled for years. Last summer, the firm that operates Everett’s Howard Johnson Plaza Hotel, one of just three full-service hotels in the county, filed for Chapter 11 bankruptcy in the midst of a legal battle with the hotel’s owner. The owner, Pacific West Hotels Inc., has tried to sell the property.

The Inn at Port Gardner on Everett’s waterfront also went through a foreclosure sale last year as the former owner sought to restructure the property’s debt. Burdett said another large motel in the city also narrowly avoided foreclosure.

In fact, the changes at the former Lynnwood Landmark Inn came after that property went through a bankruptcy and got new ownership.

“It’s just a bad market. There aren’t too many successful properties,” said Burdett, who lives in Mukilteo.

The reason for the struggling hospitality industry here comes down to the simple economic formula of too much supply and too little demand, Burdett said. Outside of the Boeing Co., the county has few large businesses that out-of-town executives need to visit regularly for meetings. This area also has not played host to many large conventions.

And even though the county ranks third in the state in tourism, Everett’s not going to threaten Seattle anytime soon as a tourist destination.

Despite Burdett’s view and the hard numbers, local hotel operators are at least publicly optimistic. Sang Chae, a Bellevue real estate attorney who took over the 60-room Inn at Port Gardner for about $1.5 million, said the hotel has seen more than 60 percent occupancy during the past year.

“This year, I think, we’ll do even better,” he said.

Since taking over, renovation work has spruced up the inn’s lobby and rooms, and Chae plans to have wireless Internet service available to his guests in the near future.

At the La Quinta in Lynnwood, nearly everything was redone, from the roof and exterior, down to details in each room, Wohlschlaeger said. The longtime Holiday Inn on the east side of I-5 in south Everett also underwent a facelift last year. The Quality Inn & Conference Center is the new name of the property at 101 128th St. SE, while the rest is now known as Comfort Inn & Suites.

Meanwhile, construction is under way on the west side of I-5 for a new Holiday Inn Express. Developer Dan Mitzel of Mount Vernon hopes to open the 100-room motel this summer.

Still in the planning stages are hotels near Paine Field and the Tulalip Casino.

Bill Lewallen, deputy director at Paine Field, said the airport is negotiating with Beechwood Development of DeForest, Wis. The firm is tentatively planning a Hilton Garden Inn with 100 rooms, including 16 executive suites.

The new hotel would be located near the National Flight Interpretive Center, a nearly $22 million aviation museum that will include a conference center. It also will serve as the site for Boeing’s popular tour center, which is the county’s single largest tourist attraction.

If all goes as planned, construction on the flight center will begin this summer, and it will open in May 2005.

The Boeing tour center already attracts more than 100,000 visitors a year, including a large percentage of foreign tourists. With the new museum and its ability to host conferences, Lewallen said a new hotel should succeed.

“Convenient, overnight lodging is seen as a real benefit to the National Flight Interpretive Center,” he said.

While studies of the new hotel have said it would have minimal effect on existing properties, Burdett said there are more than enough existing rooms to handle more visitors.

“All they’re going to do is cut the pie up further,” he said.

Even so, Burdett said he thinks the Holiday Inn Express will do a decent business, as Mitzel has done well with similar inns. That new motel would be located next to the already-struggling Everett Inn.

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